WW International, previously known as Weight Watchers, reported record growth for digital subscriptions in the first quarter of 2021. The company finished the quarter with 4.2 million digital subscribers, a 16% increase year-over-year. WW now has a total of 5 million subscribers. In spite of the subscriber growth, the company reported total net revenue of $331.8 million, down 17.1% year-over-year.

President and CEO comments

“WW had a strong start to the year, ending Q1 with 5 million subscribers, record digital subscribers, and member retention remaining at an all-time high of over 10 months,” said Mindy Grossman, WW president and CEO in a May 5 news release.

“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 and positioning us for subscriber, revenue and profit growth over the balance of 2021,” Grossman added.

Results ahead of expectations

Amy O’Keefe, WW chief financial officer, reported that the company’s first quarter results were ahead of expectations with an improvement in margin, driven by digital subscription growth and management of expenses in the company’s workshop segment.

“In addition, our recent refinancing has further strengthened our balance sheet and significantly lowered our interest rates. As the world reopens, we will continue to take decisive actions to capitalize on consumer trends, flex our cost structure to meet demand, and position WW for accelerated momentum,” O’Keefe said.

While the company may have exceeded its expectations, growth in digital subscriptions was the only area in which the company saw increases year-over-year.

Highlights

Highlights for the period ended April 3, 2021 include the following:

• Total revenue for the quarter was $331.8 million, including $279.8 million from subscription revenue, down 13.8% year-over-year, and $52.0 million from product sales and other revenue, down 31.3%.
• Adjusted gross profit for the quarter was $198.6 million, a 5.9% decrease year-over-year.
• Adjusted operating income, which includes $5.5 million in 2021 restructuring charges, was $8.4 million, a decrease of 70.7% over the first quarter of 2020.
• The company reported a net loss of $18.2 million, or $0.26 loss per share, compared to a net loss of $6.1 million, or $0.09 loss per share, in the first quarter of 2020.
• The company reported a cash balance at the end of the quarter of $113.3 million.

Subscriptions

WW reports that subscribers are down 1.5% year-over-year. The total was offset by increases in digital subscribers. Subscription revenue was down 13.8% due to declines in workshops and digital fees because of studio closures and reduced operations because of the pandemic. Product sales and other revenue were also down, also due to studio closures and reduced operations. Total paid (subscription) weeks were 63.1 million, a 3.5% decrease over total paid weeks last year of 65.4 million.

Grossman optimistic

Though the financials don’t reflect it, Grossman is optimistic that the company’s digital transformation is working, as evidenced by the growth in digital memberships which are a high margin product. She attributed the growth to the success of myWW+, the company’s first non-food innovation.

“To reach this water mall 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,” Grossman said.

In addition, at the beginning of the first quarter, the company launched its new D360 subscription product which combines coaching and content with the myWW+ app. Grossman said the product has been popular, with nearly 50% of new subscribers being millennials or younger.

“We believe that D360 will be a key driver of broadening our reach across new and diverse audiences, and helping unlock our potential to inspire and support millions more people in their weight loss and wellness journeys as well as provide us with a premium offering to our core digital experience,” said the president and CEO.

Outlook

Heading into the summer months, WW expects more subscriber growth and, by year end, 90% of subscribers will be digital. Digital revenues will increase in the mid- to high teens for the full year, and workshop revenue is expected to decrease. Costs will continue to drop. The company continues to build its virtual experiences including events featuring celebrities like Oprah Winfrey. Other areas of focus include strong onboarding in the first four weeks of the subscriber journey, personalized experiences for subscriptions, additional expansion of D360 into new markets, food innovation, and healthcare and diabetes.

Insider Take

WW had a rough first quarter financially, but the company has good reason to be optimistic. The company was in the midst of a digital transformation when COVID-19 hit, impacting its live events and workshop business. At the same time, the company was innovating its digital subscription products for the benefit of members. They continue this innovation, transformation and expansion, and they are looking to take the company’s old model and transforming it into an adaptive, innovative model that works for WW as well as for WW subscribers. While the pandemic forges on, WW is positioning itself to be strong regardless. Despite the challenging first quarter, WW seems to be on the right track.