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NutriSystem, Inc. Investor Presentation

NutriSystem, Inc. Investor Presentation. April 2008. Safe Harbor.

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NutriSystem, Inc. Investor Presentation

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  1. NutriSystem, Inc. Investor Presentation April 2008

  2. Safe Harbor We make forward-looking statements in this presentation which represent our expectations or beliefs about future events and financial performance. Forward-looking statements are identifiable by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may” and other similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Forward-looking statements are subject to known and unknown risks and uncertainties, including those described in the Company’s filings with the Securities and Exchange Commission. In addition, actual results could differ materially from those suggested by the forward-looking statements, and therefore you should not place undue reliance on the forward-looking statements.

  3. Keys To Successful Growth • Leverage Strategic Assets • Innovate and Be Customer-Focused • Continue to Build the Brand • Marketing-Driven Culture

  4. Revenue & EBITDA Growth $777 M $566 M = Revenue , CAGR = 173% = EBITDA, CAGR = 342% $210 M $173 M $140 M $38 M $35 M $2 M 2004 2005 2006 2007 Adjusted EBITDA – defined as income from continuing operations excluding non-cash employee compensation, other expense, equity loss, interest, income taxes and depreciation expense

  5. Ease of Use & Convenience Value Marketing- Driven Formula Internet Ordering & Counseling No Membership Fees / $10 Per Day Nutrition Anonymity No Center Visits / Delicious Meals Already Prepared Advanced: Sound Science / Effective Program The NutriSystem Platform Success NutriSystem is a weight loss program with a heart healthy menu that emphasizes Low Glycemic carbohydrates, optimal amounts of protein and healthy fats.

  6. Multi Channel Marketing Internet Ads TV Commercials Magazine Ads DRTV Infomercial NutriSystem .com Call Center Direct Mail Outbound Telemarketing Email Celebrity Endorsements

  7. The US Diet Industry • 58% of US adults have a BMI that classifies them as overweight or obese • 99 million US adults are dieting at a given time (64 mm to lose, 35 mm to maintain) • Commercial weight loss segment represents approximately 7 million dieters • Dieters move between segments • Majority share of commercial weight loss segment is controlled by a few companies • 1 out of 3 dieters are men • Largest projected increase over next ten years will be senior market Gallup Survey Diet Segments Source: Gallup Diet Study 2007

  8. Dieters’ Motivation Source: The Gallup Organization (2006 Survey)

  9. NutriSystem Delivers Results • 82% Customer Satisfaction1 • Clients lose an average of 9% of their starting weight2 • Mean weight loss is 1.5 to 2.0 pounds per week2 • Weight loss increased as weeks on program increased2 (1) Source: 3rd party research conducted by TARP Worldwide, 2008 Satisfaction defined as top two box. (2) Source: 3rd party research conducted by National Business Research Institute, 2006

  10. Nutritional Breakdown Guaranteed Nutrition Everyday • Balanced Nutrition • Calorie Controlled • Heart Healthy - OmegaSolTM • Controls Hunger • High in Fiber • Low in Sodium Carbohydrates 55% Protein 25% Fat 20% Assumes individual follows program including supplements

  11. Further Segmentation Marketing Channel Optimization International Expansion 2008 Strategy Customer Reactivation & Retention Product Innovation New Ecommerce Platform

  12. Financial Overview

  13. Increasing Revenue $777M $648 = Revenue per Customer, CAGR = 8% = Revenue in millions, CAGR = 173% $632 $605 $566M $513 $210M $38M 2006 2007 2005 2004 RPC is the trailing 9 month average for the initial diet cycle

  14. Our Database Has Grown Substantially 5.0 M 5 M Inactive = 2.0 M Active = .2 M PNO = 2.8 M .2 M 2.5 M 1.25 M

  15. Increasing Reactivation Revenue Contribution $95.5M = Reactivation revenue, CAGR = 202% = Reactivation contribution, CAGR = 220% $42.0M $37.8M $16.6M $10.5M $4.1M 2005 2007 2006 Contribution margin is operating margin excluding the cost of marketing

  16. Retention Drivers Improve the online experience Increase revenue per customer via promotions to lengthen stay Call Center Salvage Efforts Database Marketing New & Improved Foods New & Improved Foods Recurring Revenue Model through Retention and Reactivation Customer Life Time Value Increase counseling support Reactivation Drivers Time

  17. NutriSystem Enjoys a Tremendous ROIC LTM Return on Invested Capital¹ ¹NOPAT / (Debt + Equity). 3/31/08

  18. Adjusted EBITDA & Free Cash Flow $173M = Adjusted EBITDA, CAGR = 112% = Free Cash Flow, CAGR = 163% $140M $83M $61M $35M $12M 2005 2007 2006 Adjusted EBITDA – defined as income from continuing operations excluding non-cash employee compensation, other expense, equity loss, interest, income taxes and depreciation expense

  19. Liquidity Profile/Shareholder Distribution • Liquidity Profile • Debt Free • $200mm committed undrawn bank facility • Shareholder Distribution • Q1 purchased $45mm of our stock, approximately 10% or 3.3mm shares • Plan to continue to buy back shares to increase shareholder value up to $138mm currently authorized • Paid quarterly $.175/share • Annualized dividend of $.70/share As of 3/31/08

  20. Capitalization

  21. Q1 Results & Guidance • Q1 Results • Revenue of $216 mm • 50.5% Gross Margin • Marketing 31% of Revenue • $26.6mm Adjusted EBITDA • Guidance • Revenue • Q2 $180-$190 mm • FY $700-$720 mm • Adjusted EBITDA • Q2 $36-$40 mm • FY $125-$135 mm Adjusted EBITDA – defined as income from continuing operations excluding non-cash employee compensation, other expense, equity loss, interest, income taxes and depreciation expense

  22. Manage cash flow to invest for growth and maximize shareholder value Diversify product offering Expand into new markets Focus on customer experience and improving ROI Continue to build our brand Key Takeaways

  23. NutriSystem, Inc.Nasdaq: NTRI www.nutrisystem.com 300 Welsh Road, Building One Horsham, PA 19044 tel: (215) 706-5300

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