Nautilus, which is changing its financial year-end from Dec. 31 to March 31, reported a massive increase in net income to $20.4 million for the three months ended in March from just $2.2 million in the year-ago period, as revenues more than doubled to $206.1 million from $93.7 million. The Ebitda of $40.4 million generated during the period compared with only $2.3 million.
Sales were 143 percent higher excluding the divested Octane commercial business, which suffered a lot from the closure of gyms. The management indicated that it had made the right choice by focusing on home fitness, pointing to research showing that 25 percent of former fitness club members in the U.S. have no plans to return to their gyms. Nautilus is investing heavily on its JRNY connected fitness software, predicting that it will win over 250,000 members by the end of its new financial year in March 2022.
In the quarter ended last March 31, Nautilus’ Retail (or wholesale) segment posted a 127 percent gain to $103.4 million, with increases of 96 percent in cardio equipment to $70.9 million and 244 percent in strength equipment to $32.5 million. In particular, the segment’s sales outside the U.S. jumped by about 200 percent. Excluding Octane, the growth reached a rate of 183 percent globally.
The gains were led by Bowflex home gyms and SelectTech weights in strength, and by new Schwinn connected biked and treadmills. The segment’s gross margin improved by 3.4 percentage points to 26.0 percent.
In the Direct segment, sales went up by 115 percent to a slightly higher level of $101.5 million, posting increases of 179 percent in strength equipment and 96 percent for cardio. The gross margin here declined by 1.2 percentage points to a still relatively high level of 50.3 percent, depressed by foreign currencies and higher commodity prices and transportation costs.
For the first quarter of the new fiscal year, the management predicts growth of between 40 and 50 percent, or between 51 and 62 percent excluding Octane. A shortage of microchips and the related price increases will put pressure on the margins generated by JRNY-equipment products. Combined with a return to higher marketing expenses, representing 7 percent of sales as compared to 2 percent a year earlier, the resulting pressure on gross margins could limit operating margin at a level of between 6.5 percent and 8.0 percent.