Q2 2008 Earnings Call

August 7, 2008  8:30 am ET

Taking a closer look at some of the month’s top performers shows that airline stocks once again benefited from the falling price of oil. While some surprising names posted better than expected quarterly results and ended the month as the top internet stocks.

Q4 2007 Earnings Call

March 4, 2008 4:30 pm

Weight Watchers International (WTW), which trades on the New York Stock Exchange, is a provider of weight management services, such as exercise, and behavioral techniques, and nutritional products. The stock has a P/E of 22.66 and a PEG of 1.55. It pays a yield of 1.3%.

After all, there’s no shortage of potential customers: roughly two-thirds of Americans are overweight (30% of U.S. adults, or some 60 million people, are categorized as obese). At any given time, about a third of the U.S. population—over 70 million individuals—are on diets of one form or another.

eDiets.com Incorporated (DIET)
Q2 2006 Earnings Conference Call
August 15, 2006 8:30 am ET

Web Site Is a Prelude To Glaxo's OTC Weight-Loss Pill

On May 15th, DIET said that Prides Capital, a Boston and San Francisco-based hedge fund headed by former Blum Capital partner Kevin Richardson, agreed to purchase 1.98M shares at $5.05 from the company. Prides is also receiving five-year warrants to purchase 1.2M shares at $6.00, and the company will get a slot on DIET's board.

Revenue compared to the prior year's quarter rose slightly from $13.0 million to $13.8 million. But the operating loss also grew from $3.5 to $3.6 million.

The company had experienced reasonable growth up until recently. Revenue rose from $38.3 million for 2003 to $53.7 million in 2005. In 2005, eDiet had an operating profit of $1.2 million. But, during 2005, revenue peaked in Q2 (June) at $15.1 million and then dropped in the September quarter to $13.5 million and to $12.1 million in the December quarter. So, the current quarter is an uptick. But the operating loss is not. In each of the last three quarters of 2005, the company showed operating profits.

In the last few days, the news has gotten worse. The company agreed to buy Nutrio.com for $8.5 million. The company also did a private placement with Prides Capital for 1.7 million shares plus some warrants and under the purchase agreement that number of shares could rise. Prides will get representation on the company board.

eDiets.com, Inc., (DIET)
Q1 2006 Earnings Conference Call
May 16, 2006, 8:30 a.m. EST

eDiets.com
Q4 2005 Earnings Conference Call
March 9, 2006, 10:30 a.m. EST

Executives:

Question & Answer

Executives:

…I would say that the online advertising environment we are operating in is still very challenging. Some key advertising spots are up 75% over last year and no longer affordable.

On the plus side, our years of experience buying online media has paid off. Our media buying team found opportunities moving between… online and television to keep our acquisition costs in line.

Since inception, online advertising has been a highly cyclical business. Right now there is a lot of new money in the market and it is clearly a sellers' market. Now with Google building their advertising model and bringing new inventory online, things could improve for us at some point. Regardless, we think we can thrive in the current market.

…In advance of the new year we hired a new ad agency. This group has a great deal of success with television direct response branded campaigns. Many people have never heard the eDiets name, but given the cryptic messaging dictated by online banners, knowledge of the benefits of our products and services is limited.

Over the next year we will concentrate on communicating eDiets message more clearly in television and print. Looking out we see other opportunities.

(Quotes are from the CCBN StreetEvents transcript.)

]]> Tue, 02 Aug 2005 00:07:00 -0400 David Jackson eDiets (ticker: DIET) CEO David Humble gave one of the clearest descriptions to date of the inflation in online ad prices on his company's Q2 conference call. Excerpts:

…I would say that the online advertising environment we are operating in is still very challenging. Some key advertising spots are up 75% over last year and no longer affordable.

On the plus side, our years of experience buying online media has paid off. Our media buying team found opportunities moving between… online and television to keep our acquisition costs in line.

Since inception, online advertising has been a highly cyclical business. Right now there is a lot of new money in the market and it is clearly a sellers' market. Now with Google building their advertising model and bringing new inventory online, things could improve for us at some point. Regardless, we think we can thrive in the current market.

…In advance of the new year we hired a new ad agency. This group has a great deal of success with television direct response branded campaigns. Many people have never heard the eDiets name, but given the cryptic messaging dictated by online banners, knowledge of the benefits of our products and services is limited.

Over the next year we will concentrate on communicating eDiets message more clearly in television and print. Looking out we see other opportunities.

(Quotes are from the CCBN StreetEvents transcript.)

Complete Story »]]> DIET David Jackson http://seekingalpha.com/article/1310-ediets-beats-eps-estimate-but-marketing-spend-still-a-problem-1q05-earnings-results?source=feed 1310 eDiets (ticker: DIET) met the consensus revenue estimate but beat the EPS number by a penny. Details and a quick comment:

Q1 Results
(all percentage changes and comparisons are year on year, unless stated otherwise)

• Revenues were $13.0 million, up 18%. Consensus was $12.18 million.
• New members were 146,000; total members at end-quarter were 247,000.
• Sales and marketing up 16.6% to $12.4 million.
• Total expenses were $16.5 million, up 12.1%.
• Net loss was $3.5 million.
• EPS was loss of $0.16, versus consensus of loss of $0.17.
• Cash burn was $2.1 million versus $0.7 million a year earlier.
• Balance sheet: cash and equivalents were $6.9 million.

From the press release:

"eDiets.com recognizes advertising expense at the time the advertising is run but recognizes related subscription revenue ratably over the subscription cycle, which currently averages approximately six months. As a result, the company tends to report lower profits or losses in quarters when it is investing in advertising to grow its subscriber base. Profitability in the second quarter of fiscal 2005 is expected to improve substantially compared to the first quarter of the year."

"The growth in expenses was primarily related to the company's ability
to put a larger number of advertising dollars to work in this year's
first quarter compared to the first quarter of fiscal 2004 without
driving the average cost to acquire a member above year-ago levels.
Quarterly advertising investments for the remainder of fiscal 2005 are
expected to decline sequentially."

"Higher cash usage in the first quarter of 2005 compared to the first quarter of 2004 was primarily related to the company's shift from quarterly upfront billing to monthly billing later in 2004. This shift negatively impacted cash flow in the first quarter of 2005 by approximately $2.5 million."

• Press release here.
• DIET's 4Q04 results here.

Quick comment

Looks like things are improving: sales and marketing actually rose less than revenues (17% versus 18%). But let's not get too excited: sales and marketing still accounted for 96% of revenue...

]]> Thu, 28 Apr 2005 16:51:25 -0400 David Jackson eDiets (ticker: DIET) met the consensus revenue estimate but beat the EPS number by a penny. Details and a quick comment:

Q1 Results
(all percentage changes and comparisons are year on year, unless stated otherwise)

• Revenues were $13.0 million, up 18%. Consensus was $12.18 million.
• New members were 146,000; total members at end-quarter were 247,000.
• Sales and marketing up 16.6% to $12.4 million.
• Total expenses were $16.5 million, up 12.1%.
• Net loss was $3.5 million.
• EPS was loss of $0.16, versus consensus of loss of $0.17.
• Cash burn was $2.1 million versus $0.7 million a year earlier.
• Balance sheet: cash and equivalents were $6.9 million.

From the press release:

"eDiets.com recognizes advertising expense at the time the advertising is run but recognizes related subscription revenue ratably over the subscription cycle, which currently averages approximately six months. As a result, the company tends to report lower profits or losses in quarters when it is investing in advertising to grow its subscriber base. Profitability in the second quarter of fiscal 2005 is expected to improve substantially compared to the first quarter of the year."

"The growth in expenses was primarily related to the company's ability
to put a larger number of advertising dollars to work in this year's
first quarter compared to the first quarter of fiscal 2004 without
driving the average cost to acquire a member above year-ago levels.
Quarterly advertising investments for the remainder of fiscal 2005 are
expected to decline sequentially."

"Higher cash usage in the first quarter of 2005 compared to the first quarter of 2004 was primarily related to the company's shift from quarterly upfront billing to monthly billing later in 2004. This shift negatively impacted cash flow in the first quarter of 2005 by approximately $2.5 million."

• Press release here.
• DIET's 4Q04 results here.

Quick comment

Looks like things are improving: sales and marketing actually rose less than revenues (17% versus 18%). But let's not get too excited: sales and marketing still accounted for 96% of revenue...

Complete Story »]]> DIET David Jackson http://seekingalpha.com/article/1185-victims-of-pay-per-click-ad-inflation?source=feed 1185 The most striking theme that ran through the Q4 financial results of Internet companies, irrespective of size, was the impact of rising pay-per-click ad prices. The winners were the ad brokers - Google and Yahoo. The losers were companies that rely on advertising to attract traffic, as their marketing expenses grew faster than their revenues.

This is a critical theme for investors (rather than short-term traders). Do you own stocks in companies that are dependent on advertising and helpless in the face of rising costs? Here's a list of the victims, with the relevant stats and comments from The Internet Stock Blog's write-up of their Q4 results or recent SEC filings:

Victims of PPC Ad Inflation

AMZN - Amazon.com

Marketing expense up 44% year over year to $58 million. Net sales
up 26% year over year excluding exchange rate impact, 31% including
exchange-rate impact.

Although Amazon's marketing expense is relatively small (the company's strategy is to allocate marketing to lowering the price to customers of goods or shipping), it's highly significant that Amazon's marketing expense grew much faster than revenue (44% versus 31%).

Question: Amazon says: "We expect absolute amounts spent in marketing to increase over time." But why? If Amazon has the most efficient infrastructure and the strongest brand, that should allow it to offer the lowest prices and to boost revenue without marketing.

Sales, marketing and fulfillment costs up 13% to $4.28 million. Revenue up 3.7% to $14.5 million.

WeightWatchers.com has continued to strengthen its position as the leading online weight loss company in the world. WeightWatchers.com is now more than twice the size of its nearest competitor, based on revenues. And, unlike its nearest competitors, it is a very profitable company.

Q4 Results
(all percentage changes and comparisons are year on year, unless stated otherwise)

• Revenue was up 2.8% to $11.1 million.
• Revenues from membership fees rose less than 1% to $9.76 million.
• Sales and marketing expense rose 14% to $7.2 million, an astonishing 74% of membership revenue.
• Net loss was $59,000, or $0.00 per share, versus net income of $1.1 million, or $0.06 per share. No analyst estimates to compare these numbers to.
• Total expenses, including advertising, totaled $11.2 million versus $9.7 million. The increase "was due to modest growth in sales and marketing... as well as the consolidation of eDiets Europe Ltd.
• Cash burn from operations for the quarter was $3.2 million, versus $233,000.
• Cash at quarter-end: $8.8 million.

Q1 Guidance

• Revenue growth of 10%.
• Net loss for the quarter due to advertising expenses.

Full Year 2005 Guidance

• Revenue growth of 12-15%.
• Positive net income for the year before expensing of stock options.

The company says in its press release:

"During the first quarter of 2005 we continue to increase our estimated margin on newly acquired subscribers and we forecast revenue growth of approximately 10% for the quarter. However, we plan to make the majority of our 2005 advertising investments in the first half of the year, consistent with the seasonality of the diet business, and as a result we expect to report a loss in Q1. Our full year budget calls for 12 to 15% revenue growth and positive net income before any recognition of stock option expense as we reap the benefits of the sales and marketing investments we are making today."

• eDiet's challenges: (1) the cost of acquiring customers is rising (due to rising online advertising prices); (2) eDiet's suffers from high customer churn; (3) the company doesn't make enough money from each customer during the subscription period; (4) barriers to entry seem to be very low, and (5) other online diet companies seem to be outspending eDiets.
• A thought: online dieting is a naturally high churn business. Dieters cancel their subscriptions when they finish the diet. Then, if they later have to do another diet they might want to try a new program (presumably the last one didn't work well enough...).
• DIET burned $7.7 million of cash in 2004.
• Current market cap (at time of writing) is about $79 million.
• Looks like DIET failed the tests it set up for itself in its last conference call.

DIET chart below (it doesn't show todays drop).

]]> Thu, 24 Feb 2005 12:12:00 -0500 David Jackson Micro-cap online diet company eDiets.com (ticker: DIET) reported Q4 numbers this morning that led to a 20% pummeling of its stock in subsequent trading. Details and comments (look at the percentage of subscription revenue spent on sales and marketing and be amazed!):

Q4 Results
(all percentage changes and comparisons are year on year, unless stated otherwise)

• Revenue was up 2.8% to $11.1 million.
• Revenues from membership fees rose less than 1% to $9.76 million.
• Sales and marketing expense rose 14% to $7.2 million, an astonishing 74% of membership revenue.
• Net loss was $59,000, or $0.00 per share, versus net income of $1.1 million, or $0.06 per share. No analyst estimates to compare these numbers to.
• Total expenses, including advertising, totaled $11.2 million versus $9.7 million. The increase "was due to modest growth in sales and marketing... as well as the consolidation of eDiets Europe Ltd.
• Cash burn from operations for the quarter was $3.2 million, versus $233,000.
• Cash at quarter-end: $8.8 million.

Q1 Guidance

• Revenue growth of 10%.
• Net loss for the quarter due to advertising expenses.

Full Year 2005 Guidance

• Revenue growth of 12-15%.
• Positive net income for the year before expensing of stock options.

The company says in its press release:

"During the first quarter of 2005 we continue to increase our estimated margin on newly acquired subscribers and we forecast revenue growth of approximately 10% for the quarter. However, we plan to make the majority of our 2005 advertising investments in the first half of the year, consistent with the seasonality of the diet business, and as a result we expect to report a loss in Q1. Our full year budget calls for 12 to 15% revenue growth and positive net income before any recognition of stock option expense as we reap the benefits of the sales and marketing investments we are making today."

• eDiet's challenges: (1) the cost of acquiring customers is rising (due to rising online advertising prices); (2) eDiet's suffers from high customer churn; (3) the company doesn't make enough money from each customer during the subscription period; (4) barriers to entry seem to be very low, and (5) other online diet companies seem to be outspending eDiets.
• A thought: online dieting is a naturally high churn business. Dieters cancel their subscriptions when they finish the diet. Then, if they later have to do another diet they might want to try a new program (presumably the last one didn't work well enough...).
• DIET burned $7.7 million of cash in 2004.
• Current market cap (at time of writing) is about $79 million.
• Looks like DIET failed the tests it set up for itself in its last conference call.

DIET chart below (it doesn't show todays drop).

Complete Story »]]> DIET David Jackson http://seekingalpha.com/article/1115-will-ediets-com-diet-meet-its-own-goals-or-will-the-stock-get-slimmed-down?source=feed 1115 Comments made by eDiets.com (ticker: DIET) CEO David Humble on his company's 3Q04 earnings call now seem prescient. But they also set a clear yardstick for judging whether the company's Q4 results (which it reports Thursday morning before market open) are successful. Here's what he said, and a quick comment:

I believe the on-line fundamentals from convenience and lower cost will continue to tip the [dieting business] category our way. Like other on-line direct response and advertisers, we have seen higher on-line advertising prices significantly increase our cost to acquire subscribers. To counter this, we made several changes to the business over the past 6 months, and made significant progress towards resolving this problem.