Inside The Call: Nautilus Rides Home Fitness Boom To Record Results

With double-digit progress throughout its Direct and Retail section because the home-fitness developments present no signal of slowing down, Nautilus Inc. delivered record-breaking outcomes for the second straight quarter to provide the very best income quarter within the firm’s 35-year historical past.

In the quarter ended March 31, income was up 120 % to $206 million. Excluding the divested Octane enterprise, income for the interval was up 143 % yr over yr. The interval represents a transition quarter as the corporate’s fiscal yr is shifting to March 31.

In February, Nautilus supplied steerage calling for progress of 55 % to 75 %.

“Results had been pushed by leveraging the continued robust demand for at-home health, together with the crew’s spectacular efforts to resolve unprecedented challenges in international logistics, bringing provide a lot nearer to matching demand,” mentioned Jim Barr, CEO, on a convention name with analysts. “Our progress and profitability contributions had been as soon as once more broad-based throughout manufacturers, segments, merchandise, and geographies.”

Barr added, “Strong gross sales of our new connected-fitness cardio machines, VeloCore bikes, the brand new treadmills, and Max Trainers, mixed with the continued momentum of our SelectTech power merchandise drove these file numbers. The market reception to our new linked merchandise has been great and we’re proud to have launched our manufacturers to lots of of hundreds of recent clients, buying practically 340,000 new clients within the final 12 months.”

At the tip of March, Nautilus had practically 4 occasions as many members as a part of its JRNY linked platform as in comparison with September when it launched its first embedded display product.

Direct Segment Sales Climb 115 Percent
The direct section grew 115.4 % within the quarter to $102 million, crossing the $100 million mark for the primary time in section historical past. Among classes, power grew 178.6 %, pushed by Bowflex SelectTech weights and residential gyms. Cardio grew 95.5 %, pushed by connected-fitness bikes, the Bowflex VeloCore and C6, and Schwinn IC4, and new Bowflex connected-fitness treadmills. The newest addition to the Max Trainer line, the M9, additionally contributed to the expansion within the section.

Direct’s backlog on the finish of the transition interval was right down to $27 million from $46 million final yr as provide is coming nearer to assembly demand and customers are getting their merchandise quicker.

Gross margins within the Direct section declined 120 foundation factors to 50.3 %, pushed by greater landed prices resulting from inflationary will increase in commodity costs, FX, and elevated transportation prices. Gross revenue grew 110 % to $51 million. Segment contribution was $27.8 million, versus final yr’s $1.8 million, pushed by elevated gross revenue and decrease media spend. Advertising bills had been $10.1 million in comparison with $13.2 million final yr.

Retail Segment Revenues Vault 183 Percent
Retail section gross sales had been $103.4 million, the second-best quarterly gross sales in section historical past, second solely to final quarter’s $106.3 million. Sales had been up 126.8 % versus final yr or 182.6 % excluding the Octane Fitness enterprise offered final yr. Retail section gross sales outdoors the U.S. and Canada grew 200 % or 340 % excluding Octane.

Strength grew 243.5 %, pushed by Bowflex Home Gyms and SelectTech weights and benches. Cardio was up 96.2 %, pushed by Schwinn and Bowflex connected-fitness bikes and the brand new Bowflex connected-fitness treadmills. Similar to Direct, the Retail section was in a position to scale back its backlog. At the tip of the transition interval, Retail’s backlog was $179 million in comparison with the final quarter’s backlog of $209 million.

Gross margin fee within the Retail section expanded 340 foundation factors to 26.0 %, primarily pushed by favorable buyer combine and glued prices leverage which greater than offset greater product landed prices. Segment contribution earnings was $20.3 million or 20 %, in comparison with $2.4 million, or 5 %, for a similar interval final yr, primarily pushed by greater gross revenue.

Operating Expense Leverage Boosts Earnings
Companywide gross margin expanded 40 foundation factors within the quarter to 38.4 %. Improved mounted prices leverage within the Retail section offset margin pressures from inflationary worth will increase in commodities, FX, and continued elevated transportation prices pushed by international logistics disruptions.

Operating bills elevated 8.9 % primarily resulting from elevated normal and administrative prices. Due to gross sales leverage, working bills as a % of gross sales had been slashed to 19.1 % from 38.6 % a yr in the past.

Operating earnings was $39.7 million in comparison with a lack of $560,000 for a similar interval final yr. EBITDA was $40.4 million in comparison with $2.3 million for a similar interval final yr.

Income from persevering with operations improved to $30.6 million, or 94 cents per share, in comparison with $2.3 million, or 8 cents, for a similar interval final yr. Net earnings was $30.4 million, or 93 cents, in comparison with $2.2 million, or 7 cents, for a similar interval final yr.

For the primary quarter, Nautilus expects:

  • Net gross sales to develop between 40 % and 50 % versus the prior yr or between 51 % and 62 % when excluding Octane Fitness;
  • Gross margins to proceed to be pressured by greater commodity costs, FX, and continued disruptions in international logistics. Additionally, extraordinarily elevated costs for microchips given the worldwide shortage and incremental investments in JRNY and provide chain will additional stress gross margins within the close to time period;
  • Media spend to return to normalized ranges, shifting to about 7 % of gross sales versus 2 % of gross sales final yr; and
  • Operating margins to be between 6.5 % and eight %.

Home Fitness Growth Opportunity
Barr additionally supplied an replace on the execution of its North Star technique unveiled on March 18 at its Investor Day. The technique largely constructed round benefiting from the house health development by transitioning Nautilus from a product-led {hardware} firm to a consumer-led digital firm.

He mentioned the corporate nonetheless sees that 25 % of former gym-goers don’t ever plan on going again to the fitness center after experiencing house health. in the course of the pandemic with the house shift not less than doubling the corporate’s SAM (serviceable addressable market).  Said Barr, “As many have discovered, they like the comfort and security of understanding at house, which now has the additional advantage of a extra digital providing full of selection.”

He added, “We additionally imagine the rising work-from-anywhere mannequin can be extensively adopted and helps maintain the demand for our services and products. Studies point out that two-thirds of U.S. employees desire a hybrid office, and most of the world’s largest employers already are committing to hybrid and distant work options. As a consequence, we imagine a significant variety of gym-goers will proceed to work out at house on dates they make money working from home, along with sustaining their fitness center memberships, balancing between house and fitness center primarily based on their work schedule.”

Some of the methods underneath the North Star plan embrace utilizing extra digital ways to effectively goal customers, bettering the branding of Bowflex round linked cardio in addition to power merchandise, returning advertising and marketing spend to pre-COVID ranges, and increasing connected-fitness choices to deal with calls for for “selection, hyper-personalized one-to-one adaptive exercises.”

Nautilus’ up to date full-year 2026 monetary targets underneath the plan embrace:

  • Nautilus reiterated its goal of roughly $1 billion in complete income by the fiscal yr 2026, which might signify a 5-year CAGR of 10 %;
  • Operating margins are anticipated to be nicely above the beforehand disclosed minimal of 10 % and nearer to fifteen %;
  • Operating margins for the present tools enterprise are anticipated to have downward stress given the return to normalized promoting spend and incremental prices associated to a better mixture of merchandise with embedded screens, partially offset by enhancements in the associated fee construction;
  • The quickly rising digital subscription enterprise, JRNY, is anticipated to have working margins within the vary of 20 percent-25 % and JRNY margins are anticipated to proceed rising as membership counts rise and glued prices are leveraged past 2026, thereby contributing to the enlargement of total working margins; and
  • The firm continues to count on the digital subscription enterprise to signify roughly 20 % of complete firm income and is concentrating on to have 2 million members by the yr 2026.

Photo courtesy Nautilus

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