WW - WW Announces Third Quarter 2022 Results

• Q3 2022 End of Period Subscribers of 3.8 million
  
  
• Q3 2022 Revenues of $249.7 million
  
  
• Q3 2022 Gross Margin of 61.0%
  
  
• Q3 2022 Operating Loss of $254.5 million primarily due to $312.7 million in non-cash intangible impairment charges for Franchise Rights Acquired; Q3 2022 Adjusted Operating Income of $61.9 million excluding the impact of such impairment charges and the net impact of restructuring charges
  
  
• Revised FY 2022 Guidance: Revenues are expected to be approximately $1.04 billion and GAAP diluted net loss per share is expected to be in the range of ($3.16) to ($3.21), which incorporates the negative net impact of approximately $3.94 per diluted share from non-cash intangible impairment charges, estimated restructuring charges, and out-of-period income tax adjustments
  

NEW YORK, Nov. 03, 2022 (GLOBE NEWSWIRE) -- WW International, Inc. (NASDAQ: WW) (“WeightWatchers,” “WW,” or “the Company”) today announced its results for the third quarter of fiscal 2022.

“We are encouraged by early indicators that our data-informed approach to product development – focused on our core pillars of community, accountability, and coaching – is starting to yield positive results,” said Sima Sistani, the Company’s CEO. “With nearly 60 years of weight loss efficacy and a community of millions, we have a strong foundation on which to build a digital experience for the future.”

Amy O’Keefe, the Company’s CFO, said, “Adjusted operating income in Q3 was ahead of our expectations, despite continued pressure on revenue from lower subscriber levels year-over-year and headwinds from foreign exchange. We are confident that we are taking appropriate actions to manage costs in this environment and we continue to generate strong cash flow from our subscription model.”

Q3 2022 Consolidated Results

Q3 2022 Business and Financial Highlights

• End of Period Subscribers in Q3 2022 were down 15.0% versus the prior year period, primarily driven by declines in the Digital business in all geographic markets. Q3 2022 End of Period Digital Subscribers decreased 17.7% versus the prior year period. Q3 2022 End of Period Workshops + Digital Subscribers decreased 2.0% 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 Q3 2022 were down 13.6% versus the prior year period, driven by declines in the Digital business in all geographic markets. Q3 2022 Digital Paid Weeks decreased 17.3% versus the prior year period. Q3 2022 Workshops + Digital Paid Weeks increased 5.6% 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 Q3 2022 were $249.7 million. On a constant currency basis, Q3 2022 revenues decreased 10.7% versus the prior year period.
  
  
  • S ubscription Revenues in Q3 2022 were $220.7 million. On a constant currency basis, these revenues decreased 11.6% versus the prior year period.
    
    
  • Product Sales and Other in Q3 2022 were $29.0 million. On a constant currency basis, these revenues decreased 2.8% versus the prior year period.
    
    
• Gross Profit in Q3 2022 was $152.4 million, compared to $178.0 million in the prior year period. Adjusted gross profit in Q3 2022, which excluded the net impact of $0.0 million of restructuring charges, was $152.4 million. Adjusted gross profit in Q3 2021, which excluded the net impact of $4.9 million of restructuring charges, was $183.0 million.
  
  
  • Gross Margin in Q3 2022 was 61.0%, as compared to 60.7% in the prior year period. Adjusted gross margin in Q3 2022 was 61.0%, down 130 basis points from an adjusted gross margin of 62.3% in the prior year period, primarily driven by a mix shift to the Workshops + Digital business as well as a 50 basis point negative impact from foreign currency.
    
    
• Non-Cash Intangible Impairment Charges: During Q3 2022, the Company identified several factors, including business performance, market capitalization, and interest rates, that indicated a triggering event for impairment testing. In Q3 2022, the Company recorded non-cash impairment charges of Franchise Rights Acquired totaling $312.7 million that included charges of $298.3 million, $13.3 million, and $1.1 million related to its U.S., Canada and New Zealand operations, respectively. The impairment charges were almost entirely driven by an increase in the Company’s weighted-average cost of capital, reflecting market factors including higher interest rates and the trading values of the Company’s equity and debt.
  
  
• Operating Loss in Q3 2022 was $254.5 million, compared to operating income of $79.7 million in the prior year period. Adjusted operating income in Q3 2022, which excluded the impact of non-cash intangible impairment charges totaling $312.7 million and the net impact of $3.7 million of restructuring charges, was $61.9 million, down 30.0% versus adjusted operating income in the prior year period. Adjusted operating income in Q3 2021, which excluded the net impact of $8.6 million of restructuring charges, was $88.4 million.
  
  
• Effective Tax Rate in Q3 2022 was 25.6%, compared to 22.4% in the prior year period.
  
  
• Net Loss in Q3 2022 was $206.0 million compared to net income of $46.3 million in the prior year period.
  
  
• Diluted Net Loss per share in Q3 2022 was $2.93 compared to earnings per fully diluted share (EPS) of $0.65 in the prior year period.
  
  
  • Certain items affect year-over-year comparability.
    • Q3 2022 Diluted Net Loss per share incorporated the negative impact of $3.38 per diluted share in the aggregate due to the following items:
      • $3.34 per diluted share negative impact of non-cash intangible impairment charges for Franchise Rights Acquired.
      • $0.04 per diluted share negative net impact of restructuring charges.
    • Q3 2021 EPS was negatively impacted by $0.07 per fully diluted share in the aggregate due to the following items:
      • $0.09 per fully diluted share negative net impact of restructuring charges.
      • $0.02 per fully diluted share tax benefit due to the reversal of a valuation allowance related to certain net operating losses now expected to be realized.

Other Items

• Cash balance as of October 1, 2022 was $188.3 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 $3.6 million in Q3 2022. The Company expects to record $10 million of restructuring charges in Q4 2022, increasing its full year estimate of restructuring charges to $33 million, up from its prior estimate of $27 million. The Company now expects annual run-rate savings to be $40 million, up from its prior estimate of over $35 million. In-year fiscal 2022 run-rate savings are expected to approach $20 million, consistent with the prior estimate.

Full Year Fiscal 2022 Guidance

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

• Revenues are expected to be approximately $1.04 billion, reflecting greater pressure from foreign currency and lower subscriber levels. Prior revenue guidance was in the range of $1.05 billion to $1.09 billion.
• GAAP diluted net loss per share expected to be in the range of ($3.16) to ($3.21), which incorporates a negative net impact of approximately $3.94 per diluted share from the Franchise Rights Acquired and Goodwill impairment charges described above or previously disclosed, estimated restructuring charges, and the benefit from Q2 2022 out-of-period income tax adjustments. Prior GAAP EPS guidance was in the range of $0.25 to $0.30 per fully diluted share, which incorporated the negative impact of approximately $0.55 per fully diluted share of estimated charges and the benefit from out-of-period income tax adjustments recorded in Q2 2022.

Third 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 third 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 (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 third quarter of fiscal 2022 to exclude (a) the impact of the impairment charges for our franchise rights acquired related to our United States, Canada and New Zealand units of account and (b) the net impact of (x) charges associated with our previously disclosed 2022 restructuring plan (the “2022 plan”) and (y) charges associated with our previously disclosed 2021 organizational restructuring plan (the “2021 plan”); (ii) the first nine months of fiscal 2022 to exclude (a) the impact of impairment charges for our franchise rights acquired related to our United States, 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 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 third quarter and first nine 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 third quarter of fiscal 2022, as excluding or adjusting for the impact of the franchise rights acquired impairments (or non-cash intangible impairment charges) and the net impact of restructuring charges; (ii) with respect to the adjustments for the first nine 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 (iii) with respect to the adjustments for the third quarter and first nine 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”); 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 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” 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 ).