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Nautilus feeling fit after record-breaking fourth quarter

Pandemic fuels demand for home fitness equipment

By Anthony Macuk, Columbian business reporter
Published: February 24, 2021, 5:56pm

Vancouver-based home exercise equipment maker Nautilus posted a record-breaking fourth quarter earnings report Monday, capping off a year that saw a dramatic reversal of the company’s fortunes as the COVID-19 pandemic fueled consumer demand for home fitness options.

“Our fourth quarter was not just good, it was the best quarter in the company’s 35-year history,” CEO Jim Barr said in a Monday conference call with investors and analysts.

Nautilus’ direct and retail segments each saw their strongest-ever sales quarters. The combined sales figure was $189.3 million, an 81.7 percent year-over-year gain. Gross profit was $77.9 million, a 104.1-percent year-over-year gain. Net sales for the full year 2020 were reported at $552.6 million, compared with $309.3 million in 2019.

The direct segment saw sales of $82.2 million in the fourth quarter, up 128.8 percent year-over-year, and the retail segment saw sales of $106.3 million, a 57.5 percent year-over-year gain. Cardio equipment accounted for a large share of sales in both segments, particularly the Schwinn IC4 and other exercise bike products, according to a press release from the company.

Strength products also saw significant growth, especially in the direct segment — the company reported a 52.5 percent increase in retail strength equipment sales and a 372.1 percent increase in direct sales. In both categories, the company cited its SelectTech weights and Bowflex Home Gym products as its bestsellers.

Barr said the company focused on increasing its production and supply chain capacity in 2020 to keep up with the rising demand, and he and CFO Aina Konold both described shipping and logistics as the company’s biggest challenge in 2020.

The company’s press release specifically pointed to a severe shipping container shortage in December, resulting in about $16 million worth of orders that were unable to ship on schedule and therefore were not included in the total quarterly sales figure.

“All told, we entered 2021 with $91 million in backlog,” Barr said.

Barr said he plans to continue to focus on improving Nautilus’ supply chain and inventory capacity in 2021 to close the rest of the gap. The heightened pandemic-era demand has not decreased thus far, he said, and he’s not anticipating a major drop even as vaccines become more widely available.

Based on the company’s surveys, he said an estimated 20 percent of former gym attendees likely won’t go back even once the pandemic ends, and others may shift to more of a hybrid model where they still do some workouts at home. People with office jobs are a big driver of gym traffic, he said, and the expectation is that some of those workers may continue working from home at least part of the time.

Barr touted the 2020 release of seven new products that are compatible with the company’s online fitness platform, JRNY. The lineup led to an increase in the platform’s user base, he said, although he declined to share specific subscription numbers when asked by an analyst on the call, saying that the platform was still too new.

“We’ll report the hard numbers when it becomes material, and it’s not yet there.”

Nautilus also touted its 2020 decision to sell off its Octane Fitness brand, which focused on commercial equipment sales rather than the individual home users targeted by most of the rest of the company’s product lineup. Most of the company’s 2020 and fourth quarter year-over-year gains would have been even higher with Octane excluded, the company said in its press release.

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Columbian business reporter