vikx01 Posted April 22, 2014 Share Posted April 22, 2014 http://techcrunch.com/2014/04/21/online-fitness-startup-wello-to-be-acquired-by-weight-watchers-sources/ Link to comment Share on other sites More sharing options...
Guest hellsten Posted April 30, 2014 Share Posted April 30, 2014 http://www.weightwatchersinternational.com/phoenix.zhtml?c=130178&p=irol-newsArticle&ID=1924503&highlight= NEW YORK, April 30, 2014 /PRNewswire/ -- Weight Watchers International, Inc. (NYSE: WTW) today announced its results for the first quarter of fiscal 2014 and raised its full year fiscal 2014 earnings guidance. First quarter 2014 results include: Revenues of $409.4 million, down 16.6% versus the prior year period, with total paid weeks down 13.9% Cash flow provided by operating activities totaled $83.1 million Earnings per fully diluted share (EPS) were $0.38 "We are encouraged by the progress we are making on our transformation plan, but there is still a great deal of work to do," commented Jim Chambers, the Company's President and Chief Executive Officer. Chambers added, "Our Q1 financial results were ahead of our expectations. Given this, we have revised our full year fiscal 2014 earnings guidance to a range of $1.45 to $1.70." Mr. Market seems surprised. To me it looks like a really bad quarter. Where's the moat? Link to comment Share on other sites More sharing options...
GregS Posted April 30, 2014 Share Posted April 30, 2014 http://www.weightwatchersinternational.com/phoenix.zhtml?c=130178&p=irol-newsArticle&ID=1924503&highlight= NEW YORK, April 30, 2014 /PRNewswire/ -- Weight Watchers International, Inc. (NYSE: WTW) today announced its results for the first quarter of fiscal 2014 and raised its full year fiscal 2014 earnings guidance. First quarter 2014 results include: Revenues of $409.4 million, down 16.6% versus the prior year period, with total paid weeks down 13.9% Cash flow provided by operating activities totaled $83.1 million Earnings per fully diluted share (EPS) were $0.38 "We are encouraged by the progress we are making on our transformation plan, but there is still a great deal of work to do," commented Jim Chambers, the Company's President and Chief Executive Officer. Chambers added, "Our Q1 financial results were ahead of our expectations. Given this, we have revised our full year fiscal 2014 earnings guidance to a range of $1.45 to $1.70." Mr. Market seems surprised. To me it looks like a really bad quarter. Where's the moat? I agree - this quarter looks awful. Just glanced at the PR but it appears decline in every major metric accelerated this quarter. Revenues, income, meeting and online paid weeks, attendance - all experienced bigger declines than in Q4. Online, which used to be their growth area, is down over 12% in paid weeks for Q1 (vs 6.5% decline in Q4). They raised guidance a bit, but I'm guessing this is from cost control. Sales/attendance results look abysmal still with no signs of abating. I also noticed they reorganized their segment reporting to focus on geographic segments, meaning they aren't breaking out the details for online. I wonder why? I know expectations were low, but I wouldn't buy into this bounce. Link to comment Share on other sites More sharing options...
GregS Posted April 30, 2014 Share Posted April 30, 2014 I found the online results down at the bottom of the PR: Consolidated online revenues down 11.7% North Am online down 16.9% (Wow) How long can they keep charging $18.95 /month for online subscriptions? Link to comment Share on other sites More sharing options...
Guest deepValue Posted April 30, 2014 Share Posted April 30, 2014 Yikes. I'm only really looking at attendance at this point and it was disappointing. I'm not adding here, but I'm willing to hang on to let the thesis play out. I still think dieters who need their hands held will eventually return to Weight Watchers en masse. I'm concerned about a capital raise, though, depending on how bad it gets before a recovery. I'm also concerned that management may be unable to properly market the program, preventing a recovery from occurring. The capital raise and possible mismanagement lead me to the painful decision not to add at 30% less than my original purchase price. Link to comment Share on other sites More sharing options...
Guest hellsten Posted May 1, 2014 Share Posted May 1, 2014 Q1 2014 Results - Earnings Call Transcript http://seekingalpha.com/article/2180253-weight-watchers-internationals-ceo-discusses-q1-2014-results-earnings-call-transcript In addition, we are opening up our platform for integration with leading activity monitors and expect our implementation to begin in Europe in the middle of this year. ... Moving forward, we will be bringing this to the digital environment adding human interaction to the online model. ... we have approved the significant investment to upgrade our systems infrastructure and core processes to help ensure that we are broadly capable of servicing the healthcare sector beginning in 2015. Our discussions with interested healthcare companies are progressing well. As we outlined on Investor Day, we expect meaningful revenue contribution beginning in 2016 and beyond. ... In March, we launched Weight Watchers for diabetes through our direct employer channel, which serves and meet needs of employees with Type 2 diabetes by integrating personalized coaching into the Weight Watchers proven approach. In addition to attending Weight Watchers meetings and using our digital tools, participants are paired with a certified diabetes educator and dietitian who are specially trained in the Weight Watchers approach. ... We have an ambitious technology vision. We will become a 21st-century technology organization, engineered for the digital era, whose innovative technology fundamentally improves the way people manage their weight, health and wellness. We will be agile service-oriented, data-driven, cloud-enabled and efficient. We will be a model for digital technology in the markets in which we compete and we will be a magnet for talented innovators both, inside and outside the company. ... Technology is essential for the company's overall transformation plan. The entire executive team is committed to a 12-month horizon for turning our technology-base from a legacy challenge into an enabling asset. When we get there, we will be able to launch a product in a matter of months. Not a year. ... During Q1, we saw some signs of stabilization in our top-line trends as we made some adjustments to our advertising, which had a positive impact on recruitment trends relative to what we have been seeing prior to the advertising changes, particularly in the U.K. and in our North American Meetings business. ... Now, I will discuss our outlook for 2014. While our year-over-year recruitment trends are weak, they are no longer getting worse. ... This year as Dan said, the focus is on using tech reinvention to improve our innovation and product building capabilities. Good to hear that WTW is trying to improve their technological capabilities. The new CTO seems to be qualified. Link to comment Share on other sites More sharing options...
yadayada Posted May 1, 2014 Share Posted May 1, 2014 How is this stock cheap. moaty core business is being eroded by app competition, so it is debatable if their core business is durable. And their Apps dont seem to have nearly the same moat as their meetings have. They have like 9 years of FCF in debt. And are trading at like 6x FCF now? So 66%-100% upside if it turns out their business is durable. But that would take a few years. But their core business is in decline now for 3 years I think? I fail to see how this is such a bargain. what am i missing here? Internet revenues seem low margin. I could see how this would be a bargain without the debt. Also they destroyed shareholder value by buying back so high. Seems like insiders wanted to cash out with a premium. Link to comment Share on other sites More sharing options...
Patmo Posted May 5, 2014 Share Posted May 5, 2014 I have a certain amount of expertise with fitness (not really the business side, but still of value in my opinion) since I've been practicing strength sports for close to 10 years now, so I'll add my 2 cents. I'm holding off buying this company because while I like the CEO's candor, I don't think he has a clue where to go. He's trying to find new people's throats to shove his product into when he should focus on leveraging WW's expertise to create a product for the other big component of weight management. It would be a bold move, but necessary in the face of their situation. There are two main components to fitness/weight management, dieting and exercise. Generally, the older generations prefer to focus on dieting due to its passive nature whereas 18-30's prefer to be active. WW is essentially straight up giving up one of the more desirable age markets AND half the weight management industry by not offering an exercising product. It blows my mind to be honest that it hasn't been offered 30 years ago, I don't know what to say. There's a lot of pent up demand for a good exercising product, and the demand is heating up every minute. Evidence of this is the surging popularity of crossfit, spartan races and tough mudders. I'm not certain of the other 2's financial situations, but I know that Greg Glassman is making very good money with crossfit. There are a few key things to look for in creating a good product: It has to be fun: You can best tell how much people want to improve their shape in a regular gym in the beginning of January. However their motivation gets crushed quickly by the intense boredom that traditional gyms offer. Seriously, people don't quit because it's too challenging. They quit because they want to blow their brains out. Just by being fun, you win 80% of the battle (and crush traditional gyms from the get-go). Easier to say than to do, but the major reason the products I mentioned are gaining popularity is this. People need to be able to do it together (fun part 2): 18-30's want to be able to bust balls together, have a blast and post pictures about it to facebook. Why couldn't WW's weekly meetings be about this? Races are a great example of "being able to do it together", people of all ability levels can compete together in the same race. Put a group of amateurs together and have them play football against pros, you'll quickly realize it's a pure waste of time for everyone and their mother. But put Fatty McObese together with his good pal Slim Masterfit in the same race, and both have tons of fun. They get to do the same thing together without hindering the other person's enjoyment. It needs a relatively easy technical learning curve: This is one failure of crossfit. To make a long story short, it's having its customers do highly technically demanding exercises and this provides a "barrier of entry" of sorts to new customers. Crossfit grew so fast that the majority of its instructors are now unqualified to even teach those exercises. This creates safety/liability issues and the learning curve puts off some potential customers (I know from experience). There are more points, but to be honest during my rambling I forgot what else I had to say. At any rate, the point is that there is big money coming up in this, and WW has lots of expertise that could be leveraged to make a successful product that could compete against crossfit, spartan races, tough mudders, etc. Pretty easy when you have strong brand recognition among the general public, something these products don't enjoy nearly as much (yet). We're at the tipping point of a new health craze, and WW could tip it. It probably won't, because they're not headed that way. But it could. Thanks for reading. Link to comment Share on other sites More sharing options...
valueinvestor82 Posted May 6, 2014 Share Posted May 6, 2014 I appreciate all of the thoughts shared, but reading Gannon's notes and looking at WTW's commanding share of the industry caused me to look more closely and eventually I bought the stock at an average cost of just over $20. I guess I understand the negative side (which caused the stock to become as "cheap" or relatively low as it is), but I feel like maybe there's too much weight (pun intended?) placed on how they have a crisis with young people. I'll give you that we have different technology than young people 20 years ago, but I think that's the beauty of the company: while changes can and should be made, if someone wants to lose weight, their process statistically is among the best and it relies on accountability, not the next greatest app. This is not meant to be a "this is easy" statement, there is clearly a lot of risk inherent when a company has a large debt load, but their biggest investor had a lot of incentive, and the company had decades of fad after fad that threatened to derail the company, yet each time they recovered. So far I'm looking good on paper, we'll see how it plays out. By the way it's not more than 2% of assets so it's relatively insignificant, though it could add 2-6% total return over the next 5 years if I'm right. I'm ok with the odds. Link to comment Share on other sites More sharing options...
DanielGMask Posted May 6, 2014 Share Posted May 6, 2014 "I've seen more people fail because of liquor and leverage - leverage being borrowed money." Warren Buffett. I don't know what's going to happen with this company or if the apparent moat is sustainable, but I do know that the debt load is much more than it should. FCF is good and may stand negative scenarios but not any negative scenario. I've been reading several posts stating that the margin of safety is good enough but I strongly differ. I agree that current valuation is attractive but that's very different than stating that there's a good margin of safety. This may prove to be a great investment, I don't know, but I'd rather have a good process with a bad outcome that a bad process with a good outcome. And this seems to fall under the umbrella of a bad process decision. :) Link to comment Share on other sites More sharing options...
Patmo Posted May 7, 2014 Share Posted May 7, 2014 Last time I checked, EV/EBITDA was at 7. That's not even that great, and there's no downside protection to speak of. There are companies right now trading for cheaper and that are less leveraged. I know of 5-6 on the Canadian exchanges alone. Only a fool would see this as a flagship type of position, but still one could probably justify a basket-style-sized holding. I'm not one of them, at least not for now. Link to comment Share on other sites More sharing options...
Liberty Posted January 2, 2015 Share Posted January 2, 2015 Not sure if anyone is still watching this, but down 12% today. (never been a company I liked, but I know this thread was very active for a while...) Link to comment Share on other sites More sharing options...
Lowlight Posted January 4, 2015 Share Posted January 4, 2015 I would also be interested to see whether anyone has given a second look at WTW in the recent sell off. I don't know whether anything has changed since May of this year and just got interested in the name when the stock sold off so much on Friday. Below is a link to a Booth Laird presentation on WTW. Found this interesting when digging around for additional information/ideas on the name. http://www.boothlaird.com/2014/11/weight-watchers-presentation-from-2nd-annual-booth-laird-equity-conference-hosted-by-lsu/ Link to comment Share on other sites More sharing options...
karthikpm Posted January 4, 2015 Share Posted January 4, 2015 How can a company beat a free smartphone app for weight loss? I am not sure there is a catalyst to turn this thing around. Partnering with insurers seems like the right thing to do. Our organization is self insured, they gave everyone a fitbit to log their activity, and reductions in premium if they lose weight / improve their health... There are too many players at a lower cost for more innovative strategies/ solutions in the market now Link to comment Share on other sites More sharing options...
valueinvestor82 Posted January 4, 2015 Share Posted January 4, 2015 ....Because wtw consistently has delivered better statistical results. They've upgraded their technology, but the accountability of in-person meetings makes a difference. I've spoken with numerous women who can speak to that. And they will be working with insurers to take advantage of the ACA provision regarding weight loss. Link to comment Share on other sites More sharing options...
bookie71 Posted January 4, 2015 Share Posted January 4, 2015 They aren't real "male" friendly, but it works. I lost 50 pounds using their system. There is something about weighing in to someone you don't really know that motivates you. Link to comment Share on other sites More sharing options...
Guest brooklynvestor Posted January 5, 2015 Share Posted January 5, 2015 WWI put on a membership drive in NYC during the holiday season. They had a caroling group near Union Square and were promoting a one-on-one coaching option where customers have access to a coach remotely 24-7. It's an interesting hybrid of the accountability and support of a real person, with the convenience of online. They also recently launched a campaign, called "Help with the hard part", working with storied West Coast ad agency Wieden + Kennedy. The spots have the offbeat sensibility and humor I'd expect from W+K, and seem to refresh the brand. WWI on Youtube https://www.youtube.com/channel/UC7AWNWptGGpybSgZbV34yBw The top video on the page, released just a week ago, seems to be getting noticed as it already has nearly 800K views. I will be interested to see how this translates into memberships in Q1 and Q2. Link to comment Share on other sites More sharing options...
morob Posted January 15, 2015 Share Posted January 15, 2015 It looks as if their new strategy is really a longer term project which doesn't seem to have the potential for quick turn around in subscribers. No more celebrity endorsements which mostly led to a short term spike in subscribers. Now they are trying to recruit one subscriber at a time with a very authentic and honest approach which is much more in sync with their original formula. Prior online efforts were initially too successful (due to the novelty and a lack of competition) and made them blind to the flaws of the approach which was a departure from their successful meetings formula with peer support and personal interaction. Online also cannibalized their meeting business and as soon as online competition arrived their subscriber base started to leave for other, cheaper options. Suddenly all segments started to lose customers. They kind of escorted their clients out the door through their online offering. It was clear that their online business could only win if the formula so successful in meetings could also be translated to their online offering. Most people just aren't able to lose weight by themselves, they need support, emotional and disciplinary. Well, that is were we are now. They are trying to offer personal online coaching which potentially could make the online business a competitive offering that people are willing to pay for. However, it doesn't create a buzz and any subscriber stabilization/growth will only come with time. Nobody should expect any miracles at this point. I guess the market realized this with the stock price at historic lows following underwhelming analyst reception. We'll get more information during their next earnings call. I do think their program has long term staying power and there is a genuine need and market for it. The risk is that their program really just works in physical meetings, just like the AA program, and they won't find the right formula to make it work online. The stock clearly faces a test now and could dramatically go either way. Operational leverage, small float and very large short positions make this a difficult stock to own and one needs conviction in the long term survival of the program not only in physical meetings (which I judge as highly probable) but also online (less probable or at least with less potential than originally throught). The company has gone through big changes before. The online business doesn't even exist for that long. It quickly grew to 50% of profits which was unpredictable only a few years ago. Equally today, who knows how much the insurance business will start to contribute starting in about a year. It might become very big and a two legged stool might become a three legged stool. There is a lot of optionality in this company do to their proven program and brand and it is likely that the existing business can be stabilized enough to be able to generate enough cash flows to service the debt. Last year's expense reductions and current marketing efforts should help stabilize the ship eventually. This is a business subject to a lot of changes and visibility a few years out is very low. I don't think it is a business Buffett would get comfortable with. You can't really look 10 years out and say with any confidence how this business will look like. But it sure has potential. Link to comment Share on other sites More sharing options...
krazeenyc Posted February 4, 2015 Share Posted February 4, 2015 http://www.forbes.com/sites/parmyolson/2014/05/01/myfitnesspal-starts-tracking-steps-to-grow-the-worlds-largest-nutrition-database/ interesting to see Under Armour acquire myfitnesspal. Link to comment Share on other sites More sharing options...
bbarberayr Posted February 9, 2015 Share Posted February 9, 2015 Classic example of a business trying to protect what they had instead of realizing the world was changing and taking a leadership role in things. My fitness pal basically is an activity and food tracking app with a really good database behind it. Weight watchers built a hard-to-use app with a poor database and charged too much. They should have had the resources both financially and understanding their customers to build the market leader instead of trying to protect their meetings. Would have been tough and hurt a lot of staff internally, but reality is, my fitness pal got sold for half of weight-watcher's market cap and now has some serious money and support behind it to really make it work. Maybe the meeting approach becomes a niche market for people who need it or maybe maybe it comes back in style when people realize the on-line only approach doesn't work, but either way, WTW management should have been more proactive in understanding the market and reacted better. Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted February 9, 2015 Share Posted February 9, 2015 Classic example of a business trying to protect what they had instead of realizing the world was changing and taking a leadership role in things. Would have been tough and hurt a lot of staff internally, but reality is, my fitness pal got sold for half of weight-watcher's market cap and now has some serious money and support behind it to really make it work. I think this is tough but ultimately accurate view of the company/industry. Sometimes it's difficult to tell the head fake from the shot. Assuming you pick correctly, it sucks to fire long-time friends on what's perceived to be a guess. A lot of times the emotional costs end up too high to make a move. This is true in industry and investing (and nearly every area of life). Especially in business, it goes to show the importance of knowing the potential emotional costs your investments will face and staying away from the ones where it can be a potential death sentence (you think WEB would ever go for the GM investment like Combs or am I overly pessimistic?). I personally didn't agree with WTW's addition to the "Moat Index" from the beginning, but this fall from grace seemed unlikely. The bad news for WTW is they don't seem capable of scaling back costs fast enough. They are cutting marketing to stay profitable which is probably going to secure their fate. Link to comment Share on other sites More sharing options...
Liberty Posted February 27, 2015 Share Posted February 27, 2015 Not sure if anyone is still watching this, but down 12% today. (never been a company I liked, but I know this thread was very active for a while...) Down over 32%. Link to comment Share on other sites More sharing options...
mateo999 Posted February 27, 2015 Share Posted February 27, 2015 Down over 32%. And still trades at $1100/sub, where subs are down 15% y/y. And that nets out the $300mm in cash in my EV calc which is essentially going to be burned trying to reinvent the brand/save on costs. At $20/month and an assumed 25% Revenue to FCF conversion, that's an implied 18 years avg. customer life, and that's undiscounted. Who's buying today and why? Link to comment Share on other sites More sharing options...
tombgrt Posted February 27, 2015 Share Posted February 27, 2015 Yes amazing and interesting case study. Didn't that Geoff Gannon guy have a very sizeable position that he talked about a lot? Certainly feel bad for him though. Link to comment Share on other sites More sharing options...
Guest roark33 Posted February 27, 2015 Share Posted February 27, 2015 This is an interesting case in how slowly the market can price in things. What's this worth today. The debt due 2020 is trading about 53 cents on the dollar, and after the 300m debt payment in 2016, I have no idea how they will even make interest payments after that. 2017/2018 bankruptcy is almost inevitable, yet equity value theoretically worth something today? I think this will be sub-10 in the near future, once all the "dip-buyers" leave... If Artal wants to double-dip on this company, seems much cheaper to just let their equity go to zero and take control of the company through the debt. Back in the day, I did some calculations, I think Artal has already made roughly 10x their money on this investment.... I would be very interested if someone has a cogent argument for why this equity is worth anything? Link to comment Share on other sites More sharing options...
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