WW International Inc (WW) 2007 Q4 法說會逐字稿

Ladies and gentlemen, welcome to Weight Watchers International's fourth quarter and full year 2007 earnings teleconference call.

During the presentation, all participants will be in a listen-only mode.

Afterward, 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, February 14, 2008.

At this time, I would now like to turn the call over to Sarika Sahni of Weight Watchers International.

Please go ahead.

Thank you and thank you everyone for joining us today.

With us on the call are David Kirchhoff, President and Chief Executive Officer of Weight Watchers International and Ann Sardini, Chief Financial Officer.

At about 4:00 p.m.

Eastern time today the company issued a press release containing financial results for the fourth quarter and full year 2007.

The purpose of this call is to provide investor with some further details regarding these results and a general update on the company's progress.

The press release is available at www.WeightWatchersInternational.com.

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.

The company does not undertake any obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Now with that, I will turn the call over to Mr.

Kirchhoff.

Please go ahead, David.

Good afternoon and thank you for joining us as we review Weight Watchers International's performance for the fourth quarter and full year 2007.

I will be organizing my remarks into three sections for today's call.

First, a brief financial review of Q4 and full year 2007 results.

Second, a recap of major 2007 strategic initiatives, progress to date and major priorities in 2008.

And third, guidance for 2008.

First, Q4 and full year 2007 results.

Weight Watchers had a solid financial performance for Q4, driven as has been the case all year, by contributions from our Monthly Pass commitment plan, strength and our WeightWatchers.com business and continued growth in our licensing business.

Total companies Q4 revenues grew 21% driven by growth in all three lines of business, with meeting fees up 22%, Internet revenues up 24% and product and other sales up 15%.

Without the benefit of favorable foreign currency adjustments, revenues were up 16%.

Operating income grew 15% and our operating income margin was down 120 basis points 26.2% in this year's quarter.

Higher gross margins for Q4 2007 were more than offset by higher G&A, which was up on continued IT investment.

As a percentage of revenue, marketing expenses were up 40 basis points on last year, driven principally by production costs for the new January campaigns.

On the bottom line we reported EPS of $0.50 for the fourth quarter, compared to $0.39 per fully diluted share excluding one-time items in last year's fourth quarter, an increase of 28%.

For the full year, consolidated revenues were up 19%, operating income was up 15%, and EPS was $2.50, an increase of 21% excluding one-time items in both years.

With respect to volumes in our meetings business, in the fourth quarter total paid weeks were up 20%, primarily driven by the impact of Monthly Pass adoption in North America and the beginning of the benefit of Monthly Pass in the U.K.

and Germany.

As we forecasted on our last earnings call, attendance in the quarter remained soft with overall global attendance growth at negative 2.8%.

Growth in total paid weeks for our Weight Watchers Online product was up a strong 27% for the fourth quarter with end of year active subscribers also up 27% versus prior.

I will now briefly review our results in our major geographies and business units.

First our North American meetings business.

Total fourth quarter NACO revenues were up $170 million, an increase of 22% versus the same period in 2006.

In the fourth quarter, Monthly Pass continued to contribute significantly to top line growth, albeit at a slower pace than in Q3, reflecting its lapping of the uplift in Monthly Pass in Q4 last year.

NACO meeting fees were up 26% versus prior and up 22% without the benefit of prior period acquisitions.

For the full year, NACO revenues were up 24% with acquisitions and 16% without.

Full year meeting fees were up 20% with acquisitions and 19% without.

Q4 NACO paid weeks were up 29% and full year paid weeks were up 37%.

As noted, this rate of growth remains strong, albeit off the peak of 51% we saw in Q3.

Again, this normalization of growth rates was predicted based on Monthly Pass, now being on the market for 15 months.

While during 2008 we will continue to accrue revenue benefit from the introduction of our Monthly Pass commitment plan, its impact on our year-over-year revenue growth will moderate through the year as our Monthly Pass membership base stabilizes.

For the fourth quarter, enrollment activity remains soft as we completed our third straight year without a meaningful innovation to our program, a point I will come back to later.

Accordingly our NACO attendance were minus 2.4% for the quarter, and down 0.6% for the year.

With the benefit of recent franchise acquisitions, attendances were up 1.1% for the quarter, and up 7.7% for the full year.

Now on to the international business units.

Let me start by noting that as I discussed, our international businesses in order to provide apples-to-apples comparisons, all of the growth statistics I'm discussing will be normalized for constant year-over-year currency.

For the fourth quarter U.K.

revenues were up 23%, driven by the August price increase, Monthly Pass benefit and continued strength in product sales.

U.K.

Q4 attendances were down 2% versus prior.

While the penetration rates of Monthly Pass are still below those of NACO, they're above our initial expectation and are already having a significant impact on the U.K.'s top line.

For the full year, U.K.

revenues were up 14%, primarily driven by Q4 strength as well as strong growth in both in meeting product sales and licensing revenues that have been outstanding throughout the year.

In Continental Europe, Q4 revenues were effectively flat at plus 2%, weak attendances of minus 9% were offset by strong product sales and the benefit of Monthly Pass in Germany in the fourth quarter.

For the full year, Continental Europe revenues were flat at 0.8% with attendances for the year at a disappointing minus 9%..

Again, I would note that Continental Europe just completed its third year without the benefit of material program innovation.

Moving onto WeightWatchers.com.

WeightWatchers.com caped off an outstanding year with Q4 revenue growth of 24%, despite the loss of eTools revenue now that eTools is offered for free with Monthly Pass.

For the full year WeightWatchers.com grew its top line by 18%.

Our highly successful Weight Watchers Online product achieved end-of-period subscriber growth of 27%, compared to growth rates of 21% in Q1, 22% in Q2 and 25% in Q3.

Our efforts to boost awareness of Weight Watchers Online with TV advertising have been successful.

The online business further benefited from strengthening retention in the second half of the year as we continued to make numerous improvements to the functionality and performance of the website.

It is worth noting that in Q4 WeightWatchers.com accounted for 20% of the company's total operating income.

Now I would like to turn the discussion over to Ann Sardini who will elaborate further on our Q4 and full year performance.

After Ann's remarks I will return to the topic of our strategy and direction forward in 2008.

Thank you.

Good afternoon, everyone.

Our 2007 financial success was driven by revenue growth and gross margin expansion resulting from Monthly Pass, which ended the year having achieved 93% global growth in installed base to over 800,000 members and our Weight Watchers Online, which derived significant benefits from its first year of national television advertising, growing end of year active 27%.

In meeting product sales per attendee for the year also posted impressive results, growing by 13.6%.

Total consolidated company revenues were 19% higher in comparison to last year, reaching 1.47 billion.

Gross margin topped 55%, a 70 basis point increase over last year, and operating income grew by 14.6%, to 435.6 million.

Our net income for the year is 201.2 million, compared to 209.8 million for the full year 2006.

EPS grew 17.5% from the year earlier level, to $2.48, from $2.11 on a GAAP basis.

On a more comparable basis, EPS grew 21.4% in 2007, to $2.50 from $2.06 in 2006.

This EPS excludes early extinguishment of debt charges taken in both years and it excludes from 2006 a 6.3 million reduction in tax reserves related to our adoption of FIN 48 accounting for uncertainties in income taxes.

The decline in full year net income versus prior year resulted from 59.7 million of higher interest expense, which was incurred in conjunction with the funding of our first quarter 2007 buyback of 19.1 million shares.

Earnings per share in the year benefited from the now lower number of shares outstanding.

Consolidated company fourth quarter operating results continued the growth pattern seen in earlier quarters.

Revenues were up 20.5% versus prior in Q4, to 344 million.

We gained 70 basis points in gross margin, moving up to 52.4% versus last year's 51.7% and operating income increased 15.1% to 90.1 million.

As with the full year, fourth quarter net income of 39.8 million was below last year's 44.3 million because of higher interest expense.

The incremental debt that we took on resulted in a 13.1 million increase in interest expense; however, earnings per fully diluted share benefiting from the associated share buyback rose 11.1% in the quarter to $0.50 versus $0.45 a year ago.

Excluding the aforementioned reduction in 2006 tax reserve which benefited the fourth quarter 2006 by $0.06, our 2007 EPS increased a robust 28.2% as compared to $0.39 in prior year.

Looking at our fourth from more of an operations perspective, as David indicated revenues from all major sources posted strong gains in the quarter, with meeting fees up 22.4%, product sales up 15.2% and Internet revenues up 23.9%.

Fourth quarter meetings fees grew 38.2 million globally to 208.7 million.

While worldwide attendance in the period declined by 2.8% to 13 million, as a result of sluggish recruitment, the value of each enrolling member has risen markedly in those markets where we launched our Monthly Pass commitment plan.

Our Monthly Pass members are staying engaged in the program longer, using our Internet delivered eTools to help them stay on track, and they're attending a few more meetings on average during each enrollment cycle.

Product sales in our meetings enjoy a sixth consecutive quarter of growth, up 10.3% over Q4 last year in local currency.

On the ongoing strength of our successful strategy of refreshing and rotating product offerings on a regular basis.

On a per attendee basis, the increase in product sales was 13.4% in the period, contributing in a significant way to the rise in value of each member.

WeightWatchers.com revenues grew 24% in the quarter to 39.4 million.

Now in terms of some of the specifics of our geographies, NACO's fourth quarter meeting revenues including in meeting product sales were 170 million, 22.4% higher than last year with growth per attendee in both revenue categories driving gross margin expansion in this geography, there were nearly 700,000 Monthly Pass active at year-end 2007.

NACO meeting revenues were up double-digit versus prior throughout 2007 ending the year with 24.8% growth, 7.9 of it coming from acquisitions.

Monthly Pass drove year long gross margin expansion for NACO.

This fall we launched Monthly Pass in two of our international markets, U.K.

and Germany.

These launches along with the significant price rise taken in the U.K.

and strong product sales across most of our international markets moved fourth quarter international revenues up 7.1% versus prior on a constant currency basis.

This, despite an 8.3% decline in total international attendances in the quarter.

In current dollars, international fourth quarter revenues were 108.9 million, an 18.2% increase over prior.

Full year international revenues were 469.5 million, up 13.9% in U.S.

dollars but 4.3% in local currency.

Full year attendance was, 24.6 million in 2007, 4.4% behind prior year.

Looking briefly at the U.K.

and Continental Europe separately, U.K.

meeting revenues were a strong 38.9 million in fourth quarter, up 23.5% in local currency from the combination of the August introduction of Monthly Pass and an pricing action.

For the full year, U.K.

posted a 13.7% increase in meeting revenues, benefiting from seasons past in the first half as well as the fall diet season items mentioned above.

In fourth quarter 2007 Continental Europe's meeting revenues were 46.4 million, up 2.5% in constant currency.

For the quarter, meeting fees declined, though at a a lesser rate than attendance which was off 9.5% in the quarter while product sales were up by 12.2%.

For the full year, Continental Europe's meeting revenues of 199.7 million were flat with prior on a local currency basis.

In meeting product sales which grew considerably on a per attendee basis were nonetheless deflated by the 8.5% decline in full year attendance versus prior.

WeightWatchers.com's metrics have been outstanding all year with full year revenues up 17.5% to 154.1 million, from 131.1 million last year, despite the lower demand for paid eTools and Monthly Pass markets.

Revenue growth at the dot-com level was up 23.9% in fourth quarter, from 31.8 million last year to 39.4 million.

Online end of period active subscribers rose 27% in the quarter, to 584,000.

Moving to a review of our other revenues, franchise commissions grew by 9.3% year-over-year in the quarter.

Despite declines resulting from our reacquisition of three North America franchises over the past year.

Same-store franchise commissions grew 20.5% in the quarter, to 3.6 million.

Many of our U.S.

franchisees are benefiting from our move to a national TV advertising platform, and there is some benefit year-over-year from favorable currency exchange in our international franchise commissions.

Our other revenues grew 16.7% in the quarter, to 22.1 million.

Licensing revenues in the fourth quarter increased 16.4% to 14.8 million.

Revenues from our publications were 7.2 million in the quarter, up 17.5% on prior.

For the 2007 year, our other revenues were 80.1 million, an increase of 17.2%, with licensing contributing the lion's share up 21.4% on a full year basis.

As I noted earlier, our consolidated gross margin delivered an incremental 70 basis points versus prior in the quarter, to 52.4%.

The business experienced some downward pressure in Continental Europe, largely as a result of lower meeting averages.

However, revenue related margin -- gains in NACO and U.K.

more than compensated.

Our fourth quarter marketing investment increased 8.3 million or 24.8% over last year's level to 41.8 million.

NACO began its winter 2008 ad campaign in late December as planned, spending 3 million more than prior year in the quarter.

Continental Europe also spent ahead to support the launch of its winter diet season Power Flex Innovation.

And as I mentioned earlier, WeightWatchers.com continued to invest in national TV in the U.S.

with strong results.

Fourth quarter marketing was 12.1% of revenues in 2007, versus 11.7% in 2006.

For full year 2007, marketing expense rose 29% or 46.4 million above the 2006 level.

Just as a reminder, our 2006 marketing expense was flat to the 2005 level.

In 2007, we began an earnest to review our advertising agency relationships on a worldwide basis, made changes and developed our communications strategy.

NACO upped it's full year spend by 22% or 11.8 million investing in production and in media in non-TV format.

NACO also added promotional activities and research in support of our relevancy initiative.

Also during the year we began TV advertising for WeightWatchers.com raising that business' budget by 15.2 million.

Currency exchange added 10% to our international marketing spend which was up 21.5% in total, including expenses associated with the winter diet season innovation and Continental Europe.

Total company full year 2007 marketing was 14% of revenue, versus 12.9% in 2006.

G&A expense in the fourth quarter 2007 was 48.5 million, up 35.6% from the prior year level.

IT is the largest driver of G&A growth accounting for more than a third of the increase.

As we mentioned on previous calls, we're in the midst of a multi-year investment initiative geared to addressing long needed systems upgrades and adding new functionality.

Higher IT expenses in the quarter result from a combination of increased depreciation as we bring new systems online, and higher maintenance related to new systems already put in service.

The remainder of the fourth quarter G&A increase results from management infrastructure upgrades which have occurred during and after the fourth quarter of 2006, as well as ordinary operational increases and the impact of foreign currency translation on our international expenses.

In addition, the significant gain in operating income versus prior year resulted in higher bonus expense.

G&A was 14.1% of revenue in the fourth quarter 2007, versus 12.5% in the 2006 comparable period.

If we exclude the impact of the incremental IT investment, G&A was 12.9% of revenues in the 2007 quarter.

On the full year basis, G&A increased 35.8 million or 26.1%.

About one-third of this increase is directly attributable to our increased IT investment with the remainder primarily driven by the build-up in infrastructure in some of our international markets, foreign currency translation, support fro franchise acquisitions and normal inflation.

The company's consolidated operating income in the fourth quarter was 90.1 million, up 15.1%, from 78.3 million in the prior year quarter.

Our consolidated operating income margin of 26.2%, as compared to 27.4% in the year earlier quarter.

The 120 basis point operating income margin reduction in the quarter was driven by the impact of investments in marketing and G&A as noted above.

Interest expense in the quarter which nearly doubled from 13.6 million last Q4 to 26.7 million this year was the result of the increase in our average debt outstanding which I mentioned earlier.

The average effective interest rate was slightly below last year's at 6.30%, versus 6.52% in 2006.

Average debt outstanding in the quarter was 1.69 billion, versus 840.8 million in the year earlier quarter.

Since the first quarter of 2007, when we raised our debt level to fund the share repurchase, we paid down 215 million of debt.

Our net debt to EBITDA ratio at year-end fell below 3.5 times.

As a result, I'm pleased to report that we have now crossed the threshold that enables the 25 basis point reduction in our interest rate spread over LIBOR and that will become effective around March 1st.

This combined with declining LIBOR rates and lower debt levels should materially lower our interest expense in 2008.

Moving now to our consolidated company cash flow and balance sheet, the company generated significant free cash flow in this quarter.

Cash from operating activities excluding interest was 82.2 million after capital expenditures, 71.6 million was available to service our capital structure.

We utilized our available cash to make interest payments of 28.9 million, reduced our debt by 38.1 million, and pay our quarterly dividend of 13.9 million.

As a result, the cash balance declined in the fourth quarter to 39.8 million.

In the full year 2007, we accumulated 413.7 million of cash from operations, excluding cash interest, after 31 million of capital expenditures, 381.9 million remained available to service our capital structure.

We deployed the cash to pay 95.2 million of interest, meet our dividend payouts totaling 58.5 million and pay down 215.2 million of debt.

Typically, as is the case in fourth quarter and full year 2007, our cash flow exceeded net income, primarily because of increasing negative working capital.

In particular, our working capital has been favorably impacted by higher deferred revenue arising from our Monthly Pass commitment plan and by higher permanent differences between booked and cash taxes that arise from increases in balance sheet goodwill as we acquire franchises.

Fluctuations in the balance sheet between year-end 2007 and year-end 2006, primarily reflect an $823 million increase in our debt balance including the impact of (flaw), and a 16 million increase in accrued interest.

Both are directly a result of our first quarter 2007 refinancing.

In addition, balance sheet deferred revenue was 16 million and franchise rights acquired increased by 32 million.

Just before turning the discussion back to David who is going to cover our 2008 guidance I'll make a few comments that might be helpful in putting together your models.

First, let me remind you that the timing of Easter impacts both attendance and the timing of our marketing spend.

This year's very early Easter falls in our first quarter, whereas last year Easter was in the second quarter.

When comparing on a year-over-year basis, this change in timing has the effect of shifting 300 to 400,000 global attendances from this year's first quarter into this year's second quarter.

In addition the marketing expenses from the first week of this year's spring campaign will fall into our first quarter, last year all of the spring campaign's expense was booked in the second quarter.

This will result in a shift of about $7 million in marketing into first quarter, relative to last year.

While all of this nets out when we're looking at the first two quarters combined, it will have the effect of enhancing our second quarter's financial results, while depressing our first quarter results.

Another point to keep in mind when you're looking at 2008, relates to this year's interest expense.

As I pointed out earlier, the combination of lower debt, lower LIBOR rates and a step down in the premiums should result in full year 2008 interest expense being 17 to 19 million lower in 2008 than in 2007, absent any incremental interest resulting from future franchise acquisitions or stock buybacks.

And with that, I'll turn the discussion back to David.

Thank you, Ann.

As I assume the role of CEO in January of last year, we came together as a management team to establish our long-term strategy and our near-term foundation building initiatives.

As we have shared many times, our mission and our objectives are simple.

One, more consistently help the people that come to us achieve their goals, or strategic plank of retention and two, find more people to help or strategic plank of relevance.

Retention.

The most important way to help our members achieve weight loss success is to keep them engaged in the program longer, therefore retention has become the most successful measure we use to evaluate our members engagement with our program.

Our four major initiatives for improving retention are, one, having a payment system that is better aligned with long-term member participation, i.e...

Monthly Pass.

Two, more consistently allocating our meetings to our stronger leaders.

Three, developing and adopting best practices in the meeting room and member experience and four, innovating our programs in a way that is truly helpful to member success.

We made great progress in the first of these four initiatives with the successful implementation of Monthly Pass in North America, followed by its launch in the U.

K., Germany and Australia last fall.

The most important aspect of Monthly Pass, is that it is simply a better way for members to engage with Weight Watchers.

It gives them access to the best of what we offer in a convenient way that encourages longer-term participation.

The following two facts best illustrate the beneficial impact of Monthly Pass for our members.

First, our members are staying engaged longer.

The average Monthly Pass member maintains their subscription for about eight months, versus three to four months of elapsed time with Weight Watchers for a pay as you go member.

Second, our clinical randomized trial research shows that people who do both eTools and meetings lose 50% more weight than those that only go to meetings.

In the second initiative, leader performance management we made great strides, particularly in the larger markets of NACO in the U.K.

In both markets we made significant and measurable progress in assigning more meetings to our stronger leaders.

With the new performance management HR discipline, combined with stronger reporting and data analysis capabilities, our field management is now well equipped to make sure that we're giving our members the best experience possible.

This starts with the leader and this will continue to be a point of focus for us in coming years.

At Weight Watchers, we are truly blessed to have such a large group of committed and passionate service providers.

Our job as management is to recognize who our stronger leaders are and properly support, train and compensate them, by doing so we will continue to improve the quality and consistency of the service we deliver to our members.

In the third initiative, member experience, 2007 was a watershed year on the development of critical consumer and member insight.

We completed several seminole pieces of research that have become invaluable sources of insight for the development of improved program and service offerings.

Specifically, we completed a large and comprehensive physiographic segmentation study, a major ethnographic study of member experience and a new meeting satisfaction research methodology.

The result of all these efforts has been a step function improvement in our understanding of what works for different types of members and where the critical needs and opportunities lie.

As we go forward we will be applying these learnings in everything we do.

Finally, in the area of program development, we've begun to make important progress.

When I first presented our business strategy in February 2007, I stated that we had to be focused on creating program innovations that had the potential to improve the likelihood of member success.

As I stated then, doing innovations strictly to feed marketing provides only short term enrollment gains and is not a sustainable approach.

With this philosophy we have effectively raised the bar on what constitutes a successful and acceptable program innovation.

Beginning last year, we implemented a more disciplined program development process designed to allow us to build a more consistent stream of meaningful innovations.

This process starts with ideas and ends with operational improving concepts.

The deep consumer research we did in 2007 has been critical to filling the funnel with the ideas that can truly address members' underlying needs, gaps and wants.

We now have a very clear idea on what to focus on and where to prioritize our efforts and these insights are fueling the program innovations we will be launching in the future.

The first example to come out of this process is Continental Europe's new program Power Flex which we just launched in late December and was its first major innovation in over three years.

For 2008 on the retention front, we will continue to increase Monthly Pass penetration in the U.S.

where it is now in its 15th month since launch, as well as to build Monthly Pass penetration in markets where it has only recently been introduced.

We will also look to expand the Monthly Pass footprint in 2008 to include France at the minimum.

Leader performance management.

We will continue to make progress in leader performance management.

With the strong progress we have already made here in 2007 we're looking forward to reaching new milestones in 2008 and beyond.

Program innovation, leveraging the consumer insights that we mined in 2007, we have a very clear sense of where to focus our efforts in creating new, meaningful program innovations.

That work is under way and we expect to launch significant program innovations for the U.

S.

and U.K.

markets in time for the January 2009 marketing campaigns.

Further more the funnel is being filled and we will return to a more regular innovation cycle.

Relevance.

As I've shared with many of you on previous calls and at various presentations, we have a terrific opportunity to re-energize and differentiate our brand.

We strongly believe that no company provides the kind of lifestyle base support aided weight management services that we offer.

We are uniquely positioned as the one organization that can help people lose weight and keep it off by learning how to live a healthier lifestyle.

As I have said before, we are in the business of teaching people how to fish rather than just selling them fish.

However, our advertising and marketing programs have not always reflected and effectively portrayed our uniqueness nor have they always been particular effective on important advertising elements like cut through and persuasion.

To begin to address these issues we undertook several key steps in 2007.

We started by appointing new advertising agencies in virtually every market.

We brought in new internal marketing talent.

Finally together we developed advertising strategies that would allow us to create campaigns that lasted years, not months.

Shifting brand perception is a job that doesn't happen overnight.

With our strategy in place we then focused our efforts on improving creative execution and driving a simple, differentiated brand message in a world full of diet, clutter and noise, Weight Watchers is the program that works.

This January we launched new campaigns based on this new advertising strategy and communication architecture in both the U.S.

and Germany.

For 2008 on the relevance front now that the new U.S.

and German campaigns are up and running we're gathering early learnings to further improve their effectiveness which each marketing season.

We will also have the opportunity to apply these learnings and we look to develop and launch new advertising in the U.K.

and other markets later this year.

One new piece of news in our strategy of expanding revelance is our announcement to enter the Chinese market as formalized by the recent signing of a joint venture with Group Denon It is a sad reality that the obesity issue has found its way into developing economies and prosperity has reached countries, such as China, India and others.

Obesity is now becoming a real issue in China and we have an opportunity and I feel an obligation to provide lifestyle based solutions for that market.

Having an experienced partner in Denon will be critical in helping us jump start our entry.

We now have a management team in place on the ground in China, consisting of highly experienced Chinese executives from Denon who will be leading this exciting new opportunity.

Moving on to 2008 guidance.

As I noted earlier, we are now in NACO's fourth year without a major program innovation.

And just as we had seen in Europe, going this long without a meaningful program innovation negatively impacts recruitments.

While the Kick Start add on, has been a very well received addition to our program, it is simply not significant enough to build a marketing campaign around.

In addition, I read the papers like everyone else and I have concerns about the impact of a weakening U.S.

economy.

Without a new program innovation in NACO in 2008, we expect the softness in the enrollment trends we've been seeing both from never members and rejoining members to continue.

As well, attendances will not be helped by Monthly Pass to the same extent in 2008 as they were 2007 now that we're lapping.

While we seek to use a variety of marketing promotional tools to hold volume up until we have a new program at the end of 2008, we feel it is best to be prudent and we're basing our plan and guidance assuming mid-to high single-digit attendance declines in NACO.

Fortunately, since we will still have continuing financial benefit from Monthly Pass, and our product sales per attendance and licensing revenue should continue to do well, NACO revenues should continue to grow in 2008.

Despite not having an innovation in 2008, the U.K.

has gotten off to a solid start, running basically even with what was strong first quarter last year.

For the full year, we're forecasting flat attendance versus last year in this mature market.

However, we expect a lift from Monthly Pass to generate very positive revenue growth in the U.K.

Although it is still early days, we're very pleased with the results so far in Continental Europe.

With a significant new innovation being well received by members throughout Europe, attendances in the first six weeks of the year have trended back to our positive territory.

Based on this early success, as well as other planned initiatives, we're forecasting mid single-digit positive attendance growth in 2008, a double-digit swing from the trends last year.

Finally, I can also report that WeightWatchers.com is off to a strong start again in 2008, as this relatively newer offering continues to gain traction and penetrating its target market, bringing hundreds and thousands of new people into the Weight Watchers franchise.

In the U.S., where we're now lapping marketing campaigns with no increase in media weight, we are still seeing a continuation of strong growth.

We're seeing even more significant growth in the U.K.

and Germany where we launched awareness building TV advertising this January.

For the full year, we are forecasting Paid weeks growth of 20%.

Let me remind everyone as Ann mentioned that this year's early Easter will have the effect when comparing to the prior year of reducing this year's first quarter attendance in revenue while increasing revenue and attendance in the second quarter.

In addition an early Easter means that the first week of marketing expenditures for our spring campaign will fall into our first quarter this year versus falling entirely in the second quarter last year.

What this means is that on a year-over-year basis our first quarter will appear weaker than the underlying trends in our second quarter will appear proportionately stronger.

In summary, we anticipate solid top and bottom line growth in 2008.

Our strengthening business in Europe, the positive impact from the continued rollout of our Monthly Pass commitment plan, good growth in our licensing business and meeting product sales and WeightWatchers.com will all combine to more than offset for the projected attendance weakness in NACO.

Overall we expect revenue growth to reach double-digit for the year and full year EPS between $2.80 and $3 per fully diluted share.

At this time, we would like to answer any questions you may have.

Thank you for your patience.

The first question is from Scott Mushkin from Banc of America Securities.

Please go ahead.

Hey, David.

Hey, Scott.

I'm on a cell phone here, driving but hopefully you guys can hear me okay.

Just to clarify your NACO thoughts, I mean, are you guys seeing those types of declines currently, even though you launched that major new ad campaign?

Are we not going to really see retention and the relevance issue come together in NACO until '09?

Well, let me answer those in order, I think.

First off, when we set our guidance as we just shared for attendance in NACO, it is based on the trends that we're seeing in the first six weeks of the year.

Reflecting everything that we think is going on.

It is with the benefit of the new advertising campaign.

Despite the fact that in the first six weeks, we're not seeing positive attendance growth, I'm still very optimistic and positive about the attendance campaign in particular, in addition to generally getting feedback on it, we've also been doing quite a bit of quantitative research on it post launch and everything we're seeing from the campaign is that on a number of dimensions it's scoring quite well.

In particular on the dimension of persuasion, in other words giving people a new reason to consider and rethink the WeightWatchers brand.

It's scoring better than any campaign we've launched in quite some time.

We're very positive about this campaign.

The thing I would say about it is this kind of brand shifting campaign is the kind of advertising that takes a period of time to really take hold.

If we had done advertising for example with a completely new program and saying that Weight Watchers is this whole new thing, I would have anticipated a more immediate reaction to the advertising.

But because the advertising is primarily about sort of general brand perception shifting, my view is that that takes longer to really sort of penetrate the public consciousness.

In terms of retention and relevance, I think there's a couple things.

If you look at retention, first off, there's certain things we already launched that we've already gotten benefit from.

Monthly Pass was one of the retention initiatives and we've been benefiting that through last year and going into this year.

We are making measurable progress in terms of increasing the average quality of service in our meeting via the leader performance management and we're getting a lot of good insights that's helping shape our thinking in terms of how to evolve our service offering as well as program innovation.

In all those dimensions, different things take hold at different points in time, depending on the time line associated with making them happen but we're quite pleased with the progress we are and the retention initiative and we're absolutely on track for where we wanted to be when we started this in the beginning of '07.

With respect to relevance, it would be my anticipation that as we continue to push this campaign, and this theme that I would expect for us to be increasingly effective in doing something that we haven't always done that well, which is really differentiating our brand in the mind of members, particularly never members.

As we build that platform, it's going to put us in a really good position that as we do come out with a new program in 2009, it's going to be doing it with a brand in much more solid place in the mind of consumers.

And so the work that we've been doing on the relevance dimension, particularly with respect to advertising that we're going to continue building on throughout the course of the year, I believe is going to put us into a fantastic position to sort of further lever up, if you will, the benefit from the things that we're working on that we're going to be pushing into 2009.

Okay.

So just follow up quick, then I'll get off the line here.

Did you see sequentially deceleration in attendance year-over-year as you moved into the first quarter?

Just want to be clear.

As we moved through the first quarter?

As you moved into into the first quarter over the last six weeks.

Well, it's always a little bit odd as we move into the first quarter because you have that period at the end of December where there's so little volume in the business given the holidays, it's kind of hard to get a gauge of how things look in December versus how things look in January.

The trends we're seeing in January, first you had this sort of odd situation in the first week where new year's was on a later day, a lot of people just took the whole week off.

Putting that aside, the trends we're currently seeing are sort of what -- it's been fairly consistent so it's not like we're seeing kind of an increasing deceleration as we move through the first quarter.

It's been kind of a steady state.

Okay.

And then the final thing is going to the relevance and retention issue, am I wrong to say that until you -- maybe I'm thinking of that wrong, the intersection there is where you will become -- you will start getting new people in.

In other words, word of mouth has always been really important for you guys.

Until you intersect the relevance and the retention issue it's going to be hard to drive new membership growth and we really don't expect that until '09 is what you're saying?

As I said -- here's the way to think about collective interest in Weight Watchers and maybe this is sort of a different frame to put on it.

The one thing I would point out, even if you look at 2007 and we think this is going to continue into 2008, net interest in Weight Watchers in North America is increasing.

If you look at the sheer number of customers that -- paying customers we have in 2007 versus 2006, they were categorically higher.

Furthermore, if you look at -- and while we said there was an enrollment gap versus 2007 and 2006, it was more than made up for by the increased number of sign-ups on Weight Watchers Online which is doing a good job of penetrating its respective market.

We would expect that to be a comparable trend as we go into 2008 but as we go into 2009, we then have the benefit of the continuing growth of '09 but we also have the benefit with the new program innovation of bringing back the sort of the ideal target members from the ideal segments for the Weight Watchers meetings business, back into the fold in the way that the whole sort of thing rises.

The other point that's worth making about that is that furthermore, if you look at an online subscriber versus a meetings member, a pay as you go meetings member is comparable in value to us financially as a Weight Watchers Online subscriber.

A Monthly Pass which is really kind of the best of both, if you will is our highest value offering both in terms of weight loss but also in terms of financial return to the company.

So all those things I think together are going to continue working as we go through 2008 and into 2009.

I do believe that once we are doing some of the things we need to do, and specifically consider that as we work on the new program and as we also spend time finding ways to innovate our service offering, that the whole intent behind that is it's going to drive better member success which to your point results in word of mouth.

Our view was that we kind of needed to know where to focus on and we needed the right consumer insights to get there and that's what a lot of 2007 was about.

If that's the case, then 2008 is about basically creating and executing and implementing the designs that flow from that that begin to benefit us in 2009.

All right.

That's interesting and long call but thanks for all the detail.

It was good, actually.

Okay.

Thank you.

The next question is from Alvin from CitiGroup.

Please go ahead.

Hi, everyone.

Wanted to know some of the softness you've seen in the U.S., is that any impact from Alli?

That we don't think.

We have no reason to believe that Alli having any significant impact on our business.

Look at the trends, as I understand it, Allis, best quarter sales were in the second quarter and as I understand its Q3 and Q4 was relatively less robust, if you will.

And furthermore I think what they're calling for is sort of flattish some growth in the U.S.

in 2008.

As well as say stated before when asked that question, Alli we believe, as a diet alternative, if you will, is more likely to impact other approaches, which are kind of more of a do it for me style of weight loss such as prepared meals and things like that.

Whereas if anything, what we would expect to see is that Weight Watchers members could make the decision to also take Alli to further supplement their success.

I've asked the question a lot of times and I've spent a lot of time kind of out on the field with leaders and territory managers and members an everything else and every time I posed the question I kind of get blank stares back.

I really think they're appealing and focusing on a different target market segment than we are.

Okay.

Great and do you think some of that may be because you're most reactivation business does that sort of isolate you from that impact or -- ?

Well, I'm not completely sure I know what you mean by that but let me give it a try.

If what you're asking is whether our regions are less susceptible to the message of Alli, I suppose I could see that.

But we also get a fairly high percentage of our people we call never members, people that haven't been with Weight Watchers in ages.

And I would argue that it's more the kind of people that are attracted to us.

In other words, if you thing about the people that are interested in adopting and having a sustainable -- sustainable weight loss through a healthy lifestyle.

As I referenced before, earlier in 2007 we did this massive study and clearly one of the things that comes out of that is the recognition that different people are wired in different ways and what I would suggest is that the kind of segments that we appeal heavily to are not the kind of folks that would be focusing on pharmaceutical solutions, if you will.

Okay.

Great.

And final question regarding your franchisees, what's your strategy towards acquiring them?

How aggressive will you be and what kind of multiples are you sort of willing to pay?

We're continuing along the same lines that we have been since we started our acquisition program.

We are -- we talk to any franchisee who is interested, potentially, in selling.

We are eager to acquire certain of our franchises.

We do obviously valuations and due diligence and reviews before we take anything on.

And they are extremely accretive to us.

In terms of aggressively seeking, that's really not how it's gone.

It's been more of an opportunistic acquisition when somebody approaches us.

Okay.

Thank you.

Thank you.

The next question is from Chris Ferrara from Merrill Lynch.

Please go ahead.

Dave, did you expect attendance in North America to react better than it did in January so far?

Yes, I would have hoped.

I mean, it's one of these things where I would have conversations and they're probably listening so this is for their benefit to.

I would have conversations with our marketing team saying it's ridiculous for you to thing being out with a new advertising campaign is going to suddenly turn trends around after four weeks but I would be lying if I didn't say I was a little bit susceptible to the same sort of hope and expectation.

That being said, I would suggest that if I'm looking at it logically, the outcome we're seeing is not inconsistent.

I think one thing I want to come back to, which is kind of an important point, which is that it's not like we're seeing -- the enrollment trends we're seeing now is not income with the enrollment trends we were seeing last year.

Last year we had a full year effect of Monthly Pass accreting attendances above and beyond per enrollment cycle, if you will so that had the benefit of sort of helping us kind of close the gap a little bit.

But now that we have lapped it, we don't get the full benefit of that anymore so sort standing without from an attendance point of view some of that lift from Monthly Pass.

Now the good thing is we're get a bit of that lift from a revenue point of view.

That's why we're still looking for positive revenue growth for NACO this year.

Got it.

Why does it -- why will it be a year before we see a new product coming through or another innovation?

The best way I can describe it is that I'm pretty insistent that the program that we launch be a fantastic program.

I want the kind of program that people walk out of it and say that was unbelievably great, I can't believe you guys have never done that before.

It's fantastic.

Those are my unreasonable expectations for the kind of response we're going to get and for us to get that kind of response we have to do this the right way.

It was hard for us, because we -- we had things that we could have played with that were in the pipeline last year but when we looked at it, we asked ourselves a question are these things going to meaningfully impact member success or not and the conclusion that we came to was the things that we had at our offer were not the types of innovation that we thought were going to have a meaningful impact on member success and while we probable could of made hay with them with marketing, it just didn't feel like the right thing to do.

So while we were doing tons and tons of consumer work, which it's hard for me to express how to important that has been for our thinking, and to focusing and prioritizing our plans for program development, that brings us into this year.

If you think about it, when you launch a new program, the best way I can describe is first off you need to iterate a bunch of times with the prototype your developing and working on to make sure that's your working through all the second and third order effects that come with a significant innovation.

And to make sure that we're constantly checking back with both never members and current members, that we're not missing anything because it's a tricky business in the behavior modification world.

The other thing I would also point out is that we've got give or take 7200 leaders alone in NACO and getting 7200 leaders trained and comfortable and ready for action is something that just -- it takes time and focus and it's a lot of hard work and so our view, if you kind of look through the whole time line, believe it or not hitting January is going to require a consistent and steady effort and it's going to require us to hit milestones which we will hit.

But nonetheless, the timing is about right if we're going to get the right program out.

Got it.

Thanks.

One other quick one.

What are you guys thinking about for SG&A and for marketing as you head into 2008.

Original hi you said marketing would probably be flat as a percentage of sales year-over-year.

Can you give an update on that, maybe.

I think it will with up a little bit as I'm looking at it now, having gone through the whole process of planning 2008.

I think G&A on the other hand will be flat as a percentage of revenue.

A little bit less perhaps run rate than fourth quarter of this year.

And I'm sorry.

Just one more.

On the top line guidance, I think Dave you said revenues you think you'll reach double-digit revenue growth.

Is that including or excluding currency?

It's excluding.

We budgeted our currency at the rate that we have on average for this year so there's no currency impact.

Thank you very much.

I appreciate it.

Thanks.

Thank you.

The next question is from Michael Binetti from UBS.

Congratulations on a nice quarter there.

Just a real tactical question for you.

On the Monthly Pass uptake, could you give us a rough idea of what percent of attendees in this quarter were on Monthly Pass.

We're seeing roughly a consistency in the trend of penetration.

Just a few things on Monthly Pass.

We're seeing fairly consistent trends in terms of overall penetration rates in NACO versus what we've been seeing for most of the last year.

The other thing that I'll point out, which has been encouraging, particularly given early concerns we had about the economic climate is that the retention for Monthly Pass in January has held up very nicely as has propensity to attend meetings so monthly pass continues to be a good source of stability for us.

I think last time you talked about it you said it was over 50%.

Is it still hovering around that area.

That's right.

I guess just one other tactical question.

I have a follow-up.

How can you compare that, the Monthly Pass uptake in the U.K.

and Germany in the early days to what you saw in the U.S.

a year ago?

It's lower.

And we expected that it would be lower.

That's due to a number of reasons.

First off, it has to do with the way the credit cards are used by a given market.

It also has a little bit to do with relative penetration of ecommerce and internet penetration and a few other things.

But nonetheless, we -- I would say that it -- while it's lower, it is ahead of our expectation that we originally had and it's not a million miles away.

Then just I guess one last question.

I guess how do you separate competition from the economic sluggishness you're seeing in the NACO outlook and I guess maybe an add-on to that question, to what extent do you feel that you're sensitive to trade down in the diet category to some of the lower cost online options that people may look at?

The good new is that we have a online business and it's holding up well.

The good news also from a trade down point of view, particularly if we were seeing sensitivity around the economy, as I mentioned before, we might have expected to see some of it in cancellation rates, which we have not seen, so that's also good.

I would actually point out if you look at Weight Watchers versus large commercial competitors, we're actually less expensive.

So if you compare us to particularly the prepared meal businesses, we are a lower cost option.

In terms of the online business coming back to that again, there really isn't a significant online competitor out there, other than the ones who are, I don't know, one-fourth or one-fifth our side.

We are by far the leading player the online weight loss space in the U.S.

Thank you.

Thank you.

(OPERATOR INSTRUCTIONS).

The next question is from Jerry Herman from Stifel Nicolaus.

Please go ahead.

Stifel Nicolaus.

Go good afternoon, everybody.

Let me start with a really big picture question.

Could you guys update us on sort of the demographic of the typical user, namely, age, income levels, so on and so forth?

Yes, sure.

For the meetings business, age is fairly reflective of the overweight population in general, call it 45, 47.

Weight Watchers skews above average on income and it skews above average on education.

If you look at Weight Watchers Online, it is going to run a little bit younger.

It's been a little while since I recently looked at that number but it's going to run typically about five years below what we see in the meeting business.

More.

Or more in some cases.

I would have said closer to 40.

And then in the case of Weight Watchers Online, it's maybe even higher education, maybe as a result of the age, comparable income.

And then typically another difference between online and meetings is that people that do online have a little bit less weight to use than people that go to meetings because they're appealing to different markets.

And then just a couple of questions about Monthly Pass.

You noted that the retention was actually pretty good in January.

Haven't seen a lot of cancellations increase.

Just to be clear, that's cancellations of paid weeks, i.

e...

credit card usage.

I mean, does that actually hold true also for attendance in meetings in the early part of the year?

Yes.

I'm sorry, that's a metric that we referred to internally as propensity to attend and what we're seeing is that propensity to attend trends -- that's a mouthful -- is comparable this year to what we saw last year which was positive.

Okay.

Good.

And it looks like the longevity of the Monthly Passer is about the same as what you shared in the past.

That's right.

Is it too early to tell the amount of time, if you have it at all, it takes them to re-engage, if they disengage?

It's a great question.

One of the tricky things, and this is based a little bit on my experience, kind of growing up on the dot-com side of the business where we always had had a nine month product in Weight Watchers Online is that it takes a -- a lot more time has to elapse before you really start getting a good beat on that, because you just need enough distance between when people start cancelling and when they return because everything alongated if you will.

So it's still a little bit early for us to speculate on that.

Okay.

Great.

And just a couple of sort of strategic/numbers questions.

The IT spending is pretty high.

It's making an impact.

When does it start to tail off?

And how does that show up in cap CapEx?

We have another -- at least another year, probably a little bit more than that, and the tail-off will not be back to the original levels that we were prior, right, David?

Right.

Just because we wanted to upgrade our meeting rooms to try to do some of -- some automation there and to keep current with all of our systems and processes.

So this year I think we're about 30 million in IT spend.

About 19 million higher in depreciation.

I think the depreciation will go up for about another year and-a-half, two years and then you'll start to see it come down.

Because it will -- more and more is going to be hitting expense directly.

I'll adjust a little bit of flavor on top of Ann's comments.

A good example is what Ann referred to is meeting automation.

Said differently and said by someone who has now worked as a receptionist.

Some of our meetings have point of sale terminals and some have what we refer to as paper tallies.

We're trying to get more and more of our centers, it's about half right now, with point of sale terminals.

It gives us a bunch of advantages, first off we can process members more quickly.

I t makes life a lot easier for the service provider to open and close the meeting.

In some ways, most importantly, it allows us to -- the future potential of more directly connecting what is happening with the member in the meeting versus with our databases which ultimately can connect back with the website as we integrate all those systems.

We think the investments we're making on that side are going to be important parts of how we drive service delivery in the coming years.

They've been investments that have been a long time going back to Y2K where we pulled out all the cash registers.

We're getting back to the modern day if you will.

One final question, if I might.

The JV in China, could you maybe give us a read on a expected ramp rate there and the initial investment and any potential at least initial dilution.

It's still early days.

We're in the process of sort of working with the management team of the JV as well as with our partner to time out what expenses are going to be happening when, what's going to be in 2008 versus 2009.

What I would say right this red hot second is that first off, I'll point out that the good news with a joint venture like this is we'll be sharing expenses51 - 49 with our partner.

And given that, and given everything I'm seeing, I cannot imagine that we would be spending anything more and probably less than $5 million in 2008 and it's still early days and we'll probably get back to more specifics on future calls.

Thanks, guys.

Thank you.

The next question is from Chris from Merrill Lynch.

Please go ahead.

Thanks for taking a follow-up.

Is the Monthly Pass -- I'm sorry if you said this.

Is the Monthly Pass accretive to gross margin yet as a concept like across the company?

I think you saw that our gross margin is up about 70 basis points on the quarter and the year and that's largely coming from North America from Monthly Pass.

So yes, it is.

Got it.

Thanks.

And then just on the penetration levels, I think you said in the prepared comments that you were trying to -- you wanted to improve the penetration levels of Monthly Pass in NACO.

I apologize if you said this.

What was the penetration level in the quarter.

Can you drive the penetration level higher in the back drop of declining attendances or are those not really related in that way?

I'd say they're not connected.

I do think we can drive -- what I said before was the attendance thing that you're referring to is more a function of bringing new noses into the door, if you will.

Which doesn't have -- is not necessarily or is not related to our ability to get the people who do come into the door directed toward our best and lowest priced plan which is Monthly Pass.

There's lots of different techniques and techniques things that we're going to be doing to make sure we continue driving members to Monthly Pass.

We can get them using the meetings and eTools and everything else we have a real shot at significantly increasing weight loss success.

Got it.

Thanks a lot.

Thank you.

The next question is from Michael Binetti from UBS.

Thanks for taking a follow-up.

Just a quick question on China and I had one other tactical question.

The China business, could you give us a little hint as to what that business is going to look like, is it going to be a meeting business like you see here in the U.S.

or is it going to be licensing known products or some mix of the two.

I'll first off make the statement that particularly with a market like China, my sensitivity over competitive issues is heightened, if you will.

And so from that point of view, I don't want to go into too much specifics but I would say that the concept that we're focusing on in China would more closely resemble the primary business we're in which is helping people lose weight as opposed to having a primary focus on licensed products.

Okay.

Thank you.

And then I guess maybe you could help us understand directionally if you see -- I'm curious about kind of the regional trends you're seeing in the U.S., some of the consumer and retail companies have been reporting pockets of sluggishness in some of the areas that have been in the headlines as far as the consumer slowdown, perhaps California, Florida.

Have you seen I guess trends on a regional basis that have stood out to in those type of areas.

It's an interesting question.

Normally we don't talk about regional trends within the NACO business.

But nothing in particular comes to mind in terms of any -- in terms of any individual states being or regions being weak or soft.

Okay.

Do you feel that you benefited maybe at all from some of the L.A..

Weight Loss Centers that we saw have been closing down lately in the quarter.

I don't know.

Again, it kind of goes back to who is your target market.

I think our view is that I think thinking you're referring to the Pure Weight Loss world business, if I understand that right.

Correct.

Again, I think that that's appealing to kind of a different market segment than what we typically see has been our experience with L.A.

Weight Loss.

They tend to be more of a peripheral competitor to us.

I think they're going after a slightly different person.

And so I don't think that we've seen anything in particular.

Certainly, we've been working with them as Pure Weight Loss has been working with a number of different companies to make sure that if there are people who are attending pure weight loss, if you go to their website, Weight Watchers is visibly present so those people do have a place to go to.

I don't see any evidence that it's driving any meaningful volume to us.

Thanks again.

Thank you.

The next question is from Scott Mushkin from Banc of America Securities.

Please go ahead.

Thanks for taking a follow-up.

So David, I'm sitting here listening to this call and kind of I guess a little depressed in the sense that you guys had great financial performance and the outlook for next year looks pretty strong financially but we're sitting here with I think what everyone is probably thinking is a NACO business where attendance is as you said you're expecting down mid-to high single-digits on an attendance.

I guess I'm just -- at the same time you said that total usage of Weight Watchers is actually up if you put dot-com in there.

I'm starting to wonder is a time that we did a soul search on this meeting business and maybe took a different approach.

No, it's not a crazy question but I don't look at it that way at all.

And for the following reasons.

It is very simply the case that having the meeting business without the benefit of any kind of significant news going into the fourth year is going to take a toll.

We saw it last year in Continental Europe and we're seeing what happens in Continental Europe when we did introduce a program at least if the first few weeks of the year.

So I really do have confidence that we can continue driving interest back in that part of the business.

The other point that I want to point out, it's hard for me to express its enough, is that when you take Monthly Pass and you have both the benefits of a meeting and the benefits of the Internet tools, it really is a different proposition.

So I think that I definitely wouldn't put meetings in kind of that, it's going away box in any way, shape or form.

It's just that online happens to be doing really well because it's allowing us to penetrate into a brand-new target market for us.

And I spend -- and Scott as you know, I spend a lot of time out at meetings, out in the fields, a lot of time with members and the thing that I'm consistently seeing is they're having great success and I'm seeing younger people and older people and I'm seeing all sorts of different folks.

So what I see is basically a business that just needs the right catalyst and it needs the right efforts to bring it to a new place that is going to give us much more meaningful news, that's going to result in more people coming in, having better success, and then the engine starts running again in terms of getting more new people in the door and in the meantime it just happens to be that we're also keeping the brand vital because we do have both the online business and the meetings business which collectively we continue to grow kind of overall net consumer interest in Weight Watchers year-over-year.

Yes, I guess I was thinking maybe less is more or more with less, less meetings, maybe more formalized meetings, more centers, that type of stuff.

We talked before about how a lot of ways these meetings are a throwback to the '70s and '80s, the way they're structured.

I don't agree with the characterization.

Now, granted, I have the benefit of the consumer research that I can't point to what you're referencing as any particular issue with meetings at all.

Now -- let me finish.

I'm sorry.

What I do thing is absolutely what -- I haven't talked about because I don't have anything specific to share.

Clearly as you do all this consumer work and you get all these insights, when I say ethnographic we literally were following 45 members month in and month out as they went through the process.

When I say segmentation, it was just a massive and exhaustive study.

The things we know now about what works really well and the things we know about what's going to make it work even better is very important to us around it what it's going to allow us to do.

The first thing I am talking about is the fact that we're going to put out a program innovation that we think is going to have a significant impact.

The other thing I point out is that is also opens the door for us to evaluate what is the optimal service offering.

How can and should our meetings evolve.

How do we make it more effective and more efficacies for the members that are coming to it.

I don't think that has anything to do with meetings being irrelevant, per se, because I don't agree with that.

But I do think we have no shortage of ideas now, things we need to do to make things stronger.

Thanks for considering my questions.

I appreciate it.

There are no further questions registered at this time.

I would now like to turn the meeting back over to Mr.

Kirchhoff.

Thank you for joining us today and I look forward to speaking with you at our next earnings call.

Thank you.

The conference has now ended.

Please disconnect your lines at this time.

Thank you for your participation.