Aug. 9, 2021
According to CEO Mindy Grossman: “We ended the quarter with 4.9 million subscribers, including 4.1 million Digital subscribers -- an all-time second quarter-end high and up 6% year-over-year, but below our expectations. The strong Digital year-over-year growth momentum in Q1 slowed in the second quarter as we cycled against strong Digital performance in 2020,” “We continue to see strong member retention trends, momentum in Digital 360, and expansion of adjusted gross margins. We have a comprehensive plan to optimize performance in the second half of the year and position us well for growth in 2022. We are excited to launch our new food program innovation later this year..."
Amy O’Keefe, the company’s CFO, said, “Subscriber trends in Q2 followed a more typical seasonal pattern than we expected, and our guidance reflects this trend. Our gross margin performance remains strong and reflective of the ongoing benefits of our flexible, subscription-based digital model. Looking ahead, we have a comprehensive plan to optimize financial performance in the second half of the year and deliver growth and value creation over the long-term.”
Full Year Fiscal 2021 Guidance
The company is resuming its practice of providing financial guidance. The company is providing the following full year fiscal 2021 guidance:. Revenue to approach $1.3 billion.
Q2 2021 Business and Financial Highlights
- End of Period Subscribers in Q2 2021 were down 1.9% versus the prior year period, driven by declines in End of Period Workshops + Digital subscribers, partially offset by increases in End of Period Digital Subscribers in all major geographic markets. Q2 2021 End of Period Digital Subscribers were up 5.6% and End of Period Workshops + Digital Subscribers were down 29.6% versus the prior year period.
- Total Paid Weeks in Q2 2021 were up 0.7% versus the prior year period, driven by increases in Digital Paid Weeks in all major geographic markets, partially offset by declines in Workshops + Digital Paid Weeks. Q2 2021 Digital Paid Weeks increased 13.0% and Workshops + Digital Paid Weeks decreased 37.4% versus the prior year period.
- Revenues in Q2 2021 were $311.4 million. On a constant currency basis, Q2 2021 revenues decreased 10.2% versus the prior year period.
- Q2 2021 Gross Margin of 60%; excluding one-time charges,
- Net Income in Q2 2021 was $8.9 million compared to $14.0 million in the prior year period.
- Six month 2021 revenues through June 30 were $734 million, up 14% from 2020. Revenues in North America were down 16% for the half year, and were up 1.3% for Continental Europe, and down 19% for the UK, versus 2020.
Conference Call Information
Management reported that consumer interest in weight loss did not spike as expected during Q2. The firm closed 64 studios in Q2 and expects to have 450 of them operating at year-end 2021, vs. 800 pre-Covid-19. The number of subscribers was down 2% to 4.9 million. 85% of WW members are digital subscribers. The company has $126 million cash on hand. Marketing spend in Q3 is expected to be $40 million. The firm is focused on cost management. The company is planning for its 2022 food innovation program, which it claims will be a major change, incorporating the availability of more personal preferences and customization. WW also plans for a specific food plan to serve persons with diabetes (27 million in the U.S.). No mention by management of the COMPETITION. Why not?
Not a good 2nd quarter. So, what went wrong? Well, just our observation from our little neck of the woods in Tampa, FL, but we haven't seen many WW TV commercials lately. Lots of Noom commercials though, and they are different, not just running the same ad over and over again. Could that be an issue? Probably. if consumers were not ready to commit to weight loss programs in Q2, then why has Medifast done so well and continued its strong growth? Why doesn't top management even talk about the impact of its main competitors? Competition matters. Have they done any surveys to determine WHY consumers went with Medifast and probably NutriSystem and Noom, but not WW? Medifast is poised to become the largest weight loss company by revenues this year, with their MLM model. And, no one is talking about this?
Why did not ONE stock analyst participating in this conference call mention the competition? That's a glaring omission. Also, what do consumers think about "wellness" and WW's shifted focus to this? Is that what consumers really want, or do they just want weight loss? Maybe a survey on this is needed. How well did WW's marketing campaigns in Q2 work out? No metrics given. How are their ads resonating with prospects, vs. Noom, NutriSystem, Atkins, and other competitors? And, what's the mix of WW customers by age group - Milennials vs. Gen X and Baby Boomers? Baby Boomers are getting old and Milennials are the up and coming dieter cohort. If were WW management, we'd be doing LOTS of market research right now to find out what's going on in consumers' minds.
For More Information About The Weight Loss Market and Competitors Such as WW...
See Marketdata's March 2021 report (FS67): "The U.S. Weight Loss & Diet Control Market", an in-depth 400+ page study published since 1989 that tracks ALL segments of the weight loss market, dieter demographics, trends, 2025 Forecasts and more. Marketdata provides custom weight loss market research and consulting services, and phone consults. Contact John LaRosa, Research Director and Head Consultant, for details (813-971-8080). Find details and Table of Contents for Marketdata's weight loss reports at: marketdataenterprises.com. A $99, 46-page Overview Summary report is also available (OV4).