May 4, 2016 - According to Jim Chambers, the Company's President and CEO.: "Leveraging the success of our new Beyond the Scale program, we expect to deliver revenue and profit growth for the full year 2016 and we are raising our earnings guidance to a range of $0.80 to $1.05 per share," "Our first quarter loss was smaller than we expected, and for the first time since 2012 we grew our total subscribers year-over-year, clearly demonstrating that our business is turning around."
- Global End of Period Subscribers returned to growth, up 5% year-over-year to 3.1 million .
- Total Revenues in Q1 2016 were $306.9 million. On a constant-currency basis, total revenues decreased 3.0% versus the prior year.
- Product Sales and Other in Q1 2016 were $63.1 million. On a constant-currency basis, these revenues decreased 10.7% versus the prior year period primarily due to lower in-meeting product sales and a smaller contribution from licensing.
- Online paid subscribers increased 2.9% to 1.75 million.
- Operating Income in Q1 2016 was $13.6 million, as compared to $18.0 million in the prior year period.
- Core North America business leading turnaround, with North America: End of Period Subscribers up 11% year-over-year, Paid Weeks up 6% year-over-year, Attendance at meetings up 18% year-over-year.
The complete Press Release and financial tables may be found here:
Conference Call Info.
Management reported in a conference call today that NACO performed the best of all regions (revenues +2.3%, online revenues flat). UK sales were down 11% (online -8.3%), and Continental Europe was down 15% (online - 11.2%). Germany and France are said to be tough competitive markets. This is a reversal of trends in the past year or so, where NACO fared the worst and Europe was better. Perhaps that's due to the Oprah Winfrey effect being stronger domestically than abroad.
Gross margin was 48.7% in Q1, down from last year. WW spent $86 million on marketing in the quarter and expects to spend another $45 mill. in Q2--with a total yearly marketing spend flat with last year. The company is projecting a slight increase in revenues in 2016--to $1.2 billion, and has $128 mill. cash on hand. Management also reported healthcare client revenues (Humana, etc.) of $56 mill. in 2015, increasing to $62 million this year, and at least $100 mill. by 2018.
Management reported launching the "connect" social media platform, which is part of the app. It has 500,000 members. They also reported that the average WW member is worth $375 per year (regular meetings program with a tenure of 8 months), and the typical online customer is worth $175 (avg. tenure of 9 months.).
All in all, this was a very good quarter, and what analysts were hoping for--an end to the bleeding and the beginning of a turnaround, fueled by Oprah. However, as Marketdata has said before, there is still so much more that the company could be doing that it is not. One example is the contribution of large healthcare organizations and deals such as the one with Humana. A few years ago, management said that it expected this segment to contribute $300 million/year by 2018. Now, it's saying $100 million. We still feel that the firm is devoting too much effort and money to IT and apps and not enough on new program development to cater to untapped niche markets (seniors, men, teens, diabetics, African-American and Hispanic women). We also still feel that it can and should forge more relationships with retail partners to create more touchpoints with women, to broaden its distribution channels. Finally, we think it is not reaching out to capture Milennials and dieters under age 45 (by contrast, NutriSystem IS going after this market and the "clean eating" population via the launch of the South Beach Diet brand in early 2017.