The fitness company Nautilus, which sold off its namesake brand trademark and related assets earlier this year for about $13 million, posted numerous improved financial metrics in Q1 but still reported lower sales and a net loss for the period. In doing so, Nautilus, which retains the BowFlex brand, confirmed its FY24 guidance that includes “significant year-over-year improvement” in its adjusted EBITDA loss for the full year.
Less discounting and favorable logistics help boost numbers
Total revenues declined by 24 percent to $41.8 million from $54.8 million for the three months ended June 30, a seasonally slow period for fitness equipment. While the operating loss improved to $10.5 million from $51.2 million in the year-ago period, gross margin jumped to 20.7 percent from 12.7 percent in Q1/23.
The significant improvement in gross margin was attributed to lower landed product costs, less discounting, and favorable logistics overhead absorption that was offset by costs related to its JRNY digital offering and outbound freight costs.
The net loss, meanwhile, improved 92 percent year-over-year to a loss of $4.9 million versus a loss of $60.2 million in the year-ago period. Inventory stood at $39.8 million, down by 15 percent from March 31 and 62 percent lower than 12 months earlier.
JRNY subscriptions show steady growth
Both the direct and retail segments suffered double-digit sales declines in Q1. Lower consumer demand contributed to a 17.5 percent drop in direct sales to $21.8 million as lower bike sales contributed to a 27 percent drop in cardio sales to $12.5 million.
Strength product revenues, meanwhile, were relatively flat at $9.3 million. Lower media spending and operating costs helped improve the segment’s quarterly operating loss to $4.7 million versus $9.9 million in the year-ago quarter.
Retail segment sales fell by 29 percent to $19.5 million but were up by 69 percent year-over-year in markets outside the U.S. and Canada. Lower demand for bikes contributed to a 21 percent drop in cardio sales to $9.3 million. Strength product sales, driven by lower demand for SelectTech weights declined by 35 percent to $10.2 million.
At period end, membership in the group’s JRNY app hit 537,000, including 17 percent year-over-year growth in the number of subscribers to 150,000 who pay $11.99 a month or $99 annually for a mobile subscription that is compatible with a BowFlex or Schwinn connectable product. The company wants to grow membership 16 percent by April 2024 to reach a total of 625,000.
With the Q1 results, Nautilus reiterated its FY guidance that calls for annual revenues of $270 to $300 million that includes 60 to 65 percent of the total in H2 and full-year adjusted Ebitda of $15 million to breakeven.
