Nautilus' 32 Percent Revenue Decrease Attributed to Lower Product Sales, Advertising Expenses

Nautilus sales decline
Nautilus' stock price (NYSE: NLS) closed at $1.58 per share on Nov. 12, 2019. Comparatively, its stock price was valued at more than $13 per share in November 2018.(Photo courtesy Octane Fitness.)

Nautilus, Vancouver, Washington, has reported a revenue decrease of more than 20 percent for the third consecutive quarter, according to financials released by the company on Nov. 7.

The company includes equipment from brands Bowflex, Modern Movement, Nautilus, Octane Fitness, Schwinn and Universal.

Nautilus reported a 32.2 percent decrease in third quarter 2019 revenue to $61.7 million. The decrease was driven by a 44.1 percent decline in direct segment sales that company executives attribute to low Max Trainer product sales and a strategic 37 percent reduction in advertising spending in preparation for a fourth quarter advertising push. Retail sales also dropped 27.1 percent due to shipment delays, imposed tariffs and weak Boxflex Max Trainer product sales.

Additionally, Nautilus reported a quarterly EBITDA loss from continuing operations of $5.5 million. This compares to an income of $8.5 million during the same period last year.

Former Nautilus CEO Bruce Cazenave, just days before his March 2019 resignation, told shareholders that 2019 would be a challenging year for the company, prompting a 23.75 percent drop in the company’s share price.

Nautilus' stock price (NYSE: NLS) closed at $1.58 per share on Nov. 12. Comparatively, its stock price was valued at more than $13 per share in November 2018.

Recently appointed CEO Jim Barr said he remains optimistic about the brand's potential despite the recent financial challenges.

"The direct segment results were related to a significant reduction in advertising spend while we continued to fine-tune our refreshed brand and advertising messaging and finalize our fourth quarter advertising plan," Barr said in a media release. "In late August, we began the direct segment rollout of the new Max Total product. This trainer features our first integrated digital screen that directly connects the user to the features of our upgraded AI-powered digital platform. Our new advertising and brand campaign launched with limited media weight to test messaging effectiveness and efficiency across television, social media, PR and other digital platforms. The marketing spend during the third quarter included content development costs that we do not expect to incur on a similar scale in the fourth quarter.”

Barr assumed the role of CEO on July 29. He previously worked as an executive at Microsoft, OfficeMax and Ritchie Bros., where he specialized in digital business initiatives.

"When I decided to take the position of CEO, I knew we would face significant challenges," Barr said in a Nov. 7 call to shareholders. "I've confirmed the belief that my background in digital products and marketing and my experience driving growth transformations at legacy brands in several industries in the face of technological disruption and changes in value proposition is a strong fit for the areas that need improvement at Nautilus. Our recent results are indictative of there being a lot of work to do, but I'm convinced we can reclaim our leadership position in the fitness industry."

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