WW International Inc (WW) 2011 Q4 法說會逐字稿

Ladies and gentlemen, welcome to the Weight Watchers International fourth-quarter and full-year 2011 earnings teleconference call.

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

Afterwards, you will be invited to participate in a question-and-answer session and instructions will be given at that time.

As a reminder, this conference call is being recorded today February 14, 2012.

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

Thank you and thank you to everyone for joining us today for Weight Watchers International's fourth-quarter and full-year 2011 conference call.

With us on the call are David Kirchoff, President and Chief Executive Officer, and Ann Sardini, Chief Financial Officer.

At about 5 PM Eastern time today, the Company issued a press release reporting its financial results for the fourth quarter and full year 2011.

The purpose of this call is to provide investors with some further details regarding the Company's financial results as well as to provide a general update on the Company's progress.

The press release is available on the Company's corporate website located at www.WeightWatchersInternational.com.

Reconciliations of non-GAAP measures disclosed on this conference call to the most directly comparable GAAP financial measure are also available as part of the press release.

Before we begin, let me remind everyone that this call will contain forward-looking statements.

Investors should be aware that any forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here today.

These risk factors are explained in detail in the Company's filings with the Securities and Exchange Commission.

Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of such statements.

All forward-looking statements are made as of today and except as required by law the Company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.

I would now like turn the call over to Mr.

Kirchoff.

Please go ahead David.

Good morning and thank you for joining us as we review Weight Watchers International's performance for the fourth quarter and full year of fiscal 2011.

Weight Watchers ended 2011 with a strong fourth quarter and the best financial performance in the Company's history.

The combination of the launch of PointsPlus and hard-hitting marketing benefited our North American meetings business throughout the year particularly in the first quarter of 2011 when we saw explosive growth.

Our WeightWatchers.com business surged to new heights throughout the year.

Strong performance in the UK was sufficient to offset softness in our Continental European business.

In the fourth quarter of 2011, our business delivered solid year-over-year volume growth and very strong financial performance despite beginning to lap the surge in volume we experienced with the new program launch that began in late November 2010.

WeightWatchers.com remained at all-time highs throughout the end of fiscal 2011.

On a constant currency basis, Q4 2011 revenues grew 12.5% over the prior-year period with meeting fees up 11%, and meeting product sales down 22%, and Internet revenues growing 60%.

From a volume perspective, combined global online meetings and meetings paid weeks grew by 34% in the fourth quarter versus the prior-year period.

Q4 2011 global paid weeks in our meetings business were up about 13% versus the prior-year period while paid weeks for Weight Watchers Online remained very strong at 67% versus the prior-year period, almost exactly on par with the growth rates we saw in Q3.

Q4 2011 EPS was $0.86 compared to $0.66 for the same period in 2010, a growth rate of 30%.

Included in the Q4 2010 EPS was a $0.02 benefit per share from the reversal of a prior-year UK VAT accrual.

For the full year, the Company delivered revenue of $1.8 billion, operating income of $546 million and net income of $305 million, which translated into a 2011 full-year EPS of $4.11 versus $2.56 in 2010, a growth rate of 61%.

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

First, our North American meeting business.

To put our fourth-quarter metrics in context, as I just noted, beginning in late November of the fourth quarter, we began lapping the launch from the PointsPlus program in 2010.

During that launch, we experienced tremendous PR and buzz around the historic program changeover.

This resulted in an unusual surge in enrollment in the last six weeks of fiscal 2010.

Further, many monthly paid subscribers who otherwise would not have attended as frequently during the seasonally low period showed up in late November and December to learn about the new program.

This resulted in a significant surge of attendances during this typically quiet time of year.

Finally, as we switched over to the new program in the last six weeks of 2010, we experienced abnormally high levels of in-meeting product sales per attendee as our entire installed base of members bought the new tools and publications associated with following the new PointsPlus program.

For the fourth quarter of 2011, total NACO revenues were $193 million, up 7% versus the same period in 2010.

NACO meeting fees grew by 16% versus the prior-year period driven principally by paid weeks volume growth.

In-meeting product sales declined by 22% as we began to comp against a spike in product sales related to our PointsPlus launch in Q4 2010.

As a point of reference, product sales in Q4 2010 were up 46% as compared to Q4 2009.

NACO Q4 2011 paid weeks grew 15% versus the prior-year period compared with the 26% paid week growth we saw in Q3 of 2011.

NACO attendances for Q4 increased 6% versus the prior-year period, slower than the 14% growth we saw in Q3 of 2011 but ahead of the expectations we communicated in our Q3 conference call.

The two test markets where we rolled out our new upgraded retail centers in 2011 showed an enrollment lift of about 15%.

In anticipation of tough comparables in the seasonally all-important Q1, we made an all-out effort to open as many new upgraded retail centers as possible prior to January 2012, setting an ambitious objective of reaching 50% of our network by end of year.

Unfortunately, due significantly to unforeseen delays in achieving permitting due to the complexities of widely varying municipal rules and ordinances, we were able to only open a total of 166 centers, half of our objective, prior to the beginning of January winter campaign.

As of this call, openings of new locations have reached 239, or 35% of the total fleet of stores.

Importantly, we continue to get very positive feedback from our members on our retail upgrades, but we are disappointed we could not get the full benefit of our planned number of openings in our Q1 enrollments.

Building our B2B capabilities has been a consistent source of effort and investment in NACO throughout 2011.

At this point, it would be useful to provide a little more background and context on NACO's existing corporate business.

In 2011, the corporate, or as we sometimes refer to it, at-work business accounted for roughly 12% of our meeting attendances in this market.

Historically, the vast majority of this business has been a bottom-up grassroots regional business consisting almost entirely of individual locations in which an employee would gather interest from 20 to 25 colleagues and request a Weight Watchers leader to run a meeting on site.

This has been a cash check business and the selling process was highly local with some additional support from telesales representatives.

Beginning in 2011, we started in earnest to sell our programs at the corporate level to the heads of benefits and the chief personnel officers at larger employers, marking the first time we have sought to achieve top-down selling to larger corporations with a professional sales team.

This is what we refer to as our strategic international accounts business.

Early results from 2011 have been very encouraging with recent examples announced of new accounts, including American Express, NBC Universal, and the New York Stock Exchange.

Employers, particularly those who are self-insured, are encouraging their employees to seek a healthier lifestyle, and in many cases are providing subsidies or reimbursements when they purchase paid in Weight Watchers programs.

Key to supporting our efforts to bring in large accounts, the NACO team also began the process in late 2011 of converting the meetings product and payment message which we have historically used in our at-work business from a thick 17-week series paid upfront in cash to a corporate version of Monthly Pass where billing is recurring.

Having a corporate version of Monthly Pass is critical to supporting our larger accounts and those who offer a full or partial subsidy to their employees.

For these large corporate accounts, the transition was an important and well received change.

However, one unforeseen consequence of this change from a 17-week series to Monthly Pass has been a series of importation issues within the grassroots regional small account at-work business, which is still the significant majority of the overall at-work business.

Unfortunately, these operational issues led to challenges in getting new at-work meetings open in the first quarter of 2012.

As I will discuss later, this will result in a significant volume impact in Q1 of 2012, and we are working full steam to fix the problem so that we can return the small account part of this business back to the appropriate volume levels.

Unlike the Monthly Pass transition in our traditional meetings business, which we manage seamlessly across various geographies, we did not fully appreciate the idiosyncrasies and complexities particular to converting the at-work small account business and as a result did not properly plan and execute the transition.

Importantly, while the loss of volume is regrettable, especially in our peak season, it does not reflect any underlying erosion of demand for our services in this sector, but rather a purely executional issue that will be rectified in the coming weeks.

This past December, we launched PointsPlus 2012, the version upgrade of the program that enhances personalization and the process by which we help new members get started.

With all of the enhancements to the Monthly Pass value proposition over the past five years, including technologies such as website and mobile applications, as well as program innovations, we made the decision in Q4 to increase the price of the Monthly Pass product for the first time since it was launched in Q3 2006 from $39.95 to $42.95 to properly reflect the value of all these improvements.

All existing Monthly Pass customers were grandfathered at the old price while new enrollees began paying the higher price.

Now onto the international meetings business.

Like NACO, the UK began to lap the launch of its new program ProPoints in November.

Despite this, the UK had a solid fourth quarter from a volume perspective.

Revenues were down 3.3% on a constant currency basis with growth in meeting fees being fully offset by lower in-meeting product sales.

Again, the UK was lapping a period of unprecedented product sales for attendance levels during the soft launch of the new program in November 2010.

Q4 2011 paid weeks were up a solid 17% versus the prior-year period and Q4 attendances were up 13%.

In mid-2011, the UK began the development of an entirely new advertising campaign for the 2012 launch.

As will be discussed in the guidance section later on, the campaign, while compelling on many dimensions, has been disappointing in its ability to get members to enroll in meetings thus far in the first quarter of 2012.

The UK team is highly attuned to the issue and is taking steps to evolve and improve the campaign to more effectively inspire new members to join our meetings in this important market.

Moving on to Continental Europe, after a difficult year in 2011, we began to fully see the path to recovery in our CE business as we moved into the fourth quarter.

Overall, the CE meetings business revenues contracted 5% on a constant currency basis in Q4 2011 versus the prior-year period, a substantial improvement versus the negative 10% trend we saw in Q3.

Volumes also stabilized with paid weeks declining 5% and attendances declining 4% in Q4 2011 versus prior, a substantial improvement versus the negative 15% attendance decline we experienced in Q3.

As noted on previous calls, the CE team was disappointed that, one, its original launch of ProPoints in early 2010 did not meet its expectations, and two, that its marketing executions were failing to ignite interest with consumers throughout the second half of 2010 and all of 2011.

Based on the success of an aggressive NACO campaign, the CE management team sought to apply the best learnings from that market to the respective launches of the updated program in 2012.

By way of example, Germany, the largest of the CE markets, secured two significant Celebrity spokespeople to carry its new meetings marketing campaign and a series of TV personalities for is Weight Watchers Online campaigns.

France also secured a popular local celebrity and it launched a unique and aggressive advertising platform.

Similar strides were achieved in smaller markets throughout Europe.

In addition, CE launched ProPoints 2.0, its first version upgrade in two years, with strong response from its members.

As will be shared later, the early results of these efforts have been strong and the CE business is now back on a growth trajectory.

Moving on to WeightWatchers.com, despite comping the soft launches of PointsPlus in North America and ProPoints in the UK in Q4 2010, the WeightWatchers.com business had yet another record quarter.

New sign-ups remain significantly above prior years for the fourth quarter of 2011.

This, combined with a higher starting active base, resulted in total paid weeks growth of 67%.

This in turn drove revenue growth of 60% versus the prior-year period.

End of period active subscribers were up 50% versus Q4 2010, an impressive achievement given that the end of period actual subscribers at the end of Q4 2010 were up 38% over Q4 2009.

As always, the WeightWatchers.com team remains busy on pushing new feature launches throughout Q4 2011.

Of note was a barcode scanning app for the iPhone and Android platforms that allow Monthly Pass and Weight Watchers Online subscribers to use their smartphones to quickly determine the PointsPlus value of any branded product in the grocery store.

This allows for easy comparison shopping as well as easier tracking of foods.

In addition, the WeightWatchers.com team launched a complete revamp of the subscriber portion of the website, which has been very well received by our customers.

Now I'd like to turn the discussion over to Ann who will elaborate further on our Q4 and full-year 2011 performance.

Thank you, David, and good afternoon everyone.

Before reviewing some of the details of our fourth-quarter results, I'll provide and recap of our full year 2011 performance.

Full-year 2011 revenues were $1.82 billion, a 25.3% increase versus 2010, reflecting strong growth in our customer count.

Our Monthly Pass and Weight Watchers Online active bases grew 13.5% and 50.5% respectively from the end of 2010 to the end of 2011 to a combined $3 million.

In addition to the benefit from the higher customer base coming into the year, the NACO and UK meetings businesses and WeightWatchers.com experienced strong customer recruitment during the year, a result of the very positive response to the new program launch, coupled with the growing benefit of our effective marketing.

These factors yielded annual growth versus prior of 38.1% in our principal volume metric paid week.

The 38.1% growth in paid weeks (technical difficulty) full-year 2011 operating income growth versus prior of 40% to $546.3 million on an as-reported basis.

Note that 2010 included a $6.5 million charge related to the settlement of the California labor litigation and the benefit of $2 million from the reversal of a prior-year UK VAT accrual.

Our operating income margin for the full year 2011 was 30%, (technical difficulty) 26.8% in 2010.

Interest expense came down 21.5% or $16.4 million in 2011 versus 2010 as we do leveraged to a net debt to EBITDA level of 1.72 times.

Net income for the full year 2011 was $304.9 million, up 57%, and EPS of $4.11 was 60.7% above the $2.56 prior-year levels.

Finally, the full-year 2011 delivered $406.4 million of cash flow from operations, significantly exceeding the 2010 level of $313.1 million, which excludes a $31.6 million one-time payment made in 2010 for prior period UK VAT charges.

Consistent with the rest of 2011, the fourth quarter delivered strong financial results as well with strong growth rates in our key revenue and profit metrics and a significant increase in operating leverage.

Our fourth-quarter revenues were $401.3 million on a consolidated Company basis, an increase versus prior of 12.5%.

The key drivers were increases in online and meetings paid weeks.

Operating income was $117 million, increasing by 21.4% and outpacing the 12.5% rate of revenue growth.

We delivered 210 basis points of operating income margin improvement in the quarter, primarily as the result of gross margin expansion.

I will provide the details around our operating levers later in this report.

Net income in the quarter of $63.7 million was up 30.1% versus last year, and EPS of $0.86 was up $0.20 from $0.66 in the fourth quarter of last year.

Note that EPS for the fourth quarter of 2010 benefited from the $0.02 reversal of the UK VAT accrual.

Now, I'll provide some of the details of our fourth-quarter operational results.

The significantly higher customer base at the beginning of 2011 and the strong customer recruitment that we experienced throughout the year positively impacted the fourth quarter, which saw 33.9% growth in paid weeks on a consolidated Company basis, only slightly below the historically high growth level experienced in the first half of the year.

In our meetings business, fourth-quarter paid weeks grew by 12.6% versus prior to 23.7 million.

In Q4, paid weeks growth continued to benefit from 2011 membership momentum but was partially tempered by tougher prior-year comps.

Globally in the quarter, we had 11.4 million attendances, an increase of 5.4% versus prior.

In the WeightWatchers.com business, paid weeks increased by 67% versus the year-ago quarter at a comparable rate to the third quarter.

Sign-up growth continued to be strong and active subscribers to the Online product were 1.6 million at the end of the fourth quarter, up from 1.1 million at the prior year end.

Looking now at the impact of this volume growth on our financial performance, with all the growth rates cited from this point forward on a constant currency basis and excluding the prior-year $2 million revenue benefit of the VAT reversal.

Our consolidated Company fourth-quarter revenue growth versus prior was 13.1%.

In the meeting business, meeting revenues, including meeting fees and in-meeting product sales, rose 4.2% in the quarter to $265.3 million.

Meeting fees in the quarter grew a robust 12.3% versus last year to $218.4 million with NACO up 16.4% and the UK up 8.1%.

Increases in these markets were partially offset by performance weakness in Continental Europe.

In-meeting product sales decreased to $46.9 million globally, down 21.9%.

This is primarily a function of cycling against the soft launch of the new program in the fourth quarter of 2010, which prompted unprecedented purchases in enrollment products by current and returning members.

Accordingly, global product sales per attendee decreased 25.9% in the quarter with NACO down 26.1% and the UK down 34.1%.

In the WeightWatchers.com business, the 60.3% revenue increase in the quarter to $100 million was driven chiefly by strong sign-ups in our two largest markets, North America and the UK.

But we also saw a sign of strength in Continental Europe, lead by double-digit growth in both France and Germany.

Our other revenues were $36 million in the fourth quarter, down $1.6 million or 4.3% versus prior.

Other revenues include franchise commissions and the sale of products to our franchisees.

Franchise commissions were up versus prior but product sales were lower, consistent with the experience in the Company-owned business cycling against the 2010 new program launch.

Licensing revenues decreased by 1.4% in the fourth quarter versus prior.

Increases in UK and Continental European licensing were more than offset by declines in (technical difficulty) driven principally by one licensee.

Our reported gross margin increased by 330 basis points in the quarter, up from 52.9% last year to 56.2% this year.

The primary driver of this was a mix shift toward the higher-margin WeightWatchers.com business.

But in addition, topline growth in WeightWatchers.com drove gross margin expansion within that largely fixed cost business.

Now, to wrap up, marketing expenses for the fourth quarter were $60 million, up 28.9% versus the fourth quarter of '10, with the lion's share of increase resulting from our investments in the men's campaign and an early support for 2012.

Marketing expenses as a percentage of revenues were 15% in the fourth quarter of '11 as compared to 13.1% in the prior-year quarter.

SG&A expenses were $48.7 million in the fourth quarter of '11, an increase of 5.9% versus the fourth quarter of '10.

Expenses increased primarily in support of our growth initiatives, including technology for the development of our mobile platform and adds to staff in support of B2B healthcare business development.

Despite these investments, SG&A expenses as a percentage of revenues decreased 80 basis points to 12.1% in the fourth quarter of '11 and 12.9% in the fourth quarter of '10.

The combination of growth in the business and operating leverage resulted in an increase in our reported operating income margin of 210 basis points in the fourth quarter to 29.1%, up from 27% in the prior-year quarter.

Moving now to interest expense, which was $13 million in the fourth quarter, interest expense declined by $5.9 million, or 31%, versus prior, a result of a lower effective interest rate and lower debt outstanding.

Our effective interest rate decreased by 53 basis points to 4.47% in the fourth quarter '11 versus 5% in the prior-year quarter.

This is primarily a result of the decline in the notional value of our interest rate swap.

Since the fourth quarter of last year, we have reduced our average debt outstanding by $332 million.

As I mentioned, for the full year 2011, our cash flow from operations was strong at $459.2 million before interest payments.

After capital expenditures of $49.3 million, we had $409.9 million of free cash available to serve as our capital structure and to return cash to our shareholders.

During 2011, we paid quarterly dividends totaling $51.6 million, we made interest payments of $52.8 million, and we reduced our debt by $313.3 million.

Our debt outstanding at the end of 2011 was $1.05 billion.

And at the end of 2011, our net debt to EBITDA was 1.72 times, down from 4.33 times level following the refinancing we undertook to fund our last tender offer in January of 2007.

Now I'll turn it back to David.

Thank you Ann.

2011 was an important year for Weight Watchers on a number of critical dimensions.

Our brand has never enjoyed the participation it has seen this past year.

The combined ranks of people attending meetings and participating via the online product represents the highest level of engagement that we have seen in our almost 50-year history.

The brand has commanded significant attention, interest and buzz throughout the year.

Weight Watchers received due credit for its highly effective weight-loss system in several clinical trials as reported by marquis academic journals such as Lancet and British Medical Journal.

We have been able to continue to demonstrate that we are uniquely suited to deliver excellent weight-loss outcomes cost effectively and in a scale that is unmatched by any competitor.

We are committed to build upon this momentum to fully realize our role as the leading front-line defense against the obesity epidemic.

As we look to 2012, we will build upon this foundation by pressing forward in our key strategic areas.

Innovation -- as an organization, we succeed when our members succeed.

Given the inherent challenges of losing weight sustainably, we see numerous opportunities to help our members by aggressively innovating our offering.

Innovation can come in the form of program changes, the most extreme example being a platform change such as PointsPlus.

However, innovation can and should also come from areas such as technology and service innovation.

We have an ongoing comprehensive effort to identify and develop significant innovation territories and expect some of these to be implemented before January 2013.

The recent announcement by US News naming Weight Watchers the best weight-loss and easiest to follow diet is one sign of our innovation success.

Marketing -- we are continuing to refine and improve upon our marketing playbook.

We have been seeing strong results in many of our key markets such as NACO and more recently Germany, France and Belgium.

We will contain and pursue improvements in these already successful markets while also seeking to raise the bar in countries as marketing strategies may not yet be fully connecting.

We would continue to anticipate leveraging the voice of our successful members, whether in the form of celebrity and ordinary person or both.

WeightWatchers.com.

Growth in this business will continue to come from technology and product innovation and a combination of expanding audiences and continuing to increase product awareness among these audiences.

Weight Watchers Online, which delivers excellent consumer satisfaction at a very competitive price point, continues to successfully convert record numbers of self-help dieters to the Weight Watchers franchise.

We expect Weight Watchers Online paid weeks to equal and surpass meetings paid weeks for the first time in 2012.

Two particular areas of focus for 2012 include men.

In the spring of 2011, we began marketing Weight Watchers Online for men in the US with a follow-up campaign in fall.

During these periods, we saw the relative mix of male sign-ups to Weight Watchers Online rise from historic rates of 8% to 10% to 15% to 20%.

Based on this success, we elected to build upon this strategy.

At the end of December, we announced that Charles Barkley would be the first male spokesperson for the brand.

Response to this has been terrific and we've already been seeing men make significant contribution to the ongoing growth we expect to deliver in 2012.

Europe.

We have not historically marketed Weight Watchers Online in a meaningful way in these geographies in above-the-line advertising mediums such as television.

Beginning in January, we went on air for the first time with dedicated Weight Watchers Online advertising in Germany, France, the Netherlands, and Sweden to help drive awareness and the results have been terrific.

Healthcare and B2B.

As noted earlier, throughout 2011, we've been taking steps to position ourselves to capture the opportunity to bring in new customers via the healthcare channel.

To dimensionalize the broader opportunity for our business, we currently see about 3% of the overweight or obese adult population in the United States in either our meetings or our Online offering.

Given the relatively large number of people we see versus other commercial or healthcare-based offerings, this suggests to us that the vast majority of people with a weight problem are not getting help.

We view the healthcare channel as a critical new way to reach these people over the coming years.

We recognize that pursuing the healthcare channel will take time and an additional set of skills.

To this end, we distinguish this opportunity in terms of near term and medium term.

Near term -- large self-insured corporations.

As noted earlier, we began in earnest to sell the large corporations via heads of benefits and/or CPOs beginning in 2011 when we hired a new VP of Sales.

We further strengthened the team in early January this year when we hired an executive to lead all of our US healthcare and global innovation efforts.

Colin Watts comes to us from Walgreens where he headed up their innovation efforts with a particular focus on healthcare.

Colin will be focusing much of his time leading the effort to continue building capabilities, aptitudes, and operational components to allow us to capture this opportunity at scale.

It is critical for us to execute well against this opportunity, and we will be somewhat conservative in the rate in which we bring in new accounts until we are fully confident that we can service a faster pace of new account additions.

We have already seen numerous cases where we can achieve penetration rates of 10% or more of employees when we execute well.

So we view this as a critical channel to develop properly to position us for accelerated growth in the latter part of 2012 and more fully in 2011 and beyond.

Medium longer-term.

Large corporations represent roughly 50% of the covered lives in the US with private insurance, state/federal government and CMS representing the remainder.

We view these other payor channels as an excellent opportunity for us given our unique combination of effectiveness, cost efficiency, and scalability.

We will seek to take steps now in the form of pilots and/or partnerships to position ourselves as the healthcare industry increasingly shifts to preventive care through models such as accountable care organizations.

Retail infrastructure.

While we would have liked to have had more remodeled stores open for the start of January this year, we will continue to push forward on new location openings with the goal of achieving 80% of our store transformation by the end of 2012.

Customer data.

Having spent the last five years completing the less glamorous work of implementing the ERP system throughout the WWI, that work is largely complete.

This is allowing us to now open bandwidth to focus on customer data and using it in ways to further enable our business.

We already capture real-time data in all of our retail centers in North America and of course with our online subscribers.

We are now looking to begin doing the same and are traveling locations in the US, including at-work locations, and in France, which is serving as a pilot country for our international business.

As we achieve broader customer data capture, we can then leverage this and the strategies to improve member retention by better predicting when members are at risk of dropping out and reacting appropriately.

We can also use the data to further enhance our ability to win back, cross-sell, and upsell as well as generally improve customer service.

Finally, this customer data will further enable our efforts in the healthcare space by ensuring that we can quickly and easily meet the daily requests of our corporate customers as well as our future healthcare partners.

Guidance.

In providing guidance for this year, our forecast reflects the reality of lapping Q1 2011, a period of extremely high enrollment growth in our North American and UK businesses, as well as our WeightWatchers.com business.

As we passed the hump of Q1 2011, we expect a return to a more normal business growth trajectory in Q2 through Q4 of 2012 that better reflects the true underlying strength of our brand and the output of our strategies.

To this end, we are currently forecasting the following volume assumptions across our major lines of business.

One, North America -- volume levels in Q1 2012 will be adversely impacted by comping against the initial PointsPlus launch as well as the impact of the execution issues with our small account at-work business and delays in our new upgraded store openings.

To be clear, our NACO enrollments for the first five weeks of this year, excluding at-work, are running comfortably above 2009 and 2010 levels, but as expected, they're running behind the supercharged levels of Q1 2011.

The shortfalls in enrollments in Q1 will flow through to paid weeks for the remainder of the year, but will be largely offset as we stop lapping the Q1 hump from last year and the spring campaign this year.

We're forecasting Q1 2012 paid weeks declines in the mid-single digits, returning to growth by Q3 and into Q4.

Most of this decline is due to the small account at-work issue.

We are forecasting attendances of minus 10% in Q1 2012, again returning to positive numbers by the third quarter.

Two, the UK -- as noted, the marketing campaigns in the UK have not met expectations and this market is also facing difficult comparables, particularly in Q1 2012.

Given this, we expect the UK to have a challenging 2012 with paid weeks declines in single digits throughout the year and attendance declines in low double digits.

CE -- the CE region is off to a solid start and we are anticipating mid single-digit paid weeks growth in Q1 2012 followed by low teens growth in Q2 through Q4.

We expect attendances to follow a similar trend.

WeightWatchers.com.

The WeightWatchers.com business has continued moving to new heights with sign-up levels exceeding the prior-year period despite the triple-digit growth we saw at this time last year.

With a strong subscriber base coming into the year combined with continuing sign-up growth, we're forecasting paid weeks growth of 30% to 35% throughout 2012.

Overall financial performance.

Given these volume forecasts, we are expecting flat revenue growth in Q1 2012, then rising to high single to low double-digit growth for the remainder of the year.

One additional factor leading to the flat revenue forecast for Q1 2012 is the effect of lapping the extremely high product sales per attendance levels associated with the product launches in 1Q last year.

The beneficial impact of our Monthly Pass price increase on revenue will become increasingly evident as we proceed throughout the year, given our decision to grandfather existing members.

On the gross margin line, we expect continued expansion of 200 to 250 basis points, reflecting the proportional mix shift to the higher-margin WeightWatchers.com sales.

More of that improvement will come in the second half of the year.

On the marketing line, we have a relatively heavier marketing investment in Q1 of 2012, significantly reflecting our investments behind men and raising awareness of WeightWatchers.com in our international markets.

As is our normal practice, we recognize all of our marketing expenses incurred with revenue benefits happening throughout 2012 and into 2013.

As a result, marketing as a percentage of revenues will be up significantly in Q1 2012, roughly 750 basis points versus prior, then dropping significantly to more typical levels in subsequent quarters.

Keep in mind that, as we continue to invest behind our WeightWatchers.com business, it has the effect of increasing gross margin while also increasing marketing as a percentage of sales, given the current CPAs and the relatively lower revenue per cycle as compared with the meetings business.

For the full year, we expect marketing as a percentage of revenue to be up roughly 200 basis points.

For G&A, we expect full-year costs to be approximately 50 basis points higher on a percentage of revenue basis than prior year, reflecting investments behind our customer data initiative and our healthcare efforts.

For the full year, we're issuing EPS guidance of $4.20 to $4.60 per fully diluted share.

Now, before I open it up for questions, let me briefly review our plans for our self-tender and a related share repurchase which we have also announced at the close of the market today.

As those of you who follow the Company know, our business generates large amounts of free cash flow.

Over the years, we've used a significant amount of this cash flow to pay down large amounts of debt, leaving us at the end of 2011 with a debt-to-EBITDA level of less than 2 times, a debt level which we believe is suboptimal for our goal of maximizing value creation for our shareholders.

With debt markets once again open for business and interest rates at historically low levels, our Board has approved a plan to recapitalize the Company.

This plan will increase the total debt level for the current approximately $1 billion to approximately $2.5 billion, or 4.5 times trailing EBITDA, and use up to $1.5 billion to fund our tender offer to existing shareholders and our share buyback at the same price per share as paid in the tender from Artal Holdings, our controlling shareholder, who would maintain the same percentage ownership post-buyback as it holds now.

We expect this tender to take the form of a modified Dutch auction similar to what we did in January 2011 and that we will tender for up to $720 million of our outstanding common shares with a price range between $72 and $83 per share.

The tender offer, which will be subject to the successful closing of the financing and other customary conditions, is expected to commence next week.

While not included in our 2012 EPS guidance I just gave, based on our current expectations regarding the terms of the related financing and assuming the midpoint of our guidance range and that the tender offer is fully subscribed and successfully closed by the end of Q1 2012, these transactions will be highly accretive and we estimate would add approximately $0.45 to $0.60 per fully diluted share to our 2012 EPS, excluding any one-time charges.

At this time, operator, we would like to take questions.

(Operator Instructions).

Charles Boorady, Credit Suisse.

Thanks and good evening.

My first question is if you could just quantify for us the sign-up growth rates for the Online business kind of quarter through quarter for 2011.

We tend not to release specific sign-up growth rates.

What we do instead is we report paid weeks growth for the quarters, and then typically as we're going through the quarters, we'll talk about end-of-period active subscriber growth.

But, again, the paid weeks volume growth we are looking for the global online business is pretty consistently between 30% and 35%.

Okay, great.

So the seasonality on that business, is that more consistent growth throughout the year than what you see in the meetings business?

I think part of what's affecting -- if you look the seasonality of that business -- is it's not totally dissimilar from the meetings business, particularly now that we have Monthly Pass.

The way that business scales up is we tend to see a lot of people, as you would imagine, signing up in the first quarter.

That's what we are seeing literally as we speak.

While that is happening, the subscriber base continues to build, and it generally peaks sometime kind of mid Q2/late Q2.

Then you will see it dip a little bit during summer when not that many people are signing up but people may still be attriting.

Then it usually picks up a little bit with increasing sign-up volumes during our fall campaign.

Then it usually drops a bit during the sort of the traditional holiday period, Thanksgiving to Christmas.

Then the game starts anew as we begin the next new year.

Got it.

My second question is just on the B2B and also the business-to-government potential.

Thanks for the added color on your initiatives there.

The sales cycle is usually pretty long in that business from what I've seen on the health plan side.

And so it's a bit surprising, given that you started in 2011, that you signed up a few big trophy accounts.

I am wondering if you can give us the size of what your backlog looks like, how many employers you're talking to right now, what the interest level is that we can gauge the trajectory of growth in that B2B business?

I think, once our sales engine starts getting up to kind of more of a predictable and regular pace as we kind of work out some of the operational kinks in the business, we'll be in a better position to start giving kind of I think more clear indications of what backlog looks like.

That said, one point I'd like to make as a distinction is that the large accounts business that I was referring to, in other words large corporations, they are relatively few of our large accounts.

I only mentioned three because those are the three that have given us permission to use their names as we have discussions like this one.

We obviously have others.

That a lot of times we are not actually part of the health plan.

This is Weight Watchers is provided to employees as a separate benefit, and so it can be provided off-cycle a little bit.

And so usually if there is a sales cycle issue, it would be equally if not more likely to come up with respect to budget considerations and where the HR department's budget might be at any given point in time and a number of other different conditions.

And so it's not explicitly defined to a sort of hard-set health plan benefits calendar.

I think, as we continue evaluating ways to partner and work with insurance companies, you can imagine circumstances in which that might come into play.

Should we have success in the coming years of presenting our offerings successfully for inclusion in programs like Medicaid and Medicare via CMS, that would obviously have its own sort of cycles and timing, but that's kind of for the future.

So right now, we are not as heavily dependent on those types of cycles as you might imagine.

Great.

Thanks.

Jerry Herman, Stifel Nicolaus.

Good evening everybody.

I guess the first question, I just wondered if you would be willing to share the year-end membership on Monthly Pass, and just the notion of the price increase and just to verify that, if an individual disengages, when they come back, that happens at the higher price and what sort of motivation is that to keep them engaged at the time of the December price increase?

I can give you the Monthly Pass end of period.

The end of the year, we had about 1.4 million Monthly Pass subscribers globally.

If they were to come back -- if they were to --

Go ahead.

If they were to come to cancel their membership and then come back, the likelihood would be that we would charge the higher amount unless there was some circumstance that for us not doing that, but typically we would do that.

I don't know if you want to comment on the rest.

Yes.

Jerry, if I understand your question correctly, and I may not, we did not try to time the price increase as a way of sort of artificially keeping people retained longer at the end of the year by giving them an encouragement.

I think that the distinction between sort of the price, the $39.95 and then they come back and have to pay $42.95, I doubt that's significant enough to have a significant impact on the decision-making of any existing customers.

So, I suspect -- so I don't suspect there was much of that going on.

Frankly, the decision around (technical difficulty) just has as much to do with the number of other operational considerations, and the fact that we had felt like, with all of the enhancements and improvements we've been making, including some of the ones we launched in the fourth quarter, that it was appropriate for us to take that action.

Great.

Thanks.

Then just a follow-up, can you talk conceptually about the rationale behind the Dutch auction vis-a-vis the issuance of a dividend, growth opportunities, just sort of general uses of cash?

Maybe you can share some of the high-level highlights of the Board discussion there.

Well, it goes without saying that the vast majority of the Board discussion will be quite confidential, as you can imagine.

But I get the gist of your question.

I think the way that we look at the share repurchase is that it is tax efficient for us.

It really does, from our perspective, allow us to have a much more efficient capital structure.

It improves, frankly, our tax efficiency as a company.

We pay relatively high taxes compared to most corporations.

With the cash flow we generate and everything else, this was a very easy way for us to execute something like this that we thought would be beneficial both for the Company and for shareholders.

And to make an obvious point, it's also highly accretive.

Okay.

Thank you.

Chris Ferrara, Bank of America.

Thanks guys.

Just on the guidance range, first of all, I understand that percentage range or the width of that range is similar to what you guys did last year, but I would imagine that the moving parts may not be as significant this year without an enormous launch like you had last year.

Can you talk a little bit about the rationale, what that range is, wide as it is, in the $0.40 area?

I guess what drives the low end of that range versus what drives the high end of that range?

Yes, I mean, I don't know that there's a tremendous science behind the range.

Part of it is just, historically to your point, 10% has generally been kind of the range that we provide at the beginning of the year.

I always point out the fact that we definitely know a lot more after five weeks than we knew before the year started.

But we continue to sort of improve our understanding of trends that are happening with the business, understanding of where the economy is going, how that affects the consumer, etc., etc.

So from that point of view, we like to start here and then obviously as we get into reporting on Q1, what we typically do is we narrow the range and so on and so forth, so kind of our usual practice.

In terms of what would necessarily drive to the upper, lower end of the range, as you know, our business outcome in terms of EPS generally are going to be driven more by topline considerations than by anything else.

Our costs are fairly predictable and we usually have good contingency plans and everything else worked in.

So really it is more a function of wanting to get better visibility into how the volume trends are going.

We have a pretty good sense of what the winter campaign is going to look like.

By the time we report our Q1 numbers, we'll also have the full winter campaign behind us, but we'll also have a good indication of the spring campaign which, by the way, we are feeling quite good about.

That helps.

I guess speaking of that topline guidance I guess, unless I missed it, it sounded like you basically said that attendance or revenues would be flat in the first quarter and then get to kind of high single to low doubles for Q2 through Q4.

If that's right and we are talking about at the midpoint of something like a 7.5% range, or 7% to 8% I guess, it looks like the .com expectation, assuming that revenue growth in Online mirrors or mimics in some way paid weeks guidance, it kind of looks like .com is going to drive all of your revenue growth based on that initial guidance assumptions on the topline.

So is that right?

I guess is that just, to your point, it's early on and that's the way you're looking at things?

But I just want to make sure that rationale is the way you're looking at it as well.

Yes, the .com business is obviously going to be driving a lot of our value as we go out throughout the course of the year in terms of revenue.

As I said before, if you follow the guidance we provided on meeting volumes, we are looking in the first two quarters at negative comps in terms of overall attendances and paid weeks, but that goes into positive territory as we get into Q3 and Q4.

So really that's just a function of the significance of, A, the impact of the Q1 comp on the meetings business, and, B, some of the executional issues that I mentioned, for example in the small account at-work business.

Whereas .com has -- despite the fact it's comping these sort of crazy triple digit growth rates that we experienced last year, is still -- our sign-up volumes so far this quarter are still in excess of where we were prior year, benefiting significant by men as well as growth in our international .com businesses.

We expect to continue benefiting from that growth a little bit more consistently over the year, so that's why the .com pattern looks a little more uniform where the meeting business is more digging out a little bit from Q1 and then sort of getting progressively stronger as the year goes on.

The quarterly fluctuations make sense.

I guess what I'm asking is, on a full-year basis, it kind of sounds like you guys are implying with your guidance that the meeting business won't generate any revenue growth.

Maybe currency is a factor in that, but is that a misinterpretation?

Because based on the numbers you gave, it sounds like that's what it is and it's very possible I got that wrong.

You gave a lot of information early on.

I just wanted to see if I got that wrong or right.

Yes, I think, given the impact of Q1, that that's an accurate statement to make in terms of overall revenue growth over the course of the year.

I guess my point is I look at the business and its underlying strengths.

The fact that the meetings business will be sort of back-end solid revenue growth as we get into the second half is to me a reflection of sort of where the meeting business really is from a structural point of view.

And the fact that .com will be delivering strong growth throughout the year is obviously good news.

That's perfect.

Thanks a lot.

Greg Badishkanian, Citigroup.

Great, thanks.

So just kind of going along those lines, the year is very heavily back-end loaded.

How much of it is due to tougher compares versus some of the other drivers that you're going to expect to come in full force in the back half of the year?

It's really -- it's the tougher compare of Q1 significantly because, again, that's our heaviest enrollment period and the impact of having two enrollments is you feel it over the course of the year, although the degree to which you feel it decreases as the year goes on because, as you can imagine, those enrollments that you might have liked to have had would have been attriting throughout the course of the year.

So therefore their impact declines as you get into later quarters.

You know, that plus the fact that a couple of the issues we have, for example not having as many of the stores open as we would've liked, not obviously for a lack of effort but not having as many as we would've liked as well as the issue with the regional at-work business, the timing of those two things not being there for us in Q1 kind of made it doubly difficult.

So it was a combination of the comp but very significantly those two other factors, particularly if you look at the NACO business that had the impact that it did, that then requires us to then sort of back out.

The good news is that because, for example the regional at-work business was executional, it also means it is by definition very fixable, which gives us a lot of confidence of returning it back to the right kind of trends as we go into Q2 and beyond.

Then obviously the comparable goes away as we would expect it to (inaudible) Q1.

Okay, good.

Then I know you guys gave out some good revenue guidance for the first quarter and you typically -- I know you don't give out quarterly EPS guidance.

But I'm just thinking, because it is pretty uneven.

It's going to be pretty volatile throughout the year and low in the first quarter and kind of back-end loaded.

So is there any way we should think about margins in the first quarter and EPS around I think $1.13 just so we can model that right?

Yes.

My advice on modeling is to listen very closely as you read back through the transcript to what we talked about in terms of the impact, for example, of the fact that the gross margin will be picking up a little bit more as we get into the latter half of the year.

But really the big story with Q1 is marketing.

Again, just to sort of re-emphasize the point, if you look at a lot of the incremental marketing spend, which you can now back into given the 750 basis points I shared, 70% of that is coming on investment behind the .com product.

Of that investment, a significant amount of that incremental spend is coming against men, which is a market segment for which we are still building awareness, so the CPAs are relatively higher, as well as doing television advertising, for example in Continental Europe, Canada, a couple other places, again where awareness of Weight Watchers Online might be relatively lower so therefore the CPAs are relatively higher.

My point is that you have this kind of double effect of relatively higher CPAs on a lot of those incremental marketing dollars then being applied against the Weight Watchers Online product.

The revenue that you get for example in Q1 for a Weight Watchers Online sign-up -- I mean, think of it this way.

You're looking at average monthly price of like $18, so really the revenue benefit you get from a sign-up if you get them in the mid-point of the quarter is going to be effectively $28, something like that.

You could have CPAs that are far in excess of that.

So what that does is it basically then turns the kind of -- it turns into a negative contribution, if you will, in the first quarter.

But then, as you pass that initial marketing investment, you continue getting revenue benefit over the course of the year, which is why the sort of upside-down between revenue and marketing then goes away as you go into Q2, 3 and 4.

So really what it is is just the shape of it, given the intensity of marketing spend behind Weight Watchers Online, is really just causing the nature of our quarterly financials to look very different than what you might be used to seeing in prior years.

So again, my advice from a modeling perspective is to sort of pay close attention to the relative impact of this marketing being applied against .com given that, for the first quarter and, frankly, for the full year, about 70% of our incremental marketing investment is going against Weight Watchers Online globally.

Helpful.

Just finally on -- you had a nice price increase.

What do you think the elasticity is there?

Next year, do you think you have the opportunity raise prices again, or probably not?

I think, over time, the elasticity we would expect from a price increase -- and based on what we've seen in the past, for example with Weight Watchers Online, we have not seen long-term negative impacts in terms of raising price on Weight Watchers Online.

Now, it's important to note that Weight Watchers Online is a fairly inexpensive product, which I think is one of the reasons, at least in our portfolio which is one of the reasons why it has been so successful in gaining traction in the self-help market, if you will.

In terms of the price increase in Monthly Pass, I would expect, if there has been any volume impact, and I can't rule out that it might have had some volume impact in first quarter, but if there has been any volume impact, that that would probably pretty quickly go away based on our past experience in price increases with Pay As You Go.

Gary Albanese, Auriga.

Good evening everybody.

Just to follow up on that last question, you mentioned the marketing is going to be different from what we've seen in the past.

But does that indicate is this the kind of expenses we're going to continue to see seasonally in the future, like first quarter 2012, '13, etc.?

I'm not sure, and I'll tell you why.

For example, in spring of this year, we will be advertising Weight Watchers Online for men again but we did that last year as well.

In 2011, we did not have a men's campaign during winter, which we do this year, so that's truly incremental spend.

In the case of the television advertising we are doing in for example Continental Europe and Canada and some of those places, we did not have that spend last year; we do this year.

What it means is that we have kind of -- this is been a little bit our strategy on some level of Weight Watchers Online -- is we've been able to continue to very profitably increase penetration of Weight Watchers Online, although we still think it's under-penetrated versus where its ultimate potential is, but we've been able to approximately increase penetration by increasing the number of weeks we are on-air, by expanding audiences, and by selectively heavy-ing up in terms of media weights and things like that.

So I would expect that, as we go forward, we will be looking for, in future years, we'll be looking for new opportunities to find new ways of getting people into the fold, i.e.

new ways to invest marketing investment that we would expect would have a profitable CPA.

However, I would say that what you are seeing this year in Q1, given those things, for example men in Europe for the first time being on-air, were two pretty sizable investments that resulted in much more of a step-up than what I would guess you would typically see.

So I think that is -- no promises and I don't want to get into forecasting 2013, but I can't envision right this red-hot second the kind of structural shifts in terms of new avenues of marketing Weight Watchers Online to the extent that we've had this year in 2012.

Okay.

That's helpful.

I appreciate that.

Second, what's the Monthly Pass with the grandfathered customers?

Do you have a percentage of those customers that have been grandfathered, or a rough estimate of how large that segment is?

Yes, think of it this way.

As you heard Ann reference, the Monthly Pass of scriber base, now, that was global.

But the Monthly Pass subscriber base at the end of this year was 1.4 million, so you can estimate how much of that was North American.

Virtually all of those folks, probably 95% would be my guess, at the end of this year were grandfathered.

So that's like as of the beginning of January 1.

But then, now that you have new enrollments coming in, you will gradually see that shift over, which is why the benefit of the price increase I think is where you're going, that's why the benefit of the price increase for Monthly Pass, you really don't get anything from it in Q1, which is, by the way, it's another reason why Q1 revenues aren't going up more -- and you begin to get more revenue as you get into Q2, 3 and 4, because a greater percentage of your North America Monthly Pass mix is on the new price versus the old price.

The second half falls with the basically the eight-month retention you start to see more --

Yes, and the other thing I'll say about the eight-month retention is that is mean retention.

We do have a relatively long tail.

In other words, we tend to have -- attrition tends to go down as you get into someone's average duration, so it's not a precise at eight months everybody flips over, but it's not a bad way of thinking about it.

Okay.

One last quick question.

With the estimates, does that include the expected higher interest from the incremental debt?

No, it does not.

the $4.20 to $4.60 is exclusive of the tender offer and the financing associated with the tender offer.

Thank you.

Accretion does (technical difficulty)

Yes, the accretion that we provided at the end of my remarks is obviously net of financing costs.

Okay, great.

Thank you.

Anand Vankawala, Avondale Partners.

Thanks.

Good evening.

I just wanted to ask a quick question regarding the store conversions.

How do we get from 35% to 80% at the end of this year?

Can you give us a little bit of an idea of the progression through the quarters?

I think we would probably look to maybe get into a little bit more detail once we get into Q1.

I think one of the things we're just working through is sorting out kind of what we have right now given that January is typically a crazy time in our meeting rooms.

But I think, as we get into maybe he first-quarter release, we'll be able to give a little bit more specificity to the manner in which they're going to progress out.

That being said, I think our expectation would be that we would make steady progress over the course of the year.

So you can sort of use that as kind of a rough rule of thumb before I get a chance to get you kind of more precise estimates.

Then just real quick, I'm trying to understand, with the Online business and the active subscribers, it dropped off quite a bit in Q4 relative to the paid weeks in the Online business.

I'm having a little bit of trouble just reconciling the difference between those two metrics.

To be clear, paid weeks for Weight Watchers Online in Q4 were up 67%.

But if you look at the end-of-period active subscribers and kind of where we ended the year, so end-of-period active scrubbers were up 50% versus prior year.

That's comping against 38% growth over what we saw Q4 2010 versus Q4 2009.

Here's what's going on.

If you looked at the end of 2010, those last few, those last four or five weeks, Weight Watchers Online in the US in 2010 was beginning to benefit from the buzz around PointsPlus as well as a big television campaign in that final week of the year.

So that resulted in us having kind of a surge in the active subscriber base.

So, if you kind of look, compare that 50% versus 38% and you compare what that progression looks like end-of-period active subscribers and what it implies about where it was using, say, 2010 as a proxy, it actually is quite strong from our perspective.

So we viewed Q4 for Weight Watchers Online as an absolutely excellent quarter.

Okay.

Then I guess last, just also on the Online business, do you have any thoughts on emerging competition in the online space?

We've seen a few online start-ups that have been popping up that have been just going growing in popularity.

So just any initiatives that you have in place to combat that?

Yes, of course we have been seeing online start-ups pop up actually for the past 10 years, so this isn't new per se.

The first point I would make in terms of structural advantages we have in this proposition is that, first off, we have the only online offering that is apparently worth paying for because the other apps I guess the people who wrote them don't have sufficient confidence in them to think that they're worth very much money.

But putting that aside, what I would suggest is that the average person who buys Weight Watchers Online is not buying an online calorie counter.

They are not buying any particular app per se.

They are buying a proven program with a brand that they trust that they know to work.

And the fact that it is supported by apps is what makes for a compelling value proposition.

So it's not the application itself.

A lot of these online apps that we are now starting to see -- and you know, for example, there's websites like SparkPeople that's now been around for a bunch of years.

It really hasn't had any impact that we can discern on our business.

Apps that are now popping up on the iTunes store, they are out there but, again, we can't see any discernible impact on our business.

I think it's because the value proposition between them is pretty different.

The other point that I would make though is that while we have a lot of confidence in the inherent strength and competitive advantage of our brand, our program, and the fact that we have something that people intrinsically want, we also don't rest on our laurels.

So literally we comb the same universe looking for any good, new technology, any new good idea that we can find, no matter who does it, whether it has 1 million downloads or 100 downloads, we look at all of it.

We take the best ideas we can get and we aggressively seek to roll it out.

A good example of that, for example, was rolling out the barcode scanner, which sounds like a really simple little application, but the barcode scanner in the context of following Weight Watchers actually has turned out quite powerful.

The barcode scanner in isolation, just to show you calories, would be a little bit more beyond.

So from our point of view, what we want to do is sort of take the best of the ideas that are out there, but then wrap them into this broader value proposition of this highly compelling behavior modification program known as Weight Watchers.

I guess just one quick follow-up to that.

How many -- what percent of your users are using the mobile applications?

I don't have that number off the top of my head, but it's getting pretty high.

The reason I don't have it off the top of my head is that we have indications on what percent own a smart phone, but it's a little bit trickier for us to say who is actively using the app versus the website at any given point in time.

Thank you.

Chris Ferrara, Bank of America.

Thanks for taking the follow-up.

Dave, can you just give a little bit of a view I guess on what the sign-up growth in the meeting business might've been in Q4, and I guess how that would look into Q1?

Then just give a little color on why that would change, right?

If install base this year versus last year trends similarly because of the big Q1, why would you have an opportunity to kind of change that trend as you get to the spring diet season?

I guess what be the different dynamic there?

But the more important part is can you talk a little bit about what the sign-up growth was in Q4 and what it trended like in the meeting business in NACO I guess in the first quarter so far?

Yes, sure, I'd be happy to.

We were experiencing enrollment growth up to the point of the soft launch of PointsPlus when we started comping that.

What happened at the soft launch, which was right after Thanksgiving in 2010, was this sort of somewhat bizarre experience, it's almost like getting snow in Bermuda, in which we saw a huge number of people enrolling, relatively speaking, enrolling in the meeting business in November of -- late November 2010 through December.

So obviously while that was happening, we would never expect to see that before or after.

It was just the uniqueness of all the buzz around PointsPlus and the PR and everything else from this big momentous change.

Obviously, therefore, during late November and December, enrollments were running behind from where they were in prior but we expected that and we had been guiding to that and giving indications of that both before and after the fact.

So that wasn't any particular surprise.

Then if you look at the enrollment growth that we continued to see in Q1 of 2011 versus prior, there were some pretty impressive, very significantly into sort of high double-digit numbers for a number of weeks versus 2010, which admittedly was a relatively weaker quarter but they were also sort of substantially above 2009 by kind of leaps and bounds.

What we saw last year, if you go back and look through some of the old scripts, was that relative enrollment growth began to moderate as we got into Q2, Q3, into sort of more levels that we would associate with kind of a just generally good and strong vibrant brand.

So, if we reflect upon that pattern of enrollments that we saw in 2011 and we look at where we are right now and the things we have coming up, it's what we used to form the basis of our forecast of the volume trends beginning to moderate from an enrollment perspective as we got into Q2 and Q3 going into Q4.

I guess in Q1 '12, do you have any -- can you talk about what the enrollment trends have looked like so far, if you didn't say that already?

I mentioned it a little bit in the script, but I'd be happy to repeat it a little bit to emphasize the point.

Again, if you look at sort of what you would normally expect from a seasonal pattern, and then you look at 2011, the degree of sign-ups or enrollments coming in in Q1 2011 was anomalous compared to a normal seasonal pattern if you index Q1 versus Q2, Q3, and Q4 and what we had seen virtually in any prior year.

So -- and that's the effect of the PointsPlus launch.

If you look at kind of the enrollment levels we are seeing right now, when I'm looking at weekly enrollments coming in, I'm comparing them both to where we were in 2011, in which case we are behind, as I've referenced, but I'm also comparing enrollment levels to where we were in both 2010 and 2009, 2009 by the way being an innovation year when we rolled out momentum.

In both of those years, 2012 enrollment levels are running comfortably ahead above 2010 and 2009, which I use as another good sort of touch point to demonstrate to me that I think where we are seeing overall enrollment levels in NACO therefore feels appropriate for where we should be particularly in the non at-work part of our business.

Got it, thanks.

Thank you.

We have no further questions.

Please go ahead.

Okay.

Thank you for joining us today, and I look forward to speaking with you again at our next quarterly earnings release.

Thank you.

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