Third Quarter 2020 Net Sales Increased152% to $155 million Compared to Same Period Last Year
Operating Income of $44 million is the highest in company history
Adjusted EBITDA Was $37 million, representing an Adjusted EBITDA improvement of $43 million
VANCOUVER, Wash.--(BUSINESS WIRE)-- Nautilus, Inc. (NYSE: NLS) today reported its unaudited operating results for the third quarter of 2020.
Third Quarter 2020 Highlights Compared to Third Quarter 2019
1 See "Reconciliation of Non-GAAP Financial Measures" and "Gain (loss) on Disposal Group" for more information
Management Comments
“I’m really proud of how well our team executed this quarter. We delivered record results while continuing to position our company for long-term sustainable growth. We increased sales by 152%, expanded gross margins by 1280 basis points, delivered operating income of $44 million, the highest quarterly operating income in our history, and generated $37 million of adjusted EBITDA,” said Jim Barr, Nautilus Inc. Chief Executive Officer. “Impacts stemming from Covid-19 are changing consumers’ exercise habits and preferences in profound ways. Our team’s strong sustained execution has enabled us to capitalize on in-home fitness trends and elevated demand. We were able to attract many new consumers to our brands through both our retail and direct segments. We continue to see strong consumer response to our cardio and strength offerings, particularly our IC bikes, SelectTech weights, and Home Gyms. In Q3, we launched the new Bowflex® VeloCore™, the industry’s first (un)stationary, dual-mode bike that combines leaning technology with digital connectivity for a dynamic full body workout and an immersive digital experience. Early results for this new product have exceeded expectations. A key focus in this quarter was continuing to improve the flow of inventory in our supply chain. However, even with expanded production and improved supply chain, demand still outpaced supply, and we are entering the fourth quarter with close to a $68 million backlog."
Mr. Barr continued, “While we focused on delivering best-in-class products for our customers, we also continued to take steps to advance our long-term transformation. We sold our commercial brand, Octane Fitness, allowing the team to be laser-focused on growing and enhancing our at-home connected fitness experiences. We hired a Chief Digital Officer who has implemented large-scale digital experiences at some of the world's top technology companies to lead our JRNYTM and e-commerce teams and accelerate our ongoing digital transformation. We’ll be sharing the full details of our long-range plan in early 2021 but as we’ve demonstrated in the last four quarters, the work has already begun. We’ve strengthened our balance sheet, launched new products in response to consumer insights, and have continually enhanced our digital offering. These are the steps we need to take to successfully return Nautilus Inc. to sustainable long-term profitable growth.”
Third Quarter 2020 Segment Results Compared to Third Quarter 2019
Direct Segment
Retail Segment
Balance Sheet and Other Key Highlights
As of September 30, 2020:
Forward Looking Guidance
Announcing Filing of S-3 Shelf Registration Statement
Conference Call
Nautilus will discuss third quarter 2020 operating results during a live conference call and webcast on Monday, November 9, 2020 at 1:30 p.m. Pacific Time. The conference call can be accessed by calling (877) 425-9470 in North America. International callers may dial (201) 389-0878. Please note that there will be presentation slides accompanying the earnings call. The slides will be displayed live on the webcast and will be available to download via the webcast player or at http://www.nautilusinc.com/events. The webcast will be archived online within two hours after completion of the call and will be available for six months. Participants from the Company will include Jim Barr, Chief Executive Officer; Aina Konold, Chief Financial Officer; Becky Alseth, Chief Marketing Officer; Chris Quatrochi, SVP of Product Development; and Bill McMahon, Special Assistant to the CEO.
A telephonic playback will be available from 4:30 p.m. PT, November 9, 2020 through 8:59 p.m. PT, November 23, 2020. Participants can dial (844) 512-2921 in North America and international participants can dial (412) 317-6671 to hear the playback. The passcode for the playback is 13711832.
About Nautilus, Inc.
Headquartered in Vancouver, Washington, Nautilus, Inc. (NYSE: NLS) is a global technology driven fitness solutions company that believes everyone deserves a fit and healthy life. With a brand portfolio including Bowflex®, Nautilus®, Schwinn® and JRNY™. Nautilus, Inc. develops innovative products to support healthy living through direct and retail channels. Nautilus, Inc. uses the investor relations page of its website (www.nautilusinc.com/investors) to make information available to its investors and the market.
Forward-Looking Statements
This press release 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.
RESULTS OF OPERATIONS INFORMATION
The following summary contains information from our consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019 (unaudited and in thousands, except per share amounts):
| Three Months Ended September 30, |
| Nine Months Ended September 30, | |||||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net sales | $ | 155,391 |
|
| $ | 61,708 |
|
| $ | 363,301 |
|
| $ | 205,112 |
| |
Cost of sales | 87,453 |
|
| 42,641 |
|
| 212,370 |
|
| 132,686 |
| |||||
Gross profit | 67,938 |
|
| 19,067 |
|
| 150,931 |
|
| 72,426 |
| |||||
|
|
|
|
|
|
|
| |||||||||
Operating expenses: |
|
|
|
|
|
|
| |||||||||
Selling and marketing | 19,207 |
|
| 17,472 |
|
| 56,339 |
|
| 69,146 |
| |||||
General and administrative | 8,841 |
|
| 6,726 |
|
| 25,812 |
|
| 23,824 |
| |||||
Research and development | 4,240 |
|
| 3,122 |
|
| 11,783 |
|
| 11,282 |
| |||||
(Gain) loss on disposal group, goodwill and other intangible impairment charge | (8,345 | ) |
| — |
|
| 20,668 |
|
| 72,008 |
| |||||
Total operating expenses | 23,943 |
|
| 27,320 |
|
| 114,602 |
|
| 176,260 |
| |||||
|
|
|
|
|
|
|
| |||||||||
Operating income (loss) | 43,995 |
|
| (8,253 | ) |
| 36,329 |
|
| (103,834 | ) | |||||
Other expense, net | (628 | ) |
| (422 | ) |
| (1,434 | ) |
| (910 | ) | |||||
Income (loss) from continuing operations before income taxes | 43,367 |
|
| (8,675 | ) |
| 34,895 |
|
| (104,744 | ) | |||||
Income tax expense (benefit)(1) | 9,398 |
|
| 55 |
|
| 3,610 |
|
| (8,786 | ) | |||||
Income (loss) from continuing operations | 33,969 |
|
| (8,730 | ) |
| 31,285 |
|
| (95,958 | ) | |||||
Loss from discontinued operations, net of income taxes | (131 | ) |
| (114 | ) |
| (373 | ) |
| (329 | ) | |||||
Net income (loss) | $ | 33,838 |
|
| $ | (8,844 | ) |
| $ | 30,912 |
|
| $ | (96,287 | ) | |
|
|
|
|
|
|
|
| |||||||||
Basic income (loss) per share from continuing operations | $ | 1.13 |
|
| $ | (0.29 | ) |
| $ | 1.05 |
|
| $ | (3.24 | ) | |
Basic loss per share from discontinued operations | — |
|
| (0.01 | ) |
| (0.02 | ) |
| (0.01 | ) | |||||
Basic net income (loss) per share | $ | 1.13 |
|
| $ | (0.30 | ) |
| $ | 1.03 |
|
| $ | (3.25 | ) | |
|
|
|
|
|
|
|
| |||||||||
Diluted income (loss) per share from continuing operations | $ | 1.05 |
|
| $ | (0.29 | ) |
| $ | 0.98 |
|
| $ | (3.24 | ) | |
Diluted loss per share from discontinued operations | (0.01 | ) |
| (0.01 | ) |
| (0.01 | ) |
| (0.01 | ) | |||||
Diluted net income (loss) per share | $ | 1.04 |
|
| $ | (0.30 | ) |
| $ | 0.97 |
|
| $ | (3.25 | ) | |
|
|
|
|
|
|
|
| |||||||||
Shares used in per share calculations: |
|
|
|
|
|
|
| |||||||||
Basic | 30,038 |
|
| 29,728 |
|
| 29,914 |
|
| 29,660 |
| |||||
Diluted | 32,401 |
|
| 29,728 |
|
| 31,792 |
|
| 29,660 |
| |||||
(1) Income tax expense (benefit) for the three and nine months ended September 30, 2019 includes an immaterial correction to reduce income tax expense and the valuation allowance by $1.8 million. The correction reflects the impact of 2017 tax reform associated with the application of indefinite-lived deferred taxes to properly calculate the valuation allowance. |
SEGMENT INFORMATION
The following tables present certain comparative information by segment for the three and nine months ended September 30, 2020 and 2019 (unaudited and in thousands):
| Three Months Ended September 30, |
| Change | ||||||||||||
| 2020 |
| 2019 |
| $ |
| % | ||||||||
Net sales: |
|
|
|
|
|
|
| ||||||||
Direct | $ | 61,194 |
|
| $ | 16,197 |
|
| $ | 44,997 |
|
| 277.8 | % | |
Retail | 93,155 |
|
| 44,823 |
|
| 48,332 |
|
| 107.8 | % | ||||
Royalty | 1,042 |
|
| 688 |
|
| 354 |
|
| 51.5 | % | ||||
Consolidated net sales | $ | 155,391 |
|
| $ | 61,708 |
|
| $ | 93,683 |
|
| 151.8 | % | |
|
|
|
|
|
|
|
| ||||||||
Gross profit: |
|
|
|
|
|
|
| ||||||||
Direct | $ | 34,990 |
|
| $ | 6,210 |
|
| $ | 28,780 |
|
| 463.4 | % | |
Retail | 31,906 |
|
| 12,169 |
|
| 19,737 |
|
| 162.2 | % | ||||
Royalty | 1,042 |
|
| 688 |
|
| 354 |
|
| 51.5 | % | ||||
Consolidated gross profit | $ | 67,938 |
|
| $ | 19,067 |
|
| $ | 48,871 |
|
| 256.3 | % | |
|
|
|
|
|
|
|
| ||||||||
Contribution: |
|
|
|
|
|
|
| ||||||||
Direct | $ | 17,588 |
|
| $ | (8,693 | ) |
| $ | 26,281 |
|
| * | ||
Retail | 23,442 |
|
| 4,772 |
|
| 18,670 |
|
| 391.2 | % | ||||
Royalty | 1,042 |
|
| 688 |
|
| 354 |
|
| 51.5 | % | ||||
Consolidated contribution | $ | 42,072 |
|
| $ | (3,233 | ) |
| $ | 45,305 |
|
| * | ||
|
|
|
|
|
|
|
| ||||||||
Reconciliation of consolidated contribution to income (loss) from continuing operations: |
|
|
|
| |||||||||||
Consolidated contribution | $ | 42,072 |
|
| $ | (3,233 | ) |
| $ | 45,305 |
|
| * | ||
Amounts not directly related to segments: |
|
|
|
|
|
|
| ||||||||
Operating expenses | 1,923 |
|
| (5,020 | ) |
| 6,943 |
|
| 138.3 | % | ||||
Other expense, net | (628 | ) |
| (422 | ) |
| (206 | ) |
| (48.8 | )% | ||||
Income tax expense | (9,398 | ) |
| (55 | ) |
| (9,343 | ) |
| (16,987.3 | )% | ||||
Income (loss) from continuing operations | $ | 33,969 |
|
| $ | (8,730 | ) |
| $ | 42,699 |
|
| 489.1 | % |
*Not meaningful |
The following table compares the net sales of our major product lines within each business segment (dollars in thousands):
| Three Months Ended September 30, |
| Change | |||||||||
| 2020 |
| 2019 |
| $ |
| % | |||||
Direct net sales: |
|
|
|
|
|
|
| |||||
Cardio products(1) | $ | 44,278 |
| $ | 12,431 |
| $ | 31,847 |
| 256.2% | ||
Strength products(2) | 16,916 |
| 3,766 |
| 13,150 |
| 349.2% | |||||
| 61,194 |
| 16,197 |
| 44,997 |
| 277.8% | |||||
Retail net sales: |
|
|
|
|
|
|
| |||||
Cardio products(1) | 71,924 |
| 35,509 |
| 36,415 |
| 102.6% | |||||
Strength products(2) | 21,231 |
| 9,314 |
| 11,917 |
| 127.9% | |||||
| 93,155 |
| 44,823 |
| 48,332 |
| 107.8% | |||||
|
|
|
|
|
|
|
| |||||
Royalty | 1,042 |
| 688 |
| 354 |
| 51.5% | |||||
| $ | 155,391 |
| $ | 61,708 |
| $ | 93,683 |
| 151.8% | ||
|
|
|
|
|
|
|
|
(1) | Cardio products include: connected-fitness bikes, the Bowflex® C6, Bowflex® VeloCoreTM, Schwinn® IC4, Max Trainer®, treadmills, other exercise bikes, ellipticals and subscription services. | |
(2) | Strength products include: Bowflex® Home Gyms, Bowflex® SelectTech® dumbbells, kettlebell and barbell weights, and accessories. |
| Nine Months Ended September 30, |
| Change | ||||||||||||
| 2020 |
| 2019 |
| $ |
| % | ||||||||
Net sales: |
|
|
|
|
|
|
| ||||||||
Direct | $ | 158,768 |
|
| $ | 83,745 |
|
| $ | 75,023 |
|
| 89.6 | % | |
Retail | 201,716 |
|
| 119,097 |
|
| 82,619 |
|
| 69.4 | % | ||||
Royalty | 2,817 |
|
| 2,270 |
|
| 547 |
|
| 24.1 | % | ||||
Consolidated net sales | $ | 363,301 |
|
| $ | 205,112 |
|
| $ | 158,189 |
|
| 77.1 | % | |
|
|
|
|
|
|
|
| ||||||||
Gross profit: |
|
|
|
|
|
|
| ||||||||
Direct | $ | 86,812 |
|
| $ | 41,633 |
|
| $ | 45,179 |
|
| 108.5 | % | |
Retail | 61,302 |
|
| 28,523 |
|
| 32,779 |
|
| 114.9 | % | ||||
Royalty | 2,817 |
|
| 2,270 |
|
| 547 |
|
| 24.1 | % | ||||
Consolidated gross profit | $ | 150,931 |
|
| $ | 72,426 |
|
| $ | 78,505 |
|
| 108.4 | % | |
|
|
|
|
|
|
|
| ||||||||
Contribution: |
|
|
|
|
|
|
| ||||||||
Direct | $ | 36,392 |
|
| $ | (19,569 | ) |
| $ | 55,961 |
|
| * | ||
Retail | 37,444 |
|
| 3,803 |
|
| 33,641 |
|
| 884.6 | % | ||||
Royalty | 2,817 |
|
| 2,270 |
|
| 547 |
|
| 24.1 | % | ||||
Consolidated contribution | $ | 76,653 |
|
| $ | (13,496 | ) |
| $ | 90,149 |
|
| 668.0 | % | |
|
|
|
|
|
|
|
| ||||||||
Reconciliation of consolidated contribution to income (loss) from continuing operations: |
|
|
|
| |||||||||||
Consolidated contribution | $ | 76,653 |
|
| $ | (13,496 | ) |
| $ | 90,149 |
|
| * | ||
Amounts not directly related to segments: |
|
|
|
|
|
|
| ||||||||
Operating expenses | $ | (40,324 | ) |
| $ | (90,338 | ) |
| 50,014 |
|
| 55.4 | % | ||
Other expense, net | (1,434 | ) |
| (910 | ) |
| (524 | ) |
| (57.6 | )% | ||||
Income tax (expense) benefit | (3,610 | ) |
| 8,786 |
|
| (12,396 | ) |
| (141.1 | )% | ||||
Income (loss) from continuing operations | $ | 31,285 |
|
| $ | (95,958 | ) |
| $ | 127,243 |
|
| 132.6 | % |
*Not meaningful |
The following table compares the net sales of our major product lines within each business segment (dollars in thousands):
| Nine Months Ended September 30, |
| Change | |||||||||||
| 2020 |
| 2019 |
| $ |
| % | |||||||
Direct net sales: |
|
|
|
|
|
|
| |||||||
Cardio products(1) | $ | 125,739 |
|
| $ | 68,121 |
|
| $ | 57,618 |
|
| 84.6 | % |
Strength products(2) | 33,029 |
|
| 15,624 |
|
| 17,405 |
|
| 111.4 | % | |||
| 158,768 |
|
| 83,745 |
|
| 75,023 |
|
| 89.6 | % | |||
Retail net sales: |
|
|
|
|
|
|
| |||||||
Cardio products(1) | 157,078 |
|
| 92,250 |
|
| 64,828 |
|
| 70.3 | % | |||
Strength products(2) | 44,638 |
|
| 26,847 |
|
| 17,791 |
|
| 66.3 | % | |||
| 201,716 |
|
| 119,097 |
|
| 82,619 |
|
| 69.4 | % | |||
|
|
|
|
|
|
|
| |||||||
Royalty | 2,817 |
|
| 2,270 |
|
| 547 |
|
| 24.1 | % | |||
| $ | 363,301 |
|
| $ | 205,112 |
|
| $ | 158,189 |
|
| 77.1 | % |
|
|
|
|
|
|
|
|
(1) | Cardio products include: connected-fitness bikes, the Bowflex® C6, Bowflex® VeloCoreTM, Schwinn® IC4, Max Trainer®, treadmills, other exercise bikes, ellipticals and subscription services. | |
(2) | Strength products include: Bowflex® Home Gyms, Bowflex® SelectTech® dumbbells, kettlebell and barbell weights, and accessories. |
HELD-FOR-SALE DISPOSAL GROUP
The assets and liabilities of Octane Fitness® disposal group were recorded on the condensed consolidated balance sheets as current assets held-for-sale of $28.7 million and current liabilities held-for-sale of $9.7 million as follows (in thousands):
| As of | |||
| September 30, 2020 | |||
Assets: |
| |||
Cash and cash equivalents | $ | 108 |
| |
Trade receivables | 3,937 |
| ||
Inventories | 10,703 |
| ||
Prepaids and other current assets | 586 |
| ||
Property, plant and equipment, net | 1,571 |
| ||
Other intangible assets | 32,045 |
| ||
Loss on disposal group | (20,272 | ) | ||
Other assets | 23 |
| ||
Total current assets held-for-sale | $ | 28,701 |
| |
Liabilities: |
| |||
Trade payables | $ | 4,659 |
| |
Accrued liabilities | 759 |
| ||
Warranty obligations | 2,779 |
| ||
Deferred income tax liabilities | 1,513 |
| ||
Total current liabilities held-for-sale | $ | 9,710 |
|
BALANCE SHEET INFORMATION
The following summary contains information from our consolidated balance sheets as of September 30, 2020 and December 31, 2019 (unaudited and in thousands):
| As of | |||||||
| September 30, 2020 |
| December 31, 2019 | |||||
Assets |
|
|
| |||||
|
|
|
| |||||
Cash and cash equivalents | $ | 70,072 |
|
| $ | 11,070 |
| |
Restricted cash | 2,197 |
|
| — |
| |||
Trade receivables, net of allowances of $85 and $45 | 68,619 |
|
| 54,600 |
| |||
Inventories | 33,715 |
|
| 54,768 |
| |||
Prepaids and other current assets | 9,735 |
|
| 8,283 |
| |||
Income taxes receivable | 6,600 |
|
| 472 |
| |||
Current assets held-for-sale | 28,701 |
|
| — |
| |||
Total current assets | 219,639 |
|
| 129,193 |
| |||
Property, plant and equipment, net | 23,168 |
|
| 22,755 |
| |||
Operating lease right-of-use assets | 20,637 |
|
| 20,778 |
| |||
Other intangible assets, net | 9,553 |
|
| 43,243 |
| |||
Other assets | 6,015 |
|
| 4,510 |
| |||
Total assets | $ | 279,012 |
|
| $ | 220,479 |
| |
|
|
|
| |||||
Liabilities and Shareholders' Equity |
|
|
| |||||
|
|
|
| |||||
Trade payables | $ | 83,403 |
|
| $ | 74,255 |
| |
Accrued liabilities | 15,943 |
|
| 7,633 |
| |||
Operating lease liabilities, current portion | 3,126 |
|
| 3,720 |
| |||
Warranty obligations, current portion | 3,219 |
|
| 3,100 |
| |||
Debt payable, current portion, net of unamortized debt issuance costs of $83 and $0 | 2,417 |
|
| — |
| |||
Current liabilities held-for-sale | 9,710 |
|
| — |
| |||
Total current liabilities | 117,818 |
|
| 88,708 |
| |||
Operating lease liabilities, non-current | 19,592 |
|
| 18,982 |
| |||
Warranty obligations, non-current | 306 |
|
| 2,617 |
| |||
Income taxes payable, non-current | 3,989 |
|
| 3,676 |
| |||
Deferred income tax liabilities, non-current | 1,550 |
|
| 1,783 |
| |||
Other non-current liabilities | 801 |
|
| 46 |
| |||
Debt payable, non-current, net of unamortized debt issuance costs of $277 and $230 | 11,510 |
|
| 14,071 |
| |||
Shareholders' equity | 123,446 |
|
| 90,596 |
| |||
Total liabilities and shareholders' equity | $ | 279,012 |
|
| $ | 220,479 |
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Non-GAAP Presentation
In addition to disclosing its financial results determined in accordance with GAAP, Nautilus has presented in this release certain non-GAAP financial measures, which exclude the impact of certain items (as further described below) and provide supplemental information regarding operating performance. Nautilus presents non-GAAP financial measures as a complement to results provided in accordance with GAAP, and the non-GAAP financial measures should not be regarded as a substitute for GAAP. By disclosing these non-GAAP financial measures, management intends to provide investors with a supplemental comparison of operating results and trends for the periods presented. Management believes these measures are also useful to investors as such measures allow investors to evaluate performance using the same metrics that management uses to evaluate past performance and prospects for future performance. Nautilus strongly encourages you to review all its financial statements and publicly filed reports in their entirety and to not rely on any single financial measure.
EBITDA from Continuing Operations
Nautilus defines EBITDA from continuing operations as its income from continuing operations, adjusted to exclude interest expense (income), income tax expense (benefit) of continuing operations, and depreciation and amortization expense. Nautilus uses EBITDA from continuing operations in evaluating its operating results and for financial and operational decision-making purposes such as budgeting and establishing operational goals. Nautilus believes that EBITDA from continuing operations helps identify underlying trends in its business that could otherwise be masked by the effect of the items that are excluded from EBITDA from continuing operations and enhances the overall understanding of the Company’s past performance and future prospects. Management believes that EBITDA is frequently used by investors, securities analysts and other interested parties in their evaluation of companies, many of which present EBITDA when reporting their results. Other companies may calculate EBITDA differently, and it may not be comparable.
Adjusted Results
In addition to disclosing the comparable GAAP results, Nautilus has presented its operating income and income from continuing operations on an adjusted basis. Adjusted operating income excludes non-cash charges related to the disposal group held-for-sale and goodwill and the Octane Fitness® trade name intangible asset impairment. Adjusted income from continuing operations excludes the loss and impairment charges as well as the associated tax benefit. We believe that the adjustment of this charge and associated tax benefit, which are inconsistent in amount and frequency, supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance. In addition to presenting its EBITDA from continuing operations as described above, Nautilus has also presented EBITDA from continuing operations on an adjusted basis, excluding the aforementioned impairment charge for similar reasons.
The following table presents a reconciliation of operating expenses, the most directly comparable GAAP measure, to Adjusted operating expenses for the three and nine months ended September 30, 2020 and 2019 (unaudited and in thousands):
| Three Months Ended September 30, |
| Nine Months Ended September 30, | |||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||||
Operating expenses | $ | 23,943 |
| $ | 27,320 |
| $ | 114,602 |
|
| $ | 176,260 |
| |
Gain (loss) on disposal group(1) | 8,345 |
| — |
| (20,668 | ) |
| — |
| |||||
Goodwill and other intangible impairment charge(2) | — |
| — |
| — |
|
| (72,008 | ) | |||||
Adjusted operating expenses | $ | 32,288 |
| $ | 27,320 |
| $ | 93,934 |
|
| $ | 104,252 |
|
The following table presents a reconciliation of operating income (loss), the most directly comparable GAAP measure, to Adjusted operating income (loss) for the three and nine months ended September 30, 2020 and 2019 (unaudited and in thousands):
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | ||||||||
Operating income (loss) | $ | 43,995 |
|
| $ | (8,253 | ) |
| $ | 36,329 |
| $ | (103,834 | ) | |
(Gain) loss on disposal group(1) | (8,345 | ) |
| — |
|
| 20,668 |
| — |
| |||||
Goodwill and other intangible impairment charge(2) | — |
|
| — |
|
| — |
| 72,008 |
| |||||
Adjusted operating income (loss) | $ | 35,650 |
|
| $ | (8,253 | ) |
| $ | 56,997 |
| $ | (31,826 | ) |
The following table presents a reconciliation of income (loss) from continuing operations, the most directly comparable GAAP measure, to Adjusted income (loss) from continuing operations for the three and nine months ended September 30, 2020 and 2019 (unaudited and in thousands):
| Three Months Ended September 30, |
| Nine Months Ended September 30, | |||||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Income (loss) from continuing operations | $ | 33,969 |
|
| $ | (8,730 | ) |
| $ | 31,285 |
|
| $ | (95,958 | ) | |
(Gain) loss on disposal group(1) | (8,345 | ) |
| — |
|
| 20,668 |
|
| — |
| |||||
Goodwill and other intangible impairment charge(2) | — |
|
| — |
|
| — |
|
| 72,008 |
| |||||
Income tax expense (benefit) for (gain) loss on disposal group and goodwill and other intangible impairment | 2,420 |
|
| — |
|
| (4,796 | ) |
| (3,095 | ) | |||||
Adjusted income (loss) from continuing operations | $ | 28,044 |
|
| $ | (8,730 | ) |
| $ | 47,157 |
|
| $ | (27,045 | ) |
The following table presents a reconciliation of income (loss) from continuing operations, the most directly comparable GAAP measure, to EBITDA for the three and nine months ended September 30, 2020 and 2019 (unaudited and in thousands):
| Three Months Ended September 30, |
| Nine Months Ended September 30, | |||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||||
|
|
|
|
|
|
|
| |||||||
Income (loss) from continuing operations | $ | 33,969 |
| $ | (8,730 | ) |
| $ | 31,285 |
| $ | (95,958 | ) | |
Interest expense, net | 252 |
| 293 |
|
| 1,214 |
| 559 |
| |||||
Income tax expense (benefit) from continuing operations | 9,398 |
| 55 |
|
| 3,610 |
| (8,786 | ) | |||||
Depreciation and amortization | 1,849 |
| 2,853 |
|
| 7,303 |
| 8,045 |
| |||||
Earnings (loss) before interest, taxes, depreciation and amortization (EBITDA) from continuing operations | $ | 45,468 |
| $ | (5,529 | ) |
| $ | 43,412 |
| $ | (96,140 | ) |
The following table presents a reconciliation of income (loss) from continuing operations, the most directly comparable GAAP measure, to Adjusted EBITDA for the three and nine months ended September 30, 2020 and 2019 (unaudited and in thousands):
| Three Months Ended September 30, |
| Nine Months Ended September 30, | |||||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Income (loss) from continuing operations | $ | 33,969 |
|
| $ | (8,730) |
|
| $ | 31,285 |
|
| $ | (95,958) |
| |
Interest expense, net | 252 |
|
| 293 |
|
| 1,214 |
|
| 559 |
| |||||
Income tax expense (benefit) from continuing operations | 9,398 |
|
| 55 |
|
| 3,610 |
|
| (8,786) |
| |||||
Depreciation and amortization | 1,849 |
|
| 2,853 |
|
| 7,303 |
|
| 8,045 |
| |||||
(Gain) loss on disposal group(1) | (8,345) |
|
| — |
|
| 20,668 |
|
| — |
| |||||
Goodwill and other intangible impairment charge(2) | — |
|
| — |
|
| — |
|
| 72,008 |
| |||||
Adjusted earnings (loss) before interest, taxes, depreciation and amortization (Adjusted EBITDA) from continuing operations | $ | 37,123 |
|
| $ | (5,529) |
|
| $ | 64,080 |
|
| $ | (24,132) |
|
The following table presents a reconciliation of diluted income (loss) per share from continuing operations, the most directly comparable GAAP measure, to Adjusted diluted income (loss) per share from continuing operations for the three and nine months ended September 30, 2020 and 2019 (unaudited and in thousands):
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | ||||||||
|
|
|
|
|
|
|
| ||||||||
Diluted income (loss) per share from continuing operations | $ | 1.05 |
|
| $ | (0.29 | ) |
| $ | 0.98 |
| $ | (3.24 | ) | |
(Gain) loss on disposal group, net of tax(1) | (0.18 | ) |
| — |
|
| 0.50 |
| — |
| |||||
Goodwill and other intangible impairment charge, net of tax(2) | — |
|
| — |
|
| — |
| 2.32 |
| |||||
Adjusted diluted income (loss) per share from continuing operations | $ | 0.87 |
|
| $ | (0.29 | ) |
| $ | 1.48 |
| $ | (0.92 | ) |
(1) Gain (loss) on disposal group
In accordance with Accounting Standards Codification ("ASC") 360, Property, Plant and Equipment, for a long-lived assets or disposal group classified as held-for-sale, a loss is recognized for the carrying amount that exceeds the fair market value of the long-lived assets less the cost to sell. The assets and liabilities of a disposal group classified as held-for-sale should be presented separately in the asset and liability sections, respectively, of the balance sheet. The disposal group is expected to be structured as a sale of the subsidiary shares and we elected to classify the deferred taxes associated with the individual assets and liabilities as part of the disposal group held-for-sale.
(2) Goodwill and Other Intangible Impairment
In accordance with ASC 350, Intangibles - Goodwill and Other, Nautilus is required to test its goodwill and other indefinite-lived intangible assets for impairment annually or when a triggering event has occurred that would indicate that it is more likely than not that the fair value of the reporting units are less than the book value, including goodwill and intangibles. In our assessment, a triggering event occurred during the second quarter of 2019 as a result of the decline in our stock price and overall market capitalization. Based on the assessment conducted, we estimated a $72.0 million impairment.
View source version on businesswire.com: https://www.businesswire.com/news/home/20201109006079/en/
Investor Relations: John MillsICR, LLC 646-277-1254 john.mills@ICRinc.com
Media: John FreadNautilus, Inc. 360-859-5815 jfread@nautilus.com
Carey Kerns The Hoffman Agency 503-754-7975 ckerns@hoffman.com
Source: Nautilus, Inc.