UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM			10-Q

(Mark One)


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

For the quarterly period ended September 30, ~~2022~~2023


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

For the transition period from to

Commission file number: 001-31321



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


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

17750 S.E. 6th Way

Vancouver, Washington 98683

(Address of principal executive offices, including zip code)

(360) 859-2900

(Registrant's telephone number, including area code)

~~N/A~~Nautilus, Inc.

(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~~BFX	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 growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated Filer

☒☐

Non-accelerated filer

☐☒

Smaller reporting company

☐☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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]

The number of shares outstanding of the registrant's common stock as of November ~~4, 2022~~10, 2023 was ~~31,719,490~~36,361,526 shares.

~~NAUTILUS,~~BOWFLEX INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, ~~2022~~2023


	PART I
Item 1.	Financial Statements	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2223
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4142
Item 4.	Controls and Procedures	4142

	PART II
Item 1.	Legal Proceedings	4243
Item 1A.	Risk Factors	4243

Item 6.	Exhibits	4344
Signatures		4445

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

~~NAUTILUS,~~BOWFLEX INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)


		As of				As of
		September 30, 2022		March 31, 2022				September 30, 2023		March 31, 2023
		(unaudited)						(unaudited)
Assets	Assets						Assets
Cash and cash equivalents	Cash and cash equivalents	$	5,805	$	12,872		Cash and cash equivalents	$	8,134	$	17,362
Restricted cash	Restricted cash	946		1,339			Restricted cash	2,158		950

Trade receivables, net of allowances of $728 and $598		33,662		61,454
Trade receivables, net of allowances of $255 and $618							Trade receivables, net of allowances of $255 and $618	24,187		21,489
Inventories	Inventories	99,210		111,190			Inventories	66,077		46,599
Prepaids and other current assets	Prepaids and other current assets	10,124		14,546			Prepaids and other current assets	9,779		8,033
Other current assets - restricted, current		3,887		3,887

Income taxes receivable	Income taxes receivable	1,658		1,998			Income taxes receivable	7,215		1,789

Total current assets	Total current assets	155,292		207,286			Total current assets	117,550		96,222
Property, plant and equipment, net	Property, plant and equipment, net	34,182		32,129			Property, plant and equipment, net	28,352		32,789
Operating lease right-of-use assets	Operating lease right-of-use assets	21,085		23,620			Operating lease right-of-use assets	16,906		19,078
Goodwill		—		24,510

Other intangible assets, net	Other intangible assets, net	6,818		9,304			Other intangible assets, net	3,059		6,787
Deferred income tax assets, non-current	Deferred income tax assets, non-current	758		8,760			Deferred income tax assets, non-current	540		554
Income taxes receivable, non-current	Income taxes receivable, non-current	5,673		5,673			Income taxes receivable, non-current	—		5,673

Other assets	Other assets	2,705		2,763			Other assets	1,271		2,429
Total assets	Total assets	$	226,513	$	314,045		Total assets	$	167,678	$	163,532
Liabilities and Shareholders' Equity	Liabilities and Shareholders' Equity						Liabilities and Shareholders' Equity
Trade payables	Trade payables	$	36,542	$	53,165		Trade payables	$	63,235	$	29,378
Accrued liabilities	Accrued liabilities	19,957		29,386			Accrued liabilities	11,858		15,575
Operating lease liabilities, current portion	Operating lease liabilities, current portion	4,057		4,494			Operating lease liabilities, current portion	4,575		4,427
Financing lease liabilities, current portion	Financing lease liabilities, current portion	121		119			Financing lease liabilities, current portion	123		122
Warranty obligations, current portion	Warranty obligations, current portion	3,450		4,968			Warranty obligations, current portion	2,560		2,564
Income taxes payable, current portion	Income taxes payable, current portion	536		839			Income taxes payable, current portion	1,089		328
Debt payable, current portion, net of unamortized debt issuance costs of $57 and $57		2,243		2,243
Debt payable, current portion, net of unamortized debt issuance costs of $447 and $586							Debt payable, current portion, net of unamortized debt issuance costs of $447 and $586	1,803		1,642

Total current liabilities	Total current liabilities	66,906		95,214			Total current liabilities	85,243		54,036
Operating lease liabilities, non-current	Operating lease liabilities, non-current	18,619		20,926			Operating lease liabilities, non-current	13,950		16,380
Financing lease liabilities, non-current	Financing lease liabilities, non-current	339		395			Financing lease liabilities, non-current	225		282
Warranty obligations, non-current	Warranty obligations, non-current	900		1,248			Warranty obligations, non-current	859		703
Income taxes payable, non-current	Income taxes payable, non-current	1,943		4,029			Income taxes payable, non-current	2,055		2,316
Deferred income tax liabilities, non-current	Deferred income tax liabilities, non-current	313		—			Deferred income tax liabilities, non-current	128		253
Other non-current liabilities	Other non-current liabilities	1,081		1,071			Other non-current liabilities	4,108		1,978
Debt payable, non-current, net of unamortized debt issuance costs of $175 and $204		44,793		27,113
Debt payable, non-current, net of unamortized debt issuance costs of $931 and $1,513							Debt payable, non-current, net of unamortized debt issuance costs of $931 and $1,513	13,987		26,284
Total liabilities	Total liabilities	134,894		149,996			Total liabilities	120,555		102,232
Commitments and contingencies (Note 17)
Commitments and contingencies (Note 19)							Commitments and contingencies (Note 19)
Shareholders' equity:	Shareholders' equity:						Shareholders' equity:
Common stock - no par value, 75,000 shares authorized, 31,714 and 31,268 shares issued and outstanding		9,513		6,483
Common stock - no par value, 75,000 shares authorized, 36,347 and 31,845 shares issued and outstanding							Common stock - no par value, 75,000 shares authorized, 36,347 and 31,845 shares issued and outstanding	13,612		10,084
Retained earnings	Retained earnings	84,713		158,093			Retained earnings	35,227		52,694

Accumulated other comprehensive loss	Accumulated other comprehensive loss	(2,607)		(527)			Accumulated other comprehensive loss	(1,716)		(1,478)
Total shareholders' equity	Total shareholders' equity	91,619		164,049			Total shareholders' equity	47,123		61,300
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	226,513	$	314,045		Total liabilities and shareholders' equity	$	167,678	$	163,532

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

~~NAUTILUS,~~BOWFLEX INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except per share amounts)


		Three-Months Ended September 30,				Six-Months Ended September 30,					Three-Months Ended September 30,				Six-Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net sales	Net sales	$	65,458	$	137,959	$	120,275	$	322,552	Net sales	$	48,659	$	65,458	$	90,409	$	120,275
Cost of sales	Cost of sales	54,000		95,906		101,859		224,994		Cost of sales	38,705		54,000		71,805		101,859
Gross profit	Gross profit	11,458		42,053		18,416		97,558		Gross profit	9,954		11,458		18,604		18,416
Operating expenses:	Operating expenses:									Operating expenses:
Selling and marketing	Selling and marketing	9,400		21,939		22,290		43,239		Selling and marketing	7,023		9,400		13,024		22,290
General and administrative	General and administrative	10,995		16,376		23,458		27,899		General and administrative	8,980		10,995		17,874		23,458
Research and development	Research and development	5,405		5,688		11,229		10,503		Research and development	3,836		5,405		7,684		11,229
Restructuring and exit charges										Restructuring and exit charges	1,323		—		1,763		—
Goodwill and intangible impairment charge	Goodwill and intangible impairment charge	—		—		26,965		—		Goodwill and intangible impairment charge	—		—		—		26,965

Total operating expenses	Total operating expenses	25,800		44,003		83,942		81,641		Total operating expenses	21,162		25,800		40,345		83,942
Operating (loss) income		(14,342)		(1,950)		(65,526)		15,917
Other expense:
Operating loss										Operating loss	(11,208)		(14,342)		(21,741)		(65,526)
Other (expense) income										Other (expense) income
Interest income	Interest income	4		12		5		33		Interest income	3		4		17		5
Interest expense	Interest expense	(595)		(481)		(971)		(795)		Interest expense	(1,137)		(595)		(3,604)		(971)
Other, net	Other, net	(224)		94		(739)		(26)		Other, net	251		(224)		8,818		(739)
Total other expense, net		(815)		(375)		(1,705)		(788)
(Loss) income from continuing operations before income taxes		(15,157)		(2,325)		(67,231)		15,129
Total other (expense) income, net										Total other (expense) income, net	(883)		(815)		5,231		(1,705)
Loss from continuing operations before income taxes										Loss from continuing operations before income taxes	(12,091)		(15,157)		(16,510)		(67,231)
Income tax expense	Income tax expense	156		2,242		8,251		5,680		Income tax expense	452		156		957		8,251
(Loss) income from continuing operations		(15,313)		(4,567)		(75,482)		9,449
Loss from continuing operations										Loss from continuing operations	(12,543)		(15,313)		(17,467)		(75,482)
Discontinued operations:	Discontinued operations:									Discontinued operations:
(Loss) gain from discontinued operations before income taxes		(32)		49		(32)		(77)
Income tax (benefit) expense benefit of discontinued operations		(2,142)		84		(2,134)		90
Income (loss) from discontinued operations		2,110		(35)		2,102		(167)
Loss from discontinued operations before income taxes										Loss from discontinued operations before income taxes	—		(32)		—		(32)
Income tax benefit of discontinued operations										Income tax benefit of discontinued operations	—		(2,142)		—		(2,134)
Income from discontinued operations										Income from discontinued operations	—		2,110		—		2,102
Net loss	Net loss	$	(13,203)	$	(4,602)	$	(73,380)	$	9,282	Net loss	$	(12,543)	$	(13,203)	$	(17,467)	$	(73,380)

Basic (loss) income per share from continuing operations		$	(0.48)	$	(0.15)	$	(2.40)	$	0.31
Basic income (loss) per share from discontinued operations		0.07		—		0.07		(0.01)
Basic net (loss) income per share		$	(0.41)	$	(0.15)	$	(2.33)	$	0.30
Basic loss per share from continuing operations										Basic loss per share from continuing operations	$	(0.35)	$	(0.48)	$	(0.51)	$	(2.40)
Basic income per share from discontinued operations										Basic income per share from discontinued operations	—		0.07		—		0.07
Basic net loss per share										Basic net loss per share	$	(0.35)	$	(0.41)	$	(0.51)	$	(2.33)

Diluted (loss) income per share from continuing operations		$	(0.48)	$	(0.15)	$	(2.40)	$	0.29
Diluted loss per share from continuing operations										Diluted loss per share from continuing operations	$	(0.35)	$	(0.48)	$	(0.51)	$	(2.40)
Diluted income per share from discontinued operations	Diluted income per share from discontinued operations	0.07		—		0.07		—		Diluted income per share from discontinued operations	—		0.07		—		0.07
Diluted net (loss) income per share		$	(0.41)	$	(0.15)	$	(2.33)	$	0.29
Diluted net loss per share										Diluted net loss per share	$	(0.35)	$	(0.41)	$	(0.51)	$	(2.33)

Shares used in per share calculations:	Shares used in per share calculations:									Shares used in per share calculations:
Basic	Basic	31,585		30,968		31,496		30,833		Basic	36,008		31,585		34,192		31,496
Diluted	Diluted	31,585		30,968		31,496		32,437		Diluted	36,008		31,585		34,192		31,496

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

~~NAUTILUS,~~BOWFLEX INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME (LOSS)~~LOSS

(Unaudited and in thousands)

Three-Months Ended September 30, Six-Months Ended September 30,
2022 2021 2022 2021
Net (loss) income $ (13,203) $ (4,602) $ (73,380) $ 9,282
Other comprehensive loss:
Unrealized loss on available-for-sale securities, net of income tax expense of $—, $7, $— and $— — (4) — (4)
Foreign currency translation, net of income tax (expense) benefit of $(56), $(21), $(85) and $(8) (1,221) (411) (2,080) (194)
Other comprehensive loss (1,221) (415) (2,080) (198)
Comprehensive (loss) income $ (14,424) $ (5,017) $ (75,460) $ 9,084


	Three-Months Ended September 30,				Six-Months Ended September 30,
	2023		2022		2023		2022
Net loss	$	(12,543)	$	(13,203)	$	(17,467)	$	(73,380)
Other comprehensive loss:


Foreign currency translation, net of income tax expense of $(15), $(56), $(7), and $(85)	(416)		(1,221)		(238)		(2,080)

Comprehensive loss	$	(12,959)	$	(14,424)	$	(17,705)	$	(75,460)

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

~~NAUTILUS,~~BOWFLEX INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited and in thousands)

Common Stock Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity
Shares Amount
Balance, March 31, 2022 31,268 $ 6,483 $ 158,093 $ (527) $ 164,049
Net loss — — (60,177) — (60,177)
Foreign currency translation adjustment,
  net of income tax expense of $29
— — — (859) (859)
Stock-based compensation expense — 1,979 — — 1,979
Common stock issued under equity
  compensation plan, net of shares withheld
  for tax payments 205 (270) — — (270)
Common stock issued under employee stock purchase plan — 125 — — 125
Balance, June 30, 2022 31,473 8,317 97,916 (1,386) 104,847
Net loss — — (13,203) — (13,203)
Foreign currency translation adjustment,
  net of income tax expense of $56
— — — (1,221) (1,221)
Stock-based compensation expense — 1,367 — — 1,367
Common stock issued under equity
  compensation plan, net of shares withheld
  for tax payments 241 (171) — — (171)
Balance, September 30, 2022 31,714 $ 9,513 $ 84,713 $ (2,607) $ 91,619

Common Stock Retained Earnings Accumulated Other Comprehensive (Loss) Income Total Shareholders' Equity
Shares Amount
Balance, March 31, 2021 30,576 $ 2,176 $ 180,524 $ (155) $ 182,545
Net income — — 13,884 — 13,884
Foreign currency translation adjustment,
  net of income tax benefit of $13
— — — 217 217
Stock-based compensation expense — 1,225 — — 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
Balance, June 30, 2021 30,794 2,411 194,408 62 196,881
Net loss — — (4,602) — (4,602)
Unrealized loss on marketable securities, net of income tax expense of $7 — — — (4) (4)
Foreign currency translation adjustment,
  net of income tax expense of $21
— — — (411) (411)
Stock-based compensation expense — 1,540 — — 1,540
Common stock issued under equity
  compensation plan, net of shares withheld
  for tax payments 365 (893) — — (893)
Balance, September 30, 2021 31,159 $ 3,058 $ 189,806 $ (353) $ 192,511

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


	Common Stock					Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Total Shareholders' Equity
	Shares	Amount		APIC









Balance, March 31, 2023	31,845	$	10,084	$	—	$	52,694	$	(1,478)	$	61,300
Net loss	—	—		—		(4,924)		—		(4,924)


Foreign currency translation adjustment, net of income tax expense of $8	—	—		—		—		178		178
Issuance of common stock and pre-funded warrants, net	3,525	1,335		217		—		—		1,552
Stock-based compensation expense	34	1,050		—		—		—		1,050
Common stock issued under equity compensation plan, net of shares withheld for tax payments	(69)	(85)		—		—		—		(85)
Common stock issued under employee stock purchase plan	180	—		—		—		—		—

Balance, June 30, 2023	35,515	12,384		217		47,770		(1,300)		59,071
Net loss	—	—		—		(12,543)		—		(12,543)


Foreign currency translation adjustment, net of income tax expense of $15	—	—		—		—		(416)		(416)
Issuance of common stock upon exercise of pre-funded warrants	573	336		(217)						119
Stock-based compensation expense	—	926		—		—		—		926
Common stock issued under equity compensation plan, net of shares withheld for tax payments	(58)	(34)		—		—		—		(34)
Common stock issued under employee stock purchase plan	317	—		—		—		—		—

Balance, September 30, 2023	36,347	$	13,612	$	—	$	35,227	$	(1,716)	$	47,123

Table of Contents

~~NAUTILUS, INC.~~


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









Balance, March 31, 2022	31,268	$	6,483	$	158,093	$	(527)	$	164,049
Net loss	—	—		(60,177)		—		(60,177)


Foreign currency translation adjustment, net of income tax benefit of $29	—	—		—		(859)		(859)
Stock-based compensation expense	—	1,979		—		—		1,979
Common stock issued under equity compensation plan, net of shares withheld for tax payments	205	(270)		—		—		(270)
Common stock issued under employee stock purchase plan	—	125		—		—		125

Balance, June 30, 2022	31,473	8,317		97,916		(1,386)		104,847
Net loss	—	—		(13,203)		—		(13,203)


Foreign currency translation adjustment, net of income tax expense of $56	—	—		—		(1,221)		(1,221)
Stock-based compensation expense	—	1,367		—		—		1,367
Common stock issued under equity compensation plan, net of shares withheld for tax payments	241	(171)		—		—		(171)


Balance, September 30, 2022	31,714	$	9,513	$	84,713	$	(2,607)	$	91,619

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Unaudited and in thousands)~~

Six-Months Ended September 30,
2022 2021
Cash flows from operating activities:
(Loss) income from continuing operations $ (75,482) $ 9,449
Gain (loss) from discontinued operations 2,102 (167)
Net (loss) income (73,380) 9,282
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization 4,786 3,979
Recovery (provision) for allowance for doubtful accounts 585 (179)
Inventory lower of cost or net realizable value 1,832 —
Stock-based compensation expense 3,346 2,765
Deferred income taxes, net of valuation allowances 8,167 (1,336)
Goodwill and intangible impairment change 26,965 —
Other (1,276) 1,361
Changes in operating assets and liabilities:
Trade receivables 28,363 213
Inventories 13,299 (94,107)
Prepaids and other assets 7,164 7,256
Income taxes receivable 354 (8,080)
Trade payables (13,731) 16,182
Accrued liabilities and other liabilities, including warranty obligations (16,070) 5,910
Net cash used in operating activities (9,596) (56,754)
Cash flows from investing activities:
Proceeds from sales and maturities of available-for-sale securities — 73,448
Acquisition of business, net of cash acquired — (26,759)
Purchases of property, plant and equipment (7,511) (4,985)
Net cash provided by (used in) investing activities (7,511) 41,704
Cash flows from financing activities:
Proceeds from long-term debt 36,280 7,025
Payments on long-term debt (19,399) (3,556)
Payments on finance lease liabilities (60) —
Proceeds from employee stock purchases 125 269
Proceeds from exercise of stock options — 470
Tax payments related to stock award issuances (430) (2,623)
Net cash provided by financing activities 16,516 1,585
Effect of exchange rate changes (6,869) (910)
Net decrease in cash, cash equivalents and restricted cash (7,460) (14,375)
Cash, cash equivalents and restricted cash at beginning of period 18,098 39,780
Cash, cash equivalents and restricted cash at end of period $ 10,638 $ 25,405
Supplemental disclosure of cash flow information:
Cash paid for interest $ 770 $ 323
Cash (received from) paid for income taxes, net (47) 19,960
Supplemental disclosure of non-cash investing activities:
Capital expenditures incurred but not yet paid $ 787 $ 1,052
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:
Six-Months Ended September 30,
2022 2021
Cash and cash equivalents $ 5,805 $ 20,179
Restricted cash 946 1,339
Other current assets - restricted, current 3,887 3,887
Total cash, cash equivalents and restricted cash $ 10,638 $ 25,405

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

~~NAUTILUS,~~BOWFLEX INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)


	Six-Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Loss from continuing operations	$	(17,467)	$	(75,482)
Income from discontinued operations	—		2,102
Net loss	(17,467)		(73,380)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	6,256		4,786
Provision for allowance for doubtful accounts	88		585
Inventory lower-of-cost-or net realizable value adjustments	—		1,832
Stock-based compensation expense	1,941		3,346
Gain on asset dispositions	(9,021)		—
Loss on debt extinguishment	352		—
Deferred income taxes, net of valuation allowances	114		8,167
Goodwill and intangible impairment charge	—		26,965
Other	138		(1,276)



Changes in operating assets and liabilities:
Trade receivables	(2,416)		28,363
Inventories	(18,553)		13,299
Prepaids and other assets	1,560		7,164
Income taxes receivable	247		354
Trade payables	34,757		(13,731)
Liability classified stock-based compensation expense	4		—
Accrued liabilities and other liabilities, including warranty obligations	(5,931)		(16,070)
Net cash used in operating activities	(7,931)		(9,596)
Cash flows from investing activities:
Proceeds from sale of equity investment	2,350		—
Proceeds from sale of intellectual property	10,500		—


Purchases of property, plant and equipment	(1,902)		(7,511)




Net cash provided by (used in) investing activities	10,948		(7,511)
Cash flows from financing activities:
Proceeds from long-term debt	3,000		36,280
Payments on long-term debt	(15,976)		(19,399)

Payments of debt issuance costs	(918)		—

Early termination of debt	(353)		—
Payments on finance lease liabilities	(60)		(60)
Proceeds from public offering net of transaction costs	4,547		—
Proceeds from employee stock purchases	35		125

Tax payments related to stock award issuances	(119)		(430)

Net cash (used in) provided by financing activities	(9,844)		16,516
Effect of exchange rate changes	(1,193)		(6,869)


Net decrease in cash, cash equivalents and restricted cash	(8,020)		(7,460)

Cash, cash equivalents and restricted cash at beginning of period	18,312		18,098
Cash, cash equivalents and restricted cash at end of period	$	10,292	$	10,638

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,327	$	770
Cash paid (received) for income taxes, net	104		(47)
Supplemental disclosure of non-cash investing activities:
Capital expenditures incurred but not yet paid	$	231	$	787

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:
	Six-Months Ended September 30,
	2023		2022
Cash and cash equivalents	$	8,134	$	5,805
Restricted cash	2,158		946
Other current assets - restricted, current	—		3,887
Total cash, cash equivalents and restricted cash	$	10,292	$	10,638

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

BOWFLEX 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,~~BowFlex Inc. and its subsidiaries, all of which are wholly owned. Intercompany transactions and balances have been eliminated in consolidation.

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 fiscal year ended March 31, ~~2022~~2023 (the ~~“2022~~“2023 Form 10-K”). and for the 10-Q report for the period ended June 30, 2023.

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. 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 ~~2022~~2023 Form 10-K.

In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments necessary to present fairly our financial position as of September 30, ~~2022~~2023 and March 31, ~~2022,~~2023, and our results of operations, comprehensive ~~(loss) income~~loss and shareholders' equity for the three and six-month periods ended September 30, ~~2022~~2023 and ~~2021~~2022 and our cash flows for the six-month periods ended September 30, ~~2022~~2023 and ~~2021.~~2022. 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.

Recent Accounting Pronouncements

Recently Adopted Pronouncements

ASU ~~2020-01~~2016-13

In ~~January 2020,~~June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-01, “Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815).” The amendments in ASU 2020-01 clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the 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 the forward contract or 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 the accounting for these interactions. ASU 2020-01 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The adoption of ASU 2020-01 in the first quarter of the fiscal year ending March 31, 2023 ("fiscal 2023") did not have any effect on our financial position, results of operations or cash flows.

~~Table of Contents~~

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

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 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 2021-01, “Reference Rate Reform (Topic 848),” which permits entities to apply optional expedients in Topic 848 to derivative instruments modified because of discounting transition resulting from reference rate reform. The adoption of this guidance had no material impact on our financial position, results of operations or cash flows.

~~Recently Issued Pronouncements Not Yet Adopted~~

~~ASU 2016-13~~

~~In June 2016, the FASB issued ASU~~ 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 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 fiscal years beginning after December 15, 2022, including interim periods within those years. We ~~do not expect the adoption of this guidance would have a~~adopted ASU 2016-13 on April 1, 2023 and it had no material impact on our financial position, results of operations ~~and~~or cash flows.

Table of Contents

ASU 2020-06

In August 2020, the FASB issued ASU No. 2020-06, "Debt—Debt with Conversion and Other Options (Subtopic 470-20)" and "Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity," which address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity. ASU No. 2020-06 will become effective for us on January 1, 2024. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. FASB specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. We early adopted ASU No. 2020-06 on April 1, 2023 and it had no material impact on our financial position, results of operations or cash flows.

(2) DISCONTINUED OPERATIONS

Results from discontinued operations relate to the disposal of our former ~~Nautilus~~ Commercial business, which was completed in April 2011. Although we reached substantial completion of asset liquidation at December 31, 2012, we continued to accrue interest associated with an uncertain tax position on discontinued international operations, and incurred an immaterial amount of product liability expenses associated with products previously sold into the Commercial ~~channel.~~

Inchannel through fiscal 2023. Expenses related to discontinued operations were immaterial for the ~~second quarter~~first six months of fiscal 2023, we completed the tax deregistration of a foreign entity that was part of the discontinued operations. As a result, the previously unrecognized tax benefit and associated accrued interest and penalty in the amount of $2.1 million was released and recorded as a component of income taxes from discontinued operations during the quarter ended September 30, 2022.

2024.

(3) RESTRUCTURING AND EXIT CHARGES

In February 2023, we announced and began implementing a restructuring plan that included a reduction in workforce and other exit costs.

The following table summarizes restructuring reserve activity (in thousands):


	Employee Severance and Benefits		Third Party Costs		Total
Accrued liability as of March 31, 2023	$	1,110	$	123	$	1,233
Charges / Accruals	—		1,763		1,763
Payments	(753)		(1,129)		(1,882)
Accrued liability as of September 30, 2023	$	357	$	757	$	1,114

The charges incurred due to the restructuring plan are included within Restructuring and exit charges in the Condensed Consolidated Statements of Operations and the accrued employee severance and benefits as of September 30, 2023 is included in Accrued Liabilities on our Condensed Consolidated Balance Sheets.

Table of Contents

(4) REVENUES

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


		Three-Months Ended September 30,				Six-Months Ended September 30,					Three-Months Ended September 30,				Six-Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Product sales	Product sales	$	60,107	$	133,126	$	109,703	$	312,937	Product sales	$	44,424	$	60,107	$	81,196	$	109,703
Extended warranties and services	Extended warranties and services	938		1,388		1,980		3,144		Extended warranties and services	776		938		1,526		1,980
Royalty income										Royalty income	143		1,072		570		1,950
Other(1)	Other(1)	4,413		3,445		8,592		6,471		Other(1)	3,316		3,341		7,117		6,642
Net sales	Net sales	$	65,458	$	137,959	$	120,275	$	322,552	Net sales	$	48,659	$	65,458	$	90,409	$	120,275

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

Subscriptions

Sales of our subscriptions are deemed to be one performance obligation and we recognize revenue from these arrangements ratably over the subscription term as the performance obligation is satisfied. Revenue generated from subscriptions is recorded in our Direct segment.

~~Table of Contents~~

We also offer free trials of subscriptions that are bundled with product offerings (e.g., subscription for premium content). For these types of transactions that involve multiple performance obligations, the transaction price requires allocations to the distinct performance obligation because the free trial provides a material right. The transaction price is then allocated to each performance obligation based on stand-alone selling price. We determine stand-alone selling price based on prices charged to customers. Breakage is factored into the determination of the stand-alone selling price of a subscription. Breakage or activation rate is defined as a percentage of those purchasers that never activate a free-trial offering.

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

Three-Months Ended September 30, Six-Months Ended September 30,
2022 2021 2022 2021
United States $ 53,440 $ 102,521 $ 99,521 $ 249,670
Canada 8,388 17,852 14,195 37,214
Europe, the Middle East and Africa 2,340 13,140 4,179 27,582
All other 1,290 4,446 2,380 8,086
Net sales $ 65,458 $ 137,959 $ 120,275 $ 322,552

As of September 30, 2022, estimated revenue expected to be recognized in the future totaled $32.9 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 Direct channel. Retail orders were $32.6 million and Direct orders were $0.3 million as of September 30, 2022 compared to Retail orders of $82.9 million and Direct orders of $1.1 million as of September 30, 2021. 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.


	Three-Months Ended September 30,				Six-Months Ended September 30,
	2023		2022		2023		2022
United States	$	38,787	$	53,440	$	71,007	$	99,521
Canada	4,918		8,388		9,366		14,195
Europe, the Middle East and Africa	4,308		2,340		8,664		4,179
All other	646		1,290		1,372		2,380
Net sales	$	48,659	$	65,458	$	90,409	$	120,275

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 or the performance obligation is not satisfied. Revenue is recognized when transfer of control occurs. All customer deposits and deferred revenue received are short-term in nature, recognized over the next twelve months. Significant changes in contract liabilities balances, including revenue recognized in the reporting period that was included in opening contract liabilities, are shown below (in thousands):


		Three-Months Ended September 30,				Six-Months Ended September 30,					Three-Months Ended September 30,				Six-Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Balance, beginning of period	Balance, beginning of period	$	6,582	$	1,757	$	6,285	$	5,551	Balance, beginning of period	$	4,432	$	6,582	$	5,075	$	6,285
Cash additions		265		3,457		2,796		4,546
Cash changes										Cash changes	(239)		(973)		148		576
Deferred Revenue										Deferred Revenue	551		1,238		1,529		2,220
Revenue recognition	Revenue recognition	(2,654)		(1,761)		(4,888)		(6,644)		Revenue recognition	(1,736)		(2,654)		(3,744)		(4,888)
Balance, end of period	Balance, end of period	$	4,193	$	3,453	$	4,193	$	3,453	Balance, end of period	$	3,008	$	4,193	$	3,008	$	4,193

~~(4)~~

Table of Contents

(5) 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.

~~Table~~We did not have any assets measured at fair value on a recurring basis as of ~~Contents~~

~~Assets and liabilities~~September 30, 2023, or March 31, 2023. Liabilities measured at fair value on a recurring basis were as follows (in thousands):


		September 30, 2022
		Level 1		Level 2		Level 3		Total
Assets:

											September 30, 2023
											Level 1		Level 2		Level 3		Total

Derivatives

Foreign currency forward contracts		$	—	$	25	$	—	$	25

Total assets measured at fair value		$	—	$	25	$	—	$	25

Liabilities:	Liabilities:									Liabilities:
Common Warrants										Common Warrants	$	—	$	—	$	1,618	$	1,618
Derivatives	Derivatives									Derivatives

Foreign currency forward contracts	Foreign currency forward contracts	$	—	$	754	$	—	$	754	Foreign currency forward contracts	—		20		—		20
Total liabilities measured at fair value	Total liabilities measured at fair value	$	—	$	754	$	—	$	754	Total liabilities measured at fair value	$	—	$	20	$	1,618	$	1,638


		March 31, 2022									March 31, 2023
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Liabilities:	Liabilities:									Liabilities:
Derivatives	Derivatives									Derivatives

Foreign currency forward contracts	Foreign currency forward contracts	$	—	$	128	$	—	$	128	Foreign currency forward contracts	$	—	$	141	$	—	$	141
Total liabilities measured at fair value	Total liabilities measured at fair value	$	—	$	128	$	—	$	128	Total liabilities measured at fair value	$	—	$	141	$	—	$	141

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 six-month period ended September 30, 2022, nor for the fiscal year ended March 31, 2022 ("fiscal 2022"). Additionally, weWe did not have any changes to our valuation techniques during ~~either of these periods.~~any periods presented.

The fair ~~values~~value of our foreign currency forward contracts ~~are~~is 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.

The carrying value of our 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.

~~During the six-month period ended September 30, 2022, we evaluated~~We determined the fair value of the Common Warrants (see Note 12) liability using the Black Scholes Option Pricing methodology with Level 3 inputs.

Inherent in a Black Scholes valuation model are assumptions related to expected stock price, exercise price, stock-price volatility derived using our ~~goodwill~~historical volatility, expected term, risk-free interest rate and ~~intangible assets because triggering events~~dividend yield. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected term of the Common Warrants. The dividend yield percentage is zero based on our current expectations related to the payment of dividends during the expected term of the Common Warrants.

Table of Contents

The key inputs into the Black Scholes pricing model were ~~identified. See Note 8~~as follows:

~~for additional information.~~


			September 30, 2023
Stock Price			$0.85
Exercise Price			$1.35
Expected Life			5.22
Expected Volatility			61.66%
Expected Dividend Yield			—%
Risk Free Rate			4.55%

~~(5)~~(6) DERIVATIVES

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.

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 30, ~~2022,~~2023, total outstanding contract notional amounts were ~~$20.0~~$2.3 million and had maturities of ~~112~~62 days or less.

~~Table of Contents~~

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

Balance Sheet Classification

As of

Balance Sheet Classification

As of

September 30, 2022

March 31, 2022

September 30, 2023

March 31, 2023

Derivative instruments not designated as cash flow hedges:

Foreign currency forward contracts

Prepaids and other current assets

—

Foreign currency forward contracts

Accrued liabilities

754

128

Foreign currency forward contracts

Accrued liabilities

141

The effect of derivative instruments on our ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations was as follows (in thousands):


		Statement of Operations Classification		Three-Months Ended September 30,					Six-Months Ended September 30,							Statement of Operations Classification		Three-Months ended September 30,						Six-Months Ended September 30,
			2022			2021	2022				2021						2023			2022			2023			2022

Derivative instruments not designated as cash flow hedges:	Derivative instruments not designated as cash flow hedges:														Derivative instruments not designated as cash flow hedges:
Loss recognized in earnings		Other, net		$	(685)		$	(943)	$	(589)		$	(960)
Income (loss) recognized in earnings														Income (loss) recognized in earnings		Other, net		$	158		$	(685)		$	158		$	(589)
Income tax expense (benefit)	Income tax expense (benefit)	Income tax expense (benefit)		(170)			238		(146)			234		Income tax expense (benefit)		Income tax expense (benefit)		39			(170)			39			(146)

~~(6)~~(7) 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
September 30, 2022 March 31, 2022
Finished goods $ 94,146 $ 104,988
Parts and components 5,064 6,202
Total inventories $ 99,210 $ 111,190

Table of Contents


	As of
	September 30, 2023		March 31, 2023
Finished goods	$	62,260	$	42,463
Parts and components	3,817		4,136
Total inventories	$	66,077	$	46,599

~~(7)~~(8) PROPERTY, PLANT AND EQUIPMENT

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


		Estimated Useful Life (in years)				As of							Estimated Useful Life (in years)								As of
					September 30, 2022			March 31, 2022				Estimated Useful Life (in years)									September 30, 2023			March 31, 2023
Automobiles	Automobiles		5					$	23					$	23						Automobiles		5			$	23			$	23
Leasehold improvements	Leasehold improvements	4	to	20		3,945				3,150						Leasehold improvements		4		to		20			3,446				3,426
Computer software and equipment	Computer software and equipment	2	to	7		45,054				44,852					Computer software and equipment		2		to		7			57,211				57,223
Machinery and equipment	Machinery and equipment	3	to	5		15,653				16,447					Machinery and equipment		3		to		5			15,188				14,953
Furniture and fixtures	Furniture and fixtures	5	to	20		2,558				2,634					Furniture and fixtures		5		to		20			2,033				2,034
Work in progress(1)	Work in progress(1)	N/A				12,110				6,678					Work in progress(1)		N/A							5,604				4,061
Total cost	Total cost					79,343				73,784					Total cost									83,505				81,720
Accumulated depreciation	Accumulated depreciation					(45,161)				(41,655)					Accumulated depreciation									(55,153)				(48,931)
Total property, plant and equipment, net	Total property, plant and equipment, net					$	34,182			$	32,129				Total property, plant and equipment, net									$	28,352			$	32,789

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

~~Table of Contents~~

Depreciation expense was as follows (in thousands):

Three-Months Ended September 30, Six-Months Ended September 30,
2022 2021 2022 2021
Depreciation expense $ 2,464 $ 1,909 $ 4,755 $ 3,948


	Three-Months Ended September 30,				Six-Months Ended September 30,
	2023		2022		2023		2022
Depreciation expense	$	3,091	$	2,464	$	6,225	$	4,755

~~(8) GOODWILL AND~~(9) OTHER INTANGIBLE ASSETS

~~Goodwill~~

~~The roll forward of goodwill was as follows (in thousands):~~

~~Total~~

~~Balance, March 31, 2022~~

~~24,510~~

~~Goodwill impairment~~

~~(24,510)~~

~~Balance, September 30, 2022~~

—

~~In accordance with ASC 350 — Intangibles —~~ ~~Goodwill and Other,~~ we perform our goodwill and indefinite-lived trade names impairment valuations annually, on March 31, or sooner if triggering events are identified. While the fair value of our reporting units exceeded their respective carrying values as of March 31, 2022, we observed continued market volatility including significant declines in our market capitalization during the three-month period ended June 30, 2022, identified as a triggering event. Our trailing 30-day average market capitalization was approximately $137 million at March 31, 2022 compared to $66 million, the trailing 30-day average, as of June 30, 2022. We performed an interim evaluation and a market capitalization reconciliation during the first quarter of fiscal 2023, which resulted in a non-cash goodwill impairment charge of $24.5 million. During the three-month period ended September 30, 2022, we observed continued market volatility including declines in our market capitalization subsequent to September 30, 2022, which in part could increase the possibility of a future impairment charge. Based on our analysis, including our market capitalization during the period, we determined there were no triggering events during the quarter ended September 30, 2022.

We assigned assets and liabilities to each reporting unit based on either specific identification or by using judgment for the remaining assets and liabilities that are not specific to a reporting unit. We determined the fair value of our reporting units in Step 1 of the ASC 350 analysis using the market approach. In addition, we determined the fair value by adding a control premium observed from recent transactions of comparable companies to determine the reasonableness of that assumption and the fair values of the reporting units estimated in Step 1. Significant unobservable inputs and assumptions inherent in the valuation methodologies from Level 3 inputs were employed and include, but were not limited to, prospective financial information, growth rates, terminal value, royalty rates, discount rates, and comparable multiples from publicly traded companies in our industry. We compared the carrying amount of each reporting unit to its respective fair value. We reconciled the aggregate fair values of the reporting units determined in Step 1 (as described above) to the enterprise market capitalization plus a reasonable control premium. This total value was compared to a trailing 30-day average market capitalization of approximately $66 million as of June 30, 2022. As a result, the market capitalization reconciliation analysis identified that the Direct reporting unit's fair value was significantly lower than its carrying value, resulting in a non-cash goodwill impairment charge of $24.5 million.

Other Intangible Assets

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


		Estimated Useful Life (in years)				As of							Estimated Useful Life (in years)						As of
					September 30, 2022			March 31, 2022				Estimated Useful Life (in years)							September 30, 2023			March 31, 2023
Indefinite-lived trademarks ~~(1)~~	Indefinite-lived trademarks ~~(1)~~		N/A					$	6,597					$	9,052				Indefinite-lived trademarks ~~(1)~~		N/A			$	2,900			$	6,597

Patents	Patents	7	to	24		1,043				1,043						Patents	7	to		24			1,043				1,043

						7,640				10,095												3,943				7,640
Accumulated amortization - definite-lived intangible assets	Accumulated amortization - definite-lived intangible assets					(822)				(791)					Accumulated amortization - definite-lived intangible assets							(884)				(853)
Other intangible assets, net	Other intangible assets, net					$	6,818			$	9,304				Other intangible assets, net							$	3,059			$	6,787

~~(1)~~

~~During the first quarter of fiscal 2023, we identified impairment indicators with our indefinite-lived trademarks resulting in a $2.5 million non-cash intangible impairment charge.~~

1112

Table of Contents

During the quarter ended June 30, 2023, we completed the sale of indefinite-lived intellectual property for $10.5 million as part of our ongoing comprehensive strategic review. The sale of these assets, which included the Nautilus® brand trademark assets and related licenses, will continue to streamline our brand focus and enhance our financial flexibility. The carrying value of the intangible assets sold was $3.7 million and the resulting gain, net of transaction costs, was recorded the Consolidated Statement of Operations as Other, net.

Amortization expense was as follows (in thousands):

Three-Months Ended September 30, Six-Months Ended September 30,
2022 2021 2022 2021
Amortization expense $ 16 $ 16 $ 31 $ 31


	Three-Months Ended September 30,				Six-Months Ended September 30,
	2023		2022		2023		2022
Amortization expense	$	15	$	16	$	31	$	31

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


Remainder of fiscal 2023		$	31
2024		61
Remainder of fiscal 2024				Remainder of fiscal 2024	$	30
2025	2025	61		2025	61
2026	2026	47		2026	47
2027	2027	3		2027	3
2028				2028	3
Thereafter	Thereafter	18		Thereafter	15
		$	221		$	159

~~(9)~~(10) THE SALE OF SHARES IN EQUITY INVESTMENTS

On May 1, 2023, we completed the sale of Vi Labs for $2.3 million as part of our ongoing comprehensive strategic review. The sale of this equity investment will continue to streamline our brand focus and enhance our financial flexibility. The carrying value of the assets sold was $0.0 million and transaction costs of the sale were $0.1 million. The resulting gain of $2.2 million was recorded in the Condensed Consolidated Statements of Operations as Other, net and in the Condensed Consolidated Statements of Cash Flows as Proceeds from sale of equity investment for the quarter ended June 30, 2023.

(11) LEASES

We have several non-cancellable operating leases, primarily for office space, that expire at various dates over the next ~~eight~~seven years. These leases generally contain renewal options to extend for one 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.

Lease expense was as follows (in thousands):


		Three-Months Ended September 30,				Six-Months Ended September 30,					Three-Months Ended September 30,				Six-Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Operating lease expense	Operating lease expense	$	1,527	$	1,466	$	3,060	$	2,932	Operating lease expense	$	1,332	$	1,527	$	2,664	$	3,060
Amortization of finance lease assets	Amortization of finance lease assets	29		—		57		—		Amortization of finance lease assets	29		29		57		57

Total lease expense	Total lease expense	$	1,556	$	1,466	$	3,117	$	2,932	Total lease expense	$	1,361	$	1,556	$	2,721	$	3,117

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

Table of Contents

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

~~Table of Contents~~


		As of					As of
		September 30, 2022		March 31, 2022				September 30, 2023		March 31, 2023
Supplemental cash flow information related to leases was as follows:	Supplemental cash flow information related to leases was as follows:					Supplemental cash flow information related to leases was as follows:

Operating leases:	Operating leases:					Operating leases:
Operating lease right-of-use-assets	Operating lease right-of-use-assets	$	21,085	$	23,620	Operating lease right-of-use-assets		$	16,906	$	19,078

Operating lease liabilities, non-current	Operating lease liabilities, non-current	$	18,619	$	20,926	Operating lease liabilities, non-current		$	13,950	$	16,380
Operating lease liabilities, current portion	Operating lease liabilities, current portion	4,057		4,494		Operating lease liabilities, current portion		4,575		4,427
Total operating lease liabilities	Total operating lease liabilities	$	22,676	$	25,420	Total operating lease liabilities		$	18,525	$	20,807

Finance leases:	Finance leases:					Finance leases:
Property, plant and equipment, at cost	Property, plant and equipment, at cost	$	512	$	569	Property, plant and equipment, at cost		$	569	$	569
Accumulated depreciation	Accumulated depreciation	(57)		(57)		Accumulated depreciation		(228)		(171)
Property, plant and equipment, net	Property, plant and equipment, net	$	455	$	512	Property, plant and equipment, net		$	341	$	398

Finance lease obligations, non-current	Finance lease obligations, non-current	$	339	$	395	Finance lease obligations, non-current		$	225	$	282
Finance lease obligations, current portion	Finance lease obligations, current portion	121		119		Finance lease obligations, current portion		123		122
Total finance lease liabilities	Total finance lease liabilities	$	460	$	514	Total finance lease liabilities		$	348	$	404

Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases	Operating cash flow from operating leases	$	3,617	$	6,485	Operating cash flow from operating leases		$	2,984	$	6,226
Finance cash flows from finance leases	Finance cash flows from finance leases	60		60		Finance cash flows from finance leases		60		119

Additional lease information:	Additional lease information:					Additional lease information:
ROU assets obtained in exchange for operating lease obligations	ROU assets obtained in exchange for operating lease obligations	$	—	$	10,323	ROU assets obtained in exchange for operating lease obligations		$	—	$	100
ROU assets obtained in exchange for finance lease obligations	ROU assets obtained in exchange for finance lease obligations	—		569		ROU assets obtained in exchange for finance lease obligations		—		—
Reductions to ROU assets resulting from reductions to operating lease obligations	Reductions to ROU assets resulting from reductions to operating lease obligations	615		1,358		Reductions to ROU assets resulting from reductions to operating lease obligations		506		1,175

Weighted Average Remaining Lease Term:	Weighted Average Remaining Lease Term:					Weighted Average Remaining Lease Term:
Operating leases	Operating leases	2.6 years		3.1 years		Operating leases		4.6 years		5.0 years
Finance leases	Finance leases	4.0 years		4.5 years		Finance leases		3.0 years		3.5 years

Weighted Average Discount Rate:	Weighted Average Discount Rate:					Weighted Average Discount Rate:
Operating leases	Operating leases	4.65%		4.65%		Operating leases		5.06%		5.05%
Finance leases	Finance leases	2.14%		2.14%		Finance leases		2.08%		2.08%

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.

Table of Contents

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



	As of September 30, 2023
	Operating leases		Finance leases
Remainder of fiscal 2024	$	2,597	$	60
2025	5,644		120
2026	4,520		120
2027	2,361		59

Thereafter	5,797		—
Total undiscounted lease payments	20,919		359
Less imputed interest	(2,394)		(11)
Total lease liabilities	$	18,525	$	348

(12) CAPITAL STOCK

Issuance of Common Stock

On June 15, 2023, we entered into a securities purchase agreement (“Securities Purchase Agreement”) with an institutional investor (“Purchaser”). Pursuant to the Securities Purchase Agreement, we agreed to sell in a registered direct offering (“Registered Direct Offering”) 3,525,000 shares (“Shares”) of our common stock, no par value (“Common Stock”), and purchase contracts issued as pre-funded warrants (“Pre-Funded Warrants” and together with the Shares, the "Securities") to purchase up to 573,362 shares of Common Stock, which Pre-Funded Warrants were to be issued to the extent that the Purchaser determined, in its sole discretion, that such Purchaser would beneficially own in excess of 4.99% (or at the Purchaser’s election, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of the Securities. The Pre-Funded Warrants had an exercise price of $0.0001 per share, were immediately exercisable and could be exercised at any time after their original issuance date until such Pre-Funded Warrants were exercised in full. Each Share was sold at an offering price of $1.22 and each Pre-Funded Warrant was sold at an offering price of $1.2199 (equal to the purchase price per Share minus the exercise price of the Pre-Funded Warrant). On July 28, 2023, all 573,362 Pre-Funded warrants were exercised, resulting in the issuance of 573,362 shares of Common Stock.

Pursuant to the Securities Purchase Agreement, in a concurrent private placement (together with the Registered Direct Offering, the "Offerings"), we also issued to the Purchaser unregistered warrants (“Common Warrants”) to purchase up to 4,098,362 shares of our common stock. Each Common Warrant has an exercise price of $1.35 per share, is exercisable at any time beginning six months following their original issuance date and will expire five and a half years from the original issuance date. As of September 30, 2023, the Common Warrants had not been exercised.

In the event of any Fundamental Transaction (as such term is defined in the Securities Purchase Agreement), including any merger or consolidation, sale of substantially all of our assets, tender or exchange offer for 50% or more of our outstanding common stock, reclassification, reorganization or recapitalization of our shares of common stock, or purchase of 50% or more of our outstanding shares of common stock, then upon any subsequent exercise of a Common Warrant, the holder thereof will have the right to receive as alternative consideration, for each share of common stock that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, the number of shares of common stock of the successor or acquiring corporation of our company, if it is the surviving corporation, and any additional consideration receivable upon or as a result of such transaction by a holder of the number of shares of common stock for which the Common Warrant is exercisable immediately prior to such event. Notwithstanding the foregoing, in the event of a Fundamental Transaction, the holders of the Common Warrants have the right to require us or a successor entity to redeem the Common Warrants for cash in the amount of the Black Scholes Value (as such term is defined in the Securities Purchase Agreement) of the unexercised portion of the Common Warrants concurrently with or within 30 days following the consummation of such Fundamental Transaction.

We account for our Common Warrants in accordance with the guidance contained in ASC 815-40, Derivatives and Hedging - Contracts on an Entity’s Own Equity, and determined that the Common Warrants do not meet the criteria for equity treatment thereunder. As such, each Common Warrant must be recorded as a liability and is subject to re-

Table of Contents

As of September 30, 2022
Operating leases Finance leases
Remainder of fiscal 2023 $ 2,370 $ 60
2024 5,515 120
2025 5,585 120
2026 4,503 120
2027 2,348 60
Thereafter 5,796 —
Total undiscounted lease payments 26,117 480
Less imputed interest (3,441) (20)
Total lease liabilities $ 22,676 $ 460
measurement at each balance sheet date. Refer to Note 5 - Fair Value Measurements for further details. Changes in fair value are recognized in Other, net in our Condensed Consolidated Statements of Operations.

The following table presents the change in the fair value of Common Warrants for the periods indicated below (in thousands):



	Total
Liability balance as of March 31, 2023	$	—
Additions of common warrant liability	2,994
Liability balance as of June 30, 2023	2,994
Change in fair value of common warrant liability	(1,376)
Liability balance as of September 30, 2023	$	1,618

Roth Capital Partners, LLC (the “Placement Agent”) acted as the exclusive placement agent for the Offerings, pursuant to a Placement Agency Agreement, dated June 15, 2023 (the “Placement Agreement”).

Pursuant to the Placement Agreement, we agreed to pay the Placement Agent a cash placement fee equal to 7.0% of the aggregate gross proceeds raised in the Offerings from sales arranged for by the Placement Agent. Subject to certain conditions, we also have agreed to reimburse all reasonable travel and other out-of-pocket expenses of the Placement Agent in connection with the Offerings, including but not limited to legal fees, up to a maximum of $75,000. The Placement Agreement contains customary representations, warranties and agreements by us and customary conditions to closing. We agreed to indemnify the Placement Agent against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”), and liabilities arising from breaches of representations and warranties contained in the Placement Agreement, or to contribute to payments that the Placement Agent may be required to make in respect of those liabilities.

We received net proceeds of $4.6 million from the Offerings, net of offering expenses paid to the Placement Agent totaling $0.4 million, which proceeds will be used for general corporate purposes.

The closing of the Offerings took place on June 20, 2023. The Securities were offered and sold pursuant to our shelf registration statement on Form S-3 (File No. 333-249979) initially filed with the Securities and Exchange Commission (the “Commission”) on November 9, 2020 and declared effective on October 28, 2021. A prospectus supplement relating to the Registered Direct Offering was filed with the Commission on June 15, 2023. None of the Common Warrants or the shares of Common Stock issuable upon the exercise of the Common Warrants are registered under the Securities Act. The Common Warrants and the shares of Common Stock issuable upon exercise thereof will be issued in reliance on the exemptions from registration provided by Section 4(a)(2) under the Securities Act and Regulation D promulgated thereunder for transactions not involving a public offering.

~~(10)~~(13) ACCRUED LIABILITIES

Accrued liabilities consisted of the following (in thousands):


		As of
		September 30, 2022		March 31, 2022			As of
							September 30, 2023		March 31, 2023
Payroll and related liabilities	Payroll and related liabilities	$	10,390	$	10,405	Payroll and related liabilities	$	3,517	$	5,220
Deferred revenue	Deferred revenue	4,194		6,285		Deferred revenue	3,008		5,075
Legal settlement (2)		287		4,250
Reserves (1)						Reserves (1)	1,578		1,200
Accrued Tariffs						Accrued Tariffs	1,320		1,167

Other	Other	4,127		4,013		Other	2,435		2,913
Reserves (1)		959		4,433
Total accrued liabilities	Total accrued liabilities	$	19,957	$	29,386	Total accrued liabilities	$	11,858	$	15,575

(1) Reserves primarily consists of inventory, sales return, sales tax and product liability reserves.

~~(2)~~ Legal settlement is a loss contingency accrual related to a legal settlement involving a class action lawsuit related to advertisement of our treadmills. For further information, see Note 17, Commitments and Contingencies.

~~(11)~~

Table of Contents

(14) 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.

~~Table of Contents~~

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


		Six-Months Ended September 30,					Six-Months Ended September 30,
		2022		2021			2023		2022
Balance, beginning of period	Balance, beginning of period	$	6,216	$	9,782	Balance, beginning of period	$	3,267	$	6,216
Accruals ~~(1)~~	Accruals ~~(1)~~	1,882		(551)		Accruals ~~(1)~~	2,749		1,882

Payments	Payments	(3,748)		(1,865)		Payments	(2,597)		(3,748)
Balance, end of period	Balance, end of period	$	4,350	$	7,366	Balance, end of period	$	3,419	$	4,350
(1) Accruals were negative for the six-months ended September 30, 2021 due to a reversal of a special warranty reserve related to indoor cycling bikes.

~~(12)~~(15) ACCUMULATED OTHER COMPREHENSIVE LOSS

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

Foreign Currency Translation Adjustments Accumulated Other Comprehensive Loss
Balance, March 31, 2022 $ (527) $ (527)
Current period other comprehensive loss before reclassifications (2,080) (2,080)
Net other comprehensive loss during period (2,080) (2,080)
Balance, September 30, 2022 $ (2,607) $ (2,607)


	Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Loss
Balance, March 31, 2023	$	(1,478)	$	(1,478)
Current period other comprehensive loss before reclassifications	(238)		(238)


Balance, September 30, 2023	$	(1,716)	$	(1,716)



	Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Loss
Balance, June 30, 2023	$	(1,300)	$	(1,300)
Current period other comprehensive loss before reclassifications	(416)		(416)


Balance, September 30, 2023	$	(1,716)	$	(1,716)

Foreign Currency Translation Adjustments Accumulated Other Comprehensive Loss
Balance, June 30, 2022 $ (1,386) $ (1,386)
Current period other comprehensive loss before reclassifications (1,221) (1,221)
Net other comprehensive loss during period (1,221) (1,221)
Balance, September 30, 2022 $ (2,607) $ (2,607)

Unrealized Loss on Available-for-Sale Securities Foreign Currency Translation Adjustments Accumulated Other Comprehensive (Loss) Income
Balance, March 31, 2021 $ (8) $ (147) $ (155)
Current period other comprehensive income before reclassifications (4) (194) (198)
Net other comprehensive income during period (4) (194) (198)
Balance, September 30, 2021 $ (12) $ (341) $ (353)



	Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Loss
Balance, March 31, 2022	$	(527)	$	(527)
Current period other comprehensive loss before reclassifications	(2,080)		(2,080)


Balance, September 30, 2022	$	(2,607)	$	(2,607)

1517

Table of Contents

Unrealized Loss on Available-for-Sale Securities Foreign Currency Translation Adjustments Accumulated Other Comprehensive (Loss) Income
Balance, June 30, 2021 $ (8) $ 70 $ 62
Current period other comprehensive income before reclassifications (4) (411) (415)
Net other comprehensive income during period (4) (411) (415)
Balance, September 30, 2021 $ (12) $ (341) $ (353)



	Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Loss
Balance, June 30, 2022	$	(1,386)	$	(1,386)
Current period other comprehensive loss before reclassifications	(1,221)		(1,221)


Balance, September 30, 2022	$	(2,607)	$	(2,607)

~~(13) (LOSS) INCOME~~(16) LOSS PER SHARE

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 (loss) income per share were as follows (in thousands):

Three-Months Ended September 30, Six-Months Ended September 30,
2022 2021 2022 2021
Shares used to calculate basic income per share 31,585 30,968 31,496 30,833
Dilutive effect of outstanding stock options, performance stock units and restricted stock units — — — 1,604
Shares used to calculate diluted income per share 31,585 30,968 31,496 32,437


	Three-Months Ended September 30,		Six-Months Ended September 30,
	2023	2022	2023	2022
Shares used to calculate basic income per share	36,008	31,585	34,192	31,496
Dilutive effect of outstanding stock options, performance stock units and restricted stock units	—	—	—	—
Shares used to calculate diluted income per share	36,008	31,585	34,192	31,496

Potentially Dilutive Shares

The weighted average ~~numbers~~number of potentially dilutive shares outstanding listed in the table below were ~~dilutive and are~~ excluded from the computation of diluted per share ~~due when there is~~amounts since we had a loss from continuing operations in both periods, as such, the exercise or conversion of any ~~potential~~potentially dilutive shares would increase the number of shares in the denominator and ~~results~~result in a lower ~~income (loss)~~loss per diluted share.

~~These~~

The weighted average number of potentially dilutive shares ~~may be dilutive potential common shares in the future~~outstanding were as follows (in thousands):


		Three-Months Ended September 30,		Six-Months Ended September 30,			Three-Months Ended September 30,		Six-Months Ended September 30,
		2022	2021	2022	2021		2023	2022	2023	2022

Performance stock units						Performance stock units	11	—	4	—
Restricted stock units	Restricted stock units	136	894	241	—	Restricted stock units	—	136	23	241
Stock options	Stock options	51	526	107	—	Stock options	—	51	—	107
Total potential dilutive shares excluded due to net loss		187	1,420	348	—
Total potentially dilutive shares excluded due to net loss						Total potentially dilutive shares excluded due to net loss	11	187	27	348

~~Anti-dilutive~~Anti-Dilutive Shares

The weighted average numbers of shares outstanding listed in the table below were anti-dilutive and excluded from the computation of diluted ~~income (loss)~~loss 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 anti-dilutive potential common shares in the future (in thousands):

Table of Contents


		Three-Months Ended September 30,		Six-Months Ended September 30,			Three-Months Ended September 30,		Six-Months Ended September 30,
		2022	2021	2022	2021		2023	2022	2023	2022

Stock options	Stock options	1,696	407	1,473	295	Stock options	2,700	1,696	2,255	1,473
RSUs	RSUs	174	2	88	2	RSUs	1,475	174	1,173	88

Total anti-dilutive shares excluded	Total anti-dilutive shares excluded	1,870	409	1,561	297	Total anti-dilutive shares excluded	4,175	1,870	3,428	1,561

~~(14)~~(17) SEGMENT AND ENTERPRISE-WIDE INFORMATION

We have two operating segments, Direct and Retail. There were no changes in our operating segments during the six-months ended September 30, ~~2022.~~2023.

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, cash equivalents 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.

1719

Table of Contents

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


		Three-Months Ended September 30,				Six-Months Ended September 30,					Three-Months Ended September 30,				Six-Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net sales:	Net sales:									Net sales:
Direct	Direct	$	24,480	$	37,853	$	50,957	$	101,249	Direct	$	20,737	$	24,480	$	42,582	$	50,957
Retail	Retail	39,905		99,153		67,348		219,637		Retail	27,780		39,905		47,257		67,348
Royalty	Royalty	1,073		953		1,970		1,666		Royalty	142		1,073		570		1,970
Consolidated net sales	Consolidated net sales	$	65,458	$	137,959	$	120,275	$	322,552	Consolidated net sales	$	48,659	$	65,458	$	90,409	$	120,275

Contribution:	Contribution:									Contribution:
Direct	Direct	$	(7,887)	$	(1,835)	$	(17,780)	$	4,924	Direct	$	(7,668)	$	(7,887)	$	(12,376)	$	(17,780)
Retail	Retail	966		18,741		(4,442)		40,831		Retail	3,663		966		4,045		(4,442)
Royalty	Royalty	1,073		953		1,970		1,666		Royalty	142		1,073		570		1,970
Consolidated contribution	Consolidated contribution	$	(5,848)	$	17,859	$	(20,252)	$	47,421	Consolidated contribution	$	(3,863)	$	(5,848)	$	(7,761)	$	(20,252)

Reconciliation of consolidated contribution to (loss) income from continuing operations:
Reconciliation of consolidated contribution to loss from continuing operations:										Reconciliation of consolidated contribution to loss from continuing operations:
Consolidated contribution	Consolidated contribution	$	(5,848)	$	17,859	$	(20,252)	$	47,421	Consolidated contribution	$	(3,863)	$	(5,848)	$	(7,761)	$	(20,252)
Amounts not directly related to segments:	Amounts not directly related to segments:									Amounts not directly related to segments:
Operating expenses(1)	Operating expenses(1)	(8,493)		(19,809)		(45,274)		(31,504)		Operating expenses(1)	(7,345)		(8,493)		(13,980)		(45,274)
Other expense, net	Other expense, net	(816)		(375)		(1,704)		(788)		Other expense, net	(883)		(816)		5,231		(1,704)
Income tax expense	Income tax expense	(156)		(2,242)		(8,252)		(5,680)		Income tax expense	(452)		(156)		(957)		(8,252)
(Loss) income from continuing operations		$	(15,313)	$	(4,567)	$	(75,482)	$	9,449
(1) Included in unallocated Operating expenses is $25.4 million of Goodwill and intangible impairment charge related to the Direct segment and $1.6 million of intangible impairment charge related to the Retail segment that is not included in the contribution performance measured by the chief operating decision maker.
Loss from continuing operations										Loss from continuing operations	$	(12,543)	$	(15,313)	$	(17,467)	$	(75,482)
(1) Included in unallocated Operating expenses for the six months ended September 30, 2022 is $25.4 million of Goodwill and intangible impairment charge related to the Direct segment and $1.6 million of intangible impairment charge related to the Retail segment that is not included in the contribution performance measured by the chief operating decision maker.										(1) Included in unallocated Operating expenses for the six months ended September 30, 2022 is $25.4 million of Goodwill and intangible impairment charge related to the Direct segment and $1.6 million of intangible impairment charge related to the Retail segment that is not included in the contribution performance measured by the chief operating decision maker.


		As of				As of
		September 30, 2022		March 31, 2022				September 30, 2023		March 31, 2023
Assets:	Assets:						Assets:
Direct	Direct	$	63,675	$	93,554		Direct	$	59,084	$	50,493
Retail	Retail	108,477		144,683			Retail	59,999		58,214
Unallocated corporate	Unallocated corporate	54,361		75,808			Unallocated corporate	48,595		54,825
Total assets	Total assets	$	226,513	$	314,045		Total assets	$	167,678	$	163,532

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

Three-Months Ended
September 30, Six-Months Ended
September 30,
2022 2021 2022 2021
Amazon.com 33.7% 15.4% 31.7% 16.8%
Best Buy * 18.6% * 17.8%
*Less than 10% of total net sales.


	Three-Months Ended September 30,		Six-Months Ended September 30,
	2023	2022	2023	2022
Amazon.com	21.0%	33.7%	16.4%	31.7%

(18) BORROWINGS

Amendment to Existing Term Loan Credit Agreement

On July 28, 2023, we entered into an amendment (the “Term Loan Amendment”) to our existing SLR Term Loan with Crystal Financial LLC, d/b/a SLR Credit Solutions ("SLR") dated as of November 30, 2022 (as amended, the "SLR Term Loan").

1820

Table of Contents

~~(15) BORROWINGS~~The Term Loan Amendment provides us with an increased borrowing advance rate for certain eligible accounts owed to us by Amazon.com, Inc. and its affiliates, and allows for certain compliance reports to be delivered to SLR under the SLR Term Loan on a monthly (rather than weekly) basis as long as specified conditions are satisfied.

~~Wells Fargo Bank~~Amendment to Existing ABL Credit Agreement

On ~~October 29, 2021,~~July 28, 2023, we ~~amended~~entered into an amendment (the “ABL Amendment”) to our existing Credit Agreement ~~dated January 31, 2020 (the "Credit Agreement"),~~ with Wells Fargo Bank, National Association ~~and lenders from time to time party thereto (the "Lenders”~~("Wells Fargo") dated as of January 31, 2020 (as amended, the "ABL Credit Facility").

The ~~Lenders agreed, among other things, to make available~~ABL Amendment provides us with an increased borrowing advance rate for certain eligible accounts owed to us ~~an asset-based~~by Amazon.com, Inc. and its affiliates and allows for certain compliance reports to be delivered on a monthly (rather than weekly) basis as long as specified conditions are satisfied.In addition, the ABL Amendment reduces the maximum revolving loan facility, subject to a borrowing base (the “ABL Revolving Facility”), and a term loan facility (the “Term Loan Facility” and together with the ABL Revolving Facility, the “Credit Facility”). The aggregate principalcommitment amount ~~available~~ under the ABL ~~Revolving~~Credit Facility ~~is $100.0~~from $60.0 million ~~(the “Revolver”), subject~~ to ~~a borrowing base. The unamortized balance on~~$40.0 million.

In connection with the amendment of the SLR Term Loan ~~Facility was $11.5 million. The~~and ABL Credit Facility, ~~matures on October 29, 2026 and repayment~~we recorded a total loss of ~~obligations under the Credit Agreement is secured by substantially all~~$0.3 million, as a component of Other, net in our ~~assets, with principal and interest amounts required to be paid as scheduled.~~Condensed Consolidated Statements of Operations.

As of September 30, ~~2022,~~2023, outstanding ~~borrowings~~principal and accrued and unpaid interest totaled ~~$47.3~~$17.2 million, with ~~$9.2~~$17.2 million and ~~$38.1~~$0.0 million under our SLR Term Loan ~~Facility~~ and ~~Revolver,~~ABL Credit Facility, respectively. As of September 30, ~~2022,~~2023, we were in compliance with the financial covenants ofcontained in the agreements governing both the SLR Term Loan and ABL Credit ~~Agreement~~Facility, and ~~$22.2~~$29.0 million was available for borrowing under ~~the~~ ABL ~~Revolving~~Credit Facility.

As of September 30, 2023, our interest rate was 10.41% for the ABL Credit Facility and 13.92% for the SLR Term Loan. Interest on the ~~Revolver will accrue~~ABL Credit Facility accrues at the Secured Overnight Financing Rate ("SOFR") plus a margin of ~~1.86%~~5.00% to ~~2.36%~~5.50% (based on average quarterly availability) and interest on the SLR Term Loan ~~Facility will accrue~~accrues at SOFR plus ~~4.61%. As~~a margin of ~~September 30, 2022, our interest rate was 4.86% for the Revolver and 7.61% for the Term Loan Facility.~~7.75% to 8.25% (based on fixed charge coverage ratio).

The balance sheet classification of the borrowings under the ~~revolving~~ loan ~~credit facility~~facilities has been determined in accordance with ASC 470, Debt.

~~(16) INCOME TAXES~~

~~Valuation Allowance~~

~~Under ASC Topic 740,~~ ~~Accounting for Income Taxes~~, we must periodically evaluate deferred tax assets to determine if it is more-likely-than-not that the future tax benefits will be realized. If the negative evidence outweighs the positive, a valuation allowance must be recognized to reduce the net carrying amount of the deferred tax assets to the amount more-likely-than-not to be realized.

Evaluating the need for, and amount of, a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all available evidence on a jurisdiction-by-jurisdiction basis. Such judgments require us to interpret existing tax law and other published guidance as applied to our circumstances. As part of this assessment, we consider both positive and negative evidence. The weight given to the potential effect of positive and negative evidence must be commensurate with the extent to which the strength of the evidence can be objectively verified. We generally consider the following, but are not limited to, objectively verified evidence to determine the likelihood of realization of the deferred tax assets:

•Our current financial position and our historical results of operations for recent years. We generally consider cumulative pre-tax losses in the three-year period ending with the current quarter or a projected three-year cumulative loss position within the next 12 months following the current quarter to be significant negative evidence.

•~~A pattern of objectively-measured historical and current financial reporting loss trend is heavily weighted as a source of negative evidence.~~

•Sources of taxable income of the appropriate character. Future realization of deferred tax assets is dependent on projected taxable income of the appropriate character. Future reversals of existing temporary differences are heavily weighted sources of objectively verifiable evidence. Projections of future taxable income exclusive of reversing temporary differences are a source of positive evidence only when the projections are combined with a history of recent profits and current financial trends and can be reasonably estimated.

•~~Carry-back and carry-forward periods available. The carry-back and carry-forward periods permitted under the tax law are objectively verified evidence.~~

•Tax planning strategies. Tax planning strategies can be, depending on their nature, heavily-weighted sources of objectively verifiable positive evidence when the strategies are available and can be reasonably executed. We consider tax planning strategies only if they are feasible and justifiable considering our

~~Table of Contents~~

~~current operations and our strategic plan. Tax planning strategies, if executed, may accelerate the recovery of a deferred tax asset so the tax benefit of the deferred tax asset can be carried back.~~

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. In the first quarter of fiscal 2023, a significant new piece of objective negative evidence evaluated was the third year of cumulative losses projected within the next twelve months. Such objective evidence limits our ability to consider other subjective evidence, such as our projections for future growth.

Based on this evaluation in the first quarter of fiscal 2023, Management concluded that it was no longer more likely than not that the tax benefits from the existing U.S deferred tax assets would be realized. Management sustains the same position in the current quarter hence we continue to recognize a valuation allowance to reduce its U.S deferred tax assets to an anticipated realizable value. We recognized a $3.6 million and a $17.8 million valuation allowance in the three and six months ended September 30, 2022, respectively, against our domestic uncovered net deferred tax assets.

~~Unrecognized Tax Benefits~~

We recognize a tax benefit from uncertain tax positions in the financial statements only when it is more likely than not the position will be sustained upon examination by relevant tax authorities. We also recognize interest and penalties related to income tax matters in Income tax expense.

In September 2022, we effectively completed a tax deregistration of a foreign entity that was part of our former Commercial business. We had $0.1 million of unrecognized tax benefits from an uncertain tax position outstanding related to this foreign entity. Further we had a $2.0 million cumulative liability for interest and penalties associated with the uncertain tax position. As a result of the completion of the tax deregistration, we released this $2.1 million of corresponding liability ~~as a component of income taxes from discontinued operations in the second quarter of fiscal 2023.~~

~~(17)~~(19) COMMITMENTS AND CONTINGENCIES

Operating leases

We lease property and equipment under non-cancellable operating leases which, in the aggregate, extend through 2029. Many of these leases contain renewal options and provide for rent escalations and payment of real estate taxes, maintenance, insurance and certain other operating expenses of the properties.

For additional information related to leases, seesee Note 911 Leases.

Guarantees, Commitments and Off-Balance Sheet Arrangements

As of September 30, ~~2022,~~2023, we had standby letters of credit of ~~$0.9~~$2.1 million.

We have long lead times for inventory purchases and, therefore, must secure factory capacity from our vendors in advance. As of September 30, ~~2022,~~2023, we had approximately ~~$25.3~~$20.7 million, compared to ~~$39.8~~$12.1 million as of March 31, ~~2022~~2023, in non-cancellable market-based purchase obligations, primarily to secure additional factory capacity for inventory purchases in the next twelve months. ~~The decrease in purchase obligations was primarily due to having received much of the inventory we have ordered for the season.~~ 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~~BowFlex 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.

Table of Contents

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

~~Table of Contents~~

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 30, ~~2022.~~2023.

Legal Matters

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.

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, ~~other than as discussed below,~~ we are unable to estimate the possible loss or range of loss at this time.

During the second quarter of fiscal 2022, we recorded a $4.7 million loss contingency related to a legal settlement involving a class action lawsuit related to advertisement of our treadmills. The settlement included damages, a one-year free membership to ~~JRNY~~®, and administrative fees and was included as a component of General and administrative on our Condensed Consolidated Statements of Operations. We paid the settlement damages and related administrative fees during the second fiscal quarter of fiscal 2023.

2122

Table of Contents

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 fiscal year ended March 31, ~~2022~~2023 (the ~~“2022~~“2023 Form 10-K”). All references to the second ~~quarters~~quarter and six-months ended of fiscal ~~2023~~2024 and fiscal ~~2022~~2023 mean for the three and six-month periods ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Unless the context otherwise requires, ~~“Nautilus,~~“BowFlex,” “we,” “us” and “our” refer to ~~Nautilus,~~BowFlex Inc. and its subsidiaries. Unless indicated otherwise, all information regarding our operating results pertains to our continuing operations.

Cautionary Notice About 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 ~~continue~~ 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 ~~2022~~2023 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.

Overview

We empower healthier living through individualized connected fitness experiences and are committed to building 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 a 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~~BowFlex®, Schwinn®, JRNY®and previously the Nautilus® brand. Consistent with our North Star strategy, in fiscal 2024 we sold the Nautilus®. brand trademark assets and related licenses, which we view as non-core assets. Relatedly, on October 19, 2023, we issued a press release announcing that, effective November 1, 2023, the Company's corporate name was changing to “BowFlex Inc.” and the Company's common stock was going to be trading on the New York Stock Exchange under the ticker symbol “BFX.”

Table of Contents

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.

~~Table of Contents~~

Our results for the three and six-months ended September 30, ~~2022, are~~2023 were driven by the actions outlined in our North Star strategy. The five strategic pillars of our North Star strategy are: (1) ~~Adopt~~adopt a consumer first mindset; (2) ~~Scale~~scale a differentiated digital offering; (3) ~~Focus~~focus investments on core businesses; (4) ~~Evolve~~evolve supply chain to be a strategic advantage; and (5) ~~Build~~build organizational capabilities to win by unleashing the power of our team. We ~~intend to leverage our many strengths to transform into~~have made strong progress on all these pillars over the past two years and we believe that we have set the foundation for becoming a ~~company that empowers healthier living through individualized~~leader in connected fitness ~~experiences.~~ by leveraging our equipment business and scaling a differentiated offering.

Our transformation will ~~properly leverage~~build on our leading brands, products, innovation, distribution and digital ~~assets~~assets. Our operating model is a strategic advantage. Our asset-light manufacturing, diversified product portfolio, omni-channel distribution and variable cost structure, which enables tight management of margin, operating expenses and inventory levels, is a model built to flex with variability in market conditions.

The profound and enduring shift in consumer fitness habits post-pandemic toward at-home workouts continues to enhance our long-term opportunities. We believe this is a long-term shift and we are well-positioned to take advantage of this opportunity.

To weather the macro-economic and retail challenges that we currently face, we are staying grounded in our mission and unwavering dedication to build a healthier world, one person at a time.

~~On September 26, 2022, we announced the launch~~ We also remain steadfast in our strategy to provide consumers a broad variety of superior products at a range of price points via our ~~comprehensive review of strategic alternatives~~omni-channel distribution model. We continue to ~~identify opportunities to accelerate~~enhance our ~~digital transformation under~~product portfolio with our ~~previously announced North Star plan and enhance shareholder value. That process continues, but we have not set a timetable for the conclusion of the process and there can be no assurance~~differentiated JRNY® connected fitness offering. We believe that the ~~review will result in any transaction or other strategic change.~~

~~At the center~~advantages associated with a broad assortment of ~~health~~products and well-being is fitness and the market has so far behaved largely as we expected. The market size more than doubled over the past 2 years, is regulating from its peak with more normal seasonality, and we expect will settle at a “new normal” significantly above pre-pandemic levels (but below the pandemic peak) based on an ongoing evolution in consumers’ workouts and workplace habits. As a resultomni-channel distribution model allow us to offset areas of these changed habits and sentiments, we continue to believe much of the industry growth opportunity will remain at elevated levels relative to pre-pandemic periods. This results in stronger opportunity for our industry and Nautilus.

For fiscal 2023, we expect to return to a more typical pre-pandemic seasonality, with the second half of the fiscal year contributing more of the full year's revenue. Additionally, to gauge sales growth and progress against more "normalized," or pre-pandemic results, we will rely more heavily on measuring performance of fiscal 2023 sales growth versus the pre-pandemic twelve-month period ended March 31, 2020 ("fiscal 2020") to guide business strategy, rather than measuring performance against the atypical, outsized results that occurred during the pandemic.weakness.

Comparison for the Three-Months Ended September 30, ~~2022~~2023 to the Three-Months Ended September 30, ~~2021~~2022

•Net sales were ~~$65.5~~$48.7 million, compared to ~~$138.0~~$65.5 million, a decline of ~~52.6%~~25.7% versus last year. ~~Net sales are up 24%, or 7% Compound Annual Growth Rate ("CAGR"), when compared to the same period in fiscal 2020, excluding sales related to the Octane brand, which was sold in October 2020.~~ The sales decline versus last year iswas driven primarily by ~~the return to pre-pandemic seasonal demand and pre-pandemic sales discounting practices, as our typical sales discounts were largely unnecessary during the pandemic period.~~lower customer demand.

•Net sales of our Direct segment decreased by ~~$13.4~~$3.7 million, or ~~35.3%~~15.3%, for the three-months ended September 30, ~~2022,~~2023, compared to the three-months ended September 30, ~~2021. Net sales were up 51%, or a 15% CAGR, compared to the same period in fiscal 2020.~~2022. The net sales decrease compared to last year was primarily driven by ~~the return to pre-pandemic seasonal demand and pre-pandemic sales discounting practices.~~lower customer demand.

•Net sales of our Retail segment decreased by ~~$59.2~~$12.1 million, or ~~59.8%~~30.4%, for the three-months ended September 30, ~~2022,~~2023, compared to the three-months ended September 30, ~~2021. Net sales were up 11%, or a 3% CAGR, compared to the same period in fiscal 2020, excluding sales related to the Octane brand, which was sold in 2020,~~2022. The decrease in net sales compared to last year was primarily driven by lower ~~cardio sales as retailers work through higher-than-normal inventory levels.~~demand from retailers.

•Royalty income for the three-months ended September 30, ~~2022 increased~~2023 decreased by ~~$0.1~~$0.9 million compared to the three-months ended September 30, ~~2021.~~2022. The decrease in Royalty income was primarily due to the sale of the Nautilus® brand trademarks and related royalty licenses.

•Gross profit was ~~$11.5~~$10.0 million, compared to ~~$42.1~~$11.5 million last ~~year.~~year, a decrease of 13.1%. Gross profit ~~margins were 17.5%~~margin was 20.5% compared to ~~30.5%~~17.5% last year. The ~~13.0~~3 ppt ~~decrease~~increase in gross ~~margins~~profit margin was primarily due to ~~increased discounting (-4~~lower landed product costs (+9 ppts)~~, unfavorable logistics overhead absorption (-4 ppts), increased investments in JRNY~~® ~~(-3 ppts),~~ and a ~~prior year release of a special warranty reserve (-2 ppts), and an increase~~decrease in inventory adjustments ~~(-2~~(+2 ppts), partially offset by ~~improvement in~~unfavorable absorption of JRNY COGs (-4 ppts), increased discounting (-3 ppts), and higher other costs ~~(+2 ppts)~~(-1 ppt).

~~Table of Contents~~

•Operating expenses were ~~$25.8~~$21.2 million compared to ~~$44.0~~$25.8 million last year. The decrease of ~~$18.2~~$4.6 million, or ~~41.4%~~18.0%, was primarily due to ~~$9.3~~a $3.0 million ~~lower~~decrease in personnel expenses, a $0.8 million decrease in media spending, ~~a $4.7 million prior year loss contingency related to a legal settlement, a decrease of $3.0 million due to other cost savings,~~ and a ~~$2.7~~$0.3 million decrease in other variable selling and marketing expenses due to decreased ~~sales, offset by a $1.5 million increase in~~ ~~JRNY~~® ~~investments.~~sales. Total advertising expenses were ~~$3.1~~$2.3 million this year versus ~~$12.4~~$3.1 million last year.

Table of Contents

•Operating loss was ~~$14.3~~$11.2 million ~~or a negative 21.8% operating margin,~~ compared to an operating loss of ~~$2.0~~$14.3 million last year, primarily driven by lower operating expenses and higher gross profit.

•Income tax expense was ~~$0.2~~$0.5 million this year compared to ~~$2.2~~$0.2 million last year. The increase in income tax expense ~~this quarter~~compared to last year was primarily ~~a result of a U.S. deferred tax asset valuation allowance in the amount of $3.6 million recorded in the second quarter of fiscal 2023.~~driven by higher foreign related taxes.

•Loss from continuing operations was ~~$15.3~~$12.5 million, or ~~$0.48~~$0.35 per diluted share, compared to ~~$4.6~~a loss of $15.3 million, or ~~$0.15~~$0.48 per diluted share, last year.

•Net loss was $12.5 million, or $0.35 per diluted share, compared to a net loss of $13.2 million, or $0.41 per diluted share, ~~compared to net loss of $4.6 million or $0.15 per diluted share,~~ last year.

Comparison for the Six-Months Ended September 30, ~~2022~~2023 to the Six-Months Ended September 30, ~~2021~~2022

•Net sales were ~~$120.3~~$90.4 million, compared to ~~$322.6~~$120.3 million, a decline of ~~62.7%~~24.8% versus last year. ~~Net sales are up 17%, or 5% CAGR, when compared to the same period in fiscal 2020, excluding sales related to the Octane brand, which was sold in October 2020.~~ The net sales decline versus last year iswas driven primarily by ~~the return to pre-pandemic seasonal demand and pre-pandemic sales discounting practices, as our typical sales discounts were largely unnecessary during the pandemic period.~~lower customer demand.

•Net sales of our Direct segment decreased by ~~$50.3~~$8.4 million, or ~~49.7%~~16.4%, for the six-months ended September 30, ~~2022,~~2023, compared to the ~~six-month period~~six-months ended September 30, ~~2021. Net sales were up 38% or a 11% CAGR, compared to the same period in fiscal 2020.~~2022. The net sales decrease compared to last year iswas primarily driven by ~~the return to pre-pandemic seasonal demand and pre-pandemic sales discounting practices.~~lower customer demand.

•Net sales of our Retail segment decreased by ~~$152.3~~$20.1 million, or ~~69.3%~~29.8%, for the six-months ended September 30, ~~2022,~~2023, compared to the ~~six-month period~~six-months ended September 30, ~~2021. Net sales were up 5%, or a 2% CAGR, compared to the same period in fiscal 2020, excluding sales related to the Octane brand, which was sold in 2020.~~2022. The net sales decrease compared to last year iswas primarily driven by lower ~~cardio sales and higher sales discounting as retailers work through higher-than-normal inventory levels.~~demand from retailers.

•Royalty income for the six-months ended September 30, ~~2022 increased~~2023 decreased by ~~$0.3~~$1.4 million compared to the ~~six-month period~~six-months ended September 30, ~~2021.~~2022. The decrease in Royalty income was primarily due to the sale of the Nautilus® brand trademarks and related royalty licenses.

•Gross profit was ~~$18.4~~$18.6 million, compared to ~~$97.6~~$18.4 million last year. Gross profit ~~margins were 15.3%~~margin was 20.6% compared to ~~30.3%~~15.3% last year. The ~~15.0~~5 ppt ~~decrease~~increase in gross ~~margins~~profit margin was primarily due to ~~increased discounting (-7~~lower landed product costs (+10 ppts), ~~unfavorable~~a decrease in inventory adjustments (+2 ppts), and favorable logistics overhead absorption ~~(-6 ppts), increased investments in JRNY~~® ~~(-3 ppts), an increase in inventory adjustments (-2 ppts)~~(+1 ppt), partially offset by ~~improvements in~~unfavorable absorption of JRNY COGS (-5 ppts), increased discounting (-1 ppt), increased outbound freight (-1 ppt), and higher other costs ~~(+3 ppts)~~(-1 ppt).

•Operating expenses were ~~$83.9~~$40.3 million compared to ~~$81.6~~$83.9 million last year. The ~~increase~~decrease of ~~$2.3~~$43.6 million, or ~~2.8%~~51.9%, was primarily due to a prior year goodwill and intangible impairment charge of $27.0 million, ~~and~~an $8.4 million decrease in personnel expenses, a ~~$5.0 million increase in~~ ~~JRNY~~® ~~investments, offset by a $15.2~~$5.4 million decrease in media spending, a ~~$5.2~~$1.1 million decrease in other variable selling and marketing expenses due to decreased sales, ~~a decrease of $4.6 million due to savings in other operating expenses,~~ and a ~~$4.7~~$0.4 million ~~prior year loss contingency for a~~decrease in legal ~~settlement.~~expenses. Total advertising expenses were ~~$8.8~~$3.4 million versus ~~$24.0~~$8.8 million last year.

~~Table of Contents~~

•Operating loss was ~~$65.5~~$21.7 million or a negative ~~54.5%~~24.0% operating margin, compared to an operating ~~income~~loss of ~~$15.9~~$65.5 million last year, primarily driven by lower operating expenses during the period as well as a prior year goodwill and intangible impairment charge of $27.0 ~~million and lower gross profit associated with lower sales demand during the period.~~million.

•Income tax expense was ~~$8.3~~$1.0 million this year compared to ~~$5.7~~$8.3 million last year. ~~The income tax~~Tax expense in the current period was primarily driven by foreign related taxes and reserves related to an income tax audit. The decrease in income tax expense compared to last year was primarily as a result of athe U.S. deferred tax asset valuation allowance recognized in ~~the amount of $17.8 million recorded against our domestic uncovered net deferred tax assets to reduce our deferred tax assets to an anticipated realizable value.~~fiscal 2023.

•Loss from continuing operations was ~~$75.5~~$17.5 million, or ~~$2.40~~$0.51 per diluted share, compared to ~~income~~a loss of ~~$9.4~~$75.5 million, or ~~$0.29~~$2.40 per diluted share, last year.

•Net loss was $17.5 million, or $0.51 per diluted share, compared to a net loss of $73.4 million or $2.33 per diluted share, ~~compared to net income of $9.3 million or $0.29 per diluted share,~~ last year.

North Star Strategy Update

Table of Contents

JRNY® Digital Platform

•~~Nautilus~~BowFlex continues to enhance ~~the JRNY~~® ~~platform through many unique~~and refine existing JRNY® features that are popular with customers, including ~~the expansion of~~its personalized recommendations and differentiated, ~~visual connected-fitness experiences for JRNY~~® ~~Members.~~adaptive workouts.

•As of September 30, ~~2022, members~~2023, Members of ~~JRNY~~®~~, Nautilus’ personalized connected fitness platform,~~JRNY® reached ~~396,000,~~596,000, representing approximately ~~116%~~51% growth versus the same quarter last year. Of these ~~members, 142,000~~Members,143,000 were Subscribers, representing approximately ~~258% growth~~1% increase over the same ~~period. We define~~ ~~JRNY~~®period last year. BowFlex defines JRNY® Members as all individuals who have a ~~JRNY~~® JRNY® account and/or subscription, which includes Subscribers, their respective associated users, and users who consume free content. ~~We define Subscribers as~~A Subscriber is a person or household who paid for a ~~Subscription, are~~subscription, is in a trial subscription period, or ~~have~~has requested a "pause"' to their ~~subscriptions~~subscription for up to three months.

•~~Additionally, we made great strides over~~Earlier this year, BowFlex introduced the ~~last two years, expanding~~JRNY® app with Motion Tracking offering personalized coaching and feedback, automatic rep tracking, form guidance, and adaptive weight targets to all JRNY® memberships. Accessible via iOS or Android tablets and mobile devices, these embedded features are available to all JRNY® members with their existing membership and without the ~~number~~need for additional equipment. Leveraging proprietary technology and machine learning expertise from the Company's acquisition of ~~products featuring~~ ~~JRNY~~® ~~connectivity. In fiscal 2022, approximately 80% of total units sold were~~ ~~JRNY~~® ~~compatible, compared~~VAY, these new features bring enhanced value within the JRNY® platform, which BowFlex expects to ~~only 22%~~drive JRNY® membership growth. We have seen early success, as workouts with motion tracking are chosen by consumers 70% more frequently than other workouts in the ~~pre-pandemic fiscal 2020. The trend of approximately 80% of total units sold being~~ ~~JRNY~~® ~~compatible continued in the first two quarters of fiscal 2023.~~JRNY® platform.

•InA JRNY® Mobile subscription, priced at $11.99 per month or $99 per year, is designed for Members who like using a mobile device with a compatible BowFlex® or Schwinn® connectable product. Such Members also benefit from a wide range of whole body workouts that are versatile and can be used both at home and on the last two months, we’ve expanded our cardio offerings to include the Bowflex® BXT8J treadmill, along with the Schwinn® 190 upright bike and 290 recumbent bike. Prioritizing quality and compelling features at an affordable price point, all three products offer high-performance cardio combined with digital connectivity to the ~~JRNY~~® ~~adaptive fitness platform, paired via a user’s device~~.go.

•~~Nautilus' integration~~A JRNY® All-Access subscription, priced at $19.99 per month or $149 per year, expands a Member's usage to any of ~~VAY's motion-tracking capabilities into~~ ~~JRNY~~® ~~will further advance and accelerate personalized strength workout options, including the addition of rep counting and form coaching for~~ ~~SelectTech~~®~~users, which we believe will drive~~ ~~JRNY~~® ~~membership growth during the back-half of fiscal 2023.~~our BowFlex® built-in touchscreen cardio products.

Key Trends and Drivers of Performance

The following forward-looking statements reflect our full fiscal year ~~2023~~2024 expectations as of November ~~9, 2022,~~14, 2023, and are subject to risks and ~~uncertainties~~.uncertainties.

~~Second Half and~~Full Year Fiscal ~~2023~~2024

BowFlex is adjusting full year fiscal 2024 guidance.

•~~Given the impact of elevated inventory levels at our retail partners, we expect the second half of fiscal 2023 to represent approximately 65% of~~The Company now expects full year ~~sales, slightly higher than pre-pandemic second half seasonality~~net revenue to be in the range of ~~approximately 60%.~~$215 million to $240 million, compared to previous guidance of a range of $270 million to $300 million.

•~~Gross margins for the second half of the~~The Company now expects full year ~~are expected~~royalty revenue to be ~~in the range~~$1.1 million, compared to previous guidance of 24% to 27%. Sequential improvements in gross margin are expected to be driven by lower in-bound freight, the elimination of detention and demurrage fees, and the reduction in our logistics facilities footprint. The company closed one of its

~~Table of Contents~~

~~distribution centers at lease expiration in October of 2022 and will not be renewing the leases of some storage locations.~~

•~~We continue to expect JRNY~~® ~~members to exceed 500,000 at March 31, 2023.~~$1.8 million.

•~~We expect inventory levels~~The Company now expects to ~~continue~~cross 650,000 JRNY® Members by March 31, 2024, compared to ~~decrease over the next six months.~~

previous guidance of targeting 625,000 JRNY® Members by March 31, 2024.

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 created a heightened need for home-fitness products at an unprecedented rate and as the pandemic lessened there was a return to a more normal seasonality. We cannot predict with certainty the longer-term impacts of the COVID-19 pandemic and the change to consumer habits and sentiments and therefore, the impact on our results of operations is uncertain.

Our gross margins are being impacted by, among other things:

•Increased product costs, primarily driven by our increasing use of more expensive components in our products, which now include our connected fitness JRNY® platform.

Table of Contents

•Fluctuations in the availability, and as a result the costs, of materials used to manufacture our products.

•Tariffs and expedited shipping and transportation costs.

•Fluctuations in cost associated with the acquisition or license of products and technologies, product warranty claims, fuel, foreign currency exchange rates, and changes in costs of other distribution or manufacturing-related services.

•~~Costs relating to the addition of a new distribution facility in Southern California prior to the anticipated exit from our Portland distribution facility.~~

•The efficiency and effectiveness of our organization and operations.

•~~A return to product discounting practices in place prior to the pandemic, which were temporarily suspended in part during the pandemic.~~

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, 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.

Forecasting for our business has proven to be challenging. Despite solid demand for our products as demonstrated in our Direct segment, headwinds in Retail re-orders persist as our retail partners continue to act conservatively in light of uncertainty in the economic environment. We have had significant difficulty in forecasting near-term demand and, as a result, our expected near-term operating performance. We are taking decisive actions to reduce our costs and realign our business with the short-term revenue outlook. See "Risk Factors - Strategic and Operational Risks - Our operating results could be adversely affected if we are unable to accurately forecast consumer demand for our products and services and adequately manage our inventory" in our 2023 Form 10-K.

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~~Risk Factors located at Part I, Item 1A of our ~~2022~~2023 Form ~~10-K as supplemented by our quarterly reports on Form 10-Q.~~10-K.

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 as of December 31, 2012. ~~Although there was no revenue related to the former Commercial business in the~~In fiscal ~~2022 or year-to-date fiscal~~ 2023, ~~periods,~~ we continued to incur product liability and other legal expenses associated with product previously sold into the Commercial channel.

In the second quarter of fiscal 2023, we completed the tax deregistration of a foreign entity which was part of the discontinued operations. As a result, the previously unrecognized tax benefit and associated accrued interest and

~~Table of Contents~~

penalties in the amount of $2.1 million was released and recorded as a component of income taxes from discontinued operations in the ~~quarter.~~

second quarter of fiscal 2023. Year to date expenses related to discontinued operations were immaterial.

Table of Contents

RESULTS OF OPERATIONS

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


		Three-Months Ended September 30,				Change					Three-Months Ended September 30,				Change
		2022		2021		$		%			2023		2022		$		%
Net sales	Net sales	$	65,458	$	137,959	$	(72,501)	(52.6)	%	Net sales	$	48,659	$	65,458	$	(16,799)	(25.7)	%
Cost of sales	Cost of sales	54,000		95,906		(41,906)		(43.7)	%	Cost of sales	38,705		54,000		(15,295)		(28.3)	%
Gross profit	Gross profit	11,458		42,053		(30,595)		(72.8)	%	Gross profit	9,954		11,458		(1,504)		(13.1)	%
Operating expenses:	Operating expenses:									Operating expenses:
Selling and marketing	Selling and marketing	9,400		21,939		(12,539)		(57.2)	%	Selling and marketing	7,023		9,400		(2,377)		(25.3)	%
General and administrative	General and administrative	10,995		16,376		(5,381)		(32.9)	%	General and administrative	8,980		10,995		(2,015)		(18.3)	%
Research and development	Research and development	5,405		5,688		(283)		(5.0)	%	Research and development	3,836		5,405		(1,569)		(29.0)	%
Restructuring and exit charges										Restructuring and exit charges	1,323		—		1,323		NM

Total operating expenses	Total operating expenses	25,800		44,003		(18,203)		(41.4)	%	Total operating expenses	21,162		25,800		(4,638)		(18.0)	%
Operating loss	Operating loss	(14,342)		(1,950)		(12,392)		635.5	%	Operating loss	(11,208)		(14,342)		3,134		(21.9)	%
Other expense:	Other expense:									Other expense:
Interest income	Interest income	4		12		(8)				Interest income	3		4		(1)
Interest expense	Interest expense	(595)		(481)		(114)				Interest expense	(1,137)		(595)		(542)
Other, net	Other, net	(224)		94		(318)				Other, net	251		(224)		475
Total other expense, net	Total other expense, net	(815)		(375)		(440)				Total other expense, net	(883)		(815)		(68)
Loss from continuing operations before income taxes	Loss from continuing operations before income taxes	(15,157)		(2,325)		(12,832)				Loss from continuing operations before income taxes	(12,091)		(15,157)		3,066
Income tax expense	Income tax expense	156		2,242		(2,086)				Income tax expense	452		156		296
Loss from continuing operations	Loss from continuing operations	(15,313)		(4,567)		(10,746)				Loss from continuing operations	(12,543)		(15,313)		2,770
Income (loss) from discontinued operations, net of taxes		2,110		(35)		2,145
Income from discontinued operations										Income from discontinued operations	—		2,110		(2,110)
Net loss	Net loss	$	(13,203)	$	(4,602)	$	(8,601)			Net loss	$	(12,543)	$	(13,203)	$	660
NM = Not meaningful										NM = Not meaningful

Table of Contents

Six-Months Ended
September 30, Change
2022 2021 $ %
Net sales $ 120,275 $ 322,552 $ (202,277) (62.7) %
Cost of sales 101,859 224,994 (123,135) (54.7) %
Gross profit 18,416 97,558 (79,142) (81.1) %
Operating expenses:
Selling and marketing 22,290 43,239 (20,949) (48.4) %
General and administrative 23,458 27,899 (4,441) (15.9) %
Research and development 11,229 10,503 726 6.9 %
Goodwill and intangible impairment charge 26,965 — 26,965 NM
Total operating expenses 83,942 81,641 2,301 2.8 %
Operating (loss) income (65,526) 15,917 (81,443) (511.7) %
Other expense:
Interest income 5 33 (28)
Interest expense (971) (795) (176)
Other, net (739) (26) (713)
Total other expense, net (1,705) (788) (917)
(Loss) income from continuing operations before income taxes (67,231) 15,129 (82,360)
Income tax expense 8,251 5,680 2,571
(Loss) income from continuing operations (75,482) 9,449 (84,931)
Income (loss) from discontinued operations, net of taxes 2,102 (167) 2,269
Net (loss) income $ (73,380) $ 9,282 $ (82,662)
NM = Not meaningful


	Six-Months Ended September 30,				Change
	2023		2022		$		%
Net sales	$	90,409	$	120,275	$	(29,866)	(24.8)	%
Cost of sales	71,805		101,859		(30,054)		(29.5)	%
Gross profit	18,604		18,416		188		1.0	%
Operating expenses:
Selling and marketing	13,024		22,290		(9,266)		(41.6)	%
General and administrative	17,874		23,458		(5,584)		(23.8)	%
Research and development	7,684		11,229		(3,545)		(31.6)	%
Restructuring and exit charges	1,763		—		1,763		NM
Goodwill and intangible impairment charge	—		26,965		(26,965)		NM

Total operating expenses	40,345		83,942		(43,597)		(51.9)	%
Operating loss	(21,741)		(65,526)		43,785		(66.8)	%
Other income (expense):
Interest income	17		5		12
Interest expense	(3,604)		(971)		(2,633)
Other, net	8,818		(739)		9,557
Total other income (expense), net	5,231		(1,705)		6,936
Loss from continuing operations before income taxes	(16,510)		(67,231)		50,721
Income tax expense	957		8,251		(7,294)
Loss from continuing operations	(17,467)		(75,482)		58,015
Income from discontinued operations, net of taxes	—		2,102		(2,102)
Net loss	$	(17,467)	$	(73,380)	$	55,913
NM = Not meaningful

Table of Contents

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


		Three-Months Ended September 30,						Change						Three-Months Ended September 30,						Change
		2022			2021			$			%			2023			2022			$			%
Net sales:	Net sales:												Net sales:
Direct net sales:	Direct net sales:												Direct net sales:
Cardio products(1)	Cardio products(1)	$	16,493		$	22,406		$	(5,913)		(26.4)	%	Cardio products(1)	$	11,561		$	16,493		$	(4,932)		(29.9)	%
Strength products(2)	Strength products(2)	7,987			15,447			(7,460)			(48.3)	%	Strength products(2)	9,176			7,987			1,189			14.9	%
Direct	Direct	24,480			37,853			(13,373)			(35.3)	%	Direct	20,737			24,480			(3,743)			(15.3)	%

Retail net sales:	Retail net sales:												Retail net sales:
Cardio products(1)	Cardio products(1)	$	14,554		$	58,848		$	(44,294)		(75.3)	%	Cardio products(1)	$	11,002		$	14,554		$	(3,552)		(24.4)	%
Strength products(2)	Strength products(2)	25,351			40,305			(14,954)			(37.1)	%	Strength products(2)	16,778			25,351			(8,573)			(33.8)	%
Retail	Retail	39,905			99,153			(59,248)			(59.8)	%	Retail	27,780			39,905			(12,125)			(30.4)	%

Royalty	Royalty	1,073			953			120			12.6	%	Royalty	142			1,073			(931)			(86.8)	%
		$	65,458		$	137,959		$	(72,501)		(52.6)	%		$	48,659		$	65,458		$	(16,799)		(25.7)	%

Cost of sales:	Cost of sales:												Cost of sales:
Direct	Direct	$	21,379		$	23,877		$	(2,498)		(10.5)	%	Direct	$	17,951		$	21,379		$	(3,428)		(16.0)	%
Retail	Retail	32,621			72,029			(39,408)			(54.7)	%	Retail	20,754			32,621			(11,867)			(36.4)	%

		$	54,000		$	95,906		$	(41,906)		(43.7)	%		$	38,705		$	54,000		$	(15,295)		(28.3)	%

Gross profit:	Gross profit:												Gross profit:
Direct	Direct	$	3,101		$	13,976		$	(10,875)		(77.8)	%	Direct	$	2,786		$	3,101		$	(315)		(10.2)	%
Retail	Retail	7,284			27,124			(19,840)			(73.1)	%	Retail	7,026			7,284			(258)			(3.5)	%
Royalty	Royalty	1,073			953			120			12.6	%	Royalty	142			1,073			(931)			(86.8)	%
		$	11,458		$	42,053		$	(30,595)		(72.8)	%		$	9,954		$	11,458		$	(1,504)		(13.1)	%
Gross profit margin:	Gross profit margin:												Gross profit margin:
Direct	Direct	12.7		%	36.9		%	(24)		ppts			Direct	13.4		%	12.7		%	70		basis points
Retail	Retail	18.3		%	27.4		%	(9)		ppts			Retail	25.3		%	18.3		%	700		basis points

Contribution:	Contribution:												Contribution:
Direct	Direct	$	(7,887)		$	(1,835)		$	(6,052)		329.8	%	Direct	$	(7,668)		$	(7,887)		$	219		(2.8)	%
Retail	Retail	966			18,741			(17,775)			(94.8)	%	Retail	3,663			966			2,697			279.2	%

Contribution rate:	Contribution rate:												Contribution rate:
Direct	Direct	(32.2)		%	(4.8)		%	(27)		ppts			Direct	(37.0)		%	(32.2)		%	(480)		basis points
Retail	Retail	2.4		%	18.9		%	(17)		ppts			Retail	13.2		%	2.4		%	1,080		basis points

(1) Cardio products include: connected-fitness bikes, the BowFlex® C6, VeloCore®, Schwinn® IC4, Max Trainer®,connected-fitness treadmills, other exercise bikes, ellipticals andsubscription services (applicable to Direct only).

(2) Strength products include: Bowflex® Home Gyms, BowFlex® SelectTech® dumbbells, kettlebell and barbell weights, and accessories.

Table of Contents


	Six-Months Ended September 30,						Change
	2023			2022			$			%
Net sales:
Direct net sales:
Cardio products(1)	$	24,079		$	33,626		$	(9,547)		(28.4)	%
Strength products(2)	18,503			17,331			1,172			6.8	%
Direct	42,582			50,957			(8,375)			(16.4)	%

Retail net sales:
Cardio products(1)	$	20,323		$	26,397		$	(6,074)		(23.0)	%
Strength products(2)	26,934			40,951			(14,017)			(34.2)	%
Retail	47,257			67,348			(20,091)			(29.8)	%



Royalty	570			1,970			(1,400)			(71.1)	%
	$	90,409		$	120,275		$	(29,866)		(24.8)	%

Cost of sales:
Direct	$	36,267		$	43,293		$	(7,026)		(16.2)	%
Retail	35,538			58,566			(23,028)			(39.3)	%

	$	71,805		$	101,859		$	(30,054)		(29.5)	%

Gross profit:
Direct	$	6,315		$	7,665		$	(1,350)		(17.6)	%
Retail	11,719			8,781			2,938			33.5	%
Royalty	570			1,970			(1,400)			(71.1)	%
	$	18,604		$	18,416		$	188		1.0	%
Gross profit margin:
Direct	14.8		%	15.0		%	(20)		basis points
Retail	24.8		%	13.0		%	1,180		basis points

Contribution:
Direct	$	(12,376)		$	(17,780)		$	5,404		(30.4)	%
Retail	4,045			(4,442)			8,487			(191.1)	%

Contribution rate:
Direct	(29.1)		%	(34.9)		%	580		basis points
Retail	8.6		%	(6.6)		%	1,520		basis points

(1) Cardio products include: connected-fitness bikes, the BowFlex® C6, VeloCore®, Schwinn® IC4, Max Trainer®, connected-fitness treadmills, other exercise bikes, ellipticals and subscription services.

(2) Strength products include: Bowflex® Home Gyms, ~~Bowflex~~BowFlex® SelectTech® dumbbells, kettlebell and barbell weights, and accessories.

3031

Table of Contents

Six-Months Ended
September 30, Change
2022 2021 $ %
Net sales:
Direct net sales:
Cardio products(1)
$ 33,626 $ 53,836 $ (20,210) (37.5) %
Strength products(2)
17,331 47,413 (30,082) (63.4) %
Direct 50,957 101,249 (50,292) (49.7) %
Retail net sales:
Cardio products(1)
$ 26,397 $ 148,772 $ (122,375) (82.3) %
Strength products(2)
40,951 70,865 (29,914) (42.2) %
Retail 67,348 219,637 (152,289) (69.3) %
Royalty 1,970 1,666 304 18.2 %
$ 120,275 $ 322,552 $ (202,277) (62.7) %
Cost of sales:
Direct $ 43,293 $ 62,759 $ (19,466) (31.0) %
Retail 58,566 162,235 (103,669) (63.9) %
$ 101,859 $ 224,994 $ (123,135) (54.7) %
Gross profit:
Direct $ 7,665 $ 38,490 $ (30,825) (80.1) %
Retail 8,781 57,402 (48,621) (84.7) %
Royalty 1,970 1,666 304 18.2 %
$ 18,416 $ 97,558 $ (79,142) (81.1) %
Gross profit margin:
Direct 15.0 % 38.0 % (23) ppts
Retail 13.0 % 26.1 % (13) ppts
Contribution:
Direct $ (17,780) $ 4,924 $ (22,704) (461.1) %
Retail (4,442) 40,831 (45,273) (110.9) %
Contribution rate:
Direct (34.9) % 4.9 % (40) ppts
Retail (6.6) % 18.6 % (25) ppts

~~(1)~~ ~~Cardio products include: connected-fitness bikes, the Bowflex~~® ~~C6, VeloCore~~®~~, Schwinn~~® ~~IC4, Max Trainer~~®,~~connected-fitness treadmills, other exercise bikes, ellipticals andsubscription services.~~

~~(2)~~ ~~Strength products include: Bowflex~~® ~~Home Gyms, Bowflex~~® ~~SelectTech~~® ~~dumbbells, kettlebell and barbell weights, and accessories.~~

Sales and Gross Profit

Direct Segment

Comparison of Segment Results for the Three-Month Period Ended September 30, ~~2022~~2023 to the Three-Month Period Ended September 30, ~~2021~~2022

~~Table of Contents~~

~~Net~~Direct segment sales were ~~$24.5~~$20.7 million for the three-month period ended September 30, ~~2022,~~2023, compared to ~~$37.9~~$24.5 million, a decline of ~~35.3%~~15.3%, versus the same period in ~~2021, and up 51.1% compared to the same period in fiscal 2020. Net~~2022. The net sales decrease was primarily driven by ~~the return to pre-pandemic seasonal demand and pre-pandemic sales discounting practices.~~lower customer demand.

Cardio sales declined ~~26.4%~~29.9% versus the same period in ~~2021,~~2022. Lower Cardio sales this quarter versus last year were primarily driven by lower demand for Max Trainer® and ~~were up 32.7% compared to~~elliptical equipment. Strength product sales increased 14.9% versus the same period ~~in fiscal 2020. Lower cardio~~last year. Higher Strength sales this quarter were primarily driven by ~~lower bike demand. Strength product~~ sales ~~declined 48.3% versus the same period in 2021, and increased 112.1% compared to the same period in fiscal 2020. Lower strength sales this quarter were primarily driven by lower demand for SelectTech~~® ~~weights.~~of home gyms.

~~The Direct segment ended the quarter with $0.3 million of backlog as of September 30, 2022. This amount represents unfulfilled consumer orders net of current promotional programs and sales discounts.~~

Gross profit margin was ~~12.7%~~13.4% for the three-month period ended September 30, ~~2022~~2023 versus ~~36.9%~~12.7% for the same period in ~~2021. The 24.2~~2022. Gross profit margin improved by 1 ppt ~~decrease in gross margin was primarily driven by: increased discounting (-7~~because of gains from lower landed product costs (+7 ppts), ~~increased investments in JRNY~~® ~~(-5 ppts), a prior year release of a special warranty reserve (-4 ppts), unfavorable~~favorable logistics overhead absorption ~~(-4~~(+3 ppts), decrease in inventory adjustments (+2 ppts), lower outbound freight (+1 ppt), and lower other expenses (+1 ppt) and were almost entirely offset by unfavorable absorption of JRNY COGs (-9 ppts), and ~~increase in other costs~~increased discounting (-4 ppts). Gross profit was ~~$3.1~~$2.8 million, a decrease of ~~77.8%~~10.2% versus the same period in ~~2021.~~2022.

Segment contribution loss was ~~$7.9~~$7.7 million for the three-month period ended September 30, ~~2022,~~2023, or 37.0% of sales, compared to segment contribution loss of ~~$1.8~~$7.9 million, or 32.2% of sales, for the same period in 2022. The improvement in segment contribution loss was primarily driven by decreased media spend and lower operating expenses, partially offset by lower gross profit. Advertising expenses were $2.0 million compared to $2.6 million for the same period in 2021. The decline was primarily driven by lower gross profit, as explained above, offset by decreased media spend. Advertising expenses were $2.6 million compared to $6.8 million for the same period in 2021.2022.

Combined consumer credit approvals by our primary and secondary U.S. third-party financing providers for the second quarter of ~~2022~~fiscal 2023 were ~~50.8%~~53.9%, compared to ~~56.1%~~50.8% for the same period in ~~2021.~~2022. The ~~decrease~~increase in approvals reflects higher credit quality applications.

Retail Segment

Comparison of Segment Results for the Three-Month Period Ended September 30, ~~2022~~2023 to the Three-Month Period Ended September 30, ~~2021~~2022

~~Net~~Retail net segment sales for the three-month period ended September 30, ~~2022~~2023 were $27.8 million, compared to $39.9 million, ~~down 59.8%, from $99.2 million~~a decline of 30.4% for the same period in ~~2021. Net sales were up 10.6% compared to the same period in fiscal 2020, excluding sales related to the Octane brand.~~2022. Retail segment sales outside the United States and Canada were ~~down 80.0%~~up 41.0% versus ~~last year.~~the same period in 2022. The overall net sales decrease compared to last year iswas primarily driven by lower ~~cardio sales as retailers work through higher than normal inventory levels.~~demand from retailers.

Cardio sales for the three-month period ended September 30, ~~2022~~2023 decreased by ~~75.3%. Excluding sales related to Octane, cardio sales were down 45.7%~~24.4% compared to the same period ~~in fiscal 2020. Lower sales this quarter were primarily driven by lower bike demand. Strength product sales declined by 37.1% versus~~of last year. Lower Cardio sales this quarter were primarily driven by lower demand for ~~SelectTech® weights.~~bikes. Strength product sales declined by 33.8% versus last year. Lower Strength sales ~~were up 172.2% compared to the same period in fiscal 2020, led by the popular SelectTech® weights. Lower sales~~ this quarter versus last year were primarily driven by lower demand for ~~SelectTech®~~SelectTech® weights.

As of September 30, 2022, the Retail segment's backlog totaled $32.6 million. This amount represents customer orders for future shipments and are net of contractual rebates and consideration payable to applicable Retail customers.

Gross profit ~~margins were 18.3%~~margin was 25.3% for the three-month period ended September 30, ~~2022, down~~2023, up from ~~27.4%~~18.3% for the same period in ~~2021.~~2022. The ~~9.1~~7 ppt ~~decrease~~increase in gross profit margin was primarily due to ~~increase~~lower landed product costs (+10 ppts) and a decrease in inventory adjustments ~~(-4~~(+2 ppts), partially offset by increased discounting ~~(-3~~(-2 ppts), ~~and~~ unfavorable logistics overhead absorption ~~(-3 ppts)~~(-1 ppt), ~~partially offset by improvement~~and increases in outbound freight and other costs ~~(+1 ppt)~~(-2 ppts).Gross profit was ~~$7.3~~$7.0 million, a decrease of ~~73.1%~~3.5% versus the same period in ~~2021.~~2022.

Segment contribution ~~loss~~income for the three-month period ended September 30, ~~2022~~2023 was ~~$1.0~~$3.7 million, or ~~2.4%~~13.2% of sales, compared to segment contribution ~~income~~ of ~~$18.7~~$1.0 million, or ~~18.9%~~2.4% of sales for the same period in ~~2021,~~2022. The improvement was primarily driven by lower operating expenses, partially offset by lower gross ~~profit as explained above.~~profit.

Table of Contents

Royalty

~~Royalty~~

Royalty income ~~increased~~decreased by ~~$0.1~~$0.9 million, or ~~12.6%~~86.8%, to ~~$1.1~~$0.1 million for the three-month period ended September 30, ~~2022,~~2023, compared to the same period of ~~2021,~~2022, primarily due to the sale of the Nautilus® brand trademarks and related royalty ~~settlements.~~licenses.

Sales and Gross Profit

Direct Segment

Comparison of Segment Results for the Six-Month Period Ended September 30, ~~2022~~2023 to the Six-Month Period Ended September 30, ~~2021~~2022

~~Net~~Direct segment sales were ~~$51.0~~$42.6 million for the six-month period ended September 30, ~~2022,~~2023, compared to ~~$101.2~~$51.0 million, a decline of ~~49.7%~~16.4% versus the same period in ~~2021, and up 37.6% compared to the same period in fiscal 2020.~~2022. The net sales decrease compared to last year was primarily driven by ~~the return to pre-pandemic seasonal demand and pre-pandemic sales discounting practices.~~lower customer demand.

Cardio sales declined ~~37.5%~~28.4% versus the same period in ~~2021, and were up 17.9% compared to the same period in fiscal 2020.~~2022. Lower ~~cardio~~Cardio sales were primarily driven by lower bike demand. Strength product sales ~~declined 63.4%~~grew 6.8% versus the same period in ~~2021, and increased 103.5% compared to the same period in fiscal 2020. Lower strength~~2022. Higher Strength sales this year were primarily driven by ~~lower demand for SelectTech~~® ~~weights.~~sales of home gyms.

Gross profit margin was ~~15.0%~~14.8% for the six-month period ended September 30, ~~2022~~2023 versus ~~38.0%~~15.0% for the same period in ~~2021. The 23.0 ppt~~2022. Gross profit margin was relatively flat as gains from lower landed product costs (+7 ppts), favorable logistics overhead absorption (+3 ppts), and a decrease in ~~gross margin was primarily due to increased discounting~~inventory adjustments (+2 ppts) were offset by unfavorable absorption of JRNY COGS (-8 ppts), increased ~~investments in JRNY~~® ~~(-6~~discounting (-3 ppts), ~~unfavorable logistics overhead absorption (-6 ppts), a prior year release of a special warranty reserve (-2 ppts)~~ and ~~increased inventory reserves~~higher outbound freight (-1 ppt). Gross profit was ~~$7.7~~$6.3 million, down ~~80.1%~~17.6% versus the same period in ~~2021.~~2022.

Segment contribution loss was ~~$17.8~~$12.4 million for the six-month period ended September 30, ~~2022,~~2023, compared to segment contribution ~~income~~loss of ~~$4.9~~$17.8 million for the same period in ~~2021.~~2022. The ~~decline~~improvement was primarily driven by decreased media spend and lower operating expenses, partially offset by lower gross ~~profit, as explained above, offset by decreased media spend.~~profit. Advertising expenses were ~~$7.8~~$2.9 million compared to ~~$14.8~~$7.8 million for the same period in ~~2021.~~2022.

Retail Segment

Comparison of Segment Results for the Six-Month Period Ended September 30, ~~2022~~2023 to the Six-Month Period Ended September 30, ~~2021~~2022

~~Net~~Retail segment sales for the six-month period ended September 30, ~~2022~~2023 were ~~$67.3~~$47.3 million, down ~~69.3%~~29.8%, from ~~$219.6~~$67.3 million for the same period in ~~2021. Excluding sales related to Octane, net sales were up 5% compared to the same period in fiscal 2020.~~2022. Retail segment sales outside the United States and Canada were ~~down 81.7%~~up 53.9% versus last year. The overall net sales decrease ~~in sales~~ compared to last year is primarily driven by lower ~~cardio sales and higher sales discounting as retailers work through higher than normal inventory levels.~~demand from retailers.

Cardio sales ~~for the six-month period ended September 30, 2022 decreased~~declined by ~~82.3%. Excluding sales related to Octane, cardio sales were down 39.2% compared to~~23.0% versus the same period in ~~fiscal 2020.~~2022. Lower Cardio sales this year were primarily driven by lower bike demand. Strength product sales declined by ~~42.2%~~34.2% versus ~~last year.~~the same period in 2022. Lower Strength sales this year were primarily driven by lower demand for ~~SelectTech®~~ SelectTech® weights. ~~Strength sales were up 97.6% compared to the same period in fiscal 2020, led by the popular SelectTech® weights.~~

Gross profit ~~margins were 13.0%~~margin was 24.8% for the six-month period ended September 30, ~~2022, down~~2023, up from ~~26.1%~~13.0% for the same period in ~~2021.~~2022. The ~~13.1~~12 ppt ~~decrease~~increase in gross profit margin was primarily due to ~~increased discounting (-6~~lower landed product costs (+11 ppts) and a decrease in inventory adjustments (+2 ppts), partially offset by unfavorable logistics overhead absorption ~~(-6 ppts) and increase in inventory adjustments (-3 ppts), partially offset by improvement in other costs (+2 ppts)~~(-1 ppt). Gross profit was ~~$8.8~~$11.7 million, ~~a decrease~~an increase of ~~84.7%~~33.5% versus the same period in ~~2021.~~2022.

Segment contribution income for the six-month period ended September 30, 2023 was $4.0 million, or 8.6% of sales, compared to segment contribution loss of $4.4 million, or 6.6% of sales for the same period in 2022, primarily driven by higher gross profit in the current period.

Royalty

Royalty income decreased by $1.4 million, or 71.1%, to $0.6 million for the six-month period ended September 30, 2023, compared to the same period of 2022, primarily due to the sale of Nautilus® brand trademarks and related royalty licenses.

Table of Contents

Segment contribution loss for the six-month period ended September 30, 2022 was $4.4 million, or 6.6% of sales, compared to segment contribution income of $40.8 million, or 18.6% of sales for the same period in 2021, ~~primarily driven by lower gross profit as explained above.~~

~~Royalty~~

~~Royalty income increased by $0.3 million, or 18.2%, to $2.0 million for the six-month period ended September 30, 2022, compared to the same period of 2021, primarily due to royalty settlements.~~

Selling and Marketing

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, sales incentives related to our JRNY® platform and other programs.

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


		Three-Months Ended September 30,						Change				Three-Months Ended September 30,						Change
		2022			2021			$		%		2023			2022			$		%
Selling and marketing	Selling and marketing	$	9,400		$	21,939		$	(12,539)	(57.2)%	Selling and marketing	$	7,023		$	9,400		$	(2,377)	(25.3)%
As % of net sales	As % of net sales	14.4		%	15.9		%				As % of net sales	14.4		%	14.4		%


		Six-Months Ended September 30,						Change				Six-Months Ended September 30,						Change
		2022			2021			$		%		2023			2022			$		%
Selling and marketing	Selling and marketing	$	22,290		$	43,239		$	(20,949)	(48.4)%	Selling and marketing	$	13,024		$	22,290		$	(9,266)	(41.6)%
As % of net sales	As % of net sales	18.5		%	13.4		%				As % of net sales	14.4		%	18.5		%

The $2.4 million decrease in selling and marketing expenses for the three-month period ended September 30, ~~2022~~2023 as compared to the same period of ~~2021~~2022 was primarily related to a $0.8 million decrease ~~of $9.3 million~~ in media spend, a $0.8 million decrease in employee expenses due to a reduction in force and no bonus accrual for fiscal year 2024, a $0.2 million decrease in finance fees, and a ~~decrease of $2.7~~$0.2 million reduction in ~~other~~bad debt related expense. We expect variable selling and marketing expenses ~~due~~ to ~~decreased~~continue to fluctuate with sales.

The $9.3 million decrease in selling and marketing expenses for the for the six-month period ended September 30, ~~2022~~2023 compared to the same period of ~~2021~~2022 was primarily ~~due~~related to a ~~$15.2~~$5.4 million decrease in media spend, ~~and~~ a ~~$5.2~~$1.2 million decrease in ~~other variable selling and marketing~~employee expenses due to ~~decreased sales.~~a reduction in force and no bonus accrual for fiscal year 2024, a $0.7 million decrease in finance fees, a $0.5 million reduction in bad debt related expense, and a $0.4 million reduction in consulting expenses. We expect variable selling and marketing expenses to continue to fluctuate with sales.

Media advertising expense is the largest component of selling and marketing and was as follows (dollars in thousands):
Three-Months Ended
September 30, Change
2022 2021 $ %
Total advertising $ 3,103 $ 12,439 $ (9,336) (75.1)%


	Three-Months Ended September 30,				Change
	2023		2022		$		%


Total advertising	$	2,305	$	3,103	$	(798)	(25.7)%

Six-Months Ended
September 30, Change
2022 2021 $ %
Total advertising $ 8,815 $ 24,041 $ (15,226) (63.3)%



	Six-Months Ended September 30,				Change
	2023		2022		$		%


Total advertising	$	3,410	$	8,815	$	(5,405)	(61.3)%

The ~~$9.3~~$0.8 million decrease in media advertising expense for the three-month period ended September 30, ~~2022,~~2023, as compared to the same period of ~~2021~~2022 reflects ~~a return to more historical, pre-pandemic levels of~~increased cost control measures while maintaining advertising support to preserve market ~~share and control costs.~~share. Advertising as a percentage of selling and marketing for the three-month period ended September 30, ~~2022~~2023 was ~~33.0%~~32.8% as compared to ~~56.7%~~33.0% for the same quarter last ~~year and 35.6% for the same period in fiscal 2020.~~year.

~~Table of Contents~~

The ~~$15.2~~$5.4 million decrease in media advertising expense for the six-month period ended September 30, ~~2022,~~2023, as compared to the same period of ~~2021~~2022 reflects ~~a return to more historical, pre-pandemic levels of~~increased cost control measures while maintaining advertising support to preserve market ~~share and control costs.~~share. Advertising as a percentage of selling and marketing for the six-month period ended September 30, ~~2022~~2023 was ~~39.5%~~26.2% as compared to ~~55.6% for the same quarter last year and 37.1%~~39.5% for the same period ~~in fiscal 2020.~~last year.

Table of Contents

General and Administrative

General and administrative expenses include payroll, employee benefits, stock-based compensation expense, and other headcount-related expenses associated with finance, legal, facilities, certain human resources and other administrative personnel, and other administrative fees.

General and administrative was as follows (dollars in thousands):


		Three-Months Ended September 30,						Change				Three-Months Ended September 30,						Change
		2022			2021			$		%		2023			2022			$		%
General and administrative	General and administrative	$	10,995		$	16,376		$	(5,381)	(32.9)%	General and administrative	$	8,980		$	10,995		$	(2,015)	(18.3)%
As % of net sales	As % of net sales	16.8		%	11.9		%				As % of net sales	18.5		%	16.8		%


		Six-Months Ended September 30,						Change				Six-Months Ended September 30,						Change
		2022			2021			$		%		2023			2022			$		%
General and administrative	General and administrative	$	23,458		$	27,899		$	(4,441)	(15.9)%	General and administrative	$	17,874		$	23,458		$	(5,584)	(23.8)%
As % of net sales	As % of net sales	19.5		%	8.6		%				As % of net sales	19.8		%	19.5		%

The $2.0 million decrease in general and administrative expenses for the three-month period ended September 30, ~~2022~~2023 as compared to the same period of ~~2021~~2022 was primarily driven by a $1.8 million decrease in personnel expenses due to a ~~$4.7 million prior~~reduction in force and no bonus accrual for fiscal year ~~loss contingency related to a legal settlement.~~2024.

The $5.6 million decrease in general and administrative expenses for the six-month period ended September 30, ~~2022~~2023 compared to the same period of ~~2021~~2022 was primarily driven by a $5.0 million decrease in personnel expenses due to a ~~$4.7 million prior~~reduction in force and no bonus accrual in fiscal year ~~loss contingency related to~~2024, a ~~legal settlement and a $1.1~~$0.4 million decrease in legal expenses, ~~offset by an increase~~and a $0.2 million reduction in contract labor.

We expect general and administrative expenses to be a lower percentage of ~~$2.6 million of JRNY~~® ~~related expenses.~~net sales this fiscal year, compared to last fiscal year.

Research and Development

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

Research and development was as follows (dollars in thousands):

Three-Months Ended
September 30, Change
2022 2021 $ %
Research and development $ 5,405 $ 5,688 $ (283) (5.0)%
As % of net sales 8.3 % 4.1 %


	Three-Months Ended September 30,						Change
	2023			2022			$		%
Research and development	$	3,836		$	5,405		$	(1,569)	(29.0)%
As % of net sales	7.9		%	8.3		%


	Six-Months Ended September 30,						Change
	2023			2022			$		%
Research and development	$	7,684		$	11,229		$	(3,545)	(31.6)%
As % of net sales	8.5		%	9.3		%

The $1.6 million decrease in research and development expenses for the three-month period ended September 30, 2023, as compared to the same period of 2022, was primarily driven by a $0.7 million decrease in employee expenses due to a reduction in force, a $0.4 million reduction in contract labor, and a $0.4 million reduction in product development costs.

Table of Contents

Six-Months Ended
September 30, Change
2022 2021 $ %
Research and development $ 11,229 $ 10,503 $ 726 6.9%
As % of net sales 9.3 % 3.3 %

The research and development expenses for the three-month period ended September 30, 2022, as compared to the same period of 2021, were relatively flat and represented a higher percentage of sales this quarter due to timing of technical projects and increased investments in JRNY®~~, our digital platform.~~

~~The increase~~$3.5 million decrease in research and development expenses for the six-month period ended September 30, ~~2022~~2023, as compared to the same period of 2022, was primarily driven by a $1.4 million decrease in ~~2021 was driven primarily~~contract labor, a $1.3 million decrease in employee expenses due to a reduction in force, and a $0.8 million reduction in product development costs.

The decreases in research and development as a percentage of net sales were due to the decreases in spending being more than offset by ~~increased investments in JRNY~~®~~, our digital platform.~~lower net sales. We expect research and development expenses to be a lower percentage of net sales this fiscal year, compared to last fiscal year.

Goodwill and Intangible Impairment Charge

~~In accordance with ASC 350 — Intangibles — Goodwill and Other, we perform a goodwill and indefinite-lived asset impairment evaluation during the fourth quarter of each year. However, as~~As a result of the decline in our market value relative to the market and our industry, which was identified as a triggering event, we performed an interim evaluation and a market capitalization reconciliation during the first quarter of fiscal 2023 which resulted in a non-cash goodwill and indefinite-lived intangible assets impairment charge of $27.0 million.

ASC 350 requires us to make significant assumptions and estimates about the extent and timing of future cash flows, discount rates, growth rates and terminal value. The cash flows are estimated over a significant future period of time, which makes those estimates and assumptions subject to an even higher degree of uncertainty. We also use market valuation models and other financial ratios, which require us to make certain assumptions and estimates regarding the applicability of those models to our assets and businesses.

In accordance with ASC 360 — Property, Plant, and Equipment and other long-lived assets, we perform a test for recoverability when triggering events occur. No impairment was recognized in the quarter ended September 30, 2022.

~~For additional information related to our goodwill and intangible impairment charge, see Note 8.~~

Operating ~~(Loss) Income~~Loss

Operating loss for the ~~three-months~~three-month period ended September 30, ~~2022~~2023 was ~~$14.3~~$11.2 million, ~~an increase~~a decrease of ~~$12.4~~$3.1 million, or ~~635.5%~~21.9%, as compared to an operating loss of ~~$2.0~~$14.3 million for the same period of ~~2021.~~2022. The ~~decrease~~improvement in results was primarily driven by lower operating expenses and higher gross ~~profit associated with lower sales and lower gross margins during the period.~~profit.

Operating loss for the six-month period ended September 30, ~~2022~~2023 was ~~$65.5~~$21.7 million, ~~an increase~~a decrease of ~~$81.4~~$43.8 million, or ~~511.7%~~66.8%, as compared to an operating ~~income~~loss of ~~$15.9~~$65.5 million for the same period of ~~2021.~~2022. The ~~decrease~~improvement in results was primarily driven by alower operating expenses during the period as well as the goodwill and intangible impairment charge in the prior year period.

Interest Expense

Interest expense for the three-month period ended September 30, 2023 was $1.1 million, an increase of ~~$27.0~~$0.5 million, or 91.1%, as compared to an interest expense of $0.6 million for the same period of 2022. The increase was primarily due to a $0.3 million loss related to the amendment to the ABL Credit Facility.

Interest expense for the six-month period ended September 30, 2023 was $3.6 million, an increase of $2.6 million, as compared to an interest expense of $1.0 million for the same period of 2022. The increase was primarily due to the recognition of $1.8 million in accelerated capitalized loan fees from the amendments to the SLR Term Loan and ~~lower gross profit associated with lower sales~~ABL Credit Facility and ~~lower gross margins during the period.~~$0.6 million in interest related payments.

Other, Net

Other, net relates to the effect of exchange rate fluctuations with the U.S., the valuation of warrants and our foreign ~~subsidiaries.~~subsidiaries and intellectual property asset sale.

Other, net was as follows (in thousands):


	Three-Months Ended September 30,				Change
	2023		2022		$		%
Other, net	$	251	$	(224)	$	475	(212.1)%



	Six-Months Ended September 30,				Change
	2022		2021		$		%
Other, net	$	8,818	$	(739)	$	9,557	(1,293.2)%

The $0.5 million increase in Other, net for the three-month period ended September 30, 2023, as compared to the same period of 2022 was primarily due to a $0.9 million gain related to the revaluation of warrants sold in the first quarter of fiscal 2024, offset by a $0.4 million loss in foreign exchange.

The $9.6 million increase in Other, net for the six-month period ended September 30, 2023, as compared to the same period of 2022, was primarily due to a $6.4 million net gain on the sale of intellectual property, a $2.2 million

Table of Contents

net gain on the sale of equity investments, and a $0.9 million gain related to the revaluation of warrants sold in the first quarter of fiscal 2024, partially offset by a $0.7 million loss in foreign exchange.

Income Tax Expense

Income tax expense includes U.S. and international income taxes, and interest and penalties on uncertain tax positions.

Income tax expense was as follows (in thousands):

~~Table of Contents~~


		Three-Months Ended September 30,						Change				Three-Months Ended September 30,						Change
		2022			2021			$		%		2023			2022			$		%
Income tax expense	Income tax expense	$	156		$	2,242		$	(2,086)	(93.0)%	Income tax expense	$	452		$	156		$	296	189.7%
Effective tax rate	Effective tax rate	(1.0)		%	(96.4)		%				Effective tax rate	(3.7)		%	(1.0)		%


		Six-Months Ended September 30,						Change				Six-Months Ended September 30,						Change
		2022			2021			$		%		2023			2022			$		%
Income tax expense	Income tax expense	$	8,251		$	5,680		$	2,571	45.3%	Income tax expense	$	957		$	8,251		$	(7,294)	(88.4)%
Effective tax rate	Effective tax rate	(12.3)		%	37.5		%				Effective tax rate	(5.8)		%	(12.3)		%

Income tax expense for the ~~three-months~~three-month period ended September 30, ~~2022~~2023 was $0.5 million compared to $0.2 million last year. The expense in both quarters was primarily ~~a result of~~driven by foreign related taxes. No tax benefits associated with domestic losses were recognized due to the ~~profit generated in the foreign jurisdictions. Income tax expense for the three and six-month periods ended September 30, 2022 included the recording of a~~ U.S. deferred tax asset valuation allowance position established in the ~~amount of $3.6 million and $17.8 million, respectively.~~first quarter last year.

~~The effective~~Income tax ~~rates from continuing operations~~expense for the ~~three and~~ six-month period ended September 30, ~~2022 were~~2023 was $1.0 million compared to $8.3 million last year. Tax expense in the current period was primarily driven by foreign related taxes and reserves related to an income tax audit. The decrease in income tax expense compared to last year was primarily as a result of the ~~aforementioned U.S~~U.S. deferred tax asset valuation allowance ~~to reduce the existing U.S. domestic deferred tax assets to their anticipated realizable value.~~recognized in fiscal 2023.

Income tax expenses and effective tax rates for the three and six-months ended September 30, 2021 were primarily due to the non-deductible GAAP book expenses that are not allowed for income tax purposes. Such expenses were incurred as a result of our acquisition of VAY AG, consequently increasing the effective tax rate for the period.

~~(Loss) Income~~Loss from Continuing Operations

Loss from continuing operations was ~~$15.3~~$12.5 million for the ~~three-months~~three-month period ended September 30, ~~2022,~~2023, or ~~$0.48~~$0.35 per diluted share, compared to loss from continuing operations of ~~$4.6~~$15.3 million, or ~~$0.15~~$0.48 per diluted share, for the three-months ended September 30, ~~2021.~~2022. The ~~increase~~decrease in loss from continuing operations was primarily due to lower ~~gross profit~~operating expenses and higher ~~operating expenses as a percentage of sales~~gross profit as discussed in more detail above.

Loss from continuing operations was ~~$75.5~~$17.5 million for the six-month period ended September 30, ~~2022,~~2023, or $0.51 per diluted share, compared to loss from continuing operations of $75.5 million, or $2.40 per diluted share, ~~compared to income from continuing operations of $9.4 million, or $0.29 per diluted share,~~ for the ~~six-months~~six-month period ended September 30, ~~2021.~~2022. The decrease in ~~income~~loss from continuing operations was primarily due to lower ~~gross profit and higher~~ operating expenses as discussed in more detail ~~above.~~above, as well as the goodwill and intangible impairment charge in the prior year period.

Net ~~(Loss) Income~~Loss

Net loss was $12.5 million for the three-month period ended September 30, 2023, compared to net loss of $13.2 million for the three-months ended September 30, ~~2022, compared to net~~2022. Net loss ~~of $4.6 million~~per diluted share was $0.35 for the three-months ended September 30, ~~2021. Net loss per diluted share was $0.41 for the three-months ended September 30, 2022,~~2023, compared to net loss per diluted share of ~~$0.15~~$0.41 for the three-months ended September 30, ~~2021.~~2022.

Net loss was $17.5 million for the six-month period ended September 30, 2023, compared to net loss of $73.4 million for the six-month period ended September 30, ~~2022, compared to net income of $9.3 million for the six-months ended September 30, 2021.~~2022. Net loss per diluted share was $0.51 for the six-month period ended September 30, 2023, compared to net loss per diluted share of $2.33 for the six-month period ended September 30, ~~2022, compared to net income per diluted share of $0.29 for the six-months ended September 30, 2021.~~2022.

Table of Contents

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, including if we are able to maintain compliance with debt-related financial covenants, 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 30, ~~2022,~~2023, we had ~~$6.8~~$10.3 million of cash, cash equivalents and restricted cash, and ~~$22.2~~$29.0 million was available for borrowing under the ABL ~~Revolving~~Credit Facility, compared to ~~$14.2~~$18.3 million of cash, cash equivalents and restricted cash, and ~~$65.8~~$14.9 million available for borrowing under the ABL ~~Revolving~~Credit Facility as of March 31, ~~2022.~~ 2023.

During the quarter ended June 30, 2023, we sold 3,525,000 shares of our common stock for $1.22 per share and pre-funded warrants to purchase up to 573,362 shares of our common stock at $1.2199 per share for net proceeds of $4.6 million after offering expenses. The pre-funded warrants had an exercise price of $0.0001 per share, were immediately exercisable and would expire when exercised in full. On July 28, 2023, all 573,362 pre-funded warrants were exercised for the same number of shares of our common stock. See Note 12for additional information.

During the quarter ended June 30, 2023, we completed the sale of intellectual property for $10.5 million as part of our ongoing comprehensive strategic review. The sale of these assets, which included the Nautilus® brand trademark assets and related licenses, will continue to streamline our brand focus and enhance our financial flexibility. The carrying value of the intangible assets sold was $3.7 million and the resulting gain, net of transaction costs, was recorded in the Consolidated Statement of Operations as Other, net and in the Consolidated Statements of Cash Flows from investing activities as proceeds from sale of intellectual property for the quarter ended June 30, 2023.

During the quarter ended June 30, 2023, we completed the sale of Vi Labs for $2.3 million as part of our ongoing comprehensive strategic review. The sale of this equity investment streamlines our brand focus and enhances our financial flexibility. The assets sold did not have any carrying value and transaction costs of the sale were $0.1 million. The resulting gain of $2.2 million, net of transaction costs, was recorded in the Consolidated Statements of Operations as Other income, net and in the Consolidated Statements of Cash Flows investing activities as Proceeds from sale of equity investment for the quarter ended June 30, 2023.

We expect our cash, cash equivalents, restricted cash and amounts available for borrowing under our SLR Term Loan and ABL Credit Facility as of September 30, ~~2022,~~2023, along with cash expected to be generated from operations, to be sufficient to fund our operating and capital requirements for at least the next twelve ~~months from September 30, 2022.~~months.

If forecasted sales are not achieved, our semi-variable operating model will allow additional cost cutting measures and additional working capital levers to be executed.

Cash used in operating activities was $7.9 million for the six-month period ended September 30, 2023, compared to cash used in operating activities of $9.6 million for the six-month period ended September 30, ~~2022, compared to cash used in operating activities of $56.8 million for the six-month period ended September 30, 2021.~~2022. The improvement in cash flows from operating activities for the six-month period ended September 30, ~~2022~~2023 as compared to the same period of ~~2021~~2022 was primarily due to changes in our operating assets and liabilities discussed below and a decreased net loss, offset by a decrease in non-cash ~~charges and net income.~~charges.

Trade receivables ~~decreased~~increased to ~~$33.7~~$24.2 million as of September 30, ~~2022,~~2023, compared to ~~$61.5~~$21.5 million as of March 31, ~~2022,~~2023, primarily due to ~~lower~~increased Retail sales ~~and~~offset by cash collection efforts in the ~~timing~~second quarter of ~~customer payments.~~fiscal 2024.

Inventory was $66.1 million as of September 30, 2023, up 42% compared to $46.6 million as of March 31, 2023 and down 33% compared to $99.2 million as of September 30, ~~2022, down 11% compared to $111.2 million as~~2022. The increase in inventory in the second quarter of fiscal 2024 versus the fiscal year ended March 31, ~~2022 and down 39% compared to $162.7 million as of September 30, 2021. The decrease in inventory~~2023 was driven by ~~sell-through~~inventory purchases in anticipation of our busy season, which occurs in the third and ~~strong inventory management as we continued to right-size inventory levels.~~fourth quarters of our fiscal year. About ~~11%~~40% of inventory as of September 30, ~~2022~~2023 was in-transit.

Prepaid and other current assets decreased by $4.4 million to $10.1 million, compared to $14.5 million as of March 31, 2022, primarily due to a $1.4 million pre-payment redemption from a materials vendor and a $1.2 million deferred compensation amortization decrease.

~~Trade payables decreased by $16.6 million to $36.5 million as of September 30, 2022, compared to $53.2 million as of March 31, 2022, primarily due to timing of payments for inventory.~~

Accrued liabilities decreased by $9.4 million to $20.0 million as of September 30, 2022, compared to $29.4 million as of March 31, 2022, primarily due to a $4.2 million legal settlement payment and decreases in accrued off-site materials of $3.0 million.

Cash used in investing activities of $7.5 million for the six-month period ended September 30, 2022 was primarily due to capital purchases related to our digital platform. We anticipate spending between $12.0 million and $14.0 million in fiscal 2023 for digital platform enhancements, systems integration, and production tooling.

~~Cash provided by financing activities of $16.5 million for the six-month period ended September 30, 2022 was primarily related to proceeds from long-term debt offset by payments on long-term debt.~~

Table of Contents

Prepaid and other current assets increased by $1.7 million to $9.8 million, compared to $8.0 million as of March 31, 2023, primarily due to investment in prepaid marketing for our busy season, which occurs in the third and fourth quarters of our fiscal year.

Trade payables increased by $33.9 million to $63.2 million as of September 30, 2023, compared to $29.4 million as of March 31, 2023, primarily due to inventory purchases in advance of our busy season, which occurs in the third and fourth quarters of our fiscal year.

Accrued liabilities decreased by $3.7 million to $11.9 million as of September 30, 2023, compared to $15.6 million as of March 31, 2023, primarily due to a $2.1 million decrease in deferred revenue balances for JRNY®, which is attributed to the discontinuation of 12 month free trials, a $0.9 million reduction in the fiscal 2023 bonuses that had previously been accrued, a $0.4 million decrease in JRNY® expense accruals as compared to the first quarter of fiscal 2024, a $0.4 million decrease in accrued finance fee expenses based on lower sales volumes in the current period, and a $0.3 million reduction in return reserves, partially offset by a $0.8 million increase in accruals for offsite inventory.

Cash provided by investing activities of $10.9 million for the six-month period ended September 30, 2023 was primarily due to $10.5 million from the sale of intellectual property and $2.4 million from the sale of an equity investment, partially offset by $1.9 million of capital purchases related to our digital platform. We anticipate spending approximately $4.0 million in fiscal 2024 for digital platform enhancements, systems integration, and production tooling.

Cash used in financing activities of $9.8 million for the six-month period ended September 30, 2023 was primarily related to $16.0 million in payments on long-term debt and $0.9 million in payments of debt issuance costs, partially offset by $4.5 million in proceeds from the sale of common stock and warrants as discussed above and $3.0 million in proceeds from long-term debt.

Free Cash Flow

Free cash flow is a non-GAAP financial measure. We define free cash flow as net cash provided by (used in) operating activities minus capital expenditures. We believe that, when viewed with our GAAP results, free cash flow provides management, investors and other users of our financial information with a more complete understanding of factors and trends affecting our cash flows. We believe free cash flow provides useful additional information to users of our financial information and is an important metric because it represents a measure of how much cash we have available for discretionary and non-discretionary items after the deduction of capital expenditures. We use this metric internally, as we believe our sustained ability to generate free cash flow is an important driver of value creation. However, this non-GAAP financial measure is not intended to supersede or replace our GAAP results.

The following table presents a reconciliation of free cash flow, a non-GAAP financial measure, to Net cash provided by (used in) operating activities, the most directly comparable financial measure prepared in accordance with GAAP (in thousands):


	Three-Months Ended September 30,						Six-Months Ended September 30,
	2023			2022			2023			2022
Net cash used in operating activities	$	(5,566)		$	(3,616)		$	(7,931)		$	(9,596)
Purchase of property, plant and equipment	(724)			(4,130)			(1,902)			(7,511)
Free cash flow	$	(6,290)		$	(7,746)		$	(9,833)		$	(17,107)
Net loss	$	(12,543)		$	(13,203)		$	(17,467)		$	(73,380)
Free cash flow as percentage of net loss	50.1		%	58.7		%	56.3		%	23.3		%

Capital expenditures totaled $0.7 million and $1.9 million for the three and six months ended September 30, 2023, respectively, compared to $4.1 million and $7.5 million for the three and six months ended September 30, 2022, respectively. The decline is primarily related to lower investments in JRNY® as the Company completed the integration of Vay.

Table of Contents

Financing Arrangements

~~On October 29, 2021, we amended our~~Amendment to Existing Term Loan Credit Agreement

On July 28, 2023, we entered into an amendment (the “Term Loan Amendment”) to our existing SLR Term Loan with Crystal Financial LLC, d/b/a SLR Credit Solutions ("SLR") dated ~~January 31, 2020~~as of November 30, 2022 (as amended, the "SLR Term Loan").

The Term Loan Amendment provides us with an increased borrowing advance rate for certain eligible accounts owed to us by Amazon.com, Inc. and its affiliates, and allows for certain compliance reports to be delivered to SLR under the SLR Term Loan on a monthly (rather than weekly) basis as long as specified conditions are satisfied.

Amendment to Existing ABL Credit Agreement

On July 28, 2023, we entered into an amendment (the ~~"Credit Agreement"~~“ABL Amendment”), to our existing Credit Agreement with Wells Fargo Bank, National Association ~~and lenders from time to time party thereto~~ ("Wells Fargo") dated as of January 31, 2020 (as amended, the ~~Lenders”~~"ABL Credit Facility").

In connection with the amendment of the SLR Term Loan ~~Facility was $11.5 million. The~~and ABL Credit Facility, ~~matures on October 29, 2026 and repayment obligations under the Credit Agreement is secured by substantially all~~we recorded a total loss of $0.3 million, as a component of Other, net in our ~~assets, with principal and interest amounts required to be paid as scheduled.~~Condensed Consolidated Statements of Operations.

The balance sheet classification of the borrowings under the ~~revolving~~ loan ~~credit facility~~facilities has been determined in accordance with ASC 470, Debt.

Off-Balance Sheet Arrangements

We have long lead times for inventory purchases and, therefore, must secure factory capacity from our vendors in advance. As of September 30, ~~2022,~~2023, we had approximately ~~$25.3~~$20.7 million, compared to ~~$39.8~~$12.1 million as of March 31, ~~2022~~2023 in non-cancellable market-based purchase obligations, primarily to secure additional factory capacity for inventory purchases 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~~BowFlex warehouses. The ~~decrease~~increase in purchase obligations was primarily due to ~~seasonality.~~strong inventory management as we continue to right-size inventory levels ahead of our busy season, which occurs during the third and fourth quarters of our fiscal year.

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 our 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

Table of Contents

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 indemnifications vary from contract to contract, and generally a maximum obligation is not stated. We hold insurance policies that mitigate potential losses arising from certain types of indemnifications. Management does not deem these obligations to be significant to our financial position, results of operations or cash flows, and therefore, no liabilities were recorded at September 30, ~~2022.~~2023.

~~Table of Contents~~

SEASONALITY

We expect our revenue from fitness equipment products to vary seasonally. Sales are typically strongest in our fiscal third quarter ending December 31 and fiscal fourth quarter ending March 31 and are generally weakest in our fiscal first quarter ending June 30 and fiscal second quarter ending ~~September.~~September 30. We believe that consumers tend to be involved in outdoor activities during the spring and summer months, including outdoor exercise, which impacts sales of indoor fitness equipment. This seasonality can have a significant effect on our inventory levels, working capital needs and resource utilization.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our critical accounting policies have not changed ~~other than goodwill~~ from those discussed in our fiscal ~~2022~~2023 Form 10-K.

NEW ACCOUNTING PRONOUNCEMENTS

See Note 1 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 for a discussion of recent accounting pronouncements.

4041

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our market risk as compared to the disclosures in Part II, Item 7A in our Annual Report on Form 10-K for the year ended March 31, ~~2022,~~2023, filed with the SEC on June ~~3, 2022.~~1, 2023.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In accordance with Rule 13a-15 of the ~~Securities~~Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q, our management evaluated, with the participation of our Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act). Based upon their evaluation of these disclosure controls and procedures, our management, including the Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer, have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report, our disclosure controls and procedures are effective and designed to ensure that the information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the requisite time periods specified in the applicable Securities and Exchange Commission rules and forms, and that it is accumulated and communicated to our management, including our Principal Executive Officer Principal Financial Officer, and Principal Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the three-months ended September 30, ~~2022,~~2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4142

Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

During the second quarter of fiscal 2022, we recorded a $4.7 million loss contingency related to a legal settlement involving a class action lawsuit related to advertisement of our treadmills. The settlement includes damages, a one-year free membership to ~~JRNY~~®~~, and administrative fees and was included as a component of General and administrative on our Condensed Consolidated Statements of Operations for the fiscal year ended March 31, 2022.~~

~~On June 27, 2022, the Court approved the settlement and no appeals were filed. We paid the settlement damages and related administrative fees during the second fiscal quarter of fiscal 2023.~~

As of the date of filing of this Quarterly Report on Form 10-Q, we were not involved in any material legal proceedings.

Item 1A. Risk Factors

We operate in an environment that involves a number of risks and uncertainties. The risks and uncertainties described in our ~~2022~~2023 Form 10-K are not the only risks and uncertainties to which we are subject, and there may be other risk and uncertainties that are not currently considered material or are not known to us that could impair our business or operations. If any of the risks described in our ~~2022~~2023 Form 10-K actually occur, our business, operating results and financial position could be adversely affected. There have been no material changes to the risk factors as set forth in our ~~2022~~2023 Form 10-K.

4243

Table of Contents

Item 6. Exhibits

The following exhibits are filed herewith and this list is intended to constitute the exhibit index:


Exhibit No.						Description

3.1						Amended and Restated Articles of Incorporation - Incorporated by reference to Exhibit A to Schedule 14A, as filed with the Commission on April 22, 2008.

3.2						Amended and Restated Bylaws - Incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K, as filed with the Commission on April 5, 2005.

3.3						Amendment to Amended and Restated Bylaws of the Company - Incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K, as filed with the Commission on January 31, 2007.

4.1
						Amendment to Credit Agreement dated July 28, 2023, by and between Nautilus, Inc. and Crystal Financial LLC D/B/A SLR Credit Solutions.

~~10.1~~4.2						Amendment to Credit Agreement dated July 28, 2023, by and between Nautilus, Inc. ~~Amended~~ and ~~Restated 2015 Long-Term Incentive Plan - Incorporated by reference to Exhibit 4.6 of our Registration Statement on Form S-8, as filed with the Commission on August 22, 2022.~~Wells Fargo Bank, National Association.

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.

4344

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	~~NAUTILUS,~~BOWFLEX INC.
	(Registrant)

November ~~9, 2022~~14, 2023	By:	/S/ James Barr IV
Date		James Barr IV
		Chief Executive Officer


	~~NAUTILUS,~~BOWFLEX INC.
	(Registrant)

November ~~9, 2022~~14, 2023	By:	/S/ Aina E. Konold
Date		Aina E. Konold
		Chief Financial Officer

4445



	As of September 30, 2022
	Operating leases		Finance leases
Remainder of fiscal 2023	$	2,370	$	60
2024	5,515		120
2025	5,585		120
2026	4,503		120
2027	2,348		60
Thereafter	5,796		—
Total undiscounted lease payments	26,117		480
Less imputed interest	(3,441)		(20)
Total lease liabilities	$	22,676	$	460