NLS - Earnings call transcript Q1 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings and welcome to the Nautilus Inc. 2021 Transition Period Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. to conference like host, to now Mr. would turn over the your I ICR. Mills John with you. Thank

You begin. may

John Mills

Thank afternoon conference call. you. transition XXXX Good everyone. Welcome Nautilus' to period

the previously XXst to equipment fiscal the in year-end months partners. beginning for fiscal fiscal January As exercise and in and the XX changed year ending primary Xst better months season March X XX same XX align include retail and beginning year December ending April Nautilus announced, to the with the of to its fitness

such, financial is Chief Jim As are March results the Officer. Financial webcast period on as today, days. being referred the Participants XX this be will and Konold, Nautilus XXXX from Barr, replay to Please note XXXX Chief available for the Nautilus is call for Period. Transition Executive reporting January Officer; for next call XX, to Aina X, the and

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

release GAAP earnings at website at press issued of most today's our the Relations Investor call mentioned earnings today on measures includes comparable from to Pacific The a financial page. X:XX Time may directly the reconciliation downloaded nautilusinc.com measures. was in Our release and be non-GAAP the P.M.

statement presentation we For remarks. to Harbor during that ask our And is accompanying today's their everyone read. on have which call, management we a Safe full prepared call to the will refer slide two

future us and available forward-looking the performance based reliance These and on should Such remind Webcast to the everyone by to conference place of and click Investors now can one are beliefs on there. undue going are the and nautilusinc.com will Nautilus on on to management the be during of I'd today. presentation information access management and presentation not the make call, and You of then tab that statements guarantees them. forward-looking certain therefore, click not will like forward-looking Events statements. currently as the statements

ability results known factors and unknown trends, risks, actual to uncertainties, are be Our will affected and by predict. that and control our beyond

additional and filings concerning Relations can that, the refer the factors, our the the For our call SEC pleasure in be turn Harbor Investor is to found it Nautilus' to with Mr. And my statement website. these which please section Jim over information Safe CEO, to of to Barr.

Jim Barr

spend our by in our bringing John. highest history. revenue with transition period continued in quarter were the against demand in supply to challenges straight our performance part and you, produced demand. period, the closer Thank move to impressive the much global at-home logistics, reviewing record-breaking Results unprecedented quarter matching exceptional I'll to for In driven strategy. along on the strong company the Star XXXX efforts this results today and transition for we second first we've then progress of made North team's solve leveraging fitness, the delivered

and once were growth and again brands, broad-based contributions across products, profitability Our segments, geographies.

$XXX history. period, revenue This XX-year transition million. the up $XXX to in first XXX% the For our time topped revenue was net million is

Direct segment only The posted and Excluding excluding XXX%, time million second for first year-over-year. XXX% for mark grew quarterly segment its while up Retail history, revenue, highest the Octane last Octane the segment revenue the period business, was crossing the the divested quarter. second grew XXX% $XXX in to

has \ important memberships Strong growth. of to SelectTech excluding momentum been VeloCore our journey. progress XX experience maintain from of Trainers, combined revenue XXX,XXX in cardio tremendous year bikes, our new an with feedback the hundreds that a Octane. The continued the brands these team and connected of fitness treadmills, record the journey beachhead customers grew and continued I'm nearly for sales the International connected numbers. XXX% drove to is achieved pleased to products new market strength responding making Max machines, of reception or products product part versus growth is fitness our connected business, last our new of but international thousands We've Importantly, our member is XXX% acquiring in world-class new sales to our introduced months. really further with new and build out last have strong are and we customers proud in to in smaller

which And at-home period and accelerated short-term third times members margins long-term gym gained Nautilus steel has since the they Investor and classes, a pressure Day. greater leading community the to no fitness. future variety. industry. We company Despite get change profound sentiment end income habits in now journey million We've with goers has of during gym: the plan hit, and of online gym now to March in consumers million to the of $XX including Market doubled. we was do I of This million foreign EBITDA XX% As and was least September. you in saw former North inbound fitness we in time Star the I'd full highest dramatic higher our across year the an since on our just believe end the gross electronic Investor our year-to-year strategy for did our We as at fitness trend our towards to XXXX exchange execution $X.X than is a Addressable attitudes investments, and fitness TAM see understanding in our to the pandemic followed last to company's from increased the had has at And a going at history. compared Serviceable components cash at continued into growth. that in experienced Consumers to cash of long-term North great headwinds, beginning at-home showed longer on us and ever and hope or goals. our came Portion for closely back $XXX objectives well-positioned investments. In and year four home from update elements enthusiasm our changed short-term Operating the of could shifting embedded period higher pandemic the ways. strategy. deliver outbound SAM the first Star $XX connected the and introduced still have on and came be March, we Day, goers consistent. of September. and very ended turn unveiled and as of and of growth the in invest stayed could connectedness, like not membership the We of former technology the many after commodity product the many screen prices we of the connected at-home that that million, logistics we gym. remarkably cost, trainers, nearly on are expected.

they variety. offering As more many safety of which packed convenience prefer working added at have and home, digital out now with has found the of a benefit the

be a believe model to already US will many adopted sustain demand alternatives. also work workplace hybrid work-from-anywhere of the help emerging that We the two-thirds remote the products workers Studies our of widely hybrid committing are for world's and employers and and prefer services. indicate and largest

between goers their and addition meaningful a at As believe on home balancing schedule. home on work-from-home, a to work gym gym to in memberships out we number they will of based gym continue work their days maintaining result,

company's distribution key digital enter we strong build and our can are strengths on the that Our as phase we heritage build brand wide and of out of next capabilities. omnichannel evolution product innovation our

digital We from transforming are consumer-led hardware product-led to company Nautilus a a company.

which Our strategy XXXX, of equates to to position long-term CAGR next value, $X billion XX% revenue pillars in is including in the over rooted five designed deliver Nautilus years. to five a

continue introduced investors we has a highlighted just vision for on Investor as changes board, North to been pleased our that of we octane and mid-March, this the in to report points Day, capabilities the have quarter and early few such the and make important progress. our call of what to While may that At enhance Star now. part I'm organization sale personnel we we months it

North around to biggest becomes fitness, number for one is and consistently and One This product underpinning consumer-obsessed which consumers their understand which needs the means road pillar the of to is map. Star. wants and digital opportunities of become deeply our working

are marketing with target that efficiently products have know consumers portfolio using offers something takeaway connected cardio really. strength for for is our broad more everyone as reach to choices Bowflex digital refreshed key a consumers media We The of and industry-leading options evolved well newly messaging. tactics to as

As our acquired months dramatically I we XX the nearly mentioned earlier, XXX,XXX customers last new we another indication market. serviceable in clear expanded

speaks want further of needs to to still consumers spend capitalize want healthy In goers and we and results. pleased days, variety of to to with who very ability propensity gives their pushed are product in their more growth. introduced is but out the It work on creative get in returning scale new to March, very journey. of to XXXX. future us workouts initial is their two Our pre-COVID our than extremely we strategy best to be early on buy We every levels plan to confidence in Pillar top one the with that line engage gym marketing fiscal these continue time. directly also

experiences few last two two hyper screen like innovative variety successful. Trainer of The bikes to offerings We're new bike, quarters, journey. workouts, tremendously trainer-led fitness our meeting the CX be adaptive treadmills and launched powered Our our world off next be the workouts in they immersive the continue evolving platform by VeloCore on the Max introducing these in and a us lineup new have product seven told journey Total explore and months. few the one-to-one needs personalized the MX connected Max through embedded we We'll members products want equipment. continually digital and

our the few a launched some investments important experience. that incremental we're experiences improving we number only on JRNY JRNY product since to constantly I the getting new innovating off-machine journey screen this considered of Equipment as ago, are new base, And first of video In we making adaptive the we XXXX. new mentioned added latest Not acknowledge explore improve content. experience. quarter, earlier, days in consumer rapidly we started. together we are and accelerating we've path world plan content we It's launched trainer-led As on are workouts, and in the including just and membership growth growth times members' of version continually count digital embedded purchase we a added our the four year routes, our and mobile the BYOD expanded in September experience. member the seen

enhances capitalize XX% we on XXXXXX our of revenue need year ensure are of XXXX. approximately FY goal award the and fiscal and goal longer-term JRNY products We winning strategy to in our Star we of differentiates and our it opportunity critical us. North to as is million front and to members our being of reiterating two XXXX equates which members by digital over

us Our helped in vision progress has also talent. attract

a Friday. We This our Wayne wish Officer, advantage. awesome his strategic an competitive us XX-year best our accomplished Chief Nautilus quarter thank us into and and we incredible John world-class Wayne a Chain hired is to advantage Bolio, last Supply Officer, supply the talent a in Ellen him incredibly to Chief leadership their chain and People replacing turn we Goelz veteran, have retired very continuing wife strong his lead who leverage Ellen Raim stage. will who Grace an for help next in into

Aina you'll hear our leverage future investments to business. increase of flow first XXXX, plan the strong our our As digital we discusses cash of for the fiscal and into plan quarter that

innovation in making marketing, the discussed acquisitions. people accelerate technology, As and and following product and and areas: tuck-in cost partnerships Day, Investor investments capabilities, journey, during growth, to be membership we'll

profitable Our objective basis. long-term our our in competitors, meets we some to on invest of unlike our pay-as-you-go portion while continue is a our of a flow cash intent to is be This reinvest to vision. operating

business FY provided XXXX. about on in We view from coming to that for to XXXX. focus to and XX% we we revenue We to of part our trajectory of want the this goal long-term have members strong Star the our $X this is and for total to wanted our that equipment see strategy as the long-term operating the we and North we additional important our year discuss that long-term as planned digital offers opportunity to areas business. as As our of fiscal company perspective upside said investment To cross illustrate performance. ambition, bridge reach subscriptions two of of and targets with for Day point the that was of reinforce our revenue we share billion side transformation our digital margins highlight tremendous Investor year-end million in by the well and digital the the

more emphasize is well the a double-digit minimum to XX% business expect This to the upside long-term floor subscription growing said total digital reliable recurring of to insight we sustainable the that and provide operating year-end year-end an to products closer of by portfolio of information. more due XXXX. transformation upside unlike operating we balanced operating XXXX. a be was the For in range intent statement to product XXXX. operating and by profitability by this margins versus projected JRNY at The that of baseline XX% the did The above the margin statement establish a to model. journey of previously XX% fiscal services Total of revenue. for fully the FY of XX% of company, the To rapidly least more expected past target we XX% expected the be to have not margins illustrate following operating from sustainable that are should providing the more over-reliance updated Hero Nautilus and revenue on and new into margins are range, to fiscal

numbers XXXX. scale, margin expected membership increasing the year to fiscal and operating business business begins to continues for journey continue the rate the is As -- rise beyond digital

XXXX. to a company than higher As margin after operating moving sustainably total a see we path XX% result,

higher by Our equipment embedded return cost business improvements and related spend the given costs margins to are in mix advertising screens, expected to structure. normalize to offset incremental partially with products of the the typical

to North we accelerate be past to of the mentioned margins the the our in of opportunistically the and vision. on achievement operating linear, growth Day, I business Star as business may As the Investor invest XXXX not subscription intend

for confident Star help conviction new transparency will additional forward the the are strategy We in Nautilus. this that underscore our the North and path

lens, us a revenue into will margins that a XXXX transforming investments long-term our deliver deliver to $X $X closer of recurring our revenue portion because in top subscriptions. Using a in bring reinvest long-term achieving of a are We growing of members. sustainably digital line earnings we'll the ROI journey fiscal requisite more predictable higher of and and company that billion million ROI and goals growth

of progress how Nautilus close, proud emphasize, growth I'd take I an am As our been to that never for transformation our turnaround places the and before. to I in accelerated incredibly like equipment-only company We tremendous were it's will company we go-to-market fundamental a a that approach revenue key large adding in suffered proposition, began XXXX. our bites the by to value multiple and address and loss of have stronger Pre-pandemic, capabilities. years talent adding declines causes that changing and

results have During financial the produce market fully the pandemic, leveraged two we opportunity to best back-to-back the our including in quarters history. record-breaking XX-year

team We it its that also it sheet. whatever including world on last well retail gets to normal, an the greater new -- back we customers, believe is beyond is assets distribution, built cash the whenever enhanced and will new balance

insights never journeys with will by digital partnership on Finally, experiences consumer us our combines and we long-term been successes. strategic that to place driven fitness it's take experience a now and that put have members before, that in a company vision their a achieve our differentiated winning providing is to equipment

better kind putting We are it but entire trend, vision, committed organization time. around, to leader person only our in -- we as of prepared has work digital consumer fitness mindset, it to adopted to first will will be to more our new a transformational achieve we our putting turn vision a advance this on more a the the company not committed a to be company When of our industry. and healthier sorry world at one we and

With Aina more our our Konold, proud of it next passionate even over so CFO year's go in future. guidance now and and detail. excited like results financial to turn far I'd more that accomplishments over who'll to about our We are and Aina?

Aina Konold

ended Jim, everyone. year. you, the going a to be last period it Thank March I'm transition and the refer as and period period XX, good three same to afternoon, we'll month three XXXX month comparing to

by X% EBITDA Star increased income income compared or gross increased up sales last of X% $X.XX or by driven last G&A and year, last to other million sales sales, diluted million from in X% million increased initiatives. driven $XX XX% from increased improved versus leverage were $XX year. year, last or year. ops $XXX,XXX, compared per up investments or sales primarily year, to in X% of year $XX to R&D Operating to to net XX% and were grew sales, last were as XX% net versus net strengthen. to million continued net year's or XXX% FX year, by XX% Gross sales $XX $X million of XX% million, of of the last basis this excluding net Octane. last in covered as is versus million stock North a landed profit. or driven investments by net $X compared loss share year. to million points the rate or pressures $XX to million, $XX and XX.X%. by expenses deceleration $XX media Jim sales XXX% but inflationary and compared up on to product spend. expenses The marketing continues was costs decrease to $X to million Operating per up X% XX to JRNY. $X.XX or to in Gross $X XXX% versus of X% compared JRNY rate because million increased bonus, improvement continuing As million driven of sales net X% were renminbi $X of of last to Selling Income $X margin earlier, continuing ops million, million by down expenses million diluted to margin $XXX comp year's share. of profit up costs last $XX

and XXX% Gyms. versus segment by all-time million. performance SelectTech high an Direct and and to up to fitness bikes Home treadmills. and backlog We're our driven grew net VeloCore Strength at the $XX profit contribution Schwinn new by higher by driven by million consumers XXX% was Bowflex ICX points really end transition Gross were getting by connected closer XXX% to driven Cardio driven CX as supply now down XX%, products by Bowflex is connected sales margins million. spend. and to of demand last Gross of $XX lower their media grew and and by to XX% declined segment. from $XXX Segment weights $XX period meeting the basis gross our million, Turning million fitness year that pleased land increased the Bowflex costs. Direct million XXX coming faster. grew product year's profit $XX $X was to last are

offset Bowflex and Retail excluding year million. sales and $XX fixed profit million grew higher Octane. to XXX% last contribution up Net results. missed this should to cost At basis was points $XXX partially segment shipped year. million refined driven by current fitness to primarily quick and Bowflex compared was XX%, and by costs. $XXX and by connected The Cardio up to higher quarter favorable Home by bikes XXX%, Turning that that treadmills. XX%, Segment to $XX comparable to Retail's expanded unfilled by up or XXX product transition the used million, our is last Retail driven backlog Schwinn Retail number have grew able connected we was were end Bowflex Gyms further Direct, benches. to reduce driven million. new was mix Similar $X XXX% driven We versus backlog quarter note landed profit. retail's million. for report the weights customer last this. the orders. were to only include on $XXX We The orders period Gross fitness future margins SelectTech A gross improvement XXX% all of Strength leverage, Gross backlog. cutoff. but

to our last now last million million available stronger million investments to had a levels last credit We and $XX borrowing on Debt on million customer of $XX Inventory ended sales. other payments year driven short-term year. XXX% decreased inventory Trade $XXX AR Wells much for by to Turning Cash $XX $XX period last we highlights. were facility. of last payables timing timing from this compared $XX higher up due to year primarily was million, $XX position. compared was with and liquidity to million, million the year, $XX Fargo year. than $XX million million payments. were XXX% increased versus

our As set were levels due same XXXX end initial stay-at-home the in reflecting a $XX the million non-cancelable the end to period of We POS at about first had inventory orders. quarter, compared March unusually million surge reminder the the of of demand for low, the $XXX year. at to last of

in one Star to earnings perspective unveiled year now we March, our long-term guidance. Turning give our said that XXXX, at strategy I this long-range I When a of our would plan. on forward-looking call, FY North

conditions will while Star areas still North towards battle we how take progress transformation our to to most further can communicating and balancing is returning see progress our to to to the communicate trends the the expected thoughts, seeing. While coming many months. them to and Perhaps, this COVID-XX are keep approach the are we at market struggle we over of currently time committed we impact in of thankful investments, We're our learn normal. evolve helpful need

of our our highly rate the upcoming a of strong larger products much than products sales We driving industry. is cardio the have cardio and Sales higher the segments the a capitalize this abated opportunity. to our these we portion products. versus strategy a right unveiled First, ago. not year and believe segment this tremendous on equipment encouraged we we the growth across growth is partners one fitness retail about from growing quarter. non-connected are both our previous has our and increased reception in SAM at represent weeks bullish connected quarters Further, Orders ago are to by remain new several from

an with the at some home, and some goers to Our work the our gym that who office. out option hybrid to return have a about of gym have and those research days plans, that to to continues XX% to days the no at home coinciding gym to to intention at return work want intend show returning of

their indicates spring still Our greater spend more much late higher is direct time, wallet trends. typical also the at the And a calendar return out-of-home seasonality XXXX during of than on activities research that traffic share holiday while people season. to suggesting to a intend same

guidance the for incorporates year fiscal of XX, quarter mentioned. ending XXXX, first just trends three is Our which 'XX, months the I've that these June

For Compared flow and steel XX% excluding year in atypical assumes year, between inflationary of the first to major 'XX, to quarter related versus higher logistics global net and quarter margin gross we and between consistent year new end This are of last or fiscal goods. expect and XX% we year increases challenges and of or prior sales pandemic-driven FX grow in when to XX% logistics and costs. with Octane. XX% global prior plastics pressures no experiencing

Additionally expect in 'XX, shortage. incremental QX due year we fiscal cost to global microchip pressure the

and in spot supply are we're products. investing chips screens for our component to key screen our customers' buys of protect these embedded As meet embedded a demand

temporarily plus pricing more paying We we than elevated more experienced for the period. in are XX% transition SBCs much

June the We operating ending XXXX begin -- March margin on understand quarter a of return margins. XX.X% investors for June ending with for the It's 'XX's impact slide which quarter to the presentation reflects help to operating have margins, important to of in these spend. QX the normalized operating normalized media -- factors the a

related in next likely factors These margin are logistics temporary of gross and We spot FX, quarters. few commodities, but nature, global continue are are external impact to to for to a buying the five-point microchips. expecting

impacts Star X.X to set we of affects are Star versus particular next to expect load-ins flow retail we a when journey, with a last this amount Investor it retailers next on cash the IT begin supply move be Additionally, because strategic then million will from In investments. variable about larger to reinvest told two pay-as-we-go North marketing, Each forward This that means our of investments near-term We our chain their deliver this income, Day with to margins supply requisite investments that sales objective and and long-term is of total tranche North us and operations an sure ROI. focus members infrastructure. generate you making for and percent call get is a seek year, incremental the ones of holiday. in our we at related long-term on both evaluate costs making will our are We balance to appropriate operating QX moving sales the intend in of chain. to first we'll portion segment closer The that the shift given 'XX, by obligations. points. journey quarter

that throughout These price and from we're hit Octane. called go Some the to COGS on costs attractive improvements realize the like some basis starting the point are The of have these and of SG&A. includes and divestiture transformation. waterfall, the I've things to hit investments last increases digital that quarter ROIs operational benefits critical effect rolling our which will into on a

between gross the to As pressures new for operating margins a build expecting be short-term quarter the we X%. Nautilus, our discussed result are and X.X% the margin investments and of intentional to

herd companies, we're consumers still full will react working our to expectations now many fiscal Like is for once other how understand to immunity XXXX. Turning year our the reached.

philosophy full give providing earnings. evaluating additional to we our time, in North We will capital At are our when expectations this investments you each continue we quarter year follow expenditure in Star. upcoming pay-as-we-go for more guidance. on We'll color report

to XXX,XXX are journey between We members investment we expect And XXXX. million we $XX that of expect majority have at for expenditures the to end of the and earmarked journey. $XX capital the with reiterating FY million be

Jim? his Now, I'd like to to for turn final it back comments. over Jim

Jim Barr

Aina. you, Thank

and into profitability positioned fitness. solidify long-term for growth strong well to turnaround and are continued a We our in we digital build profound very leader and transform as

and want by our is Our right already for generating end it to and the to Star thanking has our North for is partners employees absolute commitment It positive early I our company. results. traction their the direction mission.

open You up now, leader. day proud and pandemic, be by the questions. accomplished every what am inspire Operator? to call the year me into your have blown and And to I'd to you over your I like away a

Operator

[Operator the with gentlemen, conducting Thank session. Please Swartz Truist. a your time, you. from question-and-answer Our comes and Ladies with question. this Mike first will be we Instructions] of question at line proceed

Mike Swartz

guys. understanding, us to changed. baseline, comfort touch outlook going Maybe just of now expectations the was I on a now just give sense that ago, in long-range a specifically of past kind March. you what's back Good your evening, of the Hi. to the you months on changed a low-end couple of the mid-teens that months wanted a than gave margin of higher targets, more to the I'm XXXX couple just and that you've give XX% the points several range. in us be margins and maybe should

Jim Barr

Sure. start and ask I'll Aina follow-on. I'll the

emphasized, of to is on income clarity There's it on. that more would We been as true, the change. a question We So, wanted the the more That operating available. provide I and answer on all, provided more than wanted of you it's be then floor there upside. to no we -- comment first but just know. no XX% has get going information real your what to is think at is least we it was sustainable.

change what in provide not to it add like upside add to got we'd look, that we said, to we a it, before little range. to just retrospect in clarity we've more So, that said

make look to it is wanted make at provided we've going been once add deliver, a always sense? and XXXX. more to to always we've you what business They've what numbers. this So always greater gets do Aina, had believed, and upside model. the that? to that we It's of transparency, our want we sure Does these just in

Aina Konold

No. No.

is we to it's covered floor. gave likely about feel like instead appropriate giving more it. where the Like range now you like think I end of a talk We to up. really clarification it's main only the

Mike Swartz

then, helpful. again business kind of terms And then extremely calling you're That's It just business. operating parse for the what margin low-double-digits like target Okay. low-teens through maybe is in out the the if given for equipment targets I even subscription looks margin. the margins on of of kind and the specifically the

you've that the a the past of didn't you You've achieve done over past. year initiatives the the the undertaken in plus. But that that benefit of in have when past lot you optimization

equipment that's more So, around maybe for margins. right context number give us color the why or some

Jim Barr

Aina Sure. I'll again, add on. and ask start, we'll to

put forget will on downward pointed to long run, -- machines to the Aina That that even before. got for distribution pressure in still There will short-term. more -- have and equipment provide them last-mile didn't kind business, of that pressure. that going the is short-term them maybe some downward screens you're stuff But have as to like demand So, on things going we've about begin there. the out, some that consumers

are changing that time. now, So, there lot a that, that's full business our of way everything, of in not seeing the Right because there's screens over we're the going. you're impact but things on aren't

add Aina, downward would what those you else And be there'll so, pressures. to that?

Aina Konold

have don't add. I anything to

again. you final that increased hear never reiterate you customer orientation, of also step little Just bit than that and – expanded your into from it want before little touch bought that was we and screens mile to dump and points, is our to more incorporating we margins. the we're it something just like This product and a front bit a on

Jim Barr

or our point of Day. kind talked as Yes. Last becomes touch of our early Investor points, one at first touch we mile about

So the we that in and invest in got that to projections. we've want

Mike Swartz

now Okay. to you're That's windows? – that if first normalized back you particularly may. quarter. have one heavily, final more within the maybe in to that bandwidth here a sign It just looks you marketing helpful. pretty have, question for we that's that me meet now the And I read turning demand Is the then are shipping like capacity on

Jim Barr

Aina as in of season. more like be a seeing about, Well, to more hey that and seeing, we're there's seasonality just kind we're normal Direct assuming going talked we're

going of the just on very like works at looking based variable the advertising revenue we're It's the return to much to normal level ROI. drive cost that. So and we'll – it a

And how we're course, So talk I think increasingly meeting talk you products segment closer because all And to it's cost what that of where we're – want in content works, we've to got first. still demand, purchase very have, also to direct ownership, then and innovation, equipment, it to yes, a total about. we we but that. want like you path advertising seeing too more that very, that of leaning especially and about do interesting do mean, want the we getting to hey, for keeps supply the VeloCore strong really actual at but it Retail, know about what it about know the need look membership of all things new is about I pretty you we journey. the what's consumers experience, and it day-to-day.

– a to so our well. see you'll more journey we're a lot advertising going And as in

some we that want that. and – spend So money to on

add Aina, want answers hopefully, So that you to do your question. anything?

Aina Konold

No. No.

You covered it Jim.

Mike Swartz

you. Thank Great. Okay.

Jim Barr

Thanks, Mike.

Operator

question from your proceed with Blair. Sharon the Zackfia William of comes question. next Our line Please with

Sharon Zackfia

want Hi, I of I've got good the make right. afternoon. just waterfall sure, A questions. to couple

implying I the through mid-XX% So gross for guess kind of margins are that of second just you going quarter, waterfall? kind

Aina Konold

yes. Similar,

Sharon Zackfia

Okay.

Aina Konold

mostly to as and COGS increases have journey in is well. the – for You five XXX% product cost then points COGS in is

Sharon Zackfia

chip kind Okay. a impact this the on I shortage of mean then is and before it I situation all that your I'm Perfect. to margin be of logistics now And it know mean worse but couple the you as know think and the gross back the the you what gets and business based the gets that, on well mentioned trying about impact just better? quarter I issue might orders? as a of to that and

Jim Barr

quickly guessing look imbalance got to COVID the mean, that's I'll demand we I Yes. I various driving of what inputs temporary, – say, these too. are like we to everyone to fitness installed base it pay else. sure What we think we a things to have being how exactly constitutes we're if that did that's balanced we jump going we It's But we our these enjoy, mean, make and for of year longer, look, than for on prices but and couple supply world like start to a not and at what don't tough the decision make just the be the that that to to to connected to and longer Aina can how commodities gets Yes. similarly is example. we on quarters equipment membership. say short tell. that's is JRNY know back But temporary. be and steel should do it's a going world back. why flow it's for term, more be all the though don't it's come of When And clear. think

a those more So that. demand consumer we sure can that a of component it's we restricted bit more for we thought, paying for supply little meet and making and don't that have worth

don't we doesn't a long-term know abates. exactly problem It like certainly don't think act the is I So answer know. it's it when I but

So we through baked quarter. it anything want Aina? least you in Do this at to add

Aina Konold

Yes.

from we situation, when put for it be the to recognizing I'd temporary when the similar a way we going this that ordering suppliers assuming is advance. sprint We're in to quarters several is sprint. So Sharon not a was started not started it's pandemic, that -- but a our this

we that want we to our enough, in holiday. So sure demand have meet we make through put aside that supply chain can

Jim Barr

anticipating maybe, -- to not it that, is. we're get is worse didn't question -- from where the we of your it think, not And I one we're part gets

Aina Konold

Yeah.

Jim Barr

gets in We terms it And a we prices. think again worse. crystal of exercise. we're ball it's bad anticipating not But the spot now, -- pretty it's right

Sharon Zackfia

good Officer... a new time Chain it's guess a have to Chief Supply I

Jim Barr

sure We need him. is. sure It

Sharon Zackfia

is chips, his been what other days. than there any what he's on of major he's XXXX? But he's that, XX think low-hanging I identified, or, -- than for is focused is kind fruit job on the getting his less of thrust like, what

Jim Barr

this discussed Yeah. door to and these at things. in -- the you I we as walked Investor Day is mean,

we I even in way make short-term, still. see elevated have its demand, can't meeting of We with especially a think enough supply demand. certain products, to where them just still

that. So we've got

valued transparency, what And it. quickly they to see how and make, suppliers, to can know So he's make working closer. he's and can better that bring they got very with our

And so referred our to China-plus globally. in then, we kind that of things make continue long-term but he's strategy. working to bit like And We'll to short-term. on we diversify China, a

bit And that a will longer-term of so a thing. be

at that going this handle all a We are looking volume online. to to bring we're third this DC, year

So online well. to help he's bring going that as

great McMahon, done us, has to handful as he's it's supply types a out. career great he's doing So and in of after go this particular, in sourcing global pointed you who's a for Bill these But well somebody chain, very And their to job. got things. spent who's have been --

so, us started well, far. extremely we hasn't He's And down Xst and already impact. a John just so looking have really April And making let great. expectations. high landed He's great

Sharon Zackfia

you. Thank great. right, All

Jim Barr

Sharon. Thanks,

Operator

with Steve your the of comes question next Please question. from line Our Dyer Craig-Hallum. with proceed

Steve Dyer

you Jim question. my and Thank afternoon Aina. for Good Hi. taking

Jim Barr

Hi Steve.

Aina Konold

Hi.

Steve Dyer

assuming, question. enough where bit moving But the I the you watermark a want for to or that perspective the an you the X.X% to et chip cost eases given low from a like cetera far it don't overkill commodity to be a of X% all sort feel margin year, into are could baseline operating everything here? that just parts from

Jim Barr

to I'll on jump one. ask Aina that

Aina Konold

And baseline. I last transportation low because were costs it's then would like we in to good bad, -- want say, the think, wouldn't watermark, it's year. QX really a thought, it I I worse. got

we see, update, I'd a quarter And something So every as is see, good different. say, like, baseline. you we'll if can far this like as we to

Steve Dyer

Direct. Got little bit it. And a talked versus you've about Retail

sort the historically, significant for a to more seasonality last pretty Within guess versus seasonality. I segment, quarter, being would soft think was Aina and of the as indicate pre-gym you've Direct several fairly Normal I it softening the alluded seem quarters. normal June to

maybe you're Just six that help to XX of any relative as months? color previous could there other sort last call the seeing what you there, it days, us, the year

Jim Barr

Aina that jump I Yeah. start and and I'll on one ask I'll to after. mean, on two

seasonality, just think people are So yeah, And normal going right? I outside. it's

weather and started bit then, better. little further it's high related sorts of began February normal get like Google to You all the look terms And fitness to January seasonality early down a at would probably though. searches as stayed pretty January, -- late do, significantly, for down still the

holidays. back So up other retail business they're it that thinking people course, looking normal seasonality, for demand elevated about look the the now with maybe equipment. fitness at to load all they're the category, like, trying the And of exactly are side doubling of this looks to you seasonality. when of really at Whereas

holidays, the always in confident very is the but short-term we're So seen.

public normal non-COVID any pretty as Aina, if things of, guess that that add? maybe information interest feel what it's should the color, which year, the anything kind I want know a category see but in is, -- society, additional in don't non about. to I can good call, you of as So in you that's a we'd we, sort well,

Aina Konold

I'd to want one backlog. of thing The bunch a is add, still through we're don't forget working Steve,

currently backlog, probably more So we that normal the shift revenue because that may perspective. still is of it big underlying demand traffic seasonality, not the like and have kind like but the look from

Jim Barr

That's point. a That's point. great a great

quarter. backlog coming into So we're working had that we all the -- that that of

Steve Dyer

Yes. one what to relates to get Last little bit. as JRNY. I for a me, trying just it at Yes, was that's

had you paid user doing then, subscribers? assumption to I or the would maybe ingraining the Thanks. at be that end You on talked get about of of XXX,XXX been an characterize, some experience. the members you've is adding over people by know, the all of that that about you the And rate the Are kind of of last, does mostly promotional Investor those so? year. stuff imply to and Is that sort acceleration? Day sort year call sort it, able talked

Jim Barr

it Yes, we're sure. not we to additional guidance made We No know. everyone on any just that. it's wanted said again. we Investor problem. and it at providing Look, -- Yes, once Day

Getting We on important on. are organization to our long the what early membership run. that. do to traction is is focused It's still track super in

that And embedded terms helping, before. see mix but that. in seeing like definitely was to putting way the and emphasis continue setting lot the embedded definitely of that goal a continuing on so, increase accelerate. it we're of We're in to products We're of the was products our things

us forward. So going that helps definitely

regular, paid business. we're in early of terms look, this In and

can But experience possible. a It that It's as to detail level we'll you that's many JRNY, run we're of people point. we're not make get sure got to it but promote as that we're very great So this on that at imagine attainable, to going is going a well. providing price. as promotions

than marketing definitely months already. we even members two faster other free types it try we'll people try want doing do We of to that. might that. to and We're So get

talked gives more than that hopefully, we you So, something, but not lot a about before. what really

Steve Dyer

Got it. All Thanks. right.

Jim Barr

Thanks, Steve.

Operator

with of with Capital line proceed Partners. George your question next question. comes Kelly Our from the ROTH Please

George Kelly

Hey, my everyone. for Thanks questions. taking

So you. just few for a

The your talked about new a product. Max prepared you in remarks, first, Jim, Trainer

that whether -- curious it's more, your or we would timing us And Just we SKUs. additional any of Should big sort big about also, can call should expect one additional a that year? I tell anything product? expect launches you of if product this

Jim Barr

Sure. Yes.

as companies public of but as forward. so or XX one Back the all ambitious few so, pipeline, Max before. and do had was, excited Max a it to as been We've innovation screen we're top more we more line Total getting September information, great a have to the following about we're launches. Trainer screen first would things a providing these any going the we went you embedded That in than time JRNY. not So that last VeloCore. we're product was for talk the long really out not the going there. it it of when the the know, we to bigger benefit to until of all, time, from only gets and But last space, total. Max months the Max our any of Trainer the on therefore, more product we about talked Essentially, Yes, last it's

And way lines, the with going running enhanced be top interval great to including those comes training that is refreshing a and workout about kind the Total, at the product. it. all So before, which Trainer we've of, we're, across JRNY JRNY as is from talked now Max everything all Max that to that high-intensity the

So have and will we're more more that excited people experience. that really great

George Kelly

Okay, a the okay. couple business. Retail questions of on then And

Jim Barr

Sure.

George Kelly

feel the you that retail your is -- feel offer JRNY? selection machines compatible machines, And guess, retail healthy? is embedded inventory? sort for I loading do you So, your second answered, or good more you how part JRNY are of then what at season. holiday But looking you like like these just the a the up retailers of question have so of Do that's is,

Jim Barr

question. good No, Yes.

on take and Yes the would the embedded the Aina inventory -- then inventory. you come back I'll and So I to want one embedded. maybe journey

Aina Konold

I or to you inventory the Are I make want understand how our your feel I inventory retailers? George. asking, sure, at retailers our about question, for

George Kelly

Inventory seeing their of sort we're at retailers trying to see replenishing your retailers. inventory. just what if, -- finally just I'm is

Aina Konold

sell-through So, been good. has really

haven't we in deceleration sell-through. any So, kind seen their of

we really in build we stock also So it. quarter after their bit were for but quarter, I this to ordering think just of they -- the that, what's are want in that want be little but not driving Direct But similar deficit safety and next we their might last to just holiday, to that what for not fine. want And to quarter for where position do sell-through is order. accommodating be a people,

we're So, demand. meeting that

Jim Barr

so yes, is said course, Aina Yes. right. And what exactly of

across the And and on went so Look, those one I connected We year. mean, price we selection in nine of think, great back all from one products. to modalities it's points.

to Some the of higher retailers sell our of also have priced begun some items.

several For higher than are they've it selling still kind sell Buy $X,XXX were buy door for you products example, to the so to much all sell retail. price more the retail factor and that at typical and have at inventory great But below Amazon, of of typically not online connected. that able products per can going retail that ceiling when Best the products limiting these $X,XXX. We and you're now, you're that We're a been of space more able is even of selling online worried that, and Dick's floor us. about more and

George Kelly

you. Thank Great. Okay.

Jim Barr

Great question. Thanks.

Operator

with Lake next with Mark question. Markets. [Operator question Capital Please line Smith Street of Our your from the comes Instructions] proceed

Mark Smith

guys. Hi

that at about in media for is question on where X% me First right give just Was the that in QX? period? transition you spend. the us, Can was

Jim Barr

Aina, can you that answer one?

Aina Konold

mean you -- year? last like Last

Mark Smith

just year transition period. this the reported No,

Aina Konold

from back I'm my going notes.

your just grab it. I Ask might next question

Mark Smith

My manner? international opportunities then, FX hedge are any specific discuss look potential call retail that No solid. kind question to you really Yes. on really some next is and doing really sales geographies Can maybe international problem. growth to that out in And and well? of boost

Jim Barr

Yes.

So yes.

countries business many distributorships. So, have done long we through in

countries partnerships. in better through business been just way. making there's as do you versus traction going approach it direct-to-retail with economics course, Recently, countries. we more like something XX-some-odd some distributorship of it's I that value think a that we've number limited and distributor of And

North terms America. of we call course, Canada, In geographies, of

the about but talk way not it. So we international, that's really that

So, been outside that great that's way led Outside that, growth. of Europe been the it's of that us. for and has

distributors growth strong that and partners business. and very particular some we Europe have in and retail We great continue to expand in Europe

Mark Smith

Perfect.

Jim Barr

then on are the And ready other you Aina, one?

Aina Konold

I'm going sorry, to number. -- it I'll I I'm you can't find easily. you and that call give back

Mark Smith

guys. can Thank offline. we up No, follow you,

Aina Konold

It's number. media million this actual -- an $XX fiscal period. in transition year Here's

So year's $XX million. last million $XX.X versus

Mark Smith

million. $XX.X

great. Thank you. That's Okay.

Aina Konold

you. Thank

Mark Smith

you, Thank mark.

Operator

no are back to the to queue. questions closing the further There CEO, Barr hand call remarks. Jim for like in I'd

Jim Barr

Thank with you. in support Thank Have We're upwards. of again today, talking and you rest forward call great fiscal first your to to for continued Nautilus. year everyone our on day quarter the at earnings and looking a you August. on the onwards XXXX call

Aina Konold

you. Thank

Operator

today's conclude your you this for gentlemen, Thank and does Ladies teleconference. participation.

disconnect time may You this a day. and your at lines have wonderful

Bowflex (BFXXQ) 11 May 212021 Q1 Earnings call transcript