Q2 2024 BowFlex Inc Earnings Call
Good day and welcome to the Bowflex fiscal second quarter 'twenty 'twenty four earnings results Conference call.
Speaker 1: Good day and welcome to the Bowflex fiscal second quarter 2024 earnings results conference call all participants will be in a listen only mode after today's presentation.
All participants will be in a listen only mode. After today's presentation there'll be an opportunity to ask questions. Please note. This event is being recorded I would now like to turn the conference over to your host John Mills with ICR. Please go ahead Sir.
Speaker 1: I would now like to turn the conference over to your host, John Mills with ICR. Please go ahead.
Speaker 2: Thank you. Good afternoon, everyone. Welcome to Bowflex's fiscal 2024 second quarter ended September 30th conference.
Thank you good afternoon, everyone welcome to both flex as fiscal 2024 second quarter ended September 30th Conference call.
Speaker 2: Participants on the call today from Bowflex are Jim Barr, Chief Executive Officer, and Ina Knoll, Chief Financial Officer.
Participants on the call today from both Lakes are Jim Barr, Chief Executive Officer, and <unk> Chief Financial Officer.
Speaker 2: 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.
Please note this call is being webcast and will be available for replay for the next 14 days, we'd be happy to take your questions at the conclusion of our prepared remarks our.
Speaker 2: Our earnings press release was issued today at 1 o'clock p.m. Pacific time and may be downloaded from our website at corporate.boflex.com on the investor relations page.
Our earnings press release was issued today and one at five P. M Pacific time and may be downloaded from our website at corporate Dot Bowflex Dot com.
The Investor Relations page.
Speaker 2: The earnings release, including a reconciliation of the non-GAAP financial measures mentioned in today's call to the most directly comparable GAAP.
The earnings release, including a reconciliation of the non-GAAP financial measures mentioned in today's call to the most directly comparable GAAP measures.
Speaker 2: For today's call, we have a presentation that management will refer to during their prepared remarks. On slide two is our full Safe Harbor statement, which we ask everyone to read.
For today's call we have a presentation that management will refer to during their prepared remarks on slide two is our full safe Harbor statement, which we ask everyone to read you.
Speaker 2: You can access the presentation by going to the investors page on our website and clicking on events and webinars.
You can access the presentation by going to the investors page on our website and click on events and webcast.
Speaker 2: I would like to remind everyone that during the conference call, Bowflex Management will make certain forward-looking statements.
I would like to remind everyone that during the conference call Bowflex 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.
Speaker 2: These forward-looking statements are based on the beliefs of management and information currently available to us as of today.
Speaker 2: Such forward-looking statements are not guarantees or future performance, and therefore, one should not place under-reliance.
Such forward looking statements are not guarantees of future performance and therefore, one should not place undue reliance on them.
Speaker 2: Our actual results may be affected by known and unknown risk, trends, uncertainties, and factors that are beyond our control and ability to predict.
Actual results may be affected by known and unknown risks trends uncertainties and factors that are beyond our control and ability to predict.
Speaker 2: 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.
For additional information concerning these factors please refer to the safe Harbor statement into our SEC filings, which can be found in the Investor Relations section of our website.
Speaker 2: And with that, it is my pleasure to turn the call over to Bowflex's CEO , Mr. Jim Barr.
It is my pleasure to turn the call over to both like the CEO Mr. Jim Barr.
Speaker 3: Thank you, John , and thank you all for joining us on our first earnings call as Bowflex, Inc., following our comprehensive company rebrand. Bowflex is a globally renowned name known as the beacon of fitness excellence. Our new corporate identity mirrors our number one brand and exceptional standing in the connected at-home fitness equipment market and reinforces our unyielding commitment to our strongest brand.
Thank you John and thank you all for joining us on our first earnings call as Bowflex, Inc. Following our comprehensive company rebrand.
Flex is a globally renowned name known as a beacon of fitness excellence, our new corporate identity mirrors, our number one brand and exceptional standing in the connected home at home fitness equipment market and reinforces our unyielding commitment to our strongest brands.
Speaker 3: Before we dig into results for the quarter, I'd like to first touch on what we're seeing in the industry.
Before we dig into results for the quarter I'd like to first touch on what we're seeing in the industry.
Speaker 3: As we have moved through Q2 and into Q3, we continue to face a challenging operating environment.
As we have moved through Q2 and into Q3, we continue to face a challenging operating environment.
Speaker 3: The macroeconomic backdrop remains uncertain, weighing on the consumer.
The macroeconomic backdrop remains uncertain weighing on the consumer.
Speaker 3: Retailers continue to maintain a highly conservative approach to inventory.
Retailers continue to maintain a highly conservative approach to inventory.
Speaker 3: This market uncertainty is driving an increasingly promotional environment as we head into fitness season.
This market uncertainty is driving an increasingly promotional environment as we head into fitness season.
Speaker 3: With that being said, it is important to highlight that we are successfully executing on the things we can control, including reducing our cost structure and improving our inventory position, which is enabling us to manage through this near-term environment.
With that being said it is important to highlight that we are successfully executing on the things, we can control, including reducing our cost structure and improving our inventory position, which is enabling us to manage through this near term environment.
At the same time.
Speaker 3: We are ensuring that we are well positioned to capitalize on the long-term shift to connected at-home fitness when consumer demand stabilizes.
We are ensuring that we are well positioned to capitalize on the long term shift to connected at home fitness when consumer demand stabilizes.
Speaker 3: Turning to our second quarter results, we delivered net sales of $49 million during the quarter with direct sales of $21 million. While the direct segment was down year over year, we were encouraged by the positive 15% comp we delivered in strength equipment.
Turning to our second quarter results, we delivered net sales of $49 million during the quarter with direct sales of $21 million, while the direct segment was down year over year. We were encouraged by the positive 15% comp we delivered in strength equipment.
Speaker 3: We believe these positive results are a testament to the deliberate product enhancements we've made in this area.
We believe these positive results are a testament to the deliberate deliberate product enhancements we've made in this area.
Speaker 3: Similarly, though not a big part of our business, we also return to growth in our international business reported under our retail segment.
Similarly, though not a big part of our business. We also returned to growth in our international business reported under our retail segment.
Speaker 3: Together, we hope that these bright spots are an indicator that we are nearing a return to broader enterprise growth.
Together, we hope that these bright spots are an indicator that we are nearing a return to broader enterprise growth.
Speaker 3: On the other hand, domestic retail continued to face softness and overall retail segment net sales were down 30% year over year.
On the other hand domestic retail continues.
Turning to face softness in overall retail segment net sales were down 30% year over year.
Speaker 3: Although retailer inventory of our products is down 50% year over year as of October , showing significant progress in right-sizing their inventory positions, retailers are still maintaining their conservative approach to reorders. And we believe it is prudent to plan for this to continue as we enter the peak fitness season.
Although retailer inventory of our products is down 50% year over year as of October showing significant progress in right sizing their inventory positions retailers are still maintaining their conservative approach to reorders and we believe it has it is a prudent it is prudent to plan for this to continue as we enter the peak.
This season.
Speaker 3: Importantly, over the last several quarters, we have deliberately right-sized our own inventory. This strategic move places us in a favorable position to better maintain our price discipline in an increasingly promotional environment.
Importantly over the last several quarters, we have deliberately right sized our own inventory. This strategic move places us in a favorable position to better maintain our price discipline in an increasingly promotional environment.
Speaker 3: We continue to offset the top-line softness with diligent cost management and operational excellence efforts.
We continue to offset the topline softness with diligent cost management and operational excellence efforts.
Speaker 3: underpinned by our supply chain initiatives, which have led to delivering margin improvements through reduced product landed costs year over year for four consecutive quarters, despite declining sales.
Underpinned by our supply chain initiatives, which have led to delivering margin improvements through reduced product landed cost year over year for four consecutive quarters. Despite declining sales, notably these actions also drove a second consecutive quarter of year over year improvement in adjusted EBITDA.
Speaker 3: Notably, these actions also drove a second consecutive quarter of year-over-year improvement in adjusted EBITDA loss during Q2.
Loss during Q2 <unk>.
Speaker 3: Seventeen million dollars cumulative improvement in the first half of fiscal 24 versus fiscal 23
$17 million cumulative improvement in the first half of fiscal 'twenty four versus fiscal 'twenty three.
Speaker 3: We have made the necessary investments in Journey and taken deliberate steps to scale, to reduce cash spend, and to focus on paid subscriber conversion to accelerate break-even.
We have made the necessary investments in journey and taken deliberate steps to scale to reduce cash spend and to focus on paid subscriber conversion to accelerate breakeven.
Speaker 3: By the end of Q2, we had nearly 600,000 journey members, up 51% versus second quarter fiscal 23. And we now expect about 650,000 members by the end of fiscal year versus our original guidance of 625,000.
By the end of Q2, we had nearly 600000 journey members up 51% versus second quarter fiscal 'twenty three and we now expect about 650000 members by fiscal year by the end of the fiscal year versus our original guidance of 625000.
Speaker 3: Total subscribers at the end of Q2'24 was up 1% to 143,000.
Total subscribers at the end of Q2 24 was up 1% to 143000.
Speaker 3: And most importantly, we achieved significant growth in paid subscribers versus the same quarter one year ago. This progress reflects not only additional journey product capabilities, such as motion tracking and form coaching with SelectTech Dumbbells, but also our ongoing efforts to optimize our subscriber funnel through shorter trial periods and better communication and merchandise.
And most importantly, we achieved significant growth in paid subscribers versus the same quarter, one year one year ago. This.
This progress progress reflects not only additional journey product capabilities, such as motion tracking informed coaching with select tech dumbbells, but also our ongoing efforts to optimize our subscriber funnel through shorter trial periods and better communication and merchandising.
Speaker 3: As we discussed last quarter, we recently launched an exciting pipeline of new connected fitness equipment for this fitness season, two Bowflex products, the Max Trainer SE and the iSee Bike SE, and our new Schwinn 490 Elliptic.
As we discussed last quarter, we recently launched an exciting pipeline of new connected fitness equipment for this fitness season to Bowflex products, the Max trainer SCE and the IC bike assay and our new Schwinn 490 elliptical.
Paired with our rebranded identity Bowflex continues to demonstrate its strength in producing consumer centric equipment that is inclusive and designed for different rooms in your home.
Speaker 3: Paired with our rebranded identity, Bowflex continues to demonstrate its strength in producing consumer-centric equipment that is inclusive and designed for different rooms in your home.
These products will be sold through our direct business as we deliberately focus on our focus our new products and innovation efforts to drive continued momentum in this segment.
Speaker 3: We are encouraged by early reception of these new products, which has been supported by our focused marketing spend. We continually evaluate and optimize our advertising strategy to make sure our products are hitting the right places and the right people.
We are encouraged by early reception of these new products, which has been supported by our focused marketing spend we continually evaluate and optimize our advertising strategy to make sure our products are hitting the right places and the right people.
Speaker 3: In addition, managing our marketing investments continues to be a lever we can pull quickly and adjust as we monitor the demand environment.
In addition, managing our marketing investments continues to be a lever we can pull quickly and adjust as we monitor the demand environment.
Turning to our fiscal 2024 outlook as.
Speaker 3: As I mentioned earlier, as we begin fitness season in Q3, we're seeing the macroeconomic environment continue to impact the consumer.
As I mentioned earlier, as we became big and fitness season in Q3, we're seeing the macroeconomic environment continued to impact the consumer.
Speaker 3: Retailers' reorders have remained slow as our partners continue to largely service the category with existing inventory.
Retailers Reorders have remained slow as our partners continue to largely service the category with existing inventory.
Speaker 3: Based on these dynamics and the visibility into fitness season orders we have today, we have revised our FY 2024 guidelines.
Based on these dynamics and the visibility into fitness season orders. We have today, we have revised our FY 2020 for guidance.
Speaker 3: We continue to take the necessary steps that position us well to navigate the near term. As previously mentioned, we have right-sized our inventory position, enabling us to maintain our price, support our profitability, and maintain our brand equity in a promotional environment.
We continue to take the necessary steps that position us well to navigate the near term.
As previously mentioned, we have right sized our inventory position, enabling us to maintain our price support our profitability and maintain our brand equity in a promotional environment.
Speaker 3: Our semi-variable operating model enables us to continually manage costs and prioritize investments that will drive the business forward.
Our semi variable operating Mark our model enables us to continually manage costs and prioritize investments that will drive the business forward.
We have demonstrated our ability to them.
Speaker 3: to drive improved results as an outcome of these efforts, highlighted by the $17 million year-over-year improvement in adjusted EBITDA for the first half of the year, which is seasonally our softer period. As reflected in our guidance, we continue to believe we can deliver significant year-over-year improvement in adjusted EBITDA this year.
To drive improved results as an outcome of these efforts highlighted by the $17 million year over year improvement in adjusted EBITDA for the first half of the year, which is seasonally our softer period as reflected in our guidance. We continue to believe we can deliver significant year over year improvement in adjusted EBITDA. This year.
Speaker 3: While managing near-term temporary headwinds, we continue to position ourselves to capitalize on the enduring change in long-term at-home fitness habits as we introduce new products and scale journey.
While managing near term opportunity near term temporary headwinds, we continue to position ourselves to capitalize on the enduring change in long term at home fitness habits, as we introduce new products and scale journey.
Speaker 3: Even as workouts at gyms have risen, the percentage of consumers working out at home has remained consistent over the last two years at significantly elevated levels relative to pre-pandemic.
Even as workouts at gyms have risen the percentage of consumers working out at home has remained consistent over the last two years at significantly elevated levels relative to pre pandemic.
Speaker 3: And we are well situated to fulfill the needs of our consumers, sustain interest in home workouts with our broad portfolio of strength and cardio equipment at a variety of price points and by highlighting the total cost of ownership advantages that we have.
And we are well situated to fulfill the needs of our consumers sustained interest in home workouts with our broad portfolio of strength and cardio equipment at a variety of price points and by highlighting the total cost of ownership advantages that we have.
Speaker 3: As we look ahead, we continue to be thoughtful and responsive to consumer behavior.
As we look ahead, we continue to be thoughtful and responsive to consumer behavior.
Speaker 3: with calendar year 2024 product priorities focusing on introducing new strength equipment, treadmills, and other products that broaden our portfolio at important price points.
With calendar year, 2024 product priorities, focusing on introducing new strength equipment treadmills and other products to broaden our portfolio add important price points.
Speaker 3: I will now turn it over to Ina, who will give us more detail on the second quarter results and our fiscal 2024 guidance. Ina? Thank you, Jim, and good afternoon, everyone.
I will now turn it over to Ina, who will give us more detail on our second quarter results and our fiscal 2020 for guidance.
Thank you Jim and good afternoon, everyone.
Speaker 4: Today I'll be speaking to results for the second quarter of fiscal 24 and will provide guidance for the full year fiscal 24.
Today I'll be speaking to results for the second quarter of fiscal 'twenty, four and we'll provide guidance for the full year fiscal 'twenty four.
Speaker 4: Please go to our website to view our press release and the slides accompanying this call for more information on Q2 and year-to-date results.
Please go to our website to view our press release and the slides accompanying this call for more information on Q2 and year to date results.
Turning now to slide 10.
Speaker 4: Net sales for the second quarter were $49 million, down 26% versus last year. Direct decline by about $1.5 billion.
Net sales for the second quarter were $49 million.
Down 26% versus last year.
<unk> declined by about 15%.
Speaker 4: Direct cardio was down 30%, but direct strength was up 15% versus last year. The first positive comp in strength since Q1 fiscal 22.
Iraq Cardell was down 30%, but direct strength was up 15% versus last year. The first positive comp in strength since Q1 fiscal 'twenty two.
Speaker 4: Our retail segment declined by 30% as retailers continue to be conservative with reordering inventory.
Our retail segment declined by 30% as retailers continue to be conservative with reordering inventory.
Speaker 4: Importantly, our international business is growing again, delivering positive 41% comp in the quarter.
Our international business is growing again, delivering positive 41% comp in the quarter.
Speaker 4: Gross profit was $10 million, down 13% versus last year. However, we were pleased to deliver another quarter of gross margin expansion on softer year-over-year sales.
Gross profit was $10 million down 13% versus last year.
However, we were pleased to deliver another quarter of gross margin expansion on softer year over year.
Yes.
Speaker 4: As such, Q2 gross margin of 20% was up 300 basis points versus last year.
As such Q2 gross margin of 20% plus 300 basis points versus last year.
Speaker 4: This improvement demonstrates the success of our North Star initiatives in supply chain.
This improvement demonstrates the success of our north star initiatives in supply chain.
Digging into the specific drivers.
Speaker 4: The gross margin improvement was driven by 900 basis points increased due to lower landed product costs.
That gross margin improvement was driven by 900 basis points increase due to a lower landed product costs too.
Speaker 4: 200 basis point increase due to lower inventory adjustment.
200 basis point increase due to lower inventory adjustments.
Speaker 4: These margin gains were partially offset by 400 basis points of deleverage related to Journey Cog.
These margin gains were partially offset by 400 basis points of deleverage related to Jeremy Cogs.
Speaker 4: negative 300 basis points due to increased discounting, and negative 100 basis points due to increases in other costs. Turning now to slide 11.
Negative 300 basis points due to increased discounting and negative 100 basis points due to increases in other costs.
Turning now to slide 11.
The next few lines of the P&L had been adjusted to exclude the impact of restructuring and exit charges. Please see our press release for a reconciliation to GAAP.
Speaker 4: to exclude the impact of restructuring and exit charges. Please see our press release for a written.
Speaker 4: Adjusted operating expenses were $20 million, down $5 million or 21% versus last year. The key drivers of the...
Adjusted operating expenses were $20 million down $5 million or 21% versus last year.
The key drivers of the decrease were.
Speaker 4: Three million lower personnel expenses related to the February reduction in force.
3 million lower personnel expenses related to the February reduction in force.
Speaker 4: $1 million lower advertising and $1 million lower other expenses.
1 million lower advertising and 1 million lower other expenses.
Speaker 4: Adjusted operating loss was $10 million, an improvement of $4 million versus last year. Adjusted EBITDA loss was $6 million, an improvement of $4 million versus last year.
Adjusted operating loss was $10 million, an improvement of $4 million versus last year.
Adjusted EBITDA loss was $6 million, an improvement of $4 million versus last year.
Speaker 4: Turning to slide 12 for the balance sheet as of 9.30.
Turning to slide 12 for the balance sheet as of 930.
Cash was $10 million debt.
Speaker 4: Debt was $16 million, which represents our term loan balance as we had zero borrowings on our ABL.
<unk> was 16 million, which represents our term loan balance as we had zero borrowings on our ABL.
Speaker 4: We had $29 million available for borrowing, bringing our liquidity to $39 million.
We had $29 million available for borrowing bringing our liquidity to 39 million.
Other key callouts in the balance sheet.
Speaker 4: Inventory was $66 million, up 42% versus fiscal year end, 23.
Inventory was $66 million up 42% versus fiscal year end 'twenty three driven.
Speaker 4: driven by purchases to support the upcoming fitness season.
Driven by purchases to support the upcoming fitness season.
Speaker 4: About 40% of our inventory at 930 was in transit and weighted to our best-selling SKUs.
About 40% of our inventory at 930 was in transit and weighed into our best selling Skus.
Speaker 4: Versus the same quarter last year, inventory was down 33%.
Versus the same quarter last year inventory was down 33%.
Speaker 4: AR was $24 million, and trade payables were $63 million, both up from fiscal year-end 23.
<unk> was $24 million in trade payables for $63 million, both up from fiscal year end 'twenty three.
Turning now to guidance on slide 13.
Speaker 4: Consumer demand remains soft amid an ongoing uncertain macro environment.
Consumer demand remains soft amid an ongoing uncertain macro environment.
Speaker 4: Retailers continue to be conservative with their inventory reorders.
Retailers continue to be conservative with their inventory reorders.
Speaker 4: And competitors and retailers are aggressively discounting to clear through their excess inventory.
And competitors and retailers are aggressively discounting to clear through their excess inventory.
Speaker 4: At Bowflex, we did the hard work last year to clear our inventory.
At Bell Slacks, we did the hard work last year to clear inventory.
Speaker 4: Our inventory balances this year are in line with sales trends, and units are heavily weighted to our top SKUs.
Our inventory balances this year in line with sales trends and units are heavily weighted to our top skus.
Speaker 4: Our inventory discipline gives us flexibility to navigate this fitness season and removes the pressure to aggressively discount, which would only erode our brand equity.
Our inventory discipline gives us flexibility to navigate this fitness season and removes the pressure to aggressively discount.
It would only erode our brand equity.
We believe they have the right assortment and value proposition to be competitive this fitness season.
Speaker 4: We believe we have the right assortment and value proposition to be competitive this fitness season, and because we have managed our inventory well, we have the flexibility to choose whether to forego low margin revenue to preserve the momentum of our gross margin expansion and position Bowflex well for the long term.
And because we have managed our inventory well, we have the flexibility to choose whether to forego low margin revenue to preserve the momentum of our gross margin expansion and position <unk> well for the long term.
Given the continued challenged macro environment and year to date sales trends, we are lowering our expectations for full year revenue.
Speaker 4: Given the continued challenge macro-environment and year-to-date sales trends, we are lowering our expectations for full-year revenue.
We now expect full year revenue to be between 215 and $240 million.
Compared to previous guidance of between $2 70 and $300 million.
Speaker 4: The bottom of our sales guidance range assumes that second half year-over-year sales declines will be similar to first half, roughly minus 25 percent.
The bottom of our sales guidance range assumes the second half year over year sales declines will be similar to first half roughly minus 25% versus last year.
Speaker 4: The top end of our guidance range assumes for the second half a less negative sales decline and slight growth in gross profit dollars versus last year.
Top end of our guidance range assumes for the second half are less negative sales decline and slight growth in gross profit dollars versus last year.
Speaker 4: We continue to expect year-over-year gross margin expansion for the full year, with gross margins in the back half slightly higher than the first half of this year.
We continue to expect year over year gross margin expansion for the full year with.
Gross margins in the back half slightly higher than the first half of this year.
Speaker 4: Margin expansion coupled with strong expense discipline will minimize the impact of lowered revenue on adjusted EBITDA.
Margin expansion, coupled with strong expense discipline will minimize the impact of lower revenue on adjusted EBITDA.
As a result, we now expect full year adjusted EBITDA loss to be between 15 million and $25 million, which continues to represent significant improvement over last year's loss of $47 million.
Lastly, we are increasing our guidance for fiscal year end 'twenty four attorney members.
Speaker 4: We now expect to be at about 650,000 members at 331.24 versus our original guidance of 625,000.
We now expect to be at about 650000 members at 331 24 versus our original guidance of 625000.
Speaker 4: Like many other companies, we are preparing for a continuation of a difficult operating environment.
Like many other companies we are preparing for a continuation of a difficult operating environment.
Speaker 4: While it has been challenging to predict consumer demand, we are confident in our ability to flex all available levers to minimize the impact of lower top line on the bottom line, allowing us to deliver improved adjusted EBITDA loss compared to last year. I'll turn it back now to Jim.
Well it has been challenging to predict consumer demand, we are confident in our ability to flex all available levers to minimize the impact of lower top line on the bottom line.
Allowing us to deliver improved adjusted EBITA loss compared to last year.
I'll turn it back now to Jefferies final comments.
Speaker 3: Thank you, Ina, as we step into fitness season in the second half of our fiscal 2024.
Thank you Anna as we step into fitness season in the second half of our fiscal 2024.
Speaker 3: Our steadfast commitment to operational excellence and prudent inventory management has equipped us to support the successful launch of our new Bowflex and Schwinn products.
Our steadfast commitment to operational excellence and prudent inventory management has equipped us to support the successful launch of our new Bowflex and schwinn products.
Speaker 3: As the challenges in retail persist, we will remain agile in managing our costs with a focus on driving strong cash flow and supporting our path back to profitability as we remain on track to deliver a significant year-over-year improvement in adjusted EBITDA in fiscal 2024, as implied by our guidance.
As the challenges in retail persist, we will remain agile in managing our costs with a focus on driving strong cash flow and supporting our path back to profitability as we remain on track to deliver a significant year over year improvement in adjusted EBITDA in the fiscal 2024 and fiscal 2000.
24 as implied by our guidance.
Speaker 3: Despite the ongoing challenges, we remain encouraged by several bright spots.
Despite the ongoing challenges we remain encouraged by several bright spots.
Speaker 3: over the quarter, including strength in our direct segment, growth in our international retail business, and conversion to paid subscribers in Journey, all of which support our conviction in our future as we capitalize on the long-term shift to at-home fitness.
For the quarter, including strength in our direct segment growth in our international retail business and conversion to paid paid subscribers and journey all of which support our conviction in our future as we capitalize on the long term shift to at home fitness.
Speaker 3: I want to thank our dedicated employees and partners for their diligence, perseverance, and passion for serving our consumers in their pursuit of lifelong fitness.
I want to thank our dedicated employees and partners for their diligence perseverance and passion for serving our consumers and their pursuit of lifelong fitness.
Speaker 3: Lastly, as a reminder, our Board of Directors remains diligent in assessing value-creating opportunities and initiatives to accelerate Bowflex's strategic transformation. We have no additional information to share regarding the process at this time.
Lastly, as a reminder, our board of directors remains diligent in assessing value, creating opportunities and initiatives to accelerate bowflex. The strategic transformation, we have no additional information to share regarding the process at this time.
Speaker 3: We are grateful for your continued support, and we remain focused on delivering value for our shareholders and customers as we navigate these exciting opportunities ahead. We'll now open up the call to Q&A.
We are grateful for your continued support and we remain focused on delivering value for our shareholders and customers as we navigate these exciting opportunities ahead.
Well now open up the call to Q&A operator.
Speaker 1: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad.
Thank you at this time, we'll be conducting a question and answer session.
You'd like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Our first question comes from J P wallet with Roth.
Please proceed with your question.
Good evening, everyone. Thanks for taking my questions here.
Speaker 5: Maybe just starting first, I know we're headed into the seasonally strong period, but if I could maybe just think about kind of the off-season for a minute. And Jim, I know you like to talk about kind of the permanent change we have with at-home fitness, and there are more people working out.
Maybe just starting first you know I know, we're headed into the seasonally strong period, but if I could maybe just think about kind of the off season for a minute and you know Jim I know you like to talk about.
Kind of the permanent change we have with at home fitness and there are more people working out at home.
Given kind of work hybrid.
That we see.
So my question really is kind of just as we exit the off season, what are the biggest takeaways you have in consumers purchasing habits and.
Speaker 5: You know, what is really the lesson here as we get further away from cobit and really understanding kind of offseason and what people are.
What is really the lesson here as we get further away from Covid and really understanding.
Off season, and what people are looking for.
Speaker 3: Yeah, I mean, I still continue to see what I call long term tailwind in that home fitness is more important over time than it was pre pandemic. And we see strength across, you know, first going to come across in our strength products. We started to see that we talked about bright spots, it's kind of
Yeah, I mean, I still continue to see what I call long term.
<unk> in that home fitness is more important.
Overtime.
Then it was pre pandemic.
And we see strength across first it's going to come across in our strength products. When you started to see that we talked about bright spots. It's kind of it's kind of tough to do calls or anything like that on a quarter like this but where the consumer seems seems to be but we're beginning to see some hopeful encouraging.
Speaker 3: It's kind of tough to do carbon or anything like that on a quarter like this, where the consumer seems to be, but we're beginning to see some hopeful, encouraging signals.
Signals.
Speaker 3: You know, in direct strength, we talked about in international retail journey, we can sort of see the light at the end of the tunnel with the investment in journey, and we're seeing real progress there from quarter to quarter, and, you know, really I'm happy about our ability to leverage the bottom line just to fight the things we don't control on the top line.
Indirect strength, we talked about in international retail.
Journey, we can sort of see the light at the end of the tunnel with the investment in journey.
And we're seeing real real progress there from quarter to quarter.
And I'm happy about our ability to leverage the bottom line. Despite the things we don't control on the top line. So those are those are kind of some of the some of the trends I do I do see in terms of.
Speaker 3: So those are kind of some of the trends. I do see in terms of consumer trends.
Consumer trends.
Speaker 3: You can see in our products that the products are moving to a different room of the home as people are working.
You can see in our products that the products are moving to a different room of the home.
As people are working out at home. So these products have to be sleeker naphtha belong in the family room or the living room, not necessarily in the garage or some special room or your bedroom. These are things that people want to be proud of that are things people talk about and so they they are getting slimmer. They are not as bulky as they were before they reflect our new <unk>.
Speaker 3: So these products have to be sleeker. They have to belong in the family room or the living room, not necessarily in the garage or some special room or your bedroom.
Speaker 3: These are things that people want to be proud of, that are things people talk about, and so they are getting slimmer. They are not as bulky as they were before. They reflect our new branding and the reality of where things will be there. We're continuing to see people building out their home gyms, so we're seeing people buy
Branding and the reality of it.
Where things will be there.
Continuing to see people building out their home gym, so we're seeing people buy.
Second piece more often than they were before that's been an important trend for us and then in connected fitness it used to be that your second purchase was wholly independent brand wise to your first purchase that is no longer. The case says connected fitness pervades you are essentially getting people who will buy the <unk>.
Speaker 3: your second purchase was wholly independent, brand-wise, to your first purchase.
Speaker 3: uh... that is no longer the case as connected fitness uh... pervades
Speaker 3: you're essentially getting people who will buy the same brand on the second purchase as well. So these are things we're seeing. I'd say, you know, in the short term, you know, these headwinds, for sure, deals are important this holiday. You know, I had hoped that we'd be seeing the consumer strengthen going into the holidays. I don't think that's happening. I think we're seeing a weakening of that going into the holidays, just reading other people's earnings reports and experiencing ourselves. So those are some of the things that we're kind of seeing and changing in the industry, both short and long term. Hopefully, that answers your question. But if not, let's follow up.
Same brand on the second on the second purchase as well so.
These are the things we're seeing I'd say in the short term. These these headwinds for sure deals are important this holiday.
I would hope that we'd seen the consumer strengthening going into the holidays I don't think thats happening I think we're seeing a weakening of of that going into the holidays, just reading other people's earnings reports and experiencing ourselves. So those are some of the things that we're kind of seeing in changing in the industry.
Long term hopefully that answers your question, but if not let's follow up.
Speaker 5: No, no, I think that did. And you kind of took some of the next question about promotional environment that I was going to ask. So maybe I'll switch.
No no I think David you kind of took some of the the next question about promotional environment that I was going to ask so maybe I'll switch it instead and just kind of ask.
Any changes you're seeing too.
Speaker 5: fitness floor space at some of your retail partners, whether that's your products alone, or just the broader kind of fitness space that retail has designated.
Fitness floor space at some of your retail partners, whether that's your products alone or just the broader kind of fitness space that that retail has designated.
No that's a great question.
Speaker 3: We're really not. I mean, that's the short answer is we're not seeing any structural
We're really not I mean, that's the short answer is we're not seeing any structural differences in who's carrying fitness, how many doors are carrying fitness our products and how many doors are products are in so we're not seeing any what I'll call significant structural differences and that's important to us because while retail.
Speaker 3: differences in who's carrying fitness, how many doors are carrying fitness.
Speaker 3: our products and how many doors our products are in. So we're not seeing any, what I'll call, significant structural differences. And that's important to us, because while retail may be a bit down right now, we are on-the-channel approach. We are dedicated to making sure that our consumer can reach us in a variety of different channels. And so that's going to continue to be important.
May be a bit down right now we've got our Omnichannel approach, we are dedicated to making sure that our consumer can reach us in a variety of different channels and so that's going to continue to be important while we're really seeing and what what is driving the guidance revision that we've talked about is look they're driving down the inventory and this is the first time, we've given a number on.
Speaker 3: What we're really seeing and what is driving the guidance revision that we've talked about is, look, they're driving down the inventory, and this is the first time we've given the number on that, that units are down 50% year over year. They have driven at retail a significant reduction in units, and that's great, but it's hard to predict when the ordering will return, right? That's what hasn't happened yet. We had hoped that it would for this year.
That units are down 50% year over year, so they have driven at retail cigna.
A significant reduction in units and that's great.
It's hard to predict when the ordering will return right. That's what hasn't happened yet we had hoped that it would for this for this.
Speaker 3: holiday season, and it continues to be slow. And really, that's the case in our category and some other categories. So as the retail environment remains uncertain, we're encouraged by some of the things I talked about before, international, getting a second consecutive quarter of growth. Growth in smaller retailers, I think, is a notable thing that I didn't talk about in my script. But those big retailers that had a lot of inventory are not reordering, as I mentioned.
Holiday season, and it continues to be slow and really that's the case in our category and some other categories. So.
As the retail environment remains uncertain, we are encouraged by some of the things I talked about before international getting.
A second consecutive quarter of growth.
Growth in smaller retailers I think is a notable thing that I didn't talk about in my script, but those big retailers that had a lot of inventory are not reordering as I mentioned.
Speaker 3: uh... and they can't be counterbalanced by the smaller ones but our smaller retailers who didn't have the those inventory problems
And they can't be counterbalanced by the smaller ones, but our smaller retailers who didn't have those those inventory problems are reordering strongly is that gives us.
Speaker 3: are reordering strongly. That gives us a lot of promise in that particular area. So our team has done a great job at focusing on those folks that, those retailers that didn't have as much inventory and making sure that they were well-supplied as we go into the holiday season. So we offer a premium product that
That gives us a lot of promise in that particular area. So.
Our team has done a great job at focusing on those folks that those retailers that didn't have as much inventory and making sure that they were well supplied as we go into that to the holiday season. So we offer a premium product at a strong brand and a reasonable price point with a great total cost of ownership and this gives us optimism that when the <unk>.
Speaker 3: strong brand and a reasonable price point with a great total cost of ownership and this gives us optimism that when the investments do open up that we'll be in a good position to take advantage of the market.
<unk> do open up that will be in a good position to take advantage of the market.
Speaker 5: Great, really appreciate that. And then just one last quick one, maybe more for Ina, but just in terms of liquidity, you know, I'll leave it pretty open-ended, but I saw inventories creep higher. I know that's kind of.
Great really appreciate that and then just one last quick one maybe more sure but just in.
In terms of liquidity.
I'll leave it pretty open ended but I saw inventories to creep higher I know thats kind of building for the strong season, but maybe if you could just give us your.
Speaker 5: high-level view on liquidity in cash burn. We've taken a lot of costs out of the business, but however.
Your high level view on liquidity and cash burn we've taken a lot of costs out of the business, but how are how are you thinking about it there. Thank you.
Thanks, Jason for the question. So we're comfortable with our liquidity it was $39 million at 930, <unk> and our guidance suggests that the second half adjusted EBITDA loss would be a range of minus three to minus 13, which is better than last year.
Speaker 4: Thanks, JP, for the question. So, you know, we're comfortable with our liquidity. It was $39 million at 930, and our guidance suggests that the second half adjusted EBITDA loss would be a range of minus 3 to minus 13, which is better than last year.
Speaker 4: And as we said several times in our script, I believe we've proven that this management team can minimize the impact of lower revenue on adjusted EBITDA. So we're very focused on delivering stronger EBITDA year over year, and that gives us confidence in our liquidity.
And as we said several times in our script I believe we've proven that this management team can minimize the impact of lower revenue and adjusted EBITDA.
Focus on delivering stronger EBITDA year over year and that gives us confidence in our liquidity and finally, we believe we are managing through a dense silver concurrently preparing the company for the recovery gross margin is going to be important for that we have momentum there and we're getting new products ready for the new year and we believe.
Speaker 4: And finally, we believe we're managing through a dip. So we're concurrently preparing the company for the recovery. Gross margin is going to be important for that. We have momentum there. And we're getting, you know, new products ready for the new year. And we believe that revenue growth will come as we introduce those products in the market.
That revenue growth will comments, we introduce those products in the market.
Understood. Thank you all for the time.
Thanks JP.
Speaker 1: As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad.
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.
One moment, while we poll for questions.
Speaker 1: There are no further questions at this time. At this point, I'd like to turn the call back over to Jim Barr.
There are no further questions at this time at this point I'd like to turn the call back over to Jim Barr for closing comments.
Speaker 3: Thank you again to everyone on this call today and for your continued support of Bowflex. We look forward to providing our next update on our third quarter fiscal 2024 earnings call in February . Have a great rest of your day. Onwards and upwards.
Thank you again to everyone on this call today that and for your continued support of Bowflex. We look forward to providing our next update on our third quarter fiscal 2024 earnings call in February have a great rest of your day onwards and upwards.
Speaker 1: This concludes today's conference. You may disconnect your lines at this time, and we thank you for
This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.