EX-99.3 5 d372399dex993.htm EX-99.3 EX-99.3

Exhibit 99.3

Unaudited Pro Forma Condensed Combined Financial Information of WW International, Inc. and Subsidiaries as of April 1, 2023, for the year ended December 31, 2022, and for the three months ended April 1, 2023

(in thousands, except for per share amounts)

Introduction

On April 10, 2023 (the “Closing Date”), WW International, Inc., a Virginia corporation (the “Company”) completed its previously announced acquisition of Weekend Health, Inc., doing business as Sequence, a Delaware corporation (“Sequence”), subject to the terms and conditions set forth in the Agreement and Plan of Merger, dated as of March 4, 2023, by and among the Company, Well Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company, Sequence, and Fortis Advisors LLC, a Delaware limited liability company, solely in its capacity as the Equityholders’ Representative (as defined therein) for Sequence (the “Merger Agreement”), pursuant to which Sequence continued as a wholly-owned subsidiary of the Company (the “Acquisition”). Sequence provides a technology powered care platform and mobile web application through its subscription based service, which includes a comprehensive weight management program, pharmacotherapy treatment, nutrition plans, health insurance coordination services, and access to clinicians, dietitians, fitness coaches and care coordinators.

As consideration for the Acquisition, which closed on April 10, 2023, the Company agreed to pay an aggregate amount equal to $132,000, subject to the adjustments set forth in the Merger Agreement (the “Merger Consideration”). Subject to the terms and conditions of the Merger Agreement, the Merger Consideration has been paid, or is payable, as follows: (i) approximately $64,217 in cash (inclusive of approximately $24,459 of cash on the balance sheet of Sequence) and approximately $34,702 in the form of approximately 7,996 newly issued shares of the Company’s common stock (valued at $4.34 per share), in each case, paid on the Closing Date or promptly thereafter, (ii) $16,000 in cash to be paid on April 10, 2024, and (iii) $16,000 in cash to be paid on April 10, 2025, in each case, subject to the adjustments and deductions set forth in the Merger Agreement.

Pro forma Information

The unaudited pro forma condensed combined statement of operations for the three months ended April 1, 2023 and the year ended December 31, 2022 give pro forma effect to the Acquisition as if it had occurred on January 2, 2022. The unaudited pro forma condensed combined balance sheet as of April 1, 2023 gives pro forma effect to the Acquisition as if it was completed on April 1, 2023.

The unaudited pro forma combined financial information is based on and should be read in conjunction with:

• the accompanying notes to the unaudited pro forma condensed combined financial information;

• the historical audited financial statements of WW International, Inc. as of and for the year ended December 31, 2022, and the related notes;

• the historical audited financial statements of Sequence as of and for the year ended December 31, 2022, and the related notes, filed as exhibits to this Form 8-K/A;

• the historical unaudited financial statements of WW International, Inc. as of and for the three months ended April 1, 2023, and the related notes;

• the historical unaudited financial statements of Sequence as of and for the three months ended March 31, 2023, and the related notes, filed as exhibits to this Form 8-K/A;

The unaudited pro forma condensed combined financial information has been prepared in accordance with Regulation S-X Article 11, Pro Forma Financial Information, as amended by the final rule, Amendments to Financial Disclosures about Acquired and Disposed Businesses, as adopted by the SEC in May 2020 (“Article 11”). The amended Article 11 became effective on January 1, 2021. The unaudited pro forma condensed combined financial information has been presented for illustrative purposes only and does not necessarily reflect what the combined company’s financial condition or results of operations would have been had the Acquisition occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial information also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The unaudited transaction accounting adjustments represent management’s estimates based on information available as of the date of this unaudited pro forma condensed combined financial information and are subject to change as additional information becomes available and analyses are performed.


WW INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET

APRIL 1, 2023

(IN THOUSANDS)

 

     WW International, Inc.     Weekend Health, Inc.     Transaction Accounting
Adjustments
    Notes (1)     Pro Forma Combined  

ASSETS

          

CURRENT ASSETS

          

Cash and cash equivalents

   $ 140,847     $ 27,486     $ (64,217     (a   $ 104,116  

Receivables, net

     31,059       342       —           31,401  

Inventories

     10,668       —         —           10,668  

Prepaid income taxes

     15,337       —         —           15,337  

Prepaid expenses and other current assets

     37,323       186       —           37,509  
  

 

 

   

 

 

   

 

 

     

 

 

 

TOTAL CURRENT ASSETS

     235,234       28,014       (64,217       199,031  

Property and equipment, net

     25,612       30       —           25,642  

Operating lease assets

     68,962       —         —           68,962  

Franchise rights acquired

     386,608       —         —           386,608  

Goodwill

     156,211       —         88,989       (b     245,200  

Other intangible assets, net

     64,178       700       9,113       (c     73,991  

Deferred income taxes

     23,006       2       —           23,008  

Other noncurrent assets

     13,917       —         —           13,917  
  

 

 

   

 

 

   

 

 

     

 

 

 

TOTAL ASSETS

   $ 973,728     $ 28,746     $ 33,885       $ 1,036,359  
  

 

 

   

 

 

   

 

 

     

 

 

 

LIABILITIES AND TOTAL DEFICIT

          

CURRENT LIABILITIES

          

Portion of operating lease liabilities due within one year

   $ 15,464     $ —         —         $ 15,464  

Accounts payable

     21,697       190       —           21,887  

Salaries and wages payable

     64,041       128       —           64,169  

Accrued marketing and advertising

     14,664       —         —           14,664  

Accrued interest

     10,938       —         —           10,938  

Other accrued liabilities

     42,288       1,659       18,424       (d     62,371  

Income taxes payable

     62,058       —         —           62,058  

Deferred revenue

     35,716       1,231       —           36,947  
  

 

 

   

 

 

   

 

 

     

 

 

 

TOTAL CURRENT LIABILITIES

     266,866       3,208       18,424         288,498  

Long-term debt, net

     1,423,329       —         —           1,423,329  

Long-term operating lease liabilities

     63,783       —         —           63,783  

Deferred income taxes

     19,940       —         1,943       (e     21,883  

Other

     2,079       10       12,410       (f     14,499  
  

 

 

   

 

 

   

 

 

     

 

 

 

TOTAL LIABILITIES

     1,775,997       3,218       32,777         1,811,992  

Preferred stock

     —         45,161       (45,161     (g     —    

TOTAL DEFICIT

          

Common stock

     —         2       (2     (g     —    

Treasury stock

     (3,093,237     —         —           (3,093,237

Retained earnings

     2,298,701       (19,635     46,271       (h     2,325,337  

Accumulated other comprehensive loss

     (7,733     —         —           (7,733
  

 

 

   

 

 

   

 

 

     

 

 

 

TOTAL DEFICIT

     (802,269    
(19,633

    46,269         (775,633
  

 

 

   

 

 

   

 

 

     

 

 

 

TOTAL LIABILITIES AND TOTAL DEFICIT

   $ 973,728     $ 28,746     $ 33,885       $ 1,036,359  
  

 

 

   

 

 

   

 

 

     

 

 

 

 

(1) 

See Note 4 to the Notes To The Unaudited Pro Forma Condensed Combined Financial Information for further details.


WW INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2022

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

     WW International, Inc.     Weekend Health, Inc.     Transaction Accounting
Adjustments
    Notes (1)     Pro Forma Combined        

Subscription revenues, net

   $ 919,055     $ 6,282       —         $ 925,337    

Product sales and other, net

     121,801       —         —           121,801    
  

 

 

   

 

 

   

 

 

     

 

 

   

Revenues, net

     1,040,856       6,282       —           1,047,138    
  

 

 

   

 

 

   

 

 

     

 

 

   

Cost of subscription revenues

     321,528       3,605       —           325,133    

Cost of product sales and other

     96,928       —         —           96,928    
  

 

 

   

 

 

   

 

 

     

 

 

   

Cost of revenues

     418,456       3,605       —           422,061    
  

 

 

   

 

 

   

 

 

     

 

 

   

Gross profit

     622,400       2,677       —           625,077    

Marketing expenses

     244,783       706       —           245,489    

Selling, general and administrative expenses

     263,840       4,374       11,363       (a     279,577    

Franchise rights acquired and goodwill impairments

     396,727       —         —           396,727    
  

 

 

   

 

 

   

 

 

     

 

 

   

Operating loss

     (282,950     (2,403     (11,363       (296,716  

Interest expense (income)

     81,141       (17     1,790       (b     82,914    

Other expense, net

     1,691       15,065       —           16,756    
  

 

 

   

 

 

   

 

 

     

 

 

   

Loss before income taxes

     (365,782     (17,451     (13,153       (396,386  

Benefit from for income taxes

     (114,379     9       (3,294     (c     (117,664  
  

 

 

   

 

 

   

 

 

     

 

 

   

Net loss

   $ (251,403   $ (17,460   $ (9,860     $ (278,723  
  

 

 

   

 

 

   

 

 

     

 

 

   
            

Net loss per share

            

Basic

   $ (3.58         $ (3.56  
  

 

 

         

 

 

   

Diluted

   $ (3.58         $ (3.56  
  

 

 

         

 

 

   
            

Weighted average common shares outstanding

            

Basic

     70,321           (d     78,317    
  

 

 

         

 

 

   

Diluted

     70,321           (d     78,317    
  

 

 

         

 

 

   

 

(1) 

See Note 4 to the Notes To The Unaudited Pro Forma Condensed Combined Financial Information for further details.


WW INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS

THREE MONTHS ENDED APRIL 1, 2023

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

     WW International, Inc.     Weekend Health, Inc.     Transaction Accounting
Adjustments
    Notes (1)     Pro Forma Combined        

Subscription revenues, net

   $ 211,032     $ 6,457       —         $ 217,489    

Product sales and other, net

     30,863       —         —           30,863    
  

 

 

   

 

 

   

 

 

     

 

 

   

Revenues, net

     241,895       6,457       —           248,352    
  

 

 

   

 

 

   

 

 

     

 

 

   

Cost of subscription revenues

     94,897       3,424       —           98,321    

Cost of product sales and other

     27,487       —         —           27,487    
  

 

 

   

 

 

   

 

 

     

 

 

   

Cost of revenues

     122,384       3,424       —           125,808    
  

 

 

   

 

 

   

 

 

     

 

 

   

Gross profit

     119,511       3,033       —           122,544    

Marketing expenses

     88,234       13       —           88,247    

Selling, general and administrative expenses

     59,860       2,635       868       (e     63,363    
  

 

 

   

 

 

   

 

 

     

 

 

   

Operating (loss) income

     (28,583     385       (868       (29,066  

Interest expense (income)

     22,846       (1     448       (b     23,293    

Other income, net

     (330     (199     —           (529  
  

 

 

   

 

 

   

 

 

     

 

 

   

(Loss) income before income taxes

     (51,099     585       (1,316       (51,830  

Provision for income taxes

     67,580       118       (329     (c     67,369    
  

 

 

   

 

 

   

 

 

     

 

 

   

Net (loss) income

   $ (118,679   $ 467     $ (986     $ (119,198  
  

 

 

   

 

 

   

 

 

     

 

 

   
            

Net loss per share

            

Basic

   $ (1.68         $ (1.52  
  

 

 

         

 

 

   

Diluted

   $ (1.68         $ (1.52  
  

 

 

         

 

 

   
            

Weighted average common shares outstanding

            

Basic

     70,596           (d     78,592    
  

 

 

         

 

 

   

Diluted

     70,596           (d     78,592    
  

 

 

         

 

 

   

 

(1) 

See Note 4 to the Notes To The Unaudited Pro Forma Condensed Combined Financial Information for further details.


WW INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

(in thousands)

Note 1. Basis of Presentation

The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11. The historical financial information of WW International, Inc. and Weekend Health, Inc. has been adjusted in the unaudited pro forma condensed combined financial information to reflect transaction accounting adjustments related to the Acquisition, in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).

The Company’s and Sequence’s historical financial statements were prepared in accordance with U.S. GAAP and presented in U.S. dollars.

The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting in accordance with ASC 805, Business Combinations, with the Company as the accounting acquirer, using the fair value concepts defined in ASC Topic 820, Fair Value Measurement, and based on the historical consolidated financial statements of the Company and Sequence. Under ASC 805, all assets acquired and liabilities assumed in a business combination are recognized and measured at their assumed acquisition date fair value, while transaction costs associated with the business combination are expensed as incurred. The excess of Merger Consideration over the estimated fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill.

The allocation of the aggregate Merger Consideration depends upon certain estimates and assumptions, all of which are preliminary. The allocation of the aggregate Merger Consideration has been made for the purpose of developing the unaudited pro forma condensed combined financial information.

Note 2. Accounting Policies

As part of the Acquisition, management is performing a comprehensive review of the entities’ accounting policies. As a result of the review, management may identify differences between the accounting policies of the entities which, when conformed, could have a material impact on the financial statements of the combined company. Based on its initial analysis, the Company has not identified any changes in accounting policies that would have an impact on unaudited pro forma combined condensed financial information.


Note 3. Preliminary Purchase Price Allocation

The following table shows the preliminary allocation of the purchase price for Weekend Health, Inc. to the acquired identifiable assets, liabilities assumed and goodwill:

 

Total consideration:

     

Cash paid at closing

   $ 64,217     

Cash to be paid on April 10, 2024

     16,000     

Cash to be paid on April 10, 2025

     12,420     

Total cash payments

      $ 92,637  

Less stock-based compensation expense attributable to post combination vesting

        (3,883
     

Common shares issued

     7,996     

Stock price as of April 10, 2023 (1)

   $ 4.12     

Total stock issuance purchase price

        32,943  
     

 

 

 

Aggregated merger consideration

      $ 121,697  
     

 

 

 
     

Assets acquired:

     

Cash

   $ 27,486     

Receivables

     342     

Prepaid expenses and other current assets

     186     

Property, plant and equipment

     30     

Intangible assets

     9,813     

Deferred income tax

     2     
     

 

 

 

Total assets acquired

        37,859  
     

 

 

 
     

Liabilities assumed:

     

Accounts payable

   $ 190     

Accrued liabilities

     1,787     

Deferred revenue

     1,231     

Deferred tax liability

     1,943     
     

 

 

 

Total liabilities assumed

        5,151  
     

 

 

 
     

Net assets acquired

        32,708  
     

 

 

 
     
     

 

 

 

Total goodwill

      $ 88,989  
     

 

 

 

 

(1)

Represents the fair value of the shares transferred to the sellers, based on the number of shares to be issued, 7,996, multiplied by the closing price of the Company’s ordinary shares on April 10, 2023 of $4.12 per share.

Note 4. Transaction Accounting Adjustments

The transaction accounting adjustments are based on management’s preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma combined financial information:

Adjustments to the pro forma combined balance sheet:

 

  (a)

Reflects cash paid for the acquisition by the Company of $39,758 and cash acquired and paid from the balance sheet of Sequence of $24,459.

 

  (b)

Reflects the preliminary estimate of goodwill, which represents the excess of the purchase price over the fair value of Weekend Health, Inc.’s identifiable assets acquired and liabilities assumed as presented in Note 3.


  (c)

Reflects the estimated fair value of intangible assets acquired, net of the elimination of the historical carrying value of capitalized software.

 

Intangible Asset Acquired

   Pro-Forma
Balance Sheet Fair
Value
 

Customer relationships

   $ 2,045  

Developed software

     7,768  
  

 

 

 
   $ 9,813  

Reversal of Sequence historical capitalized software

     (700
  

 

 

 

Intangible assets pro-forma balance

   $ 9,113  
  

 

 

 

 

  (d)

Reflects $16,000 of cash payable on April 10, 2024 for the acquisition plus the estimated transaction costs to be incurred subsequent to March 31, 2023 amounting to $2,424.

  (e)

Reflects the originating deferred taxes resulting from the transaction fair value adjustments of the acquired assets and assumed liabilities based on the applicable statutory tax rate with the respective estimated purchase price allocation. The effective tax rate of the combined company could be significantly different (either higher or lower) depending on post-merger activities, including cash needs and changes in tax law. Because the tax rates used for the pro forma financial information are estimated, the blended rate will likely vary from the actual effective rate in periods subsequent to completion of the Acquisition. This determination is preliminary and subject to change based upon the final determination of the fair value of the acquired assets and assumed liabilities.

  (f)

Reflects $16,000 of cash payable on April 10, 2025 for the acquisition discounted using the Company’s weighted average cost of debt, partially offset by the reversal of a $10 liability related to Weekend Health, Inc. unvested stock option exercises.

  (g)

Reflects the elimination of Weekend Health, Inc.’s common stock and preferred stock.

  (h)

Reflects the issuance of WW International, Inc. stock with a value of $32,943 and the elimination of Weekend Health, Inc.’s retained earnings of $19,635 partially offset by stock-based compensation expense attributable to post combination vesting of $3,883 and an accrual for unpaid transaction costs of $2,424.

Adjustments to the pro forma combined statement of operations:

 

  (a)

Reflects estimated amortization expense of intangible assets of $4,634 based on the estimated fair value at acquisition date, stock-based compensation expense attributable to post combination vesting of $3,883, transaction costs of $2,424 incurred subsequent to April 1, 2023 and the net impact of the addition of $504 related to payroll expenses that had been capitalized by Weekend Health, Inc. and the reversal of related amortization expense of capitalized software of $82. Transaction costs of $3,504 are included in the historical income statement of the Company for the three months ended April 1, 2023. These costs will not affect the Company’s income statement beyond 12 months after the acquisition date. Refer to the table in note (e) below for further information relating to intangible assets acquired.

 

  (b)

Reflects the accretion of interest expense for the period attributable to the discounting of the $16,000 of cash payable on April 10, 2025 using the Company’s weighted average cost of debt.

 

  (c)

Reflects the income tax impact of the transaction accounting adjustments utilizing a statutory income tax rate in effect of 25.01% for the year ended December 31, 2022 and the 3 months period ended March 31, 2023. The effective tax rate of the combined company could be significantly different (either higher or lower) depending on post-merger activities, including cash needs and changes in tax law. Because the tax rates used for the pro forma financial information are estimated, the blended rate will likely vary from the actual effective rate in periods subsequent to completion of the Acquisition. This determination is preliminary and subject to change based upon the final determination of the fair value of the acquired assets and assumed liabilities.

 

  (d)

Reflects the issuance of additional shares in connection with the Acquisition, assuming the shares were outstanding since the beginning of the fiscal year ended December 31, 2022. As the Acquisition is being reflected as if it had occurred at the beginning of the periods presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Acquisition have been outstanding for the entire periods presented.


  (e)

Reflects estimated amortization expense of intangible assets of $647 based on the estimated fair value at acquisition date and the net impact of the addition of $268 related to payroll expenses that had been capitalized by Weekend Health, Inc. and the reversal of related amortization expense of capitalized software of $48. Refer to the table below for further information relating to intangible assets acquired.

 

     Pro-Forma
     Useful      Pro-Forma Amortization Expense  

Intangible Asset Acquired

   Balance Sheet
Fair Value
     Life
(in years)
     Twelve Months Ended
December 31, 2022
     Three Months Ended
April 1, 2023
 

Customer relationships

   $ 2,045        0.4      $ 2,045      $ —    

Developed software

     7,768        3.0        2,589        647  
  

 

 

       

 

 

    

 

 

 
   $ 9,813         $ 4,634      $ 647  

The preliminary estimated fair value and useful life can differ from final amounts and the difference could have a material effect on the accompanying unaudited pro forma condensed combined financial information. A 10% change in the valuation of intangible assets would cause a corresponding increase or decrease in the balance of goodwill along with an increase in amortization expense of $463 for the twelve months ended December 31, 2022 and $204 for the three months ended April 1, 2023.