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  • welcoming new homeowners for 80 years

    Presentation

    by

    Management

    September 2008

  • *

    Management team

    CHRIS CAPEZZUTO

    General Manager

    HELENE RICCINTO

    Vice President, Operations

    MALCOLM SARNO

    Vice President,
    Production and Fulfillment

    MICHAEL FOLKS

    Vice President, Local Sales

    MICHELLE GROVER

    Division Controller

    ANTHONY ANCONA

    Director, Human Resources

    DEBORAH HENRIKSEN

    Director, Marketing

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    Agenda

    Welcome Wagons Past, Present and FutureThe New Mover MarketProduct Overview and OpportunitiesSales OrganizationFinancial OverviewGrowth Strategy and Path to Profitability

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    Welcome Wagons mission

    Help local businesses connect with new residents at a critical time when they are spending money and developing new loyalties

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  • Welcome Wagons

    Past

    Present

    Future

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    Founded by Thomas Briggs in 1928 in Memphis, TennesseeBriggs hired women as hostesses to welcome new movers to the neighborhood, on behalf of local merchantsWelcome Wagon was the pioneer of lead generation for local businesses

    Welcome Wagon history

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    Welcome Wagon was sold in 1995 to CendantIn 1998, Cendant purchased Getting To Know You, a direct mail welcoming serviceLater that year, Welcome Wagons business model was changed from home visits to direct mailUtilized the Getting To Know You product with the Welcome Wagon brandThe delivery method changed; commitment to the mission did notCendant developed a new real estate search website called move.comIn 2001, Move, Inc. (then called Homestore), bought the move.com website along with Welcome Wagon, hoping for synergistic benefits

    Welcome Wagon history

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    Synergies never materialized between Move and Welcome WagonWelcome 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

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    Welcome Wagon looking forward

    Initiatives requiring limited investment have begun, including a combination of enhancements and cost savingsGroundwork laid to achieve long-term profitabilityOn track to return to profitability in 2009 (EBITDA with Est. Corp. Costs), with full-year profitability in 2010

    2008 and 2009 Quarterly Revenue and EBITDA Projections ($000)

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    Welcome Wagons unique advantages

    Experts in new mover industry and nations most trusted brand in reaching new homeownersNationwide local sales force of 250+Single-source provider of direct marketing services to reach the new mover marketFastest access to new homeowner data through vast network of county-level suppliersAutomated data processing system that verifies and scrubs new mover filesHighest mail list accuracy with 98%+ deliverabilityIn-house production and USPS plant-verified facility

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    Welcome Wagon resources technology

    Headquartered in Plainview, NY

    We employ cutting-edge technology:

    2 Xerox iGens in a variable print-on-demand environmentXM Pie software, which drives our dynamic publishing capabilitiesTechnology experts in variable, on-demand programming and application developmentBest-in-class data research, collection and scrubbing processes

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    Welcome Wagon resources - people

    372 employees, including approximately 256 local sales representatives in 43 statesStaff of professional graphic designers who create custom ads for our clients Technology department experts in variable, on-demand programming; application developmentPrint production team with traditional and digital printing experienceTenured and dedicated employees at all levels, in Plainview and in Field SalesPASSION! Employees truly care about the products and the company and are vested in our success

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    After 80 years, were part of American culture

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    The New Mover Market

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    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 populationOn average, thats 115,000 people each dayIn 5 years, nearly 80% of the population will move

    Source: U.S. Census

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    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

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    New movers:

    desirable demographics / psychographics

    New homeowners spend 20 times more on household goods and services than non-moversAverage spend is $9,400 in the first yearMore likely to make major purchases due to credit worthiness and spending powerHave few to no loyalties
    they will need ALL new local services and merchants

    Source: High Point Associates, September 2006

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    Welcome Wagon

    Product Overview and Opportunities

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    Our marketing solutions

    Welcome Wagons suite of direct mail products helps businesses coordinate their marketing efforts to new residents at critical stages in the mover life-cycleWe mail 12 million pieces to movers annually, reaching over 4.5 million movers,
    on behalf of:12,000 small business clients30 national clients

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    Our flagship product: the Gift Book

    Businesses sponsor their category in the
    Gift Book (dentist, dry cleaner, pizzeria) with business listing and Welcome OfferMany add a full-page display ad at a higher rateSponsors pay per household mailed and
    sign a 12-month contractApproximately 2,300 local editions of
    the Gift Book in 43 states12,000+ current sponsorsAnnual distribution: 1.5 million households2008E 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%

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    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 BookNegotiation 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:

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    90 days after the Gift Book: EFY

    Especially For You is a self-mailer booklet, mailed to the same movers who received the Gift BookRepeats the Welcome Offer and reminds the mover to utilize the businessesProvides a second opportunity for customer feedbackAnnual distribution: 1.5 million

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    EFY opportunity

    EFY is currently a one-time follow-up mailerExpanding 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

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    Pinpoint postcards

    Personalized one-on-one communicationOversized postcardProven solution for targeting best prospects for our advertisersCan be timed for optimal impact and frequencyClose to 400 designs in our library; customization also available2008E 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

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    Post-Move insert program

    Welcome Wagon provides a channel for large, national businesses to reach 3 million moversThe distribution is comprised of:1.5 million through our standalone Post-Move mailer1.5 million via inserts into the Gift Book2008E revenue: $1.3 million

    Opportunity:
    Add a dedicated national sales channel to increase revenue

    Mr. & Mrs. John Doe

    123 Main Street

    Anytown, US 12345

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    Pre-Move insert program

    Initiated in 2004Re-launched with improvements in 2007Reached profitability within a few monthsIn Q4 2007, lost national sales support and profitability slipped Due to lack of revenue, Pre-Move
    was decommissioned in June 20082008 revenue (actual for Q1 & 2):
    $150,000

    Opportunity:

    This product has great potential Advertiser appeal and few competitorsOnce a national sales channel is assembled, this product can be reinstated for a quick win

    Mr. & Mrs. John Doe

    123 Main Street

    Anytown, US 12345

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    A division of Welcome Wagon, GDR sells the companys 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 ownSupplies approximately 280,000 new mover names per month
    or 3.4 million annually2008E revenue: $1.1 million

    Opportunity: Expect current profitability to continue

    New mover data

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    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 codeGetting To Know You has launched
    in July 2008 with 7 categoriesAnticipated 2008 revenue (Q3 & 4): $700,000

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    Getting To Know You
    opportunities

    Customized version for national advertisersTelesales 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 partnersKeyword and category searches, link to clients website, clients special offerMap and driving directions with business location flaggedCustomer recommendations

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    Hello Welcome Wagon alpha website

    Visit and help create their virtual neighborhoodGet the inside scoop from the locals on things to do, local sites, eventsMeet the neighborsMake recommendations, browse those made by othersPost questions and answersShare photos

    Opportunity:

    Build upon $1 million investment already madeCreate 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

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    Sales organization

    256 Total Sales:

    2
    Trainers

    2
    Trainers

    223
    Account Execs

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    Regions

    Each region consists of 6-8 districtsQuota 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 strategyRVP compensation: salary + override of regional revenue with accelerators if goals are achieved

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    Districts

    28 districts made up of an average of 10 sales territoriesAnnual sales quotas range from $900,000 to $2 millionDM 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 teamDM compensation: salary + monthly override for achieving district quotaIntroducing a variable compensation plan in August, which will replace all DM fixed-cost salary comp plans

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    Sales territories

    363 active territories within 43 states8 - 12 books are assigned per AEMonthly quota for a territory runs between $8K to $16KAE key responsibilities include prospecting potential clients, contracting new clients, renewing existing clients for Welcome Wagons suite of products sold to local business advertisers and handling customer service callsRequires a 1:1 sales consulting approach to position WW as a marketing solution as opposed to simply selling ad spaceAE compensation: 100% commission/bonus plan; commission ranges from 20 25% of net revenue + quarterly and annual bonuses

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    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 tenureThose who are successful make great income and stay longerContinuous efforts to lower turnover include revamping AE comp plan, significant training changesCurrent renewal rate is 27%This number reflects the inherent nature of small businesses COE rates are significantly higher (40%)Consistent with historical performance

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    DNA of a successful AE

    Self-motivatedHighly competitiveResilientSales experience preferredFinancially drivenThrives on recognitionEntrepreneurial

    HRs contributions supporting Field

    and Plainview operations

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    Sales force enhancement initiative

    WW management strongly supports introducing a multi-level marketing structure to expand sales force with additional pay-for-performance compensationDesignate 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 areasProvides Super AE with an override from their downline reps

    Benefits:

    Super AE hand-picks their team, can grow into more territoriesDM earns additional revenue without having to hire, train and mentorPart-time AEs benefit from a flexible position, working with a friend or neighbor, earning some spending money

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    Financial Overview

    Growth Strategy and
    Path to Profitability

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    Financial Overview past and present

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    Future path to profitability

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    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 samplesNegotiated alternative mailing solutions with USPS to reduce
    postal rates

    Reduced headcount by 23
    (includes overhead) since Jan 2008

    Outsourced appointment setters
    and telesalesReduced 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

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    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 = breakeven

    2011 = $1 million

    Introduction of
    multi-level sales strategy

    Revenue enhancement:

    2009 = $2,400,000

    2010 = $2,600,000

    2011 = $2,800,000

    Revenue enhancements:

    2009 = $500,000

    2010 = $1,000,000

    2011 = $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

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    Path to profitability (not in projections)

    Initiatives

    Costs

    Benefits

    Invest in new online order entry
    and publishing system

    $700,000

    Cost 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

    None

    Increase 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

    TBD

    Expand our current
    resource capabilities

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    Conclusion

    Local businesses will always need to find new customersWelcome Wagon has proven to be a highly effective lead generation partner for those businessesThe Companys unparalleled expertise in the robust new mover industry will continue to enable the development of increasingly valued productsWe have a proven track record in bringing new products to market and ongoing product enhancementWelcome Wagon is in an ideal position to own the new mover space via both print and online with the right partner and resources

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    $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 '08Q2 '08Q3 '08Q4 '08Q1 '09Q2 '09Q3 '09Q4 '09

    Year Ending December 31

    Source: Management

    $%$%$%$%$%

    Revenue:

    Local (Gift Book + EFY) 30,302,82279.2%32,599,90978.8%30,105,07980.6%24,915,37177.9%24,915,37177.9%

    Pinpoint Postcards 2,554,4636.7%3,912,9619.5%3,453,9439.2%3,794,20011.9%3,794,20011.9%

    National Post-Move 2,269,5335.9%2,419,7835.9%1,991,2425.3%1,327,4384.1%1,327,4384.1%

    Data 2,011,5215.3%1,611,1993.9%1,317,4273.5%1,091,1823.4%1,091,1823.4%

    National Pre-Move 1,119,1292.9%817,4382.0%497,0031.3%153,7540.5%153,7540.5%

    New Products 706,9932.2%706,9932.2%

    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 14,832,60438.8%16,609,46040.2%13,937,71237.3%13,871,01843.4%13,451,34842.0%

    Gross Profit - Adjusted 23,424,86461.2%24,751,83059.8%23,426,98262.7%18,117,92056.6%18,537,590

    58.0%

    Operating Expenses:

    Sales and Marketing 18,393,14248.1%20,864,51750.4%18,574,81249.7%14,450,96845.2%13,701,08142.8%

    General and Administrative Expenses 8,251,45621.6%9,356,22022.6%8,170,14621.9%7,947,98124.8%6,673,10620.9%

    Product Development - Adjusted 67,5250.2%34,7930.1%

    Total Operating Expenses - Adjusted 26,644,59769.6%30,220,73873.1%26,744,95771.6%22,466,47370.2%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 Corporate

    Costs

    (See Schedule 4)

    Actual 2005 Actual 2006 Actual 2007 Estimated 2008

    Year Ending December 31

    Source: Management

    $%$%$%$%$%

    Revenue:

    Local (Gift Book + EFY) 24,915,37177.9%24,915,37177.9%26,908,60173.5%29,061,28971.3%31,386,19271.2%

    Pinpoint Postcards 3,794,20011.9%3,794,20011.9%4,173,62011.4%4,590,98211.3%4,590,98210.4%

    National Post-Move 1,327,4384.1%1,327,4384.1%2,500,0006.8%3,000,0007.4%3,400,0007.7%

    Data 1,091,1823.4%1,091,1823.4%1,100,0003.0%1,100,0002.7%1,000,0002.3%

    National Pre-Move 153,7540.5%153,7540.5%500,0001.4%1,000,0002.5%1,200,0002.7%

    New Products 706,9932.2%706,9932.2%1,412,0003.9%2,000,0004.9%2,500,0005.7%

    Total Revenue 31,988,938100.0%31,988,938100.0%36,594,221100.0%40,752,271100.0%44,077,174100.0%

    Growth

    -14.4% 14.4% 11.4% 8.2%

    Total Cost of Goods Sold 14,262,14344.6%13,451,34842.0%15,076,82041.2%16,022,64839.3%16,471,06637.4%

    Total Gross Profit 17,726,79555.4%18,537,59058.0%21,517,40058.8%24,729,62260.7%27,606,10862.6%

    Operating Expenses:

    Sales and Marketing 14,450,96845.2%13,701,08142.8%14,684,33940.1%15,133,30737.1%15,488,62735.1%

    General and Administrative Expenses 7,556,85623.6%6,673,10620.9%7,947,98121.7%7,768,88719.1%6,768,88715.4%

    Product Development 67,5250.2%34,7930.1%199,0070.5%249,0070.6%499,0071.1%

    Total Operating Expenses 22,075,34869.0%20,408,98063.8%22,831,32762.4%23,151,20156.8%22,756,52151.6%

    EBITDA as Reported (4,348,553) (1,871,389) (1,313,926) 1,578,4213.9%4,849,58611.0%

    (2,539,544) (1,121,389) 495,0831.4%3,387,4308.3%6,658,59515.1%

    EBITDA as Standalone (Estimated Corporate Costs) (3,289,544) (1,871,389) (254,917) 2,637,4306.5%5,908,59513.4%

    * 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 *