May 6, 2022
WW reported its results for the first quarter of 2022. Amy O’Keefe, the company’s CFO, said, “We delivered EPS ahead of our guidance range for Q1, primarily due to lower marketing spend in our international markets, strong gross margin, and cost management. We have taken significant and decisive action to reset the cost structure, while shifting the organization’s focus to executing on a narrowed set of priorities. 2022 will serve as the foundation for future growth and operating margin expansion.”
Sima Sistani is now the company’s new CEO, having taken over from Mindy Grossman on March 21st.
- Q1 2022 End of Period Subscribers of 4.5 million
- Q1 2022 Revenues of $298 million
- Q1 2022 Gross Margin of 60.5%
- Q1 2022 Operating Income of $9.0 million
Q1 2022 Business and Financial Highlights
End of Period Subscribers in Q1 2022 were down 8.3% versus the prior year period, driven by declines in all major geographic markets. Q1 2022 End of Period Digital Subscribers decreased 9.3% and End of Period Workshops + Digital Subscribers decreased 2.8% versus the prior year period.
Total Paid Weeks in Q1 2022 were down 6.6% versus the prior year period, driven by declines in all major geographic markets. Q1 2022 Digital Paid Weeks decreased 8.0% and Workshops + Digital Paid Weeks increased 1.5% versus the prior year period.
Revenues in Q1 2022 were $297.8 million. On a constant currency basis, Q1 2022 revenues decreased 8.4% versus the prior year period.
Subscription Revenues in Q1 2022 were $257.0 million. On a constant currency basis, these revenues decreased 6.2% versus the prior year period, driven by declines in both Digital Subscription Revenues and Workshops + Digital Fees driven primarily by worsened consumer sentiment in the current environment.
Product Sales and Other in Q1 2022 were $40.8 million. On a constant currency basis, these revenues decreased 20.0% versus the prior year period, primarily due to lower e-commerce sales in the quarter.
Gross Profit in Q1 2022 was $180.1 million.
Full Year Fiscal 2022 Guidance
The company is providing the following full year fiscal 2022 guidance:
- Revenues are expected to be in the range of $1.09 billion to $1.14 billion.
The complete Press Release and financial tables can be found here
Conference Call Information:
A lot to report here. This is the first earnings call with the new CEO, Sima Sistani. The main effort now seems to be to simplify and restructure the company, with 2022 being a transition year. Ms. Sistani claims that there were too many products and services that weren't delivering. As a result, the firm will be eliminating some organizational layers, estimated to save about $30 million. Also, significantly, WW will pull back on the heavily digital focus and concentrate more on in-person workshops (studios). WW management thinks that with the pandemic of the past two years, people are now craving personal relationships, and will return. They report that global in-person attendance was up 90% year over year.
In addition, the digital space is now crowded and the cost of customer acquisition is rising.
The Digital 360 program has been scrapped, as engagement was low. These 200,000 members will be transitioned. Digital 360 was not successful in attracting the Millennial target cohort. Wages will be increased or U.S. field operations staff, as in-person workshops become a priority. WW reported that 85% of clients didn't have access to coaching.
WW had a $108 million marketing spend in Q1, as it pulled back especially in international markets. The firm is saving marketing funds for the second half of 2022. Full-year spend will be flat.
Revenues for the year are expected to be down in the high single digits, and with 3.7-3.9 million subscribers. The company will not be as concerned with developing programs specific to certain target cohorts. The emphasis will be on the main product.
Some things that were NOT discussed in the earnings call, which we'd like to know...
- How is the Personal Points program doing overall? Do clients like it? Did it attract nay new clients? This program was claimed to be a major innovation for the 2022 diet season.
- Any plans to ditch the WW name and go back to Weight Watchers?
- Will the company still be pushing "wellness", or return to a focus on weight loss?
- How much will they utilize Oprah Winfrey this year?
- What about potential new markets and niches?
- How will they respond to strong competition from players such as Medifast and Noom?
- Any plans to grow the large healthcare corporate market business?
All things considered, we at Marketdata/DietBusinessWatch feel that this is a company that always seems to be "in transition". We, as well as Wall St. analysts, are waiting to see some real progress, some penetration of new markets, and some actions to deal with competitors that have eaten away it's market share.
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