Q1 2021 WW International Inc Earnings Call
Good afternoon, and welcome to the Ww International first quarter 2021 conference call all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be and opportunity to ask questions to ask a question you May press.
Star then one on your Touchtone phone to withdraw from the question queue. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Cory Kinder VP Investor Relations. Please go ahead.
Thank you to everyone for joining us today for Ww International's first quarter 2021 conference call at about four of five P. M. Eastern time today, we issued a press release reporting our first quarter 2021 results and the purpose of this call is to provide investors with some further details regarding the company's financial risk.
As well as to provide a general update on the company's progress.
The press release is available on the company's corporate website located at corporate at Ww Dotcom supplemental investor materials are also available on the company's corporate website at the investors section under presentations and events and reconciliations of non-GAAP measures disclosed on this conference call to the most directly comparable GAAP financial measures are also available.
And 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 and 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 C O O and Amy O'keefe CFO I will now turn the call over to Mindy.
Thanks, Corey good afternoon, everyone and thank you for joining us today at.
2021 has strong momentum.
And by continued growth and our digital business and the concentrated efforts across the organization to optimize the member experience and streamline our operations and maximize our marketing efforts and builds on the collective power of community to deliver on our strategies across all touch points and the Ww ecosystem.
Today, we are the world's leading weight loss and wellness digital subscription platform with multiple membership verticals and diverse revenue streams, and creating a healthier and more profitable and more sustainable business model. Our continued digital transformation to a personalized technology experience company was clearly evident and all.
First quarter results with all high margin digital membership growth driving performance above our expectations and positioning us for subscriber revenue and profit growth over the balance of 2020 one.
Let me highlight our achievements in the quarter.
He was at end of period of subscribers reached 5 million driven by the success of my Ww plus our first non food innovation.
This is significant as we match the record high we achieved in Q1, 2020. Following the launch of the my Ww food innovation. The sold out Ww presents Oprah's 2020 vision tour and copying strength and both digital and workshops to reach this watermark level, while still operating in a COVID-19 environment.
As a testament to the work of the teams and further demonstrates the resilience of our business model as well as the true demand for Ww at a time when people need of weight loss and wellness partner more than ever.
We achieved year over year digital end of period of subscriber growth of 16% and Q1, reaching a new all time high for digital subscribers of 4.2 million and our seventh consecutive quarter of double digit digital subscriber growth.
Called at the store growth is on top of the 60% digital subscriber growth we delivered in Q1, 2020 demonstrating the continued appeal and the large addressable market opportunity for our digital offerings.
Retention continues at all time high levels of over 10 months and with digital subscribers now at 85% of our member base is clearly evident at the engagement that we are seeing with our digital members is extending our retention levels and will be the driver of further expansion and the future.
Adoption of our new digital 360 membership offering has been strong to remind U D. 360 is our new mid tier membership vertical which provides a wholly unique experience built on the platform of my Ww, plus but adding a one to many coaching and content experience that it's like anything else.
And the market.
We ended Q1 with over 150000, and <unk> hundred 60 subscribers and just the U S and the UK.
And impressive lebel given this new tier didn't fully launch until January and with the recent expansion to new countries marketing efforts are just now starting to ramp up globally.
This completely new and modern way to experience Ww is appealing to new members as well as return and Ww digital members, who are upgrading to this new vertical.
Developed with a focus on of younger and more diverse cohort. We are seeing positive results. In fact, among day 360 sign ups, who are first time members almost 50% are millennials or younger.
And the last few weeks, we introduce D 360 in Germany, France, and Canada and the early response has been strong.
Measuring the engagement of the day 360 experiences and coach interactions has been of valuable and real time opportunity to see what is resonating with members and what will enable them to have greater success.
Our unique coach live experiences are at the core of <unk> hundred 60 and a.
At billing us to build at a library of on demand content that is both highly valuable and scalable.
We believe that day 360 will be a key driver of broadening our reach across new and diverse audiences and helping unlock our potential to inspire and support of millions more people and at a weight loss and wellness journeys as well as provide us with a premium offering to our core digital experience.
Our team is ahead of our targeted efforts to realign the cost structure of our workshops business and have initiatives underway to further optimize this business and expand margins all while continuing to deliver and enhance member experience that builds community.
Even while operating with significant in person capacity restrictions and the U S and most of our international markets still being and locked down for all of our most of Q1, we were able to expand all workshop gross margins. This improvement combined with the strong margins of our digital business drove total company adjusted for <unk>.
Margin of 60% exceeding expectations and demonstrating the increased flexibility of our business model.
It is clear that many members of our craving and person community and are eager to return to workshops as the environment evolves and.
At that for the last two weeks are U S and person weekly workshop attendance surpassed our virtual workshop participation the first time and over a year.
So we truly are meeting all of our members, where they are and providing them with the support that will enable them to have the greatest success fees.
Commerce has continued its strong gross momentum in Q1 with sales increasing over 150% year over year.
Nick will provide more detail on our e-commerce and consumer products gross strategies.
In January we announced our newest global Ambassador James Corden, and addition to driving significant media coverage at the start of the year James has been and incredible partner sharing his journey with Oprah during our February live virtual experience Ww presents Oprah's your life and focus be the love you.
Need which guard at nearly 3 million views and.
And April James appeared at his first series of Ww television commercials speaking to as 20 pound weight loss and the incredible live ability of the Ww program share and his story and a lighthearted and fun way that only James Ken.
And to wrap up the accomplishments once again ww's of finalists for the prestigious Webby Awards for both our App and our social media campaigns.
I will speak more about at our go forward plans expectations and upcoming events and milestones, but will first turn it over to Nick to discuss our operating performance in more detail.
Thank you Mindy I'd like to share some additional color on the performance of all global markets.
The digital business continued to be strong and Q1 with double digit end of period of subscriber growth and each of our major markets.
As you would expect workshop change was still challenged particularly given lockdowns and several countries.
Workshop members sign up trends on new trending positively year over year and Q2 as we cycle against the onset of COVID-19 last year.
The launch of <unk> hundred 60 last month, and Germany, France, and Canada was an important milestone and bringing this new model and tech enabled coaching and speaks to more members worldwide.
Each local market is working and content creation of a centralized <unk> hundred 60 T. The same and internal production team before and Oprah virtual experiences and loss.
She has sold out of really cool.
As of mid tier pricing digital 360 is at a relatively low cost to sort of incremental sign ups. So we believe that at scale. It can be of 60% plus gross margin business.
Focused on ensuring <unk> hundred 60 drive strong engagement efficacy higher revenue per page week and.
Higher subscription lifetime value.
Turning to workshops and our team has done an incredible job and right sizing of the fixed cost structure of our studio footprint and staffing levels to adjust to the current market realities.
And Q1 of workshops business achieved a 31% adjusted gross margin as we continue to make progress from the 27% margin trough and Q3 2020.
Importantly, once we are able to safely reduce social distancing measures, we have the capacity to sort of double the current number of inpatient and attendees before and having a single workshop.
And as the COVID-19 environment is behind us.
And to return and the workshop business.
Ultimately, 40% gross margin level.
As discussed on our last call, we have significantly reduced at Ww brand at studio footprint and <unk>.
Some cases, we were able to renegotiate favorable teams and Keating month to month arrangements.
Four we now expect to have approximately 450 studios and the U S. At the end of 2021, which is up from our prior expectation of about 400.
We are implementing cost effective third party venues for all of workshops with significant capacity for both social distancing and the current and barley and for future expansion.
For example, and Manhattan, we have closed all of our permanent fixed locations and opening of workshops at the Beacon Theater and major hotel and a portion of all Manhattan office space.
The old show at the scale of our U S real estate portfolio restructuring and note that our remaining studios provide in person workshop, all access within a reasonable distance drove a 70% of the U S population.
In addition, we all utilizing cost effective and flexible third parties Jujo ash should provide broader market coverage as demand for and personal workshops with James.
Two of footprint realignment, we have saved about $25 million and rent costs on an annual run rate basis since 2019.
All studios have an average remaining lease life of 19 months and we continue to have opportunities to further optimize our network.
As we highlighted at our February call, we believe our health solutions business will be of key strategic growth level of over the long term.
The business is on track for double digit revenue growth and 2021 and is positioned for accelerated growth in 2020 two as we ramp up with our aggregator partners and our physician referral initiatives.
In addition, we have of clinical trial underway for people with type two diabetes and our team is developing a dedicated consumer offering specifically designed for people with diabetes that we plan to launch during 2022.
Finally, all consumer products business.
Looking back to 2019.
About 85% of our product sales were in studio buyout of workshop members.
And 2021, we expect about 80% of our product sales revenue to be via E Commerce.
Uh huh familiar and Ww members globally have shops, and our E. Commerce platforms already in 2021 purely are over 150% revenue growth and Q1 and also demonstrating the long term opportunity for this business since only about 10% of.
Members of.
Totally purchasing our products online.
Encouragingly approximately 60% of these e-commerce purchases of being made by digital members and this rapid shift reflects the changes we've made to our e-commerce platform.
And at <unk> integration product assortment and member marketing to drive growth and all of all geographic markets.
We are now also adding to our product assortment to the availability of new partner brands on the Ww shops marketplace, where all.
Also focus on expanding the margins about some similar product business through operational improvements, including the addition of drop ship capabilities and optimizing our supply chain or and increasingly e-commerce focused business.
And short Ww is executing well and what continues to be and uncertain environment.
Yeah, and nimbly, and managing our cost structure, while making investments to and to advance our digital transformation and now I'll turn it over to Amy to discuss our financial performance and outlook.
Thank you Nick before I discuss at first quarter financials, I would like to highlight the successful refinancing of our debt maturities, which was completed on April 13th and thank the lender community for their continued support this refinancing has significantly lowered our interest rates, resulting in an annualized savings.
Of nearly $30 million compared to our prior range providing.
Providing us with even greater flexibility and our capital structure now turning to the first quarter at.
Many of you mentioned the year ago, Q1 had exceptional performance fueled by the my Ww food innovation and further amplified by the 2020 vision tour and co.
At escalated at mid March 2020. So we only had a minimal impact on our Q1 of 2020 of resolved at.
As a result going in Q1 of 2021 had a very tough year over year comparison.
In addition, 2020 at a 50 <unk> week that ended on January <unk> 2021.
So looking at the comparable 13 calendar weeks in the two years digital member recruitment, which includes <unk> hundred 60 was up double digits year over year in 2021 on top of significant growth in 2020.
We ended Q1 with 5 million subscribers up 12% from the end of Q4 and in line with Q1 a year ago.
The 16% year over year growth and digital end of period subscribers largely offset the substantial workshop pressures in the continued COVID-19 environment.
The strong digital growth is continuing our mix shift to and increasingly digital first business at.
At Q1, and 85% of our members were digital subscribers.
Total revenue was $332 million down 20% year over year on a constant currency basis, consistent with our expectations.
And primarily reflecting the workshop subscription revenue decline of over $75 million year over year. In addition to significantly lower in studio product sales due to the COVID-19 environment and of $16 million revenue from the vision tour in the year ago first quarter.
This was partially offset by growth and digital subscription revenue, which increased 14% year over year on a constant currency basis in Q1.
Digital subscription revenue is now more than 60% of total revenues.
Adjusted gross margin was 60% up approximately 720 basis points from the prior year due to better than expected cost reductions and productivity in the workshop business.
In addition, the shift to a larger and digital subscriber mix benefited gross margin. This.
And this is the fourth consecutive quarter, where we have delivered an adjusted gross margin of approximately 60% or better.
As Nick discussed, we further reduced our fixed studio footprint and Q1, resulting in a $6 million restructuring charge in the first quarter in part due to better than expected lease exit costs and the closure of fewer locations. We now project workshop restructuring expenses to total of 11.
<unk> million dollars and a year.
Down from our prior expectation of $18 million.
Adjusted EBITDA was $26 million and incorporating the <unk> <unk> negative impact from restructuring and other one time items Q1, GAAP EPS was a loss of 26%.
Turning now to our outlook.
While at continued global economic uncertainty for the full year 2021, we now expect to exceed 2020 revenue and adjusted operating income.
Our Q1 results have us on track to deliver on that objective.
In addition, we expect that our successful refinancing will benefit EPS by <unk> 21 for the full year.
For the remaining nine months of the year and aggregate, we continue to expect to return to year over year revenue and earnings growth with a year over year trends to improve sequentially over the balance of the year.
We expect at the trajectory of end of period subscribers will take a different shape and 2021 compared to historical patterns.
And we further expect that the year over year growth rate in total end of period subscribers will improve sequentially for the balance of the year and at year end subscribers will slightly exceed the Q1 ending level.
The anticipated change in seasonality trend is driven by rebounding consumer sentiment as we head into the summer months.
<unk> recruitment driven by the strong spring campaign.
The early success of D 360, and it's launched into major European markets.
The increase and retention with the mix shift to digital and.
Further support in late Q4 from the launch of the food innovation.
At the core of all of our membership plans as our digital platform and our personalized my Ww plus experience. We expect at end 2021, with 90% of our subscribers being digital including D. 360, a significant shift from 85% at the end of 2020 and 70%.
At the end of 2019.
Digital revenues are expected to be up in the mid to high teens on a constant currency basis for the full year more than offsetting the decline in workshop revenues. Importantly, however, we expect workshop revenues will decline at a decreasing year over year rate sequentially.
Gross margin for the full year is expected to expand by over 250 basis points.
Which is up from our prior estimate driven by the continued mix shift to digital and by cost reductions and workshops that have exceeded our expectations all at a lower restructuring costs.
And as we mentioned on the last call and 2020, G&A benefited from $25 million and temporary compensation reductions that will not recur in 2021 and.
In addition, we are accelerating investment and digital product and technology resources to fuel 2022 gross.
To assist with your modeling of Q2 revenue was expected to be in line with the prior year, which is an improvement from the workshop driven decline in Q1.
Strong continued double digit digital revenue growth plus growth and consumer product sales is expected to offset revenue pressure and the workshop business.
And a reminder of that in 2020 of company's cost savings initiatives at a significant impact on Q2 expenses, particularly and marketing where we reduced spend by approximately 10 million in the quarter.
Expect that marketing and Q2 of 2021 will be approximately $55 million as we focus on capturing the benefit of rebounding consumer sentiment heading into summer.
All maintaining an efficient customer acquisition costs.
Turning to our capital structure and cash priorities at.
Q1 end, we had approximately $113 million and cash and an undrawn revolver.
Recall that a year ago cash balance of 292 million included a full revolver draw of $148 million.
We ended the quarter with a net debt to EBITDA leverage ratio of four times.
Reflecting the new interest rates on our debt our full year interest expense is now expected to be $91 million of $20 million reduction from our prior outlook due to the debt refinancing.
Excluding the impact of restructuring charges on our P&L and now expect our full year tax rate to be approximately 22%, which assumes no changes to the current statutory rate.
Capex, primarily driven by tech spend and capitalized software and.
<unk> to be and the $40 million range in 2020, one and DNA is now expected to be $43 million.
In addition to investing in technology, and digital product resources, and talent, which fueled of future growth of the business.
We'll continue to evaluate potential tuck in acquisitions of technology companies.
Also seeing opportunities for acquiring franchise territories and in Q1.
Wired, our Michigan, and Ontario franchise, which was our largest remaining franchise for $21 million.
In summary.
<unk> above plan in Q1, and are confident and our strategies and initiatives to drive performance and shareholder value in 2021, and the years ahead and will now turn the call back to Mindy.
Thanks, Amy our team has done an exceptional job over the past year and.
And accelerated our digital transformation and restructured our organization to give us greater operational and financial flexibility and focus our investments and kind of initiatives that are important to our members that we have today and that will resonate with the members of tomorrow.
We are confident and our ability to drive revenue and earnings growth for the balance of 2021 and position Ww for accelerated momentum in 2022.
Our Q1 operating and financial performance gives us increased confidence and the values at Ww can deliver at the world's weight loss and wellness program of choice at the World Reopens.
Now into the second year of the pandemic and so.
And certainly continue to feel of the pressures of the current environment, but with increasing vaccine availability and consumers are now experiencing renewed hope and optimism.
<unk> timing of everyone's next normal is and crystal clear and we will certainly vary greatly by geographic market and by individual there was of building eagerness for reconnection and increased focus on health and wellness.
Consistently introduce new marketing creative two out of our campaigns to keep the conversation new at all.
Key messages resonate to the moment at the <unk>.
Consumer is gearing up for the worldly opening and looking to show up as of renewed better versions of themselves.
And to lean into this behavioral shift.
Marketing that motivates inspires salespeople that this is their moment and at Ww is the partner to help them.
At moment.
We are intensely focused on the mindset of of consumers their evolving needs and what resonates and what gives them hope all.
Our next virtual experience with Oprah Winfrey is watching on Saturday may eight.
This special event.
Sort of license focus spring forward stronger is designed to celebrate at empower mothers and along with all parents caregivers and anyone who is forced to set their needs of side. During this time spring forward stronger and lead their best.
All right.
Along with special guests drew Barrymore, and Doctor and need of Phillips, who will also be joined by a special audience and inspiring mothers parents and caregivers focused on reclaiming their health.
He's virtual experiences, which are free and open to all members and nonmembers alike are proving to be at incredible new way to engage with audiences worldwide and the matter that is authentic resident and impactful.
Since launch a year ago. These live virtual experiences with Oprah have resulted in over 5 million views and our most recent event alone generated nearly 5 billion media impressions.
In addition to creating a wealth of unique content. We believe these special events drive incremental engagement interest and increased awareness of Ww as a wellness and weight loss brand.
We continue to focus on our four key priorities for the year.
Briefly touch on recent progress milestones for each.
First continuing to enhance the member experience at.
We know of frictionless and differentiated digital experience leads to even greater members' success longer retention and ultimately will expand subscription lifetime value.
Paywall personal assessment that we launched with my Ww, plus working very well for us and driving sign up conversion.
Continuing to iterate and optimize that experience to further improve its effectiveness and onboard and members and make the experience more personalized and getting new members off to a strong start and our weight loss and wellness journey.
No that member engagement and at first four week correlates to greater weight loss success overall satisfaction and longer retention.
As just one example of how we are focused on making our app experience even more personalized we want every member to feel like Ww has made just for them, making their weight and wellness journey easier.
Focus on and always on innovation, while we continue to build and iterate on the consumer journey.
Second building out digital 360, and setting the new membership vertical up for further growth now that we've launched D 360, and five markets.
And in 'twenty, one we remain focused on further optimizing the experience and amplifying all coaching expertise.
<unk> and community are at the core of our competitive advantage with <unk> hundred 60, I'm confident that with this new cohort of talented and inspiring and related book coaches delivering coaching and of modern and unique way and.
Diversify our member base and eat more people, where they are and build inspired lots and communities.
Third we continue to build momentum and make incredible progress towards the launch of our new 2022, food innovation and most of.
Comprehensive and our history and all.
And nutritional and behavioral science.
Clinical trials are underway and launch and marketing plans are and development.
Take members' success of course wellness and weight loss, even more simple more livable more efficacious and more sustainable and our next food innovation will make our progress.
That much more personalized or.
Our leadership and credibility and science based weight loss and wellness is a key competitive advantage and is a key driver of our members trust and Ww and.
And believe this innovation will be of significant member recruitment driver and 2022.
And for expanding into health care, and diabetes and the broader health care market represents a significant opportunity for ww over the long term.
Focused on developing strategic partnerships across the health care ecosystem with Ww can be offered as a nutrition and behavioral science based weight management and wellness programs.
With these partnerships, we hope to make it even easier for more people to join Ww.
I'm proud of our performance and achievements year to date.
Latest achievement is the efficacy of our science based sustainable weight loss and wellness program that is the foundation of member success.
This is the core value of the incredible trust that our members have and Ww.
As we have said many times before wellness and to the necessity of luxury.
Work and founding the healthy living coalition and alliance for action and solutions focused on improving food systems, and helping close nutrition GAAP that disproportionately impact underserved communities.
Her work and removing barriers to wellness.
501 C III ww good at partnering with organizations such as global citizens.
Focused on advancing our social impact.
Liver and on a global promise to democratize wellness.
Our healthy living coalition members at ship quickly and it's all up to 26 partners with new partners like impossible foods.
Food and Butcher box, having recently joined the HL fees first mobilization campaign to promote STG to advocacy hubs. Good food for all narrative and did in January and resulted in and organically each of over $20 million focusing on the issues of nutrition and security and food Justice and.
In February we launched at Ww Wellness impact award of New initiative that aims to uplift leaders and organizations and democratizing wellness and their communities.
And the U S and acknowledgment of the store health and equities impact and communities of color that were exacerbated by COVID-19.
Our inaugural year committed to exclusively selecting organizations led by and dedicated to the advancement of wellness and black.
At indigenous and communities of color and the.
U S alone we received nearly 400 adopt nominations from our member community and 170 <unk> applications.
I'll be announcing our global finalists on day seven.
Right now the world needs of Ww and more than ever.
As of the past year are taking the toll unhealth.
Erika and psychological associations latest stress and America pole and that since the pandemic started.
And 42% of participants reported of weight gain on average of 29 pounds.
10%, having gained over 50 pounds at the <unk>.
World Reopens Ww will be there to help people all people, who set themselves and get back on a path to live their best healthiest lives at.
At the leading weight loss and wellness digital subscription platform.
Multiple membership verticals and revenue streams, we are positioned to emerge from the COVID-19 environment with an even stronger consumer value proposition and at healthier more profitable and more sustainable business model. Thank.
Thank you for joining us today and were now happy to take your questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you all using a speakerphone. Please pick up your handset before pressing of keys to withdraw from the question queue. Please press Star then two.
First question is from Glenn Santander flow of Guggenheim. Please go ahead.
Oh, yeah. Thanks for taking my question.
Mindy I wanted to talk to you about this the shift towards digital a little bit more could you. Please.
Talk a little bit about the changing demographics of your customer and and the impact of that it may be having on retention rates, but in your prepared remarks, you talked a little bit about this and digital 360, but maybe if you could address at a little bit more detail and how this shift may impact your marketing strategy.
Sure.
So if you look at the core of our business. So as we remember has our digital assets of my Ww plus.
And right now about 15% of our members still want the benefit of community, whether it's virtual or physical but as you can see the digital plus digital 360 gross is obviously at a much greater percentage now of the bench.
If it's of that to your point is we're seeing diversification within our membership base, obviously younger more diverse obviously that has been strategic for us over the course of Oh.
And if you look at our marketing efforts and just to give you of perspective, you heard us.
We have our net virtual tour on Saturday and then we have a whole new suite of marketing assets.
<unk> on Sunday, and you will see that across the balance of the quarter with new creative.
Really kind of addressing what people are feeling right now.
But with a significant amount of the bar and marketing assets now being digital and we have the opportunity to really focus on diverse cohorts.
And that's really what we've been seeing and why we're seeing for example, and D 360, 50% of new members being millennials or younger and we see that trend opportunity certainly to increase.
Okay.
Okay.
Glen.
<unk> and retention.
And.
The other powerful part of the store idea, obviously youll see the quarter end of quarter out of double digit growth.
It does still at this whole sort of subscribers, but the product that we're still at all time high retention levels of over 10 months.
At this mix shift to digital shows.
Members of staying over 10 months to driving fantastic digital member retention and.
And obviously that is a result of heightened engagement because of all of the work that we've done creating a full ecosystem of <unk>.
Experiences within that digital framework, along with our coaching capabilities.
And thanks for that and then maybe if I can just ask a quick follow up to Nick on the health solutions business. Nick I think you said double digit revenue growth and 2021, what do you think that accelerates into 2022 and it wasn't clear to me as to why you expect that inflection next year given that we're still in the first half of 2021. So if you could just a lot.
Right on that of a little bit that'd be helpful. At all and thank you in advance.
And I think part of it and with.
The other.
Post pandemic economy people meeting.
Ww more than ever and that applies to.
Corporate and health care.
Partners to part of it is and some of them at some of our strategies and.
Health solutions.
Long long ago.
And ramp.
If you will typically and Aggregators and physician referral and it takes a little bit of time and ships through all of these scale and then the thing and probably more.
And just excited about the launch of a specific program next year of dedicated consumer offering specifically designed for people with diabetes, and we'll be launching and 22, I think thats and unlock for us.
Okay. Thank you.
The next question is from Sebastian Barbero of Jefferies. Please go ahead.
Hi team thanks for taking the questions.
And I just wonder if she mentioned and virtual subscriber gross collected and early Q2.
And I was wondering if you could talk a little bit more of your expectations for the full year should we expect you know end of period subscribers at the.
The end of 'twenty, one to be higher than that at the end of 2020.
And Justin just to clarify we said that.
Sure.
At year over year has turned to positive.
And Q2, as we first started too and.
<unk> III.
COVID-19 based on those so.
Positive net recruitment trends.
<unk> mentioned that the other financial metrics for.
Sure.
Moving revenue.
Yes.
And through <unk>.
Yeah. The only thing I would add to that is we had peak end of period workshops subscribers at the end of Q1 of 2020, and so we'll still be Comping end of period subscriber. This sequential decline in 2020 and that gap will close over the course of the year.
Got it okay. Thank you for that and then my second one is sort of follow up and the retention.
And trending up over 10 months of couple of years now but.
Can you help me understand of what you're going to take for that to jump to 11 months of more and and how close are we to that level.
Yes look I think the fact that we've gotten to.
COVID-19 and I mentioned, the workshop retention, you've seen it and on numbers was.
And the pressure.
All of a 10 months shows the strength of our attention and the.
Digital business and the power of the engagement.
Our strategy and.
And you could.
I'd say many times before we want to be talking about.
And retention being over 12 months and I think we've got the right sort of long term strategies to continue to a bunch of protection.
Thank you.
The next question is from Alex Fuhrman of Craig Hallum Capital Group. Please go ahead.
Great. Thanks, very much for taking my question.
Wanted to ask about the online marketplace.
It seems like a very new area for Ww and it seems like there's still a lot of room for that platform to be expanded so we'd love. It if you could tell us a little bit more about how you think about adding partners to the marketplace. Both in terms of the brands that you're partnering with as well at the product.
And capabilities of these brands spring and how many new partners and we might expect to see you at this year.
Sure Hi, Alex.
And you know I feel strongly that we have an opportunity both with our.
Product.
And our Ww products are co branded product and in building out of a wellness marketplace.
Presents an opportunity and a member and even non member benefit. So if you look at the progression phase one was launch of 100% new products across all our categories that represent what at healthy living brand is and that we did and <unk>.
2019.
<unk> two was hired the talent redo, our entire technology infrastructure and supply chain to be able to accommodate e-commerce within our digital ecosystem and our App, we launched at March 17th of less.
Last year. So all of the numbers were quoting today really is really the impact that that has had.
Phase three is what we're launching starting now and you will see moving forward, which is and enhanced capabilities to be able to expand our assortments across all three of those categories.
And have drop ship capabilities.
And as well as expanded assortment, we have a significant number of new partners that will be launching over the next week and beyond to help build out the ecosystem and a more efficient and ultimately even more profitable way.
The big opportunity is is yes.
Yes of course building out the marketplace, but second is to be able to have even more of our member base shopping within our ecosystem, because all 5 million and have the app and those capabilities.
So we really think this has benefits.
And that will continue to grow and if you just look at the last quarter with 150% increase and E Commerce and that was before any of these new capabilities that we launched.
Great that's really helpful. Thanks, Andy.
And just sort of just right now lets look at the economics of it and that great wonderful of top clients top line growth and.
And 60% plus gross margin and again, you see quarter after quarter here, but then that e-commerce business delivering margins and.
And the <unk> within that mix.
So kind of attached to it.
Revenue drivers and so you can.
A good gross profit dollar contributor also yeah, and I'll just make one more comment.
We are still in expansion of our own Ww branded products, both product set we develop as well as future licensing discussions of certain categories.
That's great. Thank you.
Okay.
Good afternoon, and this is Spencer hanus on for Greg.
I think you guys mentioned that membership trends are now training positively versus last year for the workshop, but could you talk about how they're trending versus 2019, and then how we're at pure digital subscriber growth trend and quarter to date.
So.
Kind of give a perspective on on that so as we said membership trends digital membership trends have been consistently in the double digits and it continues to build momentum.
On the studio side, what we're saying is we're seeing certainly lapping Q1.
More engagement and more sign up but we're not kind of in a comparison to 2019, but we do have the flexibility to be able to as we said double and double our membership attendance and studios without incurring more costs.
And certainly given the flexibility that we've created over the last year.
Year, we will be able to scale up as we see demand come in and so that's how we're really looking at it.
And you'll see the only thing I would add there is on the workshop side of the business.
Be mindful that around the world many of our workshops are operating at reduced capacity or not open at all and so the compare so the comparison to 2019 and there's still going to be at still gonna be all type for us at this point.
Got it that's helpful and and then on marketing spend you mentioned $55 million and <unk>, but how should we think about the level of marketing spend and the back half to support the unseasonal bump and membership and then just any update on the competitive environment and what you guys are seeing from from Newman and keto out there would be helpful. Thanks.
From a marketing perspective, I mentioned in my remarks that.
Starting in Q2, the aggressive cost savings initiatives really kicked in and the team really stepped on marketing expenses, we expect marketing and that impacts compared to the original plan. In Q2 was $10 million edition Mideast mentioned that we expect to lean into our marketing.
Campaigners and consumer sentiment rebounds.
Over the summer and so at $55 million.
That'll be up in Q2 and in the.
And I expect that to read through on the full year I expect back half levels two to be fairly in line with 2020.
And just to give you a sense, we are certainly maniacally focused on our business, but as well as evaluating the competitive environment at all times.
Health and wellness right now from a <unk>.
Consumer mindset is significant and there is a lot more emphasis certainly across the competitive landscape, but also just and consumer mindset of what they want and so what we're focused on is our differentiation what we're providing.
The science and behavioral science between well behind what we do and the efficacy of that and the power of community. So to <unk> point, we're certainly leaning into the marketing behind that.
And taking advantage of what it is we have to provide to the customer at a time when they really wanted and focus on our differentiation.
Got it thank you.
The next question is from Brian Nagel with Oppenheimer. Please go ahead.
Hi, good afternoon, and thank you for taking my questions.
So wanted to ask a couple of questions with regard to subscribers.
First one I guess I think Amy you probably talk about this but you just.
Would you expect to be at different trajectory here in 2021 net subscribers you outlined the reasons behind that of course.
And I recognize you haven't given longer term guidance, but is this a dynamic and we should expect to persist past 2020, one or is it unique to this year given the unique circumstances of the year.
So Brian Hi, So let me just say that we had and objectives prior to COVID-19 to even out the slope and we had actually been seeing improvement. So if you look at 2019, even into 2020 obvious.
Sleep COVID-19 had an impact.
So if you look at the curve. This year, obviously is going to look very different but our goal is to even out the seasonality and that was a stated goal of starting in 2018.
So that's really our focus going forward is.
To be able to be always on in terms of what we have to offer and a big factor of that was certainly not advocating our leadership and healthy weight loss, but building a much more fulsome ecosystem around year round and wellness and.
And being able to articulate that but yes that sort of goal.
That's really helpful and the second.
And I have.
We've talked a lot about the subscribers and splitting them between.
Digital and it goes lets say at this non non digital.
So if we go looking closer at those numbers and have you seen a trend of three.
The COVID-19 period with our studios closed at some of your non digital members have become digital members or is there a dynamic where the non digital members, who are simply weight potentially waiting for the studios to reopen and almost like the shadow of Cooper.
Subscribers out there.
Okay. So let me let me talk to that one of the things that has obviously retained our digital members significantly if you remember.
And when COVID-19 hit we were able to shift all of our workshops members to virtual workshops. So our existing members have certainly taken advantage of that is obviously you had more of an impact and new sign ups.
Well, we are seeing again all of our members of digital it's just a subset of members also choose the workshop business.
What we are seeing our former digital members upgrading to our new between 60 and memberships and.
And in some cases, some studio members going to digital but we also see as things reopen and opportunity for those members to go back to workshops and so we're agnostic about how somebody wants to have their greatest success, but unquestionably.
And I believe our digital membership is going to scale, just based on consumer behavior and other diversifying our member base significantly will just grow at a faster rate.
All right. Thank you very much.
The next question is from at.
I had worked at room at rumour with Keybanc capital markets. Please go ahead.
Hey, guys. Thanks for taking the question a question on the 360, obviously theres a lot more interactivity lots of options of coach Inc.
And that's what you can provide when a member is really engaging with the platform, maybe how their retention and customer satisfaction and kind of improves and and kind of any initial tweaks that you're thinking of making to the platform to maybe reduce some of the friction.
Sure.
Whole Genesis of between 60, and obviously was to really appeal to.
New audience younger audience millennial.
Audience, and we say built by millennials for millennials and a big part of that was the integration of coaching content and community. So the content and team that actually our team that built the original physical Oprah tour. The virtual tours have been working closely with the product and tech team.
And to build out and always on demand content and capability and to create and develop our coaching community that not only will retain but will also recruit because these are very externally facing coaches as well.
So that's what we're seeing right now obviously, it's new to your point. So we're looking at every opportunity and as we go into new markets to find the experience, we weight or engagement to create greater support but we are very pleased with what we are.
And to date and what it means for the future.
Yeah.
The next question is from Michael Lasser of UBS. Please go ahead.
Good evening, Thanks, a lot for taking my question.
So many of which who can you clarify some of your comments previously about so every studio subscribers as of digital subscribers, but how many of those who were signed up for the digital business are now simply signing up for that day.
Who would of startup of the studio business are now simply starting up of the digital business sits at the overall recruiting overall subscribers are flat.
Does that make sense.
So the net.
Let me just tell you again, there's there has obviously right.
At that studios are close or very limited capacity for quite some time that has affected new studio sign ups and that makes sense.
So clearly we do have lapsed customers who's come in and yes, some of them and signed up to digital in the interim.
A significant portion of our digital sign ups Omar.
Our new sign ups.
And digital and digital 360.
And then we're seeing the upgrade is.
From former digital number upgrading to <unk> suite, 16, and it's a different cohort right and the traditional studio cohort.
Yeah.
We've been talking about a fantastic quarter on quarter of double digit digital subscription growth sorry.
Regardless of what loans to Joe members.
We're waiting for and person to come back so in the meantime at choosing.
And stuff, but during the pandemic have we seen a little bit more switching activity toward.
Workshops to of digital of course rehab.
It's a very small driver of the strong quarter end quarter out of digital subscription growth story and that's.
Not where the gross driver is coming from.
And my follow up question is on gross.
Gross dollars per subscribers, which is still down despite very strong digital growth or maybe because of very strong digital growth and when do you think youre going to see that inflection in Peru stalwart.
Our subscribers number.
So when you think of gross subscriber gross dollars per subscriber and revenue per paid week and Youre right. The mix shifts just just like the impact on our revenue shifting from workshop to digital and has a significant impact.
And revenue per piece of meat.
And candidly I've been very pleased with the revenue for Pete week all.
On a sequential basis.
Given the environment and so I believe that as we continue to see the mix shifts and digital you'll see the revenue per paid week continue to decline slightly but with the launch of <unk> hundred 60, and the mid tier price point, we expect to be able to increase.
That total total digital revenue per piece of weak the other.
The thing that we are seeing is more people signing up for a much longer term plans and that's been very important and positive as well.
Yes and tons of vision.
Economic.
As of.
The business, but by and large.
The company and the LTV standpoint.
LTV given the 80%.
Gross profit of the core digital Linda.
LTV.
During this mix shift.
Is it held pretty steady.
Makes sense.
Last quick question do you have at all.
What do you see.
And these subscribers as a percentage of total digital subscribers could eventually be.
Yeah.
Interesting clearly we just launched in January we're real pleased we think it could be certainly grew.
Greater percentage of the of the business that we're seeing now even in the markets that we launched in January.
We have not done significant marketing and what we're finding we're launching.
But our goal is to have at the much higher.
Part of our digital ecosystem than it is now I don't have an exact number right now, but we're certainly focused on it.
Thank you so much.
This concludes our question and answer session I would like to turn the conference back over to Mindy Grossman for closing remarks.
Thanks to everyone for being here today, so in closing and <unk>.
I just want to reinforce business and strong momentum, we are well positioned to deliver subscriber revenue and profit growth over the balance of and for the full year.
And one of things the exceptional work of our teams around the world around creativity innovation and focus because that's been a central and accelerating our digital transformation all.
Also we continue to focus on the efficacy and the innovation around our science based sustainable weight loss and expansion into wellness because that's truly the foundation of member success, but really heightened around.
Around coaching and community, which really are at the core of our competitive advantage. So as the world Reopens, which we're starting to see the glimmers of as I think you've seen and the market as well, we are ready and focus and motivating and inspiring people worldwide. Because this is their moment and ww.
Is the partner and their wellness journey.
So again, thank you for joining us today, and we very much look forward to keeping you updated throughout the year.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yes.