WW - WW Announces Second Quarter 2020 Results with Record Digital Subscribers

• Q2 2020 End of Period Subscribers up 9% year-over-year to 5.0 million, an all-time Q2-end high
   
• Q2 2020 End of Period Digital Subscribers at all-time high and up 23% year-over-year
   
• Q2 2020 Revenues of $334 million, down 10%, or 9% on a constant currency basis, year-over-year due to studio closures
   
• Q2 2020 Gross Margin of 58%; excluding one-time charges, Q2 2020 adjusted gross margin of 60%, the highest level in 8 years

NEW YORK, Aug. 04, 2020 (GLOBE NEWSWIRE) -- WW International, Inc. (NASDAQ: WW) today announced its results for the second quarter of fiscal 2020.

“We ended the quarter with our highest-ever Q2 subscriber base of 5.0 million, driven by a record level of digital subscribers, which were up 23% year-over-year.  These milestones combined with the strength in digital revenues and our high margins are all testament to the work of our teams and talent around the world,” said Mindy Grossman, the Company’s President and CEO. “The impact of our accelerated digital transformation is evident in our second quarter results and will continue to be a key driver of our future growth and profitability.  Creating exciting new coaching experiences, adding new digital features and producing creative content that is insightful, interactive and engaging will greatly increase our ability to attract new members to WW, retain them longer, help them achieve their weight loss and wellness goals, and deliver on our mission to democratize wellness for all.”

“Our second quarter results demonstrate the benefits of our digital focus with strength in digital revenues, ecommerce, and gross margin,” said Nick Hotchkin, the Company’s CFO, Operating Officer, North America and President, Emerging Markets. “While our Q2 2020 GAAP EPS was $0.20, excluding one-time charges in the quarter, adjusted EPS was $0.67, demonstrating strong performance despite the COVID-19 environment.  We are nimbly managing our studio cost structure and are on-track to deliver on our $100 million cost-savings initiative, while maintaining strong liquidity and financial flexibility.”

Q2 2020 Consolidated Results 

Q2 2020 Business and Financial Highlights

• End of Period Subscribers in Q2 2020 were up 8.6% versus the prior year period, driven by Digital subscriber growth across all major geographic markets. Q2 2020 End of Period Digital Subscribers were up 23.2% and End of Period Studio + Digital Subscribers were down 24.2% versus the prior year period.
   
• Total Paid Weeks in Q2 2020 were up 5.1% versus the prior year period, driven by Digital growth across all major geographic markets. Q2 2020 Digital Paid Weeks increased 16.8% and Studio + Digital Paid Weeks decreased 19.7% versus the prior year period. 
   
• Revenues in Q2 2020 were $333.6 million. On a constant currency basis, Q2 2020 revenues decreased 8.7% versus the prior year period.
   
  • Service Revenues in Q2 2020 were $293.0 million. On a constant currency basis, these revenues decreased 5.7% versus the prior year period, primarily driven by declines in Studio + Digital Fees as a result of the closure of our studios due to  COVID-19.
     
  • Product Sales and Other in Q2 2020 were $40.6 million. On a constant currency basis, these revenues decreased 25.7% versus the prior year period, primarily due to lower in-studio product sales as a result of the closure of our studios due to COVID-19.
     
• Gross Profit in Q2 2020 was $194.7 million. Adjusted gross profit in Q2 2020 was $201.2 million, which excluded $6.5 million in charges associated with the Company’s previously disclosed 2020 organizational restructuring plan.  On a constant currency basis, adjusted gross profit would have decreased 5.8% versus the prior year period.
   
  • Gross Margin in Q2 2020 was 58.3% and adjusted gross margin was 60.3%.  This compares to a gross margin of 58.5% in the prior year period.
     
• Operating Income in Q2 2020 was $51.0 million. Adjusted operating income in Q2 2020 was $94.9 million, which excluded the $32.7 million one-time stock compensation expense associated with the previously disclosed option granted to Ms. Oprah Winfrey in connection with the Company extending its partnership with Ms. Winfrey and the $11.2 million in charges associated with the Company’s previously disclosed 2020 organizational restructuring plan. On a constant currency basis, adjusted operating income would have decreased 8.7% versus the prior year period. This decrease was due to lower revenues related to the Company’s Studio + Digital business.
   
  • Operating Income Margin for Q2 2020 was 15.3% and adjusted operating income margin was 28.4%.  This compares to an operating income margin of 28.6% in the prior year period.
     
• Effective Tax Rate in Q2 2020 was 28.6%, versus 23.6% in the prior year period.
   
• Net Income in Q2 2020 was $14.0 million compared to $53.8 million in the prior year period.
   
• Earnings per fully diluted share (EPS) in Q2 2020 was $0.20 compared to $0.78 in the prior year period.
  • Certain items affect year-over-year comparability. The following items in the aggregate negatively impacted Q2 2020 fully diluted EPS by $0.47:
    • $0.35 per fully diluted share impact from the one-time stock compensation expense associated with the previously disclosed option granted to Ms. Winfrey in connection with the Company extending its partnership with Ms. Winfrey.
    • $0.12 per fully diluted share impact from charges associated with the Company’s previously disclosed 2020 organizational restructuring plan.

Other Items

• Cash balance as of June 27, 2020 was $150.4 million. On June 5, 2020, WW fully repaid the borrowings outstanding under its revolving credit facility, which it previously drew down in Q1 2020 as a precautionary measure in light of the COVID-19 outbreak.

Second Quarter 2020 Conference Call and Webcast

The Company has scheduled a conference call today at 5:00 p.m. ET.  During the conference call, Mindy Grossman, President and Chief Executive Officer, and Nicholas Hotchkin, Chief Financial Officer, Operating Officer, North America & President, Emerging Markets, will discuss the second quarter of fiscal 2020 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 earnings per fully diluted share are discussed both as reported (on a GAAP basis) and, with respect to the second quarter of fiscal 2020, as adjusted (on a non-GAAP basis), to exclude the impact of the one-time stock compensation expense associated with the previously disclosed option granted to Ms. Winfrey in connection with the Company extending its partnership with Ms. Winfrey and charges associated with the Company’s previously disclosed 2020 organizational restructuring plan, 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, 2020 restructuring charges and goodwill impairment (“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.
WW – Weight Watchers reimagined – is a global wellness company powered by the world’s leading commercial weight management program. We inspire millions of people to adopt healthy habits for real life. Through our engaging tech-enabled experience and face-to-face group workshops, members follow our livable and sustainable program of healthy eating, physical activity, and a helpful mindset. Leveraging more than five decades of experience in building inspired communities and our deep expertise in behavioral science, we aim to democratize wellness and to deliver wellness for all. To learn more about the WW 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 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” 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 global outbreak of the COVID-19 virus on the Company’s business and liquidity and on the business 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 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; the ability to successfully implement new strategic initiatives, including the Company’s strategic digital transformation; the effectiveness 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 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 or privacy concerns, including the costs of compliance with evolving privacy laws and regulations; 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 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; risks and uncertainties associated with the Company’s international operations, including regulatory, economic, political, social, intellectual property and foreign currency risks; uncertainties related to a downturn in general economic conditions or consumer confidence; the Company’s ability to successfully make acquisitions or enter into joint ventures, 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 accessing resources; 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; the outcomes of litigation or regulatory actions; the impact of existing and future laws and regulations; the Company’s failure to maintain effective internal control over financial reporting; 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).