0001078207March 312022Q3FALSE00010782072021-04-012021-12-3100010782072022-02-04xbrli:shares00010782072021-12-31iso4217:USD00010782072021-03-31iso4217:USDxbrli:shares00010782072021-10-012021-12-3100010782072020-10-012020-12-3100010782072020-04-012020-12-310001078207us-gaap:CommonStockMember2021-03-310001078207us-gaap:RetainedEarningsMember2021-03-310001078207us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001078207us-gaap:RetainedEarningsMember2021-04-012021-06-3000010782072021-04-012021-06-300001078207us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001078207us-gaap:CommonStockMember2021-04-012021-06-300001078207us-gaap:CommonStockMember2021-06-300001078207us-gaap:RetainedEarningsMember2021-06-300001078207us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-3000010782072021-06-300001078207us-gaap:RetainedEarningsMember2021-07-012021-09-3000010782072021-07-012021-09-300001078207us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-012021-09-300001078207us-gaap:CommonStockMember2021-07-012021-09-300001078207us-gaap:CommonStockMember2021-09-300001078207us-gaap:RetainedEarningsMember2021-09-300001078207us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-09-3000010782072021-09-300001078207us-gaap:RetainedEarningsMember2021-10-012021-12-310001078207us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-10-012021-12-310001078207us-gaap:CommonStockMember2021-10-012021-12-310001078207us-gaap:CommonStockMember2021-12-310001078207us-gaap:RetainedEarningsMember2021-12-310001078207us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001078207us-gaap:CommonStockMember2020-03-310001078207us-gaap:RetainedEarningsMember2020-03-310001078207us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-3100010782072020-03-310001078207us-gaap:RetainedEarningsMember2020-04-012020-06-3000010782072020-04-012020-06-300001078207us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-012020-06-300001078207us-gaap:CommonStockMember2020-04-012020-06-300001078207us-gaap:CommonStockMember2020-06-300001078207us-gaap:RetainedEarningsMember2020-06-300001078207us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-3000010782072020-06-300001078207us-gaap:RetainedEarningsMember2020-07-012020-09-3000010782072020-07-012020-09-300001078207us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-012020-09-300001078207us-gaap:CommonStockMember2020-07-012020-09-300001078207us-gaap:CommonStockMember2020-09-300001078207us-gaap:RetainedEarningsMember2020-09-300001078207us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-3000010782072020-09-300001078207us-gaap:RetainedEarningsMember2020-10-012020-12-310001078207us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-10-012020-12-310001078207us-gaap:CommonStockMember2020-10-012020-12-310001078207us-gaap:CommonStockMember2020-12-310001078207us-gaap:RetainedEarningsMember2020-12-310001078207us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-3100010782072020-12-310001078207nls:VAYAGMember2021-09-172021-09-170001078207nls:VAYAGMember2021-09-170001078207nls:VAYAGMember2021-04-012021-12-31nls:engineer0001078207srt:RestatementAdjustmentMembernls:VAYAGMember2021-12-310001078207nls:VAYAGMember2021-12-310001078207nls:ProductSalesMember2021-10-012021-12-310001078207nls:ProductSalesMember2020-10-012020-12-310001078207nls:ProductSalesMember2021-04-012021-12-310001078207nls:ProductSalesMember2020-04-012020-12-310001078207nls:ExtendedWarrantiesAndServicesMember2021-10-012021-12-310001078207nls:ExtendedWarrantiesAndServicesMember2020-10-012020-12-310001078207nls:ExtendedWarrantiesAndServicesMember2021-04-012021-12-310001078207nls:ExtendedWarrantiesAndServicesMember2020-04-012020-12-310001078207nls:OtherProductsAndServicesMember2021-10-012021-12-310001078207nls:OtherProductsAndServicesMember2020-10-012020-12-310001078207nls:OtherProductsAndServicesMember2021-04-012021-12-310001078207nls:OtherProductsAndServicesMember2020-04-012020-12-310001078207country:US2021-10-012021-12-310001078207country:US2020-10-012020-12-310001078207country:US2021-04-012021-12-310001078207country:US2020-04-012020-12-310001078207country:CA2021-10-012021-12-310001078207country:CA2020-10-012020-12-310001078207country:CA2021-04-012021-12-310001078207country:CA2020-04-012020-12-310001078207nls:EuropeTheMiddleEastAndAfricaMember2021-10-012021-12-310001078207nls:EuropeTheMiddleEastAndAfricaMember2020-10-012020-12-310001078207nls:EuropeTheMiddleEastAndAfricaMember2021-04-012021-12-310001078207nls:EuropeTheMiddleEastAndAfricaMember2020-04-012020-12-310001078207nls:AllOtherCountriesMember2021-10-012021-12-310001078207nls:AllOtherCountriesMember2020-10-012020-12-310001078207nls:AllOtherCountriesMember2021-04-012021-12-310001078207nls:AllOtherCountriesMember2020-04-012020-12-310001078207nls:DirectOrdersMember2021-12-310001078207nls:RetailOrdersMember2021-12-310001078207nls:DirectOrdersMember2020-12-310001078207nls:RetailOrdersMember2020-12-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:ForeignExchangeForwardMember2021-12-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMember2021-12-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:ForeignExchangeForwardMember2021-12-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignExchangeForwardMember2021-12-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2021-12-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-12-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2021-12-310001078207us-gaap:FairValueMeasurementsRecurringMember2021-12-310001078207us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2021-03-310001078207us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-03-310001078207us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2021-03-310001078207us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMember2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:CommercialPaperMember2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:CommercialPaperMember2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:CommercialPaperMember2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueInputsLevel1Member2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueInputsLevel2Member2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueInputsLevel3Member2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMember2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel1Member2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel2Member2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel3Member2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasuryAndGovernmentMember2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:ForeignExchangeForwardMember2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeForwardMember2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:ForeignExchangeForwardMember2021-03-310001078207us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignExchangeForwardMember2021-03-310001078207us-gaap:ForeignExchangeForwardMember2021-12-310001078207us-gaap:ForeignExchangeForwardMember2021-04-012021-12-310001078207us-gaap:ForwardContractsMemberus-gaap:PrepaidExpensesAndOtherCurrentAssetsMemberus-gaap:NondesignatedMember2021-12-310001078207us-gaap:ForwardContractsMemberus-gaap:PrepaidExpensesAndOtherCurrentAssetsMemberus-gaap:NondesignatedMember2021-03-310001078207us-gaap:AccruedLiabilitiesMemberus-gaap:ForwardContractsMemberus-gaap:NondesignatedMember2021-12-310001078207us-gaap:AccruedLiabilitiesMemberus-gaap:ForwardContractsMemberus-gaap:NondesignatedMember2021-03-310001078207us-gaap:OtherOperatingIncomeExpenseMemberus-gaap:NondesignatedMember2021-10-012021-12-310001078207us-gaap:OtherOperatingIncomeExpenseMemberus-gaap:NondesignatedMember2020-10-012020-12-310001078207us-gaap:OtherOperatingIncomeExpenseMemberus-gaap:NondesignatedMember2021-04-012021-12-310001078207us-gaap:OtherOperatingIncomeExpenseMemberus-gaap:NondesignatedMember2020-04-012020-12-310001078207nls:IncomeTaxBenefitMemberus-gaap:NondesignatedMember2021-10-012021-12-310001078207nls:IncomeTaxBenefitMemberus-gaap:NondesignatedMember2020-10-012020-12-310001078207nls:IncomeTaxBenefitMemberus-gaap:NondesignatedMember2021-04-012021-12-310001078207nls:IncomeTaxBenefitMemberus-gaap:NondesignatedMember2020-04-012020-12-310001078207srt:MinimumMemberus-gaap:AutomobilesMember2021-04-012021-12-310001078207us-gaap:AutomobilesMember2021-12-310001078207us-gaap:AutomobilesMember2021-03-310001078207us-gaap:LeaseholdImprovementsMembersrt:MinimumMember2021-04-012021-12-310001078207us-gaap:LeaseholdImprovementsMembersrt:MaximumMember2021-04-012021-12-310001078207us-gaap:LeaseholdImprovementsMember2021-12-310001078207us-gaap:LeaseholdImprovementsMember2021-03-310001078207srt:MinimumMemberus-gaap:ComputerEquipmentMember2021-04-012021-12-310001078207srt:MaximumMemberus-gaap:ComputerEquipmentMember2021-04-012021-12-310001078207us-gaap:ComputerEquipmentMember2021-12-310001078207us-gaap:ComputerEquipmentMember2021-03-310001078207us-gaap:MachineryAndEquipmentMembersrt:MinimumMember2021-04-012021-12-310001078207us-gaap:MachineryAndEquipmentMembersrt:MaximumMember2021-04-012021-12-310001078207us-gaap:MachineryAndEquipmentMember2021-12-310001078207us-gaap:MachineryAndEquipmentMember2021-03-310001078207us-gaap:FurnitureAndFixturesMembersrt:MinimumMember2021-04-012021-12-310001078207us-gaap:FurnitureAndFixturesMembersrt:MaximumMember2021-04-012021-12-310001078207us-gaap:FurnitureAndFixturesMember2021-12-310001078207us-gaap:FurnitureAndFixturesMember2021-03-310001078207us-gaap:ConstructionInProgressMember2021-12-310001078207us-gaap:ConstructionInProgressMember2021-03-310001078207srt:MinimumMemberus-gaap:PatentsMember2021-04-012021-12-310001078207srt:MaximumMemberus-gaap:PatentsMember2021-04-012021-12-310001078207us-gaap:PatentsMember2021-12-310001078207us-gaap:PatentsMember2021-03-31nls:term00010782072020-04-012021-03-31xbrli:pure0001078207srt:MinimumMember2021-04-012021-12-310001078207us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2021-03-310001078207us-gaap:AccumulatedTranslationAdjustmentMember2021-03-310001078207us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2021-04-012021-12-310001078207us-gaap:AccumulatedTranslationAdjustmentMember2021-04-012021-12-310001078207us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2021-12-310001078207us-gaap:AccumulatedTranslationAdjustmentMember2021-12-310001078207us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2021-09-300001078207us-gaap:AccumulatedTranslationAdjustmentMember2021-09-300001078207us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2021-10-012021-12-310001078207us-gaap:AccumulatedTranslationAdjustmentMember2021-10-012021-12-310001078207us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-03-310001078207us-gaap:AccumulatedTranslationAdjustmentMember2020-03-310001078207us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-04-012020-12-310001078207us-gaap:AccumulatedTranslationAdjustmentMember2020-04-012020-12-310001078207us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-12-310001078207us-gaap:AccumulatedTranslationAdjustmentMember2020-12-310001078207us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-09-300001078207us-gaap:AccumulatedTranslationAdjustmentMember2020-09-300001078207us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-10-012020-12-310001078207us-gaap:AccumulatedTranslationAdjustmentMember2020-10-012020-12-310001078207us-gaap:RestrictedStockUnitsRSUMember2021-10-012021-12-310001078207us-gaap:RestrictedStockUnitsRSUMember2020-10-012020-12-310001078207us-gaap:RestrictedStockUnitsRSUMember2021-04-012021-12-310001078207us-gaap:RestrictedStockUnitsRSUMember2020-04-012020-12-310001078207us-gaap:EmployeeStockOptionMember2021-10-012021-12-310001078207us-gaap:EmployeeStockOptionMember2020-10-012020-12-310001078207us-gaap:EmployeeStockOptionMember2021-04-012021-12-310001078207us-gaap:EmployeeStockOptionMember2020-04-012020-12-31nls:segment0001078207nls:DirectMemberus-gaap:OperatingSegmentsMember2021-10-012021-12-310001078207nls:DirectMemberus-gaap:OperatingSegmentsMember2020-10-012020-12-310001078207nls:DirectMemberus-gaap:OperatingSegmentsMember2021-04-012021-12-310001078207nls:DirectMemberus-gaap:OperatingSegmentsMember2020-04-012020-12-310001078207nls:RetailSegmentMemberus-gaap:OperatingSegmentsMember2021-10-012021-12-310001078207nls:RetailSegmentMemberus-gaap:OperatingSegmentsMember2020-10-012020-12-310001078207nls:RetailSegmentMemberus-gaap:OperatingSegmentsMember2021-04-012021-12-310001078207nls:RetailSegmentMemberus-gaap:OperatingSegmentsMember2020-04-012020-12-310001078207nls:UnallocatedRoyaltyIncomeMemberus-gaap:OperatingSegmentsMember2021-10-012021-12-310001078207nls:UnallocatedRoyaltyIncomeMemberus-gaap:OperatingSegmentsMember2020-10-012020-12-310001078207nls:UnallocatedRoyaltyIncomeMemberus-gaap:OperatingSegmentsMember2021-04-012021-12-310001078207nls:UnallocatedRoyaltyIncomeMemberus-gaap:OperatingSegmentsMember2020-04-012020-12-310001078207us-gaap:OperatingSegmentsMember2021-10-012021-12-310001078207us-gaap:OperatingSegmentsMember2020-10-012020-12-310001078207us-gaap:OperatingSegmentsMember2021-04-012021-12-310001078207us-gaap:OperatingSegmentsMember2020-04-012020-12-310001078207us-gaap:CorporateNonSegmentMember2021-10-012021-12-310001078207us-gaap:CorporateNonSegmentMember2020-10-012020-12-310001078207us-gaap:CorporateNonSegmentMember2021-04-012021-12-310001078207us-gaap:CorporateNonSegmentMember2020-04-012020-12-310001078207nls:DirectMemberus-gaap:OperatingSegmentsMember2021-12-310001078207nls:DirectMemberus-gaap:OperatingSegmentsMember2021-03-310001078207nls:RetailSegmentMemberus-gaap:OperatingSegmentsMember2021-12-310001078207nls:RetailSegmentMemberus-gaap:OperatingSegmentsMember2021-03-310001078207nls:UnallocatedCorporateMember2021-12-310001078207nls:UnallocatedCorporateMember2021-03-310001078207us-gaap:SalesRevenueNetMembernls:Amazon.comMemberus-gaap:CustomerConcentrationRiskMember2020-10-012020-12-310001078207us-gaap:SalesRevenueNetMembernls:Amazon.comMemberus-gaap:CustomerConcentrationRiskMember2021-04-012021-12-310001078207us-gaap:SalesRevenueNetMembernls:Amazon.comMemberus-gaap:CustomerConcentrationRiskMember2020-04-012020-12-310001078207nls:BestBuyMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2021-10-012021-12-310001078207nls:BestBuyMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2021-04-012021-12-310001078207nls:DicksSportingGoodsMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2020-10-012020-12-310001078207nls:DicksSportingGoodsMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2020-04-012020-12-310001078207us-gaap:RevolvingCreditFacilityMembernls:WellsFargoBankMemberus-gaap:LineOfCreditMember2021-05-130001078207us-gaap:RevolvingCreditFacilityMembernls:WellsFargoBankMemberus-gaap:LineOfCreditMember2021-10-290001078207nls:TermLoanMembernls:WellsFargoBankMemberus-gaap:LineOfCreditMember2021-10-290001078207nls:TermLoanMembernls:WellsFargoBankMemberus-gaap:LineOfCreditMember2021-10-292021-10-290001078207nls:WellsFargoBankMemberus-gaap:LineOfCreditMember2021-10-292021-10-290001078207nls:WellsFargoBankMemberus-gaap:LineOfCreditMember2021-10-290001078207nls:WellsFargoBankMemberus-gaap:LineOfCreditMember2021-10-280001078207nls:WellsFargoBankMemberus-gaap:LineOfCreditMember2021-12-310001078207nls:TermLoanMembernls:WellsFargoBankMemberus-gaap:LineOfCreditMember2021-12-310001078207us-gaap:RevolvingCreditFacilityMembernls:WellsFargoBankMemberus-gaap:LineOfCreditMember2021-12-310001078207us-gaap:RevolvingCreditFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMembernls:WellsFargoBankMemberus-gaap:LineOfCreditMembersrt:MinimumMember2021-05-132021-05-130001078207us-gaap:RevolvingCreditFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMembernls:WellsFargoBankMemberus-gaap:LineOfCreditMembersrt:MaximumMember2021-05-132021-05-130001078207nls:TermLoanMemberus-gaap:LondonInterbankOfferedRateLIBORMembernls:WellsFargoBankMemberus-gaap:LineOfCreditMember2021-05-132021-05-130001078207us-gaap:InventoriesMember2021-12-310001078207us-gaap:InventoriesMember2021-03-31

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM10-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 classTrading Symbol(s)Name of each exchange on which registered
 Common Stock, no par valueNLSNew 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 companyEmerging 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
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 6.




Table of Contents
PART I.    FINANCIAL INFORMATION
    
Item 1.     Financial Statements

NAUTILUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands)
 As of
 December 31, 2021March 31, 2021
Assets
Cash and cash equivalents$18,402 $38,441 
Restricted cash1,339 1,339 
Available-for-sale securities 73,448 
Trade receivables, net of allowances of $657 and $1,177
93,611 88,657 
Inventories128,113 68,085 
Prepaids and other current assets10,981 25,840 
Income taxes receivable8,103  
Total current assets260,549 295,810 
Property, plant and equipment, net 30,976 24,496 
Operating lease right-of-use assets24,534 19,108 
Goodwill24,510  
Other intangible assets, net9,319 9,365 
Deferred income tax assets, non-current4,554 2,144 
Income taxes receivable, non-current5,673  
Other assets - restricted, non-current3,887  
Other assets2,963 3,307 
Total assets$366,965 $354,230 
Liabilities and Shareholders' Equity
Trade payables$61,850 $98,878 
Accrued liabilities25,232 19,627 
Operating lease liabilities, current portion4,653 3,384 
Financing lease liabilities, current portion119  
Warranty obligations, current portion5,724 7,243 
Income taxes payable, current portion914 5,709 
Debt payable, current portion, net of unamortized debt issuance costs of $83 and $83
2,217 3,000 
Total current liabilities100,709 137,841 
Operating lease liabilities, non-current21,855 17,875 
Financing lease liabilities, non-current423  
Warranty obligations, non-current1,401 1,408 
Income taxes payable, non-current3,997 3,657 
Other non-current liabilities4,301 607 
Debt payable, non-current, net of unamortized debt issuance costs of $173 and $236
53,594 10,297 
Total liabilities186,280 171,685 
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 earnings176,307 180,524 
Accumulated other comprehensive loss(501)(155)
Total shareholders' equity180,685 182,545 
Total liabilities and shareholders' equity$366,965 $354,230 

See accompanying Notes to Condensed Consolidated Financial Statements.
1

Table of Contents
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,
 2021202020212020
Net sales$147,258 $189,259 $469,810 $458,838 
Cost of sales117,342 111,388 342,336 265,633 
Gross profit29,916 77,871 127,474 193,205 
Operating expenses:
Selling and marketing32,395 21,998 75,634 53,651 
General and administrative11,456 10,364 39,355 28,520 
Research and development5,379 4,029 15,882 11,997 
Loss on disposal group   20,668 
Total operating expenses49,230 36,391 130,871 114,836 
Operating (loss) income(19,314)41,480 (3,397)78,369 
Other expense:
Interest income1 7 34 9 
Interest expense(354)(280)(1,149)(871)
Other, net(789)(3,367)(815)(3,628)
Total other expense, net(1,142)(3,640)(1,930)(4,490)
(Loss) income from continuing operations before income taxes(20,456)37,840 (5,327)73,879 
Income tax (benefit) expense(7,001)8,588 (1,321)15,644 
(Loss) income from continuing operations(13,455)29,252 (4,006)58,235 
Discontinued operations:
Loss from discontinued operations before income taxes(118)(65)(195)(128)
Income tax (benefit) expense of discontinued operations(74)251 16 443 
Loss from discontinued operations(44)(316)(211)(571)
Net (loss) income$(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:
Basic31,199 30,284 30,955 30,077 
Diluted31,199 32,633 30,955 32,336 




See accompanying Notes to Condensed Consolidated Financial Statements.
2

Table of Contents
NAUTILUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited and in thousands)
 
Three-Months Ended
December 31,
Nine-Months Ended
December 31,
 2021202020212020
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

Table of Contents
NAUTILUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited and in thousands)
Common StockRetained EarningsAccumulated Other Comprehensive (Loss) IncomeTotal Shareholders' Equity
SharesAmount
Balance, March 31, 202130,576 $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 plan17 269 — — 269 
Balance, June 30, 202130,794 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, 202131,159 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 plan29 217 — — 217 
Balance, December 31, 202131,245 $4,879 $176,307 $(501)$180,685 
4

Table of Contents
Common StockRetained EarningsAccumulated Other Comprehensive LossTotal Shareholders' Equity
SharesAmount
Balance, March 31, 202029,817 $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 plan63 83 — — 83 
Balance, June 30, 202029,967 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, 202030,257 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 plan31 173 — — 173 
Balance, December 31, 202030,330 $3,061 $150,120 $14 $153,195 

See accompanying Notes to Condensed Consolidated Financial Statements.
5

Table of Contents
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 amortization5,987  6,638 
Benefit for allowance for doubtful accounts(468) (42)
Inventory lower of cost or net realizable value291 1,409 
Stock-based compensation expense4,611  3,170 
Deferred income taxes, net of valuation allowances (2,938) (8,037)
Other610 (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 assets10,059  (8,616)
Income taxes receivable(13,774) 6,128 
Trade payables(36,366) 62,090 
Accrued liabilities and other liabilities, including warranty obligations8,178  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 securities73,448  
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 activities38,300  (22,822)
Cash flows from financing activities: 
Proceeds from long-term debt63,652 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 purchases486 256 
Proceeds from exercise of stock options472 50 
Tax payments related to stock award issuances(2,866)(2,196)
Net cash provided by (used in) financing activities38,660  (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 period39,780  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, net19,857  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 cash1,339 1,339 
Other assets - restricted, non-current3,887  
Total cash, cash equivalents and restricted cash$23,628 $57,920 
See accompanying Notes to Condensed Consolidated Financial Statements.
6

Table of Contents
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

Table of Contents
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

Table of Contents
(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

Table of Contents
Preliminary valuation at September 17, 2021Measurement period adjustmentsAdjusted valuation at December 31, 2021
Cash$230 $637 $867 
Accounts receivable9  9 
Prepaid expenses15 (2)13 
Deferred tax assets58 1 59 
Developed technology (included in property, plant and equipment) 3,000  3,000 
  Identifiable assets acquired3,312 636 3,948 
Accrued liabilities187 745 932 
Unearned revenue53 3 56 
Deferred tax liabilities, non-current591  591 
   Total liabilities assumed831 748 1,579 
Net identifiable assets acquired2,481 (112)2,369 
Goodwill24,508 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,
2021202020212020
Product sales$141,885 $183,642 $454,822 $444,876 
Extended warranties and services1,841 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.

10

Table of Contents
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,
2021202020212020
United States$110,870 $153,919 $360,540 $381,571 
Canada22,912 17,955 60,126 36,947 
Europe, the Middle East and Africa9,874 14,024 37,456 31,022 
All other3,602 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,
2021202020212020
Balance, beginning of period$3,453 $3,639 $5,551 $2,050 
Cash additions4,203 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.
 
11

Table of Contents
Assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):
December 31, 2021
Level 1Level 2Level 3Total
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 1Level 2Level 3Total
Assets:
Cash Equivalents
Money market funds$9,679 $ $ $9,679 
Total cash equivalents9,679   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.

12

Table of Contents
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 ClassificationAs of
December 31, 2021March 31, 2021
Derivative instruments not designated as cash flow hedges:
Foreign currency forward contractsPrepaids and other current assets$19 $ 
Foreign currency forward contractsAccrued liabilities36 672 

The effect of derivative instruments on our condensed consolidated statements of operations was as follows (in thousands):
Statement of Operations ClassificationThree-Months Ended
December 31,
Nine-Months Ended
December 31,
2021202020212020
Derivative instruments not designated as cash flow hedges:
Income (loss) recognized in earningsOther, net$797 $(1,981)$(163)$(2,406)
Income tax (benefit) expenseIncome tax (benefit) expense(194)488 40 594 

13

Table of Contents
(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, 2021March 31, 2021
Finished goods (1)
$121,073 $63,918 
Parts and components7,040 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, 2021March 31, 2021
Automobiles