NTRI Nutrisystem

Company Reported $191.3 Million of Revenue for Second Quarter 2018

Net Income Increased 7% to $26.1 Million for Second Quarter 2018

Nutrisystem, Inc. (Nasdaq: NTRI), a leading provider of health and wellness and weight management products and services including Nutrisystem® and South Beach Diet® brands, today reported financial results for the quarter and six months ended June 30, 2018.

Dawn Zier, President and Chief Executive Officer, stated, “We’re pleased to have exceeded second quarter guidance. Our multi-brand strategy, supported by two highly recognized names in the health and wellness industry, is working well and provides a strong, scalable platform for future growth.”

Ms. Zier added, “Our announcements around the recently launched DNA Body Blueprint™ and the branded lines of vitamin packs showcase our focus on science-backed personalized nutrition to drive not only weight loss, but overall health. We believe our efforts to date, coupled with second-half investments in our innovation pipeline, branding and digital media expansion, will pave the way for meaningful growth and profitably expand customer reach in 2019 and beyond.”

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

Second Quarter 2018 Compared to Second Quarter 2017

• Revenue was $191.3 million compared to $194.9 million.
• Gross margin was 53.8% compared to 54.3%.
• Net income was $26.1 million compared to $24.4 million.
• Diluted income per common share was $0.87 compared to $0.80.
• Adjusted EBITDA was $41.0 million compared to $42.5 million.
• Company repurchased $15 million of common stock during the second quarter of 2018 for a total of $25 million during the first six months of 2018.
• The Board of Directors has declared a quarterly dividend of $0.25 per share, payable August 20, 2018 to stockholders of record as of August 9, 2018.

Mike Monahan, Chief Financial Officer, commented, “Our second quarter and year-to-date results demonstrate the strength of our business model as we continued to generate solid EBITDA. We were able to repurchase $25 million of stock in the first six months of the year and will continue to use our strong free cash flow to enhance the long-term value of our company.”

Third Quarter and Updated Full Year 2018 Guidance

The Company’s third quarter and full year 2018 guidance is outlined below. Reconciliations of certain GAAP to non-GAAP measures are provided later in this press release.

• Third quarter revenue is expected to be in the range of $162 to $167 million, net income between $14.9 and $16.5 million, diluted income per common share between $0.50 and $0.55, and adjusted EBITDA between $25.5 and $27.5 million.
• Full year 2018 revenue is expected to be in the range of $693 to $708 million, net income between $62.4 and $65.5 million compared to the previous range of $61.8 to $64.8 million, diluted income per common share between $2.07 and $2.17 compared to the previous range of $2.04 to $2.14, and adjusted EBITDA between $106.5 and $110.5 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 second 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’s website for 30 days following the event and can be accessed at 844-512-2921 using replay pin number 13680849.

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 cash expense 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 third 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 leading provider of health and wellness and weight management products and services including Nutrisystem® and South Beach Diet® brands, having helped millions of people lose weight over the course of more than 45 years. The Company’s multi-brand approach to weight management 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 June 30, Six Months Ended June 30, 2018   2017 2018   2017 REVENUE $ 191,311 $ 194,894 $ 402,241 $ 407,571   COSTS AND EXPENSES: Cost of revenue 88,371 89,097 187,022 187,327 Marketing 47,169 44,840 133,149 126,518 Selling, general and administrative 18,104 21,405 38,583 40,994 Depreciation and amortization   3,851   3,789   7,600   7,566 Total costs and expenses   157,495   159,131   366,354   362,405 Operating income 33,816 35,763 35,887 45,166 INTEREST INCOME, net   (112 )   (2 )   (198 )   (26 ) Income before income tax expense 33,928 35,765 36,085 45,192 INCOME TAX EXPENSE   7,792   11,330   7,146   13,273 Net income $ 26,136 $ 24,435 $ 28,939 $ 31,919 BASIC INCOME PER COMMON SHARE $ 0.88 $ 0.82 $ 0.97 $ 1.07 DILUTED INCOME PER COMMON SHARE $ 0.87 $ 0.80 $ 0.96 $ 1.05 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 29,364 29,696 29,597 29,627 Diluted 29,679 30,206 29,911 30,096 DIVIDENDS DECLARED PER COMMON SHARE $ 0.250 $ 0.175 $ 0.500 $ 0.350        

NUTRISYSTEM, INC. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

(Unaudited, in thousands, except par value amounts)

  June 30, December 31, 2018 2017

ASSETS

CURRENT ASSETS: Cash and cash equivalents $ 28,305 $ 24,654 Short term investments 55,244 47,568 Receivables 17,944 17,871 Inventories 33,496 44,266 Prepaid income taxes 193 6,441 Prepaid expenses and other current assets   8,276   11,758 Total current assets 143,458 152,558 FIXED ASSETS, net 28,674 31,549 INTANGIBLE ASSETS, net 12,584 13,084 DEFERRED INCOME TAXES 2,775 3,202 OTHER ASSETS   1,236   1,150 Total assets $ 188,727 $ 201,543  

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES: Accounts payable $ 35,227 $ 34,816 Accrued payroll and related benefits 3,251 15,229 Deferred revenue 11,698 7,991 Other accrued expenses and current liabilities   5,996   6,068 Total current liabilities 56,172 64,104 NON-CURRENT LIABILITIES   1,752   1,636 Total liabilities   57,924   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 –

30,957 at June 30, 2018 and 30,729 at December 31, 2017)

31 31 Additional paid-in capital 76,368 69,245 Treasury stock, at cost, 1,520 shares at June 30, 2018 and 679 shares at

December 31, 2017

(43,267 ) (16,359 ) Retained earnings 97,936 83,035 Accumulated other comprehensive loss   (265 )   (149 ) Total stockholders’ equity   130,803   135,803 Total liabilities and stockholders’ equity $ 188,727 $ 201,543      

NUTRISYSTEM, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Unaudited, in thousands)

  Six Months Ended June 30, 2018   2017 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 28,939 $ 31,919 Adjustments to reconcile net income to net cash provided by operating

activities:

Depreciation and amortization 7,600 7,566 Share–based compensation expense 5,437 5,274 Deferred income tax expense (benefit) 81 (534 ) Other charges 43 12 Changes in operating assets and liabilities: Receivables (73 ) 2,081 Inventories 10,770 10,585 Prepaid expenses and other assets 3,526 1,542 Accounts payable 403 (489 ) Accrued payroll and related benefits (11,978 ) (2,550 ) Deferred revenue 5,044 1,294 Income taxes 6,294 5,842 Other accrued expenses and liabilities   (310 )   254 Net cash provided by operating activities   55,776   62,796 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of short term investments (18,651 ) (17,702 ) Proceeds from sales of short term investments 10,784 6,298 Capital additions   (3,863 )   (5,736 ) Net cash used in investing activities   (11,730 )   (17,140 ) CASH FLOWS FROM FINANCING ACTIVITIES: Exercise of stock options 1,686 3,537 Employee tax withholdings related to the vesting of equity awards (1,912 ) (1,573 ) Repurchase of common shares for treasury (24,996 ) 0 Repurchase and retirement of common shares 0 (785 ) Payment of dividends   (15,173 )   (10,637 ) Net cash used in financing activities   (40,395 )   (9,458 ) NET INCREASE IN CASH AND CASH EQUIVALENTS 3,651 36,198 CASH AND CASH EQUIVALENTS, beginning of period   24,654   9,623 CASH AND CASH EQUIVALENTS, end of period $ 28,305 $ 45,821          

NUTRISYSTEM, INC. AND SUBSIDIARIES

 

ADJUSTED EBITDA RECONCILIATION TO GAAP RESULTS

 

(Unaudited, in thousands)

  Three Months Ended June 30, Six Months Ended June 30, 2018   2017 2018   2017   Net income $ 26,136 $ 24,435 $ 28,939 $ 31,919 Interest income, net (112 ) (2 ) (198 ) (26 ) Income tax expense 7,792 11,330 7,146 13,273 Depreciation and amortization   3,851   3,789   7,600   7,566 EBITDA 37,667 39,552 43,487 52,732 Non-cash employee compensation expense   3,341   2,957   5,437   5,274 Adjusted EBITDA $ 41,008 $ 42,509 $ 48,924 $ 58,006            

NUTRISYSTEM, INC. AND SUBSIDIARIES

 

ADJUSTED EBITDA RECONCILIATION TO GAAP GUIDANCE

 

(Unaudited, in thousands)

  Three Months Ending

September 30, 2018

Year Ending

December 31, 2018

Low     High Low     High   Net income $ 14,914 $ 16,455 $ 62,402 $ 65,512 Interest income, net (110) (110) (400) (400) Income tax expense 4,446 4,905 17,858 18,748 Depreciation and amortization   3,920   3,920   15,840   15,840 EBITDA 23,170 25,170 95,700 99,700 Non-cash employee compensation expense   2,330   2,330   10,800   10,800 Adjusted EBITDA $ 25,500 $ 27,500 $ 106,500 $ 110,500  

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ICR, Inc.John Mills, 646-277-1254Partnerir@nutrisystem.comJohn.Mills@Icrinc.com