(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of common stock outstanding as of ~~April 28,~~October 27, 2022 was ~~70,331,228.~~70,526,717.

The accompanying notes are an integral part of the consolidated financial statements.

In October 2021, the Financial Accounting Standards Board ~~(the “FASB”)~~ issued updated guidance to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to (i) recognition of an acquired contract liability and (ii) payment terms and their effect on subsequent revenue recognized by the acquirer. The amendments in this update require an acquiring entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The effective date of the new guidance for public companies is for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years. Early adoption is permitted. The new guidance should be applied prospectively to business combinations occurring on or after its effective date. On January 2, 2022, the Company early adopted this updated guidance on a prospective basis, which did nothave a material impact on its consolidated financial statements.

In conjunction with the continued rationalization of its real estate portfolio, the Company has decided to enter into a sublease, which resulted in a lease asset impairment charge of $1,828 that was recognized in general and administrative expenses in the Company's consolidated statements of net income for the three and nine months ended October 1, 2022. The Company expects to begin recording sublease income as of the sublease commencement date in the fourth quarter of fiscal 2022 as an offset to general and administrative expenses.

The Company’s leases have remaining lease terms of 0 to 10 years with a weighted average lease term of 6.99 years as of October 1, 2022.

Supplemental cash flow information related to leases for the ~~three~~nine months ended ~~April 2,~~October 1, 2022 and ~~April 3,~~October 2, 2021 were as follows:

Revenues are recognized when control of the promised services or goods is transferred to the Company’s customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those services or goods.

For Subscription Revenues, the Company can collect payment in advance of providing services. Any amounts collected in advance of services being provided are recorded in deferred revenue. In the case where amounts are not collected, but the service has been provided and the revenue has been recognized, the amounts are recorded in accounts receivable. The opening and ending balances of the Company’s deferred revenues were as follows:

On February 18, 2022, the Company acquired the entire issued share capital of its Republic of Ireland franchisee, Denross Limited, and its Northern Ireland franchisee, Checkweight Limited, as follows:

On August 16, 2021, the Company acquired substantially all of the assets of its franchisee for certain territories in Maine, Weight Watchers of Maine, Inc., for a purchase price of ~~$2,250.~~$2,250. Payment was in the form of cash ($~~1,999)~~1,999), cash in reserves ($~~225)~~225) and assumed net liabilities ($~~26)~~26). The total purchase price was allocated to goodwill ($~~2,153)~~2,153), customer relationship value ($~~56)~~56) and franchise rights acquired ($~~41)~~41). The goodwill will be deductible for tax purposes.

On March 22, 2021, the Company acquired substantially all of the assets of its Michigan franchisee, The WW Group, Inc., and its Ontario, Canada franchisee, The WW Group Co., as follows:

These acquisitions have been accounted for under the purchase method of accounting and, accordingly, earnings of the acquired franchises have been included in the consolidated operating results of the Company since the date of acquisition.

Franchise rights acquired are due to acquisitions of the Company’s franchised territories as well as the acquisition of franchise promotion agreements and other factors associated with the acquired franchise territories. For the ~~three~~nine months ended ~~April 2,~~October 1, 2022, the change in the carrying value of franchise rights acquired was due to the impairments of the United States, Canada and New Zealand units of account as discussed below, the effect of exchange rate changes and the Northern Ireland franchisee acquisition as described in Note 5.

Goodwill primarily relates to the acquisition of the Company by The Kraft Heinz Company (successor to H.J. Heinz Company) in 1978, and the Company’s acquisitions of WW.com, LLC (formerly known as WW.com, Inc. and WeightWatchers.com, Inc.) in 2005 and the Company’s franchised territories. See Note 5 for additional information about acquisitions by the Company. For the ~~three~~nine months ended ~~April 2,~~October 1, 2022, the change in the carrying amount of goodwill was due to the Republic of Ireland franchisee and Northern Ireland franchisee acquisitions as described in Note 5, the impairment of the Company's wholly-owned subsidiary Kurbo, Inc. (“Kurbo”) as discussed below and the effect of exchange rate changes as follows:

Finite-lived franchise rights acquired are amortized over the remaining contractual period, which is generally less than one year. Indefinite-lived franchise rights acquired are tested for potential impairment on at least an annual basis or more often if events so require.

In performing the impairment analysis for indefinite-lived franchise rights acquired, the fair value for franchise rights acquired is estimated using a discounted cash flow approach referred to as the hypothetical start-up approach for franchise rights related to the Company’s Workshops + Digital business and a relief from royalty methodology for franchise rights related to the Company’s Digital business. The aggregate estimated fair value for these rights is then compared to the carrying value of the unit of account for those franchise rights. The Company has determined the appropriate unit of account for purposes of assessing impairment to be the combination of the rights in both the Workshops + Digital business and the Digital business in the country in which the applicable acquisition occurred. The net book values of these franchise rights in the United States, Canada, United Kingdom, Australia and New Zealand as of the October 1, 2022 balance sheet date were $400,092, $19,342, $10,061, $5,753 and $2,141, respectively.

In its hypothetical start-up approach analysis for fiscal 2022, the Company assumed that the year of maturity was reached after 7 years. Subsequent to the year of maturity, the Company estimated future cash flows for the Workshops + Digital business in each country based on assumptions regarding revenue growth and operating income margins. In the Company’s relief from royalty approach analysis for fiscal 2022, the cash flows associated with the Digital business in each country were based on the expected Digital revenue for such country and the application of a royalty rate based on current market terms. The cash flows for the Workshops + Digital and the Digital businesses were discounted utilizing rates which were calculated using the weighted-average cost of capital, which included the cost of equity and the cost of debt.

In performing the impairment analysis for goodwill, the fair value for the Company’s reporting units is estimated using a discounted cash flow approach. This approach involves projecting future cash flows attributable to the reporting unit and discounting those estimated cash flows using an appropriate discount rate. The estimated fair value is then compared to the carrying value of the reporting unit. The Company has determined the appropriate reporting unit for purposes of assessing annual impairment to be the country for all reporting units. The net book values of goodwill in the United States, Canada and other countries as of the October 1, 2022 balance sheet date were $104,019, $38,759 and $13,377, respectively.

For all of the Company’s reporting units tested as of May 8, 2022, the Company estimated future cash flows by utilizing the historical debt-free cash flows (cash flows provided by operations less capital expenditures) attributable to that country and then applied expected future operating income growth rates for such country. The Company utilized operating income as the basis for measuring its potential growth because it believes it is the best indicator of the performance of its business. The Company then discounted the estimated future cash flows utilizing a discount rate which was calculated using the weighted-average cost of capital, which included the cost of equity and the cost of debt.

The Company reviews indefinite-lived intangible assets, including franchise rights acquired with indefinite lives, and goodwill for potential impairment on at least an annual basis or more often if events so require. The Company performed fair value impairment testing as of May 8, 2022 and May 9, 2021, each the first day of fiscal May, on its indefinite-lived intangible assets and goodwill.

In performing its annual impairment analysis as of May 8, 2022, the Company determined that (i) the carrying amounts of its Canada and New Zealand franchise rights acquired with indefinite-lived units of account exceeded their respective fair values and, as a result, the Company recorded impairment charges for its Canada and New Zealand units of account of $24,485 and $834, respectively, in the second quarter of fiscal 2022; and (ii) the carrying amounts of all of its other franchise rights acquired with indefinite-lived units of account did not exceed their respective fair values and, therefore, no impairment existed with respect thereto. In performing its annual impairment analysis as of May 9, 2021, the Company determined that the carrying amounts of its franchise rights acquired with indefinite-lived units of account did not exceed their respective fair values and, therefore, no impairment existed. In performing its annual impairment analysis as of May 8, 2022 and May 9, 2021, the Company determined that the carrying amounts of its goodwill reporting units did not exceed their respective fair values and, therefore, no impairment existed.

When determining fair value, the Company utilizes various assumptions, including projections of future cash flows, growth rates and discount rates. A change in these underlying assumptions could cause a change in the results of the impairment assessments and, as such, could cause fair value to be less than the carrying amounts and result in an impairment of those assets. In the event such a result occurred, the Company would be required to record a corresponding charge, which would impact earnings. The Company would also be required to reduce the carrying amounts of the related assets on its balance sheet.

Based on the results of the Company’s May 8, 2022 annual franchise rights acquired impairment test performed for its United States unit of account, which held 92.7% of the Company’s franchise rights acquired as of the July 2, 2022 balance sheet date, the estimated fair value of this unit of account exceeded its carrying value by approximately 15%. Based on the results of the Company’s May 8, 2022 annual franchise rights acquired impairment analysis performed for its Canada and New Zealand units of account, which held 4.6 % and 0.5%, respectively, of the Company’s franchise rights acquired as of the July 2, 2022 balance sheet date, the estimated fair values of these units of account were equal to their respective carrying values. The above difference or lack thereof between the estimated fair value of the applicable unit of account and its carrying value is referred to herein as the “Annual Impairment Headroom”. As previously disclosed, a change in the underlying assumptions for the United States, Canada and New Zealand could change the results of the impairment assessment and, as such, could result in an impairment of the franchise rights acquired related to the United States, Canada and New Zealand, for which the net book values were $698,383, $34,556 and $3,574, respectively, as of July 2, 2022. Based on the results of the Company’s May 8, 2022 annual franchise rights acquired impairment analysis performed for its remaining units of account, which collectively held 2.2% of the Company’s franchise rights acquired as of the July 2, 2022 balance sheet date, the estimated fair values of these units of account exceeded their respective carrying values by over 100%.

Based on the results of the Company’s May 8, 2022 annual goodwill impairment analysis performed for all of its reporting units, all units, except for the Republic of Ireland, had an estimated fair value at least 35% higher than the respective unit’s carrying amount. Collectively, these reporting units represented 97.4% of the Company’s total goodwill as of the October 1, 2022 balance sheet date. Based on the results of the Company’s May 8, 2022 annual goodwill impairment analysis performed for its Republic of Ireland reporting unit, which holds 2.6% of the Company’s goodwill as of the October 1, 2022 balance sheet date, the estimated fair value of this reporting unit exceeded its carrying value by approximately 14%. Accordingly, a change in the underlying assumptions for the Republic of Ireland may change the results of the impairment assessment and, as such, could result in an impairment of the goodwill related to the Republic of Ireland, for which the net book value was $4,009 as of October 1, 2022.

During the quarter ended October 1, 2022, the Company identified various qualitative and quantitative factors which collectively, when combined with the Annual Impairment Headroom discussed above for the United States, Canada and New Zealand units of account, indicated a triggering event had occurred within these units of account. These factors included actual business performance as compared to the assumptions used in its annual impairment test, the continued decline in the Company’s market capitalization and market factors, including the increase in interest rates. As a result of this triggering event, the Company performed an interim impairment test of these units of account. In performing this interim impairment test as of October 1, 2022, the Company determined that the carrying amounts of its United States, Canada and New Zealand franchise rights acquired with indefinite-lived units of account exceeded their respective fair values. Accordingly, the Company recorded impairment charges for its United States, Canada and New Zealand units of account of $298,291, $13,312 and $1,138, respectively, in the third quarter of fiscal 2022. The preponderance of these impairments was driven by the increased weighted-average cost of capital used in this interim impairment test as compared to the weighted-average cost of capital used in the May 8, 2022 annual impairment test of its indefinite-lived franchise rights acquired, reflecting market factors including higher interest rates and the trading values of the Company's equity and debt.

Based on the results of the Company’s October 1, 2022 interim franchise rights acquired impairment test performed for its United States, Canada and New Zealand units of account, which hold 91.5%, 4.4% and 0.5%, respectively, of the Company’s franchise rights acquired as of the October 1, 2022 balance sheet date, the estimated fair values of these units of account were equal to their respective carrying values. Accordingly, a change in the underlying assumptions for the United States, Canada and New Zealand may change the results of the impairment assessment and, as such, could result in an impairment of the franchise rights acquired related to the United States, Canada and New Zealand, for which the net book values were $400,092, $19,342 and $2,141, respectively, as of October 1, 2022.

On August 10, 2018, the Company acquired substantially all of the assets of Kurbo Health, Inc., a family-based healthy lifestyle coaching program, for a net purchase price of $3,063, of which $1,101 was allocated to goodwill. The goodwill was deductible annually for tax purposes. The Company determined in the second quarter of fiscal 2022 to exit the Kurbo business in the third quarter of fiscal 2022 as part of its strategic plan. As a result of this determination, the Company recorded an impairment charge of $1,101 in the second quarter of fiscal 2022, which comprised the entire goodwill balance for Kurbo.

Aggregate amortization expense for finite-lived intangible assets was recorded in the amounts of ~~$8,174~~$8,347 and ~~$7,998~~$25,282 for the three and nine months ended ~~April~~October 1, 2022, respectively. Aggregate amortization expense for finite-lived intangible assets was recorded in the amounts of $8,032 and $24,066 for the three and nine months ended October 2, ~~2022 and April 3,~~ 2021, respectively.

On April 13, 2021, the Company (1) repaid in full approximately ~~$1,189,750~~$1,189,750 in aggregate principal amount of senior secured tranche B term loans due in 2024 under its then-existing credit facilities and (2) redeemed all of the ~~$300,000~~$300,000 in aggregate principal amount of its then-outstanding ~~8.625%~~8.625% Senior Notes due in 2025 (the “Discharged Senior Notes”). On April 13, 2021, the Company’s then-existing credit facilities included a senior secured revolving credit facility (which included borrowing capacity available for letters of credit) due in 2022 with ~~$175,000~~$175,000 in an aggregate principal amount of commitments. There were 0no outstanding borrowings under such revolving credit facility on that date. The Company funded such repayment of loans and redemption of notes with cash on hand as well as with proceeds received from approximately ~~$1,000,000~~$1,000,000 in an aggregate principal amount of borrowings under its new credit facilities (as amended from time to time, the “Credit Facilities”) and proceeds received from the issuance of ~~$500,000~~$500,000 in aggregate principal amount of ~~4.500%~~4.500% Senior Secured Notes due 2029 (the “Senior Secured Notes”), each as described below. These transactions are collectively referred to herein as the “April 2021 debt refinancing”. During the second quarter of fiscal 2021, thethe Company incurred fees of ~~$37,910~~$37,910 (which included ~~$12,939~~$12,939 of a prepayment penalty on the Discharged Senior Notes and ~~$5,000~~$5,000 of a debt discount on its Term Loan Facility (as defined below)) in connection with the April 2021 debt refinancing. In addition, the Company recorded a loss on early extinguishment of debt of ~~$29,169~~$29,169 in connection thereto. This early extinguishment of debt charge was comprised of ~~$12,939~~$12,939 of a prepayment penalty on the Discharged Senior Notes, ~~$9,017~~$9,017 of financing fees paid in connection with the April 2021 debt refinancing and the write-off of ~~$7,213~~$7,213 of pre-existing deferred financing fees and debt discount.

The Credit Facilities were issued under a credit agreement, dated April 13, 2021 (as amended from time to time, the “Credit Agreement”), among the Company, as borrower, the lenders party thereto, and Bank of America, N.A. (“Bank of America”), as administrative agent and an issuing bank. The Credit Facilities consist of (1) ~~$1,000,000~~$1,000,000 in aggregate principal amount of senior secured tranche B term loans due in 2028 (the “Term Loan Facility”) and (2) ~~$175,000~~$175,000 in an aggregate principal amount of commitments under a senior secured revolving credit facility (which includes borrowing capacity available for letters of credit) due in 2026 (the “Revolving Credit Facility”).

In December 2021, the Company made voluntary prepayments at par in an aggregate amount of ~~$52,500~~$52,500 in respect of its outstanding term loans under the Term Loan ~~Facility~~.Facility. As a result of these prepayments, the Company wrote off a debt discount and deferred financing fees of ~~$1,183~~$1,183 in the aggregate in the fourth quarter of fiscal 2021.

In accordance with the terms of the Credit Agreement, the Company expects to have an obligation to make an excess cash flow prepayment offer currently estimated to be $30,575 to the term loan lenders during the second quarter of fiscal 2023. The Company expects to satisfy this obligation with a prepayment no later than the required payment date.

As of ~~April 2,~~October 1, 2022, the Company had ~~$945,000~~$945,000 in an aggregate principal amount of loans outstanding under the Credit Facilities, with ~~$173,911~~$173,911 of availability and ~~$1,089~~$1,089 in issued but undrawn letters of credit outstanding under the Revolving Credit Facility. There were 0no outstanding borrowings under the Revolving Credit Facility as of ~~April 2,~~October 1, 2022.

All obligations under the Credit Agreement are guaranteed by, subject to certain exceptions, each of the Company’s current and future wholly-owned material domestic restricted subsidiaries. All obligations under the Credit Agreement, and the guarantees of those obligations, are secured by substantially all of the assets of the Company and each guarantor, subject to customary exceptions, including:

The Credit Facilities require the Company to prepay outstanding term loans, subject to certain exceptions, with:

The foregoing mandatory prepayments will be used to reduce the installments of principal on the Term Loan Facility. The Company may voluntarily repay outstanding loans under the Credit Facilities at any time without penalty, except for customary “breakage” costs with respect to LIBOR loans under the Credit Facilities.

Borrowings under the Term Loan Facility bear interest at a rate per annum equal to, at the Company’s option, either (1) an applicable margin plus a base rate determined by reference to the highest of (a) ~~0.50%~~0.50% per annum plus the Federal Funds Effective Rate as determined by the Federal Reserve Bank of New York, (b) the prime rate of Bank of America and (c) the LIBOR rate determined by reference to the cost of funds for U.S. dollar deposits for an interest period of one month adjusted for certain additional costs, plus ~~1.00%~~1.00%; provided that such rate is not lower than a floor of ~~1.50%~~1.50% or (2) an applicable margin plus a LIBOR rate determined by reference to the cost of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs, provided that LIBOR is not lower than a floor of ~~0.50%~~0.50%. Borrowings under the Revolving Credit Facility bear interest at a rate per annum equal to an applicable margin based upon a leverage-based pricing grid, plus, at the Company’s option, either (1) a base rate determined by reference to the highest of (a) ~~0.50%~~0.50% per annum plus the Federal Funds Effective Rate as determined by the Federal Reserve Bank of New York, (b) the prime rate of Bank of America and (c) the LIBOR rate determined by reference to the cost of funds for U.S. dollar deposits for an interest period of one month adjusted for certain additional costs, plus ~~1.00%~~1.00%; provided that such rate is not lower than a floor of ~~1.00%~~1.00% or (2) a LIBOR rate determined by reference to the cost of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs, provided such rate is not lower than a floor of 0.zero. As of ~~April 2,~~October 1, 2022, the applicable margins for the LIBOR rate borrowings under the Term Loan Facility and the Revolving Credit Facility were ~~3.50%~~3.50% and ~~2.75%~~2.75%, respectively. In the event that LIBOR is phased out as is currently expected, the Credit Agreement provides that the Company and the administrative agent may amend the Credit Agreement to replace the LIBOR definition therein with a successor rate subject to notifying the lending syndicate of such change and not receiving within five business days of such notification objections to such replacement rate from lenders holding at least a majority of the aggregate principal amount of loans and commitments then outstanding under the Credit Agreement; provided that such lending syndicate may not object to a SOFR-based successor rate contained in any such amendment. If the Company fails to do so, its borrowings will be based off of the alternative base rate plus a margin.

On a quarterly basis, the Company pays a commitment fee to the lenders under the Revolving Credit Facility in respect of unutilized commitments thereunder, which commitment fee fluctuates depending upon the Company’s Consolidated First Lien Leverage Ratio (as defined in the Credit Agreement).

The Credit Agreement contains other customary terms, including (1) representations, warranties and affirmative covenants, (2) negative covenants, including limitations on indebtedness, liens, mergers, acquisitions, asset sales, investments, distributions, prepayments of subordinated debt, amendments of material agreements governing subordinated indebtedness, changes to lines of business and transactions with affiliates, in each case subject to baskets, thresholds and other exceptions, and (3) customary events of default.

The availability of certain baskets and the ability to enter into certain transactions are also subject to compliance with certain financial ratios. In addition, if the aggregate principal amount of extensions of credit outstanding under the Revolving Credit Facility as of any fiscal quarter end exceeds ~~35%~~35% of the amount of the aggregate commitments under the Revolving Credit Facility in effect on such date, the Company must be in compliance with a Consolidated First Lien Leverage Ratio of ~~on or prior to the end of the first fiscal quarter of 2022, 6.00:1.00, with a step down to 5.75:~~5.75:1.00 for the period ending after the first fiscal quarter of 2022 through and including with the first fiscal quarter of 2023, with ~~an additional~~a step down to ~~5.50:~~5.50:1.00 for the period ending after the first fiscal quarter of 2023 through and including with the first fiscal quarter of 2024, with aan additional step down to ~~5.25:~~5.25:1.00 for the period ending after the first fiscal quarter of 2024 through and including with the first fiscal quarter of 2025 and again to ~~5.00:~~5.00:1.00, for the period following the first fiscal quarter of 2025. As of October 1, 2022, the Company’s actual Consolidated First Lien Leverage Ratio was 4.99:1.00 and there were no borrowings under its Revolving Credit Facility and total letters of credit issued were $1,089. The Company expects it may not be able to satisfy the Consolidated First Lien Leverage Ratio in the near future, and as a result, the amount of funds the Company is able to borrow under the Revolving Credit Facility would be effectively limited.

The Senior Secured Notes were issued pursuant to an Indenture, dated as of April 13, 2021 (as amended, supplemented or modified from time to time, the “Indenture”), among the Company, the guarantors named therein and The Bank of New York Mellon, as trustee and notes collateral agent. The Indenture contains customary terms, events of default and covenants for an issuer of non-investment grade debt securities. These covenants include limitations on indebtedness, liens, mergers, acquisitions, asset sales, investments, distributions, prepayments of subordinated debt and transactions with affiliates, in each case subject to baskets, thresholds and other exceptions.

The Senior Secured Notes accrue interest at a rate per annum equal to ~~4.500%~~4.500% and will mature on April 15, ~~2029.~~ 2029. Interest on the Senior Secured Notes is payable semi-annually on April 15 and October 15 of each year, beginning on October 15, 2021.On or after April 15, 2024, the Company may on any one or more occasions redeem some or all of the Senior Secured Notes at a purchase price equal to ~~102.250%~~102.250% of the principal amount of the Senior Secured Notes, plus accrued and unpaid interest, if any, to, but not including, the redemption date, such optional redemption price decreasing to ~~101.125%~~101.125% on or after April 15, 2025 and to ~~100.000%~~100.000% on or after April 15, ~~2026.~~2026. Prior to April 15, 2024, the Company may on any one or more occasions redeem up to ~~40%~~40% of the aggregate principal amount of the Senior Secured Notes with an amount not to exceed the net proceeds of certain equity offerings at ~~104.500%~~104.500% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the redemption date. Prior to April 15, 2024, the Company may redeem some or all of the Senior Secured Notes at a make-whole price plus accrued and unpaid interest, if any, to, but not including, the redemption date. In addition, during any twelve-month period ending prior to April 15, 2024, the Company may redeem up to ~~10%~~10% of the aggregate principal amount of the Senior Secured Notes at a purchase price equal to ~~103.000%~~103.000% of the principal amount of the Senior Secured Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. If a change of control occurs, the Company must offer to purchase for cash the Senior Secured Notes at a purchase price equal to ~~101%~~101% of the principal amount of the Senior Secured Notes, plus accrued and unpaid interest, if any, to, but not including, the purchase date. Following the sale of certain assets and subject to certain conditions, the Company must offer to purchase for cash the Senior Secured Notes at a purchase price equal to ~~100%~~100% of the principal amount of the Senior Secured Notes, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

The Senior Secured Notes are guaranteed on a senior secured basis by the Company’s subsidiaries that guarantee the Credit Facilities. The Senior Secured Notes and the note guarantees are secured by a first-priority lien on all the collateral that secures the Credit Facilities, subject to a shared lien of equal priority with the Company’s and each guarantor’s obligations under the Credit Facilities and subject to certain thresholds, exceptions and permitted liens.

At ~~April 2,~~October 1, 2022, the Company had ~~$1,445,000~~$1,445,000 outstanding under the Credit Facilities and the Senior Secured Notes, consisting of borrowings under the Term Loan Facility of ~~$945,000, $0~~$945,000, $0 drawn down on the Revolving Credit Facility and ~~$500,000~~$500,000 in aggregate principal amount of Senior Secured Notes issued and outstanding.

At ~~April 2,~~October 1, 2022 and January 1, 2022, the Company’s debt consisted of both fixed and variable-rate instruments. Interest rate swaps were entered into to hedge a portion of the cash flow exposure associated with the Company’s variable-rate borrowings. See Note 11 for information on the Company’s interest rate swaps. The weighted average interest rate (which includes amortization of deferred financing costs and debt discount) on the Company’s outstanding debt, exclusive of the impact of the swaps then in effect, was approximately ~~4.53%~~4.98% and ~~5.11%~~5.11% per annum at ~~April 2,~~October 1, 2022 and January 1, 2022, respectively, based on interest rates on these dates. The weighted average interest rate (which includes amortization of deferred financing costs and debt discount) on the Company’s outstanding debt, including the impact of the swaps then in effect, was approximately ~~5.07%~~5.28% and ~~5.62%~~5.62% per annum at ~~April 2,~~October 1, 2022 and January 1, 2022, respectively, based on interest rates on these dates.

As of ~~April 2,~~October 1, 2022 and January 1, 2022, the Company had in effect interest rate swaps with an aggregate notional amount totaling ~~$500,000.~~$500,000.

On June 11, 2018, in order to hedge a portion of its variable rate debt, the Company entered into a forward-starting interest rate swap (the “2018 swap”) with an effective date of April 2, 2020 and a termination date of March 31, ~~2024.~~2024. The initial notional amount of this swap was ~~$500,000.~~$500,000. During the term of this swap, the notional amount decreased from ~~$500,000~~$500,000 effective April 2, 2020 to ~~$250,000~~$250,000 on March 31, ~~2021.~~2021. This interest rate swap effectively fixed the variable interest rate on the notional amount of this swap at ~~3.1005%~~3.1005%. On June 7, 2019, in order to hedge a portion of its variable rate debt, the Company entered into a forward-starting interest rate swap (the “2019 swap”, and together with the 2018 swap, the “current swaps”) with an effective date of April 2, 2020 and a termination date of March 31, ~~2024.~~2024. The notional amount of this swap is ~~$250,000.~~$250,000. This interest rate swap effectively fixed the variable interest rate on the notional amount of this swap at ~~1.901%~~1.901%. The current swaps qualify for hedge accounting and, therefore, changes in the fair value of the current swaps have been recorded in accumulated other comprehensive loss.

As of ~~April 2,~~October 1, 2022, the cumulative unrealized gain for qualifying hedges was reported as a component of accumulated other comprehensive ~~income~~loss in the amount of ~~$205~~$9,932 ($~~134~~13,127 before taxes). As of January 1, 2022, the cumulative unrealized loss for qualifying hedges was reported as a component of accumulated other comprehensive loss in the amount of ~~$10,843~~$10,843 ($14,622 before taxes).

The Company is hedging forecasted transactions for periods not exceeding the next two ~~years.~~years. The Company expects approximately ~~$531~~$6,287 ($~~709~~8,397 before taxes) of net derivative ~~losses~~gains included in accumulated other comprehensive loss at ~~April 2,~~October 1, 2022, based on current market rates, will be reclassified into earnings within the next 12 months.

Accounting guidance on fair value measurements for certain financial assets and liabilities requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

When measuring fair value, the Company is required to maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company’s significant financial instruments include long-term debt and interest rate swap agreements as of ~~April 2,~~October 1, 2022 and January 1, 2022. Since there were 0no outstanding borrowings under the Revolving Credit Facility as of ~~April 2,~~October 1, 2022 and January 1, 2022, the fair value approximated a carrying value of $0$0 at both ~~April 2,~~October 1, 2022 and January 1, 2022.

The fair value of the Company’s Credit Facilities is determined by utilizing average bid prices on or near the end of each fiscal quarter (Level 2 input). As of ~~April 2,~~October 1, 2022 and January 1, 2022, the fair value of the Company’s long-term debt was approximately ~~$1,242,201~~$922,092 and ~~$1,389,306,~~$1,389,306, respectively, as compared to the carrying value (net of deferred financing costs and debt discount) of ~~$1,419,149~~$1,421,239 and ~~$1,418,104,~~$1,418,104, respectively.

The fair values for the Company’s derivative financial instruments are determined using observable current market information such as the prevailing LIBOR interest rate and LIBOR yield curve rates and include consideration of counterparty credit risk. See Note 11 for disclosures related to derivative financial instruments.

Amounts reclassified out of accumulated other comprehensive loss were as follows:

16.

Restructuring

2022 Plan ~~– Subsequent Event~~

As previously disclosed, in the second quarter of fiscal 2022, the Company committed to a restructuring plan consisting of (i) an organizational realignment to simplify the Company’s corporate structure and reduce associated costs (the “Organizational Realignment”) and (ii) a continued rationalization of its real estate portfolio resulting in the termination of certain of the Company’s operating leases (together with the Organizational Realignment, the “2022 Plan”). In connection with the 2022 Plan, the Company ~~anticipates recording~~previously expected to record restructuring charges ~~which it currently estimates will range between $18,000 to $22,000~~of approximately $27,000 in the ~~aggregate.~~ aggregate in fiscal 2022. The Company revised its estimate and currently expects to record restructuring expenses of approximately $33,000 in the aggregate in fiscal 2022 related to this plan. For the three and nine months ended October 1, 2022, the Company recorded restructuring expenses totaling $3,557 ($2,663 after tax) and $22,674 ($16,976 after tax), respectively.

The Organizational Realignment has resulted and will result in the elimination of certain positions and termination of employment for certain employees worldwide. In connection with its Organizational Realignment, the Company ~~anticipates recording~~continues to expect to record charges of approximately ~~$12,000 to $16,000~~$20,000 in the aggregate with respect to employee termination benefit costs ~~(which are expected to consist~~(consisting primarily of general and administrative expenses), the majority of which ~~will be~~were recorded in the second quarter of fiscal 2022.

In connection with the ~~termination of certain~~rationalization of its ~~operating leases,~~real estate portfolio, the Company ~~anticipates recording~~previously expected to record charges of approximately ~~$6,000~~$6,000 in the aggregate consisting of lease termination and other related costs ~~the majority~~in fiscal 2022. The Company revised its estimate and currently expects to record restructuring expenses with respect to lease termination and other related costs of ~~which will be recorded~~approximately $12,000 in the ~~second quarter~~aggregate in fiscal 2022.

Additionally, the Company expects to record other restructuring costs of approximately $1,000 in the aggregate in fiscal 2022. ~~Substantially all of these costs~~

Costs arising from the 2022 Plan ~~are expected to result in cash expenditures~~ related to separation payments, other employee termination expenses and lease termination ~~payments.~~ and other related costs, except for lease impairment and accelerated depreciation and amortization related to leased locations, are expected to result in cash expenditures. For the three and nine months ended October 1, 2022, the components of the Company’s restructuring expenses were as follows:


	Three Months Ended			Nine Months Ended
	October 1, 2022			October 1, 2022
Lease termination and other related costs	$	(334	)	$	3,332
Employee termination benefit costs		1,882			16,789
Lease impairment		1,828			1,828
Other costs		181			725
Total restructuring expenses	$	3,557		$	22,674

See Note 3 for additional information in regard to the Company's lease impairment for the three and nine months ended October 1, 2022.

For the three and nine months ended October 1, 2022, restructuring expenses were recorded in the Company’s consolidated statements of net income as follows:


	Three Months Ended			Nine Months Ended
	October 1, 2022			October 1, 2022
Cost of revenues	$	(98	)	$	4,401
Selling, general and administrative expenses		3,655			18,273
Total restructuring expenses	$	3,557		$	22,674

All expenses were recorded to general corporate expenses and, therefore, there was no impact to the segments.

For the nine months ended October 1, 2022, the Company made payments of $1,877 towards the liability for the lease termination costs. For the nine months ended October 1, 2022, the Company made payments of $7,505 towards the liability for the employee termination benefit costs.

The Company expects the ~~2022 Plan~~remaining lease termination liability of $547 and the remaining employee termination benefit liability of $9,284 to be ~~fully~~ paid in full by the end of fiscal ~~2023.~~2024.

WW INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS)

2021 Plan

As previously disclosed, in the first quarter of fiscal 2021, as the Company continued to evaluate its cost structure, anticipate consumer demand and focus on costs, the Company committed to a plan which has resulted in the termination of operating leases and elimination of certain positions worldwide. For the fiscal year ended January 1, 2022, the Company recorded restructuring expenses totaling $$21,534 ($16,109 after tax).

For the fiscal year ended January 1, 2022,, the components of the Company’s restructuring expenses were as follows:


	Fiscal Year Ended		Fiscal Year Ended
	January 1, 2022		January 1, 2022
Lease termination and other related costs	$	12,688	$	12,688
Employee termination benefit costs		8,846		8,846
Total restructuring expenses	$	21,534	$	21,534

For the fiscal year ended January 1, 2022,, restructuring expenses were recorded in the Company’s consolidated statements of net income as follows:


	Fiscal Year Ended		Fiscal Year Ended
	January 1, 2022		January 1, 2022
Cost of revenues	$	16,727	$	16,727
Selling, general and administrative expenses		4,807		4,807
Total restructuring expenses	$	21,534	$	21,534

All expenses were recorded to general corporate expenses and, therefore, there was no impact to the segments.

For the fiscal year ended January 1, 2022,, the Company made payments of ~~$7,640~~$7,640 towards the liability for the lease termination costs and decreased provision estimates by ~~$3.~~$3. For the fiscal year ended January 1, 2022,, the Company made payments of ~~$4,802~~$4,802 towards the liability for the employee termination benefit costs.

For the ~~three~~nine months ended ~~April 2,~~October 1, 2022, the Company made payments of ~~$172~~ $777towards the liability for the lease termination costs, decreased provision estimates by ~~$102~~$681 and incurred additional lease termination and other related costs of ~~$120~~$119. For the ~~three~~nine months ended ~~April 2,~~October 1, 2022, the Company made payments of $ ~~of $1,956~~3,407 towards the liability for the employee termination benefit costs, increased provision estimates by ~~$98~~$215 and incurred additional employee termination benefit costs of ~~$148.~~$148.

As of October 1, 2022, there was no outstanding lease termination liability. The Company expects ~~the remaining lease termination liability of $1,186 and~~ the remaining employee termination benefit liability of ~~$2,334~~$1,000 to be paid in full inby the end of fiscal 2023.

~~WW INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS)~~

2020 Plan

As previously disclosed, in the second quarter of fiscal 2020, in connection with its cost-savings initiative, and its continued response to the COVID-19 pandemic and the related shift in market conditions, the Company committed to a plan of reduction in force which has resulted in the elimination of certain positions and termination of employment for certain employees worldwide. To adjust to anticipated consumer demand, the Company evolved its workshop strategy and expanded its restructuring plan to include lease termination and other related ~~costs~~.costs. For the fiscal year ended January 2, 2021, the Company recorded restructuring expenses totaling $~~totaling $33,092~~33,092 ($24,756 after tax).

For the fiscal year ended January 2, 2021,, the components of the Company’s restructuring expenses were as follows:


	Fiscal Year Ended
	January 2, 2021
Lease termination and other related costs	$	7,989
Employee termination benefit costs		25,103
Total restructuring expenses	$	33,092

WW INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS)

For the fiscal year ended January 2, 2021, restructuring expenses were recorded in the Company’s consolidated statements of net income as follows:


	Fiscal Year Ended
	January 2, 2021
Cost of revenues	$	23,300
Selling, general and administrative expenses		9,792
Total restructuring expenses	$	33,092

All expenses were recorded to general corporate expenses and, therefore, there was no impact to the segments.

For the fiscal year ended January 2, 2021,, the Company made payments of ~~$645~~$645 towards the liability for the lease termination costs. For the fiscal year ended January 2, 2021,, the Company made payments of ~~$15,434~~$15,434 towards the liability for the employee termination benefit costs and increased provision estimates by ~~$180.~~$180.

For the fiscal year ended January 1, 2022,, the Company made payments of ~~$4,649~~$4,649 towards the liability for the lease termination costs and decreased provision estimates by ~~$470.~~$470. For the fiscal year ended January 1, 2022,, the Company made payments of ~~$6,773~~$6,773 towards the liability for the employee termination benefit costs and decreased provision estimates by ~~$1,136.~~$1,136.

For the ~~three~~nine months ended ~~April 2, 2022, the Company decreased provision estimates for the lease termination costs by $116. For the~~ ~~three months~~ ~~ended April 2,~~October 1, 2022, the Company made payments of ~~$605~~$86 towards the liability for the lease termination costs and decreased provision estimates by $116. For the nine months ended October 1, 2022, the Company made payments of $1,164 towards the liability for the employee termination benefit costs.

As of October 1, 2022, there was no outstanding lease termination liability. The Company expects ~~the remaining lease termination liability of $86 and~~ the remaining employee termination benefit liability of ~~$1,335~~$776 to be paid in full inby the end of fiscal ~~2022.~~2023.

2225

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

Except for historical information contained herein, this Quarterly Report on Form 10-Q includes “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, including, in particular, the statements about our plans, strategies, objectives and prospects and the impact of the COVID-19 virus under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We have generally used the words “may,” “will,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “intend,” “aim” and similar expressions in this Quarterly Report on Form 10-Q to identify forward-looking statements. We have based these forward-looking statements on our current views with respect to future events and financial performance. Actual results could differ materially from those projected in these forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things:

•

~~the impact of the ongoing global outbreak of the COVID-19 virus on our business and liquidity and on the business and consumer environment and markets in which we operate;~~

•

the impact of the ongoing global outbreak of the COVID-19 virus on our business and liquidity and on the business and consumer environment and markets in which we operate;

•

~~competition from other weight management and wellness industry participants or the development of more effective or more favorably perceived weight management methods;~~

•

competition from other weight management and wellness industry participants or the development of more effective or more favorably perceived weight management methods;

•

~~our failure to continue to retain and grow our subscriber base;~~

•

our failure to continue to retain and grow our subscriber base;

•

our ability to continue to develop new, innovative services and products and enhance our existing services and products or the failure of our services, products or brands to continue to appeal to the market, or our ability to successfully expand into new channels of distribution or respond to consumer trends or sentiment;

•

~~the ability to successfully implement strategic initiatives;~~

•

the ability to successfully implement strategic initiatives;

•

~~the effectiveness and efficiency of our advertising and marketing programs, including the strength of our social media presence;~~

•

the effectiveness and efficiency of our advertising and marketing programs, including the strength of our social media presence;

•

~~the impact on our reputation of actions taken by our franchisees, licensees, suppliers and other partners;~~

•

the impact on our reputation of actions taken by our franchisees, licensees, suppliers and other partners;

•

~~the recognition of asset impairment charges;~~

•

the recognition of asset impairment charges;

•

~~the loss of key personnel, strategic partners or consultants or failure to effectively manage and motivate our workforce;~~

•

the loss of key personnel, strategic partners or consultants or failure to effectively manage and motivate our workforce;

•

~~our chief executive officer transition;~~

•

our chief executive officer transition;

•

~~the inability to renew certain of our licenses, or the inability to do so on terms that are favorable to us;~~

•

the inability to renew certain of our licenses, or the inability to do so on terms that are favorable to us;

•

~~the expiration or early termination by us of leases;~~

•

the expiration or early termination by us of leases;

•

~~uncertainties related to a downturn in general economic conditions or consumer confidence, including the potential impact of political and social unrest, and the existing inflationary environment;~~

•

uncertainties related to a downturn in general economic conditions or consumer confidence, including the potential impact of political and social unrest, and the existing inflationary environment;

•

our ability to successfully make acquisitions or enter into joint ventures or collaborations, including our ability to successfully integrate, operate or realize the anticipated benefits of such businesses;

•

~~the seasonal nature of our business;~~

•

the seasonal nature of our business;

•

~~the impact of events that discourage or impede people from gathering with others or impede accessing resources;~~

•

the impact of events that discourage or impede people from gathering with others or impede accessing resources;

•

~~our failure to maintain effective internal control over financial reporting;~~

•

our failure to maintain effective internal control over financial reporting;

•

~~the impact of our substantial amount of debt, debt service obligations and debt covenants, and our exposure to variable rate indebtedness;~~

•

the impact of our substantial amount of debt, debt service obligations and debt covenants, and our exposure to variable rate indebtedness;

•

~~the ability to generate sufficient cash to service our debt and satisfy our other liquidity requirements;~~

•

the ability to generate sufficient cash to service our debt and satisfy our other liquidity requirements;

•

~~uncertainties regarding the satisfactory operation of our technology or systems;~~

•

uncertainties regarding the satisfactory operation of our technology or systems;

•

~~the impact of data security breaches and other malicious acts or privacy concerns, including the costs of compliance with evolving privacy laws and regulations;~~

•

the impact of data security breaches and other malicious acts or privacy concerns, including the costs of compliance with evolving privacy laws and regulations;

•

~~our ability to enforce our intellectual property rights both domestically and internationally, as well as the impact of our involvement in any claims related to intellectual property rights;~~

•

our ability to enforce our intellectual property rights both domestically and internationally, as well as the impact of our involvement in any claims related to intellectual property rights;

•

risks and uncertainties associated with our international operations, including regulatory, economic, political, social, intellectual property, and foreign currency risks, which risks may be exacerbated as a result of the war in Ukraine;

•

~~the outcomes of litigation or regulatory actions;~~

•

the outcomes of litigation or regulatory actions;

•

~~the impact of existing and future laws and regulations;~~

•

the impact of existing and future laws and regulations;

•

the possibility that the interests of Artal Group S.A., or Artal, the largest holder of our common stock and a shareholder with significant influence over us, will conflict with our interests or the interests of other holders of our common stock;

•

the impact that the sale of substantial amounts of our common stock by existing large shareholders, or the perception that such sales could occur, could have on the market price of our common stock; and

•

~~other risks and uncertainties, including those detailed from time to time in our periodic reports filed with the Securities and Exchange Commission.~~

•

other risks and uncertainties, including those detailed from time to time in our periodic reports filed with the Securities and Exchange Commission.

You should not put undue reliance on any forward-looking statements. You should understand that many important factors, including those discussed herein, could cause our results to differ materially from those expressed or suggested in any forward-looking statement. Except as required by law, we do not undertake any obligation to update or revise these forward-looking statements to reflect new information or events or circumstances that occur after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events or otherwise.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~ITEM 2.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

WW International, Inc. is a Virginia corporation with its principal executive offices in New York, New York. In this Quarterly Report on Form 10-Q unless the context indicates otherwise: “we,” “us,” “our,” the “Company,” “Weight Watchers” and “WW” refer to WW International, Inc. and all of its operations consolidated for purposes of its financial statements; “North America” refers to our North American Company-owned operations; “Continental Europe” refers to our Continental Europe Company-owned operations; “United Kingdom” refers to our United Kingdom Company-owned operations; and “Other” refers to Australia, New Zealand and emerging markets operations and franchise revenues and related costs. Each of North America, Continental Europe, United Kingdom and Other is also a reportable segment. Our “Digital” business refers to providing subscriptions to our digital product offerings, including ~~Digital 360 and~~ Personal Coaching + ~~Digital.~~Digital and Digital 360 as applicable. Our “Workshops + Digital” business refers to providing unlimited access to our workshops combined with our digital subscription product offerings to commitment plan ~~subscribers.~~subscribers, including former Digital 360 members as applicable. It also includes the provision of access to workshops for members who do not subscribe to commitment plans, including our “pay-as-you-go” members. In the second quarter of fiscal 2022, we ceased offering our Digital 360 product. More than a majority of associated members were transitioned from our Digital business to our Workshops + Digital business during the second quarter of fiscal 2022, with a de minimis number transitioning during the beginning of the third quarter of fiscal 2022. For additional details on the cessation of this product offering and how these transitions of former Digital 360 members at the then-current pricing for such product impacted the fiscal 2022 second quarter and first half number of End of Period Subscribers in each business as well as the associated Paid Weeks and Revenues for each business, see our Quarterly Report on Form 10-Q for the second quarter of fiscal 2022.

Our fiscal year ends on the Saturday closest to December 31st and consists of either 52- or 53-week periods. In this Quarterly Report on Form 10-Q:

•

“fiscal 2015” refers to our fiscal year ended January 2, 2016;

•

“fiscal 2020” refers to our fiscal year ended January 2, 2021 (included a 53rd week);

•

“fiscal 2021” refers to our fiscal year ended January 1, 2022;

•

“fiscal 2022” refers to our fiscal year ended December 31, 2022;

•

“fiscal 2023” refers to our fiscal year ended December 30, 2023;

•

“fiscal 2024” refers to our fiscal year ended December 28, 2024;

•

“fiscal 2025” refers to our fiscal year ended January 3, 2026 (includes a 53rd week);

•

“fiscal 2026” refers to our fiscal year ended January 2, 2027; and

•

“fiscal 2027” refers to our fiscal year ended January 1, 2028.

•

~~“fiscal 2015” refers to our fiscal year ended January 2, 2016;~~

•

~~“fiscal 2020” refers to our fiscal year ended January 2, 2021 (included a 53~~^rd ~~week);~~

•

~~“fiscal 2021” refers to our fiscal year ended January 1, 2022;~~

•

~~“fiscal 2022” refers to our fiscal year ended December 31, 2022;~~

•

~~“fiscal 2023” refers to our fiscal year ended December 30, 2023;~~

•

~~“fiscal 2024” refers to our fiscal year ended December 28, 2024;~~

•

~~“fiscal 2025” refers to our fiscal year ended January 3, 2026 (includes a 53~~^rd ~~week);~~

•

~~“fiscal 2026” refers to our fiscal year ended January 2, 2027; and~~

•

~~“fiscal 2027” refers to our fiscal year ended January 1, 2028.~~

The following terms used in this Quarterly Report on Form 10-Q are our trademarks: Digital 360^®, PersonalPointsTM and Weight Watchers®.

You should read the following discussion in conjunction with our Annual Report on Form 10-K for fiscal 2021 that includes additional information about us, our results of operations, our financial position and our cash flows, and with our unaudited consolidated financial statements and related notes included in Item 1 of this Quarterly Report on Form 10-Q (collectively referred to as the “Consolidated Financial Statements”).

NON-GAAP FINANCIAL MEASURES

To supplement our consolidated results presented in accordance with accounting principles generally accepted in the United States, or GAAP, we have disclosed non-GAAP financial measures of operating results that exclude or adjust certain items. Gross profit, gross profit margin, operating (loss) income, operating (loss) income margin and components thereof are discussed in this Quarterly Report on Form 10-Q both as reported (on a GAAP basis) and as adjusted (on a non-GAAP basis), as applicable, with respect to (i) the ~~first~~third quarter of fiscal 2022 to exclude (a) the impact of the impairment charges for our franchise rights acquired related to our United States, Canada and New Zealand units of account and (b) the net impact of (x) charges associated with our previously disclosed 2022 restructuring plan (the “2022 plan”) and (y) charges associated with our previously disclosed 2021 organizational restructuring plan (the “2021 plan”); (ii) the first nine months of fiscal 2022 to exclude (a) the impact of impairment charges for our franchise rights acquired related to our United States, Canada and New Zealand units of account and the impairment charge for our goodwill related to our wholly-owned subsidiary Kurbo, Inc. (“Kurbo”) and (b) the net impact of (x) charges associated with the 2022 plan, (y) charges associated with the 2021 plan or the reversal of certain of the charges associated with the 2021 plan, as applicable, and (z) the reversal of certain of the charges associated with our previously disclosed 2020 organizational restructuring plan (the “2020 plan”) ~~or (b)~~; and (iii) the ~~impact of charges associated with the 2021 plan;~~third quarter and ~~(ii) the~~ first ~~quarter~~nine months of fiscal 2021 to exclude the net impact of (x) charges associated with the 2021 plan and (y) the reversal of certain of the charges associated with the 2020 plan. We generally refer to such non-GAAP measures as follows: (i) with respect to the adjustments for the ~~first~~third quarter of fiscal 2022, as excluding or adjusting for the impact of the franchise rights acquired impairments and the net impact of restructuring ~~charges or the impact of restructuring charges, as applicable; and~~charges; (ii) with respect to the adjustments for the first nine months of fiscal 2022, as excluding or adjusting for the impact of franchise rights acquired and goodwill impairments and the net impact of restructuring charges; and (iii) with respect to the adjustments for the third quarter and first nine months of fiscal 2021, as excluding or adjusting for the net impact of ~~the~~ restructuring charges. We also present within this Quarterly Report on Form 10-Q the non-GAAP financial measures: earnings before interest, taxes, depreciation, amortization and stock-based compensation (“EBITDAS”); earnings before interest, taxes, depreciation, amortization, stock-based compensation, franchise rights acquired and goodwill impairments, net restructuring charges, and early extinguishment of debt with respect to the Company’s previously disclosed April 2021 debt refinancing and voluntary debt prepayments ~~and restructuring charges (including the net impact where applicable)~~ (“Adjusted EBITDAS”); total debt less unamortized deferred financing costs, unamortized debt discount and cash on hand (i.e., net debt); and a net debt/Adjusted EBITDAS ratio. See “—Liquidity and Capital Resources—EBITDAS, Adjusted EBITDAS and Net Debt” for the reconciliations of these non-GAAP financial measures to the most comparable GAAP financial measure in each case. Our management believes these non-GAAP financial measures provide useful supplemental information to investors regarding the performance of our business and are useful for period-over-period comparisons of the performance of our business. While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly entitled measures reported by other companies.

USE OF CONSTANT CURRENCY

As exchange rates are an important factor in understanding period-to-period comparisons, we believe in certain cases the presentation of results on a constant currency basis in addition to reported results helps improve investors’ ability to understand our operating results and evaluate our performance in comparison to prior periods. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. We use results on a constant currency basis as one measure to evaluate our performance. In this Quarterly Report on Form 10-Q, we calculate constant currency by calculating current-year results using prior-year foreign currency exchange rates. We generally refer to such amounts calculated on a constant currency basis as excluding or adjusting for the impact of foreign currency or being on a constant currency basis. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP and are not meant to be considered in isolation. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with GAAP.

CRITICAL ACCOUNTING ESTIMATES

~~For~~Franchise Rights Acquired

In performing the impairment analysis for our indefinite-lived franchise rights acquired, the fair value for our franchise rights acquired is estimated using a ~~discussion~~discounted cash flow approach referred to as the hypothetical start-up approach for our franchise rights related to our Workshops + Digital business and a relief from royalty methodology for our franchise rights related to our Digital business. The aggregate estimated fair value for these rights is then compared to the carrying value of the unit of account for those franchise rights. We have determined the appropriate unit of account for purposes of assessing impairment to be the combination of the rights in both the Workshops + Digital business and the Digital business in the country in which the applicable acquisition occurred. The net book values of these franchise rights in the United States, Canada, United Kingdom, Australia and New Zealand as of the October 1, 2022 balance sheet date were $400.1 million, $19.3 million, $10.1 million, $5.8 million and $2.1 million, respectively.

In our hypothetical start-up approach analysis for fiscal 2022, we assumed that the year of maturity was reached after 7 years. Subsequent to the year of maturity, we estimated future cash flows for the Workshops + Digital business in each country based on assumptions regarding revenue growth and operating income margins. In our relief from royalty approach analysis for fiscal 2022, the cash flows associated with the Digital business in each country were based on the expected Digital revenue for such country and the application of a royalty rate based on current market terms. The cash flows for the Workshops + Digital and the Digital businesses were discounted utilizing rates which were calculated using the weighted-average cost of capital, which included the cost of equity and the cost of debt.

Goodwill

In performing the impairment analysis for goodwill, the fair value for our reporting units is estimated using a discounted cash flow approach. This approach involves projecting future cash flows attributable to the reporting unit and discounting those estimated cash flows using an appropriate discount rate. The estimated fair value is then compared to the carrying value of the reporting unit. We have determined the appropriate reporting unit for purposes of assessing annual impairment to be the country for all reporting units. The net book values of goodwill in the United States, Canada and other countries as of the October 1, 2022 balance sheet date were $104.0 million, $38.8 million and $13.4 million, respectively.

For all of our reporting units tested as of May 8, 2022, we estimated future cash flows by utilizing the historical debt-free cash flows (cash flows provided by operations less capital expenditures) attributable to that country and then applied expected future operating income growth rates for such country. We utilized operating income as the basis for measuring our potential growth because we believe it is the best indicator of the performance of our business. We then discounted the estimated future cash flows utilizing a discount rate which was calculated using the weighted-average cost of capital, which included the cost of equity and the cost of debt.

Indefinite-Lived Franchise Rights Acquired and Goodwill Annual Impairment Test

We review indefinite-lived intangible assets, including franchise rights acquired with indefinite lives, and goodwill for potential impairment on at least an annual basis or more often if events so require. We performed fair value impairment testing as of May 8, 2022 and May 9, 2021, each the first day of fiscal May, on our indefinite-lived intangible assets and goodwill.

In performing our annual impairment analysis as of May 8, 2022, we determined that (i) the carrying amounts of our Canada and New Zealand franchise rights acquired with indefinite-lived units of account exceeded their respective fair values and, as a result, we recorded impairment charges for our Canada and New Zealand units of account of $24.5 million and $0.8 million, respectively, in the second quarter of fiscal 2022; and (ii) the carrying amounts of all of our other franchise rights acquired with indefinite-lived units of account did not exceed their respective fair values and, therefore, no impairment existed with respect thereto. In performing our annual impairment analysis as of May 9, 2021, we determined that the carrying amounts of our franchise rights acquired with indefinite-lived units of account did not exceed their respective fair values and, therefore, no impairment existed. In performing our annual impairment analysis as of May 8, 2022 and May 9, 2021, we determined that the carrying amounts of our goodwill reporting units did not exceed their respective fair values and, therefore, no impairment existed.

When determining fair value, we utilize various assumptions, including projections of future cash flows, growth rates and discount rates. A change in these underlying assumptions could cause a change in the results of the impairment assessments and, as such, could cause fair value to be less than the carrying amounts and result in an impairment of those assets. In the event such a result occurred, we would be required to record a corresponding charge, which would impact earnings. We would also be required to reduce the carrying amounts of the related assets on our balance sheet. We continue to evaluate these assumptions and believe that these assumptions are appropriate.

In performing our annual impairment analysis, we also considered the trading value of both our equity and debt. If the trading values of both our equity and debt were to significantly decline from their levels at the time of testing, we may have to take an impairment charge at the appropriate time, which could be material. For additional information on risks associated with our recognizing asset impairment charges, see “Item 1A. Risk Factors” of our Annual Report on Form 10-K for fiscal 2021.

Based on the results of our May 8, 2022 annual franchise rights acquired impairment test performed for our United States unit of account, which held 92.7% of our franchise rights acquired as of the July 2, 2022 balance sheet date, the estimated fair value of this unit of account exceeded its carrying value by approximately 15%. Based on the results of our May 8, 2022 annual franchise rights acquired impairment analysis performed for our Canada and New Zealand units of account, which held 4.6% and 0.5%, respectively, of our franchise rights acquired as of the July 2, 2022 balance sheet date, the estimated fair values of these units of account were equal to their respective carrying values. The above difference or lack thereof between the estimated fair value of the applicable unit of account and its carrying value is referred to herein as the Annual Impairment Headroom. As previously disclosed, a change in the underlying assumptions for the United States, Canada and New Zealand could change the results of the impairment assessment and, as such, could result in an impairment of the franchise rights acquired related to the United States, Canada and New Zealand, for which the net book values were $698.4 million, $34.6 million and $3.6 million, respectively, as of July 2, 2022. Based on the results of our May 8, 2022 annual franchise rights acquired impairment analysis performed for our remaining units of account, which collectively held 2.2% of our franchise rights acquired as of the July 2, 2022 balance sheet date, the estimated fair values of these units of account exceeded their respective carrying values by over 100%.

In performing this annual impairment analysis for fiscal 2022, in our hypothetical start-up approach analysis, for the year of maturity, we assumed Workshops + Digital revenue (comprised of Workshops + Digital Fees and revenues from products sold to members in studios) growth of 23.0% to 106.2% in the year of maturity from fiscal 2021, in each case, earned in the applicable country and assumed cumulative annual revenue growth rates for the years beyond the year of maturity of 2.4%. For the year of maturity and beyond, we assumed operating income margin rates of (3.0%) to 8.8%. In our relief from royalty approach, we assumed Digital revenue growth in each country of (25.6%) to 16.1% for fiscal 2022.

Based on the results of our May 8, 2022 annual goodwill impairment analysis performed for all of our reporting units, all units, except for the Republic of Ireland, had an estimated fair value at least 35% higher than the respective unit’s carrying amount. Collectively, these reporting units represented 97.4% of our total goodwill as of the October 1, 2022 balance sheet date. Based on the results of our May 8, 2022 annual goodwill impairment analysis performed for our Republic of Ireland reporting unit, which holds 2.6% of our goodwill as of the October 1, 2022 balance sheet date, the estimated fair value of this reporting unit exceeded its carrying value by approximately 14%. Accordingly, a change in the underlying assumptions for the Republic of Ireland may change the results of the impairment assessment and, as such, could result in an impairment of the goodwill related to the Republic of Ireland, for which the net book value was $4.0 million as of October 1, 2022.

The following are the more significant assumptions utilized in our annual impairment analyses for fiscal 2022 and fiscal 2021:


	Fiscal 2022	Fiscal 2021
Debt-Free Cumulative Annual Cash Flow Growth Rate	1.2% to 20.6%	0.2% to 2.6%
Discount Rate	9.6%	8.5%

Indefinite-Lived Franchise Rights Acquired Interim Impairment Test

During the quarter ended October 1, 2022, we identified various qualitative and quantitative factors which collectively, when combined with the Annual Impairment Headroom discussed above for the United States, Canada and New Zealand units of account, indicated a triggering event had occurred within these units of account. These factors included actual business performance as compared to the assumptions used in our annual impairment test, the continued decline in our market capitalization and market factors, including the increase in interest rates. As a result of this triggering event, we performed an interim impairment test of these units of account. In performing this interim impairment test as of October 1, 2022, we determined that the carrying amounts of our United States, Canada and New Zealand franchise rights acquired with indefinite-lived units of account exceeded their respective fair values. Accordingly, we recorded impairment charges for our United States, Canada and New Zealand units of account of $298.3 million, $13.3 million and $1.1 million, respectively, in the third quarter of fiscal 2022. The preponderance of these impairments was driven by the increased weighted-average cost of capital used in this interim impairment test of 13.4% as compared to the weighted-average cost of capital used in the May 8, 2022 annual impairment test of its indefinite-lived franchise rights acquired of 9.6%, reflecting market factors including higher interest rates and the trading values of our equity and debt.

In performing this interim impairment analysis, in our hypothetical start-up approach analysis, for the year of maturity, we assumed Workshops + Digital revenue (comprised of Workshops + Digital Fees and revenues from products sold to members in studios) growth of 20.2% to 57.6% in the year of maturity from fiscal 2021, in each case, earned in the applicable country and assumed cumulative annual revenue growth rates for the years beyond the year of maturity of 2.5%. For the year of maturity and beyond, we assumed operating income margin rates of 2.3% to 8.8%. In our relief from royalty approach, we assumed Digital revenue growth in each country of (21.5%) to 1.6% for fiscal 2022.

Based on the results of our October 1, 2022 interim franchise rights acquired impairment test performed for our United States, Canada and New Zealand units of account, which hold 91.5%, 4.4% and 0.5%, respectively, of our franchise rights acquired as of the October 1, 2022 balance sheet date, the estimated fair values of these units of account were equal to their respective carrying values. Accordingly, a change in the underlying assumptions for the United States, Canada and New Zealand may change the results of the impairment assessment and, as such, could result in an impairment of the franchise rights acquired related to the United States, Canada and New Zealand, for which the net book values were $400.1 million, $19.3 million and $2.1 million, respectively, as of October 1, 2022.

Any impairment test is highly dependent on the assumptions used. The most significant assumptions used in the interim impairment test discussed above were the discount rate applied and the Digital revenue growth rates. We applied a discount rate of 13.4% based on our actual weighted-average cost of capital, which included the cost of equity and the cost of debt. We projected Digital revenues based upon our current and past performance. Changes in these assumptions would have a significant impact on the valuation model. Holding all other assumptions constant, a hypothetical 50 basis point increase in our discount rate assumption would decrease the fair values of the United States, Canada and New Zealand units of account by approximately 5.5%, 5.4% and 4.2%, respectively, which would result in additional impairment charges. Holding all other assumptions constant, a hypothetical 1% reduction in projected Digital revenues for each year in the analysis would decrease the fair values of the United States, Canada and New Zealand units of account by approximately 0.9%, 1.2% and 1.0%, respectively, which would also result in additional impairment charges.

Kurbo Goodwill Impairment

On August 10, 2018, we acquired substantially all of the assets of Kurbo Health, Inc., a family-based healthy lifestyle coaching program, for a net purchase price of $3.1 million, of which $1.1 million was allocated to goodwill. The goodwill was deductible annually for tax purposes. We determined in the second quarter of fiscal 2022 to exit the Kurbo business in the third quarter of fiscal 2022 as part of our strategic plan. As a result of this determination, we recorded an impairment charge of $1.1 million in the second quarter of fiscal 2022, which comprised the entire goodwill balance for Kurbo.

Critical Accounting Policies

Information concerning our critical accounting ~~estimates affecting us, see “Item 7. Management’s Discussion and Analysis~~policies is set forth in “Note 2. Summary of ~~Financial Condition and Results~~Significant Accounting Policies” of ~~Operations—Critical Accounting Estimates” of~~our audited consolidated financial statements contained in our Annual Report on Form 10-K for fiscal 2021. Our critical accounting ~~estimates~~policies have not changed since the end of fiscal 2021.

PERFORMANCE INDICATORS

Our management team regularly reviews and analyzes a number of financial and operating metrics, including the key performance indicators listed below, in order to manage our business, measure our performance, identify trends affecting our business, determine the allocation of resources, make decisions regarding corporate strategies and assess the quality and potential variability of our cash flows and earnings. We also believe that these key performance indicators are useful to both management and investors for forecasting purposes and to facilitate comparisons to our historical operating results. These metrics are supplemental to our GAAP results and include operational measures.

•

Revenues—Our “Subscription Revenues” consist of “Digital Subscription Revenues” and “Workshops + Digital Fees”. “Digital Subscription Revenues” consist of the fees associated with subscriptions for our Digital offerings, including Personal Coaching + Digital and Digital 360 as applicable. “Workshops + Digital Fees” consist of the fees associated with our subscription plans for combined workshops and digital offerings and other payment arrangements for access to workshops. In addition, “product sales and other” consists of sales of consumer products via e-commerce, in studios and through our trusted partners, revenues from licensing and publishing, other revenues, and, in the case of the consolidated financial results and Other reportable segment, franchise fees with respect to commitment plans and royalties.

2632

•

Paid Weeks—The “Paid Weeks” metric reports paid weeks by WW customers in Company-owned operations for a given period as follows: (i) “Digital Paid Weeks” is the total paid subscription weeks for our digital subscription products (including Personal Coaching + Digital and Digital 360 as applicable); (ii) “Workshops + Digital Paid Weeks” is the sum of total paid commitment plan weeks which include workshops and digital offerings and total “pay-as-you-go” weeks; and (iii) “Total Paid Weeks” is the sum of Digital Paid Weeks and Workshops + Digital Paid Weeks.

•

Incoming Subscribers—“Subscribers” refer to Digital subscribers and Workshops + Digital subscribers who participate in recur bill programs in Company-owned operations. The “Incoming Subscribers” metric reports WW subscribers in Company-owned operations at a given period start as follows: (i) “Incoming Digital Subscribers” is the total number of Digital, including Personal Coaching + Digital and Digital 360 (as applicable), subscribers; (ii) “Incoming Workshops + Digital Subscribers” is the total number of commitment plan subscribers that have access to combined workshops and digital offerings; and (iii) “Incoming Subscribers” is the sum of Incoming Digital Subscribers and Incoming Workshops + Digital Subscribers. Recruitment and retention are key drivers for this metric.

•

End of Period Subscribers—The “End of Period Subscribers” metric reports WW subscribers in Company-owned operations at a given period end as follows: (i) “End of Period Digital Subscribers” is the total number of Digital, including Personal Coaching + Digital and Digital 360 (as applicable), subscribers; (ii) “End of Period Workshops + Digital Subscribers” is the total number of commitment plan subscribers that have access to combined workshops and digital offerings; and (iii) “End of Period Subscribers” is the sum of End of Period Digital Subscribers and End of Period Workshops + Digital Subscribers. Recruitment and retention are key drivers for this metric.

•

Gross profit and operating expenses as a percentage of revenue.

•

Revenues—Our “Subscription Revenues” consist of “Digital Subscription Revenues” and “Workshops + Digital Fees”. “Digital Subscription Revenues” consist of the fees associated with subscriptions for our Digital offerings, including Digital 360 and Personal Coaching + Digital. “Workshops + Digital Fees” consist of the fees associated with our subscription plans for combined workshops and digital offerings and other payment arrangements for access to workshops. In addition, “product sales and other” consists of sales of consumer products via e-commerce, in studios and through our trusted partners, revenues from licensing and publishing, other revenues, and, in the case of the consolidated financial results and Other reportable segment, franchise fees with respect to commitment plans and royalties.

•

Paid Weeks—The “Paid Weeks” metric reports paid weeks by WW customers in Company-owned operations for a given period as follows: (i) “Digital Paid Weeks” is the total paid subscription weeks for our digital subscription products (including Digital 360 and Personal Coaching + Digital); (ii) “Workshops + Digital Paid Weeks” is the sum of total paid commitment plan weeks which include workshops and digital offerings and total “pay-as-you-go” weeks; and (iii) “Total Paid Weeks” is the sum of Digital Paid Weeks and Workshops + Digital Paid Weeks.

•

Incoming Subscribers—“Subscribers” refer to Digital subscribers and Workshops + Digital subscribers who participate in recur bill programs in Company-owned operations. The “Incoming Subscribers” metric reports WW subscribers in Company-owned operations at a given period start as follows: (i) “Incoming Digital Subscribers” is the total number of Digital, including Digital 360 and Personal Coaching + Digital, subscribers; (ii) “Incoming Workshops + Digital Subscribers” is the total number of commitment plan subscribers that have access to combined workshops and digital offerings; and (iii) “Incoming Subscribers” is the sum of Incoming Digital Subscribers and Incoming Workshops + Digital Subscribers. Recruitment and retention are key drivers for this metric.

•

End of Period Subscribers—The “End of Period Subscribers” metric reports WW subscribers in Company-owned operations at a given period end as follows: (i) “End of Period Digital Subscribers” is the total number of Digital, including Digital 360 and Personal Coaching + Digital, subscribers; (ii) “End of Period Workshops + Digital Subscribers” is the total number of commitment plan subscribers that have access to combined workshops and digital offerings; and (iii) “End of Period Subscribers” is the sum of End of Period Digital Subscribers and End of Period Workshops + Digital Subscribers. Recruitment and retention are key drivers for this metric.

•

~~Gross profit and operating expenses as a percentage of revenue.~~

COVID-19 PANDEMIC

The novel coronavirus (including its variants, COVID-19) pandemic continues to evolve and have unpredictable impacts on consumer sentiment and behavior, which in turn have impacted and onmay impact our business ~~operations~~performance and ~~the markets in which we operate.~~operations. We have seen significant shifts in consumer sentiment with respect to the weight loss and wellness marketplace, which we believe in part is attributable to the evolution of the pandemic. COVID-19 ~~has~~ had a significant effect on our recruitments ~~since its onset.~~starting in March 2020. Our Workshops + Digital recruitments were substantially negatively impacted during the first year of the pandemic. While Digital recruitments were strong in the beginning of the COVID-19 pandemic, a subsequent turn in consumer sentiment drove a decline in Digital recruitments. Given the long-term subscription model of our business, these declines in recruitment continued to impact the number of our End of Period Subscribers in the ~~first~~third quarter of fiscal 2022, which declined compared to the prior year period. Additionally, our mix ~~shifting~~shift toward our Digital business, which was significant during the onset of the pandemic, especially when amplified by the nature of our subscription business, ~~has~~ negatively impacted ~~revenue and may continue to impact it in the future.~~revenue. Over the longer term, it remains uncertain how the COVID-19 pandemic will impact consumer demand for our products and services and consumer preferences and behavior generally.

The extent to which our operations and business trends will continue in future periods to be impacted by, and any unforeseen costs will result from, the ongoing outbreak of COVID-19 will depend largely on future developments, which are highly uncertain and cannot be accurately predicted. These developments include, among other things, the severity of any variant or surges in COVID-19 cases, new information about health implications, vaccine availability and hesitancy, and actions by government authorities to contain the outbreak or treat its impact. This dynamic situation is driving uncertainty at the macroeconomic, local and consumer levels. We continue to actively monitor the ongoing global outbreak of COVID-19 and its impact and related developments.

~~As we continue to address the impact of the pandemic, and the related evolving legal and consumer landscape, we are focused on how to best meet our members’ and consumers’ needs.~~ We continue to serve our members virtually, both via our Digital business and through virtual workshops, and to evolve our workshop strategy as we evaluate our cost structure and respond to shifting consumer sentiment. We consolidated certain of our studios and continue to close certain other branded studio locations. We continually evaluate our studio locations, and the decision to operate at any particular studio location is influenced by a number of factors, including applicable legal restrictions, consumer confidence and preferences, changes in consumer sentiment and behavior, and the protection of the health and safety of our employees and members, and is dependent on cost efficiencies and alignment with our digital and brand strategy. The current number of our studio locations is significantly lower than that prior to the pandemic, and we expect it to remain below pre-COVID-19 levels. As a result, we have incurred, and ~~we expect to~~may continue to incur, significant costs associated with our real estate realignment.

While we expect the effects of the pandemic and the related responses, including shifts in consumer sentiment and behavior, to negatively impact our results of operations, cash flows and financial position, the uncertainty of the full extent of the duration and severity of the consumer, economic and operational impacts of COVID-19 means we cannot reasonably estimate the related financial impact at this time. This dynamic situation continues to drive uncertainty at the macroeconomic, local and consumer levels. We continue to actively monitor the ongoing global outbreak of COVID-19 and its impact and related developments. For more information, see “Item 1A. Risk Factors” in Part I of our Annual Report on Form 10-K for fiscal 2021. We continue to believe that our powerful communities and our ability to inspire people to adopt healthy habits will be invaluable to people across the globe as they continue to acclimate to new social and economic environments, and that they uniquely position us in the markets in which we operate.

RESULTS OF OPERATIONS

THREE MONTHS ENDED ~~APRIL 2,~~OCTOBER 1, 2022 COMPARED TO THE THREE MONTHS ENDED ~~APRIL 3,~~OCTOBER 2, 2021

The table below sets forth selected financial information for the ~~first~~third quarter of fiscal 2022 from our consolidated statements of net income for the three months ended ~~April 2,~~October 1, 2022 versus selected financial information for the ~~first~~third quarter of fiscal 2021 from our consolidated statements of net income for the three months ended ~~April 3,~~October 2, 2021.

Summary of Selected Financial Data

(In millions, except per share amounts)

For The Three Months Ended

April 2, 2022

April 3, 2021

Increase/
(Decrease)

%
Change

% Change
Constant
Currency

Revenues, net

$
297.8

$
331.8

$
(34.0
)

(10.3
%)

(8.4
%)

Cost of revenues

117.7

138.4

(20.7
)

(15.0
%)

(13.6
%)

Gross profit

180.1

193.4

(13.3
)

(6.9
%)

(4.6
%)

Gross Margin %

60.5
%

58.3
%

Marketing expenses

107.6

116.9

(9.4
)

(8.0
%)

(6.2
%)

Selling, general & administrative
expenses

63.6

73.7

(10.1
)

(13.7
%)

(12.8
%)

Operating income

9.0

2.8

6.1

100.0
%
*
100.0
%
*
Operating Income Margin %

3.0
%

0.9
%

Interest expense

18.7

29.1

(10.5
)

(35.9
%)

(35.9
%)

Other expense (income), net

0.3

(0.2
)

0.6

100.0
%
*

100.0
%
*
Loss before income taxes

(10.0
)

(26.1
)

16.0

(61.4
%)

(67.9
%)

Benefit from income taxes

(1.8
)

(7.8
)

6.0

(77.0
%)

(83.2
%)

Net loss

$
(8.2
)

$
(18.2
)

$
10.0

(54.8
%)

(61.3
%)

Weighted average diluted shares
outstanding

70.1

69.1

1.0

1.5
%

1.5
%

Diluted net loss per share

$
(0.12
)

$
(0.26
)

$
0.15

(55.4
%)

(61.8
%)


	(In millions, except per share amounts)
	For The Three Months Ended
	October 1, 2022			October 2, 2021			Increase/ (Decrease)			% Change				% Change Constant Currency
Revenues, net	$	249.7		$	293.5		$	(43.8	)		(14.9	%)			(10.7	%)
Cost of revenues		97.4			115.5			(18.1	)		(15.7	%)			(12.7	%)
Gross profit		152.4			178.0			(25.7	)		(14.4	%)			(9.4	%)
Gross Margin %		61.0	%		60.7	%

Marketing expenses		35.7			34.6			1.1			3.3	%			9.2	%
Selling, general & administrative expenses		58.4			63.7			(5.3	)		(8.3	%)			(5.6	%)
Franchise rights acquired impairments		312.7			—			312.7			100.0	%			100.0	%
Operating (loss) income		(254.5	)		79.7			(334.3	)		(100.0	%)	*		(100.0	%)	*
Operating (Loss) Income Margin %		(101.9	%)		27.2	%

Interest expense		20.9			19.3			1.6			8.4	%			8.4	%
Other expense, net		1.3			0.8			0.6			76.0	%			76.0	%
(Loss) income before income taxes		(276.8	)		59.7			(336.5	)		(100.0	%)	*		(100.0	%)	*

(Benefit from) provision for income taxes		(70.7	)		13.3			(84.1	)		(100.0	%)	*		(100.0	%)	*
Net (loss) income	$	(206.0	)	$	46.3		$	(252.4	)		(100.0	%)	*		(100.0	%)	*

Weighted average diluted shares outstanding		70.4			70.9			(0.5	)		(0.7	%)			(0.7	%)
Diluted (net loss) earnings per share	$	(2.93	)	$	0.65		$	(3.58	)		(100.0	%)	*		(100.0	%)	*

Note: Totals may not sum due to rounding.

*Note: Percentage in excess of 100.0%.

Certain results for the ~~first~~third quarter of fiscal 2022 are adjusted to exclude the impact of the $312.7 million of franchise rights acquired impairments and the net impact of the ~~$0.3~~$3.6 million of 2022 plan restructuring charges and the $0.1 million of 2021 plan restructuring charges. See “Non-GAAP Financial Measures” above. The table below sets forth a reconciliation of certain of those components of our selected financial data for the three months ended October 1, 2022 which have been adjusted.


				Gross						Operating
	Gross			Profit			Operating			(Loss) Income
(in millions except percentages)	Profit			Margin			(Loss) Income			Margin
Third Quarter of Fiscal 2022	$	152.4			61.0	%	$	(254.5	)		(101.9	%)
Adjustments to reported amounts (1)
Franchise rights acquired impairments		—						312.7
2022 plan restructuring charges		(0.1	)					3.6
2021 plan restructuring charges		0.1						0.1
Total adjustments (1)		0.0						316.4
Third Quarter of Fiscal 2022, as adjusted (1)	$	152.4			61.0	%	$	61.9			24.8	%

Note: Totals may not sum due to rounding.

(1)

The “As adjusted” measure is a non-GAAP financial measure that adjusts the consolidated statements of net income for the third quarter of fiscal 2022 to exclude the impact of the $312.7 million ($235.1 million after tax) of franchise rights acquired impairments and the net impact of the $3.6 million ($2.7 million after tax) of 2022 plan restructuring charges and the $0.1 million ($0.1 million after tax) of 2021 plan restructuring charges. See “Non-GAAP Financial Measures” above for an explanation of our use of non-GAAP financial measures.

Certain results for the third quarter of fiscal 2021 are adjusted to exclude the net impact of the $9.3 million of 2021 plan restructuring charges and the reversal of $0.7 million of 2020 plan restructuring charges. See “Non-GAAP Financial Measures” above. The table below sets forth a reconciliation of certain of those components of our selected financial data for the three months ended October 2, 2021 which have been adjusted.


				Gross						Operating
	Gross			Profit			Operating			Income
(in millions except percentages)	Profit			Margin			Income			Margin
Third Quarter of Fiscal 2021	$	178.0			60.7	%	$	79.7			27.2	%
Adjustments to reported amounts (1)
2021 plan restructuring charges		5.6						9.3
2020 plan restructuring charges		(0.7	)					(0.7	)
Total adjustments (1)		4.9						8.6
Third Quarter of Fiscal 2021, as adjusted (1)	$	183.0			62.3	%	$	88.4			30.1	%

Note: Totals may not sum due to rounding.

(1)

The “As adjusted” measure is a non-GAAP financial measure that adjusts the consolidated statements of net income for the third quarter of fiscal 2021 to exclude the net impact of the $9.3 million ($7.0 million after tax) of 2021 plan restructuring charges and the reversal of $0.7 million ($0.5 million after tax) of 2020 plan restructuring charges. See “Non-GAAP Financial Measures” above for an explanation of our use of non-GAAP financial measures.

Consolidated Results

Revenues

Revenues for the third quarter of fiscal 2022 were $249.7 million, a decrease of $43.8 million, or 14.9%, versus the third quarter of fiscal 2021. Excluding the impact of foreign currency, which negatively impacted our revenues in the third quarter of fiscal 2022 by $12.4 million, revenues for the third quarter of fiscal 2022 would have decreased 10.7% versus the prior year period. This decrease was driven primarily by lower Subscription Revenues reflecting lower sign-ups throughout fiscal 2022 primarily due to worsened consumer sentiment and our PersonalPoints program not resonating with consumers to the extent anticipated. This worsened consumer sentiment in fiscal 2022 was due in part to the evolution of the COVID-19 pandemic as well as the likely impact of certain macro factors including increasing inflation, social and political unrest and challenged economic growth. See “—Segment Results” for additional details on revenues.

Cost of Revenues

Total cost of revenues for the third quarter of fiscal 2022 decreased $18.1 million, or 15.7%, versus the third quarter of fiscal 2021. Excluding the impact of foreign currency, which decreased cost of revenues in the third quarter of fiscal 2022 by $3.5 million, cost of revenues for the third quarter of fiscal 2022 would have decreased 12.7% versus the prior year period. Excluding the net impact of the $0.0 million of restructuring charges in the third quarter of fiscal 2022 and the net impact of the $4.9 million of restructuring charges in the third quarter of fiscal 2021, total cost of revenues for the third quarter of fiscal 2022 would have decreased by 11.9%, or 8.8% on a constant currency basis, versus the prior year period.

Gross Profit

Gross profit for the third quarter of fiscal 2022 decreased $25.7 million, or 14.4%, versus the third quarter of fiscal 2021. Excluding the impact of foreign currency, which negatively impacted gross profit in the third quarter of fiscal 2022 by $9.0 million, gross profit for the third quarter of fiscal 2022 would have decreased 9.4% versus the prior year period. Excluding the net impact of the $0.0 million of restructuring charges in the third quarter of fiscal 2022 and the net impact of the $4.9 million of restructuring charges in the third quarter of fiscal 2021, gross profit for the third quarter of fiscal 2022 would have decreased by 16.7%, or 11.8% on a constant currency basis, versus the prior year period primarily due to the decrease in revenues. Gross margin for the third quarter of fiscal 2022 increased to 61.0% versus 60.7% for the third quarter of fiscal 2021. Excluding the impact of foreign currency, gross margin in the third quarter of fiscal 2022 would have increased 0.9% to 61.5% versus the prior year period. Excluding the net impact of restructuring charges in the third quarter of fiscal 2022 and the net impact of restructuring charges in the third quarter of fiscal 2021, gross margin for the third quarter of fiscal 2022 would have decreased 1.3% to 61.0% versus the prior year period. Excluding the impact of foreign currency, the net impact of restructuring charges in the third quarter of fiscal 2022 and the net impact of restructuring charges in the third quarter of fiscal 2021, gross margin for the third quarter of fiscal 2022 would have decreased 0.8% to 61.5% versus the prior year period. The gross margin decrease was driven primarily by a revenue mix shift away from our higher margin Digital business to our lower margin Workshops + Digital business.

Marketing

Marketing expenses for the third quarter of fiscal 2022 increased $1.1 million, or 3.3%, versus the third quarter of fiscal 2021. Excluding the impact of foreign currency, which decreased marketing expenses in the third quarter of fiscal 2022 by $2.1 million, marketing expenses for the third quarter of fiscal 2022 would have increased 9.2% versus the prior year period. This increase in marketing expenses was primarily due to an increase in online, social and TV media spend. Marketing expenses as a percentage of revenue for the third quarter of fiscal 2022 increased to 14.3% from 11.8% for the third quarter of fiscal 2021.

Selling, General and Administrative

Selling, general and administrative expenses for the third quarter of fiscal 2022 decreased $5.3 million, or 8.3%, versus the third quarter of fiscal 2021. Excluding the impact of foreign currency, which decreased selling, general and administrative expenses in the third quarter of fiscal 2022 by $1.7 million, selling, general and administrative expenses for the third quarter of fiscal 2022 would have decreased 5.6% versus the prior year period. Excluding the net impact of the $3.7 million of restructuring charges in the third quarter of fiscal 2022 and the net impact of the $3.7 million of restructuring charges in the third quarter of fiscal 2021, selling, general and administrative expenses for the third quarter of fiscal 2022 would have decreased by 8.7%, or 5.8% on a constant currency basis, versus the prior year period. This decrease in selling, general and administrative expenses was primarily due to an increase in capitalizable projects, lower salary costs and lower legal and professional fees. Selling, general and administrative expenses as a percentage of revenue for the third quarter of fiscal 2022 increased to 23.4% from 21.7% for the third quarter of fiscal 2021. Excluding the net impact of restructuring charges in the third quarter of fiscal 2022 and the net impact of restructuring charges in the third quarter of fiscal 2021, selling, general and administrative expenses as a percentage of revenue for the third quarter of fiscal 2022 would have increased by 1.5%, or 1.1% on a constant currency basis, versus the prior year period.

Impairment

In performing our interim impairment analysis as of October 1, 2022, we determined that the carrying amounts of our United States, Canada and New Zealand franchise rights acquired with indefinite-lived units of account exceeded their respective fair values and, as a result, we recorded impairment charges for our United States, Canada and New Zealand units of account of $298.3 million, $13.3 million and $1.1 million, respectively, in the third quarter of fiscal 2022.

Operating (Loss) Income

Operating loss for the third quarter of fiscal 2022 was $254.5 million compared to operating income for the third quarter of fiscal 2021 of $79.7 million. Operating loss for the third quarter of fiscal 2022 was negatively impacted by $4.3 million of foreign currency. Excluding the impact of the $312.7 million of franchise rights acquired impairments in third quarter of fiscal 2022, the net impact of the $3.7 million of restructuring charges in the third quarter of fiscal 2022 and the net impact of the $8.6 million of restructuring charges in the third quarter of fiscal 2021, operating income would have been $61.9 million for the third quarter of fiscal 2022, a decrease of 30.0%, or 24.1% on a constant currency basis, versus operating income in the prior year period. Operating loss margin for the third quarter of fiscal 2022 was 101.9% compared to operating income margin for the third quarter of fiscal 2021 of 27.2%. Excluding the impact of the franchise rights acquired impairments in the third quarter of fiscal 2022, the net impact of restructuring charges in the third quarter of fiscal 2022 and the net impact of restructuring charges in the third quarter of fiscal 2021, operating income margin would have been 24.8% for the third quarter of fiscal 2022, a decrease of 5.3%, or 4.5% on a constant currency basis, versus operating income margin in the prior year period. This decrease in operating income margin was driven by an increase in marketing expenses as a percentage of revenue, an increase in selling, general and administrative expenses as a percentage of revenue and a decrease in gross margin versus the prior year period.

Interest Expense

Interest expense for the third quarter of fiscal 2022 increased $1.6 million, or 8.4%, versus the third quarter of fiscal 2021. The increase in interest expense was driven primarily by an increase in the base rate of our Term Loan Facility (as defined below).The effective interest rate on our debt, based on interest incurred (which includes amortization of our deferred financing costs and debt discount) and our average borrowings during the third quarter of fiscal 2022 and the third quarter of fiscal 2021 and excluding the impact of our interest rate swaps then in effect, increased to 5.68% per annum at the end of the third quarter of fiscal 2022 from 4.69% per annum at the end of the third quarter of fiscal 2021. Including the impact of our interest rate swaps then in effect, the effective interest rate on our debt, based on interest incurred (which includes amortization of our deferred financing costs and debt discount) and our average borrowings during the third quarter of fiscal 2022 and the third quarter of fiscal 2021, increased to 5.77% per annum at the end of the third quarter of fiscal 2022 from 5.29% per annum at the end of the third quarter of fiscal 2021. See “—Liquidity and Capital Resources—Long-Term Debt” for additional details regarding our debt, including interest rates and payments thereon. For additional details on our interest rate swaps, see “Item 3. Quantitative and Qualitative Disclosures about Market Risk” in Part I of this Quarterly Report on Form 10-Q.

Other Expense, Net

Other expense, net, which consists primarily of the impact of foreign currency on intercompany transactions, increased by $0.6 million for the third quarter of fiscal 2022 to $1.3 million of expense as compared to $0.8 million of expense for the third quarter of fiscal 2021.

Tax

Our effective tax rate for the third quarter of fiscal 2022 was 25.6% as compared to 22.4% for the third quarter of fiscal 2021. The tax benefit for the third quarter of fiscal 2022 was impacted by a U.S. state tax rate change. For the third quarter of fiscal 2022, the difference between the U.S. federal statutory tax rate and our consolidated effective tax rate was primarily due to state income tax expense and tax expense from income earned in foreign jurisdictions, partially offset by a tax benefit related to foreign-derived intangible income, or FDII.The tax expense for the third quarter of fiscal 2021 was impacted by the reversal of a valuation allowance related to tax benefits for foreign losses that are now expected to be realized. For the third quarter of fiscal 2021, the difference between the U.S. federal statutory tax rate and our consolidated effective tax rate was primarily due to state income tax expense and tax expense from income earned in foreign jurisdictions, partially offset by a tax benefit related to FDII.

We continue to evaluate the realizability of our deferred tax assets and if our U.S. business continues to decline, it is possible that some or all of the business interest expense carryforward may not be used. While this carryforward has an indefinite life, a change in the valuation allowance is possible in the foreseeable future which could materially increase our tax expense in the period the valuation allowance is recognized.

Net (Loss) Income and Diluted (Net Loss) Earnings Per Share

Net loss for the third quarter of fiscal 2022 was $206.0 million compared to net income for the third quarter of fiscal 2021 of $46.3 million. Net loss for the third quarter of fiscal 2022 was negatively impacted by $2.7 million of foreign currency. Net loss for the third quarter of fiscal 2022 included a $235.1 million impact from the franchise rights acquired impairments and a $2.7 million net impact from restructuring charges. Net income for the third quarter of fiscal 2021 included a $6.5 million net impact from restructuring charges.

Diluted net loss per share for the third quarter of fiscal 2022 was $2.93 compared to earnings per fully diluted share, or EPS, of $0.65 for the third quarter of fiscal 2021. Diluted net loss per share for the third quarter of fiscal 2022 included a $3.34 impact from the franchise rights acquired impairments and a $0.04 net impact from restructuring charges. EPS for the third quarter of fiscal 2021 included a $0.09 net impact from restructuring charges. Additionally, EPS for the third quarter of fiscal 2021 included a $0.02 tax benefit due to the reversal of a valuation allowance related to foreign losses that are now expected to be realized.

Segment Results

Metrics and Business Trends

The following tables set forth key metrics by reportable segment for the third quarter of fiscal 2022 and the percentage change in those metrics versus the prior year period:

(in millions except percentages and as noted)


	Q3 2022
	GAAP									Constant Currency
	Subscription Revenues			Product Sales & Other			Total Revenues			Subscription Revenues			Product Sales & Other			Total Revenues			Total Paid Weeks			Incoming Subscribers			EOP Subscribers
																						(in thousands)
North America	$	154.8		$	21.2		$	176.1		$	155.2		$	21.3		$	176.5			34.0			2,805.1			2,463.8
CE		51.2			5.3			56.5			60.0			6.2			66.2			13.6			1,118.9			1,009.7
UK		9.5			1.4			10.9			11.1			1.7			12.8			3.2			254.8			234.0
Other (1)		5.2			1.0			6.2			5.6			1.1			6.7			1.1			88.7			86.1
Total	$	220.7		$	29.0		$	249.7		$	231.9		$	30.2		$	262.2			51.9			4,267.5			3,793.6

	% Change Q3 2022 vs. Q3 2021
North America		(12.4	%)		0.8	%		(11.0	%)		(12.2	%)		1.0	%		(10.8	%)		(13.5	%)		(11.2	%)		(15.6	%)
CE		(21.5	%)		(20.9	%)		(21.5	%)		(8.0	%)		(7.1	%)		(8.0	%)		(12.5	%)		(12.2	%)		(12.6	%)
UK		(30.1	%)		(32.4	%)		(30.4	%)		(18.2	%)		(20.9	%)		(18.6	%)		(20.1	%)		(24.4	%)		(20.0	%)
Other (1)		(23.9	%)		(17.5	%)		(22.9	%)		(18.0	%)		(13.0	%)		(17.2	%)		(11.1	%)		(9.6	%)		(11.0	%)
Total		(15.9	%)		(6.8	%)		(14.9	%)		(11.6	%)		(2.8	%)		(10.7	%)		(13.6	%)		(12.3	%)		(15.0	%)

Note: Totals may not sum due to rounding.

(1)

Represents Australia, New Zealand and emerging markets operations and franchise revenues.

(in millions except percentages and as noted)


	Q3 2022
	Digital Subscription Revenues															Workshops + Digital Fees
	GAAP			Constant Currency			Digital Paid Weeks			Incoming Digital Subscribers			EOP Digital Subscribers			GAAP			Constant Currency			Workshops + Digital Paid Weeks			Incoming Workshops + Digital Subscribers			EOP Workshops + Digital Subscribers
										(in thousands)															(in thousands)
North America	$	102.7		$	103.0			26.3			2,174.6			1,908.4		$	52.1		$	52.2			7.8			630.5			555.4
CE		43.6			51.1			12.1			1,009.8			898.1			7.6			8.9			1.5			109.1			111.6
UK		5.7			6.7			2.3			182.8			168.6			3.8			4.4			0.9			72.0			65.4
Other (1)		3.8			4.1			0.9			72.8			70.9			1.4			1.5			0.2			15.9			15.2
Total	$	155.9		$	164.9			41.6			3,440.0			3,046.1		$	64.9		$	67.0			10.3			827.6			747.6

	% Change Q3 2022 vs. Q3 2021
North America		(17.9	%)		(17.7	%)		(17.8	%)		(16.5	%)		(18.5	%)		0.9	%		1.1	%		5.7	%		13.8	%		(3.7	%)
CE		(22.8	%)		(9.6	%)		(15.5	%)		(14.4	%)		(15.5	%)		(13.1	%)		1.9	%		23.8	%		15.7	%		21.0	%
UK		(36.8	%)		(26.0	%)		(24.4	%)		(29.9	%)		(23.0	%)		(16.9	%)		(2.7	%)		(7.0	%)		(5.9	%)		(11.1	%)
Other (1)		(18.2	%)		(11.9	%)		(6.0	%)		(2.6	%)		(7.5	%)		(36.2	%)		(31.0	%)		(28.8	%)		(32.0	%)		(24.3	%)
Total		(20.2	%)		(15.6	%)		(17.3	%)		(16.5	%)		(17.7	%)		(3.3	%)		(0.1	%)		5.6	%		10.6	%		(2.0	%)

Note: Totals may not sum due to rounding.

(1)

Represents Australia, New Zealand and emerging markets operations and franchise revenues.

North America Performance

The decrease in North America revenues for the third quarter of fiscal 2022 versus the prior year period was driven by a decrease in Subscription Revenues. The decrease in Subscription Revenues for the third quarter of fiscal 2022 versus the prior year period was driven by a decrease in Digital Subscription Revenues. Digital Subscription Revenues were negatively impacted by both the lower number of Incoming Digital Subscribers at the beginning of the third quarter of fiscal 2022 versus the beginning of the third quarter of fiscal 2021 and the recruitment decline during the third quarter of fiscal 2022 as compared to the prior year period. This decline in recruitments was driven primarily by worsened consumer sentiment in the current environment and our PersonalPoints program not resonating with consumers to the extent anticipated. The decrease in North America Total Paid Weeks for the third quarter of fiscal 2022 versus the prior year period was driven primarily by both the lower number of Total Incoming Subscribers at the beginning of the third quarter of fiscal 2022 versus the beginning of the third quarter of fiscal 2021 and lower recruitments for the third quarter of fiscal 2022 versus the prior year period. For the third quarter of fiscal 2022, Workshops + Digital Fees, Workshops + Digital Paid Weeks and End of Period Workshops + Digital Subscribers all substantially benefited from the transition of our former Digital 360 members from the Digital business to the Workshops + Digital business during the second and third quarters of fiscal 2022 as previously disclosed.

The slight increase in North America product sales and other for the third quarter of fiscal 2022 versus the prior year period was driven primarily by an increase in licensing, partially offset by a decrease in product sales.

Continental Europe Performance

The decrease in Continental Europe revenues for the third quarter of fiscal 2022 versus the prior year period was driven primarily by a decrease in Subscription Revenues. The decrease in Subscription Revenues for the third quarter of fiscal 2022 versus the prior year period was driven by a decrease in Digital Subscription Revenues. Digital Subscription Revenues were negatively impacted by both the lower number of Incoming Digital Subscribers at the beginning of the third quarter of fiscal 2022 versus the beginning of the third quarter of fiscal 2021 and the recruitment decline during the third quarter of fiscal 2022 as compared to the prior year period. This decline in recruitments was driven primarily by worsened consumer sentiment in the current environment and our PersonalPoints program not resonating with consumers to the extent anticipated. The decrease in Continental Europe Total Paid Weeks for the third quarter of fiscal 2022 versus the prior year period was driven primarily by both lower recruitments for the third quarter of fiscal 2022 versus the prior year period and the lower number of Total Incoming Subscribers at the beginning of the third quarter of fiscal 2022 versus the beginning of the third quarter of fiscal 2021.

The decrease in Continental Europe product sales and other for the third quarter of fiscal 2022 versus the prior year period was driven primarily by a decrease in product sales.

United Kingdom Performance

The decrease in UK revenues for the third quarter of fiscal 2022 versus the prior year period was driven primarily by a decrease in Subscription Revenues. The decrease in Subscription Revenues for the third quarter of fiscal 2022 versus the prior year period was driven primarily by a decrease in Digital Subscription Revenues. Digital Subscription Revenues were negatively impacted by both the lower number of Incoming Digital Subscribers at the beginning of the third quarter of fiscal 2022 versus the beginning of the third quarter of fiscal 2021 and the recruitment decline during the third quarter of fiscal 2022 as compared to the prior year period. This decline in recruitments was driven primarily by worsened consumer sentiment in the current environment and our PersonalPoints program not resonating with consumers to the extent anticipated. The decrease in UK Total Paid Weeks for the third quarter of fiscal 2022 versus the prior year period was driven primarily by both the lower number of Total Incoming Subscribers at the beginning of the third quarter of fiscal 2022 versus the beginning of the third quarter of fiscal 2021 and lower recruitments for the third quarter of fiscal 2022 versus the prior year period.

The decrease in UK product sales and other for the third quarter of fiscal 2022 versus the prior year period was driven primarily by a decrease in e-commerce product sales.

Other Performance

The decrease in Other revenues for the third quarter of fiscal 2022 versus the prior year period was driven primarily by a decrease in Subscription Revenues. The decrease in Subscription Revenues for the third quarter of fiscal 2022 versus the prior year period was driven by both a decrease in Workshops + Digital Fees and a decrease in Digital Subscription Revenues. Subscription Revenues were negatively impacted by both the lower number of Total Incoming Subscribers at the beginning of the third quarter of fiscal 2022 versus the beginning of the third quarter of fiscal 2021 and the recruitment decline during the third quarter of fiscal 2022 as compared to the prior year period. This decline in recruitments was driven primarily by worsened consumer sentiment in the current environment and our PersonalPoints program not resonating with consumers to the extent anticipated.

The decrease in Other product sales and other for the third quarter of fiscal 2022 versus the prior year period was driven primarily by a decrease in e-commerce product sales.

RESULTS OF OPERATIONS

NINE MONTHS ENDED OCTOBER 1, 2022 COMPARED TO THE NINE MONTHS ENDED OCTOBER 2, 2021

The table below sets forth selected financial information for the first nine months of fiscal 2022 from our consolidated statements of net income for the nine months ended October 1, 2022 versus selected financial information for the first nine months of fiscal 2021 from our consolidated statements of net income for the nine months ended October 2, 2021.

Summary of Selected Financial Data


	(In millions, except per share amounts)
	For The Nine Months Ended
	October 1, 2022			October 2, 2021			Increase/ (Decrease)			% Change				% Change Constant Currency
Revenues, net	$	816.9		$	936.7		$	(119.7	)		(12.8	%)			(9.6	%)
Cost of revenues		321.5			379.2			(57.7	)		(15.2	%)			(13.0	%)
Gross profit		495.4			557.5			(62.1	)		(11.1	%)			(7.3	%)
Gross Margin %		60.6	%		59.5	%

Marketing expenses		195.1			208.7			(13.5	)		(6.5	%)			(3.6	%)
Selling, general & administrative expenses		193.3			206.6			(13.3	)		(6.4	%)			(4.5	%)
Franchise rights acquired and goodwill impairments		339.2			—			339.2			100.0	%			100.0	%
Operating (loss) income		(232.2	)		142.2			(374.4	)		(100.0	%)	*		(100.0	%)	*
Operating (Loss) Income Margin %		(28.4	%)		15.2	%

Interest expense		58.8			68.7			(9.9	)		(14.4	%)			(14.4	%)
Other expense, net		3.3			0.9			2.4			100.0	%	*		100.0	%	*
Early extinguishment of debt		—			29.2			(29.2	)		(100.0	%)			(100.0	%)
(Loss) income before income taxes		(294.3	)		43.5			(337.8	)		(100.0	%)	*		(100.0	%)	*

(Benefit from) provision for income taxes		(75.4	)		6.5			(81.9	)		(100.0	%)	*		(100.0	%)	*
Net (loss) income	$	(218.9	)	$	37.0		$	(255.9	)		(100.0	%)	*		(100.0	%)	*

Weighted average diluted shares outstanding		70.3			70.9			(0.6	)		(0.9	%)			(0.9	%)
Diluted (net loss) earnings per share	$	(3.12	)	$	0.52		$	(3.64	)		(100.0	%)	*		(100.0	%)	*

Note: Totals may not sum due to rounding.

*Note: Percentage in excess of 100.0%.

Certain results for the first nine months of fiscal 2022 are adjusted to exclude the impact of the $339.2 million of franchise rights acquired and goodwill impairments and the net impact of the $22.7 million of 2022 plan restructuring charges, the reversal of $0.2 million of 2021 plan restructuring charges and the reversal of $0.1 million of 2020 plan restructuring charges. See “Non-GAAP Financial Measures” above. The table below sets forth a reconciliation of certain of those components of our selected financial data for the ~~three~~first nine months ended ~~April 2,~~October 1, 2022 which have been adjusted.


				Gross						Operating						Gross						Operating
	Gross			Profit			Operating			Income			Gross			Profit			Operating			(Loss) Income
(in millions except percentages)	Profit			Margin			Income			Margin			Profit			Margin			(Loss) Income			Margin
First Quarter of Fiscal 2022	$	180.1			60.5	%	$	9.0			3.0	%
First Nine Months of Fiscal 2022													$	495.4			60.6	%	$	(232.2	)		(28.4	%)
Adjustments to reported amounts ⁽¹⁾
Franchise rights acquired and goodwill impairments														—						339.2
2022 plan restructuring charges														4.4						22.7
2021 plan restructuring charges		0.0						0.3						(0.4	)					(0.2	)
2020 plan restructuring charges		(0.1	)					(0.1	)					(0.1	)					(0.1	)
Total adjustments ⁽¹⁾		(0.1	)					0.1						3.9						361.5
First Quarter of Fiscal 2022, as adjusted ⁽¹⁾	$	180.0			60.5	%	$	9.1			3.1	%
First Nine Months of Fiscal 2022, as adjusted (1)													$	499.3			61.1	%	$	129.3			15.8	%

Note: Totals may not sum due to rounding.

(1)

The “As adjusted” measure is a non-GAAP financial measure that adjusts the consolidated statements of net income for the first nine months of fiscal 2022 to exclude the impact of the $339.2 million ($256.4 million after tax) of franchise rights acquired and goodwill impairments and the net impact of the $22.7 million ($17.0 million after tax) of 2022 plan restructuring charges, the reversal of $0.2 million ($0.1 million after tax) of 2021 plan restructuring charges and the reversal of $0.1 million ($0.1 million after tax) of 2020 plan restructuring charges. See “Non-GAAP Financial Measures” above for an explanation of our use of non-GAAP financial measures.

~~(1)~~

The “As adjusted” measure is a non-GAAP financial measure that adjusts the consolidated statements of net income for the first quarter of fiscal 2022 to exclude the net impact of $0.3 million ($0.2 million after tax) ~~of 2021 plan restructuring charges~~ ~~and the reversal of $0.1 million ($0.1 million after tax) of 2020 plan restructuring charges. See “Non-GAAP Financial Measures” above for an explanation of our use of non-GAAP financial measures.~~

Certain results for the first ~~quarter~~nine months of fiscal 2021 are adjusted to exclude the net impact of the ~~$5.5~~$20.9 million of 2021 plan restructuring charges and the reversal of $1.5 million of 2020 plan restructuring charges. See “Non-GAAP Financial Measures” above. The table below sets forth a reconciliation of certain of those components of our selected financial data for the ~~three~~first nine months ended ~~April 3,~~October 2, 2021 which have been adjusted.


			Gross					Operating						Gross						Operating
	Gross		Profit			Operating		Income			Gross			Profit			Operating			Income
(in millions except percentages)	Profit		Margin			Income		Margin			Profit			Margin			Income			Margin
First Quarter of Fiscal 2021	$	193.4		58.3	%	$	2.8		0.9	%
First Nine Months of Fiscal 2021											$	557.5			59.5	%	$	142.2			15.2	%
Adjustments to reported amounts ⁽¹⁾
2021 plan restructuring charges		5.2					5.5					16.4						20.9
2020 plan restructuring charges												(1.3	)					(1.5	)
Total adjustments ⁽¹⁾		5.2					5.5					15.1						19.4
First Quarter of Fiscal 2021, as adjusted ⁽¹⁾	$	198.6		59.9	%	$	8.4		2.5	%
First Nine Months of Fiscal 2021, as adjusted (1)											$	572.6			61.1	%	$	161.6			17.3	%

Note: Totals may not sum due to rounding.

(1)

The “As adjusted” measure is a non-GAAP financial measure that adjusts the consolidated statements of net income for the first nine months of fiscal 2021 to exclude the net impact of the $20.9 million ($15.6 million after tax) of 2021 plan restructuring charges and the reversal of $1.5 million ($1.1 million after tax) of 2020 plan restructuring charges. See “Non-GAAP Financial Measures” above for an explanation of our use of non-GAAP financial measures.

~~(1)~~

The “As adjusted” measure is a non-GAAP financial measure that adjusts the consolidated statements of net income for the first quarter of fiscal 2021 to exclude the impact of the $5.5 million ($4.1 million after tax) of 2021 plan restructuring charges. See “Non-GAAP Financial Measures” above for an explanation of our use of non-GAAP financial measures.

Consolidated Results

Revenues

Revenues for the first ~~quarter~~nine months of fiscal 2022 were ~~$297.8~~$816.9 million, a decrease of ~~$34.0~~$119.7 million, or ~~10.3%~~12.8%, versus the first ~~quarter~~nine months of fiscal 2021. Excluding the impact of foreign currency, which negatively impacted our revenues in the first ~~quarter~~nine months of fiscal 2022 by ~~$6.3~~$29.5 million, revenues for the first ~~quarter~~nine months of fiscal 2022 would have decreased ~~8.4%~~9.6% versus the prior year period. This decrease was driven primarily by lower Subscription Revenues reflecting lower sign-ups primarily due to worsened consumer ~~sentiment.~~sentiment and our PersonalPoints program not resonating with consumers to the extent anticipated. This worsened consumer sentiment was due in part to the evolution of the COVID-19 pandemic as well as the likely impact of certain macro factors including increasing inflation, social and political unrest and challenged economic growth. See “—Segment Results” for additional details on revenues.

Cost of Revenues

Total cost of revenues for the first ~~quarter~~nine months of fiscal 2022 decreased ~~$20.7~~$57.7 million, or ~~15.0%~~15.2%, versus the first ~~quarter~~nine months of fiscal 2021. Excluding the impact of foreign currency, which decreased cost of revenues in the first ~~quarter~~nine months of fiscal 2022 by ~~$1.8~~$8.3 million, cost of revenues for the first ~~quarter~~nine months of fiscal 2022 would have decreased ~~13.6%~~13.0% versus the prior year period. Excluding the net impact of ~~$(0.1)~~the $3.9 million of restructuring charges in the first ~~quarter~~nine months of fiscal 2022 and the net impact of the ~~$5.2~~$15.1 million of restructuring charges in the first ~~quarter~~nine months of fiscal 2021, total cost of revenues for the first ~~quarter~~nine months of fiscal 2022 would have decreased by ~~11.6%~~12.7%, or ~~10.2%~~10.5% on a constant currency basis, versus the prior year period.

Gross Profit

Gross profit for the first ~~quarter~~nine months of fiscal 2022 decreased ~~$13.3~~$62.1 million, or ~~6.9%~~11.1%, versus the first ~~quarter~~nine months of fiscal 2021. Excluding the impact of foreign currency, which negatively impacted gross profit in the first ~~quarter~~nine months of fiscal 2022 by ~~$4.5~~$21.1 million, gross profit for the first ~~quarter~~nine months of fiscal 2022 would have decreased ~~4.6%~~7.3% versus the prior year period. Excluding the net impact of ~~$(0.1)~~the $3.9 million of restructuring charges in the first ~~quarter~~nine months of fiscal 2022 and the net impact of the ~~$5.2~~$15.1 million of restructuring charges in the first ~~quarter~~nine months of fiscal 2021, gross profit for the first ~~quarter~~nine months of fiscal 2022 would have decreased by ~~9.4%~~12.8%, or ~~7.1%~~9.1% on a constant currency basis, versus the prior year period primarily due to the decrease in revenues. Gross margin for the first ~~quarter~~nine months of fiscal 2022 increased ~~2.2%~~ to ~~60.5%~~60.6% versus ~~58.3%~~59.5% for the first ~~quarter~~nine months of fiscal 2021. Excluding the impact of foreign currency, gross margin in the first ~~quarter~~nine months of fiscal 2022 would have increased ~~2.4%~~1.5% to ~~60.7%~~61.0% versus the prior year period. Excluding the net impact of restructuring charges in the first ~~quarter~~nine months of fiscal 2022 and the net impact of restructuring charges in the first ~~quarter~~nine months of fiscal 2021, gross margin for the first ~~quarter~~nine months of fiscal 2022 would have ~~increased 0.6% to 60.5%~~been flat at 61.1% versus the prior year period. Excluding the impact of foreign currency, the net impact of restructuring charges in the first ~~quarter~~nine months of fiscal 2022 and the net impact of restructuring charges in the first ~~quarter~~nine months of fiscal 2021, gross margin for the first ~~quarter~~nine months of fiscal 2022 would have increased ~~0.8%~~0.4% to ~~60.7%~~61.5% versus the prior year period. The gross margin increase was driven primarily by margin expansion in the Workshops + Digital business resulting from a ~~revenue mix shift to our higher margin Digital business.~~more efficient studio footprint and a reduction in labor costs.

Marketing

Marketing expenses for the first ~~quarter~~nine months of fiscal 2022 decreased ~~$9.4~~$13.5 million, or ~~8.0%~~6.5%, versus the first ~~quarter~~nine months of fiscal 2021. Excluding the impact of foreign currency, which decreased marketing expenses in the first ~~quarter~~nine months of fiscal 2022 by ~~$2.1~~$6.1 million, marketing expenses for the first ~~quarter~~nine months of fiscal 2022 would have decreased ~~6.2%~~3.6% versus the prior year period. This decrease in marketing expenses was primarily due to a decline in TV media.Marketing expenses as a percentage of revenue for the first ~~quarter~~nine months of fiscal 2022 increased to ~~36.1%~~23.9% from ~~35.2%~~22.3% for the first ~~quarter~~nine months of fiscal 2021.

Selling, General and Administrative

Selling, general and administrative expenses for the first ~~quarter~~nine months of fiscal 2022 decreased ~~$10.1~~$13.3 million, or ~~13.7%~~6.4%, versus the first ~~quarter~~nine months of fiscal 2021. Excluding the impact of foreign currency, which decreased selling, general and administrative expenses in the first ~~quarter~~nine months of fiscal 2022 by ~~$0.7~~$4.0 million, selling, general and administrative expenses for the first ~~quarter~~nine months of fiscal 2022 would have decreased ~~12.8%~~4.5% versus the prior year period. Excluding the impact of the ~~$0.2~~$18.5 million of restructuring charges in the first ~~quarter~~nine months of fiscal 2022 and the net impact of the ~~$0.3~~$4.3 million of restructuring charges in the first ~~quarter~~nine months of fiscal 2021, selling, general and administrative expenses for the first ~~quarter~~nine months of fiscal 2022 would have decreased by ~~13.7%~~13.6%, or ~~12.7%~~11.6% on a constant currency basis, versus the prior year period. This decrease in selling, general and administrative expenses was primarily due to lower ~~bonus~~stock compensation expense, ~~driven by a change~~lower salary costs, lower professional fees and an increase in ~~timing of payment and a reduction in headcount.~~capitalizable projects. Selling, general and administrative expenses as a percentage of revenue for the first ~~quarter of fiscal 2022 decreased to 21.3% from 22.2% for the first quarter of fiscal 2021.~~

~~Operating Income~~

~~Operating income for the first quarter~~nine months of fiscal 2022 increased ~~$6.1 million, or 216.8%, versus~~to 23.7% from 22.1% for the first ~~quarter~~nine months of fiscal 2021. Excluding the impact of ~~foreign currency, which negatively impacted operating income~~restructuring charges in the first ~~quarter~~nine months of fiscal 2022 ~~by $1.7 million, operating income for the first quarter of fiscal 2022 would have increased 275.9% versus the prior year period. Excluding~~and the net impact ~~of the $0.1 million~~ of restructuring charges in the first ~~quarter of fiscal 2022 and the impact of the $5.5 million of restructuring charges in the first quarter~~nine months of fiscal 2021, ~~operating income~~selling, general and administrative expenses as a percentage of revenue for the first ~~quarter~~nine months of fiscal 2022 would have ~~increased~~decreased by ~~9.0%~~0.2%, or ~~29.0%~~0.5% on a constant currency basis, versus the prior year period.

Impairments

In performing our annual impairment analysis as of May 8, 2022, we determined that the carrying amounts of our Canada and New Zealand franchise rights acquired with indefinite-lived units of account exceeded their respective fair values and, as a result, we recorded impairment charges for our Canada and New Zealand units of account of $24.5 million and $0.8 million, respectively, in the second quarter of fiscal 2022. In addition, we determined in the second quarter of fiscal 2022 to exit the Kurbo business in the third quarter of fiscal 2022 as part of our strategic plan. As a result of this determination, we recorded an impairment charge of $1.1 million in the second quarter of fiscal 2022, which comprised the entire goodwill balance for Kurbo.

Operating (Loss) Income

Operating loss for the first nine months of fiscal 2022 was $232.2 million compared to operating income for the first nine months of fiscal 2021 of $142.2 million. Operating loss for the first nine months of fiscal 2022 was negatively impacted by $8.9 million of foreign currency. Excluding the impact of the $339.2 million of franchise rights acquired and goodwill impairments in the first nine months of fiscal 2022, the net impact of the $22.4 million of restructuring charges in the first nine months of fiscal 2022 and the net impact of the $19.4 million of restructuring charges in the first nine months of fiscal 2021, operating income would have been $129.3 million for the first nine months of fiscal 2022, a decrease of 20.0%, or 13.1% on a constant currency basis, versus operating income in the prior year period. Operating loss margin for the first nine months of fiscal 2022 was 28.4% compared to operating income margin for the first ~~quarter~~nine months of fiscal ~~2022 increased 2.2% to 3.0% versus 0.9% for~~2021 of 15.2%. Excluding the impact of the franchise rights acquired and goodwill impairments in the first ~~quarter~~nine months of fiscal ~~2021. Excluding~~2022, the net impact of restructuring charges in the first ~~quarter~~nine months of fiscal 2022 and the net impact of restructuring charges in the first ~~quarter~~nine months of fiscal 2021, operating income margin would have been 15.8% for the first ~~quarter~~nine months of fiscal 2022, ~~would have increased by 0.5%~~a decrease of 1.4%, or ~~1.0%~~0.7% on a constant currency basis, versus operating income margin in the prior year period. This ~~increase~~decrease in operating income margin was driven ~~primarily~~by an increase in marketing expenses as a percentage of revenue, partially offset by a decrease in selling, general and administrative expenses as a percentage of revenue and an increase in gross margin, ~~partially offset by an increase in marketing expenses as a percentage of revenue,~~ versus the prior year period.

Interest Expense

Interest expense for the first ~~quarter~~nine months of fiscal 2022 decreased ~~$10.5~~$9.9 million, or ~~35.9%~~14.4%, versus the first ~~quarter~~nine months of fiscal 2021. The decrease in interest expense was driven primarily by lower interest rates under our Term Loan Facility ~~(as defined below)~~ and on our Senior Secured Notes (as defined below) as a result of our April 2021 debt refinancing (as defined below).The effective interest rate on our debt, based on interest incurred (which includes amortization of our deferred financing costs and debt discount) and our average borrowings during the first ~~quarter~~nine months of fiscal 2022 and the first ~~quarter~~nine months of fiscal 2021 and excluding the impact of our interest rate swaps then in effect, decreased to ~~4.53%~~4.98% per annum at the end of the first ~~quarter~~nine months of fiscal 2022 from ~~6.59%~~5.28% per annum at the end of the first ~~quarter~~nine months of fiscal 2021. Including the impact of our interest rate swaps then in effect, the effective interest rate on our debt, based on interest incurred (which includes amortization of our deferred financing costs and debt discount) and our average borrowings during the first ~~quarter~~nine months of fiscal 2022 and the first ~~quarter~~nine months of fiscal 2021, decreased to ~~5.14%~~5.40% per annum at the end of the first ~~quarter~~nine months of fiscal 2022 from ~~7.56%~~6.00% per annum at the end of the first ~~quarter~~nine months of fiscal 2021. See “—Liquidity and Capital Resources—Long-Term Debt” for additional details regarding our debt, including interest rates and payments thereon. For additional details on our interest rate swaps, see “Item 3. Quantitative and Qualitative Disclosures about Market Risk” in Part I of this Quarterly Report on Form 10-Q.

Other Expense, ~~(Income),~~ Net

Other expense, ~~(income),~~ net, which consists primarily of the impact of foreign currency on intercompany transactions, ~~changed~~increased by ~~$0.6~~$2.4 million for the first ~~quarter~~nine months of fiscal 2022 to ~~$0.3~~$3.3 million of expense as compared to ~~$0.2~~$0.9 million of ~~income~~expense for the first nine months of fiscal 2021.

Early Extinguishment of Debt

In the second quarter of fiscal ~~2021.~~2021, we wrote-off $29.2 million of fees in connection with our April 2021 debt refinancing that we recorded as an early extinguishment of debt charge, comprised of $12.9 million of a prepayment penalty on the Discharged Senior Notes (as defined below), $9.0 million of financing fees and $7.2 million of pre-existing deferred financing fees and debt discount. For additional details on this refinancing, see “—Liquidity and Capital Resources—Long-Term Debt”.

~~Tax~~

Tax

Our effective tax rate for the first ~~quarter~~nine months of fiscal 2022 was ~~17.9%~~25.6% as compared to ~~30.0%~~14.9% for the first ~~quarter~~nine months of fiscal 2021. The tax benefit for the first nine months of fiscal 2022 was impacted by out-of-period income tax adjustments and a U.S. state tax rate change, partially offset by tax shortfalls from stock compensation. For the first ~~quarter~~nine months of fiscal 2022, the difference between the U.S. federal statutory tax rate and our consolidated effective tax rate was primarily due to ~~a tax benefit related to foreign-derived intangible income, or FDII, partially offset by state income tax expense and tax expense from income earned in foreign jurisdictions.~~ ~~The effective tax rate for the first quarter of fiscal 2021~~ ~~was impacted by~~ state income tax expense and tax expense from income earned in foreign jurisdictions, partially offset by a tax benefit related to FDII. The tax expense for the first nine months of fiscal 2021 was impacted by tax windfalls from stock compensation and the reversal of a valuation allowance related to tax benefits for foreign losses that are now expected to be realized. For the first nine months of fiscal 2021, the difference between the U.S. federal statutory tax rate and our consolidated effective tax rate was primarily due to state income tax expense and tax expense from income earned in foreign jurisdictions, partially offset by a tax benefit related to FDII.

We continue to evaluate the realizability of our deferred tax ~~windfalls from stock compensation.~~assets and if our U.S. business continues to decline, it is possible that some or all of the business interest expense carryforward may not be used. While this carryforward has an indefinite life, a change in the valuation allowance is possible in the foreseeable future which could materially increase our tax expense in the period the valuation allowance is recognized.

Net ~~Loss~~(Loss) Income and Diluted ~~Net Loss~~(Net Loss) Earnings Per Share

Net loss for the first ~~quarter~~nine months of fiscal 2022 was ~~$8.2~~$218.9 million ~~which decreased $10.0 million, or 54.8%, from the~~compared to net ~~loss~~income for the first ~~quarter~~nine months of fiscal 2021 of ~~$18.2 million~~. Excluding the impact of foreign currency, which negatively impacted net loss in the first quarter of fiscal 2022 by $1.2 million, net loss for the first quarter of fiscal 2022 would have decreased 61.3% from the prior year period. $37.0 million. Net loss for the first ~~quarter~~nine months of fiscal 2022 was negatively impacted by $5.7 million of foreign currency. Net loss for the first nine months of fiscal 2022 included a ~~$0.1~~$256.4 million impact from franchise rights acquired and goodwill impairments and a $16.7 million net impact from restructuring charges. Net ~~loss~~income for the first ~~quarter~~nine months of fiscal 2021 included a ~~$4.1~~$21.8 million impact from the write-off of fees related to our April 2021 debt refinancing and an $14.5 million net impact from restructuring charges.

Diluted net loss per share for the first ~~quarter~~nine months of fiscal 2022 was ~~a loss of $0.12~~$3.12 compared to ~~a loss~~EPS of ~~$0.26~~$0.52 for the first ~~quarter~~nine months of fiscal 2021. Diluted net loss per share for the first ~~quarter~~nine months of fiscal 2022 included a ~~$0.00~~$3.65 impact from franchise rights acquired and goodwill impairments and a $0.24 net impact from restructuring charges. ~~Diluted net loss per share~~EPS for the first ~~quarter~~nine months of fiscal 2021 included a ~~$0.06~~$0.31 impact from the write-off of fees related to our April 2021 debt refinancing and a $0.20 net impact from restructuring charges. Additionally, EPS in the first nine months of fiscal 2021 included a $0.02 tax benefit due to the reversal of a valuation allowance related to foreign losses that are now expected to be realized.

Segment Results

Metrics and Business Trends

The following tables set forth key metrics by reportable segment for the first ~~quarter~~nine months of fiscal 2022 and the percentage change in those metrics versus the prior year period:

(in millions except percentages and as noted)

	Q1 2022
	GAAP									Constant Currency
				Product									Product						Total									First Nine Months of Fiscal 2022
	Subscription			Sales &			Total			Subscription			Sales &			Total			Paid			Incoming			EOP			GAAP									Constant Currency
	Revenues			Other			Revenues			Revenues			Other			Revenues			Weeks			Subscribers			Subscribers			Subscription Revenues			Product Sales & Other			Total Revenues			Subscription Revenues			Product Sales & Other			Total Revenues			Total Paid Weeks			Incoming Subscribers			EOP Subscribers
																						(in thousands)																											(in thousands)
North America	$	176.3		$	28.0		$	204.3		$	176.3		$	28.0		$	204.3			38.7			2,734.9			2,986.2		$	498.0		$	70.4		$	568.4		$	498.8		$	70.5		$	569.3			110.5			2,734.9			2,463.8
CE		61.7			9.2			70.9			66.4			9.9			76.3			15.4			1,094.1			1,189.5			169.5			19.6			189.1			190.7			21.9			212.6			44.1			1,094.1			1,009.7
UK		12.2			2.2			14.4			12.6			2.3			14.9			3.5			245.0			270.1			32.6			5.5			38.1			35.8			6.0			41.8			10.1			245.0			234.0
Other ⁽¹⁾		6.8			1.3			8.1			7.2			1.4			8.6			1.3			94.5			99.6			18.0			3.3			21.3			19.2			3.5			22.7			3.6			94.5			86.1
Total	$	257.0		$	40.8		$	297.8		$	262.5		$	41.6		$	304.0			58.9			4,168.6			4,545.4		$	718.1		$	98.8		$	816.9		$	744.5		$	101.9		$	846.4			168.3			4,168.6			3,793.6

	% Change Q1 2022 vs. Q1 2021																											% Change First Nine Months of Fiscal 2022 vs. First Nine Months of Fiscal 2021
North America		(5.7	%)		(18.4	%)		(7.7	%)		(5.7	%)		(18.4	%)		(7.7	%)		(3.6	%)		(3.1	%)		(5.5	%)		(8.7	%)		(13.2	%)		(9.3	%)		(8.6	%)		(13.1	%)		(9.2	%)		(8.5	%)		(3.1	%)		(15.6	%)
CE		(11.7	%)		(23.6	%)		(13.4	%)		(4.9	%)		(17.8	%)		(6.8	%)		(9.7	%)		(7.2	%)		(11.8	%)		(17.1	%)		(28.1	%)		(18.4	%)		(6.7	%)		(19.7	%)		(8.3	%)		(11.5	%)		(7.2	%)		(12.6	%)
UK		(18.4	%)		(45.9	%)		(24.3	%)		(15.9	%)		(44.5	%)		(22.1	%)		(21.3	%)		(24.3	%)		(20.6	%)		(23.7	%)		(39.0	%)		(26.4	%)		(16.2	%)		(33.3	%)		(19.2	%)		(21.7	%)		(24.3	%)		(20.0	%)
Other ⁽¹⁾		(15.4	%)		(11.8	%)		(14.8	%)		(10.5	%)		(7.4	%)		(10.0	%)		(6.6	%)		(3.2	%)		(6.9	%)		(19.2	%)		(20.9	%)		(19.5	%)		(13.6	%)		(16.8	%)		(14.1	%)		(8.5	%)		(3.2	%)		(11.0	%)
Total		(8.2	%)		(21.5	%)		(10.3	%)		(6.2	%)		(20.0	%)		(8.4	%)		(6.6	%)		(5.8	%)		(8.3	%)		(11.9	%)		(18.7	%)		(12.8	%)		(8.7	%)		(16.2	%)		(9.6	%)		(10.2	%)		(5.8	%)		(15.0	%)

Note: Totals may not sum due to rounding.

(1)

Represents Australia, New Zealand and emerging markets operations and franchise revenues.

~~(1)~~

~~Represents Australia, New Zealand and emerging markets operations and franchise revenues.~~

(in millions except percentages and as noted)

	Q1 2022
	Digital Subscription Revenues						Digital			Incoming			EOP			Workshops + Digital Fees						Workshops + Digital			Incoming Workshops			EOP Workshops			First Nine Months of Fiscal 2022
				Constant			Paid			Digital			Digital						Constant			Paid			+ Digital			+ Digital			Digital Subscription Revenues															Workshops + Digital Fees
	GAAP			Currency			Weeks			Subscribers			Subscribers			GAAP			Currency			Weeks			Subscribers			Subscribers			GAAP			Constant Currency			Digital Paid Weeks			Incoming Digital Subscribers			EOP Digital Subscribers			GAAP			Constant Currency			Workshops + Digital Paid Weeks			Incoming Workshops + Digital Subscribers			EOP Workshops + Digital Subscribers
										(in thousands)															(in thousands)															(in thousands)															(in thousands)
North America	$	125.3		$	125.3			31.4			2,186.9			2,450.7		$	51.0		$	51.0			7.3			548.0			535.4		$	342.5		$	343.1			87.7			2,186.9			1,908.4		$	155.6		$	155.8			22.7			548.0			555.4
CE		53.5			57.5			14.1			998.5			1,088.3			8.2			8.9			1.3			95.7			101.1			145.9			164.1			39.9			998.5			898.1			23.6			26.6			4.2			95.7			111.6
UK		7.8			8.0			2.6			179.7			206.0			4.4			4.6			0.9			65.3			64.1			20.1			22.1			7.4			179.7			168.6			12.5			13.8			2.7			65.3			65.4
Other ⁽¹⁾		4.9			5.2			1.1			76.0			81.4			1.9			2.0			0.2			18.5			18.2			13.1			14.0			3.0			76.0			70.9			4.9			5.2			0.7			18.5			15.2
Total	$	191.5		$	196.1			49.2			3,441.1			3,826.6		$	65.5		$	66.4			9.7			727.4			718.8		$	521.6		$	543.2			138.1			3,441.1			3,046.1		$	196.5		$	201.3			30.3			727.4			747.6

	% Change Q1 2022 vs. Q1 2021																														% Change First Nine Months of Fiscal 2022 vs. First Nine Months of Fiscal 2021
North America		(5.1	%)		(5.1	%)		(6.1	%)		(6.3	%)		(6.8	%)		(7.1	%)		(7.1	%)		9.0	%		12.3	%		1.1	%		(11.6	%)		(11.4	%)		(11.9	%)		(6.3	%)		(18.5	%)		(1.7	%)		(1.6	%)		7.4	%		12.3	%		(3.7	%)
CE		(9.2	%)		(2.3	%)		(9.3	%)		(5.8	%)		(12.1	%)		(24.8	%)		(19.1	%)		(13.2	%)		(20.1	%)		(9.1	%)		(17.1	%)		(6.8	%)		(12.8	%)		(5.8	%)		(15.5	%)		(16.9	%)		(6.3	%)		3.5	%		(20.1	%)		21.0	%
UK		(20.4	%)		(18.1	%)		(23.2	%)		(23.5	%)		(22.9	%)		(14.5	%)		(11.9	%)		(15.4	%)		(26.2	%)		(12.3	%)		(29.2	%)		(22.4	%)		(25.1	%)		(23.5	%)		(23.0	%)		(12.7	%)		(3.9	%)		(10.7	%)		(26.2	%)		(11.1	%)
Other ⁽¹⁾		(6.9	%)		(1.4	%)		(0.2	%)		2.8	%		(0.3	%)		(31.6	%)		(27.7	%)		(27.0	%)		(21.9	%)		(28.2	%)		(11.7	%)		(5.6	%)		(2.4	%)		2.8	%		(7.5	%)		(34.1	%)		(29.6	%)		(28.8	%)		(21.9	%)		(24.3	%)
Total		(7.1	%)		(4.8	%)		(8.0	%)		(7.1	%)		(9.3	%)		(11.2	%)		(10.0	%)		1.5	%		1.0	%		(2.8	%)		(14.0	%)		(10.5	%)		(12.8	%)		(7.1	%)		(17.7	%)		(5.7	%)		(3.4	%)		3.8	%		1.0	%		(2.0	%)

Note: Totals may not sum due to rounding.

~~(1)~~

~~Represents Australia, New Zealand and emerging markets operations and franchise revenues~~.

(1)

Represents Australia, New Zealand and emerging markets operations and franchise revenues.

North America Performance

The decrease in North America revenues for the first ~~quarter~~nine months of fiscal 2022 versus the prior year period was driven by a decrease in Subscription Revenues and, to a lesser extent, a decrease in product sales and other. The decrease in Subscription Revenues for the first quarter of fiscal 2022 versus the prior year period was driven by both a decrease in Digital Subscription Revenues and a decrease in Workshops + Digital Fees. Subscription Revenues were negatively impacted by both the lower number of Incoming Subscribers at the beginning of the first quarter of fiscal 2022 versus the beginning of the first quarter of fiscal 2021and the recruitment decline during the first quarter of fiscal 2022 as compared to the prior year period. This decline in recruitments was driven primarily by worsened consumer sentiment in the current environment. ~~The decrease in North America Total Paid Weeks for the first quarter of fiscal 2022 versus the prior year period was driven primarily~~ ~~by both the~~ ~~lower number of~~ ~~Total Incoming Subscribers at the beginning of the first quarter of fiscal 2022 versus the beginning of the first quarter of fiscal 2021~~ ~~and lower recruitments for the first quarter of fiscal 2022 versus the prior year period.~~

~~The decrease in North America product sales and other for the first quarter~~nine months of fiscal 2022 versus the prior year period was driven primarily by a decrease in Digital Subscription Revenues. Digital Subscription Revenues were negatively impacted by both the recruitment decline during the first nine months of fiscal 2022 as compared to the prior year period and the lower number of Incoming Digital Subscribers at the beginning of fiscal 2022 versus the beginning of fiscal 2021. This decline in recruitments was driven primarily by worsened consumer sentiment in the current environment and our PersonalPoints program not resonating with consumers to the extent anticipated. The decrease in North America Total Paid Weeks for the first nine months of fiscal 2022 versus the prior year period was driven primarily by both lower recruitments for the first nine months of fiscal 2022 versus the prior year period and the lower number of Total Incoming Subscribers at the beginning of fiscal 2022 versus the beginning of fiscal 2021. For the first nine months of fiscal 2022, Workshops + Digital Fees, Workshops + Digital Paid Weeks and End of Period Workshops + Digital Subscribers all substantially benefited from the transition of our former Digital 360 members from the Digital business to the Workshops + Digital business during the second and third quarters of fiscal 2022 as previously disclosed.

The decrease in North America product sales ~~including e-commerce.~~and other for the first nine months of fiscal 2022 versus the prior year period was driven primarily by a decrease in e-commerce product sales.

Continental Europe Performance

The decrease in Continental Europe revenues for the first ~~quarter~~nine months of fiscal 2022 versus the prior year period was driven by a decrease in Subscription Revenues and, to a lesser extent, a decrease in product sales and other. The decrease in Subscription Revenues for the first ~~quarter~~nine months of fiscal 2022 versus the prior year period was driven primarily by a decrease in Digital Subscription Revenues. Digital Subscription Revenues were negatively impacted by both the recruitment decline during the first nine months of fiscal 2022 as compared to the prior year period and the lower number of Incoming Digital Subscribers at the beginning of fiscal 2022 versus the beginning of fiscal 2021. This decline in recruitments was driven primarily by worsened consumer sentiment in the current environment and our PersonalPoints program not resonating with consumers to the extent anticipated. The decrease in Continental Europe Total Paid Weeks for the first nine months of fiscal 2022 versus the prior year period was driven primarily by both lower recruitments for the first nine months of fiscal 2022 versus the prior year period and the lower number of Total Incoming Subscribers at the beginning of fiscal 2022 versus the beginning of fiscal 2021.

The decrease in Continental Europe product sales and other for the first nine months of fiscal 2022 versus the prior year period was driven primarily by a decrease in e-commerce product sales.

United Kingdom Performance

The decrease in UK revenues for the first nine months of fiscal 2022 versus the prior year period was driven by ~~both~~ a decrease in ~~Workshops + Digital Fees~~Subscription Revenues and, to a lesser extent, a decrease in product sales and other. The decrease in Subscription Revenues for the first nine months of fiscal 2022 versus the prior year period was driven primarily by a decrease in Digital Subscription Revenues. Digital Subscription Revenues were negatively impacted by both the lower number of Incoming Digital Subscribers at the beginning of ~~the first quarter of~~ fiscal 2022 versus the beginning of ~~the first quarter of~~ fiscal 2021and the recruitment decline during the first ~~quarter~~nine months of fiscal 2022 as compared to the prior year period. This decline in recruitments was driven primarily by worsened consumer sentiment in the current ~~environment.~~environment and our PersonalPoints program not resonating with consumers to the extent anticipated. The decrease in ~~Continental Europe~~UK Total Paid Weeks for the first ~~quarter~~nine months of fiscal 2022 versus the prior year period was driven primarily by both the lower number of Total Incoming Subscribers at the beginning of ~~the first quarter of~~ fiscal 2022 versus the beginning of ~~the first quarter of~~ fiscal 2021 and lower recruitments for the first ~~quarter~~nine months of fiscal 2022 versus the prior year period.

The decrease in ~~Continental Europe~~UK product sales and other for the first ~~quarter~~nine months of fiscal 2022 versus the prior year period was driven primarily by a decrease in e-commerce product sales.

~~United Kingdom Performance~~

Other Performance

The decrease in UKOther revenues for the first ~~quarter~~nine months of fiscal 2022 versus the prior year period was driven by ~~both~~ a decrease in Subscription Revenues and, to a lesser extent, a decrease in product sales and other. The decrease in Subscription Revenues for the first ~~quarter~~nine months of fiscal 2022 versus the prior year period was driven by a decrease in Workshops + Digital ~~Subscription Revenues~~Fees and, to a lesser extent, a decrease in ~~Workshops +~~ Digital ~~Fees.~~Subscription Revenues. Subscription Revenues were negatively impacted by both the ~~lower number of Incoming Digital Subscribers at the beginning of the first quarter of fiscal 2022 versus the beginning of the first quarter of fiscal 2021and the~~ recruitment decline during the first ~~quarter~~nine months of fiscal 2022 as compared to the prior year ~~period.~~period and the lower number of Total Incoming Subscribers at the beginning of fiscal 2022 versus the beginning of fiscal 2021. This decline in recruitments was driven primarily by worsened consumer sentiment in the current ~~environment.~~ environment and our PersonalPoints program not resonating with consumers to the extent anticipated.

The decrease in ~~UK Total Paid Weeks~~ ~~for the first quarter of fiscal 2022 versus the prior year period was driven primarily~~ ~~by both the~~ ~~lower number of~~ ~~Total Incoming Subscribers at the beginning of the first quarter of fiscal 2022 versus the beginning of the first quarter of fiscal 2021~~ ~~and lower recruitments for the first quarter of fiscal 2022 versus the prior year period.~~

~~The decrease in UK~~Other product sales and other for the first ~~quarter~~nine months of fiscal 2022 versus the prior year period was driven primarily by a decrease in ~~e-commerce product sales.~~

~~Other Performance~~

The decrease in Other revenues for the first quarter of fiscal 2022 versus the prior year period was driven primarily by a decrease in Subscription Revenues. The decrease in Subscription Revenues for the first quarter of fiscal 2022 versus the prior year period was driven primarily by a decrease in Workshops + Digital Fees. Workshops + Digital Fees were negatively impacted by both the lower number of Incoming Workshops + Digital Subscribers at the beginning of the first quarter of fiscal 2022 versus the beginning of the first quarter of fiscal 2021and the recruitment decline during the first quarter of fiscal 2022 as compared to the prior year period. This decline in recruitments was driven primarily by worsened consumer sentiment in the current environment.

~~The decrease in Other~~ product sales, licensing and ~~other for the first quarter of fiscal 2022 versus the prior year period was driven primarily by a decrease in~~ franchise commissions.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows provided by operating activities have historically supplied, and are expected to continue to supply, us with our primary source of liquidity. We use these cash flows, supplemented with long-term debt and short-term borrowings, to fund our operations and global strategic initiatives, pay down debt and engage in selective acquisitions. In accordance with the terms of the Credit Agreement, we expect to have an obligation to make an excess cash flow prepayment offer currently estimated to be $30.6 million to the term loan lenders during the second quarter of fiscal 2023. We expect to satisfy this obligation with a prepayment no later than the required payment date. We currently believe that cash generated by operations, our cash on hand of approximately ~~$127.6~~$188.3 million at ~~April 2,~~October 1, 2022, our ~~$173.9 million of~~ availability under our Revolving Credit Facility (as defined below) at ~~April 2,~~October 1, 2022 and our continued cost focus will provide us with sufficient liquidity to meet our obligations for the short- and long-term. In addition, if necessary, we have the flexibility to delay investments or reduce marketing spend.

We continue to proactively manage our liquidity so we can maintain flexibility to fund investments in our business, honor our long-term debt obligations, and respond to evolving business and consumer conditions. To increase our flexibility and reduce our cash interest payments, we refinanced our then-existing credit facilities and then-existing senior notes in April 2021. See “—Long-Term Debt” for additional details on this refinancing. Additionally, we instituted a number of measures throughout our operations to mitigate expenses and reduce costs as well as ensure ~~liquidity and the availability of our Revolving Credit Facility.~~liquidity. The evolving nature, and uncertain economic impact, of the current demand environment may impact our liquidity going forward. To the extent that we do not successfully manage our costs, our liquidity and financial results, as well as our ability to fully access our Revolving Credit Facility, may be adversely affected.

As market conditions warrant, we may, from time to time, seek to purchase our outstanding debt securities or loans, including the Senior Secured Notes and borrowings under the Credit Facilities (each as defined below). Such transactions could be privately negotiated or open market transactions, pursuant to tender offers or otherwise. Subject to any applicable limitations contained in the agreements governing, or terms of, our indebtedness, any such purchases made by us may be funded by the use of cash on our balance sheet, the incurrence of new secured or unsecured debt, the issuance of our equity or the sale of assets. The amounts involved in any such purchase transactions, individually or in the aggregate, may be material. Any such purchases may equate to a substantial amount of a particular class or series of debt, which may reduce the trading liquidity of such class or series.

Balance Sheet Working Capital

The following table sets forth certain relevant measures of our balance sheet working capital deficit, excluding cash and cash equivalents ~~and current portion of long-term debt~~ at:


	April 2,			January 1,			Increase/			October 1,			January 1,			Increase/
	2022			2022			(Decrease)			2022			2022			(Decrease)
	(in millions)									(in millions)
Total current assets	$	257.6		$	271.2		$	(13.5	)	$	289.8		$	271.2		$	18.6
Total current liabilities		216.7			229.1			(12.5	)		200.0			229.1			(29.2	)
Working capital surplus		41.0			42.0			1.1			89.8			42.0			(47.8	)
Cash and cash equivalents		127.6			153.8			(26.2	)		188.3			153.8			34.5
Current portion of long-term debt		—			—			—
Working capital deficit, excluding cash and cash equivalents and current portion of long-term debt	$	(86.7	)	$	(111.8	)	$	(25.1	)
Working capital deficit, excluding cash and cash equivalents										$	(98.5	)	$	(111.8	)	$	(13.3	)

Note: Totals may not sum due to rounding.

The following table sets forth a summary of the primary factors contributing to the ~~$25.1~~$13.3 million decrease in our working capital deficit, excluding cash and cash ~~equivalents and current portion of long-term debt:~~equivalents:

								Impact to
	April 2,		January 1,		Increase/			Working											Impact to
	2022		2022		(Decrease)			Capital Deficit			October 1,			January 1,		Increase/			Working
	(in millions)										2022			2022		(Decrease)			Capital Deficit
											(in millions)
Derivative (receivable) payable, net											$	(8.6	)	$	14.7	$	(23.3	)	$	(23.3	)
Deferred revenue											$	39.8		$	45.9	$	(6.1	)	$	(6.1	)
Operational liabilities and other, net of assets	$	33.9	$	54.7	$	(20.8	)	$	(20.8	)	$	50.9		$	54.7	$	(3.8	)	$	(3.8	)
Derivative payable, net	$	2.9	$	14.7	$	(11.8	)	$	(11.8	)
Portion of operating lease liabilities due within one year	$	19.0	$	20.3	$	(1.3	)	$	(1.3	)	$	18.5		$	20.3	$	(1.8	)	$	(1.8	)
Income taxes payable	$	0.6	$	1.7	$	(1.1	)	$	(1.1	)	$	1.8		$	1.7	$	0.1		$	0.1
Accrued interest											$	10.8		$	5.1	$	5.8		$	5.8
Prepaid income taxes	$	29.4	$	30.5	$	(1.1	)	$	1.1		$	14.7		$	30.5	$	(15.8	)	$	15.8
Deferred revenue	$	49.0	$	45.9	$	3.1		$	3.1
Accrued interest	$	10.8	$	5.1	$	5.7		$	5.7
Working capital deficit change, excluding cash and cash equivalents and current portion of long-term debt								$	(25.1	)
Working capital deficit change, excluding cash and cash equivalents																			$	(13.3	)

Note: Totals may not sum due to rounding.

The decrease in operational liabilities and other, net of assets, which includes accrued salaries and wages, was driven primarily by a decrease in accrued liabilities and an increase in receivables, partially offset by an increase in account payable, all due to seasonality and timing. The decreasechange in derivative (receivable) payable, net was due to a change in fair value driven by the change in interest rates. The decrease in deferred revenue was driven primarily by lower signups compared to the prior year. The increase in accrued interest was ~~primarily~~ due to the timing of debt principal payments. The decrease in prepaid income taxes was driven primarily by the timing of tax payments.

Cash Flows

The following table sets forth a summary of our cash flows for the ~~three~~nine months ended:

	April 2,			April 3,
	2022			2021			October 1,			October 2,
	(in millions)						2022			2021
Net cash used for operating activities	$	(10.5	)	$	(11.9	)
							(in millions)
Net cash provided by operating activities							$	80.5		$	125.4
Net cash used for investing activities	$	(13.6	)	$	(21.0	)	$	(33.7	)	$	(43.6	)
Net cash used for financing activities	$	(0.4	)	$	(17.1	)	$	(2.1	)	$	(55.9	)

Operating Activities

First ~~Quarter~~Nine Months of Fiscal 2022

Cash flows ~~used for~~provided by operating activities of ~~$10.5~~$80.5 million for the first ~~quarter~~nine months of fiscal 2022 reflected a decrease of ~~$1.4~~$44.8 million from ~~$11.9 million of cash flows used for operating activities for the first quarter of fiscal 2021. The decrease in cash used for operating activities was primarily the result of a decrease in~~ ~~cash used for operating assets and liabilities~~ ~~for the first quarter of fiscal 2022 as compared to the prior year period.~~

~~First Quarter of Fiscal 2021~~

~~Cash flows used for operating activities of $11.9 million for the first quarter of fiscal 2021 reflected a decrease of $20.3 million from $8.4~~$125.4 million of cash flows provided by operating activities for the first ~~quarter~~nine months of fiscal ~~2020.~~2021. The decrease in cash provided by operating activities was primarily the result of a decrease in net income, partially offset by an increase in ~~net loss of $12.2 million for~~non-cash add-back adjustments in the first ~~quarter~~nine months of fiscal ~~2021~~2022 as compared to the prior year period.

~~Investing Activities~~

First ~~Quarter~~Nine Months of Fiscal ~~2022~~2021

Cash flows provided by operating activities of $125.4 million for the first nine months of fiscal 2021 reflected a decrease of $2.1 million from $127.4 million of cash flows provided by operating activities for the first nine months of fiscal 2020.

Investing Activities

First Nine Months of Fiscal 2022

Net cash used for investing activities totaled ~~$13.6~~$33.7 million for the first ~~quarter~~nine months of fiscal 2022, a decrease of ~~$7.4~~$9.9 million as compared to the first ~~quarter~~nine months of fiscal 2021. This decrease was primarily attributable to a decrease in cash paid for acquisitions ~~for~~in the first ~~quarter~~nine months of fiscal 2022 as compared to the prior year period.

First ~~Quarter~~Nine Months of Fiscal 2021

Net cash used for investing activities totaled ~~$21.0~~$43.6 million for the first ~~quarter~~nine months of fiscal 2021, a decrease of ~~$4.9~~$4.2 million as compared to the first ~~quarter~~nine months of fiscal 2020. This decrease was primarily attributable to lower capital expenditures, ~~and cycling against the $5.0 million investment in~~ ~~ClassPass Inc.,~~ partially offset by an increase in cash paid for acquisitions, ~~for~~in the first ~~quarter~~nine months of fiscal 2021 as compared to the prior year period.

Financing Activities

First ~~Quarter~~Nine Months of Fiscal 2022

Net cash used for financing activities totaled ~~$0.4~~$2.1 million for the first ~~quarter~~nine months of fiscal 2022, a decrease of ~~$16.7~~$53.8 million as compared to the first ~~quarter~~nine months of fiscal 2021. This decrease was primarily attributable to ~~a decrease~~the April 13, 2021 payment in full of approximately $1.2 billion of borrowings under our then-existing credit facilities and redemption of all of the $300.0 million aggregate principal amount of our then-existing senior notes, as well as the payment in aggregate of $37.0 million of prepayment penalties, financing costs and debt ~~repayments for~~discount in connection with the April 2021 debt refinancing in the first ~~quarter~~nine months of fiscal ~~2022 as compared to the prior year period.See “—Long-Term Debt” for additional details on debt.~~

~~First Quarter of Fiscal 2021~~

~~Net cash used for financing activities totaled $17.1 million for the first quarter of fiscal 2021 primarily due to~~ ~~$19.3~~2021. In addition, there was $19.3 million used for scheduled debt repayments under our then-existing term loan facility. in the first quarter of fiscal 2021 and $2.5 million used for scheduled debt repayments under our Term Loan Facility (as defined below) in the third quarter of fiscal 2021. These payments were partially offset by the proceeds received of $1,000.0 million in an aggregate principal amount of borrowings under our Term Loan Facility and proceeds received from the issuance of $500.0 million in aggregate principal amount of our Senior Secured Notes (as defined below) in connection with our April 2021 debt refinancing in the first nine months of fiscal 2021. See “—Long-Term Debt” for additional details on debt.

First Nine Months of Fiscal 2021

Net cash used for financing activities totaled $55.9 million for the first nine months of fiscal 2021 primarily due to the April 13, 2021 payment in full of approximately $1.2 billion of borrowings under our then-existing credit facilities and redemption of all of the $300.0 million aggregate principal amount of our then-existing senior notes, as well as the payment in aggregate of $37.0 million of prepayment penalties, financing costs and debt discount in connection with the April 2021 debt refinancing. In addition, there was $19.3 million used for scheduled debt repayments under our then-existing term loan facility in the first quarter of fiscal 2021 and $2.5 million used for scheduled debt repayments under our Term Loan Facility in the third quarter of fiscal 2021. These payments were partially offset by the proceeds received of $1,000.0 million in an aggregate principal amount of borrowings under our Term Loan Facility and proceeds received from the issuance of $500.0 million in aggregate principal amount of our Senior Secured Notes in connection with our April 2021 debt refinancing. See “—Long-Term Debt” for additional details on debt.

Long-Term Debt

We currently plan to meet our long-term debt obligations by using cash flows provided by operating activities and opportunistically using other means to repay or refinance our obligations as we determine appropriate.

The following schedule sets forth our long-term debt obligations at ~~April 2,~~October 1, 2022:

Long-Term Debt

At ~~April 2,~~October 1, 2022

(Balances in millions)


	April 2, 2022		October 1, 2022
Term Loan Facility due April 13, 2028	$	945.0	$	945.0
Senior Secured Notes due April 15, 2029		500.0		500.0
Total		1,445.0		1,445.0
Less: Current portion		—		—
Unamortized deferred financing costs		12.1		11.1
Unamortized debt discount		13.8		12.6
Total long-term debt	$	1,419.1	$	1,421.2

Note: Totals may not sum due to rounding.

On April 13, 2021, we (1) repaid in full approximately $1.2 billion in aggregate principal amount of senior secured tranche B term loans due in 2024 under our then-existing credit facilities and (2) redeemed all of the $300.0 million in aggregate principal amount of our then-outstanding 8.625% Senior Notes due in 2025, or the Discharged Senior ~~Notes~~. Notes. On April 13, 2021, our then-existing credit facilities included a senior secured revolving credit facility (which included borrowing capacity available for letters of credit) due in 2022 with $175.0 million in an aggregate principal amount of commitments. There were no outstanding borrowings under such revolving credit facility on that date. We funded such repayment of loans and redemption of notes with cash on hand as well as with proceeds received from approximately $1,000.0 million in an aggregate principal amount of borrowings under our new credit facilities (as amended from time to time, referred to herein as the Credit Facilities) and proceeds received from the issuance of $500.0 million in aggregate principal amount of 4.500% Senior Secured Notes due 2029, or the Senior Secured Notes, each as described below. These transactions are collectively referred to herein as the April 2021 debt refinancing. During the second quarter of fiscal 2021, we incurred fees of $37.9 million (which included ~~$12.9~~$12.9 million of a prepayment penalty on the Discharged Senior Notes and $5.0 million of a debt discount on our Term Loan Facility (as(as defined ~~below~~)below)) in connection with our April 2021 debt refinancing. In addition, we recorded a loss on early extinguishment of debt of $29.2 million in connection thereto. This early extinguishment of debt charge was comprised of ~~$12.9~~$12.9 million of a prepayment penalty on the Discharged Senior Notes,, ~~$9.0~~ $9.0 million of financing fees paid in connection with our April 2021 debt refinancing and the write-off of $7.2 million of pre-existing deferred financing fees and debt discount.

Credit Facilities

The Credit Facilities were issued under a credit agreement, dated April 13, 2021 or, as amended from time to time, the Credit Agreement, among the Company, as borrower, the lenders party thereto, and Bank of America, N.A., or Bank of America, as administrative agent and an issuing bank. The Credit Facilities consist of (1) $1,000.0 million in aggregate principal amount of senior secured tranche B term loans due in 2028, or the Term Loan Facility, and (2) $175.0 million in an aggregate principal amount of commitments under a senior secured revolving credit facility (which includes borrowing capacity available for letters of credit) due in 2026, or the Revolving Credit Facility.

In December 2021, we made voluntary prepayments at par in an aggregate amount of $52.5 million in respect of our outstanding term loans under the Term Loan Facility. As a result of these prepayments, we wrote off a debt discount and deferred financing fees of $1.2 million in the aggregate in the fourth quarter of fiscal 2021.

In accordance with the terms of the Credit Agreement, we expect to have an obligation to make an excess cash flow prepayment offer currently estimated to be $30.6 million to the term loan lenders during the second quarter of fiscal 2023. We expect to satisfy this obligation with a prepayment no later than the required payment date.

As of ~~April 2,~~October 1, 2022, we had $945.0 million in an aggregate principal amount of loans outstanding under our Credit Facilities, with $173.9 million of availability and $1.1 million in issued but undrawn letters of credit outstanding under the Revolving Credit Facility. There were no outstanding borrowings under the Revolving Credit Facility as of ~~April 2,~~October 1, 2022.

All obligations under the Credit Agreement are guaranteed by, subject to certain exceptions, each of our current and future wholly-owned material domestic restricted subsidiaries. All obligations under the Credit Agreement, and the guarantees of those obligations, are secured by substantially all of the assets of the Company and each guarantor, subject to customary exceptions, including:

•

a pledge of 100% of the equity interests directly held by the Company and each guarantor in any wholly-owned material subsidiary of the Company or any guarantor (which pledge, in the case of any non-U.S. subsidiary of a U.S. subsidiary, will not include more than 65% of the voting stock of such first-tier non-U.S. subsidiary), subject to certain exceptions; and

•

a security interest in substantially all other tangible and intangible assets of the Company and each guarantor, subject to certain exceptions.

•

~~a security interest in substantially all other tangible and intangible assets of the Company and each guarantor, subject to certain exceptions.~~

The Credit Facilities require the Company to prepay outstanding term loans, subject to certain exceptions, with:

•

50% (which percentage will be reduced to 25% and 0% if the Company attains certain first lien secured net leverage ratios) of the Company’s annual excess cash flow;

•

100% of the net cash proceeds of certain non-ordinary course asset sales by the Company and its restricted subsidiaries (including casualty and condemnation events, subject to de minimis thresholds), and subject to the right to reinvest 100% of such proceeds, subject to certain qualifications; and

•

100% of the net proceeds of any issuance or incurrence of debt by the Company or any of its restricted subsidiaries, other than certain debt permitted under the Credit Agreement.

•

~~50% (which percentage will be reduced to 25% and 0% if the Company attains certain first lien secured net leverage ratios) of the Company’s annual excess cash flow;~~

•

~~100% of the net proceeds of any issuance or incurrence of debt by the Company or any of its restricted subsidiaries, other than certain debt permitted under the Credit Agreement.~~

The foregoing mandatory prepayments will be used to reduce the installments of principal on the Term Loan Facility. We may voluntarily repay outstanding loans under the Credit Facilities at any time without penalty, except for customary “breakage” costs with respect to LIBOR loans under the Credit Facilities.

Borrowings under the Term Loan Facility bear interest at a rate per annum equal to, at our option, either (1) an applicable margin plus a base rate determined by reference to the highest of (a) 0.50% per annum plus the Federal Funds Effective Rate as determined by the Federal Reserve Bank of New York, (b) the prime rate of Bank of America and (c) the LIBOR rate determined by reference to the cost of funds for U.S. dollar deposits for an interest period of one month adjusted for certain additional costs, plus 1.00%; provided that such rate is not lower than a floor of 1.50% or (2) an applicable margin plus a LIBOR rate determined by reference to the cost of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs, provided that LIBOR is not lower than a floor of 0.50%. Borrowings under the Revolving Credit Facility bear interest at a rate per annum equal to an applicable margin based upon a leverage-based pricing grid, plus, at our option, either (1) a base rate determined by reference to the highest of (a) 0.50% per annum plus the Federal Funds Effective Rate as determined by the Federal Reserve Bank of New York, (b) the prime rate of Bank of America and (c) the LIBOR rate determined by reference to the cost of funds for U.S. dollar deposits for an interest period of one month adjusted for certain additional costs, plus 1.00%; provided that such rate is not lower than a floor of 1.00% or (2) a LIBOR rate determined by reference to the cost of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs, provided such rate is not lower than a floor of zero. As of ~~April 2,~~October 1, 2022, the applicable margins for the LIBOR rate borrowings under the Term Loan Facility and the Revolving Credit Facility were 3.50% and 2.75%, respectively. In the event that LIBOR is phased out as is currently expected, the Credit Agreement provides that we and the administrative agent may amend the Credit Agreement to replace the LIBOR definition therein with a successor rate subject to notifying the lending syndicate of such change and not receiving within five business days of such notification objections to such replacement rate from lenders holding at least a majority of the aggregate principal amount of loans and commitments then outstanding under the Credit Agreement; provided that such lending syndicate may not object to a SOFR-based successor rate contained in any such amendment. If we fail to do so, our borrowings will be based off of the alternative base rate plus a margin.

On a quarterly basis, we pay a commitment fee to the lenders under the Revolving Credit Facility in respect of unutilized commitments thereunder, which commitment fee fluctuates depending upon our Consolidated First Lien Leverage Ratio (as defined in the Credit Agreement).

The availability of certain baskets and the ability to enter into certain transactions are also subject to compliance with certain financial ratios. In addition, if the aggregate principal amount of extensions of credit outstanding under the Revolving Credit Facility as of any fiscal quarter end exceeds 35% of the amount of the aggregate commitments under the Revolving Credit Facility in effect on such date, we must be in compliance with a Consolidated First Lien Leverage Ratio of ~~on or prior to the end of the first fiscal quarter of 2022, 6.00:1.00, with a step down to~~ 5.75:1.00 for the period ending after the first fiscal quarter of 2022 through and including with the first fiscal quarter of 2023, with ~~an additional~~a step down to 5.50:1.00 for the period ending after the first fiscal quarter of 2023 through and including with the first fiscal quarter of 2024, with aan additional step down to 5.25:1.00 for the period ending after the first fiscal quarter of 2024 through and including with the first fiscal quarter of 2025 and again to 5.00:1.00, for the period following the first fiscal quarter of 2025. As of October 1, 2022, our actual Consolidated First Lien Leverage Ratio was 4.99:1.00 and there were no borrowings under our Revolving Credit Facility and total letters of credit issued were $1.1 million. We expect we may not be able to satisfy the Consolidated First Lien Leverage Ratio in the near future, and as a result, the amount of funds we are able to borrow under the Revolving Credit Facility would be effectively limited.

Senior Secured Notes

The Senior Secured Notes were issued pursuant to an Indenture, dated as of April 13, 2021, or, as amended, supplemented or modified from time to time, the Indenture, among the Company, the guarantors named therein and The Bank of New York Mellon, as trustee and notes collateral agent. The Indenture contains customary terms, events of default and covenants for an issuer of non-investment grade debt securities. These covenants include limitations on indebtedness, liens, mergers, acquisitions, asset sales, investments, distributions, prepayments of subordinated debt and transactions with affiliates, in each case subject to baskets, thresholds and other exceptions.

The Senior Secured Notes accrue interest at a rate per annum equal to 4.500% and will mature on April 15, 2029. Interest on the Senior Secured Notes is payable semi-annually on April 15 and October 15 of each year, beginning on October 15, 2021. On or after April 15, 2024, we may on any one or more occasions redeem some or all of the Senior Secured Notes at a purchase price equal to 102.250% of the principal amount of the Senior Secured Notes, plus accrued and unpaid interest, if any, to, but not including, the redemption date, such optional redemption price decreasing to 101.125% on or after April 15, 2025 and to 100.000% on or after April 15, 2026. Prior to April 15, 2024, we may on any one or more occasions redeem up to 40% of the aggregate principal amount of the Senior Secured Notes with an amount not to exceed the net proceeds of certain equity offerings at 104.500% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the redemption date. Prior to April 15, 2024, we may redeem some or all of the Senior Secured Notes at a make-whole price plus accrued and unpaid interest, if any, to, but not including, the redemption date. In addition, during any twelve-month period ending prior to April 15, 2024, we may redeem up to 10% of the aggregate principal amount of the Senior Secured Notes at a purchase price equal to 103.000% of the principal amount of the Senior Secured Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. If a change of control occurs, we must offer to purchase for cash the Senior Secured Notes at a purchase price equal to 101% of the principal amount of the Senior Secured Notes, plus accrued and unpaid interest, if any, to, but not including, the purchase date. Following the sale of certain assets and subject to certain conditions, we must offer to purchase for cash the Senior Secured Notes at a purchase price equal to 100% of the principal amount of the Senior Secured Notes, plus accrued and unpaid interest, if any, to, but not including, the purchase date.

The Senior Secured Notes are guaranteed on a senior secured basis by our subsidiaries that guarantee the Credit Facilities. The Senior Secured Notes and the note guarantees are secured by a first-priority lien on all the collateral that secures the Credit Facilities, subject to a shared lien of equal priority with the Company’s and each guarantor’s obligations under the Credit Facilities and subject to certain thresholds, exceptions and permitted liens.

Outstanding Debt

At ~~April 2,~~October 1, 2022, we had $1,445.0 million outstanding under the Credit Facilities and the Senior Secured Notes, consisting of borrowings under the Term Loan Facility of $945.0 million, $0.0 drawn down on the Revolving Credit Facility and $500.0 million in aggregate principal amount of Senior Secured Notes issued and outstanding.

At ~~April 2,~~October 1, 2022 and January 1, 2022, our debt consisted of both fixed and variable-rate instruments. Interest rate swaps were entered into to hedge a portion of the cash flow exposure associated with our variable-rate borrowings. Further information regarding our interest rate swaps can be found in Part I, Item 1 of this Quarterly Report on Form 10-Q under Note 11 “Derivative Instruments and Hedging” in the Notes to the Consolidated Financial Statements. The weighted average interest rate (which includes amortization of deferred financing costs and debt discount) on our outstanding debt, exclusive of the impact of the swaps then in effect, was approximately ~~4.53%~~4.98% and 5.11% per annum at ~~April 2,~~October 1, 2022 and January 1, 2022, respectively, based on interest rates on these dates. The weighted average interest rate (which includes amortization of deferred financing costs and debt discount) on our outstanding debt, including the impact of the swaps then in effect, was approximately ~~5.07%~~5.28% and 5.62% per annum at ~~April 2,~~October 1, 2022 and January 1, 2022, respectively, based on interest rates on these dates.

The following schedule sets forth our year-by-year debt obligations at ~~April 2,~~October 1, 2022:

Total Debt Obligation

(Including Current Portion)

At ~~April 2,~~October 1, 2022

(in millions)


Remainder of fiscal 2022	$	—	$	—
Fiscal 2023		30.6		—
Fiscal 2024		—		—
Fiscal 2025		—		—
Fiscal 2026		—		—
Fiscal 2027 and thereafter		1,414.4
Fiscal 2027				10.0
Thereafter				1,435.0
Total	$	1,445.0	$	1,445.0

Note: Totals may not sum due to rounding.

Accumulated Other Comprehensive Loss

Our accumulated other comprehensive loss includes changes in the fair value of derivative instruments and the effects of foreign currency translations. At ~~April 2,~~October 1, 2022 and ~~April 3,~~October 2, 2021, the cumulative balance of changes in the fair value of derivative instruments, net of taxes, was a gain of ~~$0.2~~$9.9 million and a loss of ~~$17.1~~$14.5 million, respectively. At ~~April 2,~~October 1, 2022 and ~~April 3,~~October 2, 2021, the cumulative balance of the effects of foreign currency translations, net of taxes, was a loss of ~~$7.9~~$21.2 million and a loss of ~~$5.0~~$6.5 million, respectively.

Dividends and Stock Transactions

We do not currently pay a dividend and we have no current plans to pay dividends in the foreseeable future. Any future determination to declare and pay dividends will be made at the sole discretion of our Board of Directors, after taking into account our financial condition and results of operations, capital requirements, contractual, legal, tax and regulatory restrictions, the provisions of Virginia law affecting the payment of distributions to shareholders and such other factors our Board of Directors may deem relevant. In addition, our ability to pay dividends may be limited by covenants in our existing indebtedness, including the Credit Agreement governing the Credit Facilities and the Indenture governing the Senior Secured Notes, and may be limited by the agreements governing other indebtedness we or our subsidiaries incur in the future.

On October 9, 2003, our Board of Directors authorized, and we announced, a program to repurchase up to $250.0 million of our outstanding common stock. On each of June 13, 2005, May 25, 2006 and October 21, 2010, our Board of Directors authorized, and we announced, the addition of $250.0 million to this program. The repurchase program allows for shares to be purchased from time to time in the open market or through privately negotiated transactions. No shares will be purchased from Artal Holdings Sp. z o.o., Succursale de Luxembourg and its parents and subsidiaries under this program. The repurchase program currently has no expiration date. During the ~~three~~nine months ended ~~April 2,~~October 1, 2022 and ~~April 3,~~October 2, 2021, we repurchased no shares of our common stock under this program.

EBITDAS, Adjusted EBITDAS and Net Debt

We define EBITDAS, a non-GAAP financial measure, as earnings before interest, taxes, depreciation, amortization and stock-based compensation and Adjusted EBITDAS, a non-GAAP financial measure, as earnings before interest, taxes, depreciation, amortization, stock-based compensation, franchise rights acquired and goodwill impairments, net restructuring charges and early extinguishment of ~~debt and restructuring charges (including the net impact where applicable).~~debt.

The table below sets forth the reconciliations for EBITDAS and Adjusted EBITDAS, each a non-GAAP financial measure, to net ~~loss,~~(loss) income, the most comparable GAAP financial measure, for the three and nine months ended ~~April 2,~~October 1, 2022 and ~~April 3,~~October 2, 2021, and EBITDAS and Adjusted EBITDAS to net ~~income~~loss for the trailing twelve months ended ~~April 2,~~October 1, 2022:

(in millions)


	Three Months Ended									Three Months Ended						Nine Months Ended
	April 2, 2022			April 3, 2021			Trailing Twelve Months			October 1, 2022			October 2, 2021			October 1, 2022			October 2, 2021			Trailing Twelve Months
Net (loss) income	$	(8.2	)	$	(18.2	)	$	76.9		$	(206.0	)	$	46.3		$	(218.9	)	$	37.0		$	(189.0	)
Interest		18.7			29.1			77.5			20.9			19.3			58.8			68.7			78.0
Taxes		(1.8	)		(7.8	)		15.8			(70.7	)		13.3			(75.4	)		6.5			(72.1	)
Depreciation and amortization		10.8			11.9			44.3			10.5			11.1			31.9			34.5			43.0
Stock-based compensation		4.7			5.3			20.7			3.4			3.4			10.4			16.6			15.1
EBITDAS	$	24.1		$	20.3		$	235.2		$	(242.0	)	$	93.5		$	(193.2	)	$	163.2		$	(125.0	)
Early extinguishment of debt		—			—			30.4
Franchise rights acquired and goodwill impairments											312.7			—			339.2			—			339.2
2022 plan restructuring charges											3.6			—			22.7			—			22.7
2021 plan restructuring charges		0.3			5.5			16.3			0.1			9.3			(0.2	)		20.9			0.4
2020 plan restructuring charges		(0.1	)		—			(1.7	)		—			(0.7	)		(0.1	)		(1.5	)		(0.2	)
Early extinguishment of debt											—			—			—			29.2			1.2
Adjusted EBITDAS ⁽¹⁾	$	24.2		$	25.8		$	280.0		$	74.4		$	102.1		$	168.3		$	211.7		$	238.3

Note: Totals may not sum due to rounding.

(1)

The “Adjusted EBITDAS” measure is a non-GAAP financial measure that (i) adjusts the consolidated statements of net income for the three months ended October 1, 2022 to exclude the impact of the $312.7 million of franchise rights acquired impairments and the net impact of the $3.6 million of 2022 plan restructuring charges and the $0.1 million of 2021 plan restructuring charges; (ii) adjusts the consolidated statements of net income for the three months ended October 2, 2021 to exclude the net impact of the $9.3 million of 2021 plan restructuring charges and the reversal of $0.7 million of 2020 plan restructuring charges; (iii) adjusts the consolidated statements of net income for the nine months ended October 1, 2022 to exclude the impact of the $339.2 million of franchise rights acquired and goodwill impairments and the net impact of the $22.7 million of 2022 plan restructuring charges, the reversal of $0.2 million of 2021 plan restructuring charges and the reversal of $0.1 million of 2020 plan restructuring charges; (iv) adjusts the consolidated statements of net income for the nine months ended October 2, 2021 to exclude the net impact of the $20.9 million of 2021 plan restructuring charges and the reversal of $1.5 million of 2020 plan restructuring charges and the impact of the $29.2 million early extinguishment of debt; and (v) adjusts EBITDAS for the trailing twelve months ended October 1, 2022 to exclude the impact of the $339.2 million of franchise rights acquired and goodwill impairments, the net impact of the $22.7 million of 2022 plan restructuring charges, the $0.4 million of 2021 plan restructuring charges and the reversal of $0.2 million of 2020 plan restructuring charges and the impact of the $1.2 million early extinguishment of debt. See “Non-GAAP Financial Measures” above for an explanation of our use of non-GAAP financial measures.

The “Adjusted EBITDAS” measure is a non-GAAP financial measure that adjusts the consolidated statements of net income for the three months ended April 2, 2022 to exclude the net impact of $0.3 million ~~of 2021 plan restructuring charges and~~ the reversal of $0.1 million of 2020 plan restructuring charges; adjusts the consolidated statements of net income for the three months ended April 3, 2021 to exclude the impact of $5.5 million of 2021 plan restructuring charges; and adjusts EBITDAS for the trailing twelve months ended April 2, 2022 to exclude (a) the $30.4 million early extinguishment of debt and (b) the net impact of $16.3 million of 2021 plan restructuring charges and the reversal of $1.7 million of 2020 plan restructuring charges. See “Non-GAAP Financial Measures” above for an explanation of our use of non-GAAP financial measures.

Reducing leverage is a capital structure priority for the Company. As of ~~April 2,~~October 1, 2022, our net debt/Adjusted EBITDAS ratio was ~~4.6x.~~5.2x.

The table below sets forth the reconciliation for net debt, a non-GAAP financial measure, to total debt, the most comparable GAAP financial measure, for the ~~three~~nine months ended:

We present EBITDAS, Adjusted EBITDAS and net debt/Adjusted EBITDAS because we consider them to be useful supplemental measures of our performance. In addition, we believe EBITDAS, Adjusted EBITDAS and net debt/Adjusted EBITDAS are useful to investors, analysts and rating agencies in measuring the ability of a company to meet its debt service obligations. See “—Non-GAAP Financial Measures” herein for an explanation of our use of these non-GAAP financial measures.

As part of our ongoing business, we do not participate in arrangements that generate relationships with unconsolidated entities or financial partnerships established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes, such as entities often referred to as structured finance or special purpose entities.

Our business is seasonal due to the importance of the winter season to our overall member recruitment environment. Historically, we experience our highest level of recruitment during the first quarter of the year, which is supported with the highest concentration of advertising spending. Therefore, our number of End of Period Subscribers in the first quarter of the year is typically higher than the number in other quarters of the year, historically reflecting a decline over the course of the year.

Corporate information and our press releases, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments thereto, are available free of charge on our corporate website at corporate.ww.com as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (i.e., generally the same day as the filing), or the SEC. Moreover, we also make available at that site the Section 16 reports filed electronically by our officers, directors and 10 percent shareholders.

We use our corporate website at corporate.ww.com and certain social media channels such as our corporate Facebook page (www.facebook.com/WW), Instagram account (Instagram.com/WW) and Twitter account (@~~ww_us~~)(@ww_us) as channels of distribution of Company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. The contents of our website and social media channels shall not be deemed to be incorporated herein by reference.

As of ~~April 2,~~October 1, 2022, the market risk disclosures appearing in “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” of our Annual Report on Form 10-K for fiscal 2021 have not materially changed from January 1, 2022.

At the end of the ~~first~~third quarter of fiscal 2022, borrowings under the Credit Facilities bore interest at LIBOR plus an applicable margin of 3.50%. For the Term Loan Facility, the minimum interest rate for LIBOR applicable to such facility pursuant to the terms of the Credit Agreement was set at 0.50%, referred to herein as the LIBOR Floor. In addition, as of ~~April 2,~~October 1, 2022, our interest rate swaps in effect had an aggregate notional amount of $500.0 million. Accordingly, as of ~~April 2,~~October 1, 2022, based on the amount of variable rate debt outstanding and the then-current LIBOR rate, after giving consideration to the impact of the interest rate swaps and the LIBOR Floor, a hypothetical 90 basis point increase in interest rates would have increased annual interest expense by approximately $4.0 million and a hypothetical 90 basis point decrease in interest rates would have decreased annual interest expense by approximately ~~$2.1~~$4.0 million. This increase and decrease would have been driven primarily by the interest rate applicable to our Term Loan Facility.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our management, with the participation of our principal executive officer and our principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of ~~April 2,~~October 1, 2022, the end of the ~~first~~third quarter of fiscal 2022. Based upon that evaluation and subject to the foregoing, our principal executive officer and our principal financial officer concluded that, as of the end of the ~~first~~third quarter of fiscal 2022, the design and operation of our disclosure controls and procedures were effective at the reasonable assurance level.

There was no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The information called for by this item is incorporated herein by reference to Note 10 “Legal” of the notes to the unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q.

There have been no material changes in the risk factors from those detailed in our Annual Report on Form 10-K for fiscal 2021.


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	WW	The Nasdaq Stock Market LLC


		Page No.

PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements	2

	Unaudited Consolidated Balance Sheets at ~~April 2,~~October 1, 2022 and January 1, 2022	2

	Unaudited Consolidated Statements of Net Income for the three and nine months ended ~~April 2,~~October 1, 2022 and ~~April 3,~~October 2, 2021	3

	Unaudited Consolidated Statements of Comprehensive Income for the three and nine months ended ~~April 2,~~October 1, 2022 and ~~April 3,~~October 2, 2021	4

	Unaudited Consolidated Statements of Changes in Total Deficit for the three and nine months ended ~~April 2,~~October 1, 2022 and ~~April 3,~~October 2, 2021	5

	Unaudited Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~April 2,~~October 1, 2022 and ~~April 3,~~October 2, 2021	6

	Notes to Unaudited Consolidated Financial Statements	7

Cautionary Notice Regarding Forward-Looking Statements		2326

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2528

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4356

Item 4.	Controls and Procedures	4356

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	4457

Item 1A.	Risk Factors	4457

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4457

Item 3.	Defaults Upon Senior Securities	4457

Item 4.	Mine Safety Disclosures	4457

Item 5.	Other Information	4457

Item 6.	Exhibits	4558

Signatures		4659


	April 2,			January 1,			October 1,			January 1,
	2022			2022			2022			2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	127,640		$	153,794		$	188,291		$	153,794
Receivables (net of allowances: April 2, 2022 - $1,891 and January 1, 2022 - $1,726)		39,266			29,321
Receivables (net of allowances: October 1, 2022 - $1,693 and January 1, 2022 - $1,726)								28,192			29,321
Inventories		29,496			30,566			26,394			30,566
Prepaid income taxes		29,382			30,478			14,721			30,478
Prepaid expenses and other current assets		31,841			27,014			32,161			27,014
TOTAL CURRENT ASSETS		257,625			271,173			289,759			271,173
Property and equipment, net		34,688			37,219			30,112			37,219
Operating lease assets		86,302			89,902			79,911			89,902
Franchise rights acquired		785,852			785,195			440,515			785,195
Goodwill		163,353			157,374			156,155			157,374
Other intangible assets, net		62,268			61,126			62,952			61,126
Deferred income taxes		11,504			11,259			15,772			11,259
Other noncurrent assets		17,834			15,686			17,659			15,686
TOTAL ASSETS	$	1,419,426		$	1,428,934		$	1,092,835		$	1,428,934
LIABILITIES AND TOTAL DEFICIT
CURRENT LIABILITIES
Portion of long-term debt due within one year	$	—		$	—
Portion of operating lease liabilities due within one year		18,969			20,297		$	18,457		$	20,297
Accounts payable		29,339			22,444			17,384			22,444
Salaries and wages payable		53,112			57,401			64,047			57,401
Accrued marketing and advertising		10,191			15,904			10,277			15,904
Accrued interest		10,815			5,085			10,848			5,085
Other accrued liabilities		41,717			45,728			37,318			45,728
Derivative payable		2,912			14,670			—			14,670
Income taxes payable		618			1,748			1,850			1,748
Deferred revenue		48,991			45,855			39,772			45,855
TOTAL CURRENT LIABILITIES		216,664			229,132			199,953			229,132
Long-term debt, net		1,419,149			1,418,104			1,421,239			1,418,104
Long-term operating lease liabilities		75,527			78,157			70,848			78,157
Deferred income taxes		154,759			157,718			58,293			157,718
Other		2,656			2,227			2,005			2,227
TOTAL LIABILITIES		1,868,755			1,885,338			1,752,338			1,885,338
TOTAL DEFICIT
Common stock, $0 par value; 1,000,000 shares authorized; 122,052 shares issued at April 2, 2022 and 122,052 shares issued at January 1, 2022		0			0
Treasury stock, at cost, 51,923 shares at April 2, 2022 and 51,988 shares at January 1, 2022		(3,117,434	)		(3,120,149	)
Common stock, $0 par value; 1,000,000 shares authorized; 122,052 shares issued at October 1, 2022 and 122,052 shares issued at January 1, 2022								0			0
Treasury stock, at cost, 51,667 shares at October 1, 2022 and 51,988 shares at January 1, 2022								(3,106,098	)		(3,120,149	)
Retained earnings		2,675,767			2,682,349			2,457,912			2,682,349
Accumulated other comprehensive loss		(7,662	)		(18,604	)		(11,317	)		(18,604	)
TOTAL DEFICIT		(449,329	)		(456,404	)		(659,503	)		(456,404	)
TOTAL LIABILITIES AND TOTAL DEFICIT	$	1,419,426		$	1,428,934		$	1,092,835		$	1,428,934


	Three Months Ended						Three Months Ended					Nine Months Ended
	April 2,			April 3,			October 1,			October 2,		October 1,			October 2,
	2022			2021			2022			2021		2022			2021
Subscription revenues, net	$	256,985		$	279,820		$	220,746		$	262,401	$	718,122		$	815,092
Product sales and other, net		40,776			51,976			28,972			31,096		98,810			121,580
Revenues, net		297,761			331,796			249,718			293,497		816,932			936,672
Cost of subscription revenues		86,041			99,103			73,541			90,280		243,710			285,209
Cost of product sales and other		31,622			39,258			23,826			25,180		77,811			93,965
Cost of revenues		117,663			138,361			97,367			115,460		321,521			379,174
Gross profit		180,098			193,435			152,351			178,037		495,411			557,498
Marketing expenses		107,570			116,933			35,696			34,569		195,123			208,656
Selling, general and administrative expenses		63,558			73,671			58,443			63,745		193,320			206,615
Operating income		8,970			2,831
Franchise rights acquired and goodwill impairments								312,741			—		339,161			—
Operating (loss) income								(254,529	)		79,723		(232,193	)		142,227
Interest expense		18,671			29,123			20,912			19,283		58,837			68,699
Other expense (income), net		344			(237	)
Loss before income taxes		(10,045	)		(26,055	)
Benefit from income taxes		(1,802	)		(7,828	)
Net loss	$	(8,243	)	$	(18,227	)
Net loss per share
Other expense, net								1,344			764		3,303			908
Early extinguishment of debt								—			—		—			29,169
(Loss) income before income taxes								(276,785	)		59,676		(294,333	)		43,451
(Benefit from) provision for income taxes								(70,749	)		13,346		(75,431	)		6,488
Net (loss) income							$	(206,036	)	$	46,330	$	(218,902	)	$	36,963
(Net loss) earnings per share
Basic	$	(0.12	)	$	(0.26	)	$	(2.93	)	$	0.66	$	(3.12	)	$	0.53
Diluted	$	(0.12	)	$	(0.26	)	$	(2.93	)	$	0.65	$	(3.12	)	$	0.52
Weighted average common shares outstanding
Basic		70,086			69,084			70,383			69,875		70,258			69,516
Diluted		70,086			69,084			70,383			70,860		70,258			70,866

	Three Months Ended
	April 2,			April 3,			Three Months Ended						Nine Months Ended
	2022			2021			October 1,			October 2,			October 1,			October 2,
Net loss	$	(8,243	)	$	(18,227	)
Other comprehensive gain:
							2022			2021			2022			2021
Net (loss) income							$	(206,036	)	$	46,330		$	(218,902	)	$	36,963
Other comprehensive (loss) gain:
Foreign currency translation loss		(141	)		(1,120	)		(9,552	)		(4,877	)		(18,018	)		(3,140	)
Income tax benefit on foreign currency translation loss		35			282			2,406			1,229			4,530			791
Foreign currency translation loss, net of taxes		(106	)		(838	)		(7,146	)		(3,648	)		(13,488	)		(2,349	)
Gain on derivatives		14,756			5,204			8,590			1,891			27,748			8,617
Income tax expense on gain on derivatives		(3,708	)		(1,311	)		(2,159	)		(477	)		(6,973	)		(2,171	)
Gain on derivatives, net of taxes		11,048			3,893			6,431			1,414			20,775			6,446
Total other comprehensive gain		10,942			3,055
Comprehensive income (loss)	$	2,699		$	(15,172	)
Total other comprehensive (loss) gain								(715	)		(2,234	)		7,287			4,097
Comprehensive (loss) income							$	(206,751	)	$	44,096		$	(211,615	)	$	41,060


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐


Three Months Ended April 2, 2022											Accumulated
											Other
	Common Stock				Treasury Stock						Comprehensive			Retained
	Shares		Amount		Shares			Amount			Loss			Earnings			Total
Balance at January 1, 2022		122,052	$	0		51,988		$	(3,120,149	)	$	(18,604	)	$	2,682,349		$	(456,404	)
Comprehensive income (loss)												10,942			(8,243	)		2,699
Issuance of treasury stock under stock plans						(65	)		2,715						(3,039	)		(324	)
Compensation expense on share-based awards															4,700			4,700
Balance at April 2, 2022		122,052	$	0		51,923		$	(3,117,434	)	$	(7,662	)	$	2,675,767		$	(449,329	)



Three Months Ended October 1, 2022											Accumulated
											Other
	Common Stock				Treasury Stock						Comprehensive			Retained
	Shares		Amount		Shares			Amount			Loss			Earnings			Total
Balance at July 2, 2022		122,052	$	0		51,691		$	(3,107,324	)	$	(10,602	)	$	2,661,818		$	(456,108	)
Comprehensive loss												(715	)		(206,036	)		(206,751	)
Issuance of treasury stock under stock plans						(24	)		1,226						(1,246	)		(20	)
Compensation expense on share-based awards															3,376			3,376
Balance at October 1, 2022		122,052	$	0		51,667		$	(3,106,098	)	$	(11,317	)	$	2,457,912		$	(659,503	)


Three Months Ended April 3, 2021											Accumulated
											Other
	Common Stock				Treasury Stock						Comprehensive			Retained
	Shares		Amount		Shares			Amount			Loss			Earnings			Total
Balance at January 2, 2021		121,470	$	0		52,497		$	(3,140,903	)	$	(25,149	)	$	2,617,841		$	(548,211	)
Comprehensive (loss) income												3,055			(18,227	)		(15,172	)
Issuance of treasury stock under stock plans						(26	)		1,048						(1,083	)		(35	)
Compensation expense on share-based awards															5,340			5,340
Issuance of common stock	331														2,300			2,300
Balance at April 3, 2021		121,801	$	0		52,471		$	(3,139,855	)	$	(22,094	)	$	2,606,171		$	(555,778	)



Nine Months Ended October 1, 2022											Accumulated
											Other
	Common Stock				Treasury Stock						Comprehensive			Retained
	Shares		Amount		Shares			Amount			Loss			Earnings			Total
Balance at January 1, 2022		122,052	$	0		51,988		$	(3,120,149	)	$	(18,604	)	$	2,682,349		$	(456,404	)
Comprehensive (loss) income												7,287			(218,902	)		(211,615	)
Issuance of treasury stock under stock plans						(321	)		14,051						(15,897	)		(1,846	)
Compensation expense on share-based awards															10,362			10,362
Balance at October 1, 2022		122,052	$	0		51,667		$	(3,106,098	)	$	(11,317	)	$	2,457,912		$	(659,503	)



Three Months Ended October 2, 2021											Accumulated
											Other
	Common Stock				Treasury Stock						Comprehensive			Retained
	Shares		Amount		Shares			Amount			Loss			Earnings			Total
Balance at July 3, 2021		122,052	$	0		52,211		$	(3,129,329	)	$	(18,818	)	$	2,610,250		$	(537,897	)
Comprehensive income (loss)												(2,234	)		46,330			44,096
Issuance of treasury stock under stock plans						(50	)		2,034						(3,014	)		(980	)
Compensation expense on share-based awards															3,404			3,404
Balance at October 2, 2021		122,052	$	0		52,161		$	(3,127,295	)	$	(21,052	)	$	2,656,970		$	(491,377	)



Nine Months Ended October 2, 2021											Accumulated
											Other
	Common Stock				Treasury Stock						Comprehensive			Retained
	Shares		Amount		Shares			Amount			Loss			Earnings			Total
Balance at January 2, 2021		121,470	$	0		52,497		$	(3,140,903	)	$	(25,149	)	$	2,617,841		$	(548,211	)
Comprehensive income												4,097			36,963			41,060
Issuance of treasury stock under stock plans						(336	)		13,608						(18,481	)		(4,873	)
Compensation expense on share-based awards															16,596			16,596
Issuance of common stock		582													4,051			4,051
Balance at October 2, 2021		122,052	$	0		52,161		$	(3,127,295	)	$	(21,052	)	$	2,656,970		$	(491,377	)


	October 1, 2022		January 1, 2022
Assets:
Operating lease assets	$	79,911	$	89,902
Finance lease assets		72		127
Total leased assets	$	79,983	$	90,029

Liabilities:
Current
Operating	$	18,457	$	20,297
Finance		38		75
Noncurrent
Operating	$	70,848	$	78,157
Finance		9		29
Total lease liabilities	$	89,352	$	98,558


	Operating Leases		Finance Leases		Total
Remainder of fiscal 2022	$	4,734	$	13	$	4,747
Fiscal 2023		24,872		31		24,903
Fiscal 2024		18,014		4		18,018
Fiscal 2025		12,575		—		12,575
Fiscal 2026		9,683		—		9,683
Fiscal 2027		9,376		—		9,376
Thereafter		36,089		—		36,089
Total lease payments	$	115,343	$	48	$	115,391
Less imputed interest		26,038		1		26,039
Present value of lease liabilities	$	89,305	$	47	$	89,352


	Three Months Ended April 2, 2022										Three Months Ended October 1, 2022
	North		Continental		United						North		Continental		United
	America		Europe		Kingdom		Other		Total		America		Europe		Kingdom		Other		Total
Digital Subscription Revenues	$	125,319	$	53,475	$	7,805	$	4,883	$	191,482	$	102,735	$	43,638	$	5,693	$	3,815	$	155,881
Workshops + Digital Fees		50,980		8,222		4,422		1,879		65,503		52,113		7,586		3,764		1,402		64,865
Subscription Revenues, net	$	176,299	$	61,697	$	12,227	$	6,762	$	256,985	$	154,848	$	51,224	$	9,457	$	5,217	$	220,746
Product sales and other, net		28,014		9,205		2,212		1,345		40,776		21,234		5,272		1,441		1,025		28,972
Revenues, net	$	204,313	$	70,902	$	14,439	$	8,107	$	297,761	$	176,082	$	56,496	$	10,898	$	6,242	$	249,718


	Deferred			Deferred
	Revenue			Revenue-Long Term
Balance as of January 1, 2022	$	45,855		$	28
Net (decrease) increase during the period		(6,083	)		11
Balance as of October 1, 2022	$	39,772		$	39

Balance as of January 2, 2021	$	50,475		$	44
Net decrease during the period		(244	)		(36	)
Balance as of October 2, 2021	$	50,231		$	8


Remainder of fiscal 2022	$	22,659	$	8,223
Fiscal 2023	$	21,472	$	27,053
Fiscal 2024	$	11,013	$	16,687
Fiscal 2025	$	1,769	$	5,378
Fiscal 2026 and thereafter	$	8,661
Fiscal 2026			$	845
Fiscal 2027			$	720
Thereafter			$	7,171


	October 1, 2022									January 1, 2022
	Principal Balance		Unamortized Deferred Financing Costs		Unamortized Debt Discount		Effective Rate (1)			Principal Balance		Unamortized Deferred Financing Costs		Unamortized Debt Discount		Effective Rate (1)
Revolving Credit Facility due April 13, 2026	$	—	$	—	$	—		0.00	%	$	—	$	—	$	—		2.61	%
Term Loan Facility due April 13, 2028		945,000		6,098		12,638		5.15	%		945,000		6,930		14,362		4.48	%
Senior Secured Notes due April 15, 2029		500,000		5,025		—		4.65	%		500,000		5,604		—		4.70	%
Total	$	1,445,000	$	11,123	$	12,638		4.98	%	$	1,445,000	$	12,534	$	14,362		5.15	%
Less: Current portion		—									—
Unamortized deferred financing costs		11,123									12,534
Unamortized debt discount		12,638									14,362
Total long-term debt	$	1,421,239								$	1,418,104


			Fair Value
	Balance Sheet Classification	Balance Sheet Location	October 1, 2022		January 1, 2022
Assets:
Interest rate swaps - current swaps	Current asset	Prepaid expenses and other current assets	$	8,631	$	—
Interest rate swaps - current swaps	Noncurrent asset	Other noncurrent assets		4,513		—
Total assets			$	13,144	$	—

Liabilities:
Interest rate swaps - current swaps	Current liability	Derivative payable	$	—	$	14,670
Total liabilities			$	—	$	14,670

			Fair Value Measurements Using:
	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Interest rate swap current asset at April 2, 2022	$	30	$	—	$	30	$	—
Interest rate swap noncurrent asset at April 2, 2022	$	2,944	$	—	$	2,944	$	—
Interest rate swap current liability at April 2, 2022	$	2,912	$	—	$	2,912	$	—
Interest rate swap current liability at January 1, 2022	$	14,670	$	—	$	14,670	$	—


	Nine Months Ended October 1, 2022
	(Loss) Gain on Qualifying Hedges			Loss on Foreign Currency Translation			Total
Beginning balance at January 1, 2022	$	(10,843	)	$	(7,761	)	$	(18,604	)
Other comprehensive income (loss) before reclassifications, net of tax		17,350			(13,488	)		3,862
Amounts reclassified from accumulated other comprehensive loss, net of tax (2)		3,425			—			3,425
Net current period other comprehensive income (loss)		20,775			(13,488	)		7,287
Ending balance at October 1, 2022	$	9,932		$	(21,249	)	$	(11,317	)


	Nine Months Ended October 2, 2021
	Loss on Qualifying Hedges			Loss on Foreign Currency Translation			Total
Beginning balance at January 2, 2021	$	(20,979	)	$	(4,170	)	$	(25,149	)
Other comprehensive income (loss) before reclassifications, net of tax		418			(2,349	)		(1,931	)
Amounts reclassified from accumulated other comprehensive loss, net of tax (2)		6,028			—			6,028
Net current period other comprehensive income (loss)		6,446			(2,349	)		4,097
Ending balance at October 2, 2021	$	(14,533	)	$	(6,519	)	$	(21,052	)


	Total Revenues, net				Total Revenues, net				Total Revenues, net
	Three Months Ended				Three Months Ended				Nine Months Ended
	April 2,		April 3,		October 1,		October 2,		October 1,		October 2,
	2022		2021		2022		2021		2022		2021
North America	$	204,313	$	221,315	$	176,082	$	197,797	$	568,410	$	626,742
Continental Europe		70,902		81,896		56,496		71,933		189,140		231,764
United Kingdom		14,439		19,067		10,898		15,666		38,094		51,735
Other		8,107		9,518		6,242		8,101		21,288		26,431
Total revenues, net	$	297,761	$	331,796	$	249,718	$	293,497	$	816,932	$	936,672


	April 2, 2022		October 1, 2022
Total debt	$	1,445.0	$	1,445.0
Less: Unamortized deferred financing costs		12.1		11.1
Less: Unamortized debt discount		13.8		12.6
Less: Cash on hand		127.6		188.3
Net debt	$	1,291.5	$	1,232.9