Bowflex (BFXXQ) 9 Aug 232024 Q1 Earnings call transcript

Good day, and welcome to the Nautilus, Fiscal First Quarter 2024 Earnings Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] 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. first on Nautilus' XXXX a the this Barr, Welcome call Financial for Konold, Officer. replay Please will afternoon, ended June be everyone. note, Chief Jim quarter are Participants is from to and XX Aina today Chief being fiscal call Nautilus Good XX Officer; and conference the for next call. available

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

today's start to you John. of us. joining four topics I'd points the And key you, for all will be that Thank call. like focal emphasize thank To

adjusted strong significant margin results reduction, in QX year-over-year in progress profitability, and a resulting substantial to improvement gross operating improvement our driven back EBITDA. our show on path by expense First,

encouraging, low with Direct visible exercises despite home around sentiment retail. solid our in seasonally some and in QX consumer Second, demand sell-through

we balance financial flexibility to efforts, created proactive macroeconomic of series strengthened a landscape. improved liquidity and retail sheet, through our and and better uncertain navigate Third, greater

consumer we long-term to a a Bowflex Direct, proud position begin in opportunity, new in refreshed industry with stronger products, and our are the generation visual introducing confidence our Finally, demand branding. carrying of financial

which Turning quarter, navigate to challenges pleased the the first ability are by the demonstrate to achieved, we with results posed our environment. we macro the

million, spot Strength achieved we've product comp including For Notably we we'll exciting QX can of later bright Direct when portfolio, launches. flat Direct $XX a $XX attributed products. a This to be net cover in topic new discuss year our last sales million. strength enhancements were sales to made

in with inventory. in our line retail approach Results our segment retailers conservative expectations to a maintained were as

the retail. encouraged segment quarters approach as earlier, last we As some we QX positioned and we are well inventory And by we of are QX. our retail in they mentioned believe of movement in this peak

members also Among growth. year-over-year at and of back path representing XXX,XXX a have been journey with over our are XX% scaling showcasing number these the fruitful efforts our the remains journey XX% priority to While is year-over-year members focus subscribers, growth. XXX,XXX one profitability end QX

in traction. sequential consecutive to position. of operational gain Our our quarter We continue our efforts delivered excellence improvements seventh inventory

capital inventory to investments. us We optimize lead times, have further our enabling our now reduced rightsized and working our

trends. inventory forward, will on focus with Going sales we aligning

achieved reflecting improvement supply to initiatives. through points continued the margin, also have basis progress chain ‘XX. QX to of gross an on A We our XXX in deliver year-over-year testament expansion

We’ve notable approximately result gross XX% translated also operating steps on As headway were improvement financial balance as to to profitability. fortify EBITDA, lower the position, enhance adjusted further expenses our and into cost year-over-year. our actions and to a taken expenses sheet. liquidity cutting deliberate adjusted expansion by and make strengthen or $XX The a decisive announced margin direct we adjusted $XX of February, return operating in million million, reduced our efforts

Throughout the of agreements, made our significantly assets, position. Notably, paid non-core completed the down debt, sale diligently this amendments to pursued we certain our core quarter focus. and improved inventory credit we

prepare raise Additionally, we opportunistically and season. flexibility June, of in as common stock product made the better in places public offering drive upcoming in for a a in balance us well provide This cash launches additional as marketing growth. sheet, for the position sales to to additional as fitness we our invest

maintain position QX to net end add improvement negative quarter fiscal was strong of alternatives while a the to our environment. challenging comprehensive the the effectively in net is fuel $XX in review These position cash of and million cash actions strategic ‘XX. positive our of complexities home same a operating dynamic fitness time, significant sequential managing leadership of and At $X million, our grow proactive At connected ongoing.

and transformation our remains value on Board to opportunities Our will deliver accelerate that focused shareholders. our enhanced company's identifying

our top our line of and is in powerful with evident preferences. innovate we crafting consumer under by Our brands, Schwinn. through strategy, Star first align our products constantly the are and evolving to Bowflex North opportunities as mindset such expertise our equipment consumers Guided continually evaluating

stand sameness, to is our brand. is we've number and The First, designed the refreshed fitness brand a one new apart. of industry sea Bowflex

to way and to closer is is help why for you of you the find, and with brand one like strengthen empowering visual our embodied system new you That's our everything in color job treadmill and you, Bowflex, and already mindset you. new brand are. also move a is the the is inspiring. selections, following statement. every inside and inclusive, motive we weights make, Reflected a to set At logo. our move follow yes a Our identity imagery outwardly or The

Our new branding them. consumers and matters identity, what to move towards to empower most

digital first connected fitness brand strength journey a And This and recent our counting extremely to in has it's beginning announcing Next, journey coaching only just -- our featuring strength. and fall price in wave it of been featuring we a thrilled updated of well launch also new Bowflex lower SKU beginning foreign our the of are training equipment visual branding. just rep robust received. is be

version holiday fitness season, Ahead Bowflex and our SE, a under SE, new CX enhancing the of two top with Max selling about cardio offerings update Bowflex popular new Max products the a half our value. of branding, excellent intensity at CX which of and are up quieter our takes bike, the new the of an wildly we machine trainer training the high space interval treadmill

launching We hundreds via of new journey and and control routes compact Schwinn workouts elliptical brand. the XXX strong footprint, features of structured party Schwinn virtual third and value terrain Elliptical under a are The very delivers a apps. also a XXXXs

new and We portfolios, The new imagery. experience launches, this by XXXX, stay under identity and elevate these explore and our journey design the have is To navigation, complement Bowflex brand to the introducing they features new tuned. for wave up system. product plan All an follow calendar both enhanced as offerings. shopping of strength in in we exciting cardio a to engaging experience goal new website our customers products,

to these direction. our of developments, strategic addition strengthened Nautilus has brand further the In sale recent exciting the

as This home leader of by currently corporate the As we rebrand identity industry. a connected executing the year. of in reinforce company total our process calendar the rebranding end in the a initiative fitness will are a result,

of identity, dedication about enthusiastic our and the we Our future. are quality to the at and core innovation remains

where have revenue, to member our guidance year like ‘XX adjusted also would touch on our EBITDA fiscal we reiterated calm. full outlook, and I for JRNY

welcome also that with and subscriptions, has and month of diligence communications JRNY member as Our steady we and -- a our paid two learning trial to Conversion towards always in driving as XX% greater trials. growth. improved testing is July, rate and move from enhanced mix over

in unwavering profitability. With we path back crucial are efficient operational driving on and profitability. a framework stands In tandem, as to and streamlined our to a paving focus clear excellence regain viable our pillar operations,

in significant adjusted result, XXXX. a full for EBITDA year we anticipate As the a improvement year-over-year

innovation, and Our deliver consumer centric and efficiency, equipment us services long for shareholders. positions to operational value dedication our term to

to guidance. on and quarter I'll give detail the more fiscal will Aina, us it over now Aina? XXXX first who results our turn

I'll Please to to our release And call for more website speaking guidance accompanying information. be everyone. ‘XX full provide you, the and go will to results first view this good Thank and press for and the of slides quarter the year. Jim. Today fiscal our afternoon

to declined basis XX% $X year. by LY sales continue inventory retailers a to points to XX% XX% versus flat as down nine. gross profit up was cardio, Slide margins last were we’re continued by results Net company to Total million quarter declined about by strength and year. segment P&L comparisons year. sales last Direct purchases. were for Retail conservative with Turning last and Gross $XX year the XX%, last pleased million the approach were take momentum driven XX% with where first up [ph]. XXX from segment to

lower margin year. I'll points higher improvement we've now by through the product significant older About XXXX of now go related burdened due U.S. drivers last pandemic the inbound through demurrage was gross to freight. detention costs. cleared and from landed basis In that the inventory of expansion and were

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

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

disciplined points as JRNY depreciation. this primarily of direct is due JRNY increasing related promotions. of these gains points of cutting to points year discounting driven deleverage outbound ‘XX. portion or points XXX margin the driven exclude higher logistics favorable to in XXX approach versus COGS XXX February year-over-year about of basis basis related to is cost basis deleverage points. basis JRNY Partially mix XXX actions segment are improvement in took of improvement the overhead year. sales depreciation, primarily we to to decreased by retail, by a due demonstrating last decline COGS XXX due are a basis to offsetting are, we freight primarily If is COGS.

charges $X costs. adjusted see reconciliation few to the now or half. as later were of reallocated impact to lines back Adjusted drivers release in press to for restructuring GAAP. expenses were, a $XX operating operating been of support versus our of million key seasonally The XX. million, stronger last have year. Turning the marketing to non-cash decrease advertising on next $XX and P&L exclude impairment less are adjusted to XX% Slide the dollars expenses Please down we quarters million The

operating decrease expenses $X reflecting from expenses. in ’XX. exit $XX operating the $XX improvement year million, and year's February decrease an million, $X personnel million about took other coming marketing Excluded loss. expenses million the $XX loss all and actions selling rest was of and services, loss $X was $X contracted restructuring EBITDA decrease from million of last we variable versus in adjusted million in charges $XXX,XXX. of adjusted Adjusted in decrease expenses of an last $XX and and versus million are million improvement

million and in June balance asset proceeds of Cash a term million. sales position Debt of $XX the was June We loan. cash non-core liquidity as ‘XX. our to XX. the $XX the our sheet at our pay to now yearend use $XX Turning with million, down our was at was fiscal of portion end line from

we of the was had end negative end of As our our a $XX minimal same of $XX net XX, positive ‘XX fiscal improvement quarter the of last negative our balance position position June and an $X million million, million last quarter cash quarter, negative at $XX ABL in at cash to year. net the third and million

million. the QX we was outs Other year. balance million cash flow $X in year for the our sheet. $XX last negative fiscal versus Free call this negative quarter $X For million free cash ’XX, key flow improved same by

of the inventory inventory quarter, For quarter ‘XX year million our and the ending down $XX XX% QX same XX% versus right plan in down with we’ve year. last fiscal versus the in size

will we $XX million, trade ahead, with both continue align and inventory to AR Looking inventory disciplined payables we'll year down and from with purchases end. sales. to was were be $XX million work

guidance. to now Turning

are year full year ‘XX We adjusted members. and reaffirming end year guidance revenue, EBITDA JRNY fiscal full for

million full and of to year net Regarding $XXX between million. revenue $XXX

to retailers conservative XX% on our half being based and to continue second reorders, the represent with the business and XX% seasonality expect We revenue. between of expect of

even break we fiscal about year We're to the profitability $X.X EBITDA on our ‘XX. revenue to expect full royalty be million. of focused sale brand, the adjusted in Given for Nautilus targeting returning

guidance guiding are we range However, our given macro EBITDA adjusted net a of negative the $XX revenue of to loss million range, breakeven. uncertain and to

million the primarily costs, $XX February that the To ‘XX. About achieve $XX million deliver from in from will come of year-over-year breakeven to lower improvement. adjusted EBITDA, we we restructuring resulting need implemented improvement of

as we some reductions cost will and costs operating are result expansion, gross lower in As in demonstrated these these of COGS. margin QX, expenses of part

be offsetting some which demonstrated these due $XX rest of be margin will further gross higher year-over-year margin product as primarily improvement depreciation. to is Partially the fiscal from will lower gains deleverage to The EBITDA come landed expansion will costs QX. drive COGS, in as in gross we JRNY planned spent

qX, to full is our expect reduced the segment While in our no we in in discounting improvement year, the environment retail we in which saw guidance. for discounting continue reflected

While be pressured and in QX inventory have our of to on retailers inventory size a strength, we front. continue competitors and our exit right position the the

have at year. planned discounts year-over-year. to year versus end, growth be expect JRNY XX% about XXX,XXX be lastly, we So last we flattish And to members approximately

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

continuing We have necessary North will execute focused on on and secured the excellence, landscape financial our to the Star navigate while to flexibility current remain strategy. operational

it turn over now I'll back to Jim.

belief the shift season, strong our the operational and portfolio term We're momentum new home of Aina. excellence in and launch ahead holiday of features of excited of fitness. by the towards fitness reinforces long our which the you, Thank our connected efforts enduring for equipment

adaptable to opportunities are may of any that or staying We the committed arise. agile challenge in face and

Our and strong focus cash our path to on supporting driving remains flow profitability. back

pleased to go are ‘XX. the in year, but fiscal way performance We long that still our a to start with there's recognize

course consumers are and and to charting a long-term We experiences delivering to a that exceptional sustained committed growth. leads equipment to

products our to I winning it to passion I'd for and our and thank their for And over like employees turn that, partners to Finally, like experiences customers. would Operator? questions. with for deliver

first Securities. from ahead. Please Swartz [Operator question The Instructions] with comes go Truist Michael

and of plans back have Maybe worked bit some the retail the us of Hey, for around still it question, inventory. good I around or category? kind little just still think fitness merchandising about is plans made afternoon. the of retail give your But retailers cautious down their maybe the you you're comments ordering into visibility a environment year first half maybe

Yes, this. to Aina if I'll start to add and anything I'll wants see

to market. of be is going the omnichannel important approach part our retail, So of always course, to an

sell-through, you it. of inventories, types when environment we Direct, look we're seeing, only indicative leading in on these things of the believe so worked which But is retail, highlighted we're as the is We're they not encouraged call, definitely in And good that also so uncertain. the seeing But retail a is indicators few a retailers indicator, remains down by demand. consumer we rebuy the that for leading rebuy that make only there.

retail that as same So gives us we confidence know many in our products moving greater products in Direct, are well, cases. in

though was structural whether Prime we out in say expectations, and of us we've And get our strength portfolio any watching get far certain a category positive seen the very fitness at another retailers changes it haven't offseason, like we it's deemphasize Amazon's would was strong And to the sell-through indicator as in fitness or the retail, been the encouraging, there Day, I'd category season. any category. event brands it's that for in especially the replenishment exceeded leading in our are way.

in happens aware. holiday well late as ordering second typically early said, or you're That third quarter quarter

We're that we start hopeful times, we're So timeframe. we them, in to even getting see that expect see of to reduced them lead some with those orders.

would you anything Aina. So add

think you've covered it, No, I Jim.

the maybe rebranding just Okay, Thank you for then talked the rebranding. is and Bowflex you brand, of color. rebranding, about with the that's and the I great. then one And corporate to think

costs If you through level related to just And already assume there would around your prior were -- there's those walk in And thoughts then that. us two, that. doing I guidance? costs were your high embedded

is the are costs Yes, the answer that to there. in already

and to particular. we enhanced the opportunity mentioned, to able I and sheet flex As to marketing balance on reason in one get the the of wanted we is reasons down up be wanted

rod Bowflex strength right, we've great category, top maybe excellent on I brand. and an for stands brand So still that. quality. about tremendous look, and worked refreshing, but cardio do in us. think for needs has a never It Norris the old commercial, Chuck of people a made Particularly it equity, we'll is that, definitely But think because actually guy gyms the

vision the in of kind hear. cloud some we that that's So of the

about up is We're And slides, of and bit. imagery, the out around, of to changing to this and getting I've now the look it's red the fits everything know it's modernized made it in And it. it we whole you the we sameness, so some got statements of And it's industry. see but really a sea -- equipment time in the room, sleek. living great black in that and we're modernize

And so people I And why of well. exercise you on see really of of just products, of emotional that very mentioned, strongly the it. take do time course, the And feel we that our to in our the advantage products aspects but branding market. bringing then it's first this and as manifestation about to

anything Aina, add. you would

we've No, what in it to said North Jim in really for short And the this Star to several us about, echo term. leading care result to of to the it fitness strategy, focus brands Bowflex would the remarkable Bowflex asset. rebranded really is of said -- to how the this just term want the always effort of is responsibilities, of many we're is elevate back but sight new long our never the market. I Bowflex, and important lose on one going to quarters harkens bring like

want a of complete the absolutely by great rebranding, haven't you're also end that to then we There on and company seats. it parse we the We'll later edge be year. announce the And new bit a your way announced a you yet, it. name will of to to kind calendar And of that be the right. was plan

Okay, great. Thank you.

from [Operator go with MKM. Instructions]. George The ahead. Roth Please Kelly next comes question

thanks have taking you. three questions. I everybody, Hey, for my for

I advertising getting the that The was know, was spend you year-over-year. just quite curious spending. on bit a it media the your disclose it like number, in one down was you before And looks quarter? in first if see could even I

just curious, when And that More be strategy plan what's new like, would turn helpful? But these kind it information any of to back it's Maybe on? so around on there you aggressive? the products?

Sure, why don't we start with the facts?

year. advertising So million about a this was

So last was highest million the really to about about our down intent revenue year. versus year our quarters. last focus service spend on And X

January So ending QX, you'll see Quarter highest be big our highest month it next increasing in and us. will a is the QX. because December in and QX then for spent is

to goes. most know, That's add back we extraordinarily I was performance. is I I'll And it what with I brand, [indiscernible] known given you've spend, to full both see still low and that before, a And buying saying of that, seasonal portfolio of spending able you low. revenue. that was you and cardio there. where that Direct a different despite spend, got a center very drive front you've pleased got price low think points. just strength were still demand our choice which quarter. Right. And They're at in we from And goes

mean, we QX as in numbers obviously up spent, of So that to on pleased our both advertising. we're the said. on were we bit in and that a more I but guidance mostly our QX, our it's Aina trajectory. little spending terms where to profitability It's but planning

question I might just then near around forget your term just a what's the I to you your you me couple commensurate make was start Okay, great. remarks I second exact building inventory we to inventory? on expect tweak curious. you for your outlook inventory for sales, Or, mean, language, like And again? should it with know prepared but the your that inventory. times curious, in of said I

by ready us building consumer our that we make DCs expect inventory want demand in should start you again, for inventory sure is especially November. to Yes, meet the to to Direct,

seeing will So in higher we've increasing you'll start started balances it reflect September. it, buying

half the ‘XX, going And I recall point into applaud I be the season. October inventory having extraordinary. have. balance that I I what the our million holiday to And I for really on, you managing was that that way they the have we the you second went we think fuel people says, would there's as as mean, $XXX put about all want inventory down, of in it's talking when inventory, in anyone from thought against COVID back that year, and growth and in up that about sure way getting balances the the as to you're worked of you've team and opportunity, they've make the expect, year-over-year we got for our Aina inventory.

So we our those commensurate will with be expectations. sales building positions

Got you.

this me, And with The using revenue guess then you can are first guidance. I two XX% high question the two does And reasonable? comfort just one sure are on your And is, the is I year your now? retail? retail to second that between for I'm Okay. season? hints just around rough to ones right between what then direct looking help do -- look at do to I'm guidance split two, your but quick holiday early? you and is, full order you the level last split one, book get the question a else you what mean, on seem gauge try how that

your question up with the on Aina on looks I'll and start you that to maybe second what helpful be tell to try can side. we

down, So, inventory Day, are actually the good The good. Prime Amazon Direct I what in coming July in well. is did our business over balances leaks into bit had which mention as own before, a sell-through retail, seen we the

products, their very being in inventory more worked very CFOs than all positions But are we're of we retailers the do. categories well. many they we're said them, cautious down not demand our So we'd for have the not in still ours overall, many who carries seeing seeing of structural seeing changes I business, we

worked that So down. they haven't

And still so cautious. they're

on retail that that's she CFO that going And right conservative Board. our nature, We now. retailer have kind hearing a we're in of reiterated on

the low look to So the we the I products mentioned, over spend. moving, be seasonally, demand ad as seem especially seems if to Direct, the for good like acting with expected, products,

get us So tells that spend ad something. that low of the out to

We course, have as love, marketing lever, new we coming products a brand Direct that new people in that the we business, control of feel have have well. refreshed more we

us marketing, about our we've do new progress optimism whole the of of path like So rebranding we're all that to look, thing additional gives those meaningful fair us it. excited types is, showed confidence into the of And profitability. products, on those things. these the things going And and yes, feel amount the kind to wherewithal a We of holidays. give these

And I'll helpful. be to then try

just I And would for January in I they're the at like, you for times movement. is removed they're the you normal different. a typical volumes of And it have little would then if about say been remind kind December. Direct think such highest for because is quarter seasonality way some year, of I fair, I'll XX-XX each the next the it's assuming looked Direct. ending that full COVID of a segment, be bit highest quarter for because month is ending big March then

quarter because For is their March if in they're when receded it to in from highest little needed the it starts and retail, the customers it ending building come early up and the and December, quarter because to quarter bought September December. a to as sell is in then bit going not orders of it highest, ending high us ending their the in, some they actually that's have January,

So hopefully with that quarterly a helps seasonality. you

It does. you. Thank

Thanks, George.

concludes any our Jim back turn like remarks. over answer and conference would to to This I the session. Barr, closing question for

great eagerly quarter in rest ‘XX a Have Thank continued of fiscal support second providing call anticipate call Nautilus. you on your for on update of next the everyone our November. day. today the to our We year earnings

The has for you now attending today's thank presentation. conference concluded

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