WW INTERNATIONAL, INC. WW International, Inc. is aVirginia corporation with its principal executive offices inNew York, New York . In this Quarterly Report on Form 10-Q unless the context indicates otherwise: "we," "us," "our," the "Company," "Weight Watchers" and "WW" refer toWW International, Inc. and all of its operations consolidated for purposes of its financial statements; "North America" refers to ourNorth American Company -owned operations; "Continental Europe" refers to ourContinental Europe Company -owned operations; "United Kingdom" refers to ourUnited Kingdom Company -owned operations; and "Other" refers toAustralia ,New Zealand and emerging markets operations and franchise revenues and related costs.Each of North America , Continental Europe,United Kingdom and Other is also a reportable segment. Our "Digital" business refers to providing subscriptions to our digital product offerings, including Digital 360 and Personal Coaching + Digital. Our "Workshops + Digital" business refers to providing unlimited access to our workshops combined with our digital subscription product offerings to commitment plan subscribers. It also includes the provision of access to workshops for members who do not subscribe to commitment plans, including our "pay-as-you-go" members.
Our fiscal year ends on the Saturday closest to
• "fiscal 2015" refers to our fiscal year ended
• "fiscal 2020" refers to our fiscal year ended
53rd week);
• "fiscal 2021" refers to our fiscal year ended January 1, 2022 ;
• "fiscal 2022" refers to our fiscal year ended December 31, 2022 ;
• "fiscal 2023" refers to our fiscal year ended December 30, 2023 ;
• "fiscal 2024" refers to our fiscal year ended December 28, 2024 ;
• "fiscal 2025" refers to our fiscal year ended
53rd week);
• "fiscal 2026" refers to our fiscal year ended January 2, 2027 ; and
• "fiscal 2027" refers to our fiscal year ended January 1, 2028 .
The following terms used in this Quarterly Report on Form 10-Q are our trademarks: Digital 360® and Weight Watchers®.
You should read the following discussion in conjunction with our Annual Report
on Form 10-K for fiscal 2021 that includes additional information about us, our
results of operations, our financial position and our cash flows, and with our
unaudited consolidated financial statements and related notes included in Item 1
of this Quarterly Report on Form 10-Q (collectively referred to as the
"Consolidated Financial Statements").
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--------------------------------------------------------------------------------NON-GAAP FINANCIAL MEASURES
To supplement our consolidated results presented in accordance with accounting principles generally accepted inthe United States , or GAAP, we have disclosed non-GAAP financial measures of operating results that exclude or adjust certain items. Gross profit, gross profit margin, operating income, operating income margin and components thereof are discussed in this Quarterly Report on Form 10-Q both as reported (on a GAAP basis) and as adjusted (on a non-GAAP basis), as applicable, with respect to (i) the first quarter of fiscal 2022 to exclude (a) the net impact of (x) charges associated with our previously disclosed 2021 organizational restructuring plan (the "2021 plan") and (y) the reversal of certain of the charges associated with our previously disclosed 2020 organizational restructuring plan (the "2020 plan") or (b) the impact of charges associated with the 2021 plan; and (ii) the first quarter of fiscal 2021 to exclude the impact of charges associated with the 2021 plan. We generally refer to such non-GAAP measures as follows: (i) with respect to the adjustments for the first quarter of fiscal 2022, as excluding or adjusting for the net impact of restructuring charges or the impact of restructuring charges, as applicable; and (ii) with respect to the adjustments for the first quarter of fiscal 2021, as excluding or adjusting for the impact of the restructuring charges. We also present within this Quarterly Report on Form 10-Q the non-GAAP financial measures: earnings before interest, taxes, depreciation, amortization and stock-based compensation ("EBITDAS"); earnings before interest, taxes, depreciation, amortization, stock-based compensation, early extinguishment of debt with respect to the Company's previously disclosedApril 2021 debt refinancing and voluntary debt prepayments, and restructuring charges (including the net impact where applicable) ("Adjusted EBITDAS"); total debt less unamortized deferred financing costs, unamortized debt discount and cash on hand (i.e., net debt); and a net debt/Adjusted EBITDAS ratio. See "-Liquidity and Capital Resources-EBITDAS, Adjusted EBITDAS and Net Debt" for the reconciliations of these non-GAAP financial measures to the most comparable GAAP financial measure in each case. Our management believes these non-GAAP financial measures provide useful supplemental information to investors regarding the performance of our business and are useful for period-over-period comparisons of the performance of our business. While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly entitled measures reported by other companies.
USE OF CONSTANT CURRENCY
As exchange rates are an important factor in understanding period-to-period comparisons, we believe in certain cases the presentation of results on a constant currency basis in addition to reported results helps improve investors' ability to understand our operating results and evaluate our performance in comparison to prior periods. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. We use results on a constant currency basis as one measure to evaluate our performance. In this Quarterly Report on Form 10-Q, we calculate constant currency by calculating current-year results using prior-year foreign currency exchange rates. We generally refer to such amounts calculated on a constant currency basis as excluding or adjusting for the impact of foreign currency or being on a constant currency basis. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP and are not meant to be considered in isolation. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with GAAP.
CRITICAL ACCOUNTING ESTIMATES
For a discussion of the critical accounting estimates affecting us, see "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations-Critical Accounting Estimates" of our Annual Report on Form 10-K for
fiscal 2021. Our critical accounting estimates have not changed since the end of
fiscal 2021.
PERFORMANCE INDICATORS
Our management team regularly reviews and analyzes a number of financial and
operating metrics, including the key performance indicators listed below, in
order to manage our business, measure our performance, identify trends affecting
our business, determine the allocation of resources, make decisions regarding
corporate strategies and assess the quality and potential variability of our
cash flows and earnings. We also believe that these key performance indicators
are useful to both management and investors for forecasting purposes and to
facilitate comparisons to our historical operating results. These metrics are
supplemental to our GAAP results and include operational measures.
26
--------------------------------------------------------------------------------• Revenues-Our "Subscription Revenues" consist of "Digital Subscription
Revenues" and "Workshops + Digital Fees". "Digital Subscription Revenues"
consist of the fees associated with subscriptions for our Digital
offerings, including Digital 360 and Personal Coaching + Digital.
"Workshops + Digital Fees" consist of the fees associated with our
subscription plans for combined workshops and digital offerings and other
payment arrangements for access to workshops. In addition, "product sales
and other" consists of sales of consumer products via e-commerce, in
studios and through our trusted partners, revenues from licensing andpublishing, other revenues, and, in the case of the consolidated financial
results and Other reportable segment, franchise fees with respect to
commitment plans and royalties.
• Paid Weeks-The "Paid Weeks" metric reports paid weeks by WW customers in
Company-owned operations for a given period as follows: (i) "Digital Paid
Weeks" is the total paid subscription weeks for our digital subscription
products (including Digital 360 and Personal Coaching + Digital);
(ii) "Workshops + Digital Paid Weeks" is the sum of total paid commitment
plan weeks which include workshops and digital offerings and total
"pay-as-you-go" weeks; and (iii) "Total Paid Weeks" is the sum of Digital
Paid Weeks and Workshops + Digital Paid Weeks.
• Incoming Subscribers-"Subscribers" refer to Digital subscribers and
Workshops + Digital subscribers who participate in recur bill programs in
Company-owned operations. The "Incoming Subscribers" metric reports WW
subscribers in Company-owned operations at a given period start as
follows: (i) "Incoming Digital Subscribers" is the total number of
Digital, including Digital 360 and Personal Coaching + Digital,subscribers; (ii) "Incoming Workshops + Digital Subscribers" is the total
number of commitment plan subscribers that have access to combined
workshops and digital offerings; and (iii) "Incoming Subscribers" is the
sum of Incoming Digital Subscribers and Incoming Workshops + Digital
Subscribers. Recruitment and retention are key drivers for this metric.
• End of Period Subscribers-The "End of Period Subscribers" metric reportsWW subscribers in Company-owned operations at a given period end as
follows: (i) "End of Period Digital Subscribers" is the total number of
Digital, including Digital 360 and Personal Coaching + Digital,
subscribers; (ii) "End of Period Workshops + Digital Subscribers" is the
total number of commitment plan subscribers that have access to combined
workshops and digital offerings; and (iii) "End of Period Subscribers" is
the sum of End of Period Digital Subscribers and End of Period Workshops +
Digital Subscribers. Recruitment and retention are key drivers for this
metric.
• Gross profit and operating expenses as a percentage of revenue.
COVID-19 PANDEMIC
The novel coronavirus (including its variants, COVID-19) pandemic continues to
evolve and have unpredictable impacts on consumer sentiment and behavior and on
our business operations and the markets in which we operate. We have seen
significant shifts in consumer sentiment with respect to the weight loss and
wellness marketplace, which we believe in part is attributable to the evolution
of the pandemic. COVID-19 has had a significant effect on our recruitments since
its onset. Our Workshops + Digital recruitments were substantially negatively
impacted during the first year of the pandemic. While Digital recruitments were
strong in the beginning of the COVID-19 pandemic, a subsequent turn in consumer
sentiment drove a decline in Digital recruitments. Given the long-term
subscription model of our business, these declines in recruitment continued to
impact the number of our End of Period Subscribers in the first quarter of
fiscal 2022, which declined compared to the prior year period. Additionally, our
mix shifting toward our Digital business, which was significant during the onset
of the pandemic, especially when amplified by the nature of our subscription
business, has negatively impacted revenue and may continue to impact it in the
future. Over the longer term, it remains uncertain how the COVID-19 pandemic
will impact consumer demand for our products and services and consumer
preferences and behavior generally.
The extent to which our operations and business trends will continue in future
periods to be impacted by, and any unforeseen costs will result from, the
ongoing outbreak of COVID-19 will depend largely on future developments, which
are highly uncertain and cannot be accurately predicted. These developments
include, among other things, the severity of any variant or surges in COVID-19
cases, new information about health implications, vaccine availability and
hesitancy, and actions by government authorities to contain the outbreak or
treat its impact. This dynamic situation is driving uncertainty at the
macroeconomic, local and consumer levels. We continue to actively monitor the
ongoing global outbreak of COVID-19 and its impact and related developments.
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As we continue to address the impact of the pandemic, and the related evolving
legal and consumer landscape, we are focused on how to best meet our members'
and consumers' needs. We continue to serve our members virtually, both via our
Digital business and through virtual workshops, and to evolve our workshop
strategy as we evaluate our cost structure and respond to shifting consumer
sentiment. We consolidated certain of our studios and continue to close certain
other branded studio locations. We continually evaluate our studio locations,
and the decision to operate at any particular studio location is influenced by a
number of factors, including applicable legal restrictions, consumer confidence
and preferences, changes in consumer sentiment and behavior, and the protection
of the health and safety of our employees and members, and is dependent on cost
efficiencies and alignment with our digital and brand strategy. The current
number of our studio locations is significantly lower than that prior to the
pandemic, and we expect it to remain below pre-COVID-19 levels. As a result, we
have incurred, and we expect to continue to incur, significant costs associated
with our real estate realignment.
While we expect the effects of the pandemic and the related responses, including
shifts in consumer sentiment and behavior, to negatively impact our results of
operations, cash flows and financial position, the uncertainty of the full
extent of the duration and severity of the consumer, economic and operational
impacts of COVID-19 means we cannot reasonably estimate the related financial
impact at this time. For more information, see "Item 1A. Risk Factors" in Part I
of our Annual Report on Form 10-K for fiscal 2021. We continue to believe that
our powerful communities and our ability to inspire people to adopt healthy
habits will be invaluable to people across the globe as they continue to
acclimate to new social and economic environments, and that they uniquely
position us in the markets in which we operate.
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--------------------------------------------------------------------------------RESULTS OF OPERATIONS
THREE MONTHS ENDED
The table below sets forth selected financial information for the first quarter of fiscal 2022 from our consolidated statements of net income for the three months endedApril 2, 2022 versus selected financial information for the first quarter of fiscal 2021 from our consolidated statements of net income for the three months endedApril 3, 2021 . Summary of Selected Financial Data (In millions, except per share amounts) For The Three Months Ended % Change Increase/ % Constant April 2, 2022 April 3, 2021 (Decrease) Change Currency Revenues, net $ 297.8 $ 331.8$ (34.0 ) (10.3 %) (8.4 %) Cost of revenues 117.7 138.4 (20.7 ) (15.0 %) (13.6 %) Gross profit 180.1 193.4 (13.3 ) (6.9 %) (4.6 %) Gross Margin % 60.5 % 58.3 % Marketing expenses 107.6 116.9 (9.4 ) (8.0 %) (6.2 %)
Selling, general & administrative
expenses 63.6 73.7 (10.1 ) (13.7 %) (12.8 %) Operating income 9.0 2.8 6.1 100.0 % * 100.0 % * Operating Income Margin % 3.0 % 0.9 % Interest expense 18.7 29.1 (10.5 ) (35.9 %) (35.9 %) Other expense (income), net 0.3 (0.2 ) 0.6 100.0 % * 100.0 % * Loss before income taxes (10.0 ) (26.1 ) 16.0 (61.4 %) (67.9 %) Benefit from income taxes (1.8 ) (7.8 ) 6.0 (77.0 %) (83.2 %) Net loss $ (8.2 ) $ (18.2 )
Weighted average diluted shares
outstanding 70.1 69.1 1.0 1.5 % 1.5 %
Diluted net loss per share $ (0.12 ) $ (0.26 )
$ 0.15 (55.4 %) (61.8 %)
Note: Totals may not sum due to rounding.
*Note: Percentage in excess of 100.0%.
29
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Certain results for the first quarter of fiscal 2022 are adjusted to exclude the
net impact of the $0.3 million of 2021 plan restructuring charges and the
reversal of $0.1 million of 2020 plan restructuring charges. See "Non-GAAP
Financial Measures" above. The table below sets forth a reconciliation of
certain of those components of our selected financial data for the three months
ended April 2, 2022 which have been adjusted.
Gross Operating
Gross Profit Operating Income
(in millions except percentages) Profit Margin Income Margin
First Quarter of Fiscal 2022 $ 180.1 60.5 % $ 9.0 3.0 %
Adjustments to reported amounts (1)
2021 plan restructuring charges 0.0 0.3
2020 plan restructuring charges (0.1 ) (0.1 ) Total adjustments (1) (0.1 )
0.1
First Quarter of Fiscal 2022, as adjusted (1)
3.1 %
Note: Totals may not sum due to rounding. (1) The "As adjusted" measure is a non-GAAP financial measure that adjusts the
consolidated statements of net income for the first quarter of fiscal 2022 to
exclude the net impact of
restructuring charges and the reversal of
tax) of 2020 plan restructuring charges. See "Non-GAAP Financial Measures"
above for an explanation of our use of non-GAAP financial measures.
Certain results for the first quarter of fiscal 2021 are adjusted to exclude the impact of the$5.5 million of 2021 plan restructuring charges. See "Non-GAAP Financial Measures" above. The table below sets forth a reconciliation of certain of those components of our selected financial data for the three months endedApril 3, 2021 which have been adjusted. Gross Operating Gross Profit Operating Income (in millions except percentages) Profit Margin Income Margin First Quarter of Fiscal 2021$ 193.4 58.3 %$ 2.8 0.9 % Adjustments to reported amounts (1) 2021 plan restructuring charges 5.2
5.5
Total adjustments (1) 5.2
5.5
First Quarter of Fiscal 2021, as adjusted (1)
2.5 %
Note: Totals may not sum due to rounding. (1) The "As adjusted" measure is a non-GAAP financial measure that adjusts the
consolidated statements of net income for the first quarter of fiscal 2021 to
exclude the impact of the
restructuring charges. See "Non-GAAP Financial Measures" above for an
explanation of our use of non-GAAP financial measures.
Consolidated Results Revenues Revenues for the first quarter of fiscal 2022 were$297.8 million , a decrease of$34.0 million , or 10.3%, versus the first quarter of fiscal 2021. Excluding the impact of foreign currency, which negatively impacted our revenues in the first quarter of fiscal 2022 by$6.3 million , revenues for the first quarter of fiscal 2022 would have decreased 8.4% versus the prior year period. This decrease was driven primarily by lower Subscription Revenues reflecting worsened consumer sentiment. This worsened consumer sentiment was due in part to the evolution of the COVID-19 pandemic as well as the likely impact of certain macro factors including increasing inflation, social and political unrest and challenged economic growth. See "-Segment Results" for additional details on revenues.
Cost of Revenues
Total cost of revenues for the first quarter of fiscal 2022 decreased$20.7 million , or 15.0%, versus the first quarter of fiscal 2021. Excluding the impact of foreign currency, which decreased cost of revenues in the first quarter of fiscal 2022 by$1.8 million , cost of revenues for the first quarter of fiscal 2022 would have decreased 13.6% versus the prior year period. Excluding the net impact of$(0.1) million of restructuring charges in the first quarter of fiscal 2022 and the impact of the$5.2 million of restructuring charges in the first quarter of fiscal 2021, total cost of revenues for the first quarter of fiscal 2022 would have decreased by 11.6%, or 10.2% on a constant currency basis, versus the prior year period. 30 --------------------------------------------------------------------------------
Gross Profit
Gross profit for the first quarter of fiscal 2022 decreased$13.3 million , or 6.9%, versus the first quarter of fiscal 2021. Excluding the impact of foreign currency, which negatively impacted gross profit in the first quarter of fiscal 2022 by$4.5 million , gross profit for the first quarter of fiscal 2022 would have decreased 4.6% versus the prior year period. Excluding the net impact of$(0.1) million of restructuring charges in the first quarter of fiscal 2022 and the impact of the$5.2 million of restructuring charges in the first quarter of fiscal 2021, gross profit for the first quarter of fiscal 2022 would have decreased by 9.4%, or 7.1% on a constant currency basis, versus the prior year period primarily due to the decrease in revenues. Gross margin for the first quarter of fiscal 2022 increased 2.2% to 60.5% versus 58.3% for the first quarter of fiscal 2021. Excluding the impact of foreign currency, gross margin in the first quarter of fiscal 2022 would have increased 2.4% to 60.7% versus the prior year period. Excluding the net impact of restructuring charges in the first quarter of fiscal 2022 and the impact of restructuring charges in the first quarter of fiscal 2021, gross margin for the first quarter of fiscal 2022 would have increased 0.6% to 60.5% versus the prior year period. Excluding the impact of foreign currency, the net impact of restructuring charges in the first quarter of fiscal 2022 and the impact of restructuring charges in the first quarter of fiscal 2021, gross margin for the first quarter of fiscal 2022 would have increased 0.8% to 60.7% versus the prior year period. The gross margin increase was driven primarily by a revenue mix shift to our higher margin Digital business.
Marketing
Marketing expenses for the first quarter of fiscal 2022 decreased$9.4 million , or 8.0%, versus the first quarter of fiscal 2021. Excluding the impact of foreign currency, which decreased marketing expenses in the first quarter of fiscal 2022 by$2.1 million , marketing expenses for the first quarter of fiscal 2022 would have decreased 6.2% versus the prior year period. This decrease in marketing expenses was primarily due to a decline in TV media. Marketing expenses as a percentage of revenue for the first quarter of fiscal 2022 increased to 36.1% from 35.2% for the first quarter of fiscal 2021.
Selling, General and Administrative
Selling, general and administrative expenses for the first quarter of fiscal 2022 decreased$10.1 million , or 13.7%, versus the first quarter of fiscal 2021. Excluding the impact of foreign currency, which decreased selling, general and administrative expenses in the first quarter of fiscal 2022 by$0.7 million , selling, general and administrative expenses for the first quarter of fiscal 2022 would have decreased 12.8% versus the prior year period. Excluding the impact of the$0.2 million of restructuring charges in the first quarter of fiscal 2022 and the impact of the$0.3 million of restructuring charges in the first quarter of fiscal 2021, selling, general and administrative expenses for the first quarter of fiscal 2022 would have decreased by 13.7%, or 12.7% on a constant currency basis, versus the prior year period. This decrease in selling, general and administrative expenses was primarily due to lower bonus expense driven by a change in timing of payment and a reduction in headcount. Selling, general and administrative expenses as a percentage of revenue for the first quarter of fiscal 2022 decreased to 21.3% from 22.2% for the first quarter of fiscal 2021. Operating Income Operating income for the first quarter of fiscal 2022 increased$6.1 million , or 216.8%, versus the first quarter of fiscal 2021. Excluding the impact of foreign currency, which negatively impacted operating income in the first quarter of fiscal 2022 by$1.7 million , operating income for the first quarter of fiscal 2022 would have increased 275.9% versus the prior year period. Excluding the net impact of the$0.1 million of restructuring charges in the first quarter of fiscal 2022 and the impact of the$5.5 million of restructuring charges in the first quarter of fiscal 2021, operating income for the first quarter of fiscal 2022 would have increased by 9.0%, or 29.0% on a constant currency basis, versus the prior year period. Operating income margin for the first quarter of fiscal 2022 increased 2.2% to 3.0% versus 0.9% for the first quarter of fiscal 2021. Excluding the net impact of restructuring charges in the first quarter of fiscal 2022 and the impact of restructuring charges in the first quarter of fiscal 2021, operating income margin for the first quarter of fiscal 2022 would have increased by 0.5%, or 1.0% on a constant currency basis, versus the prior year period. This increase in operating income margin was driven primarily by a decrease in selling, general and administrative expenses as a percentage of revenue and an increase in gross margin, partially offset by an increase in marketing expenses as a percentage of revenue, versus the prior year period. 31 --------------------------------------------------------------------------------
Interest Expense
Interest expense for the first quarter of fiscal 2022 decreased$10.5 million , or 35.9%, versus the first quarter of fiscal 2021. The decrease in interest expense was driven primarily by lower interest rates under our Term Loan Facility (as defined below) and on our Senior Secured Notes (as defined below) as a result of ourApril 2021 debt refinancing (as defined below). The effective interest rate on our debt, based on interest incurred (which includes amortization of our deferred financing costs and debt discount) and our average borrowings during the first quarter of fiscal 2022 and the first quarter of fiscal 2021 and excluding the impact of our interest rate swaps then in effect, decreased to 4.53% per annum at the end of the first quarter of fiscal 2022 from 6.59% per annum at the end of the first quarter of fiscal 2021. Including the impact of our interest rate swaps then in effect, the effective interest rate on our debt, based on interest incurred (which includes amortization of our deferred financing costs and debt discount) and our average borrowings during the first quarter of fiscal 2022 and the first quarter of fiscal 2021, decreased to 5.14% per annum at the end of the first quarter of fiscal 2022 from 7.56% per annum at the end of the first quarter of fiscal 2021. See "-Liquidity and Capital Resources-Long-Term Debt" for additional details regarding our debt, including interest rates and payments thereon. For additional details on our interest rate swaps, see "Item 3. Quantitative and Qualitative Disclosures about Market Risk" in Part I of this Quarterly Report on Form 10-Q.
Other Expense (Income), Net
Other expense (income), net, which consists primarily of the impact of foreign currency on intercompany transactions, changed by$0.6 million for the first quarter of fiscal 2022 to$0.3 million of expense as compared to$0.2 million of income for the first quarter of fiscal 2021.
Tax
Our effective tax rate for the first quarter of fiscal 2022 was 17.9% as compared to 30.0% for the first quarter of fiscal 2021. For the first quarter of fiscal 2022, the difference between theU.S. federal statutory tax rate and our consolidated effective tax rate was primarily due to a tax benefit related to foreign-derived intangible income, or FDII, partially offset by state income tax expense and tax expense from income earned in foreign jurisdictions. The effective tax rate for the first quarter of fiscal 2021 was impacted by state income tax expense and tax expense from income earned in foreign jurisdictions, partially offset by a tax benefit related to FDII and a tax benefit related to tax windfalls from stock compensation.
Net Loss and Diluted Net Loss Per Share
Net loss for the first quarter of fiscal 2022 was$8.2 million , which decreased$10.0 million , or 54.8%, from the net loss for the first quarter of fiscal 2021 of$18.2 million . Excluding the impact of foreign currency, which negatively impacted net loss in the first quarter of fiscal 2022 by$1.2 million , net loss for the first quarter of fiscal 2022 would have decreased 61.3% from the prior year period. Net loss for the first quarter of fiscal 2022 included a$0.1 million net impact from restructuring charges. Net loss for the first quarter of fiscal 2021 included a$4.1 million impact from restructuring charges. Diluted net loss per share for the first quarter of fiscal 2022 was a loss of$0.12 compared to a loss of$0.26 for the first quarter of fiscal 2021. Diluted net loss per share for the first quarter of fiscal 2022 included a$0.00 net impact from restructuring charges. Diluted net loss per share for the first quarter of fiscal 2021 included a$0.06 impact from restructuring charges. 32 --------------------------------------------------------------------------------
Segment Results Metrics and Business Trends The following tables set forth key metrics by reportable segment for the first quarter of fiscal 2022 and the percentage change in those metrics versus the prior year period:
(in millions except percentages and as noted)
Q1 2022
GAAP Constant Currency
Product Product Total
Subscription Sales & Total Subscription Sales & Total Paid Incoming EOP
Revenues Other Revenues Revenues Other Revenues Weeks Subscribers Subscribers
(in thousands)
North America $ 176.3 $ 28.0 $ 204.3 $ 176.3 $ 28.0 $ 204.3 38.7 2,734.9 2,986.2
CE 61.7 9.2 70.9 66.4 9.9 76.3 15.4 1,094.1 1,189.5
UK 12.2 2.2 14.4 12.6 2.3 14.9 3.5 245.0 270.1
Other (1) 6.8 1.3 8.1 7.2 1.4 8.6 1.3 94.5 99.6
Total $ 257.0 $ 40.8 $ 297.8 $ 262.5 $ 41.6 $ 304.0 58.9 4,168.6 4,545.4
% Change Q1 2022 vs. Q1 2021
North America (5.7 %) (18.4 %) (7.7 %) (5.7 %) (18.4 %) (7.7 %) (3.6 %) (3.1 %) (5.5 %)
CE (11.7 %) (23.6 %) (13.4 %) (4.9 %) (17.8 %) (6.8 %) (9.7 %) (7.2 %) (11.8 %)
UK (18.4 %) (45.9 %) (24.3 %) (15.9 %) (44.5 %) (22.1 %) (21.3 %) (24.3 %)
(20.6 %)
Other (1) (15.4 %) (11.8 %) (14.8 %) (10.5 %) (7.4 %) (10.0 %) (6.6 %) (3.2 %) (6.9 %)
Total (8.2 %) (21.5 %) (10.3 %) (6.2 %) (20.0 %) (8.4 %) (6.6 %) (5.8 %) (8.3 %) Note: Totals may not sum due to rounding. (1) Represents Australia,New Zealand and emerging markets operations and franchise revenues.
(in millions except percentages and as noted)
Q1 2022
Workshops Incoming EOP
Digital Subscription Revenues Digital Incoming EOP Workshops + Digital Fees + Digital Workshops Workshops
Constant Paid Digital Digital Constant Paid + Digital + Digital
GAAP Currency Weeks Subscribers Subscribers GAAP Currency Weeks Subscribers Subscribers
(in thousands) (in thousands)
North America $ 125.3 $ 125.3 31.4 2,186.9 2,450.7 $ 51.0 $ 51.0 7.3 548.0 535.4
CE 53.5 57.5 14.1 998.5 1,088.3 8.2 8.9 1.3 95.7 101.1
UK 7.8 8.0 2.6 179.7 206.0 4.4 4.6 0.9 65.3 64.1
Other (1) 4.9 5.2 1.1 76.0 81.4 1.9 2.0 0.2 18.5 18.2
Total $ 191.5 $ 196.1 49.2 3,441.1 3,826.6 $ 65.5 $ 66.4 9.7 727.4 718.8
% Change Q1 2022 vs. Q1 2021
North America (5.1 %) (5.1 %) (6.1 %)
(6.3 %) (6.8 %) (7.1 %) (7.1 %) 9.0 % 12.3 % 1.1 %
CE (9.2 %) (2.3 %) (9.3 %) (5.8 %) (12.1 %) (24.8 %) (19.1 %) (13.2 %) (20.1 %) (9.1 %)
UK (20.4 %) (18.1 %) (23.2 %) (23.5 %) (22.9 %) (14.5 %) (11.9 %) (15.4 %) (26.2 %) (12.3 %)
Other (1) (6.9 %) (1.4 %) (0.2 %) 2.8 % (0.3 %) (31.6 %) (27.7 %) (27.0 %) (21.9 %) (28.2 %)
Total (7.1 %) (4.8 %) (8.0 %) (7.1 %) (9.3 %) (11.2 %) (10.0 %) 1.5 % 1.0 % (2.8 %)
Note: Totals may not sum due to rounding.
(1) Represents Australia, New Zealand and emerging markets operations and
franchise revenues.
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--------------------------------------------------------------------------------North America Performance
The decrease inNorth America revenues for the first quarter of fiscal 2022 versus the prior year period was driven by a decrease in Subscription Revenues and, to a lesser extent, a decrease in product sales and other. The decrease in Subscription Revenues for the first quarter of fiscal 2022 versus the prior year period was driven by both a decrease in Digital Subscription Revenues and a decrease in Workshops + Digital Fees. Subscription Revenues were negatively impacted by both the lower number of Incoming Subscribers at the beginning of the first quarter of fiscal 2022 versus the beginning of the first quarter of fiscal 2021 and the recruitment decline during the first quarter of fiscal 2022 as compared to the prior year period. This decline in recruitments was driven primarily by worsened consumer sentiment in the current environment. The decrease in North America Total Paid Weeks for the first quarter of fiscal 2022 versus the prior year period was driven primarily by both the lower number of Total Incoming Subscribers at the beginning of the first quarter of fiscal 2022 versus the beginning of the first quarter of fiscal 2021 and lower recruitments for the first quarter of fiscal 2022 versus the prior year period. The decrease inNorth America product sales and other for the first quarter of fiscal 2022 versus the prior year period was driven primarily by a decrease in product sales, including e-commerce.
Continental Europe Performance
The decrease in Continental Europe revenues for the first quarter of fiscal 2022 versus the prior year period was driven by a decrease in Subscription Revenues and, to a lesser extent, a decrease in product sales and other. The decrease in Subscription Revenues for the first quarter of fiscal 2022 versus the prior year period was driven by both a decrease in Workshops + Digital Fees and a decrease in Digital Subscription Revenues. Subscription Revenues were negatively impacted by both the lower number of Incoming Digital Subscribers at the beginning of the first quarter of fiscal 2022 versus the beginning of the first quarter of fiscal 2021 and the recruitment decline during the first quarter of fiscal 2022 as compared to the prior year period. This decline in recruitments was driven primarily by worsened consumer sentiment in the current environment. The decrease in Continental Europe Total Paid Weeks for the first quarter of fiscal 2022 versus the prior year period was driven primarily by both the lower number of Total Incoming Subscribers at the beginning of the first quarter of fiscal 2022 versus the beginning of the first quarter of fiscal 2021 and lower recruitments for the first quarter of fiscal 2022 versus the prior year period. The decrease in Continental Europe product sales and other for the first quarter of fiscal 2022 versus the prior year period was driven primarily by a decrease in e-commerce product sales. United Kingdom Performance The decrease inUK revenues for the first quarter of fiscal 2022 versus the prior year period was driven by both a decrease in Subscription Revenues and a decrease in product sales and other. The decrease in Subscription Revenues for the first quarter of fiscal 2022 versus the prior year period was driven by a decrease in Digital Subscription Revenues and, to a lesser extent, a decrease in Workshops + Digital Fees. Subscription Revenues were negatively impacted by both the lower number of Incoming Digital Subscribers at the beginning of the first quarter of fiscal 2022 versus the beginning of the first quarter of fiscal 2021 and the recruitment decline during the first quarter of fiscal 2022 as compared to the prior year period. This decline in recruitments was driven primarily by worsened consumer sentiment in the current environment. The decrease inUK Total Paid Weeks for the first quarter of fiscal 2022 versus the prior year period was driven primarily by both the lower number of Total Incoming Subscribers at the beginning of the first quarter of fiscal 2022 versus the beginning of the first quarter of fiscal 2021 and lower recruitments for the first quarter of fiscal 2022 versus the prior year period. The decrease inUK product sales and other for the first quarter of fiscal 2022 versus the prior year period was driven primarily by a decrease in e-commerce product sales. Other Performance The decrease in Other revenues for the first quarter of fiscal 2022 versus the prior year period was driven primarily by a decrease in Subscription Revenues. The decrease in Subscription Revenues for the first quarter of fiscal 2022 versus the prior year period was driven primarily by a decrease in Workshops + Digital Fees. Workshops + Digital Fees were negatively impacted by both the lower number of Incoming Workshops + Digital Subscribers at the beginning of the first quarter of fiscal 2022 versus the beginning of the first quarter of fiscal 2021 and the recruitment decline during the first quarter of fiscal 2022 as compared to the prior year period. This decline in recruitments was driven primarily by worsened consumer sentiment in the current environment.
The decrease in Other product sales and other for the first quarter of fiscal 2022 versus the prior year period was driven primarily by a decrease in franchise commissions.
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--------------------------------------------------------------------------------LIQUIDITY AND CAPITAL RESOURCES
Cash flows provided by operating activities have historically supplied, and are expected to continue to supply, us with our primary source of liquidity. We use these cash flows, supplemented with long-term debt and short-term borrowings, to fund our operations and global strategic initiatives, pay down debt and engage in selective acquisitions. In accordance with the terms of the Credit Agreement, we expect to have an obligation to make an excess cash flow prepayment offer currently estimated to be$30.6 million to the term loan lenders during the second quarter of fiscal 2023. We expect to satisfy this obligation with a prepayment no later than the required payment date. We currently believe that cash generated by operations, our cash on hand of approximately$127.6 million atApril 2, 2022 , our$173.9 million of availability under our Revolving Credit Facility (as defined below) atApril 2, 2022 and our continued cost focus will provide us with sufficient liquidity to meet our obligations for the short- and long-term. In addition, if necessary, we have the flexibility to delay investments or reduce marketing spend. We continue to proactively manage our liquidity so we can maintain flexibility to fund investments in our business, honor our long-term debt obligations, and respond to evolving business and consumer conditions. To increase our flexibility and reduce our cash interest payments, we refinanced our then-existing credit facilities and then-existing senior notes inApril 2021 . See "-Long-Term Debt" for additional details on this refinancing. Additionally, we instituted a number of measures throughout our operations to mitigate expenses and reduce costs as well as ensure liquidity and the availability of our Revolving Credit Facility. The evolving nature, and uncertain economic impact, of the current demand environment may impact our liquidity going forward. To the extent that we do not successfully manage our costs, our liquidity and financial results, as well as our ability to access our Revolving Credit Facility, may be adversely affected. As market conditions warrant, we may, from time to time, seek to purchase our outstanding debt securities or loans, including the Senior Secured Notes and borrowings under the Credit Facilities (each as defined below). Such transactions could be privately negotiated or open market transactions, pursuant to tender offers or otherwise. Subject to any applicable limitations contained in the agreements governing, or terms of, our indebtedness, any such purchases made by us may be funded by the use of cash on our balance sheet, the incurrence of new secured or unsecured debt, the issuance of our equity or the sale of assets. The amounts involved in any such purchase transactions, individually or in the aggregate, may be material. Any such purchases may equate to a substantial amount of a particular class or series of debt, which may reduce the trading liquidity of such class or series.
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