NutriSystem, Inc. Investor Presentation

NutriSystem, Inc. Investor Presentation

April 2008

2

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.

3

Keys To Successful Growth

Leverage Strategic Assets Innovate and Be Customer-

Focused Continue to Build the Brand Marketing-Driven Culture

4

Revenue & EBITDA Growth

= Revenue , CAGR = 173%

= EBITDA, CAGR = 342%

$38 M

$210 M

$566 M

$2 M $35 M

$140 M

2006 2007

$777 M

$173 M

Adjusted EBITDA – defined as income from continuing operations excluding non-cash employee compensation, other expense, equity loss, interest, income taxes and depreciation expense

20052004

5

The NutriSystem Platform

Advanced: Sound Science / Effective Program

No Center Visits / Delicious Meals Already Prepared

No Membership Fees / $10 Per Day

Internet Ordering & Counseling

Marketing-Driven Formula

Success

Ease of Use &

ConvenienceValue

Nutrition Anonymity

NutriSystem is a weight loss program with a heart healthy menu that emphasizes Low Glycemic carbohydrates, optimal amounts of protein and healthy fats.

6

Multi Channel Marketing

Internet Ads

Direct Mail

Email Celebrity Endorsements

DRTV Infomercial

OutboundTelemarketing

Call CenterNutriSystem.com

Magazine Ads

TV Commercials

7

The US Diet Industry

Source: Gallup Diet Study 2007Source: Gallup Diet Study 2007

Self Directed57%

Medical Diet9%

Commercial Weight Loss

Program7%

Other Plans7%

Plan Followed on Own / No Fee

20%

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

8

Dieters’ Motivation

Source: The Gallup Organization (2006 Survey)

9

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: 3(1) Source: 3rdrd party research conducted by TARP Worldwide, 2008 Satisfaction defined as top two box. party research conducted by TARP Worldwide, 2008 Satisfaction defined as top two box.(2) Source: 3(2) Source: 3rdrd party research conducted by National Business Research Institute, 2006 party research conducted by National Business Research Institute, 2006

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Guaranteed Nutrition Everyday

Balanced Nutrition

Calorie Controlled

Heart Healthy - OmegaSolTM

Controls Hunger

High in Fiber

Low in Sodium

Nutritional Breakdown

Carbohydrates55%

Protein25%

Fat20%

Assumes individual follows program including supplements

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2008Strategy

New Ecommerce

Platform

CustomerReactivation & Retention

International Expansion

ProductInnovation

MarketingChannel

Optimization

FurtherSegmentation

12

Financial Overview

13

Increasing Revenue

2004 2005

$513

$605

2006

$632$648

2007

$38M

$210M

$566M

$777M

= Revenue per Customer, CAGR = 8%

= Revenue in millions, CAGR = 173%

RPC is the trailing 9 month average for the initial diet cycle

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Our Database Has Grown Substantially

2000 2001 2002 2003 2004 2005 2006 2007

PNO On P rogram Inac tive

5 M

2.5 M

1.25 M

.2 M

5.0 M

Inactive = 2.0 M

Active = .2 M

PNO = 2.8 M

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Increasing Reactivation Revenue Contribution

$10.5M

$37.8M

2006 2007

$95.5M

$4.1M

$16.6M

$42.0M

= Reactivation revenue, CAGR = 202%

= Reactivation contribution, CAGR = 220%

Contribution margin is operating margin excluding the cost of marketing

2005

16

Time

Custom

er Life Time Value

Increase counseling support

Retention Drivers

Improve the online

experience

Call Center Salvage

Efforts

Increase revenue per customer

via promotions to lengthen stay

Database Marketing

Recurring Revenue Model through Retention and Reactivation

Reactivation Drivers

New & Improved Foods

New & Improved Foods

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NutriSystem Enjoys a Tremendous ROIC

LTM Return on Invested Capital¹

¹NOPAT / (Debt + Equity). 3/31/08¹NOPAT / (Debt + Equity). 3/31/08

73%

37% 37%

19% 18%16% 14% 12% 12% 10%

7% 7%

NMNM0%

10%

20%

30%

40%

50%

60%

70%

80%

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Adjusted EBITDA & Free Cash Flow

$35M

$140M

2006 2007

$173M

$12M

$61M

$83M

= Adjusted EBITDA, CAGR = 112%

= Free Cash Flow, CAGR = 163%

2005Adjusted 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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CapitalizationSummary Cash Flow FY 2007 Q1 2008Net income $104.2 $14.1Depreciation, amort. & noncash comp 9.8 3.2Change in WC (11.9) 27.1Capital expenditures (18.7) (2.1)Free cash flow 83.4 42.3Stock buy-back (121.8) (44.6)Other, net (1.1) 2.8 Change in cash & marketable securities ($39.4) $0.5

12/31/2007 3/31/2008Cash & marketable securities 42.4 43.0Inventory 82.5 70.3Accounts receivable 19.1 22.4Other current assets 15.4 15.0Accounts payable 46.1 56.4Accruals 4.4 10.7Other current liabilities 5.6 6.7

Long term debt 0 0Total shareholder equity 142 114

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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

NutriSystem, Inc.Nasdaq: NTRI

www.nutrisystem.com

300 Welsh Road, Building OneHorsham, PA 19044tel: (215) 706-5300