NTRI Nutrisystem

Company Reports $211 Million of Revenue for First Quarter 2018

Generates $0.09 Diluted Income Per Share for First Quarter 2018

Company Raises Full Year 2018 Guidance Ranges

Nutrisystem, Inc. (Nasdaq: NTRI), a leading provider of weight management products and services including Nutrisystem® and South Beach Diet® brands, today reported financial results for the first quarter ended March 31, 2018.

Dawn Zier, President and Chief Executive Officer, stated, “We’re pleased first quarter 2018 revenue and earnings per share exceeded our expectations, driven by better than expected results in Nutrisystem’s direct-to-consumer business. As anticipated, South Beach Diet revenues increased significantly year-over-year, and we remain excited about the long-term opportunity it represents.”

Ms. Zier added, “Our multi-brand strategy, supported by our strong ecommerce and supply chain platforms, has us well positioned in our growing category. Key metrics for both of our brands are sound and continuing to improve, reinforcing our confidence in delivering meaningful growth in 2019.”

The following are key financial highlights for the period. Reconciliations of certain GAAP to non-GAAP measures are provided later in this press release.

First Quarter 2018 Compared to First Quarter 2017

• Revenue was $210.9 million compared to $212.7 million.
• Gross margin was 53.2% compared to 53.8%.
• Net income was $2.8 million compared to $7.5 million.
• Diluted income per common share was $0.09 compared to $0.25.
• Adjusted EBITDA was $7.9 million compared to $15.5 million.
• Company repurchased $10 million of common stock during the first quarter of 2018 and an additional $5 million of common stock in April 2018.
• The Board of Directors has declared a quarterly dividend of $0.25 per share, payable May 21, 2018 to stockholders of record as of May 10, 2018.

Mike Monahan, Chief Financial Officer, commented, “We are raising our full year 2018 guidance and continue to generate strong cash flows. The strength of our balance sheet has supported key capital allocation actions such as the recent increase of our dividend, the repurchasing of our stock, and continued funding of internal investments.”

Second Quarter and Updated Full Year 2018 GuidanceThe Company’s second quarter and updated full year 2018 guidance is outlined below. Reconciliations of certain GAAP to non-GAAP measures are provided later in this press release.

• Second quarter revenue is expected to be in the range of $186 to $191 million, net income between $23.5 and $25.0 million, diluted income per common share between $0.78 and $0.83, and adjusted EBITDA between $38.4 and $40.4 million.
• Full year 2018 revenue is now expected to be in the range of $693 to $708 million compared to the previous range of $685 to $705 million, net income between $61.8 and $64.8 million consistent with the previous range of $61.7 to $64.8 million, diluted income per common share between $2.04 and $2.14 compared to the previous range of $1.99 to $2.09, and adjusted EBITDA between $106.5 and $110.5 million compared to the previous range of $106 to $110 million. The South Beach Diet brand is expected to contribute approximately $70 million in revenue in 2018.

Conference Call and Webcast

Management will host a conference call to discuss first quarter 2018 financial results today at 5:00 PM Eastern time. The conference call will include remarks from President and Chief Executive Officer, Dawn Zier, Chief Financial Officer, Mike Monahan, and Chief Marketing Officer, Keira Krausz. A webcast of the conference call will be available live on the Investor Relations section of Nutrisystem's website at www.nutrisystem.com. Interested parties unable to access the conference call via the webcast may dial 877-407-3982. A replay of the conference call will be available on the Company website for 30 days following the event and can be accessed at 844-512-2921 using replay pin number 13678360.

Non-GAAP Financial Measures

Within this press release, the Company makes reference to a non-GAAP financial measure (adjusted EBITDA) which has a directly comparable GAAP financial measure (net income). EBITDA is defined as net income excluding interest, income taxes and depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding non-cash employee compensation expense. The Company excludes non-cash employee compensation expense because it is a non-cash expense that is not reflective of the ongoing operations of the Company. Adjusted EBITDA is provided so that investors have the same financial data that management uses to assess the Company’s operating results with the belief that it will assist the investment community in properly assessing the ongoing performance of the Company for the periods being reported and future periods. The presentation of this additional information is not meant to be considered a substitute for measures prepared in accordance with GAAP.

Forward-Looking Statements

Information provided and statements contained in this press release that are not purely historical, such as second quarter and updated full year 2018 guidance, 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, risks relating to cybersecurity breaches, risks that consumer spending may decline or that U.S. and global macroeconomic conditions may worsen resulting in reduced demand for the Company’s products, risks relating to changes in consumer preferences away from the Company’s food offerings including its pre-packaged foods, risks relating to the effectiveness and efficiency of the Company’s advertising campaigns and marketing expenditures, including existing brands and the launch of new brands, which may not result in increased revenue or generate sufficient levels of brand name and program awareness, risks if the Company is unable to obtain sufficient quantities, quality and variety of food products in a timely and low-cost manner from its food vendors, risks of exposure to product liability claims if the use of the Company’s products results in illness or injury, risks if the Company becomes subject to health or advertising related claims from its customers, competitors or governmental and regulatory bodies, and risks relating to increased competition from other weight management providers. For further details and a discussion of these risks and uncertainties, see the Company's periodic reports, including the annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, filed with or furnished to the Securities and Exchange Commission and available at www.sec.gov. 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 results of any revisions to the forward-looking statements made in this press release.

About Nutrisystem, Inc.

Nutrisystem, Inc. (Nasdaq: NTRI) is a leader in the weight-loss industry, having helped millions of people lose weight over the course of more than 45 years. The Company’s multi-brand approach to weight loss includes multiple plans for 2018. For more information, go to NutrisystemNews.com and Newsroom.SouthBeachDiet.com.

     

NUTRISYSTEM, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(Unaudited, in thousands, except per share amounts)

  Three Months Ended March 31, 2018     2017 REVENUE $ 210,930   $ 212,677     COSTS AND EXPENSES: Cost of revenue 98,651 98,230 Marketing 85,980 81,678 Selling, general and administrative 20,479 19,589 Depreciation and amortization   3,749     3,777   Total costs and expenses   208,859     203,274   Operating income 2,071 9,403 INTEREST INCOME, net   (86 )   (24 ) Income before income tax (benefit) expense 2,157 9,427 INCOME TAX (BENEFIT) EXPENSE   (646 )   1,943   Net income $ 2,803   $ 7,484   BASIC INCOME PER COMMON SHARE $ 0.09   $ 0.25   DILUTED INCOME PER COMMON SHARE $ 0.09   $ 0.25   WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 29,833 29,558 Diluted 30,146 29,985 DIVIDENDS DECLARED PER COMMON SHARE $ 0.250   $ 0.175  

         

NUTRISYSTEM, INC. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

(Unaudited, in thousands, except par value amounts)

  March 31, December 31, 2018 2017

ASSETS

CURRENT ASSETS: Cash and cash equivalents $ 24,059 $ 24,654 Short term investments 52,297 47,568 Receivables 21,592 17,871 Inventories 42,118 44,266 Prepaid income taxes 6,874 6,441 Prepaid expenses and other current assets   8,817     11,758   Total current assets 155,757 152,558 FIXED ASSETS, net 30,216 31,549 INTANGIBLE ASSETS, net 12,834 13,084 DEFERRED INCOME TAXES 3,144 3,202 OTHER ASSETS   1,136     1,150   Total assets $ 203,087   $ 201,543  

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES: Accounts payable $ 56,730 $ 34,816 Accrued payroll and related benefits 2,476 15,229 Deferred revenue 12,280 7,991 Other accrued expenses and current liabilities   6,249     6,068   Total current liabilities 77,735 64,104 NON-CURRENT LIABILITIES   1,633     1,636   Total liabilities   79,368     65,740     STOCKHOLDERS’ EQUITY:

Preferred stock, $.001 par value (5,000 shares authorized, no shares issued and outstanding)

0 0

Common stock, $.001 par value (100,000 shares authorized; shares issued – 30,920 at March 31, 2018 and 30,729 at December 31, 2017)

31

31

Additional paid-in capital

72,825 69,245

Treasury stock, at cost, 1,038 shares at March 31, 2018 and 679 shares at December 31, 2017

(28,263 ) (16,359 ) Retained earnings 79,409 83,035 Accumulated other comprehensive loss   (283 )   (149 ) Total stockholders’ equity   123,719     135,803   Total liabilities and stockholders’ equity $ 203,087   $ 201,543  

   

NUTRISYSTEM, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Unaudited, in thousands)

  Three Months Ended March 31, 2018     2017 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,803 $ 7,484

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 3,749 3,777 Share–based compensation expense 2,096 2,317 Deferred income tax benefit (281 ) (276 ) Other charges 18 3 Changes in operating assets and liabilities: Receivables (3,721 ) (8,872 ) Inventories 2,148 7,098 Prepaid expenses and other assets 3,085 1,017 Accounts payable 21,870 22,557 Accrued payroll and related benefits (12,753 ) (6,981 ) Deferred revenue 5,626 10,223 Income taxes (389 ) 2,234 Other accrued expenses and liabilities   (185 )   434   Net cash provided by operating activities   24,066     41,015   CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of short term investments (8,229 ) (6,496 ) Proceeds from sales of short term investments 3,311 1,937 Capital additions   (1,759 )   (2,432 ) Net cash used in investing activities   (6,677 )   (6,991 ) CASH FLOWS FROM FINANCING ACTIVITIES: Exercise of stock options 1,484 1,803 Employee tax withholdings related to the vesting of equity awards (1,908 ) (1,330 ) Repurchase of common shares for treasury (9,996 ) 0 Repurchase and retirement of common shares 0 (785 ) Payment of dividends   (7,564 )   (5,318 ) Net cash used in financing activities   (17,984 )   (5,630 ) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (595 ) 28,394 CASH AND CASH EQUIVALENTS, beginning of period   24,654     9,623   CASH AND CASH EQUIVALENTS, end of period $ 24,059   $ 38,017  

   

NUTRISYSTEM, INC. AND SUBSIDIARIES

 

ADJUSTED EBITDA RECONCILIATION TO GAAP RESULTS

 

(Unaudited, in thousands)

  Three Months Ended March 31, 2018       2017   Net income $ 2,803 $ 7,484 Interest income, net (86 ) (24 ) Income tax (benefit) expense (646 ) 1,943 Depreciation and amortization   3,749     3,777   EBITDA 5,820 13,180 Non-cash employee compensation expense   2,096     2,317   Adjusted EBITDA $ 7,916   $ 15,497  

           

NUTRISYSTEM, INC. AND SUBSIDIARIES

 

ADJUSTED EBITDA RECONCILIATION TO GAAP GUIDANCE

 

(Unaudited, in thousands)

  Three Months Ending June 30, 2018 Year Ending December 31, 2018 Low     High Low     High   Net income $ 23,495 $ 25,013 $ 61,755 $ 64,847 Interest expense (income), net 15 15 (30 ) (30 ) Income tax expense 7,460 7,942 18,135 19,043 Depreciation and amortization   3,930   3,930   15,840     15,840   EBITDA 34,900 36,900 95,700 99,700 Non-cash employee compensation expense   3,500   3,500   10,800     10,800   Adjusted EBITDA $ 38,400 $ 40,400 $ 106,500   $ 110,500  

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ICR, Inc.John Mills, 646-277-1254PartnerJohn.Mills@Icrinc.comir@nutrisystem.com