Nautilus recorded a 22 percent drop in revenues to $147 million in the third quarter ended Dec. 31, despite a 63 percent rebound from the corresponding 2019 period, excluding the divested Octane business. The net result was a loss of $13.5 million against a net income of $28.9 million in the year-ago period.

Nautilus, however, remains bullish about its longer-term outlook and existing strategies. As company executives point out, its research shows that 25 percent of former gym goers do not ever intend to return, a percentage that ticked up to 29 percent in the third quarter, contributing to long-term indicators that favor at-home fitness trends.

International revenues were soft in the latest quarter. The U.K. and the European Union are the American fitness equipment company’s two largest international markets, and shutdowns due to the Covid-19 pandemic hurt sell-throughs there, although the demand and unit sales were described as strong. Nautilus primarily uses a distributor model for its international segment, accounting for approximately 10 percent of its overall business. The softness outside the U.S. is forecast to continue for the remainder of the fiscal year.

The only bright spot was a sequential 25 percent increase in the number of JRNY connected fitness memberships, which reached 250,000 at the end of December. The platform can now track the use of cardio and strength products and off-machine exercise.

In the Direct segment, Nautilus’ quarterly sales fell by 26 percent from the year-earlier period, with drops of 33 percent in cardio equipment and 14 percent in strength equipment. Lower sales of Bowflex Home Gyms were partially offset by good sales of SelectTech weights and benches. In the retail segment, sales were off by 19 percent, but sales of strength products were up by 73 percent, in contrast with a drop of 53 percent in cardio.

The quarterly results included a big slide of 20.8 percentage points in the gross margin to just 20.3 percent of sales, with a negative impact of 18.0 percentage points from higher logistics and product costs and lower net selling prices due to industrywide discounting during a highly promotional holiday season.

The current view of the fiscal year’s second half calls for total revenues of $260-280 million, up 31-41 percent from two years ago but lower than earlier guidance. The adjusted outlook was prompted by the lower international demand and higher discounts in the U.S. and Canada.

During the pandemic, Nautilus launched a complete suite of multi-modality, connected fitness cardio products that included bikes, treadmills and revitalized Max trainers. Also, the company continued to invest in its JRNY personal trainer service, which is forecast to be adopted by 300,000 total members or more by the end of the current fiscal year. To continue ramping up the JRNY service, Nautilus now employs more than 250 people in software development.