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TheStreet Open House

Nutrisystem's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Stocks in this article: NTRI

In the meantime, I've taken a very active role on the company as Chairman. Together with my fellow Board members and the management team, we are committed to getting Nutrisystem business back on the growth trajectory and adding shareholder value. Nutrisystem has a strong balance sheet and the Board of Directors continues to remain focused on returning value to shareholders in the form of quarterly dividend.

With that, I'll turn the call over to Joe Redling.

Joe Redling

Thanks Mike. It's great to have you back. Good afternoon and thank you joining us on today's conference call. First quarter results were below our original forecast, but we believe that this is mainly a timing issue. And as David will discuss in a moment, we are reaffirming our full year guidance for both revenues and earnings.

During the year we are going to make investments, we believe will be accretive for the full year earnings, even if that result in a short-term hit for the quarter. New customer starts are the key driver of revenue growth and when our metrics indicate, we have the ability to lean into our immediate spend for extended programs that are producing results, we're going to do that for the benefit of the overall year.

Two examples that this happened in Q1. In Q1 we converted our Costco program from program cards to gift cards. This was a new element of our offering through the Costco channel this year. We tested and prepared sales velocity and profitability of shaping from a prepaid full program card purchase to a simple $100 gift card program. And the gift card program is the clear winner on all measures.

This change shifted about $2 million of revenue from March into Q2, related to cards purchased, but not redeemed. This is a direct result of different redemption patterns of gift cards compared to program cards.

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