WW International, Inc. (WW) on Q1 2021 Results - Earnings Call Transcript
Operator: Good afternoon, and welcome to the WW International First Quarter 2021 Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Corey Kinger, VP, Investor Relations. Please go ahead. Corey Kinger: Thank you to everyone for joining us today for WW International's First Quarter 2021 Conference Call. At about 4:05 p.m. Eastern Time today, we issued a press release reporting our first quarter 2021 results. The purpose of this call is to provide investors with some further details regarding the company's financial results as well as to provide a general update on the company's progress. Mindy Grossman: Thanks, Corey. Good afternoon, everyone, and thank you for joining us today. 2021 has strong momentum, driven by continued growth in our digital business and the concentrated efforts across the organization to optimize the member experience, streamline our operations, maximize our marketing efforts and build on the collective power of community to deliver on our strategies across all touch points in the WW ecosystem. Today, we are the world's leading weight loss and wellness digital subscription platform with multiple membership verticals and diverse revenue streams, creating a healthier, more profitable and more sustainable business model. Our continued digital transformation to a personalized technology experience company was clearly evident in our first quarter results with our high-margin digital membership growth driving performance above our expectations and positioning us for subscriber, revenue and profit growth over the balance of 2021. Let me highlight our achievements in the quarter. Q1 end-of-period subscribers reached 5 million, driven by the success of myWW+, our first nonfood innovation. This is significant as we matched the record high we achieved in Q1 2020, following the launch of the myWW food innovation, the sold-out WW Presents: Oprah's 2020 Vision tour and comping strength in both digital and workshops. To reach this watermark level while still operating in a COVID environment is a testament to the work of the teams and further demonstrates the resilience of our business model as well as the true demand for WW at a time when people need a weight loss and wellness partner more than ever. Nick Hotchkin: Thank you, Mindy. I'd like to share some additional color on the performance of our global markets. The Digital business continued to be strong in Q1 with double-digit end-of-period subscriber growth in each of our major markets. As you would expect, workshop trends were still challenged, particularly given lockdowns in several countries. Workshop member sign-up trends are now trending positively year-over-year in Q2 as we cycle against the onset of COVID last year. The launch of D360 last month in Germany, France and Canada, was an important milestone in bringing this new, modern and tech-enabled coaching experience to more members worldwide. Each local market is working on content creation with our centralized D360 team, the same internal production team behind Oprah's virtual experiences and last year's sold-out arena tour. With its mid-tier pricing, Digital 360 has a relatively low cost to serve incremental sign-ups. So we believe that at scale, it can be a 60% plus gross margin business. We are focused on ensuring D360 drives strong engagement, efficacy, higher revenue per paid week and higher subscription lifetime value. Amy O'Keefe: Thank you, Nick. Before I discuss the first quarter financials, I would like to highlight the successful refinancing of our debt maturities, which was completed on April 13, and thank the lender community for their continued support. This refinancing has significantly lowered our interest rates, resulting in an annualized saving of nearly $30 million compared to our prior rates, providing us with even greater flexibility in our capital structure. Now turning to the first quarter. As Mindy mentioned, the year ago Q1 had exceptional performance fueled by the myWW food innovation and further amplified by the 2020 Vision tour. COVID escalated in mid-March 2020, so it only had a minimal impact on our Q1 2020 results. As a result, going in, Q1 of 2021 had a very tough year-over-year comparison. In addition, 2020 had a 53rd week that ended on January 2, 2021. So looking at the comparable 13 calendar weeks in the 2 years, Digital member recruitment, which includes D360, was up double digits year-over-year in 2021, on top of significant growth in 2020. We ended Q1 with 5 million subscribers, up 12% from the end of Q4 and in line with Q1 a year ago. The 16% year-over-year growth in Digital end-of-period subscribers largely offset the substantial workshop pressures in the continued COVID environment. The strong Digital growth is continuing our mix shift to an increasingly digital-first business. At Q1 end, 85% of our members were Digital subscribers. Mindy Grossman: Thanks, Amy. Our team has done an exceptional job over the past year. We've accelerated our digital transformation. We've structured our organization to give us greater operational and financial flexibility and focused our investments behind the initiatives that are important to our members that we have today and that will resonate with the members of tomorrow. We are confident in our ability to drive revenue and earnings growth for the balance of 2021 and position WW for accelerated momentum in 2022. Our Q1 operating and financial performance gives us increased confidence in the value that WW can deliver as the world's weight loss and wellness program of choice as the world reopens. Now into the second year of the pandemic, consumers certainly continue to feel the pressures of the current environment. But with increasing vaccine availability, consumers are now experiencing renewed hope and optimism. While the exact timing of everyone's next normal isn't crystal clear and will certainly vary greatly by geographic market and by individual, there is a building eagerness for reconnection and an increased focus on health and wellness. We consistently introduced new marketing creatives throughout our campaigns to keep the conversation new and to our key messages resonate to the moment. If the consumer is gearing up to the world reopening and looking to show up as a renewed, better version of themselves, we plan to lean into this behavioral shift in marketing that motivates, inspires and shows people that this is their moment, and that WW is the partner to help them seize that moment. We are intensely focused on the mindset of the consumers, their evolving needs, what resonates and what gives them hope. Our next virtual experience with Oprah Winfrey is launching on Saturday, May 8. This special event, Oprah's Your Life in Focus: Spring Forward Stronger, is designed to celebrate and empower mothers, along with all parents, caregivers and anyone who is forced to set their needs aside during this time, to spring forward stronger and lead their best, healthiest lives. Along with special guests Drew Barrymore to Dr. Anita Phillips, Oprah will also be joined by a special audience of inspiring mothers, parents and caregivers focused on reclaiming their health. These virtual experiences, which are free and open to all, members and nonmembers alike, are proving to be an incredible new way to engage with audiences worldwide in a manner that is authentic, resonant and impactful. Since launching a year ago, these live virtual experiences with Oprah have resulted in over 5 million views. And our most recent event alone generated nearly 5 billion media impressions. In addition to creating a wealth of unique content, we believe these special events drive incremental engagement, interest and increased awareness of WW as a wellness and weight loss brand. We continue to focus on our 4 key priorities for the year. I'll briefly touch on recent progress milestones for each. First, continuing to enhance the member experience. As we know, a frictionless and differentiated digital experience leads to even greater member success, longer retention and ultimately will expand subscription lifetime value. The prepay wall personal assessment that we launched with myWW+ is working very well for us in driving sign-up conversion. And we are continuing to iterate and optimize that experience to further improve its effectiveness in onboarding members and making the experience more personalized, getting new members off to a strong start in their weight loss and wellness journey. We know that member engagement in their first 4 weeks correlates to greater weight loss success, overall satisfaction and longer retention. This is just one example of how we are focused on making our app experience even more personalized. We want every member to feel like WW is made just for them, making their weight and wellness journey easier. We're focused on -- always on innovation, while we continue to build and iterate on the consumer journey. Second, building out Digital 360 and setting the new membership vertical up for further growth. Now that we've launched D360 in 5 markets, in 2021, we remain focused on further optimizing the experience and amplifying our coaching expertise. Coaching and community are at the core of our competitive advantage. With D360, I'm confident that with this new cohort of talented, inspiring and relatable coaches, delivering coaching in a modern and unique way, we can diversify our member base, meet more people where they are and build inspired, lasting communities. Third, we continue to build momentum and make incredible progress towards the launch of our new 2022 food innovation, the most comprehensive in our history and rooted in nutritional and behavioral science. Clinical trials are underway, and launch and marketing plans are in development. To make members' success across wellness and weight loss even more simple, more livable, more efficacious and more sustainable, our next food innovation will make our program that much more personalized. Our leadership and credibility in science-based weight loss and wellness is a key competitive advantage and is a key driver of our members' trust in WW. We believe this innovation will be a significant member recruitment driver in 2022. And four, expanding into health care and diabetes. The broader health care market represents a significant opportunity for WW over the long term. We're focused on developing strategic partnerships across the health care ecosystem, where WW can be offered as a nutrition and behavioral science-based weight management and wellness program. With these partnerships, we hope to make it even easier for more people to join WW. I'm proud of our performance and achievements year-to-date, but the greatest achievement is the efficacy of our science-based sustainable weight loss and wellness program that is the foundation of member success. This is the core value of the incredible trust that our members have in WW. As we have said many times before, wellness is a necessity, not a luxury. Through our work in founding the Healthy Living Coalition, an alliance for action and solutions focused on improving food systems and helping close nutrition gaps that disproportionately impact underserved communities, our work in removing barriers to wellness, through our 501(c)(3) WW Good and partnering with organizations such as Global Citizen, we are focused on advancing our social impact and delivering on a global promise to democratize wellness. Our Healthy Living Coalition membership is growing quickly and is now up to 26 partners with new partners like Impossible Foods, Just Foods and ButcherBox having recently joined. The HLC's first mobilization campaign to promote SDG-2 advocacy hubs, good food for all narratives, ended in January and resulted in an organic reach of over $20 million, focusing on the issues of nutrition insecurity and food justice. In February, we launched the WW Wellness Impact Award, a new initiative that aims to uplift leaders and organizations that are democratizing wellness in their communities. In the U.S., in acknowledgment of the strong health inequities impacting community of color that were exacerbated by COVID-19, for our inaugural year, we committed to exclusively selecting organizations led by and dedicated to the advancement of wellness in Black, indigenous and communities of color. In the U.S. alone, we received nearly 400 nominations from our member community and 170 applications. We will be announcing our global finalists on May 7. Right now, the world needs WW more than ever. The stresses of the past year are taking the toll on health. The American Psychological Association's latest Stress in America poll found that since the pandemic started, 42% of participants reported a weight gain on average of 29 pounds with 10% having gained over 50 pounds. As the world reopens, WW will be there to help people, all people, reset themselves and get back on a path to live their best, healthiest lives. As the leading weight loss and wellness digital subscription platform with multiple membership verticals and revenue streams, we are positioned to emerge from the COVID environment with an even stronger consumer value proposition and a healthier, more profitable and more sustainable business model. Thank you for joining us today, and we're now happy to take your questions. Operator: The first question is from Glen Santangelo of Guggenheim. Glen Santangelo: Mindy, I wanted to talk to you about this shift towards digital a little bit more. Could you maybe talk a little bit about the changing demographics of your customer and the impact that it may be having on retention rates? In your prepared remarks, you talked a little bit about this in Digital 360. But maybe if you could address that in a little bit more detail on how this shift may impact your marketing strategy. Mindy Grossman: Sure. So if you look at the core of our business, so every member has our Digital assets of myWW+. And right now, about 15% of our members still want the benefit of community, whether it's virtual or physical. But as you can see, the Digital plus Digital 360 growth is obviously at a much greater percentage. Now the benefits of that, to your point, is we're seeing diversification within our membership base, obviously younger, more diverse. Obviously, that has been strategic for us over the course of time. And if you look at our marketing efforts and just to give you a perspective, you heard us say we have our next virtual tour on Saturday. And then we have a whole new suite of marketing assets launching on Sunday. And you will see that across the balance of the quarter with new creatives really kind of addressing what people are feeling right now. But with a significant amount of our marketing assets now being digital, we have the opportunity to really focus on diverse cohorts. And that's really what we've been seeing and why we're seeing, for example, in D360, 50% of new members being millennial or younger. And we see that trend opportunity certainly to increase. Nick Hotchkin: Glen, I just want to add on retention because it's another powerful part of the story here. Obviously, you see the quarter in, quarter out double-digit growth in Digital subscribers. But the fact that we're still at all-time high retention levels over 10 months with a rapid mix shift to digital shows that Digital members are staying over 10 months, too. We're driving fantastic Digital member retention. Mindy Grossman: Yes. And obviously, that is a result of heightened engagement because of all the work that we've done, creating a full ecosystem of experiences within that Digital framework, along with the coaching capabilities. Glen Santangelo: And maybe if I could just ask a quick follow-up to Nick on the Health Solutions business. Nick, I think you said double-digit revenue growth in 2021, but you think that accelerates into 2022. And it wasn't clear to me as to why you expect that inflection next year, given that we're still in the first half of 2021. So if you could just elaborate on that a little bit, that would be helpful. Nick Hotchkin: Okay. I think part of it was the post-pandemic economy, people needing WW more than ever. That applies to corporate and health care partners, too. Part of it is that some of our strategies in Health Solutions have a longer sales ramp-up, if you will, particularly in the aggregators and physician referral. It takes a little bit of time for those initiatives to fully scale. And then the thing I'm probably most excited about is the launch of a specific program next year, a dedicated consumer offering specifically designed for people with diabetes that we'll be launching in '22. I think that's an unlock for us. Operator: The next question is from Sebastian Barbero of Jefferies. Sebastian Barbero: The first one is you mentioned workshop subscriber growth inflected in early Q2. I was wondering if you could talk a little bit more of your expectations for the full year. Should we expect end-of-period subscribers by the end of '21 to be higher than that at the end of 2020? Nick Hotchkin: Just to clarify, we said that workshop recruitment year-over-year has turned positive in Q2 as we've started to anniversary COVID. Based on those positive now recruitment trends, Amy mentioned that the other financial metrics for workshop, including revenue, will get better throughout the year. Amy O'Keefe: Yes. The only thing I would add to that is we had peak end-of-period workshop subscribers at the end of Q1 of 2020. And so we'll still be comping end-of-period subscriber, the sequential decline in 2020, and that gap will close over the course of the year. Sebastian Barbero: Got it. Okay. And then my second one is just a follow-up on the retention. We've been trending at over 10 months for a couple of years now. But can you help me understand what's it going to take for that to jump to 11 months or more? And how close are we to that level? Nick Hotchkin: Yes. Look, I think the fact that we've gotten through COVID -- well, you can imagine the workshop retention, you've seen it in our numbers, was under pressure. The fact that we're over 10 months shows the strength of retention in the Digital business and the power of the engagement strategy. And also, you've heard us say many times before, we want to be talking about our retention being over 12 months. And I think we've got the right long-term strategies to continue to push retention. Operator: The next question is from Alex Fuhrman of Craig-Hallum Capital Group. Alex Fuhrman: I wanted to ask about the online marketplace. It seems like a very new area for WW, and it seems like there's still a lot of room for that platform to be expanded. So I would love it if you could tell us a little bit more about how you think about adding partners to the marketplace, both in terms of the brands that you're partnering with as well as the products and capabilities that these brands bring. And how many new partners we might expect to see you add this year? Mindy Grossman: Sure. Alex, as you know, I feel strongly that we have an opportunity both with our products, our WW products, our co-branded products and in building out a wellness marketplace, presents an opportunity and a member and even nonmember benefit. So if you look at the progression, Phase 1 was launched 100% new products across all our categories that represent what a healthy living brand is, and that we did in 2019. Phase 2 was hire the talent, redo our entire technology infrastructure and supply chain to be able to accommodate e-commerce within our digital ecosystem and our app. We launched that March 17 of last year. So all the numbers we're quoting today really is really the impact that, that has had. Phase 3 is what we're launching starting now and you'll see moving forward, which is enhanced capabilities to be able to expand our assortments across all 3 of those categories, have drop-ship capabilities as well as expanded assortment. We have a significant number of new partners that we'll be launching over the next week and beyond to help build out that ecosystem in a more efficient and ultimately even more profitable way. Where the big opportunity is, yes, of course, building out the marketplace. But second is to be able to have even more of our member base shopping within our ecosystem because all 5 million have the app and those capabilities. So we really think this has benefits that will continue to grow. And if you just look at the last quarter with 150% increase in e-commerce, and that was before any of these new capabilities that we launched. Nick Hotchkin: And just to add, Alex, look, the economics of it are great, wonderful top line growth. And within our 60% plus gross margins, again, you see quarter after quarter here, within that, an e-commerce business delivering margins in the 20s within that mix. It's a fantastic revenue driver. It's a good gross profit dollar contributor also. Mindy Grossman: Yes. And I'll just make one more comment. We are still in expansion of our own WW-branded products, both products that we develop as well as future licensing discussions for certain categories. Operator: The next question is from Greg Badishkanian of Wolfe Research. Spencer Hanus: This is Spencer Hanus on for Greg. I think you guys mentioned that membership trends are now trending positively versus last year for the workshop. But could you talk about how they're trending versus 2019? And then how are pure Digital subscriber growth trending quarter-to-date? Mindy Grossman: So let's kind of give a perspective on that. So as we said, membership trends, Digital membership trends have been consistently in the double digits. And it continues to build momentum. On the studio side, what we're saying is we're seeing certainly lapping Q1 more engagement and more sign-ups. But we're not kind of in a comparison to 2019. But we do have the flexibility to be able to, as we said, double our membership attendance in studios without incurring more costs. So certainly, given the flexibility that we've created over the last year, we will be able to scale up as we see demand come in. And so that's how we're really looking at it. Amy O'Keefe: Yes. The only thing I would add there is on the workshop side of the business, be mindful that around the world, many of our workshops are operating at reduced capacity or not open at all. And so the comparison to 2019 is still going to be a plus for us at this point. Spencer Hanus: Got it. That's helpful. And then on marketing spend, you mentioned $55 million in 2Q. But how should we think about the level of marketing spend in the back half to support the unseasonal bump in membership? And then just any update on the competitive environment and what you guys are seeing from new momentum out there would be helpful. Amy O'Keefe: Yes. From a marketing perspective, I mentioned in my remarks that starting in Q2, the aggressive cost savings initiatives really kicked in. And the team really stepped on marketing expenses. So we expect marketing -- and that impact compared to the original plan in Q2 was $10 million. In addition, Mindy's mentioned that we expect to lean into our marketing campaign as consumer sentiment rebounds over the summer. And so at $55 million, that will be up in Q2. And I expect that to read through on the full year. I expect back half levels to be fairly in line with 2020. Mindy Grossman: And just to give you a sense, we are certainly maniacally focused on our business but as well as evaluating the competitive environment at all times. Look, health and wellness right now, from a consumer mindset, is significant. And there is a lot more emphasis certainly across the competitive landscape but also just in consumer mindset of what they want. And so what we're focused on is our differentiation, what we're providing, the science and behavioral science between what -- behind what we do and the efficacy of that and the power of community. So to Amy's point, we're certainly leaning into the marketing behind that, but really taking advantage of what it is we have to provide to the customer at a time when they really want it and focus on our differentiation. Operator: The next question is from Brian Nagel with Oppenheimer. Brian Nagel: So I wanted to ask a couple of questions with regard to subscribers. The first one, I guess, I think, Amy, you had probably talked about this. But you're just -- what you expect to be a different trajectory here in 2021 subscribers, you outlined the reasons behind that. The question I have is -- and I recognize you haven't given longer-term guidance. But is this a dynamic that we should expect to persist past 2021? Or is it unique to this year given the unique circumstances of the year? Mindy Grossman: So Brian, so let me just say that we had an objective prior to COVID to even out the slope. And we had actually been seeing improvements. So if you look at 2019, even into 2020, obviously, COVID had an impact. So if you look at the curve this year, obviously, it's going to look very different. But our goal is to even out the seasonality, and that was a stated goal starting in 2018. So that's really our focus going forward, is to be able to be always on in terms of what we have to offer. And a big factor of that was certainly not advocating our leadership in healthy weight loss but building a much more fulsome ecosystem around year-round wellness and being able to articulate that. But yes, that's our goal. Brian Nagel: Got it. That's really helpful. And the second question I have, this -- if you -- we talked a lot about the subscribers and splitting them between digital and, I guess I'd say, this non-digital. So if we go look closer at those numbers, I mean, have you seen a trend through this -- the COVID period with the studios closed that some of your, say, non-Digital members have become Digital members? Or is there a dynamic where the non-Digital members are simply potentially waiting for the studios to reopen and almost like the shadow group of subscribers out there? Mindy Grossman: Okay. So let me talk to that. One of the things that has obviously retained our Digital members significantly, if you remember, when COVID hit, we were able to shift all our workshop members to virtual workshops. So our existing members have certainly taken advantage of that. It's obviously had more of an impact in new sign-ups. What we are seeing -- again, all our members are digital. It's just a subset of members also choose the workshop business. What we are seeing are former Digital members upgrading to our new D360 memberships and, in some cases, some studio members going to Digital. But we also see, as things reopen, an opportunity for those members to go back to workshops. So we're agnostic about how somebody wants to have their greatest success. But unquestionably, our digital membership is going to scale just based on consumer behavior, and us diversifying our member base significantly will just grow at a faster rate. Operator: The next question is from Edward Yruma with KeyBanc Capital Markets. Edward Yruma: A question on D360. Obviously, there's a lot more interactivity, lots of options to coaching. Any metrics you can provide when a member is really engaging with the platform, maybe how their retention, customer satisfaction kind of improves? And kind of any initial tweaks that you're thinking of making to the platform to maybe reduce some of the friction? Mindy Grossman: Sure. The whole genesis of D360 obviously was to really appeal to new audience, younger audience, millennial audience. We say built by millennials, for millennials. And a big part of that was the integration of coaching, content and community. So the content team that actually -- our team that built the original physical Oprah tour, the virtual tours, have been working closely with the product and tech team to build out an always on-demand content capability and to create and develop a coaching community that not only will retain but will also recruit because these are very external-facing coaches as well. So that's what we're seeing right now. Obviously, it's new, to your point. So we're looking at every opportunity and as we go into new markets to refine the experience, create greater engagement, to create greater support. But we are very pleased with what we're seeing to date and what it means for the future. Operator: The next question is from Michael Lasser of UBS. Michael Lasser: So Mindy, I wanted you to -- can you clarify some of your comments previously about -- so every studio subscriber is a digital subscriber. But how many of those who would have signed up for the digital business are now simply signing up for the -- who would have signed up for the studio business are now simply signing up for the digital business, such that overall subscribers are flat? Does that make sense? Mindy Grossman: So let me just put it again. There is, obviously, right, the fact that studios are closed or very limited capacity for quite some time. That has affected new studio sign-ups, and that makes sense. So clearly, we do have lapsed customers who've come in. And yes, some of them have signed up to digital in the interim. But a big, significant portion of our Digital sign-ups are new sign-ups, both in Digital and Digital 360. Where we're seeing the upgrade is from former Digital members upgrading to D360. It's a different cohort, right, than the traditional studio cohort. Nick Hotchkin: Yes. I mean, we've been talking about a fantastic quarter-on-quarter double-digit Digital subscription growth story, regardless of whether those studio members are waiting for in-person to come back, so in the meantime, are choosing digital instead. Like during the pandemic, have we seen a little bit more switching activity toward -- from workshops to digital? Of course, we have. It's a very small driver of the strong quarter in, quarter out Digital subscription growth story. Amy O'Keefe: Yes. That's not where the growth driver is coming from. Michael Lasser: And my follow-up question is on gross dollars per subscriber, which is still down despite very strong Digital growth or maybe because of very strong Digital growth. So when do you think you're going to see that inflection in gross dollars per subscriber number? Amy O'Keefe: So I think the gross subscriber -- or gross dollars per subscriber in revenue per paid week. And you're right, the mix shift, just like the impact on our revenue, shifting from workshop to Digital, has a significant impact on revenue per paid week. Candidly, I've been very pleased with the revenue per paid week on a sequential basis, given the environment. And so I believe that as we continue to see the mix shift in Digital, you'll see the revenue per paid week continue to decline slightly. But with the launch of D360 at the mid-tier price point, we expect to be able to increase that total Digital revenue per paid week. Mindy Grossman: The other thing that we are seeing is more people signing up for much longer-term plans, and that's been very important and positive as well. Nick Hotchkin: Yes. Look, in terms of the -- like the economic drivers of the business, but bear in mind that from an LTV standpoint, LTV, given the 80% gross profit of the core Digital number, LTV during this mix shift has held pretty steady. Michael Lasser: Makes sense. Just a last quick question. Do you have a sense of what D360 subscribers as a percentage of total Digital subscribers could eventually be? Mindy Grossman: Yes. It's interesting. Clearly, we just launched in January. We're real pleased. We think it could be certainly a greater percentage of the business that we're seeing now, even in the markets that we launched in January. We have not done significant marketing. We're refining. We're launching. But our goal is to have it be a much higher part of our Digital ecosystem than it is now. I don't have an exact number right now, but we're certainly focused on it. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mindy Grossman for closing remarks. Mindy Grossman: Thanks, everyone, for being here today. So in closing, I just want to reinforce, this is a strong momentum. We're well positioned to deliver subscriber revenue and profit growth over the balance of and for the full year. And I want to thank the exceptional work of our teams around the world around creativity, innovation and focus because that's been essential in accelerating our digital transformation. Also, we've continued to focus on the efficacy and the innovation around our science-based, sustainable weight loss and expansion into wellness because that's truly the foundation of member success but really heightened around coaching and community, which really are at the core of our competitive advantage. So as the world reopens, which we're starting to see the glimmers of, as I think you've seen in the market as well, we are ready and focused on motivating and inspiring people worldwide because this is their moment, and WW is the partner for their wellness journey. So again, thank you for joining us today, and we very much look forward to keeping you updated throughout the year. Operator: The conference has now concluded. Thank you for attending today's presentation. 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Morgan Stanley Downgrades WW International to Equalweight, Shares Drop 3%
WW International Inc (NASDAQ:WW) shares fell more than 3% pre-market today after Morgan Stanley analysts downgraded the company to Equalweight from Overweight and significantly reduced the price target to $1.25 from $6.50.
The analysts highlighted significant challenges for WW, pointing out broad issues in attracting new users, which may impact subscriber growth and profitability. WW is experiencing a downturn in its core behavioral dieting app business due to the increasing popularity of obesity medications, which present a long-term obstacle. However, the company's Clinical segment is expanding rapidly due to emerging market opportunities, potentially offsetting the declines in its core business.
The analysts noted that the company's high debt load adds to its risk profile, making it a high-stakes situation dependent on the balance between core business declines and the rapid growth of the Clinical segment. Initially optimistic about WW's competitive advantages in the GLP-1 telehealth space driving rapid scaling and sustainable positive free cash flow, The analysts now see a material step back in performance through the second quarter. App downloads, indicative of the core business, have decelerated by 16% year-over-year, while web traffic for the Clinical segment has declined by 18% quarter-over-quarter.
WW International Shares Jump 79% on Sequence Acquisition Announcement
WW International, Inc. (NASDAQ:WW) shares jumped more than 79% on Tuesday (fell 21% the next day) after the company reported its Q4 results, provided guidance for Q1 and most importantly announced plans to acquire Sequence (transaction valued at $132 million), a subscription telehealth platform offering access to healthcare providers specializing in chronic weight management.
Q4 EPS came in at ($0.46), worse than the Street estimate of $0.01. Revenue was $223.92 million, compared to the Street estimate of $224.32 million.
For Q1/23, the company expects revenue of $235 million, compared to the Street estimate of $243.8 million.
Management pointed out that while subscriber counts and growth at the company remain muted, better analytics and more thoughtful marketing are helping the company to attract and signup members, which appear stickier and hence lend to stronger longer-term economics.
WW International Shares Jump 79% on Sequence Acquisition Announcement
WW International, Inc. (NASDAQ:WW) shares jumped more than 79% on Tuesday (fell 21% the next day) after the company reported its Q4 results, provided guidance for Q1 and most importantly announced plans to acquire Sequence (transaction valued at $132 million), a subscription telehealth platform offering access to healthcare providers specializing in chronic weight management.
Q4 EPS came in at ($0.46), worse than the Street estimate of $0.01. Revenue was $223.92 million, compared to the Street estimate of $224.32 million.
For Q1/23, the company expects revenue of $235 million, compared to the Street estimate of $243.8 million.
Management pointed out that while subscriber counts and growth at the company remain muted, better analytics and more thoughtful marketing are helping the company to attract and signup members, which appear stickier and hence lend to stronger longer-term economics.
