Nautilus Inc. reported preliminary first-quarter 2020 sales results and offered a brief business update given the unprecedented environment related to the coronavirus disease 2019.
First Quarter 2020 Preliminary Net Sales Results
Preliminary net sales for the first quarter of 2020 were approximately $94 million, up 11 percent versus the same quarter in 2019, the first time quarterly sales have grown year-over-year since Q3, 2018. This increase was driven by the power of the Bowflex and Schwinn brands, recent strategic and operational changes, disciplined execution, and a near-term trend toward home fitness.
Preliminary Q1, 2020 net sales were approximately $47 million, up 1 percent compared to Q1 2019. This is the first quarter of year-over-year sales growth for the Direct segment since Q4, 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. Both the Bowflex C6 and Schwinn IC4 connected-fitness bikes have been popular with consumers since they were first introduced in October 2019.
Preliminary Q1, 2020 net sales were approximately $46 million, up 24 percent compared to Q1 2019. Strong sales of Bowflex and Schwinn home fitness products more than offset weaker performance in the Octane Fitness commercial line. Like the Direct segment, the Retail segment was boosted by strong 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’ e-commerce and curbside pick-up platforms.
In addition to meeting strong customer demand, Nautilus is focused on the health and welfare of its employees. 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 leading 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.
Manufacturing and Supply Chain
A significant volume of Nautilus products is manufactured in China and most workers in the factories the company utilizes have returned to work. Further, ground transportation to the ports and shipping capabilities from China are improving daily. Management is working closely with partners across its entire supply chain to improve production and delivery timelines and has expedited deliveries to the U.S. and Europe to meet increased customer demand.
Jim Barr, chief executive officer of Nautilus Inc., noted, “The power of our trusted brands, quality products, and strong execution in sales, marketing, and supply chain fueled significant growth and strong results in Q1. 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. 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. Our better than expected EBITDA is the result, in part, of the strategic and operational improvements we’ve made recently, combined with a dedicated and engaged employee base focused on consistent execution.
While these short-term results have exceeded expectations, it is prudent to realize the coming quarters may present added challenges for all businesses as we better understand the longer-term impacts of COVID-19. Short-term, it may remain a significant challenge to fully match the unplanned surge in demand with supply. 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.”
Barr continued, “Our management team is very proud of our employees and how they faced this current adversity. We rapidly and profoundly changed our historical working model, well ahead of government mandates, and have created new solutions to ensure we are meeting our customers’ enhanced needs. Our supply chain and front-line customer care teams have been handling holiday-level volumes with very little time to prepare. I want to thank our employees and partners for their amazing efforts and for coming together as a team for our customers. We believe this challenge has brought out the best in our company, further demonstrating our resolve, resilience, and agility, qualities that make us stronger, and will serve us well in our efforts to return to long-term profitable growth.”
Raising First Quarter 2020 Guidance
The company 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. While preliminary Q1 results have exceeded expectations, it is prudent to realize the coming quarters may present added challenges for Nautilus and other businesses as the longer-term impacts of COVID-19 are highly uncertain and cannot be predicted with confidence.
The company does not plan to release preliminary financial information on an ongoing basis.
Previously, Nautilus only predicted positive EBITDA from continuing operations in the fourth quarter and to generate positive cash flow from operations in the fourth quarter.
As of March 31, 2020, the company 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 December 31, 2019. The company had $19.3 million available for borrowing on its line of credit as of March 31, 2020.
The amounts and financial results described in this press release reflect the company’s estimates based solely upon information available to it as of the date of this press release, which is not a comprehensive statement of its financial results or position as of March 31, 2020, and have not been reviewed or compiled by the company’s independent registered public accounting firm. The actual amounts that the company reports will be subject to its financial closing procedures and any final adjustments that may be made prior to the time its financial results for the period ended March 31, 2020 are finalized.
Photo courtesy Nautilus