Nautilus, Inc. Reports Results for the Fourth Quarter and Full Year 2018
Net sales for the fourth quarter of 2018 totaled
Operating income for the fourth quarter of 2018 was
Income from continuing operations for the fourth quarter of 2018 was
Mr. Cazenave continued, “As we enter 2019, we have implemented a number of initiatives to further strengthen our business. We have a solid cash flow business model and strong balance sheet that enables us to better educate the consumer on the many benefits of our offerings through robust marketing and with significant multi-media support. We have a healthy new product introduction schedule for 2019 across all channels and have recently acquired additional development assets, including the RunSocial® platform, as well as secured strategic relationships with key partners, such as Samsung Electronics America, Feed.fm and Vi Technologies. We expect that these investments and partnerships will deliver significant enhancements to our digital platform across all facets of its individualized customer coaching experience including visuals, music, and voice, and should further expand our product reach and potential subscription base. We are focused on improving earnings and operating margins for the future and have taken several steps in 2019 to help achieve this goal, including a workforce reduction, broad cost containment controls, and value engineering initiatives. There is also added focus on simplification to improve process efficiency and rescale our operations to be more profitable while we drive to restore growth to our Direct sales base. As for the near-term outlook, our sales in the Direct segment and the mass retail channel will be challenged in the first half of the year. Until we complete the revamping of the marketing plan in Direct, we anticipate that the recent sales weakness experienced in the segment will continue through most of the first half of 2019. Additionally, despite the strength of our mass retail channel sell-through in Q4 2018, there are significantly higher than anticipated inventories in the channel that need to be drawn down in the first quarter of 2019. At this time we are not providing specific guidance but will provide ongoing updates on the progress of our major initiatives as the year progresses. We have navigated through setbacks like this before and have come out stronger afterwards. Our goal in 2019 is to do it again, and we intend to utilize our many strengths including strong brands, technologies, talent, and ability to adapt and execute well.”
For further information, see "Results of Operations Information" attached hereto.
Segment Results
Net sales for the Direct segment were
Operating loss for the Direct segment was
Net sales for the Retail segment were
Operating income for the Retail segment was
For further information, see "Segment Information" attached hereto.
Balance Sheet
As of
For further information, see "Balance Sheet Information" attached hereto.
Technology Investments and Strategic Partnerships
As part of our capital deployment strategy, we have made multiple strategic investments which we expect will enhance and accelerate our ability to develop and commercialize the next stages of our digital platform.
In
Also during the first quarter of 2019, Nautilus made an investment in
Feed.fm and signed a strategic development partnership agreement with
Conference Call
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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 and twelve 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, including future plans for introduction
of new products, 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
2019 and future periods; statements regarding the Company's prospects,
resources or capabilities; current or future financial and economic
trends; planned investments, development partnerships and strategic
initiatives and the anticipated or targeted 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 December 31, |
Twelve Months Ended December 31, |
|||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net sales | $ | 115,385 | $ | 127,771 | $ | 396,753 | $ | 406,184 | ||||||||
Cost of sales | 64,670 | 65,327 | 215,013 | 202,302 | ||||||||||||
Gross profit | 50,715 | 62,444 | 181,740 | 203,882 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling and marketing | 36,438 | 36,901 | 115,920 | 116,222 | ||||||||||||
General and administrative | 7,486 | 6,005 | 28,226 | 27,111 | ||||||||||||
Research and development | 4,081 | 4,332 | 16,825 | 15,446 | ||||||||||||
Asset impairment charge | — | 8,800 | — | 8,800 | ||||||||||||
Total operating expenses | 48,005 | 56,038 | 160,971 | 167,579 | ||||||||||||
Operating income | 2,710 | 6,406 | 20,769 | 36,303 | ||||||||||||
Other income (expense), net | (4 | ) | 50 | 232 | (598 | ) | ||||||||||
Income from continuing operations before income taxes | 2,706 | 6,456 | 21,001 | 35,705 | ||||||||||||
Income tax expense (benefit) | 1,246 | (2,076 | ) | 5,891 | 8,080 | |||||||||||
Income from continuing operations | 1,460 | 8,532 | 15,110 | 27,625 | ||||||||||||
Loss from discontinued operations, net of income taxes(1) | (98 | ) | (88 | ) | (452 | ) | (1,358 | ) | ||||||||
Net income | $ | 1,362 | $ | 8,444 | $ | 14,658 | $ | 26,267 | ||||||||
Basic income per share from continuing operations | $ | 0.05 | $ | 0.28 | $ | 0.50 | $ | 0.90 | ||||||||
Basic loss per share from discontinued operations | — | — | (0.02 | ) | (0.04 | ) | ||||||||||
Basic net income per share(2) | $ | 0.05 | $ | 0.28 | $ | 0.49 | $ | 0.86 | ||||||||
Diluted income per share from continuing operations | $ | 0.05 | $ | 0.28 | $ | 0.50 | $ | 0.89 | ||||||||
Diluted loss per share from discontinued operations | — | — | (0.01 | ) | (0.04 | ) | ||||||||||
Diluted net income per share(2) | $ | 0.05 | $ | 0.27 | $ | 0.48 | $ | 0.85 | ||||||||
Shares used in per share calculations: | ||||||||||||||||
Basic | 29,708 |
30,470 |
30,099 | 30,671 | ||||||||||||
Diluted | 29,926 |
30,752 |
30,355 | 31,010 | ||||||||||||
Select Metrics: | ||||||||||||||||
Gross margin | 44.0 | % | 48.9 | % | 45.8 | % | 50.2 | % | ||||||||
Selling and marketing % of net sales | 31.6 | % | 28.9 | % | 29.2 | % | 28.6 | % | ||||||||
General and administrative % of net sales | 6.5 | % | 4.7 | % | 7.1 | % | 6.7 | % | ||||||||
Research and development % of net sales | 3.5 | % | 3.4 | % | 4.2 | % | 3.8 | % | ||||||||
Operating income % of net sales | 2.3 | % | 5.0 | % | 5.2 | % | 8.9 | % | ||||||||
(1) The twelve months ended December 31, 2017 includes a $1.2 million expense related to a lawsuit settlement with Biosig Instruments, Inc. |
||||||||||||||||
(2) 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 December 31, |
Change | ||||||||||||||
2018 | 2017 | $ | % | ||||||||||||
Net sales: | |||||||||||||||
Direct | $ | 49,945 | $ | 71,640 | $ | (21,695 | ) | (30.3 | )% | ||||||
Retail | 64,424 | 55,482 | 8,942 | 16.1 | % | ||||||||||
Royalty | 1,016 | 649 | 367 | 56.5 | % | ||||||||||
$ | 115,385 | $ | 127,771 | $ | (12,386 | ) | (9.7 | )% | |||||||
Operating income (loss): | |||||||||||||||
Direct | $ | (3,802 | ) | $ | 11,759 | $ | (15,561 | ) | (132.3 | )% | |||||
Retail | 11,320 | 7,068 | 4,252 | 60.2 | % | ||||||||||
Unallocated corporate | (4,808 | ) | (12,421 | ) | 7,613 | 61.3 | % | ||||||||
$ | 2,710 | $ | 6,406 | $ | (3,696 | ) | (57.7 | )% | |||||||
Twelve Months Ended December 31, |
Change | ||||||||||||||
2018 | 2017 | $ | % | ||||||||||||
Net sales: | |||||||||||||||
Direct | $ | 184,925 | $ | 219,440 | $ | (34,515 | ) | (15.7 | )% | ||||||
Retail | 208,092 | 183,875 | 24,217 | 13.2 | % | ||||||||||
Royalty | 3,736 | 2,869 | 867 | 30.2 | % | ||||||||||
$ | 396,753 | $ | 406,184 | $ | (9,431 | ) | (2.3 | )% | |||||||
Operating income (loss): | |||||||||||||||
Direct | $ | 6,865 | $ | 34,900 | $ | (28,035 | ) | (80.3 | )% | ||||||
Retail | 31,516 | 27,495 | 4,021 | 14.6 | % | ||||||||||
Unallocated corporate | (17,612 | ) | (26,092 | ) | 8,480 | 32.5 | % | ||||||||
$ | 20,769 | $ | 36,303 | $ | (15,534 | ) | (42.8 | )% | |||||||
BALANCE SHEET INFORMATION
The following summary contains information from our consolidated balance
sheets as of
As of December 31, | |||||||
2018 | 2017 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 38,125 | $ | 27,893 | |||
Available-for-sale securities | 25,392 | 57,303 | |||||
Trade receivables, net of allowances of $99 and $119 | 45,847 | 42,685 | |||||
Inventories | 68,465 | 53,354 | |||||
Prepaids and other current assets | 7,980 | 7,240 | |||||
Income taxes receivable | 5,653 | 17 | |||||
Total current assets | 191,462 | 188,492 | |||||
Property, plant and equipment, net | 22,216 | 15,827 | |||||
Goodwill | 63,452 | 62,030 | |||||
Other intangible assets, net | 55,240 | 57,743 | |||||
Other assets | 574 | 684 | |||||
Total assets | $ | 332,944 | $ | 324,776 | |||
Liabilities and Shareholders' Equity | |||||||
Trade payables | $ | 87,265 | $ | 66,899 | |||
Accrued liabilities | 8,370 | 10,764 | |||||
Warranty obligations, current portion | 3,213 | 3,718 | |||||
Note payable, current portion, net of unamortized debt issuance costs of $7 and $7 | 15,993 | 15,993 | |||||
Total current liabilities | 114,841 | 97,374 | |||||
Warranty obligations, non-current | 2,362 | 2,399 | |||||
Income taxes payable, non-current | 3,427 | 2,955 | |||||
Deferred income tax liabilities, non-current | 11,888 | 8,558 | |||||
Other long-term liabilities | 1,837 | 2,315 | |||||
Note payable, non-current, net of unamortized debt issuance costs of $7 and $14 | 15,993 | 31,986 | |||||
Shareholders' equity | 182,596 | 179,189 | |||||
Total liabilities and shareholders' equity | $ | 332,944 | $ | 324,776 | |||
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 December 31, |
Twelve Months Ended December 31, |
|||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||
Income from continuing operations | $ | 1,460 | $ | 8,532 | $ | 15,110 | $ | 27,625 | ||||||
Interest expense, net | 37 | 142 | 7 | 899 | ||||||||||
Income tax expense (benefit) of continuing operations | 1,246 | (2,076 | ) | 5,891 | 8,080 | |||||||||
Depreciation and amortization | 2,296 | 2,257 | 8,942 | 8,643 | ||||||||||
Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations | $ | 5,039 | $ | 8,855 | $ | 29,950 | $ | 45,247 | ||||||
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Source:
Investor Relations:
John Mills, ICR, LLC
Telephone: (646)
277-1254