WW International Inc., the parent company of the popular weight-loss program Weight Watchers, has announced a weaker sales forecast for the first quarter of 2023. Additionally, the company stated that its sign-ups were down this year in a January earnings call. The report came out shortly after the Wall Street Journal reported that WW would acquire telehealth platform Sequence for $106 million. The acquisition will give WW access to a market for drugs that combat diabetes and obesity, including Ozempic and Wegovy. The company has confirmed the deal.
Shares of WW rose 8% after hours on Monday, following the release of the earnings report. WW reported a net loss of $32.5 million in the fourth quarter of 2022, compared to a profit of $29.9 million in the same quarter of the previous year. Revenue fell 18.8% to $223.9 million, compared to $275.8 million in the fourth quarter of 2021. Analysts expected a GAAP net loss of 11 cents per share on $225 million in sales, according to a FactSet poll. Instead, WW reported sales of $223.9 million. End-of-period subscribers fell 14.9% in the fourth quarter, with a notable drop in the company’s digital business.
Weaker First-Quarter Sales Forecast
While FactSet estimated WW’s Q1 sales at $244 million, the company forecast around $235 million. The interim principal financial officer, Heather Stark, attributed this to the intentional shifting of an annual marketing spend from winter to fall. The goal is to focus the spend alongside digital product launches that are expected in the second half of 2023, with an ultimate aim to return the company to growth. Sima Sistani, the chief executive officer, expects trends to improve throughout the year. The company has upcoming launches that will create community and support members while enabling key behaviors, along with its entry into clinical weight management.
Acquisition of Sequence
WW plans to acquire telehealth platform Sequence in the second quarter of 2023. The acquisition follows several years of stumbles for WW, including a failed shift to wellness and personalized dietSponsored Product plans. The company plans to market the platform’s telehealth services on the Weight Watchers app and create exercise and wellness plans for those taking weight-loss drugs like Ozempic, Wegovy, and Mounjaro. Sequence has around 24,000 members, and doctors on the platform can prescribe medications like Ozempic and Wegovy.
Analyst Linda Bolton Weiser of D.A. Davidson noted in December that Sistani had facilitated the company’s turnaround by strengthening the technology and app, improving the connection among users and incentivizing users to track points and weight-loss progress. Bolton Weiser believes Sistani has correctly identified WW’s competitive advantage, which is the community and accountability of WW meetings.
WW’s financial results from the fourth quarter of 2022 showed a decline in revenue and subscribers. However, the company anticipates growth through its marketing strategy and product launches in the second half of 2023. WW’s acquisition of Sequence for $106 million will give it access to the telehealth platform and will enable it to create exercise and wellness plans for weight-loss drug consumers. The acquisition is expected to close in Q2 2023. Sima Sistani, the CEO of WW, believes the company will improve throughout the year, and the market will watch to see if it succeeds.