Investor Presentation -...
Transcript of Investor Presentation -...
NASDAQ: NTRI 2
Forward Looking Statements
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.
NASDAQ: NTRI 3
Well positioned for growth in a large addressable market with a proven and effective weight loss system.
•E-Commerce Business Model •Flexible, Efficient Supply Chain
•Marketing Driven Organization
•Focus on Customer Lifetime Value
•Expansion Opportunities
•Excellent Free Cash Flow
NASDAQ: NTRI 4
Growing Need for Commercial Weight Loss
Overweight
Obesity
2005 2015
Up 75%
Up 44%
Obesity is a Global Issue
Sources: World Health Organization & US National Center for Health Statistics via Merrill Lynch June 2008
US is a Large and
Growing Market
Overweight 1.6B 2.3B
Obese 400M 700M
Obesity More Than Doubled Since 1980
14% 32%
2/3 Population
Overweight & Obese
NASDAQ: NTRI 5
Large Addressable US Market
2008 Gallup Study
US Market 96 Million Dieters
56% - Self Designed Diet
8% - Structured Plan, Paid to JoinDoctor/Hospital Plan – 5%
Plan Followed On,
Own/No Fee - 18%
13% - Diet from Gym, Book, Other
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Commercial Programs Drive High Success Rate
% Dieters Very Satisfied
Effectively Takes
Off WeightHealthfulness Satisfies
Hunger
Easy to
Follow
Provides
Moral
Support
Cost
16%
45%
23%
64%
15%
26%
12%
40%
63%
42%
33% 33%
Self Designed DieterCommercial Program Dieter
Source: 2008 Gallup Study
NASDAQ: NTRI 7
NutriSystem: A Proven Nutritional Way to Lose Weight
30 Years of Research
Customers Lose 1.5-2 Pounds a Week
OmegaSolTM
Low Sodium
Heart Healthy
High in FiberBefore and after of Marie
NASDAQ: NTRI 9
Top E-Commerce Site
Rank Company 2007 e-Commerce Sales1 Amazon.com 14,800,000,0002 CDW 2,407,520,4633 Newegg.com 1,900,000,0004 QVC 1,880,530,0005 Netflix 1,205,000,0006 Systemax 974,610,0007 HSN 871,200,0008 Quixtar 861,000,0009 Zappos.com 850,000,00010 Overstock 760,200,00011 Buy.com 614,460,00012 PC Connection 528,400,00013 Drugstore 445,700,00014 Scholastic 397,000,00015 Peapod 339,000,00016 Blue Nile 319,300,00017 Oriental Trading Co. 299,000,000
Top Internet Only Retailers
$420,000,000
Source: Internet Retailer, Top 50 Internet Sales 2007
NASDAQ: NTRI 10
Marketing Driven Organization
Marketing Efficiency
ROI Based
Continuous Feedback
In House Creative Development & Testing
In House Media Buying Team
Use of Celebrities
NASDAQ: NTRI 12
Customer Focused Operations
The Perfect Order
In House Supply Chain Management
Outsourced Fulfillment
Outsourced Delivery
In House 500+ Person Call Center
Sales, Counseling, Customer Service
In House Research Teams with Outside Medical Board Outsourced Manufacturing
NASDAQ: NTRI 13
Future Growth Driver - Marketing
Media effectiveness and efficiency has many known and controllable levers to drive growth and profitability
Drivers of Success:
Prospects Leads Orders Re-activation
Media PromotionCall Volume Web Traffic
Conversion
Targeted MarketingDatabase Mining
Creative Promotion Media Mix ConversionEffectiveness
CustomerRelations Mgmt
Measurement &Tracking
NASDAQ: NTRI 14
Future Growth Drivers - Product Innovation & Expansion
Success from a single, gender based
product line drives innovation to create
NASDAQ: NTRI 16
Leading the Business Forward
A talented leadership team with decades of
experience in large scale subscription
businesses leading an energized & data
driven E-Commerce, Marketing, Supply
Chain & Customer Service organization to
the next level of customer satisfaction &
shareholder value.
NASDAQ: NTRI 18
Consolidated Annual Financial Summary
millions 2005 2006 2007Revenue $ 210 $ 566 $ 777
% growth 170% 37%
Gross Margin % 48.4% 52.2% 53.2%
Adjusted EBITDA1 $ 35 $ 140 $ 173% growth 300% 24%
Net Income $ 21 $ 85 $ 104% growth 305% 22%
Net Cash Provided by Operations $ 18 $ 67 $ 108% growth 272% 61%
1 Adjusted EBITDA – defined as income from continuing operations excluding non-cash employee compensation, other expense, equity loss, interest, income taxes and depreciation expense
NASDAQ: NTRI 19
Illustrative Customer Economics*
* Illustrative only, not actual figures
Our current customer EBITDA contribution is very strong; however many levers exist to improve EBITDA contribution.
Typical Customer Contribution Key DriversFood
Fulfillment
Freight Costs
Media
Creative Production
Celebrity Endorsements
Revenue $700Cost of Goods 350 50%Gross Margin 350
Marketing 175 25%Contribution $175
NASDAQ: NTRI 20
Levers on Revenue & EBITDA Contribution
Increasing Customer Subscription adds Significant Revenue1
Based on 1 Million Annual Customers:
Retention – Increase average customer time on program 1 day
$10,000,000
Up Sell – Up Sell 20% of Customer Base 1 Snack Pack ($30)
$6,000,000
Pricing - $5 increase in average selling price
$10,000,000
A 100 Basis Point Improvement:
Cost of Food
Improving Gross Margin adds Significant EBITDA Contribution2
1 For Illustrative Purposes Only 2Assumes $700M in sales.
– Menu, Ingredients, Suppliers
$7,000,000
Perfect Order – Accurate Order, On-Time Delivery, No Substitutions
$7,000,000
Supply Chain Optimization – Inventory and Distribution Management
$7,000,000
NASDAQ: NTRI 21
Customer Potential
4x $ value
•A customer who accepts the second order delivers four times the $ value of a customer that does not
•Value is driven by length of stay and reactivation
•Engagement aids length of stay and reactivation
•Customers who stay with program at least 8 weeks have high satisfaction
Accepted 2nd Order
Single Order
NASDAQ: NTRI 22
Growing Customer Database & Reactivation Revenue
2000 2001 2002 2003 2004 2005 2006 2007
Members On Program Inactive
0%
5%
10%
15%
20%
25%
2005 2006 2007 2008E
A growing database
of members & customers…
Reactivation as a % of Revenue
…leads to growing
reactivation revenue
& EBITDA contribution.
NASDAQ: NTRI 23
2008 First Half Financial Performance
Revenue - $410M
Gross Margin – 50.4%
Marketing Efficiency – 26.6%
Adjusted EBITDA – $66M
$62M Cash and Equivalents, June 30, 2008
NASDAQ: NTRI 24
Impressive Return On Invested Capital
73%
37% 37%
19% 18% 16% 14% 12% 12% 10%7% 7%
NMNM0%
10%
20%
30%
40%
50%
60%
70%
80%
NutriSys
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Medifa
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ime F
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Kraft
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Nautilu
sLTM Return on Invested Capital¹
¹¹NOPAT / (Debt + Equity). 3/31/08NOPAT / (Debt + Equity). 3/31/08
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Focus on Shareholder Value
Business generates significant free cash flow to support not only growth but return to shareholders
Shareholder distribution a focus of management team
$60MM of stock purchased in 2008Quarterly dividend with approx 4% yield
$200MM credit facility available, currently undrawn
Authorized share re-purchase of $123M
Self Funding Business Model
145% Cash CAGR
0
20
40
60
80
100
120
2005 2006 2007
Capital Expenditures
Cash Flow from Operations
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Investment Highlights
• Large addressable market
• Proven effective program
• Marketing driven E-Commerce business model
• Highly measurable marketing spend
• Cost Structure Leverage
• Flexible, efficient supply chain
• Opportunities for product & geographic expansion
• Integrated customer management platform focused on lifetime value
• Excellent free cash flow, strong balance sheet