NLS - Earnings call transcript Q3 2020

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Operator

Greetings and welcome to the Nautilus Incorporated Third Quarter 2020 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. ICR. of Mills John Mr. ahead, go Please Mills.

John Mills

Becky Vice Thank you. XXXX Jim will Development; Nautilus’ and President quarter XX Financial Welcome replay the Chief be Officer; to available afternoon, Special Bill is call call. Participants days. everyone. Product note, next Officer; Chief conference Konold, are Officer; to Chief Please today Marketing for CEO. this of Executive being Chris Senior third Aina Good Alseth, from McMahon, Assistant Barr, Quatrochi, the Nautilus webcast and for

We the will remarks. questions be happy to take conclusion your at prepared of our

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Jim Barr

today’s progress news joining by We has a you and afternoon, positive And uplifted vaccine been the Good a Thank you, call. everyone. challenging of The time on thank for to John. world. today it. are for pandemic awoke

quarter to we’re for extremely has and had, of uncertain home which demand our strong for deliver our financial pleased and impacts key While of report strategic to the our planning will the how North brands. elements progress end we will very we boost fitness new devastating results. also endurance, resulting with of the customers. third I’m business challenges our and towards Today, in our discuss on products their accomplishments continued in a has planning, our to strategy. Star amazing to challenges our as I’m are key sensitive long-term successfully trend and proud resiliency they business for our our our team navigated highlight I’ll it such phenomenal I call execution, times. the

our up to an was brands, compared year, channels products. across quarter, the driven by For revenue growth last broad and incredible XXX%

being and our supply Retail segment our Bowflex to weights fueled benches SelectTech expanding sales quarter. a our XXX% its XX% Home throughout sales and a its was profit million to response Our ever, had Direct its history, best from up CX, achieved Schwinn IC up quadrupling despite adjusted quarter improving with segment versus be Total third in Gyms our quarter. prior bikes million year Company XXX% Bowflex by year. nearly performance. best our These EBITDA margins quarter customer and ago the to results selling $XX constrained Not best the loss year-over-year. Strong of its the $X gross were in outdone, had strong ICX and

our operations, increasing long-term the the transformation. straight cash invest in fourth and was quarter flow flexibility comps of positive positive third consecutive quarter from This to quarter of our

what in hit as As its In now became now the new a first the a XXK This eighth showcased clear month, earlier the quarter, turned we normal. sustained third our and and marathon. a resulted that into sprint, agile to at it year, adjust in increasingly nimble. this world ability pandemic was our be to the we has effort

our we’ve history us Our keys to delivering so such combined a one remarkable by been to this year. operational are best of people had. market in capitalize on we opportunity, of large performances annual of the were in real late has have the customers in for The by time reason capture fully our year and profitable the passion portion the the to quarter Nautilus ever track of implementing much last team and their their execution serve putting the need Nautilus improvements able why capture most been began and market

Let me some supply our and increased production operational chain achievements We you further the give examples of in quarter. capacity.

for have of newly an kettlebells experience VeloCore a launched are working for there. VeloCore, the believe produces expediting bikes. combines X highly-differentiated inventory Bowflex including that strength that VeloCore products incredibly a capacity We in second much we ride by with as connectivity. realistic digital unstationary than combining of September and increased innovation, quickly fantastic a and to the and connectivity, We of physical other a our leaning added We and to product more SelectTech core immersive increase of Combining more your We any arms. late production a works with further fantastic launched your amazing have space-saving for as dual-mode successfully our more your across technology production These sold out Xx. with are bike product popular out Xx supplier is and bike bikes portfolio dumbbells and values. products barbells. our by example more realistic for and content digital and industry’s are been body, first

again times. selling further to hard are product working and now We are reduce them lead

we year, is invested the in last launch advertising quarter that spend as VeloCore. than This marketing was first for time higher

to brand experiences. to Bowflex immersive well-known not ads better move an these is place our and Our even innovative of provider a advertising tech-forward only driving new as connected serve sales, equipment fitness

JRNY tandem AI-driven, custom in training. introduction, drive features led VeloCore X.X, accelerate automatically on-demand the we JRNY videos. and to individualized, launched unit decreasing price increases product promotions, of software Chief Speaking been To a by and more items, select we’ve differentiate key cross new fitness adapt our and out also an user Officer efforts trainer pleased products really items to your top-line JRNY in-stock with implementing with personal our one-on-one digital digital our I’m platform, of to X.X experiences, growth, membership to and further simulate accomplished new workouts that running core the scale how of and JRNY addition to transformation. our established experience and assist progress a significantly leader our business experiences Digital we when as level connected long-term efforts our stock. at overall spearhead go hired profitability on in promoting able

a organic. produce versus of in Xx on During same strong including we quarter metrics customer ago, year the increase a which quarter, to much the was continue traffic bowflex.com,

addition, introduce the brands. we saw acquisition, our as new customers to new customer In increase in a to opportunity capitalized on we Xx

working channel, shipping these value due program during imposed with port constraints challenges, We We a travel containers It’s outbound partners to intermittent launched of that July. long-term fighting constant allocate produced including bring notable retail in and despite at our Best China, with inventory. back, series Canada a shipping delays Company. domestic enduring, Buy operational to through closely We inbound believe closures, new our accomplishments the further momentum time to and a we with have be pulled imbalance Costco results continue a scarce to shipping partner our retail will an carriers, of in increased many others launching products by while when strong these restrictions. factories, of in

team challenges, challenges One moment; way work, of an our personal of focus as all same and long-term financial we achieved on faced and particular, of Octane provided on most the Fitness customers greater our caring and but elaborate been the strong stress routine and to reduce time, inequity and a they of their market; of completed fitness short-term outstanding dimensions, things what planning leadership basis, and leadership on for proud the would in-home Producing Star costs is completed the the extended multiple isolation have the sale which incredible a on while to the in with results, I’ll of North pandemic, delivery and also effects emerging these performed racial at own, the results on home in issues concerns. long-term business our successfully series our I’m teams balancing our support they and working from people. and new of

to due together we devastating support we Like region to home, call another. the one and addition, threats a experienced concerns health family, pulled wildfires. In

Work -- learned for the also During we Company the Places earned learned straight our a to we award that year. quarter, eighth Best

While no predict and accordingly. planning duration know the fitness of to trend, thinking know want one about it I investors and we’re at-home reacting can how the to it, magnitude

trends. as results there COVID effects our waver. products. new market, quarter More home progressed, permanent gyms will a fitness the short-term see normal from reopened As for the that the reaffirmed temporary Overall, be at-home the signs demand continue for we and did not impacts permanent states prolonged yet our home evolved, and and statements to to of our fitness quarter and research both, and brands previous term longer

goers, gym. First, return a will a gym only the of percentage impact. will XX% profound true, not to have permanent Even significant say if to ever this they XX%, partly

way home vaccine This lasting or, from and administered of home. minimally believe at at workout exposed at see In balance the of either similar benefits pandemic, long-term some and the many the the we when will Second, group workouts normal, working and the think more and changes well way were a from the but are they office as will people this being safer. choose We and the away in change home of gym fitness to instead new gym the differently. workouts many majority been home balance convenience in feel to connected will until impacts scale they they the in at both, has group with we habits will stay rest or fitness. say not Why? We balancing suspect do will spending. they

resurgence again a option virus in another an at have of do of to to be that strain home. event this We the heard from or work if or want not virus, out ever emerges, also without they many caught

been in-store use their and than digital Fourth, acceleration curbside have an ordering, ecommerce and own Third, people of more seen growth to and greater products transformations retailers our of both have exposed brands ever online pickup. towards before.

carrying fitness relaxation insights, will to seller, to generation stand short-term from in growth fuel and what from with areas long As we this is matter in the and capabilities space increased marketing have used The investment consumer we and be outlook our and benefit cash retailers point products. believe price store on we an of Accordingly, areas. made restrictions, brand, with long-term resulting run, our and business. the omni-channel traditional mind, and the that final digital more believe point technology this experiences, mention in I’ll of talent and we new in most all targeted decisions can

are Here couple a examples.

invested in we focusing perennial inventory products be few believe on for the have We quarters, bestsellers. heavily key next will

our supply Our alleviate constraints. chain supply to teams working globally with are partners

To membership significantly our be goers. longer increased much ambitious to market of believe an adding constrained new QX have initiatives, roadmap club capture We need We to of we this help at-home by the already XXXX. supply as JRNY the sometime market. no the the larger products in market displace and marketing accordingly effect launched pandemic the addressable size targeted opportunity, the be has new gym with will have blends modified at goal

decisions. will you we year. We have insights, the difficult in this discuss to enough the feel that Aina we indicators has evolving or like moment. as fourth to time, waning of a end, strategic share continue demand indicators let we monitor to evidence leading quarter, forecast some of we visibility see made next for and no with pandemic alone will this make But, now To consumer the saturation. At guidance full the just it quarter.

briefly cover our Before I pass North to on this Star strategic I to want progress plan. Aina,

internally, to because direction some the the right but heard we of around are you’ve Company to be ship thought ingredients the past mode. it on to needed By XXXX. my of until in focus currently with the industry I turn it point right Nautilus As out to and our externally leadership came will return in on to not we quarter, plan plan. like a our discussing thoughts calls, end our and allow execution had be on fourth happy transformative of some implementing I’d rolling full have early this report to Company-wide. the position, we this to work we plan. we strategic I it new To completed offer But, us am I will the on

First, more lack version segments, turn needs much and fitness for company on such connected Company and strengths, and as should a habits as the our of and will brands, itself. wants, legacy addresses digital their Company’s our to plan the resilient culture. focus. It have, shopping builds our option-filled well-known and more continue product reputation underlying to fallen weaknesses and understand had consumer of general we our innovation into on broad we resilient the behind our customer-focused quality, our the issues and stronger, as failure portfolio, of It

strategy, the or adds without opportunity merely is of COVID direction right COVID a with impact. at-home As this and long-term urgency. sense trend greater the

balance provide will strengthened this Our the sheet acceleration. for fuel

Fitness, and Officer, over our in Chief Chief now Digital turn like and over I’d to last We including Examples now been go Konold, connected Aina? to we’ve launched the include on fitness product Chief but CFO, the who the execution financial Financial for detail. this Octane of in the key entering hires, year. portfolio, Aina Officer, accelerate will are across to our on Officer. full elements XXXX executing sale in executive fact, results more it Marketing of plan new mode,

Aina Konold

Jim, good afternoon, everyone. you, Thank and

I’ll October to Before to together truly I’ll XXXX Similar a P&L on to Jim’s by these team are start which numbers non-GAAP million comments we of adjusted Company results. proud worked Fitness, I of XXXX. QX to the many incredibly speaking a XXX% the press to we way because phenomenal to reconciliation sold to for see related XXth. so our I’d up to release begin, echo how numbers comparisons adjusted in group. $X sales challenges speaking disposal excludes the overcome these Net P&L our last like the entry be of website on on for our non-recurring were $XXX Octane results. the brand, and commercial with The gain about reported Please our quarter, to deliver total QX QX million.

sales third this sales our This best decade, are marks the quarter, in and consecutive of quarter growth.

of in performed and remained well heightened in backorders. meet million with to the insufficient we to $XX continue team in quarter, expand QX extremely extended And demand. period Our to an though demand and we invest production the entered supply expedited shipping, nearly meet

XXX%. year. XX% rate But Typically, XX% factor. vast versus of higher, direct execution change the a makes margin QX $XX sales to segments this A by this of also net points was only of was gross penetration last both was sales was total increase. mix almost retail Gross up sales. a X,XXX majority sales XX%. increased year, driver in key Our million, Strong basis profit of across

realizing costs, a now expense We saw This to surge sustainable, it’s more begun and into revenue our is cost in turned logistics of we DCs have amount the teams was offset thought by in by leverage, Lastly, we’re in this and global transportation to in increases and a the XXK, disruptions logistics. not driven demand. invest partially we marathon. meet sprint, in a COGS, then tremendous already

development advertising in XX% spend was We down $X of versus to expenses. new was launch VeloCore sales adjusted now OpEx, expense were last and last and X% R&D million to to last year. in Star last operating $X performance, stock improved year. this Selling of of net last in to by primarily to sales due in by our were G&A million We expenses investments $XX driven versus by compared in down of increased the investment comp sales XX% our $X net year initial down down marketing year. JRNY, Costs last million million incredible transformation. million to saw million, support versus bonus leverage XX% of the needed Costs by X% for product XX% year. X% goers. year. sales and versus Turning capabilities expenses to to X costs million driven $X were Advertising quarter and net year, gym year, this million bikes. North set this targeting to in the versus to increase $XX $X XX% increased increased

we We’re the the that predict the significant in But our really quarters. it’s two proud how stretched demand, operating since magnitude in year’s volume recognize difficult we where meet workload of in the demand increased to sustainable. income areas incremental our increased to of million of work. are of levels expense begun and But generates products. $XX last enhanced loss. these duration to an team versus not invest seen waning Certainly, million, leverage $XX last was haven’t for improvement any we’ve sales Adjusted

XX% per by operating We compared per million million was of loss $X.XX a XX%. from income year’s This is million continuing year. $XX continuing EBITDA or $XX last to a from EBITDA million Adjusted quarter’s Adjusted increased share, $X million. adjusted adjusted ops ops or diluted to XX-year of loss compared last EBITDA diluted margin share. lastly, $X.XX improved minus margin adjusted high. of delivered $X to And of $XX

in was strong ICX. execution the The offset rate XXX% both points margin up $XX I��ll weights Gross by was QX XX gross drove The partially Net by results. Turning for a to be now our launch. increases strength. was driven XX%, bike by last $XX VeloCore by comparing the compared profit cardio $X backlog transportation XXX%, Bowflex $XX improvement year. the last Schwinn to up Starting million primarily $XX strength, in of by loss higher and expense bikes, and to was grew strong to of benches compared Segment expanded driven the leverage, QX million in by million, $XX connected $X QX gross million increase The in fitness with million Cardio increase performance million were $XX performance. offset costs. XXXX million partially with advertising CX in driven QX XXX%. SelectTech contribution percentage million profit, and Direct. this with QX. results sales delivering segment. by year’s year’s XXX%

XXX%, ellipticals. Cardio XXX%. and million, XXX%, Turning now high to the historic SelectTech up Schwinn were sales Strength of Net and like sales driven up by a ICX Retail. were by up were sales bikes, $XX benches. driven weights

customer we net QX brand if XXX%. Importantly, grew rate QX’s exclude Gross compared sales, Octane backlog was was at favorable $XX segment basis points, mix $XX contribution $XX to QX. operating by for XX%, up of expense XXX sales Retail million, higher by margin Segment driven was costs. million million up gross leverage, the The XXX%. by and million, up transportation offset partially XXX%. was expense leverage. $XX and driven was improvement Gross largely profit higher profit

flat position increased $XX the partially Cash the were our now payables primarily than growth $XX QX $XX of year-end held-for-sale being associated website XXXX. due grouped was and held-for-sale to resulted of continued QX for timing was we to current the was face is is into our the million, in cash disposal Even demand flow. quarter. Octane earnings at higher facility. this assets higher million of credit group. due primarily XX% more to to $XX in to sales sheet. on our end year-end balance much liabilities by the of million The Debt stronger end detail the heightened of to higher the QX million increase compared supply. was re-classed flow-through and QX, Quick had $XX our million, to regarding Turning included million, is customer the The timing and payments, we on on fourth AR Wells million reminder, inventory liabilities advertising-related outpacing great totaled the into of our sheet the year-end. offset of and at being payments. million was at positive group Strong the receivables $XX $XX Fargo than quarter Inventory year with end. held-for-sale borrowing inventory CapEx still available Please million. see consecutive we’ve a due of of release similar have though down certain liquidity held-for-sale XX% expanded presentation. $XX assets current and Octane highlights. the other disposal Octane $X and million, XX to press our payments balance significantly $XX than decrease factory and demand. capacity, year-end, to Trade for

open in $XXX and products. factories, suppliers’ QX, we capacity guarantee our our commitments. Schwinn million we for PO further about to the Bowflex, increased So, POs At end of had our of Nautilus

the these been, slow just to provide waning like able We to POs haven’t year provide we of has seen still but saturation, now we we’ll at our to demand year committed some have expectations Should atypical best We any typically to turn units full indication believe sell for how or demand don’t our down, viewing seasonality sellers. on how year. wanted and I’d through be forward-looking pace. perennial color slower we’re results. full given the to this a guidance,

sales as think forecasting the the are volatility $XXX net tied net it’s is you We logistics environment, and capture share $XXX factors three when helpful when we with to the intended We range between to expect to our full in be to year shipped. recognition is million. sale. sales million considered The items revenue

supply. is first The

quarter, into visibility the capacity weeks have six we are we and factory clear to output. Given

began million quarter and entered $XX second gyms demand. off when demand backlog reopen. is a in have The drop the seen not in to We with over

third The related to is shipping.

industry which schedules, have logistics ability driver the this continue predict full are of impacts transportation And containers lack the next in has prepared The a season. Given our few inbound outbound companies, global other of the we that it carriers will when to current for an working the of impact big in our appears issue shipping QX. holiday the China Like recognized. months. for are unprecedented to sales it difficult our e-commerce through outgoing more disruptions and Domestically, predict volumes. directly network. shipping was backlog environment, is The already shipping this Retail’s limited from volumes been

We’re after carriers constrained much Black how more will network predict Friday. our to but fully at we this adding more cannot time be

to now Turning CapEx.

are million and raising plan and between million as And to million overall $XX $XX be between to to $XXX We adjusted we invest our to in guidance expenditure EBITDA infrastructure. capital JRNY million. more expect and technology we full-year be $XX full-year our

lower We expect QX’s. to gross QX margins than be

Aside from continued pressure on transportation cost, we’ve support already to invested in teams additional resources in increased our DCs and logistics volume.

digital We support also fitness investing and new to as is expect be as on Today, platform, expenses, we operating increases continued in JRNY we an plan in long-term QX. And, our more products filing investments in are good now item finance connected we’ll corporate in we’ll transformation. mention. We making housekeeping. be our launching marketing SX. to our pillar One a this final view early key that between which

with efficient our growth our roll raise North allow completed to internally to outlined and term capital. with externally to market opportunistically additional year. to next it long strategy. out objectives We to to capital registration immediate provide plans share no the A us access support have will strategy use Star it have We plan the and and early begun shelf us act in the will more

call the turn to Jim? like I’d for over to Jim his back comments. final Now,

Jim Barr

endured responding a great We people of our on top selling a since the root to on key We into and demand. for The against was of COVID lost connected be term QX a resulting hired cut change a it turned performance Thank workforce. became in had good is end out out our Morale change surge, XXXX, be We base, delivered our we that of products, team a in the sequential to surge real causes trajectory the Company’s see four our could XX% channels the Company. implementing our a rolled you, for growth longer All we historic a profitable business QX quarter began past XXXX changes been and product, to shaping to the most the historical as track and XX% and at important ourselves up and A blockbuster quarters first action decline, began devastating fitness. accelerated and quarter. moderate hit executive as Aina. our quarter then focused team, for in new was revenue have members of low take of the QX personalized Company. out already a line the results. horizon. started but in being been meet which quickly pre-COVID of that improvements It with on growth. our quarter plans. What of began and was profitable to and were to response, point in sustained those COVID for only led have QX position history. out long-term temporary journey

energy transformative, to to will work. long-term have continue be dedicated and We strategic time our significant been and

but accomplish your call partners most Operator? and all I’d can our I thanking we importantly, open mission. I up look together. our now, who by again the our that questions. end employees stand to Lastly forward to want to And to like to committed

Operator

is question first Truist Swartz Our from Please proceed with Securities. Instructions] your question. of [Operator Mike

Mike Swartz

inventory. guys. those and sense, and couple how us we DC, those odd a of us Maybe magnitude sense the the -- running is should evening, mentioned Aina, understanding Jim of you and investments both just but to near-term of you Good capital number this is investments in wanted through logistics very And I a year, give next a business, working I about know I the out, maybe think know Hey. of quarters. and think give mentioned some simply the I start marketing. P&L incremental that times over a some also

Aina Konold

like higher. perspective. be EBITDA telling adjusted than the that QX, margins guidance it QX you talk will QX that to beyond gross and for expenses are should going When I’m you to lower be comes that for just Well, years. give to we’ll wait launch about you that’ll more investment how and the have because sort next QX, externally until much on few we -- I’d of color our long-term give transformation, our

Jim Barr

buckets. like volume, way. I’ll of customer into of just on our activity massive adding just continue see is, customers Conceptually, sort the where activity, have that a care, of our that, base, serve add then couple based of to spike fall people in places kind they you One and to and our we DCs

digital some that’s into long-term ways. that are and see. go I in a and different our plan want is technology what to mentioned play. to lot execution seen investing So, want I And North our three, think continue of play what now in and mode key in new Star said, brand; head you’ll in then, going a marketing to we our where a as the and we a essentially to of sport as in we areas few strategy, count, experiences; for investing we our really or two, sport be One, but and you’ve not we’re change

So, -- when see good that you is couple new in example a few one launched a in athletes Officer that, think -- you Wiseman. spots, weeks Chief hired ago we we you do of Digital something that need that I and or like Garry of the

Mike Swartz

an launch kind the of is you most historic and to year forward, terms can, launched thinking kind Okay. years. for in an odd second to of the the just looking typically, And product are the timeframe. we that. about just past, way to and Thank product again, you of relative in cadence question, throughout new October space going be Is that you should your know the I I going this year But, just to anomaly, launches be upcoming schedules. is business in or this product if for year? of the August year,

Jim Barr

really way seasonality to was because product this the there’s been no think, the been in people reason there some our saying And Yes. I seasonality is that I start mean, was with it cadence buying you the had year. way products. have were

it fast. for the VeloCore, say. With it’s kind and be honest and with too normal demand a a a way, quite sold we normal launched global year, we supply, not accelerated we out example, And when lack just you, launched of in I’ll of we’ll

then but important a run of hey, So, some to launch at out, or we and it date. then to we and be first should looked later kind build inventory, -- market at is that most should said,

can the through working product of things to your in But a clear You’ll proper ahead table And be a see built an of have great and delay be would things really I product, a launching up then. have And We’ll you’ll it time thing. for kind different of I but options all to your cadence our than So, been the just want? us but and that year. little one year, year. learned the to not know, to by and your see that, having people where -- as more -- you we we’re going seen those inventory have can would is, be think extended both, And I inventories. even extended that. kind be it’d launch, way we’ve Black period, and promise competitors hits, we’ll end and these hey, normally that up once type early just things that between and try periods. on it. like promise Friday anything wait the quarter, up then, home as of hold -- exactly It’s like things still think very the by do getting first get probably obviously, bit of path else a gifts presale your or this your, much it’d to wait now the your you this what if holiday have

bit best little just to very to a these different year, bring So, out products and trying ways this market. the we’re year, figure to Mike,

Operator

is Sharon question William your Please with from proceed question. next Zackfia Blair. with Our

Sharon Zackfia

Costco of alongside either also I’m and the in then, a guess, kind or demographic an ask to the growth of If about Costco there in whether XXXX questions. with the the bring versus seeing VeloCore your separately both I there, U.S.? your the I have your couple I demographic kind was traditional afternoon. curious, pandemic pick you’re or for Hi. opportunity of Schwinn Canada, space customer also Good in the shift to brand wanted the impacting reach? brand? Bowflex Hi. are how and to And any introduction,

Jim Barr

to we We’ve ago more year It’s all, great my add quarter, year number in part, her she a remarks, analysis, I have we’ve the CMO, the phone. question, Alseth, start as this spent observation in seen our so, but of Sharon. Becky customer quarter. Sharon. I’ll got segmentation of times most on saw she may Great analysis we the of Yes. has as customer And first and in there. mentioned new -- segment saw seven customers the on deep new that and

you I need But, segmentation as people really customers time this. products of our we able a won’t part customers. years and been think tried couch, on a they to astounding as major doesn’t reaching that have them about strongest So, folks love helping explain that with for the up had we’ve of then getting, me. that’s based has as that people And I sort successful again, that and confuse their the other a they’re but a it’s traditional those think we the mission. we’re who And still segment feel that of name building seen getting of we before. brands I in but getting maybe makes new gear, long to have, fantastic some them as that me years name. do we’ve that We’ve honestly those will this them sense, that everybody’s off much And set Becky segment, to a in that Then, try segments. well exercising been of our segment internally, on and journey. for going introducing that our this people than some been And better never have and ago, work of -- and has to

doing While actually segments some way of I people we or I infomercials if of that but and under-indexing market mentioned, segments like to a first different that what group exactly couple more. And with. it extremely on be was -- was, went we extremely, on or it up I over-indexing bit think, that, late quite we the kind night don’t know ended successful missed at we think can we exercising

backdrop, that Becky, add So, to maybe with a there? anything

Becky Alseth

I that fitness. consumers one set after thing But to preferred went other Sharon, consumers turn had Jim said, the targeted fitness, more home is, of really we think market actively home have them. as thanks. as who many Jim, to we Yes. really

to So, media of people of past from in it’s see years in really the the using that, messaging And think, would products, people. high customer. when actually growth our that traditional some to brand. have our those and our I quite advertising been target of behind gym-goers awareness coming the it’s then, our really XX you addition in And we not some Bowflex, have for were

So people to you organically coming see it.

Jim Barr

quite relationship about I them some helpful is in your have was with chosen the programs to were with Canada, the And other to in Costco And, We’ve start Costco. question think, yes, very very good. U.S. soon but

Sharon Zackfia

Thank you.

Jim Barr

Sure. you, Sharon. Thank

Operator

Our next call next Steve question Craig-Hallum. Dyer -- with your with proceed is our Please with question.

Steve Dyer

congratulations Good to the all afternoon. on And results. of you exceptional

Jim Barr

Steve. Thanks,

Steve Dyer

I a into for JRNY moment. guess, digging

that closest other still. for from proxy as gauge a in very, traction revenue, The paid looks that small like look at app there’s numbers JRNY sort everyone’s But, come think, decent of you non-royalty of seeing I hungry there. apps? well. of sort a very which would and the be to sort I can are of traction there that transportation aside for downloads the Is little bit with anything

Aina Konold

is where that That’s found. right. You’re

important right that at subscription members make what it’s but we’re the our Company other said, forward. in the and to I that becomes now, to right just focus you see things our go think, looking beloved by dollars doing an it that to really similar it metrics pillar the our we’re not

are is So, really to it about members, small. we more portion we of sure becomes say at when from a that there, these because it key our experience a we’re make provide then don’t digital right lot our things the metrics talk now, best pie. of of metrics, we looking for bigger it, it can about But and underlying those

Jim Barr

discussed, that And differentiating in one just add, use actually of it, I’ll features. really the as recovered and was quite And fitness. really some key quality things great and And our we Company people product we’ve love got missed the who well connected we’ve with it. JRNY what’s the of

it the you’d However, on across where as portfolio you not to the in be. if and BYOD machines want a you’ve like, it revenue’s format, gotten as many not

it. material, And evolve in plan everything, those scale our going have, can we you’ve doing a place, to And, focus and on to that that organically where in be continue number the is business it. happen. this new leader you’ll for is a we’ve a that differentiated talk just JRNY, make numbers. our unit to a but we’ll But about so to more to side. scale will particular that’s Company, experiences. not that be scale strategic got is reporting to inorganically So, digital it And and mistake, experience, heard business. is do focuses long-term we’ve and only And we everything our more no one initiative that me both investing we and journey see that, make And on of JRNY got strategic start be as big becomes particular we’re make to to

Steve Dyer

you. Thank it. Got

it’s backlog you topics, Next jumping you me, of is one for seeing your what seen have look vis-à-vis it in you’ve you with today, sort far? notable or look revenues anything just -- over trends, any at the six kind composition as how to does forward pretty like maybe form last hold months? that looking the of all Are true what so there the

Aina Konold

the the and suspects of exciting pretty and We’ve VeloCore. of But what’s periods long to promise demand. is are really holding the the some to had for It’s benches. response them bestsellers, key our such of usual bikes, lot true the we’ve weights also form. great IC A pent-up had

insufficient. down expectation there, Jim like bold As we pretty mentioned, still it had a put We thought ran too we way was out quickly. but

in suspects initial really, some really responses seeing So, the good usual past, VeloCore. to

Jim Barr

the order supply And version XXX March, with VeloCore, then, list collected way XXXs, of of in we XXX,XXX leads. then, gotten in the -- the back April. We in when the is down. a ended fitness And up to our paper of in on we pandemic. SelectTech since as we’ve we notified kind addition of And went that toilet the when taking a we list of started initially stock worked those over went kind and out of

now. worked through almost We’re entire that list

stock going on that you’ll in So, back the on site. seeing be

guy, an e-commerce is and than team in button on grayed the anything knows the this As one now you the I order they hate order that. go thing down, more willing in out our Because great world, to like customers -- website. to I of this we our could that can to the list people and as and XXXs, to just you’ve they’ve Because and more, couple people ready do fantastic it. in the addition about someone you’ve done generated work we And what worked express begin then, serve a you case you product, the in of down, where tell. to can’t we still an even that demand, all the we’re already you couldn’t marketing buy, are of interest, that need months buy have obligated wait the But, to felt waited.

or be So, the they XXXXs. SelectTechs, that bit tells XXX, you a those the whether portfolio, includes the backlog a the lot quite XXXs the of and about product

Steve Dyer

Last for it. me. one Got

you partners, partners retail talked them And this Thanks. XX%, that think, of last further new of anything you distribution would quarter. you some the revenue contribution the retail several anticipate them, by quarter. been Amazon sort about What’s there? of I announced? grows added from you Your like of

Jim Barr

if sell I buy decisions, different market what among allocate the and of committed the and making and people there. been retail a and these supply to strategic And We mean, And in some we know fantastic. obviously, demand then decisions run. the greater it And We supply basis want feel accounts things, the we obviously we’re days, expand actually reach I for touch mean, we’ve the things it’s that growth -- demand. retail wish different how were and wants satisfy completely those retail, to direct, everything difficult choices best these on to we on way. in money, The that long Yes. our has of not they want to products. us what multiple we allocation would those make do -- customers. retailers is one things done to very most to we had way consumer but how serve they goes supply to goes had like would to ways direct in is that that. the think most do partners, any our have to and retailers, get

seen, as fitness wanted enough really while, But are into decisions do the or customers fitness our we’re want to this that add really are retailers retailers sort customers their have doing And long-term -- that carry anything anyone to just enough we great these numerical. can. had the and not folks about So, best outstanding that very care found their that that followers And and been I’ve out of is that And has really category and the not the products. I have that we strategic has thing home the more Company a retailers mean finding with -- products more products. them. these new not extended said for much and of it’s the pretty category.

as traction to those existing and doing Buy. and come Best as Amazon fulfill retailers, lots of our like with So, great well. we’re our on, And ones best DICK’s new the

Operator

question. from Markets. Our Capital next your question proceed is Please Mark Lake Smith Street with with

Mark Smith

the this, but into period, on any or VeloCore? can give on you if quarter know just impact but it VeloCore. I short looking insights and you sure from Can was Not insight guys. the additional a -- for Hi, us will answer time

Aina Konold

sales September up it lot late late shipping in -- ended of mean, September. launched in a the I really We

on really quarter sell that impact in is But, back were the to they ended number up really, So, we order items not able of then our the is and material. encouraging.

Jim Barr

our exceeded expectations very it So, yes, so. much

only got product not we’d not just So, very innovative brand to a and different, able that also, the that’s in like be, because product arms. about we’re and think product an no like tech-forward availability to benefits And But way core with is us differentiating, more show it. life only there’s it’s the but other really it’s your that that our something I better I for like advertising does excited this. excited also the said,

pleased So, had be we’ve traction been very more with we’d the pleased them. we more we’re if and of very, so far, even made --

Mark Smith

really The it’s the sequentially? my costs, that’s that can maybe VeloCore your next feel talk from excluding advertising getting kind And benefit then, what like about And Okay. VeloCore, how of you’re portfolio? advertising the tracked advertising, helping that any the rest question. you of you

Jim Barr

phone, for the -- any and had actually And to on just that we on terrific commercials, was wanted we hopefully, these hopefully, or we way right the do to some reasons this what as the and drive VeloCore me as may for really the have mean, to to really is comments I she available, to lead do But I then, products most show the chose buy of you we do the in you I that. our that thought So, so traffic a year of just some it. with additional website us this. light. seen mentioned mentioned, have And agree they Becky

the we and back, So, in one we if pull kind back those do, always we few you the getting versus a return, get first. we last then, spend, transactions. that. have much lessons on And transactional we’re of as is much return how that basis our How you a required learned years of spend not on evaluate of rate we for

to do we did And we when then, good a wanted in launch. in any get didn’t the advertising. to second we quarter, For we thought example, third this, quarter, the have

a the viewed past, think, the on if our direction some brand. shown, the just like as ambassador of be we mentioned, on in good also I newsis showed way for in really it brands. at least It to that great return we right would a trending and our was us So, transactional we’re investment a But, element. good we were unlike, as getting the ads I our it

don’t you know of add your I thunder I to Becky, or So, anything if all that. top stole have on

Becky Alseth

And a the And year-ago. introduced million $X you overall, quarter, was million last about $X No. Thanks, really spent remember, during I versus if Max We spent QX. Trainer which Jim. year, just increase we to for of or would our we Jim’s we right. some behind was for well VeloCore drive strength But spending significant to people, wanted use a some did to transactional it level. tactical some inventory. traffic whether bowflex.com. where had as we And we then, other for products add, bring

Jim Barr

a And of TV. really, lot that’s TV, that’s

heck were in of lot also the pushing a all products for sale portfolio. of We did advertising. the digital were we regard, And that a that in

So, see our we can through you’ll of feeds and and while inventory. things TV it online on had we talk advertising could had target Right? or like in amount you whatever about portfolio, exact were VeloCore, our if that, you time see for that see commercials, social any much the driving that to search you stock. of exact You SKUs the actually spend you the had pretty we that you’re

Mark Smith

or any and of exemptions kind last we’ve exposure Okay, Can give here just you reminder one great. or us anything And on me. then, on recently? tariffs, for changes a seen that

Jim Barr

Yes, he’s been Supply Head those that? Head title sure. got Why Bill Chain. job and But our main they Supply so in really, our is his of He’s is do these Chain, things. of all don’t let I on fancy of another involved tariffs. put Bill

Bill McMahon

Yes.

top We’re of is to that normally. majority tariff points incremental X.X duty roughly of our import, vast currently subject of on the a and we that products on XX%

of So, as think burden. sort that of

Jim Barr

sorry, -- that go ahead. Does

Mark Smith

crystal bit, I in here change to you your you administration into look No. ball was feel opportunities? guys little any if to going want some do a say, like maybe given

Bill McMahon

reduce to did tariff The X.X%.

got up. mixed I my numbers Sorry.

Jim Barr

year, you And So, for the were year, if last XX%. Xst at came earlier third September remember, they quarter reduced to X.X%. this then, essentially, in they

X.X%. going against of for part So quarter, the -- XX% you’re of you’re kind

X.X-point For it the be Bill? difference. will quarter, Right, that full fourth

Bill McMahon

Yes.

So, we’re comping favorably in QX.

Sorry, for the mistake.

Jim Barr

you Can question? start your Sorry. with other

Mark Smith

all or looking just, we crystal a was tariff Do there that here, at later? It administration in, exposure we like maybe opportunities? what XXXX, coming if forward in maybe Yes. less think looks as you new at your see look are look with ball you

Jim Barr

tell I know. executive will tax be that then, relations too mean, you’ve split China can early Congress up Right? be whether will got I and especially just policy air, say, We completely if case. But, better. the all And you branches. with the don’t in to Yes. is it’s hope

everyone doing. just been just and So, those react else, things like we’ll to monitor as we’ve

Operator

George from is Capital next Our Partners. with question ROTH Kelly

George Kelly

or TAM. you kind the done I I to a gym for few number, are of something not back. I size goers probably industry but going with like -- that it forget start have So, XX% I’ll I appreciate, of and that surveys was you. XX% think you’ve shared, exact

to compared normalizes So, pre-COVID, bigger a your now, be the of group pre-COVID, I at-home years this industry do is, all or industry kind of how customer how the levels? pre-COVID guess at-home much two be kind will my bigger year much you regular the question from think versus will when

Jim Barr

you And about issue grow when we planning, Yes. it at market, would our strategic X%. started a we $X.X billion. if that at-home I than less was mean, Because it huge little this in was a all about the thought our right? we fitness had strategic thought planning, up,

been, growing would plan those to in share So, have our market. gain a slightly circumstances, in

the that And a hit, market. when you’ve I for this got my all all reasons bets then in are remarks, whole mentioned growing So, trend off. massively

that we say XX% about for the long way people many gym we Never got it, to sure never back. membership is it you’ve the know and got you roughly mentioned, $XX billion gets, but think XX% they’ll And a market. big time. how that a you’ve don’t So, go that

I do not, But, $XX got that don’t a from of billion. is shift So, them at then group or believe to you’ve $X.X that permanent some you billion know. if true, the

buy when the And case. They’re that flood They’re think just then, then on balance home, Then, eventually the for going things normal. reasons back, remarks top. who back they’re it that go to in to going they’re right? differently. back a to for going going just said for new And the to as add don’t they’re they’regoing will in have to safe. also just I my we well, You people go

us we things we that those add them of up this to. we add a they could in you’ve knows So, all and know space, if you who got everybody’s just mean, results, public. and we But, there’s get just are. exactly were all where and couple where I public all up are unfortunately,

not our its we really this market It’s year, estimate getting it’s that, $X it as maybe guess. like feel We an something our from to maybe share. best tracks like know. more industry fair that don’t our went that well But, maybe But share as billion. we’re for So, billion, $X.X than $X billion that.

we and But, more our becoming to we’re survey and make looks us. best continue that it estimate. that’s like. of As more for And data-driven, good a try all that’s pretty best do job kind to our what to opportunity of

in a There If in industries aren’t too there are year. a that many out to say the you that it coming year. quite won’t maybe -- doubling double close

of So, then reasons much that And anybody’s grow. then it’s much of helps. for how that to the growth -- I said, guess how it that continues retained how the is and

at billion, know, as we But supply would $X higher constrained. if than it I be all like feel all are. maybe as that we weren’t we think, I far all

as numbers, will that that’s There they’re I more But, can a more but and on on monitor. But, you of would sometime number. other first. more that then a leading any a the And numbers, we maybe our wouldn’t kind different what time, be gives there’s we whole say of we’re you see, and thing In to lot some So, are where call, in major the early crystal time do we we we’ll is based to there’s mid-XXXX We’ve react then, website, where of those you’d all us things itself a are crunched probably you like sell-through, get retail ones that some are ones, hard that things this there if a of traffic fulfill in listen and And you’ll looking bunch waning see at that there. sense. hopefully, is maybe that but work any scientific it surveys see inventory. maybe we we done But -- we’ve would way. anybody’s there couple in demand, of a and would ball, see indicators, think. lands. meantime, able the think out in to it

George Kelly

next there. sounds going it’s but question, early a me to it That’s innings. if helpful. you’re and so I -- sort And then, it mean, And transformation is sounds JRNY like of me wrong, through correct -- I’m kind of

you And guess everyone point? content an as so, is, my offering, else some live JRNY is I more you to question live’s do important content is important what about at is learn -- think

Jim Barr

phone the I’ve JRNY here. got the father of on

So, Chris... we’ll let

Chris Quatrochi

calls, X has this a content but little space, in All fairly right. on my our cents. about previous George, time. a I’ll proven to talked give commodity in We’ve this be especially bit big

really looking able content world aren’t but the our one content best so, found schedule, the And out to offer. to things to types on-demand it of really are respond they the all people we actually content. has their be to we’ve really is impacts actually architected of live And product and looking because for for that -- been

because what the to platform, are we’re coming that’s we’re JRNY in out, adding to to the on-demand VeloCore of you that continually starting going take use. So, see XX% people and you’ll products when especially looking see content other that be

George Kelly

last think strategy about. North Is and now? M&A of that, important how talked you Star then, you about the me that And do dynamic right M&A Okay. for about question an

Jim Barr

are products content on will it roll that happen. out, and And fact you here are terms behind cases, and especially, partnerships we maybe number goers, a of in our displaced be for largely particular, strategy, the have it table. big way. in to when bets gym bit We major we that in all of some make long-term organic. the do mean, confident M&A even on that and you really without do of where like takes us a it when kind a you’ll content my -- want like you that the look short-term accelerate when when But of see, that Well, scale the we’d help Sure. you in urgency sense it’s be strategy, to to of do in a to event, of a it, kind we opinion, what you have have have JRNY I have improve

in So, we be organic executing of overall, both way. on execute, inorganic as we in levers, those will kind and

Operator

of turn Jim question-and-answer comments. over end to the floor back Barr the reached closing have We I like for would session. our to

Jim Barr

joining on with in Please your look and a for onwards to today everyone day, rest our call call. Have a our thank the Thank and another great you. update upwards. business to of for continued months stay like healthy. of Nautilus. and providing earnings the We on forward support you fourth quarter safe few I’d

Operator

you This concludes participation. today’s for your conference. Thank

your disconnect lines may time. at You this

Bowflex (BFXXQ) 9 Nov 202020 Q3 Earnings call transcript