note 1: unusually long CC... 50 minutes. DFXI getting
attention!
note 2: flat Q/Q performance even though this is traditiona-
lly their weakest quarter.
DFXI had outstanding quarter despite slow environment in
retail sector. Records, records, records.
92% of sales from direct channel. Bow Flex and nautilus
direct continue to achieve expectation. Commercial retail
prodocts expected to be seasonnally stronger next 2
quarters. Repurchased 51 000 shares for 1.2 million.
Expects sales growth to increase next 2 quarters due to
seasonal factors.
in
Q&A
wells fargo. question about favorable trend in advertising?
Benifited from sales and marketing at 30%. Do expect the
advertising rates to return to normal. How many BFX sold
to date: 47 000 for the Q, over life of product: 440 000
units. Any change in ASP: held constant. Comment on
strategy with Champion nutrition? Very large market. Natural
extension. Potentially another nautilus commercial product.
No special advertising, ad-on sale to BFX. Congrats!
USbancorppiperjaffreys: Nutritional supplement, new line?
yes, but some products already exist. Offer a nutritional
kit. We will market it under champion name. Any guidance?
no, because ad-on. Nautilus sleep, performing ahead of
expectations? yes! Roughly 16-20 million $/year? yes.
Are you running more informercials because of low cost?
Seeing an economic benefit. Run the number of informecials
needed to accomplish sales targets.
davidson investment: give us feedback relative to
conversion rates? see softening of rates and more available
time. What do you expect with airbeds? comfortable with
16-20 million estimate. Update on new products? will
announce new products at the denver show in a month. Also
goal to add 1 new product every couple of year on direct
product. Therefore, getting reasonably close to new product?
won't tell you! What's note receivables? partnership from
Champion--loan to them as working capital.
... patents on BFX? 3-4 patents. patents on sleep system?
a couple of pending applications. Taking advantage of
cross selling opportunities? not at this time. Very
heavily baby boomer, one more female oriented database.
Increased our inventory about 5 million: 3 million due to
renegotiation with vendor and anticipated growth going
forward. Try to have 6 weeks lead. Expect another 2-3
million next q.
--- congrats! general idea of sales volume from Champion?
ad-on sale to BFX. future, nautilus retail group. Do not
have much guidance now. But we selected Champion because
they are respected as premium product. Good product.
with good profit margins.
--- update on share buyback? 51000 shares for 1.2 million.
Authorization ending Oct 1 for 10mil. Nukber of units
sold for nautilus system? Won't disclose...
davidson: suprised by upside? but one downside, e-commerce
was down sequentially... e-commerce were up 94% yr/yr.
Were down q/q, not much, and believe it's a seasonal effect.
Tell us about results at nautilus? Gross profit margin of
1.9 million. G&A 540 000, income from operations, loss of
130 000, net income, loss of 53000 due to front loading for
products to come later this year. BFX sales were also around
47000 units. Surprised you matched 1st Q? Yes, very
surprised! that sales and marketing could do so well at
30%. How are third party finance vendor? default rate? no
change, using them since 1997, very conservative on approval
rates. Default rates have not deteriorated. Approving
baby boomers with good income.
red chip review: good q! Asp on BFX is 1360. Turns trending
relative to previous Qs? flat compared to previous Qs.
Believe of sales of beds are heavier certain times of
years? haven't seen seasonal factors yeat due to novelty
of product, but Christmas season should be strong.
----: congrats! decline price rates? been able to buy better
commercials. putting adds on network vs national cable?
experimenting and expanding our reach. How far out can
you buy adds? about 90 days in advance. Infomercials may
buy slightly farther out, but we're not a media speculation
company! Has environment become more or less favorable
to acquisitions? Potentially...
----: identify Kevin's biggest impact? Act as a team on
management. Kevin has a strong background of direct and
commercial markets. Kevin will concentrate on Nautilus
commercial business to improve things. Always looking for
great talent.
-...: eps? already have 1.2$ for 1st half and expect 2nd
half to be strong in commercial and retail sector.
Would you be surprised if 2nd 1/2 earnings would be less
than 1st half? Don't know how long favorable environment
remains. Let's suppose earnings can get to the 2.5$ basis,
do you expect 20% growth next year? Business is a marathon!
business looks good, but won't give forecast that far
ahead! |
