Jabin Bastian
·5 min read
Personal wellness company WW (NASDAQ:WW) reported results in line with analysts' expectations in Q4 FY2023, with revenue down 8% year on year to $206 million. On the other hand, the company's full-year revenue guidance of $845 million at the midpoint came in 8.6% below analysts' estimates. It made a GAAP loss of $1.11 per share, down from its profit of $0.05 per share in the same quarter last year.
Is now the time to buy WW? Find out by accessing our full research report, it's free.
WW (WW) Q4 FY2023 Highlights:
Revenue: $206 million vs analyst estimates of $206.9 million (small miss)
EPS: -$1.11 vs analyst estimates of -$0.16 (-$0.95 miss)
Management's revenue guidance for the upcoming financial year 2024 is $845 million at the midpoint, missing analyst estimates by 8.6% and implying -5% growth (vs -14.1% in FY2023)
Free Cash Flow was -$26.32 million, down from $25.51 million in the previous quarter
Gross Margin (GAAP): 60.6%, up from 58.1% in the same quarter last year
Digital Subscribers: 3.1 million
Market Capitalization: $288.6 million
“2023 was a pivotal year as we began transforming our business for the future. We returned WeightWatchers to year end subscriber growth – for the first time in 3 years - up 7% year-over-year,” said Sima Sistani, the Company’s CEO.
Formerly known as Weight Watchers, WW (NASDAQ:WW) is a wellness company offering a range of products and services promoting weight loss and healthy habits.
Specialized Consumer Services
Some consumer discretionary companies don’t fall neatly into a category because their products or services are unique. Although their offerings may be niche, these companies have often found more efficient or technology-enabled ways of doing or selling something that has existed for a while. Technology can be a double-edged sword, though, as it may lower the barriers to entry for new competitors and allow them to do serve customers better.
Sales Growth
A company’s long-term performance can give signals about its business quality. Any business can put up a good quarter or two, but many enduring ones muster years of growth. WW's revenue declined over the last five years, dropping 10.1% annually.
Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. WW's recent history shows its demand has decreased even further as its revenue has shown annualized declines of 14.3% over the last two years.
We can dig even further into the company's revenue dynamics by analyzing its number of digital subscribers, which reached 3.1 million in the latest quarter. Over the last two years, WW's digital subscribers averaged 7.8% year-on-year declines. Because this number is higher than its revenue growth during the same period, we can see the company's monetization has fallen.
This quarter, WW reported a rather uninspiring 8% year-on-year revenue decline to $206 million of revenue, in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 3.9% over the next 12 months, an acceleration from this quarter.
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Cash Is King
If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
Over the last two years, WW has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 2.3%, subpar for a consumer discretionary business.
WW burned through $26.32 million of cash in Q4, equivalent to a negative 12.8% margin, reducing its cash burn by 525% year on year. Over the next year, analysts predict WW's cash profitability will improve to break even. Their consensus estimates imply its LTM free cash flow margin of negative 3.3% will increase by 3.6 percentage points.
Key Takeaways from WW's Q4 Results
We struggled to find many strong positives in these results. Its gross margin, operating margin, and EPS fell short of Wall Street's expectations. Furthermore, WW's full-year revenue and operating income guidance missed analysts' estimates as the company decided to wind down its low-margin consumer products business. Overall, this was a bad quarter for WW. The company is down 22.8% on the results and currently trades at $2.94 per share.
WW may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
