Nautilus, Inc. Reports Results for the First Quarter 2018
First Quarter Revenue and Operating Income Exceed Guidance
Retail Revenue Increased 13.7% to
Company Reiterates Full Year 2018 Revenue and Operating Income Guidance
Q1 2018 Highlights
All comparisons relate to the first quarter of 2017 unless otherwise indicated:
-
Revenues:
-
Total revenue increased 1.4% to
$114.8 million compared to prior year of$113.3 million and guidance range of$110.0 to $113.0 million . -
Direct segment sales decreased 4.7% to
$71.2 million primarily from the expected decline in TreadClimber® sales, partially offset by growth of new products, including the Bowflex HVT® product. -
Retail segment sales increased 13.7% to
$43.0 million , reflecting strong growth across a variety of product lines, as well as growth in specialty and commercial customers.
-
Total revenue increased 1.4% to
-
Gross Margins:
- Total company gross margins decreased by 320 basis points to 51.3% primarily due to a reduction in Direct gross margins, coupled with a shift in segment revenue mix from Direct to Retail.
- Direct margins decreased by 250 basis points due to a shift in product mix to lower margin HVT® products and treadmills.
- Retail margins decreased by 80 basis points due to increased product costs.
-
Operating income decreased 15.7% to
$10.7 million compared to prior year of$12.7 million due to the decline in gross margin and added investments in key strategic initiatives. -
Income from continuing operations for the first quarter of 2018 was
$8.1 million , or$0.27 per diluted share, compared to income from continuing operations of$8.2 million , or$0.26 per diluted share in the prior year quarter. -
EBITDA from continuing operations decreased 11.8% to
$13.1 million compared to$14.9 million in the prior year period. -
At March 31, 2018, cash and marketable securities increased to
$92.7 million and debt decreased to$44.0 million , compared to$85.2 million and$48.0 million , respectively, at December 31, 2017. -
Repurchased
$2.7 million of stock in the open market as part of previously announced stock repurchase program.
Mr. Cazenave continued, “Implementation of the multi-faceted 2018 plan
we described in previous communications is proceeding as planned and on
schedule. This includes systems integration, consolidation of
warehousing facilities, supply base realignment and restructuring of our
international sales and support teams.
For further information, see “Results of Operations Information” attached hereto.
Segment Results
Net sales for the Direct segment were
Net sales for the Retail segment were
Royalty revenue in the first quarter 2018 was
For further information, see “Segment Information” attached hereto.
Balance Sheet
As of March 31, 2018, the Company had cash and marketable securities of
For further information, see “Balance Sheet Information” attached hereto.
Conference Call
Nautilus will host a conference call to discuss the Company’s operating
results for the first quarter ended March 31, 2018 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 three months ended
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: projected or forecasted
financial and operating results; statements regarding the Company's
prospects, resources or capabilities; current or future financial and
economic trends; planned investments, restructurings and similar
initiatives and the anticipated or targeted results therefrom; future
plans for introduction of new products; and 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: 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;
experiencing delays and/or greater than anticipated costs in connection
with launch of new products, entry into new markets, or restructuring
initiatives; 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 condensed
consolidated statements of operations for the three months ended
Three Months Ended |
|||||||||
2018 | 2017 | ||||||||
Net sales | $ | 114,813 | $ | 113,252 | |||||
Cost of sales | 55,942 | 51,507 | |||||||
Gross profit | 58,871 | 61,745 | |||||||
Operating expenses: | |||||||||
Selling and marketing | 36,763 | 37,665 | |||||||
General and administrative | 6,910 | 7,486 | |||||||
Research and development | 4,501 | 3,911 | |||||||
Total operating expenses | 48,174 | 49,062 | |||||||
Operating income | 10,697 | 12,683 | |||||||
Other expense, net | (34 | ) | (360 | ) | |||||
Income from continuing operations before income taxes | 10,663 | 12,323 | |||||||
Income tax expense | 2,523 | 4,138 | |||||||
Income from continuing operations | 8,140 | 8,185 | |||||||
Loss from discontinued operations(1) | (81 | ) | (1,092 | ) | |||||
Net income | $ | 8,059 | $ | 7,093 | |||||
Basic income per share from continuing operations | $ | 0.27 | $ | 0.27 | |||||
Basic loss per share from discontinued operations | — | (0.04 | ) | ||||||
Basic net income per share | $ | 0.27 | $ | 0.23 | |||||
Diluted income per share from continuing operations | $ | 0.27 | $ | 0.26 | |||||
Diluted loss per share from discontinued operations | — | (0.04 | ) | ||||||
Diluted net income per share(2) | $ | 0.26 | $ | 0.23 | |||||
Shares used in per share calculations: | |||||||||
Basic | 30,314 | 30,713 | |||||||
Diluted | 30,591 | 31,127 | |||||||
Select Metrics: | |||||||||
Gross margin | 51.3 | % | 54.5 | % | |||||
Selling and marketing % of net sales | 32.0 | % | 33.3 | % | |||||
General and administrative % of net sales | 6.0 | % | 6.6 | % | |||||
Research and development % of net sales | 3.9 | % | 3.5 | % | |||||
Operating income % of net sales | 9.3 | % | 11.2 | % | |||||
(1) The three months ended
(2) May not add due to rounding.
SEGMENT INFORMATION
The following table presents certain comparative information by segment
for the three months ended
Three Months Ended |
Change | |||||||||||||||
2018 | 2017 | $ | % | |||||||||||||
Net sales: | ||||||||||||||||
Direct | $ | 71,201 | $ | 74,703 | $ | (3,502 | ) | (4.7 | )% | |||||||
Retail | 42,993 | 37,805 | 5,188 | 13.7 | % | |||||||||||
Royalty | 619 | 744 | (125 | ) | (16.8 | )% | ||||||||||
$ | 114,813 | $ | 113,252 | $ | 1,561 | 1.4 | % | |||||||||
Operating income (loss): | ||||||||||||||||
Direct | $ | 11,291 | $ | 15,333 | $ | (4,042 | ) | (26.4 | )% | |||||||
Retail | 3,921 | 2,212 | 1,709 | 77.3 | % | |||||||||||
Unallocated corporate | (4,515 | ) | (4,862 | ) | 347 | 7.1 | % | |||||||||
$ | 10,697 | $ | 12,683 | $ | (1,986 | ) | (15.7 | )% |
BALANCE SHEET INFORMATION
The following summary contains information from our condensed consolidated balance sheets as of March 31, 2018 and December 31, 2017 (unaudited and in thousands):
As of | ||||||||
March 31, 2018 | December 31, 2017 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 23,747 | $ | 27,893 | ||||
Available-for-sale securities | 68,905 | 57,303 | ||||||
Trade receivables, net of allowances of $133 and $119 | 29,796 | 42,685 | ||||||
Inventories | 37,699 | 53,354 | ||||||
Prepaids and other current assets | 7,132 | 7,240 | ||||||
Income taxes receivable | 30 | 17 | ||||||
Total current assets | 167,309 | 188,492 | ||||||
Property, plant and equipment, net | 16,591 | 15,827 | ||||||
Goodwill | 61,963 | 62,030 | ||||||
Other intangible assets, net | 56,933 | 57,743 | ||||||
Deferred income tax assets, non-current | 287 | — | ||||||
Other assets | 704 | 684 | ||||||
Total assets | $ | 303,787 | $ | 324,776 | ||||
Liabilities and Shareholders' Equity | ||||||||
Trade payables | $ | 41,724 | $ | 66,899 | ||||
Accrued liabilities | 12,126 | 10,764 | ||||||
Warranty obligations, current portion | 3,900 | 3,718 | ||||||
Note payable, current portion | 15,993 | 15,993 | ||||||
Total current liabilities | 73,743 | 97,374 | ||||||
Warranty obligations, non-current | 2,158 | 2,399 | ||||||
Income taxes payable, non-current | 3,103 | 2,955 | ||||||
Deferred income tax liabilities, non-current | 9,687 | 8,558 | ||||||
Other non-current liabilities | 2,208 | 2,315 | ||||||
Note payable, non-current | 27,988 | 31,986 | ||||||
Shareholders' equity | 184,900 | 179,189 | ||||||
Total liabilities and shareholders' equity | $ | 303,787 | $ | 324,776 | ||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
The following table presents a reconciliation of EBITDA from continuing
operations for the three months ended
Three Months Ended |
||||||||
2018 | 2017 | |||||||
Income from continuing operations | $ | 8,140 | $ | 8,185 | ||||
Interest expense, net | 21 | 313 | ||||||
Income tax expense of continuing operations | 2,523 | 4,138 | ||||||
Depreciation and amortization | 2,439 | 2,244 | ||||||
Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations | $ | 13,123 | $ | 14,880 | ||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20180507005721/en/
Source:
Investor Relations Contact:
ICR, LLC
John Mills, 646-277-1254