Transcript NutriSystem Management Presentation

NutriSystem, Inc.
Investor Presentation
April 2008
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.
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Keys To Successful Growth
 Leverage Strategic Assets
 Innovate and Be Customer-
Focused
 Continue to Build the Brand
 Marketing-Driven Culture
3
Revenue & EBITDA Growth
= Revenue , CAGR = 173%
= EBITDA, CAGR = 342%
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
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The NutriSystem Platform
Success
MarketingDriven Formula
Ease of Use
&
Convenience
Value
Internet Ordering &
Counseling
No Membership Fees / $10 Per Day
Nutrition
No Center Visits / Delicious Meals Already Prepared
Anonymity
Advanced: Sound Science / Effective Program
NutriSystem is a weight loss program with a heart healthy menu that emphasizes
Low Glycemic carbohydrates, optimal amounts of protein and healthy fats.
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Multi Channel Marketing
Internet Ads
TV Commercials
Magazine Ads
DRTV Infomercial
NutriSystem
.com
Call Center
Outbound
Telemarketing
Direct Mail
Email
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Celebrity
Endorsements
The US Diet Industry
Gallup Survey Diet Segments

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
Medical Diet
9%
Commercial
Weight Loss
Program
7%
Self Directed
57%
Other Plans
7%
Plan Followed on
Own / No Fee
20%
Source: Gallup Diet Study 2007
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Dieters’ Motivation
Source: The Gallup Organization (2006 Survey)
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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
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Guaranteed Nutrition Everyday
Nutritional Breakdown
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
Balanced Nutrition

Calorie Controlled

Heart Healthy - OmegaSolTM

Controls Hunger

High in Fiber

Low in Sodium
Assumes individual follows program including supplements
Carbohydrates
55%
Protein
25%
Fat
20%
Further
Segmentation
Marketing
Channel
Optimization
International
Expansion
2008
Strategy
Customer
Reactivation
& Retention
Product
Innovation
New
Ecommerce
Platform
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Financial Overview
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Increasing Revenue
= Revenue per Customer, CAGR = 8%
= Revenue in millions, CAGR = 173%
2004
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2005
RPC is the trailing 9 month average for the initial diet cycle
2006
2007
Our Database Has Grown Substantially
PNO
On Program
Inactive
5.0 M
5M
2.5 M
.2 M
Inactive = 2.0 M
Active = .2 M
1.25 M
PNO = 2.8 M
2000 2001 2002 2003 2004 2005 2006 2007
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Increasing Reactivation Revenue
Contribution
= Reactivation revenue, CAGR = 202%
= Reactivation contribution, CAGR = 220%
2005
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Contribution margin is operating margin excluding the cost of marketing
2006
2007
Recurring Revenue Model through
Retention and Reactivation
Retention Drivers
Customer Life Time Value
Increase counseling
support
Improve the online
experience
Increase revenue per
customer via promotions to
lengthen stay
New & Improved
Foods
Reactivation Drivers
Call Center Salvage
Efforts
Database Marketing
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New & Improved
Foods
Time
NutriSystem Enjoys a Tremendous ROIC
LTM Return on Invested Capital¹
80%
73%
70%
60%
50%
37%
40%
37%
30%
19%
20%
18%
16%
10%
14%
12%
12%
10%
7%
7%
NM
NM
¹NOPAT / (Debt + Equity). 3/31/08
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Adjusted EBITDA & Free Cash Flow
= Adjusted EBITDA, CAGR = 112%
= Free Cash Flow, CAGR = 163%
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
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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
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Capitalization
Summary Cash Flow
Net income
Depreciation, amort. & noncash comp
Change in WC
Capital expenditures
Free cash flow
Stock buy-back
Other, net
Change in cash & marketable securities
Cash & marketable securities
Inventory
Accounts receivable
Other current assets
Accounts payable
Accruals
Other current liabilities
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Long term debt
Total shareholder equity
FY 2007
$104.2
9.8
(11.9)
(18.7)
83.4
Q1 2008
$14.1
3.2
27.1
(2.1)
42.3
(121.8)
(1.1)
($39.4)
(44.6)
2.8
$0.5
12/31/2007
42.4
82.5
19.1
15.4
46.1
4.4
5.6
3/31/2008
43.0
70.3
22.4
15.0
56.4
10.7
6.7
0
142
0
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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
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Key Takeaways
 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
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NutriSystem, Inc.
Nasdaq: NTRI
www.nutrisystem.com
300 Welsh Road, Building One
Horsham, PA 19044
tel: (215) 706-5300