Analyst Note| Jaime M. Katz, CFA |
While no-moat WW continues to struggle with profitability, there are signs that the company’s restructuring efforts are beginning to pay off. Total revenue fell 17% year over year to $331.8 million, missing our $350 million forecast, largely impacted by the reduction in workshop subscribers. However, adjusted gross margin increased 700 basis points to 60% from 53%, well ahead of our anticipated 53.5% as the ongoing shift to the higher-profit digital channel persists. WW posted a per share loss of $0.26 (including a one-time $0.06 negative impact), below last year’s $0.09 loss, but ahead of our expected $0.38 loss. Overall, we don’t anticipate any material change to our $35.50 fair value estimate, and view shares as undervalued.