Nautilus, Inc. Delivers 2nd Consecutive Record-Breaking Quarter
Net Sales Increased 120% to
Operating Income of
EBITDA was
Provides First Quarter 2022 Guidance and Updates Fiscal Year 2026 Operating Margin Targets
Transition Period Highlights Compared to the Same Period Last Year (3-months ending 3/31/2020)
-
Net sales were
$206.1 million , up 119.9% compared to$93.7 million for the same period last year and up 143.3%, excluding sales related to the Octane brand, which was sold inOctober 2020 . Sales growth was driven primarily by continued demand for connected fitness bikes and treadmills, like the Bowflex VeloCore® bike and T22 Treadmill, and robust sales of SelectTech® weights. Strong execution across the organization coupled with supply chain improvements that began last year drove record results. -
Gross profit was
$79.1 million , up 122.2% compared to$35.6 million for the same period last year. Gross margin rates expanded by 40 basis points to 38.4% this year compared to 38.0% for the same period last year. Improved fixed costs leverage in the Retail segment offset margin pressures from inflationary price increases in commodities, FX, and continued elevated transportation costs driven by global logistics disruptions. -
Operating expenses increased by
$3.2 million , or 8.9%, to$39.4 million primarily due to increased general and administrative costs. -
Operating income was
$39.7 million , a$40.3 million improvement compared to a loss$0.6 million for the same period last year. -
EBITDA was
$40.4 million compared to$2.3 million for the same period last year driven higher due to increased operating income. -
Income from continuing operations improved to
$30.6 million , or$0.94 per diluted share, compared to$2.3 million , or$0.08 per diluted share, for the same period last year. -
Net income was
$30.4 million , or$0.93 per diluted share, compared to$2.2 million , or$0.07 per diluted share, for the same period last year. - The effective tax rate for the Transition Period was 19.9%.
Management Comments
“Our team delivered its second consecutive quarter of record-breaking results and posted the highest quarterly revenue in our Company’s 35-year history. Net revenue of
Transition Period Segment Results Compared to
Direct Segment
-
Direct delivered its best quarterly sales in segment history. Net sales were
$101.5 million , up 115.4% compared to the same period last year. - Strength product sales grew 178.6%, led by the popular SelectTech® weights and Bowflex® Home Gyms. Cardio sales increased 95.5%, driven by connected-fitness bikes and treadmills. The latest addition to the Max Trainer® line, the M9, also contributed to the growth in the segment.
- Gross margin rate declined by 120 basis points to 50.3%, primarily driven by higher landed costs due to inflationary increases in commodity prices, FX, and elevated transportation costs.
-
Segment contribution income was
$27.8 million or 27%, compared to$1.8 million or 4% for the same period last year. The$26.0 million improvement was primarily driven by higher gross profit and decreased media spend. Advertising expenses were$10.1 million compared to$13.2 million last year.
Retail Segment
-
Retail segment sales of
$103.4 million were the second-best quarterly sales in segment history, second only to last quarter's$106.3 million . -
Net sales were up 126.8% from the same period last year, or 182.6% excluding sales related to the Octane brand. Retail segment sales outside
the United States andCanada grew 200% or 340% excluding Octane. - Strength product sales grew by 243.5%, led by the Bowflex® Home Gyms and popular SelectTech® weights and benches. Cardio sales increased by 96.2%, driven by bikes, particularly the Schwinn® IC3, IC4 and C7 connected-fitness bikes, and treadmills.
- Gross margin rate expanded by 340 basis points to 26.0%, primarily driven by favorable customer mix and fixed costs leverage which more than offset higher product landed costs.
-
Segment contribution income was
$20.3 million or 20%, compared to$2.4 million or 5% for the same period last year, primarily driven by higher gross profit.
Balance Sheet and Other Key Highlights as of
-
The Company’s liquidity position continues to improve as detailed below:
-
Cash, cash equivalents, restricted cash and available-for-sale securities were
$113.2 million , an increase of$86.8 million , compared to cash, cash equivalents and restricted cash of$26.5 million as ofMarch 31, 2020 . -
Debt was
$13.6 million compared to$28.4 million as ofMarch 31, 2020 . -
$54.4 million was available for borrowing under the Wells Fargo Asset Based Lending Revolving Facility as ofMarch 31, 2021 .
-
Cash, cash equivalents, restricted cash and available-for-sale securities were
-
Account receivables were
$88.7 million , compared to$34.3 million as ofMarch 31, 2020 . The increase in accounts receivable was primarily due to the timing of customer payments on increased sales. -
Inventory was
$68.1 million , compared to$34.9 million as ofMarch 31, 2020 . The increase in inventory was primarily due to the surge in demand for home-fitness products which depleted inventory to an uncharacteristically low level for the season last year. -
Trade payables were
$98.9 million , compared to$34.2 million as ofMarch 31, 2020 . The increase in trade payables was primarily due to timing of payments for inventory. -
Capital expenditures totaled
$2.7 million during the quarter endedMarch 31, 2021 .
Forward Looking Guidance
First Quarter Fiscal 2022
-
Net sales are expected to grow between 40% and 50% versus prior year or between 51% and 62% when excluding
Octane Fitness which was sold in calendar year 2020. - Gross margins in the upcoming quarter will continue to be pressured by higher commodity prices, FX, and continued disruptions in global logistics. Additionally, extremely elevated prices for microchips given global scarcity and incremental investments in JRNY® and Supply Chain will further pressure gross margins in the near-term.
- The Company plans to return to normalized levels of media spend, moving to about 7% of sales vs 2% of sales last year.
- As a result, operating margins are expected to be between 6.5% and 8%.
Full Year Fiscal 2022
-
Full year capital expenditures are expected to be between
$12 million and$14 million with the majority earmarked for JRNY® investments. - The Company is reiterating that JRNY® members are expected to be 250,000 by the end of FY22.
Update on Full-Year 2026 Financial Targets
Following the introduction of the Company’s
The Company is reiterating its target of approximately
The Company is also providing an update to its expectations for the long-term trajectory of operating margins.
By Fiscal Year 2026
- Operating margins are expected to be well above the previously disclosed minimum of 10% and closer to 15%.
- Operating margins for the existing equipment business are expected to have downward pressure given the return to normalized advertising spend and incremental costs related to a higher mix of products with embedded screens, partially offset by improvements in the cost structure.
- The rapidly growing digital subscription business, JRNY®, is expected to have operating margins in the range of 20%-25% and JRNY® margins are expected to continue increasing as membership counts rise and fixed costs are leveraged beyond 2026, thereby contributing to the expansion of overall operating margins.
- The Company continues to expect the digital subscription business to represent approximately 20% of total company revenue and is targeting to have 2 million members by the year 2026.
Conference Call
Nautilus will discuss our Transition Period operating results during a live conference call and webcast on
A telephonic playback will be available from
About
Headquartered in
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
RESULTS OF OPERATIONS INFORMATION
The following summary contains information from our consolidated statements of operations for the three months ended
Three Months Ended
|
||||||||
|
2021 |
2020 |
||||||
Net sales |
$ |
206,075 |
|
$ |
93,722 |
|
||
Cost of sales |
|
126,984 |
|
|
58,125 |
|
||
Gross profit |
|
79,091 |
|
|
35,597 |
|
||
Operating expenses: |
|
|
||||||
Selling and marketing |
|
23,480 |
|
|
24,686 |
|
||
General and administrative |
|
12,060 |
|
|
7,656 |
|
||
Research and development |
|
3,843 |
|
|
3,815 |
|
||
Total operating expenses |
|
39,383 |
|
|
36,157 |
|
||
Operating income (loss) |
|
39,708 |
|
|
(560 |
) |
||
Other expense, net |
|
(1,532 |
) |
|
(584 |
) |
||
Income (loss) from continuing operations before income taxes |
|
38,176 |
|
|
(1,144 |
) |
||
Income tax expense (benefit) |
|
7,595 |
|
|
(3,446 |
) |
||
Income from continuing operations |
|
30,581 |
|
|
2,302 |
|
||
Loss from discontinued operations, net of income taxes |
|
(177 |
) |
|
(118 |
) |
||
Net income |
$ |
30,404 |
|
$ |
2,184 |
|
||
|
|
|
||||||
Basic income per share from continuing operations |
$ |
1.01 |
|
$ |
0.08 |
|
||
Basic loss per share from discontinued operations |
|
(0.01 |
) |
|
— |
|
||
Basic net income per share(1) |
$ |
1.00 |
|
$ |
0.07 |
|
||
|
|
|
||||||
Diluted income per share from continuing operations |
$ |
0.94 |
|
$ |
0.08 |
|
||
Diluted loss per share from discontinued operations |
|
(0.01 |
) |
|
— |
|
||
Diluted net income per share(1) |
$ |
0.93 |
|
$ |
0.07 |
|
||
|
|
|
||||||
Shares used in per share calculations: |
|
|
||||||
Basic |
|
30,416 |
|
|
29,796 |
|
||
Diluted |
|
32,642 |
|
|
30,584 |
|
||
(1) May not add due to rounding. |
SEGMENT INFORMATION
The following tables present certain comparative information by segment and major product lines within each business segment for the three months ended
Three Months Ended
|
Change |
|||||||||||||
2021 |
2020 |
$ |
% |
|||||||||||
Net sales: | ||||||||||||||
Direct net sales: | ||||||||||||||
Cardio products(1) |
$ |
70,148 |
|
$ |
35,876 |
|
|
34,272 |
95.50 |
% |
||||
Strength products(2) |
|
31,389 |
|
|
11,265 |
|
|
20,124 |
178.60 |
% |
||||
Direct |
$ |
101,537 |
|
$ |
47,141 |
|
$ |
54,396 |
115.40 |
% |
||||
Retail net sales: | ||||||||||||||
Cardio products(1) |
|
70,907 |
|
|
36,143 |
|
|
34,764 |
96.20 |
% |
||||
Strength products(2) |
|
32,528 |
|
|
9,470 |
|
|
23,058 |
243.50 |
% |
||||
Retail |
|
103,435 |
|
|
45,613 |
|
$ |
57,822 |
126.80 |
% |
||||
Royalty |
|
1,103 |
|
|
968 |
|
|
135 |
13.90 |
% |
||||
Consolidated net sales |
$ |
206,075 |
|
$ |
93,722 |
|
$ |
112,353 |
119.90 |
% |
||||
Gross profit: | ||||||||||||||
Direct |
$ |
51,046 |
|
$ |
24,299 |
|
$ |
26,747 |
110.10 |
% |
||||
Retail |
|
26,942 |
|
|
10,330 |
|
|
16,612 |
160.80 |
% |
||||
Royalty |
|
1,103 |
|
|
968 |
|
|
135 |
13.90 |
% |
||||
Consolidated gross profit |
$ |
79,091 |
|
$ |
35,597 |
|
$ |
43,494 |
122.20 |
% |
||||
Gross margin: | ||||||||||||||
Direct |
|
50.30 |
% |
|
51.50 |
% |
(120) basis points |
|||||||
Retail |
|
26.00 |
% |
|
22.60 |
% |
340 basis points |
|||||||
Contribution: | ||||||||||||||
Direct |
$ |
27,846 |
|
$ |
1,809 |
|
$ |
26,037 |
1439.30 |
% |
||||
Retail |
|
20,348 |
|
|
2,389 |
|
|
17,959 |
751.70 |
% |
||||
Royalty |
|
1,103 |
|
|
968 |
|
|
135 |
13.90 |
% |
||||
Consolidated contribution |
$ |
49,297 |
|
$ |
5,166 |
|
$ |
44,131 |
854.30 |
% |
||||
Reconciliation of consolidated contribution to income from continuing operations: | ||||||||||||||
Consolidated contribution |
$ |
49,297 |
|
$ |
5,166 |
|
$ |
44,131 |
854.30 |
% |
||||
Amounts not directly related to segments: | ||||||||||||||
Operating expenses |
|
-9,589 |
|
|
-5,726 |
|
|
-3,863 |
-67.50 |
% |
||||
Other expense, net |
|
-1,532 |
|
|
-584 |
|
|
-948 |
-162.30 |
% |
||||
Income tax (expense) benefit |
|
-7,595 |
|
|
3,446 |
|
|
-11,041 |
-320.40 |
% |
||||
Income from continuing operations |
$ |
30,581 |
|
$ |
2,302 |
|
$ |
28,279 |
1228.50 |
% |
(1) Cardio products include: connected-fitness bikes, the Bowflex® C6, Bowflex® VeloCore®, Schwinn® IC4, |
(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
As of |
|||||||||
|
|
|
|
||||||
Assets |
|
|
|
||||||
|
|
|
|
||||||
Cash and cash equivalents |
$ |
38,441 |
$ |
56,581 |
$ |
23,024 |
|||
Restricted cash |
|
1,339 |
|
1,339 |
|
3,432 |
|||
Available-for-sale securities |
|
73,448 |
|
36,199 |
|
— |
|||
Trade receivables, net of allowances of |
|
88,657 |
|
91,224 |
|
34,260 |
|||
Inventories |
|
68,085 |
|
51,140 |
|
34,927 |
|||
Prepaids and other current assets |
|
25,840 |
|
19,188 |
|
7,281 |
|||
Income taxes receivable |
|
— |
|
4,021 |
|
10,149 |
|||
Total current assets |
|
295,810 |
|
259,692 |
|
113,073 |
|||
Property, plant and equipment, net |
|
24,496 |
|
23,926 |
|
23,143 |
|||
Operating lease right-of-use assets |
|
19,108 |
|
19,876 |
|
19,882 |
|||
Other intangible assets, net |
|
9,365 |
|
9,380 |
|
42,449 |
|||
Deferred income tax assets, non-current |
|
2,144 |
|
2,426 |
|
562 |
|||
Other assets |
|
3,307 |
|
2,817 |
|
5,261 |
|||
Total assets |
$ |
354,230 |
$ |
318,117 |
$ |
204,370 |
|||
|
|
|
|||||||
Liabilities and Shareholders' Equity |
|
|
|
||||||
|
|
|
|
||||||
Trade payables |
$ |
98,878 |
$ |
96,399 |
$ |
34,210 |
|||
Accrued liabilities |
|
19,627 |
|
22,506 |
|
9,147 |
|||
Operating lease liabilities, current portion |
|
3,384 |
|
3,331 |
|
3,782 |
|||
Warranty obligations, current portion |
|
7,243 |
|
4,198 |
|
3,366 |
|||
Income taxes payable, current portion |
|
5,709 |
|
335 |
|
298 |
|||
Debt payable, current portion, net of unamortized debt issuance costs of |
|
3,000 |
|
2,792 |
|
1,555 |
|||
Total current liabilities |
|
137,841 |
|
129,561 |
|
52,358 |
|||
Operating lease liabilities, non-current |
|
17,875 |
|
18,736 |
|
18,026 |
|||
Warranty obligations, non-current |
|
1,408 |
|
1,000 |
|
2,884 |
|||
Income taxes payable, non-current |
|
3,657 |
|
4,309 |
|
3,852 |
|||
Deferred income tax liabilities, non-current |
|
— |
|
— |
|
7,788 |
|||
Other non-current liabilities |
|
607 |
|
606 |
|
17 |
|||
Debt payable, non-current, net of unamortized debt issuance costs of |
|
10,297 |
|
10,710 |
|
26,520 |
|||
Shareholders' equity |
|
182,545 |
|
153,195 |
|
92,925 |
|||
Total liabilities and shareholders' equity |
$ |
354,230 |
$ |
318,117 |
$ |
204,370 |
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.
The following table presents a reconciliation of income from continuing operations, the most directly comparable GAAP measure, to EBITDA for the three months ended
Three Months Ended
|
|||||||
|
2021 |
2020 |
|||||
Income from continuing operations |
$ |
30,581 |
$ |
2,302 |
|
||
Interest expense, net |
|
169 |
|
625 |
|
||
Income tax expense (benefit) from continuing operations |
|
7,595 |
|
(3,446 |
) |
||
Depreciation and amortization |
|
2,017 |
|
2,810 |
|
||
Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations |
$ |
40,362 |
$ |
2,291 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20210510005875/en/
Investor Relations:
646-277-1254
john.mills@ICRinc.com
Media:
360-859-5815
jfread@nautilus.com
The
503-754-7975
ckerns@hoffman.com
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