• Revenue: $202 million for Q2 2024.

• Subscription Revenue: $200 million, a decline of 5% year over year.

• Clinical Revenue: $20 million, up $12 million year over year.

• Adjusted Gross Margin: 67.9%, up from 63.4% in the prior year.

• Marketing Expenses: $54 million, up 5% year over year.

• Adjusted G&A: $46 million, down 22% versus prior year.

• Adjusted Operating Income: $38 million, an increase of 13%.

• GAAP EPS: $0.29 compared to $0.65 in the year-ago quarter.

• Subscribers: 3.8 million, a decline of 6% year over year.

• Full Year Revenue Guidance: At least $770 million.

• Adjusted EBITDA Guidance: At least $150 million for full year 2024.

• Net Debt to Adjusted EBITDA Leverage Ratio: 9.6 times at Q2 end.

• Warning! GuruFocus has detected 3 Warning Signs with WW.

Release Date: August 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• WW International Inc (NASDAQ:WW) reported a nearly 120% increase in clinical subscribers year over year, driving $20 million in clinical revenue, up $12 million from the previous year.

• The company achieved a record high adjusted gross margin of 67.9%, up from 63.4% in the prior year, primarily driven by the discontinuation of the lower-margin consumer products business.

• WW International Inc (NASDAQ:WW) is expanding its offerings by making insurance-covered nutrition counseling with registered dietitians available to eligible members, starting with a pilot in New Jersey.

• The company launched a programmatic GLP-1 medication supply tracker to assist clinic members in locating medication supply, contributing to increased retention and a 12-month high Net Promoter Score (NPS).

• WW International Inc (NASDAQ:WW) is executing a strategic streamlining of its operational structure, resulting in approximately $60 million in annualized cash savings, mainly benefiting General and Administrative (G&A) expenses.

Negative Points

• WW International Inc (NASDAQ:WW) experienced a 6% year-over-year decline in total subscribers, ending Q2 with 3.8 million subscribers.

• The company faced increased competition and rising customer acquisition costs (CAC) in the clinic business, driven by a higher number of competitors offering compounded medications.

• Marketing expenses increased by 5% year over year, reflecting higher online advertising costs amid a challenging marketing environment.

• WW International Inc (NASDAQ:WW) revised its year-end subscriber guidance to at least 3.1 million, indicating a return to historical patterns of subscriber decline.

• The company is facing challenges with insurance coverage for obesity medications, as some health plans are discontinuing coverage, raising health equity concerns.

Q & A Highlights

Q: Can you discuss the impact of compounded GLP-1s on your clinical business and any feedback on attrition? A: Sima Sistani, CEO: We saw a significant increase in our clinic CAC due to more competitors offering compounded medications. Despite this, we are seeing increased retention and high NPS. We decided to pull back marketing dollars due to external turbulence and focus on performance marketing.

Q: How is the B2B pipeline progressing, and what are your expectations for its contribution next year? A: Sima Sistani, CEO: We are seeing strong sales momentum with large players, closing five deals last quarter. While no single deal will be material to our bottom line in a year, we are pleased with the activity and expect about $30 million in revenue from the B2B business this year.

Q: What is driving the reduction in the year-end subscriber count guidance? A: Sima Sistani, CEO: The rise in competition and increased CAC due to compounded medications have impacted our projections. We are focusing on profitability and have adjusted our guidance to reflect these new realities.

Q: How do you plan to return the clinic business to sequential growth amid high competition and elevated ad rates? A: Sima Sistani, CEO: We are focusing on our one platform strategy, adding services like registered dietitian visits to improve NPS and retention. We are also launching a new marketing campaign to improve CAC efficiency.

Q: What is your strategy to offer more affordable medically supported weight loss options? A: Sima Sistani, CEO: We prioritize FDA-approved medications but are exploring alternative paths to improve access and health equity for our members, given the ongoing medication shortages and coverage issues.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.