With a refi under its belt and no "wolf at the door," as CEO John Aglialoro put it, Cybex is now looking ahead ambitiously toward even more new products as net sales for the third quarter jumped 10 percent despite increased net losses and lower margins.
"Our confidence is the highest it's been in three years," Aglialoro said in a quarterly earnings call with investors on Oct. 29. "It's been a difficult periodâ€¦. The Cybex team had the wolf at the door everyday, and we're proud we were able to produce new products at the same time."
Net sales for the quarter were up to $21.9 million compared to $19.9 million for the comparable 2002 period. On a less positive note, the net loss for the quarter ended Sept. 27 was up 146 percent, or $953,000 ($0.12 per share) compared to $388,000 ($0.04 per share) for the third quarter of 2002. Gross profit for the quarter was $7 million or $153,000 less than the comparable 2002 quarter, with margin down 2.5 percent to 32 percent.
Of the quarter's sales, cardiovascular equipment amounted to 27 percent or $1.9 million, while treadmill sales were up 6.2 percent, CFO Art Hicks reported. Strength equipment sales were up 1.2 percent.
On the heels of the release, stock prices decreased but closed the week on Oct. 31 with a jump to $1.37, up 13.22 percent.
With the stepper/elliptical-like ArcTrainer pumping up 2003 sales strongly, Aglialoro said Cybex (AMEX: CYB) is working on other models to expand the popularity beyond the club base. Currently in R&D, he said, is a machine with the working name "ArcLite," or a slightly scaled back model that will be geared for the vertical markets such as hotels and apartment buildings. In addition, as a part of its move toward entering the home market, he said the company is also developing a unit now dubbed for working purposes the "ArcLiteLite," which will be an even more scaled-back model suitable in size and price for the home.
At the IHRSA show in March 2004 in Las Vegas, expect to see the Arc model for the vertical market, Aglialoro said, as well as a "Total Body Arc" that will incorporate upper body arms. Among cardiovascular equipment such as steppers and ellipticals, those that have more than just lower body features dominate sales by 6-to-1, he said, noting that predicted increases in sales from that are expected to help boost revenues in 2004.
In addition, the company plans to introduce a string of new bikes, both upright and recumbent, at the IHRSA show next year. Although this category is still the least used in clubs among cardiovascular equipment, Aglialoro said that it's still an important part of a full line to be able to offer clubs, adding, "We think we have the best bike in the industry."
Interestingly, about half of revenues in 2003 are from new products the company has introduced, including the ArcTrainer and the Eagle strength line, as well as its Pro+ Treadmill.
One analyst voiced a concern during the call that Cybex isn't visible and has no access, even trading by appointment, all seemingly showing no interest on the company's part in spreading the word about itself or raising its public image. Aglialoro said in the last three years -- since the "new Cybex" has been in place -- the focus has been on "having the company survive." With five quarters in a row now of revenue growth, it may be approaching a time to go on a road show, he said.
"You have to hold your fire until there is something to shoot at," he said. "It's a case of patience."
Cybex didn't return repeated telephone calls and several emails for elaboration on the comments on earnings, market direction or the future products mentioned.
In other reported earnings, for the nine months ended Sept. 27, net sales were $63.6 million compared to $56.8 million for the comparable 2002 period, an increase of 12 percent. The net loss was $2,557,000, or $0.30 per share, compared to a net loss of $22,572,000, or $2.56 per share, for the same prior year period. While the company said it doesn't expect net sales will continue to increase at this rate during the balance of 2003, it said it anticipates net sales for the full year 2003 will exceed 2002 net sales by more than its prior guidance of 3 percent to 5 percent.