Le Lézard
Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

Nautilus, Inc. Reports Fiscal First Quarter 2023 Results


Nautilus, Inc. (NYSE: NLS) today reported its unaudited operating results for the fiscal 2023 first quarter ended June 30, 2022.

Management Comments

"We are pleased to deliver solid first quarter results that reflect the execution of our multi-year transformation plan. Our omnichannel approach was critical to our success in the quarter, with Direct channel sales up 27% compared to the same pre-pandemic period in fiscal 2020. Further, we continue to expand our digital fitness platform, JRNY®, which exceeded 360,000 members at June 30, 2022, representing approximately 133% growth versus the same quarter last year," said Jim Barr, Nautilus, Inc. Chief Executive Officer.

Mr. Barr continued, "As we look ahead, we believe we are well-positioned to navigate the current macroeconomic environment. Our ability to offer customers a diversified product assortment of strength and cardio offerings that includes our JRNY® platform at a compelling total cost of ownership enables us to drive demand and expand our market position. Based on our performance to-date and visibility into the remainder of our fiscal year, I am pleased to reiterate our full year financial and JRNY® member growth guidance. We have made tremendous progress on our North Star strategy, including becoming a nimbler organization that is equipped to adapt to market conditions and continue to deliver against expectations, including our guidance of positive Adjusted EBITDA for the second-half of fiscal 2023."

Total Company Results

For fiscal 2023, Nautilus expects to return to a more typical pre-pandemic seasonality, with the 2nd Half of the year contributing more of the full year's revenue. Additionally, to gauge sales growth and progress against more "normalized" or pre-pandemic results, the Company will rely more heavily on measuring performance of fiscal 2023 sales growth versus the pre-pandemic twelve-month period that ended March 31, 2020 ("fiscal 2020") to guide business strategy, rather than measuring performance against the atypical, outsized results that occurred during the pandemic.

Fiscal 2023 First Quarter Ended June 30, 2022 Compared to June 30, 2021

1 See "Reconciliation of Non-GAAP Financial Measures" for more information

JRNY® Update

Segment Results

Fiscal 2023 First Quarter Ended June 30, 2022 Compared to June 30, 2021

Direct Segment

Retail Segment

Balance Sheet and Other Key Highlights as of June 30, 2022:

Forward Looking Guidance

The following forward-looking statements reflect the Company's full fiscal year 2023 expectations as of August 9, 2022 and are subject to risks and uncertainties.

Second Half and Full Year 2023

(1) We provide Adjusted EBITDA guidance, rather than net income guidance, due to the inherent unpredictability of forecasting certain types of expenses such as stock-based compensation and income tax expenses, which affect net income but not Adjusted EBITDA. We are unable to reasonably estimate the impact of such expenses, if any, on net income. The inability to project certain components of the calculation would significantly affect the accuracy of a reconciliation. Accordingly, we do not provide a reconciliation of projected net income to projected Adjusted EBITDA.

 

Conference Call

Nautilus will discuss our fiscal 2023 first quarter ended June 30, 2022 operating results during a live conference call and webcast on Tuesday, August 9, 2022 at 1:30 p.m. Pacific Time. The conference call can be accessed by calling (844) 825-9789 in North America. International callers may dial (412) 317-5180. 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, August 9, 2022 through 8:59 p.m. PT, August 23, 2022. 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 10169445.

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-month period ended June 30, 2022 and 2021 (unaudited and in thousands, except per share amounts):

 

 

Three-Months Ended
June 30,

 

 

2022

 

 

 

2021

 

Net sales

$

54,817

 

 

$

184,593

 

Cost of sales

 

47,860

 

 

 

129,088

 

Gross profit

 

6,957

 

 

 

55,505

 

Operating expenses:

 

 

 

Selling and marketing

 

12,891

 

 

 

21,300

 

General and administrative

 

12,463

 

 

 

11,523

 

Research and development

 

5,823

 

 

 

4,815

 

Goodwill and intangible impairment charge

 

26,965

 

 

 

?

 

Total operating expenses

 

58,142

 

 

 

37,638

 

 

 

 

 

Operating (loss) income

 

(51,185

)

 

 

17,867

 

Other expense, net

 

(889

)

 

 

(413

)

(Loss) income from continuing operations before income taxes

 

(52,074

)

 

 

17,454

 

Income tax expense

 

8,096

 

 

 

3,438

 

(Loss) income from continuing operations

 

(60,170

)

 

 

14,016

 

Loss from discontinued operations, net of income taxes

 

(7

)

 

 

(132

)

Net (loss) income

$

(60,177

)

 

$

13,884

 

 

 

 

 

Basic (loss) income per share from continuing operations

$

(1.92

)

 

$

0.46

 

Basic loss per share from discontinued operations

 

?

 

 

 

(0.01

)

Basic net (loss) income per share

$

(1.92

)

 

$

0.45

 

 

 

 

 

Diluted (loss) income per share from continuing operations

$

(1.92

)

 

$

0.43

 

Diluted loss per share from discontinued operations

 

?

 

 

 

?

 

Diluted net (loss) income per share

$

(1.92

)

 

$

0.43

 

 

 

 

 

Shares used in per share calculations:

 

 

 

Basic

 

31,405

 

 

 

30,697

 

Diluted

 

31,405

 

 

 

32,508

 

 

 

 

 

Select Metrics:

 

 

 

Gross margin

 

12.7

%

 

 

30.1

%

Selling and marketing % of net sales

 

23.5

%

 

 

11.5

%

General and administrative % of net sales

 

22.7

%

 

 

6.2

%

Research and development % of net sales

 

10.6

%

 

 

2.6

%

Operating (loss) income % of net sales

 

(93.4

) %

 

 

9.7

%

 

SEGMENT INFORMATION

The following table presents certain comparative information by segment and major product lines within each business segment for the three-months ended June 30, 2022 and 2021 (unaudited and in thousands):

 

Three-Months Ended
June 30,

 

Change

 

 

2022

 

 

 

2021

 

 

$

 

%

Net sales:

 

 

 

 

 

 

 

Direct net sales:

 

 

 

 

 

 

 

Cardio products(1)

$

17,133

 

 

$

31,430

 

 

$

(14,297

)

 

(45.5

) %

Strength products(2)

 

9,343

 

 

 

31,966

 

 

 

(22,623

)

 

(70.8

) %

Direct

 

26,476

 

 

 

63,396

 

 

 

(36,920

)

 

(58.2

) %

 

 

 

 

 

 

 

 

Retail net sales:

 

 

 

 

 

 

 

Cardio products(1)

 

11,843

 

 

 

89,924

 

 

 

(78,081

)

 

(86.8

) %

Strength products(2)

 

15,601

 

 

 

30,560

 

 

 

(14,959

)

 

(48.9

) %

Retail

 

27,444

 

 

 

120,484

 

 

 

(93,040

)

 

(77.2

) %

 

 

 

 

 

 

 

 

Royalty

 

897

 

 

 

713

 

 

 

184

 

 

25.8

%

Consolidated net sales

$

54,817

 

 

$

184,593

 

 

$

(129,776

)

 

(70.3

) %

 

 

 

 

 

 

 

 

Gross profit:

 

 

 

 

 

 

 

Direct

$

4,562

 

 

$

24,514

 

 

$

(19,952

)

 

(81.4

) %

Retail

 

1,498

 

 

 

30,278

 

 

 

(28,780

)

 

(95.1

) %

Royalty

 

897

 

 

 

713

 

 

 

184

 

 

25.8

%

Consolidated gross profit

$

6,957

 

 

$

55,505

 

 

$

(48,548

)

 

(87.5

) %

 

 

 

 

 

 

 

 

Gross margin:

 

 

 

 

 

 

 

Direct

 

17.2

%

 

 

38.7

%

 

 

(2,150

)

basis points

Retail

 

5.5

%

 

 

25.1

%

 

 

(1,960

)

basis points

 

 

 

 

 

 

 

 

Contribution:

 

 

 

 

 

 

 

Direct

$

(9,893

)

 

$

6,759

 

 

$

(16,652

)

 

(246.4

) %

Retail

 

(5,408

)

 

 

22,090

 

 

 

(27,498

)

 

(124.5

) %

Royalty

 

897

 

 

 

713

 

 

 

184

 

 

25.8

%

Consolidated contribution

$

(14,404

)

 

$

29,562

 

 

$

(43,966

)

 

(148.7

) %

 

 

 

 

 

 

 

 

Reconciliation of consolidated contribution to (loss) income from continuing operations:

Consolidated contribution

$

(14,404

)

 

$

29,562

 

 

$

(43,966

)

 

(148.7

) %

Amounts not directly related to segments:

 

 

 

 

 

 

 

Operating expenses

 

(36,781

)

 

 

(11,695

)

 

 

(25,086

)

 

(214.5

) %

Other expense, net

 

(889

)

 

 

(413

)

 

 

(476

)

 

(115.3

) %

Income tax benefit (expense)

 

(8,096

)

 

 

(3,438

)

 

 

(4,658

)

 

(135.5

) %

(Loss) income from continuing operations

$

(60,170

)

 

$

14,016

 

 

$

(74,186

)

 

(529.3

) %

(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 June 30, 2022 and March 31, 2022 (unaudited and in thousands):

 

As of

 

June 30, 2022

 

March 31, 2022

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

7,311

 

$

12,872

Restricted cash

 

1,339

 

 

1,339

Available-for-sale securities

 

?

 

 

?

Trade receivables, net of allowances

 

27,450

 

 

61,454

Inventories

 

103,932

 

 

111,190

Prepaids and other current assets

 

11,979

 

 

14,546

Other current assets - restricted, current

 

3,887

 

 

3,887

Income taxes receivable

 

1,721

 

 

1,998

Total current assets

 

157,619

 

 

207,286

Property, plant and equipment, net

 

33,185

 

 

32,129

Operating lease right-of-use assets

 

22,353

 

 

23,620

Goodwill

 

?

 

 

24,510

Other intangible assets, net

 

6,833

 

 

9,304

Deferred income tax assets, non-current

 

809

 

 

8,760

Income taxes receivable, non-current

 

5,673

 

 

5,673

Other assets

 

2,666

 

 

2,763

Total assets

$

229,138

 

$

314,045

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

Trade payables

$

26,764

 

$

53,165

Accrued liabilities

 

24,420

 

 

29,386

Operating lease liabilities, current portion

 

4,316

 

 

4,494

Finance lease liabilities, current portion

 

120

 

 

119

Warranty obligations, current portion

 

3,955

 

 

4,968

Income taxes payable, current portion

 

720

 

 

839

Debt payable, current portion, net of unamortized debt issuance costs

 

2,243

 

 

2,243

Total current liabilities

 

62,538

 

 

95,214

Operating lease liabilities, non-current

 

19,778

 

 

20,926

Finance lease liabilities, non-current

 

367

 

 

395

Warranty obligations, non-current

 

1,041

 

 

1,248

Income taxes payable, non-current

 

4,054

 

 

4,029

Deferred income tax liabilities, non-current

 

500

 

 

?

Other non-current liabilities

 

1,270

 

 

1,071

Debt payable, non-current, net of unamortized debt issuance costs

 

34,743

 

 

27,113

Shareholders' equity

 

104,847

 

 

164,049

Total liabilities and shareholders' equity

$

229,138

 

$

314,045

 

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.

Adjusted Results

In addition to disclosing the comparable GAAP results, Nautilus has presented its operating expenses and operating (loss) income on an adjusted basis. Adjusted operating expenses and Adjusted operating (loss) income excludes the non-cash charges related to the non-cash charge related to goodwill and intangible asset impairment. We believe that the adjustment of these charges and any 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. Nautilus has also presented EBITDA from continuing operations on an adjusted basis, excluding the aforementioned items for similar reasons.

Adjusted EBITDA from Continuing Operations

Nautilus has also presented EBITDA from continuing operations on an adjusted basis, to exclude the non-cash charge related to goodwill and intangible asset impairment, stock-based compensation expense, and other expenses, net. We believe that the exclusion of stock-based compensation expense provides for a better comparison of our operating results to prior periods and to our peer companies as the calculations of stock-based compensation vary from period to period and company to company due to different valuation methodologies, subjective assumptions, and the variety of award types. We exclude other expenses, net that are the result of factors and can vary significantly from one period to the next, we believe that exclusion of such other expenses are useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis. 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-month period ended June 30, 2022 and 2021 (unaudited and in thousands):

 

Three-Months Ended
June 30,

 

2022

 

2021

Operating expenses

$

58,142

 

 

$

37,638

Goodwill and intangible impairment charge(1)

 

(26,965

)

 

 

?

Adjusted operating expenses

$

31,177

 

 

$

37,638

 

The following table presents a reconciliation of operating (loss) income, the most directly comparable GAAP measure, to Adjusted operating (loss) income for the three-month period ended June 30, 2022 and 2021 (unaudited and in thousands):

 

Three-Months Ended
June 30,

 

2022

 

2021

Operating (loss) income

$

(51,185

)

 

$

17,867

Goodwill and intangible impairment charge(1)

 

26,965

 

 

 

?

Adjusted operating (loss) income

$

(24,220

)

 

$

17,867

 

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-month period ended June 30, 2022 and 2021 (unaudited and in thousands):

 

Three-Months Ended
June 30,

 

2022

 

2021

(Loss) income from continuing operations

$

(60,170

)

 

$

14,016

Other expense, net

 

889

 

 

 

413

Income tax expense from continuing operations

 

8,096

 

 

 

3,438

Depreciation and amortization

 

2,306

 

 

 

2,054

Stock-based compensation expense

 

1,979

 

 

 

1,225

Goodwill and intangible impairment charge(1)

 

26,965

 

 

 

?

Adjusted (loss) earnings before interest, taxes, depreciation, and amortization (Adjusted EBITDA) from continuing operations

$

(19,935

)

 

$

21,146

(1) Goodwill and intangible impairment charge

In accordance with ASC 350 ? Intangibles ? Goodwill and Other, an entity is required to perform goodwill and indefinite-lived trade names impairment valuations annually, or sooner if triggering events are identified. While our stock price and related market capitalization remained above our reporting unit carrying values as of March 31, 2022, we observed continued market volatility including significant declines in our market capitalization during the three-month period ended June 30, 2022, identified as a triggering event. We performed an interim evaluation and a market capitalization reconciliation during the first quarter of fiscal 2023, which resulted in non-cash goodwill and indefinite-lived intangible assets impairment charges.


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