Nautilus recorded an operating loss of $21.9 million against an operating profit of $39.7 million in the fourth quarter as retail re-orders were depressed. Gross margin slid to 17.5 percent from 38.3 percent, a factor that the company blamed on higher product costs, logistics, increased discounting, and additional investments in JRNY. Total revenues declined 41.9 percent to $119.7 million from $206.1 million for the period ended March 31. Direct sales slipped 41.1 percent to $59.8 million on double-digit declines in cardio and strength product sales. Meanwhile, retail net sales fell 43.2 percent to $58.7 million from $103.4 million, with strength sales up 9.8 percent to $35.7 million but cardio sales off 67.5 percent to $23.0 million. Retail order backlog was down 82 percent on March 31 at $32.1 million versus $178.6 million a year earlier.
Despite current slowing momentum, Nautilus is banking on a return to pre-pandemic seasonality for fitness products, with the second half of its new financial year contributing 65 to 70 percent of its annual revenues and the start of gross margin recovery driven by several actions. Besides negotiating lower costs for its top SKUs, the company is closing its Portland, Oregon distribution center in the fall, opening a new one in Southern California and not renewing storage locations obtained during the pandemic’s height. Additionally, Nautilus has begun diversifying its production facilities and will begin to ship products out of Mexico by the end of 2022. The development will reduce transit time and the cost of Pan-Pacific transportation.
FY23 total revenues are forecast at $380 to $460 million, a 52 percent increase at the mid-point from FY20 but 28.8 percent less than the $589.5 million in total sales for the 12 months ended March 31. The full-year adjusted Ebitda loss is forecast at -$25 to -$35 million. Nautilus reported a $22.4 million net loss for the recently completed year against a profit of $88.1 million. FY22 total revenues declined 24.9 percent year-over-year to $221.7 million, driven by a 39.6 percent drop in cardio product revenues due to lower bike sales. Strength product sales increased 13.0 percent to $93.2 million. In the retail segment, annual sales inched 0.5 percent lower to $364.1 million but were 5.0 percent higher, excluding Octane. Retail sales outside the U.S. and Canada fell 13.0 percent last year. Higher product costs, logistics and discounting contributed to a 9.3 percentage point decline in yearly gross margin to 21.0 percent from 30.3 percent.
Senior management is moving forward with its strategy to transform Nautilus into a consumer-led digital company from a product-led hardware one that is focused on enthusiastic cross-trainers as its primary consumer target base. In FY22, approximately 80 percent of fitness units sold by Nautilus were connectable to the company’s early-stage digital platform, JRNY, versus 22 percent in FY20. Nautilus ended the year with 325,000 JRNY members, exceeding its internal goal.
