10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2021

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                   to                   

Commission file number: 001-31321

NAUTILUS, INC.

(Exact name of Registrant as specified in its charter)

Washington	94-3002667
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

17750 S.E. 6th Way

Vancouver, Washington 98683

(Address of principal executive offices, including zip code)

(360) 859-2900

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report) 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	NLS	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  [x]    No  [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  [x]    No  [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	[ ]	Accelerated Filer	[x]	Non-accelerated filer	[ ]	Smaller reporting company	☐	Emerging growth company	☐
								If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  [x]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

The number of shares outstanding of the registrant's common stock as of February 4, 2022 was 31,248,298 shares.

NAUTILUS, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2021

	PART I
Item 1.	Financial Statements	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40
	PART II
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 6.	Exhibits	42
Signatures		43

PART I.    FINANCIAL INFORMATION

Item 1.     Financial Statements

NAUTILUS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands)

	As of
	December 31, 2021		March 31, 2021
Assets
Cash and cash equivalents	$	18,402	$	38,441
Restricted cash	1,339		1,339
Available-for-sale securities	—		73,448
Trade receivables, net of allowances of $657 and $1,177	93,611		88,657
Inventories	128,113		68,085
Prepaids and other current assets	10,981		25,840
Income taxes receivable	8,103		—
Total current assets	260,549		295,810
Property, plant and equipment, net	30,976		24,496
Operating lease right-of-use assets	24,534		19,108
Goodwill	24,510		—
Other intangible assets, net	9,319		9,365
Deferred income tax assets, non-current	4,554		2,144
Income taxes receivable, non-current	5,673		—
Other assets - restricted, non-current	3,887		—
Other assets	2,963		3,307
Total assets	$	366,965	$	354,230
Liabilities and Shareholders' Equity
Trade payables	$	61,850	$	98,878
Accrued liabilities	25,232		19,627
Operating lease liabilities, current portion	4,653		3,384
Financing lease liabilities, current portion	119		—
Warranty obligations, current portion	5,724		7,243
Income taxes payable, current portion	914		5,709
Debt payable, current portion, net of unamortized debt issuance costs of $83 and $83	2,217		3,000
Total current liabilities	100,709		137,841
Operating lease liabilities, non-current	21,855		17,875
Financing lease liabilities, non-current	423		—
Warranty obligations, non-current	1,401		1,408
Income taxes payable, non-current	3,997		3,657
Other non-current liabilities	4,301		607
Debt payable, non-current, net of unamortized debt issuance costs of $173 and $236	53,594		10,297
Total liabilities	186,280		171,685
Commitments and contingencies (Note 16)
Shareholders' equity:
Common stock - no par value, 75,000 shares authorized, 31,245 and 30,576 shares issued and outstanding	4,879		2,176
Retained earnings	176,307		180,524
Accumulated other comprehensive loss	(501)		(155)
Total shareholders' equity	180,685		182,545
Total liabilities and shareholders' equity	$	366,965	$	354,230

See accompanying Notes to Condensed Consolidated Financial Statements.

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NAUTILUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except per share amounts)

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Net sales	$	147,258	$	189,259	$	469,810	$	458,838
Cost of sales	117,342		111,388		342,336		265,633
Gross profit	29,916		77,871		127,474		193,205
Operating expenses:
Selling and marketing	32,395		21,998		75,634		53,651
General and administrative	11,456		10,364		39,355		28,520
Research and development	5,379		4,029		15,882		11,997
Loss on disposal group	—		—		—		20,668
Total operating expenses	49,230		36,391		130,871		114,836
Operating (loss) income	(19,314)		41,480		(3,397)		78,369
Other expense:
Interest income	1		7		34		9
Interest expense	(354)		(280)		(1,149)		(871)
Other, net	(789)		(3,367)		(815)		(3,628)
Total other expense, net	(1,142)		(3,640)		(1,930)		(4,490)
(Loss) income from continuing operations before income taxes	(20,456)		37,840		(5,327)		73,879
Income tax (benefit) expense	(7,001)		8,588		(1,321)		15,644
(Loss) income from continuing operations	(13,455)		29,252		(4,006)		58,235
Discontinued operations:
Loss from discontinued operations before income taxes	(118)		(65)		(195)		(128)
Income tax (benefit) expense of discontinued operations	(74)		251		16		443
Loss from discontinued operations	(44)		(316)		(211)		(571)
Net (loss) income	$	(13,499)	$	28,936	$	(4,217)	$	57,664
Basic (loss) income per share from continuing operations	$	(0.43)	$	0.97	$	(0.13)	$	1.94
Basic loss per share from discontinued operations	—		(0.01)		(0.01)		(0.02)
Basic net (loss) income per share	$	(0.43)	$	0.96	$	(0.14)	$	1.92
Diluted (loss) income per share from continuing operations	$	(0.43)	$	0.90	$	(0.13)	$	1.80
Diluted loss per share from discontinued operations	—		(0.01)		(0.01)		(0.02)
Diluted net (loss) income per share	$	(0.43)	$	0.89	$	(0.14)	$	1.78
Shares used in per share calculations:
Basic	31,199		30,284		30,955		30,077
Diluted	31,199		32,633		30,955		32,336

See accompanying Notes to Condensed Consolidated Financial Statements.

2

NAUTILUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited and in thousands)

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Net (loss) income	$	(13,499)	$	28,936	$	(4,217)	$	57,664
Other comprehensive income:
Unrealized loss on available-for-sale securities, net of income tax expense of $—, $—, $— and $—	—		(4)		(4)		(4)
Foreign currency translation, net of income tax (expense) benefit of $(2), $(10), $2 and $(4)	(148)		760		(342)		1,330
Other comprehensive (loss) income	(148)		756		(346)		1,326
Comprehensive (loss) income	$	(13,647)	$	29,692	$	(4,563)	$	58,990

See accompanying Notes to Condensed Consolidated Financial Statements.

3

NAUTILUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited and in thousands)

	Common Stock			Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Total Shareholders' Equity
	Shares	Amount
Balance, March 31, 2021	30,576	$	2,176	$	180,524	$	(155)	$	182,545
Net income	—	—		13,884		—		13,884
Unrealized loss on marketable securities, net of income tax benefit of $7	—	—		—		—		—
Foreign currency translation adjustment,   net of income tax benefit of $13	—	—		—		217		217
Stock-based compensation expense	—	1,225		—		—		1,225
Common stock issued under equity   compensation plan, net of shares withheld   for tax payments	201	(1,259)		—		—		(1,259)
Common stock issued under employee stock purchase plan	17	269		—		—		269
Balance, June 30, 2021	30,794	2,411		194,408		62		196,881
Net loss	—	—		(4,602)		—		(4,602)
Unrealized loss on marketable securities, net of income tax expense of $7	—	—		—		(4)		(4)
Foreign currency translation adjustment,   net of income tax expense of $21	—	—		—		(411)		(411)
Stock-based compensation expense	—	1,540		—		—		1,540
Common stock issued under equity   compensation plan, net of shares withheld   for tax payments	365	(893)		—		—		(893)
Common stock issued under employee stock purchase plan	—	—		—		—		—
Balance, September 30, 2021	31,159	3,058		189,806		(353)		192,511
Net loss	—	—		(13,499)		—		(13,499)
Foreign currency translation adjustment,   net of income tax expense of $2	—	—		—		(148)		(148)
Stock-based compensation expense	—	1,846		—		—		1,846
Common stock issued under equity   compensation plan, net of shares withheld   for tax payments	57	(242)		—		—		(242)
Common stock issued under employee stock purchase plan	29	217		—		—		217
Balance, December 31, 2021	31,245	$	4,879	$	176,307	$	(501)	$	180,685

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	Common Stock			Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
	Shares	Amount
Balance, March 31, 2020	29,817	$	1,781	$	92,456	$	(1,312)	$	92,925
Net loss	—	—		(5,110)		—		(5,110)
Foreign currency translation adjustment,   net of income tax benefit of $15	—	—		—		353		353
Stock-based compensation expense	—	865		—		—		865
Common stock issued under equity   compensation plan, net of shares withheld   for tax payments	87	—		—		—		—
Common stock issued under employee stock purchase plan	63	83		—		—		83
Balance, June 30, 2020	29,967	2,729		87,346		(959)		89,116
Net income	—	—		33,838		—		33,838
Foreign currency translation adjustment,   net of income tax expense of $13	—	—		—		217		217
Stock-based compensation expense	—	1,071		—		—		1,071
Common stock issued under equity   compensation plan, net of shares withheld   for tax payments	290	(796)		—		—		(796)
Balance, September 30, 2020	30,257	3,004		121,184		(742)		123,446
Net income	—	—		28,936		—		28,936
Unrealized gain on marketable securities, net of income tax expense of $—	—	—		—		(4)		(4)
Foreign currency translation adjustment,   net of income tax benefit of $2	—	—		—		760		760
Stock-based compensation expense	—	1,234		—		—		1,234
Common stock issued under equity   compensation plan, net of shares withheld   for tax payments	42	(1,350)		—		—		(1,350)
Common stock issued under employee stock purchase plan	31	173		—		—		173
Balance, December 31, 2020	30,330	$	3,061	$	150,120	$	14	$	153,195

See accompanying Notes to Condensed Consolidated Financial Statements.

5

NAUTILUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)

	Nine-Months Ended December 31,
	2021		2020
Cash flows from operating activities:
(Loss) income from continuing operations	$	(4,006)	$	58,235
Loss from discontinued operations	(211)		(571)
Net (loss) income	(4,217)		57,664
Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities:
Depreciation and amortization	5,987		6,638
Benefit for allowance for doubtful accounts	(468)		(42)
Inventory lower of cost or net realizable value	291		1,409
Stock-based compensation expense	4,611		3,170
Deferred income taxes, net of valuation allowances	(2,938)		(8,037)
Other	610		(1,160)
Loss on asset dispositions	—		709
Loss on disposal group	—		20,668
Loss on other investment in non-controlled affiliates impairment	—		2,500
Changes in operating assets and liabilities:
Trade receivables	(4,298)		(61,830)
Inventories	(59,258)		(28,529)
Prepaids and other assets	10,059		(8,616)
Income taxes receivable	(13,774)		6,128
Trade payables	(36,366)		62,090
Accrued liabilities and other liabilities, including warranty obligations	8,178		12,573
Net cash (used in) provided by operating activities	(91,583)		65,335
Cash flows from investing activities:
Proceeds from sales and maturities of available-for-sale securities	73,448		—
Acquisition of business, net of cash acquired	(26,012)		—
Purchases of property, plant and equipment	(9,136)		(8,033)
Purchases of available-for-sale securities	—		(36,199)
Proceeds from the sale of disposal group	—		21,410
Net cash provided by (used in) investing activities	38,300		(22,822)
Cash flows from financing activities:
Proceeds from long-term debt	63,652		1,616
Payments on long-term debt	(22,477)		(14,815)
Payment of debt issuance costs	(577)		(19)
Payments on finance lease liabilities	(30)		—
Proceeds from employee stock purchases	486		256
Proceeds from exercise of stock options	472		50
Tax payments related to stock award issuances	(2,866)		(2,196)
Net cash provided by (used in) financing activities	38,660		(15,108)
Effect of exchange rate changes	(1,529)		4,059
Net (decrease) increase in cash, cash equivalents and restricted cash	(16,152)		31,464
Cash, cash equivalents and restricted cash at beginning of period	39,780		26,456
Cash, cash equivalents and restricted cash at end of period	$	23,628	$	57,920
Supplemental disclosure of cash flow information:
Cash paid for interest	$	639	$	651
Cash paid for income taxes, net	19,857		17,257
Supplemental disclosure of non-cash investing activities:
Capital expenditures incurred but not yet paid	$	333	$	908
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the total of the same amounts shown above:
	December 31,
	2021		2020
Cash and cash equivalents	$	18,402	$	56,581
Restricted cash	1,339		1,339
Other assets - restricted, non-current	3,887		—
Total cash, cash equivalents and restricted cash	$	23,628	$	57,920

See accompanying Notes to Condensed Consolidated Financial Statements.

6

NAUTILUS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) GENERAL INFORMATION

Basis of Consolidation and Presentation

The accompanying condensed consolidated financial statements present the financial position, results of operations and cash flows of Nautilus, Inc. and its subsidiaries, all of which are wholly owned. Intercompany transactions and balances have been eliminated in consolidation.

On December 30, 2020, our Board of Directors approved a change in our fiscal year end from December 31st to March 31st. This document reflects our third fiscal quarter, which ended December 31, 2021, of our fiscal year from April 1, 2021 through March 31, 2022.

The accompanying condensed consolidated financial statements have not been audited. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Management believes the disclosures contained herein are adequate to make the information presented not misleading. However, these condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”).

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Uncertainties regarding such estimates and assumptions are inherent in the preparation of financial statements and actual results could differ from those estimates. These uncertainties will be heightened by the COVID-19 pandemic, as we may be unable to accurately predict the impact of COVID-19 going forward and as a result our estimates may change in the near term. Further information regarding significant estimates can be found in our 2020 Form 10-K.

In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments necessary to present fairly our financial position as of December 31, 2021 and March 31, 2021, and our results of operations, comprehensive (loss) income and shareholders' equity for the three and nine-month periods ended December 31, 2021 and 2020 and our cash flows for the nine-month period ended December 31, 2021 and 2020. Interim results are not necessarily indicative of results for a full year. Our revenues typically vary seasonally, and this seasonality can have a significant effect on operating results, inventory levels and working capital needs.

Unless indicated otherwise, all information regarding our operating results pertain to our continuing operations.

Update to Significant Accounting Policies

Goodwill

Goodwill consists of the excess of acquisition costs over the fair values of net assets acquired in business combinations. We review goodwill for impairment in the fourth quarter of each year and when events or changes in circumstances indicate that the carrying amount may be impaired. For this purpose, goodwill is evaluated at the reporting unit level. For further information regarding goodwill, see Note 2, Business Acquisition and Note 8, Goodwill and Other Intangible Assets.

Recent Accounting Pronouncements

Recently Adopted Pronouncements

ASU 2019-12

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The amendments in ASU 2019-12 introduce the following new guidance: (1) provides a policy

7

election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax; and (2) provides guidance to evaluate whether a step-up in tax basis of goodwill relates to a business combination in which book goodwill was recognized or a separate transaction. The amendments in ASU 2019-12 make changes to the following current guidance: (1) making an intra-period allocation if there is a loss in continuing operations and a gain outside of continuing operations; (2) determining when a deferred tax liability is recognized after an investor in a foreign entity transitions to or from the equity method of accounting; (3) accounting for tax law changes and year-to-date losses in interim periods; and (4) determining how to apply the income tax guidance to franchise taxes that are partially based on income. ASU 2019-12 is effective for public business entities' fiscal years, including interim periods within those fiscal years, beginning after December 15, 2020 with early adoption permitted. Our adoption of ASU 2019-12 as of January 1, 2021 had no material impact on our financial position, results of operations or cash flows.

Recently Issued Pronouncements Not Yet Adopted

ASU 2020-04 and ASU 2021-01

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848),” which provides optional guidance related to reference rate reform and provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance is applicable for our borrowing instruments, which use London Inter-bank Offered Rate (“LIBOR”) as a reference rate, which is effective beginning on March 12, 2020, and we may elect to apply the amendments prospectively through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848),” which permits entities to apply optional expedients in Topic 848 to derivative instruments modified because of discounting transition resulting from reference rate reform. We do not expect the adoption of this guidance to have a material impact on our financial position, results of operations and cash flows.

ASU 2020-01

In January 2020, the FASB issued ASU 2020-01, “Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815).” The amendments in ASU 2020-01 clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815, which could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with Topic 825, Financial Instruments. These amendments improve current GAAP by reducing diversity in practice and increasing comparability of the accounting for these interactions. ASU 2020-01 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. We do not expect the adoption of this guidance would have a material impact on our financial position, results of operations and cash flows.

ASU 2016-13

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In May 2019, the FASB issued ASU 2019-05, which provides entities to have certain instruments with an option to irrevocably elect the fair value option. In November 2019, the FASB issued ASU 2019-11, which provides clarification and addresses specific issues about certain aspects of ASU 2016-13. In March 2020, the FASB issued ASC 2020-03, which provides an update to clarify or address specific issues. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those years. We do not expect the adoption of this guidance would have a material impact on our financial position, results of operations and cash flows.

8

(2) BUSINESS ACQUISITION

On September 17, 2021, we acquired VAY AG (“VAY”) for an aggregate purchase consideration of approximately $26.9 million using cash on hand. Headquartered in Zurich, Switzerland, VAY specializes in computer vision and AI technology solutions and has developed software solutions for human motion analysis using any normal RGB (red-green-blue) camera from a device, such as a laptop, smartphone, or tablet. With a mission to democratize professional human motion analysis, VAY enables clients in fitness and health industries to understand and analyze human movement, providing personalized feedback on repetitions and form in real-time.

We accounted for the transaction as a business combination. Goodwill from the acquisition of $24.5 million represents the excess of the purchase price over the fair value of the net tangible and intangible assets and liabilities assumed and is not deductible for tax purposes. Goodwill recorded in connection with this acquisition is primarily attributable to VAY intellectual property base, employee workforce and application to future digital technologies. Acquired assets were recorded at estimated fair value as of the acquisition date. Certain liabilities were acquired as part of the transaction and were recorded at estimated fair value.

Total acquisition costs incurred through the nine-months ended December 31, 2021 were $1.0 million and were expensed in general and administrative costs. Since the acquisition occurred on September 17, 2021, no material amount of net sales or net income related to the VAY business was included in our reported December 31, 2021 financial statements.

The sellers of VAY have the opportunity to earn additional contingency consideration subject to the achievement of continued employment over an 18 month period and a total of twenty software engineers. The contingent consideration arrangement of $3.9 million will be paid to the former owners of VAY upon achievement of these milestones and recognized as compensatory expense over the service period. An escrow account was funded for the contingency consideration and is reported on the Condensed Consolidated Balance Sheets as Other assets - restricted, non-current.

Purchase Price Allocation

The purchase price allocation was determined based on the fair values of the assets and liabilities identified as of the acquisition date and may be adjusted, within a period of no more than 12 months from the acquisition date, if the final fair values change as a result of circumstances existing at the acquisition date, and upon receipt of final appraisals and valuations. Such fair value adjustments may arise in respect of property, plant and equipment upon completion of the necessary valuations and physical verifications of such assets.

The following table summarizes the preliminary fair values of the net assets acquired and liabilities assumed and measurement period adjustments since September 17, 2021, the acquisition date (in thousands):

9

	Preliminary valuation at September 17, 2021		Measurement period adjustments		Adjusted valuation at December 31, 2021
Cash	$	230	$	637	$	867
Accounts receivable	9		—		9
Prepaid expenses	15		(2)		13
Deferred tax assets	58		1		59
Developed technology (included in property, plant and equipment)	3,000		—		3,000
Identifiable assets acquired	3,312		636		3,948
Accrued liabilities	187		745		932
Unearned revenue	53		3		56
Deferred tax liabilities, non-current	591		—		591
Total liabilities assumed	831		748		1,579
Net identifiable assets acquired	2,481		(112)		2,369
Goodwill	24,508		2		24,510
Total assets acquired	$	26,989	$	(110)	$	26,879

The allocation of the purchase price is preliminary and is based upon valuation information available and estimates and assumptions made as of December 31, 2021. We are still in the process of verifying data and finalizing information including valuation and recording of the assets acquired and liabilities assumed, and the resulting amount of recognized goodwill

This acquisition is not material to our net sales, results of operations or total assets during any period presented. Accordingly, our consolidated results from operations do not differ materially from historical performance as a result of this acquisition, and, therefore, pro forma results are not presented.

(3) REVENUES

Our revenues from contracts with customers disaggregated by revenue source, excluding sales-based taxes, were as follows (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Product sales	$	141,885	$	183,642	$	454,822	$	444,876
Extended warranties and services	1,841		2,852		4,985		6,222
Other(1)	3,532		2,765		10,003		7,740
Net sales	$	147,258	$	189,259	$	469,810	$	458,838

(1) Other revenue is primarily subscription revenue, freight and delivery and royalty income.

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Our revenues disaggregated by geographic region, based on ship-to address, were as follows (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
United States	$	110,870	$	153,919	$	360,540	$	381,571
Canada	22,912		17,955		60,126		36,947
Europe, the Middle East and Africa	9,874		14,024		37,456		31,022
All other	3,602		3,361		11,688		9,298
Net sales	$	147,258	$	189,259	$	469,810	$	458,838

As of December 31, 2021, estimated revenue expected to be recognized in the future totaled $53.0 million, primarily related to customer order backlog, which includes firm orders for future shipment and unfulfilled orders to our Retail customers, as well as unfulfilled consumer orders within the Direct channel. Direct orders of $8.8 million and Retail orders of $44.2 million comprised our backlog as of December 31, 2021, compared to Direct orders of $46.5 million and Retail orders of $208.7 million as of December 31, 2020. The estimated future revenues are net of contractual rebates and consideration payable for applicable Retail customers, and net of current promotional programs and sales discounts for our Direct customers.

The following table provides information about our liabilities from contracts with customers, primarily customer deposits and deferred revenue for which advance consideration is received prior to the transfer of control. Revenue is recognized when transfer of control occurs. All customer deposits and deferred revenue received are short-term in nature and were recorded on the condensed consolidated balance sheets as accrued liabilities. Significant changes in contract liabilities balances, including revenue recognized in the reporting period that was included in opening contract liabilities, are shown below (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Balance, beginning of period	$	3,453	$	3,639	$	5,551	$	2,050
Cash additions	4,203		3,496		8,749		7,049
Revenue recognition	(1,378)		(743)		(8,022)		(2,707)
Balance, end of period	$	6,278	$	6,392	$	6,278	$	6,392

(4) FAIR VALUE MEASUREMENTS

Factors used in determining the fair value of financial assets and liabilities are summarized into three broad categories:

•Level 1 - observable inputs such as quoted prices (unadjusted) in active liquid markets for identical securities as of the reporting date;

•Level 2 - other significant directly or indirectly observable inputs, including quoted prices for similar securities, interest rates, prepayment speeds and credit risk, or observable market prices in markets with insufficient volume and/or infrequent transactions; and

•Level 3 - significant inputs that are generally unobservable inputs for which there is little or no market data available, including our own assumptions in determining fair value.

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Assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):

	December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Derivatives
Foreign currency forward contracts	$	—	$	19	$	—	$	19
Total assets measured at fair value	$	—	$	19	$	—	$	19
Liabilities:
Derivatives
Foreign currency forward contracts	$	—	$	36	$	—	$	36
Total liabilities measured at fair value	$	—	$	36	$	—	$	36

	March 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents
Money market funds	$	9,679	$	—	$	—	$	9,679
Total cash equivalents	9,679		—		—		9,679
Available-for-Sale Securities
Commercial paper	—		9,994		—		9,994
Corporate bonds	—		8,227		—		8,227
U.S. government bonds	—		55,227		—		55,227
Total available-for-sale securities	—		73,448		—		73,448
Total assets measured at fair value	$	9,679	$	73,448	$	—	$	83,127
Liabilities:
Derivatives
Foreign currency forward contracts	$	—	$	672	$	—	$	672
Total liabilities measured at fair value	$	—	$	672	$	—	$	672

For our assets measured at fair value on a recurring basis, we recognize transfers between levels at the actual date of the event or change in circumstance that caused the transfer. There were no transfers between levels during the nine-month period ended December 31, 2021, nor for the year ended March 31, 2021.

We classify our marketable securities as available-for-sale and, accordingly, record them at fair value. Level 1 investment valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 investment valuations are obtained from inputs, other than quoted market prices in active markets for identical assets, that are directly or indirectly observable in the marketplace and quoted prices in markets with limited volume or infrequent transactions. The factors or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Unrealized holding gains and losses are excluded from earnings and are reported net of tax in comprehensive income until realized.

The fair values of our foreign currency forward contracts are calculated as the present value of estimated future cash flows using discount factors derived from relevant Level 2 market inputs, including forward curves and volatility levels.

We did not have any changes to our valuation techniques during the during the nine-month period ended December 31, 2021, nor for the year ended March 31, 2021.

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We recognize or disclose the fair value of certain assets, such as non-financial assets, primarily property, plant and equipment, goodwill, other intangible assets and certain other long-lived assets in connection with impairment evaluations. All of our nonrecurring valuations use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy. Other than assets acquired, see Note 2, Business Acquisition, we determined the fair value of our developed technology included in property, plant and equipment using the cost approach which considers how much it would cost to replace an asset of equivalent utility. We did not perform any valuations on assets or liabilities that are valued at fair value on a nonrecurring basis. Other than our annual goodwill and indefinite-lived trade names impairment assessments and valuations, we did not perform any assessments or valuations on assets or liabilities that are valued at fair value on a nonrecurring basis.

As of December 31, 2021 and March 31, 2021, there were no assets or liabilities that were recorded at fair value on a nonrecurring basis.

The carrying values of cash and cash equivalents, restricted cash, trade receivables, prepaids and other current assets, trade payables and accrued liabilities approximate fair value due to their short maturities. The carrying value of our debt approximates its fair value and falls under Level 2 of the fair value hierarchy, as the interest rate is variable and based on current market rates.

(5) DERIVATIVES

From time to time, we enter into foreign exchange forward contracts to offset the earnings impacts of exchange rate fluctuations on certain monetary assets and liabilities. We do not enter into derivative instruments for any purpose other than to manage foreign currency exposure. That is, we do not engage in currency exchange rate speculation using derivative instruments.

We may hedge our net recognized foreign currency assets and liabilities with forward foreign exchange contracts to reduce the risk that our earnings and cash flows will be adversely affected by changes in foreign currency exchange rates. These derivative instruments hedge assets and liabilities that are denominated in foreign currencies and are carried at fair value with changes in the fair value recorded as other income. These derivative instruments do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are intended to offset gains and losses on the assets and liabilities being hedged. As of December 31, 2021, total outstanding contract notional amounts were $30.2 million and had maturities of 109 days or less.

The fair value of our derivative instruments was included in our condensed consolidated balance sheets as follows (in thousands):

	Balance Sheet Classification	As of
		December 31, 2021		March 31, 2021
Derivative instruments not designated as cash flow hedges:
Foreign currency forward contracts	Prepaids and other current assets	$	19	$	—
Foreign currency forward contracts	Accrued liabilities	36		672

The effect of derivative instruments on our condensed consolidated statements of operations was as follows (in thousands):

	Statement of Operations Classification	Three-Months Ended December 31,				Nine-Months Ended December 31,
		2021		2020		2021		2020
Derivative instruments not designated as cash flow hedges:
Income (loss) recognized in earnings	Other, net	$	797	$	(1,981)	$	(163)	$	(2,406)
Income tax (benefit) expense	Income tax (benefit) expense	(194)		488		40		594

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(6) INVENTORIES

Inventories are stated at the lower of cost and net realizable value, with cost determined based on the first-in, first-out method. Our inventories consisted of the following (in thousands):

	As of
	December 31, 2021		March 31, 2021
Finished goods (1)	$	121,073	$	63,918
Parts and components	7,040		4,167
Total inventories	$	128,113	$	68,085

(1) The increase in finished goods was driven by the strategic decision to increase on-hand inventory levels ahead of the fitness season given continued disruption in global logistics.

(7) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following (in thousands):

	Estimated Useful Life (in years)			As of
				December 31, 2021		March 31, 2021
Automobiles	5			$	23	$	23
Leasehold improvements	4	to	20	3,150		3,059
Computer software and equipment	2	to	7	42,231		36,956
Machinery and equipment	3	to	5	16,466		15,699
Furniture and fixtures	5	to	20	2,635		2,586
Work in progress(1)	N/A			7,430		1,314
Total cost				71,935		59,637
Accumulated depreciation				(40,959)		(35,141)
Total property, plant and equipment, net				$	30,976	$	24,496

(1) Work in progress includes information technology assets and production tooling.

Depreciation expense was as follows (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Depreciation expense	$	1,993	$	2,114	$	5,941	$	5,772

(8) GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The roll forward of goodwill was as follows (in thousands):

	Total
Balance, April 1, 2021	$	—
Business acquisition (Note 2)	24,508
Balance, September 30, 2021	24,508
Business acquisition (Note 2) - measurement period adjustments	2
Balance, December 31, 2021	$	24,510

ASC 350 — Intangibles — Goodwill and Other, we perform our goodwill and indefinite-lived trade names impairment valuations annually, on March 31,or sooner if triggering events are identified. While our stock price and related market capitalization remained above our reporting unit carrying values as of December 31, 2021, we are observing continued market volatility including declines in our market capitalization subsequent to December 31, 2021 which, in part, could increase the possibility of a future impairment charge. Based on our analysis, including

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our market capitalization during the period, we determined there were no triggering events during the quarter ended December 31, 2021.

Should the facts and circumstances surrounding our assumptions change, our goodwill impairment analysis may fail. Assumptions and estimates to determine far values are complex and often subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts. For example, if our future operating results do not meet current forecasts or if we continue to experience a sustained decline in our market capitalization, adjusted for estimated control premium, that is determined to be indicative of a reduction in fair value one or more of our reporting units, we may be required to record future impairment charges for goodwill. An impairment could have a material effect on our consolidated balance sheet and results of operations

Other Intangible Assets

Other intangible assets consisted of the following (in thousands):

	Estimated Useful Life (in years)			As of
				December 31, 2021		March 31, 2021
Indefinite-lived trademarks	N/A			$	9,052	$	9,052
Patents	7	to	24	1,443		1,443
				10,495		10,495
Accumulated amortization - definite-lived intangible assets				(1,176)		(1,130)
Other intangible assets, net				$	9,319	$	9,365

Amortization expense was as follows (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Amortization expense	$	15	$	25	$	46	$	866

Future amortization of definite-lived intangible assets is as follows (in thousands):

2022	$	15
2023	61
2024	61
2025	61
2026	47
Thereafter	22
	$	267

(9) LEASES

We have several non-cancellable operating leases, primarily for office space, that expire at various dates over the next nine years. These leases generally contain renewal options to extend for one lease term of five years. For leases that we are reasonably certain we will exercise the lease renewal options, the options were considered in determining the lease term, and associated potential option payments are included in the lease payments. The payments used in the renewal term were estimated using the percentage rate increase of historical rent payments for each location where the renewal will be exercised.

Payments due under the lease contracts include annual fixed payments for office space. Variable payments including payments for our proportionate share of the building’s property taxes, insurance, and common area maintenance are treated as non-lease components and are recognized in the period for which the costs occur.

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Lease expense was as follows (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Operating lease expense	$	1,465	$	1,072	$	4,397	$	3,269
Amortization of finance lease assets	29		—		29		—
Total lease expense	$	1,494	$	1,072	$	4,426	$	3,269

Leases with an initial term of 12 months or less (“short-term lease”) are not recorded on the balance sheet and are recognized on a straight-line basis over the lease term.

Other information related to leases was as follows (dollars in thousands):

	As of
	December 31, 2021		March 31, 2021
Supplemental cash flow information related to leases was as follows:
Operating leases:
Operating lease right-of-use-assets	$	24,534	$	19,108
Operating lease liabilities	21,855		17,875
Operating lease liabilities, net of current portion	4,653		3,384
Total operating lease liabilities	$	26,508	$	21,259
Finance leases:
Property, plant and equipment, at cost	$	569	$	—
Accumulated depreciation	(29)		—
Property, plant and equipment, net	$	540	$	—
Finance lease obligations	$	423	$	—
Finance lease obligations, net of current portion	119		—
Total finance lease liabilities	$	542	$	—
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases	$	1,724	$	1,076
Finance cash flows from finance leases	30		—
Additional lease information:
ROU assets obtained in exchange for operating lease obligations	$	1,032	$	—
ROU assets obtained in exchange for finance lease obligations	569		—
Reductions to ROU assets resulting from reductions to operating lease obligations	329		268
Weighted Average Remaining Lease Term:
Operating leases	5.89		6.94
Finance leases	4.75		—
Weighted Average Discount Rate:
Operating leases	5.00%		4.95%
Finance leases	2.08%		—%

We determined the discount rate for leases using a portfolio approach to determine an incremental borrowing rate to calculate the right-of-use assets and lease liabilities.

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Maturities of lease liabilities under non-cancellable leases were as follows (in thousands):

	As of
	December 31, 2021
	Operating leases		Finance leases
2022	$	1,344	$	120
2023	5,859		120
2024	5,422		120
2025	5,584		120
2026	4,520		90
Thereafter	8,158		—
Total undiscounted lease payments	30,887		570
Less imputed interest	(4,379)		(28)
Total lease liabilities	$	26,508	$	542

(10) ACCRUED LIABILITIES

Accrued liabilities consisted of the following (in thousands):

	As of
	December 31, 2021		March 31, 2021
Deferred revenue	$	6,278	$	5,551
Reserves (1)	5,230		2,624
Payroll and related liabilities	4,818		6,616
Legal settlement (2)	4,250		—
Other	4,656		4,836
Total accrued liabilities	$	25,232	$	19,627

(1) Reserves primarily consists of inventory, sales return, sales tax and product liability reserves.

(2) Legal settlement is a loss contingency accrual related to a legal settlement involving a class action lawsuit related to advertisement of our treadmills. For further information, see Note 16, Commitments and Contingencies.

(11) PRODUCT WARRANTIES

Our products carry defined warranties for defects in materials or workmanship which, according to their terms, generally obligate us to pay the costs of supplying and shipping replacement parts to customers and, in certain instances, pay for labor and other costs to service products. Outstanding product warranty periods range from thirty days to, in limited circumstances, the lifetime of certain product components. We record a liability at the time of sale for the estimated costs of fulfilling future warranty claims. If necessary, we adjust the liability for specific warranty-related matters when they become known and are reasonably estimable. Estimated warranty expense is included in cost of sales, based on historical warranty claim experience and available product quality data. Warranty expense is affected by the performance of new products, significant manufacturing or design defects not discovered until after the product is delivered to the customer, product failure rates, and higher or lower than expected repair costs. If warranty expense differs from previous estimates, or if circumstances change such that the assumptions inherent in previous estimates are no longer valid, the amount of product warranty obligations is adjusted accordingly.

Changes in our product warranty obligations were as follows (in thousands):

	Nine-Months Ended December 31,
	2021		2020
Balance, beginning of period	$	8,651	$	6,250
Accruals	4,416		2,791
Payments	(5,942)		(3,843)
Balance, end of period	$	7,125	$	5,198

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(12) ACCUMULATED OTHER COMPREHENSIVE LOSS

The following tables set forth the changes in accumulated other comprehensive loss, net of tax (in thousands):

	Unrealized Loss on Available-for-Sale Securities		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Loss
Balance, March 31, 2021	$	(8)	$	(147)	$	(155)
Current period other comprehensive loss before reclassifications	(4)		(342)		(346)
Net other comprehensive loss during period	(4)		(342)		(346)
Balance, December 31, 2021	$	(12)	$	(489)	$	(501)

	Unrealized Loss on Available-for-Sale Securities		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Loss
Balance, September 30, 2021	$	(12)	$	(341)	$	(353)
Current period other comprehensive loss before reclassifications	—		(148)		(148)
Net other comprehensive loss during period	—		(148)		(148)
Balance, December 31, 2021	$	(12)	$	(489)	$	(501)

	Unrealized Loss on Available-for-Sale Securities		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive (Loss) Income
Balance, March 31, 2020	$	—	$	(1,312)	$	(1,312)
Current period other comprehensive (loss) income before reclassifications	(4)		1,330		1,326
Net other comprehensive (loss) income during period	(4)		1,330		1,326
Balance, December 31, 2020	$	(4)	$	18	$	14

	Unrealized Loss on Available-for-Sale Securities		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive (Loss) Income
Balance, September 30, 2020	$	—	$	(742)	$	(742)
Current period other comprehensive (loss) income before reclassifications	(4)		760		756
Net other comprehensive income during period	(4)		760		756
Balance, December 31, 2020	$	(4)	$	18	$	14

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(13) (LOSS) INCOME PER SHARE

Basic per share amounts were computed using the weighted average number of common shares outstanding. Diluted per share amounts were calculated using the number of basic weighted average shares outstanding increased by dilutive potential common shares related to stock-based awards, as determined by the treasury stock method. Basic income per share amounts were computed using the weighted average number of common shares outstanding. Diluted income per share amounts were calculated using the number of basic weighted average shares outstanding increased by dilutive potential common shares related to stock-based awards, as determined by the treasury stock method.

The weighted average numbers of shares outstanding used to compute (loss) income per share were as follows (in thousands):

	Three-Months Ended December 31,		Nine-Months Ended December 31,
	2021	2020	2021	2020
Shares used to calculate basic income per share	31,199	30,284	30,955	30,077
Dilutive effect of outstanding stock options, performance stock units and restricted stock units	—	2,349	—	2,259
Shares used to calculate diluted income per share	31,199	32,633	30,955	32,336

The weighted average numbers of shares outstanding listed in the table below were anti-dilutive and excluded from the computation of diluted per share due to loss from continuing operations, as such, the exercise or conversion of any potential shares would increase the number of shares in the denominator and result in a lower loss per share (in thousands):

	Three-Months Ended December 31,		Nine-Months Ended December 31,
	2021	2020	2021	2020
Restricted stock units	673	—	1,024	—
Stock options	357	—	504	—

The weighted average numbers of shares outstanding listed in the table below were anti-dilutive and excluded from the computation of diluted income per share. In the case of restricted stock units, this is because unrecognized compensation expense exceeds the current value of the awards (i.e., grant date market value was higher than current average market price). In the case of stock options, this is because the average market price did not exceed the exercise price.

These shares may be anti-dilutive potential common shares in the future (in thousands):

	Three-Months Ended December 31,		Nine-Months Ended December 31,
	2021	2020	2021	2020
Restricted stock units	1,168	31	333	15
Stock options	2	—	2	3

(14) SEGMENT AND ENTERPRISE-WIDE INFORMATION

We have two operating segments, Direct and Retail. There were no changes in our operating segments during the nine-months ended December 31, 2021.

We evaluate performance of the operating segments using several factors, of which the primary financial measures are net sales and reportable segment contribution. Contribution is the measure of profit or loss, defined as net sales less product costs and directly attributable expenses. Directly attributable expenses include selling and marketing expenses, general and administrative expenses, and research and development expenses that are directly related to segment operations. Segment assets are those directly assigned to an operating segment's operations, primarily accounts receivable, inventories and other intangible assets. Unallocated assets primarily include cash, cash equivalents and restricted cash, derivative securities, shared information technology infrastructure, distribution

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centers, corporate headquarters, prepaids and other current assets, deferred income tax assets and other assets. Capital expenditures directly attributable to the Direct and Retail segments were not significant in any period.

Following is summary information by reportable segment (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Net sales:
Direct	$	60,705	$	82,158	$	161,954	$	193,785
Retail	85,701		106,320		305,338		262,423
Royalty	852		781		2,518		2,630
Consolidated net sales	$	147,258	$	189,259	$	469,810	$	458,838
Contribution:
Direct	$	(8,980)	$	23,584	$	(4,056)	$	58,167
Retail	3,270		25,338		44,101		60,393
Royalty	852		781		2,518		2,630
Consolidated contribution	$	(4,858)	$	49,703	$	42,563	$	121,190
Reconciliation of consolidated contribution to (loss) income from continuing operations:
Consolidated contribution	$	(4,858)	$	49,703	$	42,563	$	121,190
Amounts not directly related to segments:
Operating expenses	(14,456)		(8,223)		(45,960)		(42,821)
Other expense, net	(1,142)		(3,640)		(1,930)		(4,490)
Income tax benefit (expense)	7,001		(8,588)		1,321		(15,644)
(Loss) income from continuing operations	$	(13,455)	$	29,252	$	(4,006)	$	58,235

	As of
	December 31, 2021		March 31, 2021
Assets:
Direct	$	50,585	$	47,002
Retail	198,791		146,001
Unallocated corporate	117,589		161,227
Total assets	$	366,965	$	354,230

The following customers accounted for 10% or more of total net sales as follows:

	Three-Months Ended December 31,		Nine-Months Ended December 31,
	2021	2020	2021	2020
Amazon.com	*	13.5%	14.4%	17.8%
Best Buy	14.0%	*	16.6%	*
Dick's Sporting Goods	*	14.0%	*	10.7%
*Less than 10% of total net sales.

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(15) BORROWINGS

Wells Fargo Bank Credit Agreement

On October 29, 2021, we amended our Credit Agreement dated May 13, 2021 which amended our original Credit Agreement, dated January 31, 2020, with Wells Fargo Bank, National Association (“Wells Fargo”) and lenders from time to time party thereto (collectively with Wells Fargo the “Lenders”) (the “Credit Agreement”), pursuant to which the Lenders have agreed, among other things, to make available to us an asset-based revolving loan facility, subject to a borrowing base (the “ABL Revolving Facility”), and a term loan facility (the “Term Loan Facility” and together with the ABL Revolving Facility, the “Credit Facility”), in each case, as such amounts may increase or decrease in accordance with the terms of the Credit Agreement. The amendment increased the aggregate principal amount available under the ABL Revolving Facility from $55.0 million to $100.0 million (the “Revolver”), subject to a borrowing base. The maturity date of the Credit Facility was extended to October 29, 2026. The unamortized balance on the Term Loan was $11.5 million, as of the effective date of the amendment, and will amortize on a new 60-month straight line basis to coincide with the extended maturity date. In connection with the October 29, 2021 credit amendment we recorded $0.6 million in new financing costs as Other assets on our Condensed Consolidated Balance Sheet. The repayment of obligations under the Credit Agreement is secured by substantially all of our assets. Principal and interest amounts are required to be paid as scheduled.

Other structural improvements to the Credit Agreement include amending the definition of Springing Trigger Event to mean the greater of (i) 10.0% of the lesser of (a) the Revolver Commitment and (b) the Borrowing Base as of such date of determination and (ii) $7.5 million. The Springing Trigger Event pertains to the period in which a Fixed Charge Coverage Ratio test will apply and be tested. Consistent with the Credit Agreement before the amendment, there continues to be no additional financial maintenance covenants. Additionally, the borrowing base definitions were favorably amended to change the eligible in-transit inventory sublimit from $10.0 million to $22.5 million and the total inventory sublimit from $35.0 million to $65.0 million.

As of December 31, 2021, outstanding borrowings totaled $56.1 million, with $10.9 million and $45.2 million under our Term Loan Facility and Revolver, respectively. As of December 31, 2021, we were in compliance with the financial covenants of the Credit Agreement and $54.9 million was available for borrowing under the ABL Revolving Facility.

Interest on the Revolver will accrue at Secured Overnight Financing Rate (“SOFR”) plus a margin of 1.86% to 2.36% (based on average quarterly availability) and interest on the Term Loan Facility will accrue at SOFR plus 4.50%. As of December 31, 2021, our interest rate was 1.97% for the Revolver and 4.60% for the Term Loan Facility.

The balance sheet classification of the borrowings under the revolving loan credit facility has been determined in accordance with ASC 470, Debt. Borrowings outstanding under a revolving credit agreement that includes both a subjective acceleration clause and a requirement to maintain a springing lock-box arrangement are classified based on the provisions of ASC 470 because the lock-box remittances do not automatically reduce the debt outstanding.

(16) COMMITMENTS AND CONTINGENCIES

Guarantees, Commitments and Off-Balance Sheet Arrangements

As of December 31, 2021, we had standby letters of credit of $0.9 million.

We have long lead times for inventory purchases and, therefore, must secure factory capacity from our vendors in advance. As of December 31, 2021, we had approximately $59.2 million compared to $216.3 million as of March 31, 2021 in non-cancellable market-based purchase obligations, primarily to secure additional factory capacity for inventory purchases in the next twelve months. The decrease in purchase obligations was primarily due to having received much of the inventory we have ordered for the season. Purchase obligations can vary from quarter-to-quarter and versus the same period in prior years due to a number of factors, including the amount of products that are shipped directly to Retail customer warehouses versus through Nautilus warehouses.

In the ordinary course of business, we enter into agreements that require us to indemnify counterparties against third-party claims. These may include: agreements with vendors and suppliers, under which we may indemnify them against claims arising from use of their products or services; agreements with customers, under which we may indemnify them against claims arising from their use or sale of our products; real estate and equipment leases, under which we may indemnify lessors against third-party claims relating to the use of their property; agreements

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with licensees or licensors, under which we may indemnify the licensee or licensor against claims arising from their use of our intellectual property or our use of their intellectual property; and agreements with parties to debt arrangements, under which we may indemnify them against claims relating to their participation in the transactions.

The nature and terms of these indemnification obligations vary from contract to contract, and generally a maximum obligation is not stated within the agreements. We hold insurance policies that mitigate potential losses arising from certain types of indemnification obligations. Management does not deem these obligations to be significant to our financial position, results of operations or cash flows, and therefore, no related liabilities were recorded as of December 31, 2021.

Legal Matters

From time to time, in the ordinary course of business, we may be involved in various claims, lawsuits and other proceedings. These legal and tax proceedings involve uncertainty as to the eventual outcomes and losses which may be realized when one or more future events occur or fail to occur.

We regularly monitor our estimated exposure to these contingencies and, as additional information becomes known, may change our estimates accordingly. We evaluate, on a quarterly basis, developments in legal proceedings, investigations or claims that could affect the amount of any accrual, as well as any developments that would make a loss probable or reasonably possible, and whether the amount of a probable or reasonably possible loss is estimable. Among other factors, we evaluate the advice of internal and external counsel, the outcomes from similar litigation, the current status of the lawsuits (including settlement initiatives), legislative developments and other factors. Due to the numerous variables associated with these judgments and assumptions, both the precision and reliability of the resulting estimates of the related loss contingencies are subject to substantial uncertainties. Further, while we face contingencies that are reasonably possible to occur, other than as discussed below, we are unable to estimate the possible loss or range of loss at this time.

During the second quarter of fiscal 2022, we recorded a $4.7 million loss contingency related to a legal settlement involving a class action lawsuit related to advertisement of our treadmills. The settlement includes damages, a one-year free membership to JRNY®, and administrative fees and was included as a component of General and administrative on our Condensed Consolidated Statements of Operations. As of December 31, 2021, $4.3 million remained accrued and was reflected in Accrued liabilities and Other long-term liabilities on our Condensed Consolidated Balance Sheets.

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Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is based upon our financial statements as of the dates and for the periods presented in this section. You should read this discussion and analysis in conjunction with the financial statements and notes thereto found in Part I, Item 1 of this Form 10-Q and our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”). All references to the third quarters of fiscal 2022 and 2021 to mean the for the three and nine-month periods ended December 31, 2021 and 2020, respectively. Unless the context otherwise requires, “Nautilus,” “we,” “us” and “our” refer to Nautilus, Inc. and its subsidiaries. Unless indicated otherwise, all information regarding our operating results pertains to our continuing operations.

Cautionary Notice About Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “plan,” “expect,” “aim,” “believe,” “project,” “intend,” “estimate,” “will,” “should,” “could,” and other terms of similar meaning typically identify forward-looking statements. We also may make forward-looking statements in our other documents filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”). In addition, our senior management may make forward-looking statements orally to analysts, investors, representatives of the media and others. Forward-looking statements include any statements related to our future business, financial performance or operating results; anticipated fluctuations in net sales due to seasonality; plans and expectations regarding gross and operating margins; plans and expectations regarding research and development expenses and capital expenditures and anticipated results from such expenditures and other investments in our capabilities and resources; anticipated losses from discontinued operations; plans for new product introductions, strategic partnerships and anticipated demand for our new and existing products; and statements regarding our inventory and working capital requirements and the sufficiency of our financial resources. These forward-looking statements, and others we make from time-to-time, are subject to a number of risks and uncertainties. Many factors could cause actual results to differ materially from those projected in forward-looking statements, including our ability to timely acquire inventory that meets our quality control standards from sole source foreign manufacturers at acceptable costs, changes in consumer fitness trends, changes in the media consumption habits of our target consumers or the effectiveness, availability and price of media time consistent with our cost and audience profile parameters, greater than anticipated costs or delays associated with launch of new products, weaker than expected demand for new or existing products, a decline in consumer spending due to unfavorable economic conditions, softness in the retail marketplace or the availability from retailers of heavily discounted competitive products, an adverse change in the availability of credit for our customers who finance their purchases, our ability to pass along vendor raw material price increases and other cost pressures, including increased shipping costs and unfavorable foreign currency exchange rates, tariffs, risks associated with current and potential delays, work stoppages, or supply chain disruptions caused by the coronavirus pandemic, our ability to hire and retain key management personnel, our ability to effectively develop, market and sell future products, the availability and timing of capital for financing our strategic initiatives, including being able to raise capital on favorable terms or at all; changes in the financial markets, including changes in credit markets and interest rates that affect our ability to access those markets on favorable terms, the impact of any future impairments, our ability to protect our intellectual property, the introduction of competing products, and our ability to get foreign-sourced product through customs in a timely manner. Additional assumptions, risks and uncertainties are described in Part I, Item 1A, “Risk Factors,” in our 2020 Form 10-K as supplemented or modified in our quarterly reports on Form 10-Q. We do not undertake any duty to update forward-looking statements after the date they are made or conform them to actual results or to changes in circumstances or expectations.

Overview

We empower healthier living through individualized connected fitness experiences and are committed to building a healthier world, one person at a time. Our principal business activities include designing, developing, sourcing and marketing high-quality cardio and strength fitness products, related accessories and digital platform for consumer use, primarily in the U.S., Canada, Europe and Asia. Our products are sold under some of the most-recognized brand names in the fitness industry: Bowflex®, Schwinn®, JRNY® and Nautilus®.

We market our products through two distinct distribution channels, Direct and Retail, which we consider to be separate business segments. Our Direct business offers products directly to consumers primarily through websites. Our Retail business offers our products through a network of independent retail companies to reach consumers in the home use markets in the U.S. and internationally. We also derive a portion of our revenue from the licensing of our brands and intellectual property.

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As previously disclosed, we changed our fiscal year from the twelve months beginning January 1 and ending December 31 to the twelve months beginning April 1 and ending March 31.

Our results for the three and nine-months ended December 31, 2021, are driven by the actions outlined in our North Star strategy. The five strategic pillars of our North Star strategy are: (1) Adopt a consumer first mindset; (2) Scale a differentiated digital offering; (3) Focus investments on core businesses; (4) Evolve supply chain to be a strategic advantage; and (5) Build organizational capabilities to win by unleashing the power of our team. We intend to leverage our many strengths to transform into a company that empowers healthier living through individualized connected fitness experiences. Our transformation will properly leverage our leading brands, products, innovation, distribution and digital assets to build a healthier world, one person at a time.

At the center of health and well-being is fitness and the market has so far behaved largely as we expected. The market size more than doubled over the past 2 years, is regulating from its peak with more normal seasonality, and will settle at a “new normal” significantly above pre-pandemic levels based on a profound evolution in consumers’ workouts and workplace habits. As a result of these changed habits and sentiments, we continue to believe much of the industry growth opportunity will remain at elevated levels relative to pre-pandemic. This results in stronger opportunity for our industry and Nautilus.

Comparison for the Three-Months Ended December 31, 2021 to the Three-Months ended December 31, 2020

•Net sales were $147.3 million for the three-months ended December 31, 2021, compared to $189.3 million a decline of 22.2% versus for the three-months ended December 31, 2020, or down 21.7%, excluding sales related to the Octane brand, which was sold in October 2020. Lower demand of our cardio products were partially offset by sales of SelectTech® weights and benches compared to the same period in 2020.

•Net sales of our Direct segment decreased by $21.5 million, or 26.1%, for the three-months ended December 31, 2021, compared to the three-months ended December 31, 2020. Net sales decrease was primarily driven by lower cardio sales and higher sales discounting.

•Net sales of our Retail segment decreased by $20.6 million, or 19.4%, for the three-months ended December 31, 2021, compared to the three-months ended December 31, 2020. Excluding sales related to the Octane brand, which was sold in 2020, net sales were down 18.5%. The decrease in sales is primarily driven by lower cardio sales and higher sales discounting, partially offset by strong sales of SelectTech® weights and benches.

•Royalty income for the three-months ended December 31, 2021 increased by $0.1 million compared to the three-months ended December 31, 2020.

•Gross profit was $29.9 million for the three-months ended December 31, 2021, compared to gross profit of $77.9 million for the three-months ended December 31, 2020. Gross profit margins were 20.3% for the three-months ended December 31, 2021 compared to 41.1% for the three-months ended December 31, 2020. The 20.8 ppt decrease in gross margins was primarily due to: increased product costs, logistics and discounting (-18 ppts) and increased investments in JRNY® (-3 ppts).

•Operating expenses were $49.2 million for the three-months ended December 31, 2021, an increase of $12.8 million, or 35.3%, compared to operating expenses of $36.4 million for the three-months ended December 31, 2020, primarily due to $11.0 million more in advertising and $3.6 million increase in JRNY® investments. Total advertising expenses were $21.5 million for the three-months ended December 31, 2021 versus $10.5 million for the three-months ended December 31, 2020.

•Operating loss was $19.3 million or negative 13.1% operating margin for the three-months ended December 31, 2021, compared to operating income of $41.5 million for the three-months ended December 31, 2020, primarily due to lower gross profits and higher operating expenses.

•Loss from continuing operations was $13.5 million, or $(0.43) per diluted share, for the three-months ended December 31, 2021, compared to income from continuing operations of $29.3 million, or $0.90 per diluted share, for the three-months ended December 31, 2020.

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•Net loss was $13.5 million for the three-months ended December 31, 2021, compared to net income of $28.9 million for the three-months ended December 31, 2020.

•The effective tax rates were 34.2% for the three-months ended December 31, 2021 and 22.7% for the three-months ended December 31, 2020, primarily due to the impact of lower income.

Comparison for the Nine-Months Ended December 31, 2021 to the Nine-Months Ended December 31, 2020

•Net sales were $469.8 million up 2.4% for the nine-months ended December 31, 2021 compared to net sales of $458.8 million for the nine-months ended December 31, 2020. Excluding sales related to the Octane brand, net sales were up 6.8% compared to the nine-months ended December 31, 2020. The sales increase compared to the same period in 2020 was driven primarily by robust sales of our popular SelectTech® weights and benches.

•Gross profit was $127.5 million for the nine-months ended December 31, 2021, compared to gross profit of $193.2 million for the nine-months ended December 31, 2020. Gross profit margins were 27.1% for the nine-months ended December 31, 2021, compared to 42.1% for the nine-months ended December 31, 2020. The 15 ppts decrease in gross margins was primarily due to: increased product costs, logistics and discounting (-13 ppts) and increased investments in JRNY® (-2 ppts).

•Operating expenses were $130.9 million, an increase of $16.0 million, or 14.0% for the nine-months ended December 31, 2021, compared to operating expenses of $114.8 million for the nine-months ended December 31, 2020, primarily due to a $23.5 million more in advertising, increased JRNY® investments of $9.5 million, a legal settlement of $4.7 million, and acquisition expenses of $1.7 million, partially offset by the $20.7 million Octane Loss on Disposal Group for the nine-months ended December 31, 2020. Total advertising expenses were $44.3 million for the nine-months ended December 31, 2021, compared to $20.9 million for the nine-months ended December 31, 2020.

•Operating loss was $3.4 million for the nine-months ended December 31, 2021, compared to operating income of $78.4 million for the nine-months ended December 31, 2020. The decrease was primarily due to lower gross profit and higher operating expenses, partially offset by the Octane Loss on Disposal Group.

•Net loss was $4.2 million for the nine-months ended December 31, 2021, compared to net income of $57.7 million for the nine-months ended December 31, 2020.

Comparison for the Three and Nine-Month Periods Ended December 31, 2021 to the Three and Nine-Month Periods Ended December 31, 2020 and 2019, respectively.

The Company measured the sales results versus the same period both one, and in addition, two years ago as we return to our new normal level of demand post COVID pandemic.

•Net sales were $147.3 million, a decline of 22.2% versus the three-month period ended December 31, 2020. When excluding sales related to the Octane brand net sales grew 63% a 28% CAGR for the three-month period ended December 31, 2021 when compared to the same period in 2019.

•Net sales were $469.8 million, grew 2.4% versus the nine-month period ended December 31, 2020. When excluding sales related to the Octane brand net sales grew 144% a 56% CAGR for the nine-month period ended December 31, 2021 when compared to the same period in 2019.

JRNY® Update

•Nautilus, Inc. continues to enhance the JRNY® platform, creating differentiated connected-fitness experiences for their members.

•In the third quarter, the Company expanded the JRNY® enabled product line, adding the Bowflex® Max Total® 16 and Bowflex® SelectTech® 552 and 1090 dumbbells. The attachment of JRNY® to the Bowflex® SelectTech® modalities has been a significant growth driver of the JRNY® member base, which reached nearly 250k members as of December 31, 2021.

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•The Company extended JRNY® to include whole body workouts, including FitOn and new strength videos on demand. This enables customers to track workouts across strength, cardio, and whole-body in their journal. Year-to-date, the Company has added more than 150 locations to their popular Explore the World™ experiences and continues to add new trainer-led videos to the platform.

•The Company began offering 12-month complimentary trials in late September, offering customers the opportunity to create lasting habits with the platform and provide feedback on their experience over a longer term.

•The Company also recently launched JRNY.com a new subscription management and billing platform, establishing a browser-based portal for customers to manage their membership and interact with JRNY®. The subscription platform provides critical customer engagement, including payment confirmation, payment refunds, subscription changes and cancellations, and trial ending and renewal reminders.

Forward Looking Guidance

Second Half Fiscal 2022

•Given the effect of the COVID-19 pandemic on last year’s 2nd Half sales and to gauge growth and progress against more “normalized” results, the Company will be measuring this year’s sales versus the same period two years ago for the next few quarters. In addition, because fitness season straddles the last two quarters of the year, the Company believes it is prudent to consider results on a six-month basis from October 1, 2021 to March 31, 2022.

•The Company now expects total company net sales in the second half of Fiscal 2022 to be between $260 million and $280 million, an increase of 31% to 41% versus the same period in 2020. The decline versus previous guidance is driven by lower demand in International and increased promotional activity in the US and Canada in this fiscal year’s fitness season.

•The Company expects the impact of increased logistics, product costs, and discounting to decline operating margins by 15 to 16 percentage points, 3 to 4 percentage points worse than previous guidance. The change is primarily due to the more promotional environment as mentioned above.

•The Company expects investments in JRNY® and in Marketing to increase versus the same period last year. As a rate of sales compared to last year, overall investments in JRNY® will be 6 to 9 percentage points higher, and advertising spend will be 8 to 9 percentage points higher.

•As previously guided, for the second half of Fiscal 2022, the Company expects operating margin loss in the mid-teens.

•For the second half of Fiscal 2022, the Company expects adjusted EBITDA loss in the low-teens.

•The Company is reiterating full year capital expenditures to be between $12 million and $14 million with the majority earmarked for JRNY® investments.

•The Company expects the number of JRNY® members at year-end to cross 300,000 slightly above the mid-point of our previous guidance.

Longer term view, beyond Fiscal 2022

•The Company expects to return to positive adjusted EBITDA in fiscal year 2023 and are on track to achieve operating margins of 15% by FYE 2025, with margins expanding to high teens by FYE 2026.

Factors Affecting Our Performance

Our results of operations may vary significantly from period-to-period. Our revenues typically fluctuate due to the seasonality of our industry, customer buying patterns, product innovation, the nature and level of competition for health and fitness products, our ability to procure products to meet customer demand, the level of spending on, and effectiveness of, our media and advertising programs and our ability to attract new customers and maintain existing

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sales relationships. In addition, our revenues are highly susceptible to economic factors, including, among other things, the overall condition of the economy and the availability of consumer credit in both the U.S. and Canada. The COVID-19 pandemic has created a heightened need for home-fitness products at an unplanned rate. We are unable to estimate the length of time that the short-term increases in demand for many of our home-fitness products will outpace supply and we are accelerating the manufacturing and delivery of key products. We cannot predict the longer-term impacts of COVID-19 and the impact on our results of operations is uncertain. Our gross margins are being impacted by fluctuations in the costs or availability of materials used to manufacture our products, tariffs, expedited shipping and transportation costs and product warranty costs. Gross margins may also be affected by fluctuations in cost associated with acquisition or license of products and technologies, product warranty costs, the cost of fuel, foreign currency exchange rates, and changes in costs of other distribution or manufacturing-related services. Our operating profits or losses may also be affected by the efficiency and effectiveness of our organization. Historically, our operating expenses have been influenced by media costs to produce and distribute advertisements of our products on television, websites and other media, facility costs, operating costs of our information and communications systems, product supply chain management, customer support and new product development activities. In addition, our operating expenses have been affected from time-to-time by asset impairment charges, restructuring charges and other significant unusual or infrequent expenses.

As a result of the above and other factors, our period-to-period operating results may not be indicative of future performance. You should not place undue reliance on our operating results and should consider our prospects in light of the risks, expenses and difficulties typically encountered by us and other companies, both within and outside our industry. We may not be able to successfully address these risks and difficulties and, consequently, we cannot assure you of any future growth or profitability. For more information, see our discussion of risk factors located at Part I, Item 1A of our 2020 Form 10-K as supplemented by our quarterly reports on Form 10-Q.

Discontinued Operations

Results from discontinued operations relate to the disposal of our former Commercial business, which was completed in April 2011. We reached substantial completion of asset liquidation as of December 31, 2012. Although there was no revenue related to the former Commercial business in either the 2021 or 2020 periods, we continue to incur product liability and other legal expenses associated with product previously sold into the Commercial channel.

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RESULTS OF OPERATIONS

Results of operations information was as follows (dollars in thousands):

	Three-Months Ended December 31,				Change
	2021		2020		$		%
Net sales	$	147,258	$	189,259	$	(42,001)	(22.2)	%
Cost of sales	117,342		111,388		5,954		5.3	%
Gross profit	29,916		77,871		(47,955)		(61.6)	%
Operating expenses:
Selling and marketing	32,395		21,998		10,397		47.3	%
General and administrative	11,456		10,364		1,092		10.5	%
Research and development	5,379		4,029		1,350		33.5	%
Total operating expenses	49,230		36,391		12,839		35.3	%
Operating (loss) income	(19,314)		41,480		(60,794)		(146.6)	%
Other expense:
Interest income	1		7		(6)
Interest expense	(354)		(280)		(74)
Other, net	(789)		(3,367)		2,578
Total other expense, net	(1,142)		(3,640)		2,498
(Loss) income from continuing operations before income taxes	(20,456)		37,840		(58,296)
Income tax (benefit) expense	(7,001)		8,588		(15,589)
(Loss) income from continuing operations	(13,455)		29,252		(42,707)
Loss from discontinued operations, net of taxes	(44)		(316)		272
Net (loss) income	$	(13,499)	$	28,936	$	(42,435)

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	Nine-Months Ended December 31,				Change
	2021		2020		$		%
Net sales	$	469,810	$	458,838	$	10,972	2.4	%
Cost of sales	342,336		265,633		76,703		28.9	%
Gross profit	127,474		193,205		(65,731)		(34.0)	%
Operating expenses:
Selling and marketing	75,634		53,651		21,983		41.0	%
General and administrative	39,355		28,520		10,835		38.0	%
Research and development	15,882		11,997		3,885		32.4	%
Loss on disposal group	—		20,668		(20,668)		(100.0)	%
Total operating expenses	130,871		114,836		16,035		14.0	%
Operating (loss) income	(3,397)		78,369		(81,766)		(104.3)	%
Other expense:
Interest income	34		9		25
Interest expense	(1,149)		(871)		(278)
Other, net	(815)		(3,628)		2,813
Total other expense, net	(1,930)		(4,490)		2,560
(Loss) income from continuing operations before income taxes	(5,327)		73,879		(79,206)
Income tax (benefit) expense	(1,321)		15,644		(16,965)
(Loss) income from continuing operations	(4,006)		58,235		(62,241)
Loss from discontinued operations, net of taxes	(211)		(571)		360
Net (loss) income	$	(4,217)	$	57,664	$	(61,881)

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Results of operations information by segment and major product lines was as follows (dollars in thousands):

	Three-Months Ended December 31,						Change
	2021			2020			$			%
Net sales:
Direct net sales:
Cardio products(1)	$	35,558		$	52,876		$	(17,318)		(32.8)	%
Strength products(2)	25,147			29,282			(4,135)			(14.1)	%
Direct	60,705			82,158			(21,453)			(26.1)	%
Retail net sales:
Cardio products(1)	$	37,199		$	78,255		(41,056)			(52.5)	%
Strength products(2)	48,502			28,065			20,437			72.8	%
Retail	85,701			106,320			(20,619)			(19.4)	%
Royalty	852			781			71			9.1	%
	$	147,258		$	189,259		$	(42,001)		(22.2)	%
Cost of sales:
Direct	$	42,597		$	38,155		$	4,442		11.6	%
Retail	74,745			73,233			1,512			2.1	%
	$	117,342		$	111,388		$	5,954		5.3	%
Gross profit:
Direct	$	18,108		$	44,003		$	(25,895)		(58.8)	%
Retail	10,956			33,087			(22,131)			(66.9)	%
Royalty	852			781			71			9.1	%
	$	29,916		$	77,871		$	(47,955)		(61.6)	%
Gross profit margin:
Direct	29.8		%	53.6		%	(2,380)		basis points
Retail	12.8		%	31.1		%	(1,830)		basis points
Contribution:
Direct	$	(8,980)		$	23,584		(32,564)			(138.1)	%
Retail	3,270			25,338			(22,068)			(87.1)	%
Contribution rate:
Direct	(14.8)		%	28.7		%	(4,350)		basis points
Retail	3.8		%	23.8		%	(2,000)		basis points

(1) Cardio products include: connected-fitness bikes, the Bowflex® C6, VeloCore®, Schwinn® IC4, Max Trainer®, connected-fitness treadmills, other exercise bikes, ellipticals and subscription services.

(2) Strength products include: Bowflex® Home Gyms, Bowflex® SelectTech® dumbbells, kettlebell and barbell weights, and accessories.

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	Nine-Months Ended December 31,						Change
	2021			2020			$			%
Net sales:
Direct net sales:
Cardio products(1)	$	89,394		$	142,739		$	(53,345)		(37.4)	%
Strength products(2)	72,560			51,046			21,514			42.1	%
Direct	161,954			193,785			(31,831)			(16.4)	%
Retail net sales:
Cardio products(1)	185,971			199,190			(13,219)			(6.6)	%
Strength products(2)	119,367			63,233			56,134			88.8	%
Retail	305,338			262,423			42,915			16.4	%
Royalty	2,518			2,630			(112)			(4.3)	%
	$	469,810		$	458,838		$	10,972		2.4	%
Cost of sales:
Direct	$	105,356		$	87,269		$	18,087		20.7	%
Retail	236,980			178,364			58,616			32.9	%
	$	342,336		$	265,633		$	76,703		28.9	%
Gross profit:
Direct	$	56,598		$	106,516		$	(49,918)		(46.9)	%
Retail	68,358			84,059			(15,701)			(18.7)	%
Royalty	2,518			2,630			(112)			(4.3)	%
	$	127,474		$	193,205		$	(65,731)		(34.0)	%
Gross profit margin:
Direct	34.9		%	55.0		%	(2,010)		basis points
Retail	22.4		%	32.0		%	(960)		basis points
Contribution:
Direct	$	(4,056)		$	58,167		$	(62,223)		(107.0)	%
Retail	44,101			60,393			(16,292)			(27.0)	%
Contribution rate:
Direct	(2.5)		%	30.0		%	(3,250)		basis points
Retail	14.4		%	23.0		%	(860)		basis points

(1) Cardio products include: connected-fitness bikes, the Bowflex® C6, VeloCore®, Schwinn® IC4, Max Trainer®, connected-fitness treadmills, other exercise bikes, ellipticals and subscription services.

(2) Strength products include: Bowflex® Home Gyms, Bowflex® SelectTech® dumbbells, kettlebell and barbell weights, and accessories.

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Sales and Gross Profit

Direct Segment

Comparison of Segment Results for the Three-Month Period Ended December 31, 2021 to the Three-Month Period Ended December 31, 2020

Net sales were $60.7 million for the three-month period ended December 31, 2021, compared to $82.2 million, a decline of 26.1%, versus the same period in 2020. Net sales decrease was primarily driven by lower cardio sales and higher discounting.

Cardio sales declined 32.8% versus the same period in 2020. Lower sales were primarily driven by lower bike demand. Strength product sales declined 14.1% versus the same period in 2020. Lower sales were primarily driven by lower sales of Bowflex® Home Gyms, partially offset by increased sales of SelectTech® weights and benches.

The Direct segment ended the quarter with $8.8 million of backlog as of December 31, 2021, the first quarter with meaningful backlog since March 31, 2021. These amounts represent unfulfilled consumer orders net of current promotional programs and sales discounts.

Gross profit margin was 29.8% for the three-month period ended December 31, 2021 versus 53.6% for the same period in 2020. The 23.8 ppt decrease in gross margin was primarily driven by:increased product costs, logistics and discounting (-20 ppts) and increased investments in JRNY® (-4 ppts). Gross profit was $18.1 million, down 58.8% versus the same period in 2020.

Segment contribution loss was $9.0 million for the three-month period ended December 31, 2021, compared to income of $23.6 million for the same period in 2020. The decline was primarily driven by lower gross profit and increased investments in media and JRNY®. Advertising expenses were $16.1 million compared to $10.5 million for the same period in 2020.

Combined consumer credit approvals by our primary and secondary U.S. third-party financing providers for the three-month period ended December 31, 2021 were 60.3%, compared to 52.0% for the same period in 2020. The increase in approvals reflects higher credit quality applications.

Comparison of Segment Results for the Nine-Month Period Ended December 31, 2021 to the Nine-Month Period Ended December 31, 2020

Net sales for the nine-month period ended December 31, 2021 were $162.0 million, down 16.4% versus the same period in 2020. Decreased sales were driven primarily by cardio products, which declined by 37.4% versus the same period in 2020, due to lower sales of bikes. Strength products sales grew 42.1% versus the same period in 2020 driven by SelectTech® weights and benches.

Gross profit margin for the nine-month period ended December 31, 2021 was 34.9%, down from 55.0% for the same period in 2020. The 20.1 ppt decrease in gross profit margin was primarily driven by: increased product costs, logistics and discounting (-17 ppts) and increased investments in JRNY® (-3 ppts). Gross profit was $56.6 million, a decrease of 46.9% versus the same period in 2020.

Segment contribution loss for the nine-month period ended December 31, 2021 was $4.1 million, compared to income of $58.2 million for the same period in 2020. The decline was primarily driven by lower gross profit, including increased media spend and investments in JRNY®. Advertising expenses were $30.8 million compared to $20.9 million for the same period in 2020.

Retail Segment

Comparison of Segment Results for the Three-Month Period Ended December 31, 2021 to the Three-Month Period Ended December 31, 2020

Net sales for the three-month period ended December 31, 2021 were $85.7 million, down 19.4%, from $106.3 million for the same period in 2020. Excluding sales related to Octane, net sales were down 18.5% compared to last year. Retail segment sales outside the United States and Canada were down 22%, or 20% excluding Octane.

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The decrease in sales is primarily driven by lower demand for our bikes and higher sales discounting, partially offset by strong sales of SelectTech® weights and benches.

Cardio sales for the three-month period ended December 31, 2021 decreased by 52.5%. Excluding sales related to Octane, net sales were down 51.7%, compared to the same period in 2020. Lower sales were primarily driven by lower bikes sales. Strength product sales grew by 72.8%, led by the popular SelectTech® weights and benches.

Gross profit margins were 12.8% for the three-month period ended December 31, 2021, down from 31.1% for the same period in 2020. The 18.3 ppt decrease in gross margin was primarily driven by: increased product costs, logistics and discounting (-17 ppts) and increased investments in JRNY® (-1 ppt). Gross profit was $11.0 million, a decrease of 66.9% versus the same period in 2020.

Segment contribution income for the three-month period ended December 31, 2021 was $3.3 million, or 3.8% of sales, compared to $25.3 million, or 23.8% of sales for the same period in 2020, primarily driven by lower gross profit.

Comparison of Segment Results for the Nine-Month Period Ended December 31, 2021 to the Nine-Month Period Ended December 31, 2020

Net sales for the nine-month period ended December 31, 2021 were $305.3 million, up 16.4% as compared to $262.4 million for the same period in 2020. Excluding sales related to Octane, net sales were up 25.5% versus the same period in 2020. Retail segment sales outside the United States and Canada were up 22% versus same period in 2020. Excluding sales related to Octane, net sales outside the United States and Canada were up 33% versus same period in 2020.

Cardio sales were down 6.6% compared to the same period in 2020, driven primarily by bikes. Strength sales were up 88.8% compared to the same period in 2020, driven primarily by SelectTech® weights.

Gross profit margin for the nine-month period ended December 31, 2021 was 22.4%, down from 32.0% for the same period in 2020. The 9.6 ppt decrease in gross profit margin was primarily driven by increased product costs, logistics and discounting. Gross profit was $68.4 million, a decrease of 18.7% versus the same period in 2020.

Segment contribution income for the nine-month period ended December 31, 2021 was $44.1 million compared to $60.4 million, or 14.4% of sales for the nine-month period ended December 31, 2020, primarily driven by lower gross profit.

Royalty

Royalty income increased by $0.1 million, or 9.1%, to $0.9 million for the three-month period ended December 31, 2021, compared to the same period of 2020, primarily due to royalty settlements.

Royalty income decreased by $0.1 million, or 4.3%, to $2.5 million for the nine-month period ended December 31, 2021, compared to the same period of 2020, primarily due to royalty settlements.

Selling and Marketing

Selling and marketing expenses include payroll, employee benefits, and other headcount-related expenses associated with sales and marketing personnel, and the costs of media advertising, promotions, trade shows, seminars, sales incentives related to our JRNY® platform and other programs.

Selling and marketing information was as follows (dollars in thousands):

	Three-Months Ended December 31,						Change
	2021			2020			$		%
Selling and marketing	$	32,395		$	21,998		$	10,397	47.3%
As % of net sales	22.0		%	11.6		%

	Nine-Months Ended December 31,						Change
	2021			2020			$		%
Selling and marketing	$	75,634		$	53,651		$	21,983	41.0%
As % of net sales	16.1		%	11.7		%

The increase in selling and marketing expenses for the three-month period ended December 31, 2021 compared to the same period of 2020 was primarily related to an increase of $5.6 million in media spend and $5.4 million in brand advertising.

The increase in selling and marketing expenses for the nine-month period ended December 31, 2021 compared to the same period of 2020 was primarily related to an increase of $13.5 million in brand advertising and $10.0 million in media spend.

Media advertising expense is the largest component of selling and marketing and was as follows (dollars in thousands):

	Three-Months Ended December 31,				Change
	2021		2020		$		%
Media advertising - Direct	$	16,052	$	10,479	$	5,573	53.2%
Media advertising - Brand	5,415		—		5,415		*
Total advertising	$	21,467	$	10,479	$	10,988	104.9%

*Not meaningful

	Nine-Months Ended December 31,				Change
	2021		2020		$		%
Media advertising - Direct	$	30,844	$	20,881	$	9,963	47.7%
Media advertising - Brand	13,502		—		13,502		*
Total advertising	$	44,346	$	20,881	$	23,465	112.4%

*Not meaningful

The increases in media advertising for Direct for the three and nine-month periods ended December 31, 2021, as compared to the same periods of 2020 were primarily due to increased media spending as we return to more historical levels of advertising support to drive demand and preserve market share.

General and Administrative

General and administrative expenses include payroll, employee benefits, stock-based compensation expense, and other headcount-related expenses associated with finance, legal, facilities, certain human resources and other administrative personnel, acquisition costs and other administrative fees.

General and administrative was as follows (dollars in thousands):

	Three-Months Ended December 31,						Change
	2021			2020			$		%
General and administrative	$	11,456		$	10,364		$	1,092	10.5%
As % of net sales	7.8		%	5.5		%

	Nine-Months Ended December 31,						Change
	2021			2020			$		%
General and administrative	$	39,355		$	28,520		$	10,835	38.0%
As % of net sales	8.4		%	6.2		%

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The increase in general and administrative expenses for the three-month period ended December 31, 2021 compared to the same period of 2020 was primarily due to increase in personnel expenses.

The increase in general and administrative expenses for the nine-month period ended December 31, 2021 compared to the same period of 2020 was primarily due to a $4.7 million loss contingency related to a legal settlement for a class action lawsuit and increases in personnel expenses and acquisition costs.

Research and Development

Research and development expenses include payroll, employee benefits, other headcount-related expenses and information technology associated with product development.

Research and development was as follows (dollars in thousands):

	Three-Months Ended December 31,						Change
	2021			2020			$		%
Research and development	$	5,379		$	4,029		$	1,350	33.5%
As % of net sales	3.7		%	2.1		%

	Nine-Months Ended December 31,						Change
	2021			2020			$		%
Research and development	$	15,882		$	11,997		$	3,885	32.4%
As % of net sales	3.4		%	2.6		%

The increases in research and development expenses for the three and nine-month periods ended December 31, 2021, as compared to the same periods of 2020, were driven primarily by increased investments in JRNY®, our digital platform.

Loss on Disposal Group

The loss on disposal group for the nine-month period ended December 31, 2020 related to the disposal of our Octane Business in 2020.

Operating (Loss) Income

Operating loss for the three-months ended December 31, 2021 was $19.3 million, a decrease of $60.8 million, or 146.6%, as compared to an operating income of $41.5 million for the same period of 2020. The decrease was primarily due to lower gross profit and increased operating expenses as discussed in more detail above.

Operating loss for the nine-months ended December 31, 2021 was $3.4 million, a decrease of $81.8 million, or 104.3%, as compared to an operating income of $78.4 million for the same period of 2020. The decrease was primarily due to lower gross profit and increased operating expenses as discussed in more detail above.

Other, Net

Other, net relates to the effect of exchange rate fluctuations with the U.S. and our foreign subsidiaries.

Income Tax (Benefit) Expense

Income tax provision includes U.S. and international income taxes, and interest and penalties on uncertain tax positions.

Income tax (benefit) expense was as follows (dollars in thousands):

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	Three-Months Ended December 31,						Change
	2021			2020			$		%
Income tax (benefit) expense	$	(7,001)		$	8,588		$	(15,589)	(181.5)%
Effective tax rate	34.2		%	22.7		%

	Nine-Months Ended December 31,						Change
	2021			2020			$		%
Income tax (benefit) expense	$	(1,321)		$	15,644		$	(16,965)	(108.4)%
Effective tax rate	24.8		%	21.2		%

Income tax benefit for the three-months and nine-months ended December 31, 2021 was primarily due to the loss generated in the U.S.

Income tax expense for the three-months and nine-months ended December 31, 2020 was primarily a result of the profit generated in the U.S.

(Loss) Income from Continuing Operations

Loss from continuing operations was $13.5 million for the three-months ended December 31, 2021, or $0.43 per diluted share, compared to income from continuing operations of $29.3 million, or $0.90 per diluted share, for the three-months ended December 31, 2020. The decrease in income from continuing operations was primarily due to lower gross profit and higher operating expenses as discussed in more detail above.

Loss from continuing operations was $4.0 million for the nine-months ended December 31, 2021, or $0.13 per diluted share, compared to income from continuing operations of $58.2 million, or $1.80 per diluted share, for the nine-months ended December 31, 2020. The decrease was primarily due to lower gross profit and increased operating expenses as discussed in more detail above.

Net (Loss) Income

Net loss was $13.5 million for the three-months ended December 31, 2021, compared to net income of $28.9 million for the three-months ended December 31, 2020. Net loss per diluted share was $0.43 for the three-months ended December 31, 2021, compared to net income per diluted share of $0.89 for the three-months ended December 31, 2020.

Net loss was $4.2 million for the nine-months ended December 31, 2021, compared to net income of $57.7 million for the nine-months ended December 31, 2020. Net loss per diluted share was $0.14 for the nine-months ended December 31, 2021, compared to net income per diluted share of $1.78 for the nine-months ended December 31, 2020.

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LIQUIDITY AND CAPITAL RESOURCES

Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our levels of revenue, the timing and extent of spending on research and development efforts and other business initiatives, the expansion of sales and marketing activities, the timing of new product introductions, market acceptance of our products, and overall economic conditions. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our shareholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations.

As of December 31, 2021, we had $19.7 million of cash, cash equivalents and restricted cash, and $54.9 million was available for borrowing under the ABL Revolving Facility, compared to $113.2 million of cash, cash equivalents, restricted cash and available-for-sale securities, and $54.4 million available for borrowing under the ABL Revolving Facility as of March 31, 2021. We expect our cash, cash equivalents, restricted cash and amounts available for borrowing under our Credit Facility as of December 31, 2021, along with cash expected to be generated from operations, to be sufficient to fund our operating and capital requirements for at least twelve months from December 31, 2021.

Cash used in operating activities was $91.6 million for the nine-month period ended December 31, 2021, compared to cash provided in operating activities of $65.3 million for the nine-month period ended December 31, 2020. The decrease in cash flows from operating activities for the nine-month period ended December 31, 2021 as compared to the same period of 2020 was primarily due to changes in our operating assets and liabilities discussed below, as well as the decrease in net income.

Trade receivables increased to $93.6 million as of December 31, 2021, compared to $88.7 million as of March 31, 2021, primarily due to timing of customer payments.

Inventory was $128.1 million as of December 31, 2021, compared to $68.1 million as of March 31, 2021. The increase in inventory was driven by the strategic decision to increase on-hand inventory levels for the fitness season given continued disruption in global logistics. About 15% of inventory as of December 31, 2021 was in-transit.

Prepaid and other current assets decreased by $14.9 million to $11.0 million, compared to $25.8 million as of March 31, 2021, primarily due to decreases in other short-term deposits for inventory and prepaid marketing.

Trade payables decreased by $37.0 million to $61.9 million as of December 31, 2021, compared to $98.9 million as of March 31, 2021, primarily due to timing of payments for inventory.

Accrued liabilities increased by $5.6 million to $25.2 million as of December 31, 2021, compared to $19.6 million as of March 31, 2021, primarily due to an accrued loss contingency related to a class action lawsuit legal settlement.

Cash provided by investing activities of $38.3 million for the nine-month period ended December 31, 2021 was primarily due to proceeds from sales and maturities of available-for-sale securities partially offset by the $26.0 million acquisition of VAY. We anticipate spending between $12.0 million and $14.0 million in fiscal 2022 for digital platform enhancements, systems integration, and production tooling.

Cash provided by financing activities of $38.7 million for the nine-month period ended December 31, 2021 was primarily related to proceeds from long-term debt offset by payments on long-term debt.

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Financing Arrangements

On October 29, 2021, we amended our Credit Agreement dated May 13, 2021 which amended our original Credit Agreement, dated January 31, 2020, with Wells Fargo Bank, National Association (“Wells Fargo”) and lenders from time to time party thereto (collectively with Wells Fargo the “Lenders”) (the “Credit Agreement”), pursuant to which the Lenders have agreed, among other things, to make available to us an asset-based revolving loan facility, subject to a borrowing base (the “ABL Revolving Facility”), and a term loan facility (the “Term Loan Facility” and together with the ABL Revolving Facility, the “Credit Facility”), in each case, as such amounts may increase or decrease in accordance with the terms of the Credit Agreement. The amendment increased the aggregate principal amount available under the ABL Revolving Facility from $55.0 million to $100.0 million (the “Revolver”), subject to a borrowing base. The maturity date of the Credit Facility was extended to October 29, 2026. The unamortized balance on the Term Loan was $11.5 million, as of the effective date of the amendment, and will amortize on a new 60-month straight line basis to coincide with the extended maturity date. In connection with the October 29, 2021 credit amendment we recorded $0.6 million in new financing costs as Other assets on our Condensed Consolidated Balance Sheet. The repayment of obligations under the Credit Agreement is secured by substantially all of our assets. Principal and interest amounts are required to be paid as scheduled.

Other structural improvements to the Credit Agreement include amending the definition of Springing Trigger Event to mean the greater of (i) 10.0% of the lesser of (a) the Revolver Commitment and (b) the Borrowing Base as of such date of determination and (ii) $7.5 million. The Springing Trigger Event pertains to the period in which a Fixed Charge Coverage Ratio test will apply and be tested. Consistent with the Credit Agreement before the amendment, there continues to be no additional financial maintenance covenants. Additionally, the borrowing base definitions were favorably amended to change the eligible in-transit inventory sublimit from $10.0 million to $22.5 million and the total inventory sublimit from $35.0 million to $65.0 million.

As of December 31, 2021, outstanding borrowings totaled $56.1 million, with $10.9 million and $45.2 million under our Term Loan Facility and Revolver, respectively. As of December 31, 2021, we were in compliance with the financial covenants of the Credit Agreement and $54.9 million was available for borrowing under the ABL Revolving Facility.

Interest on the Revolver will accrue at Secured Overnight Financing Rate (“SOFR”) plus a margin of 1.86% to 2.36% (based on average quarterly availability) and interest on the Term Loan Facility will accrue at SOFR plus 4.50%. As of December 31, 2021, our interest rate was 1.97% for the Revolver and 4.60% for the Term Loan Facility.

The balance sheet classification of the borrowings under the revolving loan credit facility has been determined in accordance with ASC 470, Debt. Borrowings outstanding under a revolving credit agreement that includes both a subjective acceleration clause and a requirement to maintain a springing lock-box arrangement are classified based on the provisions of ASC 470 because the lock-box remittances do not automatically reduce the debt outstanding.

Off-Balance Sheet Arrangements

We have long lead times for inventory purchases and, therefore, must secure factory capacity from our vendors in advance. As of December 31, 2021, we had approximately $59.2 million, compared to $216.3 million as of March 31, 2021 in non-cancellable market-based purchase obligations, primarily to secure additional factory capacity for inventory purchases in the next twelve months. Purchase obligations can vary from quarter-to-quarter and versus the same period in prior years due to a number of factors, including the amount of products that are shipped directly to Retail customer warehouses versus through Nautilus warehouses. The decrease in purchase obligations was primarily due to receipt of inventory ordered for the holiday and fitness season.

In the ordinary course of business, we enter into agreements that require us to indemnify counterparties against third-party claims. These may include: agreements with vendors and suppliers, under which we may indemnify them against claims arising from our use of their products or services; agreements with customers, under which we may indemnify them against claims arising from their use or sale of our products; real estate and equipment leases, under which we may indemnify lessors against third-party claims relating to the use of their property; agreements with licensees or licensors, under which we may indemnify the licensee or licensor against claims arising from their use of our intellectual property or our use of their intellectual property; and agreements with parties to debt arrangements, under which we may indemnify them against claims relating to their participation in the transactions.

The nature and terms of these indemnifications vary from contract to contract, and generally a maximum obligation is not stated. We hold insurance policies that mitigate potential losses arising from certain types of indemnifications.

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Management does not deem these obligations to be significant to our financial position, results of operations or cash flows, and therefore, no liabilities were recorded at December 31, 2021.

SEASONALITY

We expect our revenue from fitness equipment products to vary seasonally. Sales are typically strongest in the fourth quarter and are generally weakest in the second quarter. We believe that consumers tend to be involved in outdoor activities during the spring and summer months, including outdoor exercise, which impacts sales of indoor fitness equipment. This seasonality can have a significant effect on our inventory levels, working capital needs and resource utilization.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our critical accounting policies have not changed other than goodwill from those discussed in our 2020 Form 10-K.

NEW ACCOUNTING PRONOUNCEMENTS

See Note 1 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 for a discussion of recent accounting pronouncements.

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Item 3.     Quantitative and Qualitative Disclosures About Market Risk

Interest Rate and Foreign Exchange Risk

Our exposure to market risk from changes in interest rates relates primarily to our cash equivalents, derivative assets and variable-rate debt obligations. Our cash equivalents mature within three-months or less from the date of purchase. Marketable securities with original maturities of greater than three-months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year may be classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. We have classified our marketable securities as available-for-sale and, therefore, we may choose to sell or hold them as changes in the market occur. Because of the short-term nature of the instruments in our portfolio, a decline in interest rates would reduce our interest income over time, and an increase in interest rates may negatively affect the market price or liquidity of certain securities within the portfolio.

Our ABL Revolving Facility and Term Loan Facility generally charge interest based on a benchmark rate such as Secured Overnight Financing Rate. Fluctuations in short-term interest rates may cause interest payments on term loan principal and drawn amounts on the revolving line to increase or decrease. As of December 31, 2021, the outstanding balances on our ABL Revolving Facility and Term Loan Facility totaled $56.1 million.

We enter into foreign exchange forward contracts to offset the earnings impacts of exchange rate fluctuations on certain monetary assets and liabilities. Total notional amounts outstanding as of December 31, 2021 were $30.2 million.

A hypothetical 10% increase in interest rates, or a 10% movement in the currencies underlying our foreign currency derivative positions, would have material impacts on our results of operations, financial position or cash flows. We do not enter into derivative instruments for any purpose other than to manage our interest rate or foreign currency exposure. That is, we do not engage in interest rate or currency exchange rate speculation using derivative instruments.

Item 4.     Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In accordance with Rule 13a-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q, our management evaluated, with the participation of our Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act). Based upon their evaluation of these disclosure controls and procedures, our management, including the Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer, have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report, our disclosure controls and procedures are effective and designed to ensure that the information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the requisite time periods specified in the applicable Securities and Exchange Commission rules and forms, and that it is accumulated and communicated to our management, including our Principal Executive Officer Principal Financial Officer, and Principal Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the three-months ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.    OTHER INFORMATION

Item 1.    Legal Proceedings

From time to time, in the ordinary course of business, we may be involved in various claims, lawsuits and other proceedings. These legal and tax proceedings involve uncertainty as to the eventual outcomes and losses which may be realized when one or more future events occur or fail to occur. As of December 31, 2021, we accrued $4.3 million for a contingent loss related to a legal settlement involving a class action lawsuit related to the advertisement of our treadmills. The settlement includes damages, a one-year free membership to JRNY®, and administrative fees and is reflected in Accrued liabilities and Other long-term liabilities on the face of our Consolidated Balance Sheets.

As of the date of filing of this Quarterly Report on Form 10-Q, we were not involved in any material legal proceedings.

Item 1A.    Risk Factors

We operate in an environment that involves a number of risks and uncertainties. The risks and uncertainties described in our 2020 Form 10-K are not the only risks and uncertainties to which we are subject, and there may be other risk and uncertainties that are not currently considered material or are not known to us that could impair our business or operations. If any of the risks described in our 2020 Form 10-K actually occur, our business, operating results and financial position could be adversely affected. There have been no material changes to the risk factors as set forth in our 2020 Form 10-K.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

None

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Item 6.    Exhibits

The following exhibits are filed herewith and this list is intended to constitute the exhibit index:

Exhibit No.	Description
3.1	Amended and Restated Articles of Incorporation - Incorporated by reference to Exhibit A to Schedule 14A, as filed with the Commission on April 22, 2008.
3.2	Amended and Restated Bylaws - Incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K, as filed with the Commission on April 5, 2005.
3.3	Amendment to Amended and Restated Bylaws of the Company - Incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K, as filed with the Commission on January 31, 2007.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities and Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
* Indicates management contract, compensatory agreement or arrangement, in which our directors or executive officers may participate.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	NAUTILUS, INC.
	(Registrant)
February 9, 2022	By:	/S/    James Barr IV
Date		James Barr IV
		Chief Executive Officer

	NAUTILUS, INC.
	(Registrant)
February 9, 2022	By:	/S/    Aina E. Konold
Date		Aina E. Konold
		Chief Financial Officer

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, James Barr IV, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Nautilus, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

February 9, 2022	By:	/s/ James Barr IV
Date		James Barr IV
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Aina E. Konold, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Nautilus, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

February 9, 2022	By:	/s/ Aina E. Konold
Date		Aina E. Konold
		Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officers of Nautilus, Inc., a Washington corporation (the “Company”), do hereby certify that:

To our knowledge, the Quarterly Report on Form 10-Q for the period ended December 31, 2021 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 9, 2022	By:	/s/ James Barr IV
Date		James Barr IV
		Chief Executive Officer

February 9, 2022	By:	/s/ Aina E. Konold
Date		Aina E. Konold
		Chief Financial Officer

XML

Cover Page - shares	9 Months Ended
	Dec. 31, 2021	Feb. 04, 2022
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Dec. 31, 2021
Entity File Number	001-31321
Entity Registrant Name	NAUTILUS, INC.
Entity Incorporation, State or Country Code	WA
Entity Tax Identification Number	94-3002667
Entity Address, Address Line One	17750 S.E. 6th Way
Entity Address, City or Town	Vancouver
Entity Address, State or Province	WA
Entity Address, Postal Zip Code	98683
City Area Code	360
Local Phone Number	859-2900
Title of 12(b) Security	Common Stock, no par value
Trading Symbol	NLS
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		31,248,298
Entity Central Index Key	0001078207
Current Fiscal Year End Date	--03-31
Amendment Flag	false
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2022

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Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Dec. 31, 2021	Mar. 31, 2021
Current assets:
Cash and cash equivalents	$ 18,402	$ 38,441
Restricted cash	1,339	1,339
Available-for-sale securities	0	73,448
Trade receivables, net of allowances of $657 and $1,177	93,611	88,657
Inventories	128,113	68,085
Prepaids and other current assets	10,981	25,840
Income taxes receivable	8,103	0
Total current assets	260,549	295,810
Property, plant and equipment, net	30,976	24,496
Operating lease right-of-use assets	24,534	19,108
Goodwill	24,510	0
Other intangible assets, net	9,319	9,365
Deferred income tax assets, non-current	4,554	2,144
Income Taxes Receivable, Noncurrent	5,673	0
Other Restricted Assets	3,887	0
Other assets	2,963	3,307
Total assets	366,965	354,230
Liabilities and Shareholders' Equity
Trade payables	61,850	98,878
Accrued liabilities	25,232	19,627
Operating lease liabilities, current portion	4,653	3,384
Finance lease obligations, net of current portion	119	0
Warranty obligations, current portion	5,724	7,243
Income taxes payable, current portion	914	5,709
Debt payable, current portion, net of unamortized debt issuance costs of $83 and $83	2,217	3,000
Total current liabilities	100,709	137,841
Operating lease liabilities, non-current	21,855	17,875
Finance lease obligations	423	0
Warranty obligations, non-current	1,401	1,408
Income taxes payable, non-current	3,997	3,657
Other non-current liabilities	4,301	607
Debt payable, non-current, net of unamortized debt issuance costs of $173 and $236	53,594	10,297
Total liabilities	186,280	171,685
Commitments and contingencies (Note 16)
Shareholders' equity:
Common stock - no par value, 75,000 shares authorized, 31,245 and 30,576 shares issued and outstanding	4,879	2,176
Retained earnings	176,307	180,524
Accumulated other comprehensive loss	(501)	(155)
Total shareholders' equity	180,685	182,545
Total liabilities and shareholders' equity	$ 366,965	$ 354,230

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Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($) $ in Thousands	Dec. 31, 2021	Mar. 31, 2021
Statement of Financial Position [Abstract]
Allowance for doubtful trade receivables	$ 657	$ 1,177
Debt Issuance Costs, Current, Net	83	83
Debt Issuance Costs, Noncurrent, Net	$ 173	$ 236
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	31,245,000	30,576,000
Common stock, shares outstanding	31,245,000	30,576,000

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Income Statement [Abstract]
Net sales	$ 147,258	$ 189,259	$ 469,810	$ 458,838
Cost of sales	117,342	111,388	342,336	265,633
Gross profit	29,916	77,871	127,474	193,205
Operating expenses:
Selling and marketing	32,395	21,998	75,634	53,651
General and administrative	11,456	10,364	39,355	28,520
Research and development	5,379	4,029	15,882	11,997
Loss on disposal group	0	0	0	20,668
Total operating expenses	49,230	36,391	130,871	114,836
Operating (loss) income	(19,314)	41,480	(3,397)	78,369
Other expense:
Interest income	1	7	34	9
Interest expense	(354)	(280)	(1,149)	(871)
Other, net	(789)	(3,367)	(815)	(3,628)
Total other expense, net	(1,142)	(3,640)	(1,930)	(4,490)
(Loss) income from continuing operations before income taxes	(20,456)	37,840	(5,327)	73,879
Income tax expense (benefit)	(7,001)	8,588	(1,321)	15,644
(Loss) income from continuing operations	(13,455)	29,252	(4,006)	58,235
Discontinued operations:
Loss from discontinued operations before income taxes	(118)	(65)	(195)	(128)
Income tax (benefit) expense of discontinued operations	(74)	251	16	443
Loss from discontinued operations	(44)	(316)	(211)	(571)
Net (loss) income	$ (13,499)	$ 28,936	$ (4,217)	$ 57,664
Earnings Per Share, Basic [Abstract]
Basic income (loss) per share from continuing operations (in dollars per share)	$ (0.43)	$ 0.97	$ (0.13)	$ 1.94
Basic loss per share from discontinued operation (in dollars per share)	0	(0.01)	(0.01)	(0.02)
Basic net income (loss) per share (in dollars per share)	(0.43)	0.96	(0.14)	1.92
Earnings Per Share, Diluted [Abstract]
Diluted income (loss) per share from continuing operations (in dollars per share)	(0.43)	0.90	(0.13)	1.80
Diluted loss per share from discontinued operation (in dollars per share)	0	(0.01)	(0.01)	(0.02)
Diluted net income (loss) per share (in dollars per share)	$ (0.43)	$ 0.89	$ (0.14)	$ 1.78
Shares used in per share calculations:
Basic (in shares)	31,199	30,284	30,955	30,077
Diluted (in shares)	31,199	32,633	30,955	32,336

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Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Statement of Comprehensive Income [Abstract]
Net (loss) income	$ (13,499)	$ 28,936	$ (4,217)	$ 57,664
Other comprehensive income:
Unrealized loss on available-for-sale securities, net of income tax expense of $—, $—, $— and $—	0	(4)	(4)	(4)
Foreign currency translation, net of income tax (expense) benefit of $(2), $(10), $2 and $(4)	(148)	760	(342)	1,330
Net other comprehensive income (loss) during period	(148)	756	(346)	1,326
Comprehensive (loss) income	$ (13,647)	$ 29,692	$ (4,563)	$ 58,990

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Condensed Condensed Consolidated Statements of Comprehensive Income (Unaudited) (Parentheticals) - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Dec. 31, 2021	Dec. 31, 2020
Statement of Comprehensive Income [Abstract]
Unrealized gain (loss) on marketable securities, tax (benefit) expense	$ 0	$ 7	$ (7)	$ 0			$ 0	$ 0
Foreign currency translation, tax (benefit) expense	$ 2	$ 21	$ (13)	$ (2)	$ (13)	$ 15	$ 10	$ 4

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Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Retained Earnings	Accumulated Other Comprehensive Income (Loss)
Beginning balance at Mar. 31, 2020	$ 92,925	$ 1,781	$ 92,456	$ (1,312)
Balance, shares at Mar. 31, 2020		29,817
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	(5,110)		(5,110)
Foreign currency translation adjustment, including income tax expense (benefit)	353			353
Stock-based compensation expense	865	$ 865	0
Common stock issued under equity compensation plan, net of shares withheld for tax payments (in shares)		87
Common stock issued under equity compensation plan, net of shares withheld for tax payments	0	$ 0
Common stock issued under employee stock purchase plan, shares		63
Common stock issued under employee stock purchase plan	83	$ 83
Balance, shares at Jun. 30, 2020		29,967
Ending balance at Jun. 30, 2020	89,116	$ 2,729	87,346	(959)
Beginning balance at Mar. 31, 2020	92,925	$ 1,781	92,456	(1,312)
Balance, shares at Mar. 31, 2020		29,817
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	57,664
Unrealized loss on marketable securities, net of income tax benefit	(4)
Foreign currency translation adjustment, including income tax expense (benefit)	1,330
Balance, shares at Dec. 31, 2020		30,330
Ending balance at Dec. 31, 2020	153,195	$ 3,061	150,120	14
Beginning balance at Jun. 30, 2020	89,116	$ 2,729	87,346	(959)
Balance, shares at Jun. 30, 2020		29,967
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	33,838		33,838
Foreign currency translation adjustment, including income tax expense (benefit)	217			217
Stock-based compensation expense	1,071	$ 1,071	0
Common stock issued under equity compensation plan, shares		290
Common stock issued under equity compensation plan, net of shares withheld for tax payments		$ (796)
Balance, shares at Sep. 30, 2020		30,257
Ending balance at Sep. 30, 2020	123,446	$ 3,004	121,184	(742)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	28,936		28,936
Unrealized loss on marketable securities, net of income tax benefit	(4)			(4)
Foreign currency translation adjustment, including income tax expense (benefit)	760			760
Stock-based compensation expense	1,234	$ 1,234	0
Common stock issued under equity compensation plan, net of shares withheld for tax payments (in shares)		42
Common stock issued under equity compensation plan, net of shares withheld for tax payments	(1,350)	$ (1,350)
Common stock issued under employee stock purchase plan, shares		31
Common stock issued under employee stock purchase plan	173	$ 173
Balance, shares at Dec. 31, 2020		30,330
Ending balance at Dec. 31, 2020	153,195	$ 3,061	150,120	14
Beginning balance at Mar. 31, 2021	182,545	$ 2,176	180,524	(155)
Balance, shares at Mar. 31, 2021		30,576
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	13,884		13,884
Unrealized loss on marketable securities, net of income tax benefit	0			0
Foreign currency translation adjustment, including income tax expense (benefit)	217			217
Stock-based compensation expense	1,225	$ 1,225	0
Common stock issued under equity compensation plan, net of shares withheld for tax payments (in shares)		201
Common stock issued under equity compensation plan, net of shares withheld for tax payments	(1,259)	$ (1,259)
Common stock issued under employee stock purchase plan, shares		17
Common stock issued under employee stock purchase plan	269	$ 269
Balance, shares at Jun. 30, 2021		30,794
Ending balance at Jun. 30, 2021	196,881	$ 2,411	194,408	62
Beginning balance at Mar. 31, 2021	182,545	$ 2,176	180,524	(155)
Balance, shares at Mar. 31, 2021		30,576
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	(4,217)
Unrealized loss on marketable securities, net of income tax benefit	(4)
Foreign currency translation adjustment, including income tax expense (benefit)	(342)
Balance, shares at Dec. 31, 2021		31,245
Ending balance at Dec. 31, 2021	180,685	$ 4,879	176,307	(501)
Beginning balance at Jun. 30, 2021	196,881	$ 2,411	194,408	62
Balance, shares at Jun. 30, 2021		30,794
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	(4,602)		(4,602)
Unrealized loss on marketable securities, net of income tax benefit	(4)			(4)
Foreign currency translation adjustment, including income tax expense (benefit)	(411)			(411)
Stock-based compensation expense	1,540	$ 1,540	0
Common stock issued under employee stock purchase plan, shares		0
Common stock issued under employee stock purchase plan	0	$ 0
Common stock issued under equity compensation plan, shares		365
Common stock issued under equity compensation plan, net of shares withheld for tax payments		$ (893)
Balance, shares at Sep. 30, 2021		31,159
Ending balance at Sep. 30, 2021	192,511	$ 3,058	189,806	(353)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	(13,499)		(13,499)
Unrealized loss on marketable securities, net of income tax benefit	0
Foreign currency translation adjustment, including income tax expense (benefit)	(148)			(148)
Stock-based compensation expense	1,846	$ 1,846	0
Common stock issued under employee stock purchase plan, shares		29
Common stock issued under employee stock purchase plan	217	$ 217
Common stock issued under equity compensation plan, shares		57
Common stock issued under equity compensation plan, net of shares withheld for tax payments		$ (242)
Balance, shares at Dec. 31, 2021		31,245
Ending balance at Dec. 31, 2021	$ 180,685	$ 4,879	$ 176,307	$ (501)

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Condensed Consolidated Statements of Stockholders' Equity - Parenthetical (Unaudited) - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Dec. 31, 2021	Dec. 31, 2020
Statement of Stockholders' Equity [Abstract]
Unrealized gain (loss) on marketable securities, tax (benefit) expense	$ 0	$ 7	$ (7)	$ 0			$ 0	$ 0
Foreign currency translation tax expense (benefit)	$ 2	$ 21	$ (13)	$ (2)	$ (13)	$ 15	$ 10	$ 4

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended				9 Months Ended		12 Months Ended
	Dec. 31, 2021	Jun. 30, 2021	Dec. 31, 2020	Jun. 30, 2020	Dec. 31, 2021	Dec. 31, 2020	Mar. 31, 2021
Cash flows from operating activities:
(Loss) income from continuing operations	$ (13,455)		$ 29,252		$ (4,006)	$ 58,235
Loss from discontinued operations	(44)		(316)		(211)	(571)
Net (loss) income	(13,499)	$ 13,884	28,936	$ (5,110)	(4,217)	57,664
Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities:
Depreciation and amortization					5,987	6,638
Benefit for allowance for doubtful accounts					(468)	(42)
Inventory lower of cost or net realizable value					291	1,409
Stock-based compensation expense					4,611	3,170
Deferred income taxes, net of valuation allowances					(2,938)	(8,037)
Other					610	(1,160)
Loss on asset dispositions					0	709
Loss on disposal group					0	20,668
Loss on other investment in non-controlled affiliates impairment					0	2,500
Changes in operating assets and liabilities:
Trade receivables					(4,298)	(61,830)
Inventories					(59,258)	(28,529)
Prepaids and other assets					10,059	(8,616)
Income taxes receivable					(13,774)	6,128
Trade payables					(36,366)	62,090
Accrued liabilities and other liabilities, including warranty obligations					8,178	12,573
Net cash (used in) provided by operating activities					(91,583)	65,335
Cash flows from investing activities:
Proceeds from sales and maturities of available-for-sale securities					73,448	0
Acquisition of business, net of cash acquired					(26,012)	0
Purchases of property, plant and equipment					(9,136)	(8,033)
Purchases of available-for-sale securities					0	(36,199)
Proceeds from the sale of disposal group					0	21,410
Net cash provided by (used in) investing activities					38,300	(22,822)
Cash flows from financing activities:
Proceeds from long-term debt					63,652	1,616
Payments on long-term debt					(22,477)	(14,815)
Payment of debt issuance costs					(577)	(19)
Payments on finance lease liabilities					(30)	0	$ 0
Proceeds from employee stock purchases					486	256
Proceeds from exercise of stock options					472	50
Tax payments related to stock award issuances					(2,866)	(2,196)
Net cash provided by (used in) financing activities					38,660	(15,108)
Effect of exchange rate changes					(1,529)	4,059
Net (decrease) increase in cash, cash equivalents and restricted cash					(16,152)	31,464
Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash at beginning of period		$ 39,780		$ 26,456	39,780	26,456	26,456
Cash, cash equivalents and restricted cash at end of period	23,628		57,920		23,628	57,920	39,780
Supplemental disclosure of cash flow information:
Cash paid for interest					639	651
Cash paid for income taxes, net					19,857	17,257
Supplemental disclosure of non-cash investing activities:
Capital expenditures incurred but not yet paid					333	908
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the total of the same amounts shown above:
Cash and cash equivalents	18,402		56,581		18,402	56,581	38,441
Restricted cash	1,339		1,339		1,339	1,339	1,339
Other assets - restricted, non-current	3,887		0		3,887	0
Total cash, cash equivalents and restricted cash	$ 23,628		$ 57,920		$ 23,628	$ 57,920	$ 39,780

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General Information

9 Months Ended

Dec. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

General Information

GENERAL INFORMATION

Basis of Consolidation and Presentation

The accompanying condensed consolidated financial statements present the financial position, results of operations and cash flows of Nautilus, Inc. and its subsidiaries, all of which are wholly owned. Intercompany transactions and balances have been eliminated in consolidation.

On December 30, 2020, our Board of Directors approved a change in our fiscal year end from December 31st to March 31st. This document reflects our third fiscal quarter, which ended December 31, 2021, of our fiscal year from April 1, 2021 through March 31, 2022.

The accompanying condensed consolidated financial statements have not been audited. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Management believes the disclosures contained herein are adequate to make the information presented not misleading. However, these condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”).

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Uncertainties regarding such estimates and assumptions are inherent in the preparation of financial statements and actual results could differ from those estimates. These uncertainties will be heightened by the COVID-19 pandemic, as we may be unable to accurately predict the impact of COVID-19 going forward and as a result our estimates may change in the near term. Further information regarding significant estimates can be found in our 2020 Form 10-K.

In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments necessary to present fairly our financial position as of December 31, 2021 and March 31, 2021, and our results of operations, comprehensive (loss) income and shareholders' equity for the three and nine-month periods ended December 31, 2021 and 2020 and our cash flows for the nine-month period ended December 31, 2021 and 2020. Interim results are not necessarily indicative of results for a full year. Our revenues typically vary seasonally, and this seasonality can have a significant effect on operating results, inventory levels and working capital needs.

Unless indicated otherwise, all information regarding our operating results pertain to our continuing operations.

Update to Significant Accounting Policies

Goodwill

Goodwill consists of the excess of acquisition costs over the fair values of net assets acquired in business combinations. We review goodwill for impairment in the fourth quarter of each year and when events or changes in circumstances indicate that the carrying amount may be impaired. For this purpose, goodwill is evaluated at the reporting unit level. For further information regarding goodwill, see Note 2, Business Acquisition and Note 8, Goodwill and Other Intangible Assets.

Recent Accounting Pronouncements

Recently Adopted Pronouncements

ASU 2019-12

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The amendments in ASU 2019-12 introduce the following new guidance: (1) provides a policy

election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax; and (2) provides guidance to evaluate whether a step-up in tax basis of goodwill relates to a business combination in which book goodwill was recognized or a separate transaction. The amendments in ASU 2019-12 make changes to the following current guidance: (1) making an intra-period allocation if there is a loss in continuing operations and a gain outside of continuing operations; (2) determining when a deferred tax liability is recognized after an investor in a foreign entity transitions to or from the equity method of accounting; (3) accounting for tax law changes and year-to-date losses in interim periods; and (4) determining how to apply the income tax guidance to franchise taxes that are partially based on income. ASU 2019-12 is effective for public business entities' fiscal years, including interim periods within those fiscal years, beginning after December 15, 2020 with early adoption permitted. Our adoption of ASU 2019-12 as of January 1, 2021 had no material impact on our financial position, results of operations or cash flows.

Recently Issued Pronouncements Not Yet Adopted

ASU 2020-04 and ASU 2021-01

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848),” which provides optional guidance related to reference rate reform and provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance is applicable for our borrowing instruments, which use London Inter-bank Offered Rate (“LIBOR”) as a reference rate, which is effective beginning on March 12, 2020, and we may elect to apply the amendments prospectively through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848),” which permits entities to apply optional expedients in Topic 848 to derivative instruments modified because of discounting transition resulting from reference rate reform. We do not expect the adoption of this guidance to have a material impact on our financial position, results of operations and cash flows.

ASU 2020-01

In January 2020, the FASB issued ASU 2020-01, “Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815).” The amendments in ASU 2020-01 clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815, which could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with Topic 825, Financial Instruments. These amendments improve current GAAP by reducing diversity in practice and increasing comparability of the accounting for these interactions. ASU 2020-01 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. We do not expect the adoption of this guidance would have a material impact on our financial position, results of operations and cash flows.

ASU 2016-13

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In May 2019, the FASB issued ASU 2019-05, which provides entities to have certain instruments with an option to irrevocably elect the fair value option. In November 2019, the FASB issued ASU 2019-11, which provides clarification and addresses specific issues about certain aspects of ASU 2016-13. In March 2020, the FASB issued ASC 2020-03, which provides an update to clarify or address specific issues. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those years. We do not expect the adoption of this guidance would have a material impact on our financial position, results of operations and cash flows.

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Business Acquisition

9 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

Business Acquisition

BUSINESS ACQUISITION

On September 17, 2021, we acquired VAY AG (“VAY”) for an aggregate purchase consideration of approximately $26.9 million using cash on hand. Headquartered in Zurich, Switzerland, VAY specializes in computer vision and AI technology solutions and has developed software solutions for human motion analysis using any normal RGB (red-green-blue) camera from a device, such as a laptop, smartphone, or tablet. With a mission to democratize professional human motion analysis, VAY enables clients in fitness and health industries to understand and analyze human movement, providing personalized feedback on repetitions and form in real-time.

We accounted for the transaction as a business combination. Goodwill from the acquisition of $24.5 million represents the excess of the purchase price over the fair value of the net tangible and intangible assets and liabilities assumed and is not deductible for tax purposes. Goodwill recorded in connection with this acquisition is primarily attributable to VAY intellectual property base, employee workforce and application to future digital technologies. Acquired assets were recorded at estimated fair value as of the acquisition date. Certain liabilities were acquired as part of the transaction and were recorded at estimated fair value.

Total acquisition costs incurred through the nine-months ended December 31, 2021 were $1.0 million and were expensed in general and administrative costs. Since the acquisition occurred on September 17, 2021, no material amount of net sales or net income related to the VAY business was included in our reported December 31, 2021 financial statements.

The sellers of VAY have the opportunity to earn additional contingency consideration subject to the achievement of continued employment over an 18 month period and a total of twenty software engineers. The contingent consideration arrangement of $3.9 million will be paid to the former owners of VAY upon achievement of these milestones and recognized as compensatory expense over the service period. An escrow account was funded for the contingency consideration and is reported on the Condensed Consolidated Balance Sheets as Other assets - restricted, non-current.

Purchase Price Allocation

The purchase price allocation was determined based on the fair values of the assets and liabilities identified as of the acquisition date and may be adjusted, within a period of no more than 12 months from the acquisition date, if the final fair values change as a result of circumstances existing at the acquisition date, and upon receipt of final appraisals and valuations. Such fair value adjustments may arise in respect of property, plant and equipment upon completion of the necessary valuations and physical verifications of such assets.

The following table summarizes the preliminary fair values of the net assets acquired and liabilities assumed and measurement period adjustments since September 17, 2021, the acquisition date (in thousands):

	Preliminary valuation at September 17, 2021		Measurement period adjustments		Adjusted valuation at December 31, 2021
Cash	$	230	$	637	$	867
Accounts receivable	9		—		9
Prepaid expenses	15		(2)		13
Deferred tax assets	58		1		59
Developed technology (included in property, plant and equipment)	3,000		—		3,000
Identifiable assets acquired	3,312		636		3,948
Accrued liabilities	187		745		932
Unearned revenue	53		3		56
Deferred tax liabilities, non-current	591		—		591
Total liabilities assumed	831		748		1,579
Net identifiable assets acquired	2,481		(112)		2,369
Goodwill	24,508		2		24,510
Total assets acquired	$	26,989	$	(110)	$	26,879

The allocation of the purchase price is preliminary and is based upon valuation information available and estimates and assumptions made as of December 31, 2021. We are still in the process of verifying data and finalizing information including valuation and recording of the assets acquired and liabilities assumed, and the resulting amount of recognized goodwill

This acquisition is not material to our net sales, results of operations or total assets during any period presented. Accordingly, our consolidated results from operations do not differ materially from historical performance as a result of this acquisition, and, therefore, pro forma results are not presented.

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Revenues

9 Months Ended

Dec. 31, 2021

Revenue from Contract with Customer [Abstract]

Revenues

REVENUES

Our revenues from contracts with customers disaggregated by revenue source, excluding sales-based taxes, were as follows (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Product sales	$	141,885	$	183,642	$	454,822	$	444,876
Extended warranties and services	1,841		2,852		4,985		6,222
Other(1)	3,532		2,765		10,003		7,740
Net sales	$	147,258	$	189,259	$	469,810	$	458,838

(1) Other revenue is primarily subscription revenue, freight and delivery and royalty income.

Our revenues disaggregated by geographic region, based on ship-to address, were as follows (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
United States	$	110,870	$	153,919	$	360,540	$	381,571
Canada	22,912		17,955		60,126		36,947
Europe, the Middle East and Africa	9,874		14,024		37,456		31,022
All other	3,602		3,361		11,688		9,298
Net sales	$	147,258	$	189,259	$	469,810	$	458,838

As of December 31, 2021, estimated revenue expected to be recognized in the future totaled $53.0 million, primarily related to customer order backlog, which includes firm orders for future shipment and unfulfilled orders to our Retail customers, as well as unfulfilled consumer orders within the Direct channel. Direct orders of $8.8 million and Retail orders of $44.2 million comprised our backlog as of December 31, 2021, compared to Direct orders of $46.5 million and Retail orders of $208.7 million as of December 31, 2020. The estimated future revenues are net of contractual rebates and consideration payable for applicable Retail customers, and net of current promotional programs and sales discounts for our Direct customers.

The following table provides information about our liabilities from contracts with customers, primarily customer deposits and deferred revenue for which advance consideration is received prior to the transfer of control. Revenue is recognized when transfer of control occurs. All customer deposits and deferred revenue received are short-term in nature and were recorded on the condensed consolidated balance sheets as accrued liabilities. Significant changes in contract liabilities balances, including revenue recognized in the reporting period that was included in opening contract liabilities, are shown below (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Balance, beginning of period	$	3,453	$	3,639	$	5,551	$	2,050
Cash additions	4,203		3,496		8,749		7,049
Revenue recognition	(1,378)		(743)		(8,022)		(2,707)
Balance, end of period	$	6,278	$	6,392	$	6,278	$	6,392

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Fair Value Measurements

9 Months Ended

Dec. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

FAIR VALUE MEASUREMENTS

Factors used in determining the fair value of financial assets and liabilities are summarized into three broad categories:

•Level 1 - observable inputs such as quoted prices (unadjusted) in active liquid markets for identical securities as of the reporting date;

•Level 2 - other significant directly or indirectly observable inputs, including quoted prices for similar securities, interest rates, prepayment speeds and credit risk, or observable market prices in markets with insufficient volume and/or infrequent transactions; and

•Level 3 - significant inputs that are generally unobservable inputs for which there is little or no market data available, including our own assumptions in determining fair value.

Assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):

	December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Derivatives
Foreign currency forward contracts	$	—	$	19	$	—	$	19
Total assets measured at fair value	$	—	$	19	$	—	$	19
Liabilities:
Derivatives
Foreign currency forward contracts	$	—	$	36	$	—	$	36
Total liabilities measured at fair value	$	—	$	36	$	—	$	36

	March 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents
Money market funds	$	9,679	$	—	$	—	$	9,679
Total cash equivalents	9,679		—		—		9,679
Available-for-Sale Securities
Commercial paper	—		9,994		—		9,994
Corporate bonds	—		8,227		—		8,227
U.S. government bonds	—		55,227		—		55,227
Total available-for-sale securities	—		73,448		—		73,448
Total assets measured at fair value	$	9,679	$	73,448	$	—	$	83,127
Liabilities:
Derivatives
Foreign currency forward contracts	$	—	$	672	$	—	$	672
Total liabilities measured at fair value	$	—	$	672	$	—	$	672

For our assets measured at fair value on a recurring basis, we recognize transfers between levels at the actual date of the event or change in circumstance that caused the transfer. There were no transfers between levels during the nine-month period ended December 31, 2021, nor for the year ended March 31, 2021.

We classify our marketable securities as available-for-sale and, accordingly, record them at fair value. Level 1 investment valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 investment valuations are obtained from inputs, other than quoted market prices in active markets for identical assets, that are directly or indirectly observable in the marketplace and quoted prices in markets with limited volume or infrequent transactions. The factors or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Unrealized holding gains and losses are excluded from earnings and are reported net of tax in comprehensive income until realized.

The fair values of our foreign currency forward contracts are calculated as the present value of estimated future cash flows using discount factors derived from relevant Level 2 market inputs, including forward curves and volatility levels.

We did not have any changes to our valuation techniques during the during the nine-month period ended December 31, 2021, nor for the year ended March 31, 2021.

We recognize or disclose the fair value of certain assets, such as non-financial assets, primarily property, plant and equipment, goodwill, other intangible assets and certain other long-lived assets in connection with impairment evaluations. All of our nonrecurring valuations use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy. Other than assets acquired, see Note 2, Business Acquisition, we determined the fair value of our developed technology included in property, plant and equipment using the cost approach which considers how much it would cost to replace an asset of equivalent utility. We did not perform any valuations on assets or liabilities that are valued at fair value on a nonrecurring basis. Other than our annual goodwill and indefinite-lived trade names impairment assessments and valuations, we did not perform any assessments or valuations on assets or liabilities that are valued at fair value on a nonrecurring basis.

As of December 31, 2021 and March 31, 2021, there were no assets or liabilities that were recorded at fair value on a nonrecurring basis.

The carrying values of cash and cash equivalents, restricted cash, trade receivables, prepaids and other current assets, trade payables and accrued liabilities approximate fair value due to their short maturities. The carrying value of our debt approximates its fair value and falls under Level 2 of the fair value hierarchy, as the interest rate is variable and based on current market rates.

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Derivatives

9 Months Ended

Dec. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

DERIVATIVES

From time to time, we enter into foreign exchange forward contracts to offset the earnings impacts of exchange rate fluctuations on certain monetary assets and liabilities. We do not enter into derivative instruments for any purpose other than to manage foreign currency exposure. That is, we do not engage in currency exchange rate speculation using derivative instruments.

We may hedge our net recognized foreign currency assets and liabilities with forward foreign exchange contracts to reduce the risk that our earnings and cash flows will be adversely affected by changes in foreign currency exchange rates. These derivative instruments hedge assets and liabilities that are denominated in foreign currencies and are carried at fair value with changes in the fair value recorded as other income. These derivative instruments do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are intended to offset gains and losses on the assets and liabilities being hedged. As of December 31, 2021, total outstanding contract notional amounts were $30.2 million and had maturities of 109 days or less.

The fair value of our derivative instruments was included in our condensed consolidated balance sheets as follows (in thousands):

	Balance Sheet Classification	As of
		December 31, 2021		March 31, 2021
Derivative instruments not designated as cash flow hedges:
Foreign currency forward contracts	Prepaids and other current assets	$	19	$	—
Foreign currency forward contracts	Accrued liabilities	36		672

The effect of derivative instruments on our condensed consolidated statements of operations was as follows (in thousands):

	Statement of Operations Classification	Three-Months Ended December 31,				Nine-Months Ended December 31,
		2021		2020		2021		2020
Derivative instruments not designated as cash flow hedges:
Income (loss) recognized in earnings	Other, net	$	797	$	(1,981)	$	(163)	$	(2,406)
Income tax (benefit) expense	Income tax (benefit) expense	(194)		488		40		594

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Inventories

9 Months Ended

Dec. 31, 2021

Inventory Disclosure [Abstract]

Inventories

INVENTORIES

Inventories are stated at the lower of cost and net realizable value, with cost determined based on the first-in, first-out method. Our inventories consisted of the following (in thousands):

	As of
	December 31, 2021		March 31, 2021
Finished goods (1)	$	121,073	$	63,918
Parts and components	7,040		4,167
Total inventories	$	128,113	$	68,085

(1) The increase in finished goods was driven by the strategic decision to increase on-hand inventory levels ahead of the fitness season given continued disruption in global logistics.

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Property, Plant and Equipment

9 Months Ended

Dec. 31, 2021

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following (in thousands):

	Estimated Useful Life (in years)			As of
				December 31, 2021		March 31, 2021
Automobiles	5			$	23	$	23
Leasehold improvements	4	to	20	3,150		3,059
Computer software and equipment	2	to	7	42,231		36,956
Machinery and equipment	3	to	5	16,466		15,699
Furniture and fixtures	5	to	20	2,635		2,586
Work in progress(1)	N/A			7,430		1,314
Total cost				71,935		59,637
Accumulated depreciation				(40,959)		(35,141)
Total property, plant and equipment, net				$	30,976	$	24,496

(1) Work in progress includes information technology assets and production tooling.

Depreciation expense was as follows (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Depreciation expense	$	1,993	$	2,114	$	5,941	$	5,772

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Goodwill and Other Intangible Assets

9 Months Ended

Dec. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The roll forward of goodwill was as follows (in thousands):

	Total
Balance, April 1, 2021	$	—
Business acquisition (Note 2)	24,508
Balance, September 30, 2021	24,508
Business acquisition (Note 2) - measurement period adjustments	2
Balance, December 31, 2021	$	24,510

ASC 350 — Intangibles — Goodwill and Other, we perform our goodwill and indefinite-lived trade names impairment valuations annually, on March 31,or sooner if triggering events are identified. While our stock price and related market capitalization remained above our reporting unit carrying values as of December 31, 2021, we are observing continued market volatility including declines in our market capitalization subsequent to December 31, 2021 which, in part, could increase the possibility of a future impairment charge. Based on our analysis, including

our market capitalization during the period, we determined there were no triggering events during the quarter ended December 31, 2021.

Should the facts and circumstances surrounding our assumptions change, our goodwill impairment analysis may fail. Assumptions and estimates to determine far values are complex and often subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts. For example, if our future operating results do not meet current forecasts or if we continue to experience a sustained decline in our market capitalization, adjusted for estimated control premium, that is determined to be indicative of a reduction in fair value one or more of our reporting units, we may be required to record future impairment charges for goodwill. An impairment could have a material effect on our consolidated balance sheet and results of operations

Other Intangible Assets

Other intangible assets consisted of the following (in thousands):

	Estimated Useful Life (in years)			As of
				December 31, 2021		March 31, 2021
Indefinite-lived trademarks	N/A			$	9,052	$	9,052
Patents	7	to	24	1,443		1,443
				10,495		10,495
Accumulated amortization - definite-lived intangible assets				(1,176)		(1,130)
Other intangible assets, net				$	9,319	$	9,365

Amortization expense was as follows (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Amortization expense	$	15	$	25	$	46	$	866

Future amortization of definite-lived intangible assets is as follows (in thousands):

2022	$	15
2023	61
2024	61
2025	61
2026	47
Thereafter	22
	$	267

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Leases

9 Months Ended

Dec. 31, 2021

Leases [Abstract]

Leases

LEASES

We have several non-cancellable operating leases, primarily for office space, that expire at various dates over the next nine years. These leases generally contain renewal options to extend for one lease term of five years. For leases that we are reasonably certain we will exercise the lease renewal options, the options were considered in determining the lease term, and associated potential option payments are included in the lease payments. The payments used in the renewal term were estimated using the percentage rate increase of historical rent payments for each location where the renewal will be exercised.

Payments due under the lease contracts include annual fixed payments for office space. Variable payments including payments for our proportionate share of the building’s property taxes, insurance, and common area maintenance are treated as non-lease components and are recognized in the period for which the costs occur.

Lease expense was as follows (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Operating lease expense	$	1,465	$	1,072	$	4,397	$	3,269
Amortization of finance lease assets	29		—		29		—
Total lease expense	$	1,494	$	1,072	$	4,426	$	3,269

Leases with an initial term of 12 months or less (“short-term lease”) are not recorded on the balance sheet and are recognized on a straight-line basis over the lease term.

Other information related to leases was as follows (dollars in thousands):

	As of
	December 31, 2021		March 31, 2021
Supplemental cash flow information related to leases was as follows:
Operating leases:
Operating lease right-of-use-assets	$	24,534	$	19,108
Operating lease liabilities	21,855		17,875
Operating lease liabilities, net of current portion	4,653		3,384
Total operating lease liabilities	$	26,508	$	21,259
Finance leases:
Property, plant and equipment, at cost	$	569	$	—
Accumulated depreciation	(29)		—
Property, plant and equipment, net	$	540	$	—
Finance lease obligations	$	423	$	—
Finance lease obligations, net of current portion	119		—
Total finance lease liabilities	$	542	$	—
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases	$	1,724	$	1,076
Finance cash flows from finance leases	30		—
Additional lease information:
ROU assets obtained in exchange for operating lease obligations	$	1,032	$	—
ROU assets obtained in exchange for finance lease obligations	569		—
Reductions to ROU assets resulting from reductions to operating lease obligations	329		268
Weighted Average Remaining Lease Term:
Operating leases	5.89		6.94
Finance leases	4.75		—
Weighted Average Discount Rate:
Operating leases	5.00%		4.95%
Finance leases	2.08%		—%

We determined the discount rate for leases using a portfolio approach to determine an incremental borrowing rate to calculate the right-of-use assets and lease liabilities.

Maturities of lease liabilities under non-cancellable leases were as follows (in thousands):

	As of
	December 31, 2021
	Operating leases		Finance leases
2022	$	1,344	$	120
2023	5,859		120
2024	5,422		120
2025	5,584		120
2026	4,520		90
Thereafter	8,158		—
Total undiscounted lease payments	30,887		570
Less imputed interest	(4,379)		(28)
Total lease liabilities	$	26,508	$	542

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Accrued Liabilities

9 Months Ended

Dec. 31, 2021

Payables and Accruals [Abstract]

Accrued Liabilities

ACCRUED LIABILITIES

Accrued liabilities consisted of the following (in thousands):

	As of
	December 31, 2021		March 31, 2021
Deferred revenue	$	6,278	$	5,551
Reserves (1)	5,230		2,624
Payroll and related liabilities	4,818		6,616
Legal settlement (2)	4,250		—
Other	4,656		4,836
Total accrued liabilities	$	25,232	$	19,627

(1) Reserves primarily consists of inventory, sales return, sales tax and product liability reserves.

(2) Legal settlement is a loss contingency accrual related to a legal settlement involving a class action lawsuit related to advertisement of our treadmills. For further information, see Note 16, Commitments and Contingencies

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Product Warranties

9 Months Ended

Dec. 31, 2021

Product Warranties Disclosures [Abstract]

Product Warranties

PRODUCT WARRANTIES

Our products carry defined warranties for defects in materials or workmanship which, according to their terms, generally obligate us to pay the costs of supplying and shipping replacement parts to customers and, in certain instances, pay for labor and other costs to service products. Outstanding product warranty periods range from thirty days to, in limited circumstances, the lifetime of certain product components. We record a liability at the time of sale for the estimated costs of fulfilling future warranty claims. If necessary, we adjust the liability for specific warranty-related matters when they become known and are reasonably estimable. Estimated warranty expense is included in cost of sales, based on historical warranty claim experience and available product quality data. Warranty expense is affected by the performance of new products, significant manufacturing or design defects not discovered until after the product is delivered to the customer, product failure rates, and higher or lower than expected repair costs. If warranty expense differs from previous estimates, or if circumstances change such that the assumptions inherent in previous estimates are no longer valid, the amount of product warranty obligations is adjusted accordingly.

Changes in our product warranty obligations were as follows (in thousands):

	Nine-Months Ended December 31,
	2021		2020
Balance, beginning of period	$	8,651	$	6,250
Accruals	4,416		2,791
Payments	(5,942)		(3,843)
Balance, end of period	$	7,125	$	5,198

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Accumulated Other Comprehensive Loss

9 Months Ended

Dec. 31, 2021

Equity [Abstract]

Accumulated Other Comprehensive Loss

ACCUMULATED OTHER COMPREHENSIVE LOSS

The following tables set forth the changes in accumulated other comprehensive loss, net of tax (in thousands):

	Unrealized Loss on Available-for-Sale Securities		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Loss
Balance, March 31, 2021	$	(8)	$	(147)	$	(155)
Current period other comprehensive loss before reclassifications	(4)		(342)		(346)
Net other comprehensive loss during period	(4)		(342)		(346)
Balance, December 31, 2021	$	(12)	$	(489)	$	(501)

	Unrealized Loss on Available-for-Sale Securities		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Loss
Balance, September 30, 2021	$	(12)	$	(341)	$	(353)
Current period other comprehensive loss before reclassifications	—		(148)		(148)
Net other comprehensive loss during period	—		(148)		(148)
Balance, December 31, 2021	$	(12)	$	(489)	$	(501)

	Unrealized Loss on Available-for-Sale Securities		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive (Loss) Income
Balance, March 31, 2020	$	—	$	(1,312)	$	(1,312)
Current period other comprehensive (loss) income before reclassifications	(4)		1,330		1,326
Net other comprehensive (loss) income during period	(4)		1,330		1,326
Balance, December 31, 2020	$	(4)	$	18	$	14

	Unrealized Loss on Available-for-Sale Securities		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive (Loss) Income
Balance, September 30, 2020	$	—	$	(742)	$	(742)
Current period other comprehensive (loss) income before reclassifications	(4)		760		756
Net other comprehensive income during period	(4)		760		756
Balance, December 31, 2020	$	(4)	$	18	$	14

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(Loss) Income Per Share

9 Months Ended

Dec. 31, 2021

Earnings Per Share [Abstract]

(Loss) Income Per Share

(LOSS) INCOME PER SHARE

Basic per share amounts were computed using the weighted average number of common shares outstanding. Diluted per share amounts were calculated using the number of basic weighted average shares outstanding increased by dilutive potential common shares related to stock-based awards, as determined by the treasury stock method. Basic income per share amounts were computed using the weighted average number of common shares outstanding. Diluted income per share amounts were calculated using the number of basic weighted average shares outstanding increased by dilutive potential common shares related to stock-based awards, as determined by the treasury stock method.

The weighted average numbers of shares outstanding used to compute (loss) income per share were as follows (in thousands):

	Three-Months Ended December 31,		Nine-Months Ended December 31,
	2021	2020	2021	2020
Shares used to calculate basic income per share	31,199	30,284	30,955	30,077
Dilutive effect of outstanding stock options, performance stock units and restricted stock units	—	2,349	—	2,259
Shares used to calculate diluted income per share	31,199	32,633	30,955	32,336

The weighted average numbers of shares outstanding listed in the table below were anti-dilutive and excluded from the computation of diluted per share due to loss from continuing operations, as such, the exercise or conversion of any potential shares would increase the number of shares in the denominator and result in a lower loss per share (in thousands):

	Three-Months Ended December 31,		Nine-Months Ended December 31,
	2021	2020	2021	2020
Restricted stock units	673	—	1,024	—
Stock options	357	—	504	—

The weighted average numbers of shares outstanding listed in the table below were anti-dilutive and excluded from the computation of diluted income per share. In the case of restricted stock units, this is because unrecognized compensation expense exceeds the current value of the awards (i.e., grant date market value was higher than current average market price). In the case of stock options, this is because the average market price did not exceed the exercise price.

These shares may be anti-dilutive potential common shares in the future (in thousands):

	Three-Months Ended December 31,		Nine-Months Ended December 31,
	2021	2020	2021	2020
Restricted stock units	1,168	31	333	15
Stock options	2	—	2	3

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Segment and Enterprise-wide Information

9 Months Ended

Dec. 31, 2021

Segment Reporting [Abstract]

Segment and Enterprise-wide Information

SEGMENT AND ENTERPRISE-WIDE INFORMATION

We have two operating segments, Direct and Retail. There were no changes in our operating segments during the nine-months ended December 31, 2021.

We evaluate performance of the operating segments using several factors, of which the primary financial measures are net sales and reportable segment contribution. Contribution is the measure of profit or loss, defined as net sales less product costs and directly attributable expenses. Directly attributable expenses include selling and marketing expenses, general and administrative expenses, and research and development expenses that are directly related to segment operations. Segment assets are those directly assigned to an operating segment's operations, primarily accounts receivable, inventories and other intangible assets. Unallocated assets primarily include cash, cash equivalents and restricted cash, derivative securities, shared information technology infrastructure, distribution

centers, corporate headquarters, prepaids and other current assets, deferred income tax assets and other assets. Capital expenditures directly attributable to the Direct and Retail segments were not significant in any period.

Following is summary information by reportable segment (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Net sales:
Direct	$	60,705	$	82,158	$	161,954	$	193,785
Retail	85,701		106,320		305,338		262,423
Royalty	852		781		2,518		2,630
Consolidated net sales	$	147,258	$	189,259	$	469,810	$	458,838
Contribution:
Direct	$	(8,980)	$	23,584	$	(4,056)	$	58,167
Retail	3,270		25,338		44,101		60,393
Royalty	852		781		2,518		2,630
Consolidated contribution	$	(4,858)	$	49,703	$	42,563	$	121,190
Reconciliation of consolidated contribution to (loss) income from continuing operations:
Consolidated contribution	$	(4,858)	$	49,703	$	42,563	$	121,190
Amounts not directly related to segments:
Operating expenses	(14,456)		(8,223)		(45,960)		(42,821)
Other expense, net	(1,142)		(3,640)		(1,930)		(4,490)
Income tax benefit (expense)	7,001		(8,588)		1,321		(15,644)
(Loss) income from continuing operations	$	(13,455)	$	29,252	$	(4,006)	$	58,235

	As of
	December 31, 2021		March 31, 2021
Assets:
Direct	$	50,585	$	47,002
Retail	198,791		146,001
Unallocated corporate	117,589		161,227
Total assets	$	366,965	$	354,230

The following customers accounted for 10% or more of total net sales as follows:

	Three-Months Ended December 31,		Nine-Months Ended December 31,
	2021	2020	2021	2020
Amazon.com	*	13.5%	14.4%	17.8%
Best Buy	14.0%	*	16.6%	*
Dick's Sporting Goods	*	14.0%	*	10.7%
*Less than 10% of total net sales.

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Borrowings

9 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

Borrowings

BORROWINGS

Wells Fargo Bank Credit Agreement

On October 29, 2021, we amended our Credit Agreement dated May 13, 2021 which amended our original Credit Agreement, dated January 31, 2020, with Wells Fargo Bank, National Association (“Wells Fargo”) and lenders from time to time party thereto (collectively with Wells Fargo the “Lenders”) (the “Credit Agreement”), pursuant to which the Lenders have agreed, among other things, to make available to us an asset-based revolving loan facility, subject to a borrowing base (the “ABL Revolving Facility”), and a term loan facility (the “Term Loan Facility” and together with the ABL Revolving Facility, the “Credit Facility”), in each case, as such amounts may increase or decrease in accordance with the terms of the Credit Agreement. The amendment increased the aggregate principal amount available under the ABL Revolving Facility from $55.0 million to $100.0 million (the “Revolver”), subject to a borrowing base. The maturity date of the Credit Facility was extended to October 29, 2026. The unamortized balance on the Term Loan was $11.5 million, as of the effective date of the amendment, and will amortize on a new 60-month straight line basis to coincide with the extended maturity date. In connection with the October 29, 2021 credit amendment we recorded $0.6 million in new financing costs as Other assets on our Condensed Consolidated Balance Sheet. The repayment of obligations under the Credit Agreement is secured by substantially all of our assets. Principal and interest amounts are required to be paid as scheduled.

Other structural improvements to the Credit Agreement include amending the definition of Springing Trigger Event to mean the greater of (i) 10.0% of the lesser of (a) the Revolver Commitment and (b) the Borrowing Base as of such date of determination and (ii) $7.5 million. The Springing Trigger Event pertains to the period in which a Fixed Charge Coverage Ratio test will apply and be tested. Consistent with the Credit Agreement before the amendment, there continues to be no additional financial maintenance covenants. Additionally, the borrowing base definitions were favorably amended to change the eligible in-transit inventory sublimit from $10.0 million to $22.5 million and the total inventory sublimit from $35.0 million to $65.0 million.

As of December 31, 2021, outstanding borrowings totaled $56.1 million, with $10.9 million and $45.2 million under our Term Loan Facility and Revolver, respectively. As of December 31, 2021, we were in compliance with the financial covenants of the Credit Agreement and $54.9 million was available for borrowing under the ABL Revolving Facility.

Interest on the Revolver will accrue at Secured Overnight Financing Rate (“SOFR”) plus a margin of 1.86% to 2.36% (based on average quarterly availability) and interest on the Term Loan Facility will accrue at SOFR plus 4.50%. As of December 31, 2021, our interest rate was 1.97% for the Revolver and 4.60% for the Term Loan Facility.

The balance sheet classification of the borrowings under the revolving loan credit facility has been determined in accordance with ASC 470, Debt. Borrowings outstanding under a revolving credit agreement that includes both a subjective acceleration clause and a requirement to maintain a springing lock-box arrangement are classified based on the provisions of ASC 470 because the lock-box remittances do not automatically reduce the debt outstanding.

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Commitments and Contingencies

9 Months Ended

Dec. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

Guarantees, Commitments and Off-Balance Sheet Arrangements

As of December 31, 2021, we had standby letters of credit of $0.9 million.

We have long lead times for inventory purchases and, therefore, must secure factory capacity from our vendors in advance. As of December 31, 2021, we had approximately $59.2 million compared to $216.3 million as of March 31, 2021 in non-cancellable market-based purchase obligations, primarily to secure additional factory capacity for inventory purchases in the next twelve months. The decrease in purchase obligations was primarily due to having received much of the inventory we have ordered for the season. Purchase obligations can vary from quarter-to-quarter and versus the same period in prior years due to a number of factors, including the amount of products that are shipped directly to Retail customer warehouses versus through Nautilus warehouses.

In the ordinary course of business, we enter into agreements that require us to indemnify counterparties against third-party claims. These may include: agreements with vendors and suppliers, under which we may indemnify them against claims arising from use of their products or services; agreements with customers, under which we may indemnify them against claims arising from their use or sale of our products; real estate and equipment leases, under which we may indemnify lessors against third-party claims relating to the use of their property; agreements

with licensees or licensors, under which we may indemnify the licensee or licensor against claims arising from their use of our intellectual property or our use of their intellectual property; and agreements with parties to debt arrangements, under which we may indemnify them against claims relating to their participation in the transactions.

The nature and terms of these indemnification obligations vary from contract to contract, and generally a maximum obligation is not stated within the agreements. We hold insurance policies that mitigate potential losses arising from certain types of indemnification obligations. Management does not deem these obligations to be significant to our financial position, results of operations or cash flows, and therefore, no related liabilities were recorded as of December 31, 2021.

Legal Matters

From time to time, in the ordinary course of business, we may be involved in various claims, lawsuits and other proceedings. These legal and tax proceedings involve uncertainty as to the eventual outcomes and losses which may be realized when one or more future events occur or fail to occur.

We regularly monitor our estimated exposure to these contingencies and, as additional information becomes known, may change our estimates accordingly. We evaluate, on a quarterly basis, developments in legal proceedings, investigations or claims that could affect the amount of any accrual, as well as any developments that would make a loss probable or reasonably possible, and whether the amount of a probable or reasonably possible loss is estimable. Among other factors, we evaluate the advice of internal and external counsel, the outcomes from similar litigation, the current status of the lawsuits (including settlement initiatives), legislative developments and other factors. Due to the numerous variables associated with these judgments and assumptions, both the precision and reliability of the resulting estimates of the related loss contingencies are subject to substantial uncertainties. Further, while we face contingencies that are reasonably possible to occur, other than as discussed below, we are unable to estimate the possible loss or range of loss at this time.

During the second quarter of fiscal 2022, we recorded a $4.7 million loss contingency related to a legal settlement involving a class action lawsuit related to advertisement of our treadmills. The settlement includes damages, a one-year free membership to JRNY®, and administrative fees and was included as a component of General and administrative on our Condensed Consolidated Statements of Operations. As of December 31, 2021, $4.3 million remained accrued and was reflected in Accrued liabilities and Other long-term liabilities on our Condensed Consolidated Balance Sheets.

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General Information (Policies)

9 Months Ended

Dec. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

New Accounting Pronouncements

Recent Accounting Pronouncements

Recently Adopted Pronouncements

ASU 2019-12

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The amendments in ASU 2019-12 introduce the following new guidance: (1) provides a policy

election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax; and (2) provides guidance to evaluate whether a step-up in tax basis of goodwill relates to a business combination in which book goodwill was recognized or a separate transaction. The amendments in ASU 2019-12 make changes to the following current guidance: (1) making an intra-period allocation if there is a loss in continuing operations and a gain outside of continuing operations; (2) determining when a deferred tax liability is recognized after an investor in a foreign entity transitions to or from the equity method of accounting; (3) accounting for tax law changes and year-to-date losses in interim periods; and (4) determining how to apply the income tax guidance to franchise taxes that are partially based on income. ASU 2019-12 is effective for public business entities' fiscal years, including interim periods within those fiscal years, beginning after December 15, 2020 with early adoption permitted. Our adoption of ASU 2019-12 as of January 1, 2021 had no material impact on our financial position, results of operations or cash flows.

Recently Issued Pronouncements Not Yet Adopted

ASU 2020-04 and ASU 2021-01

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848),” which provides optional guidance related to reference rate reform and provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance is applicable for our borrowing instruments, which use London Inter-bank Offered Rate (“LIBOR”) as a reference rate, which is effective beginning on March 12, 2020, and we may elect to apply the amendments prospectively through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848),” which permits entities to apply optional expedients in Topic 848 to derivative instruments modified because of discounting transition resulting from reference rate reform. We do not expect the adoption of this guidance to have a material impact on our financial position, results of operations and cash flows.

ASU 2020-01

In January 2020, the FASB issued ASU 2020-01, “Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815).” The amendments in ASU 2020-01 clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815, which could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with Topic 825, Financial Instruments. These amendments improve current GAAP by reducing diversity in practice and increasing comparability of the accounting for these interactions. ASU 2020-01 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. We do not expect the adoption of this guidance would have a material impact on our financial position, results of operations and cash flows.

ASU 2016-13

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In May 2019, the FASB issued ASU 2019-05, which provides entities to have certain instruments with an option to irrevocably elect the fair value option. In November 2019, the FASB issued ASU 2019-11, which provides clarification and addresses specific issues about certain aspects of ASU 2016-13. In March 2020, the FASB issued ASC 2020-03, which provides an update to clarify or address specific issues. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those years. We do not expect the adoption of this guidance would have a material impact on our financial position, results of operations and cash flows.

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Business Acquisition (Tables)

9 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

Schedule of Business Acquisitions, by Acquisition

The following table summarizes the preliminary fair values of the net assets acquired and liabilities assumed and measurement period adjustments since September 17, 2021, the acquisition date (in thousands):

	Preliminary valuation at September 17, 2021		Measurement period adjustments		Adjusted valuation at December 31, 2021
Cash	$	230	$	637	$	867
Accounts receivable	9		—		9
Prepaid expenses	15		(2)		13
Deferred tax assets	58		1		59
Developed technology (included in property, plant and equipment)	3,000		—		3,000
Identifiable assets acquired	3,312		636		3,948
Accrued liabilities	187		745		932
Unearned revenue	53		3		56
Deferred tax liabilities, non-current	591		—		591
Total liabilities assumed	831		748		1,579
Net identifiable assets acquired	2,481		(112)		2,369
Goodwill	24,508		2		24,510
Total assets acquired	$	26,989	$	(110)	$	26,879

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Revenues (Tables)

9 Months Ended

Dec. 31, 2021

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

Our revenues from contracts with customers disaggregated by revenue source, excluding sales-based taxes, were as follows (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Product sales	$	141,885	$	183,642	$	454,822	$	444,876
Extended warranties and services	1,841		2,852		4,985		6,222
Other(1)	3,532		2,765		10,003		7,740
Net sales	$	147,258	$	189,259	$	469,810	$	458,838

(1) Other revenue is primarily subscription revenue, freight and delivery and royalty income.

Our revenues disaggregated by geographic region, based on ship-to address, were as follows (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
United States	$	110,870	$	153,919	$	360,540	$	381,571
Canada	22,912		17,955		60,126		36,947
Europe, the Middle East and Africa	9,874		14,024		37,456		31,022
All other	3,602		3,361		11,688		9,298
Net sales	$	147,258	$	189,259	$	469,810	$	458,838

Contract with Customer, Asset and Liability

The following table provides information about our liabilities from contracts with customers, primarily customer deposits and deferred revenue for which advance consideration is received prior to the transfer of control. Revenue is recognized when transfer of control occurs. All customer deposits and deferred revenue received are short-term in nature and were recorded on the condensed consolidated balance sheets as accrued liabilities. Significant changes in contract liabilities balances, including revenue recognized in the reporting period that was included in opening contract liabilities, are shown below (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Balance, beginning of period	$	3,453	$	3,639	$	5,551	$	2,050
Cash additions	4,203		3,496		8,749		7,049
Revenue recognition	(1,378)		(743)		(8,022)		(2,707)
Balance, end of period	$	6,278	$	6,392	$	6,278	$	6,392

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Fair Value Measurements (Tables)

9 Months Ended

Dec. 31, 2021

Fair Value Disclosures [Abstract]

Assets measured at fair value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):

	December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Derivatives
Foreign currency forward contracts	$	—	$	19	$	—	$	19
Total assets measured at fair value	$	—	$	19	$	—	$	19
Liabilities:
Derivatives
Foreign currency forward contracts	$	—	$	36	$	—	$	36
Total liabilities measured at fair value	$	—	$	36	$	—	$	36

	March 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents
Money market funds	$	9,679	$	—	$	—	$	9,679
Total cash equivalents	9,679		—		—		9,679
Available-for-Sale Securities
Commercial paper	—		9,994		—		9,994
Corporate bonds	—		8,227		—		8,227
U.S. government bonds	—		55,227		—		55,227
Total available-for-sale securities	—		73,448		—		73,448
Total assets measured at fair value	$	9,679	$	73,448	$	—	$	83,127
Liabilities:
Derivatives
Foreign currency forward contracts	$	—	$	672	$	—	$	672
Total liabilities measured at fair value	$	—	$	672	$	—	$	672

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Derivatives (Tables)

9 Months Ended

Dec. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

The fair value of our derivative instruments was included in our condensed consolidated balance sheets as follows (in thousands):

	Balance Sheet Classification	As of
		December 31, 2021		March 31, 2021
Derivative instruments not designated as cash flow hedges:
Foreign currency forward contracts	Prepaids and other current assets	$	19	$	—
Foreign currency forward contracts	Accrued liabilities	36		672

Derivative Instruments, Gain (Loss)

The effect of derivative instruments on our condensed consolidated statements of operations was as follows (in thousands):

	Statement of Operations Classification	Three-Months Ended December 31,				Nine-Months Ended December 31,
		2021		2020		2021		2020
Derivative instruments not designated as cash flow hedges:
Income (loss) recognized in earnings	Other, net	$	797	$	(1,981)	$	(163)	$	(2,406)
Income tax (benefit) expense	Income tax (benefit) expense	(194)		488		40		594

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Inventories (Tables)

9 Months Ended

Dec. 31, 2021

Inventory Disclosure [Abstract]

Schedule of Inventories, Net of Valuation Allowances

Our inventories consisted of the following (in thousands):

	As of
	December 31, 2021		March 31, 2021
Finished goods (1)	$	121,073	$	63,918
Parts and components	7,040		4,167
Total inventories	$	128,113	$	68,085

(1) The increase in finished goods was driven by the strategic decision to increase on-hand inventory levels ahead of the fitness season given continued disruption in global logistics.

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Property, Plant, and Equipment (Tables)

9 Months Ended

Dec. 31, 2021

Property, Plant and Equipment [Abstract]

Schedule of Property, Plant and Equipment

Property, plant and equipment consisted of the following (in thousands):

	Estimated Useful Life (in years)			As of
				December 31, 2021		March 31, 2021
Automobiles	5			$	23	$	23
Leasehold improvements	4	to	20	3,150		3,059
Computer software and equipment	2	to	7	42,231		36,956
Machinery and equipment	3	to	5	16,466		15,699
Furniture and fixtures	5	to	20	2,635		2,586
Work in progress(1)	N/A			7,430		1,314
Total cost				71,935		59,637
Accumulated depreciation				(40,959)		(35,141)
Total property, plant and equipment, net				$	30,976	$	24,496

(1) Work in progress includes information technology assets and production tooling.

Schedule Of Depreciation Expense

Depreciation expense was as follows (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Depreciation expense	$	1,993	$	2,114	$	5,941	$	5,772

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Goodwill and Other Intangible Assets (Tables)

9 Months Ended

Dec. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The roll forward of goodwill was as follows (in thousands):

	Total
Balance, April 1, 2021	$	—
Business acquisition (Note 2)	24,508
Balance, September 30, 2021	24,508
Business acquisition (Note 2) - measurement period adjustments	2
Balance, December 31, 2021	$	24,510

Schedule of Finite-Lived Intangible Assets

Other intangible assets consisted of the following (in thousands):

	Estimated Useful Life (in years)			As of
				December 31, 2021		March 31, 2021
Indefinite-lived trademarks	N/A			$	9,052	$	9,052
Patents	7	to	24	1,443		1,443
				10,495		10,495
Accumulated amortization - definite-lived intangible assets				(1,176)		(1,130)
Other intangible assets, net				$	9,319	$	9,365

Schedule of Indefinite-Lived Intangible Assets

Other intangible assets consisted of the following (in thousands):

	Estimated Useful Life (in years)			As of
				December 31, 2021		March 31, 2021
Indefinite-lived trademarks	N/A			$	9,052	$	9,052
Patents	7	to	24	1,443		1,443
				10,495		10,495
Accumulated amortization - definite-lived intangible assets				(1,176)		(1,130)
Other intangible assets, net				$	9,319	$	9,365

Amortization Expense

Amortization expense was as follows (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Amortization expense	$	15	$	25	$	46	$	866

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

Future amortization of definite-lived intangible assets is as follows (in thousands):

2022	$	15
2023	61
2024	61
2025	61
2026	47
Thereafter	22
	$	267

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Leases (Tables)

9 Months Ended

Dec. 31, 2021

Leases [Abstract]

Lease, Cost

Lease expense was as follows (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Operating lease expense	$	1,465	$	1,072	$	4,397	$	3,269
Amortization of finance lease assets	29		—		29		—
Total lease expense	$	1,494	$	1,072	$	4,426	$	3,269

Lessee, Supplemental Cash Flows Information

Other information related to leases was as follows (dollars in thousands):

	As of
	December 31, 2021		March 31, 2021
Supplemental cash flow information related to leases was as follows:
Operating leases:
Operating lease right-of-use-assets	$	24,534	$	19,108
Operating lease liabilities	21,855		17,875
Operating lease liabilities, net of current portion	4,653		3,384
Total operating lease liabilities	$	26,508	$	21,259
Finance leases:
Property, plant and equipment, at cost	$	569	$	—
Accumulated depreciation	(29)		—
Property, plant and equipment, net	$	540	$	—
Finance lease obligations	$	423	$	—
Finance lease obligations, net of current portion	119		—
Total finance lease liabilities	$	542	$	—
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases	$	1,724	$	1,076
Finance cash flows from finance leases	30		—
Additional lease information:
ROU assets obtained in exchange for operating lease obligations	$	1,032	$	—
ROU assets obtained in exchange for finance lease obligations	569		—
Reductions to ROU assets resulting from reductions to operating lease obligations	329		268
Weighted Average Remaining Lease Term:
Operating leases	5.89		6.94
Finance leases	4.75		—
Weighted Average Discount Rate:
Operating leases	5.00%		4.95%
Finance leases	2.08%		—%

Lessee, Operating Lease, Liability, Maturity

Maturities of lease liabilities under non-cancellable leases were as follows (in thousands):

	As of
	December 31, 2021
	Operating leases		Finance leases
2022	$	1,344	$	120
2023	5,859		120
2024	5,422		120
2025	5,584		120
2026	4,520		90
Thereafter	8,158		—
Total undiscounted lease payments	30,887		570
Less imputed interest	(4,379)		(28)
Total lease liabilities	$	26,508	$	542

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Accrued Liabilities (Tables)

9 Months Ended

Dec. 31, 2021

Payables and Accruals [Abstract]

Schedule of Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

	As of
	December 31, 2021		March 31, 2021
Deferred revenue	$	6,278	$	5,551
Reserves (1)	5,230		2,624
Payroll and related liabilities	4,818		6,616
Legal settlement (2)	4,250		—
Other	4,656		4,836
Total accrued liabilities	$	25,232	$	19,627

(1) Reserves primarily consists of inventory, sales return, sales tax and product liability reserves.

(2) Legal settlement is a loss contingency accrual related to a legal settlement involving a class action lawsuit related to advertisement of our treadmills. For further information, see Note 16, Commitments and Contingencies

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Product Warranties (Tables)

9 Months Ended

Dec. 31, 2021

Product Warranties Disclosures [Abstract]

Schedule of Product Warranty Liability

Changes in our product warranty obligations were as follows (in thousands):

	Nine-Months Ended December 31,
	2021		2020
Balance, beginning of period	$	8,651	$	6,250
Accruals	4,416		2,791
Payments	(5,942)		(3,843)
Balance, end of period	$	7,125	$	5,198

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Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Dec. 31, 2021

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

The following tables set forth the changes in accumulated other comprehensive loss, net of tax (in thousands):

	Unrealized Loss on Available-for-Sale Securities		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Loss
Balance, March 31, 2021	$	(8)	$	(147)	$	(155)
Current period other comprehensive loss before reclassifications	(4)		(342)		(346)
Net other comprehensive loss during period	(4)		(342)		(346)
Balance, December 31, 2021	$	(12)	$	(489)	$	(501)

	Unrealized Loss on Available-for-Sale Securities		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Loss
Balance, September 30, 2021	$	(12)	$	(341)	$	(353)
Current period other comprehensive loss before reclassifications	—		(148)		(148)
Net other comprehensive loss during period	—		(148)		(148)
Balance, December 31, 2021	$	(12)	$	(489)	$	(501)

	Unrealized Loss on Available-for-Sale Securities		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive (Loss) Income
Balance, March 31, 2020	$	—	$	(1,312)	$	(1,312)
Current period other comprehensive (loss) income before reclassifications	(4)		1,330		1,326
Net other comprehensive (loss) income during period	(4)		1,330		1,326
Balance, December 31, 2020	$	(4)	$	18	$	14

	Unrealized Loss on Available-for-Sale Securities		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive (Loss) Income
Balance, September 30, 2020	$	—	$	(742)	$	(742)
Current period other comprehensive (loss) income before reclassifications	(4)		760		756
Net other comprehensive income during period	(4)		760		756
Balance, December 31, 2020	$	(4)	$	18	$	14

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(Loss) Income Per Share (Tables)

9 Months Ended

Dec. 31, 2021

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The weighted average numbers of shares outstanding used to compute (loss) income per share were as follows (in thousands):

	Three-Months Ended December 31,		Nine-Months Ended December 31,
	2021	2020	2021	2020
Shares used to calculate basic income per share	31,199	30,284	30,955	30,077
Dilutive effect of outstanding stock options, performance stock units and restricted stock units	—	2,349	—	2,259
Shares used to calculate diluted income per share	31,199	32,633	30,955	32,336

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The weighted average numbers of shares outstanding listed in the table below were anti-dilutive and excluded from the computation of diluted per share due to loss from continuing operations, as such, the exercise or conversion of any potential shares would increase the number of shares in the denominator and result in a lower loss per share (in thousands):

	Three-Months Ended December 31,		Nine-Months Ended December 31,
	2021	2020	2021	2020
Restricted stock units	673	—	1,024	—
Stock options	357	—	504	—

The weighted average numbers of shares outstanding listed in the table below were anti-dilutive and excluded from the computation of diluted income per share. In the case of restricted stock units, this is because unrecognized compensation expense exceeds the current value of the awards (i.e., grant date market value was higher than current average market price). In the case of stock options, this is because the average market price did not exceed the exercise price.

These shares may be anti-dilutive potential common shares in the future (in thousands):

	Three-Months Ended December 31,		Nine-Months Ended December 31,
	2021	2020	2021	2020
Restricted stock units	1,168	31	333	15
Stock options	2	—	2	3

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Segment and Enterprise-wide Information (Tables)

9 Months Ended

Dec. 31, 2021

Segment Reporting [Abstract]

Summary Information by Reportable Segments

Following is summary information by reportable segment (in thousands):

	Three-Months Ended December 31,				Nine-Months Ended December 31,
	2021		2020		2021		2020
Net sales:
Direct	$	60,705	$	82,158	$	161,954	$	193,785
Retail	85,701		106,320		305,338		262,423
Royalty	852		781		2,518		2,630
Consolidated net sales	$	147,258	$	189,259	$	469,810	$	458,838
Contribution:
Direct	$	(8,980)	$	23,584	$	(4,056)	$	58,167
Retail	3,270		25,338		44,101		60,393
Royalty	852		781		2,518		2,630
Consolidated contribution	$	(4,858)	$	49,703	$	42,563	$	121,190
Reconciliation of consolidated contribution to (loss) income from continuing operations:
Consolidated contribution	$	(4,858)	$	49,703	$	42,563	$	121,190
Amounts not directly related to segments:
Operating expenses	(14,456)		(8,223)		(45,960)		(42,821)
Other expense, net	(1,142)		(3,640)		(1,930)		(4,490)
Income tax benefit (expense)	7,001		(8,588)		1,321		(15,644)
(Loss) income from continuing operations	$	(13,455)	$	29,252	$	(4,006)	$	58,235

	As of
	December 31, 2021		March 31, 2021
Assets:
Direct	$	50,585	$	47,002
Retail	198,791		146,001
Unallocated corporate	117,589		161,227
Total assets	$	366,965	$	354,230

Schedules of Concentration of Risk, by Risk Factor

The following customers accounted for 10% or more of total net sales as follows:

	Three-Months Ended December 31,		Nine-Months Ended December 31,
	2021	2020	2021	2020
Amazon.com	*	13.5%	14.4%	17.8%
Best Buy	14.0%	*	16.6%	*
Dick's Sporting Goods	*	14.0%	*	10.7%
*Less than 10% of total net sales.

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General Information (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Mar. 31, 2021	Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Restricted cash	$ 1,339	$ 1,339	$ 1,339

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Business Acquisition (Details) $ in Thousands		9 Months Ended
	Sep. 17, 2021 USD ($) engineer	Dec. 31, 2021 USD ($)	Sep. 30, 2021 USD ($)	Mar. 31, 2021 USD ($)
Business Acquisition [Line Items]
Goodwill		$ 24,510	$ 24,508	$ 0
Goodwill		24,510	$ 24,508	$ 0
VAY AG
Business Acquisition [Line Items]
Purchase price	$ 26,900
Goodwill	24,508	24,510
Acquisition related costs		1,000
Contingent consideration	$ 3,900
Continued employment period	18 months
Number of software engineers | engineer	20
Cash	$ 230	867
Accounts receivable	9	9
Prepaid expenses	15	13
Deferred tax assets	58	59
Developed technology (included in property, plant and equipment)	3,000	3,000
Identifiable assets acquired	3,312	3,948
Accrued liabilities	187	932
Unearned revenue	53	56
Deferred tax liabilities, non-current	591	591
Total liabilities assumed	831	1,579
Net identifiable assets acquired	2,481	2,369
Goodwill	24,508	24,510
Total assets acquired	$ 26,989	26,879
VAY AG | Measurement period adjustments
Business Acquisition [Line Items]
Goodwill		2
Cash		637
Accounts receivable		0
Prepaid expenses		(2)
Deferred tax assets		1
Developed technology (included in property, plant and equipment)		0
Identifiable assets acquired		636
Accrued liabilities		745
Unearned revenue		3
Deferred tax liabilities, non-current		0
Total liabilities assumed		748
Net identifiable assets acquired		(112)
Goodwill		2
Total assets acquired		$ (110)

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Revenues (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Disaggregation of Revenue [Line Items]
Net sales	$ 147,258	$ 189,259	$ 469,810	$ 458,838
Remaining performance obligation	53,000		53,000
Change In Contract With Customer Liability [Roll Forward]
Balance, beginning of period	3,453	3,639	5,551	2,050
Cash additions	4,203	3,496	8,749	7,049
Revenue recognition	(1,378)	(743)	(8,022)	(2,707)
Balance, end of period	6,278	6,392	6,278	6,392
United States
Disaggregation of Revenue [Line Items]
Net sales	110,870	153,919	360,540	381,571
Canada
Disaggregation of Revenue [Line Items]
Net sales	22,912	17,955	60,126	36,947
Europe, the Middle East and Africa
Disaggregation of Revenue [Line Items]
Net sales	9,874	14,024	37,456	31,022
All other
Disaggregation of Revenue [Line Items]
Net sales	3,602	3,361	11,688	9,298
Product sales
Disaggregation of Revenue [Line Items]
Net sales	141,885	183,642	454,822	444,876
Extended warranties and services
Disaggregation of Revenue [Line Items]
Net sales	1,841	2,852	4,985	6,222
Other
Disaggregation of Revenue [Line Items]
Net sales	3,532	2,765	10,003	7,740
Retail Orders
Disaggregation of Revenue [Line Items]
Remaining performance obligation	44,200	208,700	44,200	208,700
Direct Orders
Disaggregation of Revenue [Line Items]
Remaining performance obligation	$ 8,800	$ 46,500	$ 8,800	$ 46,500

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Fair Value Measurements (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands	Dec. 31, 2021	Mar. 31, 2021
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash Equivalents		$ 9,679
Available-for-Sale Securities		73,448
Total assets measured at fair value	$ 19	83,127
Total liabilities measured at fair value	36	672
Money Market Funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash Equivalents		9,679
Commercial Paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		9,994
Corporate Bond Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		8,227
US Treasury and Government
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		55,227
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash Equivalents		9,679
Available-for-Sale Securities		0
Total assets measured at fair value	0	9,679
Total liabilities measured at fair value	0	0
Level 1 | Money Market Funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash Equivalents		9,679
Level 1 | Commercial Paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0
Level 1 | Corporate Bond Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0
Level 1 | US Treasury and Government
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash Equivalents		0
Available-for-Sale Securities		73,448
Total assets measured at fair value	19	73,448
Total liabilities measured at fair value	36	672
Level 2 | Money Market Funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash Equivalents		0
Level 2 | Commercial Paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		9,994
Level 2 | Corporate Bond Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		8,227
Level 2 | US Treasury and Government
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		55,227
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash Equivalents		0
Available-for-Sale Securities		0
Total assets measured at fair value	0	0
Total liabilities measured at fair value	0	0
Level 3 | Money Market Funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash Equivalents		0
Level 3 | Commercial Paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0
Level 3 | Corporate Bond Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0
Level 3 | US Treasury and Government
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0
Foreign currency forward contracts
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency forward contracts	19
Foreign currency forward contracts	36	672
Foreign currency forward contracts | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency forward contracts	0
Foreign currency forward contracts	0	0
Foreign currency forward contracts | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency forward contracts	19
Foreign currency forward contracts	36	672
Foreign currency forward contracts | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency forward contracts	0
Foreign currency forward contracts	$ 0	$ 0

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Derivatives - Narrative (Details) - Foreign currency forward contracts $ in Millions	9 Months Ended
	Dec. 31, 2021 USD ($)
Derivative [Line Items]
Derivative, notional amount	$ 30.2
Derivative, term of contract	109 days

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Derivatives - Fair value of derivative instruments (Details) - Foreign currency forward contracts - Derivative instruments not designated as cash flow hedges: - USD ($) $ in Thousands	Dec. 31, 2021	Mar. 31, 2021
Accrued liabilities
Derivatives, Fair Value [Line Items]
Fair value of liability derivatives	$ 36	$ 672
Prepaids and other current assets
Derivatives, Fair Value [Line Items]
Foreign currency forward contracts	$ 19	$ 0

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Derivatives - Effect On Condensed Consolidated Statements of Operations (Details) - Not Designated as Hedging Instruments - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Other, net
Derivative Instruments, Gain (Loss) [Line Items]
Income (loss) recognized in earnings	$ 797	$ (1,981)	$ (163)	$ (2,406)
Income tax expense
Derivative Instruments, Gain (Loss) [Line Items]
Income tax benefit	$ (194)	$ 488	$ 40	$ 594

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Inventories (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Mar. 31, 2021
Inventory Disclosure [Abstract]
Finished goods (1)	$ 121,073	$ 63,918
Parts and components	7,040	4,167
Total inventories	$ 128,113	$ 68,085

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Property, Plant and Equipment (Details) - USD ($) $ in Thousands	9 Months Ended
	Dec. 31, 2021	Mar. 31, 2021
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 71,935	$ 59,637
Accumulated depreciation	(40,959)	(35,141)
Total property, plant and equipment, net	30,976	24,496
Automobiles
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 23	23
Automobiles | Minimum
Property, Plant and Equipment [Line Items]
Estimated Useful Life (in years)	5 years
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 3,150	3,059
Leasehold improvements | Minimum
Property, Plant and Equipment [Line Items]
Estimated Useful Life (in years)	4 years
Leasehold improvements | Maximum
Property, Plant and Equipment [Line Items]
Estimated Useful Life (in years)	20 years
Computer software and equipment
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 42,231	36,956
Computer software and equipment | Minimum
Property, Plant and Equipment [Line Items]
Estimated Useful Life (in years)	2 years
Computer software and equipment | Maximum
Property, Plant and Equipment [Line Items]
Estimated Useful Life (in years)	7 years
Machinery and equipment
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 16,466	15,699
Machinery and equipment | Minimum
Property, Plant and Equipment [Line Items]
Estimated Useful Life (in years)	3 years
Machinery and equipment | Maximum
Property, Plant and Equipment [Line Items]
Estimated Useful Life (in years)	5 years
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 2,635	2,586
Furniture and fixtures | Minimum
Property, Plant and Equipment [Line Items]
Estimated Useful Life (in years)	5 years
Furniture and fixtures | Maximum
Property, Plant and Equipment [Line Items]
Estimated Useful Life (in years)	20 years
Work in Progress
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 7,430	$ 1,314

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Property, Plant and Equipment - Depreciation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Property, Plant and Equipment [Abstract]
Depreciation	$ 1,993	$ 2,114	$ 5,941	$ 5,772

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Goodwill and Other Intangible Assets - Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Dec. 31, 2021	Dec. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill, beginning balance	$ 24,508	$ 0
Business acquisition (Note 2)	2	24,508
Goodwill, ending balance	$ 24,510	$ 24,510

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Goodwill and Other Intangible Assets (Details) - USD ($) $ in Thousands	9 Months Ended
	Dec. 31, 2021	Mar. 31, 2021
Goodwill [Line Items]
Indefinite-lived trademarks	$ 9,052	$ 9,052
Total other intangible assets, gross	10,495	10,495
Accumulated amortization - definite-lived intangible assets	(1,176)	(1,130)
Other intangible assets, net	9,319	9,365
Patents
Goodwill [Line Items]
Finite-lived intangible assets, gross	$ 1,443	$ 1,443
Patents | Minimum
Goodwill [Line Items]
Estimated Useful Life (in years)	7 years
Patents | Maximum
Goodwill [Line Items]
Estimated Useful Life (in years)	24 years

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Goodwill and Other Intangible Assets - Patent amortization (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 15	$ 25	$ 46	$ 866

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Goodwill and Other Intangible Assets - Future intangible amortization (Details) $ in Thousands	Dec. 31, 2021 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
2022	$ 15
2023	61
2024	61
2025	61
2026	47
Thereafter	22
Finite-Lived Intangible Assets, Net	$ 267

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Leases - Additional information (Details)	Dec. 31, 2021 term
Leases [Abstract]
Operating lease, term of contract	9 years
Operating lease, number of renewal terms	1
Operating lease, renewal term	5 years

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Leases - Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Leases [Abstract]
Operating lease expense	$ 1,465	$ 1,072	$ 4,397	$ 3,269
Amortization of finance lease assets	29	0	29	0
Total lease expense	$ 1,494	$ 1,072	$ 4,426	$ 3,269

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Leases - Supplemental Cash Flow (Details) - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Mar. 31, 2021
Leases [Abstract]
Operating lease right-of-use-assets	$ 24,534		$ 19,108
Operating lease liabilities	21,855		17,875
Operating lease liabilities, net of current portion	4,653		3,384
Total lease liabilities	26,508		21,259
Property, plant and equipment, at cost	569		0
Accumulated depreciation	(29)		0
Property, plant and equipment, net	540		0
Finance lease obligations	423		0
Finance lease obligations, net of current portion	119		0
Total finance lease liabilities	542		0
Operating cash flow from operating leases	1,724		1,076
Finance cash flows from finance leases	30	$ 0	0
ROU assets obtained in exchange for operating lease obligations	1,032		0
ROU assets obtained in exchange for finance lease obligations	569		0
Reductions to ROU assets resulting from reductions to operating lease obligations	$ 329		$ 268
Operating leases, Weighted Average Remaining Lease Term	5 years 10 months 20 days		6 years 11 months 8 days
Finance leases, Weighted Average Remaining Lease Term	4 years 9 months
Operating leases, Weighted Average Discount Rate, Percent	5.00%		4.95%
Finance leases, Weighted Average Discount Rate, Percent	2.08%		0.00%

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Leases - Maturity (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Mar. 31, 2021
Operating leases
2022	$ 1,344
2023	5,859
2024	5,422
2025	5,584
2026	4,520
Thereafter	8,158
Total undiscounted lease payments	30,887
Less imputed interest	(4,379)
Total lease liabilities	26,508	$ 21,259
Finance leases
2022	120
2023	120
2024	120
2025	120
2026	90
Thereafter	0
Total undiscounted lease payments	570
Less imputed interest	(28)
Total finance lease liabilities	$ 542	$ 0

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Accrued Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Mar. 31, 2021
Payables and Accruals [Abstract]
Deferred revenue	$ 6,278	$ 5,551
Reserves	5,230	2,624
Payroll and related liabilities	4,818	6,616
Legal settlement	4,250	0
Other	4,656	4,836
Total accrued liabilities	$ 25,232	$ 19,627

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Product Warranties (Details) - USD ($) $ in Thousands	9 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Movement in Product Warranty Liability [Roll Forward]
Balance, beginning of period	$ 8,651	$ 6,250
Accruals	4,416	2,791
Payments	(5,942)	(3,843)
Balance, end of period	$ 7,125	$ 5,198
Minimum
Product Liability Contingency [Line Items]
Product warranty period	30 days

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Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	$ 192,511	$ 123,446	$ 182,545	$ 92,925
Current period other comprehensive income (loss) before reclassifications	(148)	756	(346)	1,326
Net other comprehensive income (loss) during period	(148)	756	(346)	1,326
Ending balance	180,685	153,195	180,685	153,195
Unrealized Loss on Available-for-Sale Securities
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	(12)	0	(8)	0
Current period other comprehensive income (loss) before reclassifications	0	(4)	(4)	(4)
Net other comprehensive income (loss) during period	0	(4)	(4)	(4)
Ending balance	(12)	(4)	(12)	(4)
Foreign Currency Translation Adjustments
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	(341)	(742)	(147)	(1,312)
Current period other comprehensive income (loss) before reclassifications	(148)	760	(342)	1,330
Net other comprehensive income (loss) during period	(148)	760	(342)	1,330
Ending balance	(489)	18	(489)	18
Accumulated Other Comprehensive Loss
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	(353)	(742)	(155)	(1,312)
Ending balance	$ (501)	$ 14	$ (501)	$ 14

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(Loss) Income Per Share - Weighted Average Number of Shares (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Earnings Per Share [Abstract]
Shares used to calculate basic income (loss) per share (in shares)	31,199	30,284	30,955	30,077
Dilutive effect of outstanding stock options, performance stock units and restricted stock units (in shares)	0	2,349	0	2,259
Shares used to calculate diluted income per share (in shares)	31,199	32,633	30,955	32,336

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(Loss) Income Per Share - Anti-dilutive Common Shares (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, weighted average, amount (shares)	673	0	1,024	0
Anti-dilutive securities excluded from computation of diluted income per share (in shares)	1,168	31	333	15
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, weighted average, amount (shares)	357	0	504	0
Anti-dilutive securities excluded from computation of diluted income per share (in shares)	2	0	2	3

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Segment and Enterprise-wide Information (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)	Dec. 31, 2021 USD ($) segment	Dec. 31, 2020 USD ($)	Mar. 31, 2021 USD ($)
Segment Reporting Information [Line Items]
Number of operating segments | segment			2
Net sales	$ 147,258	$ 189,259	$ 469,810	$ 458,838
Contribution	(4,858)	49,703
Reconciliation of consolidated contribution to income (loss) from continuing operations:
Operating expenses	(49,230)	(36,391)	(130,871)	(114,836)
Income tax benefit (expense)	7,001	(8,588)	1,321	(15,644)
(Loss) income from continuing operations	(13,455)	29,252	(4,006)	58,235
Assets	366,965		366,965		$ 354,230
Unallocated corporate
Reconciliation of consolidated contribution to income (loss) from continuing operations:
Assets	117,589		117,589		161,227
Operating Segments
Segment Reporting Information [Line Items]
Net sales	147,258	189,259	469,810	458,838
Contribution	(4,858)	49,703	42,563	121,190
Operating Segments | Royalty
Segment Reporting Information [Line Items]
Net sales	852	781	2,518	2,630
Unallocated royalty income, net	852	781	2,518	2,630
Operating Segments | Direct
Segment Reporting Information [Line Items]
Net sales	60,705	82,158	161,954	193,785
Contribution	(8,980)	23,584	(4,056)	58,167
Reconciliation of consolidated contribution to income (loss) from continuing operations:
Assets	50,585		50,585		47,002
Operating Segments | Retail
Segment Reporting Information [Line Items]
Net sales	85,701	106,320	305,338	262,423
Contribution	3,270	25,338	44,101	60,393
Reconciliation of consolidated contribution to income (loss) from continuing operations:
Assets	198,791		198,791		$ 146,001
Corporate, Non-Segment
Reconciliation of consolidated contribution to income (loss) from continuing operations:
Operating expenses	14,456	8,223	(45,960)	(42,821)
Other expense, net	(1,142)	(3,640)	(1,930)	(4,490)
Income tax benefit (expense)	$ (7,001)	$ 8,588	$ 1,321	$ (15,644)

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Segment and Enterprise-wide Information - Concentration (Details) - Sales Revenue, Net - Customer Concentration Risk	3 Months Ended		9 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Amazon.com
Concentration Risk [Line Items]
Concentration risk, percentage		13.50%	14.40%	17.80%
Best Buy
Concentration Risk [Line Items]
Concentration risk, percentage	14.00%		16.60%
Dick's Sporting Goods
Concentration Risk [Line Items]
Concentration risk, percentage		14.00%		10.70%

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Borrowings (Loan Agreement) (Details) - Line of Credit - Wells Fargo Bank - USD ($)	Oct. 29, 2021	May 13, 2021	Dec. 31, 2021	Oct. 28, 2021
Line of Credit Facility [Line Items]
Amount outstanding			$ 56,100,000
Springing trigger event, threshold percent of total commitment or borrowing base	10.00%
Springing trigger event, amount	$ 7,500,000
In-transit inventory sublimit	22,500,000			$ 10,000,000
Total inventory sublimit	65,000,000			$ 35,000,000
ABL Revolving Credit Facility
Line of Credit Facility [Line Items]
Maximum revolving secured credit line	100,000,000	$ 55,000,000
Amount outstanding			45,200,000
Avaiable for borrowing under line of credit			$ 54,900,000
Borrowing rate under agreement, at period end			1.97%
Term Loan
Line of Credit Facility [Line Items]
Amount outstanding	$ 11,500,000		$ 10,900,000
Debt instrument, term	60 months
Financing costs	$ 600,000
Borrowing rate under agreement, at period end			4.60%
London Interbank Offered Rate (LIBOR) | Term Loan
Line of Credit Facility [Line Items]
Basis spread on variable rate		4.50%
Minimum | London Interbank Offered Rate (LIBOR) | ABL Revolving Credit Facility
Line of Credit Facility [Line Items]
Basis spread on variable rate		1.86%
Maximum | London Interbank Offered Rate (LIBOR) | ABL Revolving Credit Facility
Line of Credit Facility [Line Items]
Basis spread on variable rate		2.36%

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Commitments and Contingencies (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2021	Dec. 31, 2021	Mar. 31, 2021
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Standby letters of credit outstanding		$ 900
Loss contingency	$ 4,700
Loss contingency liability		4,300
Inventories
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Non-cancelable market-based purchase obligation		$ 59,200	$ 216,300