Nautilus, Inc. reported fiscal fourth-quarter net sales were $68.4 million in the period ended March 31, 2023, compared to $119.7 million in the prior-year comparable period, a decline of 42.9 percent. Net sales were down 19.2 percent, when compared to the same period in fiscal 2020, excluding sales related to the Octane brand, which was sold in October 2020. The sales decline versus the prior year was said to be driven primarily by the return to pre-pandemic demand. The net sales decrease compared to fiscal 2020 was reportedly due to decreased demand.

Direct Segment
Direct segment sales declined 30.4 percent to $41.6 million in the fiscal fourth quarter, compared to $59.8 million, and down 11.7 percent compared to the fourth quarter in fiscal 2020. The net sales decrease compared to the prior year was primarily driven by the return to pre-pandemic seasonal demand and pre-pandemic sales discounting practices. The net sales decrease compared to fiscal 2020 was due to decreased demand.

Cardio sales declined 28.8 percent versus the prior-year period and were down 22.3 percent compared to the comparable period in fiscal 2020. Lower cardio sales in the most recent quarter versus the prior year were primarily driven by lower bike demand. Strength product sales declined 33.3 percent versus the prior year period and increased 22.0 percent compared to the comparable period in fiscal 2020. Lower Strength sales in Q4 versus the prior-year Q4 were said to be primarily driven by lower demand for SelectTech weights.

As of March 31, 2023, the Direct segment’s backlog totaled $0.5 million. This amount represents unfulfilled consumer orders net of current promotional programs and sales discounts.

Direct segment gross profit margin was 21.0 percent of sales in fiscal Q4 versus 19.3 percent in the prior-year period. The 170 basis point increase in gross margin was primarily driven by: lower product costs (+3 points) and decreased other costs (+1 points), offset by increased discounting (-2 points) and higher outbound freight (-1 point).

Direct segment contribution loss was $5.4 million, or 12.9 percent of sales, compared to segment contribution loss of $11.7 million, or 19.5 percent of sales in the prior-year Q4. The improvement was primarily driven by decreased media spend and lower operating expenses. Advertising expenses were $4.9 million compared to $15.2 million for the comparable period last year.

Retail Segment
Retail segment sales fell 55.4 percent to $26.2 million in fiscal Q4, compared to $58.7 million in the prior-year quarter, and down 28.5 percent compared to the comparable period in fiscal 2020 excluding sales related to the Octane brand. Retail segment sales outside the United States and Canada were up 3.6 percent versus the prior-year quarter. The net sales decrease compared to the prior-year Q4 was said to be primarily driven by the return to pre-pandemic seasonal demand. The net sales decrease compared to fiscal 2020 was due to decreased demand.

Cardio sales declined 35.4 percent versus the year-ago quarter and were down 45.2 percent compared to the comparable period in fiscal 2020, excluding sales related to the Octane brand. Lower Cardio sales this past quarter were said to be primarily driven by lower bike demand. Strength product sales declined 68.4 percent in Q4 versus the year-ago quarter and increased 19.2 percent compared to the comparable period in fiscal 2020. Lower Strength sales in Q4 were said to be primarily driven by lower demand for SelectTech® weights.

As of March 31, 2023, the Retail segment’s backlog totaled $11.5 million. This amount represents customer orders for future shipments and are net of contractual rebates and consideration payable to applicable Retail customers.

Retail segment gross profit margin was 5.0 percent in fiscal Q4 versus 14.0 percent last year. The 9.0 point decrease in gross margin was reportedly due primarily to unfavorable logistics overhead absorption (-5 points), a prior year release of a special warranty (-3 points), an increase in inventory adjustments (-1 point) and increased other costs (-1 point), partially offset by lower product costs (+1 point).

Retail segment contribution loss was $4.7 million, or 18.1 percent of sales, in the fourth quarter, compared to segment contribution income of $0.7 million, or 1.2 percent of sales, in Q4 of the prior year. The decrease was said to be primarily driven by lower gross profit due to lower sales.

Consolidated gross profit margins declined 190 basis points to 15.6 percent of sales in Q4, compared to 17.5 percent in the prior-year fourth quarter, primarily due to increased discounting driven by the decision to exit Nautilus branded products (-3 points), higher outbound freight (-2 points), unfavorable logistics overhead (-2 points), and reduced investment in JRNY (-1 point), offset by lower landed product costs (+5 points) driven by lower inbound freight and lower factory costs. Excluding Nautilus branded products, gross profit margin would have been 20.3 percent of sales.

Operating expenses were $28.2 million in the fourth quarter compared to $42.9 million in the prior-year quarter. The decrease of $14.7 million, or 34.3 percent, was primarily due to a $10.3 million decrease in media spending, a $3.9 million decrease in personnel expenses, a $1.8 million decrease in contracted services, a $0.8 million decrease in other variable selling and marketing expenses due to decreased sales and a $0.4 decrease in other costs, offset by $2.5 million in restructuring-related charges. Total advertising expenses were $4.9 million this year versus $15.2 million last year.

Operating loss was $17.5 million in fiscal Q4 compared to an operating loss of $21.9 million in the prior-year quarter, primarily driven by lower operating expenses.

Income tax expense from continuing operations was $0.8 million this year compared to a $4.7 million tax benefit in the prior year. The income tax expense in the current year was primarily a result of activities in foreign jurisdictions and the recording of a $4.8 million valuation allowance. The effective tax rate was (3.9) percent this year compared to 20.5 percent last year.

Net loss was $20.9 million, or 66 cents per diluted share, compared to a net loss of $18.2 million, or 58 cents per diluted share, in the prior-year quarter.

For the full year, Nautilus, Inc. reported:

  • Net sales were $286.8 million, compared to $589.5 million, a decline of 51.3 percent versus the prior year;
  • Direct segment sales were $139.3 million in fiscal 2023, compared to $221.7 million, a decline of 37.2 percent, versus fiscal 2022;
  • Retail segment sales were $144.1 million for the year, compared to $364.1 million, a decline of 60.4 percent versus the prior year;
  • Gross profit margins were 18.1 percent in fiscal 2023 compared to 25.2 percent in the prior year; and
  • Operating expenses were $145.3 million compared to $173.8 million in the prior year.

Loss from continuing operations was $107.5 million, or $3.40 per diluted share, in fiscal 2023, compared to a loss of $22.2 million, or 72 cents per diluted share, in the prior year. The decrease in loss from continuing operations was reportedly due primarily to lower gross profit and higher operating expenses.

Net loss was $105.4 million in fiscal 2023, compared to a net loss of $22.4 million in the prior year. Net loss per diluted share was $3.34, compared to net loss per diluted share of 72 cents in the prior year. The decrease in net loss was said to be primarily due to lower gross profit and higher operating expenses as discussed in more detail above.