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Nautilus Inc. Message Board

  • auz13 auz13 May 5, 2003 1:58 PM Flag

    the Conference Call

    Operating margin expected to fall from 26% to 15-17% for full yr 2003

    D/S of Bowflex fell from 54,000 2002 to 46,000 2003 .... Conversion rate on D/S ads dropped for the 3rd time in a row .... NSS sales did increase roughly 10% yr/yr ($7.5M to $8.3M), though if I were long I would be disappointed. Net margins fell for D/S from 20% to 16% (due to increase in advertising costs and lowered conversion rate).

    C/R sales up 13% yr/yr, but if you back out the $4.6M of Retail Bowflex its a meger 2.4% (keeping in mind an additional month of stairmaster sales, the launch of all those new products last fall didn't have much of a positive effect on C/R revenues) .... also note worthy is Cook refused to offer any information on the ASP for retail bowflex, assuming $1400 that would be roughly 3,300 units

    Net margins on C/R increased to 5.1% from 3.6%, if you back out Bowflex Retail (assume 10% net for Bowflex), C/R net profit was 4.6%

    Prediction: Bowflex sales decline in double digits, conversion rates will continue to fall (as more people will buy bowflex through retail), ad rates will continue to increase putting further pressure on net margins. NLS will warn again before the end of the year as net margins get squeezed throughout the year. (and they will cut 2004 estimate to well under $1.60)

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    • <Operating margin expected to fall from 26% to 15-17% for full yr 2003>

      Hey, goof, go back to school. You've mixed up pre-tax and after tax margins.

      Yes, NLS's after tax margin is in retreat. Not 26% to 15% but over the last few quarters its TTM after tax margin has gone from 18.7% to 17%, and now, in sync with lower EPS projections they're targeting an achievable 15% - 17% after tax margin. Still impressive, if achieved, in the current environment.

      Keep in mind that gross margin went from low 70's to mid-50's, not as surprise, but as a plan to have a major portion of sales go into inherently lower margin retail/commercial (with purchase of Schwinn & Stairmaster). And the benefit of going this direction is currently being demonstrated: retailing bowflex as a counter to lower Direct sales of bowflex; and utilizing greater research capacity via Schwinn acquisition to come up with a potential blockbuster Direct Sales product in Treadclimber.

      Look for a modest resurgence in eps forecast if treadclimber sales show some perk.

      • 1 Reply to insight4ever
      • hey, dumbass listen to the conference call before putting your foot in your mouth, (about 8:30 in) "we expect operating margins in a range of 15-17%". Also think this through with projected 525M a 10% net margin EPS=$1.60. Treadclimber sales ARE projected NOT to contribute to EPS until 2004. (and only acouple of pennies at that - Barrons article) Time to take off those rose coloured glasses.

        Please do little more research, this company HAS changed significantly from 1-year ago.

        (Also expect Q2 sales of bowflex to be below Q1 2003 and well below Q2 2002.... this due mainly b/c Q2 is traditionally the weakest and Q2 2002 was inflated with 6-wk backlog of bowflex orders from Q1 2002)

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