August 1, 2024
Management reported that: “WeightWatchers has the right strategy to return the business to growth. With a rapidly changing landscape, we are taking decisive actions to navigate through this environment and completely reimagining how we operate,” said Sima Sistani, the Company’s CEO. “We are executing a significant streamlining of our operational structure, to focus and execute against our strategic pillars to expand care, expand access, and expand payment options for our members.”
“We are refining our operational framework against our product roadmap, concentrating on high impact initiatives to enhance efficiency, accountability and speed. These actions are part of a comprehensive cost reduction plan, targeting $100 million in annualized savings including $20 million of savings currently reflected in our 2024 guidance,” said Heather Stark, the Company’s CFO.”
End of Period Subscribers of 3.8 million (down 6.1% vs. prior year period), including 81,000 End of Period Clinical Subscribers (vs. 91,000 in Q1)
Revenues of $202.1 million (down 10.6%)
Gross margin of 67.9% (up from 63.1% in prior year)
Operating Income of $35.9 million; excluding the net impact of restructuring charges related to prior year restructuring plans, adjusted operating income of $37.9 million
Net Income in Q2 2024 was $23.3 million compared to net income of $50.8 million in the prior year period.
Cash balance as of June 29, 2024 was $42.7 million.
Full Year Fiscal 2024 Guidance
The Company is providing the following update to its full year fiscal 2024 guidance:
Revenue is expected to be at least $770.0 million.
Operating loss is expected to be at most $180.7 million.
Conference Call Information
Management reported that they cut back marketing spending for the Clinical service. The total marketing spend in Q2 was $54 million. It was also reported that WW has a medication supply tracker service for clinical members, to help during this shortage environment. The WW app was refreshed. The firm now offers registered dietician visits covered by insurance. WW reports that the average tenure for Clinical members is more than 6 months. The GLP-1 environment is still challenging, with an estimated 50% more competitors offering these meds than in 2023 (compounding pharmacies, MDs, etc.). WW expects to see $20 million in savings due to staff cutbacks this year.
Marketdata Commentary
WW did not grow its number of Clinical subscribers in Q2, in fact, the figure decline from 91,000 to 83,000. It had said previously that it was expecting between 140,000 and 160,00 by the end of this year. It doesn’t seem like they will make that goal. In any case, this number, and the revenues from this service, are very small when considering the total company. The Clinical business, in our opinion, is not the magic booster that some might hope for to return WW to growth. If WW achieves the high end of its target, or 160,000 Cl8inical subscribers, that only represents 4.2% of its total 3.8 million subs. The company must somehow reinvigorate its core business — dieters that do not want a GFLP-1 drug-based program. That remains the main challenge.
Also: no mention of how European markets are faring vs. North America. Why no data? And what was the reason why WW pulled out of the market in Great Britain?
One thing that we think has hurt the company is the drastic closure of so many retail stores and meeting sites over the past few years. We think that has hurt attendance by forcing people to accept a digital experience rather than in-person meetings (the bedrock of WW business model since the 1960s). We believe that many deters still want that personal touch and peer support, and they are not getting it. Not all clients are tech-savvy Gen-Ys or Millennials. It might be wise to grow the number of informal meeting sites (schools, churches, community health centers, etc.).
Meanwhile, WW stock declined to 89 cents a share, down more than 14% this morning.
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