Nutrisystem Announces Second Quarter 2014 Financial Results Second Quarter Revenue Increased 14% to $111.1 Million, Meeting High End of Guidance Range

GAAP Earnings per Share and Adjusted EBITDA Exceed Company Second Quarter Guidance

FORT WASHINGTON, Pa., July 29, 2014 /PRNewswire/ -- Nutrisystem, Inc. (NASDAQ: NTRI), a leading provider of weight management products and services, today reported financial results for the quarter ended June 30, 2014. 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.

Second Quarter 2014

  • Revenue for the quarter was $111.1 million, an increase of 14% as compared to $97.5 million in the second quarter of 2013;
  • Gross profit increased 14% versus prior year to $56.9 million;
  • Adjusted EBITDA was $17.0 million, an increase of 25% from adjusted EBITDA of $13.5 million in the second quarter of 2013;
  • GAAP earnings per share increased 36% to $0.30 from $0.22 the prior year; and
  • Cash, cash equivalents, and short term investments increased $10.0 million during the quarter to $39.5 million at June 30, 2014 from $29.5 million at March 31, 2014. The Company had no outstanding bank debt at quarter-end under its existing bank facility.  

Dawn Zier, President and Chief Executive Officer, said, "We are pleased with our strong performance in the second quarter of fiscal 2014, as we exceeded our earnings per share and adjusted EBITDA expectations. Our continued efforts around our four-point plan have enabled us to deliver our third consecutive quarter of year-over-year double-digit revenue increases fueled by our growing direct and retail channels."

Ms. Zier added, "We continue to enhance our brand with leading product and program innovations that add to the customer experience. In addition to a double-digit increase in new customer growth, we are making progress on our e-commerce, pricing and retail initiatives.  Looking ahead, we remain focused on the successful execution of our strategic initiatives and expanding the breadth of our brand."

Mike Monahan, Chief Financial Officer, commented, "We are committed to enhancing stockholder value through increased revenue and cash flow.  Based on improved customer growth and profitability, we are increasing both our adjusted EBITDA and earnings per share guidance ranges for the year."

The Company announced that the Board of Directors has declared a quarterly dividend of $0.175 per share, payable August 18, 2014 to stockholders of record as of August 8, 2014.

Third Quarter and Updated Full Year 2014 Guidance

For the third quarter of 2014, the Company expects revenue to be in the range of $85.0 million to $90.0 million. The Company expects third quarter adjusted EBITDA to be in the range of $8.75 million to $10.75 million. The Company also expects third quarter 2014 GAAP earnings per share to be in the range of $0.12 to $0.17.

For the full year of 2014, the Company is updating its revenue guidance from a previous range of $392.0 million to $407.0 million to now be in the range of $397.0 million to $407.0 million. The Company is increasing its annual adjusted EBITDA from a previous range of $40.0 million to $44.0 million to be in the range of $41.0 million to $44.2 million. In addition, the Company is raising its GAAP earnings per share guidance from a previous range of $0.57 to $0.67 to now be in the range of $0.60 to $0.68 for the full year of 2014. 

Conference Call and Webcast

Management will host a webcast to discuss second quarter 2014 financial results today at 5:00 PM Eastern time. The webcast 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 the Nutrisystem website (www.nutrisystem.com) and a replay will be available for 30 days. Interested parties unable to access the conference call via the webcast may dial 877-407-3982, and reference conference ID 13584869.

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 and severance and related charges.

Forward-Looking Statements

Information provided and statements contained in this press release that are not purely historical, such as third quarter and full year 2014 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, specific factors discussed herein and in other press releases and public filings made by the Company (including filings by the Company with the Securities and Exchange Commission). 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 leading provider of weight loss solutions and weight-related products and services including its structured food delivery program Nutrisystem® My Way® and its new digital platform NuMi™ by Nutrisystem. Nutrisystem has helped consumers lose weight for more than 40 years by providing quality foods and a nutritionally balanced meal program. Nutrisystem® meal plans feature more than 150 menu options, along with counseling options from trained weight-loss coaches, registered dietitians and certified diabetes educators. Customers are provided further support from the online community, tools, trackers, mobile apps and more. Nutrisystem® plans are consistent with national guidelines for dietary intake meeting targets for fat, sodium, sugar, cholesterol, fiber and physical activity. Additionally, plans can be customized to specific dietary needs and preferences including the Nutrisystem® D® program for people with diabetes or those at risk for type 2 diabetes. Healthcare professionals may learn more about the programs by visiting www.nutrisystem.com/hcp. Nutrisystem® weight loss plans are available directly to consumers through www.nutrisystem.com, by phone (1-800-435-4074) and at select retailers. The NuMi multi-platform system and downloadable App can be found at http://www.numi.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,


2014

2013

2014

2013





REVENUE

$ 111,052

$ 97,469

$ 233,280

$ 202,853






COSTS AND EXPENSES:





Cost of revenue

54,141

47,716

116,562

100,069

Marketing

25,990

24,250

67,734

60,566

General and administrative

15,768

13,350

31,686

28,601

Depreciation and amortization

1,913

2,342

3,671

4,891

      Total costs and expenses

97,812

87,658

219,653

194,127

      Operating income

13,240

9,811

13,627

8,726

INTEREST EXPENSE, net

47

29

92

82

      Income before income taxes

13,193

9,782

13,535

8,644

INCOME TAX EXPENSE

4,490

3,423

4,608

2,925

      Net income

$ 8,703

$ 6,359

$ 8,927

$ 5,719






BASIC INCOME PER COMMON SHARE

$ 0.30

$ 0.22

$ 0.31

$ 0.20

DILUTED INCOME PER COMMON SHARE

$ 0.30

$ 0.22

$ 0.31

$ 0.20






WEIGHTED AVERAGE SHARES OUTSTANDING:





    Basic

28,208

27,895

28,226

27,905

    Diluted

28,600

28,001

28,634

28,046






DIVIDENDS DECLARED PER COMMON SHARE

$ 0.175

$ 0.175

$ 0.35

$ 0.35






NUTRISYSTEM, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except par value amounts)



June 30,

December 31,


2014

2013

ASSETS






CURRENT ASSETS:



Cash and cash equivalents

$     22,979

$       9,772

Short term investments

16,501

16,551

Receivables

11,117

7,738

Inventories

19,748

26,088

Prepaid income taxes

0

2,167

Deferred income taxes

1,342

931

Other current assets

4,462

6,034

               Total current assets

76,149

69,281

FIXED ASSETS, net

26,102

26,029

DEFERRED INCOME TAXES

7,032

5,924

OTHER ASSETS

1,151

1,211

               Total assets

$  110,434

$  102,445




LIABILITIES AND STOCKHOLDERS' EQUITY






CURRENT LIABILITIES:



Accounts payable

$    32,705

$   29,117

Accrued payroll and related benefits

4,776

6,723

Income taxes payable

3,724

0

Deferred revenue

5,579

4,228

Other accrued expenses and current liabilities

7,530

7,441

                    Total current liabilities            

54,314

47,509

NON-CURRENT LIABILITIES

2,716

2,779

                    Total liabilities

57,030

50,288

 

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 – 29,010 at June 30, 2014 and 28,866 at December 31, 2013)

29

29

Additional paid-in capital

27,575

24,095

Treasury stock, at cost, 222 shares at June 30, 2014 and 158 shares at December 31, 2013

(2,575)

(1,586)

Retained earnings

28,351

29,611

Accumulated other comprehensive income

24

8

                    Total stockholders' equity

53,404

52,157

                    Total liabilities and stockholders' equity

$  110,434

$   102,445

 

NUTRISYSTEM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)



Six Months Ended June 30, 


2014

2013

CASH FLOWS FROM OPERATING ACTIVITIES:



Net income

$ 8,927

$ 5,719

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



Depreciation and amortization

3,671

4,891

Loss on disposal of fixed assets

5

48

Share–based compensation expense

2,910

2,890

Deferred income tax benefit

(1,272)

(788)

Other non-cash charges

13

30

Changes in operating assets and liabilities:



Receivables

(3,379)

867

Inventories

6,340

826

Other assets

1,632

2,153

Accounts payable

3,049

6,642

Accrued payroll and related benefits

(1,947)

2,027

Deferred revenue

1,351

67

Income taxes

5,549

3,658

Other accrued expenses and liabilities

10

1,006

Net cash provided by operating activities

26,859

30,036

CASH FLOWS FROM INVESTING ACTIVITIES:



Purchases of short term investments

(4,402)

(18,458)

Proceeds from sales of short term investments

4,464

3,594

Capital additions

(3,194)

(3,984)

Proceeds from the sale of fixed assets

0

28

Net cash used in investing activities

(3,132)

(18,820)

CASH FLOWS FROM FINANCING ACTIVITIES:



Exercise of stock options

248

0

Taxes related to equity compensation awards, net

(581)

(449)

Payment of dividends

(10,187)

(9,868)

Net cash used in financing activities

(10,520)

(10,317)

NET INCREASE IN CASH AND CASH EQUIVALENTS

13,207

899

CASH AND CASH EQUIVALENTS, beginning of period

9,772

16,186

CASH AND CASH EQUIVALENTS, end of period

$ 22,979

$ 17,085

 

NUTRISYSTEM, INC. AND SUBSIDIARIES

ADJUSTED EBITDA RECONCILIATION TO GAAP RESULTS

(Unaudited, in thousands)



Three Months Ended


Six Months Ended


June 30,


June 30,


2014


2013


2014


2013









Net income

$    8,703


$     6,359


$    8,927


$     5,719

    Interest expense, net

47


29


92


82

    Income tax expense

4,490


3,423


4,608


2,925

    Depreciation and amortization

1,913


2,342


3,671


4,891

EBITDA  

15,153


12,153


17,298


13,617

    Non-cash employee compensation








      expense

1,817


1,388


2,910


2,369

    Severance and related charges

0


0


0


1,441

Adjusted EBITDA

$  16,970


$    13,541


$  20,208


$    17,427

 

NUTRISYSTEM, INC. AND SUBSIDIARIES


ADJUSTED EBITDA GUIDANCE RECONCILIATION TO GAAP MEASURES


(Unaudited, in thousands)





Three Months Ending


Twelve Months Ending



September 30, 2014


December 31, 2014



Low


High


Low


High











Net income

$          3,502


$        4,862


$      17,750


$     19,846


   Interest expense, net

100


100


200


200


   Income tax expense

1,648


2,288


9,350


10,454


   Depreciation and amortization

2,200


2,200


8,200


8,200


EBITDA  

7,450


9,450


35,500


38,700


   Non-cash employee

   compensation expense

1,300


1,300


5,500


5,500


Adjusted EBITDA

$         8,750


$       10,750


$    41,000


$    44,200











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 and severance and related charges.

NUTRISYSTEM, INC. AND SUBSIDIARIES

ADJUSTED NET INCOME RECONCILIATION TO GAAP RESULTS

(Unaudited, in thousands, except per share amounts)



Three Months Ended


Six Months Ended


June 30,


June 30,


2014


2013


2014


2013









Net income as reported

$    8,703


$      6,359


$    8,927


$      5,719

    Income tax expense as reported

4,490


3,423


4,608


2,925

Income before income tax expense

13,193


9,782


13,535


8,644

    Adjustment for one-time charges

0


0


0


1,441

Adjusted income before income tax expense

13,193


9,782


13,535


10,085

   Adjusted income tax expense

4,490


3,423


4,608


3,530

Adjusted net income

$    8,703


$      6,359


$    8,927


$      6,555









Adjusted diluted income per common share

$      0.30


$        0.22


$      0.31


$         0.23

Adjusted diluted weighted average shares








   outstanding

28,600


28,001


28,634


28,046

Adjusted income tax expense for the six months ended June 30, 2013 has been calculated using a tax rate of 35%.

Statement Regarding Non-GAAP Financial Measures

We believe EBITDA, adjusted EBITDA, adjusted EBITDA guidance and adjusted net income 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.

SOURCE Nutrisystem, Inc.



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