Slide presentation

Operating Review

July 31, 2008

Exhibit 99.2

Safe Harbor Statement

This presentation contains forward-looking statements, which may contain

words

such

“intends,”

“believes,”

“anticipates,”

and

“expects.”

These

forward-looking statements involve risks and uncertainties that may cause

our actual results to be materially different from those expressed or implied

by these statements. A more detailed description of certain factors that could

affect actual results include, but are not limited to, those discussed in the

Nautilus, Inc. annual report on Form 10-K for the fiscal year ended December

31, 2007. This presentation utilizes management allocations to present

channel segment results. These allocations are based on management

estimates and are subject to revision. We do not undertake any duty to

update forward-looking statements after the date they are made or to

conform them to actual results or to changes in circumstances or

expectations.

Bowflex, Nautilus, Nautilus One, Schwinn Fitness, StairMaster and Universal

are registered trademarks of Nautilus, Inc.

Turnaround objectives

•

Strengthen balance sheet and liquidity

–

Reduce risk

–

Support growth strategy

–

Permit future distributions to shareholders

•

Improve profitability at current sales levels

–

Lower breakeven level

–

Reduce earnings volatility

–

Eliminate losses in commercial business

–

Maintain investment in advertising

•

Develop strategy for profitable growth

–

New product development

–

Resolve retail / direct channel conflict

–

Expand share in cardio market

–

Capitalize on retail brand portfolio

•

Increase financial transparency

Balance sheet and liquidity

•

Sale of apparel business in April

–

$58.4 million net cash received

–

Up to $4.3 million to be received from escrow in October 2009

•

Terminated $69 million agreement to acquire Land America

–

$8 million payment in Q2 settles all claims

–

Good supplier relationship restored

•

Maintaining liquidity

–

Operating cost reductions

–

Inventory reductions

–

Further outsourcing reduces required capital expenditures

•

Current position

–

Net

cash

million

June

versus

net

debt

$71

million

December

31,

2007

–

Unutilized borrowing availability of approximately $35 million at June 30

•

Improved balance sheet position permits share repurchases

–

$10 million approved

–

$5.1 million repurchased through July 29

Improve profitability at current sales level

•

Historical

profitability

declined

despite

sales

increases

(1)

–

Fixed costs growing faster than sales

(1)

Excludes apparel division and restructuring and

other items; 2003 and 2004 results adjusted for

FAS 123R

($ millions)

2003

2004

2005

2006

2007

Sales

498.8

523.8

607.2

617.3

501.4

Gross Profit

243.5

238.6

262.6

266.3

196.3

Gross Margin

48.8%

45.6%

43.2%

43.1%

39.2%

Advertising

83.0

76.0

85.0

78.0

as % of sales

16.6%

14.5%

12.5%

13.8%

15.6%

Other SG&A

111.8

120.8

156.7

146.6

154.9

as % of sales

22.4%

23.1%

25.8%

23.7%

30.9%

Operating Profit

48.7

41.8

29.9

34.7

(36.6)

Operating Margin

9.8%

8.0%

4.9%

5.6%

-7.3%

Improve profitability at current sales level

•

Expense growth affected all channels negatively

(1)

Allocations based on management estimates and

are subject to revision

(2)

Corporate as a percent of Total Sales

Note: Excludes apparel division and restructuring and

other items; 2003 adjusted for FAS 123R

2003

2007

($ millions)

Direct

Retail

Comm.

Corporate

Total

Direct

Retail

Comm.

Corporate

Total

Sales

246.9

165.4

86.5

498.8

249.1

114.7

134.5

3.1

501.4

Cost of Goods Sold

(1)

79.8

116.7

58.8

255.3

98.5

96.1

109.8

0.7

305.1

Gross Profit

167.1

48.7

27.7

243.5

150.6

18.6

24.7

2.4

196.3

Gross Margin

67.7%

29.4%

32.0%

48.8%

60.5%

16.2%

18.4%

39.2%

Advertising

(1)

79.6

3.4

83.0

75.9

2.1

78.0

Other SG&A

(1)

54.7

21.9

16.5

18.7

111.8

67.7

18.0

37.1

32.1

154.9

Operating Profit

32.8

23.4

11.2

(18.7)

48.7

7.0

(1.5)

(12.4)

(29.7)

(36.6)

Operating Margin

(2)

13.3%

14.1%

12.9%

-3.7%

9.8%

2.8%

-1.3%

-9.2%

-5.9%

-7.3%

Net Income

31.3

(25.0)

EBITDA

63.7

(22.9)

Planned cost reductions

(1)

Excludes apparel division and restructuring and

other items

(2)

Incremental savings

(3)

Assumes constant sales volume and mix

Cost Reductions

2007

Percent

($ millions)

Actual

(1)

Annualized

(2)

2008

Total

Reduction

Cost of Goods Sold

(3)

305.1

(2.4)

(16.3)

(18.7)

-6.1%

Advertising

78.0

(2.0)

-2.6%

Selling & Marketing

97.4

(2.5)

(21.3)

(23.8)

-24.4%

General & Administrative

47.3

(2.2)

(9.4)

(11.6)

-24.6%

Research & Development

10.2

(1.0)

(1.1)

(2.1)

-20.3%

Subtotal Other SG&A

154.9

(5.7)

(31.8)

(37.5)

-24.2%

Total Costs

538.0

(8.1)

(50.1)

(58.2)

-10.8%

Planned cost reductions

•

Pro forma 2007 reduction by channel

•

On a pro forma 2007 basis, each channel would have been profitable

($ millions)

Direct

Retail

Commercial

Corporate

Total

Cost of Goods Sold

(1)

4.4

5.1

9.2

18.7

Advertising

2.0

Other SG&A

12.1

3.5

9.2

12.7

37.5

Total

18.5

8.6

18.4

12.7

58.2

(1)

Assumes constant sales volume and mix

Improve profitability at current sales level

•

Initial phase of cost reductions benefit H1 2008

(1)

Allocations based on management estimates and

are subject to revision

(2)

Corporate as a percent of Total Sales

Note: Excludes apparel division and restructuring and

other items

H1 2007

H1 2008

($ millions)

Direct

Retail

Comm.

Corporate

Total

Direct

Retail

Comm.

Corporate

Total

Sales

128.3

46.9

62.9

1.3

239.4

110.9

51.8

60.4

2.0

225.1

Cost of Goods Sold

(1)

48.3

39.6

50.5

0.3

138.7

43.9

40.8

48.9

(0.2)

133.4

Gross Profit

80.0

7.3

12.4

1.0

100.7

67.0

11.0

11.5

2.2

91.7

Gross Margin

62.4%

15.6%

19.7%

42.1%

60.4%

21.2%

19.0%

40.7%

Advertising

(1)

38.6

0.9

39.5

35.1

0.6

35.7

Other SG&A

(1)

35.2

8.6

17.4

16.8

78.0

26.3

6.9

15.5

12.5

61.2

Operating Profit

6.2

(2.2)

(5.0)

(15.8)

(16.8)

5.6

3.5

(4.0)

(10.3)

(5.2)

Operating Margin

(2)

4.8%

-4.7%

-7.9%

-6.6%

-7.0%

5.0%

6.8%

-6.6%

-4.6%

-2.3%

Net Income

(11.2)

(4.2)

EBITDA

(9.8)

1.7

Planned cost reductions

•

Cost of goods sold

–

Facilities consolidation

–

Consolidation of distribution centers

–

Component costs

•

SG&A

–

Reduce management duplication

–

Efficiencies in marketing, finance, IT and International

–

Purchased services

•

Additional opportunities

–

Product redesign to improve manufacturability and reduce warranty expense

–

Improved component purchasing

–

Continuing SG&A cost control

–

Improved advertising effectiveness

•

Continuing profitability issues

–

Effect of economy on revenues

–

Purchased product cost increases

–

Freight (principally outbound)

Implementation of cost reductions

•

Expected timing of cost reductions and restructuring expenses

(1)

Assumes constant sales volume and mix

Note: Includes results of 2007 reductions

Cumulative Quarterly Run Rate

2008

2009

Annualized

($ millions)

Run Rate

Savings

Cost of Goods Sold

(1)

(0.9)

(1.0)

(1.2)

(1.6)

(4.7)

(18.7)

SG&A

(5.7)

(6.7)

(7.3)

(8.4)

(9.9)

(39.5)

Total

(6.6)

(7.7)

(8.5)

(10.0)

(14.6)

(58.2)

2008

2009

($ millions)

Total

Restructuring & Other Items

Asset Write-Downs

1.4

0.7

3.5

5.6

Severance

1.8

1.5

0.4

0.6

0.4

4.7

Land America Settlement

8.0

Other

3.7

0.4

0.2

4.3

Total

9.8

6.6

1.1

4.5

0.6

22.6

Implementation of cost reductions

•

Estimated composition of restructuring costs

2008

2009

($ millions)

Total

Cash

9.8

2.4

0.4

1.6

0.6

14.8

Non-Cash

4.2

0.7

2.9

7.8

Total

9.8

6.6

1.1

4.5

0.6

22.6

Strategic focus

•

Restore sales growth at acceptable margins

•

Increase overall share in cardio market

–

2007

U.S.

fitness

market

(1)

Cardio

72%

Strength

28%

–

Nautilus percentage of cardio

Retail

60%

Direct

25%

Commercial

63%

•

Increase penetration of mid-priced commercial strength market

–

Nautilus One leads at high end

–

Mid-market is 66% larger

•

Address Retail vs. Direct channel conflicts in consumer fitness products

–

Lowered margins

–

Reduced advertising efficiency

(1)

Source:

Sporting Goods Manufacturers

Association (SGMA)

Strategic focus

•

Capitalize on brand portfolio in Retail channel

–

Bowflex

–

Nautilus

–

Schwinn Fitness

–

StairMaster

–

Universal

•

Redesign Direct products to maintain gross profit margin at optimal price points

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

2,100

2003

2004

2005

2006

2007

170

190

210

230

250

270

290

Average Selling Price

Total

Direct

Channel

Sales

Optimal ASP Zone

Strategic focus

•

Most growth initiatives involve investment in new product development

–

Innovation

–

Design for manufacturability

–

Reposition price points

–

Consumer product differentiation

•

Expect to announce results of strategic review in Q1 2009

Summary

•

Balance sheet and liquidity now satisfactory

•

Current cost reduction program completed by Q1 2009

–

Near-term improvement in earnings

–

Offsets weak economic environment

–

Continued focus on cost control

•

Investment in key growth drivers of new product development and advertising

continue at current levels

•

Opportunity to use enhanced cash flow for growth or shareholder distributions

•

Strategic Review in Q1 2009

–

New and repositioned direct products

–

New cost-reduced commercial products

–

Retail brand optimization

–

Expansion in cardio market

–

Focus on profitable growth