Nautilus Provides Preliminary Financial Results for the Fourth Quarter and Full Year 2018
January 17 2019 - 4:05PM
Business Wire
January 17, 2019
To: Nautilus, Inc. investors:
While our results for the fourth quarter of 2018 and fiscal year
ended December 31, 2018 will not be final until the conclusion of
our audit and the announcement of our final results in late
February, we are providing preliminary results for those
periods.
- Revenue range of approximately
$114-$116 million for Q4 2018 and $395-$397 million for the full
year
- Direct segment revenues of
approximately $50 million for Q4 2018
- Retail segment revenues of
approximately $64 million for Q4 2018
- Gross margin of approximately 44% for
Q4 2018 and 46% for the full year
- Operating expenses of approximately $48
million for Q4 2018 and $161 million for the full year
- Operating Income range of approximately
$2.0 - $3.0 million for Q4 2018 and $20.0 – $21.0 million for the
full year
- Tax rate of approximately 46% for the
quarter, including $0.6 million of state tax related true-ups; and
28% for the full year
- EPS from continuing operations in the
range of $0.04 to $0.05 per diluted share for Q4 2018 and between
$0.49 to $0.50 per diluted share for the full year 2018
Fourth Quarter 2018
Summary
The results for the fourth quarter of 2018 did not meet our
expectations or the guidance we had provided during our October
2018 update. We expected significantly stronger sales in the fourth
quarter of 2018 in the Direct segment, driven by the introduction
of the new digital platform Max Intelligence (MIP). We expect that
as consumers are further exposed to MIP, this unique product will
help to accelerate sales across a number of our products and brands
in the future starting in 2019.
Our Retail segment revenues continued the strong growth
trajectory we have experienced throughout 2018 with fourth quarter
sales of approximately $64 million versus $55 million during the
same period of 2017, a 16% increase. We saw broad-based strength
with key partners in the mass retail and specialty retail channels
across multiple product categories, partially offset by weaker than
expected international and commercial sales. Our international and
commercial business was impacted by service and inventory issues
resulting from an ERP system transition that is now complete. The
continuance of strong double-digit growth in the Retail segment
underscores the resonance of the Nautilus brands with distribution
and the consumer. While the overall results for the quarter are
disappointing, they are not illustrative of the underlying
strengths of the business.
Operating expenses were approximately $48 million for the fourth
quarter of 2018 compared to $47 million in the same period of the
prior year (excluding an $8.8 million intangible asset write-off in
the fourth quarter of 2017). Our tax rate for the fourth quarter of
2018 increased to 46% versus our prior guidance of 24%-25%
primarily due to $0.6 million of state related true-ups and state
valuation allowances.
Our cash balance at year-end was approximately $64 million with
inventories of approximately $68 million. The increase in
inventories of $15 million over prior year levels reflects both the
sales shortfall we experienced in the Direct segment, but also a
strategic inventory buildup to mitigate supply chain uncertainties
due to potential international tariffs. We repurchased $8 million
in shares during the quarter as part of our ongoing share buy-back
program.
We would also like to take this opportunity to provide an update
on certain organization changes that are occurring. We are pleased
to announce that Carlos Navarro has joined us as General Manager
and Vice President of the Direct business. Carlos is a very
accomplished executive with deep marketing, digital, and general
management experience across a number of blue-chip consumer and
industrial companies including Johnson & Johnson (NYSE: JNJ),
Bausch+Lomb, and Jarden Corporation, and most recently South Jersey
Industries, Inc. (NYSE: SJI).
Lastly, Bill McMahon, our Chief Operating Officer, has been
diagnosed with a health issue that requires a recovery period that
will result in him scaling back his responsibilities as COO near
term. Bill will be taking on a Special Assistant to the CEO role in
which he will support Carlos’s transition into the Direct
leadership role and help us drive many of the key cost improvement
and other strategic initiatives on which we are focused. Bill has
been a key partner in transforming the business over the past seven
years and we wish him well and a speedy recovery. There are
seasoned and talented executives in place for Bill’s areas of
responsibilities, and I will work closely with them to ensure we
execute on our priorities.
2019 Outlook
As we enter 2019, we remain confident that the market
fundamentals for our business are solid and remain intact. However,
there are a number of initiatives that we are implementing to
further strengthen our business which include a combination of
external market opportunities and internally-focused
initiatives.
We remain focused on investing in our innovation platforms
supported by robust marketing and media commitments. We have a
healthy new product introduction schedule for 2019, and in
addition, have secured strategic investments with key partners
which we anticipate will drive further enhancements to our digital
offerings starting this year. External market opportunities remain
vast given our brands, marketing power, and product innovation
capabilities, and we intend to utilize those assets to capture and
optimize the growth opportunities.
Internally-focused initiatives are targeted at mitigating some
of the profitability challenges we had last year, which we expect
to continue into 2019. Hence, we are embarking on an aggressive
cost-containment program that will simplify and make processes more
efficient, rescale the operations to be more profitable on a lower
sales base, and increase our efforts in value engineering our
products. I am confident in the ingenuity and capabilities of our
global employee base to execute and deliver on these initiatives
and return the business to stronger operating margins.
We plan to provide final 2018 results and more detailed 2019
guidance during our year-end earnings call currently scheduled for
February 25th, 2019 at 4:30 p.m. EST.
Thank you,Bruce CazenaveChief Executive OfficerNautilus,
Inc.
About Nautilus, Inc.
Headquartered in Vancouver, Washington, Nautilus, Inc. (NYSE:
NLS) is a global fitness solutions company that believes everyone
deserves a fit and healthy life. With a brand portfolio including
Bowflex®, Nautilus®, Octane Fitness®, Schwinn® and
Universal®, Nautilus, Inc. develops innovative products
to support healthy living through direct and retail channels, as
well as in commercial channels with Octane Fitness® products.
Nautilus, Inc. uses the investor relations page of its website
(www.nautilusinc.com/investors) to make information available to
its investors and the market.
This press release includes forward-looking statements
(statements which are not historical facts) within the meaning of
the Private Securities Litigation Reform Act of 1995, including:
projected or forecasted financial and operating results, including
expectations for full year 2018 net revenue and operating income;
future plans for introduction of new products, anticipated demand
for the Company's new and existing products, and projected impact
of the new product launches on the Company’s operating results for
fiscal year 2019 and future periods; statements regarding the
Company's prospects, resources or capabilities; current or future
financial and economic trends; planned investments and strategic
initiatives and the anticipated or targeted results of such
initiatives. Factors that could cause Nautilus, Inc.’s actual
results to differ materially from these forward-looking statements
include: weaker than expected demand for new or existing products;
our ability to timely acquire inventory that meets our quality
control standards from sole source foreign manufacturers at
acceptable costs; an inability to pass along or otherwise mitigate
the impact of raw material price increases and other cost
pressures, including unfavorable currency exchange rates;
experiencing delays and/or greater than anticipated costs in
connection with launch of new products, entry into new markets, or
strategic initiatives; our ability to hire and retain key
management personnel; changes in consumer fitness trends; changes
in the media consumption habits of our target consumers or the
effectiveness of our media advertising; a decline in consumer
spending due to unfavorable economic conditions; and softness in
the retail marketplace. Additional assumptions, risks and
uncertainties are described in detail in our registration
statements, reports and other filings with the Securities and
Exchange Commission, including the “Risk Factors” set forth in our
Annual Report on Form 10-K, as supplemented by our quarterly
reports on Form 10-Q. Such filings are available on our website or
at www.sec.gov. You are cautioned that such statements are not
guarantees of future performance and that our actual results may
differ materially from those set forth in the forward-looking
statements. We undertake no obligation to publicly update or revise
forward-looking statements to reflect subsequent developments,
events or circumstances.
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version on businesswire.com: https://www.businesswire.com/news/home/20190117005661/en/
John Mills, ICR, LLCTelephone: (646) 277-1254
Nautilus (NYSE:NLS)
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