Weight Watchers International Inc (NASDAQ:WW) Q2 2022 Earnings Conference Call - Final Transcript

Aug 04, 2020 • 05:00 pm ET

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Weight Watchers International Inc (NASDAQ:WW) Q2 2022 Earnings Conference Call - Final Transcript

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Presentation
Executive
Mindy F. Grossman

science-based, affordable and proven wellness and weight loss program that is both digitally-enabled and provides a real human connection.

Our second quarter results underscore the relevance and importance of our value proposition in today's environment as the trusted leader in weight loss and wellness. I am proud and thankful for our talented, dedicated and passionate employees, who put WW members first in everything they do and who have been instrumental both in navigating the here and now and also positioning WW for the years ahead.

We ended Q2 with 5 million subscribers, up 9% year-over-year and a record level for the end of Q2 and practically unchanged from our typical seasonal peak at the end of Q1. This growth is due to strong marketing execution in terms of delivering our message and value proposition to audiences in a way that is both clear and relevant to their needs and across all channels, digital, social, PR and, of course, TV. Due to the resonance of our marketing, we extended our US spring TV campaign into the summer, running both through June and July with good results. Our brand message and value proposition were then further amplified by the four-week virtual experience with Oprah, which resonated with audiences around the world.

Member recruitment trends for digital gained momentum globally over the course of the quarter, bringing digital subscribers to 3.9 million, up an impressive 23% year-over-year. Given the dynamic growth of our digital subscribers in Q2, now about 80% of our members are digital-only and about 20% are studio plus digital. With this shift, we are also seeing a demographic change with 51% of members joining in Q2 being below the age of 45.

In the second quarter, on a constant currency basis, digital revenues were up 15%. This strength was offset by the declines in studio fees and product sales due to studio closures as a result of COVID. In total, revenues were $334 million, down 9% on constant currency. Notably, adjusted gross margin was 60% in Q2, up nearly 200 basis points year-over-year due to the benefit of an increased mix of digital subscribers combined with effective cost management as we reduce our studio footprint. This is the highest adjusted gross margin we have seen in the past eight years. Adjusted operating income margin was 28%, flat year-over-year. This strong operating and financial performance demonstrates the resilience of our business model and provides a solid foundation as we continue to manage through the current environment and position WW for the long term.

On our last earnings call, I highlighted many of the digital features and enhancements we have launched to better serve members and deliver a robust experience. I'm happy to say that these new innovations have resulted in an increase in overall app engagement trends, which as you know, are a key driver of retention and ultimately member success. For example, new features, such as our water tracker have been enthusiastically received with over 2 million WW members tracking