Announces Preliminary Fourth Quarter
and Full Year Fiscal 2023 Results, Exceeding Expectations
Plans to Report Fourth Quarter and Full Year
Fiscal 2023 Results on Tuesday, May 23, 2023
Bowflex parent, Nautilus, Inc. (NYSE: NLS) (the “Company”) today
announced actions to enhance its balance sheet, including the sale
of non-core assets. In addition, the Company reported preliminary
unaudited Fourth Quarter and Full Year Fiscal 2023 Results.
The Company has completed the sale of non-core assets for
approximately $13 million in cash as part of its ongoing
comprehensive strategic review. The sale of these assets, which
include the Nautilus brand trademark assets and related licenses,
will continue to streamline the Company’s brand focus and enhance
its financial flexibility. The Company used the net proceeds from
the sale to pay down part of its term loan. As of today, the
Company’s cash, cash equivalents, and restricted cash balance is
about $19 million and borrowings are about $18 million. This
compares to cash, cash equivalents, and restricted cash balance of
about $16 million and borrowings of about $61 million as of
December 31, 2022.
The Company has also improved the terms of its credit agreement
for its existing revolving credit facility. Under the new
agreement, Nautilus has reduced the revolver commitment from $100
million to $60 million, better aligning the Company’s debt capacity
with its working capital needs and reducing its annual interest
expense and related fees. Furthermore, Nautilus paid down the
outstanding amounts on the revolver and there are currently no
outstanding borrowings.
“The sale of these valuable, but non-core assets, including the
Nautilus brand, which has been de-emphasized in our transformative
North Star strategy, position us well to continue to capitalize on
long-term growth in consumer demand for at-home fitness,” said Jim
Barr, Nautilus, Inc. Chief Executive Officer. “With the improved
financial flexibility from the sale and enhancements to our balance
sheet, we’re confident in our ability to manage through the current
environment and continue our path to becoming a leader in connected
fitness. At the same time, our strategic review is ongoing as we
continue to assess any opportunities that may accelerate our
transformation and enhance value for our shareholders, while also
benefitting our customers, employees, retail partners, and
vendors.”
Preliminary Unaudited Fourth Quarter and Full Year Fiscal
2023 Results
For the fiscal 2023 fourth quarter ended March 31, 2023, the
Company expects to report:
- Net sales of $68.4 million compared to $119.7 million last
year. The sales decline versus last year is driven primarily by the
return to pre-pandemic demand. The Company focused on significantly
reducing Nautilus branded inventory in the quarter. Excluding sales
of Nautilus branded equipment, net sales for Q4-2023 are expected
to be $62.0 million.
- Loss from continuing operations of $20.9 million compared to a
loss of $18.2 million last year.
- Adjusted EBITDA1 loss from continuing operations of $12.6
million compared to $16.9 million last year.
For the twelve-months ended March 31, 2023, the Company expects
to report:
- Net sales of $286.8 million (versus guidance of about $270
million) compared to $589.5 million last year. The sales decline
versus last year is driven primarily by the return to pre-pandemic
demand. Excluding sales of Nautilus branded equipment, net sales
for FY2023 are expected to be $274.8 million.
- Loss from continuing operations of $107.5 million compared to a
loss of $22.2 million last year.
- Adjusted EBITDA1 loss from continuing operations of $46.6
million (versus guidance of Adjusted EBITDA2 loss of about $50.0
million) compared to Adjusted EBTIDA1 loss of $3.3 million last
year.
- JRNY® Members to be approximately 500,000 as of March 31, 2023,
in line with guidance.
“I am proud to announce results that exceeded our expectations,”
said Mr. Barr. “Continued demand in our Direct business during the
fourth quarter as well as continued outstanding inventory
management and cost-control initiatives, enabled us to deliver
solid results for Q4 and fiscal year 2023. We are also pleased by
the strong momentum of our differentiated digital offering, having
achieved our growth targets for JRNY® Members by the end of the
fiscal year. We operate a strong equipment portfolio, which has
driven continued demand for our products, and we have made
significant progress scaling JRNY®.”
1 See “Reconciliation of Non-GAAP Financial Measures” for more
information.
2 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.
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.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Non-GAAP Presentation 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.
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). Management believes
these measures are also useful to investors as these are the same
metrics that management uses to evaluate past performance and
prospects for future performance. Nautilus strongly encourages
investors to review all its financial statements and publicly filed
reports in their entirety and to not rely on any single financial
measure to evaluate the Company’s performance.
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(1), the legal
settlement(2), acquisition and other related costs(3), and
involuntary termination benefits and other exit costs(4),
depreciation, amortization, and stock-based compensation and other
net expenses. The Company believes that EBITDA is an important
measure as it allows the Company to evaluate past performance and
prospects for future performance. The Company believes the
exclusion of stock-based compensation expense provides for a better
comparison of operating results to prior periods and to 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. The Company excludes other expenses, net that are the result
of a variety 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 do not reconcile non-GAAP financial measures on a
forward-looking basis as it is impractical to do so without
unreasonable effort.
The following table presents a reconciliation of loss from
continuing operations, the most directly comparable GAAP measure,
to Adjusted EBITDA from continuing operations for the three and
twelve-month periods ended March 31, 2023 and 2022 (unaudited and
in thousands):
Three-Months Ended March
31,
Twelve-Months Ended March
31,
2023
2022
2023
2022
Loss from continuing operations
$
(20,925
)
$
(18,198
)
$
(107,488
)
$
(22,204
)
Other expense, net
2,593
984
4,768
2,914
Income tax expense (benefit) from
continuing operations
786
(4,705
)
9,359
(6,026
)
Depreciation and amortization
3,147
2,628
11,103
8,615
Stock-based compensation expense
(964
)
1,651
3,908
6,262
Goodwill and intangible impairment
charge(1)
—
—
26,965
—
Legal settlement(2)
(276
)
—
(276
)
4,665
Acquisition and other related costs(3)
540
770
2,483
2,448
Restructuring and exit charges(4)
2,549
—
2,549
—
Adjusted loss before interest, taxes,
depreciation, and amortization (Adjusted EBITDA) from continuing
operations
$
(12,550
)
$
(16,870
)
$
(46,629
)
$
(3,326
)
(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. We observed continued
market volatility including significant declines in our market
capitalization during the three-month period ended June 30, 2022,
which we identified as a triggering event. In response to the
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.
(2) Legal Settlement
Legal settlement is a loss contingency accrual related to a
legal settlement for a class action lawsuit related to
advertisement of our treadmills.
(3) Acquisition and other related costs
On September 17, 2021, we acquired VAY AG
("VAY") for aggregate purchase consideration of approximately $27.0
million. We accounted for the transaction as a business
combination. Acquisition and other costs are reflected in general
and administrative costs and consist of acquisition related closing
costs and a contingent consideration arrangement. The contingent
consideration arrangement requires the Company to recognize $3.9
million compensatory expense over an 18 month service
period.
(4) Restructuring and exit charges
In February 2023, we restructured our cost structure to align
with lower revenue. In addition to ending relationships with
outsourced contractors, we executed a reduction in our workforce by
approximately 15%. Restructuring and exit charges include
involuntary employee termination benefits and other exit costs.
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version on businesswire.com: https://www.businesswire.com/news/home/20230502005536/en/
Investor Relations: John Mills ICR, LLC 646-277-1254
John.mills@icrinc.com
Media: John Fread Nautilus, Inc 360-859-5815
jfread@nautilus.com
Robin Rootenberg Action Mary 925-464-8030
robin.rootenberg@actionmary.com
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