Market Overview

Nutrisystem Announces Second Quarter 2018 Financial Results, Exceeding Expectations

Share:

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
 

View Comments and Join the Discussion!