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  • Weight Watchers International's Market Cap Is Still Obese [View article]
    "They would need to double that cash flow from now to 2020 if they have s chance of paying the 2020 debt."

    Over the past decade, WTW has carried an average of $1.5B of debt on its books (at year end figures). If they can stabilize the business and generate a few hundred million of CF from operations a year, they will refinance as they've done many times before....
    May 30, 2015. 11:38 AM | Likes Like |Link to Comment
  • Weight Watchers International's Market Cap Is Still Obese [View article]
    So no "intellectual straight jackets" of mine addressed, as expected.

    When you say an insurance carrier, do you mean someone like Humana, the third largest health insurer in the country?

    Here's what an exec at the company had to say when the partnership was announced:

    “With that in mind, partnering with Weight Watchers just made sense – it allows us to connect our members with a leading weight loss program so that they can better navigate their wellness journeys.”

    Here's another article on why Humana chose WTW:

    "The companies began discussions more than a year ago, and Humana considered several partners, Mullen [VP of wellness strategies & solutions] said, but Weight Watchers rose to the top because its approach was backed by solid science. It's also among the top recommendations by doctors to patients."

    As it relates to "impossible secular trends", you mean like the continued increase in overweight / obese people in the US and worldwide? To me, that sounds like a pretty strong secular trend for a program with decades of proven efficacy - something those insurance carriers you're talking about are likely to care about.

    As I noted above, you are betting on one thing - a continuation in the trend. That certainly seems like a solid bet so far. I think you're missing two key points: (a) flexibility on expenses at lower revenues, and (b) the likelihood of stabilization / turn with time. The second point is clearly less certain - and I don't think it will happen anytime soon. That's why the stock trades at less than 2x trailing FCF (a point you don't seem to like addressing).

    I'll leave it here because we seem to be running in circles now. Been fun talking with you ikarus; we'll see who was right when 2020 rolls around...
    May 30, 2015. 11:36 AM | Likes Like |Link to Comment
  • Weight Watchers International's Market Cap Is Still Obese [View article]
    Ikarus - point to one "intellectual straight jacket" that you see here and I would be happy to address it directly.

    I've addressed a few of yours - like saying that nobody under 35 will use WTW (when the average customer is fifteen years older than that), or that this a fixed cost business based on retail locations and fixed staff (when that's far from accurate), etc.

    By the way, who do you view as WTW's closest direct competitor? I'm interested to hear your answer.

    You are betting on one thing - a continuation in the trend. I'm sure you see that if you're wrong in that assumption, this will be a very painful short.
    May 29, 2015. 07:55 PM | Likes Like |Link to Comment
  • Weight Watchers International's Market Cap Is Still Obese [View article]
    "You are sadly mistaken and the multi-year trend away from WTW is evident in their results."

    The average WTW customer is a 48-49 year old woman. According to the 2010 Census Bureau data, there are ~11.5 million women in the US who are 45-49 years old, an another ~10.5 million in the 40-44 age bracket.

    That's just for the United States, and compares to total active subs for WTW at the end of 2014 of ~2.5 million. The comment about the "pool of potential WTW customers" is pure nonsense; there are plenty of potential customers around the world for WTW's core offering.

    As it relates to competing with technology, they certainly are fighting for trial. Whether or not that holds long term is at least partially dependent upon efficacy (assuming anybody is actually going to succeed at losing weight); as you noted, you're not sure if these things are actually effective for the average customer (the data suggests they're not).

    I would agree they need a much more attractive value offering relative to the free calorie counter apps, which is where they need to improve. They're doing a couple different things here, including (a) adapting the meetings / accountability component of the business to the digital world, (b) building their fitness capabilities, and (c) improving their software / mobile offerings. If they succeed here, there are plenty of customers out there.

    Still a lot of work to do on that front for sure...
    May 29, 2015. 04:41 PM | Likes Like |Link to Comment
  • Weight Watchers International's Market Cap Is Still Obese [View article]
    Just remember they generated $230M in cash flow from operations last year, with the stock trading at less than 2x trailing FCF.

    You better be pretty certain because if you're wrong, watch out...
    May 29, 2015. 12:54 PM | Likes Like |Link to Comment
  • Weight Watchers International's Market Cap Is Still Obese [View article]
    "This will definitely be bankrupt before the 5 year mark."

    Certainly not definite; time will tell...
    May 29, 2015. 11:27 AM | Likes Like |Link to Comment
  • Weight Watchers International's Market Cap Is Still Obese [View article]
    "WTW has been pushing the healthcare business for the past 10 years. It is like the pot of gold at the end of the rainbow. It will probably never come and certainly not in time for the current equity holders."

    That's accurate - they have been talking about it for a long, long time, with no impact. However, the fact that they finally got something worked out with Humana is a good first step. I'm not too optimistic yet, but I'm not as quick to write off the Humana deal as Max is - I think it could start to be material to results in the next five years (assuming that's what he means by "in time").
    May 29, 2015. 09:20 AM | 1 Like Like |Link to Comment
  • Amazon gives Prime users free same-day delivery in 14 metro areas [View news story]
    $35 of Fancy Feast? That's going to be one fat cat...
    May 28, 2015. 02:08 PM | 2 Likes Like |Link to Comment
  • Weight Watchers International's Market Cap Is Still Obese [View article]
    He was talking about FOSL
    May 28, 2015. 09:07 AM | Likes Like |Link to Comment
  • Weight Watchers International's Market Cap Is Still Obese [View article]
    "Someone said the CEO sold 10% of his shares but I couldn't verify..."

    Who's the someone? Are they credible? It sounds like you're saying it.
    May 28, 2015. 07:37 AM | Likes Like |Link to Comment
  • Weight Watchers International's Market Cap Is Still Obese [View article]
    "That being said, the basic point is still the same... If revenues fall another 10% and operating income falls 35% in 2015, and continues on the same trajectory in 2016, there won't be enough operating income to cover interest payments for 2017."

    The trajectory is clearly important. Key drivers of the trajectory are marketing and SG&A, which I've pointed to a few times. If I was you, I would go back and look at the financials over the past decade or so. If you did so, I would love to see you write up the numbers.
    May 27, 2015. 01:43 PM | Likes Like |Link to Comment
  • Weight Watchers International's Market Cap Is Still Obese [View article]
    Max,

    I'm copying and pasting this directly from the 10-K for FY14 revenues, net:

    1,479.9

    Revenue was down 14.2% from 2013, with marketing expense falling at a slower rate than sales. Pull up the 10-K, it's all in there. Then look at marketing as a percentage of sales over the past 10+ years; they need to adjust here, and will be forced to if they don't choose to.

    As it relates to pricing, would you mind citing a source? Back in 2007, Monthly Pass was $39.95 / month. If you look online, you'll see that it's now $44.95 / month, or ~$38.30 / month with a three month commitment. Again, I question your numbers.

    Of course this is how markets are made; we will see what happens...
    May 27, 2015. 11:50 AM | Likes Like |Link to Comment
  • Weight Watchers International's Market Cap Is Still Obese [View article]
    Max,

    In that scenario, what do you think will happen to marketing spend?

    If revenues fall 16% in 2015 (in-line with CC drop in Q1), they'll be ~$1.24 billion for the year. That's pretty close to the revenue total for 2006; now go look at how SG&A and marketing in 2014 compare to the spend in 2014 (or the projections for 2015).

    We're currently at ~$120M annualized interest expense, and falling to ~$105M or so after the 2016 payment. I think the numbers show they'll make it; you disagree, as do many others.

    We'll see in five years who was right...
    May 27, 2015. 11:15 AM | Likes Like |Link to Comment
  • Why Chromebook Sales Should Be Important To Google Shareholders [View article]
    Docs has been around for close to a decade now; how much market share does Google have? They've been quiet about this on conference calls as of late - in a period when Office 365 has been on fire. I don't think that's a coincidence...
    May 26, 2015. 07:03 PM | Likes Like |Link to Comment
  • Weight Watchers International's Market Cap Is Still Obese [View article]
    "Intuitively, that is right for this type of business that has retail locations and fixed staff, not to mention marketing."

    From the 10-K: "Our meetings are typically held in third-party locations (usually meeting rooms in well-located civic or other community centers) or space leased in retail centers."

    Well over 90% of the company's meeting locations fall into the first category, with those in the second category generally having lease terms of five years or less.

    As it relates to staff, you're overlooking the fact that compensation has a largely variable component built in - commissions that are tied to meeting attendance and product sales.

    There's another way you can see this: look at margins back in the early 2000's when WTW had less than a billion dollars in sales. Speaking of marketing, look at what they were spending back then relative to 2013; there's a lot more flexibility here than you're giving them credit for...
    May 24, 2015. 09:15 AM | Likes Like |Link to Comment
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