WW International Inc (WW) 2012 Q4 法說會逐字稿

Thank you once again for standing by, and welcome to Weight Watchers International fourth-quarter and full-year 2012 earnings teleconference call.

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

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

As a reminder this conference call is being recorded today, Wednesday, February 13, 2013.

I would now like to turn the call over to Lori Scherwin of Weight Watchers International.

Please go ahead.

Thank you, Operator, and thank you to everyone for joining us today for Weight Watchers International's fourth quarter 2012 conference call.

With us on the call is David Kirchhoff, Chief Executive Officer, and Nick Hotchkin, Chief Financial Officer.

At about 4.00 PM Eastern Time today, the Company issued a press release reporting the fourth-quarter and full-year financial results of fiscal 2012.

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 measures 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 SEC.

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

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

I would now like to turn the call over to Dave.

Please go ahead.

Good afternoon, and thank you for joining us as we review Weight Watchers International's performance for the fourth quarter of fiscal 2012.

Overall, our fourth quarter results exceeded our incoming expectations.

While Nick will provide more details on our Q4 results, at a high level Q4 2012 EPS was $1.03 on as reported basis, and $0.96 excluding a $0.07 benefit from the UK tax settlement that Nick will discuss later.

This compares favorably with an EPS of $0.86 in Q4 2011.

On a constant currency basis, Q4 2012 total revenue was up 1.7% over the prior year period, with meeting fees down 3.5%, in-meeting product sales flat, and internet revenue up 18%.

Global combined paid weeks were up 4.5% in Q4 2012 versus the same period last year.

Global meetings paid weeks were down 7.9% in Q4, while global paid weeks for online product were up 18%.

Before Nick reviews our financial results in greater detail, I would like to provide perspective on early trends we're seeing in 2013.

In early December of 2012 we launched our new program named Weight Watchers 360 in North America, with different names in other regions.

The design principle of this new program was to build on the PointsPlus program, which was rooted in tracking, by incorporating additional tools and support that encourage our members to create healthier food environments, and to help them focus on habitualizing the underlying behaviors of a healthy lifestyle.

This methodology was designed to help our members not just lose their weight, but also to develop the skills necessary to maintain their weight loss.

The program was designed to further improve member results, and provide further differentiation of our underlying program.

Early feedback from staff and members was encouraging.

While we did see some improvement in recruitment trends when we soft-launched the program in December, its early momentum has not sustained itself.

In fact, in January and into the first part of February, we've seen double-digit declines in recruitment versus prior across both our US meetings and US Weight Watchers online businesses.

While we fully expected our decision not to run a men-focused advertising campaign this year would cost us in recruitment growth at our US Weight Watchers online business, this only partially explains weakness in that business.

Needless to say, we're not happy with the trends we're seeing.

Clearly in the US we've not gotten the traction we expected, particularly with never-members, from the Weight Watchers 360 launch.

While we believe we've gotten cut-through with our new advertising campaign, we have reason to believe that our January ads lacked the persuasion we needed.

The focal points for the new advertising campaign were the program news, as well as sharing the success of our newest spokesperson, Jessica Simpson.

Jessica had terrific success on the program, losing 50 pounds since she began in the summer, and we were thrilled to share that news with the public.

However, as we approached the end of the year, we became aware that Jessica had become pregnant, which required us to take steps to adjust our advertising campaign.

While we could not be happier for Jessica and her family, the news and the gossip around her pregnancy may overshadowed any focus on a weight loss success.

As well, although we believe that the new Weight Watchers 360 program will create a much stronger behavior change platform for us, its benefits have proven difficult to communicate in a quick, compelling way, particularly for someone who does not know Weight Watchers.

The team is working hard to develop more compelling advertising for the Spring campaign.

Our Weight Watchers online advertising has done a great job over the past few years of creating awareness for losing weight online, and driving trial of our online product, by advertising the fact that you could lose weight successfully online.

This worked well for us over multiple years, a time during which there was no meaningful competitive online alternative.

Over the past year, however, there has been an increase in proliferation of free applications, and Google trend metrics indicate that consumer interest in these apps is up significantly this January.

It is now clear that the WeightWatchers.com awareness driving strategy that has been so successful at driving millions of people to WeightWatchers.com started losing some effectiveness roughly six months ago.

We now need to shift gears to leverage the groundswell of people interested in weight loss mobility tools, by communicating the full value proposition of Weight Watchers online, and the behavior modification approach on which it is based.

Our new goal is to convince the growing number of people who are inclined to seek online weight loss help that if they're going to invest their time and effort in trying to lose weight online, they should invest in the best method, Weight Watchers.

What we have been seeing this January is softness in never-member recruitment in Weight Watchers online, but continuing strength in recruiting rejoins and continuing strength in retention.

To us, this reflects the fact that people who have used Weight Watchers online, and are therefore aware of the value proposition, are choosing to come back rather than turning to free apps.

However, as to those who have not yet experienced the value proposition, we have not connected with them with our marketing.

It is the combination of our trusted brand, our program built on 50 years of accumulated intellectual property in behavioral and nutritional science, and our ability to aggressively develop enabling technologies to allow consumers to access that program, that constitutes a value proposition that no one else can match.

Years of a high satisfaction score and weight loss success are the hallmark of the Weight Watchers online product.

The indications that we're seeing for many of these free apps is that while they're frequently downloaded, they often are used only used a few times and then sit idly on the consumer's device.

In this context, the modest investment of $18.95 per month for Weight Watchers should be an easy decision for any consumer to make to get the delivery of actual weight loss success, which is what ultimately what wins in the marketplace.

Finally, one of our concerns going into the New Year was what impact falling off the fiscal cliff would have on the US consumer confidence, resulting from what would have been a broad-based tax increase.

While the worst of that was avoided, the payroll tax holiday expired, and consumers saw their paychecks shrink by mid-January.

Indications are that consumer confidence dropped significantly in January, which is the macro indicator most closely correlated with Weight Watchers recruitment.

Suffice it to say, the timing was less than ideal for us.

On the positive side, B2B in the US has stabilized in the small accounts business, and continues to grow nicely in the strategic accounts business.

The news has also been somewhat better in CE and the UK.

The Weight Watchers online business in those regions has been strong for the first six weeks of the year.

However, the meetings business, particularly in the UK and Germany, have been buffeted by severe weather, so enrollments during three of the four key weeks in January were down significantly.

The teams are taking steps to attract people that otherwise would have joined earlier, but the exercise of making up for a weak January has always proven to be very difficult with our business.

Nick will now walk through more of the specifics on the fourth quarter, along with some additional forecast data for 2013.

Thanks, Dave, and good afternoon, everyone.

As Dave referenced, in the fourth quarter we realized a $0.07 EPS benefit from the settlement of our UK tax litigation.

Recall that between 2009 and 2011, we had recorded a reserve of approximately $44 million, but we ultimately settled for about $36 million.

All of my subsequent remarks today will exclude this benefit from P&L comparisons.

Now, on to fourth-quarter business performance, starting with WeightWatchers.com.

Fourth quarter internet revenues grew 18% on a constant currency basis.

Paid weeks also grew 18% in Q4, with double-digit growth in both the US and International.

Germany and Canada continued stand-out performance on the heels of first-time TV marketing.

Sign up growth was positive in the US, Canada and Continental Europe, offset by flattish performance in the UK.

End-of-period active subscribers were also up 18% as compared with the end of year 2011.

This is somewhat better than our earlier expectations, with a late quarter pickup in sign-ups in the US and robust growth in Continental Europe.

And after several quarters of softness, UK sign-up trends began to stabilize.

Within the meetings business, total NACO revenue in fourth quarter 2012 was down 2% versus the same period in fiscal 2011.

This represents moderation versus the declines witnessed in the first nine months of the year.

NACO fourth quarter 2012 paid weeks declined 7.3%, while attendance declined 14.5% versus the prior-year period.

We continue to estimate that Hurricane Sandy had an approximately 2% impact on NACO volumes.

In-meeting product sales grew 6.1% versus Q4 2011, as an increase in product sales per attendee offset lower attendance.

Next, the UK meetings business.

The business continued to witness volume and revenue declines versus prior, and accelerating rates in Q4 as compared to the first nine months of 2012.

Fourth-quarter paid weeks declined 17.8% versus the prior-year period, and attendances were down 21.9% versus prior, in line with our guidance.

Finally, the Continental Europe meetings business.

Our Q4 2012 results were in line with our expectations.

Paid weeks grew 9% versus prior, and attendances were up 1% versus prior, benefiting from marketing and program new users.

Our other revenues, which include franchise commissions and licensing revenue, declined 9.3% on a constant currency basis in Q4 versus the same period last year.

Licensing saw sales growth benefiting from new product licenses, and an expanded product line in existing categories, including yogurt and canned goods, but franchise commissions, publishing and the magazines were down.

Now for some key financial metrics for the quarter.

In Q4 gross margin rose 30 basis points to 56.5%, driven by a mix-shift towards WeightWatchers.com as well as accretion within WeightWatchers.com, partially offset by erosion in the meetings business.

Pressure in the meetings business remains the function of softer volume, as well as one-time expenses associated with a call center upgrade, and the impact of one-time expenses and the depreciation associated with our ongoing lead sale upgrade.

Separately, we refined our approach to reporting rent expense, with a one-time negative gross margin impact of 50 basis points, but without any cash flow impact.

Meetings pricing, as measured by lecture income per paid week, was up about 4.8% on a constant-currency basis in Q4, an improvement relative to earlier in the year, as we started to realize more benefits from the meetings business price increases taken at the end of 2011, particularly in NACO.

At the end of Q4, 64% of active NACO monthly past subscribers were on the higher price, and 78% in the case of US Weight Watchers online.

Marketing spend was up approximately 6% in the fourth quarter, or up 60 basis points as a percent of sales, as we geared up for our January campaign.

G&A expense rose 21% in Q4, or up 230 basis points as a percent of sales, as we continue to invest in our growth initiatives, including B2B, technology and customer relationship management.

Higher medical claims this quarter, and the impact of our accrual reversal in 2011, were also factors.

As a result of the factors I've just discussed, our total Company Q4 operating income declined 7.4% on a constant currency basis, with reported OI margins down 270 basis points versus the prior-year period to 26.5%.

Our Q4 tax rate was 36.8%, below our expectation of 38.5%, driven largely by a one-time true-up on Canada's tax rate.

In the quarter, foreign currency impact was negligible on our results.

Now some color on the outlook for 2013.

In online, we saw a spike in recruitment when we launched Weight Watchers 360, and early into 2013.

But overall, as Dave indicated, year-to-date WeightWatchers.com 2013 sign-up trends have been disappointing.

For the year, we are assuming that WeightWatchers.com paid weeks will be flat to slightly positive versus prior year.

In the first quarter, which benefits from a higher incoming active base versus a year ago, we are assuming mid-to-high single-digit growth.

Similar to WeightWatchers.com, we saw some strengthening in NACO enrollment when we launched Weight Watchers 360.

However, given disappointing recruitment results to start the year, we also assuming -- we are assuming full-year and Q1 attendances and paid weeks will decline in the low to mid-teens.

At the end of December, we purchased our Memphis franchise for $10 million.

Impact on Q4 and 2013 is negligible.

In late January of this year, we signed an agreement to purchase the Alberta, Saskatchewan region of Canada for approximately $36 million.

We continue to believe that franchise acquisitions, when we can buy them at an appropriate price, represent a great use of free cash flow, given their strategic and financial value, and we will continue to do these opportunistically.

The UK marketing campaign is better than last year's, and we also saw strength in this market when we launched Weight Watchers 360 in December.

Unfortunately, challenging weather conditions, and a similar macro backdrop as in the US, have taken a toll on early 2013 results in our key campaign season.

As a result, we are assuming mid-to-high teens declines in the first quarter attendance in paid weeks, given the lower incoming active base, with full-year 2013 declines improving to the negative high singles to low double-digits.

Weather has also been a factor year-to-date in Continental Europe, particularly in Germany, and our outlook is for paid weeks and attendances to be flat to down slightly.

Moving down the P&L, gross margins are assumed to decline 200 to 300 basis points, with Q1's decline in the neighborhood of negative 200 basis points given the volume outlook.

We are, therefore, committed to realizing several opportunities to improve our cost structure.

More on that shortly, when we discuss G&A.

We are currently assuming that marketing expense will decline by $25 million-plus for the whole year.

This decline is consistent with our previously-communicated belief that we have identified marketing efficiencies, most notably in digital.

Note, the large majority of the spend reduction falls outside of Q1, so we do not believe this is a key driver of year-to-date volume softness, aside from the elimination of a US men's campaign.

As you would expect, given our current volume outlook, we have kicked off a process that scrutinized all areas of expense, and we are taking a zero-based approach.

Over several years, we have experienced cost creep in both G&A and operating expenses, and we believe we have significant opportunities to be more efficient with our spend going forward.

There are several areas of focus, including reducing professional fees and consulting, negotiating better terms with vendors, and optimizing our call center spend.

Every part of our business has a mandate to work with a corporate team in identifying, and then realizing savings to first and foremost fund our future growth initiatives, such as B2B and technology, but also to help mitigate weakness across our core business.

More to come on this costs program on future calls, in terms of savings and timing.

Prior to the impact of savings from this initiative, we are assuming an increase in G&A of 250 to 300 basis points as a percent of sales, 50% of which is coming from B2B and technology investments.

Below the line for the year, we expect a share count of $56 million, a tax rate of 38.5%, and interest expense of $85 million to $90 million.

For 2013, we expect to spend about $70 million on CapEx, down from around $80 million last year.

This includes roughly $20 million related to our headquarters move, offset by the near completion of the US retail initiative.

D&A for the year should be about $45 million.

We ended 2012 with approximately $2.3 billion in net debt, and a 4.2 times net debt to EBITDA leverage ratio.

Our overall priorities for cash flow remain unchanged, invest in our growth initiatives, opportunistically execute franchise acquisitions, reduce our debt levels, and return cash to shareholders through our quarterly dividends.

I will now turn this back to Dave.

Thanks, Nick.

We see an incredible world of opportunity for Weight Watchers, but we're far from satisfied with our near-term results.

We know that the process of getting people to proactively step forward and make a fundamental change in their lives is not easy.

Lifestyle change and sustainable weight loss take work and commitment.

Weight Watchers prides itself on doing right by our members, by giving them the tools they need to truly tackle difficult problems and not to promise overnight instant success.

Inherent to our category is the reality that consumers often make decisions on hope, so the challenges of the latest quick-fix are always difficult.

This is compounded by the fact that our category is also directly impacted by consumer discretionary spend, which has been unfavorable over the past few years.

In the short-term, we're actively working to adapt our marketing to the reality of our current competitive context.

Much of the work in the past five years has greatly improved the underlying strength of our brand.

Today, we are much more visible brand, with a greatly improved image of modernity.

This isn't hope on our part, but rather based on measured brand scores.

According to our tracking study, growing percentages of consumers describe Weight Watchers as for people like me, and as a plan that fits my lifestyle, as well as more modern.

We now have a program that is even better suited to longer-term behavior change, in ways that are completely unmatched.

We believe passionately in our mission and the role for us to play in fighting the obesity epidemic.

We see the success of our members every day, and we know that there are many, many more tools we can bring to bear to help consumers deal with this difficult problem.

We can and will grow our B2C business, but it will require us to be much more aggressive in certain areas than have been the case in the past.

We still do not appeal to nearly as broad a consumer market as should be the case, given the efficacy of our program.

Given our combination of science, intellectual property, technology skills and passionate people on the ground, we have the longer-term opportunity to combine these elements in ways that we have never done before.

Doing so will require a greater willingness to depart from the usual ways that Weight Watchers has offered.

Group support will always stand at the core of our offerings, but we have the opportunity to also create versions of Weight Watchers that allow us to appeal to a wider customer base.

We can do all this in a way where we can simultaneously increase our consumer appeal, while more directly tapping into the true sources of our competitive advantage.

We do not believe the emerging technologies of mobility, wearable devices, social media, et cetera, as threats.

Rather, we view them as valuable tools to leverage with our intellectual property, face-to-face capabilities, expert advice and science, and our ability to integrate all of the above in novel ways to grow our business, and once and for all tackle the obesity epidemic.

We will continue to invest behind our B2B healthcare initiatives, with a particular focus on developing our data collection capabilities, and continuing to build out our account management skills.

As noted earlier, our strategic business is off to another great double-digit growth start, and our small account business has been stabilizing.

We brought in multiple new strategic employer accounts, including the City of Boston; the City of Newark, New Jersey; and several major health systems, among others.

We will continue to build on that success.

Over the last several years, we have been increasing our investment in areas such as technology, B2B, and others as a way to pursue a multitude of opportunities.

Without rapid top line growth, our G&A as a percentage of revenue is too high.

As many of you know, we recently hired Jim Chambers as our Global President and Chief Operating Officer.

Jim brings a wealth of experience, with significant leadership roles in companies ranging from Nabisco, to Cadbury, to Kraft.

His leadership will allow us to take our impact and execution to an entirely new level of performance.

By way of example, I've asked Jim, in partnership with Nick, to take a fresh look at our organization, how it is structured, and how we're delivering against our opportunities and objectives.

I believe this effort will yield higher organizational performance, as well as lower costs.

On a separate but related point, after a long and great career with Weight Watchers, Melanie Stubbing, the current President of Europe, will be leaving us in April and moving on to her next chapter.

Jim has elected not to replace her in her position, but instead to elevate Corinne Pollier, the current GM of France, to lead all of Continental Europe, and to have Corinne and Andrew Knight, GM of the UK, report directly to him.

In addition, Mike Basone, our current CTO and President of WeightWatchers.com, has chosen to pursue other opportunities.

Mike will be with us until the middle of the year.

Mike has been with us since the beginning days of WeightWatchers.com.

Both Mike and Mel have made huge and enduring positive impacts on our organization, and both will be greatly missed.

The earnings guidance we will provide reflects the scope of uncertainty that we've seen.

Our earnings guidance reflects an assumption that the underlying trends we are seeing right now will persist for the duration of the year.

The impact of the volume will be significant, with full-year forecasts of global meetings attendance and paid weeks declines in the high single to low double-digits.

We're assuming flat to slightly positive full-year paid weeks growth for our Weight Watchers online business.

However, we will show some benefit from higher pricing and continued mix shift for Monthly Pass.

Therefore, we're assuming low double-digit revenue declines for the full year.

We will work to manage marketing and G&A spend in the context of revenue loss, but we will do so without endangering our investment areas.

Therefore, we're providing a relatively wide range of EPS guidance for the year of $3.50 to $4, with the lower end assuming no change in recruitment, and the higher end reflecting realization of benefits from our cost savings initiative.

We expect to tighten this forecast on our Q1 call, when we have greater visibility in the volume trend, and when we will have quantified our cost reduction opportunities.

In the context of the current business environment, and our need to focus the team on moving the business forward, we have decided to schedule our Analyst Day for the second half of this year.

We're committed to sharing more specifics of our long-term plan with you, including a deep dive into B2B and other critical growth areas for this business.

At this time, Operator, I would like to take questions.

Before we start questions, if I could just make one point.

I misspoke.

On our assumption for revenue for the year, we're assuming low single-digit revenue declines, not double-digit revenue declines.

Thank you for that.

Sorry.

(Operator Instructions)

Our first question comes from Bob Craig of Stifel, please go ahead.

Good afternoon, everybody.

David, just broadly speaking, it sounded to me like what we're going to see from Weight Watchers going forward is perhaps a greater strategic emphasis on the online side versus the meetings business; is that an accurate assessment of what you have been saying?

No, that is not the way I would characterize it.

You know what is interesting, Bob, is that historically up to now, we have been able to operate effectively with two offerings, Monthly Pass and Weight Watchers online.

And in both -- we have been able to add value to month, Monthly Pass particularly, through retention, increasing retention in the meetings business, and Weight Watchers online has given us an effective way of bringing in more people into the commercial dieting space.

But what has really been happening, particularly over the past year, is that this notion of dieting online is really taking hold, and people are now using not just Weight Watchers but pursuing a variety of other approaches, albeit ones that I believe are generally going to be less effective for them.

I think what we see going forward is an opportunity to sort of break free of the historic approach on being purely focused on having a purely online offering and a purely meetings offering that includes an online component, and doing variations of the above that make differing -- take differing advantages of the components we have in face-to-face interaction, or underlying science and everything else, to conceive of entirely new versions, if you will, of Weight Watchers that build upon what we do, that allow us to kind of spread our offering out to appeal to a wider range of consumers.

I think one thing that is really an important point to make, and this was seen in a recent independent academic study in the Journal of Internal Medicine, but it is also borne out by a lot of our internal research, is that when you look at what actually drives efficacy in terms of successful outcomes, what we see is that things such as apps and online and internet offerings really reach their full potential when combined with human face-to-face interaction.

And it is really the combining of all these elements that you have the greatest outcomes in terms of weight loss success, and we believe that over time that this is the most critical thing for us to focus on.

So I continue to actually believe more and more that face-to-face elements are going to be an even, in some respects, bigger part of who we are.

I just think it is going to take evidence, potentially in forms above and beyond above the traditional group support.

That's helpful.

Second question is, what are your thoughts, David, on trying to enhance affordability in this kind of environment?

I know obviously that you had price increases that you have taken over the last 18 months.

I don't know whether that has been a detrimental -- had a detrimental impact on attendance, but any thoughts on increasing promotional activity, or potentially even using some temporary price roll-backs?

Here is kind of the way I look at price, which is obviously in the context of value.

When I think about value, you know, the good news, if you will, for us across, you know, both Weight Watchers online as well as with meetings, is that the recruitment issues we're facing is not from rejoins.

In fact, if I look at the US online business, which is -- you know, had kind of the toughest time of all of our online markets, Weight Watcher, you know, rejoined activity, if you will, returning subscribers was up nicely over prior year.

As well, retention has held up very nicely over the course of the past number of years, including the worst of the great recession.

And then finally if I look at scores that our members and subscribers give us in terms of perceived value, they remain as high as they have ever been.

So what that tells me is that once we get people going and into the program, we don't have a issue from a value recognition point of view.

Now, I do think that a challenge we're facing right now is clearly, therefore, on trial, driving trial into Weight Watchers, particularly for people who have never used us before.

And given the context of difficult economic circumstances, and the fact that there is these things like free apps and those types of things, I think it is putting additional pressure on us to think of new and better ways to convey our message, and market our message, and communicate our value proposition.

But I wouldn't rule out the possibility that there are ways of us thinking about better and more effective ways to promote the product that could also stimulate trial.

Okay.

Last one for me and I'll turn it over.

Where are you versus where you think you need to be in terms of the internal infrastructure to be able to grow the B2B business, the large corporate business?

We've made great progress in the past year and, you know, that team is really coming together nicely.

We've made a couple of great hires.

You know, we're continuing to build out the technology infrastructure.

That is probably the hardest part of this, is really making sure that we have the data collection and capture capability to service the needs of some of these large accounts.

You know, it is our expectation that -- so what we're doing with that is we're in the process of rolling out laptop computers in sort of what we call tribal locations, including locations on the work site.

Our plan is right now and this year to roll out about 500 of those which, among other things, would allow us to cover the top 25 strategic accounts -- or 25 of the top strategic accounts by the end of the year, and that is really a learning platform that we can then take into the next year.

And at the same time, even in the context of managing costs and G&A much more closely, we're making sure that we properly cordon off certain investment areas to make sure they're getting the adequate oxygen they need to continue building out, so we can capture this opportunity.

You know, I'll continue to make the point that on the healthcare side of the opportunity set, you know, the more time we spend talking to people, you know, ranging from employers to health systems, to insurance companies, and everything else, the more we see that there is a tremendous pent-up need, that as the healthcare world shifts from pay -- fee for service to population health or capitated models, that is going to drive demand for preventive care services.

And in that market, if you look at our 80-plus clinical studies, the fact that we're low-cost, and that fact that we have a fully scaled-up solution, puts us in a position to have significant differentiation from any other obesity treatment out there.

I think it is absolutely crucial that we keep pace on making sure that we're continuing to build out what we have to do for that opportunity set, so that we can grow into that, while at the same time re-energizing our B2C business.

Thanks, David, I'll turn it over.

Thank you.

Our next question comes from Glen Santangelo from Credit Suisse.

Please go ahead.

Thanks for taking my questions.

David, I'm just kind of curious, based on the trends that you've seen now for the first six weeks of the year, it sounds like you're forecasting paid weeks and attendance on average between NACO and International down kind of low double-digits, so I'm curious if you could speak to the conservatism of your new outlet, particularly in the context that it sounds like you're going to be trimming your marketing expectations from your -- or you marketing dollars from your original expectations?

And I'm curious as to, given that you're disappointed with the enrollment to date, does it make sense to trim those marketing expenses at this point in time?

I should probably clarify that a little bit.

First off, in terms of our expectation, I mean, you know, it's always obviously a tricky time of year for us to forecast a full year, because we're literally -- if I kind of look at where the business has been over the past two or three months, volume trends, both online and meetings, as you heard Nick talk about, all the way through December were actually looking pretty good, and the first week of January was actually quite good, particularly for the US online business.

So things were looking up.

It wasn't until the second and third week of January that we saw a significant drop.

And what we've effectively done in building our forecast is we've assumed that that depressed level of volume that we've seen in weeks two through five of the year so far, two through six really, is going to be persistent over the course of -- the full course of the year.

So that is effectively the methodology that the forecast is built on.

Whether that is conservative or not, I mean I hope you're right, but we felt that would be a prudent way to forecast the volume of the business.

Now, the marketing point is a little bit of a different point.

We're not actually reducing marketing beyond what we were planning on doing when we entered the New Year.

So nothing is happening in the marketing budget that is in response to the current conditions.

The two things that are changing in the marketing, principally speaking, one is we did make the decision to take a year off of our men's awareness driving campaign, mostly because the cost per acquisition we were seeing, particularly in the spring and fall, were not, you know, at our levels of expectation in terms of what was profitable marketing spend, which could -- which arguably is partially a result of the way that we were doing in terms of creative execution and other things.

What we chose to do, therefore, was rather than, for example, advertising Weight Watchers for men in January, what we chose to do instead was to shift some of that marketing -- not all of it but some of that marketing support behind the general Weight Watchers online campaign.

But nonetheless, our expectation for the year is that taking out the men's marketing does reduce some of the marketing pressure, and that was always in the plan.

The other part of the plan is reducing the amount of money we spend on banner advertising specifically, and our reason for that is not because we're worried about managing a marketing budget in the context of what's happening with the overall P&L, but it was more driven out of a recognition we had that we were -- that we were increasingly coming to the conclusion that the CPA, the cost per acquisition, associated with many of those banner ads were if anything significantly understated, and therefore were not economic for us to do, i.e.

we were losing money on them.

And so what we're effectively doing is in the reduction of digital advertising we're eliminating non-productive spend, because it just wasn't driving nearly enough volume for the costs of getting that volume.

So that was the assumption, based on our analysis going into the year.

And if you actually look at the volume trends we've seen, as Nick alluded to, in January, the impact of that shift in digital strategy really doesn't hit until Q2, 3 and 4, and the reason for that is that organic demand during those last three quarters is generally going to be less, which means banner ads that were a little bit suspect under normal circumstances suddenly become more suspect.

So the way I would actually express it is that if we see opportunities to get into the market with advertising and marketing that we believe is going to deliver at a cost-effective CPA, we will absolutely spend that money.

So we actually continue to have appetite to look for new ways of investing marketing dollars, but what we're doing is we're applying perhaps an even greater level of discipline in making sure that we're getting the right ROI out of what we do.

So I think the opportunity for us is to find better and more effective marketing vehicles, so that we can have reason to spend more money.

I appreciate all that color.

Maybe if I can ask just one quick follow-up.

You commented on sort of the increasingly competitive online landscape, and given the proliferation of all these online apps, how do you think about sustainability of those as a growth trend, what you're seeing in the dot-com business now?

It sounds like based on your expectations, you've sort of tempered that growth outlook for 2013?

I'm guessing that is somewhat consistent with what you've seen in the first six weeks of the year?

But do you still feel confident that, despite all that increased competition, you should still be able to grow this business year over year, not only in '13 but as you look out over the next couple of years?

We do, for the following reasons.

Fundamentally, the thing that I take the most heart in is that after years of having people actively subscribing to and paying for Weight Watchers online, they see tremendous value in it, and they had great success on it, which is the thing that ultimately matters, you know, and again we've seen this in satisfaction studies we do multiple times per year every year.

We see this in the fact that actually -- one way of thinking about this is that if there was an issue with the value proposition for Weight Watchers online, we wouldn't be seeing repeat activity, because those people would naturally be gravitating towards other options, presumably things like free apps.

So that is not actually the phenomenon we're seeing.

People are absolutely coming back to us.

Furthermore, we haven't seen any loss in retention.

That is what is leads us to the point of view that the value proposition remains strong.

I think what you're seeing happen is that -- and we've seen this kind of anecdotally, including industry references across a wide range of a lot of these self-tracking health apps -- is that there is a tendency for people to download them on their device, and in many or most cases use them a few times and then stop using them.

The impact of that on us short-term is that effectively takes that person out of the mix.

Now the fact that they ultimately haven't lost weight means that they're still going to have a weight problem, and that they're still going to come back to us.

I think the thing that I want to keep emphasizing is that when you talk to a Weight Watchers online subscriber and say what is it that you're buying when you get Weight Watchers online, they will say first and foremost they're doing Weight Watchers, and the technology is something that enables the possibility of doing Weight Watchers in an online context, but they're buying the program, basically.

So when I kind of come back to the value proposition, and the things that we can do to both improve how we communicate it, but also the things that we can and are going to be doing to continue making it better and better, both this year and in the years to come, in ways that I think are going to be difficult for six guys and box of pizza to match, then I think we're going to be in a position that that business gets stronger.

Now one way to think about this is, you know, the paid weeks for Weight Watchers online are roughly comparable to the paid weeks for the meeting business, yet the Weight Watchers online product has a considerably lower price point, which on that basis alone would suggest that there is headroom for growth.

I think it is effectively -- you know, to me this in some respects is sort of similar to, for example, riding the low carb wave, if you want to think of it that way.

There is part of this which is a trial wave that we kind of get through with a lot of these apps, but I think we view it as an opportunity to up our game in terms of what innovation in that product looks like, and how we drive it going forward, as well as how we market it.

Glen, if I could just add one more thing to this marketing conversation.

When you looked at our guidance of '13, you have to view it in the context of what '12 was, so we spent $344 million of marketing in 2012, and a high water mark of 18.8% in sales, and so that is why -- partly why we think there is opportunity to look for pragmatic, sensible efficiencies without [approaching] anything to choke off recruitments.

Okay, thanks for all of the color.

Thank you.

Our next question comes from Brian Wang of Barclays.

Please go ahead.

Thanks for taking the questions.

The first question I have is sort of a follow-up on some of the other questions that have already been asked.

Do you think one of the issues in the year-to-date trend is that the new Weight Watchers 360 program wasn't a big enough change or upgrade, and is there any way to know that the year-to-date weakness is caused by the weak advertising message, rather than other Company-specific issues such as, potentially, the new program?

It is a great question.

And I think that -- one way to think about what we call program innovation or new programs is that is some programs -- there are some changes that we make which are designed to improve the process, and be more effective once somebody has already started, and there are others that are designed to make Weight Watchers feel more accessible and more appealing.

So I'll give you a couple of obvious examples of the latter, which is when we launched Points and moved away from food exchanges, it greatly expanded our potential audience by creating a version of Weight Watchers that was very simple and sort of much more accessible to people that were living on the go.

When we launched Weight Watchers online, which was an innovation in its own right, it basically gave people a way of doing of Weight Watchers but allowed them to have the option of doing it online, and that brought a lot of new people into the brand.

PointsPlus, similarly, was very kind of catchy, in that there was the sort of free fruit, new formula, more nutrition-based, more nutritious, that was very -- it lent itself to word of mouth, and it was a good trial vehicle.

I think what we learned with Weight Watchers 360 is that we were very focused and almost single-minded in our design of improving the behavior change techniques for people once they started, and our assumption was that if we were really good at doing that, that we could somehow find a way to like come up with a catchy way of marketing it so that people would sort of get it.

I think what you'll see with Weight Watchers 360, and what we have seen from our tracking studies, is that people definitely know that Weight Watchers has a new program, but they have no idea what it is.

And for a person who doesn't know Weight Watchers, what we couldn't find was that kind of singular grabby way that would really sort of ignite their interest and drive trial.

And I think that sometimes that's a little bit endemic when you have a program change that very much focused on kind of the internals of ones we have already started.

To be honest with you, frankly if I look at Weight Watchers 360, in some respects it gets stronger as you get closer to your goal, and actually it is a great way of helping people think through maintenance, but that is a long way from someone who is just starting.

So I think what we learned from this is that we were hopeful with this new program that we could find a way of therefore communicating it to create a lot of buzz and excitement to get people who had never done Weight Watchers before to come to us, but we could not find a message in this new program that delivered against that objective.

That would have been difficult enough but, you know -- and frankly, we don't have to have program news to get value from marketing, you know, and our intention going into this year was that we're going to have both program news and a new advertising campaign featuring a new spokesperson and ambassador.

I don't know what the probability that we would be kind of experiencing, you know, the conditions we experienced.

And again, it's wonderful for Jessica, and I couldn't be happier for her, but the timing in terms of how it worked with our campaign couldn't have been much worse.

And at that point, literally as we were finding out we were going into filming and there was not a thing we could do about it, so we tried to make the best of what we could.

It meant that we kind of had to spend more time, you know, basically reverting back to effectively the old advertising creative.

So we kind of got a double whammy of a program that didn't really convey and drive a lot of trial interest by itself, connect -- combined with an advertising campaign that did not provide the newness in advertising that we were hoping to have.

Thank you for that answer.

And that sort of leads me to a second question I had, was I think you mentioned that you were going to do, I guess, a new marketing message for the Spring, is that sort of major revamp?

Because I guess last year, when the UK marketing message missed, you needed to wait -- I don't think it was a full year, but you basically waited about a year due to lead times on those campaigns.

So if you could just talk a little bit about that, please?

Yes, and thank you for asking that question, because I think it is a good point.

You know, one of the tricks with this Spring is that we also, just because it's just one of these years where things are just happening in a particular way, this was a year with a very early Easter, in fact I think it is the earliest Easter can be.

Don't ask me to explain the Gregorian Calendar dynamics of how that works.

But it's an early Easter, which means we don't have a lot of time between now and when we get our new advertising spots out for the Spring campaign.

What that effectively means is that we can do some changes and tweaks to the advertising, but any place where we feel like our strategy -- our underlying strategy might not be quite right, so for example I talked about Weight Watchers online, means it really limits our ability to do a complete revamp.

So what we can do is we can punch certain points a little bit harder.

We can change a couple of messages up, but it doesn't afford us time to do a complete sort of relaunch, if you will, and come up with an entirely new advertising campaign, but we can do some things on the margin.

So I want to kind of temper expectations, which is one of the reasons why we've assumed that the volume trends we're seeing now persist throughout the year, I want to temper expectations of how far we can get in Spring, but recognize that we're going to be -- doing kind of a big reevaluation of the strategy that would put us in a better position potentially in Fall and certainly by next Winter campaign.

All right, great, and just one last one, and this one's probably for Nick.

Can you please discuss the debt covenants?

I guess if the guidance came in at the low end of the range, whether that would sort of trip up any of the debt covenants, if there is any issues there?

Yes, thanks, good question, and as you can imagine, as an ex-corporate Treasurer who looked at the global financial crisis, you know, covenants and the capital structure is something I look at closely.

Look, we've got real strong cash flow.

I'm comfortable with our covenants, and you know, like you know, the debt market is hard and always open to ways to optimize our capital structure, but no plans at this time and very comfortable with our covenants.

All right.

Even at the low end, you think it is fine?

Yes, you can do the same math I can do but, yes, I mean, basically yes, I am comfortable with our covenant situation.

Great, thank you.

Thank you.

Our next question comes from Peter Wahlstrom of Morningstar Investments.

Please go ahead.

Circling back to the online topic, are you seeing more competition primarily in the US, or is this a global issue where it is equally prevalent in the UK and Continental Europe?

You know, it is a great question.

We actually see proliferation of applications across the global market.

To the extent that it's had impact, the impacts seemed to be strongest in the US.

Now, I said one of the things that is worth pointing out is that just in general, the shift of consumer usage around SmartPhones and tablets is obviously taking lots of organizations by surprise.

I'm not -- I think the rates of adoption have been fairly consistent across most of the Western economies.

So, again, what is worth noting is that, you know, the online business in Europe is running ahead of prior, after comping a good year, so I think that's a positive sign, despite the fact they also had some pre-app competition.

It may not be quite as intense as what we're seeing in the US, where basically the US app environment can support a lot more players than a country with a smaller population.

But, you know, I also think that it is worth noting that there is other things at play.

The macro impact of what's going on with the US economy, again, it obviously didn't do us any favors, particularly in the context that I just described, the competitive context, with -- you know, the payroll tax going through the beginning of January could not have been worse timing, from our perspective.

So I think you do have a couple factors that were sort of working together in an unfortunate way.

Again, I view these as opportunities of -- I don't have any doubt that I've got a better mousetrap with Weight Watchers online, in terms of helping people systematically deal with the weight issue than they can get from any one singular app.

I think the challenge for us is to use this as an opportunity and a catalyst to be that much more aggressive.

Fair point.

And maybe that ties into -- one of the previous questions was asked about revisiting the pricing model, or using promotions, and I guess based on your response that even though Weight Watchers is set to become more aggressive in the online space, you don't view this as the Company's having to make a structural change to a pricing model?

Maybe it's a tiered service or something along the options of all options on the table, is that fair to say?

I think there is a lot of options on the table, but I think one of the options that I'm not contemplating is changing the fact that Weight Watchers online, even at a current price point of $18.95 a month, is a great value for the customers that are using it, based on what they tell us.

I think that -- the point I was making earlier is that if our challenge is driving trial, and that is our challenge right now, I think it is a very fair question to say are there -- in addition to having a different marketing strategy/message, are there other things we can think about in terms of promotional strategies that might be more beneficial to driving trial in a competitive context?

And I think that is absolutely on the table.

Okay.

And taking a step back, when you mentioned that you're seeing success with returning members and retention, in contrast to the never-members and maybe some of the online pressures, are you seeing a subtle demographics shift maybe, where you're missing out on a younger individual or a particular income segment of the population?

Not really, although let me take a step back and say we only have, you know, again, five or six weeks of data for January, so we're not that deep on demographic trends.

I would be surprised, but that is one of the analyses that we will be taking a look at.

If there was an income effect, the obvious hypothesis would be those people at the lower end of the income spectrum are the ones that are seeing the biggest hit on disposable spending, as a result of the payroll tax, because that effectively was a regressive tax increase.

And so if there was going to be a place where I thought that was going to have particular impact on it -- on us, I would say it would be for households earning $60,000 or $70,000 or less.

But again, I think it's going to be a little while until we have a read on that.

Okay, fair enough.

One last item, in December I know Vivus announced better-than-expected prescription growth from its Qsymia product.

I had asked about that a couple quarters ago, but wondering if you have seen as that having a material impact on either a detractor for new sign-ups or maybe the way that people perceive Weight Watchers?

You know, as I understand it, and I had a chance to listen to the Vivus presentation when I was out at San Francisco at the healthcare conference, I think they're -- you know, you have to put their trial numbers in the context of what they were expecting, and where they are in the distribution strategy.

I think if you looked at the sheer number of people getting prescriptions for the weight loss drug, in terms of just absolute numbers, it is pretty tiny right now.

So I think what you're hearing from them is more how it compares versus their expectation on a slow rollout.

I'll make the point that even in places where, you know, where Qsymia is getting coverage, as I understand it you're still looking at a co-pay of $40 to $50 a month.

So I think -- and that is where there is coverage.

We take every competitive threat -- as you've already heard, we take every competitive threat seriously.

I would say, though, that, you know, with these medications that consumers are going to have to pay significant out of pocket for them, and they're virtually all circumstances, and certainly compared to the price of Weight Watchers.

I'll also continue to make the point that those -- that all of these obesity medications, approved or to be approved, were predicated as an adjunct to a behavior change effort, as opposed to a replacement to a behavior change effort.

And so like a lot of things, we think that this -- if all of these things drive greater interest around behavior change, the question is how do we leverage that increased interest.

Okay.

Thank you.

Next question comes from Dara Mohsenian of Morgan Stanley.

Please go ahead.

Hi.

Dave, I just want to take a step back and get more of a long-term view around the meeting business.

Historically, organic attendance in North America has been declining pretty consistently over the last decade, except for a couple of years, and obviously it looks weak again in 2013, and it seems like that goes beyond just the ineffective marketing message you cited.

So I just wanted to get your perspective on what the big issues are holding you back on the meeting business, and as you think about the business going forward are there game changers in terms of how you manage the business that can help reinvigorate growth?

Yes, I think that there is -- I would characterize it the following way.

I think that to your point, I would say that when we had the right combination of marketing and program news, we were able to drive some pretty nice growth in terms of enrollment activity around the meeting business, specifically I'm talking about 2011.

You know, frankly, even if I looked recruitment trends in the beginning of 2000 -- the first half of 2012, for NACO meetings, those enrollment numbers were at or nicely ahead of 2009 and '10, they just had a tough comp.

It was really was toward the back half of the year that we saw increasing pressure from enrollment activity, and that has obviously continued into this January on the meeting side of the business.

I think from a longer-term perspective, I see a couple of things.

First off, I do see a world of Weight Watchers in which there is more in the offering than just online and meetings, so I think that's -- you could see various ways of us leveraging our face-to-face capabilities going forward.

You know, I think the reality is, is that, you know, every study that comes out again shows that the thing that is most predictive of weight loss outcomes and efficacy are often things that surround -- are surrounded by group support.

It works from a behaviour change point-of-view on a multitude of dimensions, and unlike, you know, traditional retailers being, you know, disintermediated by online options, like Amazon and things like that, there is no alternative out there that delivers weight-loss outcomes like the combination of group support combined with internet apps.

So my underlying presumption is that when you have something that does a better job of driving weight loss success, that there are ultimately ways of driving it, but the trick for us is figuring how to unlock those opportunities in the B2C context, and again I think that -- what I view this, Dara, and this is something that I think maybe in some respects speaks to some of the things that you've written about the Company over the years, is that we have to recognize that in some respects we need to be that much more aggressive in how we innovate and present our overall offering.

The other point I would make is that, you know, interestingly if you look at the Weight Watchers meetings model, for example, in the B2B context, where things like clinical data and outcomes, and measurability and those type of factors, become that much more important, and so from a -- if you ask me from a longer-term point of view, I think there are things we can do to push and drive the B2C business.

But I also view over time meetings becoming kind of a lead offering of behavior change for the treatment of things like pre-diabetes.

And so when you move into a healthcare context, interestingly enough that part of our business, effectively Monthly Pass and variants thereof, becomes an even more compelling offering for us to have, that ends up being the thing that is lower cost than other alternatives that are out in the market.

So I kind that -- you know, as I kind of look at it, I've always -- I've expected over the past year that sort of what I'll call lighter versions of Weight Watchers, such as Weight Watchers online and others, are going to get an increasing percentage of our B2C business activity, but that kind of the all-singing, all-dancing version of Weight Watchers, which is Monthly Pass, is going to increasingly become the lead horse as we push into B2B healthcare states.

Okay.

And then it clearly sounds like you're focussed on SG&A efficiencies going forward.

Can you discuss what the key areas you're looking at are, in terms of potential cost cutting, and if we can expect a more broad restructuring program at some point or if you're focused more on belt-tightening?

No, I think it's -- I would kind of put it into two or three big buckets of activity.

I think first off, we've become larger as an organization.

We have an increase in costs but, you know, with that also comes an increase in organizational complexity.

And I think it has mostly been a function of trying to do a lot of different things at the same time, because we have lots and lots of opportunities in different places.

I think one of -- one of the important opportunities we now see in the context of all this is really tightening up our focus on the bets that we're making, and making sure that we resource behind those bets, and de-prioritize things that might have been nice to do but frankly are not as important to our long-term future, and what that allows us to do is therefore tighten up organisational focus, and that allows us to reduce costs at the same time.

I'll give you a really clean example of this, is that we literally have doubled the amount of money we spend on professional services over the past three years, you know, and I'm talking tens of millions of dollars.

And I'm not sure that we're getting a return on investment from that incremental spend, as I kind of look back at it.

So that is an example where I think we can significantly tighten up.

We also have to prioritize to get there.

So that is kind of the first bucket.

The second bucket is that, you know, I think we have an opportunity to look at how we're structured as an organization.

Organizationally, are there different ways of configuring ourselves that allow us to be both more agile and better at execution, and at the same time do things more efficiently with less cost.

Then finally, I think there is always an opportunity, as one of my Boardroom members refers to it as mowing the grass, which you can use to basically, if you want to call it belt-tightening, which is just taking a fresh look to the entire cost structure and cutting out those activities, leaning harder on vendors, those types of things, that the and combination of those things both reduces costs but also increases organizational effectiveness at the same time.

And it's -- our view is not one or the other, but both.

Okay.

And then on the B2B spending increase in 2013, are you leaving 2013 in more of a sustainable type of spending base, or should we expect still substantial spending increases on the infrastructure for B2B over time beyond 2013?

I think you can expect the areas of the -- and a lot of this, obviously, is already built into our guidance.

It is all, frankly, built into our guidance.

But the places where we're increasing spending is to a certain extent, you know, people, although we now have a nice sort of core B2B team that is currently in place.

But, frankly, a lot more of where the money is coming from is the process of creating data collection capabilities in our meetings.

That is probably the biggest area of spend.

And, you know, and at some point we reached steady-state on that, and I think once we have that data collection capability, the nice thing is that it is a platform that can actually serve a lot of ends.

One, enabling our healthcare opportunity but two, as we are getting real-time data on members as they're coming to us, I think it also creates some opportunities at a certain point, [rules] around customer fragility and these types of things, that give us opportunities to increase retention.

So we think that the ROI for that activity is ultimately going to be very, very strong.

We just want to make sure we execute it the right way.

In terms of providing kind of a forward look beyond 2013 of the spend behind some of these, you know, we're going to have a little bit more to share.

We were -- again, we were hoping to have the investor meeting, the investor conference in the first half.

For all of the reasons that are probably apparent right now, we need the team to focus on the things they're focused on right now.

But we will be in a position for the second half to provide a lot more clarity for what -- that investment level, as well as our expected return against it looks like in '14, '15 and '16.

Okay, thanks.

Thank you.

Thank you.

Our next question comes from Olivia Tong of Bank of America/Merrill Lynch.

Please go ahead.

Thank you.

You know, why do you think the recruitment trend started off well but then -- in both the meetings and online, and then decelerated quickly after that?

It is a good question.

I think the most obvious thing is that when we had the soft launch, we did get some buzz from that, and I think that helped drive recruitment levels a little bit.

I do think that there is also this interesting effect in January.

If I had to hypothesize, and we're kind of sifting through the data, but if I had to hypothesize, there are two things that were -- that changed in December.

One was the macroeconomics, so this is when the payroll tax holiday went through.

I think there have been reports that a number of retailers have been sort of feeling the effect of this in January, but that is purely a January phenomenon.

Really, the impact that people were seeing on their paychecks was happening in the second and third week.

I think that explains part of it.

I think frankly, you know -- and yes, January is the time when everybody is trying whatever the new thing is, and so you might -- you'll generally see increasing take-up of whatever fad or quick-fix approach it might be, and so that potentially wasn't doing us any favors.

But frankly, most significantly, I think the fact that the messaging around the program and the advertising supporting it not hitting expectations, really you're going to see the effect of that mostly if you get into like weeks two and beyond in January, and I think that's exactly what we're seeing.

So we're just -- we're not getting the lift from our marketing that we would otherwise have gotten had things gone differently, in terms of both the program having a connecting hook with the never-member, as well as the impact of the advertising.

Got it.

And then in terms of your guidance, you guys said that you've obviously got a pretty big range there, and you typically start the year with a pretty big range.

But can you give a little bit more color in terms of what your expectations are on the bottom end versus the top end, in terms of recruitment, and then also on the cost saves, relatively speaking?

Yes, look, on the low end of our guidance is essentially that the trends that we're seeing right now in recruitment persists throughout the year, the duration of the year; on the high end of the guidance it's, you know, it's -- incorporates the benefits of our, you know, prioritization and, you know, cost reduction activities that Dave's described and, you know, that we kicked off last week with the team.

Thank you.

Thank you.

That's the last question that we have for today.

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

Thanks.

In summary, while the near-term is challenging, we've experienced similar challenges in the past, and have overcome them each time, and we will do so again this time.

I look forward to speaking with you again at our next quarterly earnings release.

Thanks very much.

Thank you.

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