UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 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 in ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, no par value NLS New York Stock Exchange 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 September 30, 2020 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 ...

PART I [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The financial statements for the period ended June 30, 2020, reflect significant revenue growth and improved profitability, driven by strong home fitness demand [Condensed Consolidated Balance Sheets](index=4&type=section&id=NAUTILUS%2C%20INC.%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of June 30, 2020, the balance sheet reflects a significant increase in cash to $45.7 million and a sharp decrease in inventories, with Octane Fitness® reclassified as held-for-sale Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $45,656 | $11,070 | | Inventories | $21,310 | $54,768 | | Current assets held-for-sale | $29,054 | $— | | Total assets | $204,971 | $220,479 | | **Liabilities & Equity** | | | | Trade payables | $45,207 | $74,255 | | Total liabilities | $115,855 | $129,883 | | Total shareholders' equity | $89,116 | $90,596 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=NAUTILUS%2C%20INC.%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) For Q2 2020, net sales surged 93.5% to $114.2 million, gross profit increased 170.6%, and net loss significantly narrowed to $5.1 million from $78.9 million year-over-year Q2 2020 vs Q2 2019 Performance (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net sales | $114,188 | $59,004 | | Gross profit | $47,396 | $17,517 | | Loss on disposal group / impairment | $29,013 | $72,008 | | Operating loss | $(7,106) | $(85,414) | | Net loss | $(5,110) | $(78,868) | | Diluted net loss per share | $(0.17) | $(2.66) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=NAUTILUS%2C%20INC.%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the six months ended June 30, 2020, net cash provided by operating activities was $46.5 million, a significant reversal from the prior year, driven by improved working capital and a smaller net loss Six Months Ended June 30 Cash Flow Summary (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $46,538 | $(37,216) | | Net cash (used in) provided by investing activities | $(4,659) | $17,897 | | Net cash used in financing activities | $(520) | $(11,002) | | **Net change in cash, cash equivalents and restricted cash** | **$36,782** | **$(30,204)** | [Notes to Condensed Consolidated Financial Statements](index=14&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) The notes detail significant accounting policies and events, including the classification of Octane Fitness® as held-for-sale, strong revenue growth across all regions and channels, a new financing agreement, and a tax benefit from the CARES Act - The company classified its Octane Fitness® business as held-for-sale as of June 30, 2020, resulting in a loss on the disposal group of **$29.0 million**[32](index=32&type=chunk) - On January 31, 2020, the company entered into a new Credit Agreement with Wells Fargo, providing a **$55.0 million** asset-based revolving loan facility and a **$15.0 million** term loan facility[79](index=79&type=chunk) - As a result of the CARES Act, the company recorded a **$3.2 million** income tax benefit in the first quarter of 2020 associated with the remeasurement of its net operating loss (NOL) carryback[88](index=88&type=chunk) - Non-cancelable purchase obligations increased significantly to **$127.7 million** as of June 30, 2020, from **$28.4 million** at year-end 2019, primarily to secure factory capacity for inventory[90](index=90&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the nearly doubled Q2 sales to strong home-fitness demand driven by COVID-19, leading to expanded gross margins, improved liquidity, and a strategic focus on digital transformation and the potential sale of Octane Fitness® [Overview](index=34&type=section&id=Overview) The company experienced continued strong demand for home-fitness products in Q2 2020 due to COVID-19, leading to nearly doubled sales, a focus on digital transformation via JRNY®, and the classification of Octane Fitness® as held-for-sale - Q2 2020 sales were nearly **double** Q2 2019 sales, driven by strong demand for home-fitness products due to the COVID-19 pandemic[102](index=102&type=chunk) - The company is continuing its digital transformation by integrating its JRNY® platform into key new products with the goal of offering digital experiences for a subscription fee[103](index=103&type=chunk) - The Octane Fitness® disposal group was classified as held-for-sale, resulting in a non-cash charge of **$29.0 million**[105](index=105&type=chunk) [Results of Operations](index=37&type=section&id=RESULTS%20OF%20OPERATIONS) Net sales for Q2 2020 increased 93.5% to $114.2 million, driven by strong growth in both Direct and Retail segments, with gross margin expanding to 41.5% and operating expenses decreasing due to lower charges and reduced media spend Q2 2020 Net Sales Growth by Segment | Segment | Q2 2020 Net Sales | YoY Change ($) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Direct | $50,433 | +$29,599 | +142.1% | | Retail | $62,948 | +$25,495 | +68.1% | | **Total** | **$114,188** | **+$55,184** | **+93.5%** | - Direct segment cardio product sales grew **183.4%** in Q2, led by connected-fitness bikes (Bowflex® C6, Schwinn® IC4) and the Max Trainer®[124](index=124&type=chunk) - Selling and marketing expenses decreased by **29.4%** in Q2 2020, primarily due to a **$4.2 million** reduction in media spend as the company pulled back on paid advertising given strong organic demand and inventory scarcity[127](index=127&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company's liquidity strengthened significantly, with cash reaching $47.9 million and $28.6 million available under its ABL facility, driven by $46.5 million in cash from operations and a sharp decrease in inventory due to high demand - As of June 30, 2020, the company had **$47.9 million** in cash, cash equivalents, and restricted cash, plus **$28.6 million** available for borrowing[155](index=155&type=chunk) - Cash provided by operating activities was **$46.5 million** for the first six months of 2020, compared to cash used of **$37.2 million** in the same period of 2019[156](index=156&type=chunk) - Inventory decreased to **$21.3 million** from **$54.8 million** at year-end 2019 due to a surge in demand for home-fitness products[158](index=158&type=chunk) - The company had approximately **$127.7 million** in non-cancelable purchase obligations as of June 30, 2020, to secure additional factory capacity for inventory purchases[168](index=168&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate fluctuations on variable-rate debt and foreign exchange rate volatility, which are mitigated by foreign exchange forward contracts with a notional amount of $35.8 million as of June 30, 2020 - The company is exposed to interest rate risk as its credit facilities charge interest based on benchmark rates such as LIBOR[176](index=176&type=chunk) - To manage foreign currency exposure, the company enters into foreign exchange forward contracts, with total notional amounts of **$35.8 million** outstanding as of June 30, 2020[177](index=177&type=chunk) [Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2020, with no material changes in internal control over financial reporting during the quarter - Management, including the Principal Executive Officer and Principal Financial Officer, concluded that disclosure controls and procedures were effective as of the end of the period[179](index=179&type=chunk) - There were no material changes in internal control over financial reporting during the three months ended June 30, 2020[180](index=180&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) As of the filing date, Nautilus, Inc. was not involved in any material legal proceedings, though it may be involved in ordinary course claims and lawsuits - As of the date of filing this Quarterly Report on Form 10-Q, the company was not involved in any material legal proceedings[181](index=181&type=chunk) [Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors to address the significant and ongoing adverse impact of the COVID-19 pandemic on operations, supply chains, and distribution systems, noting the uncertainty of its ultimate effect - A new risk factor has been added concerning health epidemics, specifically the COVID-19 pandemic, which has had and could continue to have an adverse impact on operations, supply chains, and distribution systems[183](index=183&type=chunk) - The COVID-19 pandemic is adversely affecting operations, and the company has experienced and expects to continue to experience unpredictable reductions in demand for certain products and services[186](index=186&type=chunk) - Due to the pandemic, the company has been unable to satisfy certain customer orders, leading to delays, and the ultimate impact on the business cannot be reasonably estimated at this time[187](index=187&type=chunk) [Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files for interactive data submission - The exhibits filed include CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1) and XBRL interactive data files (Exhibits 101.INS, 101.SCH, etc.)[191](index=191&type=chunk) [Signatures](index=54&type=section&id=Signatures) The Quarterly Report on Form 10-Q was duly authorized and signed on August 10, 2020, on behalf of Nautilus, Inc. by its principal executive and financial officers - The report was signed on August 10, 2020, by James Barr IV, Chief Executive Officer, and Aina E. Konold, Chief Financial Officer[194](index=194&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Unaudited Q1 2020 consolidated financial statements show a shift to net income, driven by sales growth and reduced operating expenses [Condensed Consolidated Financial Statements](index=4&type=section&id=Condensed%20Consolidated%20Financial%20Statements) Consolidated Balance Sheets (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $23,024k | $11,070k | | Total current assets | $113,073k | $129,193k | | Total assets | $204,370k | $220,479k | | **Liabilities & Equity** | | | | Total current liabilities | $52,358k | $88,708k | | Total liabilities | $111,445k | $129,883k | | Total shareholders' equity | $92,925k | $90,596k | Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net sales | $93,722k | $84,400k | | Gross profit | $35,597k | $35,842k | | Operating loss | $(560)k | $(10,167)k | | Net income (loss) | $2,184k | $(8,575)k | | Diluted net income (loss) per share | $0.07 | $(0.29) | - Net cash provided by operating activities was **$6.3 million** for Q1 2020, a significant improvement from the **$24.5 million** used in operating activities in Q1 2019[14](index=14&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, revenue, segment performance, new credit agreement, and CARES Act tax benefits Revenue by Source (in thousands) | Revenue by Source | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Product sales | $89,882k | $80,132k | | Extended warranties & services | $1,935k | $2,469k | | Other | $1,905k | $1,799k | | **Total Net Sales** | **$93,722k** | **$84,400k** | Segment Performance (in thousands) | Segment Performance | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | **Net Sales** | | | | Direct | $47,141k | $46,714k | | Retail | $45,613k | $36,821k | | **Contribution** | | | | Direct | $1,809k | $(4,542)k | | Retail | $2,389k | $(722)k | - On January 31, 2020, the company entered into a **new credit agreement with Wells Fargo**, providing an asset-based revolving loan facility of up to **$55.0 million** and a term loan of **$15.0 million**. Proceeds were used to extinguish the prior credit agreement[70](index=70&type=chunk)[71](index=71&type=chunk) - The company recorded a **$3.2 million** income tax benefit in Q1 2020 as a result of the CARES Act, which allows for the carryback of net operating losses (NOLs) to years with higher tax rates (**35%**)[77](index=77&type=chunk)[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2020 results, highlighting 11.0% net sales growth from home-fitness demand and a reduced operating loss [Overview and Results of Operations](index=25&type=section&id=Overview%20and%20Results%20of%20Operations) Q1 2020 net sales rose 11.0% from strong retail demand, reversing operating loss to net income despite lower gross margin Financial Performance Summary (in thousands) | Metric | Q1 2020 | Q1 2019 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $93,722k | $84,400k | 11.0% | | Gross Profit | $35,597k | $35,842k | (0.7)% | | Operating Expenses | $36,157k | $46,009k | (21.4)% | | Operating Loss | $(560)k | $(10,167)k | (94.5)% | | Net Income (Loss) | $2,184k | $(8,575)k | - | - The Retail segment's net sales increased by **23.9%** YoY, driven by strong demand for Bowflex® SelectTech® weights and Schwinn® IC4 connected-fitness bikes through e-commerce and curbside pick-up platforms despite retail store closures[96](index=96&type=chunk)[116](index=116&type=chunk) - The Direct segment's net sales grew **0.9%** YoY. Strong growth in strength products (**+58.5%**) was largely offset by a decline in cardio products (**-9.4%**) as strong demand for new bikes could not fully offset declines in Max Trainer® sales[95](index=95&type=chunk)[112](index=112&type=chunk) - Selling and marketing expenses decreased by **$9.4 million (27.5%)** YoY, primarily due to a **$6.5 million** reduction in media advertising spend, reflecting an increased focus on return on investment[120](index=120&type=chunk)[121](index=121&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2020, the company had $26.5 million cash and $18.0 million available credit, with operating cash flow significantly improving - As of March 31, 2020, the company had **$26.5 million** in cash, cash equivalents, and restricted cash, and **$18.0 million** available for borrowing under its ABL Revolving Facility[131](index=131&type=chunk) - Cash provided by operating activities was **$6.3 million** for Q1 2020, a stark contrast to the **$24.5 million** used in Q1 2019, primarily due to improved operating income and working capital management[132](index=132&type=chunk) - Inventories decreased by **$19.8 million** from year-end 2019 to **$34.9 million**, attributed to business seasonality and a surge in demand[134](index=134&type=chunk) - A new financing agreement with Wells Fargo was established on January 31, 2020, providing an ABL Revolving Facility up to **$55.0 million** and a Term Loan Facility of **$15.0 million**[140](index=140&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risks include interest rate changes on variable-rate debt and foreign exchange fluctuations, mitigated by forward contracts - The company's main market risks are interest rate changes on its variable-rate debt and foreign currency exchange rate fluctuations[151](index=151&type=chunk) - As of March 31, 2020, the company had **$28.4 million** in outstanding balances on its credit facilities, which are subject to interest rate fluctuations[152](index=152&type=chunk) - To mitigate foreign exchange risk, the company uses forward contracts, with total notional amounts of **$7.8 million** outstanding at the end of the quarter[153](index=153&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal controls - Based on an evaluation by management, including the Principal Executive Officer and Principal Financial Officer, the company's disclosure controls and procedures were deemed **effective** as of March 31, 2020[155](index=155&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[156](index=156&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) As of the filing date, the company was not involved in any material legal proceedings, though ordinary course claims may exist - As of the filing date of the Form 10-Q, Nautilus was **not involved in any material legal proceedings**[158](index=158&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) Updates 2019 Form 10-K risk factors, focusing on COVID-19 pandemic's adverse impacts on operations, supply chains, and market uncertainty - The COVID-19 pandemic is identified as a **significant risk** that has created worldwide operational and economic volatility, with an uncertain and unpredictable impact on the business[160](index=160&type=chunk)[161](index=161&type=chunk) - The pandemic is **adversely affecting operations, supply chains, and distribution systems**, leading to the company being unable to satisfy certain customer orders and causing product delivery delays[163](index=163&type=chunk)[164](index=164&type=chunk) - **Retail store closures** and other public health measures could adversely impact results, and the disruption of global financial markets could potentially reduce the company's ability to access capital[162](index=162&type=chunk)[165](index=165&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with Form 10-Q, including the new Credit Agreement, CEO/CFO certifications, and XBRL data files - Key exhibits filed with the report include the **Credit Agreement with Wells Fargo** dated January 31, 2020, CEO and CFO certifications pursuant to the Securities Exchange Act, and XBRL data files[167](index=167&type=chunk)

Part I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Nautilus, Inc. is a global fitness solutions company operating through Direct and Retail segments, focusing on product innovation and connected-fitness [Overview and Business Strategy](index=4&type=section&id=Overview%20and%20Business%20Strategy) Nautilus is a global fitness company focused on enhancing product lines with personalized connected-fitness and expanding international sales - The company operates through two distinct business segments: Direct (direct-to-consumer) and Retail (through a network of independent companies)[7](index=7&type=chunk) - Long-term strategy includes enhancing product lines with personalized connected-fitness, investing in the JRNY digital platform, expanding international retail sales, and maximizing royalty revenues from brand licensing[9](index=9&type=chunk) [Products and Business Segments](index=5&type=section&id=Products%20and%20Business%20Segments) The company markets cardiovascular and strength fitness products under key brands, with consumer cardio products driving **77% of 2019 revenue** - Key brands include Nautilus®, Bowflex®, Octane Fitness®, Schwinn®, and the new digital platform JRNY™[13](index=13&type=chunk) - Sales of consumer cardio products accounted for approximately **77% of the company's revenue** in 2019[14](index=14&type=chunk) [Sales, Marketing, and Innovation](index=5&type=section&id=Sales%2C%20Marketing%2C%20and%20Innovation) The Direct segment primarily sells Bowflex® cardio products, while the Retail segment offers a comprehensive line, with innovation focused on connected-fitness and the JRNY digital platform - Cardio product sales represented **82% of Direct channel revenues** in 2019[16](index=16&type=chunk) Research and Development Expenses | Year | R&D Expense (in millions) | | :--- | :--- | | 2019 | $14.3 | | 2018 | $16.8 | [Operations and Competition](index=6&type=section&id=Operations%20and%20Competition) The company's sales are seasonal, products are sourced from third-party Asian manufacturers, and the fitness market is highly competitive - Sales are typically strongest in the fourth quarter and weakest in the second quarter[24](index=24&type=chunk) - All products are produced by third-party manufacturers, primarily located in Asia, with inventory lead times of two to three months[25](index=25&type=chunk) - Principal competitors include ICON Health & Fitness, Johnson Health Tech, Peloton, Beach Body, Life Fitness, Precor, and Technogym[33](index=33&type=chunk) [Intellectual Property, Backlog, and Significant Customers](index=7&type=section&id=Intellectual%20Property%2C%20Backlog%2C%20and%20Significant%20Customers) Nautilus holds numerous trademarks and patents, experienced a doubled customer order backlog in 2019, and relies on Amazon.com and Dick's Sporting Goods as major customers - The company owns key trademarks such as Nautilus®, Bowflex®, Max Trainer®, and Octane Fitness®, and holds patents with expiration dates ranging from 2021 to 2037[36](index=36&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) - Customer order backlog increased from **$2.9 million** in 2018 to **$5.8 million** in 2019, primarily due to strong demand for new connected fitness products[44](index=44&type=chunk) Significant Customer Sales as % of Total Net Sales | Customer | 2019 | 2018 | | :--- | :--- | :--- | | Amazon.com | 15.2% | 11.5% | | Dick's Sporting Goods | 11.7% | 13.8% | [Item 1A. Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including multi-year revenue decline, reliance on key customers and products, supply chain disruptions, data privacy concerns, and intense market competition - The company is experiencing a **multi-year revenue decline**, primarily in its Direct business, and faces unprecedented competition Strategic initiatives to address these challenges are underway but success is not guaranteed[61](index=61&type=chunk)[62](index=62&type=chunk) - A significant portion of revenue is derived from a few **large retail customers** and the **Max Trainer® product line**, making the company vulnerable to customer loss or a decline in this product's sales[57](index=57&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk) - Substantially all products are manufactured by **third parties in Asia**, exposing the company to risks from supply chain disruptions, such as the **novel coronavirus (COVID-19)**, and changes in **international trade policy and tariffs**[87](index=87&type=chunk)[89](index=89&type=chunk) - The company faces risks related to **data privacy and security**, as its digital platforms process personal health and fitness information, making it subject to regulations like **HIPAA and GDPR**[73](index=73&type=chunk)[74](index=74&type=chunk) - The market is **highly competitive** with limited barriers to entry Competitors may have **greater resources or develop superior products**, limiting the company's ability to compete effectively[100](index=100&type=chunk)[101](index=101&type=chunk) [Item 2. Properties](index=18&type=section&id=Item%202.%20Properties) Nautilus, Inc. leases all its properties, including corporate headquarters, R&D facilities, and distribution centers, which are deemed adequate for current operations Summary of Leased Properties | Company | Location | Primary Function(s) | | :--- | :--- | :--- | | Nautilus | Washington | Corporate headquarters, call center, retail store, R&D | | Octane | Minnesota | Design, sales, service, R&D | | Nautilus | Ohio | Warehouse and distribution | | Nautilus | Oregon | Warehouse and distribution | | Nautilus | China | Quality assurance and software engineering | | Octane | Netherlands | Sales and service office | [Item 3. Legal Proceedings](index=18&type=section&id=Item%203.%20Legal%20Proceedings) As of the filing date of this Form 10-K, Nautilus, Inc. was not involved in any material legal proceedings - The company was not involved in any material legal proceedings as of the filing date[121](index=121&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=19&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Nautilus's common stock trades on the NYSE under 'NLS', with no dividends paid in 2019 or 2018, and **$14.0 million** remaining for share repurchases - The company's common stock is listed on the New York Stock Exchange under the symbol "NLS"[123](index=123&type=chunk) - No dividends were paid on common stock in 2019 or 2018[124](index=124&type=chunk) - As of December 31, 2019, approximately **$14.0 million** remained available for share repurchases under the program authorized through February 21, 2020[125](index=125&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2019, Nautilus experienced a significant **22.0%** net sales decrease and a **$100.5 million** operating loss, driven by impairment charges and segment declines, leading to reduced liquidity and a debt covenant breach [Overview of 2019 Performance](index=19&type=section&id=Overview%20of%202019%20Performance) The company's 2019 performance saw a **22.0% decrease in net sales** to **$309.3 million** and an operating loss of **$100.5 million**, primarily due to a **$72.0 million** impairment charge 2019 vs 2018 Key Financial Metrics | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Net Sales | $309.3M (-22.0%) | $396.8M | | Operating (Loss) Income | ($100.5M) | $20.8M | | Net (Loss) Income per Diluted Share | ($3.13) | $0.48 | - The increase in operating expenses and the resulting operating loss were primarily driven by a goodwill and intangible impairment charge of **$72.0 million**[133](index=133&type=chunk)[134](index=134&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) Net sales decreased **22.0%** to **$309.3 million** in 2019, with Direct segment sales down **35.3%** and Retail down **10.3%**, leading to a **39.2%** decline in gross profit and a **$100.5 million** operating loss Net Sales by Segment (in thousands) | Segment | 2019 | 2018 | % Change | | :--- | :--- | :--- | :--- | | Direct | $119,651 | $184,925 | (35.3)% | | Retail | $186,584 | $208,092 | (10.3)% | | **Total** | **$309,285** | **$396,753** | **(22.0)%** | Gross Profit and Margin by Segment | Segment | 2019 Gross Profit | 2019 Gross Margin | 2018 Gross Profit | 2018 Gross Margin | | :--- | :--- | :--- | :--- | :--- | | Direct | $59.6M | 49.8% | $111.5M | 60.3% | | Retail | $48.0M | 25.7% | $66.5M | 32.0% | - A non-cash goodwill and indefinite-lived intangible assets impairment charge of **$72.0 million** was recognized in the second quarter of 2019, significantly impacting operating results[165](index=165&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity significantly decreased in 2019, with cash and cash equivalents falling to **$11.1 million** and **$22.6 million** cash used in operating activities, leading to a debt covenant breach Cash and Liquidity Position (Year-End) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Cash and Cash Equivalents | $11.1M | $63.5M | | Cash (Used in) Provided by Operating Activities | ($22.6M) | $21.3M | - Inventories decreased by **$13.7 million** to **$54.8 million** as of December 31, 2019, reflecting efforts to align inventory levels with sales trends[173](index=173&type=chunk) - The company breached the **minimum fixed charge coverage ratio covenant** on its 2019 Chase Credit Agreement at year-end, but cured this post-balance sheet by obtaining **new financing in January 2020**[184](index=184&type=chunk)[410](index=410&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from interest rate and foreign currency fluctuations, which it mitigates using derivative instruments like foreign exchange forward contracts totaling **$33.2 million** - Primary market risks are from changes in interest rates affecting debt and investments, and foreign currency exchange rate fluctuations[195](index=195&type=chunk) - The company uses foreign exchange forward contracts to hedge against currency fluctuations, with total notional amounts of **$33.2 million** outstanding at year-end 2019[197](index=197&type=chunk) - Derivative instruments are used solely for managing interest rate or foreign currency exposure, not for speculative purposes[198](index=198&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=30&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for 2019 and 2018, reflecting a **$92.8 million** net loss in 2019, a substantial asset reduction, and negative operating cash flow [Consolidated Financial Statements](index=33&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements for 2019 show a significant downturn, with total assets decreasing to **$220.5 million** and a net loss of **$92.8 million**, alongside negative operating cash flow Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Total Current Assets | $129,193 | $191,462 | | Goodwill | $0 | $63,452 | | Total Assets | $220,479 | $332,944 | | Total Liabilities | $129,883 | $150,348 | | Total Shareholders' Equity | $90,596 | $182,596 | Consolidated Statement of Operations Highlights (in thousands) | Account | 2019 | 2018 | | :--- | :--- | :--- | | Net Sales | $309,285 | $396,753 | | Gross Profit | $110,583 | $181,740 | | Operating (Loss) Income | ($100,544) | $20,769 | | Net (Loss) Income | ($92,800) | $14,658 | | Diluted (Loss) Income per Share | ($3.13) | $0.48 | Consolidated Statement of Cash Flows Highlights (in thousands) | Account | 2019 | 2018 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($22,573) | $21,251 | | Net cash provided by investing activities | $12,819 | $18,713 | | Net cash used in financing activities | ($17,490) | ($28,582) | [Notes to Consolidated Financial Statements](index=38&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, including the adoption of new lease standards, a **$63.5 million** goodwill impairment, and a subsequent new **$70.0 million** credit facility in January 2020 - The company adopted the new lease accounting standard (ASU 2016-02, Topic 842) on January 1, 2019, recognizing additional operating lease liabilities of approximately **$25 million** with corresponding right-of-use assets[278](index=278&type=chunk)[283](index=283&type=chunk) - A non-cash goodwill impairment charge of **$63.5 million** was recorded in the second quarter of 2019, reducing the **goodwill balance to zero**[332](index=332&type=chunk) - An **$8.5 million** non-cash impairment charge was recorded in Q2 2019 on the **indefinite-lived Octane Fitness brand name trademark**[245](index=245&type=chunk)[315](index=315&type=chunk) - Subsequent to year-end, on January 31, 2020, the company entered into a new credit agreement with Wells Fargo for a **$55.0 million** revolving facility and a **$15.0 million** term loan, refinancing its previous facility with Chase[407](index=407&type=chunk) [Item 9A. Controls and Procedures](index=71&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were **effective as of December 31, 2019** - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were **effective as of December 31, 2019**[413](index=413&type=chunk) - Management concluded that the company's internal control over financial reporting was **effective as of December 31, 2019**, based on the COSO framework[416](index=416&type=chunk) Part III [Items 10, 11, 13, and 14](index=72&type=section&id=Item%2010%2C%2011%2C%2013%2C%2014) Information regarding directors, executive officers, corporate governance, executive compensation, related transactions, and accounting fees is incorporated by reference from the **2020 Proxy Statement** - Information regarding directors, executive officers, corporate governance, executive compensation, related transactions, and accounting fees is incorporated by reference from the **2020 Proxy Statement**[421](index=421&type=chunk)[422](index=422&type=chunk)[426](index=426&type=chunk)[427](index=427&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=72&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This item details the company's equity compensation plans as of December 31, 2019, showing **855,000** securities to be issued at a **$2.30** weighted-average exercise price Equity Compensation Plan Information (as of Dec 31, 2019) | Plan Category | Securities to be Issued Upon Exercise (a) | Weighted-Average Exercise Price (b) | Securities Remaining for Future Issuance (c) | | :--- | :--- | :--- | :--- | | Approved by security holders | 855,000 | $2.30 | 1,058,000 | | Not approved by security holders | 0 | N/A | 0 | | **Total** | **855,000** | **$2.30** | **1,058,000** | Part IV [Item 15. Exhibits and Financial Statement Schedules](index=73&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed with the Form 10-K, including the auditor's report and various corporate governance documents - This section provides an index to the financial statements and a list of all exhibits filed with the Form 10-K[428](index=428&type=chunk)[430](index=430&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 NAUTILUS, INC. (Exact name of Registrant as specified in its charter) Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, no par value NLS New York Stock Exchange 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 September 30, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES E ...

Part I. Financial Information [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Nautilus reported a **$78.9 million** net loss for Q2 2019, primarily due to a **$72.0 million** impairment charge, significantly impacting assets and cash flow Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $7,921 | $38,125 | | Inventories | $51,981 | $68,465 | | Goodwill | $0 | $63,452 | | Total assets | $193,267 | $332,944 | | Total liabilities | $98,351 | $150,348 | | Total shareholders' equity | $94,916 | $182,596 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Q2 2019 | Q2 2018 | | :--- | :--- | :--- | | Net sales | $59,004 | $75,498 | | Gross profit | $17,517 | $33,648 | | Goodwill and intangible impairment charge | $72,008 | $0 | | Operating (loss) income | $(85,414) | $1,202 | | Net (loss) income | $(78,868) | $928 | | Diluted net (loss) income per share | $(2.66) | $0.03 | Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Cash Flow Category | 2019 | 2018 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(37,216) | $16,589 | | Net cash provided by (used in) investing activities | $17,897 | $(6,935) | | Net cash used in financing activities | $(11,002) | $(11,031) | | Decrease in cash and cash equivalents | $(30,204) | $(1,964) | - In the second quarter of 2019, the company recorded a non-cash goodwill and indefinite-lived intangible assets impairment charge of **$72.0 million** (**$63.5 million** for goodwill and **$8.5 million** for intangibles), triggered by a decline in the company's market value[71](index=71&type=chunk)[57](index=57&type=chunk)[58](index=58&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes **24.6%** net sales decline and a **$72.0 million** impairment charge to a **$95.6 million** operating loss, leading to tightened liquidity and a new **$40.0 million** credit facility [Results of Operations](index=32&type=section&id=MD%26A_Results_of_Operations) Q2 2019 net sales fell **21.8%** to **$59.0 million** due to Direct segment weakness and a **$72.0 million** impairment charge, causing an **$85.4 million** operating loss Net Sales by Segment (Q2, in thousands) | Segment | Q2 2019 | Q2 2018 | Change (%) | | :--- | :--- | :--- | :--- | | Direct | $20,834 | $34,824 | (40.2)% | | Retail | $37,453 | $39,185 | (4.4)% | | **Total** | **$59,004** | **$75,498** | **(21.8)%** | Gross Margin by Segment (Q2) | Segment | Q2 2019 | Q2 2018 | Change (bps) | | :--- | :--- | :--- | :--- | | Direct | 43.3% | 59.6% | (1,630) | | Retail | 20.8% | 29.1% | (830) | - The decline in Direct segment sales was attributed to a drop in sales of Bowflex MaxTrainer® products and a **45.8%** year-over-year reduction in media spending for the quarter as the company prepared for a new marketing campaign[132](index=132&type=chunk)[140](index=140&type=chunk) - General and administrative expenses increased in Q2 2019 primarily due to a **$2.0 million** litigation settlement expense[141](index=141&type=chunk) - A non-cash goodwill and intangible assets impairment charge of **$72.0 million** was recorded in Q2 2019 due to a decline in the company's market value[144](index=144&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=MD%26A_Liquidity_and_Capital_Resources) H1 2019 liquidity weakened, with cash dropping to **$7.9 million** and **$37.2 million** cash used in operations, requiring a new **$40.0 million** credit facility - Cash and investments decreased from **$63.5 million** at December 31, 2018, to **$7.9 million** as of June 30, 2019[150](index=150&type=chunk) - Cash used in operating activities was **$37.2 million** for the first six months of 2019, compared to cash provided by operations of **$16.6 million** in the same period of 2018, primarily due to decreased operating performance[151](index=151&type=chunk) - The company entered into a new **$40.0 million** revolving line of credit agreement with JPMorgan Chase Bank, expiring in March 2022; as of June 30, 2019, **$20.6 million** was outstanding and **$14.1 million** was available for borrowing[95](index=95&type=chunk)[98](index=98&type=chunk)[159](index=159&type=chunk) - No shares were repurchased in the first six months of 2019, with **$14.0 million** remaining available for future repurchases under the existing program[167](index=167&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risks are interest rate changes on **$20.6 million** variable-rate debt and foreign currency fluctuations, with a **10%** adverse change not expected to be material - Primary market risks are identified as changes in interest rates on variable-rate debt and foreign exchange rate fluctuations[173](index=173&type=chunk) - As of June 30, 2019, the company had **$20.6 million** in variable-rate debt outstanding[174](index=174&type=chunk) - The company terminated its **$20.0 million** interest rate swap during the quarter[175](index=175&type=chunk) - A hypothetical **10%** adverse movement in interest rates or foreign currency exchange rates is not expected to have a material impact on the company's financials[176](index=176&type=chunk) [Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2019, with no material changes to internal control over financial reporting - Management, including the Principal Executive Officer and Principal Financial and Accounting Officer, concluded that the company's disclosure controls and procedures were effective as of the end of the period[177](index=177&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[178](index=178&type=chunk) Part II. Other Information [Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no involvement in any material legal proceedings as of the filing date of this report - The company reports that it was not involved in any material legal proceedings as of the filing date[180](index=180&type=chunk) [Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's 2018 Annual Report on Form 10-K were reported - There has not been a material change to the risk factors as set forth in the company's 2018 Form 10-K[181](index=181&type=chunk) [Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including an employment agreement, officer certifications, and XBRL data files - Exhibits filed include an employment agreement for James Barr IV, CEO and Controller certifications (Rule 13a-14(a) and Section 906), and XBRL interactive data files[182](index=182&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 NAUTILUS, INC. (Exact name of Registrant as specified in its charter) FORM 10-Q (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 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 Washington 94-3002667 (State or other jurisdict ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 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 | --- | --- | --- | |------------------------------------------------------|---------------------------------------------- ...