WW
Ww International, INC
NASDAQ
10-Q: WW International Reports Mixed Q2 Results Amidst Strategic Shift
Sentiment:
Quarterly Report
1 August 2024 7:13 AM
WW International's second quarter results show a decrease in revenue but an increase in gross margin, alongside a significant impairment charge.
Worse than expected
The company's revenue declined by 10.9% in the second quarter and 12.8% for the first six months of 2024, indicating worse than expected performance.
The company recorded a significant net loss of $324.6 million for the first six months of 2024, primarily due to a large impairment charge, which is worse than expected.
Summary
- WW International reported a net income of $23.3 million for the second quarter of 2024, a decrease from $50.8 million in the same period last year.
- Revenue for the quarter was $202.1 million, down 10.9% year-over-year, primarily due to a decline in other revenues and subscription revenues.
- The company's gross margin increased to 67.9% from 63.1% year-over-year, driven by the discontinuation of the lower-margin consumer products business.
- Operating income for the quarter was $35.9 million, up from $26.3 million in the prior year, but this was impacted by restructuring charges.
- For the first six months of 2024, the company reported a net loss of $324.6 million, which includes a $258 million impairment charge related to franchise rights.
- Total revenue for the first six months was $408.6 million, a decrease of 12.8% compared to the same period last year.
- The company's total debt stands at $1.445 billion, with a net debt to adjusted EBITDA ratio of 9.6x.
Sentiment
Score: 4
Explanation: The document presents a mixed picture with some positive aspects like improved gross margin and cost control, but the significant revenue decline, net loss, and high debt levels create a negative sentiment overall. The large impairment charge also raises concerns about asset valuation.
Highlights
- Second quarter revenue decreased by 10.9% year-over-year to $202.1 million.
- Gross margin increased to 67.9% in the second quarter of 2024, up from 63.1% in the same period last year.
- Operating income for the second quarter increased by 36.5% to $35.9 million.
- A significant impairment charge of $258 million was recorded for franchise rights in the first six months of 2024.
- The company's net loss for the first six months of 2024 was $324.6 million.
- The company's net debt to adjusted EBITDA ratio is 9.6x.
Positives
- Gross margin improved significantly to 67.9% in the second quarter, indicating better profitability in core services.
- Operating income increased by 36.5% in the second quarter, showing improved operational efficiency.
- Selling, general and administrative expenses decreased by 27.5% in the second quarter, contributing to cost savings.
- The company has $173.8 million of availability under its revolving credit facility.
Negatives
- Total revenue decreased by 10.9% in the second quarter and 12.8% for the first six months of 2024.
- Subscription revenues declined due to a higher mix of subscribers in lower-priced commitment periods and a shift from Workshops + Digital to Digital.
- The company recorded a substantial net loss of $324.6 million for the first six months of 2024, primarily due to a large impairment charge.
- The company was not in compliance with the Consolidated First Lien Leverage Ratio as of June 29, 2024, limiting borrowing capacity.
Risks
- The company faces competition in the weight management and health and wellness industry.
- There is a risk of not retaining and growing the subscriber base.
- The company's ability to be a leader in the clinical weight management market is uncertain.
- The company's substantial debt and debt service obligations pose a risk.
- There are uncertainties regarding the satisfactory operation of the company's technology and systems.
- The company is exposed to risks associated with international operations, including regulatory, economic, and political risks.
- The company is subject to risks related to the integration of acquisitions, including Sequence.
Future Outlook
The company anticipates recording restructuring charges between $12 million to $15 million in the second half of fiscal 2024 related to employee termination benefits. The company expects the 2024 restructuring plan to be fully executed by the end of fiscal 2025.
Management Comments
- Management believes that cash generated by operations, cash on hand, availability under the Revolving Credit Facility, and continued cost focus will provide sufficient liquidity.
- Management continues to evaluate its exposure to interest rates and may opportunistically hedge any interest rate exposure.
Industry Context
The results reflect the challenges of the competitive weight management market, with a shift towards digital offerings and the need to integrate clinical services. The company is also facing headwinds from the discontinuation of its consumer products business.
Comparison to Industry Standards
- WW International's gross margin of 67.9% is relatively high compared to some other consumer-facing subscription businesses, but the revenue decline is a concern.
- The company's net debt to adjusted EBITDA ratio of 9.6x is high, indicating a significant debt burden compared to some of its peers.
- The impairment charge of $258 million is a significant event, suggesting a reevaluation of the value of its franchise rights.
- The company's performance is mixed compared to other health and wellness companies, with some showing stronger growth in digital subscriptions and clinical services.
Stakeholder Impact
- Shareholders are impacted by the net loss and the significant impairment charge.
- Employees are impacted by the restructuring plan and the reduction in force.
- Customers may be impacted by changes in service offerings and pricing.
- Creditors are impacted by the company's high debt levels and leverage ratio.
Next Steps
- The company plans to execute a restructuring plan by the end of fiscal 2025.
- Management will continue to evaluate its exposure to interest rates and may enter into new swap arrangements.
- The company will continue to manage its liquidity to fund investments, honor debt obligations, and respond to business conditions.
Related Party Transactions
- Oprah Winfrey and her related entities provided services to the company totaling $105 and $107 for the three and six months ended June 29, 2024, respectively.
Key Dates
- April 10, 2023: WW International completed the acquisition of Sequence.
- June 4, 2024: Amanda Tolleson's last day of employment with the company.
- June 29, 2024: End of the reporting period for the second quarter of fiscal 2024.
- July 27, 2024: The company committed to a plan of reduction in force.
Keywords
weight management, subscription services, digital health, clinical services, franchise rights, impairment, restructuring, EBITDA, debt, financial results
WW
Ww International, INC
NASDAQ
Sector: TBD
Filings with Classifications
Worse than expected
9 May 2025 5:03 PM
8-K Filing
- The company received a delisting notice from Nasdaq.
- The company has commenced voluntary prepackaged cases under chapter 11 of title 11 of the United States Code.
- Trading of WW International's common stock is expected to be suspended on May 16, 2025.
Worse than expected
6 May 2025 4:13 PM
Quarterly Report
- The company's financial results were worse than expected due to declining revenues and increasing losses.
- The company's leverage ratio was worse than required by its debt covenants, leading to an expected event of default.
- The company's outlook is worse than expected due to the anticipation of a bankruptcy filing.
Worse than expected
6 May 2025 4:03 PM
Earnings Release
- Overall revenues decreased by 9.7% year-over-year, indicating a decline in the core business.
- Total subscribers decreased by 14.2% year-over-year, suggesting challenges in retaining and attracting customers.
- The company is planning a prepackaged filing under Chapter 11 of the U.S. Bankruptcy Code, indicating financial distress.
Worse than expected
21 March 2025 4:05 PM
8-K Filing
- WW International received a notice from Nasdaq for failing to maintain a minimum share price of $1.00, which is worse than expected.
Worse than expected
28 February 2025 7:14 AM
Annual Results
- The company's revenue decreased by 11.6% compared to the previous year.
- The company recorded a net loss of $345.7 million, a significant increase from the net loss of $112.3 million in the previous year.
- The company's operating loss was $236.2 million, compared to an operating income of $22.3 million in the previous year.
Worse than expected
27 February 2025 4:01 PM
Earnings Release
- Overall subscriber numbers and total revenues decreased in both Q4 and full year 2024.
- Digital and Workshops + Digital businesses experienced declines in subscribers and paid weeks.
- The company reported a significant operating loss for the full year, driven by non-cash impairment charges.
Worse than expected
3 February 2025 4:15 PM
8-K Filing
- The company needed to draw down the remaining amount of its revolving credit facility, which may indicate financial strain.
Worse than expected
6 November 2024 4:03 PM
Quarterly Report
- The company's Q3 2024 results were worse than expected due to a significant net loss, a decline in revenue, and substantial impairment charges.
- The company's net loss for the first nine months of 2024 was significantly worse than the same period in 2023 due to a large impairment charge.
Worse than expected
6 November 2024 7:05 AM
Quarterly Report
- The company's revenue and overall subscriber numbers were down compared to the prior year, indicating worse than expected results.
Worse than expected
1 August 2024 7:13 AM
Quarterly Report
- The company's revenue declined by 10.9% in the second quarter and 12.8% for the first six months of 2024, indicating worse than expected performance.
- The company recorded a significant net loss of $324.6 million for the first six months of 2024, primarily due to a large impairment charge, which is worse than expected.
Worse than expected
1 August 2024 7:05 AM
Quarterly Report
- The company's revenue decreased by 10.9% year-over-year, indicating worse than expected performance.
- The company's net income decreased by 54.2% year-over-year, indicating worse than expected performance.
- The company's total end of period subscribers decreased by 6.1% year-over-year, indicating worse than expected performance.
Worse than expected
24 May 2024 5:15 PM
Amendment to 8-K Filing
- The proposal to adopt a majority voting standard for uncontested director elections was not approved by shareholders, which is a negative outcome for the company's governance structure.
- The initial voting results were erroneous, requiring a correction, which reflects poorly on the company's internal processes.
Worse than expected
9 May 2024 5:39 PM
Quarterly Report Amendment
- The company's net loss of $347.9 million is significantly worse than the $118.7 million loss in the same period last year.
- The company's revenue decreased by 14.6%, indicating a worse performance compared to the prior year.
- The company's operating loss of $269.3 million is significantly worse than the $28.6 million loss in the prior year.
Worse than expected
9 May 2024 4:30 PM
Quarterly Report Amendment
- The company's revenue decreased by 14.6% year-over-year, indicating a worse performance than expected.
- The company reported a significant operating loss of $269.3 million, primarily due to non-cash impairment charges, which is worse than expected.
- The company's total end of period subscribers decreased by 0.5% year-over-year, indicating a worse performance than expected.
Worse than expected
2 May 2024 4:09 PM
Quarterly Report
- The company's net loss of $347.9 million is significantly worse than the $118.7 million loss in the same quarter last year.
- The company's revenue decreased by 14.6%, indicating a decline in business performance.
- The company incurred a $258 million impairment charge on franchise rights, further impacting the financial results.
Worse than expected
2 May 2024 4:05 PM
Quarterly Report
- The company reported a significant operating loss of $269.3 million, primarily due to non-cash impairment charges, which is worse than expected.
- Subscription revenues decreased by 3.7% on a constant currency basis, indicating a decline in core business performance.
- Other revenues declined dramatically by 92.0% on a constant currency basis, which is a significant negative impact.
Better than expected
14 March 2024 4:41 PM
Regulation FD Disclosure
- The company is on track to exceed its previously provided guidance for clinical subscribers, indicating better than expected performance.
Worse than expected
28 February 2024 4:29 PM
Annual Results
- The company's revenue decreased by 14.5% year-over-year, indicating worse than expected performance.
- The company's gross profit decreased by 14.8% year-over-year, indicating worse than expected performance.
- The company's operating income margin decreased by 4.6% year-over-year, indicating worse than expected performance.
Worse than expected
28 February 2024 4:06 PM
Quarterly Report
- The company's revenue decreased by 7.6% in Q4 2023 and 14.5% for the full year 2023, indicating worse than expected performance.
- The company reported a net loss of $88.1 million in Q4 2023 and $112.3 million for the full year 2023, which is worse than the prior year.
Disclaimer: This summary was generated by artificial intelligence and its accuracy is not guaranteed. The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.