Contact: John Mills, Partner ICR, Inc. 646-277-1254 ir@nutrisystem.com John.Mills@Icrinc.com
NUTRISYSTEM ANNOUNCES THIRD QUARTER 2015 FINANCIAL RESULTS
Company Reports Ninth Consecutive Quarter of Year-Over-Year Revenue Growth, Up 16%
Earnings Per Share Increase 47% Year-Over-Year to $0.25
Fort Washington, PA—October 28, 2015—Nutrisystem, Inc. (NASDAQ: NTRI), a leading provider of weight management products and services, today reported financial results for the quarter ended September 30, 2015. The following are key financial highlights for the period and reconciliations of certain GAAP to non-GAAP measures are provided later in this press release.
Dawn Zier, President and Chief Executive Officer, stated, “We continue to execute successfully against our strategic initiatives as demonstrated by our strong financial performance in the third quarter. We are seeing continued momentum in both our direct-to-consumer and retail channels and remain confident in our ability to achieve our second consecutive year of double-digit revenue growth.”
Third Quarter 2015 Compared to Third Quarter 2014
Revenue increased 16% to $104.9 million compared to $90.6 million Adjusted EBITDA grew 33% to $14.5 million compared to $10.9 million Net income increased 44% to $7.3 million compared to $5.1 million Diluted earnings per share increased 47% to $0.25 compared to $0.17
Ms. Zier added, “Our business model is foundationally strong. Our value proposition is differentiated from the competition and serves as the basis for our product innovation. We are well positioned to continue growing as we head into Diet Season 2016 and beyond.”
Mike Monahan, Chief Financial Officer, commented, “Revenue growth in the third quarter came from both our direct and retail channels, which were up year-over-year 16% and 35%, respectively. Capital expenditures are now expected to increase to approximately $12 million for the full year due to increased investment spend to support our future growth and enhance long-term value for our stockholders.”
Fourth Quarter and Updated Full Year 2015 Guidance
Nutrisystem’s fourth quarter and updated full year 2015 guidance are as follows. Reconciliations of certain GAAP to non-GAAP measures are provided later in this press release.
Fourth quarter revenue expected to be in the range of $86.6 to $91.6 million, adjusted EBITDA between $10.6 and $12.6 million, and earnings per share between $0.15 and $0.20 Full year revenue expected to be in the range of $459.0 to $464.0 million, adjusted EBITDA between $55.6 and $57.6 million, and earnings per share between $0.91 and $0.96
The Board of Directors has declared a quarterly dividend of $0.175 per share, payable November 19, 2015 to stockholders of record as of November 9, 2015.
Conference Call and Webcast
Management will host a conference call to discuss third quarter 2015 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 877-870-5176 using replay pin number 13621877.
Non-GAAP Financial Measures
Within this announcement, the Company makes reference to certain adjusted financial measures, which have directly comparable GAAP financial measures as identified in this press release. These adjusted measures are provided so that investors have the same financial data that management uses with the belief that it will assist the investment community in properly assessing the 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.
In this release, 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.
Forward-Looking Statements
Information provided and statements contained in this press release that are not purely historical, such as fourth quarter and full year 2015 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 marketing expenditures 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. 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, 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 40 years. The Company’s weight loss solutions include Nutrisystem® My Way®, a 28-day structured food delivery program including a digital platform, NuMi by Nutrisystem®, multi-day kits and individual products available at select retail outlets. The Company’s current product line offers customers the most meal choices, including more than 100 foods containing no artificial preservatives or artificial flavors. Nutrisystem® plans are consistent with national guidelines for dietary intake meeting targets for fat, sodium, sugar, cholesterol, fiber and physical activity and include comprehensive counseling options from trained weight loss coaches, registered dietitians and certified diabetes educators. Plans can be customized to specific dietary needs and preferences including the Nutrisystem® D® program for people with Type 2 diabetes or pre-diabetes. For more information, go to NutrisystemNews.com.
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NUTRISYSTEM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30, ______________________
_________________________
2015 2014 2015 2014
REVENUE $104,877 $90,570 $372,363 $323,850
---------------- --------------------- --------------------- ---------------
COSTS AND EXPENSES:
Cost of revenue 51,749 44,043 180,188 160,605
Marketing 25,566 22,388 103,880 90,122
General and administrative 14,228 14,769 47,536 46,455
Depreciation and amortization 2,304 2,076 6,761 5,747
---------------- --------------------- --------------------- ---------------
Total costs and expenses 93,847 83,276 338,365 302,929
---------------- --------------------- --------------------- ---------------
Operating income 11,030 7,294 33,998 20,921
INTEREST EXPENSE, net 61 41 140 133
---------------- --------------------- --------------------- ---
Income before income tax expense 10,969 7,253 33,858 20,788
INCOME TAX EXPENSE 3,660 2,177 11,521 6,785
---------------- --------------------- --------------------- ---------------
Net income $7,309 $5,076 $22,337 $14,003
================ ===================== ===================== ===============
BASIC INCOME PER COMMON SHARE $0.25 $0.18 $0.77 $0.49
================ ===================== ===================== ===============
DILUTED INCOME PER COMMON SHARE $0.25 $0.17 $0.76 $0.48
================ ===================== ===================== ===============
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 28,831 28,274 28,618 28,287
Diluted 29,273 28,681 29,094 28,694
DIVIDENDS DECLARED PER COMMON SHARE $0.175 $0.175 $0.525 $0.525
================ ===================== ===================== ===============
NUTRISYSTEM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands, except par value amounts)
September 30, 2015
December 31, 2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
28,049
$
12,620
Short term investments
19,211
16,627
Receivables
10,393
12,206
Inventories
17,474
26,899
Prepaid income taxes
2,477
0
Deferred income taxes
1,456
1,051
Other current assets
5,858
7,095
Total current assets
84,918
76,498
FIXED ASSETS, net
26,619
26,851
DEFERRED INCOME TAXES
5,043
5,461
OTHER ASSETS
1,062
1,082
Total assets
$
117,642
$
109,892
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable
$
27,490
$
34,261
Accrued payroll and related benefits
6,275
6,550
Income taxes payable
0
301
Deferred revenue
5,869
4,424
Other accrued expenses and current liabilities
5,970
6,131
Total current liabilities
45,604
51,667
NON-CURRENT LIABILITIES
2,319
2,710
Total liabilities
47,923
54,377
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 – 29,569 at September 30, 2015 and 28,990 at December 31, 2014)
29
29
Additional paid-in capital
39,716
29,992
Treasury stock, at cost, 386 shares at September 30, 2015 and 249 shares at December 31, 2014
(5,610
)
(3,062
)
Retained earnings
35,537
28,552
Accumulated other comprehensive income
47
4
Total stockholders’ equity
69,719
55,515
Total liabilities and stockholders’ equity
$
117,642
$
109,892
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NUTRISYSTEM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands)
Nine Months Ended
September 30,
2015
2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
22,337
$
14,003
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
6,761
5,747
Loss on disposal of fixed assets
16
7
Share–based compensation expense
4,255
4,443
Deferred income tax benefit
0
(1,391
)
Other non-cash charges
24
17
Changes in operating assets and liabilities:
Receivables
1,813
1,338
Inventories
9,425
8,598
Other assets
1,257
158
Accounts payable
(6,628
)
(932
)
Accrued payroll and related benefits
(275
)
299
Deferred revenue
1,445
828
Income taxes
(2,884
)
1,678
Other accrued expenses and liabilities
(938
)
(1,576
)
Net cash provided by operating activities
36,608
33,217
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short term investments
(12,117
)
(6,729
)
Proceeds from sales of short term investments
9,574
6,669
Capital additions
(6,302
)
(5,260
)
Net cash used in investing activities
(8,845
)
(5,320
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options
2,762
248
Taxes related to equity compensation awards, net
256
(705
)
Payment of dividends
(15,352
)
(15,270
)
Net cash used in financing activities
(12,334
)
(15,727
)
NET INCREASE IN CASH AND CASH EQUIVALENTS
15,429
12,170
CASH AND CASH EQUIVALENTS, beginning of period
12,620
9,772
CASH AND CASH EQUIVALENTS, end of period
$
28,049
$
21,942
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NUTRISYSTEM, INC. AND SUBSIDIARIES
ADJUSTED EBITDA RECONCILIATION TO GAAP RESULTS
(Unaudited, in thousands)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2015
2014
2015
2014
Net income
$
7,309
$
5,076
$
22,337
$
14,003
Interest expense, net
61
41
140
133
Income tax expense
3,660
2,177
11,521
6,785
Depreciation and amortization
2,304
2,076
6,761
5,747
EBITDA
13,334
9,370
40,759
26,668
Non-cash employee compensation expense
1,209
1,533
4,255
4,443
Adjusted EBITDA
$
14,543
$
10,903
$
45,014
$
31,111
NUTRISYSTEM, INC. AND SUBSIDIARIES
ADJUSTED EBITDA GUIDANCE RECONCILIATION TO GAAP MEASURES
(Unaudited, in thousands)
Three Months Ending
Twelve Months Ending
December 31, 2015
December 31, 2015
Low
High
Low
High
Net income
$
4,530
$
5,848
$
26,867
$
28,185
Interest expense, net
45
45
185
185
Income tax expense
2,382
3,064
13,903
14,585
Depreciation and amortization
2,409
2,409
9,170
9,170
EBITDA
9,366
11,366
50,125
52,125
Non-cash employee compensation expense
1,220
1,220
5,475
5,475
Adjusted EBITDA
$
10,586
$
12,586
$
55,600
$
57,600
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.
Statement Regarding Non-GAAP Financial Measures
We believe EBITDA, adjusted EBITDA and adjusted EBITDA guidance are useful performance metrics for management and investors because they are indicative of the ongoing operations of the Company. These non-GAAP measures exclude certain 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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