NutriSystem Inc (NTRI, Financial) filed Quarterly Report for the period ended 2010-09-30.
Nutrisystem Inc has a market cap of $568.6 million; its shares were traded at around $20.85 with a P/E ratio of 20.8 and P/S ratio of 1.1. The dividend yield of Nutrisystem Inc stocks is 3.2%. Nutrisystem Inc had an annual average earning growth of 89.2% over the past 10 years.NTRI is in the portfolios of David Dreman of Dreman Value Management, Chuck Royce of Royce& Associates, John Buckingham of Al Frank Asset Management, Inc., Mario Gabelli of GAMCO Investors, Steven Cohen of SAC Capital Advisors.
We distribute our proprietary prepackaged food through QVC, a television home shopping network. In the nine months ended September 30, 2010 and 2009, this channel represented 4% and 6% of our revenue, respectively. On the QVC network, we reach a large audience in a 50 minute infomercial format that enables us to fully convey the benefits of the Nutrisystem diet programs. Under the terms of our agreement, QVC viewers purchase Nutrisystem products directly from QVC and are not directed to the Nutrisystem website. Retail prices (including shipping and handling) offered on QVC to consumers are similar to prices offered on the website. We generate a lower gross margin (as a percent of revenue) on sales through QVC relative to the direct channel, but QVC sales require no incremental advertising and marketing expense and, management believes, exposure on QVC raises consumer awareness of the Nutrisystem brand. Net sales through QVC were $3.7 million and $16.8 million for the three and nine months ended September 30, 2010, respectively, compared to $7.6 million and $26.1 million in the comparable periods of 2009. QVC sales are a function of the number of shows and the timing of each show. The decrease in QVC sales can be primarily attributed to a decrease in the number of shows and quality air time.
Marketing expense decreased to $33.3 million in the third quarter of 2010 from $36.2 million in the third quarter of 2009. Marketing expense as a percent of revenue decreased to 27.5% in 2010 from 28.7% in 2009. Substantially all marketing spending during the third quarter of 2010 promoted the direct business. The decrease in marketing is primarily attributable to decreased spending for advertising media ($1.1 million) and television production ($1.9 million). In total, media spending was $29.8 million in the third quarter of 2010 and $30.9 million in the third quarter of 2009.
General and administrative expense increased to $18.1 million in the third quarter of 2010 compared to $16.5 million in the third quarter of 2009. General and administrative expense as a percent of revenue increased to 14.9% in the third quarter of 2010 from 13.1% for the third quarter of 2009. The increase in spending is primarily attributable to higher compensation and benefit costs ($805,000); increased spending in utilities and rent expense due to the relocation of our corporate headquarters ($585,000); and increased non-cash expense for share-based payment arrangements ($317,000).
Costs and Expenses. Cost of revenue decreased to $186.6 million in the nine months ended September 30, 2010 from $193.0 million in the comparable period of 2009. Gross margin increased to 55.7% in the nine months ended September 30, 2010 from 54.0% in the comparable period of 2009. The increase in gross margin was primarily attributable to a reduction in the use of food-based promotions, a reduced level of returns and ongoing cost savings initiatives.
Marketing expense increased to $127.2 million in the nine months ended September 30, 2010 from $118.4 million in the comparable period of 2009 and marketing expense as a percent of revenue increased to 30.2% in 2010 from 28.3% in 2009. Substantially all marketing spending during the year promoted the direct business. The increase in marketing is primarily attributable to increased spending for advertising media ($9.1 million) and increased marketing consulting ($1.8 million). These costs were partially offset by decreased television production ($1.7 million). In total, media spending was $112.6 million in the nine months ended September 30, 2010 and $103.5 million in the comparable period of 2009.
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Nutrisystem Inc has a market cap of $568.6 million; its shares were traded at around $20.85 with a P/E ratio of 20.8 and P/S ratio of 1.1. The dividend yield of Nutrisystem Inc stocks is 3.2%. Nutrisystem Inc had an annual average earning growth of 89.2% over the past 10 years.NTRI is in the portfolios of David Dreman of Dreman Value Management, Chuck Royce of Royce& Associates, John Buckingham of Al Frank Asset Management, Inc., Mario Gabelli of GAMCO Investors, Steven Cohen of SAC Capital Advisors.
Highlight of Business Operations:
In the nine months ended September 30, 2010 and 2009, the direct channel represented 96% and 94%, respectively, of our revenue. Net sales through the direct channel were $117.4 million and $404.4 million in the three and nine months ended September 30, 2010, respectively, compared to $118.6 million and $392.4 million in the comparable periods of 2009. The increase in the nine months ended September 30, 2010 is primarily attributable to an increase in customer starts and retail revenue, which was partially offset by a decline in reactivation and QVC revenue. Revenue is primarily generated through customer starts, reactivation of former customers and the customer ordering behavior, including length of time on our program and the diet program selection. Critical to increasing customer starts is our ability to deploy marketing dollars while maintaining marketing effectiveness. Factors influencing our marketing effectiveness include the quality of the advertisements, promotional activity by our competitors, as well as the price and availability of appropriate media.We distribute our proprietary prepackaged food through QVC, a television home shopping network. In the nine months ended September 30, 2010 and 2009, this channel represented 4% and 6% of our revenue, respectively. On the QVC network, we reach a large audience in a 50 minute infomercial format that enables us to fully convey the benefits of the Nutrisystem diet programs. Under the terms of our agreement, QVC viewers purchase Nutrisystem products directly from QVC and are not directed to the Nutrisystem website. Retail prices (including shipping and handling) offered on QVC to consumers are similar to prices offered on the website. We generate a lower gross margin (as a percent of revenue) on sales through QVC relative to the direct channel, but QVC sales require no incremental advertising and marketing expense and, management believes, exposure on QVC raises consumer awareness of the Nutrisystem brand. Net sales through QVC were $3.7 million and $16.8 million for the three and nine months ended September 30, 2010, respectively, compared to $7.6 million and $26.1 million in the comparable periods of 2009. QVC sales are a function of the number of shows and the timing of each show. The decrease in QVC sales can be primarily attributed to a decrease in the number of shows and quality air time.
Marketing expense decreased to $33.3 million in the third quarter of 2010 from $36.2 million in the third quarter of 2009. Marketing expense as a percent of revenue decreased to 27.5% in 2010 from 28.7% in 2009. Substantially all marketing spending during the third quarter of 2010 promoted the direct business. The decrease in marketing is primarily attributable to decreased spending for advertising media ($1.1 million) and television production ($1.9 million). In total, media spending was $29.8 million in the third quarter of 2010 and $30.9 million in the third quarter of 2009.
General and administrative expense increased to $18.1 million in the third quarter of 2010 compared to $16.5 million in the third quarter of 2009. General and administrative expense as a percent of revenue increased to 14.9% in the third quarter of 2010 from 13.1% for the third quarter of 2009. The increase in spending is primarily attributable to higher compensation and benefit costs ($805,000); increased spending in utilities and rent expense due to the relocation of our corporate headquarters ($585,000); and increased non-cash expense for share-based payment arrangements ($317,000).
Costs and Expenses. Cost of revenue decreased to $186.6 million in the nine months ended September 30, 2010 from $193.0 million in the comparable period of 2009. Gross margin increased to 55.7% in the nine months ended September 30, 2010 from 54.0% in the comparable period of 2009. The increase in gross margin was primarily attributable to a reduction in the use of food-based promotions, a reduced level of returns and ongoing cost savings initiatives.
Marketing expense increased to $127.2 million in the nine months ended September 30, 2010 from $118.4 million in the comparable period of 2009 and marketing expense as a percent of revenue increased to 30.2% in 2010 from 28.3% in 2009. Substantially all marketing spending during the year promoted the direct business. The increase in marketing is primarily attributable to increased spending for advertising media ($9.1 million) and increased marketing consulting ($1.8 million). These costs were partially offset by decreased television production ($1.7 million). In total, media spending was $112.6 million in the nine months ended September 30, 2010 and $103.5 million in the comparable period of 2009.
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