WW - WW International Inc. Announces Fourth Quarter and Full Year 2023 Results | Benzinga

Fourth Quarter 2023

• End of Period Subscribers of 3.8 million, including 67 thousand End of Period Clinical Subscribers
• Revenues of $206.0 million
• Gross margin of 60.6%; excluding the net impact of restructuring charges, adjusted gross margin of 61.4%
• Operating Loss of $6.0 million; excluding the net impact of restructuring charges and non-cash intangible impairment charges, adjusted operating income of $21.3 million

Full Year Fiscal 2023

• Revenues of $889.6 million
• Gross margin of 59.5%; excluding the net impact of restructuring charges, adjusted gross margin of 61.9%
• Operating Income of $22.3 million; excluding the net impact of restructuring charges, acquisition transaction costs, and non-cash intangible impairment charges, adjusted operating income of $89.5 million

Company Provides Full Year Fiscal 2024 Guidance

NEW YORK, Feb. 28, 2024 (GLOBE NEWSWIRE) -- WW International, Inc. (NASDAQ:WW) ("WeightWatchers," "WW," or the "Company") today announced its results for the fourth quarter and full year fiscal 2023.

"2023 was a pivotal year as we began transforming our business for the future. We returned WeightWatchers to year end subscriber growth – for the first time in 3 years - up 7% year-over-year," said Sima Sistani, the Company's CEO. "We are on track to deliver growth in total subscribers in 2024, expecting to end the year with subscribers in the range of 3.8 million to 4.0 million, including between 140 thousand and 160 thousand subscribers to our new WeightWatchers Clinic."

"WeightWatchers is creating the category of Weight Health, and to do so requires us to go further in the transformation and expand our offerings to deliver the support, services, and treatments that many need to advance their weight loss journeys. We are making intentional choices to prioritize these initiatives that we believe will have the greatest benefit for the long-term health of our business," continued Sistani.

"We executed against our 2023 objectives with a return to sign up and subscriber growth, record adjusted gross margin, and improved cost structure," said Heather Stark, the Company's CFO. "We anticipate returning to year-over-year growth in subscription revenues in the second half of 2024, and we are committed to improving margins and driving operating income growth." 

Q4 2023 Consolidated Results

Q4 2023 Business and Financial Highlights

• End of Period Subscribers in Q4 2023 were up 7.1% versus the prior year period, driven by the Digital business and the inclusion of 67 thousand Clinical Subscribers. Q4 2023 End of Period Digital Subscribers increased 8.6% versus the prior year period. Q4 2023 End of Period Workshops + Digital Subscribers decreased 8.3% versus the prior year period. 
• Total Paid Weeks in Q4 2023 were up 6.5% versus the prior year period, driven by the Digital business and the inclusion of 719 thousand Clinical Paid Weeks. Q4 2023 Digital Paid Weeks increased 8.6% versus the prior year period. Q4 2023 Workshops + Digital Paid Weeks decreased 9.2% versus the prior year period. 
• Revenues in Q4 2023 were $206.0 million. On a constant currency basis, Q4 2023 revenues decreased 8.7% versus the prior year period. 
  • Subscription Revenues in Q4 2023 were $196.1 million. On a constant currency basis, these revenues decreased 3.6% versus the prior year period. Subscription Revenues included $13.0 million of Clinical Subscription Revenues. 
  • Product Sales and Other in Q4 2023 were $9.9 million. On a constant currency basis, these revenues decreased 55.3% versus the prior year period driven by the wind down of the consumer products business. 
• Gross Profit in Q4 2023 was $124.9 million, compared to $126.0 million in the prior year period. Adjusted gross profit in Q4 2023, which excluded the net impact of $1.5 million of restructuring charges, was $126.4 million. Adjusted gross profit in Q4 2022, which excluded the net impact of $3.1 million of restructuring charges, was $129.1 million. 
  • Gross Margin in Q4 2023 was 60.6%, as compared to 56.5% in the prior year period. Adjusted gross margin in Q4 2023 was 61.4%, up from an adjusted gross margin of 57.9% in the prior year period, primarily driven by actions to reduce the fixed cost base within the Workshops + Digital business. 
• Non-Cash Intangible Impairment Charges: During Q4 2023, the Company fully impaired the goodwill and franchise rights acquired balances for past franchise acquisitions in the Republic of Ireland and Northern Ireland, resulting in total charges of $3.6 million. 
• Operating Loss in Q4 2023 was $6.0 million, compared to operating loss of $51.8 million in the prior year period. Adjusted operating income in Q4 2023, which excluded the net impact of $23.6 million of restructuring charges and non-cash intangible impairment charges of $3.6 million, was $21.3 million. Adjusted operating income in Q4 2022, which excluded the impact of non-cash intangible impairment charges totaling $57.6 million and the net impact of $17.4 million of restructuring charges, was $23.1 million. 
• Income Tax Expense in Q4 2023 was $57.6 million, which reflected an increase in the valuation allowance to offset all U.S. deferred tax assets due to the uncertainty of realizing future tax benefits of the assets. In the prior year period, income tax was a benefit of $36.7 million. 
• Net Loss in Q4 2023 was $88.1 million compared to net loss of $35.8 million in the prior year period. 
• Diluted Net Loss per share in Q4 2023 was $1.11 compared to diluted net loss per share of $0.51 in the prior year period.
  • Certain items affect year-over-year comparability.
    • Q4 2023 diluted net loss per share incorporated the net negative impact of $1.05 per diluted share in the aggregate due to the following items:
      • $0.78 per diluted share negative tax impact due to an increase in the valuation allowance to offset all U.S. deferred tax assets due to the uncertainty of realizing future tax benefits of the assets.
      • $0.22 per diluted share net negative impact of restructuring charges.
      • $0.05 per diluted share negative impact of non-cash intangible impairment charges for franchise rights acquired and goodwill.
    • Q4 2022 diluted net loss per share incorporated the negative impact of $0.52 per diluted share in the aggregate due to the following items:
      • $0.63 per diluted share negative impact of non-cash intangible impairment charges for franchise rights acquired and goodwill.
      • $0.18 per diluted share net negative impact of restructuring charges.
      • $0.68 per diluted share positive tax impact of a legal entity restructuring that resulted in a reversal of certain deferred tax liabilities.
      • $0.38 per diluted share negative tax impact of establishing a valuation allowance to offset certain deferred tax assets due to the uncertainty of realizing future tax benefits from interest expense carryforwards.

Full Year Fiscal 2023 Consolidated Results

Full Year Fiscal 2023 Business and Financial Highlights 

• Total Paid Weeks in fiscal 2023 were down 3.9% versus the prior year, driven by declines in the Digital and Workshops + Digital businesses. Fiscal 2023 Digital Paid Weeks decreased 4.5% versus the prior year. Fiscal 2023 Workshops + Digital Paid Weeks decreased 5.3% versus the prior year. Fiscal 2023 included 1.6 million Clinical Paid Weeks. 
• Revenues in fiscal 2023 were $889.6 million. On a constant currency basis, fiscal 2023 revenues decreased 14.5% versus the prior year. 
  
  • Subscription Revenues in fiscal 2023 were $822.8 million. On a constant currency basis, these revenues decreased 10.6% versus the prior year. Subscription Revenues included $30.5 million of Clinical Subscription Revenues. 
  • Product Sales and Other in fiscal 2023 were $66.8 million. On a constant currency basis, these revenues decreased 44.3% versus the prior year driven by the wind down of the consumer products business. 
• Gross Profit in fiscal 2023 was $529.3 million, compared to $621.4 million in the prior year. Adjusted gross profit in fiscal 2023, which excluded the net impact of $21.2 million of restructuring charges, was $550.5 million. Adjusted gross profit in fiscal 2022, which excluded the net impact of $7.0 million of restructuring charges, was $628.4 million. 
  
  • Gross Margin in fiscal 2023 was 59.5%, as compared to 59.8% in the prior year. Adjusted gross margin in fiscal 2023 was 61.9%, up from an adjusted gross margin of 60.4% in the prior year, primarily driven by actions to reduce the fixed cost base within the Workshops + Digital business. 
• Operating Income in fiscal 2023 was $22.3 million, compared to operating loss of $284.0 million in the prior year. Adjusted operating income in fiscal 2023, which excluded the net impact of $54.9 million of restructuring charges, $8.6 million of acquisition transaction costs, and $3.6 million of non-cash intangible impairment charges was $89.5 million. Adjusted operating income in fiscal 2022, which excluded the impact of non-cash intangible impairment charges totaling $396.7 million and the net impact of $39.7 million of restructuring charges, was $152.5 million. 
• Income Tax Expense in fiscal 2023 was $38.6 million, which reflected an increase in the valuation allowance to offset all U.S. deferred tax assets due to the uncertainty of realizing future tax benefits of the assets. In the prior year, income tax was a benefit of $109.9 million. 
• Net Loss in fiscal 2023 was $112.3 million compared to net loss of $256.9 million in the prior year. 
• Diluted Net Loss per share in fiscal 2023 was $1.46 compared to diluted net loss per share of $3.65 in the prior year.
  
  • Certain items affect year-over-year comparability.
    
    • Fiscal 2023 diluted net loss per share incorporated the net negative impact of $1.34 per diluted share in the aggregate due to the following items:
      
      • $0.66 per diluted share negative tax impact due to an increase in the valuation allowance to offset all U.S. deferred tax assets due to the uncertainty of realizing future tax benefits of the assets.
      • $0.54 per diluted share net negative impact of restructuring charges.
      • $0.10 per diluted share negative impact from acquisition transaction costs.
      • $0.05 per diluted share negative impact of non-cash intangible impairment charges for franchise rights acquired and goodwill. 
    • Fiscal 2022 diluted net loss per share incorporated the negative impact of $4.38 per diluted share in the aggregate due to the following items:
      
      • $4.28 per diluted share negative impact of non-cash intangible impairment charges for franchise rights acquired and goodwill.
      • $0.42 per diluted share net negative impact of restructuring charges.
      • $0.69 per diluted share positive tax impact of a legal entity restructuring that resulted in a reversal of certain deferred tax liabilities.
      • $0.39 per diluted share negative tax impact of establishing a valuation allowance to offset certain deferred tax assets due to the uncertainty of realizing future tax benefits from interest expense carryforwards.
      • $0.03 per diluted share tax benefit due to out-of-period income tax adjustments.

Other Items

• Cash balance as of December 30, 2023 was $109.4 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 $23.1 million in Q4 2023. This is higher than the previously disclosed estimate of up to $10.0 million as the Company continued to centralize and streamline its organization resulting in additional charges.
• Reporting Segment Update: As a result of the continued evolution of the Company's centralized organizational structure in fiscal 2023, and management's 2024 strategic planning process, the Company's reporting segments changed commencing with the first day of fiscal 2024 to one segment based on total revenue. This segment reflects the Company's global management of the business and will present results on a global basis.  The Company's reporting segments in fiscal 2023 were North America and International.   

Full Year Fiscal 2024 Guidance

The Company is providing the following full year fiscal 2024 guidance:

• Revenues are expected to be in the range of $830.0 million to $860.0 million, reflecting a $55 million year-over-year headwind from the strategic decision to wind down the Company's low-margin consumer products business.
• Operating Income is expected to be in the range of $100.0 million to $110.0 million. Changes to modernize the Company's technology organization required the Company to update its capitalized labor rate expectations. Based on these updated expectations, an estimated $9.0 million of expenses that were previously expected to be capitalized will now be reflected on the income statement in 2024. This shift in operating methodology does not impact cash.

Fourth Quarter and Full Year 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 fourth quarter and full year 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, under Events and Presentations. 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 income (loss), operating income (loss) 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 fourth quarter 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") and (x) charges associated with the Company's previously disclosed 2022 restructuring plan (the "2022 plan"), and (b) the impact of the impairment charges for the Company's goodwill related to its Republic of Ireland and Northern Ireland reporting units and the impairment charge for the Company's franchise rights acquired related to its Northern Ireland unit of account; (ii) the full year of fiscal 2023 to exclude (a) the net impact of (w) charges associated with the Company's 2023 plan, (x) charges associated with the Company's 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"), (b) the impact of certain non-recurring transaction costs in connection with the acquisition of Sequence (as defined below), and (c) the impact of the impairment charges for the Company's goodwill related to its Republic of Ireland and Northern Ireland reporting units and the impairment charge for the Company's franchise rights acquired related to its Northern Ireland unit of account; (iii) the fourth quarter of fiscal 2022 to exclude (a) the impact of impairment charges for the Company's franchise rights acquired related to its United States, Canada, United Kingdom and Australia units of account and an impairment charge for the Company's goodwill related to its Republic of Ireland reporting unit and (b) the net impact of (w) charges associated with the Company's 2023 plan, (x) charges associated with the Company's 2022 plan, (y) the reversal of certain of the charges associated with the Company's 2021 plan, and (z) the reversal of certain of the charges associated with the Company's 2020 plan; and (iv) the full year of fiscal 2022 to exclude (a) the impact of impairment charges for the Company's franchise rights acquired related to its United States, Canada, United Kingdom, New Zealand and Australia units of account and impairment charges for the Company's goodwill related to its Republic of Ireland reporting unit and its wholly-owned subsidiary Kurbo, Inc., and (b) the net impact of (w) charges associated with the 2023 plan, (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 fourth quarter of fiscal 2023, as excluding or adjusting for the net impact of restructuring charges and the impact of franchise rights acquired and goodwill impairments; (ii) with respect to the adjustments for the full year of fiscal 2023, as excluding or adjusting for the net impact of restructuring charges, the impact of acquisition transaction costs, and the impact of franchise rights acquired and goodwill impairments; and (iii) with respect to the adjustments for the fourth quarter and full year 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. 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. A reconciliation of the forward-looking full year EBITDAS outlook to net income cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the various adjusting items necessary for such reconciliation that have not yet occurred, are out of our control, or cannot be reasonably predicted. For the same reasons, the Company is unable to assess the probable significance of the unavailable information, which could have a material impact on its future GAAP financial results.

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 titled 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 programs. 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 programs. 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: competition from other weight management and health 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 be a leader in the rapidly evolving and increasingly competitive clinical weight management and weight loss market; 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 evolve its community offerings to meet the evolving tastes and preferences 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, affiliated provider entities, PCs' healthcare professionals, and other partners, including as a result of its acquisition of Weekend Health, Inc., 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 ability to successfully make acquisitions or enter into collaborations or joint ventures, including its ability to successfully integrate, operate or realize the anticipated benefits of such businesses, including with respect to Sequence; uncertainties related to a downturn in general economic conditions or consumer confidence, including as a result of the existing inflationary environment, rising interest rates, the potential impact of political and social unrest and increased volatility in the credit and capital markets; the seasonal nature of the Company's business; the Company's failure to maintain effective internal control over financial reporting; the impact of events that impede accessing resources or discourage or impede people from gathering with others; the early termination by the Company of leases; 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 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 successfully integrate and use artificial intelligence in its business; 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 war and terrorism; the outcomes of litigation or regulatory actions; the impact of existing and future laws and regulations; risks related to the 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; 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).

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