Nautilus, Inc. (NLS) Q1 2020 Earnings Conference Call May 5, 2020 4:30 PM ET
John Mills - ICR
James Barr - CEO & Director
Aina Konold - CFO
William McMahon - Special Assistant, CEO
Conference Call Participants
Michael Swartz - SunTrust Robinson Humphrey
Steven Dyer - Craig-Hallum Capital Group
Mark Smith - Lake Street Capital Markets
George Kelly - Roth Capital Partners
Good day, and welcome to the Nautilus, Inc.'s First Quarter 2020 Earnings Results Conference Call. Today's conference is being recorded. [Operator Instructions]. At this time, I would like to turn the conference over to Mr. John Mills of ICR. Please go ahead, sir.
Thank you. Good afternoon, everyone. Welcome to Nautilus' First Quarter 2020 Conference Call. Participants on the call from Nautilus are Jim Barr, Chief Executive Officer; Aina Konold, Chief Financial Officer; and Bill McMahon, Special Assistant to the CEO.
Our earnings release was issued today at 1:05 p.m. Pacific Time and may be downloaded from our website at nautilusinc.com, on the Investor Relations 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.
For today's call, we have a presentation accompanying the call that management will refer to during their prepared remarks. And on Slide 2 is our full safe harbor statement. I would like to remind everyone that during this conference call, Nautilus management will make certain forward-looking statements, and so we ask that everyone read our safe harbor statement in the presentation. You can access the presentation by going to nautilusinc.com, then click on the Investor tab, and then click on the Events and Webcasts, and the presentation will be on that page.
And with that, it is my pleasure to turn the call over to Nautilus' CEO, Mr. Jim Barr.
Thank you, John. Good afternoon, everyone, and thank you for joining today's call. Our first quarter of 2020 started out as a good quarter and turned into a much stronger quarter. Thanks to the agility of our entire organization as we captured the higher demand for home fitness products, primarily due to COVID-19 stay-at-home orders. We achieved stronger-than-expected results, including revenue growth of 11%, realized our first positive comp since the third quarter of 2018, lowered operating expenses and dramatically exceeded our EBITDA estimates. I'm incredibly proud of how our team came together to support one another, their families, our communities and our customers, keeping our business vibrant and moving forward during unprecedented times and facing a series of challenges.
During the COVID-19 pandemic, our first and foremost priority was and continues to be the safety of our employees, customers and partners. Before government orders were in place in the jurisdictions where Nautilus operates, we implemented our work from home policies for most employees worldwide, while continuing to provide leading customer care. Our distribution centers remained open for both receiving and shipping with strict guidelines on social distancing and worker health and safety protocols. A top priority for our entire organization is to serve customers during their time of need. And thanks to our company's agility, focus and persistent hard work, we've been able to meet most of our customers' needs.
As we enter the second quarter, we continue to benefit from the surging demand for at-home fitness and our company's ability to respond. Fortunately, our well-recognized brands, breadth and quality of our strong product portfolio and omnichannel capabilities have enabled us to serve both existing customers and those who are just now learning about our company and our offerings for the first time. In crisis, we saw a flight to our quality brands as consumers look to address their fitness needs. It was a time where we were reminded of the payoff of our long-term investment in brand reputation and brand building.
Our product portfolio featuring both cardio and strength offerings, a variety of types of equipment and multiple price points gave customers outstanding choices. And the individual strengths of both of our primary sales channels, Direct and Retail, were evident during the first quarter. The Direct channel permits rapid response to changes in the market. We could read new trends and respond near real time. And the Retail channel allows us to offer greater fulfillment options so that consumers can buy when, where and how they prefer.
Looking forward for the remainder of 2020, we believe we are well positioned with the right team, products and brands to bring our company back to a leadership position in home fitness. As an example, we're excited to be introducing a strong lineup of new product offerings in the fall for both Retail and Direct channels, and we'll provide more information on these in our second quarter call.
Turning to our very strong first quarter results by channel. Our Direct net sales increased for the first time year-over-year since 2017. Increased sales were driven primarily by strength products, including Bowflex, SelectTech and Bowflex home gyms. Cardio product sales declined as strong demand for our connected fitness bikes, the Bowflex C6 and the Schwinn IC4 were not enough to fully offset continued declines in our Max Trainer.
In addition to achieving its first positive comp since 2017, I wanted to share some other direct statistics to give you a flavor of the spike in demand in the last few weeks of the quarter. On bowflex.com, our highest volume website, March visits, revenue and conversion rates all exceeded December 2019, typically our holiday season peak demand. The spike in visits on bowflex.com was driven primarily by organic traffic, which was up nearly 300% versus March 2019. In the full month of March, bowflex.com revenue grew 140% versus March 2019. And for the second half of March, bowflex.com revenue increased over 250%. Our schwinnfitness.com site saw similar dynamics. In the first -- in the full month of March, our revenue was up 9x compared to March 2019. And in fact, has already exceeded all of the revenue it produced for all of 2019. We wanted to give back to our customers during trying times by giving away 30 of our top of the line Max Totals in April. This gave us an opportunity to highlight this terrific product when our website traffic was so high. To date, we've collected over 150,000 entries.
Call center sales were also strong, operating at or above typical holiday peak levels. The revenue per day for the last half of March was 80% higher than December 2019's holiday volume. We pulled back on television advertising as we generated sufficiently strong demand without it, focusing on digital and social channels, reducing our overall spend and increasing our ROI on ad spend. Also able to reduce the level of promotional pricing as we monitor competitors and our own strong demand. We worked our way through selling our most popular products and then generated demand on some that we've not sold as strongly recently.
Our Retail segment was up 24%, with strong growth coming from both strength and cardio product sales. Strength sales were driven primarily by strong demand for Bowflex SelectTech 552 adjustable weights. Cardio sales driven by the Schwinn IC4 connected fitness bikes and partially offset by declines in Octane Fitness equipment as gym closures have begun to affect sales of commercial-grade equipment. Although numerous retailers have temporarily closed store locations due to COVID-19, Bowflex and Schwinn experienced strong year-over-year sales increases through retail partners, e-commerce and curbside pickup platforms our Bowflex SelectTech 552 was a consistent hot seller on Amazon, including 1 day when we sold 6,000 units or 17 cargo containers in a single day. DICK's Sporting Goods and other retailers had a strong focus on fitness products, fueled by their dot coms and contactless store pickup. We also used the increased demand for our products to establish stronger partnerships with retailers with whom we've not had a significant historical presence.
Overall, we had winners on both the cardio and strength sides of the business. Bike demand has remained strong since the launch of the C6 and the IC4 and has continued throughout the quarter, bucking the lower seasonal trends we typically see after January. Once COVID stay-at-home orders were issued, the demand for our bikes further accelerated. Demand for strength products was unprecedented for this time of year as an alternative to going to the gym for these activities. With our digital personalized connected fitness investments, such as JRNY, we're able to see how our members are using our equipment and how their habits change over time. For example, using the 30 days after stay-at-home orders were issued and comparing that to the preceding 30-day period, we have seen that people are working out significantly more often, longer and harder. Workouts per user are up 9%. Members are spending 14% more time on their machines. And we've seen a 16% -- we've seen 16% more calories burned per user. On top of these per user metrics, we saw nearly a 50% spike in JRNY downloads just in the first 30 days of stay-at-home. These statistics are not only interesting to underscore the at-home fitness trend, but also energize us by showing that we are progressing in our noble mission of helping people live healthier lives through fitness.
Previously, I mentioned some key benefits our omnichannel approach has for customers, but there are significant benefits to our business model that were particularly highlighted during the events of the quarter. Our Direct business offers very quick conversion to cash, permits very quick decision-making in many aspects, including pricing, promotion, product mix and media spend and allocation. Finally, we can more quickly establish a direct relationship to better personalize our fitness experiences, grow our customer base and enhance lifetime value.
Our Retail channel enables us to expand our reach and footprint, getting products to consumers the way they choose. In normal times, consumers can experience our products in store. This quarter, retailers enhanced their store pickup capabilities and pivoted to online sales. We believe this is going to accelerate digital transformation at many retail partners. As a former retailer who drove digital transformations, I believe this will not only be good for them, but it could have a lasting benefit to our company as growth in the long run will be less restricted by floor space and typical in-store price points.
As we mentioned in the fourth quarter earnings call, early in the first quarter of 2020, COVID-19 disrupted our manufacturing and supply chain in China, where many of our products are manufactured. Our manufacturing and most logistics in China are now nearly fully recovered and are near full capacity. The next challenge has been responding to the unforeseen and unprecedented demand we've seen since mid-March. We have continued to work very hard to improve our manufacturing and supply chain efficiencies. We expanded production for many of our leading products, which is reducing our backlog. However, we believe the continued strong demand we are seeing for certain products could prevent us from getting fully caught up on our full backlog until the beginning of the third quarter. We are also expediting as many products as possible of balancing the cost impact to maintain proper margins. Aina will address this more when talking about margins.
Overall, I'm very pleased at how our company performed during the first quarter. We are seeing what we are capable of achieving in the short and long run. This year, while doing our best to deliver on short-term results, we remain focused on the longer-term transformation of our company. We will continue to address the areas that need improvement. We will continue to address the issues underlying the multichannel decline of our Direct business that we articulated in our last earnings call. We will not kid ourselves. The current surge in demand does not mean these issues have disappeared. Some are merely hidden, and we will relentlessly attack them. And most importantly, we will not allow the short-term sales surge to distract us from addressing the long-term future of our company. Our strategic planning process is moving ahead as expected. We are garnering insights through multiple sources of vigorous diagnostics, which will drive our focus and help us select the most attractive growth opportunities. As we have indicated previously, this will lead to an insights-driven, long-term vision and multiyear strategic plan that we anticipate sharing late in the third quarter. I expect that our transformative vision and plan built on existing strengths and those that we'll develop over time will be exciting to employees and to investors.
For those investors who are new to our company, welcome. We're glad to have you. It's important to understand the seasonal nature of our business and our industry. In a typical year, the second quarter is normally the weakest and the fourth quarter is seasonally the strongest. The first and third quarters will fluctuate to the next strongest quarter, depending on new product introductions. With that, I'd like to now turn over the call to our CFO, Aina Konold. Aina?
Thank you, Jim. Good afternoon, everyone. I'll begin by speaking to total company P&L results for Q1 2020 with comparisons to Q1 2019. Net sales were $94 million, better than prior year by 11%. Quarterly sales gains in both the Direct and Retail segments were driven by the strength of our brands, strategic and operational changes implemented in the last several months and the near-term trend towards home fitness, primarily due to the COVID-19 pandemic. Gross margin rate decreased to 38% versus 42% last year, resulting in gross profit that's essentially flat year-over-year. A shift in segment sales, unfavorable product mix and higher landed product costs were the primary drivers for the decline. The Retail segment sales were 49% of total sales this year versus 44% last year. And as noted by Jim earlier, Max Trainer sales continued to decline, and the loss of these higher-margin sales negatively affected our margins. With regards to higher landed product costs, as a reminder, products we import from China are now subject to a 7.5% tariff versus no tariff in Q1 last year. And we also expedited shipping for products that had been on back order due to supply chain disruptions caused by COVID-19. Certainly, we're not satisfied with the decline in our gross margin rates and are working cross-functionally to create a path to margin expansion in the future.
Operating expenses were better than prior year by 21%, declining to $36 million or 39% of net sales compared to $46 million or 55% of net sales last year. 2 areas drove the reduction in costs. Selling and marketing expenses were down 27% to $25 million or 26% of net sales compared to $34 million or 40% of net sales last year. The decrease in expense was primarily in advertising spend. We spent $13 million on media this year versus $20 million last year. As we've mentioned in our previous quarterly calls, we are focused on improving our media ROI and are pleased that in Q1 we were able to grow sales on lower spend.
Research and development costs were down 12% to $3.8 million or 4% of net sales compared to $4.3 million or 5% of net sales last year, primarily driven by lower maintenance expenses related to our digital platforms. General and administrative expenses were basically flat at $8 million or 8% of net sales this year compared to 9% last year. Operating loss was $0.6 million, better than prior year's loss of $10 million, a 94% improvement, driven primarily by expense reductions as gross profit was flat. While we are pleased to have meaningfully reduced our operating loss, we recognize that the path to sustainable, profitable growth requires more than expense discipline.
Income from continuing operations increased $2 million or $0.08 per diluted share compared to last year's loss of $8.5 million or minus $0.29. The improvement was primarily driven by the OpEx reductions I mentioned earlier, and a $3 million tax benefit related to the CARES Act that was recognized in the first quarter. Net income was $2 million or $0.07 per diluted share compared to a loss of $9 million or minus $0.29 per diluted share. EBITDA from continuing operations was $2 million compared to an EBITDA loss of $8 million last year.
Turning now to Q1 2020 performance by segment. I'll be comparing this year's Q1 results with Q1 2019. Net sales in the Direct segment were $47.1 million, up 1% from $46.7 million. This was Direct's first quarter of year-over-year sales increase since Q4 2017. As mentioned earlier by Jim, higher sales were driven primarily by strength, which grew by 59%. Cardio declined by 9%. A strong demand for our connected fitness bikes were not enough to fully offset declines in Max Trainer. As of March 31, 2020, future sales related to our customer backlog in direct is estimated to be approximately $8 million. Gross margin rate declined to 52% versus 57% last year, driven by unfavorable product mix and higher landed product costs. Segment contribution was $2 million, up 140% compared to a loss of $5 million. The improvement was primarily driven by a $7 million reduction in media spend as gross profit was below last year.
Turning now to the Retail segment. Net sales were $46 million, up 24% from $37 million last year. Strength product sales were up 55%, and cardio sales were up 18%, driven by the Schwinn IC4 connected fitness bike, partially offset by declines in Octane Fitness products as gym closures have begun to negatively affect sales of commercial-grade equipment. As of March 31, 2020, estimated future sales for the Retail segment totaled approximately $6 million. We disclosed Retail customers whose sales are greater than 10% of total company net sales. In Q1 2020, Amazon.com accounted for 13% of total company net sales. Gross margin rate for the Retail segment was 22.6%, down from 23.3% last year, driven primarily by unfavorable sales mix and higher landed product costs. Segment contribution was $2 million compared to a loss of $1 million last year. The improvement was primarily driven by higher net sales and reductions in operating expenses, partially offset by lower gross margin rates.
Turning now to the consolidated balance sheet as of March 31, 2020. We ended Q1 2020 with cash at $26 million and debt of $28 million, compared to cash of $11 million and debt of $14 million at year-end 2019. We had $18 million available for borrowing on our credit facility. Inventory was $35 million compared to $55 million as of year-end 2019. Seasonally, inventory levels at the end of Q1 are typically lower than at year-end. But the unplanned surge in late March related to COVID-19 did further decrease inventory levels. As Jim mentioned, we are working hard to get back in stock for our best-selling products and are continuing to expedite shipments to reduce our backlog, but we don't expect to be fully back in stock until the beginning of Q3. Working capital totaled $61 million versus $40 million at year-end 2019, the result of reductions in trade payables and receivables. Trade payables were $34 million compared to $74 million at year-end 2019, driven primarily by typical seasonality. And lastly, capital expenditures totaled $2 million as of March 31, 2020. We are reiterating our full year capital guidance range of $8 million to $10 million for the full year 2020.
We are pleased with the sales momentum in the business and how we have responded to the surge in demand for at-home fitness. That said, we do have meaningful margin pressures as customers have moved away from the higher-margin Max Trainer products to lower margin modalities, like the IC bikes and strength products. We are also managing through the lingering effects of COVID-19 on our supply chain, requiring us to expedite shipments as we seek to meet the surge in demand.
Lastly, the tariffs that were imposed in the latter half of 2019 create margin pressure that cannot always be mitigated by price increases. We know that the path to sustainable, profitable growth requires us to expand margins while continuing to manage expenses tightly. And we look forward to sharing our progress every quarter.
Now I'd like to turn the call back over to Jim for his final comments. Jim?
Thank you, Aina. While we turned in strong results and are off to a good start, the remainder of 2020 carries a lot of uncertainty because of COVID-19 and the global economy. As I've said many times in our calls since I've arrived, our long-term transformation may at times not show quarter-to-quarter linear progress. We have now entered the seasonally softest quarter of the year. The duration of the current consumer tailwind is anyone's guess and driven in part by the level of comfort with gyms and the rate at which people return to them. Though not the majority of our business, we also have exposure to the commercial fitness space through our Octane brand. And perhaps most importantly, the duration of the impending recession and subsequent shape of the recovery, factors that are very difficult to predict, will clearly impact our company.
Despite the challenges we faced, I'm incredibly proud of our first quarter results and the people who are responsible for delivering them. This has been an unprecedented time for the world and for our business. I want to sincerely thank our employees and partners who, while dealing with their own personal challenges, showed us their best work in crisis and supported our customers during the very trying period in their lives. Nautilus stands ready to continue to do our part to help people stay fit and healthy as possible through all of this and beyond.
Finally, I also want to thank our analysts and investors for their patience and loyalty to Nautilus. I want to assure you we haven't lost track of the destination of returning to long-term growth and sustained profitability. We're all working very hard every day to enhance shareholder value for our company. And now I'd like to open the call up to your questions. Operator?
[Operator Instructions]. The first question is from Mike Swartz of SunTrust.
Jim, maybe for you. I think in your prepared remarks, you had mentioned some backlogs in both of the businesses. It's the first I can remember the company talking about backlogs at quarter end for quite some time, and I think we'd have to go back to 2016 with one of the Max Trainer iterations where we actually saw a multi-month backlog occur. So maybe just provide a little frame of reference around the numbers that you gave tonight, I think, around $15 million or so in backlog. How does that look historically in periods where you've seen stronger demand? And maybe just on a year-to-year basis, what that typically looks like?
I'll have to admit I'm -- that's a great question, and I appreciate it, Mike. I'll have to admit, I don't have -- I haven't looked at the long-term backlogs over time. And so I may have to have, Bill refer to that. I do know that it's a good problem to have, the -- especially as we get to the end of March. We just had this amazing surge last few weeks of March. We were already in kind of delayed promise periods on our bikes because that has not slowed down since we launched all the way back in October. And of course, we lost a couple of -- we lost some weeks in production in China due to the COVID. So we were catching up, but we were still continuing to see just this huge demand there. And then we got to the end of the last few weeks, and then the bikes just took off and then also the weights, especially the 552s and anything strength-related because our theory was people could go outside to get some cardio in most parts of the country. They weren't restricted from doing that. But to actually do resistance training became a lot more difficult. So we saw that. So maybe after those comments, Bill, do you want to comment on kind of the historical significance?
Yes. Thanks, Jim. I don't have the exact numbers in front of me. I would tell you, Mike, that it's normal to have a little bit of backlog that happens in crossover due to the transportation, timing and other things that impact shipments, but this is many times higher than what normal backlog would be for us.
Okay. And just in terms of the increased capacity, you talked about, maybe just give us a little color on what that means? Are you -- as we look at some product on bowflex.com, it seems like you've taken some of that off the website. So am I -- when I look at that, is it you're trying to free up capacity for maybe slower turning lines? Or is that kind of just the normal end-of-life process of taking things off the website?
Well, I'll start with the website, and then I'll ask Bill to talk about what we're doing with our supply chain. So on the website, we -- for bikes, for example, we continue to take orders. I think I just checked today and we're at kind of a 45-day promise period on that, but it doesn't seem to be slowing down the demand, even though the people have to wait a while for these bikes. On things like the 552s, the Bowflex SelectTech 552s, they're a little bit longer promise periods. And at some point, we just don't want to disappoint people. So we've substituted taking orders on a product like that to a Notify Me When button, which is another example of agility. We didn't even have that feature on the website, but we just said we're going to get so many of these. And so we've captured that demand, but we haven't taken the order for those. And as we see those coming back into stock, we'll reach out to those people who expressed an interest.
The other thing that happened is we sort of worked our way down the most popular products and then began selling. Our CMO said everything, but the floorboards. We were able to sell lots of equipment that we hadn't sold in several years and that we had end-of-life officially ended life, but we hadn't actually sold out of all the inventory because we just didn't have a way to sell them this way, and we took advantage of this period where people really wanted almost any kind of equipment at some point where we were able to take advantage of that particular trend. Bill, maybe you could tack on with what you're doing supply chain wise to give us greater capacity?
Yes. Thanks, Jim. Michael, overseas, obviously, there was pretty significant disruption in Q1 in our supply chain. As Jim noted in his comments and Aina did as well, we feel like we're getting back to normal in -- with our factories, and they are at capacity, but certain product lines like the SelectTech, Jim mentioned, and bikes were actually increasing capacity and have been in the process of increasing capacity for a while on the bikes as we still don't know what total potential is for that product line. We do feel like we'll be able to catch up here in the first half of the year as we were saying maybe early Q3 will be caught up. But there is a lot of not just getting back to normal going on, but also, okay, now that you have your teams back and you're getting back to normal, we need you to up your capacity pretty quickly to help us. So all those things are in progress as we speak.
And I'll just add that our partners have been extremely great to work with. It's times like this that the relationship building you've done over multiple years with our manufacturing partners really pays off because when you ask them to go the extra mile, when we ask them to add a production line for bikes and things like that, their answer is yes, because the partnership has been contributed to -- by both sides along the way and really seems to pay off in times like this. So Mike, did we fully address your questions?
The next question is from Steve Dyer of Craig-Hallum.
Jim, you talked a little bit about the second quarter. We're coming up on halfway through it here. And you talked a couple of different times about the seasonality in the second quarter. And I guess I'm trying to square that. From where I sit, you'll have sort of more capacity, quarter-on-quarter. You'll have, hopefully, fewer, if any, supply chain disruptions. You've got a backlog that takes you out into the third quarter. So I guess, why would there be any seasonality really at all in the second quarter vis-à-vis what we just went through?
Well, Steve, great question. And the context of when I mentioned it was sort of a list of things to remember when forecasting out the rest of the year. And definitely, I did mention the second quarter. I think primarily for people who haven't covered us as long as you, so they're aware of that seasonality as well. But you're right. I mean we've continued to see strong demand for our products. I think maybe the difference between the last few weeks of the first quarter and the second quarter is we were not out of very much inventory for the first few weeks, and then we became a little bit more supply-constrained after that.
Now we're still taking orders on almost everything. We're still finding a way to clear that in the time frame that we mentioned. But we don't know -- basically, for this quarter, I'd say we are more supply-constrained than demand-constrained, and it's really just turned into a sport of trying to fulfill as much as demand as we possibly can, as creatively as we can and get products here as quickly as we can. But you're not wrong to say that the second quarter continues the momentum we saw in the first quarter, at least most of it.
So is it fair to say -- I mean I know your inventory is down roughly $20 million quarter-on-quarter. Maybe that served to satisfy some of the demand in the first quarter and you don't necessarily have that luxury with some of your SKUs into the second here?
Yes. I mean I think that's part of the story where we sold the most popular stuff and then got into some things that hadn't sold in a while and sold them down. And then -- and now we're replenishing as quickly as possible. There's plenty of product on the water right now. It will be here soon. But we had to replenish that. So we went through the fast movers, then we went into some of the more -- things we hadn't sold in a while and we sold a lot of those, which is actually a great way to clear out inventory. And now we're replenishing as quickly as we can.
Got it. And as it relates to that, I guess, I know you're -- sometimes you don't want to talk too much about specific products, but Max Trainer has obviously been quite weak year-over-year for quite some time. I think the last we checked, there's actually a bit of a backlog, maybe a little over a week now on that. Does that feel like it's reached a level of demand that -- where we might not see these big declines any further? I mean does that seem like it's found a level?
Yes. I mean it's pure speculation to know whether it's sort of found the bottom there. I think that's what you're alluding to. But it is -- we are actually quite optimistic about how it's been selling lately. Part of it is when people come to our websites naturally, as we talked about through organic traffic and they're looking for fitness products, one of the reasons we did that giveaway is to really shine a light on the Max Trainer because we actually think it's still a very, very good product. I think, and I've said this on calls before, that it's an absolutely great workout. I use it myself. It just becomes better with technology. And I think some of our models fell behind on technology.
And so for our current and future products, we're injecting more technology. And the coaching on a high-intensity workout machine like that is a super important thing. And so JRNY really plays an even greater role there. So we're not giving up on Max yet. And I hope you're absolutely right that we're close to the bottom and we could actually see an uptick there. That will change a lot of things and a lot of -- it will help a lot of things at our company obviously. Aina talked a little bit about the margin replacements where we end up replacing these high-priced, high-margin products with lower price, slightly lower-margin products in a lot of the bikes and things like that, and it's not the trade off you want to make forever. But we're very optimistic about that line. We invented it. We sold, I think, 600000-some-odd units over its life. So there must have been something good about it. And I personally like it a lot, and I think it can be rejuvenated.
That's great. And then last one for me, and I'll pass it along. So Amazon, obviously, a meaningful customer to you. Did their, sort of, preference for essential items for different pieces of the quarter or the last several weeks, I mean, has that impacted anything for you, make it any more difficult for you at all? That's it for me.
Yes. No, Steve, we did not notice anything -- any change there. We continue to sell. And of course, the big staple, as we mentioned in my remarks was the SelectTech 552. And I'm not sure where they are in the inventory now. I would suspect they're out of it, too. So -- but we have not seen any decline in their ability to deliver for customers. We've not heard anything about that, and the demand has remained strong.
The next question is from Mark Smith of Lake Street Capital.
First off, kind of big picture. Can you talk a little bit about what you expect to happen in the mix of direct versus retail in that shift going forward, strong backlog right now in direct, but will you attempt to fulfill more orders and maybe shift more people into e-commerce and direct rather than working with your retail partners?
One of the things, Mark, that we are very proud of is being an omnichannel company. And I think there was a time that the company was direct first. But we've had such great growth with our retail partners. And just my personal history is that you just get the products out there as many ways as possible so that consumers can choose the way that they buy. And that's really our philosophy. There are differences in channel economics, obviously. The economics are actually pretty close to one another when you have a normal media spend requirement, if you look at the net economics.
So right now, we've got a situation where we're not having to spend much media, and we're getting the orders anyway. And so direct is definitely a preferred channel. But our retail partners are so important to us and to our growth, and we want to grow with them. So we're going to continue to, as I did when I was in omnichannel retail, you make good decisions for the overall company, you're not optimizing one particular channel or the other. But we definitely look at the economics. We definitely look at inventory allocation based on that. But also we think about the strategic initiatives we're building with retailers. We want to grow their business. We want to give them the product they want. And especially in this quarter, we were able to make some real headway with some retailers we -- and had a relationship before because they suddenly had a need for a fitness products, and we were able to swoop in and help that. So we are balancing those things. That's really the only way I can answer that question. And we don't really have a plan going forward about the mix of those two. We're going to let the customer choose, and we're happy with both our channels.
Perfect. And then looking at the strength, especially in the Schwinn numbers, can you just confirm the already exceeded revenue from full year 2019? Is that through today? Or was that during the first quarter? And then secondly on Schwinn. Just if you can talk about how much that was kind of led by new products? And perhaps what you're seeing with pricing and price sensitivity for consumers out there today?
Sure. So I can't remember the exact date that we passed on it because I have kind of weekly meetings with our website folks and they give me great stats every week. I believe it was late March, early April, that we passed for the whole year, but I may be off a week or 2 on that. But it was late third quarter -- late first quarter, early second quarter time frame, and then it just continued to accelerate since then and that's where we kind of quoted that 9x number for the March time frame. So it's gotten tremendous traffic conversion, and it really is a lot driven by bikes. I mean that's what -- that's where -- Schwinn does have other modalities, but it's really about bikes there. And there were several models, but the star that we've mentioned a few times was the IC4 that basically is a -- the value proposition of buying a bike, we believe, is comparable to others selling at $2,300, $2,400, we're selling a bike for $799. And then we have an open platform where you can use our stuff or you could use Peloton or Zwift or any number of other pieces of software to give you real choice.
And so that value proposition for that bike and also the Bowflex version of it, the C6, has just been tremendous since the time we launched it. So it's a great -- these are great products. They have a great value proposition. And we seem to have done a good job in our marketing messaging. So nothing is getting lost in that. There's a clear reason to buy those things and that's driven a lot of growth.
Okay. And maybe this is digging too deep on specific products. But as we look at the Bowflex C6 versus the Schwinn product, it sounds like strong backlog on both of those strong orders throughout the quarter. Safe to say there's not much price sensitivity between that $799 and that $950-ish kind of price point?
Yes. I mean we started the C6 at $899, and we took a $50 price increase, I believe, around the last time we had our call. And of course, we saw no decrease in the take rate. In fact, it's increased. So at least for price sensitivity, you've got fairly comparable bikes at $799 and $849 with no major differences in kind of volume. And so we believe, at least over that range, we've got real winners.
The next question is from George Kelly of Roth Capital Partners.
So just a few for you. First of all, I believe I heard that media advertising was down pretty significantly in the quarter. I was just wondering, how do you think about that going forward? Do you need to step back more meaningfully anytime soon? Or does it just -- you're getting such a bombardment of orders, can you sort of pull back for the time being and keep it that way?
Yes, George, great question. I mean, as I mentioned, 1 of the great aspects of the Direct business and the Direct business model is the ability to respond fairly quickly. And so when you're seeing a classic thing where you're getting so much organic traffic without paying for it, you are getting a ton more traffic from investments in social media and other digital, like search, and you're getting great traffic that way. You don't really need to spend as much on the media. I mean media usually provides volume, and those things I mentioned, further down the funnel provide conversion. But when the volume seems to be natural, you -- we pull back -- we've seen some of our competition pull back. And not everybody, but most people have pulled back from that same phenomenon. We're all seeing the same things. And so we've definitely pull back on that, and that's a great thing to be able to do. It certainly isn't probably sustained well. I know it isn't sustainable for over the long run because you still have to stimulate volume at some point. And so we will be back in. But we're going to watch it day by day.
The other thing that's a factor, of course, is when you have stocked out on some things, you don't want to pay for even more traffic to come in and tell them that you're stocked out on these things. So you watch your inventory and your competitor's inventory. I know, for example, we go to Peloton's site all the time, and we see they're more than 7 weeks out themselves. And so we're all seeing those same type of things, and we all pull back a bit on our media because we're still getting all the demand we can fulfill.
Okay. Great. That's helpful. And then second question is just about JRNY. And I was wondering, so you mentioned some new products coming out this fall. I was wondering how JRNY kind of fits into that? And if I remember correctly, I thought it was going to be taken to more products across your portfolio, and there were going to be enhancements made in. And so, Jim, you've been there now for maybe, I guess, less than a year, but what's your view on JRNY? Where are we with it? And is there anything you can talk about? Are there still new things coming sometime this year?
Sure. Yes, JRNY -- I think JRNY, the best way I think about it is an operating system for our machines That's the main scenario. We'll also cover scenarios for helping you work out off the machine when you're at home. And over time, we'll find ways to log your outdoor workouts to JRNY. So those are kind of the 3 scenarios, but the 1 scenario that's most important right now is that it's an operating system to all of our products. And so when we launch products in the fall, you will see virtually everything runs JRNY.
And JRNY is -- I've said on these calls in the past that I had some negative surprises when I came here, but one of the very positive surprises for me was how far along JRNY was. A lot of the transformations I've done have had to get the company to believe in digital and then invest in it. And a couple of years later, we have products. Well, this has already been there, it's in really good shape. That said, it's a piece of software, right? So it can never be done. You're never done with it. You keep doing tons of research and seeing what the next things you should add to it are, and we'll continue to do that. But I think we've talked about on a couple of these calls, it's got probably the leading AI-driven one-to-one personal coaching that you could have in an algorithmic way, and no one else does that like we do. And then we have a number of features in JRNY that I would call are things that keep you at it longer, like being able to watch Netflix and other streaming services, like being able to use Explore the World and bike or run anywhere in the world in a 4D immersive experience, music that goes along with your workout, all sorts of things that will keep us -- keep you at it longer, keep you interested in working out and keeping you staying at it.
So that's what we're all about with JRNY is helping you get fit, stay with it by giving you a whole bunch of different choices in how to work out, but led with our industry-leading AI-driven personal coaching and personal workouts. So we're proud of it, but we're going to have to rev it. Everybody -- the competition is not going to stand still. And right now, the framework for the industry is great equipment plus great software plus great content equals a great experience. And that's where we are. We'll continue to rev that experience and make it better.
There is time for one more question, which is from Aaron Martin of A Partners -- A Investment Partners.
It's Aaron from AIGH. Is there any more quantifiable data you can give us on JRNY? You talked about the 50% increase in downloads. Are you ready to give us anything else there in terms of -- is it a 7-figure line item yet from a revenue perspective? What can you tell us there on JRNY?
Yes, Aaron, we're still sticking with what we've been doing there. It's still early, not so much in the software development because it's just -- I like where the software is, where we need to rev it. I know we're it's strong. I really like it overall. It's just not on enough pieces of equipment. And if you think about it, like installed base, till the installed base grows significantly, you're not going to have the full growth you really want to have with JRNY.
Now that said, I've said before, one of our big priorities is injecting connected fitness throughout our product portfolio and having it run JRNY. And that's what you'll see with our product -- what we roll out this fall. That's what you saw with many of our connected products we did last fall. But I think the number was, in 2018, we had maybe 3% of our products. We're "connectable" in connected fitness scenarios. We took that number significantly higher with our launches in 2019, and we'll take that number still higher, do a vast majority of all of our products available this year. So we'll continue to really grow that installed base. And as that installed base becomes more meaningful, then the subscription business does as well, and we'll begin to report on numbers at that point.
Okay. And then one more, if I may. You mentioned an opportunity with a new retail partner that you haven't had before. Anything more you can expound upon that?
Yes. I mean we're not going to name the names on the call, but these are retailers that you know -- you would know if I mentioned them. There are people we've been trying to pitch for a long time. The limitations of -- we love retail, but one of the limitations, there aren't enough sporting goods retailers, there aren't enough retailers that sell fitness products. We would like more of them, and we would like the existing ones that haven't carried fitness products, that carry more fitness products.
And so I think what really happened in this last quarter is -- these retailers are smart people. They listen to what their customers say. And when people come to their websites and say, "Look, I really wish you had more fitness products." They turn around and come to us and say, "How about you get us some more fitness products?" And what that allows us to do is get our foot in the door, get on the floor in some of these places we may [indiscernible] dot com in the meantime. But sometimes these relationships [indiscernible] to get to that point. And one of the things that has happened is we've accelerated, these retailers figured out that fitness was going to be a great category for them next year are figuring it out this year.
This concludes the question-and-answer session. I would like to turn the floor back over to Jim Barr for closing comments.
Thank you for joining our call today and your continued support -- and for your continued support of Nautilus. We look forward to providing you with another update on the business in a few months on our second quarter earnings call. Please stay safe and healthy. Have a great rest of your day, onwards and upwards. Thanks.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.