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Operator
Ladies and gentlemen, welcome to Weight Watchers International's Third Quarter 2006 Earnings Teleconference Call. [OPERATOR INSTRUCTIONS].
At this time, I would like to turn the call over to Sarika Sahni of Weight Watchers International.
Please go ahead.
Sarika Sahni - Investor Relations
Thank you Stacy, and thank you, everyone, for joining us today.
With us on the call are Linda Huett, the President and Chief Executive Officer of Weight Watchers International, and Ann Sardini, the Chief Financial Officer.
After the market closed today, the company issued a press release containing financial results for the third quarter, 2006.
Copies of the earnings release have been sent to you for your information and reference during this call and is also available via Weight Watchers International's website at www.weightwatchersinternational.com.
The purpose of this call is to provide investors with some further details regarding these results and a general update on the company's progress.
Before we begin, let me remind everyone that this call will contain forward looking statements within the meaning of this Private Security Litigation Reform Act of 1995.
These forward looking statements are based on management's current expectations and beliefs, as well as a number of assumptions concerning future events.
These statements are subject to risks, uncertainties, assumptions and other important factors.
Listeners are cautioned not to put undue reliance on such forward looking statements because actual results may vary materially from those expressed or implied.
The reports filed by the company pursuant to the United States securities laws contain discussions of these risks and uncertainties.
Weight Watchers International assumes no obligation to, and expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Readers are advised to review our filings with the United States Securities and Exchange Commission, which are available from SEC's Edgar database at www.sec.gov.
At various SEC reference facilities in the United States and via the company's website at www.weightwatchersinternational.com.
Now, with that I'll turn over -- turn the call over to Ms. Huett, please go ahead, Linda.
Linda Huett - President and CEO
Thank you, Sarika.
Good afternoon, and thank you for joining us as we review Weight Watchers International's performance for the quarter ended September 30, 2006.
As we indicated in a press release we issued this afternoon, today we announce my decision to retire at the end of the year after 23 years with Weight Watchers.
At the end of our prepared remarks, and before we open the call to questions, I will say a few words about my decision to retire as well as our CEO transition plan, but first I will open today's call with an overview of the third quarter performance across our market, and Ann will take us through a more detailed review of our financial results for the quarter.
On a consolidated basis, our revenues for the third quarter increased 11% to $285 million from $257 million in the prior year as we experienced solid revenue growth overall with the major exception being Continental Europe.
Total attendance at company-owned operations during the quarter was $13.9 million, a 2% increase versus prior year quarter.
Our gross revenue was 54.7% as compared to 55.2% last year.
We spent $30.7 million on marketing, an increase of 10% over prior, roughly in line with our revenue growth.
Including $2.9 million of stock-based compensation expenses in this year's quarter, G&A expenses, as a percentage of revenue was flat at 11.5%.
While our operating income margin declined by 50 basis points to 32.4%, our operating income for the quarter grew 9% to $92.3 million.
Our fully diluted earnings per share was $0.52 in quarter three this year up from $0.47 last year.
I would now like to address each of our major geography.
First, North America.
For the third quarter total North American revenues increased a strong 15.1% including a 3.3% contribution by our recent franchise acquisition.
NACO attendance was 8.1 million up from 7.6 million, or 6.6% increase over the prior year.
Despite weaker than expected new member recruitment trends, we benefited from strong retention driven by the robust selling of our 17-week season pass which ran through to the end of August.
In the third quarter, our average NACO meeting fee per attendance increased 7.5% over the prior year as we continued to benefit from our spring season pass and from the flow-through of our price increases.
Also our in-meeting product sales per attendance were up 3.2% in the quarter.
As we announced in our second quarter call, in late August we launched monthly pass which gives unlimited access to meetings plus free e-tool access to our -- which is our Internet weight-loss companion for meeting members.
Monthly pass enables our members to receive a discount on their meeting fee by signing up for a commitment plan which renews automatically on a monthly basis until it is cancelled.
Our NACO management and field staff, in partnership with weightwatchers.com technology group did an excellent job in rolling out this innovative new plan across our NACO market.
I'm delighted to report that monthly pass has been very well received with member take-up exceeding our expectations.
In the first six weeks alone we had over 300,000 monthly pass sign ups.
On the last call, I said that we firmly believe that monthly pass would be a big positive for both our members and our business.
As I explained for the average member who signed up the monthly pass, we expect to increase their meeting attendance and the length of stay with weight watchers to increase their weight-loss success, and as a result, to significantly grow our average meeting fee revenue per member over the course of their stay with us from around $125 to between $200 to $240.
Now, while it is too intense to launch a monthly pass to fully assess longer-term behavior from our members, I can say that based on our initial observation we believe monthly pass is on track to meet these objective.
As I mentioned on the last call, the launch of monthly pass reduces our meeting fee per attendance during the first weeks following sign up as a result of the approximately 20% discount.
After this initial period, we expect it will significantly enhance our revenues by extending the average member's involvement with Weight Watchers.
While we are modeling the net effect on revenue of monthly pass, including the loss of some eTool revenue to be roughly break-even with prior over the September to December period this year, we believe that monthly pass will be a significant driver of revenue growth next year.
Looking forward in quarter four, we expect NACO to deliver high single-digit attendance growth and double digit revenue growth.
Now, on to the UK.
I'm pleased that the UK has turned the corner and returned to growth.
For the quarter, UK revenues were up 4.2% on a local currency basis due to a very modest attendance growth and a 7.5% increase in our product sales per attendance.
Our UK attendance was 2.7 million, up 0.4% versus third quarter last year.
But there is much of a significant improvement in our attendance trend from the negative 17.2% year over year decline in quarter one and the 11.6% decline in quarter two.
This is a result of the numerous steps taken by our UK team.
I expect our attendance trends to continue to get better and to be solidly positive in the fourth quarter.
The stronger attendance flow-through from our fourth quarter into next year will help to set the stage for growth in 2007 in the UK.
As I mentioned on the last call, the UK team is working on the introduction of a simpler, improved version of the program for this coming January.
I believe this innovation will help to leverage the positive word of mouth we're again building.
In addition, the UK -- our UK retention and financial results should benefit next year from the roll out of our commitment plans there starting with the introduction of season pass at the beginning of the year.
Moving on to Continental Europe, we had a disappointing September campaign in Germany, our largest market in Continental Europe resulting in Continental Europe's local currency revenues and attendance being down 5.2% and 7.8% respectively.
Given that our fourth quarter attendance is largely driven by the flow-through of our September involvement, we now expect quarter four volumes to be similarly negative.
Unfortunately, our advertising campaign did not produce the involvements we had expected.
The ineffectiveness of the marketing this fall was compounded by the fact that we are now in our third year since our last program innovation.
While we had originally planned to launch a program innovation this year, similar to what the UK launched in 2005, that launch was delayed to January, because of the problems of the UK experience.
The consistency of our local execution across Continental Europe continues to be a key focus.
We've been working hard on strengthening the team across these markets.
In the past year we have added a new senior vice president of Continental Europe in [Mads Rider] and new general managers in the Benelux, Sweden and Spain.
We are currently searching for a new country manager in Germany, and Matt is now spending the vast majority of his time in Germany helping the team get that business back on track.
Looking forward, this January across Continental Europe we will be launching a program enhancement called, "Power Start," which we believe will create newness and excitement amongst our members.
Power Start is designed to help our members successfully lose more weight during those first few crucial weeks on the program.
And since research tells us that early success leads members to stay in the program longer, this should help grow the business.
The launch will be supported by a new marketing campaign in January.
With these combined efforts, we expect Continental Europe to deliver positive attendance growth in 2007 despite the weak flow-through from the fourth quarter this year.
Moving on to other businesses, weightwatchers.com continues to perform well.
In quarter three, revenues were up a strong 21% over the prior year quarter.
This growth was driven by an 18% increase in the active online subscriber base to 489,000 from 413,000 at the same point last year.
As of this quarter, we will be reporting only online subscribers as a significant numbers of eTools subscribers are moving to monthly pass.
In the third quarter Dotcom's contribution was $33.5 million and $15 million to our consolidated revenues and operating incomes respectively.
Other revenues, which include our global licensing and publishing businesses were up 28% to $12.7 million in quarter three of -- from $12.7 million in quarter three in '05 to $16.2 million in this year's third quarter.
Our licensing revenues were up 33% in the quarter driven by strong growth in the U.S. and the UK.
In other news I'm pleased to announce that we have acquired Suffolk County, New York franchise for $24.5 million.
Obviously, November and December are not high volume months, but on an annualized basis, this acquisition should add approximately 500,000 attendances and $8 million in revenue.
Now, I would like to turn the discussion over to Ann Sardini.
Ann Sardini - CFO
Thanks Linda.
Good afternoon everyone, as you can probably hear, I have a bit of laryngitis today.
So I'm going to ask our controller [Amy Kosovich] to deliver my prepared remarks so that I can save my voice for Q and A.
Amy Kosovich - Controller
Thank you Ann, good afternoon everyone.
I'll begin the financial review with an overview of third quarter 2006 results.
Consolidated company revenues were $284.8 million, an increase of 10.6% or $27.3 million versus the 2005 quarter.
Operating income rose 9% to $92.3 million on this sense of revenue, and despite the incremental expense for non-cash stock-based compensation triggered by our adoption of FAS 123R earlier this year.
Net income for the quarter increased at a slower pace, up 2.4% or $1.2 million to $50.6 million as a result of higher interest expense.
In particular, in relation to the credit facilities put in place at the end of 2005 by weightwatchers.com as the final stage in its acquisition.
I will remind you that as a result of our adoption of 1046R in 2004, we consolidated 100% of weightwatchers.com into our earnings last year before we actually owned the business.
Earnings per fully diluted share in the quarter were up 8.9% to $0.52 as compared to $0.47 last year.
If we eliminate from the earnings per share comparison, the impact of non-cash stock-based compensation of $0.01, EPS actually rose 12.5% in the quarter including weightwatchers.com interest expense.
From an operational perspective, the worldwide revenue increased up 10.6%, which is 9.3% on a constant currency basis, and reflects expansion of revenue per meeting attendee, as well as growth in the weightwatchers.com subscriber base.
Weightwatchers.com ended the third quarter with 627,000 active subscribers, an increase of 14.6% overall, and 18.3% excluding eToolers.
As Linda mentioned, going forward, given that many of our eToolers are migrating to monthly pass, we will be reporting only our end of period online active subscribers.
Globally, meeting attendances were up 2% in the third quarter to $13.9 million.
Attendance volumes in North America were 6.6% to $8.1 million, and UK attendance, which has been steadily improving with $2.7 million in the quarter, up slightly at 0.4% versus prior year.
Negative performance in Continental Europe of 7.8% in the quarter tampered our global attendance growth.
Looking at NACO and more debt, NACO's third quarter meeting room revenues reached a $137.3 million, growing 13.7% as compared to 6.6% growth in attendance.
There were three components to our per attendee revenue expansion in NACO.
First, in meeting product sales, penetration per attendee increased 3.2% in the quarter, particularly for consumables and new electronic products.
In addition to deeper penetration of product sales, the average meeting fee per attendee in the third quarter rose 7.5% from a combination of two factors, price rises and commitment plans.
The third quarter lecture income for attendee benefited most from the sale of the spring season pass, a 17-week plan that began in late April, and ended in late August.
As you will recall, the price that the member pays for this season pass is amortized weightably over the plan's 17 week life, whether the member attends the meeting or not.
As is typical, proportionately fewer season pass holders attended meetings in the last few weeks of eligibility while amortization continued.
Therefore, the average need for actual attendance increased.
Approximately 80% of the increase in lecture income per attendee is attributable to commitment plan.
As mentioned on our last call, the economics of our new monthly pass, a recurring billing model without specific end date has the potential to be even more creative, even the likelihood of expanded retention.
As Linda mentioned, we will begin to reach the full benefit of monthly pass in 2007, and we'll update you further during our year end earnings call in February.
Linda has provided detail on our international operations, so I will just summarize.
In total, international attendance was 5.8 million in the third quarter, down 3.8% from the prior year quarter as a result of significant softness in Continental Europe which results 7.8% versus prior.
International revenues were $94.7 million, an increase of 2.5%.
And on a local currency basis, revenues declined 1.2% with growth in licensing partially offsetting the impact of the volume decline.
In the weightwatchers.com business revenues grew 20.9%.
In the third quarter 2006, from $27.7 million to $33.5 million, the result of an 18.3% increase in online active end of period subscribers, from 413,000 in 2005 to 489,000 in this year quarter.
Franchise commissions declined 8.6% in the quarter to $4.2 million as the result of our recent acquisitions of Eastern Canada, and Weight Watchers of Greater Indiana.
NACO now includes over 80% of U.S. attendances as well as over 50% of Canadian attendances.
Excluding these two recent acquisitions, franchise commissions grew 3% in the quarter.
Our other revenues, licensing and our publications, were $16.2 million in the quarter, up 27.7% or 3.5 million over the year-ago level.
Licensing revenues across the world, when looked at in aggregate, were $12.3 million in the quarter, an increase of 33%.
The U.S. licensing business grew at a faster rate on the sense of increased distribution of existing licenses including ice-cream and cakes, and new licenses over the increase in international licensing.
Our consolidated gross margin was 54.7% in the third quarter 2006. 50 basis points below the 55.2% delivered in the third quarter 2005.
The margin erosion was primarily driven by lower meeting averages in some of our markets, and commissions paid for monthly pass bills didn't make up.
Marketing expenses for the third quarter was $30.7 million, a $2.8 million or 10.2% from last year's level for TV campaigns and promotions in Continental Europe, and to cover our recent acquisitions.
As a percent of revenues, marketing remains constant at 10.8% in both years.
G&A expenses in the 2006 third quarter closed 32.8 million, up 10.4% from the prior year level including incremental $1.5 million in non-cash stock-based compensation expense.
Excluding this expense, the G&A increase dropped to 5.2% year-on-year in the quarter.
On this adjusted basis, G&A as the percent of revenues dropped 50 basis points in the third quarter 2006 to 11% versus 11.5% in the prior year quarter.
Our reported consolidated operating income in the third quarter was $92.3 million, up 9% from 84.7 million in the prior year quarter.
Our consolidated operating income margin was 32.4%, 50 basis points lower than the prior year level of 32.9%, all a function of the gross margin compression.
Interest expense in the quarter increased by $7.9 million, $13.2 million, up from $5.3 million in the third quarter of 2005.
Versus last year, the company's third quarter consolidated debt outstanding rose $465 million from $362 million in 2005 to $817 million in 2006.
There were two components contributing to this increase.
First, as I mentioned earlier, in mid December last year, weightwatchers.com suppressed credit facilities up $215 million in place as the final stage in its acquisition by Weight Watchers International.
That amount is now 196 million.
Further, the to fund franchise acquisitions and a portion of our share buyback program, we increased our combined term loan and revolver borrowings from the third quarter 2005 level by approximately 260 million.
The company's consolidated average effective interest-rate rose to 6.53% in the third quarter this year, from 5.08% in the prior year quarter.
Now, moving onto an overview of our consolidated company cash flow.
The company generated $234 million in cash from operating activities in the ninth month ended September 30, 2006.
After capital expenditures of $22.2 million, free cash flow was $211.8 million, well in excess of our net income for the period of $165.5 million.
Most of the cash flow and excess of net income rose from the increase in deferred revenue.
Permanent differences between book and cash taxes and the timing of payables.
Our free cash flow in the nine months of this year, along with some net revolver usage enabled us to repurchase 3.6 million shares for 161.7 million, to pay quarterly dividends during the first nine months amounting to $34.8 million and to opportunistically acquire franchises.
We spent about $75 million for Eastern Canada and Indiana in the nine months.
And I was going to just mention, we had closed another purchase, a self-accounting Long Island franchise for $24.5 million.
Overall, in the nine months of 2006, our debt increased $71 million versus the yearend 2005 level, to $817 million from $746.1 million, and our cash balance increased by $27.3 million over the period.
Now I'll turn the discussion back to Linda.
Linda Huett - President and CEO
Thank you Amy.
Before discussing my retirement and our CEO transition plans, I'd like to take a moment to touch on guidance.
During our last conference call, I provided 2006 EPS guidance of $2.04 to $2.12 for fully diluted shares, including stock-based compensation expenses, but without the expenses associated with our debt refinancing.
It is our normal practice at this time of the year to narrow our guidance range.
Taking into account the weaker than previously expected performance in Continental Europe this fall, and the fact that the positive financial benefits from our successful monthly pass will only begin to accrue in the first quarter of next year, we are narrowing the range of our guidance for the full year to $2.04 to $2.08.
So before I open to questions, I would like to say a few words about my retirement.
It's never easy to decide when is the right time to retire from a position or a company you love.
But in the summer of 1999, when I agreed to accept this role, I left my three teenage daughters in Britain, and I moved to New York alone.
It has always been my intention to eventually be able to spend more significant time back in the UK with my family, which is just not possible while remaining the head of Weight Watchers International.
This is purely a personal decision.
My passion for Weight Watchers has never diminished, and my beliefs in our success has never been higher.
I'm very proud of what we as a team have achieved under my leadership, and of the initiatives we put in motion that will take the company to the next level in the coming years.
During the last seven years we have accomplished many things, not the least of which is growing our annual revenues from less than $400 million to over $1.2 billion, helping many millions of people with their weight loss efforts.
We have grown the North American company owned system from 42% to more than 80% at the U.S.; entered two new European countries and recently acquired just over half of Canada.
We reacquired the magazine publishing rights, and created from scratch, a very profitable U.S. magazine with over a $1 million in paid circulation.
We've built a strong licensing portfolio around the world that continues to grow.
We helped to build and then acquired and integrated weightwatchers.com.
Dotcom is not only the number one in online weight loss, but also was key in our ability to launch our innovative and very exciting monthly pass commitment plans for meeting members.
And most importantly, we have built a very strong and experienced management team around the world, which is more than capable of taking our great brand and service to even greater heights.
Based on a through and thoughtful succession planning process, our board of directors today appointed David Kirchhoff as my successor.
I'm delighted with our selection.
I would be working closely with Dave on the transition over the next two months, as he prepares to take over the duties of president and CEO at the beginning of 2007.
I've worked closely with Dave over the most of the past seven years and know that the company will be in very good hands under his leadership.
He is one of the first two executives hired by weightwatchers.com, was instrumental in its strategic developments and in achieving its tremendous growth, and was the CEO of weightwatchers.com at the time we acquired it.
In the past year, along with has role as head of Dotcom he has taken on the task of strengthening the team and recruiting top caliber senior management for our international markets.
David has a tremendous understanding of our brand, our customers, our employees, our business and based on this understanding, he is uniquely positioned to help the company continue to grow our business into the future.
I'm also pleased, that when Dave takes on the role of CEO in January, Thilo Semmelbauer, our Chief Operating Officer of North America, will assume the newly created role of worldwide Chief Operating Officer, which combines his and Dave's former positions into one.
Dave and I will be working with Thilo over the -- we have been working with Thilo over the past seven years, and we are both thrilled that he has agreed to accept this new role.
Let me assure you that while I'll be stepping down from my position, I will always be a member of Weight Watchers.
Given the increasing incidence of overweight and obesity around the globe, I am more convinced than ever, that what we do as a company to help people has never been more relevant.
I'm both proud of what we have accomplished to date and very excited about our prospects for the future.
Stacy, we would now like to open the call to questions.
Operator
[OPERATOR INSTRUCTIONS] Our first question is coming from Greg Cappelli, from Credit Suisse.
Greg Cappelli - Analyst
Thank you.
Hi Linda and Ann.
Ann Sardini - CFO
Hi Greg.
Greg Cappelli - Analyst
First Linda, I just want to wish you the best of luck going forward.
It has been a fun ride since the IPO.
Linda Huett - President and CEO
Yes, thank you.
Greg Cappelli - Analyst
I have three questions.
I just wanted to make sure I was clear on the organic growth from North America.
Were Canada and Indiana both in the North America attendance number quarter, and if so, hat -- could you just help us with what the organic growth rate was?
Linda Huett - President and CEO
Yes, they were -- we will be counting Canada as part of North America, obviously company-owned, going forward.
They contributed about 4% of the growth.
Greg Cappelli - Analyst
Okay.
So they were seasonally adjusted in your number obviously?
Linda Huett - President and CEO
No, we are looking at total attendance growth in North America was 6.6%.
Greg Cappelli - Analyst
Yes.
Ann Sardini - CFO
Well, the actual attendance is basically [inaudible].
Linda Huett - President and CEO
So the actual attendance is that they contribute to the quarter, represented 4% of that.
Greg Cappelli - Analyst
Okay, I understand, great.
And then ,I'm just wondering, you mentioned that recruiting was weaker than expected in the U.S..
And I know that your initial comments coming out of 2Q were fairly positive on where the U.S. was going.
Can you just may be talk about, what you're seeing there?
Linda Huett - President and CEO
Well, I think, what we are seeing is our share [voice] being diluted by some pretty big spending out there, and a lot of noise in the marketplace.
But given that, obviously, we have been concentrating a lot on our retention initiative this year.
We did expect a better campaign, and I feel very, very positive about January, because with the recent purchases, we are now at over 80% of the U.S. system, and that means that we can move to a national media buy, regarding broadcast media.
This will give us a lot of benefits that we weren't able to read before.
Better placement, better programming, better positioning within the commercial breaks et cetera.
So we're going to be doing that in January, it would also mean of course, that every dollar we spend will produce a greater share voice than we've been able to do in the past.
We also have a new creative campaign coming in support of North America's program enhancements, so I think everything will be fresh for January.
Greg Cappelli - Analyst
Okay, great, and then, just to follow up on that, so when you -- you mentioned in your prepared remarks, you're expecting high single digits for 4Q for North America.
Does that insinuate about, sort of mid single digits organic?
Linda Huett - President and CEO
I think you have to look at it as we will get the full benefit of a full quarter of the acquisitions, yes, if that's the way you want to look at it.
Greg Cappelli - Analyst
Okay, and then just last quick one.
It sounds like we're going to get some type of innovation in really all your major markets in '07.
Is that -- are those all going to be in January?
Linda Huett - President and CEO
Yes, all the major markets are putting program enhancements in, in January.
Greg Cappelli - Analyst
Okay, so then the question is, will you be -- we should probably expect more marketing expense than normal this fourth quarter, I'm guessing, with three, all in January.
Linda Huett - President and CEO
Yes, we will be putting more marketing in, and also, I know some of you are aware of the fact that we've been testing television for our Dotcom online subscription service, and we will be putting in advertising in January for that, which starts -- the same as NACO, right after Christmas.
So obviously that -- first week of that advertising will hit quarter four.
So there will be a significant increase, year over year that you will see, and we will be supporting the innovation in all of our markets around the world in the January-February point.
We also, if you're just looking at the sheer dollars invested, remember we will be supporting our acquisition with marketing spent, so if you're looking at the dollars, obviously, it includes the money that we're spending to support those new markets, including Suffolk, which has just come in to the fold.
Greg Cappelli - Analyst
Okay, thanks very much again, best of luck.
Linda Huett - President and CEO
Thank you.
Operator
Thank you, our next question is coming from Chris Ferrara from Merrill Lynch.
Ann Sardini - CFO
Hi Chris.
Chris Ferrara - Analyst
Hi, Lynn and congratulations on your retirement.
Linda Huett - President and CEO
Thank you.
Chris Ferrara - Analyst
I just want to talk about gross margin a little bit.
It was weaker than I had expected and I guess, with such positive pricing in North America, you're seeing, I guess, the meeting -- don't think meetings are growing faster than attendance in the quarter, because attendance is up.
Could you just explain a little bit why that would be?
Linda Huett - President and CEO
Ann, do you want to talk a little bit about the gross margin issue?
Ann Sardini - CFO
Sure.
One of the things about the gross margin in North America is the fact that when the monthly pass is purchased for one time, there is a special commission that's given to our service providers in the meeting room.
So that is not a recurring commission, because then they're only commissioned on the actual attendances, but it is an incremental piece for that part of it.
The other piece is frankly related to the -- the part of recruiting that we've been seeing, which is driving our attendances per meeting down a bit.
And that's -- but -- sorry, and that's the other piece.
But the reality is it's 50 basis points, it's not a huge decline, and we expect to bounce back from that.
Chris Ferrara - Analyst
Got it, and is that -- that incremental commission, I mean, you don't think it's a big -- you don't think it's a big part of the down 50 basis points, it's something -- it's just one small part of a moving piece.
Linda Huett - President and CEO
I think, Chris you have to remember year over year wasn't their last year at all.
Ann Sardini - CFO
I think it's about half.
Linda Huett - President and CEO
Yeah, and about half of the difference was contributed by that commission alone.
Chris Ferrara - Analyst
Got it, and I guess, I'm just conceptually trying to understand, I mean, it sounds like you're saying the monthly pass uptake was better than you thought, and you had more stickiness from the season pass heading through August.
Why was -- I guess, why was it a bigger disconnect between recruitment and retention than you would have expected, I mean, it seems like its -- you know, kind of a big gap there.
Linda Huett - President and CEO
When we were talking about our revenues, holding up in our revenues per attendance holding up, that obviously wasn't impacted by the spring seasons pass that we had already sold.
Because the revenue on our seasons pass, we just recognized, over the 17 weeks equally, whether a person attends or not.
So, if you're looking at our attendances, we do have summer seasonality in there, that affects our commitment plan members as well as the pay-as-you-go members.
So we expect them to attend more meetings, which is what we have been saying since we started the season's pass, and it's early days obviously on monthly pass, but monthly pass is a different economics in terms of functions in a different way on a financial basis in the seasons past us, because the revenue is recognized and the benefit is recognized over about a six-month period as opposed to the 17 weeks that we get the revenue recognition for the seasons pass.
So yes, our recruitments were softer than we expected, our attendances would have been higher had the recruitment been higher.
Ann Sardini - CFO
We are seeing some retention benefit from the plans.
Linda Huett - President and CEO
Of course, retention benefit is there.
Chris Ferrara - Analyst
And just finally, why do you think recruitment was worse than you had thought -- and you had -- than you had originally forecasted?
Linda Huett - President and CEO
Well, as I said, I think that certainly from the statistics that I've seen recently our share voice was squeezed.
We saw a decline in our share voice for the period.
I think that as we move forward and we can make better use of our marketing money, and we're putting more marketing money behind it, we will be able to call back some of that share voice and we will be going out with new creative obviously, and we will have the new program enhancement.
So I think, everything is in line for us to regenerate recruitment going in to 2007.
Chris Ferrara - Analyst
Great, thanks a lot.
Operator
Thank you, our next question is coming from Michael Lasser from Lehman Brothers.
Ann Sardini - CFO
Hi Michael.
Linda Huett - President and CEO
Hi Michael.
Michael Lasser - Analyst
Hi, and Lynn you have my best wishes as well.
I hope at the very least you come back and lead a couple of meetings periodically from time to time.
Linda Huett - President and CEO
Back to my service provider daughter.
Ann Sardini - CFO
She better.
Linda Huett - President and CEO
I will support the Company obviously, as I always have been, any way I can, but I'm hoping that with my schedule being half in the U.S. and half in the UK, I wouldn't inflict that on any particular meeting, because I do know that consistent attendance by the leader is crucial to the success of a meeting.
So I might make guest appearances, but I don't think I would inflict myself on a meeting and so.
Michael Lasser - Analyst
Well, fairly, good luck with everything.
Just looking at next year, I know it's kind of early already, but given the contribution from franchise acquisitions combined with a likely positive impact of monthly pass, how should we begin to think about NACO attendances in 2007.
It would seem like if -- customer retention can just be out flat, there's a strong --
Linda Huett - President and CEO
No, I think, David is going to be excited to tell you on his February call, what his expectations are for NACO attendances in 2007, but I think that we are saying that we believe that all of these plans that we put in place, will be strengthening both our revenue performance and our attendance picture in 2007.
So, I think that you can assume that that's going to be a brighter picture.
Michael Lasser - Analyst
And then, can you -- can you offer the hard number or the penetration rate for the monthly pass, and you said season pass was -- about 25% of the members in the meeting took that plan, was that similar or much higher?
Linda Huett - President and CEO
It was certainly higher, but the reason we moved to the finite number within that six week period within the quarter of your 300,000 is because the seasons pass is sold in in a limited period of time.
We know then precisely how many people are on it, and it's not -- you can't cancel it within that 17-week period.
Of course, monthly pass behaves quite differently.
You can sign up for it at any time, it's on sale continuously, and of course, a person can decide to cancel it at any time.
So, we felt that it would be more meaningful for you to know the kind of volume that has signed up in this early period.
And then the penetration, as we go forward, because obviously right now, we're in the unique situation of only having monthly pass.
By the time we get to January, we will have both monthly pass and a seasonal pass for the winter, the spring, and the fall.
So we will be -- then start modeling as I'm sure you will, quite a difference mix of these commitment plans.
What we're really excited about is the percentage of our members who have take up commitment plans, and are willing to put this kind of commitment on the table.
But as I said, the penetration was significantly higher than we expected, and we're just delighted with the response of both our service providers and the members.
Michael Lasser - Analyst
And were most of those plans sold right at the launch or how did it transpire through the quarter?
Linda Huett - President and CEO
Actually, we had a good takeoff, there were some pent up demand because our service providers were telling the members a few weeks in advance.
But we've been very pleased that our sales have held up.
Michael Lasser - Analyst
Okay, and there was a comment that you expect to bounce back in the near term from the hit to the gross margin by the commission associated with the monthly pass.
Is it the near term, in the fourth quarter, or is that something that should occur in the 2007 timeframe?
Linda Huett - President and CEO
Well, obviously in the fourth quarter and Ann will speak up if she feels that she wants to add to this, but in the fourth quarter we would still be paying back commission for the sale of the monthly pass, and there was no commission for the commitment plans in the fourth quarter of the prior year.
As we go forward, then obviously, it will be more smoothed out and we will be lapping the same commission, because we paid the commission on the season's pass as well as the monthly pass.
Michael Lasser - Analyst
So, I will ask it in an another way, should gross margin be down, again in the fourth quarter?
Ann Sardini - CFO
I think we can expect something similar to prior year in the fourth quarter.
Michael Lasser - Analyst
Okay, so -- and giving the -- just want to jump back to the monthly pass.
Given the early result, how long are you seeing most of the members stay on for --?
Linda Huett - President and CEO
You know, Michael, it just is too early.
We started selling it around the 20th of August, and it's a recurring billing on a monthly basis.
So as you can -- you know, you can work out.
The majority of the people have not even last months, two and three, let alone that longer picture.
So I really think we're going to have to wait until David reports in February, and I'm sure he'll be covering monthly pass and what we're seeing.
Michael Lasser - Analyst
Okay, and then last question, and then I'll go back in to queue.
With only two months left in the year, there is -- you have kind of a broad range for your guidance or implied guidance for the quarter.
What do you feel is most variable at this point that could impact how the actual results end up?
Linda Huett - President and CEO
I think the $0.04 is comparable to what I usually narrow it to at this time of the year.
Michael Lasser - Analyst
Okay.
Linda Huett - President and CEO
So it's in line with what I have always done.
Michael Lasser - Analyst
Got it, best of luck.
Linda Huett - President and CEO
Thank you very much.
Operator
Thank you, our next question is coming from Jerry Herman from Stifel Nicolaus.
Jerry Herman - Analyst
Thanks, good afternoon everybody and I --
Linda Huett - President and CEO
Hi Jerry.
Ann Sardini - CFO
Hi Jerry.
Jerry Herman - Analyst
To you as well, Linda.
Linda Huett - President and CEO
Thank you.
Jerry Herman - Analyst
Well, a couple of questions about the commitment programs, if you can, and maybe this one touches on the last question, but you guys said that there were greater than 300,000 folks signed up.
I know you're only --
Linda Huett - President and CEO
That was in the first six weeks, obviously, because I was only reporting on the quarter.
Jerry Herman - Analyst
Yes, a guesstimate of how many attendees that translated into --?
Linda Huett - President and CEO
That's the percentage that they were not giving.
I just indicated to Michael that it is higher than the 25% that we achieved with season pass.
Jerry Herman - Analyst
Okay, I'll look at that a little bit more closely.
Linda Huett - President and CEO
Okay.
Jerry Herman - Analyst
Now that season's pass is behind you, can you share what the utilization was on that program?
I know you said last time that it was running a little bit less than 80%, meaning the number of meetings they actually attend.
I know last time you said it was a little bit less than 80%.
Linda Huett - President and CEO
Off Jerry, I have a pretty good memory for statistics and for what I say, and I don't actually recall ever giving a figure of 80% attendance, you mean at this 17 meetings that they could attend?
Jerry Herman - Analyst
Yes, you were using that as a benchmark to --
Linda Huett - President and CEO
I certainly have never given that statistic.
Jerry Herman - Analyst
Okay, I'll ask the question differently then.
Ann Sardini - CFO
Perhaps it was the breakeven that you're thinking of.
Jerry Herman - Analyst
Right, and the comment was that we were -- that they would be attending less meetings than the breakeven, which is basically 80%.
Linda Huett - President and CEO
Yes, what we pointed out was that at the moment we're seeing a benefit on our attendance per -- our lecture income per attendance, our meeting fee per attendance because they're not attending to pass the breakeven point.
Jerry Herman - Analyst
Right.
Linda Huett - President and CEO
But I have pointed out also that if they did start to attend every single one of the meetings, all 17, even though our average fee per attendance would go down, we'd still see that as a real victory because we'd know that those people were losing weight more successfully.
So I really think right now, as long as you see, our average fee per attendance strengthening, you can assume that we haven't reached the number of attendances that breaches that breakeven on revenue per --
Jerry Herman - Analyst
Okay, a two-part question that, can you actually specify the number of meetings that the season pass attendees attended, that's question (a); and question (b) is, is there any measure of the efficacy of their weight loss for the season pass relative to the legacy attendee?
Linda Huett - President and CEO
We're not seeing any difference in the weight loss between our members who are on a pay as you go system, or on a prepayment plan or a commitment plan.
What we do know is that on commitment plans, they attend more meetings overall.
Jerry Herman - Analyst
Yes, I guess that was my question, shouldn't they lose more weight?
Linda Huett - President and CEO
Oh, they'll lose more weight because they attend more meetings.
I thought you meant did they lose more weight in any given week.
Jerry Herman - Analyst
Right.
Linda Huett - President and CEO
The weight loss is incomparable in any given week, but because they're attending more meetings, more weeks, their weight loss is greater overall.
Jerry Herman - Analyst
Okay, and there is --
Linda Huett - President and CEO
That's the whole -- that's one of the reasons why we're putting it in.
Jerry Herman - Analyst
Okay, but there's no specific measures on that available as --
Linda Huett - President and CEO
No, but we have had clinical trials that have proved that the more meetings you attend, the greater your weight loss, and it's attending the meetings that makes that difference.
Jerry Herman - Analyst
Okay, and then --
Linda Huett - President and CEO
Or anything we can do during encourage the attendance --
Ann Sardini - CFO
The focus is on number of attendances, it's not on whether the person is on season pass, but fortunately season pass extends the number of attendances that a person has.
Jerry Herman - Analyst
Okay, great, and I'll try to make this a short answer for you Ann, but you -- the upfront commission associated with a season pass sale -- I'm sorry, a monthly pass sale to the leader?
It is --
Ann Sardini - CFO
$1 for service provider.
Jerry Herman - Analyst
How much?
Ann Sardini - CFO
$1 per service provider.
Linda Huett - President and CEO
$1 for service provider, so that's the leader plus the receptionist, the layers within a meeting.
Jerry Herman - Analyst
That's great, thank you very much.
Operator
Thank you.
Our next question is coming from Kelly Flynn from UBS.
Linda Huett - President and CEO
Hi Kelly.
Ann Sardini - CFO
Hi Kelly.
Kelly Flynn - Analyst
Hi, how are you guys?
Linda Huett - President and CEO
We're, fine, well Ann isn't, as you can hear.
Kelly Flynn - Analyst
Yes, sorry I won't get to work with you more Linda.
Couple of questions, going back to Greg's question about organic growth, I just want to make sure I understood what you said correctly, Linda.
So you said that ex the acquired franchises, your growth would have been 2.6% on an organic basis, is that correct?
Linda Huett - President and CEO
Now, that's roughly there, yes.
Kelly Flynn - Analyst
Okay.
Linda Huett - President and CEO
I am not sure of the percentage point.
Kelly Flynn - Analyst
Okay, and then you mentioned Suffolk County I know, you mentioned some seasonal issues in Q4, but can you tell us what you're expecting the incremental benefit will be to attendees in the fourth quarter from adding Suffolk?
Linda Huett - President and CEO
No, we don't usually break it down, I just wanted to remind people that they will produce about 0.5 million attendances on an annual basis, and don't just divide that by 12, and expect November and December to contribute their portion.
It has acquired a time volume-wise of our year.
Kelly Flynn - Analyst
Okay, second question on the fourth quarter as well.
You guys have mentioned, a bunch of times that the kind of legacy of the seasons pass helped the revenue per attendee in the third quarter.
What can we expect in the fourth quarter in NACO, should we expect that to decelerate significantly because you don't have the seasons pass, and is that part of the reason that you narrowed the guidance range down to the lower end?
Ann Sardini - CFO
Yes, you can expect the deceleration, and we took down our guidance last time as a result of what we assumed the difference to be between having a season pass, and having a monthly pass in the end of third quarter into fourth quarter.
And now it's about $0.04 to $0.05.
Kelly Flynn - Analyst
Okay, and then different question on tax rate, it is a bit lower, can you give guidance on that?
Linda Huett - President and CEO
Yes, we just had an extra [three-third] that we dropped in the quarter?
Kelly Flynn - Analyst
So you expect it to come back up in Q4?
Linda Huett - President and CEO
Yes.
Kelly Flynn - Analyst
Okay, and then finally on the share voice issue, I think that's how you described it, Linda.
Linda Huett - President and CEO
Yes.
Kelly Flynn - Analyst
Can you get into anymore detail on that what -- who is gaining, I mean it seems anecdotally like Nutri-System is running a lot of ads, so is LA Weightloss, are those the players that you're seeing now, or you look --
Linda Huett - President and CEO
No, I mean, obviously, if you look at Nutri System's report --
Kelly Flynn - Analyst
Yes.
Linda Huett - President and CEO
-- they are putting a considerable amount of money in the marketplace as are people like LA Weightloss, Jenny Craig et cetera.
So it's just a noisier marketplace and with more big spending in there, so our share voice has been squeezed.
Kelly Flynn - Analyst
Okay, it seems generally that you don't have a lot of overlap with those players in terms of your demographics, I guess, especially with Nutri-Systems.
Can you just address that or is there more overlapping --
Linda Huett - President and CEO
I think that the -- I agree with you.
It's a different methodology.
I've always felt bad about the prepackaged meal concept; that it was a different methodology, but if you're just looking at the noise in the marketplace and trying to get the attention of a potential dieter, then obviously the other methodologies when they're spending big money does have an effect on that noise level.
So what we were saying about our recruitment, which was disappointing in the September campaign, was that there was a tremendous amount of noise and spend in the marketplace.
And even though we don't share the same demographics, we do share the same media.
And our share of voice in the media was contracted.
Now, up until now, as I said, we have been handicapped by the fact that we have to buy our broadcast media particularly on a spot basis and I don't know how much you know about what that does to you, but it costs you a lot more than it does if you can make a national buy.
It means that you don't get as good placements within the commercial break and you -- we probably would not be capable of getting as good appointment to view programs and placements within the schedule.
So the fact that we now have over 80% of the U.S. system and we can therefore go to a national media buy is going to make a big difference to our marketing and our ability to take more share of voice back from January onwards.
And of course, when I say January, I do mean that the North American campaign starts right after Christmas.
Kelly Flynn - Analyst
Okay, and just one last one on the Canada franchise that you added.
You gave the mid-single digit NACO guidance for the second half on your second quarter call.
Linda Huett - President and CEO
I gave high single digit for North America, yes.
Kelly Flynn - Analyst
No, but -- didn't you say mid-single digits on the second quarter call, for the second half of '06.
Linda Huett - President and CEO
Oh, yes, I'm sorry, you mean the quarter -- yes.
Kelly Flynn - Analyst
Yeah, that's right, that's what I meant.
Were you assuming at that point that Canada was going to be included in NACO?
Linda Huett - President and CEO
No, I was assuming that we were going to get an acquisition.
I mean, obviously, we do work on these for a while, but my bullishness was more indicative of the fact that I expected the campaign to work better.
Kelly Flynn - Analyst
Okay, so you said you were not assuming an acquisition?
Linda Huett - President and CEO
No, that was not predicated on us making those acquisitions, but we were in negotiation.
So I'm not saying that it wasn't in my mind, and I felt obviously that would be one of the supporting things for us to be able to bounce back in the third quarter to a mid-single digit.
Kelly Flynn - Analyst
Okay.
All right, great, thank you so much.
Operator
Thank you.
Our next question is coming from Amy Chasen from Goldman Sachs.
Linda Huett - President and CEO
Hi, Amy.
Ann Sardini - CFO
Hi, Amy.
Amy Chasen - Analyst
Congratulations.
Linda Huett - President and CEO
Thank you.
Amy Chasen - Analyst
So just sort of to follow-up on that last question, fourth quarter you said North American attendance have high single digits.
What would that expectation be on an organic basis?
Linda Huett - President and CEO
Well, obviously we've said that about 4% points of our 6.6% growth in this quarter was contributed by the franchise acquisitions.
And we're going to have a full quarter four.
So I suppose that we'll net out with a similar organic attendance growth as we had in the third quarter, and the growth will be driven primarily from the fourth quarter of the acquisition.
Amy Chasen - Analyst
So the fourth quarter organic attendance should be up more like 2% or so?
Linda Huett - President and CEO
Well, 2%-3%, I mean, similar to what we experienced this quarter.
Amy Chasen - Analyst
Okay, great.
And then just on that Power Start in Central Europe -- sorry, in Continental Europe.
Linda Huett - President and CEO
Yes.
Amy Chasen - Analyst
Can you just talk a little bit more about it, and does that have the potential to roll out into other markets like the U.S. or the UK; it sounds pretty compelling.
Linda Huett - President and CEO
Yeah, well, we've got -- Power Start is what we're calling this addition to the program, which gets you off to a good start in Continental Europe.
The new UK Simpler Plan also has a certain quick and easy start component to it which we've added to that program that wasn't there previously.
And in some of our other markets, we've got similar.
In the U.S. we have put in a new turnaround program that really chunks it down, and makes it a lot easier to focus on the different components of our approach to weight-loss at different times.
And for the research, we have that in -- live in meetings obviously being tested and was very, very positive.
But yes, everything that we do in any market gives us the opportunity to learn from it and to apply it to another market later on.
Amy Chasen - Analyst
I'm sorry, but to me, getting someone to focus on different things at different times is different than sort of promising or suggesting faster weight-loss right away, upfront.
Have you ever done anything like that in the U.S., because it seems to me that that would be a way to really generate trial, if you will?
Linda Huett - President and CEO
I don't want you to read it so much, Amy, as promising faster weight-loss in the line with maybe putting you on a much lower calorie diet at the beginning, and then going up as you go forward.
This is really to help you with compliance so that you can actually get on the program, and get off to a good start which will then deliver the weight-loss.
And this is coming out of member research that we've been doing in our European market, to get people on to the program quicker, to give them an easier time in understanding, particularly in those first few crucial weeks so that then they can have the flexibility obviously that you require as you go further into the program.
And we feel that this does have a good basis in other markets.
It's just that the program enhancements that we are putting in the U.S., we have been testing in live meetings in the U.S. and got very good results from, so I'm very positive about the chunking down as well.
And that's the approach the U.S. --
Amy Chasen - Analyst
So in other words it's a question of shortening, I guess the meeting or the educational process as opposed to speeding up the weight-loss?
Linda Huett - President and CEO
It's making it easier to understand if that makes it.
Amy Chasen - Analyst
Okay, that's great.
Linda Huett - President and CEO
-- plans, but it's easier to understand, therefore it's easier to get started.
Amy Chasen - Analyst
Okay.
And last but not the least, are you seeing any impacts from Accomplia in the international markets where it is?
Linda Huett - President and CEO
No, it entered -- the first market of ours that it entered was the UK this summer, around June-July it was available through prescription.
And it has since entered Germany, and a few of the smaller markets.
And as far as we can see, we can't see any impacts.
Obviously, any drug does still require behavior modification.
And we're just going to have to wait and see what Accomplia does.
But we believe that it's not incompatible with the Weight Watchers' method obviously, because we are the leader in behavior modification and healthy eating plans.
So we are really actively welcoming anybody into our meetings whether they're getting additional help from their physician or not.
Amy Chasen - Analyst
Okay, thank you.
Linda Huett - President and CEO
Certainly.
Operator
Thank you.
Our next question is coming from Jeff Stein from KeyBanc Capital.
Jeff Stein - Analyst
Can you -- Linda, can you please distinguish between the compensation that you pay for the monthly pass versus the season pass?
Is there a difference in the incentive to the team --
Linda Huett - President and CEO
No, it's exactly the same.
On the season's pass which has the shorter selling period, of course, we paid $1 per service provider for each one sold and we're paying the same one dollar per service provider in the meetings for each monthly pass sold.
Jeff Stein - Analyst
If the monthly pass is so much more productive, why even bother offering the season pass again beginning at January.
It would seem to me it just confuses the issue, and all you're doing is cannibalizing a more profitable option.
Linda Huett - President and CEO
We still do have some people who are either not Internet enabled or are just reluctant to put their credit cards for recurring billing into the online system.
So we feel that having a commitment plan there for the people who either are not either Internet enabled or not even credit card enabled, gives them still the option to make a commitment plan.
If you're asking me which is the better value, obviously, I think that $39-$95 per month on a recurring billing basis is more attractive than putting that $150-$160 on the table upfront.
Jeff Stein - Analyst
Right.
And as far as with your marketing spending going up next year, should we assume that you are probably going to take another price increase to help offset that increase?
Linda Huett - President and CEO
Actually, our price increases have never actually just been to pay off marketing.
We take it on a meeting -- market-by-market basis.
And as you know right now we are benefiting from some of the closure of the 20% of NACO that put a price rise in this year, and for the rest of the year we'll be benefiting from that.
We do believe that we have a pricing opportunity, but we also believe that we have an opportunity with the larger revenues per -- if you think of an enrollee coming through the door, they are going to stay for a period of time.
On these commitment plans, particularly monthly pass, the revenue we get from that enrollee, who took up monthly pass is going to be greater, and therefore we will have greater revenue to invest in marketing.
Jeff Stein - Analyst
Okay.
Linda Huett - President and CEO
But we don't see our price rises as just paying for marketing.
Jeff Stein - Analyst
Okay.
And you're going to have -- you are going to have a major innovation in the United States in January?
Is that correct?
Linda Huett Yes, we have a new program, a new version of turnaround going into the North American market right after Christmas.
Jeff Stein - Analyst
So, I would presume then that you have to retrain your personnel, you need new marketing materials, you might even have some new products.
So it would seem to me that early next year we could have some expense issues?
Linda Huett - President and CEO
No, I think you should think of our training; we have a training program in place consistently throughout a year, whether -- but we do have, obviously, a big training coming up for our service providers in North America.
And -- but I don't think that you should see that as a huge increase in our cost; it just isn't on a year-over-year basis.
We will be investing in marketing as I said.
But the biggest plus we are going to get in our marketing is the fact that we are going to be able to do a national buy.
And that will make each one of our dollars work a lot harder.
But the new money spent on marketing as I mentioned will be from the dotcom marketing.
We've been testing some television advertising for dotcom, and we will be putting in television advertising for online subscription products in the U.S. right after Christmas.
So that is new money.
Yes.
Jeff Stein - Analyst
Okay, thank you.
Operator
Thank you.
Our final question is coming from Greg Badishkanian from Citigroup.
Linda Huett - President and CEO
Hi, Greg.
Ann Sardini - CFO
Hi, Greg.
Greg Badishkanian - Analyst
Yeah, hi.
Hey, I just have a few quick follow-ups.
One is, do you think that the consumer is a little bit different with respect to Accomplia eventually coming to the United States versus the UK where there was no impact?
Linda Huett - President and CEO
I don't know that we can predict what any drug is going to do.
This will be the third drug obviously that has come into the U.S. markets since the approval process was tightened up after the disastrous Phen-Fen situation in the U.S.
But I still believe that when you're looking at drugs, every drug has a side effect and every drug might have long-term consequences.
And I think that's what a potential dieter weighs up when they are looking at drugs.
For some people obviously they -- and their doctor will make the choice that they want to have that additional help.
But every drug, every methodology requires behavior modification and Accomplia is no different than any other drug in that respect.
So I think that if we're looking at all of these medical interventions with the level of obesity and the growth in obesity, we're seeing a lot more bariatric surgery.
But without behavior modification I think people have learned now that even people with bariatric surgery can regain the weight if they haven't learned any behavior modification.
And this is now becoming very well documented.
So if you're going forward, and you're just looking at what Weight Watchers is absolutely about, it's about that whole educative process of helping people change their relationship with food.
And almost any thing you look at will be temporary if people haven't tackled that -- those lifestyle changes that are necessary.
And nobody is better placed or has a higher respect in the marketplace than Weight Watchers in that field.
So I really believe that there will be drugs, of course, there will be, but no magic bullet has been developed yet.
Greg Badishkanian - Analyst
Great.
And just maybe your thoughts on the longer term organic NACO.
It is a little bit easier comparison this quarter than last, but I think you said about 2.5%-2.6% organic growth for this third quarter.
When do you think that's going to reaccelerate and what do you think the longer term growth of NACO is organically?
Linda Huett - President and CEO
Well, obviously with the things that I've mentioned regarding marketing, regarding our spend, our national spend, regarding additional investments, the new innovation, a new creative coming in January, I'd say this.
You know, it's a great idea to look out for January; it's a big diet season for us.
And I'm sure that Dave will update you on his call in February.
Greg Badishkanian - Analyst
Great, okay, thank you very much.
Linda Huett - President and CEO
Thanks, Greg.
Operator
Thank you.
Now, I would like to turn the floor back over to management for any closing remarks.
Linda Huett - President and CEO
Well, thank you, Stacy.
And thank you all for joining us today.
I would like to express my thanks and gratitude to all of you who have followed Weight Watchers' progress during my tenure.
I like -- I hope you will be listening to our quarter four year-end call next February, which will be led by our new CEO, David Kirchhoff.
So with that,, I will say goodnight and almost good luck, but goodnight.
Operator
This concludes today's Weight Watchers conference call.
You may now disconnect.