Nautilus, Inc. Finishes Challenging 2019 With Encouraging Fourth Quarter Results
Fourth Quarter 2019 Retail Segment Sales Increased 4.8% Compared to Same Period Last Year
Company Generated Cash Flow from Operations of
Fourth Quarter 2019 EPS from Continuing Operations Increased 140% to
Company Provides First Quarter 2020 EBITDA Guidance
Fourth Quarter 2019 Highlights Compared to Fourth Quarter 2018
-
Net Sales were$104.2 million , down 9.7% compared to$115.4 million . The 4.8% increase in the Retail Segment was offset by a 28.1% decline in the Direct Segment.
-
Operating Expenses decreased by 27.4% to
$34.9 million compared to$48.0 million , primarily due to reductions in sales and marketing expenses, general and administrative costs, and research and development costs.
-
Operating Income increased by 21.4% to
$3.3 million compared to$2.7 million .
-
Income from Continuing Operations increased to
$3.7 million , or$0.12 per diluted share, compared to income from continuing operations of$1.5 million , or$0.05 per diluted share.
- The tax rate for the fourth quarter was minus 25.8% primarily due to a true-up of an income tax benefit in the prior quarter.
-
EBITDA from continuing operations increased to
$5.9 million compared to$5.0 million .
“We are seeing signs that the improvements made during the latter half of 2019 are beginning to benefit our business. New technology enhancements to our product offerings combined with more efficient advertising and reduced overall operating expenses resulted in overall improved results for the fourth quarter,” said
Fourth Quarter 2019 Segment Results Compared to Fourth Quarter 2018
Direct
-
Net Sales were$35.9 million , down 28.1% from$49.9 million . Increased sales of Bowflex bikes and Max TotalTM were more than offset by lowerMax Trainer ® product sales.
- Gross Margin was 49.9%, down from 58.7%, driven by unfavorable product mix and unfavorable overhead absorption related to the decrease in sales.
-
Operating Loss was
$5.0 million compared to operating loss of$3.8 million . The increased loss primarily reflected lower net sales and lower gross margin rates partially offset by reductions in sales and marketing expenses. The Company optimized fitness-season advertising spend and focused on higher-returning media which resulted in a 42.7% reduction in advertising expense.
Retail
-
Net Sales were$67.5 million , up 4.8% from$64.4 million . Higher sales were driven primarily by SelectTech weights and Schwinn IC bikes as well as third quarter 2019 shipment delays that were recognized in the fourth quarter of 2019.
- Gross Margin was 28.8%, down from 31.7%, driven primarily by unfavorable sales mix and higher tariffs.
-
Operating Income was
$12.2 million , up 8.1% from$11.3 million . Lower gross margin dollars were more than offset by more efficient sales and marketing expenses, as well as reduced research and development costs.
Balance Sheet
As of
New Secured Credit Facility
In
Guidance
The Company does not plan to provide specific guidance on an ongoing basis but due to the timing of the fourth quarter 2019 release and the early stages of its business transformation, it is providing the following commentary: The Company expects EBITDA from continuing operations to be a loss in the range of
These statements are forward-looking and actual results may materially differ. Refer to the “Forward-Looking Statements” section below for information on the factors that could cause our actual results to materially differ from these forward-looking statements.
Conference Call
Nautilus will host a conference call at
A telephonic playback will be available from
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 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.
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.
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 or forecasted financial and operating results, including future plans for introduction of new products and marketing campaigns, anticipated demand for the Company's new and existing products, and projected impact of the new and continuing product launches on the Company’s operating results for the first quarter of 2020 and future periods; statements regarding the Company's prospects, resources or capabilities; planned investments, strategic initiatives and the anticipated or targeted results of such initiatives; and planned operational initiatives and the anticipated cost-saving results of such initiatives. Factors that could cause Nautilus, Inc.’s actual results to differ materially from these forward-looking statements 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; an inability to pass along or otherwise mitigate the impact of raw material price increases and other cost pressures, including unfavorable currency exchange rates; 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; and 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
|
|||||||||||||||||
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Net sales |
$ |
|
104,173 |
|
|
$ |
|
115,385 |
|
|
$ |
|
309,285 |
|
|
$ |
|
396,753 |
|
|
Cost of sales |
|
66,016 |
|
|
|
64,670 |
|
|
|
198,702 |
|
|
|
215,013 |
|
|||||
Gross profit |
|
38,157 |
|
|
|
50,715 |
|
|
|
110,583 |
|
|
|
181,740 |
|
|||||
|
|
|
|
|
|
|
|
|||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|||||||||||||
Selling and marketing |
|
25,449 |
|
|
|
36,438 |
|
|
|
94,595 |
|
|
|
115,920 |
|
|||||
General and administrative |
|
6,418 |
|
|
|
7,486 |
|
|
|
30,242 |
|
|
|
28,226 |
|
|||||
Research and development |
|
3,000 |
|
|
|
4,081 |
|
|
|
14,282 |
|
|
|
16,825 |
|
|||||
|
— |
|
|
— |
|
|
|
72,008 |
|
|
— |
|
||||||||
Total operating expenses |
|
34,867 |
|
|
|
48,005 |
|
|
|
211,127 |
|
|
|
160,971 |
|
|||||
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
|
3,290 |
|
|
|
2,710 |
|
|
|
(100,544 |
) |
|
|
20,769 |
|
|||||
Other (expense) income, net |
|
(378 |
) |
|
|
(4 |
) |
|
|
(1,288 |
) |
|
|
232 |
|
|||||
Income (loss) from continuing operations before income taxes |
|
2,912 |
|
|
|
2,706 |
|
|
|
(101,832 |
) |
|
|
21,001 |
|
|||||
Income tax (benefit) expense |
|
(751 |
) |
|
|
1,246 |
|
|
|
(9,537 |
) |
|
|
5,891 |
|
|||||
Income (loss) from continuing operations |
|
3,663 |
|
|
|
1,460 |
|
|
|
(92,295 |
) |
|
|
15,110 |
|
|||||
Loss from discontinued operations, net of income taxes |
|
(176 |
) |
|
|
(98 |
) |
|
|
(505 |
) |
|
|
(452 |
) |
|||||
Net income (loss) |
$ |
|
3,487 |
|
|
$ |
|
1,362 |
|
|
$ |
|
(92,800 |
) |
|
$ |
|
14,658 |
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Basic income (loss) per share from continuing operations |
$ |
|
0.12 |
|
|
$ |
|
0.05 |
|
|
$ |
|
(3.11 |
) |
|
$ |
|
0.50 |
|
|
Basic loss per share from discontinued operations |
|
(0.01 |
) |
|
— |
|
|
|
(0.02 |
) |
|
|
(0.02 |
) |
||||||
Basic net income (loss) per share(1) |
$ |
|
0.12 |
|
|
$ |
|
0.05 |
|
|
$ |
|
(3.13 |
) |
|
$ |
|
0.49 |
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Diluted income (loss) per share from continuing operations |
$ |
|
0.12 |
|
|
$ |
|
0.05 |
|
|
$ |
|
(3.11 |
) |
|
$ |
|
0.50 |
|
|
Diluted loss per share from discontinued operations |
|
(0.01 |
) |
|
— |
|
|
|
(0.02 |
) |
|
|
(0.01 |
) |
||||||
Diluted net income (loss) per share(1) |
$ |
|
0.12 |
|
|
$ |
|
0.05 |
|
|
$ |
|
(3.13 |
) |
|
$ |
|
0.48 |
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Shares used in per share calculations: |
|
|
|
|
|
|
|
|||||||||||||
Basic |
|
29,756 |
|
|
|
29,708 |
|
|
|
29,684 |
|
|
|
30,099 |
|
|||||
Diluted |
|
29,756 |
|
|
|
29,926 |
|
|
|
29,684 |
|
|
|
30,355 |
|
|||||
|
|
|
|
|
|
|
|
|||||||||||||
(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 |
||||||||||||||||
|
2019 |
|
2018 |
|
$ |
|
% |
||||||||||||
Net sales: |
|
|
|
|
|
|
|
||||||||||||
Direct |
$ |
|
35,906 |
|
|
$ |
|
49,945 |
|
|
$ |
|
(14,039 |
) |
|
(28.1 |
)% |
||
Retail |
|
67,487 |
|
|
|
64,424 |
|
|
|
3,063 |
|
|
4.8 |
% |
|||||
Royalty |
|
780 |
|
|
|
1,016 |
|
|
|
(236 |
) |
|
(23.2 |
)% |
|||||
|
$ |
|
104,173 |
|
|
$ |
|
115,385 |
|
|
$ |
|
(11,212 |
) |
|
(9.7 |
)% |
||
|
|
|
|
|
|
|
|
||||||||||||
Operating (loss) income: |
|
|
|
|
|
|
|
||||||||||||
Direct |
$ |
|
(5,000 |
) |
|
$ |
|
(3,802 |
) |
|
$ |
|
(1,198 |
) |
|
(31.5 |
)% |
||
Retail |
|
12,240 |
|
|
|
11,320 |
|
|
|
920 |
|
|
8.1 |
% |
|||||
Unallocated corporate |
|
(3,950 |
) |
|
|
(4,808 |
) |
|
|
858 |
|
|
17.8 |
% |
|||||
|
$ |
|
3,290 |
|
|
$ |
|
2,710 |
|
|
$ |
|
580 |
|
|
21.4 |
% |
||
|
Twelve Months Ended
|
|
Change |
||||||||||||||||
|
2019 |
|
2018 |
|
$ |
|
% |
||||||||||||
Net sales: |
|
|
|
|
|
|
|
||||||||||||
Direct |
$ |
|
119,651 |
|
|
$ |
|
184,925 |
|
|
$ |
|
(65,274 |
) |
|
(35.3 |
)% |
||
Retail |
|
186,584 |
|
|
|
208,092 |
|
|
|
(21,508 |
) |
|
(10.3 |
)% |
|||||
Royalty |
|
3,050 |
|
|
|
3,736 |
|
|
|
(686 |
) |
|
(18.4 |
)% |
|||||
|
$ |
|
309,285 |
|
|
$ |
|
396,753 |
|
|
$ |
|
(87,468 |
) |
|
(22.0 |
)% |
||
|
|
|
|
|
|
|
|
||||||||||||
Operating (loss) income: |
|
|
|
|
|
|
|
||||||||||||
Direct |
$ |
|
(24,569 |
) |
|
$ |
|
6,865 |
|
|
$ |
|
(31,434 |
) |
|
(457.9 |
)% |
||
Retail |
|
16,043 |
|
|
|
31,516 |
|
|
|
(15,473 |
) |
|
(49.1 |
)% |
|||||
Unallocated corporate |
|
(92,018 |
) |
|
|
(17,612 |
) |
|
|
(74,406 |
) |
|
(422.5 |
)% |
|||||
|
$ |
|
(100,544 |
) |
|
$ |
|
20,769 |
|
|
$ |
|
(121,313 |
) |
|
(584.1 |
)% |
BALANCE SHEET INFORMATION
The following summary contains information from our consolidated balance sheets as of
As of |
||||||||||
|
2019 |
|
2018 |
|||||||
Assets |
|
|
|
|||||||
|
|
|
|
|||||||
Cash and cash equivalents |
$ |
|
11,070 |
|
|
$ |
|
38,125 |
|
|
Available-for-sale securities |
— |
|
|
|
25,392 |
|
||||
Trade receivables, net of allowances of |
|
54,600 |
|
|
|
45,847 |
|
|||
Inventories |
|
54,768 |
|
|
|
68,465 |
|
|||
Prepaids and other current assets |
|
8,283 |
|
|
|
7,980 |
|
|||
Income taxes receivable |
|
472 |
|
|
|
5,653 |
|
|||
Total current assets |
|
129,193 |
|
|
|
191,462 |
|
|||
Property, plant and equipment, net |
|
22,755 |
|
|
|
22,216 |
|
|||
Operating lease right-of-use assets |
|
20,778 |
|
|
— |
|
||||
|
— |
|
|
|
63,452 |
|
||||
Other intangible assets, net |
|
43,243 |
|
|
|
55,240 |
|
|||
Other assets |
|
4,510 |
|
|
|
574 |
|
|||
Total assets |
$ |
|
220,479 |
|
|
$ |
|
332,944 |
|
|
|
|
|
|
|||||||
Liabilities and Shareholders' Equity |
|
|
|
|||||||
|
|
|
|
|||||||
Trade payables |
$ |
|
74,255 |
|
|
$ |
|
87,265 |
|
|
Accrued liabilities |
|
7,633 |
|
|
|
8,370 |
|
|||
Operating lease liabilities, current portion |
|
3,720 |
|
|
— |
|
||||
Warranty obligations, current portion |
|
3,100 |
|
|
|
3,213 |
|
|||
Note payable, current portion, net of unamortized debt issuance costs of |
— |
|
|
|
15,993 |
|
||||
Total current liabilities |
|
88,708 |
|
|
|
114,841 |
|
|||
Operating lease liabilities, non-current |
|
18,982 |
|
|
— |
|
||||
Warranty obligations, non-current |
|
2,617 |
|
|
|
2,362 |
|
|||
Income taxes payable, non-current |
|
3,676 |
|
|
|
3,427 |
|
|||
Deferred income tax liabilities, non-current |
|
1,783 |
|
|
|
11,888 |
|
|||
Other long-term liabilities |
|
46 |
|
|
|
1,837 |
|
|||
Debt payable, non-current, net of unamortized debt issuance costs of |
|
14,071 |
|
|
|
15,993 |
|
|||
Shareholders' equity |
|
90,596 |
|
|
|
182,596 |
|
|||
Total liabilities and shareholders' equity |
$ |
|
220,479 |
|
|
$ |
|
332,944 |
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
The following table presents a reconciliation of EBITDA from continuing operations for the three and twelve months ended
|
Three Months Ended
|
|
Twelve Months Ended
|
|||||||||||||||||
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) from continuing operations |
$ |
|
3,663 |
|
|
$ |
|
1,460 |
|
|
$ |
|
(92,295 |
) |
|
$ |
|
15,110 |
|
|
Interest expense, net |
|
259 |
|
|
|
37 |
|
|
|
818 |
|
|
|
7 |
|
|||||
Income tax (benefit) expense of continuing operations |
|
(751 |
) |
|
|
1,246 |
|
|
|
(9,537 |
) |
|
|
5,891 |
|
|||||
Depreciation and amortization |
|
2,766 |
|
|
|
2,296 |
|
|
|
10,811 |
|
|
|
8,942 |
|
|||||
Earnings (loss) before interest, taxes, depreciation and amortization (EBITDA) from continuing operations |
$ |
|
5,937 |
|
|
$ |
|
5,039 |
|
|
$ |
|
(90,203 |
) |
|
$ |
|
29,950 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20200224005846/en/
Investor Relations Contact:
Telephone: (646) 277-1254
Source:
Investor Relations Contact:
John Mills, ICR, LLC
Telephone: (646) 277-1254