WW International, Inc. Announces Second Quarter 2023 Results

• End of Period Subscribers of 4.1 million
• Revenues of $226.8 million
• Operating Income of $26.3 million; excluding the net impact of restructuring charges and acquisition transaction costs, adjusted operating income of $33.9 million
• Full Year Fiscal 2023 Guidance Updates:
  • Revenues are expected to be in the range of $890.0 million to $910.0 million
  • Operating Income is expected to be in the range of $39.0 million to $51.0 million; excluding the net impact of restructuring charges and acquisition transaction costs, adjusted operating income is expected to be in the range of $80.0 million to $85.0 million

NEW YORK, Aug. 03, 2023 (GLOBE NEWSWIRE) -- WW International, Inc. (NASDAQ: WW) (“WeightWatchers,” “WW,” or the “Company”) today announced its results for the second quarter of fiscal 2023.

“Our second quarter results give me further confidence that we are on the right trajectory,” said Sima Sistani, the Company’s CEO. “Sign ups for our WeightWatchers^® business, excluding Clinical, were up year-over-year in the second quarter, delivering a return to sign up growth one quarter earlier than previously forecast. We are raising our expectation for year end 2023 total subscribers to be 3.7 million. With our portfolio of solutions to improve weight health, we are leading the movement of this positive category shift across science, culture, and communities.”

“We ended Q2 with 4.1 million subscribers. This is the first time in the Company’s reporting history that we have achieved an in-year quarter-over-quarter total subscriber step up.” said Heather Stark, the Company’s CFO. “While, as anticipated, revenue was down year-over-year primarily due to the headwinds from 2022’s ending subscriber base, our actions to optimize our real estate footprint and organizational structure drove record high adjusted gross margin. Given encouraging subscriber trends and improved margins, we now expect full year adjusted operating income to be towards the high end of our previously provided guidance range, despite modestly reduced revenue expectations.”

Q2 2023 Consolidated Results

Q2 2023 Business and Financial Highlights

• End of Period Subscribers in Q2 2023 were down 4.3% versus the prior year period, driven by declines in the Digital and Workshops + Digital businesses, partially offset by the inclusion of 37 thousand Clinical subscribers. Q2 2023 End of Period Digital Subscribers decreased 3.2% versus the prior year period. Q2 2023 End of Period Workshops + Digital Subscribers decreased 13.0% versus the prior year period.

• Total Paid Weeks in Q2 2023 were down 7.2% versus the prior year period, driven by declines in the Digital and Workshops + Digital businesses, partially offset by the inclusion of 355 thousand Clinical paid weeks. Q2 2023 Digital Paid Weeks decreased 8.5% versus the prior year period. Q2 2023 Workshops + Digital Paid Weeks decreased 4.6% versus the prior year period.

• Revenues in Q2 2023 were $226.8 million. On a constant currency basis, Q2 2023 revenues decreased 15.8% versus the prior year period.
  
  
  • Subscription Revenues in Q2 2023 were $212.1 million. On a constant currency basis, these revenues decreased 11.7% versus the prior year period, benefitting from the inclusion of $7.6 million in Clinical subscription revenues.
    
    
  • Product Sales and Other in Q2 2023 were $14.7 million. On a constant currency basis, these revenues decreased 49.3% versus the prior year period driven by the planned reductions of the consumer products business.
    

• Gross Profit in Q2 2023 was $143.2 million, compared to $163.0 million in the prior year period. Adjusted gross profit in Q2 2023, which excluded the net impact of $0.7 million of restructuring charges, was $143.8 million. Adjusted gross profit in Q2 2022, which excluded the net impact of $3.9 million of restructuring charges, was $166.9 million.
  
  
  • Gross Margin in Q2 2023 was 63.1%, as compared to 60.5% in the prior year period. Adjusted gross margin in Q2 2023 was 63.4%, up 150 basis points from an adjusted gross margin of 61.9% in the prior year period, primarily driven by actions to reduce the fixed cost base within the Workshops + Digital business.
    
    
• Operating Income in Q2 2023 was $26.3 million, compared to operating income of $13.4 million in the prior year period. Adjusted operating income in Q2 2023, which excluded the net impact of $2.7 million of restructuring charges and $4.9 million of acquisition transaction costs, was $33.9 million. Adjusted operating income in Q2 2022, which excluded the impact of non-cash intangible impairment charges totaling $26.4 million and the net impact of $18.6 million of restructuring charges, was $58.3 million.

• Income Tax Benefit in Q2 2023 was $48.1 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 $2.9 million.

• Net Income (Loss) in Q2 2023 was $50.8 million compared to net loss of $4.6 million in the prior year period.

• Diluted earnings per share in Q2 2023 was $0.65 compared to diluted net loss per share of $0.07 in the prior year period.
  • Certain items affect year-over-year comparability.
    • Q2 2023 diluted earnings per share incorporated the positive impact of $0.69 per diluted share in the aggregate due to the following items:
      • $0.77 per diluted share positive 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.
      • $0.05 per diluted share negative impact from acquisition transaction costs.
      • $0.03 per diluted share negative net impact of restructuring charges.
    • Q2 2022 diluted net loss per share incorporated the negative impact of $0.47 per diluted share in the aggregate due to the following items:
      • $0.30 per diluted share negative impact of non-cash intangible impairment charges.
      • $0.20 per diluted share net negative impact of restructuring charges.
      • $0.03 per diluted share tax benefit due to out-of-period income tax adjustments.

Other Items

• Cash balance as of July 1, 2023 was $91.4 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 $1.8 million in Q2 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. Sequence results are now reflected in the Company’s financials as well as certain metrics are included in the Clinical line of business.
  

Full Year Fiscal 2023 Guidance

The Company is updating its full year fiscal 2023 guidance:

• Revenues are expected to be in the range of $890.0 million to $910.0 million, compared to previously provided $910.0 million to $930.0 million, reflecting near-term supply constraints in the Clinical business and a subscriber mix shift.
• Operating income is expected to be in the range of $39.0 million to $51.0 million. Adjusted operating income, which excludes the net impact of restructuring charges and acquisition transaction costs, is now expected to be towards the high end of the previously provided range of $80.0 million to $85.0 million.

Second 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 second 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 second quarter and first six months of fiscal 2023 to exclude (a) the net impact of (w) charges associated with the Company's previously disclosed 2023 restructuring plan (the “2023 plan”), (x) 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, (y) charges associated with the Company's previously disclosed 2021 organizational restructuring plan (the “2021 plan”) or the reversal of certain of the charges associated with the 2021 plan, as applicable, and (z) the reversal of certain of the charges associated with the Company's previously disclosed 2020 organizational restructuring plan (the “2020 plan”) and (b) the impact of certain non-recurring transaction costs in connection with the acquisition of Sequence (as defined below); (ii) the second quarter of fiscal 2022 to exclude (a) the impact of impairment charges for the Company's franchise rights acquired related to its Canada and New Zealand units of account and the impairment charge for the Company’s goodwill related to the its wholly-owned subsidiary Kurbo, Inc. (“Kurbo”) and (b) the net impact of (x) charges associated with the 2022 plan and (y) the reversal of certain of the charges associated with the 2021 plan; and (iii) the first six months of fiscal 2022 to exclude (a) the impact of impairment charges for the Company's franchise rights acquired related to its Canada and New Zealand units of account and the impairment charge for the Company’s goodwill related to Kurbo and (b) the net impact of (x) charges associated with the 2022 plan, (y) charges associated with the 2021 plan or the reversal of certain of the charges associated with the 2021 plan, as applicable, and (z) the reversal of certain of the charges associated with the 2020 plan. We generally refer to such non-GAAP measures as follows: (i) with respect to the adjustments for the second quarter and first six months of fiscal 2023, as excluding or adjusting for the net impact of restructuring charges and the impact of acquisition transaction costs ; and (ii) with respect to the adjustments for the second quarter and first six months of fiscal 2022, as excluding or adjusting for the impact of franchise rights acquired and goodwill impairments and the net impact of restructuring charges. 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, net restructuring charges, and certain non-recurring transaction costs in connection with the acquisition of Sequence (“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. Adjusted EBITDAS for the first quarter of fiscal 2023 as presented herein was recast to reflect certain non-recurring transaction costs in connection with the acquisition of Sequence. 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.

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

Media:
Kelsey Merkel
kelsey.merkel@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 these 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 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).