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OFFON

NAUTILUS, INC.

(NLS)
  Report
Delayed Quote. Delayed Nyse - 10/15 04:10:00 pm
9.35 USD   +2.75%
09/21NAUTILUS : Announces Inducement Grants
AQ
09/17NAUTILUS, INC. : Other Events (form 8-K)
AQ
09/17NAUTILUS, INC. : Announces Inducement Grants
BU
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Nautilus : Investor Presentation – December 2020

12/10/2020 | 01:17pm EDT

DECEMBER 2020

Safe Harbor Statement

This presentation includes forward-looking statements (statements which are not historical facts) within the meaning of the Private Securities Litigation Reform Act of 1995, including: projected or forecasted financial and operating results, anticipated demand for the Company's new and existing products, statements regarding the Company's prospects, resources or capabilities; planned investments, strategic initiatives and the anticipated or targeted results of such initiatives; the effects of the COVID-19 pandemic on the Company's business; and planned operational initiatives and the anticipated cost-saving results of such initiatives. All of these forward-looking statements are subject to risks and uncertainties that may change at any time. Our financial results could also be impacted by our sale of Octane Fitness and the impact of any divestiture or separation transaction on our remaining business. Factors that could cause Nautilus, Inc.'s actual expectations to differ materially from these forward- looking statements also include: weaker than expected demand for new or existing products; our ability to timely acquire inventory that meets our quality control standards from sole source foreign manufacturers at acceptable costs; risks associated with current and potential delays, work stoppages, or supply chain disruptions caused by the COVID-19 pandemic; an inability to pass along or otherwise mitigate the impact of raw material price increases and other cost pressures, including unfavorable currency exchange rates; experiencing delays and/or greater than anticipated costs in connection with launch of new products, entry into new markets, or strategic initiatives; our ability to hire and retain key management personnel; changes in consumer fitness trends; changes in the media consumption habits of our target consumers or the effectiveness of our media advertising; a decline in consumer spending due to unfavorable economic conditions; risks related to the impact on our business of the COVID-19 pandemic or similar public health crises; softness in the retail marketplace; risks related to or not completely realizing the anticipated benefits from the sale of Octane Fitness; changes in the financial markets, including changes in credit markets and interest rates and the impact of any future impairment. Additional assumptions, risks and uncertainties are described in detail in our registration statements, reports and other filings with the Securities and Exchange Commission, including the "Risk Factors" set forth in our Annual Report on Form 10-K, as supplemented by our quarterly reports on Form 10-Q. Such filings are available on our website or at www.sec.gov. You are cautioned that such statements are not guarantees of future performance and that our actual results may differ materially from those set forth in the forward-looking statements. We undertake no obligation to publicly update or revise forward-looking statements to reflect subsequent developments, events or circumstances.

Q3 Earnings Results

Recap of Progress

2019

Q4 2019

Q1 2020

Q2 2020

Year to Forget

Change in Trajectory

Return to Growth

Blockbuster Quarter

Q3 2020

Record 3rd Quarter

  • Sales down 20%
  • Loss of $29 million (excl impairment)
  • NLS workforce reduced by 13%

Relaunched

Bikes gained

Historic results

JRNY®

momentum

Full transition to

New connected

Overcame supply

work-from-home

bikes, treads,

chain disruptions

model

Max Trainer®

Capitalized on

Progress on long-

Secured

COVID impact in

term strategy

financing

late March

Accelerated

New leaders

connected-

fitness

added

Improved liquidity

Diagnosed

position

causes of decline

and started to

respond

  • Highest operating income in history
  • Finalized long-term strategy
  • Sold Octane
  • Launched Bowflex® VeloCoreTM bikes
  • "Best Place to Work" - 8th year in a row

4

Q3 2020 Highlights

Record Third Quarter Results

Net Sales ($M)

Gross Profit ($M)

Adj. EBITDA ($M)

200

155

150

100

62

50

+152%

-

Q3 2020 Highlights

80

68

60

40

20

19

+256%

-

  1. 37

10

+$43M

-

(10)(6)

  • Sales up 152%; Highest quarterly sales in the last decade
    • Third consecutive quarter of growth
    • Strong performance in both segments
  • Gross margin rate improved +1280 bps
  • Operating Income of $44M, most profitable quarter ever
  • Adjusted EBITDA improved +$43 million
  • 4th consecutive quarter of positive cash flow

Q3 Operational Achievements

Massive increases in supply chain capacity

NEW! Product launches: VeloCoreTM and JRNY®

Established new JRNY® business unit; hired Chief Digital Officer

Continued focus on margins: improved pricing, decreased promotions, strong merchandising

Strong customer metrics: 3x increase in traffic to Bowflex.com and 7x increase in new customers

Maintained strong partnerships with existing Retail customers and onboarded new ones

Results Across Multiple Dimensions

Delivered record-breaking results

Overcame challenges

  • Disruptions in global supply chain including port closures, container shortages, and shipping delays
  • Fatigue from extended work-from-home
  • West Coast wildfires

Advanced long-term transformation

  • Successful launch of Bowflex® VeloCoreTM
  • Completed North Star strategy work
  • Sold Octane

Maintained and leveraged strong corporate culture

  • "Best Place to Work" - 8th year in a row

Near-term Market Outlook

Expect temporary and longer-term COVID impacts

Even as more gyms re-opened, our business continued to outperform

Research suggests lasting changes in workout habits of gym-goers, shifting to home fitness

Increased exposure for our brands and products

Trends towards online ordering and curbside pickup position us well due to our omni-channel model

We are responding based on this outlook

Making significant investments in inventory and expanding capacity in our best-selling products

Increasing investment in marketing, JRNY and product development to target gym-goers

North Star Strategy Update

Strategy work completed and rolling out internally

North Star focus:

Capitalize on company's strengths

  • Well-knownbrands
  • Reputation for quality
  • Legacy of innovation
  • Customer-focusedculture

Address the weaknesses

  • Losing track of consumer journey
  • Falling behind on connected fitness
  • Lack of focus

Strong Balance Sheet provides opportunity to accelerate execution

Q3 2020 Adjusted1 P&L Summary

$ in millions, except

Q3 2020

Q3 2019

$ Var

per share amounts

Net Sales

$155

$62

$94

Gross Profit

68

19

49

Gross Margin %

44%

31%

13 pts

Operating Expenses 1

32

27

5

% of Sales

21%

44%

-23 pts

Operating Income / (Loss) 1

36

(8)

44

Operating Margin % 1

23%

-13%

36 pts

Net Income / (Loss)

Continuing Ops 1,2

28

(9)

37

Diluted Income / (Loss) per share

Continuing Ops 1,2

$0.87

($0.29)

$1.16

EBITDA from Continuing Ops 1

37

(6)

43

  1. Adjusted for gain on disposal group in Q3 2020
  2. Q3 2019 results include correction to income tax, as described in 10Q

Direct Q3 2020 Segment Results

Net Sales ($M)

Gross Profit ($M)

70

61

40

35

35

60

50

30

25

Contribution ($M)

  1. 18

40

20

30

15

5

-

+$26M

20

16

10

6

10

+278%

5

+463%

-

-

Cardio

+256%

'20

'19

Strength

+349%

GM % 57%

38%

Highlights

  • 3rd consecutive quarter of sales growth
    • Both Cardio and Strength up >3x
    • Highest Q3 sales in last decade
  • Entered Q4 with $23 million in backlog
  • Segment Contribution improved by $26 million

(5)

(10)(9)

(15)

Retail Q3 2020 Segment Results

Net Sales ($M)

100

93

80

60

45

40

+108%

20

-

Cardio

+103%

Strength

+128%

Gross Profit ($M)

35

32

30

25

20

15

12

10

+162%

5

-

'20

'19

GM %

34%

27%

Contribution ($M)

25

23

20

15

10

5

5

+391%

-

Highlights

  • Delivered highest quarterly sales in segment history
    • Excluding Octane brand, Net Sales grew 132%
    • Strong growth in both Cardio and Strength
  • Entered Q4 with $451 million in backlog
  • Segment Contribution growth of 391%

1 Excludes $5M Octane backlog

Other Key Highlights for Q3

$ in millions

Q3 20201

Q4 2019

Cash

$72

$11

Debt

14

14

Accounts Receivable

69

55

Trade Payables

83

74

Inventory

34

55

  • Strong Liquidity Position; cash balance +$61M vs YE19
  • Fourth consecutive quarter of positive cash flow
  • $49 million available to borrow against Wells Fargo Facility @ 9/30/2020
  • Non-cancellablepurchase obligations at each quarter-end:
    • Q3 20: $227M2 | Q2 20: $128M | Q1 20: $35M | Q4 19: $28M | Q3 19: $47M

1 Q3 2020 balance sheet impacted by certain 'held-for-sale' reclassifications and the gain on disposal group related to Octane sale process

13

2 Excludes $13M of Octane-related POs

Expectations for FY2020

Environment continues to be volatile and the supply chain challenges mentioned in prior earnings calls remain

  • Sales growth highly dependent on uninterrupted supply chain
  • Gross margin pressures due to logistics and operations costs
  • Higher operating expenses in H2 compared to H1

Net Sales

Adjusted

EBITDA1

CapEx

  • $540M - 565M
  • $90M - 100M
  • $10M - 13M

1 Adjusted to exclude loss on disposal group charges

Product Portfolio

Customized Fitness with JRNY

16

Growing Line-up of Bowflex Connected Fitness

Bikes

Bowflex

VeloCore 22

Bowflex

VeloCore 16

Bowflex C7

Treadmills

Bowflex

T7

Bowflex

T10

Max Trainer

Bowflex Max

Total

Bowflex Max M9

Bowflex

T22

17

Bowflex Strength Best Sellers

18

Schwinn and Bowflex Bikes

19

FOR MORE INFORMATION PLEASE CONTACT

Investor Relations:

Media Contacts:

John Mills

John Fread

ICR, LLC

Nautilus, Inc.

646-277-1254

360-859-5815

john.mills@ICRinc.com

jfread@nautilus.com

Appendix

Q3 2020 P&L Summary (GAAP)

$ in millions, except

Q3 2020

Q3 2019

$ Var

per share amounts

Net Sales

$155

$62

$94

Gross Profit

68

19

49

Gross Margin %

44%

31%

13 pts

Operating Expenses

24

27

(3)

% of Sales

15%

44%

-29 pts

Operating Income / (Loss)

44

(8)

52

Operating Margin %

28%

-13%

42 pts

Net Income / (Loss)

Continuing Ops1

34

(9)

43

Net Income / (Loss)1

34

(9)

43

Net Income / (Loss) % 1

22%

-14%

36 pts

Diluted Income / (Loss) per share

Continuing Ops1

$1.05

($0.29)

$1.34

Diluted Income / (Loss) per share1

$1.04

($0.30)

$1.34

EBITDA from Continuing Ops

45

(6)

51

1 Q3 2019 results include correction to income tax, as described in 10Q

Disclaimer

Nautilus Inc. published this content on 10 December 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 December 2020 18:16:07 UTC


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