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Weight Watchers Reports Q3 Results

Nov. 3, 2016 – According to the firm’s press release: “We’ve seen a great response to our fall campaign and in Q3 we achieved our highest year-over-year percentage growth in recruitment so far this year.  We continue to see positive reactions to our Beyond the Scale program, and we look forward to generating even more interest in Weight Watchers with our upcoming winter marketing campaign featuring Oprah Winfrey,” said Nick Hotchkin, the Company’s CFO and Member, Interim Office of the CEO.

Ray Debbane, the Chairman of the Company’s Board of Directors, stated, “The search for our next CEO is progressing well.  We are pleased that the Members of the Interim Office of the CEO are deeply involved in the business and providing strong leadership during the transition.  They, together with our management team, continue to advance the Company’s transformation progress and momentum.”

Some highlights for the quarter:

Revenues were up 4% over the prior year in Q3, to $281 million

First 9 months of 2016 revenues up 0.5% to $727 million. Guidance is for full year revenues of $1.17 billion.

End of period subscribers up 10% year over year to 2.8 million

Total paid weeks up 7% vs. 2015.

Operating income up 6% to $67 million

NACO (no. American region) revenues led the way, up 8% vs. 2015 quarter

Conference Call Info.

Management reported that NACO revenues were up 8%, the UK was down 7% and Continental Europe was down by 3%-a significant improvement. The firm has lost market share in the UK due to a strong competitor there. NACO accounts for 2/3 of the firm’s business and end of period subscribers was up 15% there. Management reports a $30 mill. marketing spend in Q3, a 51% gross margin, $99 mill. of cash on hand ($140 mill. expected by year end). For full year, WTW expects NACO to be up in mid single digits, UK down low double digits, and CE down mid single digits.

Marketdata Commentary

Looks like a decent quarter for WTW. Maybe the ship has changed course. We’ll see, when the new CEO is found. We hope it’s someone good, with actual marketing expertise in a consumer service company. A female would be a plus. We wonder what the annual “tweak” in the program will be for the 2017 diet season, plus promotions involving Oprah.

The complete press release and financial tables can be found here:

http://www.weightwatchersinternational.com/file/Index?KeyFile=36547514

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