WW International, Inc. Announces First Quarter 2023 Results

• End of Period Subscribers of 4.0 million
  
• Revenues of $241.9 million
• Operating Loss of $28.6 million; excluding the net impact of restructuring charges, adjusted operating loss of $5.9 million
• Full Year Fiscal 2023 Guidance:
  • Revenues are expected to be in the range of $910.0 million to $930.0 million
  • Operating Income is expected to be in the range of $48.0 million to $60.0 million; excluding the anticipated net impact of restructuring charges, adjusted operating income is expected to be in the range of $80.0 million to $85.0 million

NEW YORK, May 04, 2023 (GLOBE NEWSWIRE) -- WW International, Inc. (NASDAQ: WW) (“WeightWatchers,” “WW,” or the “Company”) today announced its results for the first quarter of fiscal 2023.

“Our progress so far in 2023, including our acquisition of Sequence, further increases my confidence that we will return to a growth trajectory,” said Sima Sistani, the Company’s CEO. “We expect to end 2023 with total subscribers approaching 3.6 million, including 3.5 million WeightWatchers subscribers. The last time the Company ended a year with flat or higher subscribers year-over-year was 2020, so this will be a notable achievement and testament to the work our teams are delivering in enhancing our product experience and acquisition channels.”

“I am thrilled that today we announced that Heather Stark has been appointed our Chief Financial Officer. Heather has served in the interim position since December 2022. She has successfully navigated our teams through the annual planning and budgeting process, our organizational and real estate restructuring, and notably, the acquisition of Sequence. Heather is an invaluable partner to me and I look forward to continuing to work with her in the CFO role,” continued Sistani.

“The Q1 outperformance in subscribers translated into above forecast revenue, and combined with greater cost discipline, flowed into adjusted operating income results ahead of our expectations,” said Heather Stark, the Company’s CFO. “We expect performance trends to improve through the year as we benefit from our data-informed approach to member acquisition, increased operating efficiency, and an enhanced member experience following upcoming launches in our product roadmap. With a leaner, more agile organization, we are improving our operating model to drive profitable growth.”

“I am honored to be taking on the Chief Financial Officer position at WeightWatchers,” continued Stark. “It is rare to work at a company that positively impacts the lives of millions in such a personal and important way. I look forward to being part of the next stage of the Company’s transformation and partnering with Sima and the leadership team to shape the future of our member experience, operating model, and financial trajectory.”

Q1 2023 Consolidated Results

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Note: Totals may not sum due to rounding.

Q1 2023 Business and Financial Highlights

• End of Period Subscribers in Q1 2023 were down 11.5% versus the prior year period, driven by declines in the Digital business. Q1 2023 End of Period Digital Subscribers decreased 15.0% versus the prior year period. Q1 2023 End of Period Workshops + Digital Subscribers increased 6.8% versus the prior year period, substantially benefitting from the transition of former Digital 360 members from the Digital business to the Workshops + Digital business during Q2 and Q3 2022, as previously disclosed.
  
  
• Total Paid Weeks in Q1 2023 were down 13.5% versus the prior year period, driven by declines in the Digital business. Q1 2023 Digital Paid Weeks decreased 17.1% versus the prior year period. Q1 2023 Workshops + Digital Paid Weeks increased 4.5% versus the prior year period, substantially benefitting from the transition of former Digital 360 members from the Digital business to the Workshops + Digital business during Q2 and Q3 2022, as previously disclosed.
  
  
• Revenues in Q1 2023 were $241.9 million. On a constant currency basis, Q1 2023 revenues decreased 17.1% versus the prior year period.
  
  
  • Subscription Revenues in Q1 2023 were $211.0 million. On a constant currency basis, these revenues decreased 16.2% versus the prior year period.
    
    
  • Product Sales and Other in Q1 2023 were $30.9 million. On a constant currency basis, these revenues decreased 23.0% versus the prior year period.
    
    
• Gross Profit in Q1 2023 was $119.5 million, compared to $180.1 million in the prior year period. Adjusted gross profit in Q1 2023, which excluded the net impact of $18.6 million of restructuring charges, was $138.1 million. Adjusted gross profit in Q1 2022, which excluded the net impact of ($0.1) million of restructuring charges, was $180.0 million.
  
  
  • Gross Margin in Q1 2023 was 49.4%, as compared to 60.5% in the prior year period. Adjusted gross margin in Q1 2023 was 57.1%, down 335 basis points from an adjusted gross margin of 60.5% in the prior year period, primarily driven by a mix shift to the Workshops + Digital business, fixed cost deleverage, and the accounting for subscription and consumer product promotional bundles in the quarter as well as a 20 basis point negative impact from foreign currency.
    
    
• Operating Loss in Q1 2023 was $28.6 million, which included $3.2 million of transaction costs related to the acquisition of Sequence, compared to operating income of $9.0 million in the prior year period. Adjusted operating loss in Q1 2023, which excluded the net impact of $22.7 million of restructuring charges, was $5.9 million. Adjusted operating income in Q1 2022, which excluded the net impact of $0.1 million of restructuring charges, was $9.1 million.
  
  
• Income Tax expense in Q1 2023 was $67.6 million, which reflected the impact of an unusually high negative annual effective tax rate driven by a valuation allowance and small pretax loss reflected in the Company’s full year fiscal 2023 guidance. In the prior year period, income tax was a benefit of $1.8 million.
  
  
• Net Loss in Q1 2023 was $118.7 million compared to net loss of $8.2 million in the prior year period.
  
  
• Diluted Net Loss per share in Q1 2023 was $1.68 compared to diluted net loss per share of $0.12 in the prior year period.
  
  • Certain items affect year-over-year comparability.
    • Q1 2023 Diluted Net Loss per share incorporated the negative impact of $1.54 per diluted share in the aggregate due to the following items:
      • $0.24 per diluted share negative net impact of restructuring charges.
      • $1.30 per diluted share negative tax impact arising from an unusually high negative annual effective tax rate as a result of a valuation allowance and small pretax loss reflected in the Company’s full year fiscal 2023 guidance, mentioned above.
    • Q1 2022 Net Loss was negatively impacted by $0.1 million, resulting in a de minimis per share impact, due to the net impact of restructuring charges.

Other Items

• Cash balance as of April 1, 2023 was $140.8 million. On that same date, the Company had no outstanding borrowings under its revolving credit facility.
• 2023 Restructuring Plan: In connection with the previously announced 2023 restructuring plan, the Company recorded aggregate restructuring charges of approximately $23.0 million in Q1 2023. The Company expects to record up to $10.0 million of additional aggregate restructuring charges during the remainder of fiscal 2023.
• Sequence Acquisition: As previously announced, on April 10, 2023, WW completed its acquisition of Weekend Health, Inc., d/b/a Sequence, a subscription telehealth platform offering access to healthcare providers specializing in chronic weight management.
• New Segment Reporting: As previously disclosed, effective the first day of fiscal 2023, the Company realigned its organizational structure and resources to more closely align with its strategic priorities and centralized the global management of certain functions and systems. As a result of the change in its organizational structure, the Company now has two reportable segments, consisting of North America and International. “North America” refers to the Company’s North American Company-owned operations and franchise revenues and related costs. “International” refers to the Company’s Continental Europe Company-owned operations, United Kingdom Company-owned operations, and Australia, New Zealand and emerging markets operations.

Full Year Fiscal 2023 Guidance

The Company is providing the following full year fiscal 2023 guidance:

• Revenues are expected to be in the range of $910.0 million to $930.0 million.
• Operating income is expected to be in the range of $48.0 million to $60.0 million. Adjusted operating income, which excludes the anticipated net impact of restructuring charges, is expected to be in the range of $80.0 million to $85.0 million.

First Quarter 2023 Conference Call and Webcast
The Company has scheduled a conference call today at 5:00 p.m. ET. During the conference call, Sima Sistani, Chief Executive Officer, and Heather Stark, Chief Financial Officer, will discuss the first quarter of fiscal 2023 results and answer questions from the investment community.

The live webcast of the conference call will be available on the Company’s corporate website, corporate.ww.com, in the Investors section under Presentations and Events. Supplemental investor materials will also be available in the same location prior to the start of the webcast. A replay of the webcast will be available on this site for approximately 90 days.

Statement regarding Non-GAAP Financial Measures
The following provides information regarding non-GAAP financial measures used in this earnings release and today’s scheduled conference call:

To supplement the Company's consolidated results presented in accordance with accounting principles generally accepted in the United States (“GAAP”), the Company has disclosed non-GAAP financial measures of operating results that exclude or adjust certain items. Gross profit, gross margin, operating (loss) income, operating (loss) income margin, and selling, general and administrative expenses are discussed both as reported (on a GAAP basis) and as adjusted (on a non-GAAP basis), as applicable, with respect to (i) the first quarter of fiscal 2023 to exclude the net impact of (a) charges associated with the Company’s previously disclosed 2023 restructuring plan (the “2023 plan”), (b) charges associated with the Company's previously disclosed 2022 restructuring plan (the “2022 plan”) or the reversal of certain of the charges associated with the 2022 plan, as applicable, (c) the reversal of certain of the charges associated with the Company's previously disclosed 2021 organizational restructuring plan (the “2021 plan”), and (d) the reversal of certain of the charges associated with the Company's previously disclosed 2020 organizational restructuring plan (the “2020 plan”); and (ii) the first quarter of fiscal 2022 to exclude (a) the net impact of (x) charges associated with the 2021 plan and (y) the reversal of certain of the charges associated with the 2020 plan or (b) the impact of charges associated with the 2021 plan. We generally refer to such non-GAAP measures as excluding or adjusting for the net impact of restructuring charges or the impact of restructuring charges, as applicable. The Company also presents in the attachments to this release the non-GAAP financial measures earnings before interest, taxes, depreciation, amortization and stock-based compensation (“EBITDAS”); earnings before interest, taxes, depreciation, amortization, stock-based compensation, franchise rights acquired and goodwill impairments, and restructuring charges (including the net impact where applicable) (“Adjusted EBITDAS”); total debt less unamortized deferred financing costs, unamortized debt discount and cash on hand (i.e., net debt); and a net debt/Adjusted EBITDAS ratio. In addition, the Company presents certain of its financial results on a constant currency basis in addition to GAAP results. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. The Company calculates constant currency by calculating current-year results using prior-year foreign currency exchange rates.

Management believes these non-GAAP financial measures provide useful supplemental information for its and investors' evaluation of the Company's business performance and are useful for period-over-period comparisons of the performance of the Company's business. While management believes that these non-GAAP financial measures are useful in evaluating the Company's business, this information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly entitled measures reported by other companies. See "Reconciliation of Non-GAAP Financial Measures" attached to this release and reconciliations, if any, included elsewhere in this release for a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures.

About WW International, Inc.
WeightWatchers is a human-centric technology company powered by our proven, science-based, clinically effective weight loss and weight management program. For six decades, we have inspired millions of people to adopt healthy habits for real life. We combine technology and community to help members reach and sustain their goals on our program. To learn more about the WeightWatchers approach to healthy living, please visit ww.com. For more information about our global business, visit our corporate website at corporate.ww.com.

This news release and any attachments include “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, in particular, any guidance and any statements about the Company’s plans, strategies, objectives, initiatives, roadmap and prospects. The Company generally uses the words “may,” “will,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “intend,” “aim” and similar expressions in this news release and any attachments to identify forward-looking statements. The Company bases these forward-looking statements on its current views with respect to future events and financial performance. Actual results could differ materially from those projected in the forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things: the impact of the COVID-19 pandemic on the Company's business and on the consumer environment and markets in which the Company operates; competition from other weight management and wellness industry participants or the development of more effective or more favorably perceived weight management methods; the Company's failure to continue to retain and grow its subscriber base; the Company's ability to continue to develop new, innovative services and products and enhance its existing services and products or the failure of its services, products or brands to continue to appeal to the market, or its ability to successfully expand into new channels of distribution or respond to consumer trends or sentiment; the ability to successfully implement strategic initiatives; the Company's ability to transform its Workshops + Digital business strategy to meet the evolving needs of its members; the effectiveness and efficiency of the Company's advertising and marketing programs, including the strength of the Company's social media presence; the impact on the Company's reputation of actions taken by its franchisees, licensees, suppliers and other partners, including as a result of its acquisition of Weekend Health, Inc., which is doing business as Sequence (“Sequence”) (the “Acquisition”); the recognition of asset impairment charges; the loss of key personnel, strategic partners or consultants or failure to effectively manage and motivate the Company's workforce; the Company's chief executive officer transition; the inability to renew certain of the Company's licenses, or the inability to do so on terms that are favorable to the Company; the early termination by the Company of leases; uncertainties related to a downturn in general economic conditions or consumer confidence, including as a result of the existing inflationary environment, the potential impact of political and social unrest and instability in the banking system as a result of several recent bank failures; the Company's ability to successfully make acquisitions or enter into joint ventures or collaborations, including its ability to successfully integrate, operate or realize the anticipated benefits of such businesses, including with respect to Sequence; the seasonal nature of the Company's principal business; the impact of events that discourage or impede people from gathering with others or impede accessing resources; the Company's failure to maintain effective internal control over financial reporting; the impact of the Company's substantial amount of debt, debt service obligations and debt covenants, and its exposure to variable rate indebtedness; the ability to generate sufficient cash to service the Company's debt and satisfy its other liquidity requirements; uncertainties regarding the satisfactory operation of the Company's technology or systems; the impact of data security breaches and other malicious acts or privacy concerns, including the costs of compliance with evolving privacy laws and regulations; the Company's ability to enforce its intellectual property rights both domestically and internationally, as well as the impact of its involvement in any claims related to intellectual property rights; risks and uncertainties associated with the Company's international operations, including regulatory, economic, political, social, intellectual property, and foreign currency risks, which risks may be exacerbated as a result of the war in Ukraine; the outcomes of litigation or regulatory actions; the impact of existing and future laws and regulations; risks related to the Company's Acquisition, including risks that the Acquisition may not achieve its intended results; risks related to the Company's exposure to extensive and complex healthcare laws and regulations as a result of the Acquisition; the possibility that the interests of Artal Group S.A., the largest holder of the Company's common stock and a shareholder with significant influence over the Company, will conflict with the Company's interests or the interests of other holders of the Company's common stock; the impact that the sale of substantial amounts of the Company's common stock by existing large shareholders, or the perception that such sales could occur, could have on the market price of the Company's common stock; and other risks and uncertainties, including those detailed from time to time in the Company's periodic reports filed with the United States Securities and Exchange Commission (the “SEC”) (which are available on the SEC’s EDGAR database at www.sec.gov and via the Company’s website at corporate.ww.com). You should not put undue reliance on any forward-looking statements. You should understand that many important factors, including those discussed herein, could cause the Company’s results to differ materially from those expressed or suggested in any forward-looking statement. Except as required by law, the Company does not undertake any obligation to update or revise these forward-looking statements to reflect new information or events or circumstances that occur after the date of this news release or to reflect the occurrence of unanticipated events or otherwise. Readers are advised to review the Company’s filings with the SEC (which are available on the SEC’s EDGAR database at www.sec.gov and via the Company’s website at corporate.ww.com).

For more information, contact:
Investors:
Corey Kinger
corey.kinger@ww.com

Media:
Kelsey Merkel
kelsey.merkel@ww.com