Bowflex (BFXXQ) 23 May 232023 Q4 Earnings call transcript

Good day, and welcome to the Nautilus, Inc., Fourth Quarter 2023 Earnings Results Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note today's event is being recorded.

I would now like to turn the conference over to Mr. ICR. with Mills John sir. ahead, go Please

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

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

stated earnings issued downloaded Pacific mentioned the call our the Our call was of to this Time in results GAAP and will earnings website on the most PM be measures release at X:XX reconciliation against measures. The the press today today's nautilusinc.com includes XXXX. comparisons page. unless may of all from comparable period our Investor in comparable financial otherwise a non-GAAP release for directly Please be note, Relations at

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pleasure the over And is CEO, it to with Jim Barr. call Nautilus' turn that, to my Mr.

joining all us. John, you, for and thank you Thank

key four during we'll topics by call. like would highlighting today's on be I begin to focusing

fiscal our significantly cost and than guidance by and our through results 'XX Direct QX February. delivered First, better strong in leveraging business control, we provided

have we sharpen our environment. Second, better our navigate current deliberate taken to sheet positions balance and us the focus, strengthen to which actions

cash efforts profitability, company the our resulting improvement to in year-over-year expect return full XXXX. drive EBITDA in for free we flow significant and Third, to year fiscal the adjusted

our Finally, confident due in to and to we leader equipment long-term leading continue and path a our opportunity our we brands, own remain industry approach omnichannel becoming the in portfolio as comprehensive on fitness. connected position

navigate demonstrated year and full broader fourth industry macro to ability and Our quarter challenges. our results

we fiscal sales delivered cardio demand for fiscal 'XX. $XXX offerings. million For XX% year 'XX, our including of net year growth million, $XXX strength versus was Direct driven net in sales portfolio Strength of and by broad of direct

to our Direct net delivered which sales return pre-pandemic million quarter, we Within of the QX $XX enhancements offerings we've strength, million, In up seasonal in the 'XX, quarter versus including see a we in this $XX fiscal as fourth net Direct, to of made the saw reflecting XX% sales momentum we category. continue was in trends. to

enabled operational expectations. QX On us 'XX line, and EBITDA above year excellence our efforts the fiscal bottom to adjusted deliver

buy want as months We to seasonally around our we to want in of customers significantly and centered where to our softer focus our main is we very plan, our want, provide they they feel inventory well quarter. fourth them management excellence they the the our products per Our operational enter them. position and continued when inventory improve positioned

subscribers, year-over-year. in ended than approximately Of members. JRNY year growth We of JRNY were added of XX,XXX XXX,XXX growth our I'm representing scaling for year-over-year. the members our and QX members, on with XXX,XXX momentum as proud XX% our differentiated growth targets digital XX% exceeded continued offering we more these JRNY members, fiscal

We that encouraged see consumers are to sell-through progressing. are to

macroeconomic conservative However, in a to home approach fitness the of light continue category take the environment. across retailers

continue We to the half expect this first XXXX. through of fiscal

of to a we to during our $XX business are As the structure to remain proactive which committed savings omnichannel million approach. expected an the our cost basis. result, fourth quarter, took yield measures on in reset cost We annualized

We have improve. an our believe doubling been successful share market conditions model component our will Direct and of market segment XXXX Retail business remain long-term when in we since important

licenses net month To related focus navigate million. our to reflects brands X as of position proceeds of of our to loan. enhance trademark a enables part strategic we the we sale brand our improve top years included brand challenges, on ago the $XX leverage down pay term balance debt branding Nautilus impact. The our about and This our approach sheet. the and to minimal us will sale enhance announced further announced actions ongoing our have to we industry near-term Nautilus deliberate assets and several the non-core this continue streamline ability for earlier This including assets, to

Our Bowflex, of brands XX% generate Schwinn over revenue. JRNY and our

and We updating brand our reevaluating look are identity the you the process on to in future. our forward corporate of plans in

with amendments balance strategic later, alternatives Aina we and stronger the substantially same credit and to inventory the quarter our end, At discuss position as our comprehensive sheet. time, amending subsequent liquidity further The a of agreements. liquidity by enhanced review provide sale to non-core our improved credit is ongoing. Additionally, improved us will our assets, agreements, of

on strategic identifying value. Our transformation accelerate enhance to and opportunities focused the shareholder partner company's remains Board

information additional this time. process no share at this regarding have We to

Looking remain ahead, industry opportunity. confident we long-term the in

exercise habits as home opportunity with of the shift strong and Our result long-term fitness favoring research Connected continues Fitness. to to steadiness workout the show changes in a the home of

strategic we the the transformation progress industry X years on our North strategy, over under make long-term as pandemic. We our made last stronger have company normalizes will significant what post our Star believe

mix, on optimized is on Today, implemented I investment. Under areas. which media to have enhanced targeting consumer X mindset, our return our our highlight segment want we key consumer-first progress driving better and advertising

equipment, visibility into in our end-user fiscal top This have for this in we fast-moving of new highlighted we exciting sellers. benefits be strongest the our the where particularly to demand and XXXX. business refresh the pipeline our demand is by an and direct have to are Bowflex branding offerings seeing excited introduced product of strength our are We of

achieving to We chain turn our goal supply a are into transformative competitive advantage.

In tangible landed addition to gross via improvement product costs. lower margin

last enhanced and We have order process consumers. a they to need delivery rolling our our Direct retailers, to mile out we significantly the delivery permitting when them to times better for product, closer are

introducing in tracking strength technologies and devices. transitioning Fitness for real-time Connected coaching members form portfolio, We also to and to progress include scaling are receive a mobile cardio significant as vision portfolio enabling motion digital counting our using our their to installed Tangible base JRNY, results making offering. rep differentiated personalized an

we equipment resulted of be Fitness a JRNY XXX,XXX-member off offering so Connected consumed introduced This use our experiences for achievement our lower-priced of equipment who mobile wish members across Fitness. anyone to Connected only JRNY on in the to quarter, portfolio digital We've built This devices. has that their growth. and benefits experience can

our especially Connected been We what competitors, have so continued Fitness laid economy. much delivering spend we than on and in more keep a a already mentioned, strong JRNY just Because important near-term foundation for of volatile have to key much experiences reduce affordable able we've growth. total I JRNY, built member

to will advancements which conversion quality subscribers we forward, and in adaptive time. engagement personal Moving drive we'll training, on focus believe support making continue over the paid and to

our I a causing environment our time to of would XXXX difficult now seeing maintain retail be conservative continued fiscal inventory like outlook. demand, seasonality same macroeconomic to At to that their to touch has on the positions. pre-pandemic we're reversion the partners

by taking challenges sheet. and to navigating enhance We steps more efficiently industry are our these balance operate

profitability. While business, a our excellence focus 'XX, in retail. efforts, Direct significant our cost and clear back Equipment path enhancement, top for line uncertainty especially create business in and remains believe on including control We that a margin continued fiscal operational to

improvement such, for we adjusted significant EBITDA are XXXX. a guiding As year-over-year year of full to the in

will turn results 'XX fourth and us give Aina, our full over quarter Aina? will I and detail it year the now guidance. to fiscal on more who

everyone. Thank Jim, and good you, afternoon,

view will fiscal press additional on guidance company and 'XX and year for year go I'll year year provide QX to for speaking slides 'XX. for results. full Today, to website information be our fiscal full Please and to our total QX release results

Slide P&L to the for total now quarter. results Turning X, company

to last also addition to we'll 'XX. year fiscal be in comparing results pre-pandemic this year, year's revenue normalized comparing In to more

season Additionally, rationalizing as of May past made on our this disclosed brand our sold the portion fitness of Nautilus and a strategy Nautilus we've inventory. through we selling demand quarter X, took progress of branded previously stated advantage by on brand. We significant portfolio our

XX%, about more the was year by $XX retailers Octane strength be was for XX% inventory versus fiscal and year down profit sales 'XX down year with versus conservative down $XX and excluding from XX% million, were X their the in same fiscal LY. was as given continue versus XX% cardio up quarter purchases Retail points Gross declined XX%, XX%. macro were the as environment. Direct last to by down margins 'XX, about gross million quarter Net fourth driven

more branded in freight due we I'll basis the XXX logistics than decision year-over-year, points deleverage. total A absolute in decline. impacted points less now XXX branded go in through treadmills. the outbound resulting sales XXX due driven increased product. margin Nautilus were to exit dollars by to deleverage of basis declined spent the sales although overhead, to of Nautilus basis drivers gross increased points costs, were higher company discounting by

costs, logistics expansion lower sales are of product Similar house were margin year-over-year to declined to XXX company to XX closed costs. more because Costs landed lower offset is by resulting total locations incremental we JRNY basis needed storage These of points to excess than basis deleverage dollar and related Portland inventory. D.C. spend in down, exited points deleverage. COGS. while overhead, due declines the

U.S., pandemic-related demurrage freight. was inbound now older through burdened we've the cleared and by inventory detention that higher In and

to freight benefiting efforts in are optimize from imports freight. inhibition lower resulting our network, inbound New our

factory we've our top lower Additionally, SKUs. costs for negotiated

sales than XXX net Excluding last year. 'XX Nautilus have gross 'XX and basis XX%, higher QX been points have branded QX would $XX been would margins products, million

adjusted to P&L GAAP. acquisition lines to well exclude release a purchase the to restructuring expenses. exit of as costs Turning reconciliation now have operating adjusted VAY, and our to for other next and related Please of press The as see few the charges. been

million implemented $X decrease key contracted expenses decrease less $XX marketing million $XX $XX the services decrease to down about reduction Adjusted versus $X $XX last year, or $X expenses The were in and in year in personnel in operating which versus we and XX% were million selling and expenses. the million advertising, decrease million, was of in million million variable XXXX last force in February this year. related $X drivers million

an year, exit operating this million. in last million year $XX Excluded $X.X EBITDA million improvement from year. about was to And $X of Adjusted $XX.X adjusted operating to of million QX. expenses loss adjusted last was $XX.X are charges $XX compared restructuring and compared loss million million

EBITDA of impact million. Nautilus $XX.X been have deep product discounts, the selling adjusted loss branded Excluding would at

AR both of XXXX million, Turning at and down was million, $XX March XX% 'XX. from March payables was million, million of year-end for million September 'XX. available now and million, sheet $XX $XX million. versus trade Cash of were $XX bringing at our the versus $XX $XX XX. XX% the million, million XXXX. our March was and to liquidity end up we Per was borrowing, down have to balance $X Debt as our inventory peak $XXX plan, year-end down from $XX

million and positive For an of quarter was flow last $XX improvement year. versus an QX, million, $X last free million $XX improvement of cash versus

was For of versus $XX million year, year, million million. flow improvement $X last an cash $XX negative the free positive

Our cash meaningful free in reflected this the flow. showing difficult environment, in is focus excellence operational improvement on macroeconomic

proceeds and our we as both May from overall the pay term down improved ABL, our our which loan reported liquidity. to amend sales part Additionally, we our on asset of used of X, to

May were while of cash only $XX borrowings $XX our million, million. balance As X, total was our

now guidance. to Turning

providing are and guiding full year members. guidance full JRNY between We million year-end revenue, $XXX EBITDA to of for year million. We're $XXX and full 'XX adjusted sales year

between the second conservative of revenue. fiscal being and the for to therefore, first represent and we expect continue XX% of XX% half with to expect year, half We retailers reorders the

our seasonality is be typical of QX of revenue lowest business, to the the quarter the with year. Consistent expected

last than segment. a As softness be driven our in full retail of year is by lower percent sales, expected to year

$X.X to With the million. is the income Nautilus sale year full royalty be of expected brand,

EBITDA returning adjusted We're are year to profitability fiscal for to 'XX. focused breakeven on and achieve targeting

department a and this to improvement. restructuring the EBITDA net of given need EBITDA, lower changed of items COGS. landed macro business. of overhead from margin However, range guidance and guiding to in from expenses of $XX February negative year-over-year lower result our million breakeven. the logistics fundamentally achieve margin resulting will revenue come will uncertain million these To gross These some we're breakeven loss gross the adjusted of come adjusted facilities $XX costs improvement lower in $XX EBITDA range, as the will operating of The from that million we which further of will expansion expansion. in are rest of did product result we costs, which part XXXX, in costs, the

older In the demurrage, U.S., through that and factory than higher burdened sold the was inventory inbound calls. the previous we've freight with the tension

to of to demurrage All as in depreciation. offsetting rates the COGS at will spend gains costs factory attention negotiated these increased year-over-year deleverage and primarily new higher gross JRNY been due planned fiscal coming inbound margin in lower released 'XX year is capitalized be freight. be and already have dollar lower inventories and Partially some

in At this discounting expecting the improvement time, environment. any we're not

has pressured on to retailers inventory inventory rightsized, and been competitors front. be our continue the While the

have we year-over-year. flattish So discounts to be planned

we fiscal to by 'XX. Lastly, expect be about members year XXX,XXX JRNY year-end

Like for a environment. are many we operating other continuation companies, the preparing of difficult

will and sufficient. strengthen to levers our ensure our and and balance disciplined managing all that will inventory liquidity our look flex We our to we available remains costs remain sheet with

it over comments. now Jim final to turn for his I'll

Thank you, Aina.

the home proactive fitness fiscal are The of inventory we've and how demonstrated actions. well cost agility short-term I'm the difficult management of XXXX known. post navigated challenges with industry throughout and strong environment and operating pandemic proud

on and the and is differentiated of favorable scaling excel industry fitness us platform, shift are We side digital home placing Long-term at to right strong, a enduring. building trends. equipment

Looking return ahead, the flow position will us and take to continue that drive best will to actions we profitability. cash necessary to

problem teammate. I see thanking reasons Each I and employees to solving. like would your close our by be their for more be day, proud positivity to persistence, to

turn for that, questions. And I'd Operator? like it with to over

with Please Instructions] [Operator with Truist. from proceed question line question. of you. the Swartz Thank your first comes Our Michael

makes trying the help give us that Just presumably to Nautilus to just know said revenue in think a Maybe headwind revenue from maybe the you're kind the and the royalty to and presents you think I touch through terms wanted in sale a lot on But just us lower will terms if I of benefiting of year-over-year. what sense. I'm parts. sense 'XX business fiscal year-over-year be income of of reductions. -- just the moving understand maybe actually a and of cost that in earnings,

in on that Aina, one. you jump may want to

I'll take one. Yes. that

So royalty million. declining by revenue the is $X.X about

almost So big it's to not a number, and that EBITDA. down directly drops

So And to gain it's any from a excluded brand. EBITDA we had on $X.X the EBITDA, adjusted reduction the in our overcome sale impact of of for about then of Nautilus we've that million. the guidance

the kind And then, that, [lifing] very of would weren't just We Nautilus on add sales to [ph] really end of those. driving much.

JRNY. And the of Schwinn line we by on so to driven expect all been really much Bowflex, of don't and the top be business. there an impact It's

you. Got

talk strategic about, gain for of maybe Maybe maybe it? forward. think what rationale expect just out the JRNY going that pricing talk And you tiers I different and Okay. about of then to Perfect. doing you referenced

Sure.

some a competitors very, than That so $XX our at we JRNY $XXX reasonably of an are well one tier pricing people that. year, value month, the it for would to a far which or very So meant has was month with compare use screen. perfectly priced and who but proposition been great embedded of equipment a half less into $XX.XX essentially

coaching. Either training work good they'll But or do and where more mobile counting they'll just now a more we on use use are our JRNY people we're their spot So rep form strength in a and to using on there. devices. floor

that, to more they category, to when attractive wanted people are it us we we're and who make only using so that devices. do on in mobile And their

what And so our a offering $XX.XX and digital is now is month below at. that be competitors' that

subscription start So size for of evolution try It's fit market. you then of you new segments it's industry. different thing of all really with And the where kind one a the the fits us. not kind our SKUs create it's that of and new for to a thing business

rationale. the that's So

question, profitable know what be contribution expected the a does this the of if expecting, maybe But terms JRNY in you it from are and And to one I just to if I basis? the guess, members difficult little I in XXX,XXX-plus? but can. parse are I are you embedding can Okay. just guess, guidance then be maybe guess a should what what you look on or I exactly like, within maybe last be subscribers, And revenue XXXX? that out

to want one? you that maybe Aina, take

part I you. tell help JRNY Because it's of to try can don't segment. we the but disclose you revenue, Direct I'll

the see you'll plan, last will your our second, question given profitable? in the to be last the about probably where that's JRNY X in breakeven. we to revenue. think pushed I plan, JRNY on get year to long-range thought we of path of And So sales experienced did in couple getting year-and-a-half, are then, would And years, it the we we JRNY been reduction but that the a breakeven. out that's that when When we've

next the question. Wollam proceed your Our comes line Partners. from Please question ROTH of with Instructions] [Operator JP Capital with

positive. necessarily bottom growth what may from of kind just year of that a had, way be It tough And have that First, that non-core you environment, confidence sort you the interesting, new we from maybe looks the you could look retail kind around with high kind you to products, just of into assets don't point tough I little comfortable we Thank a the curious to level, of past we to this like bit the here? just go from maybe the we've kind of at on guidance where sort that given the of be given want gives revenue of might and exciting or And if is you. flattish and there the I'd that maybe finished get gives environment new that guidance? back we comparing or up out been kind helps but we if here, us especially to anything confidence and the this past can non-core start rightsizing an what year. revenue

of don't one, then that with we have. some in and why with Aina, you come I'll the new things start

Yes.

just Nautilus important right. you're trade it that JP, at who kind it sold flattish. have some if QX, chosen branded in product customers a So to It's of we it's was to you -- a lot may I look everybody, mean Bowflex of me when products. for year-over-year, been a buy may remind have down of from

overcome this we to lot we think year because selling customers don't it's something Nautilus were branded the we really year product. next to gave deal a through need some by So that a good we as

comes what confidence Direct Our we're seeing from our in business.

see We that won't looking selling what and customers to things end our to will be really respond the reordering line them we anywhere be other back some how prior at sight for our is in years. to have Retail, retail in in it half. it add growth, our confident We will they're are to that? And direct feel of but Jim, down they business. any then Direct There was up near wanting. what promotions end expectations so And

Sure. just you, Yes. Aina. Thank add. I'll

really out have for of array We products a holiday. nice new coming

them. excited reasons, competitive of that And coupling Bowflex. announced a with for about very we're we're but very, We haven't then them rebranding

same loves, and knows working on brand, products great new everybody Bowflex been out time. that, but rebranding around So behind of will we've a come scenes these a on that that the and is

some Aina, We very the there. we've terms market about well. in we've will growth stabilize as myself all seen that here category and So do what the believe there. of But coming we're excited got the employees drive size and

us gives the it's where little But to the later of consumer a that is all confidence. in So going bit about be year.

our You're that feel continuing like strength we Direct well. can to in We some fairly see control business.

balances. and was ex our other sales And who and year, back. auto day the continues retailers And looking then there. balances, XX%. down more they're of continue to come to use inventory to versus last think drive advertising down able to promotion But minus combined, at see we XX% those that things. we consistently retailers I them been hope we the drive retailers nearly buy inventory Amazon, rest We've the

worked they have confidence of we a kind get season going So confidence to that or normal have back down And into will how now to the reordering. a it's on they inventory. much have bet holiday will

segue Great. On into structural the then major all out anything there? very question. That And sort the any sort partners partnerships, of any your retail changes, to would of details maybe are call helpful. that terminations a good next opposite of partners, retail of you That's outlook just the kind that of of really with you so are newer could that and some both spectrums understand of give having you success Maybe there and for better can liking conversations the finding us are year. we kind what great kind retail be see. if

it's they'll fitness I sure. did competitors see for monitor not pandemic. not our space. But category haven't the retailer of so structural footprint, mean, changes, I the And our be far, a mean we subtraction that to added that. We wanting an the Structural space, continuing we on some that. seen backside in any we're X of to when addition before Yes, have differences some what as to of our the we're retail pandemic, even of or of get are in no. was doing. a

we'll keep So eye on our that we appears talking to be as and are that. today, at least intact

the as with past In issues of aren't into that have but strong toe retailers are retailers conversations dealing big that inventory right as we've terms partners with burdened Obviously, the the major the with some have, some and their dipping partners now. yes, into with we those it, who traction plenty of space. getting got not current retail they're we new partners, of they're are as

the you seeing like retailer and very new We're traction that. is stack But if there. we're large to high seeing opportunities, get excited that relative We there. into retailers. we're opportunity. establishments they're So an about those to traction not But super

We Very it can curious you any the think had just one. of one in of you but can just you Nautilus quick share last bit updates on I helpful. sale, just we sort the little curious kind Great. where kind remarks, if a share, And prepared of touched if on major with asset anything remaining, been are and of you perhaps don't touch still or where review. any any being updates sales strategic but else kind process, highlight large the Thank the I are considered if has can think there? thought Maybe there's of just there's on you in that? you.

a updates. Sure. what call no know sales question. great if of consider to think that's the be the outcome mentioned Yes, last of it's this. part There's I our that review. real that Project We is outcome. asset an we We which do don't will be strategic this, We Everest,

but you beyond saying for can bit can it. into no read we're updates that. it's not have real closing say ongoing, We a that's so little now. all We're that But we

Steve with Craig-Hallum. proceed question. the next from question Please with Dyer [Operator of line Instructions] your comes Our

customers. on Ryan Curious retail on It's for the Steve.

the Costco So it assume last quarter? above did Costco into quarter. to XX or jumped the they continues does buy I year, revenue your for guess this to that in past top what this guidance similar XX% of

that might want you one? tackle Aina, to

guidance to our it Retail especially when the contemplated So segment. scenarios, several came

just Jim how earlier, to So give another. versus some to said say, it's similar there's what we much reshuffling what on weighting I of one depending can kind retailer

everybody and a the now more relationships all of to and got all easily the that the And years. demands really out we pandemic, remind we more kind we're into handle all few last One retailers some have. new throughout our retailer want satisfy to we of would inventory that normal, more call can various settling were in thing unable I

declining some of though of So an to be increase opportunity have year-over-year, ones some we sales ones. to may smaller even bigger the the

up JRNY, question. they And were been my don't mentioned Okay. flat growing every you follow-up have then but for a lot it sequentially were so but quarter, members believe sequentially. year-over-year, I just subscribers

commentary growth of also members, but I in of in any sub guess So X, March XXX,XXX as flat as the q-over-q. XX. on January

equipment. is at real units it's highest and expected look ending asked. the unit No, driven third it people thing JRNY in to equipment December, to our great that's a remember Yes. our buying in The question, quarter-over-quarter volume. are by be we have members that quarter, primarily And quarter-over-quarter. I And

being you're growing then especially from steep you business the things what it the pretty sold out. quarter point, drop steep, you that rapidly So in it pretty have quarter have And there. in a this pretty and of kind was, with retail fourth units flattens a that

you're there So drop a overcome. So have what right? that's against working you new ads, to in

And flat so it's there.

strength portfolio. really or those part, very very, Structurally, strength quarter your really that not travel very people about low most excited concerned about that that. answer the It's for all which And unit just is that and question able excited things looking we're it portfolio seasonal new at that I'm cardio about the am forward. I forward. the bring about a just all allows the product JRNY beyond to to not into to new have afford going JRNY will and what's we're drives it's to wanted excited to SKU, price been our our previously. lower who make investment I like

in call further back the like James are to There closing no questions to I'd hand the remarks. Barr queue. for

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

for your Ladies and you conclude does teleconference. Thank this participation. today's gentlemen,

a and at disconnect this may wonderful time your lines day. You have