What happened 

Shares of fitness company Nautilus, Inc. (NYSE:NLS) plunged as much as 23.9% on Tuesday after it reported third-quarter earnings. Profits beat estimates, but management lowered full-year guidance, and that's why shares are dropping. At 10:55 a.m. EDT shares were still down 19.5% on the day. 

So what

Third-quarter revenue was up 9% versus a year ago to $88.1 million as retail sales jumped 15.8% to $53.5 million. Operating income was up 62.8% to $13.4 million and income from continuing operations was $8.3 million, or $0.27 per share. That easily surpassed the $0.23 in earnings that analysts expected. But that's the end of the good news. 

Workout equipment in a gym.

Image source: Getty Images.

Management said the holiday season may not be as strong as previously anticipated and lowered revenue guidance to $405 million-$410 million, or about flat versus a year ago. Operating income is expected to fall 13% to 18% to $44 million-$46 million. Both revenue and operating income were expected to rise 5% to 7% in 2017 as recently as one quarter ago. 

Now what

The new Bowflex HVT product isn't living up to expectations, which is a drag on results with declining TreadClimber sales. And until management figures out how to market the product directly to customers, its likely sales will lag expectations. Given the uncertainty around growth and the adoption of Bowflex HVT, I don't think this is a discount worth jumping on today, especially if increased marketing spending is going to crush margins for the foreseeable future. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.