How WW International is now a full “ecosystem of wellness” for customers

Mindy Grossman, WW CEO, joins Yahoo Finance to discuss the company’s shift and growth into the digital space and the new app-based membership plan, Digital 360.

Video Transcript

JULIE HYMAN: Let's talk about the sort of flow of your business, right, because you all do rely on in-person interactions, to some degree. And obviously, those have not been happening. But you've shifted a lot of your business online. What is that cadence like right now? And how is that going to evolve over the coming months?

MINDY GROSSMAN: Yeah, what's important to note is we have transformed this business over the last number of years to be the leading weight and wellness digital subscription business. And today, 90% of our business is through our digital platforms, both myWW+ and D360, which is our new platform. That's a big change from 2019 of 70-30 and 2020 of 80-20. And so we did end 2020 at 4.4 million subscribers, an all-time high.

But more important, digital growth was at 24%. So it mitigated most of the pressure, as you mentioned, on the studio business, which has been closed significantly in most of the markets. But we were in transition pre-COVID to moving to the significant digital penetration model. And that's what we see in the future of the business.

And the team did an incredible job of managing through that in 2020, and also managing the cost aspect of being able to shrink our studio footprint and give us a very flexible model. So when people are more comfortable and they might want to come back to the Digital + Unlimited Workshops, which, by the way, also include 16 hours a day, seven days a week virtual workshops for those people, we will be able to flex, but in a very strategic way financially, which is why our gross margins have had such a significant increase and have run at about 60% or more over the last three quarters.

BRIAN SOZZI: Mm-hmm Mindy, you mentioned on the studio business-- so at the start of 2020, you had 1,100 studios. And this year, you'll have about 600. So you've taken that store footprint down pretty substantially.

Should investors just be thinking WW is digital first? And then where do you plan to take the store base over the longer term? Do you need these physical locations at 600?

MINDY GROSSMAN: Sure. Now, that was actually a US number. Globally, our studios have come down significantly. In the US, what you were quoting, we now only have about 400 leased studios and about 250 flex studios. That's down from about 2,400 flex and 800 permanent.

So to your point, we are a digital-first subscription business. That is our model with multiple member tiers and other revenue streams. One of the things we're very excited about is we just launched D360, which is our newest membership, vertical, which has all the benefits of myWW+ and the digital platform, but it also has a coach-led 24/7 on-demand content and community experience for the business.

And that's at the mid-price tier. And we are incredibly excited that even prior to any marketing, we have already had over 100,000 sign ups, and it's only available in the UK and US right now, and it'll be rolling out for the balance of the year. More importantly, 30% of the members joining are new and younger, and 40% of the members joining are prior digital members who have upgraded to the new format. So that, we expect to build over the year, and we will continue to see very significant digital growth.

Now to your point on the studios, as I mentioned before, you know, we want to have ultimate flexibility. The idea for us is to meet our members where they are and give them the support that they need, and that is why we have the multiple member tiers. Now to remember, even the studio and workshop members, they use the core digital platform. So really, 100% of our members are part of the digital subscription business.

But we still have 10% who choose to have either a virtual or physical experience. And we will flex when we see people more comfortable, when we can have actually more people in the meeting based on what the parameters are. But again, most importantly, we are a digital-led company, and that's where the growth is coming from.

EMILY MCCORMICK: And Mindy, speaking of growth, there has just been such an explosive consumer demand for health and wellness, for fitness platforms during the course of 2020. And I'm wondering as new competitors arise, as gyms start to reopen, what is your customer acquisition strategy going forward to maintain subscriber momentum?

MINDY GROSSMAN: Yeah, well, what we've seen are twofold. One of the other things I'm very excited about is our retention is at an all-time high. And a significant part of that is the tremendous engagement that we have with our app. We have video fitness in our app with FitOn. We have Mindset with Headspace. We have challenges through our WellnessWins platform. And we now have sleep tracking. So this move for us from not just being the number one weight loss program globally, but now we are a full ecosystem of wellness, so we're really able to provide our members with the entire ecosystem that they can be provided.

JULIE HYMAN: Mindy, great to see you. Thank you so much for being here. Mindy Grossman is the CEO of WW. Those shares, by the way, are up going on 5%, 6% at the moment. Thanks, Mindy.

MINDY GROSSMAN: Always great to see you.