Nautilus, Inc. Reports Results for the Fourth Quarter and Full Year 2016
Fourth Quarter Revenue Increased 15% Over Prior Year to
Fourth Quarter Operating Income Increased 56% to
EPS from continuing operations increased 19% to
Net sales for the fourth quarter of 2016 totaled
Q4 2016 Highlights
-
Revenues:
-
Retail segment sales increased 43.6% to
$60.0 million , reflecting the inclusion ofOctane Fitness , partially offset by a 6.6% decline in organic growth, as improved performance at certain key retailers did not offset the loss of sales related to accounts that ceased doing business during 2016 and weakness inCanada . -
Direct segment sales decreased 2.7% to
$65.2 million as improved performance metrics in the post-election period did not completely offset the lower media response rates experienced earlier in the quarter.
-
Retail segment sales increased 43.6% to
-
Gross Margins:
- Direct and Retail segments gross margins improved by 630 and 570 basis points, respectively; total company gross margins improved 290 basis points.
-
Operating Expense:
- As a percent of revenue, operating expenses improved 120 basis points to 35.6% versus 36.8% in the fourth quarter last year, driven by lower selling and marketing costs, partially offset by higher planned research and development expenses and incremental expenses from the addition of Octane.
-
Operating income increased by 56.4% to
$19.3 million and operating margin improved by 410 basis points, from 11.3% to 15.4%. -
EBITDA from continuing operations increased by 61.7% to
$21.4 million versus$13.2 million in the same quarter prior year. -
The effective income tax rate for continuing operations in the fourth
quarter of 2016 was 36.4% versus 20.3% in the prior year quarter; the
prior year included a non-recurring tax benefit of
$2.0 million associated with the release of a valuation allowance related to foreign tax credits. -
At
December 31, 2016 , the Company had cash and marketable securities of$79.6 million and debt of$64.0 million , compared to$60.8 million and$80.0 million , respectively, atDecember 31, 2015 .
Full Year 2016 Highlights
-
Revenues:
-
Retail segment sales increased 67.5% from the prior year to
$177.9 million , reflecting the inclusion ofOctane Fitness , and organic Retail growth in excess of 9%. -
Direct segment sales were flat at
$225 million as the Company made a strategic decision to reduce media spending during the pre-election period in the third and fourth quarters due to sub-optimal media response metrics at that time.
-
Retail segment sales increased 67.5% from the prior year to
-
Gross Margins:
- Direct and Retail segment gross margins improved by 340 and 780 basis points, respectively; total company gross margins improved 50 basis points reflecting the channel mix towards higher Retail sales.
-
Operating income increased by 32.6% to
$53.4 million and operating margin improved by 110 basis points, from 12.0% to 13.1%. -
EBITDA from continuing operations increased by 41.4% to
$61.1 million .
For further information, see "Results of Operations Information" attached hereto.
Segment Results
Net sales for the Direct segment were
Operating income for the Direct segment was
Net sales for the Retail segment were
Operating income for the Retail segment was
Royalty revenue in the fourth quarter of 2016 was
For further information, see "Segment Information" attached hereto.
Balance Sheet
As of
For further information, see "Balance Sheet Information" attached hereto.
Conference Call
Nautilus will host a conference call at
A telephonic playback will be available from
Non-GAAP Presentation
In addition to disclosing results determined in accordance with GAAP, Nautilus has presented EBITDA from continuing operations, a non-GAAP financial measure, for the fourth quarter and full year 2016.
The Company defines EBITDA from continuing operations as its income from continuing operations, adjusted to exclude interest expense (income), income tax expense of continuing operations, and depreciation and amortization expense. The Company 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. The Company 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. The Company presents EBITDA from continuing operations as a complement to results provided in accordance with GAAP, and these results should not be regarded as a substitute for GAAP. The Company strongly encourages you to review all of its financial statements and publicly-filed reports in their entirety and to not rely on any single financial measure.
For a quantitative reconciliation of our non-GAAP financial measures to the most comparable GAAP measures, see "Reconciliation of Non-GAAP Financial Measures" included with this release.
About
Headquartered in
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 statements about projected or
forecasted financial and operating results, statements regarding the
Company's prospects, resources or capabilities; current or future
financial and economic trends; future operating results; future plans
for introduction of new products, channel diversification, and entry
into new markets; or anticipated demand for the Company's new and
existing products. Factors that could cause Nautilus, Inc.'s actual
results to differ materially from these forward-looking statements
include costs associated with acquired businesses, failure to
successfully integrate and realize anticipated benefits of acquired
businesses, our ability to timely acquire inventory that meets our
quality control standards from sole source foreign manufacturers at
acceptable costs, greater than anticipated costs associated with launch
of new products, incurrence of unanticipated obligations under licensing
agreements, 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, softness in the retail marketplace. 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 and twelve months ended
Three Months Ended |
Twelve Months Ended |
|||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net sales | $ | 125,764 | $ | 109,140 | $ | 406,039 | $ | 335,764 | ||||||||
Cost of sales | 61,662 | 56,660 | 194,514 | 162,530 | ||||||||||||
Gross profit | 64,102 | 52,480 | 211,525 | 173,234 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling and marketing | 34,153 | 31,425 | 115,437 | 101,618 | ||||||||||||
General and administrative | 7,164 | 6,065 | 28,775 | 21,441 | ||||||||||||
Research and development | 3,475 | 2,645 | 13,919 | 9,904 | ||||||||||||
Total operating expenses | 44,792 | 40,135 | 158,131 | 132,963 | ||||||||||||
Operating income | 19,310 | 12,345 | 53,394 | 40,271 | ||||||||||||
Other income (expense), net | (477 | ) | 16 | (1,813 | ) | (249 | ) | |||||||||
Income from continuing operations before income taxes | 18,833 | 12,361 | 51,581 | 40,022 | ||||||||||||
Income tax expense | 6,859 | 2,509 | 16,480 | 13,219 | ||||||||||||
Income from continuing operations | 11,974 | 9,852 | 35,101 | 26,803 | ||||||||||||
Loss from discontinued operations, net of income taxes | (364 | ) | (134 | ) | (923 | ) | (201 | ) | ||||||||
Net income | $ | 11,610 | $ | 9,718 | $ | 34,178 | $ | 26,602 | ||||||||
Basic income per share from continuing operations | $ | 0.39 | $ | 0.32 | $ | 1.13 | $ | 0.86 | ||||||||
Basic loss per share from discontinued operations | (0.01 | ) | — | (0.03 | ) | (0.01 | ) | |||||||||
Basic net income per share(1) | $ | 0.38 | $ | 0.31 | $ | 1.10 | $ | 0.85 | ||||||||
Diluted income per share from continuing operations | $ | 0.38 | $ | 0.32 | $ | 1.12 | $ | 0.85 | ||||||||
Diluted loss per share from discontinued operations | (0.01 | ) | — | (0.03 | ) | (0.01 | ) | |||||||||
Diluted net income per share(1) | $ | 0.37 | $ | 0.31 | $ | 1.09 | $ | 0.84 | ||||||||
Shares used in per share calculations: | ||||||||||||||||
Basic | 30,924 | 30,992 | 31,032 | 31,288 | ||||||||||||
Diluted | 31,184 | 31,249 | 31,301 | 31,589 | ||||||||||||
Select Metrics: | ||||||||||||||||
Gross margin | 51.0 | % | 48.1 | % | 52.1 | % | 51.6 | % | ||||||||
Selling and marketing % of net sales | 27.2 | % | 28.8 | % | 28.4 | % | 30.3 | % | ||||||||
General and administrative % of net sales | 5.7 | % | 5.6 | % | 7.1 | % | 6.4 | % | ||||||||
Research and development % of net sales | 2.8 | % | 2.4 | % | 3.4 | % | 2.9 | % | ||||||||
Operating income % of net sales | 15.4 | % | 11.3 | % | 13.1 | % | 12.0 | % | ||||||||
(1) May not add due to rounding. | ||||||||||||||||
SEGMENT INFORMATION
The following tables present certain comparative information by segment
for the three and twelve months ended
Three Months Ended |
Change | |||||||||||||||
2016 | 2015 | $ | % | |||||||||||||
Net sales: | ||||||||||||||||
Direct | $ | 65,173 | $ | 67,000 | $ | (1,827 | ) | (2.7 |
) |
% |
||||||
Retail | 59,981 | 41,771 | 18,210 | 43.6 |
|
% |
||||||||||
Royalty | 610 | 369 | 241 | 65.3 |
|
% |
||||||||||
$ | 125,764 | $ | 109,140 | $ | 16,624 | 15.2 |
|
% |
||||||||
Operating income (loss): | ||||||||||||||||
Direct | $ | 11,962 | $ | 9,869 | $ | 2,093 | 21.2 |
|
% |
|||||||
Retail | 12,226 | 6,950 | 5,276 | 75.9 |
|
% |
||||||||||
Unallocated corporate | (4,878 | ) | (4,474 | ) | (404 | ) | (9.0 |
) |
% |
|||||||
$ | 19,310 | $ | 12,345 | $ | 6,965 | 56.4 |
|
% |
||||||||
Twelve Months Ended |
Change | |||||||||||||||
2016 | 2015 | $ | % | |||||||||||||
Net sales: | ||||||||||||||||
Direct | $ | 225,057 | $ | 225,595 | $ | (538 | ) | (0.2 |
) |
% |
||||||
Retail | 177,920 | 106,195 | 71,725 | 67.5 |
|
% |
||||||||||
Royalty | 3,062 | 3,974 | (912 | ) | (22.9 |
) |
% |
|||||||||
$ | 406,039 | $ | 335,764 | $ | 70,275 | 20.9 |
|
% |
||||||||
Operating income (loss): | ||||||||||||||||
Direct | $ | 43,215 | $ | 39,940 | $ | 3,275 | 8.2 |
|
% |
|||||||
Retail | 29,451 | 12,850 | 16,601 | 129.2 |
|
% |
||||||||||
Unallocated corporate | (19,272 | ) | (12,519 | ) | (6,753 | ) | (53.9 |
) |
% |
|||||||
$ | 53,394 | $ | 40,271 | $ | 13,123 | 32.6 |
|
% |
||||||||
BALANCE SHEET INFORMATION
The following summary contains information from our consolidated balance
sheets as of
As of |
|||||||
2016 | 2015 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 47,874 | $ | 30,778 | |||
Available-for-sale securities | 31,743 | 29,998 | |||||
Trade receivables, net of allowances of |
45,458 | 45,155 | |||||
Inventories | 47,030 | 42,729 | |||||
Prepaids and other current assets | 8,020 | 6,888 | |||||
Income taxes receivable | 3,231 | 439 | |||||
Deferred income tax assets | — | 8,904 | |||||
Total current assets | 183,356 | 164,891 | |||||
Property, plant and equipment, net | 17,468 | 16,764 | |||||
|
61,888 | 60,470 | |||||
Other intangible assets, net | 69,800 | 73,354 | |||||
Deferred income tax assets, non-current | 11 | — | |||||
Other assets | 543 | 433 | |||||
Total assets | $ | 333,066 | $ | 315,912 | |||
Liabilities and Shareholders' Equity | |||||||
Trade payables | $ | 66,020 | $ | 61,745 | |||
Accrued liabilities | 12,892 | 13,027 | |||||
Warranty obligations, current portion | 3,500 | 4,753 | |||||
Note payable, current portion, net of unamortized debt issuance
costs of |
15,993 | 15,993 | |||||
Total current liabilities | 98,405 | 95,518 | |||||
Warranty obligations, non-current | 3,950 | 3,792 | |||||
Income taxes payable, non-current | 2,403 | 4,116 | |||||
Deferred income tax liabilities, non-current | 16,991 | 18,380 | |||||
Other long-term liabilities | 2,481 | 3,144 | |||||
Note payable, non-current, net of unamortized debt issuance costs of
|
47,979 | 63,971 | |||||
Shareholders' equity | 160,857 | 126,991 | |||||
Total liabilities and shareholders' equity | $ | 333,066 | $ | 315,912 | |||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Three Months Ended |
Twelve Months Ended |
|||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Income from continuing operations | $ | 11,974 | $ | 9,852 | $ | 35,101 | $ | 26,803 | ||||||||
Interest expense (income), net | 407 | (49 | ) | 1,694 | (196 | ) | ||||||||||
Income tax expense of continuing operations | 6,859 | 2,509 | 16,480 | 13,219 | ||||||||||||
Depreciation and amortization | 2,126 | 901 | 7,874 | 3,412 | ||||||||||||
Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations | $ | 21,366 | $ | 13,213 | $ | 61,149 | $ | 43,238 |
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