WW - Earnings call transcript Q4 2017 | WW International, Inc.

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Operator

Good afternoon, and welcome to the Weight Watchers' Fourth Quarter and Full Year 2017 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note that today's event is being recorded. I would now like to turn the conference over to Corey Kinger, Investor Relations. ahead. go Please

Corey Kinger

provide Time And year today Andrea. with full to for this fourth to financial press available on details Reconciliations PM everyone XXXX update press is as also issued corporate results a Thank regarding reporting call results. release most Weight as to thank further The Watchers The is some general us the measures Eastern X:XX this of about the for as release call. website company's the and are to on available and investors the part directly progress. International's company's joining company conference disclosed a full you, quarter release. the call At you of today, non-GAAP weightwatchersinternational.com. XXXX on GAAP fourth well provide comparable measures year of quarter company's purpose the conference located press at the financial

me new except any or uncertainties this the of and a company and update materially or uncertainties Please and today, publicly filings statements. any discussed cause such of whether we are forward-looking subject information, undertakes refer to These and otherwise. with those risks forward-looking these future as no statements, Commission. as various remind that filings forward-looking of for a are today. Before All results by and more in factors to statements the required detailed to discussion to explained risks actual everyone Securities revise risk events statements law, aware result here obligation contain let made of call forward-looking statements that as in forward-looking Investors the be Exchange that from begin, are should statements. detail differ will the could company's

the company's Mindy the Mindy. over I'll Hotchkin, Nick CFO. and are now call today's Joining and call CEO, turn to President Grossman,

Mindy F. Grossman

today. great Thanks, be you with it's speaking Corey. Good afternoon, to everyone. And

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America, revenue growth Importantly, and profitability increases. UK global; North Europe, all markets showing Continental was with the and

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Nicholas P. Hotchkin

Mindy. Thanks,

highlighting XXXX Let year a few items key full our performance. and me QX by financial start in

from WW in of million, up revenue gains XX% global our and weeks Furthermore, XXX,XXX from up in were subscribers approximately or our QX year-over-year prior grew all X.X Total in outperformance XX% bringing of trends accelerated both geographies. to and QX member Online. year major launch all meetings weeks particular end-of-period with subscribers global with the With recruitment paid in exceeding paid Freestyle, Online our expectations. and double-digits end-of-period

currency points million through flowed an year-over-year one-time rate operating income Higher aggregate which leverage XX% revenues Continued up increase on impairment, EPS a $X.XX, of year-over-year XX%, We which included a year year, in XXX on gross momentum full XXXX throughout to margin increased $X.X of QX the constant of and basis on XX% profitability, revenue to million constant total operating discuss Brazil positive and $XX adjusting billion. business of basis. our currency after I'll delivered later, our for and basis GAAP impact for $XXX $X.XX. a adjusted model constant currency was drove

up EPS EPS of ahead QX guidance. operating a $X.XX from new business came year program momentum in last guidance the $X.XX. our the was the our final November accelerating the With year, for $X.XX our Our $X.XX launch weeks in of range in GAAP our implied year. performance to of

our year the Also, detailed one-time one-time tax debt of our As the Act EPS tax color of to and an XXXX U.S. resulting give deferred positive related re-measurement net Tax an of reflects $X.XX QX included on GAAP Spain, XXXX an for first the the the To one-time of refinancing reversal XXXX Tax benefit aggregate certain to the net the bit that new Law, benefit incentives $X.XX, items, in impact more release, operations impairment taxes in from technology cessation and $X.XX related which reserves, earnings in prepayment. benefit liabilities. note our included QX Brazil $X.XX XXXX prior from EPS EPS investments. you and included a our tax a net GAAP

environment the economic fees. we recorded charge share million debt challenging successful finally, Brazil, And impairment result in per our $X.XX refinancing of QX $XX of related one-time a Second, million charge. refinancing, we share incurred goodwill continuing as or or $X due per $X.XX non-cash to a to a

is and million extending loan $XXX term XXXX, pre-payable $X.XX maturities, while XXXX notes and maintaining a new capital billion our our senior in debt in due are new due structure. Our flexible

in refinancing, of the ended million facility. $XX which the year million $XX we our credit $XXX included Following on with revolving million cash, borrowings

excludes expectations from debt-to-EBITDAS and a full down in turns year which at we line the EBITDAS, times and two ended Brazil was times our impairment year five the end at leverage XXXX. adjusted charge XXXX about $XXX Our net million with X.X

to our enthusiastic, driving geographic program all response markets. the XXXX, major mentioned, to new has Turning recruitment across as Mindy strong member been

experience improvements app. billion In it's year-over-year XXXX member our benefit the of share revenue fact, than focus $X.XX range growth on benefit estimated we term in nine are GAAP continued been base. on lower year highest growth more from level interest tax We've guidance have been new solid expect expected reform well platform XXXX offset of EPS in this QX approximately And strength businesses. strong continued higher roughly earnings growth, Based member Based guidance by longer prior QX and Connect, our million. offerings. on And well negative $X.XX an expecting are to the revenue will continues about and starting reflects stay And media therefore by this and an has we and recruitment tools also the exchange EPS program as $XX our plans. of months and growth, is the turning XXXX, compared average increasing guidance which top in operating under and XXXX $X.XX includes in $X.XX in like success XXXX of since recruitment to growth tax benefit versus the outstanding to double-digit per embedded policy. increase the both as growth have as be is seen reflects for far, length of so on impact year. to EPS another an positive we seen member approximately engagement the online year-over-year $X.XX, commitment our be in our the plan higher XX meetings per introducing far especially recruitment on tax share with ongoing retention, Online positive The a across and both approach year top-line shares XXXX from global year, this the finally this in full at in in assumes to our full year On basis, for so in substantial driven representing subscriber members this social million XXXX. full this as foreign expense what rate this we would response benefit

of comments, remainder going EPS speak I'm the midpoint the my currency basis. constant of our and a range year full For to to on

more account remove to brand. to full our of we year market, little implementation full our is the or revenues the products that line in overnight. In low up and all change ingredients largest we In color up recently range about the new products $XX To be X% a In expect on going the company's revenue mid-teens. XX% our up anticipate revenue carry North bit Europe, be provide contextualize total revenue. forecast. our full artificial America, to from plan And in we important to to this such with So the to mid-teens. UK expect our we of be not for in Continental annual year revenue year it's million our this, roughly in that vision, happen to note announced

all, are replace and about licenses with basis margin in categories And shortly. XXXX revenue and and partners position brand technology will in legacy is long-term will of advance meetings-only increase Mindy in annual reformulate the important that strength business to across to vision And with momentum. in to to reimagine view quarter, of will And a into our talking $XX decided as Mexico targeted this points million some our licensing close and more by wellness that partnerships the as year. million prior expand approximately the to we've strength. from execute than that geographies our in to end, $X and be our numerous continue existing these expected first we'll working XXX partially our intend reflects and leverage which products less is We opportunities, in products long-term online our XXXX, bringing Gross of of to on operations and operating line of business, offset we investments about our we revenue. is new for rate business the

integrated marketing is to in the of ahead, be a as Marketing million We a broader spend. XXXX America Latin expected Mexico digital experience. expect due which This in but re-enter part higher to flat to marketing with initiatives, as expense years of expansion well spend highest Impact a year-over-year health quarterly on fully summer year-over-year speak sales our and has face-to-face largely and $XXX increase been Campaign, is percent and our around digital powerful and period long. is will therefore, QX how spend. for spend us in partner be and can And year a showing the higher busiest lives of the working about than Mindy for have we it in all that recruitment months, peoples' note global Summer usual

we be expense expect XXXX rate million. spend $XXX year. the our of in to in a to tax be prior is a Act. G&A Below head expected currently line, initiatives the year, million in we're compensation to to This in to investments $XXX the expense. for primarily rate expect increase be is XXXX. full XX% about reflects the under support Tax interest percent higher range. expense addition as $XXX and of we growth the assuming full-year to which year-over-year lower about capabilities equity $XXX QX our be marketing million This million is product due down and and sales tech For in count higher XXXX, to And

year, sheet sustained based our power and which EBITDAS such plan. XXXX, have acquisitions a in our improving long-term full our to demonstrating the make drive and of business model. on focus leverage areas also could end and times the of cash ahead expect rationale. the X.X also we down to target growth. brand, at we below $XXX continue And now technology as financially investments this debt-to-EBITDAS product, good we net of debt, small of approximately million, make we highly For generative achieving attractive we as be expect balance And And plan paying on strategic to outlook, to our

spend to primarily $XX software, by be million million. increase year-over-year with expect range investments and the due We be is product to in driven our accelerated tech to CapEx, $XX expansion expected D&A capitalized and related the the primarily tech offices. approximately of and

in program people three million We habits. addition while social other content experiences have Watchers our to By goals. with XXXX, us ways people Cruise we aim Weight worldwide million be as year-end our healthy in through with to the adopt with like we I'd XX us million such engaging our X to in X on media. have discuss aim Finally, and engaging want year or people to helping connecting

to we For XXXX, billion XXXX, billion. by approach of manage our of the positive to you profit $X.X revenue will structure driven share as growth to like of to with sales. that, $X.XX can our in year recruitment from exceeds growth I'd in And so revenue retention. And to $X billion which plan expected expect aim than Mindy. that our be our continue growth have continued We member the it rate full of see to we rate solid growth turn revenue more cost responsibly our lion's and XXXX, back from

Mindy F. Grossman

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time U.S. expectancy solve me is. the often ask XXXX People paradox. has It's declined row two years and that We competition XXXX. a is this In another our since fact, help in can who the life first company. in not

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joining turn the that, now for thanks for So, to today. call us the on With we'll call operator Q&A. the

Operator

Thank you.

We will the now session. begin question-and-answer

Our Alex Group. Capital comes of ahead. from go question Craig-Hallum first Fuhrman Please

Alex Joseph Fuhrman

taking wanted couple great my I you Great. much to ask question Thank congratulations very on and year. of things. a a really about for

diet ever the program your in with in like with as how of members prepared One of using as regular the some had update, your on in this the America in I how as time, they either Connect? Mindy it as curious sense basis in and would quickly, interacted you members, interacting have them quite many it love your are and was I'd with quarter you recruiting once sounds it year's way North this are globally to a and legacy Connect Connect think know are members or newer mentioned was as a remarks fees adapting frequently of get you've your Connect and new best be users some

Mindy F. Grossman

Sure. Alex. Thanks,

core think access foundation So, is about app if technology our member and what they the we our our of platform our have, including have to and you any Connect. tools

they're of those the new So, the because of tremendous and community of interesting a globally. when in want someone recruits they engagement Connect, comes support extremely new amount looking want on see it's get What's is, asking the and they others. a is do questions, potentially you meeting feedback high they're support no for to room, different

people engage, they for continue health support being because tool to and as retention goals, want within, the have of the great to well who a stay as who continue their achieved we journey. many Connect on who seeing to to we're their have community continue original want as members So, able

and to that I more how invest form being communities, been continuing have sharing, we own We mentioned like important people is. video things their able in know to as

an will only not the to Connect, within see evolution you entire continue just app, So the with member journey. but on

Alex Joseph Fuhrman

Connect, inflection being so obviously of And this business to I and usage why we the This XXXX members because increased by That's has perhaps does been which been so the Is that driven seems online in well maybe explain just leave really business as year the surpassed they it, much far. strong they saw what part reverse has in meetings mean, the began. when helpful. Thanks, Mindy. it somehow has far of business of, that of XXXX, stronger, online convert was, or meetings, curious, as the kind online like... some meetings

Mindy F. Grossman

is important reality our mobile device in the think the I device. our life is most Yeah, today

our integrated we're experiences, diversifying couple to more meeting we've engaging, our last we our and they experience will relevant online is that in growth they in looking our who've have go certainly be so meetings and to to that, physical. lot a come said a to constant also to accelerate. changed investing that to the engagement at also tools content do we much into And and we're want believe And technology with be because But that over being have continue everyone years, the the of also member going have that base as and having more chosen to members then audience.

see to continue will world, expect of, you But to evolution mobile in think see, the I continue to both. you accelerate. to of So, adoption will today's kind

Nicholas P. Hotchkin

And, how balanced pleased we growth. right. also I absolutely I'm and XXXX that's started I in we love when how the performed it's it's growth. fact that Alex, global think that XXXX, look I at

XX% that in also at the of increase Absolutely, higher we'd end-of-period expect, subscribers fact XXXX, to was online membership growth good within up that was see. the as meeting XX% at end was the but So, XX%?

Alex Joseph Fuhrman

the just And who you teens helpful. That's free sounds plan summer. memberships really that need. something the health it could ago big like could mean over join to if with Great. address few to then ask weeks lastly, about I a public I their offer a announced parents

we've from last of some those have childhood the over how obesity on and about statistics ranging on are feedback place. so the feel and community mentioned seen I to that? from the members range leaders years the how all class, so. that? tracked your that of the your XX speak, own Internet What's on the daunting been or mean meetings your members pretty do a But opinions dietician You wide

Mindy F. Grossman

Yeah. Thanks.

that not our for science, issues. we want make there's thoughtfully population that's addressed do I and one, in all been that brand that not would for that's rooted just for clear number individuals members on nothing and So especially to

specific do and have that's it most because the positive. feel is the healthier and company way, This response by And works, members. have We the is that our thing. the we important teen, field know letting can together, the about it is Actually different about in very specifics and in, the healthy they habits be and announcing come together. around family parameters eating, of needs really way a who healthier we'll they have there's support. to adult. from if with So an families look extremely from will getting we be around come and this. when meant internal, families this, we And do to But get had a teens very as

Alex Joseph Fuhrman

great to you Thank very That's hear. you. much. Thank

Operator

comes from Please next of Riley B. Kara Our go question FBR. ahead. Anderson

Kara L. Anderson

Hi. afternoon. Good

Mindy F. Grossman

Hi.

Nicholas P. Hotchkin

Kara. Hi,

Kara L. Anderson

revenue you're in goal provide you the revenue to Are gets that there XXXX excite I'm like might you going? more and off to momentum color XXXX. built in new that FY pathway guiding $X of or keep the that new recruitment the thoughts? into are on wondering grow the XX% your growth What if iterations definitively Freestyle expectation markets billion program can recruitment to

Nicholas P. Hotchkin

really having I in so I'd and value think from mean, to to I I say, tech revenue the that innovation consumers off year, start guiding it leading digital good And this we're to power well addition think approaching and platforms $X.XX and we levels. a for combining $XXX almost really shows XXXX up million billion of proposition have. as great marketing

in and of good also. XXXX business to off being a a start strong revenue the flows we're and into start XXXX obviously a good off model nature forecast, that think through I having our So, to

on retention. the I are growth of and to new has to But billion also opportunity excited that healthcare same such our revenue think share and expect to But plus lion's XXXX reflect pathway recruitment about strong start programs that a geography goal. our a great by very three-year in beyond $X to that, response I'd increasing driving the the the we token, continued focus around products and and to space, licensing in WW the the business. been opportunities having world Freestyle re-energize opportunities,

Kara L. Anderson

me. Great. for second question And then

Weight about any, with Just response or the could I guess, if the there. program you've Freestyle talk of interest acceleration the Watchers and wondering if demographic seen male you

Mindy F. Grossman

We men. men. very the having definitely have I mean within It Connect have engagement has more they're response. great within worked noticed definitely seen program, aggressively with with success

And really race, age, and you I lot saw and focused think gender, of diversity: marketing in of said I stage. diversity cross-section marketing real on of within our including ethnicity, before, broad the members, geography, the as a women. life we're men

efforts So in because to be you will works. see know it our inclusive that continue we marketing

Kara L. Anderson

Thanks. me. That's it from

Operator

Our comes next Sidoti. of Camma Frank from ahead. Please go question

Frank Camma

good guys, afternoon. Hi,

Mindy F. Grossman

Hey.

Nicholas P. Hotchkin

Hey, Frank.

Frank Camma

that the it was of with million XXXX. think, online member the you does does the How meetings height does compare? X goal, I target, stated Nick, How company, it on that How compare whether or combined.

Nicholas P. Hotchkin

the QX levels so first year the X of in – quarter based believe than we in has more million ended brand We XXXX, comfortably when this believe. like growth and fastest first recruitment I million XXXX quarter on we've been see since the brand million double-digit and X.X a easily X.X Yeah. XXXX report ahead is having so seen us the the of brand, probably far people peak with our could I people in the to and or number I going people back of in XXXX,

Frank Camma

Right.

on question that's other grocery first that's My the side, on the model, side. relationship, detailed purely a at-home model? not product the well, Okay. delivery just so really question product FreshRealm The

Mindy F. Grossman

think and a so home hour separately over recipes are developed quick is with in our evolution there's be all prep, a packaged that meal we that that half period which grocery. the they at cooked looking ingredients current of yeah, But global we've than fresh we'll in of products. in from space That, at both our the less opportunities, and the time food other in

Frank Camma

Sure.

Mindy F. Grossman

around of point think view really kitchen this what is very idea And being from area we cross-section opportunity. connotates that healthy of of an an a a broad authoritative is product

Frank Camma

QX a event, calendar that's QX? And

Mindy F. Grossman

in target is the quarter. the now third Fresh Actually, for right No.

Frank Camma

a that just product, you is to own get from around FreshRealm? quarter. licensing And where licensing you going I Third fee a final the be arrangement guess or do question that,

Mindy F. Grossman

will a That be licensing-partnering.

Frank Camma

Okay.

be I So back in the this is to revenue pretty the to you of right? on a amount mean, licensing to, sizable have one bring that this used heyday levers,

Mindy F. Grossman

Correct.

Frank Camma

Okay.

it? to And they're still for say we mean to than FreshRealm how revenue right, that Is other about XXXX, like number I mostly when besides announced, drive component? which that so when up, up, think you product are way a fair meetings the is so that so we that they sales that, product still licensing about that ancillary – them think we meetings

Mindy F. Grossman

what see So, what sit essentially was as we historical opportunity. and back let me say and

Frank Camma

Sure.

Mindy F. Grossman

within we So, for about saying the you're meeting that sales is framework, part, it's talk most the right. correct, today, what product sold the

Frank Camma

Okay.

Mindy F. Grossman

where more with other more is make distribution and that in products partnerships also them product us. we sell have consistent distribution, develop brand that the opportunity certainly but However, not and see can but only in sense we to that for makes our elevate to there the we that that

Frank Camma

could. Do find the that? I a if standpoint tracking the smartwatches and that phone? is or question on it a robust from they're it you Just using more – more Okay. or as for on final still I not using curious have is your people more app

Mindy F. Grossman

the would I say Yeah. the predominant utilization app. is

relative are that However, we integrated our what to smartwatch with and into is. continue experience partners work we to

Frank Camma

Okay. Great. Thanks, guys.

Operator

go Our next Citi. Please Greg of Badishkanian ahead. from comes question

Jesse L. della Penna

Hi, is for on This Jesse della for Thanks Greg. Penna taking actually questions. my

cost of differential be So, talk a to each seeing the little meeting subscribers versus bit adding may those, you just go back like online to between about an the could the subscribers, one? incremental you're

Mindy F. Grossman

of, talk base to, it of being an can to is then addition someone subscriber. in aim of part again. meeting And Watchers. Every That's, wanted just member might to also have Weight the that, online say Nick the kind to that, So, experience. I

very that's monetization. I bifurcation the talk then important So, the sure Nick just make when want and to could to the talk engagement about around we

Nicholas P. Hotchkin

We've the a $X top revenue in you chooses income operating of paying somebody relatively basis over business of frankly guiding a of for through growth improvement which translating somebody you meetings using well us flow our operating growth exclusively am $X.XX XXXX about quarters. improvement whether income be premium range. margin been points attend comfortably to to see XXX responds in this economics favorable as to I look last in a points and growth at When also just Yeah. line incremental growth, comfortably our few shows why and been of our in model very basis growth tools where or the to it into that's digital it agnostic gross the XXX XX% has to XXXX, join how

Jesse L. della Penna

think of I rest yeah Okay, great. should my so good this And be answered the Thanks. other for me. were questions

Operator

go Morningstar Our Research. last from comes of Please R.J. question Hottovy ahead.

R.J. Hottovy

you three-year but that that's additional there the and Is deals take lot talked and wanted target, show structurally upside numbers profitability operating licensing leverage the some prevent bit billion a through, going in $X at I there's that the is perspective, might that follow-up look different little there, obviously areas. should business investments from on hit of you've Nick, anything you margins. a around to presumably take things some above about, target, Thanks. with the like there technology assuming to the that be model other on a XX% getting historical and

look want get just model a of profitability out. in early sense the and lot to, some But Just out. know you bit have a long-term made under I play there's might kind to to, the of, business flush probably from rough of kind things it still perspective? what terms moves it's a a of, of that

Nicholas P. Hotchkin

to we Obviously, as Yeah. you'd XXXX. as $X growth looking driving back forward focused the we're on and Thanks, billion plan so plus expect business rather number by certainly we're R.J. that than very

future also focusing growth, sustainable growth. driving to propel also I think while invest on been we've we'll profitable clear that very

as our guidance that example XX% that $X.XX to growth to EBITDAS rate and and important of $XXX with in by it's up sales over of approaching rate XXXX our million. us revenue nicely So, you an growth our growth see profit being exceeds billion being guidance up,

well CapEx in dollars revenue are continue essential vision. So, that moves investing we'll new brand clear profitability in cases dollars have business we're see do we need you to reinvesting to and investing and that as our we're and marketing And so. G&A we growth do as and where we're to important in support you we're where there driving see

R.J. Hottovy

Watchers Mindy, of side. of has has about came see, just form early as Community be you of fitness what potential guys FreshRealm be finding just to I idea to guess there there, seems kind you if of kind thoughts may interesting over Weight couple how partnerships one do partner out on just you that take, any discussion I a well of that perhaps it'd on partners Thanks. a had Event because a partnership, back that, pretty years? And the Global have partnership next the see things out my the of was a that the of lot second evolve like of maybe But that lot on. and as are that could the wanted the question embarking the the been Cruise. Obviously that with few weeks

Mindy F. Grossman

Yeah.

think body. So food, you the if put you what about what we've articulated your is in that,

solely. going we're That own we own to develop ours the First, are research. unequivocably to do the science, we're to going is going We're to going own. that programs, to the

activity, to going we're company. to a relates not fitness it As become

and environment. kind a in we approaching integrate combination forward prompt of, and be the So, on we something And working of mindfulness we're can we will what right that's that robust we're will as a that's believe activity things will so move development we on as we're on with be into do mindset we, before offer partners content multiple how now. and will then the integration we of and well and it and right what partnerships, now. that And side, it develop test probably

R.J. Hottovy

Thanks.

Operator

question-and-answer remarks. session. the our to would over back concludes for closing to like This I Grossman turn any conference Mindy

Mindy F. Grossman

and thank us you company. millions team continued and your everyone Watchers all of to thanks all do Thank in Weight interest every the also today, So, incredible day. for inspiring want our thank the you for in our I for members And you. joining global serving work

Operator

now you presentation. for has conference attending concluded. The today's Thank

lines. disconnect may your You now

WW International (WW) 27 Feb 182017 Q4 Earnings call transcript