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Actionable news in WTW: WEIGHT WATCHERS INTERNATIONAL Inc,

Weight Watchers Announces First Quarter 2016 Results and Raises Full Year 2016 Guidance

  • Global End of Period Subscribers returned to growth, up 5% year-over-year to 3.1 million



  • 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



  • Full year 2016 EPS guidance raised to a range of $0.80 to $1.05
    • Incorporating the $0.17 loss per share in Q1 2016
    • Reflecting expected revenue and profit growth in Q2 2016 and for the full year

Weight Watchers International, Inc. (NYSE:WTW) today announced its results for the first quarter of fiscal 2016 and raised full year fiscal 2016 earnings guidance.

"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," said Jim Chambers
, the Company's President and Chief Executive Officer. "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."

Q1 2016 Consolidated Global Results





(in millions except percentages, per share amounts, and as noted)



Three Months Ended



% Change



% Change

Adjusted for

Constant

Currency

April 2,

2016



April 4,

2015



















Service Revenues, net



$243.8



$250.0



(2.5)%



(0.8)%

Product Sales and Other, net



63.1



72.1



(12.5)%



(10.7)%



















Revenues, net



$306.9



$322.1



(4.7)%



(3.0)%



















Operating Income



$ 13.6



$18.0



(24.9)%



(27.0)%

Adjustments

















Restructuring Charges



-



5.8



























Adjusted Operating Income



$ 13.6



$ 23.8



(43.1)%



(44.7)%



















Net Loss*



$ (10.8)



$ (5.4)



(97.9%)



(102.3%)

Adjustments

















Debt Extinguishment



-



(2.9)









Restructuring Charges



-



3.5



























Adjusted Net Loss*



$ (10.8)



$ (4.8)



(122.5%)



(127.4%)



















EPS



$ (0.17)



$ (0.10)



(76.9%)



(80.9%)

Adjustments

















Debt Extinguishment



-



(0.05)









Restructuring Charges



-



0.06



























Adjusted EPS



$ (0.17)



$ (0.09)



(98.9%)



(103.3%)























































Total Paid Weeks



39.2



38.5



1.7%

N/A

Meeting(1) Paid Weeks



17.7



17.2



2.7%

N/A

Online(2) Paid Weeks



21.5



21.3



0.8%

N/A

















End of Period Subscribers(3)

(in thousands)



3,063.3



2,921.8



4.8%

N/A

Meeting Subscribers (in thousands)



1,310.5



1,218.0



7.6%

N/A

Online Subscribers (in thousands)



1,752.7



1,703.8



2.9%

N/A

















Total Attendance (in millions)



9.6



9.1



5.8%

N/A

















Note: Totals may not sum due to rounding.

See "Reconciliation of Non-GAAP Financial Measures" attached to this release for further detail on adjustments to GAAP financial measures.

(1) "Meetings" refers to monthly commitment plan subscribers, "pay-as-you-go" members, Total Access subscribers and other meetings members.

(2) "Online" refers to Weight Watchers Online, Weight Watchers OnlinePlus, Personal Coaching and other digital subscription products.

(3) "Subscribers" refers to meetings members and Online subscribers who participate in recurring billing programs, such as the Company's monthly commitment plans for its meetings business.

*Except in the case of the financials attached to this release, "Net Loss" refers to Net Loss attributable to Weight Watchers International, Inc.

Q1 2016 Business and Financial Highlights

  • End of Period Subscribers were up 4.8% for Q1 2016 versus the prior year period, driven by strong recruitment growth in North America where End of Period Subscribers increased 11.2%, partially offset by declines in the United Kingdom and Continental Europe. Globally in Q1 2016, End of Period Meetings Subscribers were up 7.6% and End of Period Online Subscribers were up 2.9%, both driven by solid gains in North America.



  • Total Paid Weeks in Q1 2016 were up 1.7% as compared to the prior year period, with an Online Paid Weeks increase of 0.8% and a Meeting Paid Weeks increase of 2.7%. These gains were driven by strength in North America where Total Paid Weeks grew 5.9% year-over-year, partially offset by declines in international segments.



  • Total Attendance at meetings was up 5.8% as compared to the prior year period, driven by 18.0% growth year-over-year in North America, partially offset by declines in international segments.



  • Total Revenues in Q1 2016 were $306.9 million. On a constant-currency basis, total revenues decreased 3.0% versus the prior year period.



    • Service Revenues in Q1 2016 were $243.8 million. On a constant-currency basis, these revenues decreased 0.8% versus the prior year period, as growth in North America was offset by declines in international markets.



      As a subscription model business, revenue from a member is recognized over the length of stay of that member. Approximate average length of stay, or retention, for a Weight Watchers member is 8 months for Meetings members and 9 months for Online members. Therefore, the Q1 2016 Service Revenues reflect only a portion of the expected total subscription revenues from new recruits in the quarter. This was more than offset by the carry-over impact from the weak year-over-year member recruitment trends experienced through most of 2015.



    • 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.



  • Operating Income in Q1 2016 was $13.6 million, as compared to $18.0 million in the prior year period. Adjusted Operating Income in Q1 2016 was also $13.6 million, as compared to $23.8 million in the prior year period.



  • Net Loss and Adjusted Net Loss were both $10.8 million in Q1 2016. Earnings per fully diluted share (EPS) and Adjusted EPS were a loss of $0.17 in Q1 2016.



    In Q1 2015 Net Loss was $5.4 million, or $0.10 per fully diluted share. Adjusted Net Loss was $4.8 million, or a loss of $0.09 per fully diluted share, in Q1 2015.



  • Cash balance was $127.8 million as of April 2, 2016. During the quarter, the Company paid in full its $144.3 million B-1 debt obligations using cash on hand.

Items Affecting Year Over Year Comparability: Q1 2015 results were impacted by two items that affect year-over-year comparability. First, the Company incurred $5.8 million ($3.5 million after tax or $0.06 per fully diluted share) of charges in connection with its previously disclosed 2015 restructuring plan. Second, the Company recorded a gain on early extinguishment of debt of $4.8 million ($2.9 million after tax or $0.05 per fully diluted share) for its previously disclosed debt prepayment in the quarter.

Full Year Fiscal 2016 Earnings Guidance

The Company raised its full year 2016 earnings guidance to between $0.80 and $1.05 per fully diluted share.

First Quarter 2016 Conference Call and Webcast

The Company has scheduled a conference call today at 5:00 p.m. ET. During the conference call, Jim Chambers
, President and Chief Executive Officer, and Nick Hotchkin
, Chief Financial Officer, will discuss the first quarter 2016 results and answer questions from the investment community. Live audio of the conference call will be simultaneously webcast over the Internet on the Company's corporate website, www.weightwatchersinternational.com. A replay of the webcast will be available on this site for approximately 90 days.

Statement regarding Non-GAAP Financial Measures

The following provides information regarding non-GAAP financial measures used in this earnings release:

To supplement the Company's consolidated results presented in accordance with accounting principles generally accepted in the United States (GAAP), the Company has disclosed non-GAAP financial measures of operating results that exclude or adjust certain items. Net loss, net loss per fully diluted share, operating income and operating income margin, gross profit and gross profit margin, and selling, general and administrative expenses are discussed in this release both as reported (on a GAAP basis) and, with respect to the first quarter of fiscal 2015, as adjusted (on a non-GAAP basis), as applicable, to exclude the impact of charges associated with the Company's previously disclosed 2015 plan to restructure its organization and to exclude the impact from the gain on early extinguishment of debt associated with the Company's previously reported debt prepayment in the period. Earnings before interest, taxes, depreciation, amortization and stock-based compensation (EBITDAS) is presented in the attachments to this release. In addition, the Company presents certain of its financial results on a constant currency basis in addition to GAAP results. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. In this release and any attachments, the Company calculates constant currency by calculating current-year results using prior-year foreign currency exchange rates.

Management believes these non-GAAP financial measures provide useful supplemental information for its and investors' evaluation of the Company's business performance and are useful for period-over-period comparisons of the performance of the Company's business. While management believes that these financial measures are useful in evaluating the Company's business, this information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In...


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