Nutrisystem, Inc. (NASDAQ: NTRI), a leading provider of weight
management products and services, today reported financial results
for the quarter ended March 31, 2013. The Company also announced
that the Board of Directors declared a quarterly dividend of $0.175
per share, payable May 23, 2013, to stockholders of record as of
May 13, 2013.
The following are financial highlights for the quarter ended
March 31, 2013:
- Revenues of $105.4 million compared to
$128.5 million in the first quarter of 2012. The decline was driven
by the removal of unprofitable revenue streams and weak consumer
response to the 2013 creative campaign. The Company’s new
management team is addressing the response issues through a return
to direct marketing analytics and creative best practices.
- Gross margins improved 520 basis points
to 50.3% during the quarter from 45.1% in last year’s first quarter
as a result of the elimination of free giveaways, single-digit
improvements in new customer average selling price, and process
re-engineering around cost of goods sold, delivering on the first
phase of the Company’s turnaround plan.
- Operating loss for the quarter was $1.1
million, an improvement of $5.7 million compared to last year’s
operating loss of $6.8 million. Excluding one-time
severance-related charges of $1.4 million, operating income for the
quarter was $0.3 million, representing the first time since 2010
that the Company has recorded a first quarter adjusted operating
profit.
- Adjusted EBITDA was $3.9 million, a
$5.8 million improvement compared to an adjusted EBITDA loss of
$1.9 million in the first quarter of 2012. This was driven by an
improvement in gross margin combined with careful management of
marketing and G&A expenses. Adjusted EBITDA is defined as net
loss excluding non-cash employee compensation, severance and
related charges, interest, income taxes, depreciation and
amortization as referenced below in the adjusted EBITDA
reconciliation table.
- Net loss for the quarter was $640,000,
or $0.02 per diluted share. One-time charges were $1.4 million in
the first quarter, and impacted earnings per share by $0.02.
Excluding one-time charges, net income for the quarter improved to
$200,000 or $0.00 on an earnings per share basis, which
outperformed the Company’s original forecast of a loss of $0.03 to
$0.08 per share in the first quarter and compares favorably to a Q1
2012 loss of $0.16.
- Cash, cash equivalents, and short term
investments were $35.1 million at March 31, 2013. The Company had
no outstanding bank debt at quarter-end under its existing bank
facility.
Dawn Zier, President and Chief Executive Officer of Nutrisystem,
said, “Profitability improved in the first quarter, indicating that
our turnaround is beginning to take root. We continue to be focused
on improving customer profitability and ensuring that we maximize
the Company’s bottom line. To that end we made good progress this
quarter by increasing revenue per customer, average selling price
to new customers, and gross margins, as well as reducing overall
corporate expenses.”
Ms. Zier added, “We are investing in the future of our business,
and ultimately we have to stabilize the top line and then return to
growth. We have a number of strategic initiatives in this regard.
We are building an innovation pipeline to drive product and program
improvement, create new products to address specific consumer
segments, and enhance customization options throughout each phase
of the weight loss journey. The first of these new products, our
5-Day Nutrisystem® Jumpstart™ Your Weight Loss Kits exclusive at
Walmart, was introduced during the first quarter and is now
available at 2,000 select Walmart stores across the country. We
plan to continue to expand this program throughout the year. As
part of this launch, one of the kits available is specifically
targeted to the type 2 diabetes market.”
Ms. Zier continued, “Our engagement of Melissa Joan Hart as a
celebrity spokesperson provides us with a new, relatable brand
ambassador who mirrors our values and who we expect will resonate
with our customers. We also are enhancing our online platform to
improve the customer experience while creating new online offerings
to meet the needs of the DIY dieter – a market expansion
opportunity for Nutrisystem. All told, we are marching forward with
our plan to grow shareholder value by stabilizing our core
business, improving profitability, and building new growth
initiatives.”
Guidance Update
The Company’s guidance for 2013 is as follows:
- Adjusted earnings per share are
expected to be in the range of $0.23 to $0.33 per share for the
full year and $0.15 to $0.20 per share for the second quarter.
- Revenue pressure is expected to
continue in the second quarter due to fewer on-program customers
entering the quarter, a continued sluggish consumer spending
environment, and continued consumer response challenges. This
revenue pressure should begin to abate in the second half of the
year, as the Company’s strategic initiatives begin to take
hold.
- Gross margins are expected to remain in
the low 50% range as the Company continues to focus on price and
supply chain management throughout the year.
- Marketing efficiency is anticipated to
be slightly higher than the prior year as we dedicate media to
testing both offer and creative in the second half of the year, and
also fund our product development initiatives in support of the
2014 diet season.
- G&A expense will likely be flat to
up slightly versus adjusted 2012 due to investment in our growth
initiatives.
- Tax rates are expected to be in the
mid-30% range for the year.
Conference Call and Webcast
Management will host a webcast to discuss first quarter
financial results today at 4:30 PM Eastern time. The webcast will
include remarks from President and Chief Executive Officer Dawn
Zier, Acting Chief Financial Officer Kathy Simone, and Chief
Marketing Officer Keira Krausz. A webcast of the conference call
will be available live on the Investor Relations section of the
Nutrisystem website (www.nutrisystem.com) and a replay will be
available for 30 days. Interested parties unable to access the
conference call via the webcast may dial 719-325-2420 and reference
conference 7861876.
Forward-Looking Statement Disclaimer
Information provided and statements contained in this press
release that are not purely historical, such as second quarter and
full year 2013 guidance, company transition, and the Company’s
financial and operational outlook, are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933,
Section 21E of the Securities Exchange Act of 1934 and the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements only speak as of the date of this press release and the
Company assumes no obligation to update the information included in
this press release. Statements made in this press release that are
forward-looking in nature may involve risks and uncertainties.
Accordingly, readers are cautioned that any such forward-looking
statements are not guarantees and are subject to certain risks,
uncertainties and assumptions that are difficult to predict,
including, without limitation, specific factors discussed herein
and in other releases and public filings made by the Company
(including filings by the Company with the Securities and Exchange
Commission). Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable as of
the date made, expectations may prove to have been materially
different from the results expressed or implied by such
forward-looking statements. Unless otherwise required by law, the
Company also disclaims any obligation to update its view of any
such risks or uncertainties or to announce publicly the result of
any revisions to the forward-looking statements made in this press
release.
About Nutrisystem
Having helped Americans lose millions of pounds for over 40
years, Nutrisystem, Inc. (NASDAQ: NTRI) develops evidence-based
programs for healthy weight management, and is the leading provider
of home-delivered weight loss meal plans. Nutrisystem offers
balanced nutrition in the form of low glycemic index meal plans
designed for men and women, including seniors, vegetarians and the
Nutrisystem® D® program for people with, or at risk for, type 2
diabetes. Nutrisystem® plans include a wide variety of pantry and
frozen entrees and snacks to aid in program satisfaction and
adherence, as well as transition plans to support long-term
success. The Fort Washington, PA-based company also provides weight
management support and counseling by trained weight-loss coaches
and registered dietitians, as well as through an engaged online
community, online tools and trackers, mobile apps, cookbooks and
more. Healthcare professionals may learn more about the programs by
visiting www.nutrisystem.com/hcp. Nutrisystem® weight loss plans
are available directly to consumers through www.nutrisystem.com, by
phone (1-800-435-4074) and at select retailers.
NUTRISYSTEM, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share
amounts)
Three Months Ended March 31,
2013
2012 REVENUE
$
105,384 $ 128,517
COSTS AND EXPENSES: Cost of revenue 52,353 70,529 Marketing 36,316
45,667 General and administrative 15,251 16,315 Depreciation and
amortization
2,549 2,836
Total costs and expenses
106,469
135,347 Operating loss (1,085) (6,830) INTEREST
EXPENSE, net
(53) (274)
Loss before income taxes (1,138) (7,104) INCOME TAX BENEFIT
(498) (2,623) Net loss
$ (640) $
(4,481) BASIC LOSS PER COMMON SHARE
$ (0.02) $
(0.16) DILUTED LOSS PER COMMON SHARE
$
(0.02) $ (0.16)
WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 27,759 27,321 Diluted
27,759 27,321 DIVIDENDS DECLARED PER COMMON SHARE
$ 0.175 $ 0.175
NUTRISYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share and
par value amounts)
March 31, December 31, 2013 2012
ASSETS
CURRENT ASSETS: Cash and cash equivalents $ 20,707 $ 16,186 Short
term investments 14,350 3,205 Receivables 12,475 8,487 Inventories
22,711 23,637 Prepaid income taxes 4,415 4,531 Deferred income
taxes 2,087 2,969 Other current assets
4,212
7,160 Total current assets 80,957 66,175
FIXED ASSETS, net 26,992 28,003 OTHER ASSETS
5,394 4,228 Total assets
$ 113,343 $
98,406
LIABILITIES AND
STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES: Accounts payable $ 37,091 $ 23,192 Accrued
payroll and related benefits 3,269 1,326 Deferred revenue 5,911
3,343 Other accrued expenses and current liabilities
8,295 6,911 Total current
liabilities 54,566 34,772 NON-CURRENT LIABILITIES
3,345 3,525 Total liabilities
57,911 38,297
STOCKHOLDERS’ EQUITY: Preferred stock, $.001 par value (5,000,000
shares authorized, no shares issued and outstanding) 0 0 Common
stock, $.001 par value (100,000,000 shares authorized; shares
issued – 28,739,718 at March 31, 2013 and 28,631,464 at December
31, 2012) 29 29 Additional paid-in capital 19,615 18,466
Treasury stock, at cost, 112,366 shares at
March 31, 2013 and 72,561 shares at December 31, 2012
(975) (636) Retained earnings 36,743 42,254 Accumulated other
comprehensive income (loss)
20
(4) Total stockholders’ equity
55,432 60,109 Total liabilities
and stockholders’ equity
$ 113,343
$ 98,406 NUTRISYSTEM, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Three Months Ended March 31,
2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $
(640) $ (4,481) Adjustments to reconcile net loss to net cash
provided by operating activities: Depreciation and amortization
2,549 2,836 Loss on disposal of fixed assets 42 6 Share–based
compensation expense 1,502 1,845 Deferred income tax benefit (609)
(904) Other non-cash charges 29 0 Changes in operating assets and
liabilities: Receivables (3,988) (2,670) Inventories 926 5,644
Other assets 2,915 1,693 Accounts payable 13,995 9,854 Accrued
payroll and related benefits 1,943 2,477 Deferred revenue 2,568 571
Income taxes 71 (1,916) Other accrued expenses and liabilities
1,094 117 Net cash provided
by operating activities
22,397
15,072 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases
of short term investments (14,524) (28) Proceeds from sales of
short term investments 3,371 0 Capital additions
(1,555) (1,345) Net cash used in
investing activities
(12,708)
(1,373) CASH FLOWS FROM FINANCING ACTIVITIES: Exercise
of stock options 0 9 Taxes related to equity compensation awards,
net (297) (250) Payment of dividends
(4,871)
(4,937) Net cash used in financing activities
(5,168) (5,178) NET
INCREASE IN CASH AND CASH EQUIVALENTS 4,521 8,521 CASH AND CASH
EQUIVALENTS, beginning of period
16,186
47,594 CASH AND CASH EQUIVALENTS, end of period
$ 20,707 $
56,115 NUTRISYSTEM, INC. AND
SUBSIDIARIES ADJUSTED EBITDA RECONCILIATION TO GAAP
RESULTS (Unaudited, in thousands)
Three Months Ended March 31,
2013 2012 Adjusted EBITDA $ 3,886 $ (1,946)
Non-cash employee compensation expense
(981) (1,751) Interest expense, net (53) (274) Income tax benefit
498 2,623 Depreciation and amortization (2,549) (2,836) Severance
and related charges (1,441) (297) Net loss $ (640) $
(4,481)
Adjusted EBITDA is defined as net loss excluding non-cash
employee compensation, severance and related charges, interest,
income taxes, depreciation and amortization.
We believe Adjusted EBITDA is a useful performance metric for
management and investors because it is more indicative of the
ongoing operations of the Company. Adjusted EBITDA excludes
non-cash and non-operating items to facilitate comparisons and
provide a meaningful measurement that is focused on the performance
of the ongoing operations of the Company.
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