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Nautilus' (NLS) Q4 Earnings Beat Estimates, Revenues Up Y/Y

Nautilus NLS reported fourth-quarter 2020 adjusted earnings of 97 cents per share, beating the Zacks Consensus Estimate by 27.6%. The company had reported adjusted earnings of 12 cents per share in the year-ago quarter.

Revenues of $189.3 million missed the consensus mark by 0.8%. However, the figure surged 81.7% year over year. Eliminating the contribution from the Octane business, which was sold in October 2020, revenues soared 108.3% year on year.

Continued strength in the company’s at-home fitness products like its connected fitness bikes, Schwinn IC4, Bowflex C6 and VeloCore, Bowflex Home Gyms, and SelectTech weights and benches, despite the roll-out of the COVID-19 vaccine, has contributed to this top-line growth.

Moreover, growing traction of the newly-launched Bowflex C7 bike, two Bowflex Treadmills, and Max Trainer, along with the company’s JRNY 2.0 connected digital fitness platform, was a major positive.

 

Nautilus Group, Inc. The Price, Consensus and EPS Surprise

Nautilus Group, Inc. The price-consensus-eps-surprise-chart | Nautilus Group, Inc. The Quote

Segment Details

Direct Segment revenues (43.4% of the total revenues) soared 128.8% year over year to $82.2 million. Revenues from Cardio Products and Strength Products jumped 78% and a whopping 372.1% year over year to $52.9 million and $29.3 million, respectively.

Retail Segment revenues (56.2% of the total revenues) surged 57.5% year over year to $106.3 million. Revenues in the segment climbed 96.2% year over year, after excluding revenues from the recently-divested Octane business. Revenues from Cardio Products and Strength Products went up 59.4% and 52.5% year over year to $78.3 million and $28.1 million, respectively.

Royalty Segment revenues (0.4% of the total revenues) was $0.8 million, up 0.1% year over year.

As of Dec 31, 2020, the direct backlog was $46.5 million compared with $3.5 million as of Dec 31, 2019. Retail backlog was $45 million compared with $2.3 million as of Dec 31, 2019.

Backlog in the fourth quarter mainly resulted from the lack of shipping containers, disruptions related to global logistics and continued factory capacity limitations.

Operating Details

Gross profit surged 104.1% year over year to $77.9 million from the year-ago quarter’s $38.2 million. In addition, the gross margin expanded 450 basis points (bps) year over year to 41.2%.

This upswing was driven by improved margins in both direct and retail segments, partially offset by higher transportation costs due to the global logistics headwinds.

General and administrative expenses flared up 61.5% year over year to $10.4 million. Research and development expenses rose 34.3% year over year to $4 million on higher investments in the JRNY platform. However, selling and marketing expenses declined 13.6% year on year to $22 million.

Nautilus reported adjusted operating income of $41.5 million, significantly higher than the $3.3 million reported in the year-ago quarter. Adjusted operating margin expanded 18.8% year over year to 21.9%.

Adjusted EBITDA was $42.8 million, up a whopping 620.2% year on year.

Balance Sheet

As of Dec 31, 2020, Nautilus had cash & cash equivalents worth $56.6 million compared with $70.1 million as of Sep 30, 2020.

The company’s long-term debt was $13.5 million as of Dec 31, 2020 compared with $14.3 million as of Sep 30, 2020.

Guidance

On Dec 30, 2020, Nautilus’ Board of Directors approved the change in the company’s fiscal year from the 12 months beginning Jan 1 and ending Dec 31 to the 12 months beginning Apr 1 and ending Mar 31.

For the transition period from Jan 1, 2021 to Mar 31, 2021, Nautilus projects revenue growth between 55-75% year over year.
The company anticipates solid demand for its robust home fitness product portfolio, amid the COVID-19 vaccine roll-out and reopening of gyms, to continue fueling top-line growth over the long haul.

However, global logistic disruptions are expected to be an overhang. In addition, gross margin for the March-end quarter is likely to be flat year over year on higher logistics costs and elevated commodity prices. Also, operating expenses might flare up on higher marketing expenses and investments in the JRNY digital fitness platform.

Zacks Rank & Stocks to Consider

Currently, Nautilus carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Retail-Wholesale sector are Foot Locker FL, Dollar Tree DLTR and DICK’s Sporting Goods DKS. Foot Locker sports a Zacks Rank #1 (Strong Buy), while Dollar Tree and DICK’s Sporting Goods carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Foot Locker, Dollar Tree and DICK’s Sporting Goods are set to release their quarterly earnings on Feb 26, Mar 3 and Mar 9, respectively.

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