VANCOUVER, WASHINGTON--(BUSINESS WIRE)--August 3, 2015 - Nautilus, Inc. (NYSE: NLS) today reported its unaudited operating results for the second quarter ended June 30, 2015.
Net sales for the second quarter of 2015 totaled $59.7 million, a 23.0% increase compared to $48.5 million in the same quarter of 2014. The strong growth was driven by higher sales in both the Direct and Retail segments. For the first six months of 2015, net sales were $155.9 million, an increase of 29.5% over the same period last year. Gross margins for the second quarter improved by 40 basis points to 51.4%, reflecting margin increases in the Direct segment as well as a favorable mix between segments. Operating income from continuing operations for the second quarter of 2015 was $3.9 million, a 65.3% increase over operating income from continuing operations of $2.4 million reported in the same quarter of 2014. The increase in operating income primarily reflects higher sales and gross margins in the Direct segment, as well as improved leverage of general and administrative costs across higher sales volumes. For the first six months of 2015, operating income from continuing operations was $21.5 million, compared to $11.4 million in the same period last year, an increase of 89.2%.
Income from continuing operations for the second quarter of 2015 was $2.2 million, or $0.07 per diluted share, compared to income from continuing operations of $1.5 million, or $0.05 per diluted share, for the second quarter of last year. For the first six months of 2015, income from continuing operations was $13.1 million, compared to $7.2 million in the same period last year, an increase of 80.5%.
For the second quarter of 2015, the Company reported net income of $2.4 million, or $0.08 per diluted share, which includes income from discontinued operations of $0.2 million. In the second quarter of 2014, the Company reported net income of $0.6 million, or $0.02 per diluted share, which included a $0.9 million loss from discontinued operations.
Bruce M. Cazenave, Chief Executive Officer, stated, “We are pleased to report another quarter of strong financial results, which include solid double digit sales increases for both the Direct and Retail segments. We also achieved overall gross margin improvement and robust operating income growth while continuing to invest in key growth initiatives. Our Direct segment benefited from strong consumer demand for a number of our product offerings including the Bowflex Max Trainer®. The Retail sales increase reflects continued positive response from retail partners across a broad base of cardio and strength products, including the treadmill lineup introduced in the second half of last year.”
Mr. Cazenave continued, “We are well positioned going into the second half of 2015. There is good momentum in the base business plus we are launching a number of exciting products in the coming months, including new bikes, smart SelectTech® dumbbells, and a refreshed TreadClimber® line. We will be previewing many of these introductions in late September at our new product showcase event in New York.”
For further information, see “Results of Operations Information” attached hereto.
Net sales for the Direct segment were $41.7 million in the second quarter of 2015, an increase of 28.8% over the comparable period last year. Direct segment sales benefited from continued strong demand for cardio products, especially the Bowflex Max Trainer® product line. For the first six months of 2015, net sales for the Direct segment were $115.7 million, an increase of 39.3% over the same period last year.
Operating income for the Direct segment was $5.1 million for the second quarter of 2015, an increase of 31.3% compared to the second quarter 2014. Operating income benefited from higher revenue and gross margins. Gross margin for the Direct business improved 50 basis points to 62.2% for the second quarter of 2015, compared to 61.7% in the second quarter of last year. Gross margins improved primarily due to leveraging supply chain costs.
Net sales for the Retail segment were $17.4 million in the second quarter of 2015, an increase of 15.7% when compared to $15.0 million in the second quarter last year. The improvement in Retail net sales reflects strong SelectTech® dumbbell sales coupled with continued retailer and consumer acceptance of the Company’s new lineup of cardio products including the recently launched treadmill line. For the first six months of 2015, net sales for the Retail segment totaled $38.7 million, an increase of 10.1% over the same period last year.
Operating income for the Retail segment was $1.2 million for the second quarter 2015 compared to $1.3 million in the second quarter of last year. Retail gross margin was 23.5% in the second quarter of 2015, compared to 24.4% in the same quarter of the prior year. Retail gross margins for the second quarter of 2015 were negatively impacted by unfavorable product and customer mix.
Royalty revenue in the second quarter 2015 was $0.6 million, compared to $1.2 million for the same quarter of last year. Royalty revenue declined due to the expiration of certain patents in specific jurisdictions.
For further information, see “Segment Information” attached hereto.
As of June 30, 2015, the Company had cash and investments of $87.2 million and no debt, compared to cash and investments of $72.2 million and no debt at year end 2014. Working capital of $99.5 million as of June 30, 2015 was $16.5 million higher than the 2014 year-end balance of $83.1 million, primarily due to growth in cash and investments of $15.0 million during the first half of 2015. Inventory as of June 30, 2015 was $28.4 million, compared to $24.9 million as of December 31, 2014 and $23.2 million at the end of the second quarter last year. The increase in inventory compared to the second quarter of last year is due to higher revenues, new product introductions, and the addition of a new distribution center.
For further information, see “Balance Sheet Information” attached hereto.
Nautilus will host a conference call to discuss the Company’s operating results for the second quarter ended June 30, 2015 at 4:30 p.m. ET (1:30 p.m. PT) on Monday, August 3, 2015. The call will be broadcast live over the Internet hosted at http://www.nautilusinc.com/events and will be archived online within one hour after completion of the call. In addition, listeners may call (800) 899-2086 in North America and international listeners may call (212) 231-2932. Participants from the Company will include Bruce M. Cazenave, Chief Executive Officer, Sid Nayar, Chief Financial Officer, and William B. McMahon, Chief Operating Officer.
A telephonic playback will be available from 6:30 p.m. ET, August 3, 2015, through 6:30 p.m. ET, August 17, 2015. Participants can dial (800) 633-8284 in North America and international participants can dial (402) 977-9140 to hear the playback. The passcode for the playback is 21772412.
About Nautilus, Inc.
Headquartered in Vancouver, Washington, Nautilus, Inc. (NYSE: NLS) is a global fitness products company providing innovative, quality solutions to help people achieve a healthy lifestyle. With a brand portfolio including Nautilus®, Bowflex®, TreadClimber®, Schwinn®, Schwinn Fitness™ and Universal®, Nautilus markets innovative fitness products through Direct and Retail channels. Websites: www.nautilusinc.com and www.bowflex.com.
This press release includes forward-looking statements (statements which are not historical facts) within the meaning of the Private Securities Litigation Reform Act of 1995, including statements concerning: the Company’s prospects, resources or capabilities; current or future financial and economic trends; future operating results; future plans for introduction of new products and the anticipated reception of such products; anticipated demand for the Company’s new and existing products; plans to improve margin performance; maintenance of appropriate inventory levels; growth in revenues and profits; leverage of operating expenses and the results of marketing and media investments. Factors that could cause Nautilus, Inc.’s actual results to differ materially from these forward-looking statements include our ability to timely acquire inventory that meets our quality control standards from sole source foreign manufacturers at acceptable costs, the effectiveness, availability and price of media time consistent with our cost and audience profile parameters, greater than anticipated costs associated with launch of new products, a decline in consumer spending due to unfavorable economic conditions, softness in the retail marketplace, an adverse change in the availability of credit for our customers who finance their purchases, our ability to pass along vendor raw material price increases and increased shipping costs, our ability to effectively develop, market and sell future products, our ability to protect our intellectual property, the introduction of competing products, and our ability to get foreign-sourced product through customs in a timely manner. Additional assumptions, risks and uncertainties are described in detail in our registration statements, reports and other filings with the Securities and Exchange Commission, including the “Risk Factors” set forth in our Annual Report on Form 10-K, as supplemented by our quarterly reports on Form 10-Q. Such filings are available on our website or at www.sec.gov. You are cautioned that such statements are not guarantees of future performance and that our actual results may differ materially from those set forth in the forward-looking statements. We undertake no obligation to publicly update or revise forward-looking statements to reflect subsequent developments, events or circumstances.
RESULTS OF OPERATIONS INFORMATION
The following summary contains information from our consolidated statements of operations for the three and six months ended June 30, 2015 and 2014 (unaudited and in thousands, except per share amounts):
Three Months Ended
Six Months Ended
|Cost of sales||29,039||23,766||71,389||57,189|
|Selling and marketing||20,052||15,690||48,451||37,463|
|General and administrative||4,293||4,959||9,871||10,762|
|Research and development||2,379||1,752||4,686||3,655|
|Total operating expenses||26,724||22,401||63,008||51,880|
|Income from continuing operations before income taxes||3,704||2,334||21,232||11,276|
|Income tax provision||1,485||836||8,154||4,030|
|Income from continuing operations||2,219||1,498||13,078||7,246|
|Income (loss) from discontinued operations, net of income taxes||205||(941||)||78||(1,315||)|
|Basic income per share from continuing operations||$||0.07||$||0.05||$||0.42||$||0.23|
|Basic income (loss) per share from discontinued operations||0.01||(0.03||)||—||(0.04||)|
|Basic net income per share||$||0.08||$||0.02||$||0.42||$||0.19|
|Diluted income per share from continuing operations||$||0.07||$||0.05||$||0.41||$||0.23|
|Diluted income (loss) per share from discontinued operations||0.01||(0.03||)||—||(0.04||)|
|Diluted net income per share||$||0.08||$||0.02||$||0.41||$||0.19|
|Shares used in per share calculations:|
The following tables present certain comparative information by segment for the three and six months ended June 30, 2015 and 2014 (unaudited and in thousands):
Three Months Ended
|Operating income (loss):|
Six Months Ended
|Operating income (loss):|
BALANCE SHEET INFORMATION
The following summary contains information from our consolidated balance sheets as of June 30, 2015 and December 31, 2014 (unaudited and in thousands):
|June 30, 2015||December 31, 2014|
|Cash and cash equivalents||$||37,489||$||45,206|
|Trade receivables, net of allowances of $31 and $108||12,635||26,260|
|Prepaids and other current assets||4,469||6,987|
|Income taxes receivable||170||50|
|Deferred income tax assets, current||9,511||12,368|
|Total current assets||142,401||142,751|
|Property, plant and equipment, net||10,544||9,634|
|Other intangible assets, net||10,106||10,575|
|Long-term deferred income tax assets||5,087||9,546|
|Liabilities and Shareholders' Equity|
|Total current liabilities||42,861||59,671|
|Income taxes payable||3,614||3,725|
|Other long-term liabilities||1,759||1,186|
|Total liabilities and shareholders' equity||$||170,995||$||175,654|