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Gold/Mining/Energy : Direct Focus Inc. (DFXI)

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To: whenitgoesup who wrote (589)	7/18/2000 9:50:51 PM
From: trilobyte	Read Replies (1) of 768

Hi Walt, I'm listening to the conference call now. Growth of e-commerce added stability to sales growth. Direct sales 88%. Nautilus represented 12% (5.4 million even though Nautilus is slow during first 2 quarters). Cash at end of 2Q: 48M. DSO constant at 2 days for direct and 70 for nautilus. Continued growth in 2nd Q of ecommerce (32% sequential increase). Emphasis put on this by Cook. Leverage Nautilus: sales of Nautilus sleep system are on track to represent approximately 5% of sales by the end of the year. Nitro line of nautilus products started shipping in late June. Line of equipment with more popular price points (i.e. cheaper?!). Start shipping home line of Nautilus strength products in late july. Plan to roll out new nautilus branded products (don't know yet...). Questions/Answers. 1) higher conversion rates on Direct sales? yes... ecommerce growing faster than expected. Helped stability in 2ndQ. 2) Changed in marketing ecommerce? constantly modifying things, but no major changes. 3) ecommerce volume driven by cable TV advertisement? yes. 4) nautilus... seasonality? 2nd and 3rd Q tend to be weakest on commercial side. expectations is to see this business continue to grow. 2nd Q was better than 1st on Nautilus... starting from a small base. 5) air bed line... feedback on reception, sales, margin? response to direct marketing? beds is much like what was noticed on bow flex early on. Pleased with what they see. 7 months in roll out. Did it represent 5% this Q? met internal projection... don't want to break out info... but expectation is that it will be 5% of sales by the end of the year. 6) How close to new proprietary product that would be direct marketed. several projects in various stages. Not prepared to say when next product intro will be. 7) sales and marketing expenses... what portion is coming from cable advertising? don't reveal this info (over 50%). 8) 2nd q weaker than 3rd? on direct side of business, 3rd Q is definitely better. nautilus unexpectedly better than 1st, but because of a small basis. Profit on Nautilus: 144 000. Gross margin on Nautilus 35%. 9) are you currently represented in all major regions of the country? been represented in all markets for the past 3 years. Difference between then and now is the quantity of represen- tation. don't miss a week without being reprensented. 10) observed competition on power pro? always been! total gymn since 96. o.k. that's about it. There were only three fellows asking questions. Contrary to last Q in which it seemed everyone was trying to extract forward guidance on eps from the company, this was not the case this conference call. So little was said about expectations for last Q but the fact that direct sales should grow, means we're looking at record revenues and eps. Probably in the .85-.95 range. So estimates will have to be increased dramatically. My disapointment was that there wasn't more analysts/ enthusiasm from the financial community from the financial crowd... oh well, they'll eventually figure it out! I'm holding on to my shares at least through the Christmas period. No question in my mind that DFXI will outperform all markets. Trilobyte p.s. check out results for one of my other holdings: SSTI. very very impressive, as DFXI

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