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6 NAUTILUS AUTI Nautilus , Inc. Reports Fiscal Second Quarter Results November 9 , 2021 First Half Fiscal Year 2022 Net Sales up 20 % versus Last Year and up 167 % versus Fiscal Year 2020 Advances JRNYⓇ platform with Completed Acquisition of VAY AG , a leader in motion technology JRNYⓇ Total Members Approximately 200,000 Increasing JRNY® Investment to Accelerate Roadmap to Achieving Long - Term Operating Margin Targets VANCOUVER , Wash .-- ( BUSINESS WIRE ) -- Nov . 9 , 2021-- Nautilus , Inc. ( NYSE : NLS ) today reported its unaudited operating results for the fiscal 2022 second quarter and six - months ended September 30 , 2021 . Management Comments " Our second quarter results reflect the continued momentum of our North Star Strategy , as we capitalize on the sustained expansion of the home fitness addressable market . Second quarter fiscal 2022 net sales were up 124 % on a two - year basis , driven by triple digit gains across both Retail and Direct segments compared to 2019 levels . We also increased revenue 20 % for the first half of fiscal 2022 compared to first half of fiscal 2021. While our results were affected by global shipping constraints , we continued to advance our supply chain process , including the opening of a new distribution center , that has allowed us to work down backlog and improve our inventory position relative to last year , " said Jim Barr , Nautilus Inc. Chief Executive Officer . Inc Mr. Barr continued " As we look ahead , we have great conviction that a winning personalized connected fitness experience is the future of Nautilus . We have made significant progress executing against our North Star strategy , including the recent VAY acquisition that enhances our software development capabilities and adds new and innovative features to the JRNY platform . The business impact of these strategic initiatives has already exceeded our expectations , with nearly 200,000 JRNY members today , about 3x where we were a year - ago . While we are thrilled with this initial success , we are just scratching the surface of where we believe we can take the business and cement our leadership position within the digitally connected fitness space . We have made the strategic decision to accelerate our investment in JRNY® for the remainder of fiscal 2022 and in fiscal 2023 , with a focus on product innovation and marketing . This will enable our digital subscription business to be accretive sooner than previously expected and ultimately accelerate our roadmap to achieving a sustainable operating margin target of 15 % by one year to fiscal 2025 , with margins expanding to high teens by fiscal 2026. " Total Company Results Fiscal 2022 Second Quarter Ended September 30 , 2021 Compared to September 30 , 2020 • Net sales were $ 138.0 million , compared to $ 155.4 million , a decline of 11.2 % versus last year , or down 5.4 % excluding sales related to the Octane brand , which was sold in October 2020. Net sales are up 160 % , or a 61 % CAGR , when compared to the same period in 2019 , excluding Octane . The sales decline was driven primarily by lower Direct sales and shipping constraints . Due to the severe shortage of shipping containers , some factory fulfilled orders , representing over $ 22 million in revenue , did not ship as planned in late September . 56 % of those orders shipped in October . • Gross profit was $ 42.1 million , compared to $ 67.9 million last year . Gross profit margins were 30.5 % compared to 43.7 % last year . The 13.2 ppt decrease in gross margins was primarily due to : logistics ( -8 ppts ) , commodities , components , and foreign exchange ( -4 ppts ) and increased investments in JRNYⓇ ( -1 ppt ) . ● ● Operating expenses were $ 44.0 million , an increase of $ 20.1 million , or 83.8 % , compared to last year , primarily due to last year's $ 8.3 million Octane Gain on Disposal Group , a legal settlement of $ 4.7 million , $ 4.0 million more in advertising , $ 3.5 million increase in JRNY® investments , and acquisition expenses of $ 0.8 million . Total advertising expenses were $ 12.1 million versus $ 8.0 million last year , trending more towards historical levels . Operating loss was $ 2.0 million or negative 1.4 % operating margin , compared to operating income of $ 44.0 million last year , primarily due to lower gross profits and higher operating expenses . • Loss from continuing operations was $ 4.6 million , or - $ 0.15 per diluted share , compared to income of $ 34.0 million , or $ 1.05 per diluted share , last year . • Net loss was $ 4.6 million , or - $ 0.15 per diluted share , compared to a net income of $ 33.8 million , or $ 1.04 per diluted share , last year . • The effective tax rate was negative 96.4 % this year compared to 21.7 % last year , primarily due to the impact of the VAY acquisition .