Bowflex (BFXXQ) 10 Nov 222023 Q2 Earnings call transcript

Good day, and welcome to the Nautilus, Inc.

Second Quarter 2023 Earnings Results Conference Call. All participants will be in listen-only mode [Operator Instructions]. Please note today's event is being recorded. I would now like to turn the conference over to John Mills with ICR. sir. ahead, go Please

Officer; afternoon, and September to on XXth Nautilus for call XX Chief today Good Officer. next Chief second note, the be Please the fiscal available quarter from this Executive Barr, Jim ended conference being are Aina everyone. you. Konold, Nautilus' Financial webcast Welcome is XXXX call and will Thank days. call. replay Participants for

our to happy your at prepared take remarks. of We will be the questions conclusion

be issued was may the release release Our at our X:XX site today's and press fiscal versus earnings and pre-pandemic reconciliation to on our fiscal non-GAAP and XXXX as earnings comparing Time Pacific today XXXX, period year demonstrating growth mentioned the to in page. call be directly we Web of progress. results PM measures includes a The is GAAP most from last the versus comparable believe measures. downloaded financial the we at nautilusinc.com Investors comparing Please in last helpful will note,

call, today's will during that X management Slide On safe a we read. our presentation to full remarks. prepared to everyone statement, is which their ask harbor will we refer have For

them. presentation make our certain available You information like therefore, are undue forward-looking forward-looking on the us on statements not and and will future now to of access page everyone currently going that on of remind to of not one performance, These to the today. can Events statements. and Investors call, are place on forward-looking guarantees based conference Web as management reliance management should Such Nautilus statements the beliefs clicking and I'd site by the Webcast. during this

uncertainties that by will risks, unknown beyond control to predict. and results be our known and actual ability and Our factors are affected trends,

refer it my site. be on turn safe which pleasure with For that, the call Investor to additional statement in our Nautilus' to filings, is CEO, found And concerning section our Barr. factors, harbor Web Jim can SEC over to and the the please these information Relations to Mr.

for to thank I'd and and post One, weather long enhance workouts Two, Nautilus three John, consumer you top short the us. operating line advantage at joining things you term like in strategic an opportunity you, to toward shift challenges. home away habits Thank to fitness enduring all the for our term continues pandemic from today's is profound call. model take a company.

structure expenses Our variation conditions. flex to margin, with manufacturing, levels cost built product market that portfolio, model of and a light asset of the tight and omnichannel operating diversified management distribution, variable inventory enables is

and we and offering capture our term continue scale and revenue JRNY serve profit. to Third, enhance to long digital our customers differentiated better

but fitness, focused our gross grew points trending the the half proof our despite consumer undergoing As consensus. quarterly long delivering challenges, and operating our term short of in members this, breakeven and goal our cutting expenses, to line, plan, down margins many top significantly JRNY on company improved This the our profitable quarter, the to loss our resulted challenged other reduced significant a for is towards for EBITDA home remains beat this year]. At industries, adjusted we in inventory opportunity macroeconomic term manage growth intact. analysts sequentially, like [backhalf in

worked say is they favor and adults consistently recently plus solidified in out of in years up fitness. Consumers’ their consumers shifted have their the well a home target that segments, workouts, build To same our out is home at world shows research long with shift in in past sticking from as macro noble take profound dedication budgets. this mission recently segments and even of Our nearly watch XX% to time. one value to challenges, surveyed home. at reported opportunity. XX% unwavering person home, long more with grounded trend our of beginning and at retail belts and positioned this staying are are In habits and term our healthier a the and we even defined a weather advantage tighten This high XX% the Over who two XXXX. the US particularly working our term is target seismic they of at

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XX% now the up for demand quarter compared we net of Even offering. financial our for consumer saw solid million quarter We this second results. our in channel XX% end delivered environment, sales in XXXX. channel second digital Moving direct retail up with to and and $XX to to JRNY the the XXXX the products tough compared

sell our strength XXX% particularly lowering in inventories the as year. XX,XXX quarter. level our passed and quality retailers by retail over of last the compared channel threshold modalities. reinforcing a through, in XXX,XXX a and [Technical members, high Growth continued saw advantage, cardio, sales offering these Difficulty] a another of driven and categories soft on increase we key of inventoried lagged, focus in the same We many JRNY quarter cardio members to bikes publicized position seasonally their While moderate added an and direct both have resulted conservative across broad was portfolio strategic portfolio having over widely the IC strength of period for

home push is modality excluding in to fitness stay. our XXXX As channel post categories, period in cautious XX% pre-pandemic favoring about home same Yet can the supports that we to including levels fitness. compared Further are retailers up XX% across belief quarter here growth Octane. channel inventory Retail XXXX same exercise was in pandemic fiscal the remain our habits one or versus direct channel the growth soft, others. many

through. seeing reorders others they sell to are in comfortable we stock retailers, And some have assisting existing destocking additional from We are the of tracking and still placing inventories reorders. being while significant in retail before as sell

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significant consensus. half, million, quarter a As loss to $XX totaled cutting first delivering from loss beat adjusted analyst a result, the the for the quarter EBITDA in

real and of the continued in the performance EBITDA improvement demonstrating improvement are adjusted We during year. expect back half

cost EBITDA comfortable Lastly, seasonally expect will deliver in will the adjusted along half. strong structure Difficulty] the with results. diving our we're quarterly detail position into entering nature the first call of and with flexible [Technical we second in remain our fact which deeper stronger the improvement half of compared that our later Aina the we liquidity more year, to provide

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traffic approach drive to advertising to marketing with transactional nimble shift to as marketing to on media the the embracing quarter, be media focused and chance us needed. converting Our digital spend and best of allows In investments sales. we

is to and marketing category. shift to investment more quarter We affected in our we the the a operating decision An expenses, advantage. and third our from are and pillar also of and efficiencies January of made regulate important our when quarter continuously North the last, business season to non-media supply purchase And becoming in chain for an peak looking the second strategic focus model in additional savings. consumers Star shop

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update Let to an JRNY. me move on on now providing

total XXX,XXX in members report second As now I soft that at said are improvement XX,XXX members, we're we earlier, year-over-year. quarter to pleased seasonally a XXX% and our added JRNY

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on operating the adjusted to expenses slide. next Turning

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the improvement is today due takeaway our Nautilus' long line positioned long for the that to and term hope challenging remainder is term is It the earnings call from an profound one retail this for and behavior consumer despite and and Aina. opportunity you, Thank shift year macro of top workouts. my towards There enduring bottom of environment. at-home over that

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from Michael Schwartz first Truist. Today's Instructions] with question comes [Operator

it you business. to sounds the year, guidance that retail most full for took of like Understand is the down related

this number comfort the you’re of So how half given second I hearing the you do visibility and do and here, inventory? guess the guess year, mean, into of about have new retail how reduction much I much everyone's with into guiding I I that, everything, have to you think,

as -- I'll first I Well, mentioned, tag Aina and start on. will

we it First, retailer It their position to are where getting comfort. is reorders. retailer, really level some depends on varies and of stock their

my As remarks, a haven't risk aversion that's going you'll there's I and that mentioned a retail of we see, you'll in seen on. not see in recent lot in years category our that just

direction. We the to are down and monitor continue through are retail coming and in right they retail and they sell headed the the levels,

So that. we think we'll see

I demand. think my out point In the remarks, to it other still it to in call and that words, see people we I’ll -- continue mentioned our are I consumer products. end it's important buying

So versus you're with pre-pandemic. seeing the same that period XX% interact

know as term there as that there us is long the tells We well. that well. that's So

sidelines and just the to of it's that. the are and through matter -- just we on And problems to don't we have a So that, inventory we sit of our our timing ways problems. monitor help their working either, retailers the continue

bidding on through help own prices, do try coordinate with undercutting to have, et keywords, each what make channel other we they to we them, we're sure with the same cetera. sell not So our

a little for channel is just there is in our situation the retail they're a doors problem. expanded reason. Anything that you So add… short monitor for in clogged [Technical to this going temporary But right? retail, This continue problem, know term. we We're We've we’re the Difficulty] just we'll would forward. a optimistic,

I they did we're how the pleased just how really QX. is in of would we're been by downward driven doing with and direct’s agree retail, that with a side pleased lot

Okay, direct terms is great, I expected before? expectations I to mean, that take kind lower of question. your did mean, down similar that just or or in what you’d was my for you next of clarification.

is similar, about most retail. It's the of decline in

maybe maybe early I to something today kind I or over we guess COVID right maybe November, think normal of pointed the then to last would promotion you promotion the few maybe here or last as classify or quarters, now? in how normalized the promotion, relative you period. sit -- slowing And approaching quarter

a and is early. thing. doing we lots it's Black right? everybody that? the we've would I discretionary mean, environment consumers hard, you mentioned we're advertising terms same that. I've deals the same never there, hitting We that I support it have That to seen margin seeing other thing. know things income I spend on fairly think way Friday said, got of start What and the out mean, going we're promotional early to in limited of so add and and

I would if back add inventoried. year really that, half, back were last how on back you we versus compare about over half we're this year thinking last half,

we need an push lever year, promotional of over inventory use be to hang to clear inventory. have don't wanted through. we that that to So This we to want we kind competitive but

be be more selective So in choose competitive. we can we how to

back with looking can So inventory and we're expansion that I'm be margin the happy for competitive deliver still I position. really the half. I'm our we And -- think in

And comes Smith from Mark Street our Markets. Lake at Capital next today question

one them, of questions, my season. was kind environment, entering then just along just that that of this retail of as especially and total just you're of one key on inventory, with channel and seeing just selling we You -- promotional kind but this think hit about what

about the you're you mean thinking about retailer or asked inventory, inventory I our inventory? So

your competitors love and kind all then of both, and to well, would your inventory. retail hear inventory, of product, total maybe of inventory even kind Retail as three. I

functional cross that and it's were a margin showing mean, meet strong pleased balance pretty high line make top we been inventory, one our really expansion. it not with with proud the objectives on that's start has sheet. how year. on I'll we still managed. our got down our glided So last I'm the I sure And it and up of team effort how well to

all that. have in with direction of Jim it's with question retailers, well. other right, And the and The as stocking, other you their asked in also -- the a right they're monitoring thing moving that fitness that's we pleased categories. not how as and really in at said, and really, just inventory doing you're they we're watching So way tricky, are our but things

they're seeing their through to to patterns. our before reorder, and they if maybe still product inventory rest So normal appropriate of more is, and like till close just levels, we're be getting cautious they're what choose more even appropriately glides wait the down selling they lower, may more

while So the we outside in it for things will backlog they But have they're quarter, of categories inventory think a to out. have backlog had we last retail, take across stocked all digest have other that a all fitness. a I probably reordering them

and other we to cut the very deeply? me speak broadly you sounds is, the and this just just cuts then balance quarter. like And too the expenses to how can cutting of that you not strategic sustainability these in was like some of it operating to question But from

a and It's all meet we question, objectives kind to referred the we term a balancing it that make our it's to We without time, near about great right? of in one future. cutting can Jim that and about off our remarks his sure think act, need

contractors, outside after as shed height, that easily equivalents we doubling employees. not knew quickly, pandemic some brings our capabilities, remind everybody that were costs. more we looking we're closer to going excess went to variable, -- So fixed be were time out predicted, are then was our is then kind than really down, height things outside maybe these of at and make we so we're as as could that to when And we intentionally demand closely of the chose expanded we growing need more to We rather in its some dip start make that to reaching there'd what that don't we don't recovery hire a and more as it we advantage opportunity cut I comes. balance add the resources that. want I when know, to and you'd were many Jim, really to to just off when take full we sure sales that of our the and the anything sure if to want

No.

intentional. and was the you I sure sales, we we've not said headcount I'm But that as doubled think it know rough our only we before. if XX%, increased number,

but just that. faster was we thought go And a some way it people thought measured we to should do

position. done think hiring, and that so we're good the we And did we freezing early a of things have others we've continued And like we've example, that what done summer thing. in pretty in done that. sort We've for in that's and

go someone, including something down. really faster. it some personal this someone approval that to pull said, grow it's things Aina has it came things into back to and on of both we of wants a tough to to fantastic. make these and anytime And my here slowed when us requires backfill, hire want So like company And look,

a make what full when with a managing the are We said, So be that is to really turns -- things able try velocity permanent. those we No cost around, and we she kind of The permanent, we every on it's reasons one line And And the the responsibly hold when position managing we and dip. we're balancing we're of cuts the thinks that's to out this the principle coming certain in dip. of balance are it's areas, we're we the what act. dip, side do a capture that's to back in growth we day. want is know do not this this for try other of doing. of dip, it

do during right, October? one this did that was one, the I'll quarter? Is Maybe that in next last I accounting Portland sneak think you closed DC

October closed Yes, we in at lease expiration. it

look So time one there's for or we no lease next expense things quarter? this in any that should

mean, expiration. we moving closed the minor, of like because lease very bit a minor. little it's there's transferring I costs just No, it inventory, very but at

Instructions] Capital Wollam with Partners. [Operator JP ROTH

If maybe understand one then external we and for the you start environmental. of But macro. other if minute, kind kind and more internally, back internally, focus a know, of step I no control more will can can maybe I one the

As said, you're a you dip right Jim, now. managing

everyone maybe kind really just the best the priorities If of of are you top are to through, kind things other want kind really meets what positioned? drilling that couple to that this of out down internally, two team side three mind are of you come that could the when walk of

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is makes going. buy experience for better people A that So a the of equipment I reinforcing the where lot capturing the every making mean, make digital we're part track another. of sure now, it's equipment of to together the we our because because of digital experience. and JRNY that. one digital big day. on discussion is, happening and that, Overtime, it's see course, how And and sure equipment already that, is puck

is So of our it's this another of be I'd to is obsessed. one Pillar consumer consumer. strategy that thing. type our thing say

timing course, are and into mind. so Aina we're the And design that that in the coming And As short as the we term sure but both position consumers moving want insight quickly that forward that a that product right? trying and and the then of after top is long needs make here, and bake like out term things our possible. to weighs are we read to in data said, as of of dip

for So when wherewithal more do just that is. And easy. on place, of things brand and that Bowflex we've the choices, One hard to are keep advertising. brand Star about fair given down spent investment is advertising last I are invest but our to when want a excited brand doing taken we have we don't it, mean, We our amount -- year a some choices, we were to some moved one money we take North Difficulty]. and the transactional then we sales level, amazing remember, we'll in that we're when last we have do fact think I I invested really it, we advertising managing down won't seeing it No, when invested it. this already the in brands Why? resources to dip. year ROI. the we But the had actually I'm that we when Does lowest we to our generate past mean Because [Technical do do that we again? to at modern JRNY are it an brand and continue quarter,

continue that the go you as balance long cover… Anything add term would forward and to So I we in that didn't we short business.

term No, need through but long we dip. don't do this do that think lose to the what it's act, sight of manage I to balancing

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of value it's talked the the mean, about then price. some new And already I I that said. I've things products are

came think they and They're even the ready, at are they're two we bikes though different Recumbent I them the of like are own. -- pretty bikes, category those a is bikes out much are down. example, right for

and We getting years talked [Technical wild the key our one the we really We a I couple that products And relative started think on really growth like So that's about. our we JRNY. did new hog years in go the has our total three competition. timed Difficulty]. ago then of we're to advantages been ownership then few of the with have over are of fueled well last just products it cost

versus before even price you the comparisons of then couple and bikes at what that had Peloton, SKU bikes of extremely when did others super pandemic hot, the a to were for our subscription, costs look once And build in that we subscription. of example hit we the of those were half we introduced get the well. So SKU, equipment and by cost cost

advantage of and the add is to days, our these so And of portfolio. our then enhances ownership. which cost when in the cost people important across to subscription experience, you our have cost that just that We digital continue becoming total

focusing, are what I said those stuff people control. our of focusing times really you really honestly, of Sure. products right? in cycles, We Are macro. the we in we feel I'm about. this control And don't so So the some retailer There you in during know proud the control see people we just for the We demand concerned it? some with business uplifted my as there's We on remarks, things on about we control. for the for but the and demand don't it's future. our see side, because [products] our is don't today, temporary, other inventories, are

short operators intact mean up may is dip, to and that, long It but through what do. spirits our you your responsible term, and ambition slow the keeps have term that's going. keeping working in down your what So compartmentalizing the that's us

session. turn over and conference the question-and-answer I'd back the our team this And gentlemen, management ladies any to for final concludes to like remarks.

for talking the a onwards our today upwards. on earnings rest support Nautilus. to day quarter XXXX Have and February. Thank third of you again you everyone continued the call great look of your We to in forward call year in fiscal

Thank today's presentation. today's concludes attending for you conference We This thank all sir. you call.

lines, your disconnect You and may a now have wonderful evening.