WW International Inc.(WW) - 2024 Q2 - Quarterly Results

Company Overview and Q2 2024 Highlights This section provides an overview of WW International, Inc., detailing its Q2 2024 financial and operational performance and management's strategic commentary Second Quarter 2024 Key Highlights WW International, Inc. announced its Q2 2024 results, reporting 3.8 million subscribers, $202.1 million in revenues, and a gross margin of 67.9%, alongside a 2024 restructuring plan targeting $100 million in annual cost savings and updated full-year guidance Q2 2024 Key Financial & Operational Highlights | Metric | Value | | :-------------------------- | :------------------ | | End of Period Subscribers | 3.8 million | | End of Period Clinical Subscribers | 81 thousand | | Revenues | $202.1 million | | Gross margin | 67.9% | | Operating Income | $35.9 million | | Adjusted Operating Income | $37.9 million | | 2024 Restructuring Plan Savings | $100 million (annual run-rate) | Management Commentary CEO Sima Sistani emphasized a strategic shift to return to growth by streamlining operations, focusing on expanding care, access, and payment options, and positioning WW as a leading digital health provider, while CFO Heather Stark highlighted a comprehensive cost reduction plan targeting $100 million in annualized savings to maximize profitability - CEO Sima Sistani stated the company is executing a significant streamlining of its operational structure to focus on strategic pillars: expand care, expand access, and expand payment options for members, aiming to return to growth and achieve long-term success as a leading digital health provider of weight health[2] - CFO Heather Stark announced a comprehensive cost reduction plan targeting $100 million in annualized savings, including $20 million already reflected in 2024 guidance, to enhance efficiency, accountability, and speed, and maximize profitability[2] Q2 2024 Consolidated Financial Performance This section details WW International's Q2 2024 consolidated financial results, including revenue, profitability, net income, and EPS, with year-over-year comparisons Summary of Financial Results WW International reported a decline in total revenues and subscription revenues for Q2 2024 compared to the prior year, primarily due to decreases in Digital and Workshops + Digital segments, while operating income improved significantly, net income and EPS saw substantial declines, and gross margin increased due to the discontinuation of the lower-margin consumer products business Q2 2024 Consolidated Financial Performance (YoY Change) | Metric | Q2 2024 (Millions) | Q2 2023 (Millions) | % Change | % Change (Constant Currency) | | :-------------------------- | :----------------- | :----------------- | :--------- | :--------------------------- | | Revenues, net | $202.1 | $226.8 | (10.9%) | (10.6%) | | Subscription Revenues, net | $200.0 | $212.1 | (5.7%) | (5.4%) | | Other Revenues, net | $2.1 | $14.7 | (85.6%) | (85.5%) | | Gross Profit | $137.3 | $143.2 | (4.1%) | (3.8%) | | Adjusted Gross Profit | $137.2 | $143.8 | (4.6%) | (4.3%) | | Operating Income | $35.9 | $26.3 | 36.5% | 37.6% | | Adjusted Operating Income | $37.9 | $33.9 | 12.0% | 12.8% | | Net Income | $23.3 | $50.8 | (54.2%) | (53.8%) | | EPS | $0.29 | $0.65 | (54.9%) | (54.5%) | - Gross Margin in Q2 2024 was 67.9%, up from 63.1% in the prior year, primarily driven by the discontinuation of the lower-margin consumer products business at the end of 2023[4] Detailed Revenue Analysis Total revenues decreased by 10.9% to $202.1 million, with subscription revenues, including $19.7 million from Clinical subscriptions, declining by 5.7%, and other revenues seeing a sharp 85.6% decrease due to the discontinuation of the consumer products business Q2 2024 Revenue Breakdown (YoY Change) | Revenue Type | Q2 2024 (Millions) | Q2 2023 (Millions) | % Change | | :-------------------------- | :----------------- | :----------------- | :--------- | | Revenues, net | $202.1 | $226.8 | (10.9%) | | Subscription Revenues, net | $200.0 | $212.1 | (5.7%) | | Clinical Subscription Revenues | $19.7 | N/A | N/A | | Other Revenues, net | $2.1 | $14.7 | (85.6%) | - The significant decrease in Other Revenues was primarily driven by the discontinuation of the consumer products business[4] Profitability and Margins Gross profit decreased to $137.3 million, but the gross margin improved to 67.9% due to the exit from the lower-margin consumer products business, while operating income increased by 36.5% to $35.9 million, with adjusted operating income rising by 12.0% to $37.9 million Q2 2024 Profitability (YoY Change) | Metric | Q2 2024 (Millions) | Q2 2023 (Millions) | % Change | | :-------------------------- | :----------------- | :----------------- | :--------- | | Gross Profit | $137.3 | $143.2 | (4.1%) | | Gross Margin | 67.9% | 63.1% | 4.8 pp | | Operating Income | $35.9 | $26.3 | 36.5% | | Adjusted Operating Income | $37.9 | $33.9 | 12.0% | - The increase in gross margin was primarily due to the discontinuation of the lower-margin consumer products business at the end of 2023[4] Net Income and Earnings Per Share (EPS) Net income for Q2 2024 was $23.3 million, a 54.2% decrease from $50.8 million in the prior year, with diluted EPS also falling by 54.9% to $0.29 from $0.65, as the income tax benefit significantly decreased from $48.1 million in Q2 2023 to $15.8 million in Q2 2024, influenced by a high negative annual effective tax rate Q2 2024 Net Income and EPS (YoY Change) | Metric | Q2 2024 (Millions/Share) | Q2 2023 (Millions/Share) | % Change | | :-------------------------- | :----------------------- | :----------------------- | :--------- | | Net Income | $23.3 | $50.8 | (54.2%) | | Diluted EPS | $0.29 | $0.65 | (54.9%) | | Income Tax Benefit | $15.8 | $48.1 | (67.1%) | - The income tax benefit in Q2 2024 reflected an unusually high negative annual effective tax rate, driven by a valuation allowance and small pretax loss in the Company's full year fiscal 2024 guidance[4] EPS Comparability Adjustments Q2 2024 diluted EPS included a net positive impact of $0.42 per share, primarily from a $0.44 positive tax impact due to an unusually high negative annual effective tax rate, partially offset by a $0.02 negative impact from restructuring charges, while Q2 2023 EPS included a $0.69 positive impact, mainly from a $0.77 positive tax impact, offset by acquisition transaction costs and restructuring charges - Q2 2024 diluted earnings per share incorporated a net positive impact of $0.42 per diluted share, primarily due to a $0.44 positive tax impact arising from an unusually high negative annual effective tax rate[6] - Q2 2023 diluted earnings per share incorporated a positive impact of $0.69 per diluted share, mainly from a $0.77 positive tax impact, offset by acquisition transaction costs and restructuring charges[6] Q2 2024 Operational Performance This section analyzes WW International's Q2 2024 operational performance, focusing on subscriber trends and paid weeks across its Digital, Workshops + Digital, and Clinical segments Subscriber Trends Total End of Period Subscribers decreased by 6.1% YoY to 3.8 million, with Digital and Workshops + Digital subscribers declining by 4.2% and 21.4% respectively, while Clinical Subscribers surged by 119.8% to 81 thousand, indicating a significant shift in subscriber growth towards clinical offerings Q2 2024 End of Period Subscribers (YoY Change) | Subscriber Type | Q2 2024 (Thousands) | Q2 2023 (Thousands) | % Change | | :-------------------------------- | :------------------ | :------------------ | :--------- | | Total End of Period Subscribers | 3,837 | 4,086 | (6.1%) | | Digital Subscribers | 3,190 | 3,329 | (4.2%) | | Workshops + Digital Subscribers | 566 | 720 | (21.4%) | | Clinical Subscribers | 81 | 37 | 119.8% | - End of Period Subscribers in Q2 2024 were down 6.1% versus the prior year period, driven by declines in the Digital and Workshops + Digital businesses[4] - Q2 2024 End of Period Clinical Subscribers increased 119.8% versus the prior year period[4] Paid Weeks Trends Total Paid Weeks in Q2 2024 were down 4.9% versus the prior year, driven by declines in the Digital and Workshops + Digital businesses, while Clinical Paid Weeks experienced substantial growth, increasing by 205.4% year-over-year Q2 2024 Paid Weeks (YoY Change) | Paid Weeks Type | Q2 2024 (Thousands) | Q2 2023 (Thousands) | % Change | | :-------------------------- | :------------------ | :------------------ | :--------- | | Total Paid Weeks | 50,745 | 53,356 | (4.9%) | | Digital Paid Weeks | 41,979 | 43,246 | (2.9%) | | Workshops + Digital Paid Weeks | 7,682 | 9,755 | (21.3%) | | Clinical Paid Weeks | 1,084 | 355 | 205.4% | - Total Paid Weeks in Q2 2024 were down 4.9% versus the prior year period, driven by declines in the Digital and Workshops + Digital businesses[4] - Q2 2024 Clinical Paid Weeks increased 205.4% versus the prior year period[4] Corporate Initiatives and Outlook This section outlines WW International's corporate initiatives, including its cash position, restructuring plan, and updated full-year fiscal 2024 guidance Cash Position and Restructuring Plan WW International's cash balance stood at $42.7 million as of June 29, 2024, with no outstanding debt under its revolving credit facility, while the company initiated a 2024 Restructuring Plan to streamline operations and optimize its product portfolio, anticipating $12.0 million to $15.0 million in restructuring charges in the second half of fiscal 2024, with an expected $100 million in annual run-rate cost savings - Cash balance as of June 29, 2024, was $42.7 million, with no outstanding borrowings under its revolving credit facility[7] - The 2024 Restructuring Plan is expected to result in $100 million of annual run-rate cost savings related to strategic streamlining of operational structure and cost-savings initiatives[1][7] - The company anticipates recording restructuring charges between $12.0 million to $15.0 million in the aggregate in the second half of fiscal 2024 for the 2024 Restructuring Plan[7] Full Year Fiscal 2024 Guidance The company updated its full-year fiscal 2024 guidance, expecting revenues of at least $770.0 million, projecting an operating loss of at most $180.7 million, but an adjusted operating income (excluding non-cash intangible impairment charges and restructuring charges) of at least $100.0 million Full Year Fiscal 2024 Guidance Update | Metric | Guidance (Millions) | | :-------------------------- | :------------------ | | Revenue | At least $770.0 | | Operating Loss | At most $(180.7) | | Adjusted Operating Income | At least $100.0 | Conference Call Information WW International scheduled a conference call and webcast for August 1, 2024, at 8:30 a.m. ET, where the CEO and CFO discussed Q2 2024 results and answered investor questions, with supplemental investor materials and a webcast replay available on the company's corporate website - A conference call and live webcast were scheduled for August 1, 2024, at 8:30 a.m. ET, featuring CEO Sima Sistani and CFO Heather Stark to discuss the second quarter of fiscal 2024 results[9] - Supplemental investor materials and a replay of the webcast will be available on the Company's corporate website, corporate.ww.com, under Events and Presentations[10] Non-GAAP Financial Measures Disclosure This section explains WW International's use of non-GAAP financial measures, such as adjusted gross profit and operating income, and constant currency reporting, to provide a clearer view of core business performance Explanation of Non-GAAP Measures WW International uses non-GAAP financial measures like adjusted gross profit, operating income, EBITDAS, and Adjusted EBITDAS to provide a clearer view of its core business performance by excluding specific items such as restructuring charges, acquisition transaction costs, and impairment charges, also utilizing constant currency reporting to compare results without exchange rate fluctuations - Non-GAAP financial measures are used to supplement GAAP results, providing useful supplemental information for evaluating business performance and facilitating period-over-period comparisons[11][12] - Common non-GAAP adjustments include excluding the impact of franchise rights acquired impairments, restructuring charges, and acquisition transaction costs[11] - Constant currency information compares results between periods as if exchange rates had remained constant, calculated by using prior-year foreign currency exchange rates for current-year results[11] About WW International & Forward-Looking Statements This section provides an overview of WW International as a human-centric technology company and includes important disclosures regarding forward-looking statements and associated risk factors About WW International, Inc. WeightWatchers is described as a human-centric technology company that offers proven, science-based, clinically effective weight loss and weight management programs, having helped millions adopt healthy habits for six decades by combining technology and community - WeightWatchers is a human-centric technology company powered by proven, science-based, clinically effective weight loss and weight management programs[13] - The company combines technology and community to help members reach and sustain their goals, with a six-decade history of inspiring healthy habits[13] Forward-Looking Statements and Risk Factors The report contains forward-looking statements regarding plans, strategies, and financial performance, which are subject to various risks and uncertainties including competition, subscriber retention, ability to innovate, successful implementation of strategic initiatives, economic conditions, data security, and regulatory changes, cautioning readers not to place undue reliance on these statements - The news release includes forward-looking statements regarding the Company's plans, strategies, objectives, initiatives, roadmap, and prospects, which are based on current views but actual results could differ materially[14] - Key risks and uncertainties include competition from other weight management participants, failure to retain and grow subscriber base, ability to develop new services, and uncertainties related to a downturn in general economic conditions[14][15] - Readers are advised to review the Company's filings with the SEC for detailed risk factors and should not place undue reliance on any forward-looking statements[15] Unaudited Consolidated Financial Statements This section presents WW International's unaudited consolidated financial statements, including balance sheets, statements of operations for three and six months, and cash flows Consolidated Balance Sheets As of June 29, 2024, total assets were $614.3 million, a decrease from $982.0 million at December 30, 2023, primarily driven by a significant reduction in cash and cash equivalents and franchise rights acquired, while total liabilities also decreased to $1,701.5 million from $1,743.1 million, and the total deficit widened to $(1,087.3) million from $(761.1) million Consolidated Balance Sheet Highlights (June 29, 2024 vs. December 30, 2023) | Metric | June 29, 2024 (Thousands) | December 30, 2023 (Thousands) | Change (Thousands) | | :-------------------------- | :------------------------ | :------------------------ | :----------------- | | Cash and cash equivalents | $42,709 | $109,366 | $(66,657) | | Total Current Assets | $88,091 | $179,474 | $(91,383) | | Franchise rights acquired | $128,164 | $386,526 | $(258,362) | | Total Assets | $614,256 | $982,030 | $(367,774) | | Total Current Liabilities | $200,370 | $205,462 | $(5,092) | | Long-term debt, net | $1,428,553 | $1,426,464 | $2,089 | | Total Liabilities | $1,701,539 | $1,743,124 | $(41,585) | | Total Deficit | $(1,087,283) | $(761,094) | $(326,189) | Consolidated Statements of Operations (Three Months) For the three months ended June 29, 2024, net revenues were $202.1 million, down from $226.8 million in the prior year, gross profit was $137.3 million, and operating income increased to $35.9 million from $26.3 million, but net income decreased significantly to $23.3 million from $50.8 million, resulting in diluted EPS of $0.29 compared to $0.65 Consolidated Statements of Operations (Three Months Ended) | Metric | June 29, 2024 (Thousands) | July 1, 2023 (Thousands) | | :-------------------------- | :------------------------ | :----------------------- | | Revenues, net | $202,073 | $226,830 | | Cost of revenues | $64,779 | $83,650 | | Gross profit | $137,294 | $143,180 | | Marketing expenses | $53,696 | $51,119 | | Selling, general and administrative expenses | $47,665 | $65,744 | | Operating income | $35,933 | $26,317 | | Interest expense | $28,577 | $24,075 | | Income before income taxes | $7,434 | $2,762 | | Benefit from income taxes | $(15,835) | $(48,066) | | Net income | $23,269 | $50,828 | | Diluted EPS | $0.29 | $0.65 | Consolidated Statements of Operations (Six Months) For the six months ended June 29, 2024, net revenues were $408.6 million, down from $468.7 million in the prior year, and the company reported an operating loss of $(233.4) million, significantly higher than $(2.3) million in the prior year, primarily due to $258.0 million in franchise rights acquired impairments, leading to a net loss of $(324.6) million, compared to $(67.9) million, and diluted EPS of $(4.09) versus $(0.91) Consolidated Statements of Operations (Six Months Ended) | Metric | June 29, 2024 (Thousands) | July 1, 2023 (Thousands) | | :-------------------------- | :------------------------ | :----------------------- | | Revenues, net | $408,621 | $468,724 | | Gross profit | $275,094 | $262,691 | | Marketing expenses | $143,858 | $139,353 | | Selling, general and administrative expenses | $106,647 | $125,604 | | Franchise rights acquired impairments | $257,988 | $0 | | Operating loss | $(233,399) | $(2,266) | | Loss before income taxes | $(285,020) | $(48,336) | | Net loss | $(324,633) | $(67,851) | | Diluted Net loss per share | $(4.09) | $(0.91) | - The significant increase in operating loss and net loss for the six months ended June 29, 2024, was primarily driven by $258.0 million in franchise rights acquired impairments[19] Consolidated Statements of Cash Flows For the six months ended June 29, 2024, cash used for operating activities increased to $(38.0) million from $(27.1) million in the prior year, cash used for investing activities decreased to $(10.1) million from $(58.0) million, mainly due to lower capital expenditures and no cash paid for acquisitions, and cash used for financing activities increased to $(17.1) million from $(2.3) million, resulting in an overall net decrease in cash and cash equivalents of $(66.7) million, ending the period at $42.7 million Consolidated Statements of Cash Flows (Six Months Ended) | Cash Flow Activity | June 29, 2024 (Thousands) | July 1, 2023 (Thousands) | | :-------------------------- | :------------------------ | :----------------------- | | Cash used for operating activities | $(37,976) | $(27,057) | | Cash used for investing activities | $(10,111) | $(58,023) | | Cash used for financing activities | $(17,132) | $(2,341) | | Net decrease in cash and cash equivalents | $(66,657) | $(86,880) | | Cash and cash equivalents, end of period | $42,709 | $91,446 | - The decrease in cash used for investing activities was largely due to lower capitalized software and website development expenditures and no cash paid for acquisitions in 2024 compared to 2023[21] Unaudited Operational Statistics This section provides unaudited operational statistics for Q2 and YTD 2024, detailing trends in total paid weeks and end-of-period subscribers across various business segments Q2 2024 Operational Statistics For the three months ended June 29, 2024, Total Paid Weeks decreased by 4.9% to 50.7 million, while Total End of Period Subscribers decreased by 6.1% to 3.8 million, with Digital and Workshops + Digital segments seeing declines in both metrics, but Clinical Paid Weeks surged by 205.4% and Clinical Subscribers increased by 119.8% Q2 2024 Operational Statistics (YoY Change) | Metric | Q2 2024 (Thousands) | Q2 2023 (Thousands) | Variance | | :-------------------------------- | :------------------ | :------------------ | :--------- | | Total Paid Weeks | 50,745 | 53,356 | (4.9%) | | Digital Paid Weeks | 41,979 | 43,246 | (2.9%) | | Workshops + Digital Paid Weeks | 7,682 | 9,755 | (21.3%) | | Clinical Paid Weeks | 1,084 | 355 | 205.4% | | Total End of Period Subscribers | 3,837 | 4,086 | (6.1%) | | Digital Subscribers | 3,190 | 3,329 | (4.2%) | | Workshops + Digital Subscribers | 566 | 720 | (21.4%) | | Clinical Subscribers | 81 | 37 | 119.8% | YTD 2024 Operational Statistics For the six months ended June 29, 2024, Total Paid Weeks decreased by 1.7% to 102.5 million, with Digital Paid Weeks seeing a slight increase of 0.3%, while Workshops + Digital Paid Weeks declined by 19.1%, and Clinical Paid Weeks experienced a massive 497.9% increase, with End of Period Subscribers mirroring Q2 trends, showing overall decline but strong Clinical growth YTD 2024 Operational Statistics (YoY Change) | Metric | YTD 2024 (Thousands) | YTD 2023 (Thousands) | Variance | | :-------------------------------- | :------------------- | :------------------- | :--------- | | Total Paid Weeks | 102,527 | 104,308 | (1.7%) | | Digital Paid Weeks | 84,298 | 84,047 | 0.3% | | Workshops + Digital Paid Weeks | 16,106 | 19,906 | (19.1%) | | Clinical Paid Weeks | 2,123 | 355 | 497.9% | | Total End of Period Subscribers | 3,837 | 4,086 | (6.1%) | | Digital Subscribers | 3,190 | 3,329 | (4.2%) | | Workshops + Digital Subscribers | 566 | 720 | (21.4%) | | Clinical Subscribers | 81 | 37 | 119.8% | Reconciliation of Non-GAAP Financial Measures This section provides detailed reconciliations of GAAP to non-GAAP financial measures, including revenues, gross profit, operating income, EBITDAS, and full-year guidance Revenue Reconciliation (Q2 2024) For Q2 2024, total revenues decreased by 10.9% (10.6% constant currency) to $202.1 million, subscription revenues declined by 5.7% (5.4% constant currency), with Digital and Workshops + Digital subscription revenues decreasing, while Clinical Subscription Revenues surged by 159.8% to $19.7 million, and Other Revenues saw an 85.6% decline Q2 2024 Revenue Reconciliation (YoY Change) | Metric | Q2 2024 GAAP (Thousands) | Q2 2024 Constant Currency (Thousands) | Q2 2023 GAAP (Thousands) | % Change (GAAP) | % Change (Constant Currency) | | :-------------------------------- | :----------------------- | :---------------------------- | :----------------------- | :---------------- | :--------------------------- | | Total Revenues | $202,073 | $202,726 | $226,830 | (10.9%) | (10.6%) | | Subscription Revenues | $199,956 | $200,599 | $212,140 | (5.7%) | (5.4%) | | Digital Subscription Revenues | $134,551 | $135,111 | $147,381 | (8.7%) | (8.3%) | | Workshops + Digital Subscription Revenues | $45,682 | $45,764 | $57,167 | (20.1%) | (19.9%) | | Clinical Subscription Revenues | $19,723 | $19,723 | $7,592 | 159.8% | 159.8% | | Other Revenues | $2,117 | $2,127 | $14,690 | (85.6%) | (85.5%) | Revenue Reconciliation (YTD 2024) For the six months ended June 29, 2024, total revenues decreased by 12.8% (12.9% constant currency) to $408.6 million, subscription revenues declined by 4.5% (4.6% constant currency), Clinical Subscription Revenues showed exceptional growth, increasing by 406.8% to $38.5 million, while Other Revenues plummeted by 89.9% YTD 2024 Revenue Reconciliation (YoY Change) | Metric | YTD 2024 GAAP (Thousands) | YTD 2024 Constant Currency (Thousands) | YTD 2023 GAAP (Thousands) | % Change (GAAP) | % Change (Constant Currency) | | :-------------------------------- | :------------------------ | :---------------------------- | :----------------------- | :---------------- | :--------------------------- | | Total Revenues | $408,621 | $408,491 | $468,724 | (12.8%) | (12.9%) | | Subscription Revenues | $404,012 | $403,885 | $423,172 | (4.5%) | (4.6%) | | Digital Subscription Revenues | $272,185 | $272,142 | $296,725 | (8.3%) | (8.3%) | | Workshops + Digital Subscription Revenues | $93,352 | $93,267 | $118,855 | (21.5%) | (21.5%) | | Clinical Subscription Revenues | $38,475 | $38,475 | $7,592 | 406.8% | 406.8% | | Other Revenues | $4,609 | $4,606 | $45,552 | (89.9%) | (89.9%) | Gross Profit, SG&A, Operating Income Reconciliation (Q2 2024) For Q2 2024, adjusted gross profit decreased by 4.6% to $137.2 million, but adjusted gross margin improved to 67.9%, adjusted selling, general and administrative expenses decreased by 22.6% to $45.6 million, and adjusted operating income increased by 12.0% to $37.9 million, with an adjusted operating income margin of 18.8% Q2 2024 Adjusted Profitability Reconciliation (YoY Change) | Metric | Q2 2024 GAAP (Thousands) | Q2 2024 Adjusted (Thousands) | Q2 2023 GAAP (Thousands) | Q2 2023 Adjusted (Thousands) | % Change (Adjusted) | | :-------------------------------- | :----------------------- | :--------------------------- | :----------------------- | :--------------------------- | :------------------ | | Gross Profit | $137,294 | $137,192 | $143,180 | $143,839 | (4.6%) | | Gross Margin | 67.9% | 67.9% | 63.1% | 63.4% | 4.5 pp | | Selling, General and Administrative Expenses | $47,665 | $45,584 | $65,744 | $58,867 | (22.6%) | | Operating Income | $35,933 | $37,912 | $26,317 | $33,853 | 12.0% | | Operating Income Margin | 17.8% | 18.8% | 11.6% | 14.9% | 3.9 pp | Gross Profit, SG&A, Operating Loss Reconciliation (YTD 2024) For the six months ended June 29, 2024, adjusted gross profit decreased by 1.6% to $277.4 million, with an adjusted gross margin of 67.9%, adjusted selling, general and administrative expenses decreased by 8.7% to $101.3 million, and adjusted operating income increased by 2.1% to $32.3 million, despite a GAAP operating loss of $(233.4) million due to impairment charges YTD 2024 Adjusted Profitability Reconciliation (YoY Change) | Metric | YTD 2024 GAAP (Thousands) | YTD 2024 Adjusted (Thousands) | YTD 2023 GAAP (Thousands) | YTD 2023 Adjusted (Thousands) | % Change (Adjusted) | | :-------------------------------- | :------------------------ | :---------------------------- | :----------------------- | :--------------------------- | :------------------ | | Gross Profit | $275,094 | $277,447 | $262,691 | $281,967 | (1.6%) | | Gross Margin | 67.3% | 67.9% | 56.0% | 60.2% | 7.7 pp | | Selling, General and Administrative Expenses | $106,647 | $101,284 | $125,604 | $110,966 | (8.7%) | | Operating Loss | $(233,399) | $32,305 | $(2,266) | $31,648 | 2.1% | | Operating Loss Margin | (57.1%) | 7.9% | (0.5%) | 6.8% | 1.1 pp | - The significant difference between GAAP operating loss and adjusted operating income for YTD 2024 is primarily due to the exclusion of $257.988 million in franchise rights acquired impairments in the adjusted figures[27] EBITDAS and Adjusted EBITDAS Reconciliation For Q2 2024, EBITDAS was $48.3 million, and Adjusted EBITDAS was $50.3 million, up from $49.4 million in Q2 2023, while for the six months ended June 29, 2024, EBITDAS was $(206.6) million, and Adjusted EBITDAS was $59.1 million, down from $60.4 million in the prior year, primarily due to the inclusion of $258.0 million in franchise rights acquired impairments in the EBITDAS calculation EBITDAS and Adjusted EBITDAS Reconciliation | Metric | Q2 2024 (Thousands) | Q2 2023 (Thousands) | YTD 2024 (Thousands) | YTD 2023 (Thousands) | | :-------------------------- | :------------------ | :------------------ | :------------------- | :------------------- | | Net Income (Loss) | $23,269 | $50,828 | $(324,633) | $(67,851) | | EBITDAS | $48,296 | $41,832 | $(206,627) | $26,520 | | Franchise Rights Acquired Impairments | $0 | $0 | $257,988 | $0 | | Adjusted EBITDAS | $50,275 | $49,368 | $59,077 | $60,434 | - The significant difference in YTD EBITDAS between 2024 and 2023 is largely attributable to the $257.988 million impairment charges for franchise rights acquired in 2024[28] Net Debt to Adjusted EBITDAS As of Q2 2024, the company reported total debt of $1,428.6 million and net debt of $1,385.8 million (after deducting cash of $42.7 million), with the trailing twelve months Adjusted EBITDAS at $145.0 million, resulting in a Net Debt to Adjusted EBITDAS ratio of 9.6x Net Debt to Adjusted EBITDAS (Trailing Twelve Months) | Metric | Trailing Twelve Months (Thousands) | | :-------------------------- | :------------------------------- | | Net Income (Loss) | $(369,037) | | Adjusted EBITDAS | $144,998 | | Total Debt | $1,428,553 | | Less: Cash | $42,709 | | Net Debt | $1,385,844 | | Net Debt to Adjusted EBITDAS | 9.6x | Full Year 2024 Operating Income Guidance Reconciliation The full year 2024 operating loss guidance of $(180.7) million is reconciled to an adjusted operating income guidance of $100.0 million by excluding net restructuring charges of $(22.7) million and franchise rights acquired impairments of $(258.0) million Full Year 2024 Operating Income Guidance Reconciliation | Metric | Amount (Millions) | | :-------------------------- | :---------------- | | Operating Loss (Guidance) | $(180.7) | | Net Restructuring Charges | $(22.7) | | Franchise Rights Acquired Impairments | $(258.0) | | Adjusted Operating Income (Guidance) | $100.0 | - The adjusted operating income guidance for full year 2024 excludes significant non-cash intangible impairment charges and anticipated restructuring charges[32]