Octane Fitness' ZeroRunner ZR800 was described as a "key product launch" by Nautilus Chief Operating Officer William McMahon during a conference call with analysts to share second quarter financials.
Octane Fitness began to offer the Schwinn Airdyne Pro, left, at specialty fitness retailers in April, and it will be available commercially in the fourth quarter of 2016. The Octane Fitness ZeroRunner ZR8000, right, launched in June. (Photos courtesy Nautilus.)
Nautilus, Vancouver, Washington, reported a 31.6 percent increase in second quarter sales to $78.5 million, according to financials released Monday.
The increase in revenue was driven by incremental sales resulting from the January acquisition of Octane Fitness along with strong organic sales growth in both the direct and retail segments, Nautilus said in its earnings release. Net sales for the first six months of 2016 were $199.5 million, marking an increase of 27.9 percent over the same period in 2015.
"We are very pleased with our overall performance in the second quarter," Bruce Cazenave, CEO, Nautilus, said in a statement. "Solid revenue growth and increased gross margins in both the direct and retail business segments resulted in operating income growth of over 67 percent. The organic retail business grew 19 percent and when including revenue from Octane Fitness, retail revenue increased 89 percent. Our disciplined approach to revenue and operating income growth continues to pay dividends."
Octane Fitness' ZR8000, the first commercial-quality ZeroRunner, was revealed at IHRSA 2016 in March and launched in June. The ZR800 was described as a "key product launch" by Nautilus Chief Operating Officer William McMahon during the conference call with analysts.
"We're very pleased with the early installations and feedback from customers," McMahon said in the call. "We continue to be pleased with the performance of our core businesses and encouraged by the integration of the Octane Fitness business. During due diligence, we felt that these businesses would be highly complementary, and now six months into integration we're confirming those assumptions."
Nautilus products are sold in direct and retail channels. Net sales for the retail segment were $32.9 million in the second quarter, marking an increase of 89.1 percent compared to the second quarter 2015. Net sales for the direct segment were $44.9 million in the second quarter of 2016, marking an increase of 7.9 percent over the comparable period last year.
The improvement in retail net sales reflects the inclusion of Octane Fitness, as well as strong double digit organic growth across both the cardio and strength components of the retail business, Nautilus said in its release. Net sales for the retail segment totaled $71.7 million for the first six months of 2016, marking an increase of 85.3 percent over the same period in 2015.
Direct segment sales benefited from continued strong demand for cardio products, especially the Bowflex Max Trainer product line, Nautilus said. For the first six months of 2016, net sales for the direct segment were$126.2 million, an increase of 9 percent over the same period last year.
"As we enter the back half of the year, we are well positioned for more growth with a number of new product introductions and increased market penetration secured in the retail segment," Cazanave said in a statement. "Our focus on product innovation and channel diversification will provide the foundation for continued growth in market share both domestically and internationally. The integration of Octane Fitness is also progressing as expected, and the early receptivity of Octane's commercial Zero Runner has been very positive. We look forward to showcasing the commercial Zero Runner along with several other new Nautilus products at our annual September product showcase event in New York."