For the transition period from to

Commission file number: 001-31321



										NAUTILUS, INC.
~~NAUTILUS, INC.~~
(Exact name of Registrant as specified in its charter)

~~Washington~~	~~94-3002667~~
Washington		94-3002667
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Vancouver, Washington 98683

(Address of principal executive offices, including zip code)

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	NLS	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [x] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and ~~"emerging~~“emerging growth ~~company"~~company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ~~[ ]~~☐ No [x]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

The number of shares outstanding of the registrant's common stock as of ~~October 31, 2017~~August 6, 2021 was ~~30,707,103~~ 30,930,700 shares.

NAUTILUS, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~2021



	PART I
Item 1.	Financial Statements	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1718
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2629
Item 4.	Controls and Procedures	2729

	PART II
Item 1.	Legal Proceedings	2830
Item 1A.	Risk Factors	2830
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	28
Item 6.	Exhibits	2930
Signatures		2931

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NAUTILUS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands)


	As of
	June 30, 2021		March 31, 2021
Assets
Cash and cash equivalents	$	25,218	$	38,441
Restricted cash	1,339		1,339
Available-for-sale securities	56,264		73,448
Trade receivables, net of allowances of $1,311 and $1,177	98,160		88,657
Inventories	111,132		68,085
Prepaids and other current assets	15,650		25,840
Income taxes receivable	9,500		0


Total current assets	317,263		295,810
Property, plant and equipment, net	24,718		24,496
Operating lease right-of-use assets	25,662		19,108

Other intangible assets, net	9,350		9,365
Deferred income tax assets, non-current	3,068		2,144
Other assets	2,325		3,307
Total assets	$	382,386	$	354,230
Liabilities and Shareholders' Equity
Trade payables	$	114,602	$	98,878
Accrued liabilities	14,515		19,627
Operating lease liabilities, current portion	4,706		3,384
Warranty obligations, current portion	8,191		7,243
Income taxes payable, current portion	845		5,709
Debt payable, current portion, net of unamortized debt issuance costs of $83 and $83	3,125		3,000

Total current liabilities	145,984		137,841
Operating lease liabilities, non-current	23,221		17,875
Warranty obligations, non-current	1,593		1,408
Income taxes payable, non-current	3,805		3,657

Other non-current liabilities	606		607
Debt payable, non-current, net of unamortized debt issuance costs of $215 and $236	10,296		10,297
Total liabilities	185,505		171,685
Commitments and contingencies (Note 15)	0		0
Shareholders' equity:
Common stock - 0 par value, 75,000 shares authorized, 30,794 and 30,576 shares issued and outstanding	2,411		2,176
Retained earnings	194,408		180,524

Accumulated other comprehensive income (loss)	62		(155)
Total shareholders' equity	196,881		182,545
Total liabilities and shareholders' equity	$	382,386	$	354,230

As of
September 30, 2017    December 31, 2016
Assets
Cash and cash equivalents $ 30,481
   $ 47,874
Available-for-sale securities 47,295
31,743
Trade receivables, net of allowances of $472 and $170 38,534
   45,458
Inventories 57,646
   47,030
Prepaids and other current assets 6,795
   8,020
Income taxes receivable 61
   3,231
Total current assets 180,812
183,356
Property, plant and equipment, net 16,166
   17,468
Goodwill 62,045
   61,888
Other intangible assets, net 67,354
   69,800
Deferred income tax assets, non-current —
11
Other assets 456
   543
Total assets $ 326,833
$ 333,066
Liabilities and Shareholders' Equity
Trade payables $ 62,146
   $ 66,020
Accrued liabilities 8,056
   12,892
Warranty obligations, current portion 3,253
   3,500
Note payable, current portion, net of unamortized debt issuance costs
of $7 and $7
15,993
15,993
Total current liabilities 89,448
98,405
Warranty obligations, non-current 3,048

3,950
Income taxes payable, non-current 2,646
   2,403
Deferred income tax liabilities, non-current 16,868
16,991
Other non-current liabilities 2,365
   2,481
Note payable, non-current, net of unamortized debt issuance costs
of $16 and $21
35,984
47,979
Total liabilities 150,359
172,209
Commitments and contingencies (Note 14)

Shareholders' equity:
Common stock - no par value, 75,000 shares authorized, 30,707 and
30,825 shares issued and outstanding
826
   578
Retained earnings 175,969
   161,496
Accumulated other comprehensive loss (321 )    (1,217 )
Total shareholders' equity 176,474
   160,857
Total liabilities and shareholders' equity $ 326,833
   $ 333,066

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

NAUTILUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except per share amounts)


	Three Months Ended September 30,						Nine Months Ended September 30,							Three-Months Ended June 30,
	2017			2016			2017			2016				2021		2020
Net sales	$	88,132		$	80,818		$	278,413		$	280,275		Net sales	$	184,593	$	114,188
Cost of sales	46,817			41,601			136,975			132,852			Cost of sales	129,088		66,792
Gross profit	41,315			39,217			141,438			147,423			Gross profit	55,505		47,396
Operating expenses:													Operating expenses:
Selling and marketing	18,028			21,394			79,321			81,284			Selling and marketing	21,300		12,446
General and administrative	6,305			6,177			21,106			21,611			General and administrative	11,523		9,315
Research and development	3,617			3,435			11,114			10,444			Research and development	4,815		3,728
Loss on disposal group													Loss on disposal group	0		29,013

Total operating expenses	27,950			31,006			111,541			113,339			Total operating expenses	37,638		54,502
Operating income	13,365			8,211			29,897			34,084
Other income (expense):
Operating income (loss)													Operating income (loss)	17,867		(7,106)
Other expense:													Other expense:
Interest income	170			60			476			182			Interest income	21		1
Interest expense	(377		)	(489		)	(1,233		)	(1,469		)	Interest expense	(314)		(338)
Other, net	46			211			109			(49		)	Other, net	(120)		115
Total other expense, net	(161		)	(218		)	(648		)	(1,336		)	Total other expense, net	(413)		(222)
Income from continuing operations before income taxes	13,204			7,993			29,249			32,748
Income tax expense	4,862			148			10,156			9,621
Income from continuing operations	8,342			7,845			19,093			23,127
Income (loss) from continuing operations before income taxes													Income (loss) from continuing operations before income taxes	17,454		(7,328)
Income tax expense (benefit)													Income tax expense (benefit)	3,438		(2,342)
Income (loss) from continuing operations													Income (loss) from continuing operations	14,016		(4,986)
Discontinued operations:													Discontinued operations:
Loss from discontinued operations before income taxes	(40		)	(308		)	(1,695		)	(612		)	Loss from discontinued operations before income taxes	(126)		(29)
Income tax expense (benefit) of discontinued operations	61			(57		)	(425		)	(53		)
Income tax expense of discontinued operations													Income tax expense of discontinued operations	6		95
Loss from discontinued operations	(101		)	(251		)	(1,270		)	(559		)	Loss from discontinued operations	(132)		(124)
Net income	$	8,241		$	7,594		$	17,823		$	22,568
Net income (loss)													Net income (loss)	$	13,884	$	(5,110)

Basic income per share from continuing operations	$	0.27		$	0.25		$	0.62		$	0.74
Basic income (loss) per share from continuing operations													Basic income (loss) per share from continuing operations	$	0.46	$	(0.17)
Basic loss per share from discontinued operations	—			(0.01		)	(0.04		)	(0.02		)	Basic loss per share from discontinued operations	(0.01)		0
Basic net income per share⁽¹⁾	$	0.27		$	0.24		$	0.58		$	0.73
Basic net income (loss) per share													Basic net income (loss) per share	$	0.45	$	(0.17)

Diluted income per share from continuing operations	$	0.27		$	0.25		$	0.61		$	0.74
Diluted income (loss) per share from continuing operations													Diluted income (loss) per share from continuing operations	$	0.43	$	(0.17)
Diluted loss per share from discontinued operations	—			(0.01		)	(0.04		)	(0.02		)	Diluted loss per share from discontinued operations	0		0
Diluted net income per share	$	0.27		$	0.24		$	0.57		$	0.72
Diluted net income (loss) per share													Diluted net income (loss) per share	$	0.43	$	(0.17)

Shares used in per share calculations:													Shares used in per share calculations:
Basic	30,749			31,118			30,739			31,069			Basic	30,697		29,909
Diluted	31,075			31,385			31,098			31,340			Diluted	32,508		29,909

⁽¹⁾ ~~May not add due to rounding.~~

See accompanying Notes to Condensed Consolidated Financial ~~Statements.~~Statements.

Table of Contents

NAUTILUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited and in thousands)


	Three-Months Ended June 30,
	2021		2020
Net income (loss)	$	13,884	$	(5,110)
Other comprehensive income:
Unrealized gain on available-for-sale securities, net of income tax benefit of $7 and $0	0		0

Foreign currency translation, net of income tax benefit of $13 and $15	217		353
Other comprehensive income	217		353
Comprehensive income (loss)	$	14,101	$	(4,757)

See accompanying Notes to Condensed Consolidated Financial Statements.

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net income $ 8,241
$ 7,594
$ 17,823
$ 22,568
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities, net of income tax expense (benefit) of $13, $0, $(4) and $16 22
—
(6 ) 26
Gain (loss) on derivative securities, effective portion, net of income tax expense (benefit) of $14, $150, $79 and $(326) 23
248
130
(539 )
Foreign currency translation, net of income tax expense (benefit) of $1, $(1), $3 and $(6) 371
(45 ) 772
397
Other comprehensive income (loss) 416
203
896
(116 )
Comprehensive income $ 8,657
$ 7,797
$ 18,719
$ 22,452

Table of Contents

NAUTILUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited and in thousands)


	Common Stock			Retained Earnings		Accumulated Other Comprehensive Income		Total Shareholders' Equity
	Shares	Amount









Balances at March 31, 2021	30,576	$	2,176	$	180,524	$	(155)	$	182,545
Net income	—	—		13,884		—		13,884
Unrealized loss on marketable securities, net of income tax benefit of $7	—	—		—		0		0

Foreign currency translation adjustment, net of income tax benefit of $13	—	—		—		217		217
Stock-based compensation expense	—	1,225		0		—		1,225
Common stock issued under equity compensation plan, net of shares withheld for tax payments	201	(1,259)		—		—		(1,259)
Common stock issued under employee stock purchase plan	17	269		—		—		269

Balances at June 30, 2021	30,794	$	2,411	$	194,408	$	62	$	196,881


	Common Stock			Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
	Shares	Amount









Balances at March 31, 2020	29,817	$	1,781	$	92,456	$	(1,312)	$	92,925
Net loss	—	—		(5,110)		—		(5,110)


Foreign currency translation adjustment, net of income tax benefit of $15	—	—		—		353		353
Stock-based compensation expense	—	865		0		—		865
Common stock issued under equity compensation plan, net of shares withheld for tax payments	87	0		—		—		0
Common stock issued under employee stock purchase plan	63	83		—		—		83

Balances at June 30, 2020	29,967	$	2,729	$	87,346	$	(959)	$	89,116

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

NAUTILUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)


								Three-Months Ended June 30,
								2021		2020
Cash flows from operating activities:							Cash flows from operating activities:
Income (loss) from continuing operations							Income (loss) from continuing operations	$	14,016	$	(4,986)
Loss from discontinued operations							Loss from discontinued operations	(132)		(124)
Net income (loss)							Net income (loss)	13,884		(5,110)
Adjustments to reconcile net income to cash provided by operating activities:							Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization							Depreciation and amortization	2,054		2,646
Provision for allowance for doubtful accounts							Provision for allowance for doubtful accounts	(156)		596
Inventory lower of cost or net realizable value							Inventory lower of cost or net realizable value	(134)		773
Stock-based compensation expense							Stock-based compensation expense	1,225		865
Loss on asset dispositions							Loss on asset dispositions	0		184

Loss on disposal group, goodwill and other intangible impairment charge							Loss on disposal group, goodwill and other intangible impairment charge	0		29,013
Deferred income taxes, net of valuation allowances							Deferred income taxes, net of valuation allowances	(908)		(7,523)

Other							Other	1,125		(961)
Changes in operating assets and liabilities:							Changes in operating assets and liabilities:
Trade receivables							Trade receivables	(9,638)		(7,995)
Inventories							Inventories	(43,259)		1,506
Prepaids and other assets							Prepaids and other assets	3,706		(611)
Income taxes receivable							Income taxes receivable	(9,512)		4,823
Trade payables							Trade payables	15,200		19,742
Accrued liabilities and other liabilities, including warranty obligations							Accrued liabilities and other liabilities, including warranty obligations	(1,743)		2,264

Net cash (used in) provided by operating activities							Net cash (used in) provided by operating activities	(28,156)		40,212
Cash flows from investing activities:							Cash flows from investing activities:

Proceeds from sales and maturities of available-for-sale securities							Proceeds from sales and maturities of available-for-sale securities	17,185		0

Purchases of property, plant and equipment							Purchases of property, plant and equipment	(1,850)		(2,965)

Net cash provided by (used in) investing activities							Net cash provided by (used in) investing activities	15,335		(2,965)
Cash flows from financing activities:							Cash flows from financing activities:
Proceeds from long-term debt							Proceeds from long-term debt	1,185		575
Payments on long-term debt							Payments on long-term debt	(1,337)		(13,167)

	Nine Months Ended September 30,
	2017			2016
Cash flows from operating activities:
Income from continuing operations	$	19,093		$	23,127
Loss from discontinued operations	(1,270		)	(559		)
Net income	17,823			22,568
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	6,386			5,748
Provision for allowance for doubtful accounts	375			183
Inventory lower-of-cost-or-market/NRV adjustments	294			72
Stock-based compensation expense	1,938			2,045
Loss on asset dispositions	58			107
Deferred income taxes, net of valuation allowance	(193		)	5,707
Excess tax benefit related to stock-based awards	—			(1,852		)
Other	(101		)	6
Changes in operating assets and liabilities:
Trade receivables	6,532			13,633
Inventories	(11,056		)	(4,716		)
Prepaids and other current assets	1,644			(413		)
Income taxes receivable	3,170			(5,397		)
Trade payables	(4,275		)	(15,475		)
Accrued liabilities, including warranty obligations	(5,875		)	(7,286		)
Net cash provided by operating activities	16,720			14,930
Cash flows from investing activities:
Purchases of available-for-sale securities	(57,054		)	(22,972		)
Proceeds from maturities of available-for-sale securities	41,620			24,818
Proceeds from sales of available-for-sale securities	—			71
Acquisition of business, net of cash acquired	—			(3,468		)
Purchases of property, plant and equipment	(2,726		)	(3,237		)
Net cash used in investing activities	(18,160		)	(4,788		)
Cash flows from financing activities:
Payments on long-term debt	(12,000		)	(12,000		)
Payments for stock repurchases	(4,848		)	—
Proceeds from exercise of stock options and employee stock plan purchases	548			531
Proceeds from employee stock purchases							Proceeds from employee stock purchases	269		0
Proceeds from exercise of stock options							Proceeds from exercise of stock options	63		83
Tax payments related to stock award issuances	(741		)	(221		)	Tax payments related to stock award issuances	(1,322)		0
Excess tax benefit related to stock-based awards	—			1,852

Net cash used in financing activities	(17,041		)	(9,838		)	Net cash used in financing activities	(1,142)		(12,509)
Effect of exchange rate changes on cash and cash equivalents	1,088			87			Effect of exchange rate changes on cash and cash equivalents	740		644
Increase (decrease) in cash and cash equivalents	(17,393		)	391
Cash and cash equivalents:
Beginning of period	47,874			30,778
End of period	$	30,481		$	31,169
(Decrease) increase in cash, cash equivalents and restricted cash							(Decrease) increase in cash, cash equivalents and restricted cash	(13,223)		25,382
Less: Net change in cash balances classified as assets held-for-sale							Less: Net change in cash balances classified as assets held-for-sale	0		(3,986)
Net change in cash, cash equivalents and restricted cash							Net change in cash, cash equivalents and restricted cash	(13,223)		21,396
Cash, cash equivalents and restricted cash:							Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash at beginning of period							Cash, cash equivalents and restricted cash at beginning of period	39,780		26,456
Cash, cash equivalents and restricted cash at end of period							Cash, cash equivalents and restricted cash at end of period	$	26,557	$	47,852

Supplemental disclosure of cash flow information:							Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,228		$	1,462		Cash paid for interest	$	60	$	212
Cash paid for income taxes, net	5,686			11,331			Cash paid for income taxes, net	18,562		447
Supplemental disclosure of non-cash investing activities:							Supplemental disclosure of non-cash investing activities:
Capital expenditures incurred but not yet paid	$	336		$	922		Capital expenditures incurred but not yet paid	$	786	$	652

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the total of the same amounts shown above:							The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the total of the same amounts shown above:
								Three-Months Ended June 30,
								2021		2020
Cash and cash equivalents							Cash and cash equivalents	$	25,218	$	45,656
Restricted cash							Restricted cash	1,339		2,196
Total cash, cash equivalents and restricted cash							Total cash, cash equivalents and restricted cash	$	26,557	$	47,852

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

NAUTILUS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) GENERAL INFORMATION

Basis of Consolidation and Presentation

The accompanying condensed consolidated financial statements present the financial position, results of operations and cash flows of Nautilus, Inc. and its subsidiaries, all of which are wholly owned. Intercompany transactions and balances have been eliminated in consolidation.

On December 30, 2020, our Board of Directors approved a change in our fiscal year end from December 31st to March 31st. This document reflects our first quarter ending June 30, 2021 covering our fiscal year from April 1, 2021 through March 31, 2022.

The accompanying condensed consolidated financial statements have not been audited. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Management believes the disclosures contained herein are adequate to make the information presented not misleading. However, these condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020 (the ~~“2016~~“2020 Form 10-K”).

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. ~~Actual~~Uncertainties regarding such estimates and assumptions are inherent in the preparation of financial statements and actual results could differ from those estimates. These uncertainties will be heightened by the COVID-19 pandemic, as we may be unable to accurately predict the impact of COVID-19 going forward and as a result our estimates may change in the near term. Further information regarding significant estimates can be found in our ~~2016~~2020 Form 10-K.

We have reclassified certain amounts in prior-period financial statements to conform to the current period's presentation. On the consolidated balance sheets, we have reclassified from accrued liabilities to income taxes payable, current portion.

In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments necessary to present fairly our financial position as of ~~September~~June 30, ~~2017~~2021 and ~~December~~March 31, ~~2016,~~2021, and our results of operations, ~~and~~ comprehensive income and shareholders' equity for the ~~three~~three-month periods ended June 30, 2021 and ~~nine months ended~~ ~~September 30, 2017~~2020 and ~~2016, and~~our cash flows for the ~~nine months~~three-month periods ended ~~September~~June 30, ~~2017~~2021 and ~~2016.~~2020. Interim results are not necessarily indicative of results for a full year. Our revenues typically vary seasonally, and this seasonality can have a significant effect on operating results, inventory levels and working capital needs.

Unless indicated otherwise, all information regarding our operating results pertain to our continuing operations.

~~New~~Recent Accounting Pronouncements

Recently Adopted Pronouncements

ASU ~~2017-12~~2019-12

In ~~August 2017,~~December 2019, the ~~Financial Accounting Standards Board ("FASB")~~FASB issued ~~Accounting Standards Update ("ASU") 2017-12, "Derivatives and Hedging~~ASU 2019-12, “Income Taxes (Topic ~~815) - Targeted Improvements to~~740): Simplifying the Accounting for Hedging Activities". ASU 2017-12 provides better alignment of an entity's risk management activities and financial reporting of hedges through changes to both the designation and measurement guidance for qualifying hedging relationships. In addition, theIncome Taxes.” The amendments in ASU ~~2017-12 also simplify~~2019-12 introduce the ~~recognition~~following new guidance: (1) provides a policy election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax; and ~~presentation~~(2) provides guidance to evaluate whether a step-up in tax basis of goodwill relates to a business combination in which book goodwill was recognized or a separate transaction. The amendments in ASU 2019-12 make changes to the ~~effects~~following current guidance: (1) making an intraperiod allocation if there is a loss in continuing operations and a gain outside of continuing operations; (2) determining when a deferred tax liability is recognized after an investor in a foreign entity transitions to or from the ~~hedging instrument~~equity method of accounting; (3) accounting for tax law changes and year-to-date losses in interim periods; and (4) determining how to apply the ~~hedged item in the financial statements~~income tax guidance to ~~increase the understandability of the results of an entity's intended hedging strategies.~~franchise taxes that are partially based on income. ASU ~~2017-12~~2019-12 is effective for public ~~companies'~~business entities' fiscal years,

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including interim periods within those fiscal years, beginning after December 15, ~~2018. Early application is permitted in any interim period after issuance of the new standard,~~2020 with ~~effect of~~early adoption reflected as of the beginning of the fiscal year of adoption. For cash flow and net investment hedges existing as of the adoption date, an entity should apply a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income and opening retaining earnings. Amended presentation and disclosure guidance is required only prospectively, and certain transition elections are available upon adoption. While we do not expect thepermitted. Our adoption of ASU ~~2017-12 to have a~~2019-12 as of January 1, 2021 had no material ~~effect on our business, we are evaluating any potential~~ impact ~~that adoption of ASU 2017-12 may have~~ on our financial position, results of operations or cash flows.

Recently Issued Pronouncements Not Yet Adopted

ASU 2020-04 and ASU ~~2017-09~~2021-01

In ~~May 2017,~~March 2020, the FASB issued ASU ~~2017-09, "Compensation - Stock Compensation~~2020-04, “Reference Rate Reform (Topic ~~718) - Scope in Modification Accounting".~~848),” which provides optional guidance related to reference rate reform and provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance is applicable for our borrowing instruments, which use London Inter-bank Offered Rate (“LIBOR”) as a reference rate, which is effective beginning on March 12, 2020, and we may elect to apply the amendments prospectively through December 31, 2022. In January 2021, the FASB issued ASU ~~2017-09 provides clarity and reduces diversity in practice and cost and complexity when applying the guidance~~2021-01, “Reference Rate Reform (Topic 848),” which permits entities to apply optional expedients in Topic ~~718~~848 to ~~a change to the terms or conditions~~derivative instruments modified because of a share-based payment award. An entity should account for the effects of a modification unless all of certain criteria are met. Those criteria relate to fair value, vesting conditions and classification of the modified award. If all three conditions are the same for the modified award as for the original award, then the entity should not account for the effects of the modification. ASU 2017-09 is effective for all entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim

~~period, for public business entities for reporting periods for which financial statements have not yet been issued.~~discounting transition resulting from reference rate reform. We do not expect the adoption of ~~ASU 2017-09~~this guidance to have a material ~~effect~~impact on our financial position, results of operations orand cash flows.

ASU ~~2017-04~~2020-01

In January ~~2017,~~2020, the FASB issued ASU ~~2017-04, "Intangibles - Goodwill~~2020-01, “Investments—Equity Securities (Topic 321), Investments—Equity Method and ~~Other~~Joint Ventures (Topic ~~350) - Simplifying~~323), and Derivatives and Hedging (Topic 815).” The amendments in ASU 2020-01 clarify certain interactions between the ~~Test~~guidance to account for ~~Goodwill Impairment". ASU 2017-04 simplifies~~certain equity securities under Topic 321, the ~~subsequent~~guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815, which could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of ~~goodwill by eliminating Step 2 from~~ the ~~goodwill impairment test. An entity should perform its annual,~~forward contract or ~~interim, goodwill impairment test by comparing~~exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with Topic 825, Financial Instruments. These amendments improve current GAAP by reducing diversity in practice and increasing comparability of ~~a reporting unit with its carrying amount, and recognize an impairment charge~~the accounting for the amount by which the carrying amount exceeds the reporting unit's fair value, if applicable. The loss recognized should not exceed the total amount of goodwill allocated to the reporting unit. The same impairment test also applies to any reporting unit with a zero or negative carrying amount. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.these interactions. ASU ~~2017-04~~2020-01 is effective for ~~public companies'~~ fiscal years beginning after December 15, 2021, including interim periods within those fiscal ~~years, beginning after December 15, 2019, on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017.~~years. We do not expect the adoption of ~~ASU 2017-04 to~~this guidance would have a material ~~effect~~impact on our financial position, results of operations orand cash flows.

~~ASU 2016-15~~

In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments." The amendments in ASU 2016-15 are intended to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows, with the intent of reducing diversity in practice for the eight (8) types of cash flows identified. ASU 2016-15 is effective for public companies' fiscal years, including interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. Entities must apply the guidance retrospectively to all periods presented, but may apply it prospectively if retrospective application would be impracticable. We do not expect the adoption of ASU 2016-15 to have a material effect on our financial position, results of operations or cash flows.

ASU 2016-13

In June 2016, the FASB issued ASU 2016-13, ~~"Financial~~“Financial Instruments -– Credit Losses (Topic 326) -: Measurement of Credit Losses on Financial Instruments.~~" The amendments in~~” ASU 2016-13 ~~replace the incurred loss impairment methodology in current GAAP with~~requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In May 2019, the FASB issued ASU 2019-05, which provides entities to have certain instruments with an option to irrevocably elect the fair value option. In November 2019, the FASB issued ASU 2019-11, which provides clarification and addresses specific issues about certain aspects of ASU 2016-13. In March 2020, the FASB issued ASC 2020-03, which provides an update to clarify or address specific issues. ASU 2016-13 is effective for ~~public companies' annual periods, including interim periods within those~~ fiscal years beginning after December 15, ~~2019, using a modified-retrospective approach, with certain exceptions. Early adoption is permitted. While we~~2022, including interim periods within those years. We do not expect the adoption of ~~ASU 2016-13 to have a material effect on our business, we are evaluating any potential impact that adoption of ASU 2016-13 may have on our financial position, results of operations or cash flows.~~

~~ASU 2016-09~~

In March 2016, the FASB issued ASU 2016-09, "Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting." ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for public companies' annual periods, including interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted subject to certain requirements, and the method of application (i.e., retrospective, modified retrospective or prospective) depends on the transaction area that is being amended. Related to forfeitures, we changed our accounting treatment of forfeiture expense reversals from "at vest date" to "at forfeiture date." We applied thethis guidance on a modified retrospective basis, which resulted in a cumulative effective adjustment (in thousands) of $28 reduction to beginning retained earnings. In addition, related to excess tax benefits, we recognized all current period expense through the statement of operations and presented excess tax benefits as an operating cash flow, applied prospectively, with no adjustment to prior periods. The adoption of ASU 2016-09 in January 2017 did notwould have a material impact on our financial position, results of operations orand cash flows.

~~ASU 2016-02~~

~~In February 2016,~~(2) REVENUES

Our revenues from contracts with customers disaggregated by revenue source, excluding sales-based taxes, were as follows (in thousands):


	Three-Months Ended June 30,
	2021		2020
Product sales	$	179,811	$	110,595
Extended warranties and services	1,756		1,465
Other(1)	3,026		2,128
Net sales	$	184,593	$	114,188

(1) Other revenue is primarily freight and delivery, royalty income and subscription revenue.

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Our revenues disaggregated by geographic region, based on ship-to address, were as follows (in thousands):


	Three-Months Ended June 30,
	2021		2020
United States	$	147,149	$	97,363
Canada	19,362		6,248
Europe, the Middle East and Africa	14,442		8,493
All other	3,640		2,084
Net sales	$	184,593	$	114,188

As of June 30, 2021, estimated revenue expected to be recognized in the ~~FASB issued ASU 2016-02, "Leases (Topic 842)." ASU 2016-02 replaces~~future totaled $145.0 million, primarily related to customer order backlog, which includes firm orders for future shipment and unfulfilled orders to our Retail customers, as well as unfulfilled consumer orders within the ~~existing guidance in Accounting Standards Codification ("ASC") 840, Leases. The new standard would require companies and other organizations~~Direct channel. We have further refined our Retail backlog to include ~~lease obligations~~unfilled future orders. Direct orders of $3.1 million and Retail orders of $141.9 million, comprised our backlog as of June 30, 2021, compared to Direct orders of $20.6 million and Retail orders of $130.0 million as of June 30, 2020. The estimated future revenues are net of contractual rebates and consideration payable for applicable Retail customers, and net of current promotional programs and sales discounts for our Direct customers.

The following table provides information about our liabilities from contracts with customers, primarily customer deposits and deferred revenue for which advance consideration is received prior to the transfer of control. Revenue is recognized when transfer of control occurs. All customer deposits and deferred revenue received are short-term in nature and were recorded on their balance sheets, including a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use ("ROU") asset and a corresponding lease liability. For finance leases the lessee would recognize interest expense and amortization of the ROU asset, and for operating leases the lessee would recognize a straight-line total lease expense. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. ASU 2016-02 is effective for public companies' annual periods, and interim periods within those fiscal years, beginning after December 15, 2018. We are currently assessing the impact that ASU 2016-02 will have on our consolidated financial statements,

~~and expect that the primary impact upon adoption will be the recognition, on a discounted basis, of our minimum commitments under non-cancellable operating leases on our~~condensed consolidated balance sheets ~~resulting~~as accrued liabilities. Significant changes in contract liabilities balances, including revenue recognized in the ~~recording of right of use assets and lease liabilities.~~reporting period that was included in opening contract liabilities, are shown below (in thousands):


	Three-Months Ended June 30,
	2021		2020
Balance, beginning of period	$	5,551	$	2,050
Cash additions	1,089		2,371
Revenue recognition	(4,883)		(918)
Balance, end of period	$	1,757	$	3,503

~~ASU 2015-11~~

In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory (Topic 330).” ASU 2015-11 simplifies the accounting for the valuation of all inventory not accounted for using the last-in, first-out (“LIFO”) method by prescribing inventory be valued at the lower of cost and net realizable value. ASU 2015-11 is effective for public companies' annual periods, including interim periods within those fiscal years, beginning after December 15, 2016 on a prospective basis. Early adoption is permitted. Our adoption of ASU 2015-11 in January 2017 did not have a material effect on our financial position, results of operations or cash flows.

~~ASU 2014-09~~

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers." ASU 2014-09 replaces most existing revenue recognition guidance, and requires companies to recognize revenue based upon the transfer of promised goods and/or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and/or services. In addition, the new guidance requires enhanced disclosures, including revenue recognition policies to identify performance obligations to customers and significant judgments in measurement and recognition. ASU 2014-09 is effective, as amended, for annual and interim periods beginning on or after December 15, 2017, applied retrospectively to each prior period presented or retrospectively with a cumulative effect adjustment recognized as of the adoption date. We do not plan to early adopt this new standard, and accordingly, will adopt the new standard on January 1, 2018. We are planning to adopt using the full retrospective method.

We have identified and made substantial progress in analyzing our principal revenue streams by channel, including potential impacts on the timing of recognition of variable consideration and contract costs, primarily sales commissions, and on presentation of our installation and services revenue. In addition, we are nearing completion of our review of significant contracts and evaluation of the potential changes to our business processes, controls, systems and disclosures resulting from adoption of the new standard. We expect to finish these assessments during the fourth quarter of 2017. Based on our analyses to date, we have identified potential accounting and financial reporting impacts to our business processes, controls, systems and disclosures as a result of the new standard, and we are planning for those changes. Further, while we do not expect the adoption of ASU 2014-09, as amended, to have a material effect on our financial position, results of operations or cash flows, we do anticipate significant additional disclosure requirements upon adoption of the new standard.

~~(2) DISCONTINUED OPERATIONS~~

There was no revenue related to discontinued operations for the three and nine months ended September 30, 2017. However, we continue to have product liability expenses associated with product previously sold into the Commercial channel.

(3) FAIR VALUE MEASUREMENTS

Factors used in determining the fair value of financial assets and liabilities are summarized into three broad categories:

•Level 1 - observable inputs such as quoted prices (unadjusted) in active liquid markets for identical securities as of the reporting date;

•Level 2 - other significant directly or indirectly observable inputs, including quoted prices for similar securities, interest rates, prepayment speeds and credit risk; or observable market prices in markets with insufficient volume and/or infrequent transactions; and

•Level 3 - significant inputs that are generally unobservable inputs for which there is little or no market data available, including our own assumptions in determining fair value.

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Assets and liabilities measured at fair value on a recurring basis ~~as of September 30, 2017 and December 31, 2016~~ were as follows (in thousands):


	June 30, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents
Money market funds	$	6,184	$	0	$	0	$	6,184




Total cash equivalents	6,184		0		0		6,184
Available-for-Sale Securities

Commercial paper	0		7,998		0		7,998
Corporate bonds	0		8,153		0		8,153
U.S. government bonds	0		40,113		0		40,113
Total available-for-sale securities	0		56,264		0		56,264




Total assets measured at fair value	$	6,184	$	56,264	$	0	$	62,448

Liabilities:
Derivatives

Foreign currency forward contracts	$	0	$	510	$	0	$	510
Total liabilities measured at fair value	$	0	$	510	$	0	$	510


	September 30, 2017											March 31, 2021
	Level 1		Level 2			Level 3		Total				Level 1		Level 2		Level 3		Total
Assets:											Assets:
Cash Equivalents											Cash Equivalents
Money market funds	$	6,848	$	—		$	—	$	6,848		Money market funds	$	9,679	$	0	$	0	$	9,679
Commercial paper	—		1,998			—		1,998

Total cash equivalents	6,848		1,998			—		8,846			Total cash equivalents	9,679		0		0		9,679
Available-for-Sale Securities											Available-for-Sale Securities
Certificates of deposit⁽¹⁾	—		14,974			—		14,974

Commercial paper	—		1,998			—		1,998			Commercial paper	0		9,994		0		9,994
Corporate bonds	—		25,313			—		25,313			Corporate bonds	0		8,227		0		8,227
U.S. government bonds	—		5,010			—		5,010			U.S. government bonds	0		55,227		0		55,227
Total available-for-sale securities	—		47,295			—		47,295			Total available-for-sale securities	0		73,448		0		73,448
Derivatives
Interest rate swap contract	—		170			—		170

Total assets measured at fair value	$	6,848	$	49,463		$	—	$	56,311		Total assets measured at fair value	$	9,679	$	73,448	$	0	$	83,127

Liabilities:											Liabilities:
Derivatives											Derivatives

Foreign currency forward contracts	$	—	$	(65	)	$	—	$	(65	)	Foreign currency forward contracts	$	0	$	672	$	0	$	672
Total liabilities measured at fair value	$	—	$	(65	)	$	—	$	(65	)	Total liabilities measured at fair value	$	0	$	672	$	0	$	672

December 31, 2016
Level 1 Level 2 Level 3 Total
Assets:
Cash Equivalents
Money market funds $ 9,635
$ —
$ —
$ 9,635
Commercial paper —
3,999
—
3,999
Total cash equivalents 9,635
3,999
—
13,634
Available-for-Sale Securities
Certificates of deposit⁽¹⁾
—
22,820
—
22,820
Corporate bonds —
6,922
—
6,922
U.S. government bonds —
2,001
—
2,001
Total available-for-sale securities —
31,743
—
31,743
Total assets measured at fair value $ 9,635
$ 35,742
$ —
$ 45,377

Liabilities:
Derivatives
Interest rate swap contract $ —
$ (38 ) $ —
$ (38 )
Total liabilities measured at fair value $ —
$ (38 ) $ —
$ (38 )

⁽¹⁾ ~~All certificates of deposit are within current FDIC insurance limits.~~

For our assets measured at fair value on a recurring basis, we recognize transfers between levels at the actual date of the event or change in circumstance that caused the transfer. There were no transfers between levels during the ~~nine months~~three-month period ended ~~September~~June 30, ~~2017,~~2021, nor for the ~~year~~period ended ~~December~~March 31, ~~2016.~~2021.

~~We did not have any changes to our valuation techniques during the nine months ended September 30, 2017, nor for the year ended December 31, 2016.~~

We classify our marketable securities as available-for-sale and, accordingly, record them at fair value. Level 1 investment valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 investment valuations are obtained from inputs, other than quoted market prices in active markets for identical assets, that are directly or indirectly observable in the marketplace and quoted prices in markets with limited volume or infrequent transactions. The factors or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Unrealized holding gains and losses are excluded from earnings and are reported net of tax in comprehensive income until realized.

The fair values of ~~our interest rate swap contract and~~ our foreign currency forward contracts are calculated as the present value of estimated future cash flows using discount factors derived from relevant Level 2 market inputs, including forward curves and volatility levels.

We did not have any changes to our valuation techniques during the three-month period ended June 30, 2021, nor for the year ended March 31, 2021.

We recognize or disclose the fair value of certain assets, such as non-financial assets, primarily property, plant and equipment, goodwill, other intangible assets and certain other long-lived assets in connection with impairment evaluations. All of our nonrecurring valuations use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy. ~~We did not perform any valuations on~~

As of June 30, 2021 and March 31, 2021, there were no assets or liabilities that are valued at fair value on a nonrecurring basis during the first nine months of 2017. During the fourth quarter of 2016, we performed our annual goodwill and indefinite-lived trade names impairment analyses effective as of October 1, 2016. During the nine months ended September 30, 2017 and the year ended December 31, 2016, we did not record any other-than-temporary impairments on our financial assets required to be measuredwere recorded at fair value on a nonrecurring basis.

The carrying values of cash and cash equivalents, restricted cash, trade receivables, prepaids and other current assets, trade payables and accrued liabilities approximate fair value due to their short maturities. The carrying value of our ~~term loan~~debt approximates its fair value and falls under Level 2 of the fair value hierarchy, as the interest rate is variable and based on current market rates.

From time to time, we enter into ~~interest rate swaps to fix a portion of our interest expense, and~~ foreign exchange forward contracts to offset the earnings impacts of exchange rate fluctuations on certain monetary assets and liabilities. We do not enter into derivative instruments for any purpose other than to manage ~~interest rate or~~ foreign currency exposure. That is, we do not engage in ~~interest rate or~~ currency exchange rate speculation using derivative instruments.

As of September 30, 2017, we had a $52.0 million interest rate swap outstanding with JPMorgan Chase Bank, N.A. This interest rate swap matures on December 31, 2020 and has a fixed rate of 1.42% per annum. The variable rate on the interest rate swap is the one-month LIBOR benchmark. At September 30, 2017, the one-month LIBOR rate was 1.24%.

We typically designate all interest rate swaps as cash flow hedges and, accordingly, record the change in fair value for the effective portion of these interest rate swaps in accumulated other comprehensive income rather than current period earnings until the underlying hedged transaction affects earnings. Gains and losses on the derivative representing hedge ineffectiveness are recognized in current earnings. For the three and nine months ended September 30, 2017 and 2016, there was no ineffectiveness. As of September 30, 2017, we expect to reclassify a gain of less than $0.1 million from accumulated other comprehensive income to earnings within the next twelve months.

We may hedge our net recognized foreign currency assets and liabilities with forward foreign exchange contracts to reduce the risk that our earnings and cash flows will be adversely affected by changes in foreign currency exchange rates. These derivative instruments hedge assets and liabilities that are denominated in foreign currencies and are carried at fair value with changes in the fair value recorded as other income. These derivative instruments do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are intended to offset gains and losses on the assets and liabilities being hedged. As of ~~September~~June 30, ~~2017,~~2021, total outstanding contract notional amounts were ~~$18.3 million. At September 30, 2017, these outstanding balance sheet hedging derivatives~~$66.0 million and had maturities of 9079 days or less.

The fair value of our derivative instruments was included in our condensed consolidated balance sheets as follows (in thousands):

Balance Sheet Classification As of
September 30, 2017 December 31, 2016
Derivative instruments designated as cash flow hedges:
Interest rate swap contract Prepaids and other current assets $ 170
$ —
Accrued liabilities —
38
$ 170
$ 38

Derivative instruments not designated as cash flow hedges:
Foreign currency forward contracts Accrued liabilities $ 65
$ —

The effect of derivative instruments on our condensed consolidated statements of operations was as follows (in thousands):

Statement of Operations Classification Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Derivative instruments designated as cash flow hedges:
Income (loss) recognized in other comprehensive income before reclassifications --- $ 8
$ 84
$ 6
$ (896 )
Loss reclassified from accumulated other comprehensive income to earnings for the effective portion Interest expense (26 ) (167 ) (189 ) (480 )
Income tax benefit Income tax expense 11
3
65
123

Derivative instruments not designated as cash flow hedges:
Loss recognized in earnings Other, net $ (53 ) $ —
$ (53 ) $ —
Income tax benefit Income tax expense 18
—
18
—

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~~For additional information related to our derivatives, see Notes 3 and 10.~~

(5) INVENTORIES

Inventories are stated at the lower of cost and net realizable value, with cost determined based on the first-in, first-out method. Our inventories consisted of the following (in thousands):


	As of
	June 30, 2021		March 31, 2021
Finished goods	$	106,413	$	63,918
Parts and components	4,719		4,167
Total inventories	$	111,132	$	68,085

As of
September 30, 2017 December 31, 2016
Finished goods $ 53,271
   $ 43,130
Parts and components 4,375
   3,900
Total inventories $ 57,646
   $ 47,030

Property, plant and equipment consisted of the following (in thousands):

Estimated
Useful Life
(in years)
As of
September 30, 2017 December 31, 2016
Automobiles 5 to 6 $ 23
$ 139
Leasehold improvements 4 to 20 3,426
3,388
Computer software and equipment 3 to 7 26,138
25,899
Machinery and equipment 3 to 5 14,732
13,085
Furniture and fixtures 5 to 20 2,230
2,238
Work in progress⁽¹⁾
N/A 1,647
768
Total cost 48,196
45,517
Accumulated depreciation (32,030 ) (28,049 )
Total property, plant and equipment, net $ 16,166
$ 17,468

⁽¹⁾ Work in progress includes ~~computer software~~information technology assets and production tooling.

~~(7) GOODWILL AND OTHER INTANGIBLE ASSETS~~

~~The rollforward of goodwill~~Depreciation expense was as follows (in thousands):

Direct Retail Total
Balance, January 1, 2016 $ 2,113
$ 58,357
$ 60,470
Currency exchange rate adjustment 67
3
70
Business acquisition - measurement period adjustments —
1,348
1,348
Balance, December 31, 2016 2,180
59,708
61,888
Currency exchange rate adjustment 168
(11 ) 157
Balance, September 30, 2017 $ 2,348
$ 59,697
$ 62,045

~~Other Intangible Assets~~

Other intangible assets consisted of the following (in thousands):

Estimated
Useful Life
(in years)
As of
September 30, 2017 December 31, 2016
Indefinite-lived trademarks N/A $ 32,052
$ 32,052
Definite-lived trademarks 10 to 15 2,600
2,600
Patents 8 to 24 15,187
31,487
Customer relationships 10 to 15 24,700
24,700
74,539
90,839
Accumulated amortization - definite-lived intangible assets (7,185 ) (21,039 )
Other intangible assets, net $ 67,354
$ 69,800

Amortization expense was as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Amortization expense $ 812
$ 817
$ 2,446
$ 2,738

Future amortization of definite-lived intangible assets is as follows (in thousands):

Remainder of 2017 $ 810
2018 3,164
2019 3,134
2020 3,108
2021 3,078
Thereafter 22,008
$ 35,302

We have several non-cancellable operating leases, primarily for office space, that expire at various dates over the next nine years. These leases generally contain renewal options to extend for 1 lease term of five years. For leases that we are reasonably certain we will exercise the lease renewal options, the options were considered in determining the lease term, and associated potential option payments are included in the lease payments. The payments used in the renewal term were estimated using the percentage rate increase of historical rent payments for each location where the renewal will be exercised.

Payments due under the lease contracts include annual fixed payments for office space. Variable payments including payments for our proportionate share of the building’s property taxes, insurance, and common area maintenance are treated as non-lease components and are recognized in the period for which the costs occur.

Operating lease expense was as follows (in thousands):

Leases with an initial term of 12 months or less (“short-term lease”) are not recorded on the balance sheet and are recognized on a straight-line basis over the lease term.

Other information related to leases was as follows (dollars in thousands):

We determined the discount rate for leases using a portfolio approach to determine an incremental borrowing rate to calculate the right-of-use assets and lease liabilities.

Maturities of operating lease liabilities under non-cancellable leases were as follows (in thousands):


	As of
	June 30, 2021
2022	$	4,502
2023	5,606
2024	5,168
2025	5,330
2026	4,267
Thereafter	7,969
Total undiscounted lease payments	32,842
Less imputed interest	(4,915)
Total lease liabilities	$	27,927

Accrued liabilities consisted of the following (in thousands):

As of
September 30, 2017 December 31, 2016
Payroll and related liabilities $ 2,199
$ 4,579
Other 5,857
8,313
Total accrued liabilities $ 8,056
$ 12,892
(1) Reserves is primarily sales return, inventory, sales tax and product liability reserves.

~~(9)~~(10) PRODUCT WARRANTIES

Our products carry defined warranties for defects in materials or workmanship which, according to their terms, generally obligate us to pay the costs of supplying and shipping replacement parts to customers and, in certain instances, pay for labor and other costs to service products. Outstanding product warranty periods range from thirty days to, in limited circumstances, the lifetime of certain product components. We record a liability at the time of sale for the estimated costs of fulfilling future warranty claims. If necessary, we adjust the liability for specific warranty-related matters when they become known and are reasonably estimable. Estimated warranty expense is included in cost of sales, based on historical warranty claim experience and available product quality data. Warranty expense is affected by the performance of new products, significant manufacturing or design defects not discovered until after the product is delivered to the customer, product failure rates, and higher or lower than expected repair costs. If warranty expense differs from previous estimates, or if circumstances change such that the assumptions inherent in previous estimates are no longer valid, the amount of product warranty obligations is adjusted accordingly.

Changes in our product warranty obligations were as follows (in thousands):

Nine Months Ended September 30,
2017 2016
Balance, beginning of period $ 7,450
$ 8,545
Accruals 2,163
2,132
Payments (3,312 ) (2,857 )
Balance, end of period $ 6,301
$ 7,820

~~(10)~~(11) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables set forth the changes in accumulated other comprehensive ~~income (loss),~~loss, net of tax (in thousands) ~~for the periods presented:~~:

Current period other comprehensive income

before reclassifications

Unrealized Loss on Available-for-Sale Securities Gain (Loss) on Derivative Securities (Effective Portion) Foreign Currency Translation Adjustments Accumulated Other Comprehensive Income (Loss)
Balance, January 1, 2017 $ (8 ) $ (24 ) $ (1,185 ) $ (1,217 )
Current period other comprehensive income (loss) before reclassifications (6 ) 6
772
772
Reclassification of amounts to earnings —
124
—
124
Net other comprehensive income (loss) during period (6 ) 130
772
896
Balance, September 30, 2017 $ (14 ) $ 106
$ (413 ) $ (321 )



	Unrealized (Loss) Gain on Available-for-Sale Securities		Gain (Loss) on Derivative Securities		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Loss
Balance, March 31, 2020	$	0	$	0	$	(1,312)	$	(1,312)
Current period other comprehensive loss before reclassifications	0		0		353		353

Net other comprehensive loss during period	0		0		353		353
Balance, June 30, 2020	$	0	$	0	$	(959)	$	(959)

Unrealized Gain on Available-for-Sale Securities Gain (Loss) on Derivative Securities (Effective Portion) Foreign Currency Translation Adjustments Accumulated Other Comprehensive Income (Loss)
Balance, July 1, 2016 $ 10
$ (787 ) $ (869 ) $ (1,646 )
Current period other comprehensive income (loss) before reclassifications —
84
(45 ) 39
Reclassification of amounts to earnings —
164
—
164
Net other comprehensive income (loss) during period —
248
(45 ) 203
Balance, September 30, 2016 $ 10
$ (539 ) $ (914 ) $ (1,443 )

Unrealized Gain (Loss) on Available-for-Sale Securities Loss on Derivative Securities (Effective Portion) Foreign Currency Translation Adjustments Accumulated Other Comprehensive Loss
Balance, January 1, 2016 $ (16 ) $ —
$ (1,311 ) $ (1,327 )
Current period other comprehensive income (loss) before reclassifications 26
(896 ) 397
(473 )
Reclassification of amounts to earnings —
357
—
357
Net other comprehensive income (loss) during period 26
(539 ) 397
(116 )
Balance, September 30, 2016 $ 10
$ (539 ) $ (914 ) $ (1,443 )

~~(11) STOCK REPURCHASE PROGRAM~~

~~On May 4, 2016, our Board of Directors authorized the repurchase of up to $10.0 million of our outstanding common stock from time to time through May 4, 2018.~~

On April 25, 2017, our Board of Directors authorized an additional $15.0 million share repurchase program, bringing the total authorization under existing programs to $25.0 million. Under the new program, shares of our common stock may be repurchased from time to time through April 25, 2019. Repurchases may be made in open market transactions at prevailing prices, in privately negotiated transactions, or by other means in accordance with federal securities laws. Share repurchases will be funded from existing cash balances, and repurchased shares will be retired and returned to unissued authorized shares.

~~As of September 30, 2017, there was $18.2 million remaining available for repurchases under the share repurchase programs.~~

~~Cumulative repurchases pursuant to the programs are as follows:~~

Quarter Ended Number of Shares Repurchased Amount Average Price Per Share
December 31, 2016 120,996 $1,957,882 $16.18
March 31, 2017 218,515 3,426,959 15.68
September 30, 2017 86,856 1,420,934 16.36
Totals-to-Date 426,367 $6,805,775 $15.96

Basic per share amounts were computed using the weighted average number of common shares outstanding. Diluted per share amounts were calculated using the number of basic weighted average shares outstanding increased by dilutive potential common shares related to stock-based awards, as determined by the treasury stock method. Basic income per share amounts were computed using the weighted average number of common shares outstanding. Diluted income per share amounts were calculated using the number of basic weighted average shares outstanding increased by dilutive potential common shares related to stock-based awards, as determined by the treasury stock method.

The weighted average numbers of shares outstanding used to compute income per share were as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Shares used to calculate basic income per share 30,749
31,118
30,739
31,069
Dilutive effect of outstanding stock options, performance stock units and restricted stock units 326
267
359
271
Shares used to calculate diluted income per share 31,075
31,385
31,098
31,340

The weighted average numbers of shares outstanding listed in the table below were anti-dilutive and excluded from the computation of diluted income per share. In the case of restricted stock units, this is because unrecognized compensation expense exceeds the current value of the awards (i.e., grant date market value was higher than current average market price). In the case of stock options, this is because the average market price did not exceed the exercise price.

These shares may be ~~dilutive~~anti-dilutive potential common shares in the future (in thousands):


	Three-Months Ended June 30,
	2021	2020

Restricted stock units	220	580
Stock options	0	45

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Stock options 7
4
8
11

(13) SEGMENT AND ENTERPRISE-WIDE INFORMATION

~~In accordance with FASB ASC 280,~~ ~~Segment Reporting, we determined that we~~We have ~~two~~2 operating segments, - Direct and Retail. There ~~have been~~were no changes in our operating segments during the ~~nine months~~three-months ended ~~September~~June 30, ~~2017.~~2021.

We evaluate performance of the operating segments using several factors, of which the primary financial measures are net sales and reportable segment contribution.Contribution is the measure of profit or loss, defined as net sales less product costs and directly attributable expenses. Directly attributable expenses include selling and marketing expenses, general and administrative expenses, and research and development expenses that are directly related to segment operations. Segment assets are those directly assigned to an operating segment's operations, primarily accounts receivable, inventories ~~goodwill~~ and other intangible assets. Unallocated assets primarily include cash, ~~and~~ cash equivalents ~~available-for-sale securities,~~and restricted cash, derivative securities, shared information technology infrastructure,

distribution centers, corporate headquarters, prepaids and other current assets, deferred income tax assets and other assets. Capital expenditures directly attributable to the Direct and Retail segments were not significant in any period.

Following is summary information by reportable segment (in thousands):


	As of
	June 30,		March 31,
Assets:	2021		2021
Direct	$	45,176	$	47,002
Retail	192,189		146,001
Unallocated corporate	145,021		161,227
Total assets	$	382,386	$	354,230

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net sales:
Direct $ 33,986
$ 33,710
$ 147,800
$ 159,884
Retail 53,505
46,223
128,393
117,939
Royalty 641
885
2,220
2,452
Consolidated net sales $ 88,132
$ 80,818
$ 278,413
$ 280,275
Contribution:
Direct $ 5,289
$ 2,584
$ 23,141
$ 31,253
Retail 12,118
9,164
20,427
17,225
Royalty 638
871
2,206
2,419
Consolidated contribution $ 18,045
$ 12,619
$ 45,774
$ 50,897

Reconciliation of consolidated contribution to income from continuing operations:
Consolidated contribution $ 18,045
$ 12,619
$ 45,774
$ 50,897
Amounts not directly related to segments:
Operating expenses (4,680 ) (4,408 ) (15,877 ) (16,813 )
Other expense, net (161 ) (218 ) (648 ) (1,336 )
Income tax expense (4,862 ) (148 ) (10,156 ) (9,621 )
Income from continuing operations $ 8,342
$ 7,845
$ 19,093
$ 23,127

~~There was no material change in the allocation of assets by segment during the first nine months of 2017 and, accordingly, assets by segment are not presented.~~

~~Certain~~The following customers ~~individually represented~~accounted for 10% or more of total net sales as follows:

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Customer:
Customer #1 18.5 % 17.2 % 13.5 % 12.1 %
Customer #2 13.7 % *
*
*


	Three-Months Ended June 30,
	2021		2020
Amazon.com	17.9	%	18.0	%
Best Buy	17.1	%	*

*Less than 10% of total net sales.

Wells Fargo Bank Credit Agreement

On May 14, 2021, we amended the January 31, 2020 Credit Agreement with Wells Fargo Bank, National Association (“Wells Fargo”) and lenders from time to time party thereto (collectively with Wells Fargo the “Lenders”) (“Credit Agreement”), pursuant to which the Lenders have agreed, among other things, to make available to us an asset-based revolving loan facility in the aggregate principal amount of up to $55.0 million, subject to a borrowing base (the “ABL Revolving Facility”), and a term loan facility in the aggregate principal amount of $15.0 million (the “Term Loan Facility” and together with the ABL Revolving Facility, the “Wells Fargo Financing"), in each case, as such amounts may increase or decrease in accordance with the terms of the Credit Agreement. Several key features have been beneficially amended including permanently removing the $7.5 million minimum liquidity covenant and minimum EBITDA covenant that was scheduled to commence February 1, 2022. The Credit Facility now contains a single market-based 1.0x springing fixed charge coverage ratio tested only when availability is less than the greater of $6.0 million and 12.5% of the Loan Cap, as defined in the Credit Agreement. Various borrowing base definitions and limits were also amended that will result in improved availability under the asset-based revolver. In addition to the above structural improvements, the interest rate on the term loan was reduced to LIBOR plus 4.50% versus 5.00%. The maturity date remains January 31, 2025 and the term loan continues to contain amortization as originally scheduled. The repayment of obligations under the Credit Agreement is secured by substantially all of our assets. Principal and interest amounts are required to be paid as scheduled.

Interest on the ABL Revolving Facility will accrue at LIBOR plus a margin of 1.75% to 2.25% (based on average quarterly availability) and interest on the Term Loan Facility will accrue at LIBOR plus 4.50%. As of June 30, 2021, our interest rate was 1.85% for the ABL Revolving Facility and 4.60% for the Term Loan Facility.

As of June 30, 2021,outstanding borrowings, net of debt issuance costs, totaled $13.4 million, with $11.9 million and $1.5 million under our Term Loan Facility and ABL Revolving Facility, respectively. As of June 30, 2021, we were in compliance with the financial covenants of the Credit Agreement and $53.6 million was available for borrowing under the ABL Revolving Facility. Any outstanding balance is due and payable on January 31, 2025.

The balance sheet classification of the borrowings under the revolving loan credit facility has been determined in accordance with ASC 470, Debt. Borrowings outstanding under a revolving credit agreement that includes both a subjective acceleration clause and a requirement to maintain a springing lock-box arrangement are classified based on the provisions of ASC 470 because the lock-box remittances do not automatically reduce the debt outstanding.

(15) COMMITMENTS AND CONTINGENCIES

Guarantees, Commitments and Off-Balance Sheet Arrangements

As of ~~September~~June 30, ~~2017~~,2021, we had no standby letters of ~~credit.~~credit of $0.9 million.

We have long lead times for inventory purchases and, therefore, must secure factory capacity from our vendors in advance. As of ~~September~~June 30, ~~2017~~,2021, we had approximately ~~$37.5~~$174.9 million compared to $216.3 million as of March 31, 2021 in ~~noncancelable~~non-cancelable market-based purchase obligations, primarily to secured additional factory capacity for inventory purchases ~~expected to be received within~~in the next twelve months. Purchase obligations can vary from quarter-to-quarter and versus the same period in prior years due to a number of factors, including the amount of products that are shipped directly to Retail customer warehouses versus through Nautilus warehouses.

In the ordinary course of business, we enter into agreements that require us to indemnify counterparties against third-party claims. These may include: agreements with vendors and suppliers, under which we may indemnify them against claims arising from use of their products or services; agreements with customers, under which we may indemnify them against claims arising from their

use or sale of our products; real estate and equipment leases,

under which we may indemnify lessors against third-party claims relating to the use of their property; agreements with licensees or licensors, under which we may indemnify the licensee or licensor against claims arising from their use of our intellectual property or our use of their intellectual property; and agreements with parties to debt arrangements, under which we may indemnify them against claims relating to their participation in the transactions.

The nature and terms of these indemnification obligations vary from contract to contract, and generally a maximum obligation is not stated within the agreements. We hold insurance policies that mitigate potential losses arising from certain types of indemnification obligations. Management does not deem these obligations to be significant to our financial position, results of operations or cash flows, and therefore, no related liabilities were recorded as of ~~September~~June 30, ~~2017.~~2021.

From time to time, in the ordinary course of business, we may be involved in various claims, lawsuits and other proceedings. These legal and tax proceedings involve uncertainty as to the eventual outcomes and losses which may be realized when one or more future events occur or fail to occur.

Litigation and jury verdicts are, to some degree, inherently unpredictable, and although we have determined that a loss is not probable in connection with any current legal proceeding, it is reasonably possible that a loss may be incurred in connection with proceedings to which we are a party. Assessment of whether incurrence of a loss is probable, or a reasonable possibility, in connection with a particular proceeding, and estimation of the loss, or a range of loss, involves complex judgments and numerous uncertainties. Management is unable to estimate a range of reasonably possible losses related to litigation in which the damages sought are indeterminate, or the legal and factual basis for the relevant claims have not been developed with specificity. As such, zero liability is recorded as of September 30, 2017.

We regularly monitor our estimated exposure to these contingencies and, as additional information becomes known, may change our estimates accordingly. We evaluate, on a quarterly basis, developments in legal proceedings, investigations or claims that could affect the amount of any accrual, as well as any developments that would make a loss probable or reasonably possible, and whether the amount of a probable or reasonably possible loss is estimable. Among other factors, we evaluate the advice of internal and external counsel, the outcomes from similar litigation, the current status of the lawsuits (including settlement initiatives), legislative developments and other factors. Due to the numerous variables associated with these judgments and assumptions, both the precision and reliability of the resulting estimates of the related loss contingencies are subject to substantial uncertainties. Further, while we face contingencies that are reasonably possible to occur, we are unable to estimate the possible loss or range of loss at this time. As such, 0 liability is recorded as of June 30, 2021.

~~Indemnification Settlement~~

During the three months ended September 30, 2017, we received payment in settlement of an indemnification claim related to the December 31, 2015 purchase of Octane. The settlement totaled $1.5 million, and was related to excess royalty expense, obsolete inventory, duty on tooling equipment, and uncollectible accounts receivable. These amounts were credited to the condensed consolidated statement of operations for the third quarter of 2017 in the line items for selling and marketing and cost of sales in accordance with the accountingAs of the ~~original costs.~~date of filing of this Quarterly Report on Form 10-Q, we were not involved in any material legal proceedings.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is based upon our financial statements as of the dates and for the periods presented in this section. You should read this discussion and analysis in conjunction with the financial statements and notes thereto found in Part I, Item 1 of this Form 10-Q and our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020 (the ~~“2016~~“2020 Form 10-K”). All references to the ~~third~~first quarter of 2021 and ~~first nine months of 2017 and 2016~~2020 mean the ~~three and nine-month~~three-month periods ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively. Unless the context otherwise requires, “Nautilus,” “we,” “us” and “our” refer to Nautilus, Inc. and its subsidiaries. Unless indicated otherwise, all information regarding our operating results pertains to our continuing operations.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “plan,” “expect,” “aim,” “believe,” “project,” “intend,” “estimate,” “will,” “should,” “could,” and other terms of similar meaning typically identify forward-looking statements. We also may make forward-looking statements in our other documents filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”). In addition, our senior management may make forward-looking statements orally to analysts, investors, representatives of the media and others. Forward-looking statements include any statements related to our future business, financial performance or operating results; anticipated fluctuations in net sales due to seasonality; plans and expectations regarding gross and operating margins; plans and expectations regarding research and development expenses and capital expenditures and anticipated results from such expenditures and other investments in our capabilities and resources; anticipated losses from discontinued operations; plans for new product introductions, strategic partnerships and anticipated demand for our new and existing products; and statements regarding our inventory and working capital requirements and the sufficiency of our financial resources. These forward-looking statements, and others we make from time-to-time, are subject to a number of risks and uncertainties. Many factors could cause actual results to differ materially from those projected in forward-looking statements, including our ability to timely acquire inventory that meets our quality control standards from sole source foreign manufacturers at acceptable costs, changes in consumer fitness trends, changes in the media consumption habits of our target consumers or the effectiveness, availability and price of media time consistent with our cost and audience profile parameters, greater than anticipated costs or delays associated with launch of new products, weaker than expected demand for new or existing products, a decline in consumer spending due to unfavorable economic conditions, softness in the retail marketplace or the availability from retailers of heavily discounted competitive products, an adverse change in the availability of credit for our customers who finance their purchases, our ability to pass along vendor raw material price increases and other cost pressures, including increased shipping costs and unfavorable foreign currency exchange rates, tariffs, risks associated with current and potential delays, work stoppages, or supply chain disruptions caused by the coronavirus pandemic, our ability to hire and retain key management personnel, our ability to effectively develop, market and sell future products, the availability and timing of capital for financing our strategic initiatives, including being able to raise capital on favorable terms or at all; changes in the financial markets, including changes in credit markets and interest rates that affect our ability to access those markets on favorable terms, the impact of any future impairments, our ability to protect our intellectual property, the introduction of competing products, and our ability to get foreign-sourced product through customs in a timely manner. Additional assumptions, risks and uncertainties are described in Part I, Item 1A, “Risk Factors,” in our 2020 Form 10-K as supplemented or modified in our quarterly reports on Form 10-Q. We do not undertake any duty to update forward-looking statements after the date they are made or conform them to actual results or to changes in circumstances or expectations.

We empower healthier living through individualized connected fitness experiences. We are committed to build a healthier world, one person at a time. Our principal business activities include designing, developing, sourcing and marketing high-quality cardio and strength fitness products, related accessories and digital platform for consumer use, primarily in the U.S., Canada, Europe and Asia. Our products are sold under some of the most-recognized brand names in the fitness industry: Bowflex®, Schwinn®, JRNY® and Nautilus®.

We market our products through two distinct distribution channels, Direct and Retail, which we consider to be separate business segments. Our Direct business offers products directly to consumers primarily through websites. Our Retail business offers our products through a network of independent retail companies to reach consumers in the home use markets in the U.S. and internationally. We also derive a portion of our revenue from the licensing of our brands and intellectual property.

As previously disclosed, we changed our fiscal year from the twelve months beginning January 1 and ending December 31 to the twelve months beginning April 1 and ending March 31 in order to include the primary fitness season for exercise equipment, October to March, in the same fiscal year. In addition, the new fiscal year-end is better aligned with the fiscal year-end of our retail partners.

For the three-months ended June 30, 2021, our results were primarily impacted by strong demand driven by our North Star strategy and the at home fitness surge. The five strategic pillars of North Star are (1) Adopt a consumer first mindset; (2) Scale a differentiated digital offering; (3) Focus investments on core businesses; (4) Evolve supply chain to be strategic advantage; and (5) Build organizational capabilities to win by unleashing the power of our team. We will leverage our many strengths to transform into a company that empowers healthier living through individualized connected fitness experiences. Our transformation will properly leverage our leading brands, products, innovation, distribution and digital assets to build a healthier world, one person at a time.

•Net sales for the three-months ended June 30, 2021 were $184.6 million, reflecting a 61.7% increase as compared to net sales of $114.2 million for the three-months ended June 30, 2020. Sales were up 74.4%, excluding sales related to the Octane brand, which was sold in October 2020.Sales growth was driven primarily by continued demand for connected fitness bikes and treadmills, like the Bowflex® VeloCore® bike and Bowflex® T22 Treadmill, and robust sales of SelectTech® weights.

•Net sales of our Direct segment increased by $13.0 million, or 25.7%, for the three-months ended June 30, 2021, compared to the three-months ended June 30, 2020.

•Net sales of our Retail segment increased by $57.5 million, or 91.4%, for the three-months ended June 30, 2021, compared to the three-months ended June 30, 2020. Excluding Octane, net sales grew 120.7%.

•Royalty income for the three-months ended June 30, 2021 decreased by $0.1 million compared to the three-months ended June 30, 2020.

•Gross profit for the three-months ended June 30, 2021 was $55.5 million, reflecting a 17.1% increase as compared to gross profit of $47.4 million for the three-months ended June 30, 2020.Gross margin rate for the three-months ended June 30, 2021 was 30.1% compared to 41.5% for the three-months ended June 30, 2020. This margin pressure is the result of current macro events affecting not just the Company but many others as well. The 11.4 ppt decrease in gross margins was primarily due to: higher landed product costs driven by inflationary price increases in commodities and components, foreign exchange, and elevated transportation costs, partially offset by sales price increases (-6 ppts), channel mix as Direct segment sales were 34% versus 44% last year (-3 ppts), outbound freight (-1 ppt), and a strategic decision to end production of select SKUs (-1 ppt).

•Operating expenses for the three-months ended June 30, 2021 were $37.6 million, a decrease of $16.9 million, or 30.9%, as compared to operating expenses of $54.5 million for the three-months ended June 30, 2020, primarily due to the $29.0 million loss on disposal group for the same period last year partially offset by increased selling and marketing expenses, as the Direct business returned to more normalized levels of advertising and the company invested in incremental brand marketing. Total advertising expenses were $11.6 million this year versus $2.8 million last year. General and administrative expenses and product development expenses also increased versus last year primarily driven by investments in JRNY®.

•Operating income for the three-months ended June 30, 2021 was $17.9 million or 9.7% operating margin, a $25.0 million improvement compared to an operating loss of $7.1 million for the three-months ended June 30, 2020. JRNY® investments were $4.6 million this year versus $1 million last year and brand marketing was $3.4 million this year versus $0 last year. Excluding these investments, our Q1 2022 operating margins have been improved by 4 percentage points.

•Income from continuing operations was $14.0 million for the three-months ended June 30, 2021, or $0.43 per diluted share, compared to a loss from continuing operations of $5.0 million, or $0.17 per diluted share, for the three-months ended June 30, 2020.

•Net income was $13.9 million for the three-months ended June 30, 2021, compared to net loss of $5.1 million for the three-months ended June 30, 2020.

•The effective tax rates for the three-months ended June 30, 2021 and for the three-months ended June 30, 2020 were 19.7% and 32.0%, respectively.

Nautilus Inc. continues to enhance the JRNY® platform, creating differentiated connected fitness experiences for their members. In the past quarter, the Company enhanced its content library, adding 200+ trainer-led videos and commissioning additional Explore the World content. They introduced the JRNY® app for use with its popular IC4 and C6 bikes further expanding its diverse lineup of connected products.

Today, Nautilus also announced a strategic partnership with digital fitness provider, FitOn. Under the agreement, JRNY® members will have access to hundreds of off-product workouts through the JRNY® digital fitness platform and app to keep members engaged and reaching their fitness goals.

Forward Looking Guidance

Second Quarter Fiscal 2022

•The Company’s revenue for the next few quarters will be compared to record results due to the pandemic’s effect on net sales last year. To gauge continued progress against the expanded addressable market, the Company will be measuring business versus last year and versus the same period two years ago for the next few quarters.

•Demand curves for the Direct segment in Q1 and in the first month of Q2 have started to revert to more typical seasonality patterns. Now that Direct’s backlog has returned to more normal levels, the Company expects Direct sales in Q2 to be lower than Q1.

•The Company expects total company net sales for the 2nd quarter of fiscal 2022 to be between $145 million and $155 million, a 2-year revenue CAGR of 53% to 59%.

•Similar to many other companies, the Company expects external gross margin challenges to continue in Q2 and anticipates increased price pressure due to the ongoing chip shortage.

•The Company was pleased with the results of North Star investment in Q1 and plans to continue investing in Q2. Brand marketing expenditures will be between $5 million and $6 million versus $3 million last quarter and zero last year. JRNY® investment will be between $5.5 million and $6.5 million versus $5 million last quarter and $1 million last year. JRNY® investments will further enhance platform functionality via improved adaptive workouts, the addition of a member portal, and additional fresh content, like the ones provided by their new partner FitOn. The Company expects these investments to dilute operating margins by 7 to 8 percentage points.

•Given these investments and the external macro pressure on gross margin, the Company expects operating margins to be in the low single digits.

Back Half of Fiscal 2022

•The Company expects to continue investing in North Star on a “pay as we go” basis.

•The Company assumes that the external macro factors negatively affecting gross margins will continue in Q3 and Q4. Although it’s unclear when the pressure will ease, the Company expects that over time, prices will stabilize and eventually return closer to pre-pandemic levels.

•Until the macro environment improves, the Company expects operating margins to be in the low to mid-single digits for the back half of the year.

•The Company continues to expect full year capital expenditures to be between $12 million and $14 million with the majority earmarked for JRNY® investments.

•The Company reiterates their expectation of reaching 250,000 JRNY® members by the end of FY22

Longer term view, beyond Fiscal 2022

•The Company’s conviction in their North Star strategy has never been stronger. Growth in JRNY® members and their increased engagement confirm the Company’s expectations that their North Star investments will ultimately yield higher quality recurring revenue and long-term profitable growth.

•The Company believes the near-term external gross margin pressures are temporary and are not delaying the Company’s expectations of achieving sustainable operating margins upwards of 15% by FYE 2026, as they realize the long-term benefits of their transformational investments.

Factors Affecting Our Performance

Our results of operations may vary significantly from period-to-period. Our revenues typically fluctuate due to the seasonality of our industry, customer buying patterns, product innovation, the nature and level of competition for health and fitness products, our ability to procure products to meet customer demand, the level of spending on, and effectiveness of, our media and advertising programs and our ability to attract new customers and maintain existing sales relationships. In addition, our revenues are highly susceptible to economic factors, including, among other things, the overall condition of the economy and the availability of consumer credit in both the U.S. and Canada. The COVID-19 pandemic has created a heightened need for home-fitness products at an unplanned rate. We are unable to estimate the length of time that the short-term increases in demand for many of our home-fitness products will outpace supply and we are accelerating the manufacturing and delivery of key products. We cannot predict the longer-term impacts of COVID-19 and the impact on our results of operations is uncertain. Our ~~profit~~gross margins ~~may vary in response to the aforementioned factors and our ability to manage product costs. Profit margins may also be affected~~are being impacted by fluctuations in the costs or availability of materials used to manufacture our products, tariffs, expedited shipping and transportation costs and product warranty costs. Gross margins may also be affected by fluctuations in cost associated with acquisition or license of products and technologies, product warranty costs, the cost of fuel, foreign currency exchange rates, and changes in costs of other distribution or manufacturing-related services. Our operating profits or losses may also be affected by the efficiency and effectiveness of our organization. Historically, our operating expenses have been influenced by media costs to produce and distribute advertisements of our products on television, ~~the Internet~~websites and other media, facility costs, operating costs of our information and communications systems, product supply chain management, customer support and new product development activities. In addition, our operating expenses have been affected from time-to-time by asset impairment charges, restructuring charges and other significant unusual or infrequent expenses.

As a result of the above and other factors, our period-to-period operating results may not be indicative of future performance. You should not place undue reliance on our operating results and should consider our prospects in light of the risks, expenses and difficulties typically encountered by us and other companies, both within and outside our industry. We may not be able to successfully address these risks and difficulties and, consequently, we cannot assure you of any future growth or profitability. For more information, see our discussion of risk factors located at Part I, Item 1A of our ~~2016 Form 10-K.~~

~~Forward-Looking Statements~~

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "plan," "expect," "aim," "believe," "project," "intend," "estimate," "will," "should," "could," and other terms of similar meaning typically identify forward-looking statements. Forward-looking statements include any statements related to our future business and financial performance; anticipated fluctuations in net sales due to seasonality; plans and expectations regarding gross and operating margins; plans and expectations regarding research and development expenses and capital expenditures; anticipated losses from discontinued operations; results of media investment in the Direct segment; plans for new product introductions and anticipated demand for our new and existing products; and statements regarding our inventory and working capital requirements and the sufficiency of our financial resources. These forward-looking statements, and others we make from time-to-time, are subject to a number of risks and uncertainties. Many factors could cause actual results to differ materially from those projected in forward-looking statements, including our ability to timely acquire inventory that meets our quality control standards from sole source foreign manufacturers at acceptable costs, the effectiveness, availability and price of media time consistent with our cost and audience profile parameters, greater than anticipated costs associated with launch of new products, our ability to successfully integrate acquired businesses, a decline in consumer spending due to unfavorable economic conditions, softness in the retail marketplace, an adverse change in the availability of credit for our customers who finance their purchases, our ability to pass along vendor raw material price increases and increased shipping costs, our ability to effectively develop, market and sell future products, our ability to protect our intellectual property, the introduction of competing products, and our ability to get foreign-sourced product through customs in a timely manner. Additional assumptions, risks and uncertainties are described in Part I, Item 1A, "Risk Factors," in our 20162020 Form 10-K as supplemented ~~or modified in~~by our quarterly reports on Form 10-Q. ~~We do not undertake any duty to update forward-looking statements after the date they are made or conform them to actual results or to changes in circumstances or expectations.~~

We are committed to providing innovative, quality solutions to help people achieve a fit and healthy lifestyle. Our principal business activities include designing, developing, sourcing and marketing high-quality cardio and strength fitness products and related accessories for consumer use, primarily in the U.S., Canada and Europe. Our products are sold under some of the most-recognized brand names in the fitness industry: Nautilus
^®~~, Bowflex~~^®~~, Octane Fitness~~^®~~, Schwinn~~^®~~and Universal~~^®.

~~We market our products through two distinct distribution channels, Direct and Retail, which we consider to be separate business segments. Our~~ ~~Direct~~ ~~business offers products directly to consumers through television advertising, catalogs and the Internet. Our~~ ~~Retail~~ business offers our products through a network of independent retail companies and specialty retailers with stores and websites located in the U.S. and internationally. We also derive a portion of our revenue from the licensing of our brands and intellectual property.

~~Net sales for the~~ ~~first nine months~~ of 2017 were $278.4 million, a decrease of $1.9 million, or 0.7%, as compared to net sales of $280.3 million for the first nine months of 2016. Net sales of our Direct segment decreased $12.1 million, or 7.6%, in the first nine months of 2017, compared to the first nine months of 2016, primarily due to a decline in TreadClimber^® sales. Net sales of our Retail segment increased by $10.5 million, or 8.9%, in the first nine months of 2017, compared to the first nine months of 2016, reflecting increases for both traditional and e-commerce customers across multiple product categories.

Gross profit for the first nine months of 2017 was $141.4 million, or 50.8% of net sales, a decrease of $6.0 million, or 4.1%, as compared to gross profit of $147.4 million, or 52.6% of net sales, for the first nine months of 2016. The decrease in gross profit dollars was primarily due to the decrease in net sales. Gross margin percentage points decreased 1.8%, due to a shift in segment mix, reflecting an increased percentage of Retail sales, and a decline in the Direct channel margin.

Operating expenses for the first nine months of 2017 were $111.5 million, a decrease of $1.8 million, or 1.6%, as compared to operating expenses of $113.3 million for the first nine months of 2016. The decrease in operating expenses was primarily related to decreased sales and marketing expense. The decrease in sales and marketing expense was due to a retroactive financing fees rebate of $2.1 million, and a $1.0 million settlement payment received in connection with an indemnification claim.

Operating income for the first nine months of 2017 was $29.9 million, a decrease of $4.2 million, or 12.3%, as compared to operating income of $34.1 million for the first nine months of 2016. The decrease in operating income for the first nine months of 2017 compared to the first nine months of 2016 was driven primarily by the lower net sales and gross margin dollars.

Income from continuing operations was $19.1 million for the first nine months of 2017, or $0.61 per diluted share, compared to income from continuing operations of $23.1 million, or $0.74 per diluted share, for the first nine months of 2016. The effective tax rates for the first nine months of 2017 and 2016 were 34.7% and 29.4%, respectively. The 5.3% year-over-year percentage rate increase was due to the release of previously unrecognized tax benefits associated with certain non-U.S. filing positions during the third quarter of 2016.

Net income for the first nine months of 2017 was $17.8 million, compared to net income of $22.6 million for the first nine months of 2016. Net income per diluted share was $0.57 for the first nine months of 2017, compared to $0.72 for the first nine months of 2016.

Discontinued Operations

Results from discontinued operations relate to the disposal of our former Commercial business, which was completed in April 2011. We reached substantial completion of asset liquidation atas of December 31, 2012. Although there was no revenue related to the former Commercial business in either the ~~2017~~2021 or ~~2016~~2020 periods, we continue to ~~have~~incur product liability and other legal expenses associated with product previously sold into the Commercial channel.

Table of Contents

RESULTS OF OPERATIONS

Results of operations information was as follows (dollars in thousands):


	Three-Months Ended June 30,				Change
	2021		2020		$		%
Net sales	$	184,593	$	114,188	$	70,405	61.7	%
Cost of sales	129,088		66,792		62,296		93.3	%
Gross profit	55,505		47,396		8,109		17.1	%
Operating expenses:
Selling and marketing	21,300		12,446		8,854		71.1	%
General and administrative	11,523		9,315		2,208		23.7	%
Research and development	4,815		3,728		1,087		29.2	%
Loss on disposal group	—		29,013		(29,013)		(100.0)	%
Total operating expenses	37,638		54,502		(16,864)		(30.9)	%
Operating income (loss)	17,867		(7,106)		24,973		(351.4)	%
Other expense:
Interest income	21		1		20		2,000.0	%
Interest expense	(314)		(338)		24		(7.1)	%
Other, net	(120)		115		(235)		*
Total other expense, net	(413)		(222)		(191)		86.0	%
Income (loss) from continuing operations before income taxes	17,454		(7,328)		24,782
Income tax expense (benefit)	3,438		(2,342)		5,780
Income (loss) from continuing operations	14,016		(4,986)		19,002
Loss from discontinued operations, net of income taxes	(132)		(124)		(8)
Net income (loss)	$	13,884	$	(5,110)	$	18,994

Three Months Ended September 30, Change
2017 2016 $ %
Net sales $ 88,132
$ 80,818
$ 7,314
9.0 %
Cost of sales 46,817
41,601
5,216
12.5 %
Gross profit 41,315
39,217
2,098
5.3 %
Operating expenses:
Selling and marketing 18,028
21,394
(3,366 ) (15.7 )%
General and administrative 6,305
6,177
128
2.1 %
Research and development 3,617
3,435
182
5.3 %
Total operating expenses 27,950
31,006
(3,056 ) (9.9 )%
Operating income 13,365
8,211
5,154
62.8 %
Other income (expense):
Interest income 170
60
110

Interest expense (377 ) (489 ) 112

Other, net 46
211
(165 )
Total other expense, net (161 ) (218 ) 57

Income from continuing operations before income taxes 13,204
7,993
5,211

Income tax expense 4,862
148
4,714

Income from continuing operations 8,342
7,845
497

Loss from discontinued operations, net of taxes (101 ) (251 ) 150

Net income $ 8,241
$ 7,594
$ 647

*Not meaningful

Nine Months Ended September 30, Change
2017 2016 $ %
Net sales $ 278,413
$ 280,275
$ (1,862 ) (0.7 )%
Cost of sales 136,975
132,852
4,123
3.1 %
Gross profit 141,438
147,423
(5,985 ) (4.1 )%
Operating expenses:
Selling and marketing 79,321
81,284
(1,963 ) (2.4 )%
General and administrative 21,106
21,611
(505 ) (2.3 )%
Research and development 11,114
10,444
670
6.4 %
Total operating expenses 111,541
113,339
(1,798 ) (1.6 )%
Operating income 29,897
34,084
(4,187 ) (12.3 )%
Other income (expense):
Interest income 476
182
294

Interest expense (1,233 ) (1,469 ) 236

Other, net 109
(49 ) 158

Total other expense, net (648 ) (1,336 ) 688

Income from continuing operations before income taxes 29,249
32,748
(3,499 )
Income tax expense 10,156
9,621
535

Income from continuing operations 19,093
23,127
(4,034 )
Loss from discontinued operations, net of taxes (1,270 ) (559 ) (711 )
Net income $ 17,823
$ 22,568
$ (4,745 )

Table of Contents

Results of operations information by segment and major product lines was as follows (dollars in thousands):


	Three-Months Ended June 30,						Change
	2021			2020			$			%
Net sales:
Direct net sales:
Cardio products(1)	$	31,430		$	45,585		$	(14,155)		(31.1)	%
Strength products(2)	31,966			4,848			27,118			559.4	%
Direct	63,396			50,433			12,963			25.7	%

Retail net sales:
Cardio products(1)	89,924			49,011			40,913			83.5	%
Strength products(2)	30,560			13,937			16,623			119.3	%
Retail	120,484			62,948			57,536			91.4	%



Royalty	713			807			(94)			(11.6)	%
	$	184,593		$	114,188		$	70,405		61.7	%

Cost of sales:
Direct	$	38,882		$	22,910		$	15,972		69.7	%
Retail	90,206			43,882			46,324			105.6	%

	$	129,088		$	66,792		$	62,296		93.3	%

Gross profit:
Direct	$	24,514		$	27,523		$	(3,009)		(10.9)	%
Retail	30,278			19,066			11,212			58.8	%
Royalty	713			807			(94)			(11.6)	%
	$	55,505		$	47,396		$	8,109		17.1	%
Gross margin:
Direct	38.7		%	54.6		%	(1,590)		basis points
Retail	25.1		%	30.3		%	(520)		basis points

Contribution:
Direct	$	6,759		$	16,995		(10,236)			(60.2)	%
Retail	22,090			11,613			10,477			90.2	%

Contribution rate:
Direct	10.7		%	33.7		%	(2,300)		basis points
Retail	18.3		%	18.4		%	(10)		basis points
(1) Cardio products include: connected-fitness bikes, the Bowflex® C6, Bowflex® VeloCore®, Schwinn® IC4, Max Trainer®, connected-fitness treadmills, other exercise bikes, ellipticals and subscription services.
(2) Strength products include: Bowflex® Home Gyms, Bowflex® SelectTech® dumbbells, kettlebell and barbell weights, and accessories.

Three Months Ended September 30, Change
2017 2016 $ %
Net sales:
Direct $ 33,986
$ 33,710
$ 276
0.8 %
Retail 53,505
46,223
7,282
15.8 %
Royalty 641
885
(244 ) (27.6 )%
$ 88,132
$ 80,818
$ 7,314
9.0 %
Cost of sales:
Direct $ 12,401
$ 11,579
$ 822
7.1 %
Retail 34,413
30,008
4,405
14.7 %
Royalty 3
14
(11 ) (78.6 )%
$ 46,817
$ 41,601
$ 5,216
12.5 %
Gross profit:
Direct $ 21,585
$ 22,131
$ (546 ) (2.5 )%
Retail 19,092
16,215
2,877
17.7 %
Royalty 638
871
(233 ) (26.8 )%
$ 41,315
$ 39,217
$ 2,098
5.3 %
Gross margin:
Direct 63.5 % 65.7 % (220 ) basis points
Retail 35.7 % 35.1 % 60
basis points

Nine Months Ended September 30, Change
2017 2016 $ %
Net sales:
Direct $ 147,800
$ 159,884
$ (12,084 ) (7.6 )%
Retail 128,393
117,939
10,454
8.9 %
Royalty 2,220
2,452
(232 ) (9.5 )%
$ 278,413
$ 280,275
$ (1,862 ) (0.7 )%
Cost of sales:
Direct $ 52,525
$ 53,732
$ (1,207 ) (2.2 )%
Retail 84,436
79,087
5,349
6.8 %
Royalty 14
33
(19 ) (57.6 )%
$ 136,975
$ 132,852
$ 4,123
3.1 %
Gross profit:
Direct $ 95,275
$ 106,152
$ (10,877 ) (10.2 )%
Retail 43,957
38,852
5,105
13.1 %
Royalty 2,206
2,419
(213 ) (8.8 )%
$ 141,438
$ 147,423
$ (5,985 ) (4.1 )%
Gross margin:
Direct 64.5 % 66.4 % (190 ) basis points
Retail 34.2 % 32.9 % 130
basis points

~~The following table compares the net sales of our major product lines within each business segment (dollars in thousands):~~

Three Months Ended September 30, Change
2017 2016 $ %
Direct net sales:
Cardio products⁽¹⁾
$ 30,087
$ 30,548
$ (461 ) (1.5 )%
Strength products⁽²⁾
3,899
3,162
737
23.3 %
33,986
33,710
276
0.8 %
Retail net sales:
Cardio products⁽¹⁾
39,389
33,280
6,109
18.4 %
Strength products⁽²⁾
14,116
12,943
1,173
9.1 %
53,505
46,223
7,282
15.8 %

Royalty 641
885
(244 ) (27.6 )%
$ 88,132
$ 80,818
$ 7,314
9.0 %

Nine Months Ended September 30, Change
2017 2016 $ %
Direct net sales:
Cardio products⁽¹⁾
$ 133,421
$ 149,074
$ (15,653 ) (10.5 )%
Strength products⁽²⁾
14,379
10,810
3,569
33.0 %
147,800
159,884
(12,084 ) (7.6 )%
Retail net sales:
Cardio products⁽¹⁾
96,249
86,739
9,510
11.0 %
Strength products⁽²⁾
32,144
31,200
944
3.0 %
128,393
117,939
10,454
8.9 %

Royalty 2,220
2,452
(232 ) (9.5 )%
$ 278,413
$ 280,275
$ (1,862 ) (0.7 )%

⁽¹⁾ Cardio products include: Max Trainer^®,TreadClimber^®, HVT™, Zero Runner^®, treadmills, exercise bikes and ellipticals.
⁽²⁾ Strength products include: home gyms, selectorized dumbbells, kettlebell weights and accessories.

Direct

~~Direct net~~Net sales ~~increased 0.8%~~ for the ~~three month period~~three-months ended ~~September~~June 30, ~~2017 compared to~~2021 were $63.4 million, up 25.7%, from $50.4 million in the same period ~~of 2016 as new~~last year.

Strength product sales grew 559.4% to a historical record, led by the popular SelectTech® weights and Bowflex® Home Gyms. Cardio sales declined 31.1%, primarily due to end-of-life products ~~including the Bowflex HVT~~^TM~~, offset~~that are no longer available for sale this year and a decline in ~~TreadClimber~~sales of the Schwinn^® IC4 Bowflex® C6 bikes that was partially offset by VeloCore® sales. ~~For~~

Gross margin rate for the ~~nine months~~three-months ended ~~September~~June 30, ~~2017, Direct net sales decreased 7.6% compared to~~2021 was 38.7%, down 15.9%, from 54.6% in the same period last year. The 15.9 ppt decrease in gross margin was primarily driven by: higher landed product costs (-6

Table of ~~2016 due~~Contents

ppts), higher outbound freight costs (-6 ppts), deleveraging of fixed costs as direct sales grew slower than retail’s (-2 ppts), a strategic decision to ~~a decline~~end production of select SKUs (-1 ppt), and increased investments in ~~TreadClimber~~JRNY^® ~~sales, partially offset by a 33.0% increase in strength product sales.~~(-1 ppt). Gross profit was $24.5 million, down 10.9% versus last year. Gross profit for the three-months ended June 30, 2021 was $24.5 million, down 10.9% compared to gross profit of $27.5 million same period last year.

Segment contribution income for the three-months ended June 30, 2021 was $6.8 million or 10.7%, down 60.2%, compared to segment contribution income of $17.0 million or 33.7% for the same period last year. The $10.2 million decline was primarily driven by lower gross profit and the return to normalized levels of media spend. Advertising expenses were $8.0 million for the three-months ended June 30, 2021 compared to $2.4 million last year.

Combined consumer credit approvals by our primary and secondary U.S. third-party financing providers for the ~~third quarter of 2017~~three-months ended June 30, 2021 were ~~53.7%~~53.0%, compared to ~~47.9%~~48.4% in the same period of ~~2016. We continue to experience improved credit~~2020. The increase in approval rates ~~due to our media strategy, which focuses on generation of responses from consumers with relatively high~~reflects higher credit quality. Additionally, our Tier 1 credit provider has noted strong performance from our account portfolio, and, due to that credit profile, has progressively expanded its approval standards. We remain focused on maintaining a healthy payment balance between cash and financed purchases.quality applications.

The $0.8 million increase in cost of sales of our Direct business for the three month period ended September 30, 2017 compared to the same period of 2016 was due to the higher volume of sales. The $1.2 million decrease in cost of sales of our Direct business for the nine months ended September 30, 2017 compared to the same period of 2016 was due to lower net sales.

For the three and nine month periods ended September 30, 2017, Direct gross margins decreased 220 and 190 basis points, respectively, as compared to the same periods of 2016 primarily due to unfavorable product mix and higher discounting for older products.

Retail

Retail ~~net~~segment sales ~~increased 15.8% and 8.9%~~of $120.5 million for the ~~three and nine month periods~~three-months ended ~~September~~June 30, ~~2017 compared to~~2021, the best quarterly sales in segment history.

Net sales for the three-months ended June 30, 2021 were up 91.4%, from $62.9 million for the same ~~periods of 2016. The increases in both periods reflected growth in traditional and e-commerce customers across multiple product categories.~~

~~The increases in cost of~~period last year, or 120.7% excluding sales ~~of our Retail business for the three and nine month periods ended September 30, 2017 compared to the same periods of 2016 were primarily~~ related to the ~~increases~~Octane brand. Retail segment sales outside the United States and Canada grew 70%, or 102% excluding Octane.

Strength product sales grew by 119.3%, led by our popular SelectTech® weights and benches and Bowflex® Home Gyms. Cardio sales increased by 83.5%, to a historical record, driven by connected-fitness bikes and treadmills.

Gross margin rate for the three-months ended June 30, 2021 was 25.1%, down from 30.3% in ~~Retail net sales as discussed above.~~

~~For~~ the ~~three and nine month periods ended September 30, 2017, Retail~~same period last year. The 5.2 ppt decrease in gross margin ~~increased~~was primarily driven by: higher landed product costs (-6 ppts), a strategic decision to end production of select SKUs (-1 ppt), offset by ~~60 and 130 basis points, respectively,~~leverage on fixed costs as retail segment sales grew faster than direct segment sales (+2 ppts).Gross profit for the three-months ended June 30, 2021 was $30.3 million, an increase of 58.8% compared to gross profit of $19.1 million same period last year.

Segment contribution income for the three-months ended June 30, 2021 was $22.1 million or 18.3%, compared to $11.6 million or 18.4% for the same ~~periods of 2016 due to favorable absorption of fixed costs over the increased sales volume~~period last year, primarily driven by higher gross profit and ~~the one-time settlement of an indemnification claim.~~expense leverage.

Selling and Marketing

Dollars in thousands Three Months Ended September 30, Change
2017 2016 $ %
Selling and marketing $18,028 $21,394 $(3,366) (15.7)%
As % of net sales 20.5% 26.5%
Selling and marketing expenses include payroll, employee benefits, and other headcount-related expenses associated with sales and marketing personnel, and the costs of media advertising, promotions, trade shows, seminars, and other programs.

Dollars in thousands Nine Months Ended September 30, Change
2017 2016 $ %
Selling and marketing $79,321 $81,284 $(1,963) (2.4)%
As % of net sales 28.5% 29.0%

Selling and marketing information was as follows (dollars in thousands):


	Three-Months Ended June 30,		Change
	2021	2020	$	%
Selling and marketing	$21,300	$12,446	$8,854	71.1%
As % of net sales	11.5%	10.9%

The ~~$3.4 million decrease~~increase in selling and marketing expense in the ~~three month~~three-month period ended ~~September~~June 30, 2017 compared to the same period of 2016 was due to lower variable selling expenses of $2.6 million, primarily related to lower financing fees reflecting a retroactive contract adjustment of $2.1 million and receipt of a one-time settlement payment of $1.0 million for an indemnification claim.

~~The $2.0 million decrease in selling and marketing expense in the nine month period ended September 30, 2017~~2021 as compared to the same period of ~~2016~~2020 was primarily related to a ~~$4.7~~$5.6 million ~~decrease~~increase in ~~variable selling costs, including the factors noted above, and lower marketing program costs of $1.0 million, offset by increases of $2.9 million in~~Direct media advertising and ~~$0.8~~a $3.1 million ~~in photo and video production costs.~~increase for brand marketing.

Media advertising expense of our Direct business is the largest component of selling and marketing and was as ~~follows:~~follows (dollars in thousands):

Table of Contents


						Three-Months Ended June 30,		Change
Dollars in thousands	Three Months Ended September 30,		Change
	2017	2016	$	%		2021	2020	$	%
Media advertising	$11,114	$10,790	$324	3.0%	Media advertising	$8,016	$2,385	$5,631	236.1%
As % of net sales					As % of net sales	4.3%	2.1%

Dollars in thousands Nine Months Ended September 30, Change
2017 2016 $ %
Media advertising $43,704 $40,804 $2,900 7.1%

The increases in media advertising in the three and nine month periods ended September 30, 2017 compared to the same periods of 2016 reflected lower response rates that drove the increased investments in advertising.

~~General and Administrative~~

Dollars in thousands Three Months Ended September 30, Change
2017 2016 $ %
General and administrative $6,305 $6,177 $128 2.1%
As % of net sales 7.2% 7.6%

Dollars in thousands Nine Months Ended September 30, Change
2017 2016 $ %
General and administrative $21,106 $21,611 $(505) (2.3)%
As % of net sales 7.6% 7.7%

The increase in ~~general and administrative~~media advertising for the ~~three months~~three-month period ended ~~September~~June 30, ~~2017~~2021 compared to the same period of ~~2016~~2020 was primarily due the return to ~~higher legal expenses~~normalized levels of ~~$0.4 million, offset by $0.4 million lower integration costs~~media spend.

General and Administrative

General and administrative ~~cost savings related to Octane incurred in~~expenses include payroll, employee benefits, stock-based compensation expense, and other headcount-related expenses associated with the ~~same comparative period.~~executive team, finance, legal, IT, facilities, certain human resources and other administrative personnel, and other administrative fees.

~~The decrease in general~~General and administrative expenses was as follows (dollars in thousands):


	Three-Months Ended June 30,		Change
	2021	2020	$	%
General and administrative	$11,523	$9,315	$2,208	23.7%
As % of net sales	6.2%	8.2%

General and administrative expenses were higher for the ~~nine months~~three-months ended ~~September~~June 30, ~~2017~~2021 compared to the same period of ~~2016 was~~2020 primarily ~~due to $0.8 million savings related to lower integration costs~~driven by increases in IT, and ~~administrative cost savings related to Octane,~~for short-term incentive and ~~lower employee incentives and compensation costs of $0.9 million. These costs were partially offset by higher litigation-related expenses of $1.3 million for the same comparative period.~~personnel costs.

Research and Development

Research and development expenses include payroll, employee benefits, other headcount-related expenses and information technology associated with product development.

Dollars in thousands Three Months Ended September 30, Change
2017 2016 $ %
Research and development $3,617 $3,435 $182 5.3%
As % of net sales 4.1% 4.3%

Research and development expenses were as follows (dollars in thousands):


						Three-Months Ended June 30,		Change
Dollars in thousands	Nine Months Ended September 30,		Change
	2017	2016	$	%		2021	2020	$	%
Research and development	$11,114	$10,444	$670	6.4%	Research and development	$4,815	$3,728	$1,087	29.2%
As % of net sales	4.0%	3.7%			As % of net sales	2.6%	3.3%

The ~~increases~~increase in research and development inexpenses for the ~~three and nine month periods~~three-month period ended ~~September~~June 30, ~~2017~~2021 compared to the same ~~periods~~period of ~~2016 were~~2020 was primarily ~~due~~driven by an increase in investment for our digital platform JRNY®, which more than offset savings associated with the divestiture of Octane.

Loss on Disposal Group

In the quarter ended June 30, 2020, we recorded a $29.0 million non-cash charge related to the fair value of the held-for-sale of assets of our ~~investment~~Octane Fitness brand name which was sold in ~~additional engineering and product development headcount as we continue to supplement our new product development resources required to innovate and broaden our product portfolio.~~October 2020.

Interest expense ~~of $0.4 million and $1.2~~was nearly flat at $0.3 million for the ~~three~~three-month period ended June 30, 2021 and ~~nine month periods ended September~~June 30, ~~2017 decreased $0.1 million and $0.2 million, respectively, compared to the same periods of 2016. The decreases were due to reductions in principal balance on our term loan.~~2020.

Other, net primarily relates to the effect of exchange rate fluctuations between the U.S. and our foreign subsidiaries ~~primarily Canada, China~~ and ~~Europe.~~

foreign exchange derivative contracts.

Income Tax Expense

(Benefit)

Dollars in thousands Three Months Ended September 30, Change
2017 2016 $ %
Income tax expense $4,862 $148 $4,714 *
Effective tax rate 36.8% 1.9%
Income tax provision includes U.S. and international income taxes, and interest and penalties on uncertain tax positions.

Dollars in thousands Nine Months Ended September 30, Change
2017 2016 $ %
Income tax expense $10,156 $9,621 $535 5.6%
Effective tax rate 34.7% 29.4%

Income tax expense ~~and effective~~(benefit) was as follows (dollars in thousands):


	Three-Months Ended June 30,		Change
	2021	2020	$	%
Income tax expense (benefit)	$3,438	$(2,342)	$5,780	(246.8)%
Effective tax rate	19.7%	32.0%

The income tax ~~rates~~expense from continuing operations for the ~~three and nine month periods~~three-months period ended ~~September~~June 30, ~~2017~~2021 was primarily related to our profitable U.S and foreign operations. The reduced effective tax rates from continuing operations for the three and nine month periods ended September 30, 2016 were primarily due to the release of, on a ~~non-recurring basis, previously unrecognized tax benefits associated with certain non-U.S. filing positions. These resulted from completion~~result of the ~~deregistration process of a certain foreign entity. In addition,~~profit generated in the U.S. The reduced effective tax rate for the ~~nine months ended September 30, 2017 included $0.7 million of~~same period was primarily due to the excess tax ~~benefits~~benefit related to stock-based compensation recognized as a current period benefit through the ~~statement~~Condensed Consolidated Statements of Operations.

The income tax benefit and effective tax rate from continuing operations ~~resulting from~~for the ~~adoption~~same period of ~~ASU 2016-09~~the prior year were primarily due to the loss recorded as a result of the held-for-sale valuation of our Octane Fitness disposal group in ~~January 2017.~~the quarter.

LIQUIDITY AND CAPITAL RESOURCES

Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our levels of revenue, the timing and extent of spending on research and development efforts and other business initiatives, the expansion of sales and marketing activities, the timing of new product introductions, market acceptance of our products, and overall economic conditions. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our shareholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations.

As of ~~September~~June 30, ~~2017~~,2021, we had ~~$77.8~~$82.8 million of cash, cash equivalents, restricted cash and ~~investments~~available-for-sale securities, and $53.6 million was available for borrowing under the ABL Revolving Facility, compared to ~~$79.6~~$113.2 million of cash, cash equivalents, restricted cash and available-for-sale securities, and $54.4 million was available for borrowing under the ABL Revolving Facility as of ~~December~~March 31, ~~2016. Cash provided by operating activities was $16.7 million for the nine months ended~~ ~~September 30, 2017, compared to $14.9 million for the~~ ~~nine months ended~~ ~~September 30, 2016.~~2021. We expect our cash, cash equivalents, restricted cash and ~~available-for-sale securities at September~~investments and amounts available under our Wells Fargo Financing as of June 30, ~~2017,~~2021, along with cash expected to be generated from operations, to be sufficient to fund our operating and capital requirements for at least twelve months from ~~September~~June 30, ~~2017.~~2021.

Cash used in operating activities was $28.2 million for the three-month period ended June 30, 2021, compared to cash provided in operating activities of $40.2 million for the three-month period ended June 30, 2020. The ~~increase~~decrease in cash flows from operating activities for the ~~nine months~~three-month period ended ~~September~~June 30, ~~2017~~2021 as compared to the same period of ~~2016~~2020 was primarily due to ~~the~~ changes in our operating assets and liabilities as discussed below, partially offset by the ~~decline~~increase in ~~operating performance.~~

Trade receivables ~~decreased $6.9~~increased by $9.5 million to ~~$38.5 million~~ ~~as of September 30, 2017, compared to $45.5~~$98.2 million as of ~~December~~June 30, 2021, compared to $88.7 million as of March 31, ~~2016,~~2021, primarily due to ~~seasonally lower net sales to specialty retail and commercial customers.~~timing of customer payments on increased sales. Trade receivables as of ~~September~~June 30, ~~2017~~2021 compared to ~~September~~June 30, ~~2016~~2020 increased ~~$7.3~~by $64.4 million due to the ~~increase in Retail net~~timing of customer payments on increased sales.

~~Inventories increased $10.6~~Inventory was $111.1 million, compared to ~~$57.6~~$68.1 million as of ~~September~~March 31, 2021. The increase in inventory is driven by the strategic decision to increase on-hand inventory levels ahead of the fitness season given continued disruption in global logistics. More than 60% of inventory as of June 30, ~~2017,~~2021 was in-transit. Inventories as of June 30, 2021 compared to ~~$47.0~~June 30, 2020, increased by $89.8 million, primarily due to the surge in demand for home-fitness products.

Prepaid and other current assets decreased by $10.2 million to $15.7 million, compared to $25.8 million as of ~~December~~March 31, ~~2016 due~~2021, primarily related to ~~seasonal preparations~~other short-term deposits for ~~the fourth quarter. Inventories as of September 30, 2017 compared to September 30, 2016~~inventory.

Trade payables increased by ~~$8.4 million due to increased in-transit inventory.~~

~~Trade payables decreased $3.9~~$15.7 million to ~~$62.1 million~~ ~~as of September 30, 2017, compared to $66.0~~$114.6 million as of ~~December~~June 30, 2021, compared to $98.9 million as of March 31, ~~2016,~~2021, primarily due to ~~seasonality~~timing of ~~the business. Trade payables as of September 30, 2017 compared to September 30, 2016 increased $17.4 million. The higher amount outstanding as of September 30, 2017 was due to the increased~~payments for inventory.

Accrued liabilities decreased ~~$4.8~~by $5.1 million to ~~$8.1~~$14.5 million as of ~~September~~June 30, ~~2017,~~2021, compared to ~~$12.9~~$19.6 million as of ~~December~~March 31, ~~2016,~~2021, primarily due to ~~payout~~deferred revenue liabilities.

Cash ~~used in~~provided by investing activities of ~~$18.2~~$15.3 million for the ~~first nine months of 2017~~three-month period ended June 30, 2021 was primarily ~~related~~due to ~~net purchases~~proceeds from sales and maturities of ~~marketable securities of $15.4 million. In addition, $2.7 million was used for capital expenditures primarily related to production equipment tooling and implementation of new software systems.~~available-for-sale securities. We anticipate spending between ~~$4.5~~$12.0 million and ~~$5.5~~$14.0 million in ~~2017~~2022 for ~~product tooling, computer equipment and software,~~digital platform enhancements, systems integration, and production ~~equipment.~~tooling.

Cash used in financing activities of ~~$17.0~~$1.1 million for the ~~first nine months of 2017~~three-month period ended June 30, 2021 was primarily related to ~~principal repayments on our term loan of $12.0 million and share repurchases of $4.8 million.~~tax payments related to stock award issuances.

Financing Arrangements

~~We have a~~On May 14, 2021, we amended the January 31, 2020 Credit Agreement with ~~JPMorgan Chase~~Wells Fargo Bank, ~~N.A.~~National Association (“~~Chase Bank”~~Wells Fargo”) ~~that provides for~~and lenders from time to time party thereto (collectively with Wells Fargo the “Lenders”) (“Credit Agreement”), pursuant to which the Lenders have agreed, among other things, to make available to us an ~~$80.0~~asset-based revolving loan facility in the aggregate principal amount of up to $55.0 million, subject to a borrowing base (the “ABL Revolving Facility”), and a term loan facility in the aggregate principal amount of $15.0 million (the “Term Loan Facility” and ~~a $20.0 million revolving line of credit. The term~~together with the ABL Revolving Facility, the “Wells Fargo Financing"), in each case, as such amounts may increase or decrease in accordance with the terms of the Credit ~~Agreement expires~~Agreement. Several key features have been beneficially amended including permanently removing the $7.5 million minimum liquidity covenant and minimum EBITDA covenant that was scheduled to commence February 1, 2022. The Credit Facility now contains a single market-based 1.0x springing fixed charge coverage ratio tested only when availability is less than the greater of $6.0 million and 12.5% of the Loan Cap, as defined in the Credit Agreement. Various borrowing base definitions and limits were also amended that will result in improved availability under the asset-based revolver. In addition to the above structural improvements, the interest rate on ~~December~~the term loan was reduced to LIBOR plus 4.50% versus 5.00%. The maturity date remains January 31, ~~2020~~2025 and the term loan continues to contain amortization as originally scheduled. The repayment of obligations under the Credit Agreement is secured by substantially all of our assets. Principal and interest amounts are required to be paid as scheduled.

~~The Credit Agreement, as amended, contains customary covenants, including minimum fixed charge coverage ratio~~Interest on the ABL Revolving Facility will accrue at LIBOR plus a margin of 1.75% to 2.25% (based on average quarterly availability) and ~~funded debt to EBITDA ratio, and limitations~~interest on ~~capital expenditures, mergers and acquisitions, indebtedness, liens, dispositions, dividends and investments. The Credit Agreement also contains customary events~~the Term Loan Facility will accrue at LIBOR plus 4.50%. As of ~~default. Upon an event of default, the lender may terminate its credit line commitment, accelerate all outstanding obligations and exercise its remedies under the continuing security agreement.~~

~~Borrowing availability under the revolving line of credit is subject to~~June 30, 2021, our compliance with certain financial and operating covenants at the time borrowings are requested. Letters of credit under the Credit Agreement are treated as a reduction of the available borrowing amount and are subject to covenant testing.

~~The~~ interest rate ~~applicable to~~was 1.85% for the ~~term loan, as well as each advance under~~ABL Revolving Facility and 4.60% for the revolving line of credit, is based on either Chase Bank's floating prime rate or adjusted LIBOR, plus an applicable margin. As of September 30, 2017, our borrowing rate for both the term loan and line of credit advances was 2.49%.Term Loan Facility.

As of ~~September~~June 30, ~~2017, the balance on our term loan was $52.0~~2021, outstanding borrowings, net of debt issuance costs, totaled $13.4 million, with $11.9 million and ~~we had no outstanding borrowings~~$1.5 million under ~~the line of credit.~~our Term Loan Facility and ABL Revolving Facility, respectively. As of ~~September~~June 30, ~~2017,~~2021, we were in compliance with the financial covenants of the Credit Agreement and ~~$20.0~~$53.6 million was available for borrowing under the ~~line~~ABL Revolving Facility. Any outstanding balance is due and payable on January 31, 2025.

The balance sheet classification of ~~credit.~~

~~As of September 30, 2017, we had~~the borrowings under the revolving loan credit facility has been determined in accordance with ASC 470, Debt. Borrowings outstanding under a ~~$52.0 million receive-variable, pay-fixed interest rate swap outstanding with Chase Bank. The interest rate swap amortizes monthly in line with the outstanding principal balance on our term loan~~revolving credit agreement that includes both a subjective acceleration clause and isa requirement to maintain a springing lock-box arrangement are classified ~~as a cash flow hedge. The swap matures on December 31, 2020 and has a fixed rate of 1.42% per annum. The variable rate~~based on the ~~interest rate swap is~~provisions of ASC 470 because the ~~one-month LIBOR benchmark. At September 30, 2017,~~lock-box remittances do not automatically reduce the ~~one-month LIBOR rate was 1.24%.~~debt outstanding.

~~Commitments and Contingencies~~

~~For a description of our commitments and contingencies, refer to Note 14 to our condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.~~

Off-Balance Sheet Arrangements


	As of
	June 30, 2021		March 31, 2021
Supplemental cash flow information:
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flow from operating leases	$	1,352	$	1,076
Additional operating lease information:

Reductions to ROU assets resulting from reductions to operating lease obligations	$	359	$	268

Weighted average remaining operating lease term (years)	6.26		6.97
Weighted average discount rate on operating leases	5.00%		4.95%


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



~~[ ]~~☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	As of
	September 30, 2017			December 31, 2016
Assets
Cash and cash equivalents	$	30,481		$	47,874
Available-for-sale securities	47,295			31,743
Trade receivables, net of allowances of $472 and $170	38,534			45,458
Inventories	57,646			47,030
Prepaids and other current assets	6,795			8,020
Income taxes receivable	61			3,231
Total current assets	180,812			183,356
Property, plant and equipment, net	16,166			17,468
Goodwill	62,045			61,888
Other intangible assets, net	67,354			69,800
Deferred income tax assets, non-current	—			11
Other assets	456			543
Total assets	$	326,833		$	333,066
Liabilities and Shareholders' Equity
Trade payables	$	62,146		$	66,020
Accrued liabilities	8,056			12,892
Warranty obligations, current portion	3,253			3,500
Note payable, current portion, net of unamortized debt issuance costs of $7 and $7	15,993			15,993
Total current liabilities	89,448			98,405
Warranty obligations, non-current	3,048			3,950
Income taxes payable, non-current	2,646			2,403
Deferred income tax liabilities, non-current	16,868			16,991
Other non-current liabilities	2,365			2,481
Note payable, non-current, net of unamortized debt issuance costs of $16 and $21	35,984			47,979
Total liabilities	150,359			172,209
Commitments and contingencies (Note 14)
Shareholders' equity:
Common stock - no par value, 75,000 shares authorized, 30,707 and 30,825 shares issued and outstanding	826			578
Retained earnings	175,969			161,496
Accumulated other comprehensive loss	(321		)	(1,217		)
Total shareholders' equity	176,474			160,857
Total liabilities and shareholders' equity	$	326,833		$	333,066


	Balance Sheet Classification	As of
		June 30, 2021		March 31, 2021






Derivative instruments not designated as cash flow hedges:

	Accrued liabilities	$	510	$	672


	Statement of Operations Classification	Three-Months Ended June 30,
		2021		2020





Derivative instruments not designated as cash flow hedges:
Loss recognized in earnings	Other, net	$	(17)	$	(141)
Income tax (benefit) expense	Income tax expense (benefit)	(4)		35



	Estimated Useful Life (in years)			As of
	Estimated Useful Life (in years)			September 30, 2017			December 31, 2016
Automobiles	5	to	6	$	23		$	139
Leasehold improvements	4	to	20	3,426			3,388
Computer software and equipment	3	to	7	26,138			25,899
Machinery and equipment	3	to	5	14,732			13,085
Furniture and fixtures	5	to	20	2,230			2,238
Work in progress⁽¹⁾	N/A			1,647			768
Total cost				48,196			45,517
Accumulated depreciation				(32,030		)	(28,049		)
Total property, plant and equipment, net				$	16,166		$	17,468



Remainder of 2017	$	810
2018	3,164
2019	3,134
2020	3,108
2021	3,078
Thereafter	22,008
	$	35,302



	Unrealized Gain (Loss) on Available-for-Sale Securities			Gain on Derivative Securities (Effective Portion)		Foreign Currency Translation Adjustments			Accumulated Other Comprehensive Income (Loss)
Balance, July 1, 2017	$	(36	)	$	83	$	(784	)	$	(737	)
Current period other comprehensive income before reclassifications	22			8		371			401
Reclassification of amounts to earnings	—			15		—			15
Net other comprehensive income during period	22			23		371			416
Balance, September 30, 2017	$	(14	)	$	106	$	(413	)	$	(321	)



	Unrealized Loss on Available-for-Sale Securities			Gain (Loss) on Derivative Securities (Effective Portion)			Foreign Currency Translation Adjustments			Accumulated Other Comprehensive Income (Loss)
Balance, January 1, 2017	$	(8	)	$	(24	)	$	(1,185	)	$	(1,217	)
Current period other comprehensive income (loss) before reclassifications	(6		)	6			772			772
Reclassification of amounts to earnings	—			124			—			124
Net other comprehensive income (loss) during period	(6		)	130			772			896
Balance, September 30, 2017	$	(14	)	$	106		$	(413	)	$	(321	)



	Unrealized Gain (Loss) on Available-for-Sale Securities			Loss on Derivative Securities (Effective Portion)			Foreign Currency Translation Adjustments			Accumulated Other Comprehensive Loss
Balance, January 1, 2016	$	(16	)	$	—		$	(1,311	)	$	(1,327	)
Current period other comprehensive income (loss) before reclassifications	26			(896		)	397			(473		)
Reclassification of amounts to earnings	—			357			—			357
Net other comprehensive income (loss) during period	26			(539		)	397			(116		)
Balance, September 30, 2016	$	10		$	(539	)	$	(914	)	$	(1,443	)



~~[x]~~FORM			10-Q



Quarter Ended	Number of Shares	Repurchased Amount	Average Price Per Share
December 31, 2016	120,996	$1,957,882	$16.18
March 31, 2017	218,515	3,426,959	15.68
September 30, 2017	86,856	1,420,934	16.36
Totals-to-Date	426,367	$6,805,775	$15.96


~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~



Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs^(1),(2)	(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ^(1),(2)
July 1 - July 31	—	$—	—	$19,615,159
August 1 - August 31	86,856	16.36	86,856	18,194,225
September 1 - September 30	—	—	—	18,194,225
Total	86,856	$16.36	86,856	$18,194,225

⁽¹⁾ On May 4, 2016, our Board of Directors authorized the repurchase of up to $10.0 million of our outstanding common stock from time to time through May 4, 2018.
⁽²⁾ On April 25, 2017, our Board of Directors authorized the repurchase of an additional $15.0 million of our outstanding common stock from time to time through April 25, 2019.


Exhibit No.						Description


~~Exhibit No.~~						~~Description~~

~~31.1~~10.1						Second Amendment to Credit Agreement dated May 13, 2021, by and between Nautilus, Inc. and Wells Fargo Bank, National Association
10.2*						Employment Agreement dated August 2, 2021, by and between Nautilus, Inc. and Alan L. Chan.
31.1						Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

31.2						Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

32.1						Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities and Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH						XBRL Taxonomy Extension Schema Document

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						XBRL Taxonomy Extension Label Linkbase Document

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

* Indicates management contract, compensatory agreement or arrangement, in which our directors or executive officers may participate.


			NAUTILUS, INC.
			(Registrant)

August 9, 2021			~~NAUTILUS, INC.~~
	~~(Registrant)~~

~~November 2, 2017~~	By:	/S/ ~~Bruce M. Cazenave~~James Barr IV
Date				~~Bruce M. Cazenave~~James Barr IV
				Chief Executive Officer ~~(Principal Executive Officer)~~