Nautilus (NLS) Tops Q4 EPS by 1c, Revenues Beat

Nautilus (NYSE: NLS) reported Q4 EPS of $0.05, $0.01 better than the analyst estimate of $0.04. Revenue for the quarter came in at $115.39 million versus the consensus estimate of $114.71 million.

Bruce M. Cazenave, Chief Executive Officer, stated, “While there were pockets of growth and profit improvement, the overall results for the quarter were clearly below our expectations. Our Direct segment\'s disappointing results more than offset the strong Retail growth primarily due to much slower than expected sales of our refreshed Max Trainer product line launched in November which now incorporates an innovative digital personalized coaching platform called Max IntelligenceTM. We partially attribute the reduced sales of the Max Trainer product to low consumer awareness and understanding of this added digital capability which delivers a greatly enhanced consumer experience. The negative impact of slow initial traction of the Max Intelligence platform was magnified because the launch coincided with the critical holiday and fitness season, but there were many valuable lessons during these first two months of introduction. Importantly, given that the feedback from purchasers is generally very positive, we continue to believe that this platform and the unique personalization of the fitness experience it provides is unlike anything in the market today and will resonate with a broad base of consumers as awareness continues to build. The current obstacles we have can be overcome and our team is hard at work revamping the marketing message and media spending strategy with plans to relaunch in a significant way as soon as possible this year. Given what we now know and are able to do going forward, we have added confidence and will continue to aggressively invest in building out this platform across additional modalities during 2019.”

Mr. Cazenave continued, “As we enter 2019, we have implemented a number of initiatives to further strengthen our business. We have a solid cash flow business model and strong balance sheet that enables us to better educate the consumer on the many benefits of our offerings through robust marketing and with significant multi-media support. We have a healthy new product introduction schedule for 2019 across all channels and have recently acquired additional development assets, including the RunSocial® platform, as well as secured strategic relationships with key partners, such as Samsung Electronics America, Feed.fm and Vi Technologies. We expect that these investments and partnerships will deliver significant enhancements to our digital platform across all facets of its individualized customer coaching experience including visuals, music, and voice, and should further expand our product reach and potential subscription base. We are focused on improving earnings and operating margins for the future and have taken several steps in 2019 to help achieve this goal, including a workforce reduction, broad cost containment controls, and value engineering initiatives. There is also added focus on simplification to improve process efficiency and rescale our operations to be more profitable while we drive to restore growth to our Direct sales base. As for the near-term outlook, our sales in the Direct segment and the mass retail channel will be challenged in the first half of the year. Until we complete the revamping of the marketing plan in Direct, we anticipate that the recent sales weakness experienced in the segment will continue through most of the first half of 2019. Additionally, despite the strength of our mass retail channel sell-through in Q4 2018, there are significantly higher than anticipated inventories in the channel that need to be drawn down in the first quarter of 2019. At this time we are not providing specific guidance but will provide ongoing updates on the progress of our major initiatives as the year progresses. We have navigated through setbacks like this before and have come out stronger afterwards. Our goal in 2019 is to do it again, and we intend to utilize our many strengths including strong brands, technologies, talent, and ability to adapt and execute well.”

For earnings history and earnings-related data on Nautilus (NLS) click here.

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