WW INTERNATIONAL INC

Previous wording

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. Effective the first day of fiscal 2024 (i.e., December 31, 2023), as a result of the continued evolution of our centralized organizational structure in fiscal 2023, and management’s 2024 strategic planning process, our reportable segments changed to one segment for the purpose of making operational and resource decisions and assessing financial performance. Our “Digital” business refers to providing subscriptions to our digital product offerings. Our “Workshops + Digital” business refers to providing subscriptions for unlimited access to our workshops combined with our digital subscription product offerings. Our “Clinical” business refers to providing subscriptions to our clinical product offerings provided by WeightWatchers Clinic (formerly referred to as Sequence).

Current wording

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. Effective the first day of fiscal 2024 (i.e., December 31, 2023), as a result of the continued evolution of our centralized organizational structure in fiscal 2023, and management’s 2024 strategic planning process, our reportable segments changed to one segment for the purpose of making operational and resource decisions and assessing financial performance. Our “Digital” business refers to providing subscriptions to our digital product offerings. Our “Workshops + Digital” business refers to providing subscriptions for unlimited access to our workshops combined with our digital subscription product offerings. Our “Clinical” business refers to providing subscriptions to our clinical product offerings provided by WeightWatchers Clinic (formerly referred to as Sequence) combined with our digital subscription product offerings.

Previous wording

To supplement our consolidated results presented in accordance with accounting principles generally accepted in the United States (“GAAP”), we have disclosed non-GAAP financial measures of operating results that exclude or adjust certain items. Gross profit, gross margin, operating income (loss), operating income (loss) 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 second quarter of fiscal 2024 to exclude the impact or net impact, as applicable, of charges associated with our previously disclosed 2023 restructuring plan (the “2023 plan”) and our previously disclosed 2022 restructuring plan (the “2022 plan”); (ii) the first six months of fiscal 2024 to exclude (x) the impact of impairment charges for our franchise rights acquired related to our United States, Australia, New Zealand and United Kingdom units of account and (y) the net impact of charges associated with the 2023 plan and the 2022 plan; and (iii) the second quarter and first six months of fiscal 2023 to exclude (x) the net impact of (a) charges associated with the 2023 plan, (b) charges associated with the 2022 plan or the reversal of certain of the charges associated with the 2022 plan, as applicable, (c) charges associated with our previously disclosed 2021 organizational restructuring plan (the “2021 plan”) or the reversal of certain of the charges associated with the 2021 plan, as applicable, and (d) the reversal of certain of the charges associated with our previously disclosed 2020 organizational restructuring plan (the “2020 plan”) and (y) the impact of certain non-recurring transaction costs in connection with the acquisition of Sequence. We generally refer to such non-GAAP measures as excluding or adjusting for the impact of franchise rights acquired impairments, the impact or net impact, as applicable, of restructuring charges, and the impact of acquisition transaction costs, as applicable. 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 certain non-recurring transaction costs in connection with the acquisition of Sequence (“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 perform…

Excerpt shortened here; the source contains the full paragraph.

Current wording

To supplement our consolidated results presented in accordance with accounting principles generally accepted in the United States (“GAAP”), we have disclosed non-GAAP financial measures of operating results that exclude or adjust certain items. Gross profit, gross 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 third quarter of fiscal 2024 to exclude (x) the impact of impairment charges for our franchise rights acquired related to our United States and United Kingdom units of account, (y) the net impact of (a) charges associated with our previously disclosed 2024 restructuring plan (the “2024 plan”), (b) charges associated with our previously disclosed 2023 restructuring plan (the “2023 plan”) or the reversal of certain of the charges associated with the 2023 plan, as applicable and (c) the reversal of certain of the charges associated with our previously disclosed 2022 restructuring plan (the “2022 plan”), and (z) the impact of certain non-recurring expenses in connection with the separation from the Company of our former Chief Executive Officer (“CEO”); (ii) the first nine months of fiscal 2024 to exclude (x) the impact of impairment charges for our franchise rights acquired related to our United States, Australia, United Kingdom and New Zealand units of account, (y) the net impact of charges associated with the 2024 plan, the 2023 plan and the 2022 plan, and (z) the impact of certain non-recurring expenses in connection with the separation from the Company of our former CEO; (iii) the third quarter of fiscal 2023 to exclude the net impact of charges associated with the 2023 plan and the reversal of certain of the charges associated with the 2022 plan; and (iv) the first nine months of fiscal 2023 to exclude (x) the net impact of (a) charges associated with the 2023 plan, (b) charges associated with the 2022 plan or the reversal of certain of the charges associated with the 2022 plan, as applicable, (c) charges associated with our previously disclosed 2021 organizational restructuring plan (the “2021 plan”) or the reversal of certain of the charges associated with the 2021 plan, as applicable, and (d) the reversal of certain of the charges associated with our previously disclosed 2020 organizational restructuring plan (the “2020 plan”), and (y) the impact of certain non-recurring transaction costs in connection with the acquisition of Sequence. We generally refer to such non-GAAP measures as excluding or adjusting for the impact of franchise rights acquired impairments, the net impact of restructuring charges, the impact of acquisition transaction costs, and the impact of former CEO separation expenses, as applicable. We also present within this Quarterly Report on Form 10-Q the non-GAAP financial measures: earnings before interest, taxes, depr…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

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 our Workshops + Digital business and a relief from royalty methodology for franchise rights related to our Digital business. The aggregate estimated fair value for these franchise rights is then compared to the carrying value of the unit of account for these 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 franchise rights acquired in the United States and United Kingdom units of account as of the June 29, 2024 balance sheet date were $122.9 million and $2.6 million, respectively.

Current wording

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 our Workshops + Digital business and a relief from royalty methodology for franchise rights related to our Digital business. The aggregate estimated fair value for these franchise rights is then compared to the carrying value of the unit of account for these 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 value of franchise rights acquired for the United States unit of account as of the September 28, 2024 balance sheet date was $68.6 million.

Previous wording

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 units for purposes of assessing goodwill impairment to be the Behavioral and Clinical business lines. Our “Behavioral” business line consists of our Workshops + Digital business and Digital business. The net book values of goodwill in the Behavioral and Clinical reporting units as of the June 29, 2024 balance sheet date were $152.1 million and $89.7 million, respectively.

Current wording

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 units for purposes of assessing goodwill impairment to be the Behavioral and Clinical business lines. Our “Behavioral” business line consists of our Workshops + Digital business and Digital business. The net book values of goodwill for the Behavioral and Clinical reporting units as of the September 28, 2024 balance sheet date were $153.0 million and $89.7 million, respectively.

Previous wording

We review indefinite-lived franchise rights acquired and goodwill for potential impairment on at least an annual basis or more often if events so require. We performed our annual fair value impairment testing as of May 5, 2024 and May 7, 2023, each the first day of fiscal May, on our indefinite-lived franchise rights acquired and goodwill. In addition, based on triggering events, we performed interim impairment tests as of March 30, 2024 on our indefinite-lived franchise rights acquired and goodwill for the first quarter of fiscal 2024.

Current wording

We review indefinite-lived franchise rights acquired and goodwill for potential impairment on at least an annual basis or more often if events so require. We performed our annual fair value impairment testing as of May 5, 2024 and May 7, 2023, each the first day of fiscal May, on our indefinite-lived franchise rights acquired and goodwill. In addition, based on triggering events, we performed interim impairment tests as of March 30, 2024 and September 28, 2024 on our indefinite-lived franchise rights acquired and goodwill for the first and third quarters of fiscal 2024, respectively.

Previous wording

When determining fair value, we utilize various assumptions, including projections of future cash flows, revenue growth rates, operating income margins 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.

Current wording

When determining fair value, we utilize various assumptions, including projections of future cash flows, revenue growth rates, operating income margins 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 values 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 values of the related assets on our balance sheet. We continue to evaluate these assumptions and believe that these assumptions are appropriate.

Previous wording

Further information regarding the results of our franchise rights acquired and goodwill annual impairment tests and our franchise rights acquired and goodwill interim impairment tests for the first quarter of fiscal 2024 can be found in Note 6 “Franchise Rights Acquired, Goodwill and Other Intangible Assets” in the notes to the consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

Further information regarding the results of our franchise rights acquired and goodwill annual impairment tests and our franchise rights acquired and goodwill interim impairment tests for the first and third quarters of fiscal 2024 can be found in Note 6 “Franchise Rights Acquired, Goodwill and Other Intangible Assets” in the notes to the consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

Revenues—Our “Subscription Revenues” consist of “Digital Subscription Revenues”, “Workshops + Digital Subscription Revenues” and “Clinical Subscription Revenues”. “Digital Subscription Revenues” consist of the fees associated with subscriptions for our Digital offerings. “Workshops + Digital Subscription Revenues” consist of the fees associated with subscriptions for combined workshops and Digital offerings. “Clinical Subscription Revenues” consist of the fees associated with subscriptions for our Clinical offerings. In addition, “Other Revenues” (formerly known as “product sales and other”) consist of revenues from licensing and publishing, franchise fees with respect to commitment plans and royalties, and other revenues. Prior to fiscal 2024, “Other Revenues” included sales of consumer products.

Current wording

Revenues—Our “Subscription Revenues” consist of “Digital Subscription Revenues”, “Workshops + Digital Subscription Revenues” and “Clinical Subscription Revenues”. “Digital Subscription Revenues” consist of the fees associated with subscriptions for our Digital offerings. “Workshops + Digital Subscription Revenues” consist of the fees associated with subscriptions for combined workshops and Digital offerings. “Clinical Subscription Revenues” consist of the fees associated with subscriptions for combined Clinical and Digital offerings. In addition, “Other Revenues” (formerly known as “product sales and other”) consist of revenues from licensing and publishing, franchise fees with respect to commitment plans and royalties, and other revenues. Prior to fiscal 2024, “Other Revenues” included sales of consumer products.

Previous wording

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 offerings; (ii) “Workshops + Digital Paid Weeks” is the total paid subscription weeks for combined workshops and Digital offerings; (iii) “Clinical Paid Weeks” is the total paid subscription weeks for our Clinical offerings; and (iv) “Total Paid Weeks” is the sum of Digital Paid Weeks, Workshops + Digital Paid Weeks and Clinical Paid Weeks.

Current wording

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 offerings; (ii) “Workshops + Digital Paid Weeks” is the total paid subscription weeks for combined workshops and Digital offerings; (iii) “Clinical Paid Weeks” is the total paid subscription weeks for combined Clinical and Digital offerings; and (iv) “Total Paid Weeks” is the sum of Digital Paid Weeks, Workshops + Digital Paid Weeks and Clinical Paid Weeks.

Previous wording

Incoming Subscribers—“Subscribers” refer to Digital subscribers, Workshops + Digital subscribers and Clinical subscribers who participate in recurring bill programs in Company-owned operations. The “Incoming Subscribers” metric reports Subscribers in Company-owned operations at a given period start as follows: (i) “Incoming Digital Subscribers” is the total number of Digital subscribers; (ii) “Incoming Workshops + Digital Subscribers” is the total number of subscribers that have access to combined workshops and Digital offerings; (iii) “Incoming Clinical Subscribers” is the total number of Clinical subscribers; and (iv) “Incoming Subscribers” is the sum of Incoming Digital Subscribers, Incoming Workshops + Digital Subscribers and Incoming Clinical Subscribers, as applicable. Given we completed our acquisition of Sequence in April 2023 after the beginning of the second quarter of fiscal 2023, we have incoming subscribers with respect to our Clinical business for the second quarter and first six months of fiscal 2024, but not for the second quarter and first six months of fiscal 2023. Recruitment and retention are key drivers for this metric.

Current wording

Incoming Subscribers—“Subscribers” refer to Digital subscribers, Workshops + Digital subscribers and Clinical subscribers who participate in recurring bill programs in Company-owned operations. The “Incoming Subscribers” metric reports Subscribers in Company-owned operations at a given period start as follows: (i) “Incoming Digital Subscribers” is the total number of Digital subscribers; (ii) “Incoming Workshops + Digital Subscribers” is the total number of subscribers that have access to combined workshops and Digital offerings; (iii) “Incoming Clinical Subscribers” is the total number of subscribers that have access to combined Clinical and Digital offerings; and (iv) “Incoming Subscribers” is the sum of Incoming Digital Subscribers, Incoming Workshops + Digital Subscribers and Incoming Clinical Subscribers, as applicable. Given we completed our acquisition of Sequence in April 2023 after the beginning of the second quarter of fiscal 2023, we have incoming subscribers with respect to our Clinical business for the third quarter and first nine months of fiscal 2024 and for the third quarter of fiscal 2023, but not for the first nine months of fiscal 2023. Recruitment and retention are key drivers for this metric.

Previous wording

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

Current wording

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

Previous wording

The table below sets forth selected financial information for the second quarter of fiscal 2024 from our consolidated statements of operations for the three months ended June 29, 2024 versus selected financial information for the second quarter of fiscal 2023 from our consolidated statements of operations for the three months ended July 1, 2023.

Current wording

The table below sets forth selected financial information for the third quarter of fiscal 2024 from our consolidated statements of operations for the three months ended September 28, 2024 versus selected financial information for the third quarter of fiscal 2023 from our consolidated statements of operations for the three months ended September 30, 2023.

Previous wording

The “As adjusted” measure is a non-GAAP financial measure that adjusts the consolidated statements of operations for the first six months of fiscal 2024 to exclude the impact of the $258.0 million ($241.5 million after tax) of franchise rights acquired impairments, and the net impact of the $7.4 million ($5.6 million after tax)of 2023 plan restructuring charges andthe $0.3 million ($0.2 million after tax)of 2022 plan restructuring charges. See “Non-GAAP Financial Measures” above for an explanation of our use of non-GAAP financial measures.

Current wording

The “As adjusted” measure is a non-GAAP financial measure that adjusts the consolidated statements of operations for the third quarter of fiscal 2023 to exclude the net impact of the $6.2 million ($4.6 million after tax)of 2023 plan restructuring chargesand the reversal of $0.2 million ($0.2 million after tax)of 2022 plan restructuring charges. See “Non-GAAP Financial Measures” above for an explanation of our use of non-GAAP financial measures.

Previous wording

Revenues for the second quarter of fiscal 2024 were $202.1 million, a decrease of $24.8 million, or 10.9%, versus the second quarter of fiscal 2023. Excluding the impact of foreign currency, which negatively impacted our revenues in the second quarter of fiscal 2024 by $0.7 million, revenues for the second quarter of fiscal 2024 would have decreased 10.6% versus the prior year period. This decrease was driven by both the decline in Other Revenues and the decline in Subscription Revenues. The decline in Other Revenues was primarily due to the discontinuation of our consumer products business at the end of fiscal 2023. The decline in Subscription Revenues was primarily due to a higher mix of subscribers within their initial, lower-priced, commitment periods and the continued mix shift from our Workshops + Digital business to our Digital business. Additionally, Subscription Revenues were negatively impacted by non-Clinical recruitment declines during the second quarter of fiscal 2024 versus the prior year period. The decline in Subscription Revenues was partially offset by an increase in Clinical Subscription Revenues for the second quarter of fiscal 2024 versus the prior year period. See “—Operating Results” for additional details on revenues.

Current wording

Revenues for the third quarter of fiscal 2024 were $192.9 million, a decrease of $22.0 million, or 10.2%, versus the third quarter of fiscal 2023. Excluding the impact of foreign currency, which positively impacted our revenues in the third quarter of fiscal 2024 by $0.7 million, revenues for the third quarter of fiscal 2024 would have decreased 10.6% versus the prior year period. This decrease was driven by both the decline in Subscription Revenues and the decline in Other Revenues. The decline in Subscription Revenues was primarily due to recruitment declines during the third quarter of fiscal 2024 versus the prior year period and the lower number of non-Clinical Incoming Subscribers at the beginning of the third quarter of fiscal 2024 versus the beginning of the third quarter of fiscal 2023. Additionally, Subscription Revenues were negatively impacted by the continued mix shift from our Workshops + Digital business to our Digital business and a higher mix of Digital subscribers within their initial, lower-priced commitment periods. Subscription Revenues benefited from an increase in Clinical Subscription Revenues for the third quarter of fiscal 2024 versus the prior year period. The decline in Other Revenues was primarily due to the discontinuation of our consumer products business at the end of fiscal 2023. See “—Operating Results” for additional details on revenues.

Previous wording

Cost of revenues for the second quarter of fiscal 2024 decreased $18.9 million, or 22.6%, versus the second quarter of fiscal 2023. Excluding the impact of foreign currency, which decreased cost of revenues in the second quarter of fiscal 2024 by $0.1 million, cost of revenues for the second quarter of fiscal 2024 would have decreased 22.4% versus the prior year period. Excluding the impact of the reversal of $0.1 million of restructuring charges in the second quarter of fiscal 2024 and the net impact of the $0.7 million of restructuring charges in the second quarter of fiscal 2023, cost of revenues for the second quarter of fiscal 2024 would have decreased by 21.8%, or 21.6% on a constant currency basis, versus the prior year period.

Current wording

Cost of revenues for the third quarter of fiscal 2024 decreased $9.7 million, or 13.3%, versus the third quarter of fiscal 2023. Excluding the impact of foreign currency, which increased cost of revenues in the third quarter of fiscal 2024 by $0.1 million, cost of revenues for the third quarter of fiscal 2024 would have decreased 13.5% versus the prior year period. Excluding the net impact of the $3.8 million of restructuring charges in the third quarter of fiscal 2024 and the net impact of the $0.4 million of restructuring charges in the third quarter of fiscal 2023, cost of revenues for the third quarter of fiscal 2024 would have decreased by 18.1%, or 18.2% on a constant currency basis, versus the prior year period.

Previous wording

Gross profit for the second quarter of fiscal 2024 decreased $5.9 million, or 4.1%, versus the second quarter of fiscal 2023. Excluding the impact of foreign currency, which negatively impacted gross profit in the second quarter of fiscal 2024 by $0.5 million, gross profit for the second quarter of fiscal 2024 would have decreased 3.8% versus the prior year period. Excluding the impact of the reversal of $0.1 million of restructuring charges in the second quarter of fiscal 2024 and the net impact of the $0.7 million of restructuring charges in the second quarter of fiscal 2023, gross profit for the second quarter of fiscal 2024 would have decreased by 4.6%, or 4.3% on a constant currency basis, versus the prior year period. Gross margin for the second quarter of fiscal 2024 increased to 67.9% versus 63.1% for the second quarter of fiscal 2023. Excluding the impact of foreign currency, gross margin in the second quarter of fiscal 2024 would have increased 4.9% to 68.0% versus the prior year period. Excluding the impact of the reversal of restructuring charges in the second quarter of fiscal 2024 and the net impact of restructuring charges in the second quarter of fiscal 2023, gross margin for the second quarter of fiscal 2024 would have increased 4.5% to 67.9%, both as adjusted and as adjusted on a constant currency basis, versus the prior year period. This gross margin increase was driven primarily by the discontinuation of our lower margin consumer products business at the end of fiscal 2023.

Current wording

Gross profit for the third quarter of fiscal 2024 decreased $12.3 million, or 8.6%, versus the third quarter of fiscal 2023. Excluding the impact of foreign currency, which positively impacted gross profit in the third quarter of fiscal 2024 by $0.6 million, gross profit for the third quarter of fiscal 2024 would have decreased 9.1% versus the prior year period. Excluding the net impact of the $3.8 million of restructuring charges in the third quarter of fiscal 2024 and the net impact of the $0.4 million of restructuring charges in the third quarter of fiscal 2023, gross profit for the third quarter of fiscal 2024 would have decreased by 6.2%, or 6.6% on a constant currency basis, versus the prior year period. Gross margin for the third quarter of fiscal 2024 increased to 67.1%, both as reported and on a constant currency basis, versus 66.0% for the third quarter of fiscal 2023. Excluding the net impact of restructuring charges in the third quarter of fiscal 2024 and the net impact of restructuring charges in the third quarter of fiscal 2023, gross margin for the third quarter of fiscal 2024 would have increased to 69.1%, both as adjusted and as adjusted on a constant currency basis, versus the prior year period. This gross margin increase was driven primarily by actions to reduce the fixed cost base within our business and the discontinuation of our lower margin consumer products business at the end of fiscal 2023.

Previous wording

Selling, general and administrative expenses for the second quarter of fiscal 2024 decreased $18.1 million, or 27.5%, versus the second quarter of fiscal 2023. Excluding the impact of foreign currency, which decreased selling, general and administrative expenses in the second quarter of fiscal 2024 by $0.1 million, selling, general and administrative expenses for the second quarter of fiscal 2024 would have decreased 27.4% versus the prior year period. Excluding the net impact of the $2.1 million of restructuring charges in the second quarter of fiscal 2024, the net impact of the $2.0 million of restructuring charges in the second quarter of fiscal 2023 and the impact of the $4.9 million of acquisition transaction costs in the second quarter of fiscal 2023, selling, general and administrative expenses for the second quarter of fiscal 2024 would have decreased by 22.6%, or 22.4% on a constant currency basis, versus the prior year period. This decrease in selling, general and administrative expenses was primarily due to a decline in employee compensation and related costs. Selling, general and administrative expenses as a percentage of revenue for the second quarter of fiscal 2024 decreased to 23.6% from 29.0% for the second quarter of fiscal 2023. Excluding the net impact of restructuring charges in the second quarter of fiscal 2024, the net impact of restructuring charges in the second quarter of fiscal 2023 and the impact of acquisition transaction costs in the second quarter of fiscal 2023, selling, general and administrative expenses as a percentage of revenue for the second quarter of fiscal 2024 would have decreased by 3.4%, both as adjusted and as adjusted on a constant currency basis, versus the prior year period.

Current wording

Selling, general and administrative expenses for the third quarter of fiscal 2024 increased $4.1 million, or 6.4%, versus the third quarter of fiscal 2023. Excluding the impact of foreign currency, which increased selling, general and administrative expenses in the third quarter of fiscal 2024 by $0.1 million, selling, general and administrative expenses for the third quarter of fiscal 2024 would have increased 6.3% versus the prior year period. Excluding the net impact of the $10.0 million of restructuring charges in the third quarter of fiscal 2024, the impact of the $3.9 million of former CEO separation expenses in the third quarter of fiscal 2024 and the net impact of the $5.6 million of restructuring charges in the third quarter of fiscal 2023, selling, general and administrative expenses for the third quarter of fiscal 2024 would have decreased by 7.3%, or 7.4% on a constant currency basis, versus the prior year period. This decrease in selling, general and administrative expenses was primarily due to a decline in employee compensation and related costs. Selling, general and administrative expenses as a percentage of revenue for the third quarter of fiscal 2024 increased to 34.8% from 29.3% for the third quarter of fiscal 2023. Excluding the net impact of restructuring charges in the third quarter of fiscal 2024, the impact of former CEO separation expenses in the third quarter of fiscal 2024 and the net impact of restructuring charges in the third quarter of fiscal 2023, selling, general and administrative expenses as a percentage of revenue for the third quarter of fiscal 2024 would have increased by 0.9%, both as adjusted and as adjusted on a constant currency basis, versus the prior year period.

Previous wording

Operating income for the second quarter of fiscal 2024 increased $9.6 million, or 36.5%, versus the second quarter of fiscal 2023. Excluding the impact of foreign currency, which negatively impacted operating income in the second quarter of fiscal 2024 by $0.3 million, operating income for the second quarter of fiscal 2024 would have increased 37.6% versus the prior year period. Excluding the net impact of the $2.0 million of restructuring charges in the second quarter of fiscal 2024, the net impact of the $2.7 million of restructuring charges in the second quarter of fiscal 2023 and the impact of the $4.9 million of acquisition transaction costs in the second quarter of fiscal 2023, operating income for the second quarter of fiscal 2024 would have increased by 12.0%, or 12.8% on a constant currency basis, versus the prior year period. Operating income margin for the second quarter of fiscal 2024 increased 6.2% to 17.8% versus 11.6% for the second quarter of fiscal 2023. Excluding the net impact of restructuring charges in the second quarter of fiscal 2024, the net impact of restructuring charges in the second quarter of fiscal 2023 and the impact of acquisition transaction costs in the second quarter of fiscal 2023, operating income margin for the second quarter of fiscal 2024 would have increased by 3.8%, or 3.9% on a constant currency basis, versus the prior year period. This increase in operating income margin was driven primarily by an increase in gross margin and a decrease in selling, general and administrative expenses as a percentage of revenue, partially offset by an increase in marketing expenses as a percentage of revenue, versus the prior year period.

Current wording

Operating loss for the third quarter of fiscal 2024 was $39.0 million compared to operating income for the third quarter of fiscal 2023 of $30.6 million. Operating loss for the third quarter of fiscal 2024 was positively impacted by $0.5 million of foreign currency. Excluding the impact of the $57.0 million of franchise rights acquired impairments in the third quarter of fiscal 2024, the net impact of the $13.8 million of restructuring charges in the third quarter of fiscal 2024, the impact of the $3.9 million of former CEO separation expenses in the third quarter of fiscal 2024 and the net impact of the $6.0 million of restructuring charges in the third quarter of fiscal 2023, operating income would have been $35.7 million for the third quarter of fiscal 2024 versus operating income of $36.6 million for the third quarter of fiscal 2023, a decrease of 2.5%, or 4.2% on a constant currency basis. Operating loss margin for the third quarter of fiscal 2024 was 20.2% compared to operating income margin for the third quarter of fiscal 2023 of 14.2%. Excluding the impact of franchise rights acquired impairments in the third quarter of fiscal 2024, the net impact of restructuring charges in the third quarter of fiscal 2024, the impact of former CEO separation expenses in the third quarter of fiscal 2024 and the net impact of restructuring charges in the third quarter of fiscal 2023, operating income margin would have been 18.5%, or 18.2% on a constant currency basis, for the third quarter of fiscal 2024 versus operating income margin of 17.0% for the third quarter of fiscal 2023. This increase in operating income margin was driven primarily by an increase in gross margin, partially offset by an increase in selling, general and administrative expenses as a percentage of revenue and an increase in marketing expenses as a percentage of revenue, versus the prior year period.

Previous wording

Interest expense for the second quarter of fiscal 2024 increased $4.5 million, or 18.7%, versus the second quarter of fiscal 2023. 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 second quarter of fiscal 2024 and the second quarter of fiscal 2023 and excluding the impact of any applicable interest rate swaps, increased to 7.76% per annum for the second quarter of fiscal 2024 from 7.51% per annum for the second quarter of fiscal 2023. Interest expense was impacted by the termination of our interest rate swaps on March 31, 2024. Including the impact of any applicable interest rate swaps, 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 second quarter of fiscal 2024 and the second quarter of fiscal 2023, increased to 7.76% per annum for the second quarter of fiscal 2024 from 6.63% per annum for the second quarter of fiscal 2023. See “—Liquidity and Capital Resources—Long-Term Debt” for additional details regarding our debt, including interest rates and payments thereon. Further information regarding our use of interest rate swaps can be found in Note 11 “Derivative Instruments and Hedging” in the notes to the consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

Interest expense for the third quarter of fiscal 2024 increased $4.1 million, or 16.8%, versus the third quarter of fiscal 2023. 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 2024 and the third quarter of fiscal 2023 and excluding the impact of any applicable interest rate swaps, increased to 7.75% per annum for the third quarter of fiscal 2024 from 7.73% per annum for the third quarter of fiscal 2023. Interest expense was impacted by the termination of our interest rate swaps on March 31, 2024. Including the impact of any applicable interest rate swaps, 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 2024 and the third quarter of fiscal 2023, increased to 7.75% per annum for the third quarter of fiscal 2024 from 6.75% per annum for the third quarter of fiscal 2023. See “—Liquidity and Capital Resources—Long-Term Debt” for additional details regarding our debt, including interest rates and payments thereon. Further information regarding our use of interest rate swaps can be found in Note 11 “Derivative Instruments and Hedging” in the notes to the consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

Other income, net, which consists primarily of the impact of foreign currency on intercompany transactions, decreased by $0.4 million for the second quarter of fiscal 2024 to $0.1 million of income as compared to $0.5 million of income for the second quarter of fiscal 2023.

Current wording

Other expense, net, which consists primarily of the negative impact of foreign currency on intercompany transactions, increased by $5.1 million for the third quarter of fiscal 2024 to $5.9 million of expense as compared to $0.8 million of expense for the third quarter of fiscal 2023.

Previous wording

Our effective tax rate for the second quarter of fiscal 2024 was (213.0%) compared to (1,740.0%) for the second quarter of fiscal 2023. The effective tax rate for interim periods is determined using an annual effective tax rate, adjusted for discrete items. The forecasted full-year tax expense, which included an increase in valuation allowance against U.S. deferred tax assets, in relation to our forecasted full-year pretax loss (albeit minimal), drove the unusually high negative annual effective tax rate. Applying this negative annual effective tax rate to pretax income for the second quarter of fiscal 2024 resulted in an income tax benefit. In addition, the effective tax rate was impacted by tax expense recorded for an out-of-period income tax adjustment and tax expense from a valuation allowance established to offset certain non-U.S. deferred tax assets due to the uncertainty of realizing future tax benefits. The adoption of the Organization for Economic Cooperation and Development’s global tax reform initiative, which introduces a global minimum tax of 15% applicable to large multinational corporations, did not have an impact on our effective tax rate for the second quarter of fiscal 2024.

Current wording

Our effective tax rate for the third quarter of fiscal 2024 was 37.2% compared to (727.7%) for the third quarter of fiscal 2023. The effective tax rate for interim periods is determined using an annual effective tax rate, adjusted for discrete items. The forecasted full-year fiscal 2024 tax expense, which included an increase in valuation allowance against U.S. deferred tax assets, in relation to our forecasted full-year pretax loss (albeit minimal), drove the unusually high negative annual effective tax rate. Applying this negative annual effective tax rate to pretax loss for the third quarter of fiscal 2024 resulted in an income tax benefit. The adoption of the Organization for Economic Cooperation and Development’s global tax reform initiative, which introduces a global minimum tax of 15% applicable to large multinational corporations, did not have an impact on our effective tax rate for the third quarter of fiscal 2024.

Previous wording

For the second quarter of fiscal 2023, the difference between the U.S. federal statutory tax rate and our consolidated effective tax rate was primarily due to the valuation allowance noted above. In addition, the effective tax rate was impacted by tax expense from income earned in foreign jurisdictions, partially offset by a tax benefit related to foreign-derived intangible income (“FDII”).

Current wording

For the third quarter of fiscal 2023, the difference between the U.S. federal statutory tax rate and our consolidated effective tax rate was primarily due to the valuation allowance noted above. In addition, the effective tax rate was impacted by tax expense from income earned in foreign jurisdictions, partially offset by a tax benefit related to foreign-derived intangible income (“FDII”).

Previous wording

Net income for the second quarter of fiscal 2024 was $23.3 million compared to net income for the second quarter of fiscal 2023 of $50.8 million. Net income for the second quarter of fiscal 2024 was negatively impacted by $0.2 million of foreign currency. Net income for the second quarter of fiscal 2024 included a $1.5 million net impact from restructuring charges. Net income for the second quarter of fiscal 2023 included a $2.0 million net impact from restructuring charges and a $4.3 million impact from acquisition transaction costs.

Current wording

Net loss for the third quarter of fiscal 2024 was $46.2 million compared to net income for the third quarter of fiscal 2023 of $43.7 million. Net loss for the third quarter of fiscal 2024 was positively impacted by $0.3 million of foreign currency. Net loss for the third quarter of fiscal 2024 included a $51.8 million impact from franchise rights acquired impairments, a $10.4 million net impact from restructuring charges and a $2.9 million impact from former CEO separation expenses. Net income for the third quarter of fiscal 2023 included a $4.5 million net impact from restructuring charges.

Previous wording

Earnings per fully diluted share (“EPS”) for the second quarter of fiscal 2024 was $0.29 compared to EPS for the second quarter of fiscal 2023 of $0.65. EPS per share for the second quarter of fiscal 2024 included a $0.02 net impact from restructuring charges. EPS for the second quarter of fiscal 2023 included a $0.03 net impact from restructuring charges and a $0.05 impact from acquisition transaction costs.

Current wording

Diluted net loss per share for the third quarter of fiscal 2024 was $0.58 compared to earnings per fully diluted share (“EPS”) for the third quarter of fiscal 2023 of $0.54. Diluted net loss per share for the third quarter of fiscal 2024 included a $0.65 impact from franchise rights acquired impairments, a $0.13 net impact from restructuring charges and a $0.04 impact from former CEO separation expenses. EPS for the third quarter of fiscal 2023 included a $0.06 net impact from restructuring charges.

Previous wording

The following tables set forth key metrics for the second quarter of fiscal 2024 and the percentage change in those metrics versus the prior year period, as applicable:

Current wording

The following tables set forth key metrics for the third quarter of fiscal 2024 and the percentage change in those metrics versus the prior year period:

Previous wording

The decrease in Subscription Revenues for the second quarter of fiscal 2024 versus the prior year period was driven by both a decrease in Digital Subscription Revenues and a decrease in Workshops + Digital Subscription Revenues primarily due to a higher mix of subscribers within their initial, lower-priced, commitment periods and the continued mix shift from our Workshops + Digital business to our Digital business. Digital Subscription Revenues and Workshops + Digital Subscription Revenues were also negatively impacted by recruitment declines during the second quarter of fiscal 2024 as compared to the prior year period. In addition, the lower number of Incoming Workshops + Digital Subscribers at the beginning of the second quarter of fiscal 2024 versus the beginning of the second quarter of fiscal 2023 contributed to the decrease in Workshops + Digital Subscription Revenues in the quarter. The decrease in Subscription Revenues for the second quarter of fiscal 2024 was partially offset by an increase in Clinical Subscription Revenues versus the prior year period, despite the recruitment challenges in the second quarter of fiscal 2024 arising from the increasingly competitive environment.

Current wording

The decrease in revenues for the third quarter of fiscal 2024 versus the prior year period was driven by both a decrease in Subscription Revenues and a decrease in Other Revenues. The decrease in Subscription Revenues for the third quarter of fiscal 2024 versus the prior year period was driven by a decrease in Digital Subscription Revenues and, to a lesser extent, a decrease in Workshops + Digital Subscription Revenues primarily due to recruitment declines during the third quarter of fiscal 2024 as compared to the prior year period and the lower number of Incoming Digital Subscribers and Incoming Workshops + Digital Subscribers at the beginning of the third quarter of fiscal 2024 versus the beginning of the third quarter of fiscal 2023. In addition, the continued mix shift from our Workshops + Digital business to our Digital business and a higher mix of Digital subscribers within their initial, lower-priced commitment periods contributed to the decrease in Digital and Workshops + Digital Subscription Revenues in the quarter. Subscription Revenues benefited from an increase in Clinical Subscription Revenues for the third quarter of fiscal 2024 versus the prior year period, despite the recruitment challenges in the third quarter of fiscal 2024 arising from the increasingly competitive environment.

Previous wording

The decrease in Total Paid Weeks for the second quarter of fiscal 2024 versus the prior year period was driven primarily by non-Clinical recruitment declines during the second quarter of fiscal 2024 as compared to the prior year period and the lower number of Incoming Subscribers at the beginning of the second quarter of fiscal 2024 versus the beginning of the second quarter of fiscal 2023.

Current wording

The decrease in Total Paid Weeks for the third quarter of fiscal 2024 versus the prior year period was driven primarily by recruitment declines during the third quarter of fiscal 2024 as compared to the prior year period and the lower number of Incoming Subscribers at the beginning of the third quarter of fiscal 2024 versus the beginning of the third quarter of fiscal 2023.

Previous wording

SIX MONTHS ENDED JUNE 29, 2024 COMPARED TO THE SIX MONTHS ENDED JULY 1, 2023

Current wording

NINE MONTHS ENDED SEPTEMBER 28, 2024 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2023

Previous wording

The table below sets forth selected financial information for the first six months of fiscal 2024 from our consolidated statements of operations for the six months ended June 29, 2024 versus selected financial information for the first six months of fiscal 2023 from our consolidated statements of operations for the six months ended July 1, 2023.

Current wording

The table below sets forth selected financial information for the first nine months of fiscal 2024 from our consolidated statements of operations for the nine months ended September 28, 2024 versus selected financial information for the first nine months of fiscal 2023 from our consolidated statements of operations for the nine months ended September 30, 2023.

Previous wording

The “As adjusted” measure is a non-GAAP financial measure that adjusts the consolidated statements of operations for the second quarter of fiscal 2024 to exclude the net impact of the $1.9 million ($1.4 million after tax)of 2023 plan restructuring charges andthe $0.1 million ($0.1 million after tax)of 2022 plan restructuring charges. See “Non-GAAP Financial Measures” above for an explanation of our use of non-GAAP financial measures.

Current wording

The “As adjusted” measure is a non-GAAP financial measure that adjusts the consolidated statements of operations for the first nine months of fiscal 2024 to exclude the impact of the $315.0 million ($293.2 million after tax) of franchise rights acquired impairments, the net impact of the $14.8 million ($11.1 million after tax)of 2024 plan restructuring charges, the $6.7 million ($5.0 million after tax)of 2023 plan restructuring charges andthe $0.1 million ($42 thousand after tax)of 2022 plan restructuring charges, and theimpact of the $3.9 million ($2.9 million after tax)of former CEO separation expenses. See “Non-GAAP Financial Measures” above for an explanation of our use of non-GAAP financial measures.

Previous wording

The “As adjusted” measure is a non-GAAP financial measure that adjusts the consolidated statements of operations for the first six months of fiscal 2023 to exclude the net impact of the $24.4 million ($18.3 million after tax)of 2023 plan restructuring charges, the $0.9 million ($0.6 million after tax)of 2022 plan restructuring charges, the $0.1 million ($43 thousand after tax) of 2021 plan restructuring charges and the reversal of $22 thousand ($16 thousand after tax) of 2020 plan restructuring charges, and the impact of the $8.6 million ($7.5 million after tax) of acquisition transaction costs. See “Non-GAAP Financial Measures” above for an explanation of our use of non-GAAP financial measures.

Current wording

The “As adjusted” measure is a non-GAAP financial measure that adjusts the consolidated statements of operations for the first nine months of fiscal 2023 to exclude the net impact of the $30.6 million ($22.9 million after tax)of 2023 plan restructuring charges, the $0.6 million ($0.5 million after tax)of 2022 plan restructuring charges, the $0.1 million ($43 thousand after tax) of 2021 plan restructuring charges and the reversal of $21 thousand ($16 thousand after tax) of 2020 plan restructuring charges, and the impact of the $8.6 million ($7.5 million after tax) of acquisition transaction costs. See “Non-GAAP Financial Measures” above for an explanation of our use of non-GAAP financial measures.

Previous wording

Revenues for the first six months of fiscal 2024 were $408.6 million, a decrease of $60.1 million, or 12.8%, versus the first six months of fiscal 2023. Excluding the impact of foreign currency, which positively impacted our revenues in the first six months of fiscal 2024 by $0.1 million, revenues for the first six months of fiscal 2024 would have decreased 12.9% versus the prior year period. This decrease was driven primarily by the decline in Other Revenues from the discontinuation of our consumer products business at the end of fiscal 2023. Lower Subscription Revenues, primarily due to a higher mix of subscribers within their initial, lower-priced, commitment periods and the continued mix shift from our Workshops + Digital business to our Digital business, also contributed to the decrease in revenues in the period. Additionally, Subscription Revenues were negatively impacted by non-Clinical recruitment declines during the first six months of fiscal 2024 versus the prior year period. Subscription Revenues included $38.5 million of Clinical Subscription Revenues for the first six months of fiscal 2024 versus $7.6 million of Clinical Subscription Revenues for the first six months of fiscal 2023 as a result of our acquisition of Sequence closing during the second quarter of fiscal 2023. See “—Operating Results” for additional details on revenues.

Current wording

Revenues for the first nine months of fiscal 2024 were $601.5 million, a decrease of $82.1 million, or 12.0%, versus the first nine months of fiscal 2023. Excluding the impact of foreign currency, which positively impacted our revenues in the first nine months of fiscal 2024 by $0.8 million, revenues for the first nine months of fiscal 2024 would have decreased 12.1% versus the prior year period. This decrease was driven primarily by the decline in Other Revenues from the discontinuation of our consumer products business at the end of fiscal 2023. Lower Subscription Revenues, primarily due to a higher mix of Digital subscribers within their initial, lower-priced commitment periods and non-Clinical recruitment declines during the first nine months of fiscal 2024 versus the prior year period, also contributed to the decrease in revenues in the period. Additionally, Subscription Revenues were negatively impacted by the continued mix shift from our Workshops + Digital business to our Digital business. Subscription Revenues included $57.5 million of Clinical Subscription Revenues for the first nine months of fiscal 2024 versus $17.6 million of Clinical Subscription Revenues for the first nine months of fiscal 2023 as a result of our acquisition of Sequence closing during the second quarter of fiscal 2023. See “—Operating Results” for additional details on revenues.

Previous wording

Cost of revenues for the first six months of fiscal 2024 decreased $72.5 million, or 35.2%, versus the first six months of fiscal 2023. Excluding the impact of foreign currency, which increased cost of revenues in the first six months of fiscal 2024 by $0.1 million, cost of revenues for the first six months of fiscal 2024 would have decreased 35.2% versus the prior year period. Excluding the net impact of the $2.4 million of restructuring charges in the first six months of fiscal 2024 and the net impact of the $19.3 million of restructuring charges in the first six months of fiscal 2023, cost of revenues for the first six months of fiscal 2024 would have decreased by 29.8%, both as adjusted and as adjusted on a constant currency basis, versus the prior year period.

Current wording

Cost of revenues for the first nine months of fiscal 2024 decreased $82.2 million, or 29.5%, versus the first nine months of fiscal 2023. Excluding the impact of foreign currency, which increased cost of revenues in the first nine months of fiscal 2024 by $0.2 million, cost of revenues for the first nine months of fiscal 2024 would have decreased 29.5% versus the prior year period. Excluding the net impact of the $6.2 million of restructuring charges in the first nine months of fiscal 2024 and the net impact of the $19.7 million of restructuring charges in the first nine months of fiscal 2023, cost of revenues for the first nine months of fiscal 2024 would have decreased by 26.5%, or 26.6% on a constant currency basis, versus the prior year period.

Previous wording

Gross profit for the first six months of fiscal 2024 increased $12.4 million, or 4.7%, versus the first six months of fiscal 2023. Excluding the impact of foreign currency, which positively impacted gross profit in the first six months of fiscal 2024 by $0.1 million, gross profit for the first six months of fiscal 2024 would have increased 4.7% versus the prior year period. Excluding the net impact of the $2.4 million of restructuring charges in the first six months of fiscal 2024 and the net impact of the $19.3 million of restructuring charges in the first six months of fiscal 2023, gross profit for the first six months of fiscal 2024 would have decreased by 1.6%, both as adjusted and as adjusted on a constant currency basis, versus the prior year period. Gross margin for the first six months of fiscal 2024 increased to 67.3%, both as reported and on a constant currency basis, versus 56.0% for the first six months of fiscal 2023. Excluding the net impact of restructuring charges in the first six months of fiscal 2024 and the net impact of restructuring charges in the first six months of fiscal 2023, gross margin for the first six months of fiscal 2024 would have increased 7.7% to 67.9%, both as adjusted and as adjusted on a constant currency basis, versus the prior year period. This gross margin increase was driven primarily by the discontinuation of our lower margin consumer products business at the end of fiscal 2023.

Current wording

Gross profit for the first nine months of fiscal 2024 increased $0.1 million, or 0.0%, versus the first nine months of fiscal 2023. Excluding the impact of foreign currency, which positively impacted gross profit in the first nine months of fiscal 2024 by $0.7 million, gross profit for the first nine months of fiscal 2024 would have decreased 0.1% versus the prior year period. Excluding the net impact of the $6.2 million of restructuring charges in the first nine months of fiscal 2024 and the net impact of the $19.7 million of restructuring charges in the first nine months of fiscal 2023, gross profit for the first nine months of fiscal 2024 would have decreased by 3.1%, or 3.3% on a constant currency basis, versus the prior year period. Gross margin for the first nine months of fiscal 2024 increased to 67.3%, or 67.2% on a constant currency basis, versus 59.2% for the first nine months of fiscal 2023. Excluding the net impact of restructuring charges in the first nine months of fiscal 2024 and the net impact of restructuring charges in the first nine months of fiscal 2023, gross margin for the first nine months of fiscal 2024 would have increased 6.2% to 68.3%, both as adjusted and as adjusted on a constant currency basis, versus the prior year period. This gross margin increase was driven primarily by actions to reduce the fixed cost base within our business and the discontinuation of our lower margin consumer products business at the end of fiscal 2023.

Previous wording

Marketing expenses for the first six months of fiscal 2024 increased $4.5 million, or 3.2%, versus the first six months of fiscal 2023. Excluding the impact of foreign currency, which increased marketing expenses in the first six months of fiscal 2024 by $0.1 million, marketing expenses for the first six months of fiscal 2024 would have increased 3.1% versus the prior year period. This increase in marketing expenses was primarily due to higher spend on Online advertising, partially offset by lower spend on TV advertising and production fees and agency fees. Marketing expenses as a percentage of revenue for the first six months of fiscal 2024 increased to 35.2% from 29.7% for the first six months of fiscal 2023.

Current wording

Marketing expenses for the first nine months of fiscal 2024 increased $0.8 million, or 0.4%, versus the first nine months of fiscal 2023. Foreign currency had a de minimis impact on marketing expenses for the first nine months of fiscal 2024. This increase in marketing expenses was primarily due to higher spend on online advertising, partially offset by lower spend on TV advertising and production fees and agency fees. Marketing expenses as a percentage of revenue for the first nine months of fiscal 2024 increased to 31.3% from 27.4% for the first nine months of fiscal 2023.

Previous wording

Selling, general and administrative expenses for the first six months of fiscal 2024 decreased $19.0 million, or 15.1%, versus the first six months of fiscal 2023. Excluding the impact of foreign currency, which increased selling, general and administrative expenses in the first six months of fiscal 2024 by $0.1 million, selling, general and administrative expenses for the first six months of fiscal 2024 would have decreased 15.1% versus the prior year period. Excluding the net impact of the $5.4 million of restructuring charges in the first six months of fiscal 2024, the net impact of the $6.0 million of restructuring charges in the first six months of fiscal 2023 and the impact of the $8.6 million of acquisition transaction costs in the first six months of fiscal 2023, selling, general and administrative expenses for the first six months of fiscal 2024 would have decreased by 8.7%, or 8.8% on a constant currency basis, versus the prior year period. This decrease in selling, general and administrative expenses was primarily due to a decline in employee compensation and related costs. Selling, general and administrative expenses as a percentage of revenue for the first six months of fiscal 2024 decreased to 26.1% from 26.8% for the first six months of fiscal 2023. Excluding the net impact of restructuring charges in the first six months of fiscal 2024, the net impact of restructuring charges in the first six months of fiscal 2023 and the impact of acquisition transaction costs in the first six months of fiscal 2023, selling, general and administrative expenses as a percentage of revenue for the first six months of fiscal 2024 would have increased by 1.1%, both as adjusted and as adjusted on a constant currency basis, versus the prior year period.

Current wording

Selling, general and administrative expenses for the first nine months of fiscal 2024 decreased $14.9 million, or 7.9%, versus the first nine months of fiscal 2023. Excluding the impact of foreign currency, which increased selling, general and administrative expenses in the first nine months of fiscal 2024 by $0.1 million, selling, general and administrative expenses for the first nine months of fiscal 2024 would have decreased 8.0% versus the prior year period. Excluding the net impact of the $15.3 million of restructuring charges in the first nine months of fiscal 2024, the $3.9 million of former CEO separation expenses in the first nine months of fiscal 2024, the net impact of the $11.6 million of restructuring charges in the first nine months of fiscal 2023 and the impact of the $8.6 million of acquisition transaction costs in the first nine months of fiscal 2023, selling, general and administrative expenses for the first nine months of fiscal 2024 would have decreased by 8.2%, or 8.3% on a constant currency basis, versus the prior year period. This decrease in selling, general and administrative expenses was primarily due to a decline in employee compensation and related costs. Selling, general and administrative expenses as a percentage of revenue for the first nine months of fiscal 2024 increased to 28.9% from 27.6% for the first nine months of fiscal 2023. Excluding the net impact of restructuring charges in the first nine months of fiscal 2024, the impact of former CEO separation expenses in the first nine months of fiscal 2024, the net impact of restructuring charges in the first nine months of fiscal 2023 and the impact of acquisition transaction costs in the first nine months of fiscal 2023, selling, general and administrative expenses as a percentage of revenue for the first nine months of fiscal 2024 would have increased by 1.1%, both as adjusted and as adjusted on a constant currency basis, versus the prior year period.

Previous wording

In performing our interim impairment analysis as of March 30, 2024, we determined that the carrying amounts of our United States, Australia, New Zealand and United Kingdom 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, Australia, New Zealand and United Kingdom units of account of $251.4 million, $4.1 million, $2.3 million and $0.2 million, respectively, in the first quarter of fiscal 2024.

Current wording

In performing our interim impairment analysis as of March 30, 2024, we determined that the carrying values of our United States, Australia, New Zealand and United Kingdom 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, Australia, New Zealand and United Kingdom units of account of $251.4 million, $4.1 million, $2.3 million and $0.2 million, respectively, in the first quarter of fiscal 2024.

Previous wording

Operating loss for the first six months of fiscal 2024 was $233.4 million compared to operating loss for the first six months of fiscal 2023 of $2.3 million. Foreign currency had a de minimis impact on operating loss for the first six months of fiscal 2024. Excluding the impact of the $258.0 million of franchise rights acquired impairments in the first six months of fiscal 2024, the net impact of the $7.7 million of restructuring charges in the first six months of fiscal 2024, the net impact of the $25.3 million of restructuring charges in the first six months of fiscal 2023 and the impact of the $8.6 million of acquisition transaction costs in the first six months of fiscal 2023, operating income would have been $32.3 million for the first six months of fiscal 2024 versus operating income of $31.6 million for the first six months of fiscal 2023, an increase of 2.1%, or 2.5% on a constant currency basis. Operating loss margin for the first six months of fiscal 2024 was 57.1% compared to operating loss margin for the first six months of fiscal 2023 of 0.5%. Excluding the impact of franchise rights acquired impairments in the first six months of fiscal 2024, the net impact of restructuring charges in the first six months of fiscal 2024, the net impact of restructuring charges in the first six months of fiscal 2023 and the impact of acquisition transaction costs in the first six months of fiscal 2023, operating income margin would have been 7.9% for the first six months of fiscal 2024, both as adjusted and as adjusted on a constant currency basis, versus operating income margin of 6.8% for the first six months of fiscal 2023. This increase in operating income margin was driven primarily by an increase in gross margin, partially offset by an increase in marketing expenses as a percentage of revenue and an increase in selling, general and administrative expenses as a percentage of revenue, versus the prior year period.

Current wording

Operating loss for the first nine months of fiscal 2024 was $272.4 million compared to operating income for the first nine months of fiscal 2023 of $28.3 million. Operating loss for the first nine months of fiscal 2024 was positively impacted by $0.4 million of foreign currency. Excluding the impact of the $315.0 million of franchise rights acquired impairments in the first nine months of fiscal 2024, the net impact of the $21.5 million of restructuring charges in the first nine months of fiscal 2024, the impact of the $3.9 million of former CEO separation expenses in the first nine months of fiscal 2024, the net impact of the $31.3 million of restructuring charges in the first nine months of fiscal 2023 and the impact of the $8.6 million of acquisition transaction costs in the first nine months of fiscal 2023, operating income would have been $68.0 million for the first nine months of fiscal 2024 versus operating income of $68.2 million for the first nine months of fiscal 2023, a decrease of 0.4%, or 1.1% on a constant currency basis. Operating loss margin for the first nine months of fiscal 2024 was 45.3% compared to operating income margin for the first nine months of fiscal 2023 of 4.1%. Excluding the impact of franchise rights acquired impairments in the first nine months of fiscal 2024, the net impact of restructuring charges in the first nine months of fiscal 2024, the impact of former CEO separation expenses in the first nine months of fiscal 2024, the net impact of restructuring charges in the first nine months of fiscal 2023 and the impact of acquisition transaction costs in the first nine months of fiscal 2023, operating income margin would have been 11.3%, or 11.2% on a constant currency basis, for the first nine months of fiscal 2024 versus operating income margin of 10.0% for the first nine months of fiscal 2023. This increase in operating income margin was driven primarily by an increase in gross margin, partially offset by an increase in marketing expenses as a percentage of revenue and an increase in selling, general and administrative expenses as a percentage of revenue, versus the prior year period.

Previous wording

Interest expense for the first six months of fiscal 2024 increased $6.4 million, or 13.6%, versus the first six months of fiscal 2023. 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 first six months of fiscal 2024 and the first six months of fiscal 2023 and excluding the impact of any applicable interest rate swaps, increased to 7.77% per annum for the first six months of fiscal 2024 from 7.35% per annum for the first six months of fiscal 2023. Interest expense was impacted by the termination of our interest rate swaps on March 31, 2024. Including the impact of any applicable interest rate swaps, 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 six months of fiscal 2024 and the first six months of fiscal 2023, increased to 7.28% per annum for the first six months of fiscal 2024 from 6.55% per annum for the first six months of fiscal 2023. See “—Liquidity and Capital Resources—Long-Term Debt” for additional details regarding our debt, including interest rates and payments thereon. Further information regarding our use of interest rate swaps can be found in Note 11 “Derivative Instruments and Hedging” in the notes to the consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

Interest expense for the first nine months of fiscal 2024 increased $10.5 million, or 14.7%, versus the first nine months of fiscal 2023. 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 first nine months of fiscal 2024 and the first nine months of fiscal 2023 and excluding the impact of any applicable interest rate swaps, increased to 7.76% per annum for the first nine months of fiscal 2024 from 7.48% per annum for the first nine months of fiscal 2023. Interest expense was impacted by the termination of our interest rate swaps on March 31, 2024. Including the impact of any applicable interest rate swaps, 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 nine months of fiscal 2024 and the first nine months of fiscal 2023, increased to 7.44% per annum for the first nine months of fiscal 2024 from 6.62% per annum for the first nine months of fiscal 2023. See “—Liquidity and Capital Resources—Long-Term Debt” for additional details regarding our debt, including interest rates and payments thereon. Further information regarding our use of interest rate swaps can be found in Note 11 “Derivative Instruments and Hedging” in the notes to the consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

Other income, net, which consists primarily of the impact of foreign currency on intercompany transactions, increased by $0.8 million for the first six months of fiscal 2024 to $1.7 million of income as compared to $0.9 million of income for the first six months of fiscal 2023.

Current wording

Other expense (income), net, which consists primarily of the negative impact of foreign currency on intercompany transactions, changed by $4.2 million for the first nine months of fiscal 2024 to $4.2 million of expense as compared to $36 thousand of income for the first nine months of fiscal 2023.