First Half Fiscal Year 2022 Net Sales up 20%
versus Last Year and up 167% versus Fiscal Year 2020
Advances JRNY® platform with
Completed Acquisition of VAY AG, a leader in motion
technology
JRNY® Total Members Approximately
200,000
Increasing JRNY® Investment to
Accelerate Roadmap to Achieving Long-Term Operating Margin
Targets
Nautilus, Inc. (NYSE: NLS) today reported its unaudited
operating results for the fiscal 2022 second quarter and six-months
ended September 30, 2021.
Management Comments
“Our second quarter results reflect the continued momentum of
our North Star Strategy, as we capitalize on the sustained
expansion of the home fitness addressable market. Second quarter
fiscal 2022 net sales were up 124% on a two-year basis, driven by
triple digit gains across both Retail and Direct segments compared
to 2019 levels. We also increased revenue 20% for the first half of
fiscal 2022 compared to first half of fiscal 2021. While our
results were affected by global shipping constraints, we continued
to advance our supply chain process, including the opening of a new
distribution center, that has allowed us to work down backlog and
improve our inventory position relative to last year,” said Jim
Barr, Nautilus Inc. Chief Executive Officer.
Mr. Barr continued “As we look ahead, we have great conviction
that a winning personalized connected fitness experience is the
future of Nautilus. We have made significant progress executing
against our North Star strategy, including the recent VAY
acquisition that enhances our software development capabilities and
adds new and innovative features to the JRNY platform. The business
impact of these strategic initiatives has already exceeded our
expectations, with nearly 200,000 JRNY members today, about 3x
where we were a year-ago. While we are thrilled with this initial
success, we are just scratching the surface of where we believe we
can take the business and cement our leadership position within the
digitally connected fitness space. We have made the strategic
decision to accelerate our investment in JRNY® for the remainder of
fiscal 2022 and in fiscal 2023, with a focus on product innovation
and marketing. This will enable our digital subscription business
to be accretive sooner than previously expected and ultimately
accelerate our roadmap to achieving a sustainable operating margin
target of 15% by one year to fiscal 2025, with margins expanding to
high teens by fiscal 2026.”
Total Company Results
Fiscal 2022 Second Quarter Ended September 30, 2021 Compared
to September 30, 2020
- Net sales were $138.0 million, compared to $155.4 million, a
decline of 11.2% versus last year, or down 5.4% excluding sales
related to the Octane brand, which was sold in October 2020. Net
sales are up 160%, or a 61% CAGR, when compared to the same period
in 2019, excluding Octane. The sales decline was driven primarily
by lower Direct sales and shipping constraints. Due to the severe
shortage of shipping containers, some factory fulfilled orders,
representing over $22 million in revenue, did not ship as planned
in late September. 56% of those orders shipped in October.
- Gross profit was $42.1 million, compared to $67.9 million last
year. Gross profit margins were 30.5% compared to 43.7% last year.
The 13.2 ppt decrease in gross margins was primarily due to:
logistics (-8 ppts), commodities, components, and foreign exchange
(-4 ppts) and increased investments in JRNY® (-1 ppt).
- Operating expenses were $44.0 million, an increase of $20.1
million, or 83.8%, compared to last year, primarily due to last
year’s $8.3 million Octane Gain on Disposal Group, a legal
settlement of $4.7 million, $4.0 million more in advertising, $3.5
million increase in JRNY® investments, and acquisition expenses of
$0.8 million. Total advertising expenses were $12.1 million versus
$8.0 million last year, trending more towards historical
levels.
- Operating loss was $2.0 million or negative 1.4% operating
margin, compared to operating income of $44.0 million last year,
primarily due to lower gross profits and higher operating
expenses.
- Loss from continuing operations was $4.6 million, or -$0.15 per
diluted share, compared to income of $34.0 million, or $1.05 per
diluted share, last year.
- Net loss was $4.6 million, or -$0.15 per diluted share,
compared to a net income of $33.8 million, or $1.04 per diluted
share, last year.
- The effective tax rate was negative 96.4% this year compared to
21.7% last year, primarily due to the impact of the VAY
acquisition.
- The following statements exclude the impact of the legal
settlement and acquisition costs for the three-months ended
September 30, 2021 and gain on disposal group for the same period
in 20201.
- Adjusted operating expenses were $38.5 million, or 27.9% of
sales, compared to $32.3 million, or 20.8% of sales, last year. The
increase was driven by increased advertising and JRNY®
investments.
- Adjusted operating income decreased to $3.5 million compared to
last year’s $35.7 million, driven by lower gross profit and higher
adjusted operating expenses.
- Adjusted income from continuing operations was $0.9 million, or
$0.03 per diluted share, compared to $28.0 million, or $0.87 per
diluted share.
- Adjusted EBITDA from continuing operations was $7.1 million
compared to $38.2 million last year.
1 See “Reconciliation of Non-GAAP Financial
Measures” and “Gain or loss on Disposal Group” for more
information
Six-Months Ended September 30, 2021 Compared to Six-Months
Ended September 30, 2020 (First Half)
- Net sales were $322.6 million up 19.7% compared to $269.6
million last year. Excluding sales related to the Octane brand, net
sales were up 28.2% compared to last year and up 215% or a 77% CAGR
when compared to six-months ending September 30, 2019. The sales
increase was driven primarily by robust sales of our popular
SelectTech® weights.
- Gross profit was $97.6 million compared to $115.3 million last
year. Gross profit margins were 30.2% compared to 42.8% last year.
The 12.6 ppts decrease in gross margins was primarily due to:
logistics (-7 ppts), commodities, components, and foreign exchange
(-5 ppts) and increased investments in JRNY® (-1 ppt).
- Operating expenses were $81.6 million, an increase of $3.2
million, or 4.1%, compared to $78.4 million last year, primarily
due to $12.5 million more in advertising, increased JRNY®
investments of $5.9 million, a legal settlement of $4.7 million,
acquisition expenses of $1.0 million, and partially offset by last
year’s $20.7 million Octane Loss on Disposal Group. Total
advertising expenses were $22.9 million compared to $10.4 million
last year.
- Operating income was $15.9 million compared to $36.9 million
last year. The decrease was primarily due to lower gross profit and
higher operating expenses.
- Net income was $9.3 million compared to $28.7 million last
year.
- The following statements exclude the impact of the legal
settlement and acquisition costs for the six-months ended September
30, 2021 and loss on disposal group for the same period in 20201.
- Adjusted operating expenses were $75.9 million, or 23.5% of
sales, compared to $57.8 million, or 21.4% of sales, last year. The
increase was driven by $12.5 million of increased advertising and
$5.9 million of increased JRNY® investments.
- Adjusted operating income decreased to $21.6 million compared
to last year’s $57.6 million, driven by lower gross margins and
higher operating expenses.
- Adjusted income from continuing operations was $15.1 million,
or $0.46 per diluted share, compared to $44.9 million, or $1.40 per
diluted share.
- Adjusted EBITDA from continuing operations was $28.3 million
compared to $63.7 million last year.
1 See “Reconciliation of Non-GAAP Financial
Measures” and “Gain or loss on Disposal Group” for more
information
JRNY® Update
Nautilus Inc. continues to enhance the JRNY® platform, creating
differentiated connected-fitness experiences for their members. On
September 17, 2021, Nautilus completed its acquisition of VAY AG
(“VAY”). VAY specializes in computer vision and AI technology and
has developed reliable and precise software solutions for human
motion analysis using input from a standard RGB (red-green-blue)
camera, such as those found on laptops, smartphones, and tablets.
With a mission to democratize professional human motion analysis,
VAY enables clients in fitness & health to understand and
analyze human movement, providing personalized feedback on
repetitions and form in real-time. This acquisition will enhance
the JRNY® connected-fitness experience by driving innovation and
functionality for members, keeping them engaged, and helping them
reach their fitness goals.
The Company recently announced that the JRNY® digital fitness
platform now includes a video library of instructor-led strength
workouts for Bowflex® SelectTech® 552 and 1090 dumbbells, and that,
for a limited time, purchasers of new JRNY®-enabled products will
receive a one-year complimentary membership. This marks the latest
step in making the JRNY® experience available to more consumers —
whether they are using cardio or strength equipment.
The Company also recently introduced the Bowflex® Max Total® 16
cardio machine — the premier model in the popular, one-of-a-kind
Max Trainer line — which includes a 16”, embedded HD touch screen
that integrates with the enhanced JRNY® digital fitness platform to
help members achieve their fitness goals by offering curated
workouts and entertainment options that stream while being coached.
The Max Trainer has been one of the Company’s all-time best-selling
products. This latest offering includes a one-year JRNY® digital
fitness platform membership. JRNY® members stay engaged and
motivated with unlimited access to voice-coached individualized
workouts, world-class trainer-led workouts, and immersive
experiences where workouts are paired with Explore the World™
routes. JRNY® also provides integration with other fitness app
workouts, which are tracked and saved in the JRNY® member’s
journal.
The Company defines JRNY® Members as all individuals who have a
JRNY® account and/or subscription, which includes Subscribers,
their respective associated members and members who consume free
content.
Segment Results
Fiscal 2022 Second Quarter Ended September 30, 2021 Compared
to September 30, 2020
Direct Segment
- Direct segment sales were $37.9 million, compared to $61.2
million a decline of 38.1% versus last year, and up 134% or a 53%
CAGR compared to the same period in 2019. Demand trends and sales
results for the quarter were more in line with pre-pandemic
seasonality.
- Cardio sales declined 49.4% versus last year and were up 80% or
a 34% CAGR compared to the same period in 2019. Lower sales this
quarter were primarily driven by lower bike sales, partially offset
by increased sales of treadmills and the Max M9, which was the
Direct segment’s best-selling model. Strength product sales
declined 8.7% versus last year and increased 310% or a 103% CAGR
compared to the same period in 2019. Lower sales this quarter were
primarily driven by lower sales of Bowflex® Home Gyms partially
offset by increased sales of SelectTech® weights.
- Given the improvement in the Company’s inventory position and
the ability to fulfill orders within the quarter, the Direct
segment's backlog as of September 30, 2021 is down to $1.1 million
compared to $26.5 million as of March 31, 2021. These amounts
represent unfulfilled consumer orders net of current promotional
programs and sales discounts.
- Gross profit margins were 36.9% versus 57.2% last year. The
20.3 ppt decrease in gross margin was primarily driven by:
logistics (-13 ppts), increased investments in JRNY® (-5 ppts) and
commodities, components, and foreign exchange (-2 ppts). Gross
profit was $14.0 million, down 60.1% versus last year.
- Segment contribution loss was $1.8 million or 4.8% of sales,
compared to $17.6 million or 28.7% of sales last year. The decline
was primarily driven by lower gross profit, including increased
investments in JRNY®, partially offset by decreased media spend.
Advertising expenses were $6.8 million compared to $8.0 million
last year.
Retail Segment
- Retail segment sales were $99.2 million, up by 6.4% versus last
year. Excluding sales related to Octane, net sales were up 18.6%
compared to last year and up 175% or a 66% CAGR compared to the
same period in 2019. Retail segment sales outside the United States
and Canada were 57% excluding Octane and up 655% or a 175% CAGR
compared to the same period in 2019.
- Cardio sales declined by 18.2% versus last year. Excluding
sales of the Octane brand, cardio sales were down 5.6% compared to
last year, or up 120% or a 48% CAGR compared to the same period in
2019. Lower sales this quarter were primarily driven by bikes and
ellipticals. Strength product sales grew by 89.8% versus last year,
or up 333% or a 108% CAGR compared to the same period in 2019, led
by the popular SelectTech® weights.
- As of September 30, 2021, the Retail segment's backlog totaled
$82.9 million compared to $178.6 million as of March 31, 2021.
These amounts represent customer orders for future shipments and
are net of contractual rebates and consideration payable to
applicable Retail customers. Due to the severe shortage of shipping
containers, some factory fulfilled orders, representing over $22
million of the Retail backlog, did not ship as planned in late
September. 56% of those orders shipped in October.
- Gross profit margins were 27.4% compared to 34.3% last year.
The 6.9 ppt decrease in gross margin was primarily driven by:
commodities, components, and foreign exchange (-4 ppts) and
logistics (-3 ppts). Gross profit was $27.1 million, a decrease of
15% versus last year.
- Segment contribution income was $18.7 million, or 18.9% of
sales, compared to $23.4 million, or 25.2% of sales, last year. The
decline was primarily driven by lower gross profit.
Comparison of Segment Results for the Six-Month Period Ended
September 30, 2021 to the Six-Month Period Ended September 30, 2020
(First Half)
Direct Segment
- Net sales for the six-month period ended September 30, 2021 or
First Half were $101.2 million, down 9.3% versus last year or up
173% or a 65% CAGR compared to the same period in 2019. Decreased
sales this year were driven primarily by cardio products which
declined by 40.1% versus last year, due to lower sales of bikes and
partially offset by increased sales of treadmills and max trainers.
Strength product sales grew 117.9% versus last year, driven by
SelectTech® weights and benches.
- Gross profit margin for the six-month period ended September
30, 2021 were 38.0% down from 56.0% last year. The 18.0 ppt
decrease in gross profit margin was primarily driven by: logistics
(-12 ppts), commodities, components, and foreign exchange (-3 ppts)
and increased investments in JRNY® (-3 ppts). Gross profit was
$38.5 million, a decrease of 38.4% versus last year.
Retail Segment
- Net sales for the six-month period ended September 30, 2021 or
First Half were $219.6 million, up 40.7% versus last year.
Excluding sales related to Octane, net sales were up 58.9% versus
last year, and up 243%, or an 85% CAGR compared to the same period
in 2019. Cardio sales were up 23.0% versus last year, driven
primarily by bikes and treadmills. Excluding sales related to
Octane, cardio sales were up 44.4% versus last year, and up 243% or
an 85% CAGR compared to the same period in 2019. Strength sales
were up 101.5% versus last year, driven primarily by SelectTech®
weights and up 242% or an 85% CAGR compared to the same period in
2019.
- Gross profit margins for the six-month period ended September
30, 2021 were 26.1%, down from 32.7% last year. The 6.6 ppt
decrease in gross profit margin was primarily driven by:
commodities, components, and foreign exchange (-4 ppts) and
logistics (-3 ppts). Gross profit was $57.4 million, an increase of
12.6% versus last year.
Balance Sheet and Other Key Highlights as of September
30, 2021:
- Cash and Liquidity:
- Cash, cash equivalents, and restricted cash were $21.5 million,
compared to cash, cash equivalents, restricted cash and
available-for-sale securities of $113.2 million as of March 31,
2021. The decrease was primarily due to the strategic decision to
increase on-hand inventory for the holiday season and the
acquisition of VAY.
- Debt and other borrowings were $17.2 million compared to $13.3
million as of March 31, 2021.
- $49.0 million was available for borrowing under the Wells Fargo
Asset Based Lending Revolving Facility (“Facility”) compared to
$54.4 million as of March 31, 2021.
- On October 29, 2021 we amended our Facility to increase our
revolver size from $55.0 million to $100.0 million and extended the
maturity date to October 29, 2026.
- Inventory was $162.7 million, compared to $68.1 million as of
March 31, 2021. The increase in inventory is driven by the
strategic decision to increase on-hand inventory levels ahead of
the fitness season given continued disruption in global logistics.
About 40% of inventory as of September 30, 2021 was
in-transit.
- Trade receivables were $88.7 million as of September 30, 2021
and March 31, 2021. Trade receivables were flat due to the timing
of customer payments on decreased sales.
- Trade payables were $115.2 million, compared to $98.9 million
as of March 31, 2021. The increase in trade payables was primarily
due to the timing of payments for inventory.
- Capital expenditures totaled $5.0 million for the six-months
ended September 30, 2021.
Forward Looking Guidance
Back Half of Fiscal 2022
- The Company’s revenue for the next few quarters will be
compared to record results due to the pandemic’s effect on net
sales last year. To gauge continued progress against the expanded
addressable market, the Company will be measuring business versus
the same period two years ago for the next few quarters.
- The Company expects total company net sales for the back half
of fiscal 2022 to be between $290 million and $320 million, a
2-year revenue CAGR of 21% to 27%. Sales guidance reflects $6.0
million to $7.0 million of deferred revenue related to the
Company’s plan to continue bundling 12-month JRNY® trials with
cardio equipment sales.
- The Company expects global supply chain challenges to continue
pressuring gross margins in the back half. Gross margins are
expected to be 15 to 17 percentage points lower than the same
period last year driven by increased logistics, deferred revenue,
and investments in JRNY®.
- The Company was pleased with the results of the JRNY®
investments in the 1st Half and plans to increase investments in
the back half to accelerate membership acquisition. The Company
expects these investments to dilute operating margins by 5 to 6
percentage points.
- The Company expects to increase advertising spend in the 2nd
Half by 9 to 11 percentage points as a rate of sales to market the
latest connected fitness offerings to remain competitive in share
of voice in the upcoming fitness season.
- Lastly, the Company expects to continue investing in the
infrastructure needed to scale and expects these investments to
dilute operating margins by 4 to 5 percentage points.
- Given these investments and the external macro pressure on
gross margin, the Company expects a loss in the back half with
negative operating margins in the mid-teens.
- The Company continues to expect full year capital expenditures
to be between $12 million and $14 million with the majority
earmarked for JRNY® investments.
- The Company is raising their guidance for JRNY® members to
250,000 to 350,000 by the end of FY22.
Longer term view, beyond Fiscal 2022
- For fiscal year 2023, the Company expects gross margin to
improve to the low 30% range driven by stabilization in the
logistics environment and the accretive impact of the higher margin
subscription business. Thus, the Company expects to return to
positive adjusted EBITDA in fiscal year 2023.
- The Company stated that they have made the strategic decision
to accelerate investments in JRNY for the remainder of fiscal 2022
and through fiscal 2023 with a focus on product innovation and
marketing. The Company now believes that JRNY will be accretive
sooner than previously expected and will accelerate the achievement
of their long-term operating margin goal of 15% by one year to FYE
2025, with margins expanding to high teens by FYE 26.
Conference Call
Nautilus will discuss our fiscal 2022 second quarter ended
September 30, 2021 operating results during a live conference call
and webcast on Tuesday, November 9, 2021 at 1:30 p.m. Pacific Time.
The conference call can be accessed by calling (877) 425-9470 in
North America. International callers may dial (201) 389-0878.
Please note that there will be presentation slides accompanying the
earnings call. The slides will be displayed live on the webcast and
will be available to download via the webcast player or at
http://www.nautilusinc.com/events. The webcast will be archived
online within two hours after completion of the call and will be
available for six months. Participants from the Company will
include Jim Barr, Chief Executive Officer and Aina Konold, Chief
Financial Officer.
A telephonic playback will be available from 4:30 p.m. PT,
November 9, 2021 through 8:59 p.m. PT, November 23, 2021.
Participants can dial (844) 512-2921 in North America and
international participants can dial (412) 317-6671 to hear the
playback. The passcode for the playback is 13723711.
About Nautilus, Inc.
Nautilus, Inc. (NYSE:NLS) is a global leader in digitally
connected home fitness solutions. The company’s brand family
includes Bowflex®, Nautilus®, Schwinn®, and JRNY®, its digital
fitness platform. With a broad selection of exercise bikes, cardio
equipment, and strength training products, Nautilus, Inc. empowers
healthier living through individualized connected fitness
experiences and in doing so, envisions building a healthier world,
one person at a time.
Headquartered in Vancouver, Washington, the company’s products
are sold direct to consumer on brand websites and through retail
partners and are available throughout the U.S. and internationally.
Nautilus, Inc. uses the investor relations page of its website
(www.nautilusinc.com/investors) to make information available to
its investors and the market.
Forward-Looking Statements
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, targeted or forecasted financial, operating results and
capital expenditures, including but not limited to net sales growth
rates, gross margins, operating expenses, operating margins,
anticipated demand for the Company's new and existing products,
statements regarding the Company's prospects, resources or
capabilities; planned investments, strategic initiatives and the
anticipated or targeted results of such initiatives; the effects of
the COVID-19 pandemic on the Company’s business; and planned
operational initiatives and the anticipated cost-saving results of
such initiatives. All of these forward-looking statements are
subject to risks and uncertainties that may change at any time.
Factors that could cause Nautilus, Inc.’s actual expectations to
differ materially from these forward-looking statements also
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; risks associated with current and potential
delays, work stoppages, or supply chain disruptions, including
shipping delays due to the severe shortage of shipping containers;
an inability to pass along or otherwise mitigate the impact of raw
material price increases and other cost pressures, including
unfavorable currency exchange rates and increased shipping costs;
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; risks related to
the impact on our business of the COVID-19 pandemic or similar
public health crises; softness in the retail marketplace;
availability and timing of capital for financing our strategic
initiatives, including being able to raise capital on favorable
terms or at all; changes in the financial markets, including
changes in credit markets and interest rates that affect our
ability to access those markets on favorable terms and the impact
of any future impairment. 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.
RESULTS OF OPERATIONS INFORMATION
The following summary contains information from our consolidated
statements of operations for the three and six-months ended
September 30, 2021 and 2020 (unaudited and in thousands, except per
share amounts):
Three-Months Ended September
30,
Six-Months Ended September
30,
2021
2020
2021
2020
Net sales
$
137,959
$
155,391
$
322,552
$
269,579
Cost of sales
95,906
87,453
224,994
154,245
Gross profit
42,053
67,938
97,558
115,334
Operating expenses:
Selling and marketing
21,939
19,207
43,239
31,653
General and administrative
16,376
8,841
27,899
18,156
Research and development
5,688
4,240
10,503
7,968
(Gain) loss on disposal group
—
(8,345
)
—
20,668
Total operating expenses
44,003
23,943
81,641
78,445
Operating (loss) income
(1,950
)
43,995
15,917
36,889
Other expense, net
(375
)
(628
)
(788
)
(850
)
(Loss) income from continuing operations
before income taxes
(2,325
)
43,367
15,129
36,039
Income tax expense
2,242
9,398
5,680
7,056
(Loss) income from continuing
operations
(4,567
)
33,969
9,449
28,983
Loss from discontinued operations, net of
income taxes
(35
)
(131
)
(167
)
(255
)
Net (loss) income
$
(4,602
)
$
33,838
$
9,282
$
28,728
Basic (loss) income per share from
continuing operations
$
(0.15
)
$
1.13
$
0.31
$
0.97
Basic loss per share from discontinued
operations
—
—
(0.01
)
(0.01
)
Basic net (loss) income per share
$
(0.15
)
$
1.13
$
0.30
$
0.96
Diluted (loss) income per share from
continuing operations
$
(0.15
)
$
1.05
$
0.29
$
0.90
Diluted loss per share from discontinued
operations
—
(0.01
)
—
—
Diluted net (loss) income per share
$
(0.15
)
$
1.04
$
0.29
$
0.90
Shares used in per share calculations:
Basic
30,968
30,038
30,833
29,974
Diluted
30,968
32,401
32,437
32,038
Select Metrics:
Gross margin
30.5
%
43.7
%
30.2
%
42.8
%
Selling and marketing % of net sales
15.9
%
12.4
%
13.4
%
11.7
%
General and administrative % of net
sales
11.9
%
5.7
%
8.6
%
6.7
%
Research and development % of net
sales
4.1
%
2.7
%
3.3
%
3.0
%
Operating (loss) income % of net sales
(1.4
)%
28.3
%
4.9
%
13.7
%
SEGMENT INFORMATION
following tables present certain comparative information by
segment and major product lines within each business segment for
the three and six-months ended September 30, 2021 and 2020
(unaudited and in thousands):
Three-Months Ended September
30,
Change
2021
2020
$
%
Net sales:
Direct net sales:
Cardio products(1)
$
22,406
$
44,278
$
(21,872
)
(49.4
)%
Strength products(2)
15,447
16,916
(1,469
)
(8.7
)%
Direct
37,853
61,194
(23,341
)
(38.1
)%
Retail net sales:
Cardio products(1)
58,848
71,924
(13,076
)
(18.2
)%
Strength products(2)
40,305
21,231
19,074
89.8
%
Retail
99,153
93,155
5,998
6.4
%
Royalty
953
1,042
(89
)
(8.5
)%
Consolidated net sales
$
137,959
$
155,391
$
(17,432
)
(11.2
)%
Gross profit:
Direct
$
13,976
$
34,990
$
(21,014
)
(60.1
)%
Retail
27,124
31,906
(4,782
)
(15.0
)%
Royalty
953
1,042
(89
)
(8.5
)%
Consolidated gross profit
$
42,053
$
67,938
$
(25,885
)
(38.1
)%
Gross margin:
Direct
36.9
%
57.2
%
(2,030
)
basis points
Retail
27.4
%
34.3
%
(690
)
basis points
Contribution:
Direct
$
(1,835
)
$
17,588
$
(19,423
)
(110.4
)%
Retail
18,741
23,442
(4,701
)
(20.1
)%
Royalty
953
1,042
(89
)
(8.5
)%
Consolidated contribution
$
17,859
$
42,072
$
(24,213
)
(57.6
)%
Reconciliation of consolidated
contribution to (loss) income from continuing operations:
Consolidated contribution
$
17,859
$
42,072
$
(24,213
)
(57.6
)%
Amounts not directly related to
segments:
Operating expenses
(19,809
)
1,923
(21,732
)
(1,130.1
)%
Other expense, net
(375
)
(628
)
253
40.3
%
Income tax expense
(2,242
)
(9,398
)
7,156
76.1
%
(Loss) income from continuing
operations
$
(4,567
)
$
33,969
$
(38,536
)
(113.4
)%
(1) Cardio products include:
connected-fitness bikes, the Bowflex® C6, Bowflex® VeloCore®,
Schwinn® IC4, Max Trainer®, connected-fitness treadmills, other
exercise bikes, ellipticals and subscription services.
(2) Strength products include:
Bowflex® Home Gyms, Bowflex® SelectTech® dumbbells, kettlebell and
barbell weights, and accessories.
Six-Months Ended September
30,
Change
2021
2020
$
%
Net sales:
Direct net sales:
Cardio products(1)
$
53,836
$
89,863
$
(36,027
)
(40.1
)%
Strength products(2)
47,413
21,764
25,649
117.9
%
Direct
101,249
111,627
(10,378
)
(9.3
)%
Retail net sales:
Cardio products(1)
148,772
120,935
27,837
23.0
%
Strength products(2)
70,865
35,168
35,697
101.5
%
Retail
219,637
156,103
63,534
40.7
%
Royalty
1,666
1,849
(183
)
(9.9
)%
Consolidated net sales
$
322,552
$
269,579
$
52,973
19.7
%
Gross profit:
Direct
$
38,490
$
62,513
$
(24,023
)
(38.4
)%
Retail
57,402
50,972
6,430
12.6
%
Royalty
1,666
1,849
(183
)
(9.9
)%
Consolidated gross profit
$
97,558
$
115,334
$
(17,776
)
(15.4
)%
Gross margin:
Direct
38.0
%
56.0
%
(1,800
)
basis points
Retail
26.1
%
32.7
%
(660
)
basis points
Contribution:
Direct
$
4,924
$
34,583
$
(29,659
)
(85.8
)%
Retail
40,831
35,055
5,776
16.5
%
Royalty
1,666
1,849
(183
)
(9.9
)%
Consolidated contribution
$
47,421
$
71,487
$
(24,066
)
(33.7
)%
Reconciliation of consolidated
contribution to income from continuing operations:
Consolidated contribution
$
47,421
$
71,487
$
(24,066
)
(33.7
)%
Amounts not directly related to
segments:
Operating expenses
(31,504
)
(34,598
)
3,094
8.9
%
Other expense, net
(788
)
(850
)
62
7.3
%
Income tax expense
(5,680
)
(7,056
)
1,376
19.5
%
Income from continuing operations
$
9,449
$
28,983
$
(19,534
)
(67.4
)%
(1) Cardio products include:
connected-fitness bikes, the Bowflex® C6, Bowflex® VeloCore®,
Schwinn® IC4, Max Trainer®, connected-fitness treadmills, other
exercise bikes, ellipticals and subscription services.
(2) Strength products include: Bowflex®
Home Gyms, Bowflex® SelectTech® dumbbells, kettlebell and barbell
weights, and accessories.
BALANCE SHEET INFORMATION
The following summary contains information from our consolidated
balance sheets as of September 30, 2021 and March 31, 2021
(unaudited and in thousands):
As of
September 30, 2021
March 31, 2021
Assets
Cash and cash equivalents
$
20,179
$
38,441
Restricted cash
1,339
1,339
Available-for-sale securities
—
73,448
Trade receivables, net of allowances
88,712
88,657
Inventories
162,669
68,085
Prepaids and other current assets
13,120
25,840
Income taxes receivable
2,404
—
Total current assets
288,423
295,810
Property, plant and equipment, net
29,463
24,496
Operating lease right-of-use assets
24,540
19,108
Goodwill
24,508
—
Other intangible assets, net
9,334
9,365
Deferred income tax assets,
non-current
2,950
2,144
Income taxes receivable, non-current
5,673
—
Other assets – restricted, non-current
3,887
—
Other assets
2,252
3,307
Total assets
$
391,030
$
354,230
Liabilities and Shareholders'
Equity
Trade payables
$
115,238
$
98,878
Accrued liabilities
22,402
19,627
Operating lease liabilities, current
portion
4,766
3,384
Warranty obligations, current portion
5,899
7,243
Income taxes payable, current portion
595
5,709
Debt payable, current portion, net of
unamortized debt issuance costs
3,250
3,000
Total current liabilities
152,150
137,841
Operating lease liabilities,
non-current
22,006
17,875
Warranty obligations, non-current
1,467
1,408
Income taxes payable, non-current
3,990
3,657
Other non-current liabilities
4,908
607
Debt payable, non-current, net of
unamortized debt issuance costs
13,998
10,297
Shareholders' equity
192,511
182,545
Total liabilities and shareholders'
equity
$
391,030
$
354,230
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Non-GAAP Presentation
In addition to disclosing its financial results determined in
accordance with GAAP, Nautilus has presented in this release
certain non-GAAP financial measures, which exclude the impact of
certain items (as further described below) and provide supplemental
information regarding operating performance. Nautilus presents
non-GAAP financial measures as a complement to results provided in
accordance with GAAP, and the non-GAAP financial measures should
not be regarded as a substitute for GAAP. By disclosing these
non-GAAP financial measures, management intends to provide
investors with a supplemental comparison of operating results and
trends for the periods presented. Management believes these
measures are also useful to investors as such measures allow
investors to evaluate performance using the same metrics that
management uses to evaluate past performance and prospects for
future performance. Nautilus strongly encourages you to review all
its financial statements and publicly filed reports in their
entirety and to not rely on any single financial measure.
EBITDA from Continuing Operations
Nautilus defines EBITDA from continuing operations as its income
from continuing operations, adjusted to exclude interest expense
(income), income tax expense (benefit) of continuing operations,
and depreciation and amortization expense. Nautilus uses EBITDA
from continuing operations in evaluating its operating results and
for financial and operational decision-making purposes such as
budgeting and establishing operational goals. Nautilus believes
that EBITDA from continuing operations helps identify underlying
trends in its business that could otherwise be masked by the effect
of the items that are excluded from EBITDA from continuing
operations and enhances the overall understanding of the Company’s
past performance and future prospects. Management believes that
EBITDA is frequently used by investors, securities analysts, and
other interested parties in their evaluation of companies, many of
which present EBITDA when reporting their results. Other companies
may calculate EBITDA differently, and it may not be comparable.
Adjusted Results
In addition to disclosing the comparable GAAP results, Nautilus
has presented its operating expenses, operating income (loss), and
income (loss) from continuing operations on an adjusted basis.
Adjusted operating expenses excludes the non-cash charges related
to the disposal group held-for-sale of Octane Fitness®, legal
settlements and acquisition costs. Adjusted operating income
excludes non-cash charges related to the disposal group
held-for-sale of Octane Fitness®. Adjusted income from continuing
operations excludes the loss as well as the associated tax benefit.
We believe that the adjustment of this charge and associated tax
benefit, which are inconsistent in amount and frequency,
supplements the GAAP information with a measure that can be used to
assess the sustainability of our operating performance. In addition
to presenting its EBITDA from continuing operations as described
above, Nautilus has also presented EBITDA from continuing
operations on an adjusted basis, excluding the aforementioned loss
for similar reasons.
Adjusted EBITDA from Continuing Operations
In addition to presenting its EBITDA from continuing operations
as described above, Nautilus has also presented EBITDA from
continuing operations on an adjusted basis, to exclude the non-cash
charge related to stock-based compensation expense, legal
settlements, and acquisition costs. We believe that the adjustment
of this charge, which is inconsistent in amount and frequency,
supplements the EBITDA information with a measure that can be used
to assess the sustainability of our operating performance.
The following table presents a reconciliation of operating
expenses, the most directly comparable GAAP measure, to Adjusted
operating expenses for the three and six-month periods ended
September 30, 2021 and 2020 (unaudited and in thousands):
Three-Months Ended September
30,
Six-Months Ended September
30,
2021
2020
2021
2020
Operating expenses
$
44,003
$
23,943
$
81,641
$
78,445
Gain (loss) on disposal group(1)
—
8,345
—
(20,668
)
Legal settlements
(4,665
)
—
(4,665
)
—
Acquisition costs
(818
)
—
(1,030
)
—
Adjusted operating expenses
$
38,520
$
32,288
$
75,946
$
57,777
The following table presents a reconciliation of operating
(loss) income, the most directly comparable GAAP measure, to
Adjusted operating income for the three and six-month periods ended
September 30, 2021 and 2020 (unaudited and in thousands):
Three-Months Ended September
30,
Six-Months Ended September
30,
2021
2020
2021
2020
Operating (loss) income
$
(1,950
)
$
43,995
$
15,917
$
36,889
(Gain) loss on disposal group(1)
—
(8,345
)
—
20,668
Legal settlements
4,665
—
4,665
—
Acquisition costs
818
—
1,030
—
Adjusted operating income
$
3,533
$
35,650
$
21,612
$
57,557
The following table presents a reconciliation of (loss) income
from continuing operations, the most directly comparable GAAP
measure, to Adjusted income from continuing operations for the
three and six-month periods ended September 30, 2021 and 2020
(unaudited and in thousands):
Three-Months Ended September
30,
Six-Months Ended September
30,
2021
2020
2021
2020
(Loss) income from continuing
operations
$
(4,567
)
$
33,969
$
9,449
$
28,983
(Gain) loss on disposal group(1)
—
(8,345
)
—
20,668
Income tax expense (benefit) for (gain)
loss on disposal group
—
2,420
—
(4,796
)
Legal settlements
4,665
—
4,665
—
Acquisition costs
818
—
1,030
—
Adjusted income from continuing
operations
$
916
$
28,044
$
15,144
$
44,855
The following table presents a reconciliation of (loss) income
from continuing operations, the most directly comparable GAAP
measure, to EBITDA from continuing operations for the three and
six-month periods ended September 30, 2021 and 2020 (unaudited and
in thousands):
Three-Months Ended September
30,
Six-Months Ended September
30,
2021
2020
2021
2020
(Loss) income from continuing
operations
$
(4,567
)
$
33,969
$
9,449
$
28,983
Interest expense, net
469
252
762
589
Income tax expense from continuing
operations
2,242
9,398
5,680
7,056
Depreciation and amortization
1,944
1,853
3,979
4,497
Earnings before interest, taxes,
depreciation, and amortization (EBITDA) from continuing
operations
$
88
$
45,472
$
19,870
$
41,125
The following table presents a reconciliation of (loss) income
from continuing operations, the most directly comparable GAAP
measure, to Adjusted EBITDA from continuing operations for the
three and six-month periods ended September 30, 2021 and 2020
(unaudited and in thousands):
Three-Months Ended September
30,
Six-Months Ended September
30,
2021
2020
2021
2020
(Loss) income from continuing
operations
$
(4,567
)
$
33,969
$
9,449
$
28,983
Interest expense, net
469
252
762
589
Income tax expense from continuing
operations
2,242
9,398
5,680
7,056
Depreciation and amortization
1,944
1,853
3,979
4,497
(Gain) loss on disposal group(1)
—
(8,345
)
—
20,668
Stock-based compensation expense
1,540
1,071
2,765
1,936
Legal settlements
4,665
—
4,665
—
Acquisition costs
818
—
1,030
—
Adjusted earnings before interest, taxes,
depreciation, and amortization (Adjusted EBITDA) from continuing
operations
$
7,111
$
38,198
$
28,330
$
63,729
The following table presents a reconciliation of diluted (loss)
income per share from continuing operations, the most directly
comparable GAAP measure, to Adjusted diluted income per share from
continuing operations for the three and six-month periods ended
September 30, 2021 and 2020 (unaudited and in thousands):
Three-Months Ended September
30,
Six-Months Ended September
30,
2021
2020
2021
2020
Diluted (loss) income per share from
continuing operations
$
(0.15
)
$
1.05
$
0.29
$
0.90
(Gain) loss on disposal group, net of
tax(1)
—
(0.18
)
—
0.50
Legal settlements
0.15
—
0.14
—
Acquisition costs
0.03
—
0.03
—
Adjusted diluted income per share from
continuing operations
$
0.03
$
0.87
$
0.46
$
1.40
(1) Gain or loss on disposal group In accordance with
Accounting Standards Codification (“ASC”) 360, Property, Plant and
Equipment, for a long-lived assets or disposal group classified as
held-for-sale, a loss is recognized for the carrying amount that
exceeds the fair market value of the long-lived assets less the
cost to sell. The assets and liabilities of a disposal group
classified as held-for-sale should be presented separately in the
asset and liability sections, respectively, of the balance sheet.
The disposal group was structured as a sale of the subsidiary
shares and we elected to classify the deferred taxes associated
with the individual assets and liabilities as part of the disposal
group held-for-sale.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211109006443/en/
Investor Relations: John Mills ICR, LLC 646-277-1254
john.mills@ICRinc.com
Media: John Fread Nautilus, Inc 360-859-5815
jfread@nautilus.com
Carey Kerns The Hoffman Agency 503-754-7975
ckerns@hoffmn.com
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