Good day, and welcome to the Nautilus, Inc S econd Quarter 2023 Earnings Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to John Mills with ICR. Please go ahead, sir. Thank you. Good afternoon, everyone. Welcome to Nautilus's fiscal 2023 Second Quarter Ended September 30 Conference Call. Participants on the call today from Nautilus are Jim Barr, Chief Executive Officer, and Aina Konold, Chief Financial Officer. Please note this call is being webcast and will be available for replay for the next 14 days. We'll be happy to take your questions at the conclusion of our prepared remarks. Our earnings press release was issued today at approximately 1:05 P.M. Pacific Time and may be downloaded from our website at nautilusinc.com on the Investors page. The earnings release includes a reconciliation of the non-GAAP financial measures mentioned in today's call to the most directly comparable GAAP measures. Please note we'll be comparing results versus last year, fiscal 2022, and versus fiscal 2020, as we believe comparing to the last pre-pandemic period is helpful in demonstrating our growth and progress. For today's call, we have a presentation that management will refer to during their prepared remarks. On slide 2 is our full safe harbor statement, which we will ask everyone to read. You can access the presentation now by going to the Investors page on our website and clicking on Events and Webcasts. I'd like to remind everyone that during this conference call, Nautilus management will make certain forward-looking statements. These forward-looking statements are based on the beliefs of management and information currently available to us as of today. Such forward-looking statements are not guarantees of future performance and therefore, one should not place undue reliance on them. Our actual results may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control and ability to predict. For additional information concerning these factors, please refer to the safe harbor statement and to our SEC filings which can be found in the investor relations section of our website. With that, it is my pleasure to turn the call over to Nautilus's CEO, Mr. Jim Barr. Thank you, John, and thank you all for joining us. I'd like you to take away three things from today's call. One, the profound and enduring shift in consumer fitness habits post-pandemic toward at-home workouts continues to enhance the long-term opportunity for our company. Two, Nautilus' operating model is a strategic advantage to weather short-term top-line challenges. Our asset-light manufacturing, diversified product portfolio, omni-channel distribution, and variable cost structure that enables tight management of margin, operating expenses, and inventory levels is a model built to flex with the variation of market conditions. Third, we continue to enhance and scale our differentiated digital offering JRNY to better serve our customers and capture long-term revenue and profit. As proof points for this quarter, despite the challenged top line, we grew JRNY members and managed down our inventory on plan, significantly improved our gross margins and reduced our operating expenses, delivering a significant beat to analysts' Adjusted EBITDA consensus. This resulted in cutting our quarterly loss in half sequentially, trending towards our goal to break even in the back half of the year. At-home fitness, like many other consumer-focused industries, is undergoing short-term macroeconomic challenges, but the long-term profitable growth opportunity for our company remains intact. Our research shows that consumers, and particularly our recently defined high-value target segments, are sticking with home workouts even as they tighten their belts and watch their budgets. Consumers' long-term habits have shifted and solidified in the past two-plus years in favor of home fitness. Over 60% of U.S. adults recently surveyed say they consistently worked out at home, up from 43% who reported the same at the beginning of 2020. In our target segments, this trend is even more profound, with nearly 90% working out at home. This is a long-term seismic shift, and Nautilus is well-positioned to take advantage of this opportunity. To weather the macro and retail challenges, we are staying grounded in our noble mission and unwavering in our dedication to build a healthier world one person at a time. We also remain steadfast in our strategy to provide consumers a broad variety of superior products and a wide range of price points via our omni-channel distribution models. We continue to enhance the portfolio with our differentiated JRNY Connected Fitness offering. These advantages of a broad assortment of products and omni-channel distribution allowed us to offset areas of weakness in the quarter. Moving now to the second quarter financial results. Even in this tough environment, we saw solid end consumer demand for our products and for our JRNY digital offering. We delivered net sales of $65 million in the second quarter. With the direct channel up 51% compared to 2020, and the retail channel up 11% compared to 2020. While we saw a moderate level of retail sell-through, the widely publicized over inventoried and conservative position of retailers across many categories and their continued focus on lowering these inventories resulted in reduced sales for the quarter. We added 40,000 members in a seasonally soft quarter and have passed the key threshold of 400,000 JRNY members, an increase of over 116% compared to the same period last year. Growth in our direct channel was driven by our strength portfolio, as cardio, particularly IC bikes, lagged, reinforcing another strategic advantage, having a broad portfolio offering both high-quality strength and cardio modalities. As one channel or modality is soft, we can push the others. Further, 51% growth in our direct channel versus the same period in 2020 supports our belief that post-pandemic exercise habits favoring home fitness are here to stay. Retail channel growth was up 11% compared to the same pre-pandemic quarter in fiscal 2020, excluding Octane. Yet retailers remain cautious about inventory levels across many categories, including home fitness. We are tracking and assisting in the destocking of existing retail inventories as they sell through. While we are seeing reorders from some retailers, others still have additional stock to sell before being comfortable in placing significant reorders. Given these conditions, when we saw softened reorders in retail, we pivoted with a focus on our direct channel for this past quarter. Driven by key actions we took earlier this year to lower supply chain costs, we improved gross margins by 480 basis points sequentially from the first quarter, and we expect continued improvement in the back half of the year and into fiscal 2024. While top line grew about 19% sequentially, we reduced our adjusted operating expenses by 19%, showcasing our operating leverage and variable cost structure. As a result, Adjusted EBITDA loss for the quarter total $10 million, cutting the loss from the first quarter in half, delivering a significant beat to analyst consensus. We are demonstrating real improvement in Adjusted EBITDA performance and expect continued improvement during the back half of the year. Lastly, we remain comfortable with our liquidity position, given the flexible nature of our cost structure and the fact that we're entering the seasonally stronger second half of the year, which we expect will deliver strong improvement in our Adjusted EBITDA compared to the first half. Aina will provide more detail later in the call, along with diving deeper into quarterly results. Now I would like to discuss the other elements of our unique operating model. As noted before, our model is designed for agility with significant variability. Some examples of the variable parts of our business are as follows. An asset-light model with outsourced manufacturing. Utilizing contractors for sprints and surges in software development. Continuing to rationalize our product portfolio and focusing on fast-moving top sellers. SKU rationalization under North Star has resulted in over 80% of the volume in the quarter concentrated in our top 25 products. Our approach to marketing and embracing digital media allows us to be nimble and shift marketing investments as needed. In the quarter, we focused advertising spend on transactional media to drive traffic with the best chance of converting to sales. We also made the decision to shift marketing investment from the second quarter to our peak season in the third quarter and in January, when more consumers are expected to shop and purchase in the category. Last, we continuously regulate non-media operating expenses, looking for efficiencies and savings. An additional focus of our business model and an important pillar of North Star is our supply chain becoming a strategic advantage. We have made great progress here and are reaping the benefits with gross margins sequentially improving by 480 basis points this quarter. We expect even greater improvement in the back half of the fiscal year based on the following. We closed our Portland DC at the end of October and have successfully transferred inventory to our Columbus and Southern California DCs, both strategically placed to optimize expedited deliveries. We renegotiated inbound freight rates as well as contract manufacturing costs for our top products. Once we sell through existing inventories, we will start to see the flow-through of manufacturing and freight savings, possibly later this fiscal year. Let me now move on to providing an update on JRNY. As I said earlier, we are pleased to report that we added 40,000 members in our seasonally soft second quarter and are now at 400,000 total JRNY members, a 116% improvement year-over-year. Let me highlight the important accomplishments that led to this growth. 80% of our units sold are JRNY-enabled now. JRNY is now offered across the cardio portfolio, including treadmills, bikes, and our proprietary Max Trainers, as well as available with Bring Your Own Device for our number one selling SelectTech dumbbells. We have enhanced several important aspects of the JRNY platform, including usage analytics to help better understand what our members use and enjoy among our industry-leading variety of ways to work out. We've also added an enhanced member communication platform that permits us to more easily convey new features and benefits and coach and encourage members between workouts. We continue to enhance our instructor-led content library and added new Explore the World immersive experience routes to give consumers nearly 400 places to visit while working out. We are doubling down on our differentiated adaptive workouts that are unique to each individual member, and expect to offer more features over the coming quarters. We continue working to integrate JRNY with motion tracking with our leading 552 and 1090 dumbbells, and are on track to start a broad beta test in the third quarter. Finally, we are excited that per typical early life cycles of subscription products, we are beginning to convert the very first of the 12-month membership trials that bundled with JRNY-enabled cardio products. As more trial memberships come up for renewal and this data becomes more meaningful and useful, we will share information on conversion and churn. For now, churn is embedded in the member numbers. These advancements have us well positioned to grow our base and engagement of JRNY members. We continue to expect to end the fiscal year with more than one-half million JRNY members. In addition to the digital capabilities in JRNY, what do we have coming up for fitness season? Well, new products, of course. This week we introduced the Schwinn 190 upright and the Schwinn 290 recumbent bikes. Both bikes are connectable to JRNY and feature Terrain Control Technology, plus modern design elements and functionality suitable for all fitness levels. We also recently launched a new value-priced treadmill, the Bowflex BXT8J, which we believe is an important Which we believe is important this holiday as consumers shop with value in mind. This treadmill pairs with a user's phone or tablet and offers our differentiated adaptive workouts, Explore the World, Routes, JRNY Radio, and hundreds of trainer-led workouts through the JRNY app. It is available for online purchase at select retailers, including Amazon, Best Buy, Dick's Sporting Goods, and Nebraska Furniture Mart. I would like to close with a few other important points. Due to the current economic environment and the conservative position of our retail partners, we are lowering our previous revenue expectations for the back half of 2023. Even with these lower expectations, we expect strong improvement in our top and bottom line results for the back half of 2023 due to third and fourth quarter seasonality, increased advertising spend to drive more demand, new products, and leveraging the advantages of our operating model. Aina will provide more details on guidance and liquidity in a few moments. Over the last 2+ years, we have made tangible, lasting changes to our business, where we leverage the shift in consumer fitness trends and set our company up for long-term growth. While we have temporarily slowed some elements of our North Star investment as we responsibly balance long-term ambitions with short-term objectives, we remain steadfast on our path to Nautilus digital transformation. Given the dynamic market environment and the tremendous long-term growth potential in this sector, as previously announced, our board of directors launched a comprehensive review of strategic alternatives to identify partner opportunities to accelerate the company's strategic transformation and enhance shareholder value. We have engaged Evercore, a global investment bank advisor, to assist in this effort. At this time, we have no additional information to share regarding the process or timeline. I will now turn it over to Aina, who will give us more detail on the second quarter results and the guidance for the full year. Thank you, Jim, and good afternoon, everyone. Today, I'll be speaking to total company results for Q2 fiscal year 2023 and will provide guidance for the full year. Please go to our website to view our press release and the slides accompanying this presentation for more information on Q2 and year-to-date results and for additional information on our segments. Given the unique nature of last year's results, we'll also be comparing this year's revenue to fiscal year 2020 to gauge our growth and overall company improvements when compared to more normalized pre-pandemic results. Turning to slide 11, total company P&L for the quarter, with comparisons primarily to last year. Net sales for the second quarter were $65 million, down 53% versus last year and up 24% versus the same quarter in fiscal year 2020, excluding Octane. Our direct segment grew 51% versus the same quarter in fiscal year 2020, while the retail segment grew 11%. Gross profit was $11 million and gross margins were 18%, down 13 points from LY but up sequentially, nearly 5 points the last quarter. I'll now go through the drivers of the gross margin decline from last year. 4 points due to increased discounting as we were still benefiting from pandemic tailwinds last year. 4 points due to the deleveraging of logistics fixed costs given the decline in sales. 2 points due to last year's release of a special warranty reserve. 2 points due to inventory adjustments related to continued progress in phasing out Nautilus-branded inventory. 3 points related to increased JRNY investments. These declines were partially offset by approximately 2 points of supply chain cost improvements, like lower inbound freight and more favorable FX rates with the dollar strengthening against the RMB. If we exclude the impact of the inventory adjustments and last year's release of a special warranty reserve, Q2 gross margins would have been 22%. Turning now to adjusted operating expenses. The next few lines of the P&L have been adjusted to exclude acquisition and other costs related to the purchase of VAY and last year's legal settlement. Please see our press release for a reconciliation to GAAP. Adjusted operating expenses were $25 million, down 35% versus last year. The primary driver of the decrease was lower advertising, which was $3 million this year versus $12 million last year. Adjusted operating expenses excluding advertising were $22 million, down 15% versus last year, even with continued investments in JRNY. We controlled variable expenses across all functions to ensure that they remained in line with lower sales. Adjusted operating loss was $14 million, and Adjusted EBITDA loss was $10 million. I'd now like to walk through a waterfall chart on slide 13 that shows how we went from an Adjusted EBITDA loss of nearly $20 million in Q1 to only $10 million in Q2. Q2 sales were up $11 million or about 20% versus Q1. We brought down inventory levels per our plan, and we expanded our margin sequentially by nearly 5 points, delivering $5 million more in gross profit on $11 million more sales. Much of this is due to the great progress we've made to transform our supply chain into a strategic advantage. Another North Star priority was shifting more of our advertising spend to digital media, which gives us flexibility to adjust marketing investments as needed. We reduced marketing dollars in Q2, a seasonally low revenue quarter, and shifted them to the fitness season. This quarter's ad spend was primarily in transactional media to drive traffic with the best chance of conversion. Because we have an asset-light, semi-variable operating model, we have the ability and flexibility to ramp down expenses in line with sales. Q2 OpEx, excluding advertising, was down $2 million versus Q1. As a result, we delivered nearly $10 million more in EBITDA, cutting our loss in half from nearly $20 million down to $10 million. Let me now turn to slide 14 for first half results with comparisons primarily to last year. Net sales were $120 million, down 63% versus last year and up 17% versus the same period in fiscal year 2020, excluding Octane. Gross profit was $18 million and gross margins were 15%, down 15 points versus last year. The key drivers of the gross margin decline were 7 points due to increased discounting, 6 points related to deleveraging logistics fixed costs, 2 points due to the Q2 inventory adjustment, 3 points due to increased JRNY investments. These declines were partially offset by 3 points of supply chain cost improvements. Turning to adjusted operating expenses on the next slide. As a reminder, please see our press release for a reconciliation to GAAP. Adjusted OpEx was $56 million, down 27% versus last year. Selling and marketing expenses were down 48% or $21 million, driven by lower ad spend, which was $9 million this first half versus $24 million last year. Adjusted operating expenses excluding advertising were $47 million, down 10% versus last year, inclusive of continued investments in JRNY. Adjusted operating loss was $37 million and adjusted EBITDA loss was $29 million. Turning now to the balance sheet as of September 30. Cash was $7 million. Per our plan, quarter-ending inventory was $99 million, down 39% versus last year and down 11% versus year-end. At 9/30, about 11% of our inventory was in transit and continues to be concentrated in our best-selling SKUs, with over a quarter of our inventory costs in SelectTech weights. AR was $34 million, and trade payables were $37 million, both down from year-end. Debt was $47 million. We had $22 million available for borrowing, bringing our liquidity at the end of September to $29 million. We remain comfortable with our liquidity as we are entering our seasonally higher volume back half. Higher revenue, combined with our expectations of sequentially higher gross margins and continued cost discipline, will result in improved liquidity in the back half. I'll now turn to guidance for the rest of the year. We are lowering full-year revenue guidance to between $315 million and $365 million, which translates to second half revenue of between $195 million and $245 million. Given the adjustment to our full-year revenue expectations, we are now guiding to full-year Adjusted EBITDA loss of between -$30 million to -$40 million, which implies a second half Adjusted EBITDA of breakeven to a loss of $10 million. The presentation contains a waterfall chart on slide 18 that demonstrates our path to second half breakeven Adjusted EBITDA compared to first half Adjusted EBITDA loss. Similar to Q2, the most impactful improvement will come from higher revenue, supported by higher gross margins. We now expect gross margins in the second half to be between 24% and 27%, an improvement of 9-12 points versus first half gross margins. The margin improvement is driven by lower logistics costs as we've closed the Portland DC and gotten out of the storage locations we rented to house our excess inventories. Better FX as the dollar continues to strengthen versus the RMB, and lower product costs as we've sold through older inventory and are getting more benefit from the newer inventory that reflects lower factory and inbound freight costs. We expect to invest in more advertising versus the first half and expect variable costs to grow in line with sales, partially offset by continued cost discipline in other areas. Our objective is breakeven Adjusted EBITDA in the second half, and we believe that we have enough leverage given our asset-light, semi-variable operating model to adjust to a variety of sales outcomes. Lastly, we continue to expect JRNY members to cross the 500,000 mark at year-end 2023. With that, I'll turn it over to Jim. Thank you, Aina. It is my hope that one takeaway from our earnings call today is that Nautilus is positioned for top- and bottom-line improvement for the remainder of this year and over the long term, despite the challenging macro and retail environment. There is long-term opportunity due to an enduring and profound shift of consumer behavior towards at-home workouts. Our company is well positioned to meet these needs with our strong portfolio of product offerings, an expanded omnichannel go-to-market model, and a differentiated digital platform. As seen this past quarter, the Nautilus operating model allows us to lean into one channel when the other is pressured. A broad product portfolio provides balance when one category, such as cardio or one modality, for example, bikes, may be lacking. Our operating model is a strategic advantage relative to competitors who have lagged behind in adjusting their businesses in light of macroeconomic challenges, and we are just beginning to adjust theirs in key ways to more closely emulate ours, asset-light manufacturing, a broadening product portfolio, expanding omni-channel distribution, and a more variable and agile cost structure. We are making steady progress on the execution of our strategy and have already begun to see the fruits of our labor. Despite the challenged top line, we grew JRNY members and managed down our inventory on plan, significantly improved our gross margins, and reduced our operating expenses. This resulted in cutting our quarterly loss in half sequentially and trending towards our goal to break even in the back half of the year. Under our North Star strategy, we have streamlined our portfolio and divested the non-core parts of our business. We've hired the right leadership with a measured approach to recruiting talent in line with growth, doubled down on our investment in digital, and strengthened our supply chain. We did it all while riding a historic wave of demand and navigating unprecedented operational challenges. Our liquidity, the strength of our brands, and our operating model all provide reasons to believe in the success of this company. To end, I want to thank our employees and partners for focusing on what they can control, balancing long-term opportunity with near-term pressures, and for their tenacity, resilience, creative problem-solving, and tireless support of our mission. Now I'd like to turn it over for questions. Operator? Thank you. We'll now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Today's first question comes from Michael Swartz with Truist. Please go ahead. Hey. Yeah. Good evening. I understand you took down guidance for the full year. It sounds like most of that is related to the retail business. I guess with the new number you're guiding to here, I mean, how much comfort do you have, and I guess how much visibility do you have into that, into the second half of the year, you know, given everything I think everyone's hearing about retail and reduction of inventory? Well, first, as I mentioned, I'll start, and Aina will tag on. First, we are getting some reorders. It varies retailer to retailer. It depends on where their stock position is and really their level of comfort. As I mentioned in my remarks, there's a risk aversion we haven't seen in recent years in retail, and that's not just our category that you'll see. You'll see a lot of that going on. We continue to monitor the retail sell-through and the retail levels, and they are coming down, and they are headed in the right direction. We think we'll see that. I think it's important to point out that we continue to see, and I mentioned it in my remarks, I called it end consumer demand. In other words, people are still buying our products. You're seeing that in direct, the 51%, versus the same period pre-pandemic. That tells us that that's there as well. We know the long term is there as well, so it's just a matter of working through the inventory and the timing of that, and we continue to monitor that. We don't just sit on the sidelines either. We have ways to help our retailers. You know, their problem is our problem. You know, we do help them try to sell through what they have. We coordinate with our own channel to make sure we're not undercutting each other with prices, bidding on the same keywords, et cetera. We'll just continue to monitor that situation going forward. We're optimistic. We know this is a temporary problem, right? This is not a permanent problem. We've expanded our doors in retail. They're there for a reason. We're just a little clogged in the retail channel for the short term. Anything you would add, Aina? I just would agree that a lot of the downward guide is driven by retail. We're really pleased with how direct's been doing, and we're pleased with how they did in Q2. Okay, great. That was my next question. I mean, just in terms of clarification, I mean, did you take down or lower your expectations for direct, or is that kind of similar to what you had expected before? It's about similar. Most of the decline is in retail. Okay. Perfect. Then maybe I think last quarter or maybe the last two quarters, you kind of pointed to slowing promotion or maybe normalized promotion, or something approaching normal maybe over the relative to the COVID period. I guess as we sit here today in early November, how would you classify promotion, right, you know, right now? Yeah, I'll start. I mean, it's a fairly promotional environment out there, right? I mean, I think everybody is seeing the same thing. I've never seen Black Friday deals start so early. We know consumers have limited discretionary income, and we're hitting it early and hard, and we're doing the same thing. That said, you know, we've got lots of things going the other way that we mentioned in terms of margin and advertising spend to support that. What would you add on to that? I would add on that if you compare how we're thinking about this back half versus last year back half, we were really over inventoried, so we wanted to use the promotional lever to clear that inventory. This year, we wanna be competitive, but we don't have an inventory kinda hangover that we need to push through, so we can be more selective in how we choose to be competitive. I'm really happy with our inventory position, and I think we can be competitive and still deliver the margin expansion we're looking for in the back half. Okay, great. Thank you. Thank you. Thank you. Our next question today comes from Mark Smith at Lake Street Capital Markets. Please go ahead. Hi, guys. Mark Hit on one of them, one of my questions, but that was just, you know, retail and total channel inventory, just kind of what you're seeing, and then along with that, just promotional environment, especially as we think about this category entering this key selling season. When you ask about inventory, you're thinking about our inventory or the retailer inventory? You know, I would love to hear kind of both, you know, and maybe. Okay the three. You know, retail inventory of your product, total kind of retail inventory of all competitors as well, and then your inventory. Yeah. I'll start with our inventory, the one that's showing up on our balance sheet. I'm really proud of how well the team has managed. I mean, we were not pleased with how high it got last year, and it's been a pretty strong cross-functional effort to make sure that we guided it down and still meet, you know, our objectives on top line and margin expansion. Really, really pleased with that. As Jim said, we're watching. We have a way of monitoring our inventory at the retailers, and it's moving in the right direction as well. The thing that's tricky, and you asked that question, and you're right, how are they doing with all their other things they're stocking, not just in fitness but also in other categories? What we're seeing is even if they're selling through our product and maybe they're getting close to lower, more appropriate levels, they may still choose to be more cautious and just wait till the rest of their inventory appropriately glides down before they reorder more like normal patterns. We have a backlog in retail. We had a backlog last quarter. They're reordering things that have stocked out, but I think it will take a while for them to probably digest all the inventory they have across all other categories outside of fitness. Okay. The other question from me is, you know, we like the cuts to the operating expenses, and it sounds like some of that was very strategic just in this quarter. You know, can you just speak broadly to, you know, the sustainability of these cuts and then, you know, how you balance not cutting too deeply? It's a great question and one that we think about all the time and kinda Jim referred to it in his remarks about it's a balancing act, right? We need to make sure that we can meet our near-term objectives without cutting off our future. What I'd wanna just remind everybody is when we were growing and the pandemic was at its height and sales were doubling quickly, we chose intentionally not to hire as many full-time equivalents that were our employees. We expanded our capabilities by really reaching out to outside contractors, outside resources, so that when the demand went down as we predicted, we knew there'd be a dip after the height, that we could more easily shed some of these excess costs. Then as we're. You know, as that kind of brings in closer and we need to start looking maybe more closely to some things that are more fixed rather than variable, we're going to make sure that we really balance and make sure that we don't cut off our opportunity to take advantage of the recovery when it comes. I don't know, Jim, if you'd wanna add anything to that? No. I think, you know, this is a rough number. I'm not sure if we've said it before, but as we doubled sales, we only increased our headcount 20%. That was intentional. Some people thought we should go faster, but we just thought it was a measured way to do that. You know, that's what we've done, and we think we're in a pretty good position. We've done things like others have done in freezing hiring, for example. That's the first thing. We did that early in the summer, and we've continued that. Anytime someone wants to hire someone, including a backfill, it requires my personal approval, and that has slowed things down. Like Aina said, look, both of us came here to really grow this company and make it into something fantastic. It's tough to pull back on some of these things when we wanna go faster. You know, that is what she said. It's a balancing act. We try. When we do make cuts and we do hold the line in certain cost areas, it's really kind of with the principle of when this turns back around, 'cause we are managing a dip. That's what we're doing. No one thinks this is permanent. The reasons for it are not permanent. We're managing this dip, and on the other side of the dip, we wanna be able to capture the full velocity of growth coming out of the dip. We know that's the position we're in, and we try to balance those things responsibly every day. Perfect. Maybe I'll sneak in one last accounting one. I think did you close the Portland DC during this next quarter? Is that right? Was that October? Yes. We closed it in October at lease expiration. Okay. There's no lease expense or any one-time things that we should look for in this next quarter? No, because we just closed it at lease expiration. Okay. I mean, there's a little bit of moving costs, but very minor. Okay. Like transferring the inventory. It's very minor. All right. Perfect. Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star then one at this time. Today's next question comes from JP Wollam with ROTH Capital Partners. Please go ahead. Hi, Jim. Hi, Aina. Thanks for taking my questions here. Hi. If I could maybe step back for a minute, you know, maybe one, we'll focus kind of more internally, and then the other kind of more external environmental. You know, if we start internally, and I understand, you know, no one can control the macro. As you said, Jim, you're managing a dip right now. If you could just kinda maybe walk through, you know, when the team meets internally, what are kind of the couple, two to three things that are really top of mind, that are priorities that you want everyone, kind of really drilling down to come out the other side of this best positioned? Yeah. Sure. No, that's a great question. I think first and foremost, focusing on our long-term opportunity, right? We are managing a dip, but we're all here. We all chose Nautilus because we wanted to build something great, and we saw in the pandemic that the opportunity we came here for expanded significantly in a permanent way. A lot of our discussion is, you know, how to make sure that we're on track for capturing that. A big part of that, of course, is JRNY and making sure that because we see where the puck is going. I mean, it's digital and equipment together reinforcing one another. Over time, it's already happening now, people buy equipment because of the digital experience, and the digital experience makes the equipment better every day. It's this type of thing. I'd say another thing is our consumer. Pillar one of our strategy is to be consumer obsessed. The data and insight that are coming out, and trying to read both timing, but the long-term needs of consumers and bake that into our product design and things like that is top of mind. Then, of course, the short-term weighs in here, right? As Aina said, you know, we wanna make sure that we're in a position, after the dip, that we are moving forward as quickly as possible. When we are given choices, some things are hard choices, some are easy. You know, one North Star investment we've taken down is our brand advertising. We spent a fair amount of money last year on brand advertising and moved our brand to a more modern place. Nautilus brand, that is. We were excited about that, and we wanna keep doing it, but we just don't have the wherewithal to do it when we're managing the dip. Does that mean we won't do it again? No. I think when we have the resources to do it, we'll do it. I'm already really seeing the fact that we invested last year in brand, and then when we take our advertising down to the lowest transactional level I remember for this past quarter, we continued to generate sales at an amazing ROI. Why? Because we actually had invested in that previously. We continue to balance that short- and long-term as we go forward in the business. Anything you would add that I didn't cover? No. I think it's that balancing act. Don't lose sight of the long-term, but do what we need to do to manage through this dip. Okay. Great. Then maybe from the kinda external perspective, as we head into the seasonally strong quarters, and Aina, I know we're, you know, maybe a couple months in already, but maybe if you could just talk about what you are looking forward to most, kinda given the broader environment. Maybe that's marketing dollars going a little further than they used to, people tightening wallets and maybe trading down out of expensive gym memberships. Anything that you can kind of point to that you're looking forward to and gives you confidence in the next couple of quarters. Yeah. I mean, it's some of the things I've already said. You know, I talked about the new products that are value priced. I think those are ready. They came out at the right even though two of them are bikes and bikes are down, they're different bikes. They're like, for example, the recumbent is a category we pretty much own. So we think our products are well-timed, the new products we've done. We didn't go hog wild on it like we did a couple of years ago when we were getting started in JRNY. We just have the three that I talked about. Really one of our key advantages that's really fueled our growth over the last few years has been total cost of ownership relative to the competition. We look at SKU by SKU comparisons of what our equipment costs versus others' costs, and then build in the cost of the subscription, what you get for that subscription. We had even before the pandemic hit, you know, when bikes were super hot, we introduced a couple of bikes that were half the price of Peloton, for example, and those did extremely well. We continue to have that cost advantage across our portfolio. Then when you add in the cost of our subscription and the digital experience, which is becoming so important to people these days, that just enhances our total cost of ownership. Those are some of the things we, you know, we feel really uplifted about. Really honestly, with people, just focusing, and I said in my remarks, I'm so proud of our people for focusing in on what you control. There are times during business cycles, there's some stuff you don't control. We don't control the macro. Are we concerned about it? Sure. We don't control retailer inventories, but it's temporary, right? We know this is on the other side 'cause we see the demand for our products today, we see the demand for our products in the future. So compartmentalizing that, keeping your spirits up and working through the dip, that's what responsible operators do. It may mean you have to slow down your ambition in the short term, but our long term is intact, and that's what keeps us going. Perfect. Really appreciate the time. Thank you. Sure. Thank you. Good questions. Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to the management team for any final remarks. Thank you everyone on the call today for your continued support of Nautilus. We look forward to talking to you again in our third quarter fiscal year 2023 earnings call in February. Have a great rest of the day. Onwards and upwards. Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have