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.

     
NUTRISYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
 

Three Months Ended
September 30,

Nine Months Ended
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  
 
 
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  
 
 
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.