WW Announces Second Quarter 2022 Results

• Q2 2022 End of Period Subscribers of 4.3 million

• Q2 2022 Revenues of $269.5 million
  
  
• Q2 2022 Gross Margin of 60.5%; Q2 2022 adjusted gross margin of 61.9% excluding the net impact of restructuring charges
  
  
• Q2 2022 Operating Income of $13.4 million; Q2 2022 adjusted operating income of $58.3 million excluding the impact of non-cash intangible impairment charges and net impact of restructuring charges
  
  
• Revised FY 2022 Guidance: Revenues in the range of $1.05 billion to $1.09 billion and GAAP EPS in the range of $0.25 to $0.30 per fully diluted share, which incorporates the net negative impact of approximately $0.55 per fully diluted share from non-cash intangible impairment charges, estimated restructuring charges, and out-of-period income tax adjustments
  

NEW YORK, Aug. 04, 2022 (GLOBE NEWSWIRE) -- WW International, Inc. (NASDAQ: WW) (“WeightWatchers,” “WW,” or “the Company”) today announced its results for the second quarter of fiscal 2022.

“I joined WeightWatchers with a clear-eyed vision that building a digital community around a shared interest of health and weight loss is the key to member success and subscriber growth. I am now even more confident that it is the right path forward,” said Sima Sistani, the Company’s CEO. “2022 will be a transition year while we execute on a number of initiatives to simplify the business and build a foundation for profitable growth.”

Amy O’Keefe, the Company’s CFO, said, “The actions that we have taken to right-size our cost structure enabled us to expand our adjusted operating margin despite revenue pressure in the second quarter. For the balance of the year, we are focused on stabilizing subscriber trends, while continuing to manage costs tightly in the current environment.”

Q2 2022 Consolidated Results

Q2 2022 Business and Financial Highlights

• End of Period Subscribers in Q2 2022 were down 12.3% versus the prior year period, primarily driven by declines in the Digital business in all major geographic markets. Q2 2022 End of Period Digital Subscribers decreased 16.5% versus the prior year period. Q2 2022 End of Period Workshops + Digital Subscribers increased 10.6% versus the prior year period, benefitting from the transition of former Digital 360 members from the Digital business to the Workshops + Digital business in the quarter.
  • Adjusting Q2 2022 End of Period Subscribers for both businesses to exclude the transition of 127 thousand former Digital 360 members from the Digital business to the Workshops + Digital business, End of Period Digital Subscribers would have been down 13.4% and End of Period Workshops + Digital Subscribers would have been down 6.4%, both versus the prior year period.

• Total Paid Weeks in Q2 2022 were down 10.7% versus the prior year period, driven by declines in all major geographic markets. Q2 2022 Digital Paid Weeks decreased 13.4% versus the prior year period. Q2 2022 Workshops + Digital Paid Weeks increased 4.3% versus the prior year period, benefitting from the transition of former Digital 360 members from the Digital business to the Workshops + Digital business in the quarter.
  • Adjusting Q2 2022 Paid Weeks for both businesses to exclude 847 thousand Paid Weeks attributable to former Digital 360 members who transitioned from the Digital business to the Workshops + Digital business, Digital Paid Weeks would have been down 11.8% and Workshops + Digital Paid Weeks would have been down 4.3%, both versus the prior year period.

• Revenues in Q2 2022 were $269.5 million. On a constant currency basis, Q2 2022 revenues decreased 10.0% versus the prior year period.
  
  
  • Subscription Revenues in Q2 2022 were $240.4 million. On a constant currency basis, these revenues decreased 8.3% versus the prior year period.
    
    
  • Product Sales and Other in Q2 2022 were $29.1 million. On a constant currency basis, these revenues decreased 21.9% versus the prior year period.
    
    
• Gross Profit in Q2 2022 was $163.0 million, compared to $186.0 million in the prior year period. Adjusted gross profit in Q2 2022, which excluded the net impact of $3.9 million of restructuring charges, was $166.9 million. Adjusted gross profit in Q2 2021, which excluded the net impact of $5.0 million of restructuring charges, was $191.0 million.
  
  
  • Gross Margin in Q2 2022 was 60.5%, as compared to 59.7% in the prior year period. Adjusted gross margin in Q2 2022 was 61.9%, up 60 basis points from an adjusted gross margin of 61.3% in the prior year period primarily driven by operating leverage within the Workshops + Digital business.
    
    
• Non-Cash Intangible Impairment Charges: In Q2 2022, the Company recorded non-cash intangible impairment charges totaling $26.4 million that included a $24.5 million charge of franchise rights acquired related to its Canada operation, a $0.8 million charge of franchise rights acquired related to its New Zealand operation, and a $1.1 million charge of its goodwill related to its Kurbo operations following the determination to exit its Kurbo business.
  
  
• Operating Income in Q2 2022 was $13.4 million, compared to $59.7 million in the prior year period. 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, down 10.1% versus adjusted operating income in the prior year period. Adjusted operating income in Q2 2021, which excluded the net impact of $5.2 million of restructuring charges, was $64.9 million.
  
  
• Effective Tax Rate in Q2 2022 was 38.4%, compared to 9.9% in the prior year period.
  
  
• Net Loss in Q2 2022 was $4.6 million compared to net income of $8.9 million in the prior year period.
  
  
• Diluted Net Loss per share in Q2 2022 was $0.07 compared to earnings per fully diluted share (EPS) of $0.12 in the prior year period.
  
  
  • Certain items affect year-over-year comparability.
    • Q2 2022 EPS was negatively impacted by $0.47 in the aggregate due to the following items:
      • $0.30 per fully diluted share negative impact of non-cash intangible impairment charges.
      • $0.20 per fully diluted share net negative impact of restructuring charges.
      • $0.03 per fully diluted share tax benefit due to out-of-period income tax adjustments.
    • Q2 2021 EPS was negatively impacted by $0.36 in the aggregate due to the following items:
      • $0.31 per fully diluted share impact from early extinguishment of debt charges associated with the Company’s previously announced April 2021 debt refinancing.
      • $0.05 per fully diluted share net negative impact of restructuring charges.
        
        

Other Items

• Cash balance as of July 2, 2022 was $148.6 million. On that same date, the Company had no outstanding borrowings under its $175.0 million revolving credit facility.
• 2022 Restructuring Plan: In connection with its previously announced 2022 restructuring plan, the Company recorded restructuring charges of $19.1 million in Q2 2022. The Company expects to record an additional $8 million of restructuring charges in fiscal 2022, increasing its full year estimate of restructuring charges to $27 million, up from its prior range of $18 million to $22 million. The Company now expects annual run-rate savings to be over $35 million, up from its prior estimate of nearly $30 million. In-year fiscal 2022 run-rate savings are expected to approach $20 million, at the high end of the prior estimated range of $16 million to $20 million.
• Cessation of Digital 360 Product Offering: As previously announced, in Q2 2022, the Company ceased offering its Digital 360 product and transitioned more than a majority of the associated members from the Digital business to the Workshops + Digital business, with a de minimis number transitioning during the beginning of the third quarter of fiscal 2022. For additional detail on the impact of this transition of former Digital 360 members at the then-current pricing for such product on End of Period Subscribers, Revenues, and Paid Weeks, see “Operational Statistics” and “Reconciliation of Non-GAAP Financial Measures” attached to this release.
  
  

Full Year Fiscal 2022 Guidance

The Company is updating its full year fiscal 2022 guidance, as follows:

• Revenues are expected to be in the range of $1.05 billion to $1.09 billion. Prior revenue guidance was in the range of $1.09 billion to $1.14 billion.
• GAAP EPS expected to be in the range of $0.25 to $0.30 per fully diluted share, which incorporates a net negative impact of approximately $0.55 per fully diluted share related to non-cash intangible impairment charges recorded in Q2 2022, estimated restructuring charges, and the benefit from out-of-period income tax adjustments recorded in Q2 2022. Prior GAAP EPS guidance was in the range of $0.72 to $0.78 per fully diluted share, which incorporated the negative impact of approximately $0.20 to $0.24 per fully diluted share of estimated restructuring charges.

Second Quarter 2022 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 Amy O’Keefe, Chief Financial Officer, will discuss the second quarter of fiscal 2022 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 profit margin, operating income, operating 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 of fiscal 2022 to exclude (a) the impact of impairment charges for our franchise rights acquired related to our Canada and New Zealand units of account and the impairment charge for our goodwill related to our wholly-owned subsidiary Kurbo, Inc. (“Kurbo”) and (b) the net impact of (x) charges associated with our previously disclosed 2022 restructuring plan (the “2022 plan”) and (y) the reversal of certain of the charges associated with our previously disclosed 2021 organizational restructuring plan (the “2021 plan”); (ii) the first six months of fiscal 2022 to exclude (a) the impact of impairment charges for our franchise rights acquired related to our Canada and New Zealand units of account and the impairment charge for our 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 our previously disclosed 2020 organizational restructuring plan (the “2020 plan”); and (iii) the second quarter and first six months of fiscal 2021 to exclude 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. 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 2022, as excluding or adjusting for the impact of franchise rights acquired and goodwill impairments (or non-cash intangible impairment charges) and the net impact of restructuring charges; and (ii) with respect to the adjustments for the second quarter and first six months of fiscal 2021, as excluding or adjusting for 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 early extinguishment of debt with respect to the Company’s previously disclosed April 2021 debt refinancing and voluntary debt prepayments (“Adjusted EBITDAS”); net debt; and a net debt to 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 the world's leading commercial weight management program. For nearly six decades, we have inspired millions of people to adopt healthy habits for real life. Through our comprehensive tools, expert Coaches and community, members follow our proven, sustainable, science-based program focused on weight loss. 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, revenue and earnings guidance and any statements about the Company’s plans, strategies, objectives, initiatives, roadmap and prospects and the impact of the COVID-19 virus. The Company generally uses the words “may,” “will,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “intend,” “aim,” "bring," "going to" 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 ongoing global outbreak of the COVID-19 virus on the Company’s business and liquidity and on the business and 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 the Company’s ability to successfully expand into new channels of distribution or respond to consumer trends or sentiment; the ability to successfully implement strategic initiatives; the effectiveness and efficiency of the Company’s advertising and marketing programs, including the strength of its social media presence; the impact on the Company’s reputation of actions taken by its franchisees, licensees, suppliers and other partners; 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 expiration or early termination by the Company of leases; uncertainties related to a downturn in general economic conditions or consumer confidence, including the potential impact of political and social unrest, and the existing inflationary environment; 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; the seasonal nature of the Company’s 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 the Company’s 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; 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 Securities and Exchange Commission. 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 United States Securities and Exchange Commission (which are available on the SEC’s EDGAR database at www.sec.gov and via the Company’s website at corporate.ww.com).