U.S. Markets closed

Edited Transcript of NLS earnings conference call or presentation 31-Jul-17 8:30pm GMT

Thomson Reuters StreetEvents

Q2 2017 Nautilus Inc Earnings Call

Vancouver Aug 13, 2017 (Thomson StreetEvents) -- Edited Transcript of Nautilus Inc earnings conference call or presentation Monday, July 31, 2017 at 8:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Bruce M. Cazenave

Nautilus, Inc. - CEO and Director

* John Mills

ICR, LLC - Partner

* Sidharth Nayar

Nautilus, Inc. - CFO

* William B. McMahon

Nautilus, Inc. - COO

================================================================================

Conference Call Participants

================================================================================

* Christopher Walter Krueger

Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst

* Frank Anthony Camma

Sidoti & Company, LLC - Analyst

* George Arthur Kelly

Imperial Capital, LLC, Research Division - Analyst

* Michael Arlington Swartz

SunTrust Robinson Humphrey, Inc., Research Division - Senior Analyst

* Michael Milton Yuji Kawamoto

D.A. Davidson & Co., Research Division - Research Associate

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, and welcome to the Nautilus, Inc. Second Quarter 2017 Earnings Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to John Mills with ICR. Please go ahead, sir.

--------------------------------------------------------------------------------

John Mills, ICR, LLC - Partner [2]

--------------------------------------------------------------------------------

Thank you. Good afternoon, everyone. Welcome to Nautilus' Second Quarter 2017 Conference Call. Participants on the call from Nautilus are Bruce Cazenave, Chief Executive Officer; Sid Nayar, Chief Financial Officer; and Bill McMahon, Chief Operating Officer.

Our earnings release was issued earlier today and may be downloaded from our website at nautilusinc.com on the Investor Relations page. The earnings release includes a reconciliation of the non-GAAP financial measures mentioned in today's call and with the most directly comparable GAAP measures. Remarks on today's conference call will include forward-looking statements within the meaning of the securities laws.

These include statements concerning financial projections, operating trends, anticipated growth and profitability, anticipated new product introductions, anticipated capital expenditures and anticipated results of new product and business development initiatives.

Forward-looking statements are subject to a number of risks and uncertainties, and actual results may differ materially from these statements. For more information about these risks, please refer to our most recent annual report on Form 10-K.

Nautilus undertakes no obligation to update or otherwise publicly release any revision to forward-looking statements to reflect new information, events or circumstances after they were made or to reflect the occurrence of unanticipated events. All information and comments regarding our operating results pertain to our continuing operations unless otherwise noted.

And with that, it is my pleasure to turn the call over to our CEO, Mr. Bruce Cazenave. Go ahead, Bruce.

--------------------------------------------------------------------------------

Bruce M. Cazenave, Nautilus, Inc. - CEO and Director [3]

--------------------------------------------------------------------------------

Thank you, John. Good afternoon, everyone, and thank you for joining our call today. I'd like to start by providing a general overview of our second quarter, and then we'll turn it over to Sid Nayar to review our financial details in more detail. Bill McMahon will then provide details on the business segments as well as updates on product activity. Finally, I will provide some closing remarks before we open up the call for more questions.

The second quarter 2017 results are right in line with our expectations. Our Retail segment delivered solid double-digit revenue growth, and this growth came from both the organic Retail business as well as the Octane business. Total growth of 13% for the segment reflected robust increases across multiple products and a number of key customer accounts. Retail margins also increased by 100 basis points, primarily due to improved product mix.

In our Direct channel, we had a successful launch of the new Bowflex Hybrid Velocity Trainer or HVT, which generated incremental sales in the quarter and complemented other core existing products that achieved increased revenue as well.

Overall, however, our total revenue in the Direct business declined year-over-year, as anticipated, due to continued lower sales from the TreadClimber product line, as that mature product shifts into a different marketing strategy with less TV media support.

As a reminder, the second quarter is our seasonally slowest quarter and where much of the focus is to position our businesses to optimize the much larger back half. From that standpoint, our second quarter performance gives us the confidence to reiterate our 2017 full year guidance of 5% to 7% growth in both revenues and operating income. Importantly, we continued to (inaudible) growth in the back half of 2017 due to a number of factors that Bill will discuss in greater detail in a few moments.

Now I'd like to turn the call over to Sid. Sid?

--------------------------------------------------------------------------------

Sidharth Nayar, Nautilus, Inc. - CFO [4]

--------------------------------------------------------------------------------

Thank you, Bruce. Net sales for the second quarter totaled $77 million, a decrease of 1.9% as compared to the same period in the prior year, reflecting 13% sales growth in the Retail segment, offset by a 13% sales decline in the Direct segment. For the first 6 months of 2017, net sales were $190.3 million, a decrease of 4.6% over the same period last year.

Second quarter gross margins decreased 380 basis points in the Direct segment to 63.3% and were up 100 basis points in the Retail segment to 34.5% when compared to the same quarter last year. On an overall basis, total company gross margins for the second quarter of 2017 decreased by 350 basis points to 49.8% versus the same period prior year, reflecting the shift in channel mix to an increased percentage of Retail segment revenues.

Year-to-date 2017 gross margins of 52.6% are 170 basis points lower than 2016 year-to-date gross margins, primarily reflecting the shift in mix to more Retail sales coupled with lower Direct margins.

Total operating expenses for the second quarter of 2017 as a percentage of net sales decreased to 44.8% from 44.9% in the same period last year, primarily reflecting lower sales and marketing expense. Total operating expenses for the first 6 months of 2017 as a percentage of sales were 43.9% as compared to 41.3% for the same prior period.

Sales and marketing expense for the second quarter of 2017 were $23.6 million or 30.7% of net sales as compared to $24.7 million or 31.5% of net sales in the same period last year. The lower dollar spending primarily reflects settlement of a royalty dispute, resulting in a reserve reversal of $1.4 million, coupled with lower finance fees. The decrease in sales and marketing as a percentage of sales reflects the same factors.

For the first 6 months of 2017, sales and marketing expenses totaled $61.3 million or 32.2% of net sales compared to $59.9 million or 30% of net sales for the same period in the prior year, with higher media spending of $2.6 million being the main driver.

General and administrative expenses were $7.3 million or 9.5% of net sales for the second quarter of 2017, which compares to $7.2 million or 9.2% of net sales in the same period last year. The increased dollar spending in G&A primarily reflects higher litigation-related spending, partially offset by lower stock compensation and amortization expenses. General and administrative expenses for the first 6 months of 2017 as a percentage of net sales totaled 7.8% as compared to 7.7% for the same prior period, reflecting the decrease in net sales.

Research and development costs in the second quarter of 2017 were $3.6 million or 4.7% of net sales compared to $3.4 million or 4.3% of net sales in the same period last year. The dollar increase reflects our continued investment in the engineering and design resources required to continue to innovate and broaden our product portfolio. Research and development expenses for the first 6 months of 2017 as a percentage of net sales totaled 3.9% as compared to 3.5% for the same prior period.

Operating income for the second quarter of 2017 decreased to $3.8 million as compared to operating income of $6.6 million in the same quarter of last year. The decrease reflects the decline in Direct revenues and margins, partially offset by improved Retail segment operating margins. Operating margin for the second quarter of 2017 was 5% compared to 8.4% for the same period last year. EBITDA from continuing operations in the second quarter of 2017 was $6.2 million versus $8.5 million for the same quarter of the prior year.

For the first 6 months of 2017, operating income was $16.5 million or 8.7% of net sales compared to $25.9 million or 13% of net sales for the same period last year. Year-to-date EBITDA from continuing operations totaled $21.1 million versus $29.6 million in the same period last year.

Income from continuing operations for the second quarter of 2017 was $2.6 million or $0.08 per diluted share as compared to $3.7 million or $0.12 per diluted share for the same period last year. For the first 6 months of 2017, income from continuing operations was $10.8 million or $0.35 per diluted share, a decrease of 29.6% over the same period last year.

The effective tax rate for the second quarter of 2017 was 31.1% compared to 38.3% in the same period last year. Tax expense in the current quarter was partially reduced due to the company's adoption of accounting guidance in 2017, allowing for the deduction of excess tax benefits related to stock-based compensation.

Total net income, including discontinued operations, for the second quarter of 2017 was $2.5 million or $0.08 per diluted share, which includes a $0.1 million loss, net of taxes, from discontinued operations. This compares to the second quarter last year where we reported total net income, including discontinued operations of $3.5 million or $0.11 per diluted share, which included a net loss from discontinued operations of $0.2 million. Year-to-date net income for 2017 totaled $9.6 million or $0.31 per diluted share versus $15 million or $0.48 per diluted share for the same period last year.

Turning now to our segment results. Net sales in the Direct business totaled $39.1 million for the second quarter of 2017, a 13% decrease over the same quarter last year. Direct segment sales were impacted primarily by a continued decline in TreadClimber sales. The launch of the Bowflex HVT product line and the Results cardio series, coupled with stronger performance of the strength category, helped mitigate some of this decline. Year-to-date sales of $113.8 million are down 9.8% year-over-year, reflecting the same factors impacting Q2.

Gross margin for the Direct business declined to 63.3% for the second quarter of 2017 compared to 67.1% in the same quarter last year due to higher discounting of TreadClimber products and the unfavorable operations cost leverage impact of lower sales. The prior year also included a favorable impact of warranty reserve adjustments.

Operating income for the second quarter of 2017 in our Direct business was $2.5 million compared to $7.5 million in the same quarter prior year. Operating income was negatively impacted by the lower net sales and gross margins in the second quarter of 2017, coupled with incremental creative expenses related to the HVT product launch. Year-to-date 2017 operating income for the Direct segment totaled $17.9 million, 15.7% of net sales, compared to $28.7 million or 22% of net sales in the same prior period.

Net sales in our Retail segment for the second quarter of 2017 were $37.1 million, an increase of 12.7% compared to $32.9 million in the second quarter of last year. The increase in Retail net sales reflects broad-based sales growth in both the traditional Retail and Octane businesses. Gross margins for the Retail business improved by 100 basis points to 34.5% in the second quarter of 2017 as compared to 33.5% for the prior period, mostly due to improved product and channel mix. Year-to-date 2017 gross margins for Retail totaled 33.2%, up 160 basis points versus the same period the prior year, primarily driven by the same factors.

In the second quarter of 2017, operating income for the Retail business totaled $6.1 million as compared to $4.1 million in the same period of last year. The increase is attributable to the higher revenue and gross margins, along with the previously mentioned $1.4 million reserve reversal related to settlement of a royalty dispute. Year-to-date 2017 operating income for the Retail business totaled $8.3 million versus $8.1 million for the same period in the prior year.

Now turning to the consolidated balance sheet. Cash and investments totaled $85.4 million as of June 30, 2017, with $56 million of debt. This compares to $79.6 million in cash and debt of $64 million at December 31, 2016. Inventories were $42.3 million as of June 30, 2017, compared to $47 million at December 31, 2016, and $43 million at June 30, 2016. The decrease in inventory versus year-end 2016 relates to the seasonality of the business.

Trade payables were $46.9 million as of June 30, 2017, compared to $66 million at the end of 2016, again, reflecting seasonality of purchases. Capital expenditures totaled $1.1 million for the 6 months ended June 30, 2017, with spending primarily on product tooling and IT assets. We anticipate full year CapEx to be in the range of $6 million to $7 million.

At this time, I'd like to turn it over to Bill McMahon, our Chief Operating Officer, who will provide additional insights into our business and key products. Bill?

--------------------------------------------------------------------------------

William B. McMahon, Nautilus, Inc. - COO [5]

--------------------------------------------------------------------------------

Thank you, Sid. Good afternoon, everyone. I'd like to provide further background on our results and provide commentary on our outlook for the second half of 2017.

Starting with our Direct segment. Our Q2 sales decline versus prior year was primarily driven by the continued decline in Bowflex TreadClimber sales. As we noted in our Q1 results earnings call, we have adjusted downward our Direct media investments in the TreadClimber category and are cascading the product into other channels of the business. This step, while prudent, did further impact Direct channel revenue negatively. We anticipate this impact -- we anticipated this impact when issuing our guidance for the full year 2017, and Direct channel revenues are still in line with our outlook of returning to growth in the second half.

We do anticipate the new product launches will offset declines in TreadClimber performance in the future. During Q2, we launched one of the key products in that effort with the premiere of the Bowflex Hybrid Velocity Trainer or HVT. We are very encouraged by the early performance of HVT in several key areas, including consumer response rate and the cost per interaction to achieve that response.

HVT is already delivering strong lead generation efficiency and doing so ahead of our expectations. That said, launching in the spring season does allow us to use the summer and early fall to test areas we'd like to improve regarding this product, which is primarily in the areas of matching direct marketing messaging to demographics and ensuring those messages resonate and drive strong conversion in the coming fall season. But based on early performance, we anticipate stepping up spend in HVT advertising throughout the remainder of the year to drive growth and awareness.

Meanwhile, Bowflex Max Trainer sales continued to deliver the majority of sales in our Direct segment in Q2. Max Trainer sales significantly increased for Nautilus overall in Q2 but were down slightly in Direct, with the largest contributor being -- the prior Q2 -- prior year Q2 sales benefited from carrying in a backordered Max Trainer M7. Coinciding with the launch demand of that SKU, this effect was anticipated in our guidance for the full year.

The Direct channel continues to deliver growth in the strength category. Both selectorized weights and home gym sales grew in the quarter. The Bowflex SelectTech 560 was the key driver of that growth, though our legacy rod gyms also grew year-over-year. We feel this growth in the strength category represents a continuing participation trend wherein consumers are seeking strength training solutions to add to their existing cardio regimen.

In the second half of 2017, we'll enter a period where our Direct business is comparing to a prior year that was influenced by significant consumer response headwind surrounding the presidential election, the impact of which we have outlined in prior earnings calls. We've launched a major new product, and our credit approval levels, along with the general credit environment, remain excellent.

Turning now to our Retail segment. Our Q2 revenues were up 12.7% year-over-year and in line with our expectations. Retail growth was broad-based, spanning both online and bricks-and-mortar accounts as well as in domestic and in international markets. Additionally, our sales in specialty and commercial channels also grew year-over-year during the quarter, and we are pleased to see a consistent return to growth in this segment.

While certain competitors continue to use online promotional strategies involving deals of the day and deep incentives, we're relying on the quality and value proposition of our products to resonate with consumers. Our point-of-sale performance is driven by positive consumer reviews, leading to our lift in sales without sacrificing the margin gains of the past year.

Also of note, as we enter the second half of the year, we feel that the inventory balance adjusting by certain retail partners is complete, and purchasing has returned to a pattern in line with point-of-sale performance.

In terms of product performance, Retail sales in the second quarter were helped by growth of a variety of categories, including Max Trainer, treadmills, Schwinn bikes, Bowflex home gyms, Schwinn Airdyne Pro and the Octane Zero Runner ZR8000. Additionally, TreadClimber as a category delivered growth in the Retail channel last quarter.

In our prior earnings call, we outlined several product launches for the second half of 2017. These included the Bowflex Results Series cardio line of treadmills and ellipticals; the Schwinn AD7 consumer-grade Airdyne bike; along with our new full-featured and upscale commercial Airdyne, the Octane Airdyne X, which combines the latest in Airdyne technology with a full commercial club warranty package and is backed by the industry-leading Octane service team.

Additionally, we plan to launch the new Octane ZR7000, which is the second machine in our full commercial club-rated Zero Runner line. And we'll enter new categories with the launch of a mass retail-targeted rowing machine, the Schwinn Crewmaster; and a new incremental price point addition to our consumer indoor cycling line with the Schwinn IC3 bike.

Further to the topic of new categories, we'll also enter the handheld (inaudible) fitness market with the launch of our new Modern Movement products, the M-Board and M-Pad, which provides smartly designed, go-anywhere exercise tools that integrate with free apps to deliver a dynamic digital experience. Finally, we also plan to launch updated versions of our very successful Schwinn 70 Series and Nautilus 6 Series bikes, ellipticals and treadmills, reflecting our commitment to supporting successful existing product platforms, while further expanding our market share in new categories.

Based on our current understanding of retail plan -- retailer plans for the ongoing point-of-sale performance of our products, we anticipate strong Retail growth in the back half of 2017, driven by gains in retail floor placement at key national accounts as well as with new products online. And this is reflected in our guidance.

In terms of inventory and supply chain, we are well balanced and well positioned to meet our needs. Our suppliers are equipped and prepared to support our growth plans. And in addition to the product launches occurring this year, we have a robust multiyear product road map in place, and we're already preparing for new products in 2018.

I'm very grateful for the efforts of our global Nautilus team of employees, and I'm optimistic as we head into the back half of the year.

At this point, I'd like to turn the call back over to Bruce for his closing comments. Bruce?

--------------------------------------------------------------------------------

Bruce M. Cazenave, Nautilus, Inc. - CEO and Director [6]

--------------------------------------------------------------------------------

Thank you, Bill. I'd like to make a few final comments before we open up the call for questions. Since early in the year, we communicated how we saw the year unfolding, with a slow first half followed by returning to double-digit growth in the back half and the reasons for that expected trajectory. The good news is we are tracking as planned, and we are well positioned to deliver the back-half growth that supports the full year guidance we have provided.

In our Direct segment, expected growth from multiple product offerings, including our Bowflex Max Trainer and the added new HVT offering, combined with easier TreadClimber comps, will enable us to return to growth in this segment.

In our Retail segment, we anticipate continued solid results, driven by expanded product offerings from our Octane, Nautilus and Bowflex brands that are expected to garner additional commercial, traditional retail and e-commerce placements this fall.

For years now, our standard operating mode has been to focus simultaneously on both near-term execution of our plans while also building and investing for long-term continued growth. That approach has worked well, and we are pleased with the momentum our company currently has on both of those fronts. Driving innovation and commercializing the robust pipeline of new products in our 3-year road map remains our top strategic focus area. Other near-term priorities, particularly in 2017 and '18, are to accelerate the growth in international markets and to optimize the opportunities that the acquisition of Octane Fitness affords us.

In closing, I'd like to thank all of our dedicated employees, who are instrumental in our successes and help make the company stronger every quarter as a result of their efforts and initiatives.

That concludes our prepared remarks. Now I'd like to open up the call for questions. Operator?

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) We'll go first to Frank Camma with Sidoti.

--------------------------------------------------------------------------------

Frank Anthony Camma, Sidoti & Company, LLC - Analyst [2]

--------------------------------------------------------------------------------

I was just wondering if you could talk -- you guys gave a lot of comments on the Retail channel, obviously, that was the star this quarter. Could you just talk about the health of the specialty channel, the Octane sales and sort of how you comped against last year? As I know there was some disruption there. Can you talk a little bit more about that?

--------------------------------------------------------------------------------

William B. McMahon, Nautilus, Inc. - COO [3]

--------------------------------------------------------------------------------

Yes, we saw -- Frank, it's Bill. Appreciate the question. We did see growth in the consumer side, especially specialty overall. We are starting to see stability in that channel and segment. Still more work to do to get back to where we were, let's say, but happy to see some growth coming back on that side.

--------------------------------------------------------------------------------

Frank Anthony Camma, Sidoti & Company, LLC - Analyst [4]

--------------------------------------------------------------------------------

Okay. And the bricks-and-mortar side is pretty well publicized, but you seem to be confident on the inventory level. Can you talk about just on the e-commerce side of Retail and, perhaps, like what growth you're getting there? Is there a way to kind of call that out?

--------------------------------------------------------------------------------

William B. McMahon, Nautilus, Inc. - COO [5]

--------------------------------------------------------------------------------

Well, we don't break out, as you know, by individual subsegments in terms of performance. We did grow in e-commerce and did grow with our large accounts during the quarter.

--------------------------------------------------------------------------------

Frank Anthony Camma, Sidoti & Company, LLC - Analyst [6]

--------------------------------------------------------------------------------

Okay. My other question is just on the new products that you called out. I'm familiar with those, but can you just -- are those Retail products, the board and the price points? Can you just refresh my memory on that?

--------------------------------------------------------------------------------

William B. McMahon, Nautilus, Inc. - COO [7]

--------------------------------------------------------------------------------

Yes, the boards will run roughly between $69 and just below $100. And they will be placed in retail, bricks-and-mortar and in online, but also, we'll run our own e-commerce efforts and digital advertising to support awareness of those products.

--------------------------------------------------------------------------------

Frank Anthony Camma, Sidoti & Company, LLC - Analyst [8]

--------------------------------------------------------------------------------

Okay. But it's not -- is that a Nautilus brand product? Or is that a Bowflex brand product? I forget.

--------------------------------------------------------------------------------

William B. McMahon, Nautilus, Inc. - COO [9]

--------------------------------------------------------------------------------

No, it's actually going to be branded Modern Movement, which is a brand that we acquired along with the intellectual property. We do think a unique brand for this type of product is befitting. It represents a different type of exercise from, say, either traditional Nautilus strength and/or Bowflex pure tech focus.

--------------------------------------------------------------------------------

Operator [10]

--------------------------------------------------------------------------------

We'll take our next question from Michael Swartz with SunTrust Bank.

--------------------------------------------------------------------------------

Michael Arlington Swartz, SunTrust Robinson Humphrey, Inc., Research Division - Senior Analyst [11]

--------------------------------------------------------------------------------

Bill, just wanted to follow up on HVT. You gave some color on that product. But maybe help us understand, maybe relative to prior product introductions in the Direct business maybe how that's trending. And then the second question on HVT is, could you break out how much you actually spent in kind of prelaunch costs?

--------------------------------------------------------------------------------

William B. McMahon, Nautilus, Inc. - COO [12]

--------------------------------------------------------------------------------

Thanks, Mike. Yes, I think it's okay, Sid, to say that on the creative side we spent about $1 million in terms of creating the initial videos, commercials and web advertising assets that we used. And that definitely impacted the profitability of Direct in the quarter. In terms of performance of the product, where we're very happy with it as compared to anything else we've launched is we do use NPS now or Net Promoter Score, and we do look very closely at consumer acceptance, and HVT is getting the highest scores we've seen in any product that we've launched so far. So we're happy that the consumers love it. The people who have it want to recommend it. A strong majority of people who have bought the product have expressed that they would recommend the product to a friend. And as I mentioned in my remarks, we like the consumer response, and we like the price that we're paying in terms of lead generation for that response. Where it's a little bit slower than, say, a Max Trainer launch has been in conversion out of the gate. We're not surprised with that because HVT is behaving more similar to TreadClimber, to answer your question. It's a more considered purchase. And I think -- to be blunt, we need to do some education to the market, and they need to get used to what this type of product can do for them. And that's what we mean by looking at our messages through the summer here in terms of hitting on what are the themes that allow us to best get that message across and in turn drive higher conversion as we spend more against the product in the fall.

--------------------------------------------------------------------------------

Michael Arlington Swartz, SunTrust Robinson Humphrey, Inc., Research Division - Senior Analyst [13]

--------------------------------------------------------------------------------

Okay. That's extremely helpful. And then second question for Sid. I think in your prepared remarks, you mentioned you're comfortable you can get back to double-digit top line growth in the back half of the year. I didn't hear you say it, but are you also comfortable you can get back to double-digit bottom line growth as well?

--------------------------------------------------------------------------------

Sidharth Nayar, Nautilus, Inc. - CFO [14]

--------------------------------------------------------------------------------

Yes, I think we're comfortable with the -- that would allow us to effectively drive to the 5% to 7% bottom line growth for the full year.

--------------------------------------------------------------------------------

Michael Arlington Swartz, SunTrust Robinson Humphrey, Inc., Research Division - Senior Analyst [15]

--------------------------------------------------------------------------------

Okay. Yes. Then on TreadClimber, I think, obviously, with the strategy there, taking some of that product into the Retail channel, is there a way we can look at that product line holistically across both? Was it flat during the quarter? Or would it still have been down?

--------------------------------------------------------------------------------

William B. McMahon, Nautilus, Inc. - COO [16]

--------------------------------------------------------------------------------

It still would have been down.

--------------------------------------------------------------------------------

Operator [17]

--------------------------------------------------------------------------------

(Operator Instructions) We'll take our next question from George Kelly with Imperial Capital.

--------------------------------------------------------------------------------

George Arthur Kelly, Imperial Capital, LLC, Research Division - Analyst [18]

--------------------------------------------------------------------------------

I apologize. I hopped on late, so you might have to repeat yourself a bit with this. But the new Bowflex treadmill and elliptical lines that you launched recently, can you talk about how those started? And you've talked, I think it was on the last conference call, about expecting a good launch with key retailers this fall. Is that still something you're expecting?

--------------------------------------------------------------------------------

William B. McMahon, Nautilus, Inc. - COO [19]

--------------------------------------------------------------------------------

George, yes. First of all, we're fully confident that Bowflex Results Series, as we call the new treadmills and ellipticals, will have placement online and in-store this fall and, I think, prominently so. So we're looking forward to seeing how they perform. But something, as you picked up on our last call we talked about in Direct, we did something unusual for us, which is to do some digital promotion, more traditional or standard fitness products, and we felt these 2 products deserve that. The contribution from those products are part of the growth side of what happened in Direct in the quarter. We're seeing some continued improvement in performance of the Results Series for Direct. But it's important to note it's not a TV product, so it's not going to be a major needle mover. But we're pretty happy to see that the team can sell treadmills and ellipticals as well as the more exotic Bowflex products.

--------------------------------------------------------------------------------

George Arthur Kelly, Imperial Capital, LLC, Research Division - Analyst [20]

--------------------------------------------------------------------------------

Okay, okay. And then, is DICK'S one of the partners for in-store retail?

--------------------------------------------------------------------------------

William B. McMahon, Nautilus, Inc. - COO [21]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

George Arthur Kelly, Imperial Capital, LLC, Research Division - Analyst [22]

--------------------------------------------------------------------------------

Okay. And then can you say anything else about -- do you still expect to launch another major Direct product next year? And can you say anything about what that product could look like?

--------------------------------------------------------------------------------

William B. McMahon, Nautilus, Inc. - COO [23]

--------------------------------------------------------------------------------

Yes and no. But it's coming.

--------------------------------------------------------------------------------

George Arthur Kelly, Imperial Capital, LLC, Research Division - Analyst [24]

--------------------------------------------------------------------------------

I know it's early. I know you just launched HVT but -- it's coming. Okay.

--------------------------------------------------------------------------------

William B. McMahon, Nautilus, Inc. - COO [25]

--------------------------------------------------------------------------------

Yes. I think, George, important to note we would like to increase our cadence on Direct launches. We felt the time between Max and HVT was, perhaps, not optimal. And we do have another Direct product planned for next year, but we're not ready yet to talk anything about it.

--------------------------------------------------------------------------------

George Arthur Kelly, Imperial Capital, LLC, Research Division - Analyst [26]

--------------------------------------------------------------------------------

Okay. And then last question for me. The approvals percentage in the quarter?

--------------------------------------------------------------------------------

William B. McMahon, Nautilus, Inc. - COO [27]

--------------------------------------------------------------------------------

Was 52.2% versus last quarter -- last year's same quarter. Sid?

--------------------------------------------------------------------------------

Sidharth Nayar, Nautilus, Inc. - CFO [28]

--------------------------------------------------------------------------------

Hang on for a second. Yes, it was 52% versus 47.3%.

--------------------------------------------------------------------------------

William B. McMahon, Nautilus, Inc. - COO [29]

--------------------------------------------------------------------------------

47.3% last year. I'd add on the credit, the gains in credit were primarily gains in Tier 1 improvement. So we continue to have a strong relationship with our Tier 1 provider.

--------------------------------------------------------------------------------

Operator [30]

--------------------------------------------------------------------------------

Our next question will come from Michael Kawamoto with D.A. Davidson.

--------------------------------------------------------------------------------

Michael Milton Yuji Kawamoto, D.A. Davidson & Co., Research Division - Research Associate [31]

--------------------------------------------------------------------------------

This is Michael on for Andrew today. I was wondering if you have seen any shifts in the competitive landscape, especially on the higher-end part of the market?

--------------------------------------------------------------------------------

Bruce M. Cazenave, Nautilus, Inc. - CEO and Director [32]

--------------------------------------------------------------------------------

No. Any particular categories you're interested in or...

--------------------------------------------------------------------------------

William B. McMahon, Nautilus, Inc. - COO [33]

--------------------------------------------------------------------------------

We haven't seen any macro change.

--------------------------------------------------------------------------------

Michael Milton Yuji Kawamoto, D.A. Davidson & Co., Research Division - Research Associate [34]

--------------------------------------------------------------------------------

Just in relation to like Peloton or [outside] Johnson Health Tech and the Matrix?

--------------------------------------------------------------------------------

William B. McMahon, Nautilus, Inc. - COO [35]

--------------------------------------------------------------------------------

Yes. We definitely see Peloton creating awareness, and certainly congrats to them on creating a lot of brand awareness. But we haven't seen impact to -- we're addressing different consumers in a lot of ways with our products. Matrix does have a new line of products that they've launched in the specialty space, and they are carrying them in their company-owned stores. However, we are in close communication with Johnson, who's the company that owns the Matrix brand. And we continue to have a strong partnership with Johnson and their 2nd Wind stores for Octane product. So we're certainly aware of that new product, but we wouldn't call that a macro change for us.

--------------------------------------------------------------------------------

Operator [36]

--------------------------------------------------------------------------------

We'll now take a question from Chris Krueger with Lake Street Capital Markets.

--------------------------------------------------------------------------------

Christopher Walter Krueger, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [37]

--------------------------------------------------------------------------------

Pretty much all my questions have already been asked and answered, but I do have one. Did you guys do any share repurchase activity during the quarter and how much? And what's still authorized?

--------------------------------------------------------------------------------

Sidharth Nayar, Nautilus, Inc. - CFO [38]

--------------------------------------------------------------------------------

So the answer is no, there was no share repurchase activity. We've got $19.6 million still open, which includes the $15 million that we authorized in early Q2.

--------------------------------------------------------------------------------

Operator [39]

--------------------------------------------------------------------------------

And that concludes today's question-and-answer session. At this time, I will turn the conference back to Bruce Cazenave for any additional or closing remarks.

--------------------------------------------------------------------------------

Bruce M. Cazenave, Nautilus, Inc. - CEO and Director [40]

--------------------------------------------------------------------------------

Thank you. Thanks again all for participating in our call today and your interest in Nautilus. We look forward to reporting more progress on our third quarter call in late October. I hope everyone has a great rest of the day. Thank you.

--------------------------------------------------------------------------------

Operator [41]

--------------------------------------------------------------------------------

This concludes today's call. Thank you for your participation. You may now disconnect.