Weight Watchers International Inc WTW
Q3 2012 Earnings Call Transcript

Transcript Call Date 11/05/2012

Operator: Ladies and gentlemen, welcome to Weight Watchers International's Third Quarter 2012 Earnings Teleconference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in the question-and-answer session and instructions will be given at that time. As a reminder, this conference call is being recorded today, November 5, 2012.

At this time, I would like to turn the call over to Lori Scherwin of Weight Watchers International. Please go ahead.

Lori Scherwin - IR: Thank you, operator, and thank you to everyone for joining us today for Weight Watchers International's third quarter 2012 conference call. With us on the call is Dave Kirchhoff, President and CEO; and Nick Hotchkin, CFO.

At about 4.00 o'clock pm Eastern Time today, the Company issued a press release reporting its financial results for the third quarter of fiscal 2012. The purpose of this call is to provide investors with further details regarding the Company's financial results as well as to provide a general update on the Company's progress. The press release is available on the Company's corporate website located at Reconciliations of non-GAAP measures disclosed on this conference call to the most directly comparable GAAP financial measure are also available as part of the press release.

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

I would now like to turn the call over to David. Please go ahead.

David P. Kirchhoff - President and CEO: Good afternoon, and thank you for joining for us as we review Weight Watchers International's performance for the third quarter of fiscal 2012. Overall 2012 is wrapping up very much in line with our prior guidance with Q3 coming in somewhat better than our expectations and Q4 expected to come in somewhat below in the bottom line because of factors we will discuss.

On a constant currency basis, Q3 2012 total revenue was up 2.7% over the prior year period with meeting fees down 2.4% and meeting product sales down 8.4% and internet revenue growing 24%. Global combined paid weeks were up 9% in Q3 2012 versus the same period last year. Global meetings paid weeks were down 4.2% in Q3 while global paid weeks for online product were up 23%.

For Q3 2012, our operating income margin was down 160 basis points versus a prior year period to 30.7%. While gross margin was up 80 basis points versus prior to 59.4%, marketing as a percentage of revenue was up 90 basis points primarily reflecting continued investment in driving awareness of our Weight Watchers Online product. G&A as a percentage of revenue was up 150 basis points versus prior, primarily reflecting investments in technology and staff to support our key strategic initiatives such as B2B. Q3 2012 EPS was $1.20 compared to $1.09 for the same period in 2011, benefiting from our share repurchases earlier this year. We experienced about $0.04 of unfavorable forex impact in the third quarter of this year versus prior.

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