Ww Presentation
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…welcoming new homeowners for 80 years
Presentationby
Management
September 2008
2
Management team
CHRIS CAPEZZUTO General Manager
HELENE RICCINTO Vice President, Operations
MALCOLM SARNOVice President, Production and Fulfillment
MICHAEL FOLKS Vice President, Local Sales
MICHELLE GROVER Division Controller
ANTHONY ANCONA Director, Human Resources
DEBORAH HENRIKSEN Director, Marketing
3
Agenda
Welcome Wagon’s Past, Present and Future
The New Mover Market
Product Overview and Opportunities
Sales Organization
Financial Overview
Growth Strategy and Path to Profitability
4
Welcome Wagon’s mission
Help local businesses connect with new residents at a critical time when they are spending money and developing
new loyalties
Welcome Wagon’s
Past
Present
Future
5
6
Founded by Thomas Briggs in 1928 in Memphis, Tennessee
Briggs hired women as “hostesses” to welcome new movers to the neighborhood, on behalf of local merchants
Welcome Wagon was the pioneer of lead generation for local businesses
Welcome Wagon history
7
Welcome Wagon was sold in 1995 to Cendant
In 1998, Cendant purchased Getting To Know You, a direct mail welcoming service
Later that year, Welcome Wagon’s business model was changed from home visits to direct mail
• Utilized the Getting To Know You product with the Welcome Wagon brand
• The delivery method changed; commitment to the mission did not
Cendant developed a new real estate search website called move.com
In 2001, Move, Inc. (then called Homestore), bought the move.com website along with Welcome Wagon, hoping for synergistic benefits
Welcome Wagon history
8
Synergies never materialized between Move and Welcome Wagon
Welcome Wagon fell short of its potential due to lack of dedicated resources and focus from corporate management, as well as limited investment in infrastructure, promotion and product development
Over the past year, the current WW management team has developed solid growth and profitability plans
The team is excited to pursue opportunities with a new owner
Welcome Wagon present
9
Welcome Wagon looking forward…
Initiatives requiring limited investment have begun, including a combination of enhancements and cost savings
Groundwork laid to achieve long-term profitability
On track to return to profitability in 2009 (EBITDA with Est. Corp. Costs), with full-year profitability in 2010
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
($1,000)
($800)
($600)
($400)
($200)
$0
$200
$400
Revenue $8,459 $7,625 $8,016 $7,889 $8,277 $9,095 $10,322 $8,899
EBITDA ($527) ($895) ($201) ($247) ($394) ($95) $225 $9
Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09 Q4 '09
2008 and 2009 Quarterly Revenue and EBITDA Projections ($000)
10
Welcome Wagon’s unique advantages
Experts in new mover industry and nation’s most trusted brand in reaching new homeowners
Nationwide local sales force of 250+
Single-source provider of direct marketing services to reach the new mover market
Fastest access to new homeowner data through vast network of county-level suppliers
Automated data processing system that verifies and scrubs new mover files
Highest mail list accuracy with 98%+ deliverability
In-house production and USPS plant-verified facility
11
Welcome Wagon resources – technology
Headquartered in Plainview, NY
We employ cutting-edge technology: 2 Xerox iGens in a variable print-on-demand
environment XM Pie software, which drives our dynamic
publishing capabilities Technology experts in variable, on-demand
programming and application development Best-in-class data research, collection and
scrubbing processes
12
Welcome Wagon resources - people
372 employees, including approximately 256 local sales representatives in 43 states
Staff of professional graphic designers who create custom ads for our clients
Technology department – experts in variable, on-demand programming; application development
Print production team with traditional and digital printing experience
Tenured and dedicated employees at all levels, in Plainview and in Field Sales
PASSION! Employees truly care about the products and the company and are vested in our success
13
After 80 years, we’re part of American culture
14
The New Mover Market
15
New movers: a constant supply
Each year, approximately 19 million American households (42 million people) move to a new home
This represents 16% of the US population
On average, that’s 115,000 people each day
In 5 years, nearly 80% of the population will move
Source: U.S. Census
16
New movers: a lucrative target
Moving triggers a wave of expenditure on move-related products and services
This spending yields a staggering mover-related industry of approximately
$170 Billion annually in the U.S.
Source: High Point Associates, September 2006
17
New movers: desirable demographics / psychographics
New homeowners spend 20 times more on household goods and services than non-movers
Average spend is $9,400 in the first year
More likely to make major purchases due to credit worthiness and spending power
Have few to no loyalties – they will need ALL new local services and merchants
Source: High Point Associates, September 2006
18
Welcome WagonProduct Overview
and Opportunities
19
Our marketing solutions
Welcome Wagon’s suite of direct mail products helps businesses coordinate their marketing efforts to new residents at critical stages in the mover life-cycle
We mail 12 million pieces to movers annually, reaching over 4.5 million movers, on behalf of:• 12,000 small business clients• 30 national clients
20
Our flagship product: the Gift Book
Businesses sponsor their category in the Gift Book (dentist, dry cleaner, pizzeria) with business listing and Welcome Offer Many add a full-page display ad at
a higher rate
Sponsors pay per household mailed and sign a 12-month contract
Approximately 2,300 local editions of the Gift Book in 43 states
12,000+ current sponsors
Annual distribution: 1.5 million households
2008E revenue: $ 25.0 million (includes EFY)
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Gift Book revenue by category
0.3%
0.3%
0.9%
2.7%
2.9%
3.8%
5.7%
5.4%
7.8%
8.3%
14.9%
20.6%
26.5%
22
In progress (pilot launch Q4 2008): addition of sponsored local content to each book, providing information on parks, beaches, recreation areas, schools, town and county municipal offices, photos
Gift Book opportunities
Regional and national corporate ads in the Gift Book
Negotiation with companies to develop franchise programs, co-op plans for their distributors
Other opportunities:A dedicated national sales team or outside sales firm would enable two opportunities:
23
90 days after the Gift Book: EFY
“Especially For You” is a self-mailer booklet, mailed to the same movers who received the Gift Book
Repeats the “Welcome Offer” and reminds the mover to utilize the businesses
Provides a second opportunity for customer feedback
Annual distribution: 1.5 million
24
EFY opportunity
EFY is currently a one-time follow-up mailer
Expanding EFY to a 3x (multi-touch) mailer would provide a marketing opportunity to reach new movers at critical points after they move:
• 3 mos. – as they are first discovering their new home
• 6 mos. – as they begin to settle in• 9 mos. – as they complete the process and now feel
truly “at home”
Enables better opportunity for more targeted and relevant messaging
25
Pinpoint postcards
Personalized one-on-one communication
Oversized postcard
Proven solution for targeting best prospects for our advertisers
Can be timed for optimal impact and frequency
Close to 400 designs in our library; customization also available
2008E revenue: $3.8 million
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Pinpoint opportunities
Enhanced version of product that leverages XMPie, allowing elements of the postcard design to be highly personalized to the recipient
Build out demographic/psychographics to provide more client options
27
Post-Move insert program
Welcome Wagon provides a channel for large, national businesses to reach 3 million movers
The distribution is comprised of:• 1.5 million through our standalone Post-Move mailer• 1.5 million via inserts into the Gift Book
2008E revenue: $1.3 million
Opportunity: Add a dedicated national sales channel to increase revenue
Mr. & Mrs. John Doe
123 Main Street
Anytown, US 12345
28
Pre-Move insert program
Initiated in 2004 Re-launched with improvements in
2007• Reached profitability within a few
months In Q4 2007, lost national sales
support and profitability slipped Due to lack of revenue, Pre-Move
was decommissioned in June 2008 2008 revenue (actual for Q1 & 2):
$150,000
Opportunity: This product has great potential Advertiser appeal and few
competitors Once a national sales channel is
assembled, this product can be reinstated for a quick “win”
Mr. & Mrs. John Doe123 Main StreetAnytown, US 12345
29
A division of Welcome Wagon, GDR sells the company’s mover data files either directly or via list brokers to large marketers (e.g., banks/credit card companies, housewares/electronics, catalogers, etc.)
GDR has a reputation of consistently supplying names that others cannot quickly or easily obtain on their own
• Supplies approximately 280,000 new mover names per month or 3.4 million annually
2008E revenue: $1.1 million
Opportunity: Expect current profitability to continue
New mover data
30
Getting To Know You
Getting To Know You is a new direct mail product, designed to reach new movers:
• Solo mailer – only one business per envelope
• Brightly colored envelope with a personalized letter inside
• Mailed to ALL movers, including home buyers, home renters, apartment renters, etc.
• Can be sold in any available zip code
Getting To Know You has launched in July 2008 with 7 categories
Anticipated 2008 revenue (Q3 & 4): $700,000
31
Getting To Know Youopportunities
Customized version for national advertisers
Telesales to expand reach across entire U.S.
Expanding to additional categories
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welcomewagon.com
The local business directory built
for “movers”
Featured placement for Welcome Wagon partners
Keyword and category searches, link to client’s website, client’s special offer
Map and driving directions with business location flagged
Customer recommendations
33
“Hello Welcome Wagon” alpha website
Visit – and help create – their “virtual” neighborhood
Get the “inside scoop” from the locals on things to do, local sites, events
Meet the neighbors
Make recommendations, browse those made by others
Post questions and answers
Share photos
Opportunity: Build upon $1 million investment already
made
Create a “must visit” site that retains eyeballs long after the move
Local neighborhood “social networking” site that allows consumers to:
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Sales Organization
36
Sales organization
2 Trainers
256 Total Sales:
223 Account Execs
2 Trainers
37
Regions
Each region consists of 6-8 districts
Quota breakdown:
• Northeast: 26%
• Mid-America: 26%
• American South: 28%
• Western: 20%
RVP key responsibilities include hiring and managing District Managers, developing and executing regional sales strategy, overseeing sales training, assisting with larger sales deals and setting pricing strategy
RVP compensation: salary + override of regional revenue with accelerators if goals are achieved
38
Districts
28 districts made up of an average of 10 sales territories
Annual sales quotas range from $900,000 to $2 million
DM key responsibilities include hiring, training and managing Account Executives, handling customer service issues, developing and executing a district sales strategy and overall motivation and development of their team
DM compensation: salary + monthly override for achieving district quota
Introducing a variable compensation plan in August, which will replace all DM fixed-cost salary comp plans
39
Sales territories
363 active territories within 43 states
8 - 12 books are assigned per AE
Monthly quota for a territory runs between $8K to $16K
AE key responsibilities include prospecting potential clients, contracting new clients, renewing existing clients for Welcome Wagon’s suite of products sold to local business advertisers and handling customer service calls• Requires a 1:1 “sales consulting” approach to position
WW as a marketing solution as opposed to simply selling ad space
AE compensation: 100% commission/bonus plan; commission ranges from 20 – 25% of net revenue + quarterly and annual bonuses
40
Key sales challenges
Current turnover is 55% • Skewed higher by certain territories
However, we retain our top performers (COEs), demonstrated by a 5.3 year average tenure• Those who are successful make great income and stay
longer
Continuous efforts to lower turnover include revamping AE comp plan, significant training changes
Current renewal rate is 27%• This number reflects the inherent nature of small
businesses • COE rates are significantly higher (40%)• Consistent with historical performance
41
DNA of a successful AE
Self-motivated
Highly competitive
Resilient
Sales experience preferred
Financially driven
Thrives on recognition
Entrepreneurial
HR’s contributions supporting Field and Plainview operations…
42
Sales force enhancement initiative
WW management strongly supports introducing a multi-level marketing structure to expand sales force with additional pay-for-performance compensation
Designate top AE candidates as “Super AEs” (based on performance/tenure)
Super AEs may recruit, hire and train part-time reps to sell within their territory • Allows the Super AE to build their own team and grow into more
book areas• Provides Super AE with an override from their “downline” reps
Benefits: Super AE hand-picks their team, can grow into more
territories
DM earns additional revenue without having to hire, train and mentor
Part-time AEs benefit from a flexible position, working with a friend or neighbor, earning some spending money
43
Financial Overview
Growth Strategy and Path to Profitability
44
Financial Overview – past and present
Year Ending December 31Source: Management
$ % $ % $ % $ % $ %Revenue:
Local (Gift Book + EFY) 30,302,822 79.2% 32,599,909 78.8% 30,105,079 80.6% 24,915,371 77.9% 24,915,371 77.9%Pinpoint Postcards 2,554,463 6.7% 3,912,961 9.5% 3,453,943 9.2% 3,794,200 11.9% 3,794,200 11.9%National Post-Move 2,269,533 5.9% 2,419,783 5.9% 1,991,242 5.3% 1,327,438 4.1% 1,327,438 4.1%Data 2,011,521 5.3% 1,611,199 3.9% 1,317,427 3.5% 1,091,182 3.4% 1,091,182 3.4%National Pre-Move 1,119,129 2.9% 817,438 2.0% 497,003 1.3% 153,754 0.5% 153,754 0.5%New Products 706,993 2.2% 706,993 2.2%
Total Revenue 38,257,468 100.0% 41,361,289 100.0% 37,364,694 100.0% 31,988,938 100.0% 31,988,938 100.0%Growth 8.1% -9.7% -14.4%
Total Cost of Goods Sold - Adjusted 14,832,604 38.8% 16,609,460 40.2% 13,937,712 37.3% 13,871,018 43.4% 13,451,348 42.0%Gross Profit - Adjusted 23,424,864 61.2% 24,751,830 59.8% 23,426,982 62.7% 18,117,920 56.6% 18,537,590 58.0%
Operating Expenses:Sales and Marketing 18,393,142 48.1% 20,864,517 50.4% 18,574,812 49.7% 14,450,968 45.2% 13,701,081 42.8%General and Administrative Expenses 8,251,456 21.6% 9,356,220 22.6% 8,170,146 21.9% 7,947,981 24.8% 6,673,106 20.9%Product Development - Adjusted 67,525 0.2% 34,793 0.1%
Total Operating Expenses - Adjusted 26,644,597 69.6% 30,220,738 73.1% 26,744,957 71.6% 22,466,473 70.2% 20,408,980 63.8%
Adjusted EBITDA (3,219,734) (5,468,908) (3,317,975) (4,348,553) (1,871,389)
(1,212,733) (2,510,554) (915,885) (2,539,544) (1,121,389)
Pro Forma 2008
Statements of Income
Adjusted EBITDA before CorporateCosts (See Schedule 4)
Actual 2005 Actual 2006 Actual 2007 Estimated 2008
45
Future – path to profitability
Year Ending December 31Source: Management
$ % $ % $ % $ % $ %
Revenue:Local (Gift Book + EFY) 24,915,371 77.9% 24,915,371 77.9% 26,908,601 73.5% 29,061,289 71.3% 31,386,192 71.2%Pinpoint Postcards 3,794,200 11.9% 3,794,200 11.9% 4,173,620 11.4% 4,590,982 11.3% 4,590,982 10.4%National Post-Move 1,327,438 4.1% 1,327,438 4.1% 2,500,000 6.8% 3,000,000 7.4% 3,400,000 7.7%Data 1,091,182 3.4% 1,091,182 3.4% 1,100,000 3.0% 1,100,000 2.7% 1,000,000 2.3%National Pre-Move 153,754 0.5% 153,754 0.5% 500,000 1.4% 1,000,000 2.5% 1,200,000 2.7%New Products 706,993 2.2% 706,993 2.2% 1,412,000 3.9% 2,000,000 4.9% 2,500,000 5.7%
Total Revenue 31,988,938 100.0% 31,988,938 100.0% 36,594,221 100.0% 40,752,271 100.0% 44,077,174 100.0%Growth -14.4% 14.4% 11.4% 8.2%
Total Cost of Goods Sold 14,262,143 44.6% 13,451,348 42.0% 15,076,820 41.2% 16,022,648 39.3% 16,471,066 37.4%
Total Gross Profit 17,726,795 55.4% 18,537,590 58.0% 21,517,400 58.8% 24,729,622 60.7% 27,606,108 62.6%
Operating Expenses:Sales and Marketing 14,450,968 45.2% 13,701,081 42.8% 14,684,339 40.1% 15,133,307 37.1% 15,488,627 35.1%General and Administrative Expenses 7,556,856 23.6% 6,673,106 20.9% 7,947,981 21.7% 7,768,887 19.1% 6,768,887 15.4%Product Development 67,525 0.2% 34,793 0.1% 199,007 0.5% 249,007 0.6% 499,007 1.1%
Total Operating Expenses 22,075,348 69.0% 20,408,980 63.8% 22,831,327 62.4% 23,151,201 56.8% 22,756,521 51.6%
EBITDA as Reported (4,348,553) (1,871,389) (1,313,926) 1,578,421 3.9% 4,849,586 11.0%
(2,539,544) (1,121,389) 495,083 1.4% 3,387,430 8.3% 6,658,595 15.1%
EBITDA as Standalone (Estimated Corporate Costs) (3,289,544) (1,871,389) (254,917) 2,637,430 6.5% 5,908,595 13.4%
* Pro Forma adjustments include cost reductions implemented in the second half of 2008 annualized over the full year and estimated costs to replace functions currently provided via corporate allocations.
Projected 2011
Path to Profitability
EBITDA before Corporate Allocations
Estimated 2008 Projected 2009 Projected 2010Pro Forma 2008 *
46
Path to profitability (implemented in 2008)
Renegotiated pricing agreements for certain supplies and services
New AE commission plan (reduced training and travel expenses,
unrecoverable draw)
Reduced number of samples Negotiated alternative mailing
solutions with USPS to reduce postal rates
Reduced headcount by 23(includes overhead) since Jan 2008
Outsourced appointment setters and telesales Reduced fixed headcount by 13
$655,000
None $100,000
$300,000
(annual cost savings)
$45,000 $1,170,000
$15,000 $500,000
None
None
Initiatives Costs Benefits
47
Path to profitability (in projections)
Initiatives Costs Benefits
Create a dedicated national sales channel (for Gift Book, Pinpoint and
Post-Move mailer)
Ties sales compensation directly to sales revenue in 2009 and beyond
(2008 = $350,000)
Incremental $3 million in revenue by 2011
Ramp up to $500,000 by 2011
Introduction of new products (e.g., multi-touch mailing)
Enhancement of existing products (e.g., Pinpoint)
Institute variable compensation plan for District Managers
Reduce facility expense (enabled by outsourcing)
Sublease in 2009 & 2010; lease buyout in 2010
Cost savings:2009 = $200,000 (approx.)
2010 = breakeven2011 = $1 million
Introduction of multi-level sales strategy
Revenue enhancement:2009 = $2,400,0002010 = $2,600,0002011 = $2,800,000
Revenue enhancements:2009 = $500,000
2010 = $1,000,0002011 = $1,500,000
< $10,000
$200,000(IT and upfront costs)
< $100,000+ commissions
$1,000,000 buyout in 2010
Outsource all production and mailing operations
Increase in out-of-pocket costs for production of book ($0.50), offset by corresponding staff reductions
Equipment sale = $700,000
48
Path to profitability (not in projections)
Initiatives Costs Benefits
Invest in new online order entry and publishing system
$700,000Cost savings:
$900,000 annually
Invest in web development; possible integration of welcomewagon.com
and Hello Welcome Wagon sites
Move has invested $1 million in the Hello Welcome Wagon website; additional investment depends
upon scope
Significant local business directory + social networking site = increased traffic =
advertising dollars = revenue gains
Active solicitation of new mover email addresses to enable development of
an email product
3rd party Email Service Provider + promotion investment
New revenue channel
Suspension of lower-value Books
NoneIncrease average
book value; more cost efficiencies
Outsource new product development
Partner with direct mail experts in consumer redemption to improve results tracking on behalf of clients
$50,000 Improved renewal rate will enhance revenue
TBDExpand our current resource capabilities
49
Conclusion
Local businesses will always need to find new customers
Welcome Wagon has proven to be a highly effective lead generation partner for those businesses
The Company’s unparalleled expertise in the robust new mover industry will continue to enable the development of increasingly valued products
• We have a proven track record in bringing new products to market and ongoing product enhancement
Welcome Wagon is in an ideal position to “own” the new mover space – via both print and online – with the right partner and resources