Nautilus Offers Q1 2020 Preliminary Financials, Update on Effects of COVID-19 on Business

Nautilus Inc.’s preliminary net sales for the first quarter 2020 were approximately $94 million, up 11 percent compared to the same period in 2019, the first time quarterly sales have grown year-over-year since third quarter 2018, the Vancouver, Washington-based company announced this week.

This increase was driven by sales of the Bowflex and Schwinn brands, recent strategic and operational changes, disciplined execution and a near-term trend toward home fitness, according to the company.

Nautilus will report official operating results for the first quarter ended March 31, 2020, on May 5.

Nautilus owns Octane Fitness, which sells commercial products to health clubs and is part of Nautilus’ Retail segment, which also includes sales through retail businesses. Preliminary first quarter 2020 net sales for the company’s Retail segment were approximately $46 million, up 24 percent compared to the same period last year. Sales of Bowflex and Schwinn home fitness products more than offset weaker performance in the Octane Fitness commercial line, according to the company. In this preliminary report, Nautilus did not give specifics on how much weaker sales for the Octane Fitness commercial line were for the quarter. 

The Retail segment was boosted by demand for Bowflex SelectTech 552 adjustable weights and Schwinn IC4 connected-fitness bikes. Although numerous retailers have temporarily closed store locations due to COVID-19, Bowflex and Schwinn experienced strong year-over-year sales increases through retail partners’ ecommerce and curbside pick-up platforms.

Its preliminary first quarter net sales for its Direct segment was $47 million, up 1 percent compared to first quarter 2019. This is the first quarter of year-over-year sales growth for the direct segment since fourth quarter 2017. Top-selling direct-to-consumer items like the Bowflex SelectTech dumbbells and kettlebells and the Bowflex C6 and Schwinn IC4 bikes more than offset lower Max Trainer sales, according to the company. Both the Bowflex C6 and Schwinn IC4 connected-fitness bikes have been popular with consumers since they were first introduced in October 2019.

Effects of COVID-19

Nautilus has implemented procedures during the COVID-19 pandemic to keep employees and customers safe while still fulfilling demand, the company said. 

A significant volume of Nautilus products is manufactured in China, and most workers in the factories the company utilizes have returned to work as the COVID-19 pandemic in China wanes, according to the company. Further, ground transportation to the ports and shipping capabilities from China are improving daily. Management is working closely with partners across its supply chain to improve production and delivery timelines and has expedited deliveries to the United States and Europe to meet increased customer demand.

In addition to meeting strong customer demand, Nautilus is focused on the health and welfare of its employees, Nautilus said. Before government orders were in place in the jurisdictions where Nautilus conducts business, the company implemented its work-from-home policies for most employees worldwide, while continuing to provide customer care for Direct and Retail customers.

The company’s distribution centers remain open for both receiving and shipping with strict guidelines on social distancing and worker health and safety protocols.

“COVID-19 has created a heightened need for home-fitness products and our company was able to meet customer demand well, through both the Direct and Retail segments,” Jim Barr, CEO of Nautilus Inc., said in the media release. “We reversed five quarters of year-over-year sales declines and delivered sales growth of 11 percent in Q1 2020 as customers gravitated to key products like the Bowflex SelectTech dumbbells, Bowflex C6 bike, and the Schwinn IC4 bike. Demand for many of our home-fitness products continues to outpace supply and we are pulling all levers to accelerate the manufacturing and delivery of key products.”

Despite the positive results for the first quarter, Barr cautioned that the coming quarters may present added challenges for all businesses as the longer-term impacts of COVID-19 come to light.

“Short-term, it may remain a significant challenge to fully match the unplanned surge in demand with supply,” he said. “Looking to the long term, like many companies, we will be evaluating the potential impact and duration of the pandemic on the overall macro-economic environment.”

2020 Outlook for Nautilus

Nautilus now expects EBITDA from continuing operations to be in the range of $0.0 million to positive $1.5 million. This information is preliminary and based upon information available as of the date of this release.

As of March 31, 2020, Nautilus had cash and cash equivalents of $26.5 million and debt of $28.0 million, compared to cash and cash equivalents of $11.1 million and debt of $14.1 million as of Dec. 31, 2019. The company had $19.3 million available for borrowing on its line of credit as of March 31, 2020.