Amid debt concerns and Oprah exit, WeightWatchers CEO sends internal memo to employees as stock crashes.

• Sima Sistani, CEO of WeightWatchers, sent a memo to employees, assuring them of the company's financial stability and stating that its GLP-1 weight-loss drug clinicals business is growing at a faster rate than previously stated in the earnings and guidance release two weeks ago.
• Oprah Winfrey is leaving the iconic weight-loss company's board in May, and shares fell by 20% following the announcement of her departure on Feb. 28.
• On Thursday, WW stock reached a new 52-week low, despite temporarily recovering from Oprah headlines, due to ongoing concerns about the balance sheet and core weight-loss business, resulting in a loss of more than half its value in a month.

Sima Sistani, CEO of WeightWatchers, has sent a memo to employees, assuring them that the company's financial position is stable and its new clinical business related to GLP-1 weight loss drugs is growing at a faster rate than anticipated.

In the memo, Sistani expressed her desire to "address some of the breathless media coverage."

On Feb. 28, Oprah Winfrey announced plans to leave the company's board and donate her shares to a museum's endowment, causing a 20%-plus drop in earnings. However, shares stabilized later that week. Since then, WW shares have experienced heavy selling, dropping to a new 52-week low on Thursday. Over the past month, shares have fallen 58%. The stock's debt load, short interest, and general anxiety about the impact of new weight loss drugs have contributed to heightened volatility.

Recent headlines have highlighted the company's substantial debt load, but this issue is not new, and most of the debt is not due for several years.

"Sistani informed employees that the headlines were often speculative, as the company had strong liquidity and was not facing a cash crunch. Additionally, the company had very attractive, long-term debt agreements with no maturities due until 2028 and 2029."

Guggenheim Partners analysts stated in a note on Thursday that they are not worried about World Wide Web Holdings' (WW) ability to repay its debt, which includes approximately $945 million outstanding on a non-amortizing term loan that matures in April 2028, and $500 million of notes due in April 2029.

According to Guggenheim, the company had approximately $109 million in cash at the end of 2023.

The company's debt is approximately 10 times its publicly traded equity value at its current market cap.

Although the debt has a high leverage, we anticipate that WW will be able to cover interest payments without any issues and will be in a stronger position to recapitalize the company in 2-3 years after the Clinical business scales. We also believe that any concerns about a recapitalization or default this year are exaggerated.

The Guggenheim museum maintains a buy rating on the shares with a $12 price target, while WW shares closed at $1.87 on Thursday.

In order to combat the threat of GLP-1 drugs to its core business, WW acquired Sequence, now known as WeightWatchers Clinic, to provide patients with clinicians who can prescribe the drugs and integrate them with a comprehensive weight-loss program. The FDA requires the use of these drugs in conjunction with broader weight-loss diet and exercise strategies.

Sistani wrote in a note to employees that her GLP-1 related clinicals business has grown quickly since it reported on Feb. 28 and provided guidance for the year. In fact, she stated that they are on track to exceed their Q1 guidance for Clinic subscribers.

The clinicals business has to grow for investors to turn bullish on the stock, according to several analysts who cover the stock, despite any faster growth being a positive development.

"One analyst who was consulted after the internal memo was shared stated that WW is in a difficult position, but they could not comment for attribution due to concerns about fair disclosure of the material information. The analyst suggested that the clinicals business, now named WeightWatchers Clinic, should be the future, following the GLP-1 playbook. However, the analyst noted that the upside to the small business is not significant, and the bigger issue is that the legacy business continues to struggle and the company is overly leveraged."

WeightWatchers reported that it ended Q4 with 3.8 million subscribers, including 67,000 for clinical subscriptions. However, the company's guidance for the full year 2024 was total subscriber growth in the range of 3.8 million to 4.0 million, including between 140,000 and 160,000 subscribers to WeightWatchers Clinic.

"Transforming a business requires courage and determination," Sistani wrote to employees. "We will continue to focus on delivering for our members, and the stock price will take care of itself," she stated. "I understand that clickbait stories may not feel great, but we will prove the naysayers wrong."

The Guggenheim note on Thursday stated that it would not be surprising if the special contained positive commentary about combining GLP-1 drug therapies with a clinically-guided behavior modification program. The note also mentioned that WW, a company from the weight loss industry, was among the participants in the TV event.

Sistani was named to the inaugural CNBC Changemakers list, revealed in February.