NLS - Nautilus Inc.

[SandU]

Market cap 50mUSD, EV around 70mUSD. http://www.nautilusinc.com

 

Nautilus sells training equipment/machines under strong brands like Bowflex, Schwinn, Universal and Octane.

The company was a pretty good compounding story with growth and high return on capital until 2017. After that some sales problem occurred, mostly related to the Bowflex Max Trainer line https://trends.google.com/trends/explore?data-ipsquote-timestamp=today%205-y&q=Bowflex%20Max%20Trainer and 2019 has started badly which has caused the stockprice to fall heavy . Writedowns of over 70mUSD was made in Q2 http://www.nautilusinc.com/investors/sec-filings/. The company blames bad marketing etc. A new modell is released in H2 and new marketing have been recorded. Also a new CEO with digital/e-commerse is in place as of this week.

 

During its glory days the company made operating profits over todays market value and the market value was 10 x higher than today.

The problems dont seem insoluble here with the strong brands etc.

 

Digitalisation may be intresting here and might be an opening into sales to "other types of people" than normally buys these machines.

 

Write up from Shadow Stocks http://shadowstock.blogspot.com/2019/07/nautilus-nls-extreme-value-opportunity.html

Since most sales are in North America, it would be intresting to get youre views of this company. Have you noticed any new brands gaining market share etc? Other thoughts on this one?

 

 

 

 

 

 

 

 

 

[Foreign Tuffett]

Direct-to-consumer fitness is incredibly faddish. Here are some anecdotes:

 

I once observed someone wearing two identical Fitbits at the same time

 

In the early 2000s seemingly every second suburban family had a Bowflex home gym

 

In the latter half of the 2000s, the "P90X" video program was all the rage. Billy Blanks' videos were the 1990s version of this. Jane Fonda's videos were the 1980s version of this.

 

The high end Peloton exercise bike is currently dominating the "yuppie trend follower" segment of the home exercise market

[Castanza]

Direct-to-consumer fitness is incredibly faddish. Here are some anecdotes:

 

I once observed someone wearing two identical Fitbits at the same time

 

In the early 2000s seemingly every second suburban family had a Bowflex home gym

 

In the latter half of the 2000s, the "P90X" video program was all the rage. Billy Blanks' videos were the 1990s version of this. Jane Fonda's videos were the 1980s version of this.

 

The high end Peloton exercise bike is currently dominating the "yuppie trend follower" segment of the home exercise market

 

I can't believe the price of those things! Like a used car. It's like the Apple of exercise equipment.

[EricSchleien]

Hello,

 

Just wrote an article about this which was also published on Seeking Alpha yesterday: https://www.gscm.co/blog/nautilus-nls-needs-an-activist

 

Best,

Eric

[SandU]

Direct-to-consumer fitness is incredibly faddish. Here are some anecdotes:

 

I once observed someone wearing two identical Fitbits at the same time

 

In the early 2000s seemingly every second suburban family had a Bowflex home gym

 

In the latter half of the 2000s, the "P90X" video program was all the rage. Billy Blanks' videos were the 1990s version of this. Jane Fonda's videos were the 1980s version of this.

 

The high end Peloton exercise bike is currently dominating the "yuppie trend follower" segment of the home exercise market

 

Yes, thats true to some extent. But over the last 20 years the company has only reported negativ operating income two years (during the financial crises) - so its a pretty stable business after all. Even though revenue topped early -00´s, then dropped > 50 % during 08-09, to double again after that.

[Foreign Tuffett]

Direct-to-consumer fitness is incredibly faddish. Here are some anecdotes:

 

I once observed someone wearing two identical Fitbits at the same time

 

In the early 2000s seemingly every second suburban family had a Bowflex home gym

 

In the latter half of the 2000s, the "P90X" video program was all the rage. Billy Blanks' videos were the 1990s version of this. Jane Fonda's videos were the 1980s version of this.

 

The high end Peloton exercise bike is currently dominating the "yuppie trend follower" segment of the home exercise market

 

Yes, thats true to some extent. But over the last 20 years the company has only reported negativ operating income two years (during the financial crises) - so its a pretty stable business after all. Even though revenue topped early -00´s, then dropped > 50 % during 08-09, to double again after that.

 

It's been a "stable" business because they introduce new products on a regular basis. It's not like Heinz Ketchup where the exact same combination of ingredients is jammed in a bottle and sold for decades.

 

As you mention, this business did $585M in revenue way back in 2002! Thus, one could certainly quibble with the idea that it's been stable. A better way to frame this company is that its results rise and fall with how "on trend" its current product line is + how well it is marketed.

 

It's a pass for me. Ultra trendy Peloton is dominating the high end home fitness market + Planet Fitness memberships are so cheap that the value proposition of mass market home fitness equipment isn't very good anymore.

[SandU]

Direct-to-consumer fitness is incredibly faddish. Here are some anecdotes:

 

I once observed someone wearing two identical Fitbits at the same time

 

In the early 2000s seemingly every second suburban family had a Bowflex home gym

 

In the latter half of the 2000s, the "P90X" video program was all the rage. Billy Blanks' videos were the 1990s version of this. Jane Fonda's videos were the 1980s version of this.

 

The high end Peloton exercise bike is currently dominating the "yuppie trend follower" segment of the home exercise market

 

Yes, thats true to some extent. But over the last 20 years the company has only reported negativ operating income two years (during the financial crises) - so its a pretty stable business after all. Even though revenue topped early -00´s, then dropped > 50 % during 08-09, to double again after that.

 

It's been a "stable" business because they introduce new products on a regular basis. It's not like Heinz Ketchup where the exact same combination of ingredients is jammed in a bottle and sold for decades.

 

As you mention, this business did $585M in revenue way back in 2002! Thus, one could certainly quibble with the idea that it's been stable. A better way to frame this company is that its results rise and fall with how "on trend" its current product line is + how well it is marketed.

 

It's a pass for me. Ultra trendy Peloton is dominating the high end home fitness market + Planet Fitness memberships are so cheap that the value proposition of mass market home fitness equipment isn't very good anymore.

 

Stable may not have been the optimal choise of word - point was more that the brands have survived (and done quite well) for 20-30 years, so its probably not an "incredebly faddish" business. I think theres been an underlying demand for some of the machines thats not so "trend dependent", enough to survive and do ok returns but not to thrive, unless they hit trends. Question is if thats still the case.

Youre info on Planet Fitness and Peloton is just what i was looking for, so thanks for that.