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Weight Watchers Reports Q4 & 2016 Yearly Results

Feb. 28, 2017 – “We delivered positive member recruitment growth in every quarter of 2016, ending the year with 10% more subscribers than the prior year,” said Nick Hotchkin, the company’s CFO and Member, Interim Office of the CEO. “So far in 2017 our global marketing campaigns are driving strong member recruitment and interest in our Beyond the Scale program. With the year off to a good start, we are confident we will deliver revenue growth and higher profitability throughout the year.”

The company posted total year revenues of $1.164 billion–essentially flat vs. the prior year. However, end-of-period subscribers was up 10% year over year, to 2.6 million. Total paid weeks in Q4 were also up 10%, and Q4 revenues were up 3% to $267 million. The firm had $201 million in operating income for the year, up 6%.

The return to growth was attributed largely to better results at the company’s key NACO region, coupled with strong growth in Europe (France, Germany), but the UK meetings business remained soft. This was the 5th quarter of improvement in year over year results.

Of the total revenues of $1.164 billion, service revenues in fiscal 2016 were $949 million, while product sales and Other revenues in fiscal 2016 were $215.8 million. Net income in 2016 was $67.7 million, vs. $32.9 million in the prior year. Operations in Spain have not reached profitability and will cease. NACO revenues for 2016 reached $801 million (up 5.7% constant currency). UK revenues were $113 million (-19%). Continental Europe revenues were $211 million (up 8%).

Find the Press Release with complete financial tables here:


Conference Call Findings 

Management reported that they launched a new “Connecting with Oprah” feature, and that she continued to appear in ads, touting her 40 lb. weight loss. The firm expects Q1 2017 to be its 6th consecutive quarter of better sales. The company has $109 million of cash on hand, and there are 230,000 more subscribers than during the prior year. The company expects revenues in 2017 to reach $1.25 billion (up 7.8%), with NACO operations posting an expected low double-digit gain, the UK down in the mid-single digits, and Continental Europe up in the low-single digits.

Marketdata Commentary – EBIDTA Rules Analysts’ Minds

Once again, analysts’ questions focused on the financials. No marketing questions. No competitor questions. No structural issues questions. Lost opportunity. Analysts afraid to ask tough questions.  Let’s all chant…OM…OM… EBIDTA….EBIDTA…. That’s all that matters, right?

Here’s a few questions your COULD have asked guys:

  • Why do you think NutriSystem revenues grew 18% last year and your sales were flat?
  • When can we expect to see some significant revenues from the Healthcare Solutions business, and more deals like Humana?
  • Why aren’t you pursuing more retail partnerships?
  • How would you characterize the morale of your 10,000 group leaders?
  • Why did it take you so long to admit that you have to look to dieters under age 48 for future growth?
  • Do you still think that a one-size fits-all program is attuned to dieters’ needs?
  • High protein diets and ketogenic diets are hot right now. Do you have any plans to offer anything in these areas in 2017?
  • Do you think it might be time to throw in the towel in the UK?

All in all, a good quarter and a decent year. But, let’s put things in perspective here. Bottom line, WTW had a flat year–no revenue growth vs. 2015. While that’s good for them to at least stop the bleeding, the fact is that NutriSystem had an 18% revenue gain in 2016. So, who’s the winner? What we’re seeing now is that a rising tide lifts all ships–even WTW. I bet that even Jenny Craig’s sales were up.

Management also reported that (wait for it…) they need to reach younger customers, and pledges to do more research on reaching this demographic. What’s there to research? We know the demand is there. It’s just a matter of developing a program and services for them. Wow, what a concept! Finally, after several years of saying that they were going to focus on women age 48 and older, someone actually came to a logical conclusion! The new CEO search continues.

Also, when asked by one analyst what’s going on with the large healthcare organizations segment, management said they were doing a “strategic reset”, and things take time here. Really? They’ve been “resetting” for five years now, since 2012. When will this potential $300 million market (WTW’s estimate) bear some fruit, we wonder — maybe 20 years from now?

When asked if the firm had any potential new partnerships in the works, similar to the deal with Apple watch, management really didn’t answer the question, so no, nothing new as far as partners go.



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