Nutrisystem 2015 Annual Report Download - page 17

ITEM 1A.RISK FACTORS
You should consider carefully the following risks and uncertainties when reading this Annual Report. If any of
the events described below actually occurs, the Company’s business, financial condition and operating results
could be materially adversely affected. You should understand that it is not possible to predict or identify all such
risks and uncertainties. Consequently, you should not consider the following to be a complete discussion of all
potential risks or uncertainties.
Our future growth and profitability will depend in large part upon the effectiveness and efficiency of our
marketing expenditures and our ability to select effective markets and media in which to advertise.
Our marketing expenditures were $124.2 million, $107.7 million and $95.8 million in 2015, 2014 and 2013,
respectively. Our future growth and profitability will depend in large part upon the effectiveness and efficiency
of our marketing expenditures, including our ability to:
• create greater awareness of our brand and our program;
• identify the most effective and efficient levels of spending in each market, media and specific media
vehicle;
• determine the appropriate creative messages and media mix for advertising, marketing and promotional
expenditures;
• effectively manage marketing costs (including creative and media) in order to maintain acceptable
customer acquisition costs;
• acquire cost-effective national television advertising;
• select the most effective markets, media and specific media vehicles in which to advertise; and
• convert consumer inquiries into actual orders.
Our planned marketing expenditures may not result in increased revenue or generate sufficient levels of brand
name and program awareness. We may not be able to manage our marketing expenditures on a cost-effective
basis whereby our customer acquisition costs may exceed the contribution profit generated from each additional
customer.
Our sales may be adversely impacted by the health and stability of the general economy.
Unfavorable changes in general economic conditions, such as a recession or prolonged economic slowdown, may
reduce the demand for our products and otherwise adversely affect our sales. For example, economic forces,
including general economic conditions, demographic trends, consumer confidence in the economy, changes in
disposable consumer income and/or reductions in discretionary spending, may cause consumers to defer
purchases of our program which could adversely affect our revenue, gross margins, and/or our overall financial
condition and operating results.
We rely on third parties to provide us with adequate food supply, freight and fulfillment and Internet and
networking services, the loss of any of which could cause our revenue, earnings or reputation to suffer.
Food Manufacturers and Other Suppliers. We rely solely on third-party manufacturers to supply all of the food,
other products we sell and packaging materials. In 2015, approximately 19% and 17% of inventory purchases
were from two vendors. If we are unable to obtain sufficient quantity, quality and variety of food, other products
and packaging materials in a timely and low-cost manner from our manufacturers, we will be unable to fulfill our
customers’ orders in a timely manner, which may cause us to lose revenue and market share or incur higher
costs, as well as damage the value of the Nutrisystem brand.
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