Nautilus, Inc. reported its unaudited operating results for the third quarter and nine months ended Sept. 30, 2019. Results were down headed into a huge season of new product offerings and connected fitness releases.
Net sales for the third quarter of 2019 totaled $61.7 million, a decrease of 32.2% compared to $91.1 million in the same quarter of 2018. Direct segment sales were down by 44.1% from the prior year quarter, primarily driven by lower Max Trainer® product sales and related to a 37.0% reduction in advertising expense compared to the prior year quarter as the company prepared to increase spending on a new advertising campaign in the fourth quarter of 2019.
Retail sales were down by 27.1% from the same quarter of the prior year, primarily reflecting partial shipment delays to October 2019 related to recently imposed tariffs further discussed below, as well as a decline in Bowflex Max Trainer® product sales. Royalty revenue in the third quarter of 2019 was $0.7 million, an increase of 12.4% compared to the same quarter of last year primarily due to a new agreement. For the first nine months of 2019, net sales were $205.1 million, a decrease of 27.1% compared to $281.4 million in the same period in the prior year. Gross margins for the third quarter of 2019 were 30.9% versus 42.3% for the same period of last year, primarily due to unfavorable product mix and unfavorable overhead absorption related to the decline in sales.
Total operating expenses for the third quarter of 2019 decreased by $5.0 million to $27.3 million compared to $32.3 million in the same period of last year, primarily due to lower advertising spend and product development costs, partially offset by increased advertising production costs. Operating loss for the third quarter of 2019 was $8.3 million, compared to operating income of $6.2 million in the same period of last year, primarily due to lower sales and unfavorable gross margins, partially offset by lower operating expenses.
Loss from continuing operations for the third quarter of 2019 was $10.6 million, or $0.36 per diluted share, compared to income of $4.5 million, or $0.15 per diluted share, for the same period of last year. Tax expense in the third quarter of 2019 included a $3.9 million, or $0.13 per diluted share, valuation allowance against the Company’s deferred tax assets.
EBITDA loss from continuing operations for the third quarter of 2019 totaled $5.5 million compared to income of $8.5 million in the same quarter of the prior year.
