Jim Barr - Nautilus & The Future of Home Fitness

Hey everybody, welcome to the Future of Fitness, a top-rated fitness industry podcast for over three years and running. I am your host, Eric Malzone, and I have the absolute pleasure of talking to entrepreneurs, innovators, and cutting-edge technology experts within the extremely fast-paced industries of fitness, wellness, and health sciences. Please stop by at futurefitness.co to subscribe and learn more. One of the most important and undeniable trends in our industry is the ever-growing consumer demand for personalization. That personalization is driven by health data. If you are a consumer-focused health and wellness company, you know that acquiring and making use of that health data is traditionally expensive, complicated, and full of friction for the consumer, but not anymore. Thanks to the good people at Sprint, a camera-enabled digital biomarker platform that connects any app to the human body. Formerly known as Elite HRV, the patented technology behind the Sprend platform leverages a decade of research into physiology, behavior, and health insights, including collaboration with 117 universities, analysis of more than 4 billion biomarkers across 20 million user sessions. Using the smartphone as a sensor, Sprin's evidence-based machine learning algorithms deliver actionable biomarker insights such as body composition, HRV, stress, recovery, progress tracking, and more, all through an easy-to-integrate SDK and API. Health and wellness companies are integrating Sprint to better understand their users' holistic health, make their apps more personalized and adaptive, demonstrate measurable progress, and empower their members to understand their bodies and make well-informed decisions for their well-being. Go to Sprin.com and learn more. That is Spren.com. Hey friends, if you follow the show, you may have picked up on my passion for heart rate variability when it comes to recovery, performance, and longevity. I track it religiously and I'm always looking for ways to improve. Over the past few months, I've been taking this new supplement called HRV Plus by mode and method. Over that time, I've experienced significant improvement in sleep quality, faster recovery, and an objective uptick in my average HRV. About two to three points on average. That's a big deal. HRV Plus is the world's first expert-curated, carefully sourced blend of all natural micronutrients to optimize recovery, increase performance, and boost heart rate variability. Formulated by some of the world's leading experts, HRV Plus combines their proprietary hemp extract with omega-3 oil, magnesium, and curcumin extract to target inflammation, improve sleep, and supercharge our endocannabinoid systems. I encourage you to give it a shot. Go to modemethod.com and enter discount code Eric15. That's modemodemethod.com and enter code Eric15 for 15% off. Go get it. We are live. Jim Barr, welcome to the future of fitness.

Thanks, Eric. Thanks for having me on.

It's a pleasure. I am very eager uh to learn about your background, what you're doing at Nautilus, and uh and just get your opinions. I think you have some very uh you have extensive business experience, leadership experience, all those things. And you've seen this playbook a little bit kind of unfold in different industries. So it's always so valuable to get someone who's come from many industries into our industry and be like, hey, everyone calm down, right? We've seen this before. Maybe we've never seen a pandemic in our lifetimes, but we've seen a lot of stuff before. So uh thank you for joining me. And maybe we can just start with this. Uh, Gina, how how did you get to be the CEO of Nautilus? What give us a little of your backstory?

Yeah, um, thanks, Eric. I appreciate the opportunity again. Um, so what I love to do and kind of been the um the theme of my career is looking for companies that uh miss some kind of trend. They're they still have great assets, but they miss some kind of trend, either a change in uh consumer tastes um in value proposition, a lot of times it's uh some kind of technological disruption. And generally, you know, my career and my experience is in um you know, kind of digital transformations and uh and being a digital innovator. So generally, my playbook um has you know, injects um digital into the products. That's usually one of the missing ingredients, um, and then digital into the go-to-market, into the marketing and things like that. Um, and you know, I also like bringing in a strategy and bringing in a team and then getting it going in the right direction and and and making it work. And so Nautilus was a you know a great opportunity that way. I'd done it in um, I think I've done it five or six times. Uh starting back at Microsoft, you know, we missed things back then. Uh we missed uh search, Google got it. We missed the iPad, Apple got it, we missed the iPhone, Apple got it. Um, and so even though we were the highest, most capitalized uh company in the world, we made, we made mistakes and and didn't follow the trends the right way. So it can happen to really good companies, but it's really to me about um bringing bringing them back. And when when I looked at Nautilus, of course, great brands. You know, you've got you've got you know uh BoFlex is our top brand, you've got Schwin, uh great bike brand, um Iconic, over 100 years old. Uh, and you know, our new our new journey offering on top of that that travels across those brands. We had some other brands in house as well that we've uh the Nautilus brand, of course, that we've chosen not to uh launch products in anymore, but you know, we had to rationalize that. But great products, um, a really choiceful portfolio, which is great for different economic cycles like like this one, where you have all the cardio modalities and strength as well, and you have price point various price points in each of those so that people can select um whatever works for their for their budget. Um, on the channel distribution, we had um we we sell about half direct and half through retail partners like um Dick Sporting Goods and uh Amazon and Best Buy and Costco. Um and then we you know we were starting to differ you know uh scale this differentiated uh digital offering and getting into connected fitness, but we had Miss Connected Fitness, which was you know something I thought we could come back from. Um and we had to get going really quickly to do that. So uh looked at that, said great assets and you know, thanks for the opportunity. We had like a uh we had a tough 2019, so we had a catalyst to change. Um I I you know when I've done this in other industries, whether they've been retail or heavy equipment, um, one of the things is to convince people that they have to change. And uh we already had that here. We had lost 22% of our revenue base in a year where the economy was quite strong, but we were not. Uh so we had to diagnose that, and that was the case for change, and you didn't have to make that. So by the time I got here, people were ready to change, they just needed the direction.

Yeah, that's uh it's fascinating, Jay. And we'll get into specifically like the the trends that Nautilus missed and things you you identified. I'm curious, how do you do you have a process for uh I guess identifying and isolating trends? Right? How how do you go about that? Because that's I mean that that's the golden goose, right? That that's like if you can identify trends and get ahead of them. I mean, it's really easy for some of the things you mentioned, like search for for Microsoft and all that. Look, hindsight would be like, oh yeah, how did you miss that? Right. But as you're going through it, it's really hard to see these trends. How do you go about that?

Yeah, no, it's a it's it's a great question. So in the case of connected fitness, um, it was pretty clear. It was pretty clear that at least that was one of the issues that we had to deal with. The fact that connected fitness is here to stay. It makes everybody's workouts more interesting. Uh, for us, it extends our noble mission. You know, we've had this mission for 35, 40 years to help people live healthier lives through fitness. But honestly, it our journey sort of ended when we shipped you a couple of boxes and a heavy treadmill to your door. We didn't know if you used it. We didn't know if we made your life better. Um, we like to believe we did, but we didn't actually know. And then with Connected Fitness, we have an ongoing relationship with our customer where we can coach them, where we can motivate them, where we know if we're actually making a difference, or it turned into a coat rack. And that's really um, you know, tremendously um, you know, exciting for us. So, you know, that's that's one thing you could really spot. The the things that aren't as easy to spot, usually what one thing I do is come in and ask who our target customer is. And if either they say everybody too broad or they say something too narrow, then um when you look at the, you look at that, you go, okay, we're probably not in the right place. In the case of Nautilus, we had been, I don't know if it was late-night infomercials over the years or whatnot, but we ended up targeting um a group of people for whom fitness was not a very important part of their life. In other words, the types of people that we needed to get off the couch into the game, which is a great part of the Noble mission. But next to that, when we looked at segmentations, we were something like four times over-indexed in those types of customers. You know, if you looked at our customers and compared them to the general market, we were four times over-indexed, which to me tells me even if it was a good segment, we're running out of people in that segment. Because there aren't that many more that we don't have. And that was part of what was happening in 2019. So when we did our segmentation, there were a couple of uh segments really close to that. One of which uh was, you know, uh we call enthusiastic cross-trainers. These are people for whom um exercise is more important um to their life. They may not love it every day, but they know it's important to their lives and they pursue it as a lifetime passion. They're less episodic about it. And so ironically, we were going after customers that were probably the most difficult to keep and stay at it, and we were missing many of the customers who really wanted what we could provide in a big way, especially as we moved to connected fitness. So those were those were some of the things that you you could kind of see. One that was very obvious from the outside that got me excited, and one that um took a little bit of analysis uh you know internally to figure out that we had actually we're actually focused on the wrong customer, our are, which then affects your messaging. It affects um whether you buy you know TV or you go more social, social and uh digital in your in your go-to-market, all of that affects, but those are kind of two that you could kind of uh first spot from the outside and then uh reconfirm once you get into the to the inside of the company.

Jim, when you entered into the connected fitness space uh right around that time, it was and still is. It there's a lot going on in the connected fitness market. How did you identify your strategic approach, you know, given competition and you know, well, pandemic? I mean, we can talk about that. It just flew everything off kilter. But how how did you decide, okay, this is given the competition, this is where we're gonna leverage? What what did you what were your thoughts there?

Yeah, uh in the in the in the digital space, we knew we wanted to get into connected fitness, and we knew um that our portfolio it we had exactly one product that was connected in any way. So that was that was a problem. So, you know, we we knew the strength of Nautilus is in its wide portfolio. So we we had to go first and say, okay, our cardio portfolio first, let's put screens on them, let's run our digital experience on them in a native way to give people the best um offering possible. And then we had to sort of look at um once you have that installed base, which now by the way, we're going into strength, which uh we can talk about as well, and and how how we can work with dumbbells and form coaching and um uh rep counting and and all that. But but really that first step being let's get some products that run journey and that are great products, you know, that that that live up to our legacy of quality and all that. And that wasn't easy, especially once the pandemic hit, and we were launching, I think, eight new cardio products like that in uh in about 12 to 18 months during the pandemic, when it was, you know, we couldn't go to China where we we actually manufacture a lot of this. And um, and so you know that really got us going. And then when we looked at journey, um, you know, if you compare to something like Peloton, for example, um, masters of the of the spin class. Look, if you if you want a spin class with an instructor that's gonna kick your butt, uh motivate you in that way, and you want to compete, that is that is top. That's top. And we really we admired um at the time many of the things that Peloton were doing. Um I just wanted to be mentioned in the same sentences then back then, but uh maybe that's changed a little bit, but uh but we were we we knew we had to have a different angle. So, you know, when we when we hit journey, the main part of journey is individualized connected fitness. So we've changed the whole, we've changed the whole actually mission, vision, value of the company, values of the company around that, that you know, our our our values basically um are you know our our mission really is to empower healthier living through individualized connected fitness. So it's that focus on the individual, maybe not the class and maybe not the competition, but we thought through through AI and machine learning um we could give you the workouts that you wanted uh to accomplish your goals. Look how you were actually performing over time and give you workouts that take you even further. Um you could even tell it, you know, I had two glasses of wine last night, take it easy on me, and we would we would offer you um an adaptive workout that would fit that situation. So that's kind of the center of the differentiation is that we're focused on the individual, that we use software and technology to to give you a workout that's just for you. Um we'll even suggest uh music, explore the world places where you could where you could um bike or run in you know 400 different places around the world. Um, and we bring that all together. So that's that was kind of our our angle there, and we built on that um over time to try to really establish that differentiation. We call it kind of there's there's kind of kind of some pithy things I say. It's first tons of variety because you can get this on not just bikes, but treads and and um our and ellipticals and what we call our max trainer and now weights and things like that. So there's a variety of different workouts, floor exercises, things like that. You know, we don't want you to have to go get a new app because you want to do yoga on Tuesdays. Got all that baked into uh into that. Um there's a variety of uh ways to work out. Uh you can stream entertainment, watch Netflix while you're being coached. Uh you could uh you could go, again, 400 places in the world to really explore. Uh, you can uh program your own music, um, all of those types of things. And what we've really found is that it's different on each piece of equipment. Sure, on a bike, the first thing you think of, thanks to Peloton is is a class. But when you get um on a tread, you don't really have that same concept. And when you get on a hit trainer, not the same concept. You want to go fast and slow, fast and slow. Tell me when to do it, tell me the right intervals, all of that. And so it's kind of like an easy button uh on top of that. So then, you know, that in addition to the variety, we call it you know, entertainment beyond the class. We do want to entertain you. We do have streaming. We're the only people that really allow you to stream Netflix and and Hulu and all that while you're while you're working out and on our console while being coached, all of that fits together. So that's our vision. And we have to continually look at you know what people use and don't use. That's the best thing about digital, right? Is you get immediate feedback. What what are people doing? What are they not doing? You kind of kill the things that uh that they that they're not using, and you add to the things that they are using, and you evolve over time. And we've gone from 14,000 members uh when I got here to about um 400,000 now. So it's uh we've not only made the product better, but we've we've we've we've scaled it. And we have we have a lot more uh ahead of us uh being late to this game, but we're really excited about the progress we've made.

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Yeah, it's pretty interesting. When again, one of the reasons we're built the way we are is because over 40 years we saw that modalities come in and out of fashion, right? They just uh they're they're they're uh they're hot for a while and then not. I mean, for sure, um through about the midpoint of the pandemic and even into the late part of the pandemic, bikes were really hot, right? And it, you know, thanks to Peloton and some of our other competitors uh and us, uh, we had we have a variety of bikes under a couple of different brands uh that at different price points. And so uh that was very hot. Um lately, bikes are down, right? Um the whole cardio category is a bit down post-pandemic, but bikes, um unlike any other, that's that's the one that has the greatest, greatest glut, which is really why I'm I'm happy we're built the way we are with all the modalities, strength and and cardio, because when one's down, the others uh the others can uh can can be up. So then in the pandemic, dumbbells were were fantastic for us and continue to be our number one selling product. It actually, you know, we're number three in dollar share to Peloton and iFit, but we're number one in unit sales, and and a big reason for that is uh are these dumbbells. Um I've you've probably used them or hopefully you have. They're selectorized, you know, you can change to various weights. And during the pan, they were always popular, or always our number one MPS product, but uh during the pandemic, when space constraints became more important to people, instead of a you know, as you build your home gym, which is definitely a trend that's happened, um, you know, you you you don't need you know 12 linear feet um for all the dumbbells you'll need. You just need one little corner. And so these things have been extremely um popular. I I I use them several times a week. It's my favorite product that we make, and uh for a lot of people I talk to, uh really great too. So those are those are unique to us and um and people really, really love them.

Why do you think bikes are down? Is is that I mean, my my guess is that it just during the pandemic it people just bought all the bikes and now you know the consumer demand has just decreased because people who are either gonna buy them already have them, right? Is that accurate or something different?

Yeah, I think so. I mean, uh, in we believe, and it's really tough to get market sizes for our industry. It's not like consumer packaged goods that have weekly runs of tell you exactly who bought what. So it's really tough to get the denominator of market share. But we believe that during the pandemic, the at-home fitness category in the US grew two to three times. And bikes were a big part of that, uh, of that growth. Um, we think that growth is most of that growth is is permanent, um, which I can I can tell you our reasoning for that in a second. But but bikes, yes, bikes were a big, a big part of uh the growth, but we saw growth in all categories. I mean, for the early part of the pandemic, anything a consumer could get their hands on, uh, they did. And starting with since the pandemic kind of started in a you know late winter, early spring time frame, um, call it March of 20. Um, at first it was all about strength. Um, because you could kind of go outside. Um, I don't know if you could in Montana or Chicago, but you could go outside starting about then to get your cardio. You know, you felt shut in. Uh, but you if you didn't have weights and you were used to going to the gym for for any kind of strength training, you were kind of out of luck. And so the strength really began to take off. But during that pandemic, really the whole industry um was was uplifted. And what it probably had more to do for about a year and a half, it probably had more to do with where you could get supply than than the inherent demand. So it grew two to three times, but it probably would have grown even more if we had all been able to meet all the demand we were seeing in that first you know, 12 months or so.

Yeah, that's so interesting. So we've kind of talked about the last few years. Uh I want to get into the now and the future, right? And and some of your um thoughts and opinions on that. I mean, yeah, I know you've kind of broken it down eloquently into like three different categories. I'm gonna let you explain it all. You know, I'm really curious too, is um so many people in this industry are like, well, pandemic's over, at-home fitness is dead, everyone's going back to the gyms, which all of it's exciting. I'm like, well, you know, if as long as consumers are engaged and they're, you know, going to gyms or doing it at home, like I I just you I want more people exercising, right? That's that's what I want. Um but let's look into like what are you seeing now? What what is maybe um antagonistic to some of the trends that people are talking about? And and what are you what are you seeing for the future here?

Yes, uh, it's a great question because uh as as I mentioned before, we know everyone knows that this industry grew tremendously, um, we think two to three times. And we always knew when we were doing our strategic planning that there would be a hangover period because a lot of that was pull through. Um and so we knew that was going to happen. So we began taking a survey um actually before the pandemic, um, as we were trying to discover who our customer base would be. So pre-pandemic, and what we asked people are you know, where where are you working out? You know, what uh are you working out in a gym, at home, not at all? And uh we start with the the population that I think is most relevant is people for whom fitness is moderately important. And we define that as you spend $500 a year or more on fitness. So it could be a club, it could be um, it could be some of our equipment, it could be a digital experience, whatever it happens to be. It's important enough for you to spend money on. Four out of ten of that population were working out at home pre-pandemic. At the height of the pandemic, that number went um to seven out of ten uh at its peak. It is still somewhere between six and seven out of ten. This is two years later after we stop. So, what that tells us is that um habits have profoundly changed in the favor of home fitness. And I think if a lot of us just think of our own habits, um, you know, the work model has influenced that. A lot of gym workouts really related to the idea that maybe at lunchtime or before work or after work you would go to the gym. And if you were working there for five days a week, maybe you'd work out at home on the weekends, but it wasn't a prevalent part of this. Now, flash forward to now, where most of us are working in a hybrid model, uh, you need home equipment. And so during the pandemic, uh, we really saw that peak at about seven out of 10. And it hasn't regulated much, even as people have gone back to the gym. There's still something like 20 to 30 percent of people who are telling us who who are former gym goers that they'll never never go back to the gym, and that's a factor. That's just a pure preference. But I think more importantly, is this hybrid model that really reflects how people are living their lives and working that that says if I'm gonna be at home a few days a week, I need the equipment there. And because of that, we've seen a rebuy rate, which means people will buy more than one piece of equipment. This used to be more of a one-and-done uh industry. You know, you might buy a tread and then we'd never see someone again. You know, we'd use our emails, we send them, but they wouldn't buy again. We're seeing that uh that rebuy rate go uh you know double over time. So we know people are building these home gyms. Another trend that we've seen is the gyms are moving to um the living room in some cases too. They used to be in the garage or in in a spare room or but but so so that has implications. You want the you want the equipment to look sleek enough. You want it to be part of something you'd be proud of, not you know, so much plastic and metal that you know it belongs in the garage. So all of those are really trends, but we're very confident. And if we look at the you know, that that target segment, so it went from four to ten to seven out of ten, and it's hanging out about um six six and a half out of ten right now. And then if you take that same survey to what I call our target customers, you know, we went for these people who really um enjoy working out or for whom um working out is a bigger part of their lives, it's nine out of ten. So and and so there is a permanent difference. Where does it settle? I mean, it's tough to tell. We know it was gonna go up and then it was gonna come down. Uh we actually predicted the two down years. This is the second of the two down years in terms of our revenue. Um, but the quarter that we just reported, our direct business, which is the one we can see the best, was up 50%, 51% to be exact, over the same period pre-pandemic. So you you you feel like even with the pull forward, it's a at least a plus 50%, and it probably will be somewhere between 50% and 100% growth on the original base. Of course, we've attracted new competitors and uh things like that, but uh uh but but that dynamic we think is here to stay, and that gives us great opportunity, you know, with our with our well-known brands and with our diverse product portfolio and our on-the-channel go-to-market and our differentiated digital offering. Um, we're well positioned to uh to play in that space.

It's such an interesting and heated debate of the at person versus you know, the in-person in real life is what they call it now, right? I IRL and uh and the in the I I love it. It's like I have to keep I talk about all the time and I got to keep up with the new acronyms. Um and in the gym, and it seems like we really won't know for a couple years, right, as to how this thing settles out. But it just makes a lot of sense. I think what we saw, you know, most people agree during the pandemic was just an acceleration of trends that were already starting to take place. You know, this just forced people to get more stuff at home. Now they have it accessible at home. That that's really, you know, if you boil it down, that's what happened. I mean, I I include myself. I now have really, you know, three at home gym setups now. And I still go to my gym.

You got a good setup.

Yeah, I got some, I got some nice setups, Jim. That's for sure. Um and you know, some of these subsets you guys are are talking about, you know, the people who spend over $500, $500 or more per year, and then kind of your more devoted people. What about like the I call them the disengaged, right? People who traditionally just not engaged in fitness. Like, how has the at-home market gotten to them? Or has it really?

Yeah, I I think I think it has. Now, those were our typical target customers for BoFlex. I don't know if it was late-night infomercials or it was deliberate. You know, I wasn't here uh at the time, but uh but those folks were really our bread and butter. Uh, we were four times over-indexed with uh with those customers. Uh and um, and those those people are going through the same things. I would say maybe another trend we're seeing is a wider view of holistic wellness, right? Um, you know, to include uh nutrition, to include uh mental well-being, to include how exercise makes you feel, not necessarily how it makes you look and the physical appearance elements of it. So that holistic view has changed. You know, used to be that target customer wanted to go, you know, quick results, wanted to lose some weight, wanted to look better on the beach, whatever it happens to be. And and those are decent motivations, but they're not they're not long-term motivations. They're not who you are internally. And so I think we've really seen a lot of that change too. Maybe it was being locked up and really considering what's important in one's life, whatever it happened to be. But we really saw a change in that. And and so those those people are are in the same, are in the same boat. Um, they might have different things initially uh motivating them, but but it really is this overall view of holistic wellness that's important to so many of us. And that's why we that's why you love this industry, that's why I love this industry, uh, is because we can make a big difference in people's lives.

Yeah, and it it's become so interesting. I mean, I I talked about four years ago, I was really I was I was ready for a new industry. And then if I'm honest with myself, the pandemic happened, everything got really, really interesting. I was like, okay, now it's now it's exciting. Okay, I've been waiting, you know, 13 years for this to get really exciting, and it sure it sure did. You know, when you talk about the holistic, you know, fitness and wellness uh trend as well. How how are you um how is Nautilus, I guess, adapting to that trend? How are you how are you taking advantage of that?

Yeah, for sure. I mean, the first thing is the BoFlex brand. Um, you know, when I first got here, lots of pictures of sweaty buff guys and um very slim women uh working out. Um and the idea really was, and we weren't the only ones then, um, you want to kind of capture what what people want to become. Um, and you show them pictures of that, uh, of what they could aspire to. But it was such a sea of sameness. Um, so you know, over the over the last couple of years, you've seen in our brand advertising, you're just seeing more regular people, people you can identify with, um, that that may not may not look that way. And then some of our competitors, they they love the picture of that same person, you know, in a condo most people can't afford overlooking some beautiful view. And you might want to aspire to that, but I I think it's it's kind of too much an element of that. And then there's the element of competition. Um, some people do want a leaderboard and want to be number one, but most people that we talk talk to in all of those segments really want to become the best version of themselves. And so um that that's really what we're trying to get to. And individualized connected fitness really does um give us an angle to be able to bring that to life. We have a lot of really good work um with the BoFlex brand that brings it to brings it to the next next level. Um, BoFlex was also probably, it's such a well-known and loved brand, but it's a little dated, or at least it was when we first got here. You know, it conjures up uh visions of a Rod gym or late night infomercials, or even Chuck Norris, who never, by the way, worked for our company. It was like some other direct marketing company. So, but but we know that uh especially when we have Journey and our digital platform, it can move our BoFlex brand in the right direction uh and become a more modern version of itself. So it really, these two brands really uh mutually reinforce one another that um you know maybe Journey puts a little cool on the um on the BoFlex brand. And the BoFlex brand is so well known that when you're developing a new brand like uh like Journey and a new experience, then um that that really helps. And then, you know, we'll continue to really look at the trends over time to uh you know uh to take take the company. I mean, the one thing is since we missed such a big trend, we are absolutely paranoid about missing the next thing, right? So we are really focused on that. And and really, um, you know, having done this in a bunch of different venues with different uh industries, the one commonality usually is not looking far enough left and right for substitutes and far enough left and right for the thing coming your way. You know, my first one was encyclopedias at Encyclopedia Britannica, the first dinosaur of the internet, so I did that. But uh, but we we thought our competition uh when I first got there was World Book Encyclopedias, and obviously it was the internet and and Wikipedia is good enough and all these other trends. But I think you just continue to uh look for things like that.

Yeah, yeah. Bet you wish you got that one back.

Yeah. Well, I as I tell people it's on my resume. I learned a lot about it, but it's a smaller font. I I it's I don't give myself the same grades for that one as the other one since then.

Yeah, gosh, man. I just think about what I used to have to do when I had like a report to write. I used to have to pull out all the encyclopedias. And you know, uh kids nowadays, they have no idea, right, how how uh how much information there is available to them. It's it's bananas. Uh you you had mentioned strength solutions, and I want to I want to touch on that because I'm you know huge fan of strength for just about everybody, really. I can't think of a uh application where strength isn't good for for a consumer um for their long, you know, both short-term and long-term health. Um what are you guys working on there? What's in that department?

Yeah. So about a year ago, we bought a company um called Way. It's spelled V A Y, but uh in Swiss German uh pronounced Way. And they were the leaders working with all of our competitors at the time in what we call uh motion tracking and vision tracking. What that means is using a normal camera, such as what you might find on a tablet or a phone, um uh we we are uh learning how to track, count your reps, and coach you on form. So those are two uh two things we're working on, and we have a beta going live later this quarter that brings that to life. So what we do is we couple our dumbbells, which I told you number one NPS product, we sold millions of units of these things. We couple that with um with uh journey uh and uh and rep counting and um inform coaching. Also have classes and things like that all in the journey app for strength. Um, and that's kind of our first entrance into the space is to take this product that is unique to us, that that millions of people love, and bring that that type of experience to it. And um we've we've just launched the beta, I've just tried it. It's pretty it's terrific. I mean, it'll get better over time, but we'll we'll launch with you know uh dozens of exercises that you can start right away. Uh, and you know, using using the camera and um a whole bunch of great tech behind it from the Swiss company, uh we're able to uh uh you know to count your reps and uh make you know so you don't have to write them down in your journey uh journal. And if you're doing the exercise right for maximum um maximum um uh benefit, or if you're doing it wrong uh you might hurt yourself, we can coach you on that. So I'm very excited about that. Um over time we'll bring that to more strength equipment, but that is the first offering and and um really really excited about that.

That's an interesting piece of tech. I mean, the the rep counting kind of you know, I I think that's just you got to pay that to play nowadays, right? And but the the the the form correction, that's been a challenging one, a challenging nut to crack because you know it it's it's got limitations. So, you know, I when you look at what you guys are doing in the market, what do you think is critical for for form correction when it comes to the technology? Like, what is a consumer expecting on this?

Yeah, yeah. I mean, uh we're gonna learn a lot in the in the in the in the test that we're doing, but some things we already already know is things like form factor, for example. Like we'll we'll likely launch with a tablet before we go to mobile phones, because you got to kind of put it in the floor 10 feet away and be able to see yourself and hear yourself um, you know, hear the feedback uh going going there. Um, I think one one one interesting um thing we're learning is is the feedback on how often you correct someone. So if they're doing it wrong and you correct them 10 times in a row on the same, like that's not helpful, just like one of our spouses doing the same thing to us or whatever it happens to be. Uh, but if you tell them, hey, you know, you should you should keep this arm straight or you should keep your back straight, um, that that sort of thing, uh, you know, we're we're learning that. But then it's honestly one of those things with machine learning uh that gets better pretty quickly once you have enough data points out there and correction points uh there. And so that's that's what we're really excited about. So I don't know that we'll get it 100% right, straight out of the box, but we feel like we have a competitive advantage in that. And uh and that once we once we keep getting those data points and those usage uh points, that that the machine learning will get uh will get a lot better.

Yeah, and I mean that's just it, you just got to be out collecting the data, right? And that's that's just the world we live in now with these type of ventures. Um one of the things I'm always curious about is that, you know, obviously you guys are very much B2C. And how um is there advantages or things that if I'm a fitness professional, you know, maybe you're a particular gym owner or a coach or a trainer, you know, how is is Nautilus focusing on making me better at my job in any specific areas, or are you guys primarily focused just on the B2C side?

Well, you know, in the holistic view of of health and wellness, I mean, the other way that it travels is with you as a human being, right? So uh what I mean by that is look, our focus in our what we're good at is is the at-home scenario, on on and off our equipment. But we recognize, of course, that same person goes to the gym, especially in this hybrid model that I was mentioning. And today those things are not really connected well. And then that same person goes outside to go for a hike or a walk or a run. Um, and that's got to be brought in there. Right now, the angle on that is mostly wearables, you know, your your your watch or your uh or some other wearable. And so I think you know, a lot of this is going to um come come together over time.

Yeah. Uh so we are this is Q4 2022.

Well, one thing I could tell you as well, though, is we we do care um about that person where wherever they go, right? So, like I said, so if that person's at the gym, you know, we we think we can help. I mean, a lot of this, you know, personal trainers, things like that. I mean, one of the things we want Journey to help emulate sometimes is is someone that really cares just about you. And and that could actually be a human being and uh using using our equipment. So we know we know uh Journey needs to work that way. Uh, we do actually have a B2B B2B business which is selling through retailers, but it's not exactly what you're saying, where you know there's a personal trainer involved. But we do like the fact that we're we're on the channel and you can go to a store and check it out, or you can buy it online if um from BoFlex.com if you if you know that.

Yeah, and the reason I ask it because I I was having an interesting conversation with a couple colleagues of mine. Um I won't bring them up, but we were talking about how the role of the personal trainer um is no longer really seen as a career path, right? Uh, you know, 10, whatever, 10, 20 years, let's say say 10 years ago, you know, people will go to um an equinox or whatever, you know, a nice hand. And they're like, okay, well, I'm gonna start as a trainer, I'm gonna become, you know, a group trainer, then a manager, and then, you know, maybe all the way up to district, you know, and there's there was a path. People don't seem to be interested in that anymore. You know, the personal trainer has been seen as a gig, really. You know, it's part of the gig economy. People will do it for a little while and then move on to another job. And what we're noticing is like there's very but there are still a small percentage of people who really want to make this a career. And I think the role is one of the things, you know, um, as an industry, what we can do is help locating these particular people and then making them more impactful to more people. And I think that comes through a lot of technology aspects, right? Like if you can have one person coaching a hundred people because they have the data and they have the insights and they have the tools to do it, and someone who's really educated who wants to go get all, you know. Uh go through all the degrees and things like that and certification it takes to be a really good fitness professional. You know, how how can we support this shrinking group to be able to apply to more people? And I don't know, it's kind of a random thought that I have, but that's why I asked that question.

No, no, I mean I I I'm certainly no expert on that, but you've seen a lot of industries change over the pandemic. And while you know, some elements that you mentioned may be negative towards that particular um profession, um, I think of like something like telemedicine or people getting uh mental mental health um uh checkups all done using video technology like we're using today. And um, that probably has the ability to reach more people, you know, how that model actually develops and how the compensation elements build up to whether it can be a meaningful career for more people or less people. I think there are some things technologically that suggest that's more important. So if if if your overall health is becoming more important and working out at home is becoming more important, uh then um I think it follows that that at least certain elements of that personal training experience would become more important and maybe just need different uh delivery mechanisms. Maybe that's a that's a catalyst for that. But again, I'm not an expert on it. You probably know more about that than than I do, but we want we want to make sure we watch what our what our customers want and give them more of that. So we'll continue to look for trends um like the one we just talked about.

Yeah, yeah. So what I was getting as we're we're in Q4 2022, right? We're we're looking at next year. Uh probably once again, not gonna be a boring year, uh, I would imagine, with uh the threats of recession if we're not already in recession, depending on who you ask. Um, there seems to be a big trend as well to consolidation and acquisition within the industry. Um, when you look at next year, Jim, what are you preparing yourself for? How how you know, give us some insights into your personal crystal ball? What do you see here?

Yeah, for sure. I think, you know, as we were talking about before, we know that this industry grew tremendously and is now coming down from that peak, but no one's sure exactly where that it where where we hit that point. Um, as I mentioned in our direct business, we're up 50% over pre-pandemic, even with pull forward. So we think it'll it'll it'll end up being somewhere between there and 100% or something like that. But we don't know when. The other thing that is part of our equation now that makes business tough for us and and people like us is on the channel is great, but retail right now is stuffed with inventory. So what happened there? Uh, that's a temporary, you know, in addition to the macro being temporary, this is an additional headwind. But we have long-term tailwinds and the positive. We have a headwind today, which is retailers like you know, Best Buy and Amazon and uh and uh Dick Sporting Goods, they ran out of product in 2020 for the holiday season. You know, they bought everything they could, still ran, and so they left money on the table. So then, as they planned for holiday 21, um, for us in the June quarter, which is way earlier than it usually happens, they ordered a lot of stuff, not just from us, from everyone, not just in fitness, but in every other category as well. And then they um uh then by the time they got to 21 and the in the we started to get the demand calming down a little bit, they still had way too much stuff. And so that's where it is today. So we just did our earnings last week, and um our our revenue our revenue's down. And the reason our revenue is down, even though uh we're up on uh on direct is is retail. Um and that's not a forever thing, that's kind of like a log jam, right? You know, like there's this, they've got enough inventory. Um, you know, their their owners, their their senior managers aren't saying, hey, we want you to go buy more inventory and take a chance. We want you to get rid of inventory in every category, and we don't want you to buy much more, even if it means you might stock up. So we've seen that happen. That's been a real thing for us and um you know, anyone who sells through through retail. The good news is that's temporary. The the tough part, you know, is it really does require a crystal ball. Will they sell through all that stuff this fitness season, which for us kind of ends around the end of January, and then it gets a little slower all the way until uh till fall. Um or or will they, you know, or will they still have a lot of inventory, which means we may have a little bit of this hangover still into 24. And we'll be able to look at that. We we do get reports on how much inventory each of our retailers have, what they're doing to sell through, meaning end a consumer sell through, um, and we'll we'll we'll make a judgment on that. The good news is, like I said, and it's not to be taken for granted, is in this economy, if you give the consumer a deal, even if you sell something at a thousand bucks or fifteen hundred bucks, they're still buying, which is great. Um, so we are seeing the end consumer demand. Uh, we hope to continue to see that end consumer demand. But those are the factors. What is the macro going to do for the end consumer? And what is this temporary log jam? When does that loosen up? Uh, and and that's what we're telling investors. And we're just trying to look at the data, uh, talk to our retailers and discuss when you know when we think that'll happen. So that that's that's kind of the industry as we've talked about it. Long-term uh positive tailwind, short-term negative um uh challenges with with the macro and the inventory levels.

Yeah. That's great insights. And uh, you know, one of the last questions I always ask on the show, Jim, is you know, in in the spirit of you know, collaboration throughout the industry, and if people are listening, you know, give them reason to reach out. But what do you need right now? What do you need as the CEO of Nautilus? What's uh what's critical?

Yeah, I mean, um first thing is our is our people. You know, it's it's it's a tough thing to be a quote unquote um pandemic darling and come down from that and uh and you know have kind of this, it's all been difficult, right? The highs and the lows, but coming down and getting people to understand and believe the temporary nature of what we're going through and that this too shall pass. Um, you know, uh I've I've used the uh the probably the overused um rough rough seas make great sailors. So, you know, all of those types of things, and we're learning, and it's a great density of experience, and we get to work in this great industry that we're we all we all appreciate. So, first of all, it's really just you know our people hanging in there, um making sure they focus on what they can control and don't worry about the things they can't control. Um, that's a big part of it. I do think you mentioned consolidation before. So we've announced um that we're open to strategic alternatives, which is kind of shorthand for uh important partnerships to go faster on our North Star uh journey to become who we want to become. Uh so we're open to um different companies helping us there in a way that we haven't before. And I think that was gonna happen any anyway. I think the industry consolidated, I mean, for every one of us to have our own version of journey. Um, and for some of us, just if you have a single modality, like a rower or something like that, and you have that, and it's gonna trend to a more consolidated view of your fitness, and then it's gonna have to travel in the holistic way to the various places you work out. So that's that's where partnerships can come, you know, fitness and wellness could come together. But it's really partners to um, you know, to help us help us achieve our vision and maybe their vision um more rapidly by working together.

Right on. Well, Jim, thank you so much. If people want to get a hold of you or uh or just connect or wherever you want to send them online, where where would you like people to go?

Uh I think you can just call our call our office. Um I still I still uh check my check my voicemails uh and uh and uh I definitely um you know uh enjoy talking to customers. I'm I'm definitely on social media as well, uh LinkedIn, Instagram, um those different places as well. So uh if people want to get a hold of me, uh definitely there's there's ways to do it.

Right on. Well, Jim, thank you so much for for spending an hour with me today. I know you're a busy guy. It's been really insightful and really appreciate it. Ladies and gentlemen, Jim Barr. Thanks. Hey, wait, don't leave yet. This is your host, Eric Malzone, and I hope you enjoyed this episode of Future of Minutes. If you did, I'm gonna ask you to do three simple things. It takes under five minutes and it goes such a long way. We really appreciate it. Number one, please subscribe to our show wherever you listen to it. iTunes, Spotify, Castbox, whatever it may be. Number two, please leave us a favorable review. Number three, share. Put it on social media, talk about it to your friends, send it in a text message, whatever it may be. Please share this episode because we put a lot of work into it. We want to make sure that as many people are getting value out of it as possible. Lastly, if you'd like to learn more, get in touch with me, simply go to the featuroffitness.co. You can subscribe to our newsletter there, or you can simply get in touch with me as I love to hear from our listeners. So thank you so much. This is Eric Malzone, and this is the Future of Fitness. Have a great day.