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» Nutrisystem CEO Discusses Q1 2011 Results - Earnings Call Transcript
I'll now turn the call over to Mike Hagan, Chairman of Nutrisystem's Board of Directors.Mike Hagan Thanks Joe, and thanks everyone for joining us. I appreciate the opportunity to say hello to the investment community and introduce myself, as it's been a while since I served in its capacity for Nutrisystem. My main message to you today is that the Board is behind the company in its current strategic plan. Our company has been navigating through some challenging time, I believe and to my other fellow board members that we have a solid foundation in place to recapture positive momentum. In particular, I'm excited about our first two launch into the retail channel. Joe will provide more detail on our retail plan in a moment that I've been impressed by the thoughtful process and planning that has led us to where we are today. This is simply one of the biggest growth opportunities we've attacked in our current incarnation. And one that we believe will significantly enhance revenues and earnings in the coming years. We're disappointed to see Joe Redling leave the company. Unfortunately, Joe has added considerable debt to our management team over the past year. And we are well-positioned in staff to continue to execute on our current operating plan. We are currently in the process of engaging a search front to identify our next company leader and we'll keep you informed of our progress. Joe continues to lead the day-to-day operations. And I look forward to once again working with Joe over the next several months to ensure a smooth transition and keep it focused on our critical growth initiative. With the eventual resignation of Joe Redling from the Board as well as the pending departures of Board members, Ted Leonsis and Laura Lang, we are also working with a national search front to search an additional candidate for our Board of Directors.
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.
In addition, the lower than anticipated Q1 earnings was directly attributable to our decision to aggressively invest in marketing to drive improved Q2 and full year topline revenue and earnings. While first quarter marketing spend was down year-over-year, the month-by-month spend told a different story.Read the rest of this transcript for free on seekingalpha.com