Q4 2020 WW International Inc Earnings Call
Good afternoon and welcome to.
To Ww International fourth quarter of 2020 earnings conference call all.
All participants will be in listen only mode.
If you need assistance please per se.
All conference specialist by pressing the star key followed by Europe.
After today's presentation there'll be an opportunity to ask questions. Please note that this event is being recorded.
Now I'd like to turn the conference over to Ms. Corey.
Ginsberg, Vice President of Investor Relations.
Thank you everyone for joining us today for Ww International fourth quarter, and full year 2020 conference call and about four P. M. Eastern time today, we issued a press release reporting our fourth quarter and full year 2020 results. The purpose of this call is to provide investors with some further details regarding the company's financial results as well as provide.
The general update on the company's progress.
The press release is available on the company's corporate website located at corporate Ww Dotcom.
General industrial materials are also available on the company's corporate website in the investors section under presentations and events.
Filiation of blonde GAAP measures disclosed on this conference call to the most directly comparable GAAP financial measures are also available as part of the press release.
Before we begin let me remind everyone that this call will contain forward looking statements investors should be aware of that any forward looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here. Today. These risk factors are explained in detail in the company's filings with the Securities and Exchange Commission. Please refer to these.
Filings for a more detailed discussion of forward looking statements and the risks and uncertainties of such statements. All forward looking statements are made as of today and except as required by law. The company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information future events or otherwise.
Joining today's call are Mindy Grossman, President and CEO, Nick Hotchkin CLO, Inc.
Any other key CFO I will now turn the call over to Nancy.
Thanks, Corey good afternoon, everyone and thank you for joining us today.
It's hard to believe that it was only a year ago that we were preparing for the finale of the spectacular Ww presents Oprah's 2020 vision tour in Denver on March seven.
At that time, none of us could've predicted that 2020, we changed suddenly and dramatically.
I am extremely proud of the work of our teams around the world of what.
They were able to accomplish in a period of extreme challenges certainly not the year, we had imagined, but nonetheless, a year that showcased our ability to innovate adapt collaborate foster an incredible sense of community and validate the resilience of our teams and our business.
In 'twenty 'twenty, our global teams have a singular focus on delivering a high quality differentiated technology enabled member experience.
Abiding guidance support community and inspiration all.
While ensuring science based proven efficacious and sustainable wellness and weight loss at the time of non members in the world need us more than ever.
Our focus on always on innovation accelerating our digital transformation and reinforcing our position as of technology experience company as well as our member of first mindset will continue to view everything we do and will drive our strategic priorities and performance as we go forward.
Let me highlight our 2020 achievements and performance.
[noise] aggressively responding to the changes in the environment and delivering a 360 degree of holistic member experience through our innovative digital platform virtual contact experiences new virtual workshop formats to meet our members where they are and foster community we were able to.
Two.
Drive membership growth gross.
Gross digital subscribers 24 per cent.
Maintain all time high member retention and engagement.
But e-commerce gross capabilities and product expansion and successfully launched back to back innovations like Ww and my Ww plus both of which have created an entirely new personalized experience for our members.
As a result of these achievements W. W ended 2020 with four point for millions of subscribers up 4% year over year and at an all time of year end high.
We delivered full year revenue of $1 4 billion.
Significantly expanded adjusted gross margin to 60 per cent for the past eight quarters and delivered adjusted EBITDA of 358 million.
By successfully driving strong year over year growth in digital with subscriptions up an impressive 24 per cent and revenues up 21 per cent on a constant currency basis.
We were largely able to offset the significant pressures that COVID-19 had on our workshop business globally.
By actively managing our cost structure, we preserve cash flows and profitability ending 2020 with ample financial flexibility as we navigate what is still an uncertain and dynamic environment.
The political and agile actions of our team made this possible.
The launch of my Ww.
Not only executing the first ever nine city Oprah's 2020 vision tour, but quickly pivoting to a global multi week virtual experience delivering much needed support and inspiration to millions of people around the globe.
So our first ever virtual workshop experience, bringing a new era of coaching and community members.
Adding even more value to the of member experience with more features content personalization and gamification of sleep and hydration tracking fit all workout videos and challenges and even more community enablement in our connect platform.
Integrated all e-commerce platform into our App and expanded consumer product offerings driving over 300% growth in U S E Commerce revenues in 2020.
It's bad start Ww health solutions business through technology investments and new partnerships, such as Cvs and well talk.
Amplified our commitment to inclusion and diversity and founded the healthy living coalition advancing our efforts to democratize wellness and healthy living is a human right.
In 'twenty 'twenty, one we will continue to innovate with a focus on the member experience.
<unk> technology, and personalization and bill as always all the power of community.
The global launch of my Ww, plus our first holistic non food program innovation.
They bring a deeply enriching more interactive and personalized app experience.
Utilizing of personal assessment my Ww plus has been well received by members and with the focus of our winter marketing campaign, which bought this new and unique experience to life.
The announcement of our newest global Ambassador James Gordon was enthusiastically received driving significant media coverage at the start of the year.
And once again for the 11th year in a row Ww is ranked as the number one best diet for weight loss by U S News and World report.
When I came to Ww over three years ago I was confident that we could have greater impact by elevating the brand enhancing and modernizing of digital experience and he bobbing and expanding our expertise and leadership in coach Inc.
Digital 360.
Our new mid tier membership vertical.
An entirely new experience built on the platform of my Ww plus.
Adding of one too many coaching of content experience unlike anything that exists today.
Each of these 60 provides daily inspiration engaging coach live sessions and real time connection delivered in a modern and unique way to an entirely new cohort of inspiring and related Bull coaches, who are featured in our newest campaign assets.
The brain digital 360 day life, our production team and created our librarian of tour and virtual experiences partners with our technology digital product and brand teams together, creating a truly re imagine member and coaching experience.
Digital 360 has been a standout success with over 100000 sign ups of debate.
Have any external marketing and prior to our new TV and digital creative campaign, highlighting D 360 over 30% of the sign ups were new to Ww and over 40 per sample of returning digital members demonstrating the potential as both an upsell and a way to attract new cohorts.
Today day 360 is only available in the U S and UK.
I will discuss later will be rolling out globally, which will be a key lever of growth.
It's acquisition retention and brand evolution.
The same team was also behind our recent life virtual experience Ww presents Oprah's your life in focus.
All of you need we offer this free interactive virtual experience on Saturday February 13th which had over 1 million views and generated nearly 5 billion media impressions hosted by Oprah and featuring Jennifer Garner era Leftish of Folly.
And at first time sit down interview with James Corden discussing his Ww journey and more.
Then kicked off of the pre show featuring our day 360 coaches, allowing attendees to see the unique experience, they're creating every day.
Whereas you of life and focus series will be held quarterly throughout 'twenty 'twenty, one and will showcase the power of the Ww community and create an opportunity to attract new members to the brand.
It is important to remember.
Why all of these innovations have been so critical in Q1, we are comping. The launch of my Ww Oprah was 2020 vision tour, and resulting media Avalanche and an exceptionally strong workshop sign up period.
As a result in Q1 'twenty 'twenty, one we're facing significant headwinds primarily from our workshop business.
As consumers, particularly lapsed members associate this vertical with in person workshops, the majority of which had been closed.
Importantly, however.
Expect to deliver strong digital end of period of subscriber growth in Q1 income.
<unk> digital suite 16.
Looking ahead to our upcoming spring marketing our integrated campaign will highlight inspiring real stories of our members, including James Gordon who will be featured in our television commercials in the U S and UK.
I will speak later on our 'twenty 'twenty, one priorities and future outlook that I will now turn it over to Nick to discuss key highlights and quarter to date operating performance.
Thank you Mindy of.
Business has gone through a significant shift to a subscription model over the past several years.
We expect that by the end of 2021 off.
Subscriber base will be 90 per cent digital.
Digital 360, and 10 per cent workshops.
Includes income and virtual workshops.
A notable shift from a 70 30 mix in 2019, and an 80 515 mix in 2020.
As it relates to revenue a year ago digital subscription revenues were equal to all workshop plus digital revenues.
In Q4, that's all.
Subscription revenues are now more than two ex workshop growing in every geographic market.
We're already way down this path pre COVID-19, but in the past few years, we have been able to significantly accelerate this transition.
Our continued focus and investments in technology is critical to driving our business in 2021 and beyond.
We now have three tech hubs and additional resources around the globe to support Ww products and Tech innovation, all gross levers and all always focus on non op experience.
As it relates to the geographic markets that has been a unique here net members sign up trends have very small of unusual for a number of reasons.
Covid restrictions market, such as the UK, which had a higher penetration of workshops of had greater pressure, whereas Jimmy in France of benefited from a higher mix of digital subscribers.
Opened lockdown rules of also affected consumer behavior.
Especially as it relates to the research mentality at the beginning of the year.
One thing that is true everywhere as the consumers are seeking economic value and trust. So we have worked to test and create relevance of office strategies that emphasizes economic value, but also have the benefit of longer term commitments.
On a global basis average retention remains over 10 months that's all.
Record level of Ww.
Its tone of retention showing continued strength.
Continue to focus on LTV longer term commitment plans introduced Chad.
And not to purchase continues to work well for us with a conversion rate from free trial of a downturn.
<unk> 55 per cent and accounting for about 10% of Memphis sign ups.
The addition of our assessment tool leading to a two week free trial has been a strong recruitment vehicle.
It's important to note that we do not count free trials of sign up sort of subscribers until they come Thats true of paid membership at the conclusion of the pre trial.
And that the purchase of members tend to be per signs Ww members.
<unk> five per cent used 45, all younger.
This all 360 has had a strong stocks and of 29 95 per month.
The premium to our digital membership.
Many of you mentioned have already had over one hundreds of thousands of people sign up for <unk>.
360 in the U S and the UK.
TV and digital campaigns of just launched featuring our new coaches and experience.
We'll be rolling out of <unk> hundred 60 to Germany, France, and Canada during the first half of this year.
Given the successful launch of digital 360.
Trends in our core of 21 95 per month digital offering.
<unk> digital subscriber growth and gross margin improvements in 'twenty and 'twenty one.
I mean, it could be some context on all workshops business that'd be all today versus a year ago, and how we are strategically planning and managing some of the future.
Globally at the beginning of 'twenty 'twenty, we had approximately 16000 coaches and guides.
11, hundreds of Ww branded studios and 10003rd party locations.
2021.
Expect to have roughly 7000 coaches and guides.
600 studios and depending on the countries specific COVID-19 restrictions.
<unk> thousand third party locations.
For additional context within the U S our largest market.
<unk> 2020 with of real estate footprint of 800, Ww brand New studios in 'twenty 303rd Party locations.
2021 we'll have about 400 studios in 253rd party locations.
Unless you can clearly see we've taken aggressive actions to rightsize This segment.
To focus on aligning the workshops cost structure.
Managing for maximum flexibility and leveraging strategic partnerships.
All of our workshop plus digital business has become a smaller part of all makes this high touch premium offering at 44 95 per month.
And an important differentiator.
Portfolio.
For all brands.
Over our history many of millions of people have successfully lost weight by pulling the Ww program the guidance and inspiration from our coaches the workshop of member community.
We all finding new ways to provide the same support.
Virtual workshops, which we launched just a year ago of playing a pivotal role in keeping workshop members engaged the typical virtual workshop.
Approximately 100 members per workshop, and some workshops of becoming micro events, attracting up to 500 of members.
And to provide some perspective in the U S operating virtual workshops 16 hours a day seven days of week to create as much flexibility for our members as possible.
As you know subscriptions represented about 85% of our total revenue.
All of it sells into other.
<unk> represents the remaining 15 per cent.
You know all extremely pleased with the performance of all E Commerce business.
To remind you once in all up less than a year ago.
After significant investments in the integrated experience and product assortment expansion.
It has helped us to offset sales of studios.
Obviously, the primary sales channel was buyer all physical studios.
Good day E Commerce represents 80% of all of product sales. This is 30% of your on a go go against spikes of it in 'twenty and 'twenty. One E. Commerce will continue on a strong growth trajectory.
We continue to build our branded co branded and marketplace part of this portfolio.
And I expect to see continued expansion and collaborations.
As our recently announced collaboration with the vitamin Shoppe.
Finally, I'm also focused on the opportunity in health care in diabetes.
Health solutions business.
To be of key strategic growth lever for us.
Turning to growth through expanding our relationships with employers providers payers and physicians.
Now have plans to develop a dedicated consumer offering specifically designed for people with diabetes.
In the U S alone more than 30 million people are living with diabetes and despite the high correlation between obesity and type two diabetes. This population is under represented.
W of membership base.
I'm thrilled of Doctor of Adam Kaufman has joined Ww to oversee all health care diabetes business.
All right responsibility.
W. W. H S business and partnership expansion areas such as telehealth.
Telemedicine.
In addition to his deep expertise in diabetes, Adam has unique experience and technology to improvement of health care services.
We are building momentum and expect strong Ww HRS revenue growth in 2021 accelerated.
The accelerated growth potential in 2022 and beyond.
Now I'll turn it over to D V discuss all financial performance and outlook.
Thank you Nick as Mindy mentioned, we ended 2020 with a record $4 4 million subscribers up 4% from the end of 2019 with digital subscriber growth of 24% up 20% or more in all of our major geographic markets. We are.
Extremely pleased that the growth in digital subscribers all set this substantial workshop pressure isn't that unusual here.
For the full year 2020 total revenue was $1 4 billion down just three per cent year over year on a constant currency basis. An impressive result, considering that workshop subscription revenue declined over $150 million. In addition to significantly lower even studio product sales due to the COVID-19.
Net.
Digital subscription revenue was up 21 per cent on a constant currency basis for the full year.
Adjusted gross margin was 58, 1% up approximately 250 basis points from the prior year, a testament to quick actions taken on our cost structure.
In addition, the shift to a larger digital subscriber mix benefited gross margin, which is over 80% and our digital business.
Adjusted EBITDA was $358 million in 2020.
The impact of the digital mix shift and our ability to flex the workshop business cost structure to demand.
During Q4, we made the decision to implement additional cost reductions to our global workshop operation by clothing certain of our fixed locations.
As a result of our full year 2020 of restructuring charge with $33 1 billion all from our prior estimate of $22 5 million.
Incorporating the 63 negative impacts of restructuring and other one time items full year 2020, GAAP EPS was $1 seven.
Turning now to our outlook as Mindy highlighted prior to the impact of Covid in mid March of 2020, we had an exceptional start last year. We just launched a new food program had significant media of momentum from over 2020 vision tour and strong member sign ups in both workshop and digital.
In that context for the first quarter of 2021, we expect revenue to decline compare and people of record revenue quarter. In Q1 of 2020, primarily driven by our workshop business, which we expect to be down approximately 50% year over year end of nonrecurring $16 million.
Revenue benefit we had in 2020 subdivision tour.
As a result, we expect Q1 total revenue decline in the mid to high teens.
Gross margins, however are expected to increase over 500 basis points benefiting from the growth in digital subscribers.
Rest of cost management efforts in our workshops.
In the absence of costs related to the 2020 vision tour.
Due to the downsizing of our studio footprint, we anticipate taking an $18 million restructuring charge in 2021 with the majority of them falling in Q1.
Marketing and G&A are expected to be relatively in line with Q1 2000 twenty's level.
Given all of these factors and excluding the impact from restructuring charges. We expect Q1 adjusted operating income to be down from last year of 25 million, leading to Q1 operating income in the low single digit millions.
And just a few short weeks, we will begin to anniversary of the negative effect of Covid has had on our business per.
Typically with regard to its impact on workshop.
Looking beyond Q1, we expect Q2 to Q4 to deliver strengthening results on a year over year basis.
Therefore, our objective for 2021 is to meet if not exceed full year 2020 revenue and adjusted operating income.
We expect to see strong year over year member sign up growth starting in the last few weeks of Q1, therefore for the remaining nine months of the year in aggregate, we expect to returns of year over year revenue and earnings growth.
We expect this will be led by continued revenue and subscriber growth in our digital business accelerated quite a success of D 360, and a strong spring marketing campaign.
We also expect that year over year sign ups in our workshop business will turn positive and will build over time as consumers get more comfortable returning to an in person environment.
In addition to having access to all limited virtual workshop.
We expect to expand gross margin by over 200 basis points for the full year driven by strong digital growth.
We will continue our focus on right sizing our cost structure throughout the organization. However, please note that in 2020 G&A benefited from $25 million in temporary reductions in compensation.
As we demonstrated in 2020, we will be responsive to an evolving environment and will balance cost discipline with investments.
Best position Ww for gross in 2022.
Turning to our capital structure and cash priority at year end 2020, we had approximately 160 $66 million in cash and an undrawn revolver.
We ended the year with a net debt to EBITDA leverage ratio of three seven times or 2.8 times Levered all have first lien debt phases.
Reflecting the current interest rates on our debt at this time, our full year interest expense is expected to be $111 million.
The strength of our balance sheet and dependent on market conditions, we are evaluating opportunities to re price our debt in the near term.
For illustration purposes of 100 basis point reduction in our blended interest rate would equate to $15 million in pre tax savings annually.
Excluding the impact of restructuring charges on our P&L, we expect our full year tax rate to be approximately 24%.
Which assumes no changes to the current statutory rate.
Capex, primarily driven by tech spend and capitalized software is anticipated to be in of $40 million range. In 2021, DNA is expected to be $52 million.
In addition to investing in technology, and digital product resources, and talent, which fueled of future growth of the business. We will continue to evaluate potential tuck in acquisitions of technology company. We are also seeing opportunities for acquiring franchise territory and are in discussions with several franchisee.
In summary, we believe we were focused on the right initiatives to fuel long term growth of revenue and earnings drive strong cash generation and maximize financial flexibility.
I will now turn the call back to Mindy.
Thanks Amy.
A day Ww is the leading weight loss and wellness digital subscription platform with multiple membership verticals and revenue streams, creating a healthier more profitable and more sustainable business model.
It was clear pre COVID-19 and even more so given what we've experienced over the past year that the world needs health and wellness now more than ever before we are singularly focused on making Ww V weight loss of wellness partner of choice for people families communities. The world of course every month.
Consumers are seeking solutions, but they are looking for more than tactical tools. They are looking for coaching community personalized solutions and connection we have reflected this in our marketing our technology experience our platform engagement and our programmatic offerings.
To achieve these objectives, we have established a culture of rigorous prioritization focus of our efforts and resources on the initiatives in 'twenty 'twenty, one that will have the greatest impact for today and for the future.
Two that we are focused on the following key priorities first the member experience investments in our App experience and an always on innovation roadmap to give our members of the intuitive at personalized experience that they need.
This is key to both of recruitment pathway and increase retention.
From the moment of consideration to our assessment Onboarding and ongoing engagement, we will continue to innovate and invest in the technology to create a frictionless and differentiated digital experience.
Our building of new data platform and proprietary dashboard to measuring guide everything from the efficacy of Onboarding to habit formation to greater personalization enhanced discovery ability and ultimately expanding L. T V.
These proprietary engagement Kpis look at our member of cohorts at an entirely new way instead of grouping them by demographics focusing on their behaviors and then within these behavior driven groups measuring activation of engagement tenure and efficacy to deliver actionable insights into how we can opt in.
<unk> of member experience.
Second digital 360 as of.
I mentioned, we are thrilled with the launch of D 360 in the U S and UK with strong sign ups from new Ww members as well as from returning digital members choosing D 360, as an upsell on her joining.
Vendors are enjoying engaging that our coaches and content, particularly the coach live experiences.
We will accelerate our global rollout for 'twenty and 'twenty, one as well as to continue to optimize the experience and expand and amplify our coaching expertise.
It will be in advance of the relaunch of our one on one platform. However, we will continue to offer the one of them on coaching experience that we have today.
The focus on digital 360 will benefit the entirety of our coaching experiences across digital virtual of wildlife.
Third our 'twenty 'twenty two food innovation.
Our science team are experts and constantly using the best in breakthrough innovation across nutrition behavior change technology, and psychology to constantly identify ways to make our members' success across wellness and weight loss, even more simple more livable more efficacious.
Yes, and more sustainable momentum.
Higher team has never been more excited about of food innovation.
The development process technology and testing is ahead of any other year.
We've had strong consumer feedback and results to date.
I'll leave it will be of significant member recruitment of driver for 2022.
And finally health care and diabetes as Nick mentioned, we have invested in our Ww health solutions business over the past few years, you'll think of an entirely new technology platform, expanding the resources team and talent and advancing relationships with employers providers payers and physicians.
But the opportunity is greater we will be.
Focus on the broader health care market as well as diabetes is a core of Ww vertical offering.
We are thrilled to have doctor out of Kauffmann join our team to lead these efforts, which will include Ww health solutions diabetes and sort.
T J partnerships and telehealth telemedicine and health care of working with the teams globally.
We are confident in our ability to drive revenue and earnings growth over the course of the year, we have an expansive vision and a radical focus.
Combination of which will drive our efforts in sequential progress in 2021 and allow us to deliver multi year growth and profit objectives as well as on our global impact and improving People's lives through their partnership with Ww, Inc.
Loathing this past year has reinforced our vision and belief in the strength of our new business model. The discipline that we've applied to our investment thesis and the talented team that we've cultivated.
Maximize our opportunity and solidify our path for value creation and growth with that I will now take your questions.
I'll begin the question and answer session.
Good question you May Press Star then one of you touched on at all.
Using a speakerphone please pick up your handset before pressing the keys with all.
All of your question. Please press Star then two.
At this time of pause momentarily to assemble our roster.
First question come from stuff with me.
Jefferies. Please go ahead.
Thank you good afternoon, everyone I mean of a couple of questions. The first is actually many of your comments at the end I think you mentioned confidence in sales and EPS growth this year.
Maybe we can contrast that a bit to the guidance, which implies kind of of stable rate.
Maybe share with us a little bit about where you see some of the upside potential coming and then if you could just walk us through the first quarter again, I think you mentioned workshops down 50%.
And the digital business, but maybe help us think through the composition of the start to the year and then how you expect that aren't where that waterfall to progress as the year of progressive. Thank you Omar.
Sure I think the first thing I would say is this is definitively not typical year in terms of a normal arc of seasonality because of Covid. So you're gonna have to look at it a little differently.
And so what what we were articulating is that particularly on the studio side of the business because at the beginning of 2020, we had very strong studio sign ups, particularly in that first quarter and that's what we are accomplishing so even though we.
Mentioned that we will have strong digital growth of the end of Q1, that's where you have for GAAP starting at the back of March you will go into the sequential improvement and cadence of comp, particularly in the digital business. The second piece is I mentioned.
<unk> 16, which is a premium to our digital business.
And to that point right now just in the U S and UK with no marketing efforts whatsoever, we're already seeing over 100000 sign ups. So that will be a trajectory throughout the balance of the year. In addition to our other marketing efforts.
Spoke about our Ww health solutions business and our efforts in that which also does not have the typical cadence.
All of seasonality because it really is based on thousands of.
Lawyers et cetera, so, it's a different cadence of business and with our partnerships with Cvs well.
Well top of adjusting out cast light.
You will be building on memberships over that time.
Dish and you know we did not launch e-commerce in all of our up until March 7th of 2020 and that business is scaling significantly.
As we have more and more of our members and we have more product expansion in the business. So it's why we have been talking about kind of of different curve of trajectory for the year. Then you would traditionally see which is why we feel the revenue and earnings.
Gross over the course of the year is what we're confident there.
Great and if I could follow up on me on one company you just made which is your e-commerce business with inside your App is there an opportunity to develop of third party partnership or a marketplace model, where you feel like you could curate and deliver a selection of products and maybe even services that would be beneficial to your user base that would be.
Sure.
Yeah, I'm really glad you brought that up because of our goal is to be a.
Fully health and wellness operational marketplace. So just to give you of perspective.
You know what when I came into the company basically all of it most if not all of our sales of products where in all our studios.
They werent products that we felt fit the brand so over the course of the time, we got out of 100 per cent of the products we sold.
We launched all of our new products and have been rolling that out while we've rebuilt our e-commerce platform globally.
And that new global platform.
Is what watch March 7th in addition to product expansion.
Currently.
The product Assortments are granted Ww products that we develop source et cetera, we felt a co branded portfolio. So for example, small electrics of dash, our partnership with vitamin shop for supplements and you'll see more co branded and then the third is really built.
Out more of a marketplace.
And you will see a lot more of that as we expand our drop ship capabilities and even potentially other subscription businesses be able to integrate.
Within the App and you know for me coming from a product background and development it's ex.
Sighting to see both the member engagement and engagement in general with what we're doing on the product side.
Great. Thank you very much.
Thank you next question comes from Orange Bank of Morgan Stanley. Please go ahead.
Hi, This is moving on for Lauren just a quick one for me can you provide some color on what youre seeing in the early digital 360 customer behavior of engagement and retention when compared to other core digital are student of member.
Yeah, what we're really excited about is that.
In addition to attracting new audience and really being an upsell for lap digital we are definitely seeing the significant portion of that consumer as under 45 and again that was before we did our heavier marketing that really expose our coaches.
To a significant degree and just one comment on the coaching those coaches, who we developed and identified for D 360, our influences on their own and are creating their own recruitment.
So that's exciting as well and you look at our ability to offer this new vertical which also has margins closer to our digital margins.
This is a very important gross element and lastly for us as a brand that once of many coaching has been part of who we are and now be able to do it through a robust digital platform, where we can integrate content and then.
Lastly, you know the team working with that the coaches all the content, but we are developing content beyond that to create greater engagement. So for example, we have walk towards with people like Oprah signs of grouped Oh, Matthew Mcconaughey. So there's a very highly engaged.
Our satisfaction scores are very high which is what's giving us the confidence to be very aggressive on both the rollout and the marketing.
Yeah, that's gonna catch us at sort of excited about the D 360 launch and with somewhat of the attention characteristics to our digital art of 29 95 price. It can have high LTV and all core digital offer.
Great. Thank you.
Thank you and our next question comes from Alex All of Craig Hoagland. Please go ahead.
Yeah.
Great. Thanks, very much for taking my question.
Wanted to ask about.
It seems like you have kind of a once in a lifetime opportunity here to really rebuild the studio business for the modern era oven, but you know you mentioned many of them you definitely different points of distribution of where we could see the meeting taking place are there any other kind of big picture changes that you're envisioning over the next couple of years of as you build that business back.
In terms of the experience and how the workshops are conducted.
Absolutely.
You look at the aggressive changes we made and this is why we wanted to give everybody a global perspective on just how significantly we looked at the business.
Where we are today is it does give us the optionality as we see people come back to react very quickly out of flexible basis. It also gives us kind of give us the ability to pilot.
New experience concepts.
That are very different than what we traditionally had and our branded studio location.
And it also gives us the ability to meld, the virtual and the physical to be able to amplify and service our audience in a very different way. So they could have their local physical studio, but they can also have access to virtual studios with different cohorts and different.
Coaches.
And that's what people are really responding to now obviously in the short term they're closed a lot of our market.
But it's definitely gonna give us as you said all kind of once in a lifetime to reframe. What this entire membership vertical is going to be for the future.
That's very exciting thank you Felipe.
Thank you next question comes from Edward Europe, All Keybanc capital markets. Please go ahead.
All right. This is Brent color on for Ed.
So you kind of year since you've relaunched CTG any thoughts on how it's gone and what you can do to accelerate growth there.
We have all quite.
Opportunity in our consumer products business and the areas that we're very focused on right now or what we call healthy eats which as all of our food products that we have been expanding significantly beyond just snack products as part of products. It.
Coffee products and Youre going of see continues marketplace expansion of their healthy kitchen, which are all are everything from small electrics to kitchen tools and measurement everything having to do with healthy eating.
<unk> Tec and healthy lifestyle, you'll start to see built out and it's way beyond what I would call our scaled businesses.
Other aspects of health Tech and then as I mentioned before really also being able to build out.
The marketplace portion of really good example of what we've done in a partnership I use of vitamin Shoppe, because it's not just about our product creation, yes, we did launch pill packs, both for healthy living as well as heart health, but we're.
Delivering those for commerce, both and vitamin Shoppe digital platform, our digital platform and in their physical locations. We also have ww areas with all of our other products and we have also trained their associates.
For Ww and so we also have the capability of doing sign ups within the store. So what we're trying to do is be creative in these strategic partnerships, which also gives us an opportunity to reach more audience.
Yeah for cooking day, I guess had looked thrilled with the growth in <unk>.
He called me I was looking 2020, we tripled the number of Skus.
So doubled both Europe.
Penetration with our members on our repeat purchase rate, but despite that this is of business, but we feel we're just scratching the surface on the opportunity and that's why they told of gains and strong growth in 'twenty, one and beyond and E Commerce.
Great. Thank you.
Thank you.
Next question comes from Michael Lasser of UBS. Please go ahead.
Hi, This is Mike Swartz on for Michael Lasser, Thanks for taking our questions. One of the key aspects of the Ww story has been an ability to build durable relationships with members over a long period of time, even if they were gas along the way leading to 10 plus year relationships as you begin to targeted younger demographic with digital offerings. Do you think you can create a similar relationship with the.
H corner, even if you don't have the personal connection of peer to peer workshops.
Actually we're already seeing that our digital retention is significant and we've seen an increase and the real key to that is engagement.
And you know everything that we built an integrated from the personal assessment before you joined to being matched to a program to all of the personalization throughout your journey.
As well as building the digital community in all our core platform with connect but also now of a decent.
<unk> with building the coach relationship.
And we've seen retention continued to build across our digital platforms. So that gives us confidence regardless of the age range its been consistent across.
Thank you and it's a quick follow up can you give us a sense about customer acquisition cost of trended over the past year, and whether you're still around that target five to one ratio with the L. T D.
Yeah look at LTV to CAC.
All of it carefully.
Parts of one maintain such a strong part of it.
Our business model very efficient marketing model and teaching of great job.
Tom King of shift from you all.
<unk> two of you shouldn't really fantastic work building out all of our digital marketing strategy also of nice Spike but company in 'twenty one.
Thank you.
Thank you next question from Brian Nagel from Oppenheimer. Please go ahead.
Hi, good evening.
Hi, Brian.
No I think this has been asked before so I apologize, but I just don't want towards Sudan.
With the best of Jamba is on the current trajectory.
Digital subscription growth as it so far here in 'twenty, one and within the parameters.
Parameters of the guidance you gave for Q Q1, how we should think about digital growth there.
Yeah, well, what we spoke to is that we're going to see strong digital growth in Q1.
The pressure is on the studio business.
Yeah.
And then.
As we're tracking right now Europe Europe against the difficult comparisons.
Does that kind of what you've been doing.
Of the business should get better secure coupon progresses.
Absolutely.
So as we mentioned if I can just add lease.
We will begin to comp against the Covid comp in 2020 in just a couple of weeks and then do you had mentioned that we had of we had a record quarter in Q1 of 2020 with strong workshop and digital sign up plus the all provision tour and a strong March.
<unk> campaign, and so we are seeing.
Parrott of pressure to our peak Q1 performance and so we are guiding revenue down in Q1 in the mid to high teens, but we do expect revenue and earnings growth from Q2 to Q4 in the aggregate as we move past fees that's tough.
And you will still see digital subscribers growth healthy digital subscriber growth at the end of Q1.
Got it okay. Thank you for the second of I guess, all the longer term in nature, but maybe more of a predict you talked about you just talk for a while the business of shifting to digital and then you also have this shift happening with Europe.
The legacy studio business going to virtual and physical how should we think about it as that transitions against hopefully a backdrop of the COVID-19 headwinds are abating, but how should we think about just the expenses locations of the deposit expense implications of that.
Well actually and I'll, let Nick go into it in more detail, but the actions we took all.
On the right sizing of the studio has given us tremendous flexibility to be able to respond to what we're seeing in consumer behavior, which also gives us the opportunity to improve margins in that segment of the business, albeit it's a small or a portion of the business.
And the digital on day 360 yards of significantly higher margin.
That's still price because lots of pure play should.
Today, you're looking in.
In many countries.
Like UK, France.
Canada of Cdos onto open line.
None of us so it's really tough and that's why the shift to virtual workshops has been so essential to keep our members.
Engage post COVID-19 as people become more willing to.
Meet in person.
The wonderfully flexible Oh workshop no cost per se.
Today, obviously with social distancing.
About 10 to 12 people and all.
Location, even windows open we can quickly.
Increased capacity both of them are remaining 400 locations in the United States and asked US to go apps, which are very cost effective to meet demand.
Okay.
Yeah.
Thank you next question is from Linda Bolton Weiser of D. A Davidson. Please go ahead.
Okay.
Thanks, So I guess, we're up to the point here, where it's a year in diet season, 'twenty 'twenty, two where we would have a major program innovation.
Is that something you are planning for is there any color you can give us on the magnitude of that coming up for the next diet season. Thanks.
Yeah.
'twenty 'twenty.
Two innovation that is launching.
I tried to express.
Outside of it.
It was about it based on what we're seeing.
It's very innovative very breakthrough and even in early results. So we felt really good going into 2020 and as you know.
We launch at the end of 'twenty and 'twenty, one so we'll be able to be able to have benefits from that as well, but it's very strong.
Thanks, and I just wanted to clarify too that I understood. What you said about the cadence of seasonality or are you, suggesting that subscribers could actually grow sequentially. As we go through the year of will we still end the year with subscribers below the first quarter level.
But what what what you're going to see a sequential improvement quarter by quarter. So we're going to see the reverse I'm, calling it more of a COVID-19 year that traditional.
Seasonality, yes, you will see growth sequentially over the course of the year, yes.
Okay. Thanks very much.
Thank you next question Inc.
From Goldman Sachs. Please go ahead.
Okay.
Hey, good evening folks.
Hi.
Thank you first of all of them yet so I guess, a couple of questions I want to come back to the expectation of them all.
Of the B B.
The typical slope.
But first and foremost clarity on the first quarter.
Is it sort of back of the envelope on walking into a walking back to it.
Applied digital whereas figure of around $200 million.
Does that.
Does that strike you as sort of reasonable and B what does it imply in terms of recruitment for digital it looks like youre carrying over a fair amount of sub growth.
Degree of subscribers and that would be one of the weakest one of the it would be absolutely the weakest of sequential growth figures, we've seen it's a multiple of <unk>.
So to start with just setting expectations on Q1 as I mentioned, we do expect significant headwinds. So so to be clear, we believe that our quarter. One total revenue will decline in the mid to high teens.
Driven by workshop until.
So as a result, our digital revenue was expected to be up significantly on a year over year basis.
Yes, you gave of 50% number and then you can back it implies sequentially if not all of it all I just want to make sure because I know you it will be up year on year, because you've finished the year well.
I'm, just trying to make sure I'm sort of.
Studies.
I'm contextualize even spoke correctly.
So.
We actually so so I don't think so right now of Fisher is the short answer.
In order to in order to back into that number. So we are expecting we're expecting gross.
We're not prepared to provide the split at this point, but what we are expecting higher growth higher growth than that absolutely revenue in Q1, because you also have to remember even with a decline what percentage of the overall business. It is.
Yes.
That's helpful. Though you expect you to only type of your year of growth, but real quarter on quarter gross.
That has helped net oh.
Okay.
Wendy.
Guy you can once you would suggest if we use normal seasonality that your revenue is on track to decline 70 per cent or so for the year, you're expecting to define normal seasonality because theyre coming out of Covid of.
I hear you so you're kind of looking for a new all cycle.
All resolution period, which would knock on wood I hope happens what what are the guideposts that you think we should be looking at that to see if this is coming to fruition.
Well similar to how we've looked at the balance of the year. It's also what are we doing that's going to drive that growth is not just of com.
You have my Ww plots and a very strong engagement in our digital business you have the growth and expansion of D 360.
You have of we sat around the comps of studio and then you have growth in other areas of the business.
As commerce and consumer growth with Ww health solution.
So you start building on that quarter by quarter, and you're going to see sequential growth.
Yes.
Those of you mentioned the mix.
Really excited for spring.
Opinion campaign.
<unk> <unk> will be a.
Appreciate it and TV commercials in the U S and the UK. So it's all I think of that it's going to drive a lot of interest in it right.
And just just to circle back to your to your digital question Don.
Don't forget that we added 16 million dollar revenue comp year over year from the Oh provision tour. In addition to that in store product sales will be down significantly with workshop revenue. So I think that's the piece that you're missing.
Yes, 60 million tipping fees. Thank you.
Thank you.
Some of the final question today comes from.
The grim.
Paul.
Please go ahead.
Yeah. Thanks for taking the question you talked about the opportunity on the health solutions business. A few times I'm. Just curious if you can give us some more color on some of the specific goals you have there for fiscal 'twenty, one and what we should be looking for throughout the year to kind of measure of progress on that front. Thanks.
Or I'm, just going to give you some background and I'm going to let Nick talk to it is what all of you.
You know we've had the Ww health solutions business per year I came in and realize this is not the business that is really going to take us into the future.
So the first number of years, which you didn't hear me talk about it very much was completely rebuilding that business. The platform. The technology. That's why we opened the tech hub in Toronto as well as the team as well as what our offering was a cross employers.
Payers physicians et cetera.
And so the platform now that we have.
Is what we can really move forward with the.
So as I mentioned you know, we're now with the Cvs is in the world talks and the other.
Other areas and that is going to build.
Based on the timing of when they sell in over the course of the year so far.
All of good visibility to be confident to say that we're gonna see gross in that business over the course of 'twenty 'twenty. One that can then scale that much more significantly in 2022 based on the timing.
I think I was trying to lease.
Multiple.
Gross levels here are focusing on small and medium size businesses of course, they aggregate is Cvs of all tell us about cash slide that wendy's.
Mentioned.
Physician referral is a strong focus area of also now with.
No Adam Cochrane, joining us to leave the Ww IHS business and.
First of all up to diabetes offering I think of real synergies between health guidance IBD sloping of T shirts bright for this combined business vertical.
Okay, great. Thanks.
Well, well well be able to give you updates on this every quarter, but we are confident in the grocery channel.
This concludes our question and answer session all of it.
Ill turn the conference back over to Mindy Grossman CEO for closing remarks.
Well. Thank you everyone. I think you can tell I'm confident in our strategy as well as the rigorous focus we have on the key initiatives that will have the greatest impact and what we're focused on is the recruitment retention and diversification of our member base.
Liberating strong digital subscriber and revenue growth driver.
Driving total revenue and earnings growth for the balance of 2021 to accelerate growth in 2022 and beyond.
I just wanted to once again, thank our talented teams around the world for their exceptional work during this time.
Has reinforced our leadership of the technology experience company to all.
Of our differentiated member experience at a time when it's more critical than ever. So thank you everyone for joining us today and I look forward to keep you updated throughout the year.
All such as now concluded.
Thank you for attending today's presentation you may now disconnect.
Okay.