WW International Annual Report 2021

Plain-text annual report

2021 ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 1, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-16769 WW INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Virginia (State or other jurisdiction of incorporation or organization) 11-6040273 (I.R.S. Employer Identification No.) 675 Avenue of the Americas, 6th Floor, New York, New York 10010 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (212) 589-2700 Securities registered pursuant to Section 12(b) of the Act: Title of each class Common Stock, no par value Trading Symbol(s) WW Securities registered pursuant to Section 12(g) of the Act: None (Title of class) Name of each exchange on which registered The Nasdaq Stock Market LLC Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ 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. Large accelerated filer ☒ Non-accelerated filer ☐ Accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ The aggregate market value of the registrant’s common stock held by non-affiliates as of July 2, 2021 (based upon the closing price of $36.76 per share of common stock as of July 2, 2021, the last business day of the registrant’s second fiscal quarter of 2021, as quoted on The Nasdaq Stock Market LLC) was $1,954,624,188. For purposes of this computation, it is assumed that shares of common stock held by our directors, executive officers and certain shareholders as of July 2, 2021 would be deemed stock held by affiliates. The number of shares of common stock outstanding as of February 1, 2022 was 70,076,953. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s definitive Proxy Statement for its 2022 annual meeting of shareholders are incorporated herein by reference in Part III, Items 10-14. Such Proxy Statement will be filed with the SEC no later than 120 days after the registrant’s fiscal year ended January 1, 2022. WW International, Inc. Annual Report on Form 10-K Table of Contents Part I Item 1. Business................................................................................................................................................... Item 1A. Risk Factors............................................................................................................................................. Item 1B. Unresolved Staff Comments ................................................................................................................... Properties................................................................................................................................................. Item 2. Item 3. Legal Proceedings ................................................................................................................................... Item 4. Mine Safety Disclosures.......................................................................................................................... Information about our Executive Officers and Directors........................................................................ Part II Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities ................................................................................................................................ Item 6. [Reserved] ............................................................................................................................................... Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ................. Item 7A. Quantitative and Qualitative Disclosures About Market Risk ................................................................ Financial Statements and Supplementary Data ....................................................................................... Item 8. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ................ Item 9A. Controls and Procedures.......................................................................................................................... Item 9B. Other Information.................................................................................................................................... Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections .................................................... Part III Item 10. Directors, Executive Officers and Corporate Governance...................................................................... Item 11. Executive Compensation......................................................................................................................... Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters ................................................................................................................................................ Item 13. Certain Relationships and Related Transactions, and Director Independence........................................ Item 14. Principal Accountant Fees and Services ................................................................................................. Part IV Item 15. Exhibits and Financial Statement Schedules........................................................................................... Item 16. Form 10-K Summary............................................................................................................................... Page 1 12 27 27 27 27 28 32 33 34 59 60 60 60 61 61 62 62 62 62 62 64 70 i BASIS OF PRESENTATION WW International, Inc., formerly known as Weight Watchers International, Inc., is a Virginia corporation with its principal executive offices in New York, New York. In this Annual Report on Form 10-K unless the context indicates otherwise: “we,” “us,” “our,” the “Company” 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 fiscal year ends on the Saturday closest to December 31st and consists of either 52- or 53-week periods. In this Annual Report on Form 10-K: • • • • • • • • • • • • • • • “fiscal 2009” refers to our fiscal year ended January 2, 2010; “fiscal 2014” refers to our fiscal year ended January 3, 2015 (included a 53rd week); “fiscal 2015” refers to our fiscal year ended January 2, 2016; “fiscal 2016” refers to our fiscal year ended December 31, 2016; “fiscal 2017” refers to our fiscal year ended December 30, 2017; “fiscal 2018” refers to our fiscal year ended December 29, 2018; “fiscal 2019” refers to our fiscal year ended December 28, 2019; “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. The following terms used in this Annual Report on Form 10-K are our trademarks: Digital 360®, myWW®, PersonalPoints TM, Points®, Weight Watchers®, ZeroPointTM and the WW logo. ii Item 1. Business Overview PART I We are a global wellness company powered by the world’s leading commercial weight management program and an award-winning digital subscription platform. We are focused on inspiring people to adopt healthy habits for real life and aim to democratize and deliver wellness for all. With nearly six decades of weight management experience, expertise and know-how, we are one of the most recognized and trusted brand names among weight- conscious consumers. We educate our members and provide them with guidance, digital tools and an inspiring community to enable them to develop healthy habits and focus on their overall health and wellness. WW-branded services and products include digital offerings provided through our apps and websites, workshops, consumer products, and various events and experiences. Our business has gone through a significant shift to a digital subscription model over the past several years and our primary sources of revenue are subscriptions for our digital products and for our workshops. Our “Digital” business refers to providing subscriptions to our digital product offerings, including Digital 360 and Personal Coaching + Digital. Our “Workshops + Digital” (formerly known as “Studio + Digital”) business refers to providing unlimited access to our workshops combined with our digital subscription product offerings to commitment plan subscribers. 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. We believe that the power of our communities -- via our Connect platform, workshops and Digital 360 offering -- increases accountability and provides our members with inspiration, human connection, and support. This inspires them and enables them to build healthier and more fulfilling food, activity, mindset and sleep habits. Our brands enjoy high awareness and credibility among all types of consumers—women and men, consumers online and offline, the support-inclined and the self-help-inclined. We believe that our program conveys an image of healthy, livable, sustainable and effective weight management in a supportive environment. The efficacy of our commercial weight management programs has been clinically proven in numerous studies and trials. As the number of overweight and obese people worldwide grows, the need for an effective, scalable and consumer-friendly weight management program increases. We believe our global presence and brand awareness uniquely position us in the global weight management market, and thereby provide us a unique platform to impact the wellness market. We have built our business by helping millions of people around the world lose weight through a sensible, sustainable and livable approach to food, activity and mindset. We believe we are the leading global provider of paid digital subscription weight management products. As of the end of fiscal 2021, we had a total of approximately 4.2 million subscribers, of which approximately 3.4 million were Digital subscribers and approximately 0.7 million were Workshops + Digital subscribers. Our strong brands, together with the effectiveness of our program, loyal customer base, strong digital offerings and unparalleled network of workshops and coaches, enable us to attract new and returning customers. Business Organization and Global Operations We have four reportable segments based on an integrated geographical structure as follows: North America, Continental Europe (CE), United Kingdom and Other. Each reportable segment provides similar services and products. We operate in numerous countries around the world. Our “North America” reportable segment consists of our United States and Canada Company-owned operations; our “Continental Europe” reportable segment consists of our Germany, Switzerland, France, Belgium, Netherlands and Sweden Company-owned operations; our “United Kingdom” reportable segment consists of our United Kingdom Company-owned operations; and our “Other” reportable segment consists of our Australia, New Zealand, and Brazil Company-owned operations, as well as revenues and costs from our franchises in the United States and certain other countries. 1 Our Services and Products Our Program and Food Plans We offer services and products that are based on our new, personalized, weight management and wellness program, known as PersonalPoints. The program is founded on a holistic approach for the body and mind. It provides a personalized path towards a healthier, more active, more fulfilling life with an individualized food plan and the flexibility to make healthy lifestyle choices based on the member’s preferences. The program is comprised of a range of science-based nutritional, activity, behavioral and lifestyle tools and approaches that members can select to support their unique journey, based on the understanding that everyone’s needs and eating patterns are different. It delivers targeted content and experiences, powered by our smart personalization platform that understands and acts on the needs of members. Our new program brings together three innovations: (i) a personalized list of ZeroPoint foods (which do not need to be weighed, measured, or tracked and form the foundation of a healthy eating pattern), (ii) an updated proprietary nutritional algorithm that assigns each food a value based on the food’s calorie, saturated fat, unsaturated fat, added sugar, protein and fiber content and (iii) the ability to add Points for healthy behaviors, such as exercising and reaching a daily water goal. There is no one way to follow the program. An individualized food plan and activity target, based on a proprietary, personal assessment which takes into account a member’s food and activity preferences, is developed for each member and grounded in our scientific Points system. A member is given a unique daily and weekly budget to stay within to guide them towards healthy foods and activity. Our new program also takes into account the dietary needs of those living with diabetes by tailoring their plans towards foods that are less likely to impact blood sugar levels. Prior to the new program’s launch in November 2021, we offered a program known as myWW+ in the majority of our markets, which launched in November 2020. In addition to focusing on healthy eating habits and activity, and in furtherance of our mission to focus on overall health and wellness, our program also addresses other aspects of a healthy and fulfilled life, such as mindset, sleep, community and hydration. We carefully select partners in the wellness and activity spaces who offer services that can aid our members. For example, members can typically access meditation and/or mindfulness content to assist them in developing and maintaining a helpful mindset on their wellness journeys. They also typically are able to access a variety of guided workouts ranging from low intensity stretching to cardio. WW’s Connect Groups, a part of our digital community, foster meaningful relationships that inspire healthy habits by helping people find communities based on food, identity, wellness journey, activity, mindset, hobbies, locations, events and workshops. Finally, to further inspire and reinforce healthy habits, WellnessWins, our rewards program, inspires members to build, and recognizes members for building, healthy habits. Members can earn “Wins” and redeem them for products and experiences. Our Subscription Businesses Our members mainly participate in our program either by solely using our digital products or by using our digital products supplemented by group workshops. Within these two channels, we offer a variety of services and products to meet each member’s preferences. Additionally, our wellness coaches educate members on our program and provide inspiration and support to members in developing healthy habits. The primary payment structure for our services globally is through subscription plans. Pursuant to these plans, a member typically commits to a minimum term and is automatically charged on a monthly basis until the member elects to cancel. 2 Digital Business In our Digital business, we offer digital subscription products based on the WW approach to wellness and weight management. These products provide interactive and personalized resources that allow users to follow our weight management program via our app and web-based products. They help subscribers adopt a healthier and more active lifestyle, a helpful mindset, and healthy habits, with a view toward long-term behavior modification — a key aspect of the WW approach toward healthy and sustainable weight loss. These products provide subscribers with content, functionality, access to coaches and resources and interactive weight management plans and wellness tools. We believe our personalized and interactive Digital subscription products give subscribers an engaging experience. Our Connect online community, which can be accessed via our app and our web-based platform, gives our subscribers a way to stay virtually connected and support and inspire each other. We continually innovate our Digital offerings, most recently updating the design, usability, features and capabilities of our app to support our new weight management and wellness program. We also expanded our Digital offerings by introducing Digital 360, a digitally-enabled, community-focused and coach-led membership plan in limited markets. This premium-priced Digital offering is designed to give members next-level support, motivation and accountability with expert coaches through live and on-demand exclusive content and events. As of the end of fiscal 2021, we had approximately 3.4 million Digital subscribers. Workshops + Digital Business In our Workshops + Digital business, we present our program in workshops of 30 to 45 minutes in duration, conveniently scheduled throughout the day. In March 2020, we introduced virtual workshops in immediate response to the impact of COVID-19, and we continue to innovate this offering to address the shift in consumer sentiment towards digitally-enabled offerings. For more information on the impact of COVID-19, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Material Trends—COVID-19 Pandemic” of this Annual Report on Form 10-K. Workshops + Digital members can attend unlimited workshops both virtually and, where available, in-person. Our face-to-face, interactive community remains the cornerstone of our workshops. Wellness coaches facilitate interactive workshops that encourage learning and inspire members to make positive changes towards their individual goals. Members provide each other inspiration and support by sharing their experiences with, and by providing encouragement and empathy to, other people on weight management and wellness journeys. In addition, our members have access to our digital tools to assist them on their journeys. As of the end of fiscal 2021, we had approximately 0.7 million Workshops + Digital subscribers. We have franchisees in a limited number of territories. In fiscal 2021, revenues from our franchisees were immaterial. Pursuant to long-standing agreements, we and our franchisees typically pay each other royalties and other fees. We have enjoyed a mutually beneficial relationship with our franchisees over many years. Most franchise agreements are perpetual and can be terminated only upon a material breach or bankruptcy of the franchisee. Our Consumer Product Sales We sell a range of consumer products, including WW-branded, co-branded, and curated products. These products complement our weight management program and help our customers in their weight management and wellness efforts. Our products are designed to be high quality and offer benefits related to the WW program. We primarily sell consumer products online through our e-commerce platforms, at our studios, and through our trusted partners. In fiscal 2021, sales of consumer products represented approximately 10.1% of our total revenues. We seek to optimize our product offerings by updating existing products, introducing new products and sharing best practices across geographies. Our WW-branded products include bars, snacks, cookbooks and kitchen tools. We also license our trademarks and other intellectual property in certain categories of food, beverages and other relevant consumer products and services. We also co-brand or endorse with carefully selected branded consumer products and services. By partnering with carefully selected companies in categories relevant and helpful to weight- and health-conscious consumers, we have a high margin licensing business that gives us access to these consumers and also increases the awareness of our brands. In connection with our acquisition from The Kraft Heinz Company (successor to H.J. Heinz Company), or Heinz, in September 1999, Heinz received a perpetual royalty-free license to continue using our brand in certain food categories. We believe that the strength of the WW brands will create new long-term licensing and partnership opportunities for us. 3 Health Solutions As healthcare costs continue to be a significant concern on the minds of employers and their employees, we believe that our broad range of services and products uniquely positions us to serve the market and help employers reduce their healthcare costs and improve the overall well-being of their employees. Our strategy is focused on leveraging our organizational capability to serve employers, both directly and through aggregators, with both our Digital and Workshops + Digital offerings. We believe the healthcare market, including the diabetes segment, represents an important channel to reach new consumers. We continue to explore different approaches to, and strategies for, this market. Our Clinical Efficacy and Reputation in the Marketplace WW is one of the most clinically-studied commercial weight management programs, including by way of more than 130 published, scientific, peer reviewed clinical studies (including 35 randomized trials) over more than four decades. For example, in 2019, a randomized controlled trial conducted by research teams at the University of North Carolina - Chapel Hill, University of British Columbia, and University of Leeds and funded by us found that study participants assigned to WW for 12 months had over two times more weight loss compared to participants who were assigned to a do-it-yourself weight loss approach. In 2017, a randomized controlled trial conducted by research teams at the University of Cambridge, the University of Liverpool and the University of Oxford and partially funded by us was published in The Lancet and found that adults with obesity referred to WW for one year lost significantly more weight and were able to keep it off for longer compared to those who either received brief advice and self-help materials, or who were referred to a 12-week WW program. In addition, compared to adults receiving brief advice and self-help, adults who followed either the 12- or 52-week WW program achieved greater reductions in body fat; those who followed 52 weeks of WW also achieved greater blood sugar control. Research has shown that WW has impact that reaches beyond our members. In 2018, a 6-month randomized controlled trial conducted by researchers at the University of Connecticut funded by us and published in Obesity showed a “ripple effect” of WW – significant weight loss among untreated spouses of WW members. In 2021, a six-month clinical trial of our new program conducted by the University of Connecticut and funded by us found that participants on the program experienced clinically significant benefits, including weight loss. Study participants reported a 40% increase in their healthy habits as well as a 15% decrease in hunger. WW also has demonstrated efficacy among individuals with diabetes and prediabetes. In 2016, a randomized controlled trial conducted by the Indiana University School of Medicine and funded by us was published in the American Journal of Public Health and found that adults with prediabetes following our Diabetes Prevention Program, or DPP, lost significantly more weight and experienced better blood sugar control than those following a self-initiated diabetes prevention program using supplemental counseling materials. A continuation study published in 2018 showed that these outcomes were maintained at 18 and 24 months and that our DPP was highly cost- effective. Another randomized controlled trial conducted by the Medical University of South Carolina, funded by us and published in Obesity in 2016, found that adults with Type 2 diabetes who followed our diabetes program lost significantly more weight and experienced better blood sugar control than those in a standard diabetes care program. In 2021, a clinical trial conducted at Pennington Biomedical Research Center, University of Florida and Virginia Commonwealth University and funded by us found that the WW program, modified for adults with Type 2 diabetes, had favorable and clinically meaningful effects on glycemic control, body weight and diabetes distress at 12 and 24 weeks. In 2020, a review published in Endocrinology and Metabolism Clinics of North America highlighted the potential for physicians to refer patients with obesity to commercial weight loss programs. It noted that WW is one of only four commercial weight loss programs meeting guideline-recommended standards with demonstrated safety and efficacy at 12 months and one of only two commercial weight loss programs with demonstrated effects on reducing HbA1c levels in participants with Type 2 diabetes. Authors of the review concluded physicians might consider referral to WW for patients with obesity and those with obesity and Type 2 diabetes. Our efficacy and the value of our offerings are also well-acknowledged in the marketplace. For instance, in 2022, we again were recognized by U.S. News & World Report in the “Best Diets” rankings, including tying for #1 for “Best Weight-Loss Diets” for the twelfth consecutive year and #1 for “Best Diet Programs.” 4 Marketing and Promotion Our communications with consumers and other promotional efforts enhance our brand image and awareness, and motivate both former and potential new customers to join WW. We utilize a data-driven approach to our media placements, promotional offers, and website and app store presence to enhance marketing efficiency, drive conversion, and maximize subscription value. Our advertising campaigns are supported across multiple platforms (e.g., television, YouTube, social media, programmatic, audio, search, affiliate, branded content, electronic customer relationship marketing (eCRM), direct mail, and public relations). We develop and maintain a high level of engagement with current and potential customers on various social media platforms including Facebook, Instagram and TikTok. Also, we utilize brand ambassadors, spokespersons and social media influencers, including celebrities, as part of our advertising and marketing. In addition to the above advertising channels, we take advantage of other channels for which we are uniquely positioned given our long history and network of WW coaches and members. The word of mouth generated by our current and former members, combined with our strong brand and known effectiveness, enable us to attract new and returning members. We also carry out many of our key public relations initiatives through the efforts of current and former WW coaches and members, and celebrity brand ambassadors. In October 2015, we entered into a Strategic Collaboration Agreement with Oprah Winfrey, pursuant to which, among other things, Ms. Winfrey provides us with services in her discretion to promote the Company and our programs, products and services, including in advertisements and promotions, and making personal appearances on our behalf. For example, in fiscal 2020, as part of our collaboration with Ms. Winfrey, in addition to appearing in our advertising campaign in the United States and other select markets, she embarked on a wellness-focused, national arena tour called WW Presents: Oprahs 2020 Vision: Your Life in Focus, and hosted Oprah's Your Life in Focus: A Vision Forward, a live, free, interactive, four-week wellness-focused virtual experience. In fiscal 2021, in addition to being featured in our U.S. winter advertising campaign, Ms. Winfrey hosted a live, free, interactive virtual series inspired by her 2020 arena tour and virtual experience. Further information on this agreement and our partnership with Ms. Winfrey can be found below under “—History—Winfrey Transaction.” Seasonality 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 (as defined below) 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. Competition We compete in the global weight management and wellness market. The weight management and wellness industries include commercial weight management programs; weight loss and wellness apps; surgical procedures; the pharmaceutical industry; the genetics and biotechnology industry; self-help weight management regimens and other self-help weight management products, services and publications, such as books, magazines, websites, and social media influencers and groups; dietary supplements and meal replacement products; healthy living services, coaching, products, content and publications; weight management services administered by doctors, nutritionists and dieticians; government agencies and non-profit groups that offer weight management services; fitness centers; and national drug store chains. Competition among commercial weight management programs is largely based on program recognition and reputation; the effectiveness, safety, personalization and price of the program; and the related digital platform, content and user experience. We compete with several other companies in the commercial weight management industry, although we believe that in certain cases their businesses are not comparable to ours. For example, we believe our prominence as one of the most clinically-studied commercial weight management programs differentiates us from many of our competitors. Additionally, certain of these competitors’ businesses are based on the sale of pre-packaged meals and meal replacements. In conjunction with a flexible, customized food plan that allows customers the freedom to choose what they eat based on their personal preferences, we believe that the power of our communities -- via our Connect platform, workshops and Digital 360 offering -- increases accountability and provides our members with inspiration, human connection, and support, which motivates them and enables them to build healthier and more fulfilling food, activity and lifestyle habits. 5 We believe that food manufacturers that produce meal replacement products are not comparable competition because these businesses’ meal replacement products do not engender behavior modification through education in conjunction with a flexible, customized healthy food plan. We also compete with various self-help diets, products, services and publications, such as apps, activity monitors and other free or low-cost alternatives. Trademarks, Patents and Other Proprietary Rights We own numerous domestic and international trademarks, patents, domain names and other proprietary rights that are valuable assets and are important to our business. Depending upon the jurisdiction, trademarks are valid as long as they are used in the regular course of trade and/or their registrations are properly maintained. Patent protection extends for varying periods according to the date of patent filing or grant and the legal term of patents in the jurisdiction in which the patent is granted. The actual protection afforded by a patent may vary from country to country depending upon the type of patent, the scope of its coverage and the availability of legal remedies in the country. We believe the protection of our trademarks, copyrights, patents, domain names, trade dress and trade secrets is important to our success. We aggressively protect our intellectual property rights by relying on a combination of trademark, copyright, patent, trade dress, trade secret and other intellectual property laws, and through domain name dispute resolution systems. History Early Development In 1961, Jean Nidetch, our founder, attended a New York City obesity clinic and took what she learned from her personal experience at the obesity clinic and began weight-loss meetings with a group of her overweight friends in the basement of a New York apartment building. Under Ms. Nidetch’s leadership, the group members supported each other in their weight-loss efforts, and word of the group’s success quickly spread. Ms. Nidetch and Al and Felice Lippert, who all successfully lost weight through these efforts, formally launched our business in 1963. WW International, Inc. (formerly known as Weight Watchers International, Inc.) was incorporated as a Virginia corporation in 1974 and succeeded to the business started in New York in 1963. Heinz acquired us in 1978. Artal Ownership In September 1999, Artal Luxembourg S.A., or Artal Luxembourg, acquired us from Heinz. Artal Luxembourg is an indirect subsidiary of Artal Group S.A., or Artal Group, which together with its parents and its subsidiaries is referred to in this Annual Report on Form 10-K as Artal. Currently, Artal Luxembourg is the record holder of all our shares owned by Artal. As a result of Artal selling a portion of its shares of our common stock in fiscal 2018, we are no longer a “controlled company” under the rules of The Nasdaq Global Select Market, or Nasdaq. Winfrey Transaction On October 18, 2015, we entered into a Strategic Collaboration Agreement with Ms. Winfrey, or, as amended, the Strategic Collaboration Agreement, pursuant to which Ms. Winfrey granted us the right to use, subject to her approval, her name, image, likeness and endorsement for and in connection with the Company and its programs, products and services (including in advertising, promotion, materials and content), and we granted Ms. Winfrey the right to use our trademarks and service marks to collaborate with and promote the Company and its programs, products and services. The Strategic Collaboration Agreement had an initial term of five years, or the Initial Term, with additional successive one year renewal terms. On December 15, 2019, we entered into an amendment of the Strategic Collaboration Agreement, or the Strategic Collaboration Amendment, with Ms. Winfrey, pursuant to which, among other things, the Initial Term was extended until April 17, 2023 (with no additional successive renewal terms) after which a second term will commence and continue through the earlier of the date of the Company’s 2025 annual meeting of shareholders or May 31, 2025, or the Second Term and together with the Initial Term, the Strategic Term. During the remainder of the Initial Term, Ms. Winfrey will consult with us and participate in developing, planning, executing and enhancing the WW program and related initiatives, and provide us with services in her discretion to promote the Company and its programs, products and services, including in advertisements and promotions, and making personal appearances on our behalf. Subsequently, during the Second Term, Ms. Winfrey and the Company will collaborate with each other towards the mutual objective of advancing and promoting the WW programs and the Company, and in connection therewith, Ms. Winfrey will consult with the 6 Company and participate in developing, planning, executing and enhancing the WW programs and related initiatives. In connection therewith, Ms. Winfrey will make available to the Company her knowledge, expertise, and abilities in the areas of corporate management, consumer insights, advertising and marketing, consumer motivation, and community activation and consult and participate in the design and planning of creative strategy and the related execution of the consumer experience in connection with the WW programs. In addition, throughout the Second Term, except as otherwise prohibited by applicable law, the Company will cause Ms. Winfrey to be nominated as a director of the Company. Ms. Winfrey will not grant anyone but the Company the right to use her name, image, likeness or endorsement for or in connection with any other weight loss or weight management programs during the Strategic Term, and she will not engage in any other weight loss or weight management business, program, products, or services during the Strategic Term and for one year thereafter. The Strategic Collaboration Amendment became operative on May 6, 2020 when our shareholders approved the Winfrey Amendment Option (as defined below). On October 18, 2015, we also entered into a Share Purchase Agreement with Ms. Winfrey, or, as amended, the Winfrey Purchase Agreement, pursuant to which we issued and sold to Ms. Winfrey an aggregate of 6,362,103 shares of our common stock for an aggregate cash purchase price of $43,198,679. The purchased shares are subject to a right of first offer and right of first refusal held by the Company. Under the Winfrey Purchase Agreement, Ms. Winfrey has certain demand registration rights and piggyback rights with respect to these purchased shares. On December 15, 2019, the Company entered into an amendment to the Winfrey Purchase Agreement with Ms. Winfrey. Initially, the Winfrey Purchase Agreement provided Ms. Winfrey with the right to be nominated as a director of the Company for so long as she and certain permitted transferees own at least 3% of our issued and outstanding common stock. The amendment to the Winfrey Purchase Agreement provides Ms. Winfrey with the right to be nominated as a director of the Company through and until January 1, 2023. Ms. Winfrey will not be required to resign as a director at such time. The amendment to the Winfrey Purchase Agreement became operative on May 6, 2020 when our shareholders approved the Winfrey Amendment Option. In consideration of Ms. Winfrey entering into the Strategic Collaboration Agreement and the performance of her obligations thereunder, on October 18, 2015, we granted Ms. Winfrey a fully vested option to purchase 3,513,468 shares of our common stock, or the Winfrey Option. The term sheet for the Winfrey Option, which includes the terms and conditions appended thereto, relating to the grant of the Winfrey Option is referred to herein as the Winfrey Option Agreement. The Winfrey Option is exercisable at a price of $6.97 per share, in whole or in part, at any time prior to October 18, 2025, subject to earlier termination under certain circumstances, including if (i) the Strategic Collaboration Agreement expires as a result of Ms. Winfrey’s decision not to renew the term of such agreement and (ii) a change in control (as defined in the Winfrey Option Agreement) of the Company occurs. The shares issuable upon exercise of the Winfrey Option are subject to a right of first offer and right of first refusal held by the Company. In consideration of Ms. Winfrey entering into the Strategic Collaboration Amendment and the performance of her obligations thereunder, on December 15, 2019, the Company and Ms. Winfrey entered into a term sheet relating to the grant of a fully vested option to purchase 3,276,484 shares of our common stock, or the Winfrey Amendment Option. The term sheet for the Winfrey Amendment Option, which includes the terms and conditions appended thereto, is referred to herein as the Winfrey Amendment Option Agreement. Upon our shareholders approving the Winfrey Amendment Option on May 6, 2020, it became exercisable at a price of $38.84 per share, in whole or in part, at any time prior to November 30, 2025, subject to earlier termination under certain circumstances, including if a change in control (as defined in the Winfrey Amendment Option Agreement) of the Company occurs. The shares issuable upon exercise of the Winfrey Amendment Option are subject to certain transfer restrictions and a right of first offer and right of first refusal held by the Company. In fiscal 2020, as permitted under the Winfrey Purchase Agreement and the Winfrey Option Agreement transfer provisions, Ms. Winfrey sold 2,782,476 of the purchased shares discussed above and exercised a portion of the Winfrey Option resulting in the sale of 1,118,036 shares issuable under such option, respectively. Similarly, in fiscal 2021, Ms. Winfrey sold 1,541,564 of the purchased shares discussed above and exercised a portion of the Winfrey Option resulting in the sale of 581,348 shares issuable under such option. The transactions contemplated by the Strategic Collaboration Agreement, Winfrey Purchase Agreement, Winfrey Option Agreement and Winfrey Amendment Option Agreement are collectively referred to herein as the Winfrey Transaction. For additional information on risks arising from a potential loss of Ms. Winfrey’s services or a change in the nature of our partnership with her, please see “Item 1A. Risk Factors—Loss of key personnel, strategic partners or consultants or failure to effectively manage and motivate our workforce could negatively impact our sales of services and products, business, financial condition and results of operations.” of this Annual Report on Form 10-K. 7 Regulation A number of laws and regulations govern our advertising and marketing, services, products, operations and relations with consumers, licensees, franchisees, coaches, guides, employees and government authorities in the countries in which we operate. Certain federal, state and foreign agencies, such as the U.S. Federal Trade Commission, or FTC, and the U.S. Food and Drug Administration, or FDA, regulate and enforce such laws and regulations relating to advertising and marketing, promotions, packaging, labeling, privacy, consumer pricing and billing arrangements and other consumer protection matters. We are subject to many distinct employment, labor, commercial, benefits and tax laws and regulations in each country in which we operate, including regulations affecting our employment and wage and hour practices and our relations with our coaches, guides and employees. Laws and regulations directly applicable to data protection and communications, operations or commerce over the Internet, such as those governing consumer protection, intellectual property, privacy and taxation, continue to evolve. Our operations are subject to these laws and regulations and we continue to monitor their development and our compliance. In addition, we are subject to other laws and regulations in the United States and internationally. During the mid-1990s, the FTC filed complaints against a number of commercial weight management providers alleging violations of federal law in connection with the use of advertisements that featured testimonials, claims for program success and program costs. In 1997, we entered into a consent order with the FTC settling all contested issues raised in the complaint filed against us. The consent order required us to comply with certain procedures and disclosures in connection with our advertisements of services and products and expired by its terms in 2017. From time to time, we have been in discussions with the FTC regarding such matters. Subsequent to our 2018 acquisition of Kurbo Health, Inc., or Kurbo, we have been in discussions with the FTC regarding online privacy obligations associated with that program. In February 2022, the FTC filed a complaint and proposed settlement order to resolve allegations that Kurbo violated the Children’s Online Privacy Protection Act. For additional information, see Note 16 of our audited consolidated financial statements, contained in Part IV, Item 15 of this Annual Report on Form 10-K. Human Capital Management At WW our core mission is to inspire healthy habits for real life - for people, families, communities and the world. We believe that our workforce plays an integral role in achieving our mission. As of December 31, 2021, we had approximately 7,700 employees, a majority of whom were part-time employees. In addition, in certain of our international markets, our coaches and guides are self-employed and are not included in this total. Diversity and Inclusion We believe that a diverse and inclusive workforce helps us to explore and realize the many different paths to health and wellness for our members, which leads to better execution of our strategic initiatives. For example, over 50% of the members of our Executive Committee, including our Chief Executive Officer and our Chief Financial Officer, are women. To further our commitment to create an inclusive and diverse culture, we have a Head of Inclusion & Diversity who reports directly to our Chief People Officer. Additionally, we offer forums and formal training programs for our employees to enable them to continue their education and share best practices and experiences, which creates an ongoing evolution and community with respect to diversity and inclusion and belonging in the workplace. Training and Development We develop our personnel by offering in-house learning and development resources. These include online and in-person training programs on a variety of topics in order to foster career growth both long term and short term. For example, we offer leadership training to help ensure our future business leaders have the necessary skill sets to manage and lead our organization. Wellness, Health and Safety We are focused on promoting the total wellness of our employees, and offer resources, programs and services to support our employees’ physical, mental, financial and social wellness. For example, employees receive an annual wellness allowance, offering a flexible and personalized way to support their wellness goals. 8 As a wellness company, we believe that flexibility is important in creating a work environment that supports our employees’ wellbeing, while still maintaining our commitment to our members. We have introduced a flexible work model, called Work from Wherever (WfW), designed to enhance productivity and foster innovation by allowing our corporate employees as much flexibility as possible to determine when, where and how they work to achieve the best possible results. To facilitate this flexibility and promote virtual collaboration, we offer forums and formal training programs for our employees to provide them with the tools and skills to be successful in this new virtual workplace. We believe this approach strikes an appropriate balance between our purpose-driven culture of helping our members develop healthy habits while respecting the wellness, health and safety of our employees. As always, protecting the privacy and security of our data is one of our top priorities, and we have adopted an advanced industry standard Zero-Trust software-defined network, coupled with multi-factor authentication, to secure our environment from unauthorized access. Since the rollout of WfW, our employees have overwhelmingly indicated that WfW positively contributes to their engagement and gives WW a competitive advantage in the external talent market. Total Rewards We provide competitive compensation and benefits programs for our employees. In addition to salaries, these programs (which vary by employee level and by the country where the employees are located) include, among other items, bonuses, stock awards, retirement benefits including 401(k) (or local market equivalent) and profit-sharing plan or participation in a non-qualified deferred compensation plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, paid parental leave, advocacy resources, flexible work schedules and employee assistance programs. Available Information 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) 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. Our Amended and Restated Code of Business Conduct and Ethics, or the Code of Business Conduct and Ethics, and our Corporate Governance Guidelines as amended are also available on our corporate website at corporate.ww.com. 9 CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS Except for historical information contained herein, this Annual Report on Form 10-K includes “forward- looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, 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 under the headings “Business” and “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 Annual Report on Form 10-K and the documents incorporated by reference herein 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; 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 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 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 recognition of asset impairment charges; the loss of key personnel, strategic partners or consultants or failure to effectively manage and motivate our workforce; 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 expiration or early termination by us of leases; uncertainties related to a downturn in general economic conditions or consumer confidence; 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 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; 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; 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; 10 • • • • • • • 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; the outcomes of litigation or regulatory actions; the impact of existing and future laws and regulations; the possibility that the interests of 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 SEC. You should not put undue reliance on any forward-looking statements. You should understand that many important factors, including those discussed under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” 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 Annual Report on Form 10-K or to reflect the occurrence of unanticipated events or otherwise. 11 Item 1A. Risk Factors You should consider carefully, in addition to the other information contained in this Annual Report on Form 10-K and the exhibits hereto, the following risk factors in evaluating our business. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. The following discussion of risks is not all inclusive but is designed to highlight what we believe are the most significant risks that we face. Additional risks and uncertainties, not presently known to us or that we currently deem immaterial, may also have a material adverse effect on our business, financial condition or results of operations. Risks Related to Our Business and Operations The ongoing global outbreak of the COVID-19 virus is adversely impacting, and will continue to adversely impact, our business and may adversely impact our liquidity. The ongoing global outbreak of the coronavirus (including its variants, COVID-19) has had and will continue to have a significant adverse impact on our business as well as on the business environment and the markets in which we operate. This global health crisis has also had a significant adverse effect on overall economic conditions and the consumer environment, and we expect consumer demand to continue to be negatively impacted due to changes in consumer sentiment towards our products and services, behavior and confidence and health concerns. The situation remains dynamic and subject to rapid and possibly significant change. New developments, including 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, may negatively impact our business. This dynamic situation is driving uncertainty at the macroeconomic, local and consumer levels. While we continue to actively monitor the ongoing COVID-19 pandemic, the full extent of the magnitude and duration of its negative impact to our business cannot be predicted with certainty. We have taken steps to address the risks and impact of the COVID-19 pandemic, but we have experienced significant disruption to our business and seen significant shifts in consumer sentiment with respect to the weight loss and wellness marketplace as the pandemic evolves. While Digital recruitments were strong in the beginning of the COVID-19 pandemic, a subsequent turn in consumer sentiment has driven a decline in Digital recruitments, and recruitment projections for our Digital business are unpredictable. Our Workshops + Digital recruitments were dramatically impacted during the first year of the pandemic, and mix shifted toward our Digital business. This change in our mix, especially when amplified by the nature of our subscription business, has negatively impacted revenue and may continue to impact it in the future. While the number of End of Period Subscribers at the end of fiscal 2021 was essentially flat compared to the pre-pandemic number at the end of fiscal 2019, it decreased 5.8% versus the end of fiscal 2020. Over the longer term, it remains uncertain how the COVID-19 pandemic will impact consumer sentiment for our products and services and consumer preferences and behavior generally. Our member retention in both our Digital and Workshops + Digital businesses may also be significantly negatively impacted by the pandemic. Following the suspension of our in-person workshops in March 2020, we rapidly transitioned these workshops to an entirely virtual experience. In June 2020, we began a phased re-opening with reduced operations of a limited number of our studio locations. During fiscal 2021, we selectively resumed in-person workshops where profitable and consistent with promoting the health and safety of our employees and members. However, we had to close some of these studios which were re-opened in response to shifting requirements in local jurisdictions as new variants emerged and COVID-19 cases surged. During these uncertain times, we will continue to adhere to the requirements in local jurisdictions to close re-opened studios as necessary. We continue to evolve our workshop strategy as we evaluate our cost structure and respond to shifting consumer sentiments, and accordingly we may need to further reduce operations. We continue to offer virtual workshops, which may not be successful in meeting the needs or preferences of many of our members, employees and the communities in which we operate. This may result in further decreases in our recruitment as well as a significant decrease in our retention of members. Our reduced studio operations have and will continue to adversely impact our in-studio product sales. The decision to resume in- person workshops or close certain workshops has been and will continue to be influenced by a number of factors, including applicable legal restrictions, consumer confidence, sentiment and preferences, cost efficiencies, our evolving workshop strategies and the protection of the health and safety of our employees and members. 12 Changes in consumer sentiment and behavior, including willingness to meet in groups, prioritization of discretionary spending, and health concerns, may impact consumer demand for our products and services and recruitment and retention of members in our Digital and Workshops + Digital businesses. We may also find it more difficult to staff our business operations. The perceived risk of infection or health risk may adversely affect attendance at our workshops. These risks may also adversely affect our business, liquidity, financial condition and results of operations, particularly if any self-imposed or government-imposed restrictions are in place for a significant amount of time or repeatedly reinstated. As part of our focus on best meeting our members’ and consumers’ needs, we consolidated certain of our studios and continue to close certain other branded studio locations. As a result, we have incurred, and we expect to continue to incur, significant costs associated with our real estate realignment. The decision to re-open a studio location, if at all, or further consolidate studio locations, will be 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 will be dependent on cost efficiencies and alignment with our digital and brand strategy. We may not be able to successfully control our studio environments and realize the intended business advantages of maintaining a select group of studio locations, which could adversely affect our Workshops + Digital business and results of operations. Our business depends on a number of third parties including vendors, landlords, lenders, marketing partners, third-party technology providers, and supply chain partners. COVID-19 may have a material adverse impact on these parties and their ability to meet their obligations to us. Any such failure by our third-party partners could negatively impact our ability to provide our products and services to customers. One or more of these third parties may experience financial distress, increased supply or other operational costs, staffing shortages or liquidity challenges, file for bankruptcy protection, go out of business, or suffer disruptions in their business due to the COVID-19 outbreak. For example, the failure of any third-party technology provider to provide continuous and uninterrupted service could result in disruptions in our websites, services and products or network systems. The negative impact of COVID-19 on these third-party partners may result in increased costs of doing business with them which may have a negative impact on our business or results of operations. The full extent of the impact of COVID-19 on these third-party partners continues to evolve and is uncertain. If a significant percentage of our workforce, or the workforces of our third-party partners (and their suppliers), is unable to work, whether because of illness, quarantine, limitations on travel or other government restrictions in connection with COVID-19, our operations may be negatively impacted by labor shortages and supply chain disruptions, among other things. Additionally, the cost of our workforce may increase as we seek to staff in the challenging labor environment. We also depend on senior management and other key personnel and consultants, and the illness of certain personnel or consultants could result in the loss of expertise and negatively affect our operations, brand image and goodwill. The widespread health crisis also could adversely affect the economies and financial markets of countries in which we operate, resulting in an economic downturn, including rising inflation, that could affect consumer demand for our products and services. Our customer purchasing patterns can be influenced by economic factors. The precise impact, and extent thereof, on our business from the disruption of financial markets and the weakening of overall economic conditions cannot be predicted with certainty. Uncertainties regarding the economic impact of COVID-19 have resulted in, and are likely to continue to result in, sustained impact on the economy. Our business is particularly sensitive to reductions in discretionary consumer spending, which may be adversely impacted by a recession or fears of a recession, volatility and declines in the stock market and increasingly pessimistic consumer sentiment due to perceived or actual economic and/or health risks. Consumers may shift purchases to lower-priced or other perceived value offerings during economic downturns. Prolonged unfavorable economic conditions, including as a result of COVID-19, and any resulting recession or slowed economic growth, may have an adverse effect on our financial condition and results of operations. While we have been able to sufficiently address our liquidity needs during the COVID pandemic, the evolving and uncertain economic impact of COVID-19 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 access our New Revolving Credit Facility, may be adversely affected. 13 If we are unable to generate sufficient cash or to access liquidity at the time and on terms we may require, we may encounter difficulty funding our business requirements including debt repayments when due. We may not be able to access liquidity, including our New Revolving Credit Facility, or the terms and conditions of available credit may be substantially more expensive than previously expected due to changes in our operating results and general financial conditions and credit markets. We may require waivers or amendments to our existing long-term debt and these requirements may trigger pricing increases from lenders for available credit. Reductions in our liquidity position and the need to use capital for other day to day requirements of our business may affect a number of our business initiatives and long-term investments and as a result we may be required to curtail and/or postpone business investments as well as other initiatives that require capital investment. Due to the negative COVID-19 environment and the uncertainty of the magnitude and duration of its impact on our business and the economies and financial markets in which we operate, we have previously implemented a number of measures impacting our workforce, including temporary compensation reductions for certain employees, restructurings, and temporary closures of office facilities, and we may need to do so again in the future. These actions, and any actions required in the future, may materially affect our ability to recruit or retain talent. The COVID-19 pandemic (including governmental responses, shifting consumer sentiment and behavior, broad economic impacts and market disruptions) has heightened the risks related to the other risk factors described herein. Competition from other weight management and wellness industry participants or the development of more effective or more favorably perceived weight management methods could result in decreased demand for our services and products. The weight management and wellness marketplace is highly competitive. We compete against a wide range of providers of weight management services and products. Our competitors include: commercial weight management programs; weight loss and wellness apps; surgical procedures; the pharmaceutical industry; the genetics and biotechnology industry; self-help weight management regimens and other self-help weight management products, services and publications, such as books, magazines, websites, and social media influencers and groups; dietary supplements and meal replacement products; healthy living services, coaching, products, content and publications; weight management services administered by doctors, nutritionists and dieticians; government agencies and non- profit groups that offer weight management services; fitness centers; and national drug store chains. As we or others develop new or different weight management services, products, methods or technologies, additional competitors may emerge. Furthermore, existing competitors may enter new markets or expand their offerings or advertising and marketing programs, and future competitors may do the same. More effective or more favorably perceived diet and weight and healthy living management methods, including pharmaceutical treatments, fat and sugar substitutes or other technological and scientific advancements in weight management methods, also may be developed. This competition may reduce demand for our services and products. The purchasing decisions of weight management and healthy living consumers are highly subjective and can be influenced by many factors, such as brand image or reputation, marketing programs, cost, social media presence and sentiment, consumer trends, personalization, the digital platform, content and user experience, and perception of the efficacy of the service and product offerings. Moreover, consumers can, and frequently do, change approaches easily and at little cost. For example, fad diets and weight loss trends, such as low-carbohydrate diets, have adversely affected our revenues from time to time. Also, our revenue has been and may continue to be adversely affected by the popularity of apps, activity monitors and other free or low-cost alternatives. Any decrease in demand for our services and products may adversely affect our business, financial condition or results of operations. A failure to continue to retain and grow our subscriber base could adversely affect our results of operations and business. Subscriptions to our businesses generate the predominant portion of our revenue, and our future growth depends upon our ability to retain and grow our subscriber base and audience. To do so will require us to continue to evolve our subscription model, user experience and digital platforms; address changing consumer demands and developments in technology; and improve our services and products while continuing to provide our members with guidance, compelling content, personalization and an inspiring community to enable them to develop healthy habits. We have invested and will continue to invest significant resources in these efforts, but there is no assurance that we will be able to successfully maintain and increase our subscriber base or that we will be able to do so without taking steps such as reducing pricing or incurring subscription acquisition costs that would affect our subscription revenues, margin and/or profitability. 14 If we do not continue to develop new, innovative services and products or if our services, products or brands do not continue to appeal to the market, or if we are unable to successfully expand into new channels of distribution or respond to consumer trends or sentiment, our business may suffer. The weight management and wellness marketplace is subject to changing consumer demands and sentiment based, in large part, on the efficacy and popular appeal of weight management and healthy living programs. The popularity of weight management and healthy living programs is dependent, in part, on their ease of use, cost and channels of distribution as well as consumer trends or sentiment. For example, consumers are increasingly focusing on more integrated lifestyle and fitness approaches and may associate our program with just food, nutrition and diet, which could adversely impact its popularity. Additionally, developments in public opinion on the types of products and services we provide could negatively impact the popular appeal of our services and products. Our future success depends on our ability to continue to develop and market new, innovative services and products and to enhance our existing services and products, each on a timely basis, to respond to new and evolving consumer demands and sentiment, achieve market acceptance and keep pace with new nutritional, weight management, healthy living, technological and other developments. We may not be successful in developing, introducing on a timely basis or marketing any new or enhanced services and products. Additionally, new or enhanced services or products may not appeal to the market or the market’s perception of us. As we announce new articulations of our brands, such as our evolution from Weight Watchers to WW in 2018, and we adopt new trademarks, the marketplace may not embrace or accept them and it may take time to build their reputation and goodwill, both with consumers and with our partners. Our future success also will depend, in part, on our ability to successfully distribute our services and products through appealing channels of distribution, such as social media. Our failure to develop new, innovative services and products and to enhance our existing services and products, the failure of our services, products or brands to continue to appeal to the market or respond to consumer trends or sentiment, or the failure to expand into appealing new channels of distribution could have an adverse impact on our ability to attract and retain members and subscribers and thus adversely affect our business, financial condition or results of operations. We may not be able to successfully implement our strategic initiatives, which could adversely impact our business, financial conditions or results of operations. We are continually evaluating the changing consumer environment and the competitive environment of the weight management and healthy living marketplace and seeking out opportunities to improve our performance through the implementation of selected strategic initiatives. The goal of these efforts is to develop and implement a comprehensive and competitive business strategy that addresses those changes. Over the past several years, we have increased our focus on overall health and wellness. We may not be able to successfully implement our strategic initiatives and realize the intended business opportunities, growth prospects, including new business channels, and competitive advantages. Our efforts to capitalize on business opportunities may not bring the intended results. Assumptions underlying expected financial results or consumer demand and receptivity may not be met or economic or consumer conditions may deteriorate. We also may be unable to attract and retain highly qualified and skilled personnel, or engage with partners of choice, to implement our strategic initiatives. If these or other factors limit our ability to successfully execute our strategic initiatives, our business activities, financial condition or results of operations may be adversely affected. We continually innovate our digital offerings and experiences for our members. For example, in November 2021, we launched our new weight management and wellness program, with corresponding design, usability, features and capabilities updates to our app. In December 2020, we expanded our offerings and introduced Digital 360, a digitally-enabled, community-focused and coach-led membership plan. Such new offerings may not have the same success, or gain traction as quickly, as our past offerings. This increased focus on more personalized and digitally-enabled offerings may not be successful in meeting the needs or preferences of many of our current or potential members. As a result, we may experience decreases in our recruitment and retention of members, or increased member cancellations. We may not be able to successfully launch our new virtual or other digital offerings and realize the intended business opportunities, growth prospects, including new business channels, and competitive advantages of our digital strategy. Assumptions underlying expected financial results or consumer demand and receptivity may not be met or economic or consumer conditions may deteriorate, including as a result of the impact of COVID-19, and may adversely impact our ability to continue to successfully implement this digital strategy. If these or other factors limit our ability to successfully execute this strategic initiative, our business, financial conditions or results of operations may be adversely impacted. 15 Our business depends on the effectiveness and efficiency of our advertising and marketing programs across multiple platforms, including the strength of our social media presence, to attract and retain members and subscribers. Our business success depends on our ability to attract and retain members and subscribers. Our ability to attract and retain members and subscribers depends significantly on the effectiveness and efficiency of our advertising and marketing practices across multiple platforms. For example, if our advertising and marketing programs are not effective and fail to attract sufficient recruitments during the first quarter of the fiscal year, our most important period for recruitments, it historically has had an outsized negative impact on our performance for the remainder of the year. Our competitors may create more compelling marketing campaigns, or may devote greater financial and other resources to marketing and advertising, which could drive our current and potential members and subscribers to our competitors. Additionally, our marketing initiatives may become increasingly expensive and generating a meaningful return on those initiatives may be difficult. In addition, from time-to-time, we use the success stories of our members and subscribers, and utilize brand ambassadors, spokespersons and social media influencers, including in some cases celebrities, in our advertising and marketing programs to communicate on a personal level with consumers. Actions taken by these individuals that harm their personal reputation or image, or include the cessation of using our services and products, could have an adverse impact on the advertising and marketing campaigns in which they are featured. We and our brand ambassadors, spokespersons and social media influencers also use social media channels as a means of communicating with consumers. Unauthorized or inappropriate use of these channels could result in harmful publicity or negative consumer experiences, which could have an adverse impact on the effectiveness of our marketing in these channels. In addition, substantial negative commentary by others on social media platforms could have an adverse impact on our reputation and ability to attract and retain members and subscribers. If our advertising and marketing campaigns do not generate a sufficient number of members and subscribers, or fail to develop a high level of engagement with current and potential members and subscribers on various platforms, our business, financial condition and results of operations will be adversely affected. Our reputation could be impaired due to actions taken by our franchisees, licensees, suppliers and other partners. We believe that our brands, including their widespread recognition and strong reputation and goodwill in the market, are one of our most valuable assets and they provide us with a competitive advantage. Our franchisees operate their businesses under our brands. We license our trademarks to third parties for the manufacture and sale in retail stores by such parties of a variety of goods, including food products, and also co-brand or endorse third-party branded consumer services and products. We also sell through a variety of channels, including online through our e- commerce platforms, at our studios, and through our trusted partners, food and non-food products manufactured by third-party suppliers. In addition, we integrate our services and products with those of other third parties, including through bundled and joint offerings, and integrate data from trusted third-party partners into our offerings. Our third- party partnerships also extend to event sponsorships and co-promotions. Our franchisees, licensees, suppliers and other partners are independent third parties with their own financial objectives, third-party relationships and brand associations. Actions taken by them, including violations of generally accepted ethical business practices or breaches of law, regulations or contractual obligations, such as not following our program or not maintaining our quality and safety standards, could harm our reputation. Also, our products may be subject to product recalls, brand confusion, litigation or other deficiencies, which could harm our brands. Any negative publicity associated with these actions or these third parties would adversely affect our reputation and may result in decreased recruitment, Digital product subscriptions, workshop attendance and product sales and, as a result, lower revenues and profits. We may be required to recognize asset impairment charges for indefinite- and definite-lived assets. In accordance with GAAP (as defined hereafter), we perform impairment reviews of our indefinite-lived assets, which include franchise rights acquired and goodwill, on at least an annual basis or more often if events so require. We also continually evaluate whether current factors or indicators, such as the deterioration in relevant, country macroeconomic conditions, an increased competitive environment, a decline in our financial performance, and/or other prevailing conditions in the capital markets, require the performance of an interim impairment assessment of those assets. The process of testing franchise rights acquired, goodwill and other indefinite-lived assets for impairment involves numerous judgments, assumptions and estimates made by management which inherently reflect a high degree of uncertainty. Certain factors, including the future profitability of our businesses, the price of our common stock, the market value of our debt and macroeconomic conditions (both at the global and local levels), might have a negative impact on the fair value of these assets. In fiscal 2020, we recorded a $3.7 million impairment charge for goodwill related to our Brazil reporting unit. We may incur additional impairment 16 charges in the future, which would have an adverse impact on our results of operations. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in Part II of this Annual Report on Form 10-K for additional information. Additionally, we evaluate definite-lived assets, both tangible, which includes our physical plant and equipment, and intangible, which includes both internally developed and purchased software, for impairment by comparing the net realizable value of the asset to the carrying value of the capitalized cost. If the value of those assets is not deemed to be recoverable, an assessment of the fair value of those assets is performed and, to the extent the carrying value exceeds the fair value, an impairment charge is recognized. Should our investment in capitalized definite-lived assets become impaired, there would also be an adverse impact on our results of operations. Loss of key personnel, strategic partners or consultants or failure to effectively manage and motivate our workforce could negatively impact our sales of services and products, business, financial condition and results of operations. We depend on senior management and other key personnel and consultants, and the loss of certain personnel or consultants could result in the loss of management continuity and institutional knowledge and negatively affect our operations, brand image and goodwill. In October 2015, Ms. Winfrey and the Company began a long-term, strategic partnership, which included her making a substantial equity investment in the Company, joining our Board of Directors, providing certain consulting services and granting us the right to use her name and marks. For additional details on these consulting services and rights and the applicable term during which we may benefit, see “Item 1. Business—History—Winfrey Transaction” of this Annual Report on Form 10-K. Our ability to maintain our brand image and leverage the goodwill associated with Ms. Winfrey’s name may be damaged if we were to lose her services or if the nature of our partnership changes. The loss of Ms. Winfrey’s services or partnership with us for any reason (including as a result of her death or disability), any negative market or industry perception with respect to her or her participation in the Company’s programs, or the failure by Ms. Winfrey to provide services in her discretion to promote the Company, our programs, services and products or to consult with us and participate in developing, planning, executing and enhancing our programs and related initiatives, all in accordance with our strategic partnership arrangements with her, could have an adverse effect on our business, financial condition and results of operations. We also depend heavily upon our coaches and guides to support our customers in their weight management efforts. If we fail to appropriately manage and motivate our coaches and guides, we may not be able to adequately service our customers which could negatively impact our sales of services and products. Changes in factors such as overall unemployment levels, local competition for qualified personnel, prevailing wage rates and employment law, as well as rising employee benefits costs, including insurance in the areas in which we operate, could increase our labor costs and interfere with our ability to adequately retain qualified individuals to provide support to customers. Additionally, our inability to attract and retain qualified coaches and guides could delay or hinder our successfully executing our strategic initiatives. We are undergoing a chief executive officer transition, which could cause disruption to our business or have an adverse impact on our operations and business strategy as well as the public or market perception of our business. In September 2021, Mindy Grossman resigned as President and Chief Executive Officer of the Company, effective on the earlier of (i) the commencement of employment of any successor Chief Executive Officer (or interim replacement) and (ii) April 15, 2022. On February 23, 2022, we appointed Sima Sistani as Chief Executive Officer, effective March 21, 2022, with Ms. Grossman resigning as President and Chief Executive Officer as of March 18, 2022. Any significant leadership change or executive management transition involves inherent risk and can be inherently difficult to manage. It may involve a diversion of resources and management attention, be disruptive to our daily operations or relationships with customers, suppliers, and employees, make it more difficult to hire and retain key employees, impact our public or market perception or hinder progress on key strategic initiatives, any of which could have a negative impact on our business or stock price. 17 The inability to renew certain of our licenses, or the inability to do so on terms that are favorable to us, could have an adverse effect on our financial results. We have entered into licensing, co-branding and endorsement relationships with numerous partners for the distribution and sale of certain products and services that are relevant and helpful to weight- and health-conscious consumers. These arrangements are typically for fixed terms, following which the parties decide whether to extend the term of the arrangement. There is no guarantee that we will reach mutually agreeable terms with our partners for extending an arrangement. Similarly, in those instances where a licensee enjoys the option to extend the term of a license as a result of having achieved certain conditions, there is no guarantee that the licensee will avail itself of such option. Our financial results could be adversely affected if we are unable to extend a licensing, co-branding or endorsement arrangement, if we are unable to do so on terms favorable to us, or if we cannot locate a suitable alternative to an incumbent licensee who has decided not to renew its arrangement. Expiration or early termination by us of leases could have an adverse impact on our financial results. Our operations, including corporate offices, are located in leased office space and many of our workshops are held in leased space in retail centers. As leases expire, we may not be able to renew them on acceptable terms or secure suitable replacement locations. As we decide to relocate or close studios before the expiration of the applicable lease term, we may incur payments to landlords to terminate or “buy out” the remaining term of the lease. For example, in fiscal 2021 we recorded a $12.2 million charge in connection with the closure of certain studios. Any of the above events could adversely impact our financial results. Our business may decline as a result of a downturn in general economic conditions or consumer confidence. Our business is highly dependent on product subscriptions, workshop fees and product sales. A downturn in general economic conditions, including inflationary environments, or consumer confidence in any of our markets could result in people curtailing or reallocating their discretionary spending which, in turn, could reduce product subscriptions, attendance at our workshops and product sales. Any reduction in consumer spending may adversely affect our business, financial condition or results of operations. We may not successfully make acquisitions or enter into joint ventures or collaborations and we may not successfully integrate, operate or realize the anticipated benefits of such businesses. As part of our strategic initiatives, we may pursue selected acquisitions, joint ventures or collaborations. We may not be able to effect these transactions or partnerships on commercially reasonable terms or at all. Additionally, if the market negatively perceives our business or financial condition, we may not be a partner of choice for such transactions or partnerships, which could adversely affect our ability to enter into such transactions or partnerships and the terms thereof. Any future acquisitions or joint ventures may require access to additional capital, and we may not have access to such capital on commercially reasonable terms or at all. Even if we enter into these transactions, we may not realize the benefits we anticipate or we may experience difficulties in integrating any acquired companies, technologies and products into our existing business or in providing our services and products in newly acquired markets; attrition of key personnel from acquired businesses; significant charges or expenses; higher costs of integration than we anticipated; or unforeseen operating difficulties that require significant financial and managerial resources that would otherwise be available for the ongoing development of our services and products or the expansion of our existing operations. Our ability to influence the control of, or distributions from, our joint ventures may be limited by contract or otherwise. If any of the other investors in one of our joint ventures fails to observe its commitments, or its interests are different than ours, the joint venture may not be able to operate according to its business plan, we may be required to increase our level of commitment, or such entities may take actions which are not in our best interest. If we are unable to maintain our relationships with our joint venture partners, we could lose our ability to operate in the geographies and/or markets in which they operate, which could have an adverse effect on our business, financial condition or results of operations. 18 We also may be limited by contract or otherwise with respect to, or have no control over, the resources that any third party partner may devote to the research, development and commercialization of services and products under our collaborations. Any of our collaborators may not perform their obligations as expected. Our collaborators may breach or terminate their agreements with us or otherwise fail to conduct research, development or commercialization activities successfully, in a timely manner or in compliance with legal requirements. Additionally, disputes may arise with respect to the ownership of rights to technology developed with our collaboration partners. The failure of our collaboration partners to meet their obligations, adequately deploy resources or to satisfactorily resolve disputes with us could have an adverse effect on our business, financial condition or results of operations. Consummating these transactions and partnerships could also result in the incurrence of additional debt and related interest expense, as well as unforeseen contingent liabilities, all of which could have an adverse effect on our business, financial condition or results of operations. We may also issue additional equity in connection with these transactions and partnerships, which would dilute our existing shareholders. The seasonal nature of our business could cause our operating results to fluctuate. We have experienced and expect to continue to experience fluctuations in our quarterly results of operations due to the seasonal nature of our business. Historically, the first quarter of the fiscal year, known as our winter season, is the most important quarter for recruitments. Given the subscription nature of our products, failure to realize recruitments during the winter season could negatively impact our performance for the remainder of the year. Seasonality also impacts relative revenue and profitability of each quarter of the year, both on a quarter-to-quarter and year-over-year basis. This seasonality could cause our share price to fluctuate as the results of an interim financial period may not be indicative of our full year results. Any event that discourages or impedes people from gathering with others, whether at a gathering place, work or otherwise, or impedes accessing resources could adversely affect our business. Our business is subject to conditions beyond our control, including health epidemics (such as the COVID-19 pandemic), extreme weather and climate conditions (which may become more frequent and more severe with the increasing effects of climate change), war, terrorism, loss of resources such as electricity and internet connections, national disasters and other extraordinary events, that may prevent or impede in-person or virtual workshop attendance or accessing our Digital products. These conditions could also impact the ability of our suppliers and other third party partners to meet their obligations to us and negatively impact our ability to provide our products and services to customers. The occurrence of any event that discourages people from gathering with others or impedes their ability to access our services and products could adversely affect our business, financial condition or results of operations. If we do not maintain effective internal control over financial reporting, we could fail to report our financial results accurately. Effective internal control over financial reporting is necessary for us to provide reliable financial reports. In the past we have discovered, and in the future we may discover, areas of our internal control over financial reporting that need improvement. In the future, if we identify a control deficiency that rises to the level of a material weakness in our internal controls over financial reporting, this material weakness may adversely affect our ability to record, process, summarize and report financial information timely and accurately and, as a result, our financial statements may contain material misstatements or omissions. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. 19 Risks Related to Our Liquidity Our substantial amount of debt and our debt service obligations, as well as our exposure to variable rate indebtedness, could adversely affect our financial condition, and the restrictions of our debt covenants could impede our operations and flexibility. As of January 1, 2022, our total debt was $1,445.0 million. In addition, at January 1, 2022, we had $173.9 million available under our revolving credit facility. $945.0 million of our debt consists of variable-rate instruments so we are subject to the risk of higher interest rates. We seek to manage our exposure to interest rates through interest rate swaps. At the end of fiscal 2021, we had in effect interest rate swaps with an aggregate notional amount of $500.0 million. Our high degree of debt leverage could have significant consequences, including the following: • • • • • • • • requiring a substantial portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities; exposing us to the risk of increased interest rates because certain of our borrowings, including the borrowings under our credit facilities, are at variable rates of interest; making it more difficult for us to make payments and otherwise satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default; restricting our ability and flexibility to make strategic acquisitions and to take advantage of other strategic opportunities to grow our business funded by significant additional indebtedness or causing us to make non-strategic divestitures; limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions and other general corporate purposes; limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who may be less leveraged or may have greater financial resources than us; increasing our vulnerability to general adverse economic and industry conditions; and limiting, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds on commercially reasonable terms, if at all. Our credit facilities and the indenture governing our notes permit us to incur additional indebtedness in the future. If we incur additional indebtedness, the risks we face as a result of our leverage could intensify. While there is no net debt to EBITDA (earnings before interest, taxes, depreciation and amortization) leverage ratio maintenance requirement on the debt outstanding under our credit facilities (other than when the aggregate principal amount of our outstanding revolving loans plus letters of credit exceeds 35% of the amount of the lenders’ revolving commitments, as further discussed below), our credit facilities and the indenture governing our notes contain customary covenants for a non-investment grade company, including covenants that in certain circumstances restrict our ability to incur additional indebtedness and liens, pay dividends on and redeem capital stock, make investments, sell our assets and enter into acquisitions, mergers and transfers of all or substantially all of our assets, prepay subordinated debt and enter into transactions with affiliates, in each case subject to baskets, thresholds and other exceptions. Under the terms of our credit facilities, depending on our leverage ratio, we are obligated to offer to prepay our term loan facilities in an aggregate amount determined by our excess cash flow. In addition, our revolving credit facility includes a maintenance covenant that requires compliance with certain first lien secured net leverage ratios when the aggregate principal amount of all revolving loans plus available, undrawn letters of credit and unreimbursed letters of credit (subject to customary exceptions and thresholds) as of the end of a fiscal quarter exceeds 35% of the amount of the lenders’ revolving commitments. 20 Our failure to comply with these covenants could result in an acceleration of our debt, cause cross-defaults under our other debt, lead to the foreclosure on assets collateralizing secured debt (and the lenders and holders of that secured debt would rank ahead of the holders of unsecured debt in the proceeds of those assets) and result in our lenders terminating all commitments to extend further credit. If our indebtedness is accelerated, we may not be able to repay our indebtedness, and we may not be able to borrow sufficient funds to refinance such indebtedness. Any such prepayment or refinancing could adversely affect our financial condition and liquidity. In addition, if we incur additional debt in the future, we may be subject to additional covenants, which may be more restrictive than those to which we are currently subject. Additionally, borrowings under our credit facilities are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness may increase even though the amount borrowed remains the same, if our then-effective swaps, if any, do not reduce our exposure. In addition, certain of our variable rate indebtedness uses LIBOR as a benchmark for establishing the rate of interest. LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform. On March 5, 2021, the United Kingdom's Financial Conduct Authority, or the FCA, which regulates LIBOR, announced that all LIBOR settings will either cease to be provided or no longer be representative (i) immediately after December 31, 2021, in the case of the one-week and two-month U.S. dollar settings, and (ii) immediately after June 30, 2023, in the case of all remaining U.S. dollar settings. Additionally, the Federal Reserve Board, Federal Deposit Insurance Corporation, Office of the Comptroller of Currency, and other interagency regulatory bodies advised U.S. banks to stop entering into new U.S. dollar LIBOR based contracts by December 31, 2021. The Federal Reserve, in conjunction with the Alternative Reference Rate Committee, or the ARRC, a committee convened by the Federal Reserve that includes major market participants, has identified the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities, as its preferred alternative rate for LIBOR. There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured lending rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities. Although SOFR is the ARRC’s recommended replacement rate, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in other ways that would result in higher interest costs for us. In the event that LIBOR is phased out as is currently expected, our New Credit Agreement (defined hereafter) provides that the Company and the administrative agent may amend the New 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 New 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. We may not be able to generate sufficient cash to service all of our debt and satisfy our other liquidity requirements. Our ability to make scheduled payments on or to refinance our debt obligations and to fund our planned capital expenditures and other ongoing liquidity needs depends on our future performance, which may be affected by financial, business, economic, demographic and other factors, such as attitudes toward weight management and wellness programs and pressure from our competitors. As of the end of fiscal 2021, we have a term loan facility with an outstanding aggregate principal amount of $945.0 million due in April 2028, a revolving credit facility with availability of $173.9 million maturing in April 2026 and $500.0 million in aggregate principal amount of outstanding 4.500% senior secured notes due in April 2029. We expect to pay the principal and interest due on the term loan facility and our notes from a combination of our cash flows provided by operating activities and by opportunistically using other means to repay or refinance our obligations as we determine appropriate. There can be no assurance that we will maintain a level of cash flows provided by operating activities in an amount sufficient to permit us to pay the principal and interest on all of our outstanding debt. 21 If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness. Our ability, if any, to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt, if available on acceptable terms or at all, could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments may restrict us from adopting some of these alternatives. In addition, any deterioration in our performance may result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness or our ability to refinance our debt obligations on favorable terms or at all. Risk Related to Technology, Security and Intellectual Property Any failure of our technology or systems to perform satisfactorily could result in an adverse impact on our business. We rely on software, hardware, network systems and similar technology, including cloud-based technology, that is either developed by us or licensed from or maintained by third parties to operate our websites and platforms, Digital subscription product offerings, and other services and products such as the recurring billing system associated with certain of our commitment plans, and to support our business operations. As much of this technology is complex, there may be future errors, defects or performance problems, including when we update our technology or integrate new technology to expand and enhance our capabilities. Our technology may malfunction or suffer from defects that become apparent only after extended use. The integrity of our technology may also be compromised as a result of third-party cyber-attacks, such as hacking, spear phishing campaigns and denial of service (DOS) attacks, which are increasingly negatively impacting companies. In addition, our operations depend on our ability to protect our information technology systems against damage from third-party cyber-attacks, fire, power loss, water, earthquakes, telecommunications failures and similar unexpected adverse events. Disruptions in our websites, apps, services and products or network systems could result from a number of factors, including unknown technical defects, insufficient capacity, the failure of our third-party providers to provide continuous and uninterrupted service and unusual volume in traffic for our platforms. Such disruptions would be most impactful if they occurred during peak activity periods and may impact accessibility to our services and products. While we maintain disaster recovery capabilities to return to normal operation in a timely manner, and we deploy multiple parallel instances of our applications across multiple computer resources, we do not have a fully redundant system that includes an instantaneous recovery capability. In the event we experience significant disruptions, we may be unable to repair our systems in an efficient and timely manner, which could have an adverse impact on our business. As a result of such possible defects, failures, interruptions or other problems, our services and products could be rendered unreliable or be perceived as unreliable by customers, which could result in harm to our reputation and brands. Any failure of our technology or systems could result in an adverse impact on our business. Our reputation and the appeal of our services and products may be harmed by data security breaches and other malicious acts or privacy concerns. Breaches of data security, website defacements and other malicious acts, which are increasingly negatively impacting companies, could result in unauthorized access to proprietary or customer information or data, including credit card transaction data, or cause interruptions to our services and products. Such unauthorized access or interruptions could harm our reputation and brands and expose us to liability and regulatory claims, and may result in the loss of existing or potential customers. We rely upon sophisticated information technology systems to operate our business. In the ordinary course of business, we provide content and collect, store and utilize confidential information (including, but not limited to, personal customer information and data), and it is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information as well as comply with applicable regulatory requirements and contractual obligations. 22 We also have outsourced significant elements of our information technology infrastructure and, as a result, we are managing many independent vendor relationships with third parties who may or could have access to our confidential information and website content. The size and complexity of our information technology and information security systems, and those of our third-party vendors with whom we contract, make such systems potentially vulnerable to security breaches. While we have invested, including by maintaining cybersecurity insurance coverage, and developed systems and processes designed to protect such proprietary or customer information or data and our website content, these measures are costly, and there can be no assurance that our efforts will prevent service interruptions or security breaches and other malicious acts. Existing, proposed or new data privacy legislation and regulations, including interpretations thereof, could also significantly affect our business. For example, the European General Data Protection Regulation (GDPR) includes increased privacy and security requirements for companies that receive or process personal data of residents of Europe. As a result, we have implemented measures to comply with these requirements, including, among other things, documenting our data processing activities and informing users about how we use their personal data. We also obtain consent and/or offer new controls to existing and new users in Europe before processing data for certain aspects of our services and products. In addition, the GDPR requires submission of personal data breach notifications to our designated European privacy regulator. The GDPR also includes significant penalties for non- compliance with any of several requirements of the regulation. Data protection and privacy laws have also been enacted by the U.S. federal and state governments, including the California Consumer Privacy Act (CCPA), which became effective on January 1, 2020, the Health Insurance Portability and Accountability Act (HIPAA), and other relevant statutes. These laws also typically include notification obligations and impose significant penalties and potential liability for non-compliance. The data privacy and security regulatory regime continues to evolve and is increasingly demanding. Many states are considering privacy and security legislation and there are ongoing discussions regarding a national privacy law. Variations in requirements across jurisdictions could present compliance challenges, and any failures to comply with such requirements may have an adverse effect on our business or results of operations. Further, many jurisdictions require that customers be notified if a security breach results in the disclosure of their personal financial account or other information, and additional jurisdictions and governmental entities are considering such laws. In addition, other public disclosure laws may require that material security breaches be reported. If we experience, or in certain cases suspect, a security breach and such notice or public disclosure is required in the future, our reputation, brands and business may be harmed. Prospective and existing customers and clients may have concerns regarding our use of private information or data collected on our apps and websites or through our services and products, such as weight management information, financial data, email addresses and home addresses. These privacy concerns could keep customers and clients from using our apps and websites or purchasing our services or products, and third parties from partnering with us. While no cybersecurity breach or attack to date has had a material impact on our business or results of operations, there can be no assurance that our efforts to maintain the security and integrity of our information technology networks and related systems will be effective or that attempted security breaches or disruptions would not be successful or damaging. In addition, the transmission of computer viruses, or similar malware, could adversely affect our information technology systems and harm our business operations. As a result, it may become necessary to expend significant additional amounts of capital and other resources to protect against, or to alleviate, problems caused by security breaches. These expenditures, however, may not prove to be a sufficient protection or remedy. Third parties may infringe on our brands and other intellectual property rights, which may have an adverse impact on our business. We currently rely on a combination of trademark, copyright, trade dress, trade secret, patent and other intellectual property laws and domain name dispute resolution systems to establish and protect our proprietary rights, including our brands and technology. If we fail to successfully enforce our intellectual property rights, the value of our brands, services and products could be diminished and our business may suffer. Our precautions may not prevent misappropriation of our intellectual property, including reverse engineering of technology, particularly in foreign countries where laws or law enforcement practices may not protect our proprietary rights as fully as in the United States. Any legal action that we may bring to protect our brands and other intellectual property could be unsuccessful and expensive and could divert management’s attention from other business concerns. In addition, legal standards relating to the validity, enforceability and scope of protection of intellectual property, especially in Internet-related businesses, are uncertain and evolving. These evolving legal standards may not sufficiently protect our intellectual property rights in the future. 23 We may be subject to intellectual property rights claims. Third parties may make claims against us alleging infringement of their intellectual property rights. Any intellectual property claims, regardless of merit, could be time-consuming and expensive to litigate or settle and could significantly divert management’s attention from other business concerns. In addition, if we were unable to successfully defend against such claims, we may have to pay damages, stop selling the service or product or stop using the software, technology or content found to be in violation of a third party’s rights, seek a license for the infringing service, product, software, technology or content or develop alternative non-infringing services, products, software, technology or content. If we cannot license on reasonable terms, develop alternatives or stop using the service, product, software, technology or content for any infringing aspects of our business, we may be forced to limit our service and product offerings. Any of these results could reduce our revenues or our ability to compete effectively, increase our costs or harm our business. Risks Related to Our International Operations, Litigation, Laws and Regulations Our international operations expose us to regulatory, economic, political, social and intellectual property risks in the countries in which we operate. The international nature of our operations involves a number of risks, including changes in U.S. and foreign regulations, tariffs, taxes and exchange controls; economic downturns; inflation and political and social instability in the countries in which we operate; weakening or loss of the protection of intellectual property rights in some countries and limitations on our ability to enforce our intellectual property rights under some local laws; and our dependence on foreign personnel. For example, during the second quarter of fiscal 2016, the United Kingdom voted by referendum to exit the European Union (the “EU”), commonly referred to as “Brexit.” On January 31, 2020, the United Kingdom ceased to be part of the EU and the transition period ended on December 31, 2020. The EU and the UK agreed to an EU-UK Trade and Cooperation Agreement (“TCA”) that governs the trading relationship between the UK and the member states of the EU from January 1, 2021. Broadly, the TCA provides for zero tariffs and zero quotas on all goods that comply with the appropriate rules of origin, but is subject to both parties maintaining a level playing field in areas such as environmental protection, social and labor rights, investment, competition, state aid, and tax transparency. Brexit has and continues to create general economic uncertainty in the UK and EU. The effects of Brexit could have an adverse impact on our business, results of operations, financial condition, and/or cash flows, particularly with respect to our United Kingdom reportable segment. Foreign regulations may also restrict our ability to operate in some countries, acquire new businesses, recur bill our customers or repatriate cash from foreign subsidiaries back to the United States. If we expand our operations into additional foreign countries, we may be subject to additional risks, including the ability to successfully adapt to local culture and navigate regulatory, economic, political, social and intellectual property risks. We cannot be certain that we will be able to enter and successfully compete in additional foreign markets or that we will be able to continue to compete in the foreign markets in which we currently operate. We are exposed to foreign currency risks from our international operations that could adversely affect our financial results. A significant portion of our revenues and operating costs are denominated in foreign currencies. We are therefore exposed to fluctuations in the exchange rates between the U.S. dollar and the currencies in which our foreign operations receive revenues and pay expenses. We do not currently hedge, and have not historically hedged, our exposure to foreign currency fluctuations. Our consolidated financial results are presented in U.S. dollars and therefore, during times of a strengthening U.S. dollar, our reported international revenues and earnings will be reduced because the local currency will translate into fewer U.S. dollars. In addition, the assets and liabilities of our non-U.S. subsidiaries are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. Revenues and expenses are translated into U.S. dollars at the average exchange rate for the period. Translation adjustments arising from the use of differing exchange rates from period to period are recorded in shareholders’ equity as accumulated other comprehensive income (loss). Translation adjustments arising from intercompany receivables and payables with our foreign subsidiaries are generally recorded as a component of other expense (income). Accordingly, changes in currency exchange rates will cause our revenues, operating costs, net income and shareholders’ equity to fluctuate. 24 Outcomes of litigation or regulatory actions could adversely impact our financial condition. From time to time, we may be a party to lawsuits and regulatory actions relating to our business operations. Due to the inherent uncertainties of legal actions and regulatory proceedings, we cannot predict their outcomes with certainty. Therefore, it is possible that our results of operations, financial condition or cash flows could be adversely affected by the unfavorable resolution of one or more legal or regulatory actions. For example, the previously disclosed adverse UK tax ruling relating to our self-employment model in the United Kingdom resulted in an aggregate adverse charge of approximately $37.0 million in fiscal 2009. As we expand our wellness offerings, consumers may misconstrue our program as providing medical advice. As we clearly state in our consumer communications, most of our coaches and guides do not have extensive training or certification in nutrition, diet or health fields beyond the training they receive from us. Despite our disclaimers, as more customers come to us seeking a healthy lifestyle, they may misperceive that our coaches and guides are providing medical advice. We may also be subject to claims that our coaches and guides have provided inappropriate advice or have inappropriately referred or failed to refer customers to health care providers when needed. Regardless of the outcome of any legal action or regulatory proceeding, such actions and proceedings could result in substantial costs and may require that our management devote substantial time and resources to defend us. Our business is subject to legislative and regulatory restrictions. A number of laws and regulations govern our advertising and marketing, services, products, operations and relations with consumers, licensees, franchisees, coaches, guides, employees and government authorities in the countries in which we operate. Certain federal, state and foreign agencies, such as the FTC and FDA, regulate and enforce such laws and regulations relating to advertising and marketing, promotions, packaging, labeling, privacy, consumer pricing and billing arrangements, and other consumer protection matters. A determination by a federal, state or foreign agency, or a court in connection with a governmental enforcement action or private litigation, that any of our practices do not meet existing or new laws or regulations could result in liability, adverse publicity, and restrictions on our business operations. For example, during the mid-1990s, the FTC filed complaints against a number of commercial weight management providers alleging violations of federal law in connection with the use of advertisements that featured testimonials, claims for program success and program costs. In 1997, we entered into a consent order with the FTC settling all contested issues raised in the complaint filed against us. The consent order required us to comply with certain procedures and disclosures in connection with our advertisements of services and products and expired by its terms in 2017. Subsequent to our 2018 acquisition of Kurbo, we became subject to additional obligations under the Children’s Online Privacy Protection Act (COPPA) and other applicable laws and regulations enforced by the FTC and other agencies. In February 2022, the FTC filed a complaint and proposed settlement order to resolve allegations that Kurbo violated COPPA. For additional information, see Note 16 of our audited consolidated financial statements, contained in Part IV, Item 15 of this Annual Report on Form 10-K. We are subject to many distinct employment, labor, commercial, benefits and tax laws and regulations in each country in which we operate, including regulations affecting our employment and wage and hour practices and our relations with our employees, coaches and guides. If we are required to comply with new laws or regulations or interpretations of existing laws and regulations that differ from our interpretations, are unable to comply with these laws, regulations or interpretations, or are subject to litigation with respect to these laws, regulations or interpretations, our business and results of operations could be adversely affected. Laws and regulations directly applicable to communications, operations or commerce over the Internet, such as those governing consumer protection, intellectual property, privacy and taxation, continue to evolve. Recent examples include the enactment of the GDPR and the CCPA. If we are required to comply with new laws or regulations or interpretations of existing laws or regulations that differ from our interpretations, or if we are unable to comply with these laws, regulations or interpretations, our business and results of operations could be adversely affected. Future laws or regulations, including laws or regulations affecting our advertising and marketing practices, consumer pricing and billing arrangements, relations with consumers, employees, coaches, guides, brand ambassadors, spokespersons, social media influencers, licensees or franchisees, or our services and products, may have an adverse impact on us. 25 Risks Related to Ownership of Our Common Stock Artal has significant influence over us and may have conflicts of interest with us or the holders of our common stock. Artal owns approximately 21% of our outstanding common stock and has the ability to exercise significant influence over the election and removal of our directors and our corporate and management policies, including potential mergers or acquisitions, payment of dividends, asset sales, the amendment of our articles of incorporation or bylaws and other significant corporate transactions. This concentration of our ownership may delay or deter possible changes in control of our company, which may reduce the value of an investment in our common stock. So long as Artal owns 10% or more of our common stock, Artal will have the right pursuant to an agreement with us to nominate directors to our Board of Directors in proportion to its stock ownership. The interests of Artal may not coincide with our interests or the interests of other holders of our common stock. If our existing large shareholders sell a substantial amount of shares of our common stock, the market price of our common stock could decline. The sale of substantial amounts of shares of our common stock by existing large shareholders, or the perception that such sales could occur, including sales by Artal or Ms. Winfrey, could harm the prevailing market price of shares of our common stock. In fiscal 2018, Artal sold 14,625,000 shares of our common stock and Ms. Winfrey sold 2,359,702 shares of our common stock (including shares transferred by Ms. Winfrey as a gift to The Oprah Winfrey Charitable Foundation that were subsequently sold by such foundation). Sales such as these, and the possibility that additional sales may occur in the future, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. Substantially all of our outstanding shares of common stock are freely tradable without restriction or further registration under the Securities Act, except that any shares held by our affiliates, as that term is defined under Rule 144 of the Securities Act and including Artal and Ms. Winfrey, may be sold only in compliance with certain limitations applicable to affiliates. Our articles of incorporation and bylaws and Virginia corporate law contain provisions that may discourage a takeover attempt. Provisions contained in our articles of incorporation and bylaws and the laws of Virginia, the state in which we are incorporated, could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our shareholders. Provisions of our articles of incorporation and bylaws impose various procedural and other requirements, which could make it more difficult for shareholders to effect certain corporate actions. For example, our articles of incorporation authorize our Board of Directors to determine the rights, preferences, privileges and restrictions of unissued series of preferred stock, without any vote or action by our shareholders. Thus, our Board of Directors can authorize and issue shares of preferred stock with voting or conversion rights that could adversely affect the voting or other rights of holders of our common stock. These rights may have the effect of delaying or deterring a change of control of our company. In addition, a change of control of our company may be delayed or deterred as a result of our having three classes of directors. These provisions could limit the price that certain investors might be willing to pay in the future for shares of our common stock. 26 Item 1B. Unresolved Staff Comments None. Item 2. Properties We are currently headquartered in New York, New York in a leased office space, with additional corporate, customer support, technology and certain other operations located in leased office spaces elsewhere in the United States and Canada. Each of our foreign country operations generally also has leased or shared office space to support its operations. Our in-person workshops are typically held in space leased in retail centers or in third-party locations (usually meeting rooms in well-located hotels). Item 3. Legal Proceedings The information called for by this item is incorporated herein by reference to the legal proceedings disclosure under Note 16 “Commitments and Contingencies” of the notes to the audited consolidated financial statements contained in this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. 27 INFORMATION ABOUT OUR EXECUTIVE OFFICERS AND DIRECTORS Pursuant to General Instruction G(3) to Form 10-K, certain of the information regarding our directors and executive officers required by Items 401(a), (b) and (e) of Regulation S-K is hereby included in Part I of this Annual Report on Form 10-K. Set forth below are the names, ages as of January 1, 2022 and current positions of our executive officers and directors. Directors are elected at the annual meeting of shareholders. Executive officers are appointed by, and hold office at, the discretion of our Board of Directors. Name Age Position Mindy Grossman .............................................. 64 President and Chief Executive Officer, Director Amy O’Keefe.................................................... 51 Chief Financial Officer Nicholas P. Hotchkin ........................................ 56 Chief Operating Officer Michael F. Colosi.............................................. 56 General Counsel and Secretary Michael Lysaght ............................................... 48 Chief Digital Officer Raymond Debbane(1) ......................................... 66 Chairman of the Board of Directors Steven M. Altschuler, M.D.(1)(2) ......................... 68 Director Julie Bornstein .................................................. 51 Director Jennifer Dulski(1) ............................................... 50 Director Jonas M. Fajgenbaum ....................................... 49 Director Denis F. Kelly(2)................................................. 72 Director Julie Rice(3) ........................................................ 51 Director Thilo Semmelbauer(2)(3) ...................................... 56 Director Christopher J. Sobecki(1)(3) ................................. 63 Director Oprah Winfrey .................................................. 67 Director (1) (2) (3) Member of Compensation and Benefits Committee. Member of Audit Committee. Member of Nominating and Corporate Governance Committee. Mindy Grossman. Ms. Grossman has served as a director and our President and Chief Executive Officer since July 2017. Prior to joining us, she served as Chief Executive Officer of HSN, Inc., an interactive, multichannel retailer of fashion, household and lifestyle products, and a member of its Board of Directors from August 2008 to May 2017. Prior to joining HSN, she served as Chief Executive Officer of IAC Retailing, a business segment of HSN’s former parent company, IAC/InterActiveCorp, a media and Internet company, from April 2006 to August 2008, and Global Vice President of Nike, Inc.’s apparel business from October 2000 to March 2006. Earlier in her career, Ms. Grossman held various other executive positions in the retail industry, including President and CEO of Polo Jeans Company, Vice President of New Business Development at Polo Ralph Lauren Corporation, President of Chaps Ralph Lauren, and Senior Vice President of Menswear for Warnaco, Inc. Ms. Grossman is a director of Fanatics, Inc. and was previously a director of Bloomin’ Brands, Inc. She also serves as a director of UNICEF USA and Vault Health, Inc. 28 Amy OKeefe. Ms. O’Keefe has served as our Chief Financial Officer since October 2020. Prior to joining us, Ms. O’Keefe served as Chief Financial Officer of Drive DeVilbiss Healthcare Limited, a global manufacturer and distributor of medical products, from March 2017 to June 2020. She previously served as Chief Financial Officer of Savant Systems, LLC, a global designer and developer of home automation and control systems, from April 2015 to December 2016, and Chief Financial Officer of D&M Holdings Inc., a global designer and manufacturer of audio products, from January 2011 to July 2014. Prior to that time, Ms. O’Keefe held several corporate finance positions with The Black & Decker Corporation, including as Divisional Chief Financial Officer for certain divisions, and was a certified public accountant for Ernst & Young LLP. Ms. O’Keefe received a B.B.A. in Accounting from Loyola College. Nicholas P. Hotchkin. Mr. Hotchkin has served as our Chief Operating Officer since October 2020. In addition to serving as our Chief Financial Officer from August 2012 to September 2020, he served as our Operating Officer, North America from March 2019 to September 2020 and our President, Emerging Markets from March 2018 to September 2020. He also served as a member of our former Interim Office of the Chief Executive Officer from September 2016 to July 2017. Prior to joining us, Mr. Hotchkin had spent several years at Staples, Inc., a global leader in the office supply industry. Most recently, Mr. Hotchkin served as Senior Vice President of Finance for the U.S. Retail division of Staples based in Massachusetts, a position he held from May 2010 to August 2012. Before assuming that position, he had been Senior Vice President of Finance and Treasurer of Staples, a position he held from November 2006 to April 2010. Prior to joining Staples, Mr. Hotchkin held several corporate finance positions with Delphi Corporation and General Motors Corporation including assignments in the United States, Asia and Europe. Mr. Hotchkin received a B.A. in Economics from Harvard College and an M.B.A. from the Harvard Business School. Michael F. Colosi. Mr. Colosi has served as our General Counsel and Secretary since May 2014. Prior to joining us, Mr. Colosi most recently served as Senior Vice President, General Counsel and Corporate Secretary of Kenneth Cole Productions, Inc. (KCP), a multi-brand retail, wholesale and licensing company, from March 2007 to February 2014. His service as General Counsel and Secretary of KCP commenced in July 2000 and July 2004, respectively. He also served as Corporate Vice President of KCP from July 2000 to February 2007. Prior to joining KCP, Mr. Colosi was Associate General Counsel and Assistant Secretary for The Warnaco Group, Inc., an international apparel company, from 1996 to 2000. Mr. Colosi received a B.A. in Economics and English from Cornell University and a J.D. from The University of Michigan Law School. Michael Lysaght. Mr. Lysaght has served as our Chief Digital Officer since August 2019. He previously served as our Chief Technology Officer from September 2016 to July 2019, our Senior Vice President of Digital Product Engineering from September 2014 to September 2016 and as Interim Chief Technology Officer from April 2016 to September 2016. Prior to joining us, Mr. Lysaght worked at SecondMarket, Inc. (now Nasdaq Private Market), a platform providing liquidity solutions for private companies, from March 2009 to September 2014, where he most recently held the role of Vice President of Engineering/Head of Technology. He previously was an Independent Consultant working for a variety of startups, telecommunication companies and financial institutions. Mr. Lysaght has a B. Sc. in Computer Science from University College Cork, Ireland. Raymond Debbane. Mr. Debbane has been the Chairman of our Board of Directors since our acquisition by Artal Luxembourg in September 1999. Mr. Debbane is a co-founder and the Chief Executive Officer of The Invus Group, LLC. Prior to forming The Invus Group, LLC in 1985, Mr. Debbane was a manager and consultant for The Boston Consulting Group in Paris, France. He holds an M.B.A. from Stanford Graduate School of Business, an M.S. in Food Science and Technology from the University of California, Davis and a B.S. in Agricultural Sciences and Agricultural Engineering from American University of Beirut. Mr. Debbane is the Chairman of the Board of Directors of Lexicon Pharmaceuticals, Inc. He is also the Chief Executive Officer and a director of Artal Group S.A., and the Chairman of the Board of Directors of a number of private companies of which Artal or Invus, L.P. are shareholders. Mr. Debbane was previously a director of Blue Buffalo Pet Products, Inc. 29 Steven M. Altschuler, M.D. Dr. Altschuler has been a director since September 2012. Since May 2018, Dr. Altschuler has served as a Managing Director, Healthcare Ventures, of Ziff Capital Partners, a private investment firm. He previously served as a consultant to the University of Miami Health Care System from September 2017 through December 2017, the Chief Executive Officer of University of Miami Health Care System and Executive Vice President for Healthcare at the University of Miami from January 2016 to September 2017, and the Chief Executive Officer of The Children’s Hospital of Philadelphia (CHOP) from April 2000 until June 2015. Prior to assuming the role of Chief Executive Officer, Dr. Altschuler held several positions at CHOP and the Perelman School of Medicine at the University of Pennsylvania, including Physician-in-Chief/Chair of Pediatrics and chief of the Division of Gastroenterology, Hepatology and Nutrition. Dr. Altschuler received a B.A. in mathematics and an M.D. from Case Western Reserve University. Dr. Altschuler is Chairman of the Board of Directors of 89bio, Inc. and a director of Orchard Therapeutics plc. He previously served as Chair of the Board of Directors of Spark Therapeutics, Inc. and a director of Adtalem Global Education Inc. Julie Bornstein. Ms. Bornstein has been a director since February 2019. Since February 2018, Ms. Bornstein has served as Chief Executive Officer of The Yes Platform, Inc., an AI-powered online shopping platform she co- founded. From March 2015 to September 2017, Ms. Bornstein served as Chief Operating Officer at Stitch Fix, Inc., an online styling services company. Prior to that, Ms. Bornstein served as Chief Digital Officer at Sephora, a cosmetic retail company and subsidiary of LVMH Moët Hennessy Louis Vuitton SE, from August 2007 to March 2015. Ms. Bornstein received a B.A. in Government from Harvard College and an M.B.A. from Harvard Business School. Ms. Bornstein is a director of Redfin Corporation and Sweetgreen, Inc. Jennifer Dulski. Ms. Dulski has been a director since February 2020. In April 2020, Ms. Dulski founded and began serving as Chief Executive Officer of Rising Team, a SaaS company that provides tools for leadership and team development. She previously served as Head of Groups & Community for Facebook, Inc., a social networking service, from September 2017 to May 2019 and as President & Chief Operating Officer of Change.org, a social change platform, from January 2013 to June 2017. Until January 2013, Ms. Dulski served as Global Head of Product Management, Shopping & Product Ads at Google Inc., which she joined in 2011 when it acquired The Dealmap, a company she co-founded and for which she served as Chief Executive Officer from 2007 until its acquisition. Prior to that, Ms. Dulski served in multiple roles at Yahoo! Inc. from 1999 until 2007. Ms. Dulski received a B.A. in Psychology and an M.B.A. from Cornell University. She was previously a director of TEGNA Inc. and Social Capital Hedosophia Holdings Corp. V. Jonas M. Fajgenbaum. Mr. Fajgenbaum has been a director since our acquisition by Artal Luxembourg in September 1999. Mr. Fajgenbaum is a Managing Director of The Invus Group, LLC, which he joined in 1996. Prior to joining The Invus Group, LLC, Mr. Fajgenbaum was a consultant for McKinsey & Company in New York from 1994 to 1996. He graduated with a B.S. in Economics with a concentration in Finance from The Wharton School of the University of Pennsylvania and a B.A. in Economics from the University of Pennsylvania. Mr. Fajgenbaum is a director of a number of private companies of which Artal or Invus, L.P. are shareholders. Denis F. Kelly. Mr. Kelly has been a director since May 2015. Mr. Kelly is affiliated with, and has served as a Managing Partner of, Scura Partners Securities LLC, a private investment banking firm which he co-founded, since 2001. In addition, Mr. Kelly is a Hearing Officer for National Arbitration and Mediation (NAM), one of the leading dispute resolution institutions in the United States. From 1993 to 2001, he was a Managing Director of Prudential Securities Incorporated. Previously, he served as the President and Chief Executive Officer of Denbrook Capital Corporation, a merchant banking firm, from 1991 to 1993. From 1980 to 1991, Mr. Kelly held various positions at Merrill Lynch, including Managing Director of Mergers and Acquisitions and Managing Director of Merchant Banking. Mr. Kelly began his investment banking career at Lehman Brothers in 1974. Mr. Kelly received a B.A. from Amherst College and an M.B.A. from the Wharton School of Business of the University of Pennsylvania. He was previously a director of MSC Industrial Direct Co., Inc. Julie Rice. Ms. Rice has been a director since August 2018. Since February 2021, she has served as the Co- Founder and Co-Chief Executive Officer of Peoplehood LLC, a connection and wellness company, and since June 2016, she has served as the Co-Founder of LifeShop LLC, an advising and investing company. From November 2017 to March 2019, Ms. Rice served as a Partner at WeWork, a shared workspace company. After co- founding SoulCycle Inc., a fitness company, in 2006, Ms. Rice served as Co-Chief Executive Officer from 2006 to 2015, Chief Talent and Creative Officer from 2015 to 2016 and a member of the board of directors from 2010 to 2018. Previously, Ms. Rice was a Talent Manager at Handprint Entertainment from 1997 to 2004. Ms. Rice received a B.A. in English and Theater from the State University of New York at Binghamton. 30 Thilo Semmelbauer. Mr. Semmelbauer has been a director since September 2016. He served as a member of our former Interim Office of the Chief Executive Officer from September 2016 to July 2017. Since May 2019, Mr. Semmelbauer has served as Managing Director of Insight Partners, a global private equity and venture capital firm, where he previously served as a Senior Advisor from 2017 to 2019 and a Venture Partner from 2015 to 2017. From 2010 to 2015, he served as President and Chief Operating Officer of Shutterstock, Inc., a global marketplace for licensing images, videos, and music to businesses worldwide. From 2009 to 2010, he served as Executive Vice President, Consumer Business, of TheLadders.com, a career management company. Mr. Semmelbauer was also Weight Watchers International, Inc.’s Global Chief Operating Officer from 2006 to 2008 and Chief Operating Officer for North America from 2004 to 2006, after serving as President and Chief Operating Officer of WeightWatchers.com from 2000 to 2004 where he was part of the founding team. He holds an A.B. in Electrical Engineering and Computer Science from Dartmouth College and a dual M.S. in Management and Electrical Engineering from the Massachusetts Institute of Technology. Christopher J. Sobecki. Mr. Sobecki has been a director since our acquisition by Artal Luxembourg in September 1999. He served as a member of our former Interim Office of the Chief Executive Officer from September 2016 to July 2017. Mr. Sobecki is a Managing Director of The Invus Group, LLC, which he joined in 1989. He received an M.B.A. from the Harvard Business School. He also obtained a B.S. in Industrial Engineering from Purdue University. Mr. Sobecki is a director of Lexicon Pharmaceuticals, Inc. and a number of private companies of which Artal or Invus, L.P. are shareholders. Oprah Winfrey. Ms. Winfrey has been a director since October 2015. Since January 2009, Ms. Winfrey has served as the Chairman of her cable network, OWN: Oprah Winfrey Network, taking on the role of Chief Executive Officer in July 2011. Previously, she founded Harpo, Inc. in 1986, under which she has launched numerous media and entertainment businesses, including O, The Oprah Magazine and Harpo Films, in addition to producing the award-winning talk show ‘The Oprah Winfrey Show’ for 25 years. Ms. Winfrey is a global media leader, philanthropist, producer and actress. She also has been serving as a member of the Smithsonian’s advisory council since 2004. 31 PART II Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on Nasdaq. Our common stock has traded on Nasdaq under the symbol “WW” since April 22, 2019, prior to which it traded under the symbol “WTW.” 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 fiscal 2021 and fiscal 2020, we repurchased no shares of our common stock under this program. As of the end of fiscal 2021, $208.9 million remained available to purchase shares of our common stock under the repurchase program. Holders The approximate number of holders of record of our common stock as of February 1, 2022 was 225. This number does not include beneficial owners of our securities held in the name of nominees. Dividends We do not currently pay a dividend and we have no current plans to pay dividends in the foreseeable future. 32 Stock Performance Graph The following graph sets forth the cumulative return on our common stock from December 30, 2016, the last trading day of our 2016 fiscal year, through December 31, 2021, the last trading day of our 2021 fiscal year, as compared to the cumulative return of the Standard & Poor’s 500 Index, or the S&P 500 Index, and the cumulative return of the Standard & Poor’s MidCap 400 Index, or the S&P MidCap 400 Index. We selected the S&P 500 Index because it is a broad index of equity markets. We selected the S&P MidCap 400 Index, which is generally comprised of issuers having a similar market capitalization with the Company at the times presented and of which we are currently a member, because we believe that there are no other lines of business or published industry indices or peer groups that provide a more meaningful comparison of the cumulative return of our stock. The graph assumes that $100 was invested on December 30, 2016 in each of (1) our common stock, (2) the S&P 500 Index and (3) the S&P MidCap 400 Index, and that all dividends, as applicable, were reinvested. 450.00 $450.00 400.00 350.00 300.00 250.00 200.00 150.00 100.00 50.00 0.00 12.30.16 12.29.17 12.28.18 12.27.19 12.31.20 12.31.21 WW International, Inc. S&P 500 Index S&P MidCap 400 Index Company/Index WW International, Inc................................ S&P 500 Index ........................................... S&P MidCap 400 Index ............................. 12.30.16 12.29.17 12.28.18 12.27.19 12.31.20 12.31.21 100.00 100.00 100.00 386.72 121.83 116.24 360.61 115.49 102.31 328.55 153.57 130.36 213.10 181.35 148.25 140.87 233.40 184.96 Cumulative Total Return ($) Item 6. [Reserved] Not applicable. 33 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion in conjunction with our consolidated financial statements and related notes included in Item 15 of this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, strategies, prospects, objectives, expectations and intentions. The cautionary statements discussed in Cautionary Notice Regarding Forward- Looking Statements and elsewhere in this Annual Report on Form 10-K should be read as applying to all forward- looking statements wherever they appear in this Annual Report on Form 10-K. Our actual results could differ materially from those discussed here. Factors that could cause or contribute to these differences include, without limitation, those discussed in Risk Factors included in Item 1A of this Annual Report on Form 10-K. For the discussion of the financial condition and results of operations for the year ended January 2, 2021 compared to the year ended December 28, 2019, refer to "Part IIItem 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended January 2, 2021 filed with the SEC on February 25, 2021, which discussion is incorporated herein by reference. Overview We are a global wellness company powered by the world’s leading commercial weight management program and an award-winning digital subscription platform. We are focused on inspiring people to adopt healthy habits for real life and aim to democratize and deliver wellness for all. With nearly six decades of weight management experience, expertise and know-how, we are one of the most recognized and trusted brand names among weight- conscious consumers. We educate our members and provide them with guidance, digital tools and an inspiring community to enable them to develop healthy habits and focus on their overall health and wellness. WW-branded services and products include digital offerings provided through our apps and websites, workshops, consumer products, and various events and experiences. Our business has gone through a significant shift to a digital subscription model over the past several years and our primary sources of revenue are subscriptions for our digital products and for our workshops. Our “Digital” business refers to providing subscriptions to our digital product offerings, including Digital 360 and Personal Coaching + Digital. Our “Workshops + Digital” (formerly known as “Studio + Digital”) business refers to providing unlimited access to our workshops combined with our digital subscription product offerings to commitment plan subscribers. 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. We operate in numerous countries around the world, including through our franchise operations. We have four reportable segments based on an integrated geographical structure as follows: North America, Continental Europe (CE), United Kingdom and Other. See the section entitled “Business—Business Organization and Global Operations” in Item 1 of this Annual Report on Form 10-K for further information on these reportable segments and the countries in which we operate. Components of our Results of Operations Revenues We derive our revenues principally from: • • • Subscription Revenues. Our “Subscription Revenues” consist of “Digital Subscription Revenues” and “Workshops + Digital Fees” (formerly known as “Studio + 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-studio product sales. We sell a range of consumer products, including bars, snacks, cookbooks and kitchen tools, in our studios. E-commerce, licensing, franchise royalties and other. We generate revenues from sales of consumer products online through our e-commerce platforms and through our trusted partners. We license our trademarks and other intellectual property in certain categories of food, beverages and other relevant consumer products and services. We also co-brand or endorse with carefully selected branded consumer products and services. In addition, our franchisees typically pay us a royalty fee of 10% of their Workshops + Digital fee revenues as well as purchase products for sale in their workshops. We also generate revenues from publishing. 34 The following table sets forth our revenues by category for the past two fiscal years. Revenue Sources (in millions) Subscription Revenues ........................................................................................ $ In-studio product sales ........................................................................................ E-commerce, licensing, franchise royalties and other ........................................ Total .................................................................................................................... $ 1,063.0 21.9 127.5 1,212.5 $ $ 1,186.5 40.4 151.3 1,378.1 Fiscal 2021 (52 weeks) Fiscal 2020 (53 weeks) Note: Totals may not sum due to rounding. Total revenues for fiscal 2021 decreased 12.0% versus fiscal 2020 driven primarily by a decrease in Subscription Revenues. Additional revenue details are as follows: • • • Subscription Revenues. Subscription Revenues for fiscal 2021 decreased 10.4% versus fiscal 2020 due to a decrease in Workshops + Digital Fees, partially offset by an increase in Digital Subscription Revenues. Our Workshops + Digital products are priced at a premium compared to our Digital products. Workshops + Digital Fees were negatively impacted by both the lower number of Incoming Workshops + Digital Subscribers at the beginning of fiscal 2021 versus the beginning of fiscal 2020 and the significant recruitment decline in fiscal 2021 driven by the closure of certain of our studios and the limited reopening of others primarily related to the COVID-19 environment. End of Period Subscribers for fiscal 2021 decreased 5.8% versus the prior year. In fiscal 2021, recruitment declined compared to the prior year due to the COVID-19 environment and cycling against the successful launch of the myWW program in fiscal 2020. Partially mitigating these trends, member retention in the aggregate has improved over fiscal 2020 and was at historic highs in fiscal 2021. Recruitment and retention continue to be a key strategic focus. In-studio product sales. In-studio product sales for fiscal 2021 decreased 45.7% versus fiscal 2020 as a result of the closure of our studios and reduced operations related to the COVID-19 pandemic. E-commerce, licensing, franchise royalties and other. All other revenues for fiscal 2021 decreased 15.7% versus fiscal 2020 primarily due to cycling against the revenue received in connection with the WW Presents: Oprahs 2020 Vision tour in fiscal 2020. Cost of Revenues Total cost of revenues primarily consists of expenses to operate our studios and workshops, costs to sell consumer products and costs to develop and operate our digital products. Operating costs primarily consist of salary expense paid to operations management, commissions and expenses paid to our employees, coaches and guides, studio room rent, customer service costs (both in-house and third-party), program material expenses, depreciation and amortization associated with field automation, credit card and fulfillment fees and training and other expenses. Cost to sell products includes costs of products purchased from our third-party suppliers, inventory reserves, royalties, and inbound and outbound shipping and related costs incurred in making our products available for sale or use. Costs to operate our digital products include salaries and related benefits, depreciation and amortization of website development, credit card processing fees and other costs incurred in developing our digital offerings. Marketing Expenses Marketing expenses primarily consist of costs to produce advertising and marketing materials as well as media costs to advertise our brand and products across multiple platforms (e.g., television, YouTube, social media, programmatic, audio, search, affiliate, branded content, electronic customer relationship marketing (eCRM), direct mail and public relations), costs paid to third-party agencies who help us develop our marketing campaigns and strategy, expenses in support of market research, as well as costs incurred in connection with local marketing and promotions. 35 Selling, General and Administrative Expenses Selling, general and administrative expenses consist of compensation, benefits and other related costs, including stock-based compensation, third-party consulting, temporary help, audit, legal and litigation expenses as well as facility costs and depreciation and amortization of systems in support of the business infrastructure and offices globally. Selling, general and administrative expenses also include amortization expense of certain of our intangible assets and certain one-time transaction expenses. Gross Margin The following table sets forth our gross profit and gross margin for the past two fiscal years, as adjusted for fiscal 2021 to exclude the impact of the 2021 plan restructuring charges and the reversal of 2020 plan restructuring charges, and as adjusted for fiscal 2020 to exclude the impact of the 2020 plan restructuring charges. See “Non- GAAP Financial Measures” for additional information. (in millions except percentages) Gross Profit ............................................................................................................ $ Gross Margin ................................................................................................... Adjustments to Reported Amounts (1) 2021 plan restructuring charges .................................................................. 2020 plan restructuring charges .................................................................. Gross Profit, as adjusted (1) .................................................................................... $ Gross Margin impact from above adjustments (1) ............................................ Gross Margin, as adjusted (1) ........................................................................... Fiscal 2021 Fiscal 2020 $ $ 726.4 59.9% 16.7 (1.3) 741.8 (1.3%) 61.2% 777.8 56.4% — 23.3 801.1 (1.7%) 58.1% 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 fiscal 2021 to exclude the impact of the $16.7 million ($12.5 million after tax) of 2021 plan restructuring charges and the reversal of $1.3 million ($1.0 million after tax) of 2020 plan restructuring charges, and for fiscal 2020 to exclude the impact of the $23.3 million ($17.4 million after tax) of 2020 plan restructuring charges. See “Non-GAAP Financial Measures” below for an explanation of our use of non-GAAP financial measures. In fiscal 2021, excluding the impact of the 2021 plan restructuring charges and the reversal of 2020 plan restructuring charges, the gross margin increase from fiscal 2020, excluding the impact of the 2020 plan restructuring charges, was driven primarily by a revenue mix shift to our higher margin Digital business and cycling against the lower margin revenues from the WW Presents: Oprahs 2020 Vision tour, partially offset by an increase in fixed costs in our Digital business primarily related to Digital 360. 36 Operating Income Margin The following table sets forth our operating income for the past two fiscal years, as adjusted for fiscal 2021 to exclude the impact of the 2021 plan restructuring charges and the reversal of 2020 plan restructuring charges, and as adjusted for fiscal 2020 to exclude the impact of the 2020 plan restructuring charges, the Winfrey Stock Compensation expense and the impairment charge for our goodwill related to our Brazil reporting unit: (in millions except percentages) Operating Income................................................................................................... $ Operating Income Margin................................................................................ Fiscal 2021 Fiscal 2020 196.3 16.2% $ 216.2 15.7% Adjustments to Reported Amounts (1) 2021 plan restructuring charges .................................................................. 2020 plan restructuring charges .................................................................. Winfrey Stock Compensation expense ....................................................... Goodwill impairment .................................................................................. Operating Income, as adjusted (1)........................................................................... $ Operating Income Margin impact from above adjustments (1)......................... Operating Income Margin, as adjusted (1)........................................................ 21.5 (1.6) — — 216.2 (1.6%) 17.8% $ — 33.1 32.7 3.7 285.6 (5.0%) 20.7% 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 fiscal 2021 to exclude the impact of the $21.5 million ($16.1 million after tax) of 2021 plan restructuring charges and the reversal of $1.6 million ($1.2 million after tax) of 2020 plan restructuring charges, and for fiscal 2020 to exclude the impact of the $33.1 million ($24.8 million after tax) of 2020 plan restructuring charges, the $32.7 million ($24.5 million after tax) Winfrey Stock Compensation expense and the $3.7 million ($2.7 million after tax) goodwill impairment charge related to our Brazil reporting unit. See “Non-GAAP Financial Measures” below for an explanation of our use of non-GAAP financial measures. In fiscal 2021, excluding the impact of the 2021 plan restructuring charges and the reversal of 2020 plan restructuring charges, the decrease in operating income margin from fiscal 2020, excluding the impact of the 2020 restructuring charges, the Winfrey Stock Compensation expense and the goodwill impairment charge, was driven primarily 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, partially offset by an increase in gross margin. Material Trends 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 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 (including revenues from the WW Presents: Oprahs 2020 Vision tour), and, in the case of the consolidated financial results and Other reportable segment, franchise fees with respect to commitment plans and royalties. 37 • • • 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” (formerly known as “Studio + 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” (formerly known as “Incoming Studio + 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” (formerly known as “End of Period Studio + 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 impact our business operations and the markets in which we operate. Additionally, we have seen significant shifts in consumer sentiment with respect to the weight loss and wellness marketplace as the pandemic evolves. COVID-19 had a significant effect on our reported results for fiscal 2020 and fiscal 2021. While the number of End of Period Subscribers at the end of fiscal 2021 was essentially flat compared to the pre-pandemic number at the end of fiscal 2019, it decreased 5.8% versus the end of fiscal 2020. While Digital recruitments were strong in the beginning of the COVID-19 pandemic, a subsequent turn in consumer sentiment has driven a decline in Digital recruitments, and recruitment projections for our Digital business are unpredictable. Our Workshops + Digital recruitments were dramatically impacted during the first year of the pandemic, and mix shifted toward our Digital business. This change in our mix, especially when amplified by the nature of our subscription business, has negatively impacted revenue and may continue to impact it in the future. The negative impact of COVID-19, including its impact on consumer sentiment, is expected to continue to impact the business in the first quarter of fiscal 2022. 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 uncertainly 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. 38 In response to the public health crisis posed by COVID-19, in March 2020, we suspended our in-person workshops and moved quickly to transition these workshops to an entirely virtual experience. In June 2020, we began a phased re-opening with reduced operations of a limited number of our studio locations. During fiscal 2021, we selectively resumed in-person workshops where profitable and consistent with promoting the health and safety of our employees and members. However, during these uncertain times, we will continue to adhere to the requirements in local jurisdictions to close re-opened studios as necessary. We continue to evolve our workshop strategy as we evaluate our cost structure and respond to shifting consumer sentiment. This evolution may lead to further reduced operations. We continue to serve our members virtually, both via our Digital business and through virtual workshops. However, our Workshops + Digital business, including its business operations, number of subscribers and in-studio product sales, remain substantially affected by the evolving COVID-19 environment. 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 consolidated certain of our studios and continue to close certain other branded studio locations. The decision to re-open a studio location, if at all, or further consolidate studio locations, will be 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 will be 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 continue to incur, significant costs associated with our real estate realignment. While we expect the effects of the pandemic and the related responses 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 economic and operational impacts of COVID-19 means we cannot reasonably estimate the related financial impact at this time. For more information, see “Item 1A. Risk Factors” in Part I of this Annual Report on Form 10-K. 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. Market Trends We believe that our revenues and profitability can be sensitive to major trends in the wellness and weight management industries. In particular, we believe that our business could be adversely impacted by: • • • • • • • • • • increased competition from weight loss and wellness apps; reduced consumer interest in commercial weight loss and diet programs; the development of more effective or more favorably perceived weight management methods or technologies, including by the pharmaceutical, genetics and biotechnology industries; a failure to develop and market new, innovative services and products, to enhance our existing services and products, or to successfully expand into new channels of distribution or respond to consumer trends or sentiment, including consumer focus on integrated lifestyle and fitness approaches; a failure to successfully implement new strategic initiatives; a decrease in the effectiveness of our marketing, advertising, and social media programs or an increase in the effectiveness of our competitors’ similar programs; an impairment of our brands and other intellectual property; a failure of our technology or systems to perform as designed; any event or condition, including health epidemics and natural disasters, that may discourage or impede people from gathering with others or accessing resources; and a downturn in general economic conditions or consumer confidence. 39 North America Metrics and Business Trends In fiscal 2021, North America Total Paid Weeks decreased 4.2% versus the prior year. The decrease in North America Total Paid Weeks was driven primarily by lower recruitments versus the prior year due to the COVID-19 environment and cycling against the successful launch of the myWW program in fiscal 2020. Continental Europe Metrics and Business Trends In fiscal 2021, Continental Europe Total Paid Weeks increased 0.3% versus the prior year, driven primarily by the higher number of Incoming Digital Subscribers at the beginning of fiscal 2021 versus the beginning of fiscal 2020, offset by lower recruitments versus the prior year due to the COVID-19 environment. United Kingdom Metrics and Business Trends In fiscal 2021, UK Total Paid Weeks decreased 19.0% versus the prior year. The decrease in UK Total Paid Weeks was driven primarily by lower recruitments versus the prior year due to the COVID-19 environment and cycling against the successful launch of the myWW program in fiscal 2020. 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 income and operating income margin are discussed in this Annual Report on Form 10-K both as reported (on a GAAP basis) and as adjusted (on a non-GAAP basis), as applicable, with respect to (i) fiscal 2021 to exclude the net impact of (x) charges associated with our previously disclosed 2021 organizational restructuring plan and (y) the reversal of certain of the charges associated with our previously disclosed 2020 organizational restructuring plan and (ii) fiscal 2020 to exclude the impact of (x) charges associated with our previously disclosed 2020 organizational restructuring plan, (y) the one-time stock compensation expense associated with the previously disclosed option granted to Ms. Oprah Winfrey in connection with the Company extending its partnership with Ms. Winfrey (the “Winfrey Stock Compensation expense”) and (z) the impairment charge for our goodwill related to our Brazil reporting unit. We generally refer to such non-GAAP measures as follows: (i) with respect to the adjustments for fiscal 2021, as excluding or adjusting for the net impact of restructuring charges; and (ii) with respect to the adjustments for fiscal 2020, as excluding or adjusting for the impact of the restructuring charges, the Winfrey Stock Compensation expense and the goodwill impairment charge. We also present within this Annual Report on Form 10-K 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, early extinguishment of debt, restructuring charges (including the net impact where applicable) and goodwill impairment (“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. 40 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 Annual Report on Form 10-K, 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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to the impairment analysis for goodwill and other indefinite-lived intangible assets. We base our estimates on historical experience and on various other factors and assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. Based on this criteria, we believe the following accounting policies are most important to the portrayal of our financial condition and results of operations and require our most significant judgments and estimates. In addition, there are other items within our financial statements that require estimation, but are not deemed critical as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements. Franchise Rights Acquired 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 on an annual basis for impairment. In performing the impairment analysis for our indefinite-lived franchise rights acquired, the fair value for our franchise rights acquired is estimated using a 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 January 1, 2022 balance sheet date were $698.4 million, $60.1 million, $12.2 million, $6.5 million and $4.8 million, respectively. In our hypothetical start-up approach analysis for fiscal 2021, 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 2021, 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. 41 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 January 1, 2022 balance sheet date were $105.1 million, $42.4 million and $9.9 million, respectively. For all of our reporting units tested as of May 9, 2021, 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 9, 2021 and May 3, 2020, each the first day of fiscal May, on our indefinite- lived intangible assets and goodwill. In performing our annual impairment analysis as of May 9, 2021 and May 3, 2020, we determined that the carrying amounts of our franchise rights acquired with indefinite lives units of account and 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. 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 current levels, 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 this Annual Report on Form 10-K. Based on the results of our May 9, 2021 annual franchise rights acquired impairment analysis performed for all of our units of account, all units, except for New Zealand, had an estimated fair value at least 45% higher than the respective unit’s carrying amount. Collectively, these units of account represent 99.4% of our total franchise rights acquired as of the January 1, 2022 balance sheet date. Based on the results of our annual franchise rights acquired impairment test performed for our New Zealand unit of account, which holds 0.6% of our franchise rights acquired as of the January 1, 2022 balance sheet date, the estimated fair value of this unit of account exceeded its carrying value by approximately 10%. Accordingly, a change in the underlying assumptions for 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 New Zealand, for which the net book value was $4.8 million as of January 1, 2022. In performing this impairment analysis for fiscal 2021, 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 (41.5%) to 5.6% in the year of maturity from fiscal 2020, in each case, earned in the applicable country and assumed cumulative annual revenue growth rates for the years beyond the year of maturity of 1.8%. For the year of maturity and beyond, we assumed operating income margin rates of 7.1% to 11.7%. In our relief from royalty approach, we assumed Digital revenue growth in each country of 17.9% to 28.3% in fiscal 2021 and of 4.7% to 26.8% in fiscal 2022. Based on the results of our May 9, 2021 annual goodwill impairment test performed for all of our reporting units, there was significant headroom in the goodwill impairment analysis for those units, with the difference between the carrying value and the fair value exceeding 100%. 42 The following are the more significant assumptions utilized in our annual impairment analyses for fiscal 2021 and fiscal 2020: Debt-Free Cumulative Annual Cash Flow Growth Rate ....................... Discount Rate......................................................................................... Fiscal 2021 0.2% to 2.6% 8.5% Fiscal 2020 4.0% to 13.9% 9.5% Canada Indefinite-Lived Franchise Rights Acquired Interim Impairment Test Our Canada unit of account had a net book value of $60.1 million, 7.7% of our franchise rights acquired as of the January 1, 2022 balance sheet date. Given the lower headroom in the May 9, 2021 annual franchise rights acquired impairment test for this unit relative to the other units of account and the decline in business performance through fiscal 2021 (which may continue into fiscal 2022), we performed an interim impairment analysis as of January 1, 2022. In this test, the estimated fair value of this unit of account exceeded its carrying value by approximately 3%. Therefore, we did not record an impairment for the Canada unit of account. Any impairment test is highly dependent on the assumptions used. The most significant assumptions at issue are the discount rate applied and the Digital revenue growth rate used. In the interim impairment analysis, we applied a discount rate of 9.0% 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 value by approximately 8%, which would result in an impairment. Holding all other assumptions constant, a hypothetical 1% reduction in projected Digital revenues for each year in the analysis would decrease the fair value by approximately 5%, which would also result in an impairment. Brazil Goodwill Impairment With respect to our Brazil reporting unit, during the first quarter of fiscal 2020, we made a strategic decision to shift to an exclusively Digital business in that country. We determined that this decision, together with the negative impact of COVID-19, the ongoing challenging economic environment in Brazil and our reduced expectations regarding the reporting unit’s future operating cash flows, required us to perform an interim goodwill impairment analysis. In performing this discounted cash flow analysis, we determined that the carrying amount of this reporting unit exceeded its fair value and as a result recorded an impairment charge of $3.7 million, which comprised the remaining balance of goodwill for this reporting unit. As it related to our goodwill impairment analysis for Brazil, we estimated future debt-free cash flows in contemplation of our growth strategies for that market. In developing these projections, we considered the growth strategies under the current market conditions in Brazil. 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. Critical Accounting Policies Information concerning our critical accounting policies is set forth in Note 2 of our audited consolidated financial statements, contained in Part IV, Item 15 of this Annual Report on Form 10-K. 43 RESULTS OF OPERATIONS FOR FISCAL 2021 (52 weeks) COMPARED TO FISCAL 2020 (53 weeks) The Company’s fiscal year ends on the Saturday closest to December 31st and consists of either 52- or 53- week periods. Fiscal 2021 contained 52 weeks, while fiscal 2020 contained 53 weeks. The first week of fiscal 2020, which began on December 29, 2019 and ended on January 4, 2020, contributed an additional $25.5 million in fiscal 2020 net revenues. Due to the timing of the first week of fiscal 2020, additional marketing expense drove a decline of $7.5 million in fiscal 2020 operating income. The first week of fiscal 2020 also contributed 3.2 million of additional Digital Paid Weeks, 1.3 million of additional Workshops + Digital Paid Weeks and 4.5 million of additional Total Paid Weeks to fiscal 2020. The additional week in fiscal 2020 also resulted in an additional week of interest expense for that year. The table below sets forth selected financial information for fiscal 2021 from our consolidated statements of net income for fiscal 2021 versus selected financial information for fiscal 2020 from our consolidated statements of net income for fiscal 2020. Summary of Selected Financial Data (In millions, except per share amounts) Fiscal 2021 Fiscal 2020 Increase/ (Decrease) % Change % Change Constant Currency Revenues, net .................................. $ Cost of revenues.............................. Gross profit ................................ Gross Margin % ........................ $ 1,212.5 486.1 726.4 59.9% $ 1,378.1 600.3 777.8 56.4% (165.7) (114.2) (51.5) (12.0%) (19.0%) (6.6%) (13.7%) (20.2%) (8.7%) Marketing expenses......................... Selling, general & administrative expenses ....................................... Goodwill impairment ...................... Operating income ...................... Operating Income Margin %..... Interest expense............................... Other expense, net........................... Early extinguishment of debt .......... Income before income taxes ...... Provision for income taxes.............. Net income................................. Net loss attributable to the noncontrolling interest ................. Net income attributable to 261.5 260.7 0.7 0.3% (2.0%) 268.6 — 196.3 16.2% 87.9 1.4 30.4 76.7 9.8 66.9 — 297.3 3.7 216.2 15.7% 123.3 0.3 0.0 92.5 17.5 75.0 0.0 (28.7) (3.7) (19.9) (35.4) 1.0 30.4 (15.8) (7.7) (8.1) (9.6%) (100.0%) (9.2%) (10.7%) (100.0%) (12.3%) (28.7%) 100.0% * 100.0% (17.1%) (44.0%) (10.9%) (28.7%) 100.0% * 100.0% (24.5%) (55.0%) (17.4%) (0.0) (100.0%) (100.0%) WW International, Inc.................. $ 66.9 $ 75.1 $ (8.2) (10.9%) (17.4%) Weighted average diluted shares outstanding ................................... Diluted earnings per share............... $ Note: Totals may not sum due to rounding. *Note: Percentage in excess of 100.0%. 70.7 0.95 $ 70.0 1.07 $ 0.7 (0.13) 1.0% (11.8%) 1.0% (18.2%) 44 Certain results for fiscal 2021 are adjusted to exclude the impact of the $21.5 million of 2021 plan restructuring charges and the reversal of $1.6 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 fiscal year ended January 1, 2022 which have been adjusted. (in millions except percentages) Fiscal 2021 ............................................................................... $ Adjustments to reported amounts (1) 2021 plan restructuring charges .......................................... 2020 plan restructuring charges .......................................... Total adjustments (1)....................................................... Fiscal 2021, as adjusted (1) ...................................................... $ Gross Profit Gross Profit Margin Operating Income Operating Income Margin 726.4 59.9% $ 196.3 16.2% 16.7 (1.3) 15.4 741.8 21.5 (1.6) 19.9 216.2 61.2% $ 17.8% 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 fiscal 2021 to exclude the impact of the $21.5 million ($16.1 million after tax) of 2021 plan restructuring charges and the reversal of $1.6 million ($1.2 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 fiscal 2020 are adjusted to exclude the impact of the $33.1 million of 2020 plan restructuring charges, the $32.7 million Winfrey Stock Compensation expense and the $3.7 million goodwill impairment charge related to our Brazil reporting unit. 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 fiscal year ended January 2, 2021 which have been adjusted. (in millions except percentages) Fiscal 2020 ............................................................................... $ Adjustments to reported amounts (1) 2020 plan restructuring charges .......................................... Winfrey Stock Compensation expense ............................... Goodwill impairment .......................................................... Total adjustments (1)....................................................... Fiscal 2020, as adjusted (1) ...................................................... $ Gross Profit 777.8 23.3 — — 23.3 801.1 Gross Profit Margin Operating Income Operating Income Margin 56.4% $ 216.2 15.7% 33.1 32.7 3.7 69.4 285.6 58.1% $ 20.7% 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 fiscal 2020 to exclude the impact of the $33.1 million ($24.8 million after tax) of 2020 plan restructuring charges, the $32.7 million ($24.5 million after tax) Winfrey Stock Compensation expense and the $3.7 million ($2.7 million after tax) goodwill impairment charge. See “Non-GAAP Financial Measures” above for an explanation of our use of non-GAAP financial measures. Consolidated Results Revenues Revenues for fiscal 2021 were $1,212.5 million, a decrease of $165.7 million, or 12.0%, versus fiscal 2020. Excluding the impact of foreign currency, which positively impacted our revenues in fiscal 2021 by $23.2 million, revenues for fiscal 2021 would have decreased 13.7% versus the prior year. This decrease was driven primarily by lower revenues related to Workshops + Digital Fees as a result of the lower number of subscribers at the beginning of fiscal 2021 and throughout the fiscal year as compared to the prior year period due to the COVID-19 pandemic. See “—Segment Results” for additional details on revenues. 45 Cost of Revenues Total cost of revenues for fiscal 2021 decreased $114.2 million, or 19.0%, versus the prior year. Excluding the net impact of the $15.4 million of restructuring charges in fiscal 2021 and the impact of the $23.3 million of restructuring charges in fiscal 2020, total cost of revenues for fiscal 2021 would have decreased by 18.4%, or 19.7% on a constant currency basis, versus the prior year. Gross Profit Gross profit decreased $51.5 million, or 6.6%, in fiscal 2021 compared to fiscal 2020. Excluding the impact of foreign currency, which positively impacted gross profit in fiscal 2021 by $15.9 million, gross profit for fiscal 2021 would have decreased 8.7% versus the prior year. Excluding the net impact of the $15.4 million of restructuring charges in fiscal 2021 and the impact of the $23.3 million of restructuring charges in fiscal 2020, gross profit for fiscal 2021 would have decreased by 7.4%, or 9.4% on a constant currency basis, versus the prior year primarily due to the decrease in revenues. Gross margin for fiscal 2021 increased 3.5% to 59.9% versus 56.4% for fiscal 2020. Excluding the impact of foreign currency, gross margin for fiscal 2021 would have increased 3.3% to 59.7% versus the prior year. Excluding the net impact of restructuring charges in fiscal 2021 and the impact of restructuring charges in fiscal 2020, gross margin for fiscal 2021 would have increased 3.0% to 61.2% versus the prior year. Excluding the impact of foreign currency, the net impact of restructuring charges in fiscal 2021 and the impact of restructuring charges in fiscal 2020, gross margin for fiscal 2021 would have increased 2.9% to 61.0% versus the prior year. The gross margin increase was driven primarily by a revenue mix shift to our higher margin Digital business and cycling against the lower margin revenues from the WW Presents: Oprahs 2020 Vision tour, partially offset by an increase in fixed costs in our Digital business primarily related to Digital 360. Marketing Marketing expenses for fiscal 2021 increased $0.7 million, or 0.3%, versus fiscal 2020. Excluding the impact of foreign currency, which increased marketing expenses in fiscal 2021 by $5.9 million, marketing expenses for fiscal 2021 would have decreased 2.0% versus fiscal 2020. Marketing expenses as a percentage of revenue increased to 21.6% in fiscal 2021 as compared to 18.9% in fiscal 2020. Selling, General and Administrative Selling, general and administrative expenses for fiscal 2021 decreased $28.7 million, or 9.6%, versus fiscal 2020. Excluding the impact of foreign currency, which increased selling, general and administrative expenses in fiscal 2021 by $3.2 million, selling, general and administrative expenses for fiscal 2021 would have decreased 10.7% versus the prior year. Excluding the net impact of the $4.5 million of restructuring charges in fiscal 2021 and the impact of both the $32.7 million Winfrey Stock Compensation expense and the $9.8 million of restructuring charges in fiscal 2020, selling, general and administrative expenses for fiscal 2021 would have increased by 3.7%, or 2.4% on a constant currency basis, versus the prior year. This increase in selling, general and administrative expenses was driven primarily by higher employee compensation and related expenses. Selling, general and administrative expenses as a percentage of revenue increased to 22.2% in fiscal 2021 as compared to 21.6% in fiscal 2020. Impairment In performing our interim impairment analysis for our Brazil reporting unit during the first quarter of fiscal 2020, we determined that, based on the fair values calculated, the carrying amount of goodwill related to our Brazil reporting unit exceeded our fair value and recorded an impairment charge of $3.7 million in fiscal 2020. 46 Operating Income Operating income for fiscal 2021 decreased $19.9 million, or 9.2%, versus fiscal 2020. Excluding the impact of foreign currency, which positively impacted operating income in fiscal 2021 by $6.8 million, operating income for fiscal 2021 would have decreased 12.3% versus the prior year. Excluding the net impact of the $19.9 million of restructuring charges in fiscal 2021 and the impact of the $33.1 million of restructuring charges, the $32.7 million Winfrey Stock Compensation expense and the $3.7 million goodwill impairment charge related to our Brazil reporting unit in fiscal 2020, operating income for fiscal 2021 would have decreased by 24.3%, or 26.7% on a constant currency basis, versus the prior year. This decrease in operating income was driven primarily by a decrease in gross profit as compared to the prior year. Operating income margin for fiscal 2021 increased 0.5% to 16.2% from 15.7% for fiscal 2020. Excluding the net impact of restructuring charges in fiscal 2021 and the impact of restructuring charges, the Winfrey Stock Compensation expense and the goodwill impairment charge in fiscal 2020, operating income margin for fiscal 2021 would have decreased by 2.9%, or 3.1% on a constant currency basis, versus the prior year. This decrease in operating income margin was driven primarily 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, partially offset by an increase in gross margin, versus the prior year. Interest Expense Interest expense for fiscal 2021 decreased $35.4 million, or 28.7%, versus fiscal 2020. The decrease in interest expense was driven primarily by lower interest rates under our New 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 fiscal 2021 and fiscal 2020 and excluding the impact of our interest rate swaps then in effect, decreased to 5.15% per annum at the end of fiscal 2021 from 6.94% per annum at the end of fiscal 2020. 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 fiscal 2021 and fiscal 2020, decreased to 5.85% per annum at the end of fiscal 2021 from 7.72% per annum at the end of fiscal 2020. 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 7A. Quantitative and Qualitative Disclosures about Market Risk” in this Annual Report on Form 10-K. Other Expense, Net Other expense, net, which consists primarily of the impact of foreign currency on intercompany transactions, increased by $1.0 million in fiscal 2021 to $1.4 million of expense as compared to $0.3 million of expense in the prior year. Early Extinguishment of Debt In fiscal 2021, we recorded $30.4 million in an aggregate amount of early extinguishment of debt charges, comprised of (1) $29.2 million recorded in the second quarter of fiscal 2021 resulting from fees in connection with the April 2021 debt refinancing, consisting of $12.9 million of a prepayment penalty on the Discharged Senior Notes (as defined below), $9.0 million of financing fees and the write-off of $7.2 million of pre-existing deferred financing fees and debt discount and (2) $1.2 million recorded in the fourth quarter of fiscal 2021 resulting from the write-off of a debt discount and deferred financing fees in connection with the voluntary debt prepayments of our outstanding term loans under the New Term Loan Facility. For additional details, see “—Liquidity and Capital Resources— Long-Term Debt”. Tax Our effective tax rate for fiscal 2021 was 12.7% as compared to 18.9% for fiscal 2020. The tax expense for fiscal 2021 was impacted by a tax benefit related to a decrease in the applicable state tax rate on certain deferred income, a tax benefit related to tax windfalls from stock compensation and a tax benefit due to the reversal of a valuation allowance related to certain non-U.S. net operating losses that are now expected to be realized, partially offset by tax expense related to income earned in foreign jurisdictions at rates higher than the U.S. 47 The tax expense for fiscal 2020 was impacted by a tax benefit related to the reversal of the tax impact of global intangible low-taxed income, or GILTI, a tax benefit related to tax windfalls from stock compensation and a tax benefit related to foreign-derived intangible income, partially offset by tax expense related to income earned in foreign jurisdictions at rates higher than the U.S. and out-of-period income tax adjustments. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, was signed into law. The CARES Act includes provisions relating to modifications to the net interest deduction limitation, net operating loss carryforward rules, refundable payroll tax credits and deferment of the employer portion of certain payroll taxes. On July 20, 2020, the U.S. Treasury Department released final regulations under Internal Revenue Code Section 951A (TD 9902) permitting a taxpayer to elect to exclude from its GILTI inclusion items of income subject to a high effective rate of foreign tax. As a result of the final regulations, we recorded a $7.6 million tax benefit in fiscal 2020 related to the fiscal 2018 and fiscal 2019 taxes previously accrued attributable to GILTI. Net Income Attributable to the Company and Earnings Per Share Net income attributable to the Company for fiscal 2021 was $66.9 million, which reflected a $8.2 million, or 10.9%, decrease from fiscal 2020. Excluding the impact of foreign currency, which positively impacted net income attributable to the Company in fiscal 2021 by $4.9 million, net income attributable to the Company for fiscal 2021 would have decreased by 17.4% versus the prior year. Net income attributable to the Company for fiscal 2021 included a $22.7 million impact from the write-off of fees related to our aggregate early extinguishment of debt charges and a $14.9 million net impact from restructuring charges. Additionally, net income attributable to the Company for fiscal 2021 included a $6.3 million tax benefit related to a decrease in the applicable state tax rate on certain deferred income and a $1.6 million tax benefit due to the reversal of a valuation allowance related to certain non-U.S. net operating losses that are now expected to be realized. Net income attributable to the Company for fiscal 2020 included a $24.8 million impact from restructuring charges, a $24.5 million impact from the Winfrey Stock Compensation expense and a $2.7 million impact from the goodwill impairment charge related to our Brazil reporting unit. Additionally, net income attributable to the Company for fiscal 2020 included a $7.6 million tax benefit related to the reversal of the fiscal 2018 and fiscal 2019 tax impact of GILTI. Earnings per fully diluted share, or EPS, for fiscal 2021 was $0.95 compared to $1.07 for fiscal 2020. EPS for fiscal 2021 included a $0.32 impact from the write-off of fees related to our aggregate early extinguishment of debt charges and a $0.21 net impact from restructuring charges. Additionally, EPS for fiscal 2021 included a $0.09 tax benefit related to a decrease in the applicable state tax rate on certain deferred income and a $0.02 tax benefit due to the reversal of a valuation allowance related to certain non-U.S. net operating losses that are now expected to be realized. EPS for fiscal 2020 included a $0.35 impact from restructuring charges, a $0.35 impact from the Winfrey Stock Compensation expense and a $0.04 impact from the goodwill impairment charge related to our Brazil reporting unit. Additionally, EPS for fiscal 2020 included an $0.11 tax benefit related to the reversal of the fiscal 2018 and fiscal 2019 tax impact of GILTI. 48 Segment Results Metrics and Business Trends The following tables set forth key metrics by reportable segment for fiscal 2021 and the percentage change in those metrics versus the prior year: (in millions except percentages and as noted) Subscription Revenues North America...... $ CE......................... UK ........................ Other (1)................. Total ..................... $ 714.2 265.0 55.1 28.8 1,063.0 GAAP Product Sales & Other $ $ 100.6 32.9 10.8 5.2 149.4 Fiscal 2021 Constant Currency Total Revenues Subscription Revenues $ 814.8 297.9 65.8 33.9 $ 1,212.5 $ $ 711.1 254.1 51.3 26.6 1,043.1 Product Sales & Other $ $ 100.0 31.3 10.0 4.9 146.2 Total Revenues $ 811.2 285.3 61.3 31.5 $ 1,189.2 Total Paid Weeks 157.0 64.8 16.4 5.2 243.4 Incoming Subscribers EOP Subscribers (in thousands) 2,822.3 1,179.6 323.5 97.7 4,423.0 2,734.9 1,094.1 245.0 94.5 4,168.6 North America...... CE......................... UK ........................ Other (1)................. Total ..................... (12.3 %) (3.7 %) (18.1 %) (3.4 %) (10.4 %) (21.3 %) (13.9 %) (37.4 %) (39.1 %) (22.0 %) (13.5 %) (4.9 %) (22.0 %) (11.3 %) (12.0 %) (12.7 %) (7.7 %) (23.7 %) (10.6 %) (12.1 %) (21.7 %) (18.2 %) (41.8 %) (42.8 %) (23.7 %) (13.9 %) (8.9 %) (27.4 %) (17.7 %) (13.7 %) (4.2 %) 0.3 % (19.0 %) (4.6 %) (4.3 %) 3.7 % 11.3 % (10.5 %) (4.3 %) 4.2 % (3.1 %) (7.2 %) (24.3 %) (3.2 %) (5.8 %) % Change Fiscal 2021 vs. Fiscal 2020 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) Fiscal 2021 Digital Subscription Revenues GAAP North America ...... $ CE ......................... UK......................... Other (1) ................. Total ...................... $ 504.2 228.3 36.3 19.4 788.2 Constant Currency $ $ 501.7 218.9 33.8 17.9 772.4 Digital Paid Weeks Incoming Digital Subscribers EOP Digital Subscribers (in thousands) 128.3 59.3 12.4 4.1 204.1 2,334.1 1,059.9 235.0 74.0 3,703.0 2,186.9 998.5 179.7 76.0 3,441.1 Workshops + Digital Fees GAAP $ $ 210.1 36.7 18.7 9.4 274.9 Constant Currency $ $ 209.4 35.2 17.4 8.7 270.7 Workshops + Digital Paid Weeks Incoming Workshops + Digital Subscribers EOP Workshops + Digital Subscribers 28.7 5.5 4.0 1.2 39.3 (in thousands) 488.2 119.7 88.5 23.7 720.0 548.0 95.7 65.3 18.5 727.4 North America ...... CE ......................... UK......................... Other (1) ................. Total ...................... 4.1 % 9.8 % 7.2 % 16.1 % 6.1 % 3.6 % 5.3 % (0.3 %) 7.5 % 3.9 % 3.0 % 7.4 % (1.8 %) 7.0 % 4.0 % % Change Fiscal 2021 vs. Fiscal 2020 24.8 % 22.8 % 23.9 % 20.1 % 24.0 % (6.3 %) (5.8 %) (23.5 %) 2.8 % (7.1 %) (36.3 %) (45.4 %) (43.8 %) (28.2 %) (38.0 %) (36.5 %) (47.7 %) (47.6 %) (33.6 %) (39.0 %) (27.1 %) (41.6 %) (47.6 %) (30.6 %) (32.3 %) (42.7 %) (39.1 %) (48.5 %) (41.5 %) (42.9 %) 12.3 % (20.1 %) (26.2 %) (21.9 %) 1.0 % Note: Totals may not sum due to rounding. (1) Represents Australia, New Zealand and emerging markets operations and franchise revenues. 49 North America Performance The decrease in North America revenues for fiscal 2021 versus the prior year was driven primarily by a decrease in Subscription Revenues. The decrease in Subscription Revenues for fiscal 2021 versus the prior year 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 fiscal 2021 versus the beginning of fiscal 2020 and the significant recruitment decline in fiscal 2021 as compared to the prior year driven by the closure of certain of our studios and the limited reopening of others primarily related to the COVID-19 environment. The decrease in North America Total Paid Weeks for fiscal 2021 was driven primarily by lower recruitments versus the prior year due to the COVID-19 environment and cycling against the successful launch of the myWW program in fiscal 2020. The decrease in North America product sales and other for fiscal 2021 versus the prior year was driven primarily by cycling against the revenue received in connection with the WW Presents: Oprahs 2020 Vision tour in fiscal 2020 and a decrease in in-studio product sales. Continental Europe Performance The decrease in Continental Europe revenues for fiscal 2021 versus the prior year was driven by both a decrease in Subscription Revenues and a decrease in product sales and other. The decrease in Subscription Revenues for fiscal 2021 versus the prior year was driven by a decrease in Workshops + Digital Fees, partially offset by an increase in Digital Subscription Revenues. Workshops + Digital Fees were negatively impacted by both the lower number of Incoming Workshops + Digital Subscribers at the beginning of fiscal 2021 versus the beginning of fiscal 2020 and the significant recruitment decline in fiscal 2021 as compared to the prior year driven by the closure of certain of our studios and the limited reopening of others primarily related to the COVID-19 environment. The slight increase in Continental Europe Total Paid Weeks for fiscal 2021 versus the prior year was driven primarily by the higher number of Incoming Digital Subscribers at the beginning of fiscal 2021 versus the beginning of fiscal 2020, offset by lower recruitments versus the prior year due to the COVID-19 environment. The decrease in Continental Europe product sales and other for fiscal 2021 versus the prior year was driven primarily by a decrease in product sales. United Kingdom Performance The decrease in UK revenues for fiscal 2021 versus the prior year was driven by both a decrease in Subscription Revenues and a decrease in product sales and other. The decrease in Subscription Revenues for fiscal 2021 versus the prior year 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 fiscal 2021 versus the beginning of fiscal 2020 and the significant recruitment decline in fiscal 2021 as compared to the prior year driven by the closure of certain of our studios and the limited reopening of others primarily related to the COVID-19 environment. The decrease in UK Total Paid Weeks for fiscal 2021 was driven primarily by lower recruitments versus the prior year due to the COVID-19 environment and cycling against the successful launch of the myWW program in fiscal 2020. The decrease in UK product sales and other for fiscal 2021 versus the prior year was driven primarily by a decrease in product sales. Other Performance The decrease in Other revenues for fiscal 2021 versus the prior year was driven by both a decrease in product sales and other and a decrease in Subscription Revenues. The decrease in Subscription Revenues for fiscal 2021 versus the prior year was driven by a decrease in Workshops + Digital Fees, partially offset by an increase in Digital Subscription Revenues. Workshops + Digital Fees were negatively impacted by both the lower number of Incoming Workshops + Digital Subscribers at the beginning of fiscal 2021 versus the beginning of fiscal 2020 and the recruitment decline in fiscal 2021 as compared to the prior year driven by the closure of certain of our studios and the limited reopening of others primarily related to the COVID-19 environment. The decrease in Other product sales and other for fiscal 2021 versus the prior year was driven primarily by a decrease in franchise commissions and product sales. 50 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. We currently believe that cash generated by operations, our cash on hand of approximately $153.8 million at January 1, 2022, our $173.9 million of availability under our New Revolving Credit Facility (as defined below) at January 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 arising from the COVID-19 pandemic. 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 New Revolving Credit Facility. The evolving nature, and uncertain economic impact, of COVID-19 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 access our New 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 New 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: Total current assets ............................................................ $ Total current liabilities ...................................................... Working capital surplus (deficit)....................................... Cash and cash equivalents ................................................. Current portion of long-term debt ..................................... Working capital deficit, excluding cash and cash January 1, 2022 January 2, 2021 (in millions) Increase/ (Decrease) $ 271.2 229.1 42.0 153.8 — $ 299.2 340.1 (40.9) 165.9 77.0 (28.0) (111.0) (82.9) (12.1) (77.0) equivalents and current portion of long-term debt ......... $ (111.8) $ (129.8) $ (18.0) Note: Totals may not sum due to rounding. 51 The following table sets forth a summary of the primary factors contributing to the $18.0 million decrease in our working capital deficit, excluding cash and cash equivalents and current portion of long-term debt: Derivative payable................................................ $ Prepaid income taxes............................................ $ Portion of operating lease liabilities due within one year ............................................................. $ Income taxes payable ........................................... $ Deferred revenue .................................................. $ Accrued interest.................................................... $ Operational liabilities and other, net of assets...... $ Working capital deficit change, excluding cash and cash equivalents and current portion of long-term debt ................................................... Note: Totals may not sum due to rounding. January 1, 2022 January 2, 2021 Increase/ (Decrease) Impact to Working Capital Deficit 14.7 30.5 20.3 1.7 45.9 5.1 54.7 $ $ $ $ $ $ $ (in millions) 28.3 20.0 $ $ 28.6 7.8 50.5 2.7 32.0 $ $ $ $ $ (13.6) $ $ 10.5 (8.3) $ (6.1) $ (4.6) $ $ 2.4 $ 22.7 (13.6) (10.5) (8.3) (6.1) (4.6) 2.4 22.7 $ (18.0) The decrease in derivative payable was due to a change in fair value driven by the change in interest rates. The increase in prepaid income taxes was primarily due to the timing of tax payments, partially offset by tax accruals. The decrease in the portion of operating lease liabilities due within one year was due to the increase in lease terminations. The decrease in income taxes payable was primarily due to the timing of tax payments, partially offset by tax accruals. The increase in operational liabilities and other, net of assets, which includes accrued salaries and wages, was driven primarily by a decline in inventory balances and a decline in prepaid advertising due to the timing of payments. Cash Flows The following table sets forth a summary of our cash flows for the fiscal years ended: Net cash provided by operating activities...................................................... $ Net cash used for investing activities............................................................. $ Net cash used for financing activities ............................................................ $ January 1, 2022 January 2, 2021 (in millions) $ 157.3 (52.8) $ (111.5) $ 135.9 (65.6) (95.5) Operating Activities Fiscal 2021 Cash flows provided by operating activities of $157.3 million in fiscal 2021 reflected an increase of $21.3 million from $135.9 million of cash flows provided by operating activities in fiscal 2020. The increase in cash provided by operating activities was primarily the result of an increase in cash provided by operating assets and liabilities, partially offset by a decrease in non-cash add-backs in fiscal 2021 as compared to the prior year. Fiscal 2020 Cash flows provided by operating activities of $135.9 million in fiscal 2020 reflected a decrease of $46.5 million from $182.4 million of cash flows provided by operating activities in fiscal 2019. The decrease in cash provided by operating activities was primarily the result of a decrease in net income attributable to the Company of $44.5 million in fiscal 2020 as compared to the prior year. 52 Investing Activities Fiscal 2021 Net cash used for investing activities totaled $52.8 million in fiscal 2021, a decrease of $12.8 million as compared to fiscal 2020. This decrease was primarily attributable to lower capital expenditures in fiscal 2021 as compared to the prior year. Fiscal 2020 Net cash used for investing activities totaled $65.6 million in fiscal 2020, an increase of $13.0 million as compared to fiscal 2019. This increase was primarily attributable to cash paid for acquisitions in fiscal 2020. In fiscal 2020, we entered into a strategic collaboration agreement with ClassPass Inc. (“ClassPass”) and also invested $5.0 million in ClassPass’ $285.0 million Series E Preferred Stock funding round. Financing Activities Fiscal 2021 Net cash used for financing activities totaled $111.5 million in 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 $37.9 million of prepayment penalties, financing costs and debt discount in connection with the April 2021 debt refinancing. In addition, there was $52.5 million used in an aggregate amount for voluntary debt prepayments under our New Term Loan Facility (as defined below) in the fourth quarter of fiscal 2021, $2.5 million used for scheduled debt repayments under our New Term Loan Facility in the third quarter of fiscal 2021 and $19.3 million used for scheduled debt repayments under our then-existing term loan facility in the first 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 New 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. See “—Long-Term Debt” for additional details on debt. Fiscal 2020 Net cash used for financing activities totaled $95.5 million in fiscal 2020 primarily due to $96.3 million used for scheduled debt repayments under our then-existing term loan facility. 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 January 1, 2022: Long-Term Debt At January 1, 2022 (Balances in millions) Term Loan Facility due April 13, 2028 ....................................................................................... $ Senior Secured Notes due April 15, 2029.................................................................................... Total .................................................................................................................................. Less: Current portion ................................................................................................................... Unamortized deferred financing costs.................................................................................... Unamortized debt discount..................................................................................................... Total long-term debt ......................................................................................................... $ January 1, 2022 945.0 500.0 1,445.0 — 12.5 14.4 1,418.1 Note: Totals may not sum due to rounding. 53 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. 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 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. These transactions are collectively referred to herein as the April 2021 debt refinancing. Our new credit facilities consist of a $1,000.0 million term loan facility and a $175.0 million revolving credit facility (which includes borrowing capacity available for letters of credit) (collectively, as amended from time to time, referred to herein as the New Credit Facilities). During the second quarter of fiscal 2021, we incurred fees of $37.9 million (which included $12.9 million of a prepayment penalty on the Discharged Senior Notes and $5.0 million of a debt discount on our New Term Loan Facility (as defined 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 million of a prepayment penalty on the Discharged Senior Notes, $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. New Credit Facilities The New Credit Facilities were issued under a credit agreement, dated April 13, 2021 or, as amended from time to time, the New 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 New 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 New 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 New 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 New 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. As of January 1, 2022, we had $945.0 million in an aggregate principal amount of loans outstanding under our New Credit Facilities, with $173.9 million of availability and $1.1 million in issued but undrawn letters of credit outstanding under the New Revolving Credit Facility. There were no outstanding borrowings under the New Revolving Credit Facility as of January 1, 2022. All obligations under the New 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 New 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. The New 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 54 • 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 New Credit Agreement. The foregoing mandatory prepayments will be used to reduce the installments of principal on the New Term Loan Facility. We may voluntarily repay outstanding loans under the New Credit Facilities at any time without penalty, except for customary “breakage” costs with respect to LIBOR loans under the New Credit Facilities. Borrowings under the New 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 New 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 January 1, 2022, the applicable margins for the LIBOR rate borrowings under the New Term Loan Facility and the New Revolving Credit Facility were 3.50% and 2.75%, respectively. In the event that LIBOR is phased out as is currently expected, the New Credit Agreement provides that we and the administrative agent may amend the New 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 New 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 New 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 New Credit Agreement). The New 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 New Revolving Credit Facility as of any fiscal quarter end exceeds 35% of the amount of the aggregate commitments under the New 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 first fiscal quarter of 2023, with an additional step down to 5.50:1.00 for the period ending after the first fiscal quarter of 2023 through and including with first fiscal quarter of 2024, with a step down to 5.25:1.00 for the period ending after the first fiscal quarter of 2024 through and including with first fiscal quarter of 2025 and again to 5.00:1.00, for the period following the first fiscal quarter of 2025. 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 New Indenture, among the Company, the guarantors named therein and The Bank of New York Mellon, as trustee and notes collateral agent. The New 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. 55 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 New Credit Facilities. The Senior Secured Notes and the note guarantees are secured by a first-priority lien on all the collateral that secures the New Credit Facilities, subject to a shared lien of equal priority with the Company’s and each guarantor’s obligations under the New Credit Facilities and subject to certain thresholds, exceptions and permitted liens. Outstanding Debt At January 1, 2022, we had $1,445.0 million outstanding under the New Credit Facilities and the Senior Secured Notes, consisting of borrowings under the New Term Loan Facility of $945.0 million, $0.0 drawn down on the New Revolving Credit Facility and $500.0 million in aggregate principal amount of Senior Secured Notes issued and outstanding. At the end of fiscal 2021 and fiscal 2020, 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 IV, Item 15 of this Annual Report on Form 10-K under Note 19 “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 5.11% and 7.03% per annum at January 1, 2022 and January 2, 2021, 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 5.62% and 7.41% per annum at January 1, 2022 and January 2, 2021, respectively, based on interest rates on these dates. Dividends 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 New Credit Agreement governing the New Credit Facilities and the New Indenture governing the Senior Secured Notes, and may be limited by the agreements governing other indebtedness we or our subsidiaries incur in the future. 56 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, early extinguishment of debt, restructuring charges (including the net impact where applicable) and goodwill impairment. The table below sets forth the reconciliations for EBITDAS and Adjusted EBITDAS, each a non-GAAP financial measure, to net income, the most comparable GAAP financial measure, for the fiscal years ended: (in millions) Net Income ........................................................................... Interest .................................................................................. Taxes .................................................................................... Depreciation and amortization ............................................. Stock-based compensation ................................................... EBITDAS ............................................................................. Early extinguishment of debt ............................................... 2021 plan restructuring charges ........................................... 2020 plan restructuring charges ........................................... Goodwill impairment ........................................................... Adjusted EBITDAS (1).......................................................... $ $ $ $ January 1, 2022 January 2, 2021 66.9 87.9 9.8 45.5 21.3 231.4 30.4 21.5 (1.6) — 281.7 $ $ $ 75.1 123.3 17.5 50.0 55.0 320.9 — — 33.1 3.7 357.6 Note: Totals may not sum due to rounding. (1) The “Adjusted EBITDAS” measure is a non-GAAP financial measure that adjusts the consolidated statements of net income for fiscal 2021 to exclude the $30.4 million early extinguishment of debt, the $21.5 million of 2021 plan restructuring charges and the reversal of $1.6 million of 2020 plan restructuring charges and adjusts the consolidated statements of net income for fiscal 2020 to exclude the $33.1 million of 2020 plan restructuring charges and the $3.7 million impairment charge for goodwill related to our Brazil reporting unit. 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 January 1, 2022, our net debt/Adjusted EBITDAS ratio was 4.5x. 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 fiscal year ended: (in millions) Total debt.................................................................................................................. Less: Unamortized deferred financing costs ............................................................ Less: Unamortized debt discount ............................................................................. Less: Cash on hand................................................................................................... Net debt .................................................................................................................... $ $ January 1, 2022 1,445.0 12.5 14.4 153.8 1,264.3 Note: Totals may not sum due to rounding. 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. 57 Contractual Obligations We are obligated under non-cancelable agreements primarily for office and rent facilities operating leases. Consolidated rent expense charged to operations under all our leases for fiscal 2021 was approximately $46.4 million. The following table summarizes our future contractual obligations as of the end of fiscal 2021: Long-Term Debt (1) Total Less than 1 Year Payment Due by Period 1-3 Years (in millions) 3-5 Years More than 5 Years Principal ............................................................... $ 1,445.0 $ Interest.................................................................. Operating leases, finance leases and non-cancelable agreements.............................................................. 147.9 429.4 Total (2) ................................................................. $ 2,022.3 $ — $ — $ 69.6 126.5 — $ 1,445.0 105.2 128.1 36.1 105.7 $ 45.8 172.3 $ 20.7 45.3 148.8 $ 1,595.5 Note: Totals may not sum due to rounding. (1) Due to the fact that a portion of our debt is variable rate based, we have assumed for purposes of this table that the interest rate on all of our debt as of the end of fiscal 2021 remains constant for all periods presented. The provision for income tax contingencies included in other long-term liabilities on the consolidated balance sheet is not included in the table above due to the fact that the Company is unable to estimate the timing of payment for this liability. (2) 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. We believe that cash flows from operating activities, together with cash on hand, will provide sufficient liquidity for the short-term to fund currently anticipated capital expenditure and working capital requirements, as well as debt service requirements. Franchisee Acquisitions On August 16, 2021, we acquired substantially all of the assets of our franchisee for certain territories in Maine, Weight Watchers of Maine, Inc., for a purchase price of $2.3 million. On March 22, 2021, we acquired substantially all of the assets of our franchisee for certain territories in Michigan, The WW Group, Inc., for an aggregate purchase price of $17.5 million. On March 22, 2021, we acquired substantially all of the assets of our franchisee for certain territories in Ontario, Canada, The WW Group Co., for an aggregate purchase price of $3.1 million. On October 26, 2020, we acquired substantially all of the assets of our franchisees for certain territories in Arizona and California, Weight Watchers of Arizona, Inc. and Weight Watchers of Imperial County, Inc., respectively, for an aggregate purchase price of $10.0 million. Factors Affecting Future Liquidity Any future acquisitions, joint ventures or other similar transactions could require additional capital and we cannot be certain that any additional capital will be available on acceptable terms or at all. Our ability to fund our capital expenditure requirements, interest, principal and dividend payment obligations and working capital requirements depends on our future operations, performance and cash flow. These are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control. Off-Balance Sheet Arrangements 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. 58 Related Parties For a discussion of related party transactions affecting us, see “Item 13. Certain Relationships and Related Transactions, and Director Independence” in Part III of this Annual Report on Form 10-K. Seasonality 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. Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to market risks relating to interest rate changes and foreign currency fluctuations. All of our market risk sensitive instruments were entered into for purposes other than trading. The Company’s exposure to market risk as of the end of fiscal 2021 is described below. Interest Rate Risk Our exposure to market risk for changes in interest rates relates to interest expense of variable rate debt, in particular changes in LIBOR or the base rates which are used to determine the applicable interest rates for borrowings under the New Credit Facilities. On July 26, 2013, in order to hedge a portion of our variable rate debt, we entered into a forward-starting interest rate swap with an effective date of March 31, 2014 and a termination date of April 2, 2020. The initial notional amount of this swap was $1.5 billion. During the term of this swap, the notional amount decreased from $1.5 billion effective March 31, 2014 to $1.25 billion on April 3, 2017 and to $1.0 billion on April 1, 2019. This interest rate swap effectively fixed the variable interest rate on the notional amount of this swap at 2.41%. This swap qualified for hedge accounting and, therefore, changes in the fair value of this swap were recorded in accumulated other comprehensive loss. On June 11, 2018, in order to hedge a portion of our variable rate debt, we entered into a forward-starting interest rate swap, or the 2018 swap, with an effective date of April 2, 2020 and a termination date of March 31, 2024. The initial notional amount of this swap was $500.0 million. During the term of this swap, the notional amount decreased from $500.0 million effective April 2, 2020 to $250.0 million on March 31, 2021. This interest rate swap effectively fixed the variable interest rate on the notional amount of this swap at 3.1005%. On June 7, 2019, in order to hedge a portion of our variable rate debt, we entered into a forward-starting interest rate swap (together with the 2018 swap, known as the current swaps) with an effective date of April 2, 2020 and a termination date of March 31, 2024. The notional amount of this swap is $250.0 million. This interest rate swap effectively fixed the variable interest rate on the notional amount of this swap at 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 the end of fiscal 2021, we had $945.0 million of variable rate debt, of which $445.0 million remained unhedged. As of January 1, 2022, borrowings under the New Credit Facilities bore interest at LIBOR plus an applicable margin of 3.50%. For the New Term Loan Facility, the minimum interest rate for LIBOR applicable to such facility pursuant to the terms of the New Credit Agreement is set at 0.50%, referred to herein as the LIBOR Floor. In addition, as of January 1, 2022, our interest rate swaps in effect had an aggregate notional amount of $500.0 million. Accordingly, as of January 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, driven primarily by the interest rate applicable to our New Term Loan Facility. A hypothetical 90 basis point decrease in interest rates would have resulted in no change to annual interest expense, driven primarily by the LIBOR Floor. There have been no material changes to our exposure to market risk from the end of fiscal 2020 as compared to the end of fiscal 2021. 59 Foreign Currency Risk Other than inter-company transactions between our domestic and foreign entities, we generally do not have significant transactions that are denominated in a currency other than the functional currency applicable to each entity. As a result, substantially all of our revenues and expenses in each jurisdiction in which we operate are in the same functional currency. In general, we are a net receiver of currencies other than the U.S. dollar. Accordingly, changes in exchange rates may negatively affect our revenues and gross margins as expressed in U.S. dollars. In the future, we may enter into forward and swap contracts to hedge transactions denominated in foreign currencies to reduce the currency risk associated with fluctuating exchange rates. Realized and unrealized gains and losses from any of these transactions may be included in net income for the period. Fluctuations in currency exchange rates, particularly with respect to the euro, canadian dollar and pound sterling, may impact our shareholders’ equity. The assets and liabilities of our non-U.S. subsidiaries are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. Revenues and expenses are translated into U.S. dollars at the average exchange rate for the period. The resulting translation adjustments are recorded in shareholders’ equity as a component of accumulated other comprehensive loss. In addition, exchange rate fluctuations will cause the U.S. dollar translated amounts to change in comparison to prior periods. Item 8. Financial Statements and Supplementary Data This information is incorporated by reference to our consolidated financial statements on pages F-1 through F- 42 and our financial statement schedule on page S-1, including the report thereon of PricewaterhouseCoopers LLP on pages F-2 to F-4. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Disclosure Controls and Procedures 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 January 1, 2022, the end of fiscal 2021. 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 fiscal 2021, the design and operation of our disclosure controls and procedures were effective at the reasonable assurance level. Internal Control Over Financial Reporting Managements Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management assessed the effectiveness of our internal control over financial reporting as of January 1, 2022, the end of fiscal 2021. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control Integrated Framework (2013). Based on this assessment, our management, under the supervision and with the participation of our principal executive officer and our principal financial officer, concluded that, as of January 1, 2022, our internal control over financial reporting was effective based on those criteria. 60 The effectiveness of our internal control over financial reporting as of January 1, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears on pages F-2 to F-4 to our consolidated financial statements. Changes in Internal Control Over Financial Reporting 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. Item 9B. Other Information None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 61 PART III Items 10, 11, 12, 13 and 14. Directors, Executive Officers and Corporate Governance; Executive Compensation; Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters; Certain Relationships and Related Transactions, and Director Independence; Principal Accountant Fees and Services Information called for by Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K is incorporated by reference from our definitive Proxy Statement to be filed in connection with our 2022 Annual Meeting of Shareholders pursuant to Regulation 14A, except that (i) certain of the information regarding our directors and executive officers called for by Items 401(a), (b) and (e) of Regulation S-K has been included in Part I of this Annual Report on Form 10-K; (ii) the information regarding certain Company equity compensation plans called for by Item 201(d) of Regulation S-K is set forth below and (iii) the information regarding our Amended and Restated Code of Business Conduct and Ethics, or the Code of Business Conduct and Ethics, called for by Item 406 of Regulation S-K is set forth below. Securities Authorized for Issuance Under Equity Compensation Plans The following table summarizes our equity compensation plan information as of January 1, 2022: Equity Compensation Plan Information Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted-average exercise price of outstanding options, warrants and rights (b) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) 7,202,800 (1) $ 33.84 (2) 5,964,530 (3) 500,000 (4) $ $ 7,702,800 60.00 (2) 36.13 (2) — 5,964,530 Plan category Equity compensation plans approved by security holders .................................... Equity compensation plans not approved by security holders ............................... Total ........................................................ (1) (2) (3) (4) Consists of 1,520,620 shares of our common stock issuable upon the exercise of outstanding stock options awarded under our Third Amended and Restated 2014 Stock Incentive Plan, or 2014 Plan, and our 2008 Stock Incentive Plan, or 2008 Plan; 408,697 shares of our common stock issuable upon the exercise of the Winfrey Option granted pursuant to the Winfrey Option Agreement; 3,276,484 shares of our common stock issuable upon the exercise of the Winfrey Amendment Option granted pursuant to the Winfrey Amendment Option Agreement; 1,595,355 shares of our common stock issuable upon the vesting of restricted stock units, or RSUs, awarded under our 2014 Plan; and 401,644 shares of our common stock issuable upon the vesting of performance-based stock units, or PSUs, awarded under our 2014 Plan. The number of shares to be issued in respect of PSUs has been calculated based on the assumption that the maximum level of performance applicable to the PSUs has been achieved. The Winfrey Option was approved by the written consent of Artal Luxembourg which, as of the date thereof, controlled a majority of the voting power of our outstanding common stock. For additional details on the Winfrey Option, the Winfrey Amendment Option, the Winfrey Option Agreement and the Winfrey Amendment Option Agreement, see “Item 1. Business—History—Winfrey Transaction” of this Annual Report on Form 10-K. Reflects the weighted average exercise price of outstanding stock options. This weighted average does not reflect the shares that will be issued upon the vesting of outstanding RSUs and PSUs because such equity awards have no exercise price. Consists of shares of our common stock available for future issuance under our 2014 Plan, pursuant to various awards our Board of Directors’ Compensation and Benefits Committee may make, including non-qualified stock options, incentive stock options, stock appreciation rights, RSUs, restricted stock, performance-based awards and other equity-based awards. In connection with the initial approval of our 2014 Plan on May 6, 2014, our 2014 Plan replaced our 2008 Plan with respect to prospective equity grants. Consists of 500,000 shares of our common stock issuable upon the exercise of a stock option granted on July 5, 2017 to Ms. Grossman in connection with her appointment as our President and Chief Executive Officer. This stock option was granted in reliance on the employment inducement exemption provided under the New York Stock Exchange Listed Company Manual Rule 303A.08. This stock option has a seven year term and proportionately vested annually over a four year period which began with the first anniversary of Ms. Grossman’s July 5, 2017 employment commencement date. While the stock option was not awarded pursuant to our 2014 Plan, it is subject to the same terms and conditions of the 2014 Plan. 62 Code of Business Conduct and Ethics We have adopted the Code of Business Conduct and Ethics for our officers, including our principal executive officer, principal financial officer, principal accounting officer or controller, and our employees and directors. Our Code of Business Conduct and Ethics is available on our corporate website at corporate.ww.com/govdocs. In addition to any disclosures required under the Exchange Act, the date and nature of any substantive amendment of our Code of Business Conduct and Ethics or waiver thereof applicable to any of our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions, and that relates to any element of the code of ethics definition enumerated in Item 406(b) of Regulation S- K of the Exchange Act, will be disclosed within four business days of the date of such amendment or waiver on our corporate website at corporate.ww.com/govdocs and corporate.ww.com/corporate-actions, respectively. In the case of a waiver, the name of the person to whom the waiver was granted will also be disclosed on our corporate website within four business days of the date of such waiver. 63 Item 15. Exhibits and Financial Statement Schedules PART IV (a) 1. Financial Statements The financial statements listed in the Index to Financial Statements and Financial Statement Schedule on page F-1 are filed as part of this Annual Report on Form 10-K. 2. Financial Statement Schedule The financial statement schedule listed in the Index to Financial Statements and Financial Statement Schedule on page F-1 is filed as part of this Annual Report on Form 10-K. 3. Exhibits The exhibits listed in the Exhibit Index are filed as part of this Annual Report on Form 10-K. 64 WW INTERNATIONAL, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE COVERED BY REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Items 15(a) (1) & (2) Report of Independent Registered Public Accounting Firm (PricewaterhouseCoopers LLP, New York, NY, Auditor Firm ID: 238).................................................................................................................................... Consolidated Balance Sheets at January 1, 2022 and January 2, 2021 .............................................................. Pages F-2 F-5 Consolidated Statements of Net Income for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019 ........................................................................................................................................ F-6 Consolidated Statements of Comprehensive Income for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019 ........................................................................................................................ F-7 Consolidated Statements of Changes in Total Deficit for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019 ........................................................................................................................ F-8 Consolidated Statements of Cash Flows for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019 ........................................................................................................................................ F-9 Notes to Consolidated Financial Statements ...................................................................................................... F-10 Schedule II—Valuation and Qualifying Accounts and Reserves for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019....................................................................................................... S-1 All other schedules are omitted for the reason that they are either not required, not applicable, not material or the information is included in the consolidated financial statements or notes thereto. F-1 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of WW International, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of WW International, Inc. and its subsidiaries (the “Company”) as of January 1, 2022 and January 2, 2021, and the related consolidated statements of net income, of comprehensive income, of changes in total deficit and of cash flows for each of the three years in the period ended January 1, 2022, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of January 1, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 1, 2022 and January 2, 2021, and the results of its operations and its cash flows for each of the three years in the period ended January 1, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 1, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. F-2 Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Indefinite-Lived Franchise Rights Acquired Impairment Assessments United States and Canada As described in Note 2 to the consolidated financial statements, indefinite-lived franchise rights acquired for the United States and Canada were $698.4 million and $60.1 million, respectively, as of January 1, 2022. Management reviews indefinite-lived franchise rights acquired for potential impairment on at least an annual basis or more often if events so require. Potential impairment of indefinite-lived franchise rights acquired is identified by comparing the estimated fair value for these rights to their carrying value. Given the decline in business performance through fiscal 2021 for Canada, the Company performed an interim impairment analysis as of January 1, 2022. Fair value of indefinite-lived franchise rights acquired is estimated by management 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. Management uses various assumptions to determine fair value, including revenue growth rates, operating income margins, market-based royalty rate, and discount rate. The principal considerations for our determination that performing procedures relating to the indefinite-lived franchise rights acquired impairment assessments for the United States and Canada is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of the indefinite-lived franchise rights acquired for the United States and Canada, (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates and operating income margins, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. F-3 Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s indefinite-lived franchise rights acquired impairment assessments, including controls over the valuation of the indefinite-lived franchise rights acquired. These procedures also included, among others (i) testing management’s process for developing the fair value estimates of the indefinite-lived franchise rights acquired for the United States and Canada, (ii) evaluating the appropriateness of the discounted cash flow approach and the relief from royalty methodology, (iii) testing the completeness and accuracy of underlying data used in the discounted cash flow approach and relief from royalty methodology, and (iv) evaluating the significant assumptions used by management related to revenue growth rates and operating income margins. Evaluating management’s assumptions related to revenue growth rates and operating income margins involved evaluating whether the assumptions used by management were reasonable considering the current and past performance of the indefinite-lived franchise rights acquired and whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow approach and relief from royalty methodology. /s/ PricewaterhouseCoopers LLP New York, New York March 1, 2022 We have served as the Company’s auditor since 1999. F-4 WW INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AT (IN THOUSANDS) January 1, 2022 January 2, 2021 ASSETS CURRENT ASSETS Cash and cash equivalents ........................................................................... $ Receivables (net of allowances: January 1, 2022 - $1,726 and 153,794 $ 165,887 January 2, 2021 - $2,298) ......................................................................... Inventories ................................................................................................... Prepaid income taxes ................................................................................... Prepaid marketing and advertising .............................................................. Prepaid expenses and other current assets ................................................... TOTAL CURRENT ASSETS................................................................ Property and equipment, net ............................................................................. Operating lease assets ....................................................................................... Franchise rights acquired .................................................................................. Goodwill............................................................................................................ Other intangible assets, net ............................................................................... Deferred income taxes ...................................................................................... Other noncurrent assets ..................................................................................... TOTAL ASSETS ................................................................................... $ LIABILITIES AND TOTAL DEFICIT CURRENT LIABILITIES Portion of long-term debt due within one year............................................ $ Portion of operating lease liabilities due within one year ........................... Accounts payable......................................................................................... Salaries and wages payable ......................................................................... Accrued marketing and advertising ............................................................. Accrued interest ........................................................................................... Other accrued liabilities............................................................................... Derivative payable ....................................................................................... Income taxes payable................................................................................... Deferred revenue ......................................................................................... TOTAL CURRENT LIABILITIES ....................................................... Long-term debt, net........................................................................................... Long-term operating lease liabilities................................................................. Deferred income taxes ...................................................................................... Other.................................................................................................................. TOTAL LIABILITIES........................................................................... Commitments and contingencies (Note 16) TOTAL DEFICIT Common stock, $0 par value; 1,000,000 shares authorized; 122,052 shares issued at January 1, 2022 and 121,470 shares issued at January 2, 2021......................................................................................... Treasury stock, at cost, 51,988 shares at January 1, 2022 and 52,497 shares at January 2, 2021.......................................................................... Retained earnings ........................................................................................ Accumulated other comprehensive loss ...................................................... TOTAL DEFICIT .................................................................................. TOTAL LIABILITIES AND TOTAL DEFICIT................................... $ 29,321 30,566 30,478 5,981 21,033 271,173 37,219 89,902 785,195 157,374 61,126 11,259 15,686 1,428,934 $ — $ 20,297 22,444 57,401 15,904 5,085 45,728 14,670 1,748 45,855 229,132 1,418,104 78,157 157,718 2,227 1,885,338 34,555 39,456 20,028 15,656 23,610 299,192 51,935 119,102 765,850 155,617 59,709 13,625 16,144 1,481,174 77,000 28,551 23,052 58,047 15,556 2,710 48,615 28,283 7,810 50,475 340,099 1,408,800 101,561 173,713 5,212 2,029,385 0 0 (3,120,149) 2,682,349 (18,604) (456,404) 1,428,934 $ (3,140,903) 2,617,841 (25,149) (548,211) 1,481,174 The accompanying notes are an integral part of the consolidated financial statements. F-5 WW INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF NET INCOME FOR THE FISCAL YEARS ENDED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) January 1, 2022 (52 weeks) January 2, 2021 (53 weeks) December 28, 2019 (52 weeks) Subscription revenues, net...................................................... Product sales and other, net.................................................... Revenues, net .................................................................... Cost of subscription revenues ................................................ Cost of product sales and other .............................................. Cost of revenues................................................................ Gross profit ....................................................................... Marketing expenses................................................................ Selling, general and administrative expenses......................... Goodwill impairment ............................................................. Operating income.............................................................. Interest expense ...................................................................... Other expense, net .................................................................. Early extinguishment of debt ................................................. Income before income taxes ............................................. Provision for income taxes ..................................................... Net income........................................................................ Net loss attributable to the noncontrolling interest ................ Net income attributable to WW International, Inc. .......... Earnings per share attributable to WW International, Inc. Basic.................................................................................. Diluted .............................................................................. Weighted average common shares outstanding ..................... Basic.................................................................................. Diluted .............................................................................. $ $ $ $ $ $ $ $ 1,063,039 149,424 1,212,463 370,064 116,044 486,108 726,355 261,457 268,614 — 196,284 87,909 1,358 30,352 76,665 9,773 66,892 — 66,892 0.96 0.95 69,640 70,744 $ $ $ $ 1,186,489 191,635 1,378,124 452,882 147,401 600,283 777,841 260,727 297,287 3,665 216,162 123,310 349 — 92,503 17,462 75,041 38 75,079 1.11 1.07 67,849 70,020 1,207,266 206,071 1,413,337 502,907 123,748 626,655 786,682 243,998 254,699 — 287,985 135,267 1,758 — 150,960 31,513 119,447 169 119,616 1.78 1.72 67,188 69,550 The accompanying notes are an integral part of the consolidated financial statements. F-6 WW INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE FISCAL YEARS ENDED (IN THOUSANDS) Net income ................................................................................. $ Other comprehensive gain (loss): Foreign currency translation (loss) gain ............................... Income tax benefit (expense) on foreign currency translation (loss) gain......................................................... Foreign currency translation (loss) gain, net of taxes........... Gain (loss) on derivatives ..................................................... Income tax (expense) benefit on gain (loss) on derivatives.......................................................................... Gain (loss) on derivatives, net of taxes................................. Total other comprehensive gain (loss) ....................................... Comprehensive income .............................................................. Net loss attributable to the noncontrolling interest............... Foreign currency translation loss, net of taxes attributable to the noncontrolling interest.......................... Comprehensive loss attributable to the noncontrolling interest ..................................................................................... Comprehensive income attributable to January 1, 2022 (52 weeks) January 2, 2021 (53 weeks) December 28, 2019 (52 weeks) 66,892 $ 75,041 $ 119,447 (4,797) 10,088 3,676 1,206 (3,591) 13,539 (3,403) 10,136 6,545 73,437 — — — (2,533) 7,555 (7,305) 1,855 (5,450) 2,105 77,146 38 98 136 (939) 2,737 (19,222) 4,868 (14,354) (11,617) 107,830 169 22 191 WW International, Inc............................................................. $ 73,437 $ 77,282 $ 108,021 The accompanying notes are an integral part of the consolidated financial statements. F-7 WW INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL DEFICIT (IN THOUSANDS) WW International, Inc. Accumulated Other Common Stock Shares Amount Treasury Stock Shares Amount Comprehensive Retained Earnings Loss Total Redeemable Noncontrolling Interest Balance at December 29, 2018 ............................................... $ 3,913 120,352 $ 0 53,396 $(3,175,624) $ (15,757) $2,382,438 $(808,943) Comprehensive income (loss) .............................................. (191) Issuance of treasury stock under stock plans ........................... Compensation expense on share-based awards........................ Balance at December 28, (11,595) 119,616 108,021 (463) 17,350 (22,442) (5,092) 20,471 20,471 2019 ............................................... $ 3,722 120,352 $ 0 52,933 $(3,158,274) $ (27,352) $2,500,083 $(685,543) Comprehensive income (loss) .............................................. (136) Issuance of treasury stock under stock plans ........................... Compensation expense on share-based awards........................ Issuance of common stock ............... Acquisition of minority interest ....... Balance at January 2, 1,118 (3,586) 2,203 75,079 77,282 (436) 17,371 (23,181) (5,810) 55,013 7,793 3,054 55,013 7,793 3,054 2021 ............................................... $ — 121,470 $ 0 52,497 $(3,140,903) $ (25,149) $2,617,841 $(548,211) Comprehensive income .................... Issuance of treasury stock under stock plans ........................... Compensation expense on share-based awards........................ Issuance of common stock ............... Balance at January 1, — 6,545 66,892 73,437 (509) 20,754 (27,783) (7,029) 582 21,348 4,051 21,348 4,051 2022 ............................................... $ — 122,052 $ 0 51,988 $(3,120,149) $ (18,604) $2,682,349 $(456,404) The accompanying notes are an integral part of the consolidated financial statements. F-8 WW INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED (IN THOUSANDS) January 1, 2022 (52 weeks) January 2, 2021 (53 weeks) December 28, 2019 (52 weeks) 66,892 $ 75,041 $ 119,447 48,550 50,677 45,017 Operating activities: Net income ................................................................................... $ Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization................................................ Amortization of deferred financing costs and debt discount................................................................................ Goodwill impairment.............................................................. Impairment of intangible and long-lived assets...................... Share-based compensation expense........................................ Deferred tax benefit ................................................................ Allowance for doubtful accounts............................................ Reserve for inventory obsolescence ....................................... Foreign currency exchange rate loss ...................................... Early extinguishment of debt.................................................. Changes in cash due to: Receivables............................................................................. Inventories .............................................................................. Prepaid expenses..................................................................... Accounts payable.................................................................... Accrued liabilities................................................................... Deferred revenue .................................................................... Other long term assets and liabilities, net............................... Income taxes ........................................................................... Cash provided by operating activities .................................... Investing activities: Capital expenditures..................................................................... Capitalized software expenditures ............................................... Cash paid for acquisitions ............................................................ Other items, net ............................................................................ Cash used for investing activities ........................................... Financing activities: 6,136 — 521 21,348 (15,565) (214) 7,657 744 30,352 4,707 1,816 1,554 373 1,272 (3,886) (7,962) (7,014) 157,281 (2,446) (35,205) (12,836) (2,266) (52,753) Net (payments) borrowings on revolver ...................................... Proceeds from long term debt ...................................................... Financing costs and debt discount ............................................... Payments on long-term debt ........................................................ Taxes paid related to net share settlement of equity awards........ Proceeds from stock options exercised ........................................ Cash paid for acquisitions ............................................................ Other items, net ............................................................................ Cash used for financing activities........................................... Effect of exchange rate changes on cash and cash equivalents......... Net decrease in cash and cash equivalents ........................................ Cash and cash equivalents, beginning of period ............................... Cash and cash equivalents, end of period.......................................... $ 0 1,500,000 (37,910) (1,564,000) (7,494) 4,469 (6,450) (151) (111,536) (5,085) (12,093) 165,887 153,794 $ 8,845 3,665 1,372 55,013 (1,440) 411 16,425 719 — (3,600) (25,940) (5,081) (4,045) (29,421) (11,583) 1,859 3,023 135,940 (21,490) (28,941) (10,037) (5,123) (65,591) 0 — (475) (96,250) (6,798) 8,176 — (192) (95,539) 8,341 (16,849) 182,736 165,887 $ 9,318 — 307 20,471 (9,424) (123) 8,710 1,235 — 1,331 (9,127) 13,619 1,347 (6,968) 6,199 (878) (18,098) 182,383 (17,159) (30,824) (4,060) (580) (52,623) 0 — — (177,000) (6,582) 1,076 — (487) (182,993) (1,005) (54,238) 236,974 182,736 The accompanying notes are an integral part of the consolidated financial statements. F-9 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) 1. Basis of Presentation The accompanying consolidated financial statements include the accounts of WW International, Inc. and all of its subsidiaries. The terms “Company” and “WW” as used throughout these notes are used to indicate WW International, Inc. and all of its operations consolidated for purposes of its financial statements. The Company’s “Digital” business refers to providing subscriptions to the Company’s digital product offerings, including Digital 360 and Personal Coaching + Digital. The Company’s “Workshops + Digital” (formerly known as “Studio + Digital”) business refers to providing unlimited access to the Company’s workshops combined with the Company’s digital subscription product offerings to commitment plan subscribers. It also includes the provision of access to workshops for members who do not subscribe to commitment plans, including the Company’s “pay-as-you-go” members. The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) and include all of the Company’s majority-owned subsidiaries. All entities acquired, and any entity of which a majority interest was acquired, are included in the consolidated financial statements from the date of acquisition. In the fourth quarter of fiscal 2020, the remaining 20% interest in Vigilantes do Peso Marketing Ltda. was transferred to the Company in a cashless exchange, resulting in the reclassification of the redeemable noncontrolling interest to equity. All intercompany accounts and transactions have been eliminated in consolidation. In fiscal 2020, the Company identified and recorded out-of-period adjustments related to income tax errors resulting from income tax receivables that should have been adjusted in prior fiscal years. The impact of correcting these errors, which were immaterial to prior period financial statements and corrected in the fourth quarter of fiscal 2020, increased provision for income taxes by $2,278 and decreased net income attributable to the Company by $2,278. 2. Summary of Significant Accounting Policies Fiscal Year The Company’s fiscal year ends on the Saturday closest to December 31st and consists of either 52 or 53-week periods. Fiscal 2021 contained 52 weeks, fiscal 2020 contained 53 weeks and fiscal 2019 contained 52 weeks. Use of Estimates The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates and judgments, including those related to inventories, the impairment analysis for goodwill and other indefinite-lived intangible assets, revenue, share- based compensation, income taxes, tax contingencies and litigation. The Company bases its estimates on historical experience and on various other factors and assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. While all available information has been considered, actual amounts could differ from these estimates. For example, the ongoing global outbreak of the coronavirus (including its variants, COVID-19) has had and will continue to have an adverse impact on the Company’s business as well as on the business environment and the markets in which it operates. This global health crisis has also had a significant adverse effect on overall economic conditions and the Company expects consumer demand to continue to be negatively impacted due to changes in consumer behavior and confidence and health concerns. The situation remains dynamic and subject to rapid and possibly significant change, with the United States and other countries continuing to struggle with rolling outbreaks of COVID-19. Accordingly, the full extent of the magnitude and duration of the negative impact to the Company’s business from the COVID-19 pandemic cannot be predicted with certainty. The Company considered the impact of COVID-19 on the assumptions and estimates used when preparing this Annual Report on Form 10-K and the accompanying consolidated financial statements. These assumptions and estimates may change as new events occur and additional information is obtained, and such future changes may have an adverse impact on the Company's results of operations, financial position and liquidity. F-10 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) Translation of Foreign Currencies For all foreign operations, the functional currency is the local currency. Assets and liabilities of these operations are translated into U.S. dollars using the exchange rate in effect at the end of each reporting period. Income statement accounts are translated at the average rate of exchange prevailing during each reporting period. Translation adjustments arising from the use of differing exchange rates from period to period are included in accumulated other comprehensive loss. Foreign currency gains and losses arising from the translation of intercompany receivables and intercompany payables with the Company’s international subsidiaries are recorded as a component of other expense, net, unless the receivable or payable is considered long-term in nature, in which case the foreign currency gains and losses are recorded as a component of accumulated other comprehensive loss. Cash Equivalents Cash and cash equivalents are defined as highly liquid investments with original maturities of three months or less. Cash balances may, at times, exceed insurable amounts. The Company believes it mitigates this risk by investing in or through major financial institutions. Cash includes balances due from third-party credit card companies. Inventories Inventories, which consist of finished goods, are stated at the lower of cost or net realizable value on a first-in, first-out basis, net of reserves for obsolescence and shrinkage. Property and Equipment Property and equipment are recorded at cost. For financial reporting purposes, equipment is depreciated on the straight-line method over the estimated useful lives of the assets (3 to 10 years). Leasehold improvements are amortized on the straight-line method over the shorter of the term of the lease or the useful life of the related assets. Expenditures for new facilities and improvements that substantially extend the useful life of an asset are capitalized. Ordinary repairs and maintenance are expensed as incurred. When assets are retired or otherwise disposed of, the cost and related depreciation are removed from the accounts and any related gains or losses are included in income. Impairment of Long Lived Assets The Company reviews long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. In fiscal 2021, fiscal 2020 and fiscal 2019, the Company recorded impairment charges of $5, $62 and $307, respectively, related to internal-use computer software that was not expected to provide substantive service potential. In fiscal 2021, fiscal 2020 and fiscal 2019, the Company recorded impairment charges of $516, $1,310 and $0, respectively, related to property, plant and equipment that were expected to be disposed of before the end of their estimated useful lives. Franchise Rights Acquired 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 on an annual basis for impairment. F-11 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) 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 January 1, 2022 balance sheet date were $698,383, $60,117, $12,187, $6,529 and $4,840, respectively, totaling $782,056 and the net book values as of the January 2, 2021 balance sheet date were $681,497, $56,694, $12,318, $6,907 and $5,084, respectively, totaling $762,500. In its hypothetical start-up approach analysis for fiscal 2021, 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 2021, 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 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 January 1, 2022 balance sheet date were $105,121, $42,409 and $9,844, respectively, totaling $157,374. The net book values of goodwill in the United States, Canada and other countries as of the January 2, 2021 balance sheet date were $102,968, $42,103 and $10,546, respectively, totaling $155,617. For all of the Company’s reporting units tested as of May 9, 2021, 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. Indefinite-Lived Franchise Rights Acquired and Goodwill Annual Impairment Test 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 9, 2021 and May 3, 2020, each the first day of fiscal May, on its indefinite-lived intangible assets and goodwill. In performing its annual impairment analysis as of May 9, 2021 and May 3, 2020, the Company determined that the carrying amounts of its franchise rights acquired with indefinite lives units of account and 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. F-12 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) Based on the results of the Company’s May 9, 2021 annual franchise rights acquired impairment analysis performed for all of its units of account, all units, except for New Zealand, had an estimated fair value at least 45% higher than the respective unit’s carrying amount. Collectively, these units of account represent 99.4% of the Company’s total franchise rights acquired as of the January 1, 2022 balance sheet date. Based on the results of the Company’s annual franchise rights acquired impairment test performed for its New Zealand unit of account, which holds 0.6% of the Company’s franchise rights acquired as of the January 1, 2022 balance sheet date, the estimated fair value of this unit of account exceeded its carrying value by approximately 10%. Accordingly, a change in the underlying assumptions for 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 New Zealand, for which the net book value was $4,840 as of January 1, 2022. Based on the results of the Company’s May 9, 2021 annual goodwill impairment test performed for all of its reporting units, there was significant headroom in the goodwill impairment analysis for those units, with the difference between the carrying value and the fair value exceeding 100%. Canada Indefinite-Lived Franchise Rights Acquired Interim Impairment Test The Company’s Canada unit of account had a net book value of $60,117, 7.7% of its franchise rights acquired as of the January 1, 2022 balance sheet date. Given the lower headroom in the May 9, 2021 annual franchise rights acquired impairment test for this unit relative to the other units of account and the decline in business performance through fiscal 2021 (which may continue into fiscal 2022), the Company performed an interim impairment analysis as of January 1, 2022. In this test, the estimated fair value of this unit of account exceeded its carrying value by approximately 3%. Therefore, the Company did not record an impairment for the Canada unit of account. Brazil Goodwill Impairment With respect to its Brazil reporting unit, during the first quarter of fiscal 2020, the Company made a strategic decision to shift to an exclusively Digital business in that country. The Company determined that this decision, together with the negative impact of COVID-19, the ongoing challenging economic environment in Brazil and its reduced expectations regarding the reporting unit’s future operating cash flows, required the Company to perform an interim goodwill impairment analysis. In performing this discounted cash flow analysis, the Company determined that the carrying amount of this reporting unit exceeded its fair value and as a result recorded an impairment charge of $3,665, which comprised the remaining balance of goodwill for this reporting unit. As it related to its goodwill impairment analysis for Brazil, the Company estimated future debt-free cash flows in contemplation of its growth strategies for that market. In developing these projections, the Company considered the growth strategies under the current market conditions in Brazil. 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. Other Intangible Assets Other finite-lived intangible assets are amortized using the straight-line method over their estimated useful lives of 3 to 20 years. The Company expenses all software costs incurred during the preliminary project stage and capitalizes all internal and external direct costs of materials and services consumed in developing software once the development has reached the application development stage. Application development stage costs generally include software configuration, coding, installation to hardware and testing. These costs are amortized over their estimated useful life of 3 years for website development costs and from 3 to 5 years for all other software costs. All costs incurred for upgrades, maintenance and enhancements, including the cost of website content, which do not result in additional functionality, are expensed as incurred. F-13 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) Revenue Recognition 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. The Company earns revenue from subscriptions for its digital products and by conducting workshops, for which it charges a fee, predominantly through commitment plans, as well as prepayment plans or the “pay-as-you- go” arrangement. The Company also earns revenue by selling consumer products online through its e-commerce platforms, at its studios, and through its trusted partners; collecting royalties related to licensing agreements; collecting royalties from franchisees; and publishing. Commitment plan revenues and prepaid workshop fees are recorded to revenue on a straight-line basis as control is transferred since these performance obligations are satisfied over time. “Digital Subscription Revenues,” consisting of the fees associated with subscriptions for the Company’s Digital products, including Digital 360 and Personal Coaching + Digital, are recognized on a straight-line basis as control is transferred since these performance obligations are satisfied over time. One-time Digital sign-up fees are considered immaterial in the context of the contract and the related revenue is amortized into revenue over the commitment period. “Workshops + Digital Fees” (formerly known as “Studio + Digital Fees”), consisting of the fees associated with subscription plans for combined workshops and digital offerings and other payment arrangements for access to workshops, are recognized on a straight-line basis as control is transferred since these performance obligations are satisfied over time. In the Workshops + Digital business, the Company generally charges non-refundable registration and starter fees in exchange for access to the Company’s digital subscription products, an introductory information session and materials it provides to new members. Revenue from these registration and starter fees is considered immaterial in the context of the contract and is amortized into revenue over the commitment period. Revenue from consumer product sales online through e-commerce platforms and at studios, royalties and commissions, and “pay-as-you-go” workshop fees is recognized at the point in time control is transferred, which is when products are shipped to customers and partners and title and risk of loss passes to them, royalties and commissions are earned, and services are rendered, respectively. For revenue transactions that involve multiple performance obligations, the amount of revenue recognized is determined using the relative fair value approach, which is generally based on each performance obligation’s stand-alone selling price. Discounts to customers, including free registration offers, are recorded as a deduction from gross revenue in the period such revenue was recognized. The Company grants refunds in aggregate amounts that historically have not been material. Because the period of payment of the refund generally approximates the period revenue was originally recognized, refunds are recorded as a reduction of revenue over the same period. The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. The Company expenses sales commissions when incurred (amortization period would have been one year or less) and these expenses are recorded within selling, general and administrative expenses. The Company treats shipping and handling fees as fulfillment costs and not as a separate performance obligation, and as a result, any fees received from customers are included in the transaction price allocated to the performance obligation of providing goods with a corresponding amount accrued within cost of product sales and other for amounts paid to applicable carriers. Sales tax, value-added tax and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. Advertising Costs Advertising costs consist primarily of broadcast and digital media. All costs related to advertising are expensed in the period incurred, except for media production-related costs, which are expensed the first time the advertising takes place. Total advertising expenses for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019 were $252,754, $248,473 and $235,826, respectively. F-14 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) Income Taxes Deferred income tax assets and liabilities result primarily from temporary differences between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which differences are expected to reverse. If it is more-likely-than-not that some portion of a deferred tax asset will not be realized, a valuation allowance is recognized. The Company considers historic levels of income, estimates of future taxable income and feasible tax planning strategies in assessing the need for a tax valuation allowance. The Company recognizes a benefit for uncertain tax positions when a tax position taken or expected to be taken in a tax return is more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company recognizes accrued interest and penalties associated with uncertain tax positions as part of the provision for income taxes on its consolidated statements of net income. In addition, assets and liabilities acquired in purchase business combinations are assigned their fair values and deferred taxes are provided for lower or higher tax bases. Derivative Instruments and Hedging The Company is exposed to certain risks related to its ongoing business operations, primarily interest rate risk and foreign currency risk. Interest rate swaps were entered into to hedge a portion of the cash flow exposure associated with the Company’s variable-rate borrowings. The Company does not use any derivative instruments for trading or speculative purposes. The Company recognizes the fair value of all derivative instruments as either assets or liabilities on the balance sheet. The Company has designated and accounted for interest rate swaps as cash flow hedges of its variable-rate borrowings. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive loss and reclassified into earnings in the periods during which the hedged transactions affect earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. The fair value of the Company’s interest rate swaps is reported as a component of accumulated other comprehensive loss on its balance sheet. See Note 18 for a further discussion regarding the fair value of the Company’s interest rate swaps. The net effect of the interest payable and receivable under the Company’s effective interest rate swap is included in interest expense on its consolidated statements of net income. Deferred Financing Costs Deferred financing costs consist of fees paid by the Company as part of the establishment, exchange and/or modification of the Company’s long-term debt. Amortization expense for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019 was $6,136, $8,845 and $9,318, respectively. 3. Accounting Standards Adopted in Current Year In December 2019, the Financial Accounting Standards Board (the “FASB”) issued updated guidance simplifying the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 as well as by improving consistent application of GAAP by clarifying and amending existing guidance. The effective date of the new guidance for public companies is for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. Early adoption is permitted. On January 3, 2021, the Company adopted the updated guidance simplifying the accounting for income taxes on a prospective basis, which did not have a material impact on its consolidated financial statements. F-15 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) 4. Leases A lease is defined as an arrangement that contractually specifies the right to use and control an identified asset for a specific period of time in exchange for consideration. Operating leases are included in operating lease assets, portion of operating lease liabilities due within one year, and long-term operating lease liabilities in the Company’s consolidated balance sheets. Finance leases are included in property and equipment, net, other accrued liabilities, and other long-term liabilities in the Company’s consolidated balance sheets. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term, using the Company’s incremental borrowing rate commensurate with the lease term, since the Company’s lessors do not provide an implicit rate, nor is one readily available. The incremental borrowing rate is calculated based on the Company’s credit yield curve and adjusted for collateralization, credit quality and economic environment impact, all where applicable. The lease asset includes scheduled lease payments and excludes lease incentives, such as free rent periods and tenant improvement allowances. The Company has certain leases that may include an option to renew and when it is reasonably probable to exercise such option, the Company will include the renewal option terms in determining the lease asset and lease liability. The Company does not have any renewal options that would have a material impact on the terms of the leases and that are also reasonably expected to be exercised as of January 1, 2022. A lease may contain both fixed and variable payments. Variable lease payments that are linked to an index or rate are measured based on the current index or rate at the implementation of the lease accounting standard, or lease commencement date for new leases, with the impact of future changes in the index or rate being recorded as a period expense. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components and has elected not to separate non- lease components from lease components and instead to account for each separate lease component and non-lease component as a single lease component. The Company has elected the short-term lease exception accounting policy, whereby the recognition requirements of the updated guidance is not applied and lease expense is recorded on a straight-line basis with respect to leases with an initial term of 12 months or less. The Company’s operating leases are primarily for its studios and corporate offices. At January 1, 2022 and January 2, 2021, the Company’s lease assets and lease liabilities were as follows: Assets: Operating lease assets ........................................................................... Finance lease assets .............................................................................. Total leased assets................................................................................. Liabilities: Current Operating......................................................................................... Finance ............................................................................................ Noncurrent Operating......................................................................................... Finance ............................................................................................ Total lease liabilities ............................................................................. $ $ $ $ $ January 1, 2022 January 2, 2021 89,902 127 90,029 20,297 75 78,157 29 98,558 $ $ $ $ $ 119,102 207 119,309 28,551 88 101,561 93 130,293 F-16 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) For the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019, the components of the Company’s lease expense were as follows: Operating lease cost: Fixed lease cost .................................. $ Lease termination cost ....................... Variable lease cost ............................. Total operating lease cost ........................ $ Finance lease cost: Amortization of leased assets............. Interest on lease liabilities.................. Total finance lease cost ........................... $ Total lease cost ........................................ $ January 1, 2022 Fiscal Year Ended January 2, 2021 December 28, 2019 37,688 8,542 21 46,251 151 8 159 46,410 $ $ $ $ 48,674 6,109 (30) 54,753 192 12 204 54,957 $ $ $ $ 51,246 10 — 51,256 487 20 507 51,763 At January 1, 2022 and January 2, 2021, the Company’s weighted average remaining lease term and weighted average discount rates were as follows: Weighted Average Remaining Lease Term (years) Operating leases ................................................................. Finance leases..................................................................... Weighted Average Discount Rate Operating leases ................................................................. Finance leases..................................................................... January 1, 2022 January 2, 2021 7.29 1.54 7.15 5.31 7.08 2.35 6.95 5.51 The Company’s leases have remaining lease terms of 0 to 11 years with a weighted average lease term of 7.28 years as of January 1, 2022. At January 1, 2022, the maturity of the Company’s lease liabilities in each of the next five fiscal years and thereafter were as follows: Operating Leases Finance Leases Total Fiscal 2022............................................................................ $ Fiscal 2023............................................................................ Fiscal 2024............................................................................ Fiscal 2025............................................................................ Fiscal 2026............................................................................ Thereafter ............................................................................. Total lease payments ............................................................ $ Less imputed interest............................................................ Present value of lease liabilities ........................................... $ 26,611 20,594 15,708 11,547 9,195 45,345 129,000 30,546 98,454 $ $ $ 79 25 5 — — — 109 5 104 $ $ $ 26,690 20,619 15,713 11,547 9,195 45,345 129,109 30,551 98,558 F-17 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) Supplemental cash flow information related to leases for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019 were as follows: Fiscal Year Ended January 1, January 2, December 28, 2022 2021 2019 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases ............................................. $ Operating cash flows from finance leases................................................. $ Financing cash flows from finance leases................................................. $ 39,747 8 151 Leased assets obtained in exchange for new operating lease liabilities ......... $ Leased assets obtained in exchange for new finance lease liabilities............. $ 1,057 81 $ $ $ $ $ 49,043 12 192 5,113 132 $ $ $ $ $ 51,326 20 487 41,693 105 5. Revenue 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. See Note 2 for further information on the Company’s revenue recognition policies. The following table presents the Company’s revenues disaggregated by revenue source: January 1, 2022 Fiscal Year Ended January 2, 2021 December 28, 2019 Digital Subscription Revenues ............................................... $ Workshops + Digital Fees ...................................................... Subscription Revenues, net ............................................... $ Product sales and other, net .................................................... Revenues, net .................................................................... $ 788,173 $ 274,866 1,063,039 $ 149,424 1,212,463 $ 743,060 $ 443,429 1,186,489 $ 191,635 1,378,124 $ 609,996 597,270 1,207,266 206,071 1,413,337 The following tables present the Company’s revenues disaggregated by revenue source and segment: Digital Subscription Revenues ............. $ Workshops + Digital Fees .................... Subscription Revenues, net ............. $ Product sales and other, net .................. Revenues, net .................................. $ Digital Subscription Revenues ............. $ Workshops + Digital Fees .................... Subscription Revenues, net ............. $ Product sales and other, net .................. Revenues, net .................................. $ North America 504,152 $ 210,076 714,228 $ 100,569 814,797 $ North America 484,471 $ 329,885 814,356 $ 127,744 942,100 $ Fiscal Year Ended January 1, 2022 United Kingdom Continental Europe Other 228,296 $ 36,707 265,003 $ 32,907 297,910 $ 36,347 $ 18,709 55,056 $ 10,764 65,820 $ 19,378 $ 9,374 28,752 $ 5,184 33,936 $ Fiscal Year Ended January 2, 2021 United Kingdom Continental Europe Other 207,978 $ 67,201 275,179 $ 38,201 313,380 $ 33,919 $ 33,283 67,202 $ 17,185 84,387 $ 16,692 $ 13,060 29,752 $ 8,505 38,257 $ Total 788,173 274,866 1,063,039 149,424 1,212,463 Total 743,060 443,429 1,186,489 191,635 1,378,124 F-18 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) Digital Subscription Revenues ............. $ Workshops + Digital Fees .................... Subscription Revenues, net ............. $ Product sales and other, net .................. Revenues, net .................................. $ Information about Contract Balances North America 401,890 $ 446,576 848,466 $ 130,836 979,302 $ Fiscal Year Ended December 28, 2019 United Kingdom Continental Europe Other 167,008 $ 87,962 254,970 $ 38,263 293,233 $ 26,898 $ 44,145 71,043 $ 23,514 94,557 $ 14,200 $ 18,587 32,787 $ 13,458 46,245 $ Total 609,996 597,270 1,207,266 206,071 1,413,337 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 are as follows: Balance as of December 28, 2019 ................................. Net decrease during the period ...................................... Balance as of January 2, 2021 ....................................... Net decrease during the period ...................................... Balance as of January 1, 2022 ....................................... $ $ $ 60,613 (10,138) 50,475 (4,620) 45,855 $ $ $ 54 (10) 44 (16) 28 Deferred Revenue Deferred Revenue-Long Term Revenue recognized from amounts included in current deferred revenue as of January 2, 2021 was $50,385 for the fiscal year ended January 1, 2022. Revenue recognized from amounts included in current deferred revenue as of December 28, 2019 was $60,555 for the fiscal year ended January 2, 2021. The Company’s long-term deferred revenue, which is included in other liabilities on its consolidated balance sheet, had a balance of $28 and $44 at January 1, 2022 and January 2, 2021, respectively, for revenue that will not be recognized during the next fiscal year and is generally related to upfront payments received as an inducement for entering into certain sales-based royalty agreements with third party licensees. This revenue is amortized on a straight-line basis over the term of the applicable agreement. 6. Acquisitions Acquisitions of Franchisees 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 (the “Maine Acquisition”). Payment was in the form of cash ($1,999), cash in reserves ($225) and assumed net liabilities ($26). The total purchase price was allocated to goodwill ($2,153), customer relationship value ($56) and franchise rights acquired ($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: (a) The Company acquired substantially all of the assets of The WW Group, Inc., which operated franchises in certain territories in Michigan, for an aggregate purchase price of $17,500. Payment was in the form of cash paid on March 22, 2021 ($8,255), cash paid on July 30, 2021 ($6,450), cash in reserves ($2,300) and assumed net liabilities ($495). The total purchase price was allocated to franchise rights acquired ($16,885), customer relationship value ($408), inventories ($162), property and equipment, net ($41) and other assets ($4); and F-19 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) (b) The Company acquired substantially all of the assets of The WW Group Co., which operated franchises in certain territories in Ontario, Canada, for an aggregate purchase price of $3,114. Payment was in the form of cash ($2,605), cash in reserves ($599) and assumed net assets ($90). The total purchase price was allocated to franchise rights acquired ($3,040), customer relationship value ($42), property and equipment, net ($25), inventories ($6) and other assets ($1). On October 26, 2020, the Company acquired substantially all of the assets of its franchisees for certain territories in Arizona and California, Weight Watchers of Arizona, Inc. and Weight Watchers of Imperial County, Inc., respectively, for an aggregate purchase price of $10,000. Payment was in the form of cash ($10,037) and assumed net assets ($37). The total purchase price was allocated to franchise rights acquired ($9,546), customer relationship value ($227), property and equipment, net ($131), inventories ($84) and other assets ($12). On October 21, 2019, the Company acquired substantially all of the assets of its franchisee for certain territories in Nevada and Utah, Weight Watchers of Las Vegas, Inc., for a purchase price of $4,500. Payment was in the form of cash ($4,060) plus cash in reserves ($385) and assumed net liabilities ($55). The total purchase price was allocated to goodwill ($4,111), customer relationship value ($271) and franchise rights acquired ($118). The goodwill will be deductible for tax purposes. 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. 7. Franchise Rights Acquired, Goodwill and Other Intangible Assets The Company performed its annual impairment review of indefinite-lived intangible assets, including franchise rights acquired with indefinite lives, and goodwill for fiscal 2021 and fiscal 2020 on May 9, 2021 and May 3, 2020, respectively. In performing its annual impairment analysis as of May 9, 2021 and May 3, 2020, the Company determined that the carrying amounts of its franchise rights acquired with indefinite lives units of account and goodwill reporting units did not exceed their respective fair values and therefore, no impairment existed. The Company performed an interim impairment analysis as of January 1, 2022 for the Canada indefinite-lived franchise rights acquired and determined the carrying amount for this unit of account did not exceed its respective fair value and therefore, no impairment existed. With respect to its Brazil reporting unit, during the first quarter of fiscal 2020, the Company made a strategic decision to shift to an exclusively Digital business in that country. The Company determined that this decision, together with the negative impact of COVID-19, the ongoing challenging economic environment in Brazil and its reduced expectations regarding the reporting unit’s future operating cash flows, required the Company to perform an interim goodwill impairment analysis. In performing this discounted cash flow analysis, the Company determined that the carrying amount of this reporting unit exceeded its fair value and as a result recorded an impairment charge of $3,665, which comprised the remaining balance of goodwill for this reporting unit. 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 fiscal year ended January 1, 2022, the change in the carrying value of franchise rights acquired was due to the franchisee acquisitions as described in Note 6 and the effect of exchange rate changes. F-20 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) 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 6 for additional information about acquisitions by the Company. For the fiscal year ended January 1, 2022, the change in the carrying amount of goodwill was due to the Maine Acquisition and the effect of exchange rate changes as follows: North America Continental Europe United Kingdom Balance as of December 28, 2019 ............................. $ 143,940 $ Goodwill impairment................................................. Effect of exchange rate changes ................................ Balance as of January 2, 2021 ................................... $ 145,071 $ Goodwill acquired during the period......................... Effect of exchange rate changes ................................ Balance as of January 1, 2022 ................................... $ 147,530 $ — 1,131 2,153 306 7,015 $ — 777 7,792 $ — (606) 7,186 $ 1,213 $ — 55 1,268 $ — (14) 1,254 $ Other Total 5,748 $ 157,916 (3,665) (3,665) (597) 1,366 1,486 $ 155,617 2,153 (396) 1,404 $ 157,374 — (82) Finite-lived Intangible Assets The carrying values of finite-lived intangible assets as of January 1, 2022 and January 2, 2021 were as follows: January 1, 2022 January 2, 2021 Capitalized software costs .................................. Website development costs................................. Trademarks ......................................................... Other ................................................................... Trademarks and other intangible assets ........ Franchise rights acquired.................................... Total finite-lived intangible assets ................ Gross Carrying Amount 115,065 110,678 12,116 14,021 251,880 7,905 259,785 $ $ $ Accumulated Amortization 94,771 $ 78,629 11,677 5,677 190,754 4,766 195,520 $ $ Gross Carrying Amount 131,420 95,718 11,999 14,093 253,230 7,925 261,155 $ $ $ Accumulated Amortization 109,170 $ 67,656 11,457 5,238 193,521 4,575 198,096 $ $ Aggregate amortization expense for finite-lived intangible assets was recorded in the amounts of $32,220, $29,828 and $29,330 for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019, respectively. Estimated amortization expense of existing finite-lived intangible assets for the next five fiscal years and thereafter was as follows: Fiscal 2022 ................................................................................................................................... $ Fiscal 2023 ................................................................................................................................... $ Fiscal 2024 ................................................................................................................................... $ Fiscal 2025 ................................................................................................................................... $ Fiscal 2026 and thereafter............................................................................................................ $ 28,386 18,343 7,932 986 8,618 F-21 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) 8. Property and Equipment The carrying values of property and equipment as of January 1, 2022 and January 2, 2021 were as follows: Equipment ........................................................................................................... $ Leasehold improvements .................................................................................... Less: Accumulated depreciation and amortization ............................................. $ January 1, 2022 January 2, 2021 71,436 72,235 143,671 (106,452) 37,219 $ $ 88,261 90,161 178,422 (126,487) 51,935 Depreciation and amortization expense of property and equipment for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019 was $16,330, $20,849 and $15,687, respectively. 9. Long-Term Debt The components of the Company’s long-term debt were as follows: January 1, 2022 January 2, 2021 Unamortized Deferred Financing Costs Principal Balance 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..................................... $ — $ — $ — 2.61% $ — $ — $ Term Loan Facility due April 13, 2028..................................... 945,000 Senior Secured Notes due April 15, 2029..................................... 500,000 Revolving Credit Facility due November 29, 2022 ............................ Term Loan Facility due November 29, 2024 ............................ Senior Notes due December 1, 2025............................... — — — Total......................................... $ 1,445,000 $ Less: Current portion............................. — Unamortized deferred financing costs ............................. Unamortized debt discount............. 12,534 14,362 Total long-term debt ................ $ 1,418,104 — — — — 0.00% 0.00% 0.00% 3.03% 6,930 5,604 — — 14,362 4.48% 4.70% 0.00% — — — — — — — — — 6.03% 1,209,000 5,113 17,233 6.60% — 12,534 $ — 14,362 8.62% 300,000 5.15% $1,509,000 $ 854 5,967 $ — 17,233 8.71% 6.94% 77,000 5,967 17,233 $1,408,800 (1) Includes amortization of deferred financing costs and debt discount. F-22 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) On April 13, 2021, the Company (1) repaid in full approximately $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 in aggregate principal amount of its then-outstanding 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 in an aggregate principal amount of commitments. There were no 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 in an aggregate principal amount of borrowings under its new credit facilities and proceeds received from the issuance of $500,000 in aggregate principal amount of 4.500% Senior Secured Notes due 2029 (the “Senior Secured Notes”). These transactions are collectively referred to herein as the “April 2021 debt refinancing”. The Company’s new credit facilities consist of a $1,000,000 term loan facility and a $175,000 revolving credit facility (which includes borrowing capacity available for letters of credit) (collectively, as amended from time to time, the “New Credit Facilities”). During the second quarter of fiscal 2021, the Company incurred fees of $37,910 (which included $12,939 of a prepayment penalty on the Discharged Senior Notes and $5,000 of a debt discount on its New 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 in connection thereto. This early extinguishment of debt charge was comprised of $12,939 of a prepayment penalty on the Discharged Senior Notes, $9,017 of financing fees paid in connection with the April 2021 debt refinancing and the write-off of $7,213 of pre-existing deferred financing fees and debt discount. New Credit Facilities The New Credit Facilities were issued under a credit agreement, dated April 13, 2021 (as amended from time to time, the “New 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 New Credit Facilities consist of (1) $1,000,000 in aggregate principal amount of senior secured tranche B term loans due in 2028 (the “New Term Loan Facility”) and (2) $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 “New Revolving Credit Facility”). In December 2021, the Company made voluntary prepayments at par in an aggregate amount of $52,500 in respect of its outstanding term loans under the New Term Loan Facility. As a result of these prepayments, the Company wrote off a debt discount and deferred financing fees of $1,183 in the aggregate in the fourth quarter of fiscal 2021. As of January 1, 2022, the Company had $945,000 in an aggregate principal amount of loans outstanding under the New Credit Facilities, with $173,911 of availability and $1,089 in issued but undrawn letters of credit outstanding under the New Revolving Credit Facility. There were no outstanding borrowings under the New Revolving Credit Facility as of January 1, 2022. All obligations under the New 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 New 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. The New 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; F-23 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) • • 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 New Credit Agreement. The foregoing mandatory prepayments will be used to reduce the installments of principal on the New Term Loan Facility. The Company may voluntarily repay outstanding loans under the New Credit Facilities at any time without penalty, except for customary “breakage” costs with respect to LIBOR loans under the New Credit Facilities. Borrowings under the New 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% 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 New 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% 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 January 1, 2022, the applicable margins for the LIBOR rate borrowings under the New Term Loan Facility and the New Revolving Credit Facility were 3.50% and 2.75%, respectively. In the event that LIBOR is phased out as is currently expected, the New Credit Agreement provides that the Company and the administrative agent may amend the New 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 New 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 New 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 New Credit Agreement). The New 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 New Revolving Credit Facility as of any fiscal quarter end exceeds 35% of the amount of the aggregate commitments under the New 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 5.75:1.00 for the period ending after the first fiscal quarter of 2022 through and including with first fiscal quarter of 2023, with an additional step down to 5.50:1.00 for the period ending after the first fiscal quarter of 2023 through and including with first fiscal quarter of 2024, with a step down to 5.25:1.00 for the period ending after the first fiscal quarter of 2024 through and including with first fiscal quarter of 2025 and again to 5.00:1.00, for the period following the first fiscal quarter of 2025. F-24 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) Senior Secured Notes 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 “New Indenture”), among the Company, the guarantors named therein and The Bank of New York Mellon, as trustee and notes collateral agent. The New 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, 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% 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, the Company 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, 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% 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, the Company 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, the Company 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 the Company’s subsidiaries that guarantee the New Credit Facilities. The Senior Secured Notes and the note guarantees are secured by a first-priority lien on all the collateral that secures the New Credit Facilities, subject to a shared lien of equal priority with the Company’s and each guarantor’s obligations under the New Credit Facilities and subject to certain thresholds, exceptions and permitted liens. Outstanding Debt At January 1, 2022, the Company had $1,445,000 outstanding under the New Credit Facilities and the Senior Secured Notes, consisting of borrowings under the New Term Loan Facility of $945,000, $0 drawn down on the New Revolving Credit Facility and $500,000 in aggregate principal amount of Senior Secured Notes issued and outstanding. At January 1, 2022 and January 2, 2021, 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 19 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 5.11% and 7.03% per annum at January 1, 2022 and January 2, 2021, 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 5.62% and 7.41% per annum at January 1, 2022 and January 2, 2021, respectively, based on interest rates on these dates. F-25 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) Maturities At January 1, 2022, the aggregate amounts of the Company’s existing long-term debt maturing in each of the next five fiscal years and thereafter were as follows: Fiscal 2022 ................................................................................................................................... $ Fiscal 2023 ................................................................................................................................... Fiscal 2024 ................................................................................................................................... Fiscal 2025 ................................................................................................................................... Fiscal 2026 ................................................................................................................................... Fiscal 2027 and thereafter............................................................................................................ $ — — — — — 1,445,000 1,445,000 10. Treasury Stock On October 9, 2003, the Company’s Board of Directors authorized, and the Company announced, a program to repurchase up to $250,000 of the Company’s outstanding common stock. On each of June 13, 2005, May 25, 2006 and October 21, 2010, the Company’s Board of Directors authorized, and the Company announced, the addition of $250,000 to the 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 fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019, the Company repurchased no shares of its common stock under this program. As of the end of fiscal 2021, $208,933 remained available to purchase shares of the Company’s common stock under the repurchase program. 11. Earnings Per Share Basic earnings per share (“EPS”) is calculated utilizing the weighted average number of common shares outstanding during the periods presented. Diluted EPS is calculated utilizing the weighted average number of common shares outstanding during the periods presented adjusted for the effect of dilutive common stock equivalents. The following table sets forth the computation of basic and diluted EPS for the fiscal years ended: January 1, 2022 Fiscal Year Ended January 2, 2021 December 28, 2019 Numerator: Net income attributable to WW International, Inc......... $ 66,892 $ 75,079 $ 119,616 Denominator: Weighted average shares of common stock outstanding......................................................... Effect of dilutive common stock equivalents................. Weighted average diluted common shares outstanding ................................................. Earnings per share attributable to WW International, Inc. 69,640 1,104 70,744 67,849 2,171 70,020 Basic............................................................................... $ Diluted............................................................................ $ 0.96 0.95 $ $ 1.11 1.07 $ $ 67,188 2,362 69,550 1.78 1.72 The number of anti-dilutive common stock equivalents excluded from the calculation of the weighted average number of common shares for diluted EPS was 5,270, 4,052 and 1,705 for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019, respectively. F-26 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) 12. Stock Plans Incentive Compensation Plans and Winfrey Amendment Option On May 6, 2008, the Company’s shareholders approved the 2008 Stock Incentive Plan (the “2008 Plan”). On May 6, 2014, the Company’s shareholders approved the 2014 Stock Incentive Plan (as amended and restated, the “2014 Plan”, and together with the 2008 Plan, the “Stock Plans”), which replaced the 2008 Plan for all equity-based awards granted on or after May 6, 2014. The 2014 Plan is designed to promote the long-term financial interests and growth of the Company by attracting, motivating and retaining employees with the ability to contribute to the success of the business and to align compensation for the Company’s employees over a multi-year period directly with the interests of the shareholders of the Company. The Company’s long-term equity incentive compensation program has historically included time-vesting non-qualified stock option and/or restricted stock unit (“RSUs”) (including performance-based stock unit with both time- and performance-vesting criteria (“PSUs”)) awards. From time to time, the Company has granted fully-vested shares of its common stock to individuals in connection with special circumstances. The Company’s Board of Directors or a committee thereof administers the 2014 Plan. Under the 2014 Plan, grants may take the following forms at the Company’s Board of Directors’ Compensation and Benefits Committee’s (the “Compensation Committee”) discretion: non-qualified stock options, incentive stock options, stock appreciation rights, RSUs, restricted stock and other stock-based awards. As of January 1, 2022, the maximum number of shares of common stock available for grant under the 2014 Plan was 12,500, subject to increase and adjustment as set forth in the 2014 Plan. Under the 2014 Plan, the Company also grants fully-vested shares of its common stock to certain members of its Board of Directors. While these shares are fully vested, the directors are restricted from selling these shares while they are still serving on the Company’s Board of Directors subject to limited exceptions. During the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019, the Company granted to members of the Company’s Board of Directors an aggregate of 29, 31 and 29 fully-vested shares, respectively, and recognized compensation expense of $757, $688 and $756, respectively. Under the Winfrey Amendment Option (as defined below), in fiscal 2020 the Company granted Ms. Winfrey a fully vested option to purchase 3,276 shares of the Company’s common stock as more fully described in Note 22. The Company issues common stock for share-based compensation awards from treasury stock. The total compensation cost that has been charged against income for share-based compensation awards and the Winfrey Amendment Option, as applicable, was $21,348, $55,013 and $20,471 for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019, respectively. Such amounts have been included as a component of selling, general and administrative expenses. The total income tax benefit recognized in the Company’s consolidated statements of net income for all share-based compensation awards was $5,175, $10,915 and $2,141 for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019, respectively. The tax benefits realized from options exercised and RSUs and PSUs vested totaled $7,999, $8,426 and $2,840 for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019, respectively. No compensation costs were capitalized. As of January 1, 2022, there was $31,877 of total unrecognized compensation cost related to the stock options, RSUs and PSUs granted under the Stock Plans. That cost is expected to be recognized over a weighted-average period of approximately 1.5 years. Stock Option Awards with Time-Vesting Criteria Stock options with time-vesting criteria (“Time-Vesting Options”) are exercisable based on the terms and conditions outlined in the applicable award agreement. Time-Vesting Options outstanding at January 1, 2022, January 2, 2021 and December 28, 2019 vest over a period of two to four years and the expiration term is seven to ten years. Time-Vesting Options outstanding at January 1, 2022, January 2, 2021 and December 28, 2019 have an exercise price between $3.97 and $60.00 per share. The Company did not grant Time-Vesting Options in fiscal 2019. F-27 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) The fair value of each of these option awards is estimated on the date of grant using the Black-Scholes option pricing model with the weighted average assumptions noted in the following table. Expected volatility is based on the historical volatility of the Company’s common stock. Since the Company’s option exercise history is limited, it has estimated the expected term of these options (other than the options with a seven-year term) to be the midpoint between the vesting period and the contractual term of each option. For options with a seven-year contractual term, the expected term is equal to 7 years. The risk-free interest rate is based on the U.S. Treasury yield curve in effect on the date of grant which most closely corresponds to the expected term of the Time-Vesting Options. The dividend yield is based on the Company’s historic average dividend yield. Dividend yield ...................................... Volatility............................................... Risk-free interest rate ........................... Expected term (years)........................... Option Activity January 1, 2022 0.0% 56.7% 1.13% 6.5 January 2, 2021 0.0% 56.5% - 56.7% 0.45% - 0.52% 5.9 - 6.5 A summary of all option activity under the Stock Plans and the Initial Option Agreement (as defined below) for the fiscal year ended January 1, 2022 is presented below. Outstanding at January 2, 2021 ........................ Granted........................................................ Exercised..................................................... Cancelled .................................................... Outstanding at January 1, 2022 ........................ Exercisable at January 1, 2022 ......................... Shares 6,360 $ $ 354 (606) $ (402) $ $ 5,706 5,172 $ Weighted- Average Exercise Price Weighted- Average Remaining Contractual Life (Yrs.) Aggregate Intrinsic Value 33.09 29.43 7.02 25.97 36.13 37.38 4.0 3.5 $ $ 5,028 5,028 The weighted-average grant-date fair value of all options granted (including the Winfrey Amendment Option) was $15.64, $9.98 and $0.00 for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019, respectively. The total intrinsic value of all options exercised (including options granted under the Initial Option Agreement) was $18,497, $24,841 and $1,105 for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019, respectively. Cash received from Time-Vesting Options exercised during the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019 was $4,469, $8,176 and $1,076, respectively. Restricted Stock Unit Awards with Time-Vesting Criteria RSUs are exercisable based on the terms outlined in the applicable award agreement. The RSUs generally vest over a period of two to four years. The fair value of RSUs is determined using the closing market price of the Company’s common stock on the date of grant. A summary of RSU activity under the Stock Plans for the fiscal year ended January 1, 2022 is presented below. Outstanding at January 2, 2021 .......................................................... Granted.......................................................................................... Vested ........................................................................................... Forfeited........................................................................................ Outstanding at January 1, 2022 .......................................................... Shares 1,699 1,204 (736) (572) 1,595 $ $ $ $ $ Weighted-Average Grant-Date Fair Value 21.32 24.29 24.60 21.51 21.99 F-28 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) The weighted-average grant-date fair value of RSUs granted was $24.29, $19.40 and $19.09 for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019, respectively. The total fair value of RSUs vested during the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019 was $18,097, $15,015 and $12,268, respectively. Performance-Based Stock Unit Awards with Time- and Performance-Vesting Criteria In fiscal 2019, the Company granted 280.1 PSUs having both time- and performance-vesting criteria. The time-vesting criteria for these PSUs will be satisfied upon continued employment (with limited exceptions) on the third anniversary of the grant date. The performance-vesting criteria for these PSUs will be satisfied if the Company has achieved a certain annual operating income objective for the performance period of fiscal 2021. Pursuant to these awards, the number of PSUs that become vested, if any, upon the satisfaction of both vesting criteria, shall be equal to (x) the target number of PSUs granted multiplied by (y) the applicable achievement percentage, rounded down to avoid the issuance of fractional shares. The Company is currently accruing compensation expense to what it believes is the probable outcome upon vesting. In fiscal 2018, the Company granted 81.3 PSUs having both time- and performance-vesting criteria. The time- vesting criteria for these PSUs was satisfied upon continued employment (with limited exceptions) on May 15, 2021. The performance-vesting criteria for these PSUs was not satisfied and 0 PSUs became vested in fiscal 2021 upon the satisfaction of the time-vesting criteria. The Company accrued compensation expense in an amount equal to the outcome upon vesting. In fiscal 2017, the Company granted 98.5 PSUs in May 2017 and 47.9 PSUs in July 2017, all having both time- and performance-vesting criteria (the “2017 PSUs”). The time-vesting criteria for these PSUs was satisfied upon continued employment (with limited exceptions) on May 15, 2020. The performance-vesting criteria for two- thirds of these PSUs was satisfied when the Company achieved, in the case of the May 2017 awards, certain annual operating income objectives and, in the case of the July 2017 award, certain net income or operating income objectives, as applicable for each of the fiscal 2017 and fiscal 2018 performance years. The performance-vesting criteria for the fiscal 2019 performance year was not satisfied. When the performance measure was met, if at all, for a particular 2017 Award Performance Year (i.e., each fiscal year over a three-year period, fiscal 2017 through fiscal 2019), that portion of units was “banked” for potential issuance following the satisfaction of the time-vesting criteria. Such portion of units “banked” was equal to (x) the target number of PSUs granted for the applicable 2017 Award Performance Year multiplied by (y) the applicable achievement percentage (166.67% in the case of fiscal 2017 and fiscal 2018), rounded down to avoid the issuance of fractional shares. Pursuant to these awards, the number of PSUs that became vested in fiscal 2020 upon the satisfaction of the time-vesting criteria was 122.6. The Company accrued compensation expense in an amount equal to the outcome upon vesting. In fiscal 2016, the Company granted 289.9 PSUs having both time- and performance-vesting criteria. The time-vesting criteria for these PSUs was satisfied upon continued employment (with limited exceptions) on the third anniversary of the grant date. The performance-vesting criteria for these PSUs was satisfied when the Company achieved a Debt Ratio (as defined in the applicable term sheet for these PSU awards and based on a Debt to EBITDAS ratio (each, as defined therein)) at levels at or below 4.5x over the performance period from December 31, 2017 to December 29, 2018. Pursuant to these awards, the number of PSUs that became vested in fiscal 2019 upon the satisfaction of the time-vesting criteria of 219.3 was calculated as (x) the target number of PSUs granted multiplied by (y) 166.67%, the applicable Debt Ratio achievement percentage, rounded down to avoid the issuance of fractional shares. The Company accrued compensation expense in an amount equal to the outcome upon vesting. F-29 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) The fair value of PSUs is determined using the closing market price of the Company’s common stock on the date of grant. A summary of PSU activity under the 2014 Plan for the fiscal year ended January 1, 2022 is presented below. Outstanding at January 2, 2021 .......................................................... Granted.......................................................................................... Vested ........................................................................................... Forfeited........................................................................................ Outstanding at January 1, 2022 .......................................................... Shares Weighted-Average Grant-Date Fair Value 295 — — (94) 201 $ $ $ $ $ 31.46 — — 58.21 18.94 The weighted-average grant-date fair value of PSUs granted and/or incremental shares vested was $0.00, $28.09 and $17.51 during the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019, respectively. The total fair value of PSUs vested during the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019 was $0, $3,443 and $2,891, respectively. 13. Income Taxes On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act (the “CARES Act”) was signed into law. The CARES Act includes provisions relating to modifications to the net interest deduction limitation, net operating loss carryforward rules, refundable payroll tax credits and deferment of the employer portion of certain payroll taxes. On July 20, 2020, the U.S. Treasury Department released final regulations under Internal Revenue Code Section 951A (TD 9902) permitting a taxpayer to elect to exclude from its global intangible low-taxed income (“GILTI”) inclusion items of income subject to a high effective rate of foreign tax. As a result of the final regulations, the Company recorded a $7,566 tax benefit in fiscal 2020 related to the fiscal 2018 and fiscal 2019 taxes previously accrued attributable to GILTI. The following tables summarize the Company’s consolidated provision for U.S. federal, state and foreign taxes on income: Current: January 1, 2022 Fiscal Year Ended January 2, 2021 December 28, 2019 U.S. federal .................................................................................. $ State.............................................................................................. Foreign ......................................................................................... $ Deferred: U.S. federal .................................................................................. $ State.............................................................................................. Foreign ......................................................................................... $ Total tax provision ....................................................................... $ 38 1,055 24,245 25,338 $ $ (8,510) $ (9,589) 2,534 (15,565) $ $ 9,773 (14,052) $ 4,421 28,533 18,902 $ $ 94 (2,835) 1,301 (1,440) $ $ 17,462 20,900 1,873 18,164 40,937 (9,137) (2,434) 2,147 (9,424) 31,513 F-30 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) The components of the Company’s consolidated income before income taxes consist of the following: Domestic...................................................................... $ Foreign......................................................................... $ January 1, 2022 Fiscal Year Ended January 2, 2021 December 28, 2019 (27,763) $ 104,428 76,665 $ (10,467) $ 102,970 92,503 $ 75,932 75,028 150,960 The effective tax rates for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019 were 12.7%, 18.9% and 20.9%, respectively. The difference between the U.S. federal statutory tax rate and the Company’s consolidated effective tax rate is as follows: The Company’s effective tax rate for the fiscal year ended January 1, 2022 was impacted by the following items: (i) a $6,347 tax benefit related to a decrease in the applicable state tax rate on certain deferred income, (ii) a $3,548 tax benefit related to tax windfalls from stock compensation and (iii) a $1,560 a tax benefit due to the reversal of a valuation allowance related to certain non-U.S. net operating losses that are now expected to be realized. These benefits were partially offset by $6,888 of tax expense related to income earned in foreign jurisdictions at rates higher than the U.S. The Company’s effective tax rate for the fiscal year ended January 2, 2021 was impacted by the following items: (i) a $7,566 tax benefit related to the reversal of the tax impact of GILTI, (ii) a $4,714 tax benefit related to tax windfalls from stock compensation and (iii) a $1,401 tax benefit related to foreign-derived intangible income (“FDII”). These benefits were partially offset by (i) a $8,056 tax expense related to income earned in foreign jurisdictions at rates higher than the U.S. and (ii) a $2,278 tax expense for out-of-period income tax adjustments. The Company’s effective tax rate for the fiscal year ended December 28, 2019 was impacted by the following items: (i) a $5,148 tax expense related to income earned in foreign jurisdictions and (ii) a $3,524 tax expense related to GILTI. In addition, the effective tax rate for fiscal 2019 was impacted by the following: (i) a $5,650 tax benefit related to FDII, (ii) a $1,375 tax benefit related to the reversal of tax reserves no longer needed, and (iii) a $746 tax benefit related to the cessation of certain publishing operations. Fiscal Year Ended January 1, 2022 January 2, 2021 December 28, 2019 U.S. federal statutory tax rate ......................................... State income taxes (net of federal benefit) ..................... Cessation of operations................................................... Research and development credit ................................... Tax windfall on share-based awards............................... Reserves for uncertain tax positions ............................... Tax rate changes ............................................................. Executive compensation limitation................................. GILTI.............................................................................. FDII................................................................................. (Decrease) increase in valuation allowance due to net operating loss ......................................................... Out-of-period adjustments .............................................. Tax return adjustments related to the 2017 Tax Act....... Impact of foreign operations........................................... Other ............................................................................... Total effective tax rate............................................... 21.0% (1.8%) 0.0% (1.8%) (4.6%) 0.2% (8.2%) 1.8% 0.0% 0.0% (2.0%) 0.0% 0.0% 9.0% (0.9%) 12.7% 21.0% 1.0% 0.0% (2.2%) (4.3%) 0.9% (1.2%) 1.2% (8.2%) (1.5%) 0.0% 2.5% 0.0% 8.7% 1.0% 18.9% 21.0% (0.3%) (0.5%) (1.2%) (0.1%) (0.9%) 0.0% 0.5% 2.3% (3.7%) 0.4% 0.0% (0.7%) 3.4% 0.7% 20.9% F-31 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) The deferred tax assets and liabilities recorded on the Company’s consolidated balance sheets are as follows: January 1, 2022 January 2, 2021 Interest expense disallowance ............................................................................. $ Operating lease liabilities.................................................................................... Operating loss carryforwards .............................................................................. Provision for estimated expenses ........................................................................ Salaries and wages .............................................................................................. Share-based compensation .................................................................................. Other comprehensive income.............................................................................. Other.................................................................................................................... Less: valuation allowance ................................................................................... Total deferred tax assets...................................................................................... $ Goodwill and intangible assets ........................................................................... $ Operating lease assets ......................................................................................... Depreciation ........................................................................................................ Prepaid expenses ................................................................................................. Total deferred tax liabilities ................................................................................ $ Net deferred tax liabilities................................................................................... $ $ 44,598 22,901 14,172 2,128 2,710 15,707 6,306 5,927 (10,083) 104,366 $ (224,548) $ (20,794) (4,044) (1,433) (250,819) $ (146,453) $ 32,971 31,108 8,780 1,643 3,875 14,747 8,525 6,320 (7,190) 100,779 (227,198) (28,378) (3,912) (1,379) (260,867) (160,088) As of January 1, 2022 and January 2, 2021, the Company had primarily foreign and state net operating loss carryforwards of approximately $111,432 and $110,039, respectively, some of which have an unlimited carryforward period, while others expire in various years beginning in fiscal 2022. The Company maintains a full valuation allowance on its state and certain foreign net operating loss carryforwards as it is deemed more likely than not that such losses will not be realized. In fiscal 2021, the Company recorded a $1,560 income tax benefit for the release in the valuation allowance related to its operations in Switzerland. As a result of the Tax Cuts and Jobs Act (the “2017 Tax Act”) changing the U.S. to a modified territorial tax system, the Company will no longer assert its $80,892 of undistributed foreign earnings as of January 1, 2022 are permanently reinvested. The Company has considered whether there would be any potential future costs of not asserting indefinite reinvestment and does not expect such costs to be significant. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: January 1, 2022 Fiscal Year Ended January 2, 2021 December 28, 2019 Balance at beginning of year .................................................................... $ Increases related to tax positions taken in current year ............................ Increases related to tax positions taken in prior years .............................. Reductions related to tax positions taken in prior years ........................... Reductions related to settlements with tax authorities ............................. Effects of foreign currency translation ..................................................... Balance at end of year............................................................................... $ 851 196 260 (199) — (53) 1,055 $ $ 206 $ — 605 — — 40 851 $ 3,665 — 264 (2,731) (992) — 206 At January 1, 2022, the total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate is $985. In fiscal 2021, the Company reached a favorable settlement with the IRS for the 2018 tax year, which resulted in no adjustment, and closed an audit in Germany for tax years 2013 to 2016, which resulted in an assessment of $529. The Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. At January 1, 2022, with few exceptions, the Company was no longer subject to U.S. federal, state or local income tax examinations by tax authorities for years prior to 2018, or non-U.S. income tax examinations by tax authorities for years prior to 2016. F-32 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The Company had $(54) and $196 of accrued interest and penalties at January 1, 2022 and January 2, 2021, respectively. The Company recognized $142, $190 and $(257) of an income tax expense (benefit) in interest and penalties during the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019, respectively. 14. Employee Benefit Plans The Company sponsors the Third Amended and Restated WW Savings Plan (the “Savings Plan”) for salaried and certain hourly U.S. employees of the Company. The Savings Plan is a defined contribution plan that provides for employer matching contributions of 50% of the employee’s tax deferred contributions up to 6% of an employee’s eligible compensation for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019. Effective as of May 30, 2020, the Company temporarily suspended employer matching contributions through December 31, 2020. Expense related to these contributions for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019 was $3,136, $1,655 and $2,901, respectively. During fiscal 2014, the Company received a favorable determination letter from the IRS that qualifies the Savings Plan under Section 401(a) of the Internal Revenue Code. Pursuant to the Savings Plan, the Company also makes profit sharing contributions for all full-time salaried U.S. employees who are eligible to participate in the Savings Plan (except for certain personnel above a determined compensation level). The profit sharing contribution is a guaranteed monthly employer contribution on behalf of each participant based on the participant’s age and a percentage of the participant’s eligible compensation. The Savings Plan also has a discretionary supplemental profit sharing employer contribution component that is determined annually by the Compensation Committee. Effective as of May 30, 2020, the Company temporarily suspended profit sharing contributions through December 31, 2020. Expense related to these contributions for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019 was $1,342, $914 and $1,313, respectively. For certain U.S. personnel above a determined compensation level, the Company sponsors the Second Amended and Restated Weight Watchers Executive Profit Sharing Plan (“EPSP”). Under the IRS definition, the EPSP is considered a Nonqualified Deferred Compensation Plan. There is a promise of payment by the Company made on the employees’ behalf instead of an individual account with a cash balance. The EPSP provides for a guaranteed employer contribution on behalf of each participant based on the participant’s age and a percentage of the participant’s eligible compensation. The EPSP has a discretionary supplemental employer contribution component that is determined annually by the Compensation Committee. The EPSP is valued at the end of each fiscal month, based on an annualized interest rate of prime plus 2%, with an annualized cap of 15%. Effective as of May 30, 2020, the Company temporarily suspended EPSP contributions through December 31, 2020. Expense related to this commitment for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019 was $3,975, $1,761 and $3,691, respectively. 15. Cash Flow Information January 1, 2022 Fiscal Year Ended January 2, 2021 December 28, 2019 Net cash paid during the year for: Interest expense ............................................................................ $ Income taxes (1)............................................................................. $ 79,374 41,377 Noncash investing and financing activities were as follows: Fair value of net assets acquired in connection with acquisitions ................................................................................ $ 20,032 Capital expenditures and Capitalized software included in accounts payable and accrued expenses................................ $ 1,835 $ $ $ $ 137,163 $ 24,609 $ 130,081 34,268 9,677 $ 118 3,497 $ 3,844 (1) Fiscal 2021, fiscal 2020 and fiscal 2019 include tax refunds received of $1,077, $6,936 and $13,309, respectively. F-33 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) See Note 4 for disclosures on supplemental cash flow information related to leases. 16. Commitments and Contingencies Securities Class Action and Derivative Matters In March 2019, two substantially identical class action complaints alleging violations of the federal securities laws were filed by individual shareholders against the Company, certain of the Company’s current officers and the Company’s former controlling shareholder, Artal Group S.A. (“Artal”), in the United States District Court for the Southern District of New York. The actions were consolidated and lead plaintiffs were appointed in June 2019. A consolidated amended complaint was filed on July 29, 2019, naming as defendants the Company, certain of the Company’s current officers and directors, and Artal and certain of its affiliates. A second consolidated amended complaint was filed on September 27, 2019. The operative complaint asserted claims on behalf of all purchasers of the Company’s common stock between May 4, 2018 and February 26, 2019, inclusive (the “Class Period”), including purchasers of the Company’s common stock traceable to the May 2018 secondary offering of the Company’s common stock by certain of its shareholders. The complaint alleged that, during the Class Period, the defendants disseminated materially false and misleading statements and/or concealed or recklessly disregarded material adverse facts. The complaint alleged claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, and with respect to the secondary offering, under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, as amended. The plaintiffs sought to recover unspecified damages on behalf of the class members. The Company filed a motion to dismiss the complaint on October 31, 2019. On November 30, 2020, the Court granted the Company’s motion to dismiss in full and dismissed the complaint. The plaintiffs did not appeal. Between March and July 2019, the Company received shareholder litigation demands alleging breaches of fiduciary duties by certain current and former Company directors and executive officers, to the alleged injury of the Company. The allegations in the demands related to those contained in the dismissed securities class action litigation. In response to the demands, pursuant to Virginia law, the Board of Directors created a special committee to investigate and evaluate the claims made in the demands. In addition, four derivative complaints were filed, each making allegations against certain of the Company’s officers and directors and/or Artal and certain of its affiliates. First, on June 13, 2019, a shareholder derivative complaint was filed in the Southern District of New York against certain of the Company’s officers and directors alleging, among other things, that the defendants breached fiduciary duties to the alleged injury of the Company. The plaintiff voluntarily dismissed the complaint on July 8, 2019 and the Company agreed to treat the complaint as a litigation demand. Second, on July 23, 2019, another shareholder derivative complaint was filed in the Southern District of New York against certain of the Company’s officers and directors alleging, among other things, that the defendants breached fiduciary duties to the alleged injury of the Company. The plaintiff voluntarily dismissed the complaint the same day. Third, on October 25, 2019, another shareholder derivative complaint was filed in the Southern District of New York against certain of the Company’s officers and directors alleging, among other things, that the defendants breached fiduciary duties to the alleged injury of the Company. Finally, on December 16, 2019, a shareholder derivative complaint was filed in New York Supreme Court against certain of the Company’s officers and directors, and Artal and certain of its affiliates, alleging, among other things, that the defendants breached fiduciary duties to the alleged injury of the Company. This action and the derivative action filed October 25, 2019 (collectively, the “Derivative Actions”) were initially stayed pending a decision on the defendants’ motion to dismiss the securities class action, and all parties agreed to an additional stay until June 24, 2021. On June 24, 2021, the parties to the Derivative Actions jointly notified the Southern District of New York and the New York Supreme Court that the parties reached an agreement-in-principle to resolve the Derivative Actions. Subsequently, on August 17, 2021, the parties to the Derivative Actions jointly filed the formal Stipulation of Settlement as well as the Proposed Order and Final Judgment in New York Supreme Court. On November 30, 2021, the New York Supreme Court entered the Order and Final Judgment, and on January 7, 2022, the Southern District of New York entered a dismissal order. The time to appeal the Order and Final Judgment and the dismissal of the October 25, 2019 federal derivative action has passed. F-34 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) Federal Trade Commission Matter The Company received a letter from the U.S. Federal Trade Commission (the “FTC”) dated September 3, 2019, advising that the FTC was conducting a non-public inquiry into the practices of the Company's wholly owned subsidiary Kurbo, Inc. (“Kurbo”) relating to the collection, use, disclosure and sharing of personal information. Kurbo offers a paid private coaching service as well as a free app to help families teach children healthy habits. The FTC focused on whether certain practices in the Kurbo free app complied with the Children's Online Privacy Protection Act ("COPPA"). On February 16, 2022, the FTC filed a complaint and proposed settlement order in the United States District Court for the Northern District of California to resolve allegations that Kurbo violated COPPA by failing to provide required notices and obtain verifiable parental consent prior to collecting, using, and disclosing personal information from children using the Kurbo app. In connection with the proposed settlement, Kurbo and the Company are required, among other things: (i) to update their procedures to ensure that they obtain verifiable parental consent before collecting personal information from children, (ii) to destroy all of the personal information they may have obtained without verifiable parental consent as well as any models or algorithms based on that information, (iii) to update their records retention policy to require destruction of user information one year after a child stops tracking in the Kurbo app, and (iv) to pay a civil penalty of $1,500. Kurbo and the Company deny all of the material allegations in the FTC complaint and deny that either Kurbo or the Company ever violated COPPA or otherwise engaged in any wrongdoing. They entered into the settlement solely to resolve the matter and avoid the expense of litigation. The settlement will become final when the court enters the Consent Order. Other Litigation Matters Due to the nature of the Company’s activities, it is also, at times, subject to other pending and threatened legal actions that arise out of the ordinary course of business. In the opinion of management, the disposition of any such matters is not expected, individually or in the aggregate, to have a material adverse effect on the Company’s results of operations, financial condition or cash flows. However, the results of legal actions cannot be predicted with certainty. Therefore, it is possible that the Company’s results of operations, financial condition or cash flows could be materially adversely affected in any particular period by the unfavorable resolution of one or more legal actions. Commitments Minimum commitments under non-cancelable purchase obligations at January 1, 2022 were $18,861, of which $9,378 is due in fiscal 2022, $7,544 is due in fiscal 2023 and the remaining $1,939 is due in fiscal 2024. See Note 4 for disclosures related to minimum commitments under lease obligations, primarily for office and rental facilities operating leases. 17. Segment and Geographic Data The Company has four reportable segments based on an integrated geographical structure as follows: North America, Continental Europe, United Kingdom and Other. Other consists of Australia, New Zealand and emerging markets operations and franchise revenues and related costs, all of which have been grouped together as if they were a single reportable segment because they do not meet any of the quantitative thresholds and are immaterial for separate disclosure. To be consistent with the information that is presented to the chief operating decision maker, the Company does not include intercompany activity in the segment results. Information about the Company’s reportable segments is as follows: Total Revenue, net for the Fiscal Year Ended January 2, 2021 January 1, 2022 December 28, 2019 North America .......................................................................... $ Continental Europe ................................................................... United Kingdom ....................................................................... Other ......................................................................................... Total revenues, net.................................................................... $ 814,797 297,910 65,820 33,936 1,212,463 $ $ 942,100 313,380 84,387 38,257 1,378,124 $ $ 979,302 293,233 94,557 46,245 1,413,337 F-35 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) Segment operating income: North America .......................................................................... $ Continental Europe ................................................................... United Kingdom ....................................................................... Other ......................................................................................... Total segment operating income............................................... General corporate expenses ...................................................... Interest expense ........................................................................ Other expense, net .................................................................... Early extinguishment of debt.................................................... Provision for income taxes ....................................................... Net income................................................................................ $ Net loss attributable to the noncontrolling interest................... Net income attributable to WW International, Inc. .................. $ Net Income for the Fiscal Year Ended January 2, 2021 January 1, 2022 December 28, 2019 217,901 117,390 8,134 5,454 348,879 152,595 87,909 1,358 30,352 9,773 66,892 — 66,892 $ $ $ 269,580 124,891 10,648 2,341 407,460 191,298 123,310 349 — 17,462 75,041 38 75,079 $ $ $ 281,937 95,201 9,543 4,374 391,055 103,070 135,267 1,758 — 31,513 119,447 169 119,616 Depreciation and Amortization for the Fiscal Year Ended January 2, 2021 December 28, 2019 January 1, 2022 North America .......................................................................... $ Continental Europe ................................................................... United Kingdom ....................................................................... Other ......................................................................................... Total segment depreciation and amortization........................... General corporate depreciation and amortization..................... Depreciation and amortization.................................................. $ 39,270 1,468 799 404 41,941 12,745 54,686 $ $ 39,740 1,615 1,017 370 42,742 16,780 59,522 $ $ 36,643 1,709 802 443 39,597 14,738 54,335 The following tables present information about the Company’s sources of revenue and other information by geographic area. There were no material amounts of sales or transfers among geographic areas and no material amounts of U.S. export sales. $ Total Revenue, net for the Fiscal Year Ended January 2, 2021 743,060 443,429 40,352 151,283 1,378,124 $ $ $ January 1, 2022 788,173 274,866 21,908 127,516 1,212,463 December 28, 2019 609,996 597,270 118,493 87,578 1,413,337 Digital Subscription Revenues ...................................................... $ Workshops + Digital Fees ............................................................. In-studio product sales................................................................... E-commerce, licensing, franchise royalties and other................... $ F-36 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) United States.................................................................................. $ Canada ........................................................................................... Continental Europe........................................................................ United Kingdom ............................................................................ Other .............................................................................................. $ $ Total Revenue, net for the Fiscal Year Ended January 2, 2021 880,945 61,155 313,380 84,387 38,257 1,378,124 $ $ $ January 1, 2022 759,737 55,060 297,910 65,820 33,936 1,212,463 December 28, 2019 913,930 65,372 293,233 94,557 46,245 1,413,337 United States.................................................................................................... $ Canada ............................................................................................................. Continental Europe.......................................................................................... United Kingdom .............................................................................................. Other ................................................................................................................ $ (1) Amounts include finance lease assets United States.................................................................................................... $ Canada ............................................................................................................. Continental Europe.......................................................................................... United Kingdom .............................................................................................. Other ................................................................................................................ $ Long-Lived Assets (1) January 1, 2022 January 2, 2021 31,566 3,198 1,111 1,002 342 37,219 $ $ 43,651 4,508 1,471 1,751 554 51,935 Operating Lease Assets January 1, 2022 January 2, 2021 80,609 5,079 2,216 1,732 266 89,902 $ $ 107,023 6,136 3,038 2,217 688 119,102 18. Fair Value Measurements 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: • • • Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. When measuring fair value, the Company is required to maximize the use of observable inputs and minimize the use of unobservable inputs. Fair Value of Financial Instruments The Company’s significant financial instruments include long-term debt and interest rate swap agreements as of January 1, 2022 and January 2, 2021. Since there were no outstanding borrowings under the New Revolving Credit Facility as of January 1, 2022, the fair value approximated a carrying value of $0 at January 1, 2022. Since there were no outstanding borrowings under the then-existing Revolving Credit Facility as of January 2, 2021, the fair value approximated a carrying value of $0 at January 2, 2021. F-37 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) 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 January 1, 2022 and January 2, 2021, the fair value of the Company’s long-term debt was approximately $1,389,306 and $1,501,148, respectively, as compared to the carrying value (net of deferred financing costs and debt discount) of $1,418,104 and $1,485,800, respectively. Derivative Financial Instruments 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 19 for disclosures related to derivative financial instruments. The following table presents the aggregate fair value of the Company’s derivative financial instruments: 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 liability at January 1, 2022 ........ $ Interest rate swap liability at January 2, 2021 ........ $ 14,670 $ 28,283 $ — $ — $ 14,670 $ 28,283 $ — — The Company did not have any transfers into or out of Levels 1 and 2 and did not maintain any assets or liabilities classified as Level 3 during the fiscal years ended January 1, 2022 and January 2, 2021. 19. Derivative Instruments and Hedging As of January 1, 2022 and January 2, 2021, the Company had in effect interest rate swaps with an aggregate notional amount totaling $500,000 and $750,000, respectively. On July 26, 2013, in order to hedge a portion of its variable rate debt, the Company entered into a forward- starting interest rate swap with an effective date of March 31, 2014 and a termination date of April 2, 2020. The initial notional amount of this swap was $1,500,000. During the term of this swap, the notional amount decreased from $1,500,000 effective March 31, 2014 to $1,250,000 on April 3, 2017 and to $1,000,000 on April 1, 2019. This interest rate swap effectively fixed the variable interest rate on the notional amount of this swap at 2.41%. This swap qualified for hedge accounting and, therefore, changes in the fair value of this swap were recorded in accumulated other comprehensive loss. 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. The initial notional amount of this swap was $500,000. During the term of this swap, the notional amount decreased from $500,000 effective April 2, 2020 to $250,000 on March 31, 2021. This interest rate swap effectively fixed the variable interest rate on the notional amount of this swap at 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 (together with the 2018 swap, the “current swaps”) with an effective date of April 2, 2020 and a termination date of March 31, 2024. The notional amount of this swap is $250,000. This interest rate swap effectively fixed the variable interest rate on the notional amount of this swap at 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 January 1, 2022 and January 2, 2021, cumulative unrealized losses for qualifying hedges were reported as a component of accumulated other comprehensive loss in the amounts of $10,843 ($14,622 before taxes) and $20,979 ($28,161 before taxes), respectively. As of January 1, 2022 and January 2, 2021, the aggregate fair values of the Company’s current swaps were liabilities of $14,670 and $28,283, respectively, which were included in derivative payable in the consolidated balance sheets. The Company is hedging forecasted transactions for periods not exceeding the next three years. The Company expects approximately $4,566 ($6,103 before taxes) of derivative losses included in accumulated other comprehensive loss at January 1, 2022, based on current market rates, will be reclassified into earnings within the next 12 months. F-38 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) 20. Accumulated Other Comprehensive Loss Amounts reclassified out of accumulated other comprehensive loss are as follows: Changes in Accumulated Other Comprehensive Loss by Component (1) Fiscal Year Ended January 1, 2022 Loss on Foreign Currency Translation Loss on Qualifying Hedges Total Beginning balance at January 2, 2021............................................... $ (20,979) $ (4,170) $ (25,149) Other comprehensive income (loss) before reclassifications, net of tax........................................................ 2,452 (3,591) (1,139) Amounts reclassified from accumulated other comprehensive loss, net of tax (2) .............................................. Net current period other comprehensive income (loss)..................... Ending balance at January 1, 2022 .................................................... $ 7,684 10,136 (10,843) $ — (3,591) (7,761) $ 7,684 6,545 (18,604) (1) (2) Amounts in parentheses indicate debits See separate table below for details about these reclassifications Beginning balance at December 28, 2019......................................... $ (15,529) $ (11,823) $ (27,352) Other comprehensive (loss) income before reclassifications, net of tax ....................................................... (14,590) 7,555 (7,035) Fiscal Year Ended January 2, 2021 Loss on Foreign Currency Translation Loss on Qualifying Hedges Total Amounts reclassified from accumulated other comprehensive loss, net of tax (2).............................................. 9,140 — Net current period other comprehensive (loss) income including noncontrolling interest ...................................... (5,450) 7,555 Less: Net current period other comprehensive loss attributable to the noncontrolling interest ......................... Ending balance at January 2, 2021.................................................... $ (1) (2) Amounts in parentheses indicate debits See separate table below for details about these reclassifications 9,140 2,105 98 — 98 (20,979) $ (4,170) $ (25,149) Fiscal Year Ended December 28, 2019 Loss on Foreign Currency Translation Loss on Qualifying Hedges Total Beginning balance at December 29, 2018 ......................................... $ (1,175) $ (14,582) $ (15,757) Other comprehensive (loss) income before reclassifications, net of tax........................................................ (13,752) 2,737 (11,015) Amounts reclassified from accumulated other comprehensive loss, net of tax (2) .............................................. (602) — (602) Net current period other comprehensive (loss) income including noncontrolling interest....................................... (14,354) 2,737 (11,617) Less: Net current period other comprehensive loss attributable to the noncontrolling interest.......................... Ending balance at December 28, 2019 .............................................. $ — (15,529) $ 22 (11,823) $ 22 (27,352) (1) (2) Amounts in parentheses indicate debits See separate table below for details about these reclassifications F-39 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) Reclassifications out of Accumulated Other Comprehensive Loss (1) Details about Other Comprehensive Loss Components (Loss) Gain on Qualifying Hedges Interest rate contracts ................... $ $ January 1, 2022 Fiscal Year Ended January 2, 2021 Amounts Reclassified from Accumulated Other Comprehensive Loss December 28, 2019 Affected Line Item in the Statement Where Net Income is Presented (10,271) $ (10,271) 2,587 (7,684) $ (12,218) $ (12,218) 3,078 (9,140) $ Interest expense Income before income taxes 807 807 (205) Provision for income taxes 602 Net income (1) Amounts in parentheses indicate debits to profit/loss 21. Recently Issued Accounting Pronouncements In October 2021, the FASB issued updated guidance that requires an acquiring entity to apply Topic 606 to recognize and measure contract assets and contract liabilities acquired in a business combination. 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. Although the Company is currently evaluating the timing of adoption for this guidance, it does not expect the adoption to have a material impact on its consolidated financial statements. 22. Related Party As previously disclosed, on October 18, 2015, the Company entered into the Strategic Collaboration Agreement with Oprah Winfrey, under which she would consult with the Company and participate in developing, planning, executing and enhancing the WW program and related initiatives, and provide it with services in her discretion to promote the Company and its programs, products and services for an initial term of five years (the “Initial Term”). As previously disclosed, on December 15, 2019, the Company entered into an amendment of the Strategic Collaboration Agreement with Ms. Winfrey, pursuant to which, among other things, the Initial Term of the Strategic Collaboration Agreement was extended until April 17, 2023 (with no additional successive renewal terms) after which a second term will commence and continue through the earlier of the date of the Company’s 2025 annual meeting of shareholders or May 31, 2025. Ms. Winfrey will continue to provide the above-described services during the remainder of the Initial Term and, during the second term, will provide certain consulting and other services to the Company. In consideration of Ms. Winfrey entering into the amendment to the Strategic Collaboration Agreement and the performance of her obligations thereunder, on December 15, 2019 the Company granted Ms. Winfrey a fully vested option to purchase 3,276 shares of the Company’s common stock (the "Winfrey Amendment Option") which became exercisable on May 6, 2020, the date on which shareholder approval of such option was obtained. The amendment to the Strategic Collaboration Agreement became operative on May 6, 2020 when the Company's shareholders approved the Winfrey Amendment Option. Based on the Black Scholes option pricing method as of May 6, 2020, the Company recorded $32,686 of compensation expense in the second quarter of fiscal 2020 for the Winfrey Amendment Option. The Company used a dividend yield of 0.0%, 63.68% volatility and a risk-free interest rate of 0.41%. Compensation expense was included as a component of selling, general and administrative expenses. In addition to the Strategic Collaboration Agreement, Ms. Winfrey and her related entities provided services to the Company totaling $918, $2,228 and $2,791 for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019, respectively, which services included advertising, production and related fees. Also, during the fiscal year ended December 28, 2019, the Company received advertising services from entities related to Ms. Winfrey at no charge with an estimated value of $330. F-40 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS) Entities related to Ms. Winfrey were reimbursed for actual costs incurred in connection with the WW Presents: Oprahs 2020 Vision tour totaling $1,653 for the fiscal year ended January 2, 2021. The Company’s accounts payable to parties related to Ms. Winfrey at January 1, 2022 and January 2, 2021 was $120 and $76, respectively. During the fiscal year ended January 1, 2022, as permitted by the transfer provisions set forth in the previously disclosed Share Purchase Agreement, dated October 18, 2015, between the Company and Ms. Winfrey, as amended (the “Purchase Agreement”), and the previously disclosed Winfrey Option Agreement, dated October 18, 2015, between the Company and Ms. Winfrey (the “Initial Option Agreement”), Ms. Winfrey sold 1,542 of the shares she purchased under such purchase agreement and exercised a portion of her stock options granted in fiscal 2015 resulting in the sale of 581 shares issuable under such options, respectively. During the fiscal year ended January 2, 2021, as permitted by the transfer provisions set forth in the Purchase Agreement and the Initial Option Agreement, Ms. Winfrey sold 2,782 of the shares she purchased under such purchase agreement and exercised a portion of her stock options granted in fiscal 2015 resulting in the sale of 1,118 shares issuable under such options, respectively. 23. Restructuring 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 and will result 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 January 1, 2022 Lease termination and other related costs.............................................................. $ Employee termination benefit costs....................................................................... Total restructuring expenses .................................................................................. $ 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 January 1, 2022 Cost of revenues..................................................................................................... $ Selling, general and administrative expenses ........................................................ Total restructuring expenses .................................................................................. $ 12,688 8,846 21,534 16,727 4,807 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 towards the liability for the lease termination costs and decreased provision estimates by $3. For the fiscal year ended January 1, 2022, the Company made payments of $4,802 towards the liability for the employee termination benefit costs. The Company expects the remaining lease termination liability of $1,361 and the remaining employee termination benefit liability of $4,044 to be paid in full in fiscal 2023. F-41 WW INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO 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. For the fiscal year ended January 2, 2021, the Company recorded restructuring expenses totaling $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: Lease termination and other related costs............................................................... $ Employee termination benefit costs........................................................................ Total restructuring expenses ................................................................................... $ 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 Fiscal Year Ended January 2, 2021 Cost of revenues..................................................................................................... $ Selling, general and administrative expenses ........................................................ Total restructuring expenses .................................................................................. $ 7,989 25,103 33,092 23,300 9,792 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 towards the liability for the lease termination costs. For the fiscal year ended January 2, 2021, the Company made payments of $15,434 towards the liability for the employee termination benefit costs and increased provision estimates by $180. For the fiscal year ended January 1, 2022, the Company made payments of $4,649 towards the liability for the lease termination costs and decreased provision estimates by $470. For the fiscal year ended January 1, 2022, the Company made payments of $6,773 towards the liability for the employee termination benefit costs and decreased provision estimates by $1,136. The Company expects the remaining lease termination liability of $202 and the remaining employee termination benefit liability of $1,940 to be paid in full in fiscal 2022. 2019 Organizational Realignment As previously disclosed, in the first quarter of fiscal 2019, the Company undertook an organizational realignment which resulted in the elimination of certain positions and termination of employment for certain employees worldwide. The Company recorded expenses in connection with employee termination benefit costs of $6,331 ($4,727 after tax) for the fiscal year ended December 28, 2019 (all expenses were recorded in the first quarter of fiscal 2019). These expenses impacted cost of revenues by $1,425 and selling, general and administrative expense by $4,906 for the fiscal year ended December 28, 2019. The Company did not record additional expenses in connection with this organizational realignment. All expenses were recorded to general corporate expenses and, therefore, there was no impact to the segments. For the fiscal year ended December 28, 2019, the Company made payments of $5,077 towards the liability for these expenses and lowered provision estimates by $83. For the fiscal year ended January 2, 2021, the Company made payments of $1,052 towards the liability for these expenses and lowered provision estimates by $119. As of January 2, 2021, there was no outstanding liability related thereto. F-42 SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (IN THOUSANDS) Additions Balance at Beginning of Period Charged to Costs and Expenses Charged to Other Accounts Deductions (1) Balance at End of Period FISCAL YEAR ENDED JANUARY 1, 2022 Allowance for credit losses .............................. $ Inventory and other reserves ............................ $ Tax valuation allowance................................... $ 2,298 $ 10,239 $ 7,190 $ (214) $ 7,657 $ 1,266 $ — $ (358) $ — $ (10,755) $ (2,810) $ 4,437 $ 1,726 7,141 10,083 FISCAL YEAR ENDED JANUARY 2, 2021 Allowance for credit losses .............................. $ Inventory and other reserves ............................ $ Tax valuation allowance................................... $ 1,813 $ 4,685 $ 6,760 $ 411 $ 16,425 $ 792 $ 74 $ — $ — $ (10,871) $ (503) $ 141 $ 2,298 10,239 7,190 FISCAL YEAR ENDED DECEMBER 28, 2019 Allowance for credit losses .............................. $ Inventory and other reserves ............................ $ Tax valuation allowance................................... $ 1,743 $ 3,843 $ 6,191 $ (123) $ 8,710 $ 709 $ — $ — $ (40) $ 193 $ (7,868) $ (100) $ 1,813 4,685 6,760 (1) Primarily represents the utilization of established reserves, net of recoveries, where applicable. S-1 Exhibit Number **3.1 **3.2 **4.1 **4.2 *4.3 **10.1 **10.2 **10.3 **10.4 **10.5 **10.6 **10.7 EXHIBIT INDEX Description Amended and Restated Articles of Incorporation of WW International, Inc. (effective as of September 29, 2019) (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, as filed on September 30, 2019 (File No. 001-16769), and incorporated herein by reference). Amended and Restated Bylaws of WW International, Inc. (effective as of October 1, 2020) (filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 26, 2020, as filed on October 29, 2020 (File No. 001-16769), and incorporated herein by reference). Indenture, dated as of April 13, 2021, among WW International, Inc., the guarantors party thereto and The Bank of New York Mellon, as trustee and notes collateral agent, relating to $500.0 million in aggregate principal amount of 4.500% Senior Secured Notes due 2029 (the “Notes”) (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K, as filed on April 13, 2021 (File No. 001-16769), and incorporated herein by reference). Form of Note (included in Exhibit 4.1 above). Description of Securities. Credit Agreement, dated as of April 13, 2021, among WW International, Inc., as borrower, the lenders party thereto and Bank of America, N.A., as administrative agent and issuing bank (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed on April 13, 2021 (File No. 001-16769), and incorporated herein by reference). Equal Priority Intercreditor Agreement, dated as of April 13, 2021, among WW International, Inc., the guarantors party thereto, Bank of America, N.A., as collateral agent under the Credit Agreement and The Bank of New York Mellon, as notes collateral agent (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, as filed on April 13, 2021 (File No. 001-16769), and incorporated herein by reference). License Agreement, dated as of September 29, 1999, between WW Foods, LLC and Weight Watchers International, Inc. (filed as Exhibit 10.4 to the Company’s Registration Statement on Form S-4, as filed on December 2, 1999 (File No. 333-92005), and incorporated herein by reference). LLC Agreement, dated as of September 29, 1999, between H.J. Heinz Company and Weight Watchers International, Inc. (filed as Exhibit 10.7 to the Company’s Registration Statement on Form S-4, as filed on December 2, 1999 (File No. 333-92005), and incorporated herein by reference). Operating Agreement, dated as of September 29, 1999, between Weight Watchers International, Inc. and H.J. Heinz Company (filed as Exhibit 10.8 to the Company’s Registration Statement on Form S-4, as filed on December 2, 1999 (File No. 333-92005), and incorporated herein by reference). Amendment to Operating Agreement, dated August 4, 2009, by and between Weight Watchers International, Inc. and H.J. Heinz Company (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 3, 2009, as filed on November 12, 2009 (File No. 001-16769), and incorporated herein by reference). Amendment to Agreements, dated as of October 1, 2002, by and between Weight Watchers International, Inc., WW Foods, LLC and H.J. Heinz Company (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 3, 2009, as filed on November 12, 2009 (File No. 001-16769), and incorporated herein by reference). 65 Exhibit Number Description **10.8 **10.9 **10.10 †**10.11 †**10.12 †**10.13 †**10.14 †**10.15 †**10.16 †**10.17 †**10.18 †**10.19 Registration Rights Agreement, dated as of September 29, 1999, among Weight Watchers International, Inc., H.J. Heinz Company and Artal Luxembourg S.A. (filed as Exhibit 10.38 to Amendment No. 1 to the Company’s Registration Statement on Form S-1, as filed on October 29, 2001 (File No. 333-69362), and incorporated herein by reference). Corporate Agreement, dated as of November 5, 2001, between Weight Watchers International, Inc. and Artal Luxembourg S.A. (the “Corporate Agreement”) (filed as Exhibit 10.36 to Amendment No. 2 to the Company’s Registration Statement on Form S-1, as filed on November 9, 2001 (File No. 333-69362), and incorporated herein by reference). Amendment, dated as of July 1, 2005, to the Corporate Agreement (filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 2, 2005, as filed on August 11, 2005 (File No. 001-16769), and incorporated herein by reference). Weight Watchers International, Inc. 2008 Stock Incentive Plan (filed as Appendix A of the Company’s Definitive Proxy Statement on Schedule 14A filed on March 31, 2008 (File No. 001-16769), and incorporated herein by reference). Third Amended and Restated WW International, Inc. 2014 Stock Incentive Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed on May 12, 2021 (File No. 001- 16769), and incorporated herein by reference). Form of Term Sheet for Employee Stock Awards and Form of Terms and Conditions for Employee Stock Awards (filed as Exhibit 10.34 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, as filed on February 27, 2006 (File No. 001- 16769), and incorporated herein by reference). Form of Term Sheet for Employee Restricted Stock Unit Awards and Form of Terms and Conditions for Employee Restricted Stock Unit Awards (filed as Exhibit 10.35 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, as filed on February 27, 2006 (File No. 001-16769), and incorporated herein by reference). Form of Term Sheet for Employee Stock Option Awards and Form of Terms and Conditions for Employee Stock Option Awards (Chief Executive Officer Initial Equity Award—Stock Incentive Plan Award) (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K, as filed on April 26, 2017 (File No. 001-16769), and incorporated herein by reference). Form of Term Sheet for Employee Stock Option Awards and Form of Terms and Conditions for Employee Stock Option Awards (Chief Executive Officer Initial Equity Award—Inducement Grant Award) (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K, as filed on April 26, 2017 (File No. 001-16769), and incorporated herein by reference). Form of Term Sheet for Employee Restricted Stock Unit Awards and Form of Terms and Conditions for Employee Restricted Stock Unit Awards (Chief Executive Officer Initial Equity Award) (filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K, as filed on April 26, 2017 (File No. 001-16769), and incorporated herein by reference). 2017 Form of Term Sheet for Employee Restricted Stock Unit Awards and 2017 Form of Terms and Conditions for Employee Restricted Stock Unit Awards (filed as Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2017, as filed on August 8, 2017 (File No. 001-16769), and incorporated herein by reference). 2017 Form of Term Sheet for Employee Restricted Stock Unit Awards and 2017 Form of Terms and Conditions for Employee Restricted Stock Unit Awards (Chief Executive Officer Annual Equity Award) (filed as Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2017, as filed on August 8, 2017 (File No. 001-16769), and incorporated herein by reference). 66 Exhibit Number Description †**10.20 †**10.21 †**10.22 †**10.23 †**10.24 †**10.25 †**10.26 †*10.27 †**10.28 †**10.29 †**10.30 2018 Form of Term Sheet for Employee Restricted Stock Unit Awards and 2018 Form of Terms and Conditions for Employee Restricted Stock Unit Awards (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q Q for the fiscal quarter ended June 30, 2018, as filed on August 7, 2018 (File No. 001-16769), and incorporated herein by reference). 2020 Form of Term Sheet for Employee Stock Option Awards and 2020 Form of Terms and Conditions for Employee Stock Option Awards (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 27, 2020, as filed on August 4, 2020 (File No. 001-16769), and incorporated herein by reference). 2020 Form of Term Sheet for Employee Stock Option Awards and 2020 Form of Terms and Conditions for Employee Stock Option Awards (Chief Executive Officer Annual Equity Award) (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 27, 2020, as filed on August 4, 2020 (File No. 001-16769), and incorporated herein by reference). Form of Amended and Restated Restricted Stock Agreement for Weight Watchers International, Inc. non-employee directors and certain members of the former Interim Office of the Chief Executive Officer (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 2014, as filed on August 7, 2014 (File No. 001-16769), and incorporated herein by reference). Second Amended and Restated Weight Watchers Executive Profit Sharing Plan, August 1, 2012 (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 29, 2012, as filed on November 8, 2012 (File No. 001-16769), and incorporated herein by reference). Form of Amended and Restated Continuity Agreement between Weight Watchers International, Inc. and certain key executives (Chief Operating Officer, Chief Financial Officer and General Counsel & Secretary) (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 2, 2011, as filed on August 11, 2011 (File No. 001-16769), and incorporated herein by reference). Form of Amended and Restated Continuity Agreement between Weight Watchers International, Inc. and certain key executives (certain executive officers) (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 2, 2011, as filed on August 11, 2011 (File No. 001-16769), and incorporated herein by reference). Second Amended and Restated Continuity Agreement between WW International, Inc. and certain key executives. Continuity Agreement, dated as of April 21, 2017, by and between Weight Watchers International, Inc. and Mindy Grossman (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, as filed on April 26, 2017 (File No. 001-16769), and incorporated herein by reference). Employment Agreement, dated as of April 21, 2017, by and between Weight Watchers International, Inc. and Mindy Grossman (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed on April 26, 2017 (File No. 001-16769), and incorporated herein by reference). Separation Agreement, dated as of September 28, 2021, by and between WW International, Inc. and Mindy Grossman (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed on October 1, 2021 (File No. 001-16769), and incorporated herein by reference). 67 Exhibit Number Description †**10.31 †**10.32 †**10.33 †**10.34 †**10.35 †**10.36 †**10.37 †**10.38 †**10.39 †**10.40 **10.41 Offer Letter, dated as of July 2, 2012, by and between Weight Watchers International, Inc. and Nicholas P. Hotchkin (filed as Exhibit 10.31 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2012, as filed on February 27, 2013 (File No. 001-16769), and incorporated herein by reference). Letter Agreement, dated as of May 8, 2013, by and between Weight Watchers International, Inc. and Nicholas Hotchkin (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 29, 2013, as filed on August 8, 2013 (File No. 001-16769), and incorporated herein by reference). Second Letter Agreement, dated as of September 14, 2016, by and between Nicholas Hotchkin and Weight Watchers International, Inc. (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 1, 2016, as filed on November 8, 2016 (File No. 001-16769), and incorporated herein by reference). Offer Letter, dated as of March 3, 2014, by and between Weight Watchers International, Inc. and Michael F. Colosi (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 4, 2015, as filed on May 14, 2015 (File No. 001-16769), and incorporated herein by reference). Offer Letter, dated July 30, 2020, by and between WW International, Inc. and Amy O’Keefe (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 26, 2020, as filed on October 29, 2020 (File No. 001-16769), and incorporated herein by reference). Offer Letter, dated January 29, 2018, by and between Weight Watchers International, Inc. and Gail Tifford (filed as Exhibit 10.41 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2021, as filed on February 25, 2021 (File No. 001-16769), and incorporated herein by reference). Separation Agreement and General Release, dated August 22, 2021, by and between WW International, Inc. and Gail Tifford (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 2, 2021, as filed on November 4, 2021 (File No. 001-16769), and incorporated herein by reference). Offer Letter, dated July 29, 2014, by and between Weight Watchers International, Inc. and Michael Lysaght (filed as Exhibit 10.42 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2021, as filed on February 25, 2021 (File No. 001-16769), and incorporated herein by reference). Letter Agreement, dated September 7, 2016, by and between Weight Watchers International, Inc. and Michael Lysaght (filed as Exhibit 10.43 to the Company’s Annual Report on Form 10- K for the fiscal year ended January 2, 2021, as filed on February 25, 2021 (File No. 001-16769), and incorporated herein by reference). Letter Agreement, dated August 7, 2019, by and between WW International, Inc. and Michael Lysaght (filed as Exhibit 10.44 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2021, as filed on February 25, 2021 (File No. 001-16769), and incorporated herein by reference). Share Purchase Agreement, dated October 18, 2015, between Weight Watchers International, Inc. and Oprah Winfrey (“Share Purchase Agreement”) (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed on October 19, 2015 (File No. 001-16769), and incorporated herein by reference). 68 Exhibit Number Description **10.42 †**10.43 **10.44 **10.45 †**10.46 *21.1 *23.1 *31.1 *31.2 *32.1 Amendment to Share Purchase Agreement, dated as of December 15, 2019, between WW International, Inc. and Oprah Winfrey (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K, as filed on December 16, 2019 (File No. 001-16769), and incorporated herein by reference). Option Agreement, dated October 18, 2015, between Weight Watchers International, Inc. and Oprah Winfrey (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, as filed on October 19, 2015 (File No. 001-16769), and incorporated herein by reference). Strategic Collaboration Agreement, dated October 18, 2015, between Weight Watchers International, Inc. and Oprah Winfrey (“Strategic Collaboration Agreement”) (filed as Exhibit 10.39 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2016, as filed on March 2, 2016 (File No. 001-16769), and incorporated herein by reference). First Amendment of Strategic Collaboration Agreement, dated as of December 15, 2019, between WW International, Inc. and Oprah Winfrey (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed on December 16, 2019 (File No. 001-16769), and incorporated herein by reference). Option Agreement, dated December 15, 2019, between WW International, Inc. and Oprah Winfrey (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, as filed on December 16, 2019 (File No. 001-16769), and incorporated herein by reference). Subsidiaries of WW International, Inc. Consent of Independent Registered Public Accounting Firm. Rule 13a-14(a) Certification by Mindy Grossman, Chief Executive Officer. Rule 13a-14(a) Certification by Amy O’Keefe, Chief Financial Officer. Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *Exhibit 101 *EX-101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. *EX-101.SCH Inline XBRL Taxonomy Extension Schema Document *EX-101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document *EX-101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document *EX-101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document *EX-101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document *Exhibit 104 The cover page from WW International, Inc.’s Annual Report on Form 10-K for the fiscal year ended January 1, 2022, formatted in Inline XBRL (included within the Exhibit 101 attachments). * ** † Filed herewith. Previously filed. Represents a management arrangement or compensatory plan. 69 Item 16. Form 10-K Summary None. 70 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: March 1, 2022 By: /S/ MINDY GROSSMAN WW INTERNATIONAL, INC. Mindy Grossman President, Chief Executive Officer and Director (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. SIGNATURES Date: March 1, 2022 Date: March 1, 2022 Date: March 1, 2022 Date: March 1, 2022 Date: March 1, 2022 Date: March 1, 2022 Date: March 1, 2022 Date: March 1, 2022 Date: March 1, 2022 Date: March 1, 2022 Date: March 1, 2022 Date: March 1, 2022 Date: March 1, 2022 By: By: By: By: By: By: By: By: By: By: By: By: By: /S/ MINDY GROSSMAN Mindy Grossman President, Chief Executive Officer and Director (Principal Executive Officer) /S/ AMY O’KEEFE Amy O’Keefe Chief Financial Officer (Principal Financial Officer) /S/ AMY KOSSOVER Amy Kossover Chief Accounting Officer, Senior Vice President and Corporate Controller (Principal Accounting Officer) /S/ RAYMOND DEBBANE Raymond Debbane Director /S/ STEVEN M. ALTSCHULER /S/ /S/ Steven M. Altschuler Director JULIE BORNSTEIN Julie Bornstein Director JENNIFER DULSKI Jennifer Dulski Director JONAS M. FAJGENBAUM Jonas M. Fajgenbaum Director /S/ /S/ DENIS F. KELLY /S/ Denis F. Kelly Director JULIE RICE Julie Rice Director /S/ THILO SEMMELBAUER Thilo Semmelbauer Director /S/ CHRISTOPHER J. SOBECKI Christopher J. Sobecki Director /S/ OPRAH WINFREY Oprah Winfrey Director

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