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Me

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 30, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-16769

 

WW INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

 

Virginia

 

11-6040273

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

675 Avenue of the Americas, 6th Floor, New York, New York 10010

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (212) 589-2700

 

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

WW

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

The number of shares of common stock outstanding as of April 25, 2024 was 79,274,672.

 

 


 

 

WW INTERNATIONAL, INC.

TABLE OF CONTENTS

 

 

Page No.

 

 

 

PART I—FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

2

 

 

 

Unaudited Consolidated Balance Sheets at March 30, 2024 and December 30, 2023

2

 

 

 

Unaudited Consolidated Statements of Operations for the three months ended March 30, 2024 and April 1, 2023

3

 

 

 

Unaudited Consolidated Statements of Comprehensive Loss for the three months ended March 30, 2024 and April 1, 2023

4

 

 

 

 

Unaudited Consolidated Statements of Changes in Total Deficit for the three months ended March 30, 2024 and April 1, 2023

5

 

 

 

 

Unaudited Consolidated Statements of Cash Flows for the three months ended March 30, 2024 and April 1, 2023

6

 

 

 

Notes to Unaudited Consolidated Financial Statements

7

 

 

 

Cautionary Notice Regarding Forward-Looking Statements

25

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

43

 

 

 

Item 4.

Controls and Procedures

43

 

 

 

PART II—OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

44

 

 

 

Item 1A.

Risk Factors

44

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

44

 

 

 

Item 3.

Defaults Upon Senior Securities

44

 

 

 

Item 4.

Mine Safety Disclosures

44

 

 

 

Item 5.

Other Information

44

 

 

 

Item 6.

Exhibits

45

 

 

 

Signatures

46

 

 


 

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WW INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS AT

(IN THOUSANDS)

 

 

 

March 30,

 

 

December 30,

 

 

 

2024

 

 

2023

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

66,615

 

 

$

109,366

 

Receivables (net of allowances: March 30, 2024 - $1,887 and
   December 30, 2023 - $
1,041)

 

 

13,173

 

 

 

14,938

 

Prepaid income taxes

 

 

14,316

 

 

 

25,370

 

Prepaid marketing and advertising

 

 

2,982

 

 

 

10,149

 

Prepaid expenses and other current assets

 

 

19,888

 

 

 

19,651

 

TOTAL CURRENT ASSETS

 

 

116,974

 

 

 

179,474

 

Property and equipment, net

 

 

19,068

 

 

 

19,741

 

Operating lease assets

 

 

50,133

 

 

 

52,272

 

Franchise rights acquired

 

 

128,213

 

 

 

386,526

 

Goodwill

 

 

242,258

 

 

 

243,441

 

Other intangible assets, net

 

 

58,031

 

 

 

63,208

 

Deferred income taxes

 

 

20,328

 

 

 

19,683

 

Other noncurrent assets

 

 

19,243

 

 

 

17,685

 

TOTAL ASSETS

 

$

654,248

 

 

$

982,030

 

LIABILITIES AND TOTAL DEFICIT

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Portion of operating lease liabilities due within one year

 

$

9,660

 

 

$

9,613

 

Accounts payable

 

 

22,514

 

 

 

18,507

 

Salaries and wages payable

 

 

52,769

 

 

 

79,096

 

Accrued marketing and advertising

 

 

15,789

 

 

 

18,215

 

Accrued interest

 

 

11,204

 

 

 

5,346

 

Deferred acquisition payable

 

 

16,000

 

 

 

16,500

 

Other accrued liabilities

 

 

23,019

 

 

 

22,610

 

Income taxes payable

 

 

62,088

 

 

 

1,609

 

Deferred revenue

 

 

36,004

 

 

 

33,966

 

TOTAL CURRENT LIABILITIES

 

 

249,047

 

 

 

205,462

 

Long-term debt, net

 

 

1,427,509

 

 

 

1,426,464

 

Long-term operating lease liabilities

 

 

51,256

 

 

 

53,461

 

Deferred income taxes

 

 

22,544

 

 

 

41,994

 

Other

 

 

16,191

 

 

 

15,743

 

TOTAL LIABILITIES

 

 

1,766,547

 

 

 

1,743,124

 

TOTAL DEFICIT

 

 

 

 

 

 

Common stock, $0 par value; 1,000,000 shares authorized; 130,048 
   shares issued at March 30, 2024 and
130,048 shares issued at
   December 30, 2023

 

 

0

 

 

 

0

 

Treasury stock, at cost, 50,803 shares at March 30, 2024 and 50,859
   shares at December 30, 2023

 

 

(3,062,005

)

 

 

(3,064,628

)

Retained earnings

 

 

1,966,625

 

 

 

2,314,834

 

Accumulated other comprehensive loss

 

 

(16,919

)

 

 

(11,300

)

TOTAL DEFICIT

 

 

(1,112,299

)

 

 

(761,094

)

TOTAL LIABILITIES AND TOTAL DEFICIT

 

$

654,248

 

 

$

982,030

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

2


 

WW INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

 

 

Three Months Ended

 

 

 

March 30,

 

 

April 1,

 

 

 

2024

 

 

2023

 

Subscription revenues, net

 

$

204,056

 

 

$

211,032

 

Other revenues, net

 

 

2,492

 

 

 

30,863

 

Revenues, net

 

 

206,548

 

 

 

241,895

 

Cost of subscription revenues

 

 

67,816

 

 

 

94,897

 

Cost of other revenues

 

 

932

 

 

 

27,487

 

Cost of revenues

 

 

68,748

 

 

 

122,384

 

Gross profit

 

 

137,800

 

 

 

119,511

 

Marketing expenses

 

 

90,162

 

 

 

88,234

 

Selling, general and administrative expenses

 

 

58,982

 

 

 

59,860

 

Franchise rights acquired impairments

 

 

257,988

 

 

 

 

Operating loss

 

 

(269,332

)

 

 

(28,583

)

Interest expense

 

 

24,727

 

 

 

22,846

 

Other income, net

 

 

(1,605

)

 

 

(330

)

Loss before income taxes

 

 

(292,454

)

 

 

(51,099

)

Provision for income taxes

 

 

55,448

 

 

 

67,580

 

Net loss

 

$

(347,902

)

 

$

(118,679

)

Net loss per share

 

 

 

 

 

 

Basic

 

$

(4.39

)

 

$

(1.68

)

Diluted

 

$

(4.39

)

 

$

(1.68

)

Weighted average common shares outstanding

 

 

 

 

 

 

Basic

 

 

79,208

 

 

 

70,596

 

Diluted

 

 

79,208

 

 

 

70,596

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

3


 

WW INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(IN THOUSANDS)

 

 

 

Three Months Ended

 

 

 

March 30,

 

 

April 1,

 

 

 

2024

 

 

2023

 

Net loss

 

$

(347,902

)

 

$

(118,679

)

Other comprehensive loss:

 

 

 

 

 

 

Foreign currency translation (loss) gain

 

 

(3,888

)

 

 

113

 

Income tax benefit (expense) on foreign currency translation (loss) gain

 

 

985

 

 

 

(28

)

   Foreign currency translation (loss) gain, net of taxes

 

 

(2,903

)

 

 

85

 

Loss on derivatives

 

 

(3,473

)

 

 

(3,130

)

Income tax benefit on loss on derivatives

 

 

757

 

 

 

782

 

   Loss on derivatives, net of taxes

 

 

(2,716

)

 

 

(2,348

)

Total other comprehensive loss

 

 

(5,619

)

 

 

(2,263

)

Comprehensive loss

 

$

(353,521

)

 

$

(120,942

)

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

4


 

WW INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED Consolidated Statements of Changes in Total Deficit

(IN THOUSANDS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 30, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Comprehensive

 

 

Retained

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Loss

 

 

Earnings

 

 

Total

 

Balance at December 30, 2023

 

 

130,048

 

 

$

0

 

 

 

50,859

 

 

$

(3,064,628

)

 

$

(11,300

)

 

$

2,314,834

 

 

$

(761,094

)

Comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,619

)

 

 

(347,902

)

 

 

(353,521

)

Issuance of treasury stock under stock plans

 

 

 

 

 

 

 

 

(56

)

 

 

2,623

 

 

 

 

 

 

(2,709

)

 

 

(86

)

Compensation expense on share-based awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,402

 

 

 

2,402

 

Balance at March 30, 2024

 

 

130,048

 

 

$

0

 

 

 

50,803

 

 

$

(3,062,005

)

 

$

(16,919

)

 

$

1,966,625

 

 

$

(1,112,299

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended April 1, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Comprehensive

 

 

Retained

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Loss

 

 

Earnings

 

 

Total

 

Balance at December 31, 2022

 

 

122,052

 

 

$

0

 

 

 

51,496

 

 

$

(3,097,304

)

 

$

(5,470

)

 

$

2,418,959

 

 

$

(683,815

)

Comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,263

)

 

 

(118,679

)

 

 

(120,942

)

Issuance of treasury stock under stock plans

 

 

 

 

 

 

 

 

(78

)

 

 

4,067

 

 

 

 

 

 

(4,248

)

 

 

(181

)

Compensation expense on share-based awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,669

 

 

 

2,669

 

Balance at April 1, 2023

 

 

122,052

 

 

$

0

 

 

 

51,418

 

 

$

(3,093,237

)

 

$

(7,733

)

 

$

2,298,701

 

 

$

(802,269

)

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

5


 

WW INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

 

 

 

Three Months Ended

 

 

 

March 30,

 

 

April 1,

 

 

 

2024

 

 

2023

 

Operating activities:

 

 

 

 

 

 

Net loss

 

$

(347,902

)

 

$

(118,679

)

Adjustments to reconcile net loss to cash used for operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

10,403

 

 

 

11,989

 

Amortization of deferred financing costs and debt discount

 

 

1,254

 

 

 

1,254

 

Impairment of franchise rights acquired

 

 

257,988

 

 

 

 

Impairment of intangible and long-lived assets

 

 

24

 

 

 

171

 

Share-based compensation expense

 

 

2,402

 

 

 

2,669

 

Deferred tax benefit

 

 

(18,244

)

 

 

(3,110

)

Allowance for doubtful accounts

 

 

2,757

 

 

 

(74

)

Reserve for inventory obsolescence

 

 

85

 

 

 

2,037

 

Foreign currency exchange rate gain

 

 

(1,304

)

 

 

(389

)

Changes in cash due to:

 

 

 

 

 

 

Receivables

 

 

3,788

 

 

 

(5,961

)

Inventories

 

 

79

 

 

 

7,994

 

Prepaid expenses

 

 

13,882

 

 

 

4,937

 

Accounts payable

 

 

4,130

 

 

 

2,728

 

Accrued liabilities

 

 

(26,393

)

 

 

3,188

 

Deferred revenue

 

 

2,321

 

 

 

3,405

 

Other long term assets and liabilities, net

 

 

(1,796

)

 

 

734

 

Income taxes

 

 

60,491

 

 

 

60,385

 

Cash used for operating activities

 

 

(36,035

)

 

 

(26,722

)

Investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(476

)

 

 

(990

)

Capitalized software and website development expenditures

 

 

(4,333

)

 

 

(9,350

)

Other items, net

 

 

(1

)

 

 

(8

)

Cash used for investing activities

 

 

(4,810

)

 

 

(10,348

)

Financing activities:

 

 

 

 

 

 

Taxes paid related to net share settlement of equity awards

 

 

(114

)

 

 

(205

)

Proceeds from stock options exercised

 

 

 

 

 

7

 

Cash paid for acquisitions

 

 

(500

)

 

 

(500

)

Other items, net

 

 

(2

)

 

 

(26

)

Cash used for financing activities

 

 

(616

)

 

 

(724

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(1,290

)

 

 

315

 

Net decrease in cash and cash equivalents

 

 

(42,751

)

 

 

(37,479

)

Cash and cash equivalents, beginning of period

 

 

109,366

 

 

 

178,326

 

Cash and cash equivalents, end of period

 

$

66,615

 

 

$

140,847

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

6


 

WW INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS)

1.
Basis of Presentation

The accompanying consolidated financial statements include the accounts of WW International, Inc., all of its subsidiaries and the variable interest entities of which WW International, Inc. is the primary beneficiary. The terms “Company” and “WW” as used throughout these notes are used to indicate WW International, Inc. and all of its operations consolidated for purposes of its financial statements. The Company’s “Digital” business refers to providing subscriptions to the Company’s digital product offerings. The Company’s “Workshops + Digital” business refers to providing subscriptions for unlimited access to the Company’s workshops combined with the Company’s digital subscription product offerings. The Company’s “Clinical” business refers to providing subscriptions to the Company’s clinical product offerings provided by WeightWatchers Clinic (formerly referred to as Sequence).

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and include amounts that are based on management’s best estimates and assumptions. While all available information has been considered, actual amounts could differ from those estimates. These estimates and assumptions may change as new events occur and additional information is obtained, and such future changes may have an adverse impact on the Company's results of operations, financial position and liquidity. The consolidated financial statements include all of the Company’s majority-owned subsidiaries. All entities acquired, and any entity of which a majority interest was acquired, are included in the consolidated financial statements from the date of acquisition. All intercompany accounts and transactions have been eliminated in consolidation. The Company’s operating results for any interim period are not necessarily indicative of future or annual results. The consolidated financial statements are unaudited and, accordingly, they do not include all of the information necessary for a comprehensive presentation of results of operations, financial position and cash flow activity required by GAAP for complete financial statements but, in the opinion of management, reflect all adjustments including those of a normal recurring nature necessary for a fair statement of the interim results presented.

As previously disclosed, effective the first day of fiscal 2024 (i.e., December 31, 2023), as a result of the continued evolution of the Company’s centralized organizational structure in fiscal 2023, and management’s 2024 strategic planning process, the Company’s reportable segments changed to one segment for the purpose of making operational and resource decisions and assessing financial performance. Since the Company operates in one operating segment and reportable segment, all required financial segment information can be found in the consolidated financial statements.

Prior period amounts have been reclassified to conform with the current period presentation.

These consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for fiscal 2023 filed on February 28, 2024, which includes additional information about the Company, its results of operations, its financial position and its cash flows.

2.
Accounting Standards Adopted in Current Year

There were no new accounting standards adopted during the three months ended March 30, 2024.

 

7


WW INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS)

 

3.
Leases

At March 30, 2024 and December 30, 2023, the Company’s lease assets and lease liabilities, primarily for its studios and corporate offices, were as follows:

 

 

 

March 30, 2024

 

 

December 30, 2023

 

Assets:

 

 

 

 

 

 

Operating leases

 

$

50,133

 

 

$

52,272

 

Finance leases

 

 

2

 

 

 

5

 

Total lease assets

 

$

50,135

 

 

$

52,277

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Current

 

 

 

 

 

 

Operating leases

 

$

9,660

 

 

$

9,613

 

Finance leases

 

 

2

 

 

 

4

 

Noncurrent

 

 

 

 

 

 

Operating leases

 

 

51,256

 

 

 

53,461

 

Finance leases

 

 

 

 

 

 

Total lease liabilities

 

$

60,918

 

 

$

63,078

 

 

For the three months ended March 30, 2024 and April 1, 2023, the components of the Company’s lease expense were as follows:

 

 

 

Three Months Ended

 

 

 

March 30,

 

 

April 1,

 

 

 

2024

 

 

2023

 

Operating lease cost:

 

 

 

 

 

 

Fixed lease cost

 

$

3,983

 

 

$

7,153

 

Lease termination (benefit) cost

 

 

(156

)

 

 

12,219

 

Variable lease cost

 

 

14

 

 

 

15

 

Total operating lease cost

 

$

3,841

 

 

$

19,387

 

Finance lease cost:

 

 

 

 

 

 

Amortization of leased assets

 

$

2

 

 

$

26

 

Interest on lease liabilities

 

 

0

 

 

 

0

 

Total finance lease cost

 

$

2

 

 

$

26

 

Total lease cost

 

$

3,843

 

 

$

19,413

 

 

As previously disclosed, in conjunction with the continued rationalization of its real estate portfolio, the Company entered into subleases with commencement dates in the first quarter of fiscal 2023. The Company recorded $912 and $621 of sublease income for the three months ended March 30, 2024 and April 1, 2023, respectively, as an offset to general and administrative expenses.

At March 30, 2024 and December 30, 2023, the Company’s weighted average remaining lease term and weighted average discount rates were as follows:

 

 

 

March 30, 2024

 

 

December 30, 2023

 

Weighted Average Remaining Lease Term (years)

 

 

 

 

 

 

Operating leases

 

 

7.14

 

 

 

7.31

 

Finance leases

 

 

0.70

 

 

 

0.48

 

 

 

 

 

 

 

 

Weighted Average Discount Rate

 

 

 

 

 

 

Operating leases

 

 

7.55

 

 

 

7.54

 

Finance leases

 

 

3.69

 

 

 

4.10

 

The Company’s leases have remaining lease terms of 0 to 8 years with a weighted average lease term of 7.14 years as of March 30, 2024.

 

8


WW INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS)

 

At March 30, 2024, the maturity of the Company’s lease liabilities in each of the next five fiscal years and thereafter were as follows:

 

 

Operating
Leases

 

 

Finance
Leases

 

 

Total

 

Remainder of fiscal 2024

$

10,342

 

 

$

2

 

 

$

10,344

 

Fiscal 2025

 

13,081

 

 

 

 

 

 

13,081

 

Fiscal 2026

 

10,228

 

 

 

 

 

 

10,228

 

Fiscal 2027

 

9,473

 

 

 

 

 

 

9,473

 

Fiscal 2028

 

9,030

 

 

 

 

 

 

9,030

 

Fiscal 2029

 

8,950

 

 

 

 

 

 

8,950

 

Thereafter

 

17,852

 

 

 

 

 

 

17,852

 

Total lease payments

$

78,956

 

 

$

2

 

 

$

78,958

 

Less imputed interest

 

18,040

 

 

 

0

 

 

 

18,040

 

Present value of lease liabilities

$

60,916

 

 

$

2

 

 

$

60,918

 

Supplemental cash flow information related to leases for the three months ended March 30, 2024 and April 1, 2023 were as follows:

 

 

 

Three Months Ended

 

 

 

March 30,

 

 

April 1,

 

 

 

2024

 

 

2023

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

3,964

 

 

$

7,208

 

Operating cash flows from finance leases

 

$

0

 

 

$

0

 

Financing cash flows from finance leases

 

$

2

 

 

$

26

 

 

 

 

 

 

 

 

Lease assets obtained (modified) in exchange for new (modified) operating lease liabilities

 

$

766

 

 

$

(1,052

)

Lease assets (modified) obtained in exchange for (modified) new finance lease liabilities

 

$

(1

)

 

$

 

 

4.
Revenue

Revenues are recognized when control of the promised services or goods is transferred to the Company’s customers in an amount that reflects the consideration it expects to be entitled to in exchange for those services or goods.

The following table presents the Company’s revenues disaggregated by revenue source:

 

 

Three Months Ended

 

 

March 30,

 

 

April 1,

 

 

2024

 

 

2023

 

Digital Subscription Revenues

$

137,633

 

 

$

149,344

 

Workshops + Digital Subscription Revenues

 

47,671

 

 

 

61,688

 

Clinical Subscription Revenues

 

18,752

 

 

 

 

Subscription Revenues, net

$

204,056

 

 

$

211,032

 

Other Revenues, net

 

2,492

 

 

 

30,863

 

Revenues, net

$

206,548

 

 

$

241,895

 

 

 

9


WW INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS)

 

Information about Contract Balances

For Subscription Revenues, the Company can collect payment in advance of providing services. Any amounts collected in advance of services being provided are recorded in deferred revenue. In the case where amounts are not collected, but the service has been provided and the revenue has been recognized, the amounts are recorded in accounts receivable. The opening and ending balances of the Company’s deferred revenues were as follows:

 

 

 

Deferred

 

 

Deferred

 

 

 

Revenue

 

 

Revenue-Long Term

 

Balance as of December 30, 2023

 

$

33,966

 

 

$

165

 

Net increase (decrease) during the period

 

 

2,038

 

 

 

(21

)

Balance as of March 30, 2024

 

$

36,004

 

 

$

144

 

 

 

 

 

 

 

 

Balance as of December 31, 2022

 

$

32,156

 

 

$

360

 

Net increase (decrease) during the period

 

 

3,560

 

 

 

(57

)

Balance as of April 1, 2023

 

$

35,716

 

 

$

303

 

Revenue recognized from amounts included in current deferred revenue as of December 30, 2023 was $27,915 for the three months ended March 30, 2024. Revenue recognized from amounts included in current deferred revenue as of December 31, 2022 was $29,733 for the three months ended April 1, 2023. The Company’s long-term deferred revenue, which is included in other liabilities on its consolidated balance sheets, represents revenue that will not be recognized during the next 12 months and is generally related to upfront payments received as an inducement for entering into certain sales-based royalty agreements with third-party licensees. This revenue is amortized on a straight-line basis over the term of the applicable agreement.

5.
Acquisitions

Acquisition of Sequence

On April 10, 2023 (the “Closing Date”), the Company completed its previously announced acquisition of Weekend Health, Inc., doing business as Sequence, a Delaware corporation (“Sequence”), subject to the terms and conditions set forth in the Agreement and Plan of Merger, dated as of March 4, 2023, by and among the Company, Well Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company, Sequence, and Fortis Advisors LLC, a Delaware limited liability company, solely in its capacity as the Equityholders’ Representative (as defined therein) for Sequence (the “Merger Agreement”), pursuant to which Sequence continued as a wholly-owned subsidiary of the Company (the “Acquisition”). Sequence provided a technology powered care platform and mobile web application through its subscription based service, which included a comprehensive weight management program, pharmacotherapy treatment, nutrition plans, health insurance coordination services, and access to clinicians, dietitians, fitness coaches and care coordinators.

As consideration for the Acquisition, the Company agreed to pay an aggregate amount equal to $132,000, subject to the adjustments set forth in the Merger Agreement (the “Merger Consideration”). Subject to the terms and conditions of the Merger Agreement, the Merger Consideration has been paid, or is payable, as follows: (i) approximately $64,217 in cash (inclusive of approximately $25,800 of cash on the balance sheet of Sequence) and approximately $34,702 in the form of approximately 7,996 newly issued shares of Company common stock (valued at $4.34 per share), in each case, paid on or promptly following the Closing Date, (ii) $16,000 in cash to be paid on April 10, 2024, and (iii) $16,000 in cash to be paid on April 10, 2025, in each case, subject to the adjustments and deductions set forth in the Merger Agreement.

 

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WW INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS)

 

The following table shows the purchase price allocation for Sequence to the acquired identifiable assets, liabilities assumed and goodwill:

 

Total consideration:

 

 

 

 

 

Cash paid at closing

 

$

64,217

 

 

 

Cash to be paid on April 10, 2024

 

 

16,000

 

 

 

Cash to be paid on April 10, 2025 (1)

 

 

12,420

 

 

 

Total cash payments

 

 

 

$

92,637

 

Less stock-based compensation expense attributable to post combination vesting

 

 

 

 

(3,882

)

 

 

 

 

 

 

Common shares issued

 

 

7,996

 

 

 

Stock price as of April 10, 2023 (2)

 

$

4.12

 

 

 

Total stock issuance purchase price (2)

 

 

 

 

32,943

 

Aggregated merger consideration

 

 

 

$

121,698

 

 

 

 

 

 

 

Assets acquired:

 

 

 

 

 

Cash

 

$

25,776

 

 

 

Prepaid expenses and other current assets

 

 

2,220

 

 

 

Property, plant and equipment

 

 

34

 

 

 

Intangible assets

 

 

7,222

 

 

 

Total assets acquired

 

 

 

 

35,252

 

 

 

 

 

 

 

Liabilities assumed:

 

 

 

 

 

Accounts payable

 

$

70

 

 

 

Accrued liabilities

 

 

14

 

 

 

Deferred revenue

 

 

1,300

 

 

 

Deferred tax liability

 

 

1,912

 

 

 

Total liabilities assumed

 

 

 

 

3,296

 

 

 

 

 

 

 

Net assets acquired

 

 

 

 

31,956

 

 

 

 

 

 

 

Total goodwill

 

 

 

$

89,742

 

 

(1)
Reflects $16,000 of cash payable on April 10, 2025 as Merger Consideration discounted using the Company’s weighted average cost of debt.
(2)
Represents the fair value of the shares transferred to the sellers as Merger Consideration