Jim Barr - Bowflex Rebrand & Sticking To The Northstar

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[00:01:29] Learn more at Workout.com. That's W-R-K-O-U-T.com. Just one O, W-R-K-O-U-T. Go get it. All right. We're live. Jim Barr, welcome back to the future of fitness, ma'am. Thanks for having me back. Appreciate it. Yeah, it's a pleasure. I learned a lot from our first one.

[00:01:58] You have so many insights that come to the industry from outside of the industry and all the different companies and roles that you've worked in. I love that. It brings outside perspective that is very needed in such a young industry. Really appreciate the first interview.

[00:02:13] Super happy to have you back. Man, you've been busy. We thought 2022 was a wild year. 2023 has been very interesting in so many ways. I guess that's probably the best place to start off, Jim. Just give us an update.

[00:02:27] It's been about a year since we recorded what's new in your world and both flex, not unless, Schwinn, all of the things. Yeah, sure. I'll try to do a world with that and then we can dive into any topic you'd like.

[00:02:41] I'd say overall, the theme of the year is continued to be a long-term tailwind towards home fitness and blunted by a short-term headwind of what the industry is dealing with right now. A big picture. More people are working out at home than ever.

[00:03:01] We have a recent survey that says 86% of Americans are working out at home. That's significant. We've been taking the same survey since before the pandemic. Before the pandemic, about four out of 10 people were working out at home on the same

[00:03:18] survey, six and a half to seven out of 10 now. Even as people have come back to the gym, the importance of home fitness has continued to be the same. That's a bit of a surprise because you would think maybe as people went back to the gym,

[00:03:33] the home become less important. It's really based on long-term changes in fitness habits towards the home. I think it probably relates a lot to our work habits. If you're home certain days, you're probably going to work out at home.

[00:03:47] If you're in the office, you'll work out maybe at the gym or maybe at home. Either way, you've got to have the home there. That's kind of the long-term tailwind. Short-term headwinds are the things that we talk about in earnings reports.

[00:04:00] I did one just yesterday, which are things like, where's the consumer going to be this holiday with discretionary expensive goods? Are they going to defer? Are they going to trade down? What's going to happen there? That's very important to a company like us, of course.

[00:04:15] We know fitness is going to be important for the long run, but you could defer this purchase and so that's part of it. How much of the sales during the pandemic where we kind of tripled in sales was

[00:04:24] pulled forward, how long does it take to snap back and regulate? Then really the other one is related to retailers. Retailers are being quite cautious. We reported that we have 50%. Retailers have worked down their inventory 50% from this time last year, but they're

[00:04:42] not reordering at the same frequency as they typically did because they're being cautious about building their inventory in a number of categories, including ours. You got that story going on that continues for us personally. We have rebranded the company.

[00:04:58] Last time we spoke, I was the CEO of Nautilus Inc. I'm now the CEO of Bowflex Inc. That was an important thing that we could spend some time on as well. At the same time, we've taken the Bowflex consumer brand identity and really revamped that.

[00:05:16] We wanted to modernize it. We are back on. We had quite a slew of interesting events that just happened from firearms to recording, stopping to all that, but we're here. We're going to get this interview laid down properly. My apologies to you, Jim.

[00:05:31] Let's kick it off again where the year in review. It's been one year since you've been in this podcast. You've had a lot of stuff going on. Please again, go ahead and recap what's been taking on your role. Sure. Absolutely.

[00:05:44] One of the themes that we touched on last time, which is home fitness tailwind against home fitness headwind in the short term. The tailwind is long-term, we believe, in nature because it's really based on profound changes in home fitness habits.

[00:06:03] A lot of those being driven by your place of work. If you're working more days from home than you were pre-pandemic, which is the case for most of us, that's the case for me right now. That means that you need to have that equipment at home.

[00:06:16] Even as people have gone back to the gym, that continues to grow. There are a few stats we have and one stat that we study, we believe that it's our 2023 survey. Basically, we found that 86% of Americans work out at home in some measure.

[00:06:37] In another one, and that's US-based to be clear. Then in another survey, this one is actually pretty important because we asked the same questions now for two and a half years before the pandemic through now. We ask people where are the places that you work out?

[00:06:56] Pre-pandemic, it was about 40%, four out of 10 worked out at home in any way, shape or form. In this same survey, it went from four out of 10 to about at its peak, about seven out of 10. Now it's six and a half out of 10 that work out at home.

[00:07:16] Again, it's that same theory that if you're going to be working from home more days, you're going to need the equipment. We've seen a profound change in the number of people who are building home gyms, who want variety of equipment.

[00:07:28] They used to just buy one and put it in a quarter of their home. Now they're buying multiple pieces. They're building strength and cardio together. That has had a big difference. We have a long-term tailwind because of those changes in habits.

[00:07:44] We don't see that going away anytime soon. Then of course, in the short term, everyone's talking about our industry. It's like you poor guys being in that industry because you're like the opposite of hospitality. You dropped the right away and now it's growing and everything's happy.

[00:08:02] You guys went super high right away and now you've got this post-pandemic hangover. Everyone in our spaces is in this same category, whether you're public or private. Really, the reason that is is because there's three things going on that are hitting our industry pretty hard.

[00:08:21] Number one, where is the consumer going to be on consumer discretionary goods like we saw at this holiday? Are they going to trade down? Are they going to defer the purchase? That's a difficult thing for us to deal with.

[00:08:37] The other thing is of course, when you spiked up in sales, how many of those were whole forward sales that you're not going to get now for a while until people regulate? That's a question no one has been able to answer.

[00:08:48] Then finally, a good number of us sell not only directly on our websites as we do but also through retailers. Retailers have the same issue. They're looking at the consumer and saying, gee, is the consumer going to spend this holiday?

[00:09:02] If I'm not sure, I'm going to pull back on my inventory purchases. That has happened. In some of our retailers, we have great retailers like Dick's Sporting Goods in Amazon and Best Buy. Some of those folks look at their inventory and they say, we're just

[00:09:16] going to take some chances that we have enough inventory this year because we, that second year of COVID, they all bought a lot of inventory that they're still selling. Those three headwinds, but the good news is there's a long-term tailwind there.

[00:09:31] That'd be one thing to really talk about. Happy to dive further into that. In terms of what we ourselves are doing, there's a lot of exciting things. The first thing that I'll talk about is last time we spoke, I was CEO

[00:09:43] of Nautilus Inc., now I'm CEO of Bowflex Inc. We've changed that to reflect our number one brand. 85% of what we sell is under the Bowflex brand. Nautilus was like, when I took this job, I told my kids who are in their 20s,

[00:10:00] I'm going to be CEO of Nautilus and they were like, what did they do? And I said, well, they make Bowflex. Like, okay, now I get it. So it's a little bit generational. And this was part of our long-term strategies to make sure we focus

[00:10:12] on the brands that matter. And now we've rebranded the company just to reflect our number one brand and really the brand that we invest the most in. So that's been a lot of fun and that just happened a few weeks ago. So I was being exciting.

[00:10:29] I thought some people at the company might be like, oh, Jim, that was the one thing not to change. We just love this brand. And they really did love this brand, but even the old timers are like, yeah, it was time.

[00:10:39] It was time and this was the right time to do it. So that's exciting and that's something we could talk about. I would say at the same time, we have the consumer rebrand of the Bowflex brand, which is it's always stood for strength first and then cardio.

[00:10:54] It probably needs to be modernized a bit. A lot of times when we talk about the Bowflex brand, they talk about the rod gyms that have been around for a while and they do this or they talk about Chuck Norris, somebody like that who might have been this,

[00:11:08] actually wasn't a spokesman of ours ever, but they don't know that. So it's in the word cloud for sure. So we want to modernize that. And we did a lot of work to really study fitness, what motivates people and all of this.

[00:11:22] And I'm really in our new Bowflex brand identity. It's more personalized. It's more around connected fitness. It's about our quality equipment, which it always has been, but it's really about getting to the you that's inside of you. It's we're meant to be empowering, more inclusive,

[00:11:40] not always the person who is in the best shape or measures progress through weight loss. I mean, there's many different body types that mean healthy and we're trying to be inclusive about all that. And a lot of our advertising talks

[00:11:57] about bringing out the you that's inside of you. So that's a big part of it. And then as a result of that, we've launched some new products as we do every holiday, but the new products actually reflect that new brand identity, everything from fonts

[00:12:10] to colors and the things like that. Well, one thing we saw about equipment in our space is everything was a sea of black and red. Like that was our logo, that was everybody's logo. All the equipment looked the same.

[00:12:22] It was big, bulky, beefy is what we call it. I remember when I first got here a few years ago, people said, yeah, you need beefy products. Well, that's not what's happened. When what happened during the pandemic is the place where people work out moved

[00:12:35] in some cases to another room of the home. Maybe it used to be in the bedroom or in the back of the garage or maybe you had a dedicated space, but with no more additional space, people weren't buying bigger homes,

[00:12:47] all that kind of stuff, especially as interest rates got there. So they had to find a good place in their home. So they're starting to work out more often in the family room or the living room. That's a big part of it.

[00:12:57] So what does that mean for our products? Not only do they have the new branding on it with Bowflex, but those products actually have to be fit in that room of the home. So they have to be sleeker. They have to take up less space.

[00:13:08] And most importantly, they have to be quiet. So the products that we've released this year as a quieter max trainer without the big fan, making the noise that might have been fine in the bedroom. But if your spouse is watching TV right there,

[00:13:21] you're not gonna make a lot of fans that way. So we took the fan out of that and it's quieter. So everything's quieter. Everything takes up less space and fits in that room of the home. So we're excited about the release of those products this year.

[00:13:35] And then I think the thing to remind everyone too, we talked about it a bit last time we got together about a year ago, but we continue to be in this major transformation of our company from being a equipment only company to our new North Star strategy,

[00:13:52] which includes first being consumer led and everything we do, just cause we can make a piece of equipment. Our in engineering doesn't mean we're gonna sell it. We're gonna look at who's gonna buy it. We're gonna understand our consumer like we've never had before.

[00:14:05] We're gonna understand how we're gonna talk about it. And then we're gonna green light it and do that. So we're very, very consumer centric. We know more about our consumers than we ever have. And that's very important as things change. And obviously last few years things have changed.

[00:14:18] We made an investment in connected fitness obviously is the second pillar of that with journey and a unique version of journey. And that's differentiated, but it's still based on our equipment. We've had to focus. We're out of commercial fitness in home only.

[00:14:35] You have to focus in order to get the strategy going. We've done great job in supply chain. That's been a big part of it. And then we brought in the people we need and the team we need to do this. And it's been an interesting year,

[00:14:47] I'll just say with the long term, knowing that you're managing a dip and knowing that you gotta get through this last little bit and you're not sure how long it's gonna last and what people are gonna be doing this holiday.

[00:15:00] But I appreciate our employees hanging in there with us and it's been quite a year. Yeah, you've grabbed the helm at a very interesting time indeed. And one of the things, I wanna circle back on so much of that. The rebrand, I find rebrands to be fascinating.

[00:15:19] I don't know why, I'm always attracted to the reasoning, the thought. Maybe you could just walk us through the meetings in the boardroom about what the strategy is. Did you meet with friction internally? Who led it and what is in your mind

[00:15:35] when you talk about brand and rebrand? Like what does that mean to you? Because that definition of brand, I've had some very intelligent people on this podcast explain to me where their vision of what brand means, right? Using the quotation with my fingers.

[00:15:48] So yeah, walk us through the thought process behind that and how did you get to the point where you're able to pull the trigger on it? Sure, so I'll start with a consumer brand because it really happened at two levels, the consumer brand and the company brand.

[00:16:00] And they happen to end up in the same place that they were a different bit of journey relative to your question. On the consumer brand, it really just starts with knowing your customers, your consumers better than you ever have and what motivates them.

[00:16:16] And realistically where is your brand today? And what we've really seen, first of all, the industry is a sea of sameness. The equipment tends to look the same. It's big, it's bulky, it's mostly red and black and it hasn't changed much.

[00:16:32] And so when you want to actually break loose of the rest, you just say, look, how can we make this equipment different and better? But then there's the emotional benefits of exercise and understanding, it's been fascinating though you've been in it longer than I have,

[00:16:49] I've been in it for a half years, but to understand the various segments of why people exercise, what motivates them, what keeps it after them. And we created this five or six different segments to understand the consumer and it really helps us focus

[00:17:05] on the fact that there isn't just one. There are people not in our target that are, we call gym socializers. You give all these segments like cute names, but one of them is gym socializers and those are people who go to the gym

[00:17:17] just to be with other people. They might work out a little bit but they're mostly, you've seen them around, this guy's always leaning talking to somebody else and be like, how long is this guy here? But that's not our target but that is important to understand

[00:17:29] that that target is there. The ones that we go after are enthusiastic cross trainers. These are people who like exercise, understand that it is a something they're gonna be doing their whole lives. Some days you won't love it but you're gonna be doing it your whole lives.

[00:17:42] You have a broad perspective on fitness and wellness and you're gonna keep doing that and that has fueled a lot of what we've done right over the last few years is understanding that consumer because previously we went for a consumer that wanted a shortcut,

[00:17:59] wanted the best workout in 14 minutes. That was actually one of our slogans at one point but those people are in and out of fitness pretty quickly. It doesn't always work for them. They think there's a shortcut, there really isn't. We all know that whether it's what you eat

[00:18:13] or how you exercise that that's part of it. So understanding that consumer and we really found that what he and she were missing in that core category were just this idea that you don't have to be someone you're not. You don't have to lose 50 pounds

[00:18:30] to be successful in fitness. You can still be the you that you are and so we did a bunch of discovery around understanding what those people wanted and making sure that we could position the Bowflex brand to bring out the you that's already inside you.

[00:18:46] So in other words, you're not as far away from where you wanna be than you are, than you think. Maybe you watch some other commercials and you're like, you see this person on a bike with washboard abs and you're never gonna be that person.

[00:18:57] So it's a very more inclusive way. So a bunch of emotional benefits. Look, I'm an e-commerce guy. So like I always used to say in marketing and like if it doesn't have an ROI, it doesn't matter but really the emotional benefits are deeper than that.

[00:19:10] And so our whole Bowflex rebrand is around understanding the emotional benefits and the various parts of that. On the one for the company, given the fact that we were rebranding the consumer brand, we said, well, hey, should we stay with Nautilus? Among our brands, it's not even close.

[00:19:30] We are like, our number one brand is Bowflex. 85% of what we sell, it's the most recognizable. It doesn't matter what generation you're in, you know Bowflex, it's in both strength and cardio. So it has this great reputation. So we actually sold the Nautilus brand earlier this year.

[00:19:50] One way to get cash and get through the struggles is to sell some assets that you weren't using. And when we originally did our strategy, we said we're not gonna use this brand anymore. So we sold it for around $13 million in cash

[00:20:02] and then we said, okay, so that's now an opportunistic time to change the name of the company. So we're changing the consumer brand, we're changing the name of the company and you ask a great question because it's like, I was really concerned that some of the old timers

[00:20:16] and like a lot of companies, we have people that have been here 30 years, 40 years, you're like, okay, this guy comes in four and a half years ago and now he's like changing all this stuff and now he's changing the name of the company. Like, what does that mean?

[00:20:28] But I was really surprised to hear that even the old timers thought it was time and it was time to modernize the company, modernize a brand. And then every time you talk about either the company's performance or just what you're doing in your advertising,

[00:20:45] it all accrues to the same brand which is both less. And it's interesting to me too what you nailed about like the lifetime fitness consumer. And I think it's so timely, I mean, you look at some of the, what's happening now from the public perspective,

[00:21:01] I call it the Huberman effect where people are really seeking out health and then now longevity and hell span are now a thing and it's becoming the Atea's book and all these things are coming out where it's like, this is a lifelong thing.

[00:21:15] Like this isn't six week challenge anymore. Not just doing this for a little while and you find this stuff at consumers and I presume these types of consumers will buy the equipment, probably get the latest one when it comes out, they like the features,

[00:21:28] there's a lot of different things they'll do. So that's really, it's interesting. When you think of brand, Jim, like Andrew Sugarman on this podcast not too long ago, he's the CEO of Center, the app Chris Hemsworth app. And he worked at Star Wars for a long time.

[00:21:45] He worked at Disney and I asked him what he thought of brand. He gets really interesting analogy about like, you know, Star Wars fanboys, like the emotional connection to a brand, right? So when you think and it's so ambiguous, it's so objective, right?

[00:21:59] Like, no, subjective, sorry about like, what is a brand? So when you think of that, like what comes to mind when you define it? Yeah. I mean, brand really comes into play economically, it comes into play when someone is thinking about making a purchase

[00:22:13] and certainly in our category, it's a considered purchase. So this purchase cycle could go on for two, three, four, six months sometimes. And so you go through reading reviews, you go through talking to your friends, all the things that influence your purchase.

[00:22:30] But in the end, one of the most important things, and this is where we try to be, is the brand. What is your perception of this brand? And so building your brand over time so that it comes into play when the purchase decision is happening.

[00:22:44] We're not selling macaroni and cheese at $1.50. We're selling things that are $1,000, $1,500 sometimes. And so it really comes into play there. And we kind of saw it's a case study in how important brands are during the pandemic. If you remember, it didn't matter what brand.

[00:23:03] Like you were just like, if you needed a guy to get a dumbbell, you got a dumbbell. If you like, you weren't like saying, oh, I want to get the dumbbell with the best brand. You just like, if you needed equipment, you bought whatever you could find

[00:23:15] because there was a scarcity of supply back then. And so when we looked at our market share, we did a good job to actually ride that up and maintain our market share. But what's happened since then is now that people are buying only when they want to buy

[00:23:30] and being more choiceful, our market share has doubled because even though as the industries come down, but that tells me that at the point of purchase, whenever you're making that decision, you're thinking of our brand and you're thinking about it in a positive way because it matters now.

[00:23:49] And so that's what I think of brand. I'm sure there's more elegant ways that people who are lifetime marketers, as I mentioned, I'm more of a digital marketer. So I'm like, what's my ROI? If I spend a dollar, would I get back? But they really are.

[00:24:04] Like you're absolutely right. This emotional connection and the way people feel about your brand in particular at the time of purchase or they're in the purchase consideration funnel, that's just super important. I'm super proud that as people are becoming more selective

[00:24:19] than they were at the peak of the pandemic that they're choosing our brand more often. Yeah, it is interesting. I mean, I'm thinking about how much equipment I've purchased over my lifetime, especially as a gym owner, more in the functional fitness space.

[00:24:31] Like I bought all kinds of equipment by different brands, but what I always came back to is like I tip my cap to rogue fitness. They are, when it comes to that specific niche of the industry, like Olympic barbells and bumper plates and all those things, like bang.

[00:24:47] I knew if I spent a little bit more on rogue, I would have a barbell for life. Something like my dad told me, take care of, buy nice things, take care of them, you'll have them forever. But not always. So yeah, I mean, when in the home equipment,

[00:25:01] do you guys, is that what you're striving for is to be like the rogue fitness of home? Yeah, I mean, there's a few brands that people know. They know Nordatrack maybe, although they rebranded their company iFit. So I think there's some confusion there in the market,

[00:25:17] but Nordatrack is one, Peloton people think about in this space and there's a few other brands. And yeah, we wanna be at the top echelon of those brands when people are making that purchase decision. And it really is important. The same reason you think of rogue,

[00:25:35] you're like, I know that it works. I know other people that have used it. And it's like, when you are making a considered purchase and spending a bit of money, then something that you're gonna keep around your house for five or 10 years, whatever,

[00:25:47] the cost of being wrong is pretty high. Again, it's not like the mac and cheese. It's like, you throw that away if you don't like it. This, you're really making an investment that's important to you, probably cost you some money.

[00:25:58] And so to, if it's a brand you know, and it has a great reputation, that's really gonna come into play at that point. And honestly, if you go try to save a little bit of money, like if you haven't gone rogue, you save a little bit of money,

[00:26:12] you get them and you're just like, now I have to kinda look at myself for five or 10 years that I tried to save a little bit of money and I didn't make the purchase that in my gut I knew I wanted to do.

[00:26:22] So we're trying to set people free there so that they're saying, hey, when I'm making that decision, I know based on the 40 years that we've been in business that if you buy a Bowflex or a Schwinn, that that is going to be a big difference.

[00:26:35] And one thing that you mentioned that's actually a pretty interesting trend is what you said about buying different brands at different times has been true of home fitness. It used to be a one and done category as I first studied this industry a few years ago,

[00:26:47] like you could buy a Nordatrack tread and then you'd buy a Bowflex bike, let's say. And you didn't really connect those two purchases to one another when you could afford them, you did them. But what we're seeing is people are building within the same brand category.

[00:27:00] So now when you're making a brand decision, it's a multi product decision. Why is that? Because we all have some sort of a connected fitness app, right? And I don't think the paradigm people want is every piece of equipment has a different app.

[00:27:15] What they want is something that tracks you across all your pieces of equipment, whether it's one of these or one of these or in Journey, for example, you can get multiple pieces of equipment. So we've seen brand loyalty we haven't seen before.

[00:27:30] So it sort of ups the stakes on branding a little bit higher than it used to be. It was a one time transactional type of thing before and now it is a connection with a brand that might span several transactions. Yeah, it's interesting.

[00:27:45] And imagine aesthetics play into that too. It's like, if you're gonna build out a home gym in the space like a living room or something like that where it's more visible, you want it to look on brand and synchronicity I guess across them.

[00:27:56] And when he pointed for the audience, when he pointed this and this, he was looking at his order ring and his app watch, which I'm a Garmin or a combo myself, but I appreciate them all. I wanna shift a little bit too and just talk about earnings reports.

[00:28:11] It's that season right now as we're recording in November of 2023. But yeah, tell us about how did the earnings report go and what's that like as a CEO? Yeah, so with that long kind of long-term headwind, long-term tailwind short-term headwind,

[00:28:28] we were forced to get to talk more about the headwinds in this earnings report that I did the other day because we still, I mean, it hasn't happened yet. Just like a lot of industries, our quarter that we're in right now starting with what we call Turkey Five,

[00:28:41] the five days around Turkey, around Thanksgiving, that's like 20% of the year in our direct business. So it hasn't happened yet. It still could be quite robust. A lot of questions about where the consumer's gonna be as I mentioned before, we haven't seen the retail order.

[00:28:56] So that's already kind of starting to, they're slower than they typically were. So one of the hardest things we had to do is kind of lower our guidance even though we got close to what we thought we'd do in the last quarter, we had a slight miss there.

[00:29:10] It was harder to say, what's gonna happen the back half of the year which for us is everything, right? It's like it's the third quarter beginning with Turkey Five and then we extend all the way through the end of January where people have made new year's resolutions

[00:29:24] and they're making their buys to change their life in the new year. And so we had to bring down the guidance on that. So that was challenging. We knew that would be tough and we knew there was a lot of uncertainty.

[00:29:37] So what really we were trying to get across in that is like despite the fact, I can't tell you, Wall Street hates imprecision and uncertainty but I can't give them certainty on the top line of a business going into this right now that I typically can.

[00:29:53] So we dropped our expectations for the year, had a broader range but what we really wanted to signal is we have gotten better at cost cutting. We've gotten better at margin improvement. We have four straight quarters of improving our margins. So we are well positioned.

[00:30:10] We have shown that whatever the world throws at us the next few quarters, we have a way to overcome it. So that was part of it. And then there were a few, I would say sparklers that we talked about. One is everyone's had negative comps in our industry

[00:30:24] for the last few years, but we had our first positive comp in our direct business and in strength and Bowflex really stands for strength. So that was a call it a, maybe the first sign that we could be turning the corner there, our international business was also up.

[00:30:39] So that's two of our three channels. The third one is domestic retail and I told you that one's down because of the reorders but we had two good things there. When we talk about the new products and we touched on them a little bit

[00:30:52] a new max trainer that's silent. We have a new bike that looks great and we also have a Schwinn elliptical that we've launched. So all of these are great, they're on brand and we love launching them at this time of year that drives quite a bit of growth.

[00:31:07] So that's good. We talked about the new branding that we've already talked about here and we talked about journey. Journey is it's every one of us in connected fitness have an investment we make in our digital experience because we've seen that it's here to stay,

[00:31:22] that people stay working out longer than more interesting you make it. So instead of the 12, five years ago there were 12 ways to work out on a treadmill. And once you did all 12, you got bored and it became a coat rack. But now with these experiences,

[00:31:37] you can run 300 places and you can run a different place in the world on our equipment every day of the year and not get bored. And then you can watch Netflix and get trained. You can, we have a, our angle is really individualized connected fitness.

[00:31:51] So even when you're using our dumbbells where we have motion tracking technology to tell you whether you're doing it right. And we have, we have a rep counting and all of that. So this is as individualized as it can get. So one of the messages is where we,

[00:32:06] we've made the product better. We've launched it now for dumbbells. People really like it and our paid subs are way up. So we're, we're getting to the right spot there. So some nice sparklers around, you know, around earnings, but in general, you know,

[00:32:22] it's a challenging time for our industry. Yeah. Yeah. And I want to get your opinion on something I have. I'm just recording industry deep dive, which I do quarterly with Juliet and Alex. And we go over earning was reported. And overall it seems like,

[00:32:37] and we discussed this that Wall Street just doesn't really like fitness yet. I mean, do you, do you agree or disagree with that? What's your point of view on, because I mean lifetime very profitable. They had great earnings reports, right?

[00:32:50] But still just that doesn't seem to spark as much interest in maybe some other industries. So what do you, what do you think about that? Yeah. I mean, you know, like just put me in the lineup with every CEO

[00:32:59] that winds up at stock prices and high enough, right? So this is, I'm definitely there. I mean, when I see where our stock is and we probably didn't deserve as high as we went. And we definitely don't deserve where we are now. And I think, you know,

[00:33:13] what I mentioned before is if there's uncertainty in a business, Wall Street doesn't like it, right? And if there is not a recurring revenue stream, Wall Street likes it less. So that's why journey is important to us to subscription revenue base is important.

[00:33:26] I can't really explain some of the other competitors because clubs have, you know, recurring revenue base. And so I think planet fitness has been doing well and things like that. But yeah, there may not be a full appreciation of it. And then this, you know, this industry,

[00:33:44] whether it's the gym, a commercial industry or the home industry have just been in a rollercoaster the last few years. And so you've got uncertainty, you're managing, you're not quite to the other side of it yet. And I really believe what's going to happen is

[00:33:59] that once things settle down, it'll just be a normal boring business again. And you're gonna start getting, the normal boring businesses get a better multiple get Wall Street to appreciate them better. When you've hit the peak and now you're on your way down

[00:34:13] and you don't know when where the bottom is, then some of us have trouble with that and you can't really blame investors for that. They got other places to invest their money if they want stability and it may not be with us right now.

[00:34:26] But that long-term health, fitness, wellness, it's important and it will only grow in importance and it's only gonna come together in terms of holistic view of it. So I mean, I think it's all gonna regulate it but right now it is what it is.

[00:34:45] Yeah, well if I'm in the audience, I'm thinking now's a good time to buy. So we'll take it. Thank you. You're making a lot of money. Yeah, yeah, I can. Connected fitness. So obviously you guys are players in that space,

[00:34:59] believers in it, investing in the future of it. It seems to be at least within our industry like Peloton is synonymous with connected. Everyone thinks like whatever Peloton, whatever happens to Peloton is what's happening connected. So maybe give us an idea of like the larger landscape

[00:35:13] of connected fitness and where you see it going, especially just in like the next year of 2024. Yeah, I mean, I think the one thing I'm actually completely convicted on is that it's just a better model. I'm not just talking business model, I'm talking about for consumers

[00:35:29] and for people who work out. It's just as I mentioned before. So the variety is what people seek, whether that's variety of equipment where we built journey for every piece of equipment or variety of ways to work out. You might wanna do yoga on Tuesday,

[00:35:46] you wanna do strength on Monday and Wednesday and you're doing cardio on Thursday and Friday. And so that variety is really important. And then the different ways to work out. It's like how do I not be bored and what's been fascinating to me? Like someone like Peloton,

[00:36:02] you can't do a better job than they did on bringing the studio bike class home. Like that's just brilliant. And early when I first got this job, I was like, I need to ride that way because that is just fantastic.

[00:36:17] But what we found having a broader portfolio than they have of different types of equipment and strength and cardio is that you use these connected fitness experiences on differently on different devices. So you might have the idea of a class

[00:36:31] when you're on a bike and that makes total sense. And so you need those classes. But when you're on a treadmill, you don't have an idea of a treadmill class. You have like, I need 40 minutes to go by

[00:36:41] as quickly as possible without boring the heck out of myself. And actually try to motivate myself to say, how do I look forward to this? So like it's funny, but things like watching Netflix while you're being coached on the machine, like the workouts have trended

[00:36:56] to the length of a Netflix program, but everyone's different. It's interesting to see how each piece of equipment gets worked on, but you can see that overall, whether you look at our stats or you look at Peloton stats, the two public companies in this space,

[00:37:12] we're making a difference. People are working out more often and they're not getting boards quickly and they're staying with it longer. And hey, it's not solving world hunger, but it's a pretty darn important thing for our members and for their members.

[00:37:27] And so that's why I am absolutely convicted that some form of connected fitness is here to stay and that all of us are really looking for the best way to provide that and differentiate it. We're Peloton's more of a one to many,

[00:37:41] they have a great class, a class which is one to many. We are individualized. So when you get on journey, we know what you've done, we know what your goals are, we suggest the workout for you. You can say, no, I don't wanna do that

[00:37:52] or you could take this, you can work out a different place all the time and we count your reps and we look at your form, nothing's more personalized than that. So that's our angle, not that we're gonna have every class in the world,

[00:38:03] but that we are going to have enough ways to work out, enough variety that keep you entertained, keep you at it longer. That's what it's really all about. But I'd just say in general, I think connected fitness is here to stay.

[00:38:15] If it wasn't, a lot of us would've given up before because this is a little, it's expensive. I mean, my company could be more profitable if I just forgot about connected fitness, but we built so much of what we think

[00:38:26] the consumer needs and we're kind of right at the tail end where we can see break even in the near future. And more importantly, our company mission of helping people live healthier lives through fitness, we know whether it's working and that is inspirational to us.

[00:38:41] So it's great for consumers, it's great for our employees and it's great for our business model. What do you, Jim? What do you think it's gonna take to come out on top in the connected fitness field? Like is it gonna be advanced personalization?

[00:38:55] Is it gonna be lowering the price point for kind of democratize the availability of it? Like what are some of the key factors that you think are critical in winning that? Cause I don't disagree. I think connected is here to stay in some form, right?

[00:39:07] And it's gonna continue, cause it's very dynamic, right? There's so many technologies in McGush. It's hard to believe that one year ago we weren't even talking about chat GPT, right? And here we are with AI is completely mainstream. And so it's gonna continue in advance,

[00:39:20] but at a macro level, what do you think it's gonna take to win that? Yeah, I mean, I think it's not a winner take all situation. It's just gonna matter kind of what your own personal use case is. So if I'm Peloton, which I'm not,

[00:39:34] but their company starts with that experience. It's a digital company that happens to come along that has equipment come along for the ride, right? That's where all their profitability is that's where that's the most important thing for their business. And I see their angle

[00:39:54] and I would play the same game if I were them. Ours, it's always been about the equipment. And our view of connected fitness is that it makes our equipment better. It, I just kind of have this view that it used to be whether it's a car or

[00:40:08] or it's a piece of equipment. The day you bought it, it had all the cool stuff on it, right? And so the best day you own that piece of equipment was the first day. But with connected fitness, I can give you more workouts.

[00:40:21] I can learn more about you. I can coach you. I can, I get better over time. So no longer is that first day the best day. It should be just the first day. And I think that's where it is.

[00:40:30] And I think that's gonna be a big part of it for us. The angle is personalization and kind of perching ourselves on your shoulder and saying, how do we make things, whatever we have, lots of content, whatever, but how do we suggest it for you?

[00:40:44] If you only had 12, it wasn't hard to pick. Now you have 300 places to work out in the world. You have Netflix, Hulu, you have coaching, you have strength and cardio. Like how do we make that easy for you in a personalized way? That's a big part of it.

[00:40:59] So anyway, those are some of the things I think that will make a difference, but it's gonna come down to everybody's own use cases. And I like ours. I mean, I haven't had to pivot the company as much about it. It's always been about the equipment.

[00:41:12] It still will be about the equipment, but the equipment's better over time with journey. No, it's a really interesting point. And if I'm picking up on this, is that journey is becoming the center point of the user journey ironically.

[00:41:31] It's like the coach almost who continues to vary it and make each person's fitness journey unique to them. Is that essentially the point of it all? I think it's the glue. For us, it's the glue. We'll continue to sell the products that people demand and people wanna use,

[00:41:53] but when we launch a product now we launch a product with an experience. So our strategy has gone from being an equipment manufacturer to being a provider of fitness experiences. Now ours always start on the equipment. You can get workouts for yoga, not on the equipment, whatever.

[00:42:11] I think it's eventually gonna go outside and you'll use your watch or your ring or whatever to connect all this stuff. But yeah, it's what keeps people interested, what keeps people at it longer, that's what it's all about. Yeah, interesting.

[00:42:27] And is that, I was looking at some of your PR announcements and things like that and adaptive fitness seems to be a term that I'm seeing around. So is that how you're defining it? Yeah, we tried saying the word personalization and when we tested that out on consumers,

[00:42:43] as I said, trying to be as consumer-centric as possible, it's such an overused word. So adaptive worked better. So we start using adaptive more often. Why does it work better? Cause it's a type of personalization. It adapts to you, what you are trying to do,

[00:43:01] what your goals are, how you've progressed so far. So that's kind of like if you have a favorite personal trainer in your gym or whatever that person knows you, they know what you've been trying to do. They know you're training for a marathon or you wanna get 10% stronger

[00:43:20] or you're recovering from an injury, whatever it is. They know what that is, so do we now. And then they can craft a program for how you get there. And that's our approach to this. It is exactly like that. And the adaptive seems to resonate

[00:43:37] somehow a little bit more. I think it's probably an overuse of the word personalization, right? And I'm probably saying this about AI in three years or whatever, everyone say AI in three years. What does it really mean? What can it do for you?

[00:43:48] So that's what we use this. We do use AI, we do use machine learning, but it's all in the service of providing an adaptive workout to get you where you'd like to be. Yeah, well I appreciate the use of adaptive cause I probably said personalization

[00:44:03] a thousand times too many on this podcast this year. It's just been such a buzzword. Yeah, right. You know equipment, I think, that's where you guys hang your hat, right? And equipment really hasn't changed a whole lot over the past few decades, right?

[00:44:17] You got your treadmills, you got your bikes, people can do, people have the VersaClimber or whatever brand names are calling that now. But how do you see opportunities to break the mold on home equipment? Like new imaginations of it. I presume you got R&D working on

[00:44:36] stuff like this all the time. Maybe give us a glimpse into the future. Where do you think there are opportunities to improve? Yeah, I mean our company's profitability if you studied it over 40 years is we would have something we would call a hero product

[00:44:48] which would be kind of what you're talking about. You've invented something new no one has invented before and we had the Rob Jim is the first version of that then we had a walking machine that was next version of that then we had our Max Trainer

[00:45:00] which is a hit trainer that became kind of the hero product for the company. It's just harder and harder to come up with something that no one's ever invented before that's gonna change people's lives. I mean probably the most recent one we've come up with

[00:45:14] is the leaning bike we call Velocorps. It's like the other bikes but it goes side to side it feels like you're really riding a bike. It helps your core better and it helps your arm. You're gonna get stuff like that occasionally

[00:45:28] but I don't think you can bet the company on always coming up with something that's never been invented before. That's a very difficult thing to do and people have been at this for a while. So I think you're gonna get line extensions

[00:45:41] quieter, sleeker, things like that we're doing now. I don't know that you're gonna get something that's never been invented before. Now when you go over to strength our number one product are these adjustable dumbbells and they're top NPS net promoter score product. They're our most popular product.

[00:45:59] They sell for 300 or 350 and in the pandemic you could get them on eBay for like $1,500. I mean there was a secondary market. So these things are great but we can evolve those to be even better. So we're excited about that and there are things you can do

[00:46:13] to make an already great product even better. And then I think strength machines are gonna be a really interesting one. For us because of the RodGym's I don't see 10 years from now that RodGym's are RodGym's. There might still be around

[00:46:25] but there's a lot of innovation going on in strength where it's not you don't have to have the weight stacks that we used to have or something that simulates the weight stacks in what we used in the RodGym's. There's actually digital engines

[00:46:40] that can create any amount of weight with a touch of a button. You see it in tonal for example they do a nice job of this but I think we're gonna see a bunch of innovation in that area and strength that'll be really good.

[00:46:51] And I think it will help our company a lot being one of the big leaders in home gyms and in strength. I think that's gonna be a big part of it. So I don't know if anything that'll ever be like invented brand new de novo.

[00:47:04] I mean maybe you give tonal some credit there now you have to bolt it to the wall and it costs $4,000. So there are things they need to work on for sure but I think pretty much grew a category on top of the one we already owned

[00:47:16] and it didn't hit us at all. So it expanded that category. So when you're looking at opportunities and where innovation can happen I think strength is a good one. Yeah, I love it. And I agree 100% I think strength is I play with, I have a tonal

[00:47:27] it's played with it all the time. It's gonna have to load stuff though. I know and that's... Oh yeah. I think the two of us are three weight guys. And so there's an advantage there's an advantage of that as well. So I think that'll persist.

[00:47:38] Yeah, I think barbells and good old concept two rowers will be around if there's ever a nuclear holocaust those things will still survive and people will be using them. So good job on those brands. And Jim it's we're betting up on time.

[00:47:52] I always like to ask as a final question like what do you need right now? How can the industry help you a few people are gonna reach out what would you like to hear from them about?

[00:48:02] Sure, I mean, I think for any of us in the fitness space I mean, especially in home fitness we're not at our high point right now. So I think if people are gonna buy home equipment let's get it done that'd be super helpful.

[00:48:16] I know that's a little bit of pandering but it's important and I just keep emphasizing that fitness is gonna continue to be more important looking at help whether it's us or somebody else I think a few of us could use some sales right now

[00:48:33] whether it's through a retailer or at home and I think that's really it. And I wish everybody the best on their fitness journeys. Yeah, well I appreciate it Jim. It's always a pleasure and look forward to getting you back on about a year

[00:48:48] and we can talk about the huge sales numbers that are gonna come in 2024. Thank you. It's gonna be a lot of fun. It was my point about that. Yeah, awesome. Ladies and gentlemen, Jim. Mark, thank you. Hey, wait, don't leave yet. This is your host, Eric Malzone

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