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, initiatives, 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 December 28, 2024 compared to the year ended December 30, 2023, refer to "Part II—Item 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 December 28, 2024 filed with the SEC on February 28, 2025, which discussion is incorporated herein by reference.
Overview
For more than sixty years, Weight Watchers has been one of the world’s most effective weight management programs, designed to help millions of members live longer, healthier lives. Our unique approach to weight health was built on a simple idea: people trying to lose weight together succeed more often than those who go it alone.
Today, we are redefining weight management for the GLP-1 era with a fully integrated model that brings together our supportive community built over six decades with personalized nutrition, behavioral science, digital innovation, world-class coaching, and compassion to create a differentiated program that is unique in the marketplace. In addition, our digital platform provides our U.S. members access to a network of licensed, specialized healthcare professionals – including board-certified doctors and clinicians trained in obesity medicine – who can prescribe a comprehensive formulary of medications, including both the oral and injectable versions of GLP-1 medications, to eligible members through Weight Watchers-affiliated practices.
Our primary sources of revenue across our fully integrated model are subscriptions for our Behavioral and Clinical business offerings. Our “Behavioral” business refers to providing subscriptions to our digital product offerings with the option to add on unlimited access to our workshops. Our “Clinical” business refers to providing subscriptions to our clinical product offerings provided by Weight Watchers Clinic combined with our digital subscription product offerings and unlimited access to our workshops.
Emergence from Bankruptcy
See “Item 1. Business—Emergence from Bankruptcy” for information regarding the Company’s emergence from the Chapter 11 Cases on June 24, 2025.
Non-GAAP Financial Measures
To supplement our consolidated results presented in accordance with accounting principles generally accepted in the United States (“GAAP”), we have disclosed non-GAAP financial measures of operating results that exclude or adjust certain items. We present within this Annual Report on Form 10-K the following non-GAAP financial measures: earnings before interest, taxes, depreciation and amortization expenses and share-based compensation expense (“EBITDA”); and EBITDA adjusted for goodwill and other intangible assets impairments, reorganization items, net, transaction costs related to strategic alternatives and Chapter 11 financial reorganization, net restructuring charges, former Chief Executive Officer (“CEO”) separation expenses and other items as indicated in the reconciliations below that management believes are not indicative of ongoing operations (“Adjusted EBITDA”). See “—Liquidity and Capital Resources—EBITDA and Adjusted EBITDA” 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 titled measures reported by other companies.
Use of Constant Currency
As exchange rates are an important factor in understanding period-to-period comparisons, we believe in certain cases the presentation of results on a constant currency basis in addition to reported results helps improve investors’ ability to understand our operating results and evaluate our performance in comparison to prior periods. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. We use results on a constant currency basis as one measure to evaluate our performance. In this 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.
Sources of Revenue
We derive our revenue principally from:
Subscription Revenue. Our “Subscription Revenue” consists of the aggregate of: (a) “Behavioral Subscription Revenue”, the fees associated with subscriptions for our Behavioral offerings; and (b) “Clinical Subscription Revenue”, the fees associated with subscriptions for our Clinical offerings. See “—Overview” above for additional details on these offerings.
Other Revenue. We license our trademarks and other intellectual property in certain categories of food, beverages and other weight management-relevant consumer products and services. We also co-brand with or endorse carefully selected branded consumer products and services. In addition, we generate revenue from franchise fees with respect to commitment plans and royalties, and publishing. Prior to fiscal 2024, we also sold a range of consumer products, including bars, snacks, cookbooks and kitchen tools, online through our e-commerce platforms, at our studios, and through our trusted partners. Our consumer products business closed at the end of fiscal 2023.
Cost and Expenses
Cost of Revenue
Total cost of revenue primarily consists of expenses to operate our studios and workshops, costs to develop and provide our digital and clinical products and costs to sell consumer products prior to fiscal 2024. Operating costs primarily consist of salary expense paid to operations management, commissions and expenses paid to our employees, coaches and guides, clinicians, 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 products include salaries and related benefits, depreciation and amortization of capitalized software and website development, credit card processing fees and other costs incurred in developing our offerings, as applicable.
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 (linear and digital streaming), social media, search, programmatic, audio, 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 associated with brand ambassadors, expenses in support of market research, as well as costs incurred in connection with local marketing and promotions and personnel-related costs, such as salaries, benefits, and share-based compensation.
Product Development Expenses
Product development expenses include personnel-related costs, such as salaries, benefits, and share-based compensation, as well as engineering, design, data, and other costs related to product development, such as software licenses.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of compensation, benefits and other related costs, including share-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.
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. As of the Emergence Date and due to our change in fiscal year, we consider these metrics on a fiscal month basis and therefore we no longer report Paid Weeks and Subscription Revenue Per Paid Weeks, but now report Monthly Subscription Revenue Per Average Subscriber.
Revenue—Our “Subscription Revenue” consists of the aggregate of: (a) “Behavioral Subscription Revenue”, the fees associated with subscriptions for our Behavioral offerings; and (b) “Clinical Subscription Revenue”, the fees associated with subscriptions for our Clinical offerings. See “—Overview” above for additional details on these offerings. In addition, “Other Revenue” (formerly known as “product sales and other”) consists of revenue from licensing, franchise fees with respect to commitment plans and royalties, publishing and other revenue. Prior to fiscal 2024, Other Revenue included sales of consumer products.
Incoming Subscribers—“Subscribers” refer to Behavioral subscribers and Clinical subscribers who participate in recurring bill programs in Company-owned operations. The “Incoming Subscribers” metric reports Subscribers in Company-owned operations at a given period start. Recruitment and retention are key drivers for this metric. Management utilizes this metric to monitor changes in the subscriber base which directly impacts our revenue growth and trends.
End of Period Subscribers—The “End of Period Subscribers” metric reports Subscribers in Company-owned operations at a given period end. Recruitment and retention are key drivers for this metric. Management utilizes this metric to monitor changes in the subscriber base which directly impacts our revenue growth and trends.
Monthly Subscription Revenue Per Average Subscriber—The “Monthly Subscription Revenue Per Average Subscriber” metric reports the monthly fees associated with subscriptions for our offerings divided by the Average Subscriber for our businesses. Monthly Subscription Revenue for both quarterly and year-to-date periods for each respective business are calculated as Subscription Revenue divided by the number of months in the respective quarterly or year-to-date period. The “Average Subscriber” for quarterly periods for each respective business is the average of its Incoming Subscribers and End of Period Subscribers for the respective quarterly period. The “Average Subscriber” for year-to-date periods for each respective business is the average of its Incoming Subscribers at the beginning of the fiscal year and its End of Period Subscribers for each quarter end within the respective year-to-date period. Management utilizes this metric to consider revenue growth and trends on a per subscriber basis.
Gross profit and gross margin.
Market Trends
Our revenue and profitability can be sensitive to major trends in the weight management and health and wellness industries. In particular, we believe that our business could be adversely impacted by:
the rapidly evolving and increasingly competitive clinical weight management and weight loss market and increasing consumer interest in weight management medications and the failure of our offerings to compete in such market and environment;
the development of more effective or more favorably perceived weight management methods or technologies, including by the pharmaceutical, genetics and biotechnology industries;
the rapidly evolving regulatory landscape applicable to GLP-1s;
increased competition from weight loss and wellness apps;
reduced consumer interest in commercial weight loss and diet programs;
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 the failure of new services or products to appeal to evolving consumer sentiment;
a failure to successfully implement new strategic initiatives;
a failure of our technology or systems to perform as designed;
a decrease in the effectiveness of our marketing, advertising, and social media programs or an increase in the effectiveness of our competitors’ similar programs;
a downturn in general economic conditions or consumer confidence;
an impairment of our brands and other intellectual property; and
any event or condition that impedes people from accessing resources or discourages or impedes people from gathering with others.
For additional information on the aforementioned trends, see “Risk Factors” in Item 1A of this Annual Report on Form 10-K.
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, revenue 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.
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 units for purposes of assessing goodwill impairment to be the Behavioral and Clinical business lines.
In performing the impairment analysis for goodwill, for all of our reporting units, we estimated future cash flows by utilizing the historical debt-free cash flows (cash flows provided by operations less capital expenditures) attributable to each of the Behavioral and Clinical reporting units and then applied expected future operating income growth rates for the respective reporting unit. We utilized adjusted EBITDA 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.
Other Intangible Assets - Predecessor
Finite-lived franchise rights acquired were amortized over the remaining contractual period, which was generally less than one year. Indefinite-lived franchise rights acquired were tested for potential impairment on at least an annual basis or more often if events so required.
In performing the impairment analysis for indefinite-lived franchise rights acquired, the fair value for franchise rights acquired was estimated using both a relief from royalty methodology and a discounted cash flow approach referred to as the hypothetical start-up approach. The aggregate estimated fair value for these franchise rights was then compared to the carrying value of the unit of account for these rights. We determined the appropriate unit of account for purposes of assessing impairment to be the rights in the Behavioral business in the country in which the applicable acquisition occurred.
In our relief from royalty approach analysis, the cash flows associated with the Behavioral business in each country were based on the expected revenue for such country and the application of a royalty rate based on current market terms. In our hypothetical start-up approach analysis, we assumed that the year of maturity was reached after 7 years. Subsequent to the year of maturity for the hypothetical start-up approach, we estimated future cash flows in each country based on assumptions regarding revenue growth and operating income margins. The cash flows 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.
Other finite-lived intangible assets were amortized using the straight-line method over their estimated useful lives of 3 to 20 years. We expensed all software costs incurred during the preliminary project stage and capitalized all internal and external direct costs of materials and services consumed in developing software once the development reached the application development stage. Application development stage costs generally included software configuration, coding, installation to hardware and testing. These costs were amortized over their estimated useful lives of 3 to 5 years for software and website development costs. All costs incurred for upgrades, maintenance and enhancements, including the cost of website content, which did not result in additional functionality, were expensed as incurred.
Other Intangible Assets - Successor
Upon the adoption of fresh start accounting, we identified total other intangible assets of $529.0 million that principally consisted of trade name, developed technology, database, customers/subscribers and customer relationships, which were estimated based on either the cost approach, direct cost approach, relief from royalty or multi-period excess earnings methods. Significant assumptions for identified intangibles included royalty rates, discount rates, margins, attrition rates, revenue growth rates, and economic lives. Such fair value measurement of intangible assets is considered Level 3 of the fair value hierarchy.
Trade name is an indefinite-lived intangible asset. The remaining other intangible assets are finite-lived intangible assets, which are amortized using the straight-line method over their estimated useful lives of 1 to 6 years. We also capitalize 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 lives of 3 years for software and website development costs. All costs incurred for upgrades, maintenance and enhancements, including the cost of website content, which did not result in additional functionality, were expensed as incurred.
We review indefinite-lived intangible assets for potential impairment on at least an annual basis or more often if events so require. Impairment is assessed by examining underlying assumptions used to determine fair value including projections of future cash flows, revenue growth rates, operating income margins and discount rates. We also consider the trading value of both our equity and debt. If we determine that it is more likely than not that our indefinite-lived intangible assets may be impaired, we use a quantitative approach to assess the asset’s fair value and the amount of the impairment, if any.
Goodwill and Other Intangible Assets Impairment Tests
We review goodwill for potential impairment on at least an annual basis or more often if events so require. In performing the annual impairment analyses as of May 4, 2025 (Predecessor) and May 5, 2024 (Predecessor), we determined that the carrying values of our goodwill reporting units did not exceed their respective fair values and, therefore, no impairments existed.
We review indefinite-lived intangible assets for potential impairment on at least an annual basis or more often if events so require. Impairment is assessed by examining underlying assumptions used to determine fair value including projections of future cash flows, revenue growth rates, operating income margins and discount rates. We also considered the trading value of both our equity and debt. If we determine that it's more likely than not that our intangible assets may be impaired, we use a quantitative approach to assess the asset’s fair value and the amount of the impairment, if any. In performing the annual impairment analyses as of May 4, 2025 (Predecessor) and May 5, 2024 (Predecessor), we determined that the carrying values of our franchise rights acquired with indefinite-lived units of account did not exceed their respective fair values and, therefore, no impairments existed.
Based on the triggering events indicated during the quarters ended September 28, 2024 (Predecessor), March 30, 2024 (Predecessor) and March 29, 2025 (Predecessor), we performed interim impairment tests for all of our goodwill reporting units and franchise rights acquired with indefinite-lived units of account in the third quarter of fiscal 2024 (Predecessor), the first quarter of fiscal 2024 (Predecessor) and the first quarter of fiscal 2025 (Predecessor), respectively.
When determining fair value, we utilize various assumptions, including projections of future cash flows, revenue growth rates, operating income margins and discount rates. A change in these underlying assumptions could cause a change in the results of the impairment assessments and, as such, could cause fair value to be less than the carrying values and result in an impairment of those assets. In the event such a result occurred, we would be required to record a corresponding charge, which would impact earnings. We would also be required to reduce the carrying values of the related assets on our balance sheet. We continue to evaluate these assumptions and believe that these assumptions are appropriate.
In performing our impairment analyses, we also considered the trading value of both our equity and debt. If the trading values of both our equity and debt were to significantly decline from their levels at the time of testing, we may have to take an impairment charge at the appropriate time, which could be material. For additional information on risks associated with our recognizing asset impairment charges, see the risk factor titled “We have in the past and may in the future be required to recognize asset impairment charges for indefinite- and definite-lived assets” found in “Item 1A. Risk Factors” of this Annual Report on Form 10-K.
As a result of the inherent uncertainty associated with forming the estimates within our goodwill and other intangible assets impairment tests, actual results could differ from those estimates. Future events and changing market conditions may impact our assumptions as to future revenue and operating margin growth, weighted average cost of capital, and other factors that may result in changes in our estimates of fair value. Although we believe the assumptions used in testing for impairment are reasonable, a lack of recovery or further deterioration in market conditions or financial performance, a lack of recovery or further decline in our share price from current levels for a sustained period, or an increase in the market-based weighted average cost of capital, among other factors, could significantly impact our impairment analysis and may result in future goodwill or other intangible asset impairment charges that, if incurred, could have a material adverse effect on our financial condition and results of operations.
Further information regarding the results of our goodwill and other intangible assets annual impairment tests and interim impairment tests for the third quarter of fiscal 2024 (Predecessor), the first quarter of fiscal 2024 (Predecessor) and the first quarter of fiscal 2025 (Predecessor) can be found in Note 7 “Goodwill and Other Intangible Assets” of the notes to the audited consolidated financial statements, contained in Part IV, Item 15 of this Annual Report on Form 10-K.
Bankruptcy
We applied ASC 852 in preparing our consolidated financial statements starting on the Petition Date. ASC 852 requires the financial statements, for the periods subsequent to the Petition Date and up to and including the Emergence Date, which includes the period of emergence from Chapter 11 bankruptcy, to distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain charges incurred during the bankruptcy proceedings, such as legal and professional fees incurred directly as a result of the bankruptcy proceeding, the write-off of deferred financing costs and discount on debt subject to compromise and other related charges are recorded as Reorganization Items, net in the consolidated statements of operations.
In connection with our emergence from bankruptcy and in accordance with ASC 852, we qualified for and adopted fresh start accounting on the Emergence Date. We were required to adopt fresh start accounting because (i) the holders of existing voting shares of the Predecessor received less than 50% of the voting shares of the Successor, and (ii) the reorganization value of our assets immediately prior to confirmation of the Plan was less than the post-petition liabilities and allowed claims. In accordance with ASC 852, with the application of fresh start accounting, we allocated the reorganization value to our individual assets and liabilities (except for deferred income taxes) based on their estimated fair values in conformity with ASC 805, Business Combinations . The amount of deferred taxes was determined in accordance with ASC 740, Income Taxes . The Emergence Date fair values of our assets and liabilities differed materially from their recorded values as reflected on the historical balance sheets. Refer to Note 3 “Fresh Start Accounting” of the notes to the audited consolidated financial statements, contained in Part IV, Item 15 of this Annual Report on Form 10-K, for additional information.
We identified intangible assets of $529.0 million, which principally consisted of trade name, developed technology, database, customer/subscribers and customer relationships were estimated based on either the cost approach, direct cost approach, relief from royalty or multi-period excess earnings methods. Significant assumptions for identified intangibles included royalty rates, discount rates, margins, attrition rates, revenue growth rates, and economic lives. Such fair value measurement of intangible assets is considered Level 3 of the fair value hierarchy.
For trade names valued under the relief from royalty income approach, the royalty rate was estimated to be 6.0%. For the developed technology-based intangibles that were valued using the relief from royalty income approach, the royalty rate was estimated to be 4.0% for Behavioral developed technology and 5.0% for Clinical developed technology. For the database intangibles that were valued using the cost approach and direct cost approach, the margin was estimated to be 19.0%. For customer related intangible assets that were valued using the multi-period excess earnings method, the attrition rate was estimated to be 25.0% for Behavioral customers/ subscribers and 40.0% for Clinical customers/subscribers. For business-to-business (B2B) customer-related intangible assets that were valued using the multi-period excess earnings method, the attrition rate was estimated to be 10.0%. The discount rate applied to all the above models was 17.0%.
Income Taxes – Realizability of Deferred Tax Assets
We are subject to income taxes in the U.S. and various foreign jurisdictions. Significant estimates and judgments are required in determining our provision for income taxes, most notably the realizability of our deferred income tax assets. 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. We consider historical levels of income, estimates of future taxable income, future reversals of existing taxable temporary differences, potential carrybacks of operating loss and tax credits and feasible tax planning strategies in assessing the need for a tax valuation allowance.
As of December 31, 2025 (Successor), we had valuation allowances of $106.8 million. After taking into consideration the future reversals of existing taxable temporary differences, we maintain a partial valuation allowance on our U.S. federal and state interest expense carryforward as it is deemed more likely than not that the related deferred tax income assets will not be realized. As a result of emergence from the Chapter 11 bankruptcy proceedings, we experienced an ownership change and our ability to utilize disallowed business interest carryforwards to reduce future taxable income and federal income tax is subject to various limitations under Section 382 of the Code.
In evaluating the objective evidence that historical results provide, we considered three years of cumulative operating results and determined we do not have sufficient positive evidence from our estimates of future taxable income to release our valuation allowances. Estimating future taxable income requires significant judgment based on our current plans to manage our underlying business. We will continue to monitor the need for a valuation allowance against our deferred tax assets on a quarterly basis.
Critical Accounting Policies
Information concerning our critical accounting policies is set forth in Note 1 “Basis of Presentation and Summary of Significant Accounting Policies” of the notes to the audited consolidated financial statements, contained in Part IV, Item 15 of this Annual Report on Form 10-K.
RESULTS OF OPERATIONS
The table below sets forth selected financial information from our consolidated statements of operations for the periods presented.
(In millions, except per share amounts and percentages)
Successor
Predecessor
Period from
Period from
June 25, 2025
December 29, 2024
Fiscal Year Ended
through December 31, 2025
through June 24, 2025
December 28, 2024
Revenue, net
Cost of revenue
Gross profit
Gross Margin %
Marketing expenses
Product development expenses
Selling, general & administrative expenses
Franchise rights acquired impairments
Operating (loss) income
Operating (Loss) Income Margin %
Reorganization items, net
Interest expense
Other expense (income), net
(Loss) income before income taxes
Provision for income taxes
Net (loss) income
Weighted average diluted shares outstanding
Diluted (net loss) earnings per share
Note: Totals may not sum due to rounding.
Included within the operating results are the impact of transaction costs related to strategic alternatives and Chapter 11 financial reorganization, the impact of depreciation and amortization expenses, the net impact of restructuring charges, the impact of share-based compensation expense, and the impact of former CEO separation expenses, as applicable, which are further detailed below.
Transaction Costs
Certain non-recurring transaction costs related to strategic alternatives and Chapter 11 financial reorganization are included in applicable line items on the consolidated statements of operations:
(in millions)
Successor
Predecessor
Period from
Period from
June 25, 2025
December 29, 2024
Fiscal Year Ended
through December 31, 2025
through June 24, 2025
December 28, 2024
Transaction costs:
Selling, general and administrative expenses
Total transaction costs
Depreciation and Amortization Expenses
Depreciation and amortization expenses are included in applicable line items on the consolidated statements of operations:
(in millions)
Successor
Predecessor
Period from
Period from
June 25, 2025
December 29, 2024
Fiscal Year Ended
through December 31, 2025
through June 24, 2025
December 28, 2024
Depreciation and amortization expenses:
Cost of revenue
Product development expenses
Selling, general and administrative expenses
Total depreciation and amortization expenses
Restructuring Charges
Restructuring charges consist of expenses associated with the reduction in headcount as a result of certain strategic re-alignments. Restructuring charges include our 2025 restructuring plan (the “2025 Plan”), our previously disclosed 2024 restructuring plan (the “2024 Plan”), our previously disclosed 2023 restructuring plan (the “2023 Plan”), and our previously disclosed 2022 restructuring plan (the “2022 Plan”). The restructuring charges are included in applicable line items on the consolidated statements of operations:
(in millions)
Successor
Predecessor
Period from
Period from
June 25, 2025
December 29, 2024
Fiscal Year Ended
through December 31, 2025
through June 24, 2025
December 28, 2024
Restructuring charges:
Cost of revenue
Selling, general and administrative expenses
Total restructuring charges
Share-based Compensation Expense
Share-based compensation expense is included in applicable line items on the consolidated statements of operations:
(in millions)
Successor
Predecessor
Period from
Period from
June 25, 2025
December 29, 2024
Fiscal Year Ended
through December 31, 2025
through June 24, 2025
December 28, 2024
Share-based compensation expense:
Selling, general and administrative expenses
Total share-based compensation expense
Former CEO Separation Expenses
Certain non-recurring expenses in connection with the separation from the Company of our former CEO are included in applicable line items on the consolidated statements of operations:
(in millions)
Successor
Predecessor
Period from
Period from
June 25, 2025
December 29, 2024
Fiscal Year Ended
through December 31, 2025
through June 24, 2025
December 28, 2024
Former CEO separation expenses:
Selling, general and administrative expenses
Total transaction costs
Consolidated Results of Operations
Revenue
Revenue was $347.1 million for the period from June 25, 2025 through December 31, 2025 (Successor), $363.6 million for the period from December 29, 2024 through June 24, 2025 (Predecessor) and $785.9 million for the fiscal year ended December 28, 2024 (Predecessor). Foreign currency positively impacted our revenue for the period from June 25, 2025 through December 31, 2025 (Successor) by $6.0 million and for the period from December 29, 2024 through June 24, 2025 (Predecessor) by $0.5 million. The change in revenue was driven by a decline in Behavioral Subscription Revenue, partially offset by an increase in Clinical Subscription Revenue and four additional reporting days in fiscal 2025 as a result of the change in our fiscal reporting calendar. The decline in Behavioral Subscription Revenue was primarily due to the lower number of Incoming Behavioral Subscribers versus the prior year coupled with Behavioral recruitment challenges, which were further impacted by bankruptcy-related media coverage. The increase in Clinical Subscription Revenue was primarily due to an increase in the number of subscribers due to consumer interest in weight management medications, including from our former compounded GLP-1 offering.
Cost of Revenue
Cost of revenue was $100.0 million for the period from June 25, 2025 through December 31, 2025 (Successor), $100.2 million for the period from December 29, 2024 through June 24, 2025 (Predecessor) and $252.8 million for the fiscal year ended December 28, 2024 (Predecessor). Foreign currency increased cost of revenue for the period from June 25, 2025 through December 31, 2025 (Successor) by $0.7 million and had a de minimis impact on cost of revenue for the period from December 29, 2024 through June 24, 2025 (Predecessor). The change in cost of revenue was primarily driven by a decrease in revenue, coupled with operational efficiency gains from actions taken to reduce our fixed cost base resulting in a more variable cost structure.
Gross Profit
Gross profit was $247.1 million for the period from June 25, 2025 through December 31, 2025 (Successor), $263.4 million for the period from December 29, 2024 through June 24, 2025 (Predecessor) and $533.1 million for the fiscal year ended December 28, 2024 (Predecessor). Foreign currency positively impacted gross profit for the period from June 25, 2025 through December 31, 2025 (Successor) by $5.3 million and for the period from December 29, 2024 through June 24, 2025 (Predecessor) by $0.5 million.
Gross margin was 71.2% for the period from June 25, 2025 through December 31, 2025 (Successor), 72.4% for the period from December 29, 2024 through June 24, 2025 (Predecessor) and 67.8% for the fiscal year ended December 28, 2024 (Predecessor). The gross margin change was due to the reduction in cost of revenue as a result of actions to reduce our fixed cost base and move to a more variable cost structure.
Marketing Expenses
Marketing expenses were $116.7 million for the period from June 25, 2025 through December 31, 2025 (Successor), $110.9 million for the period from December 29, 2024 through June 24, 2025 (Predecessor) and $236.5 million for the fiscal year ended December 28, 2024 (Predecessor). Foreign currency increased marketing expenses for the period from June 25, 2025 through December 31, 2025 (Successor) by $0.5 million and decreased marketing expenses for the period from December 29, 2024 through June 24, 2025 (Predecessor) by $0.1 million. The change in marketing expenses was primarily due to the strategic decision to reduce marketing spend during our financial reorganization process, partially offset by increased spend associated with additional calendar days in fiscal 2025 as a result of the change in our fiscal reporting calendar. These additional calendar days had heightened spend to drive awareness for our product offerings ahead of peak demand season in the new year.
Product Development Expenses
Product development expenses were $17.1 million for the period from June 25, 2025 through December 31, 2025 (Successor), $25.3 million for the period from December 29, 2024 through June 24, 2025 (Predecessor) and $42.2 million for the fiscal year ended December 28, 2024 (Predecessor). Foreign currency had a de minimis impact on product development expenses for the period from June 25, 2025 through December 31, 2025 (Successor) and for the period from December 29, 2024 through June 24, 2025 (Predecessor). The change in product development expenses was de minimis due to an increase in the capitalization rate associated with product and technology initiatives aligned with our website and app rebuild.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $115.7 million for the period from June 25, 2025 through December 31, 2025 (Successor), $78.5 million for the period from December 29, 2024 through June 24, 2025 (Predecessor) and $175.7 million for the fiscal year ended December 28, 2024 (Predecessor). Foreign currency increased selling, general and administrative expenses for the period from June 25, 2025 through December 31, 2025 (Successor) by $0.3 million and had a de minimis impact on selling, general and administrative expenses for the period from December 29, 2024 through June 24, 2025 (Predecessor). The change in selling, general and administrative expenses was due to increased depreciation and amortization expenses and the transaction and reorganization related costs associated with the Chapter 11 financial reorganization of the Company, partially offset by a decline in restructuring charges and the related cost reductions.
Franchise Rights Acquired Impairments
In performing our interim impairment analysis as of March 29, 2025 (Predecessor), we determined that the carrying value of our United States indefinite-lived franchise rights acquired unit of account exceeded its respective fair value and, as a result, we recorded an impairment charge for our United States unit of account of $27.5 million in the first quarter of fiscal 2025 (Predecessor).
In performing our interim impairment analysis as of September 28, 2024 (Predecessor), we determined that the carrying values of our United States and United Kingdom indefinite-lived franchise rights acquired units of account exceeded their respective fair values and, as a result, we recorded impairment charges for our United States and United Kingdom units of account of $54.3 million and $2.8 million, respectively, in the third quarter of fiscal 2024 (Predecessor).
In performing our interim impairment analysis as of March 30, 2024 (Predecessor), we determined that the carrying values of our United States, Australia, New Zealand and United Kingdom indefinite-lived franchise rights acquired units of account exceeded their respective fair values and, as a result, we recorded impairment charges for our United States, Australia, New Zealand and United Kingdom units of account of $251.4 million, $4.1 million, $2.3 million and $0.2 million, respectively, in the first quarter of fiscal 2024 (Predecessor).
Reorganization Items, Net
The net reorganization gain of $1,143.9 million for the period from December 29, 2024 through June 24, 2025 (Predecessor) related to our emergence from Chapter 11 bankruptcy and primarily consisted of the gain on settlement of liabilities subject to compromise and the impacts of fresh start valuation adjustments. See Note 2 “Emergence from Voluntary Reorganization under Chapter 11” of the notes to the audited consolidated financial statements, contained in Part IV, Item 15 of this Annual Report on Form 10-K, for further information.
Interest Expense
Interest expense was $24.7 million for the period from June 25, 2025 through December 31, 2025 (Successor), $38.7 million for the period from December 29, 2024 through June 24, 2025 (Predecessor) and $109.0 million for the fiscal year ended December 28, 2024 (Predecessor). The change in interest expense was driven by the Chapter 11 financial reorganization and the reduction in Successor debt under the New Term Loan Facility relative to Predecessor debt. The effective interest rate on our debt, based on interest incurred (which includes amortization of our deferred financing costs and debt discount, as applicable) and our average borrowings during each of the respective periods and excluding the impact of any applicable interest rate swaps, was 10.91% per annum for the period from June 25, 2025 through December 31, 2025 (Successor), 7.14% per annum for the period from December 29, 2024 through June 24, 2025 (Predecessor) and 7.74% per annum for the fiscal year ended December 28, 2024 (Predecessor), or 7.50% per annum for the fiscal year ended December 28, 2024 (Predecessor) including the impact of any applicable interest rate swaps. Interest expense was impacted by the termination of our interest rate swaps on March 31, 2024. See “—Liquidity and Capital Resources—Long-Term Debt” for additional details regarding our debt, including interest rates and payments thereon.
Other Expense (Income), Net
Other expense (income), net, which consists primarily of the impact of foreign currency on intercompany transactions, was $1.3 million of expense for the period from June 25, 2025 through December 31, 2025 (Successor), $6.7 million of expense for the period from December 29, 2024 through June 24, 2025 (Predecessor) and was a de minimis amount of income for the fiscal year ended December 28, 2024 (Predecessor).
Provision for Income Taxes
Our effective tax rate was (119.3%) for the period from June 25, 2025 through December 31, 2025 (Successor), 0.1% for the period from December 29, 2024 through June 24, 2025 (Predecessor) and (0.2%) for the fiscal year ended December 28, 2024 (Predecessor).
The tax expense for the period from June 25, 2025 through December 31, 2025 (Successor) was impacted by tax expense due to increases in our valuation allowance, as well as tax expense impacts of interim period tax accounting adjustments as described below.
The tax expense for the period from December 29, 2024 through June 24, 2025 (Predecessor) was 0.1% and primarily consisted of the income tax impacts from reorganization and fresh start adjustments, including adjustments to our valuation allowance. We recorded income tax benefits for reorganization adjustments in the Predecessor period, primarily consisting of: (i) tax expense for the reduction in federal and state deferred tax assets related to cancelled share-based compensation awards, (ii) tax benefit related to non-taxable cancellation of debt income ("CODI") realized upon emergence; and (iii) tax benefit for the reduction in our valuation allowance resulting from the adjustments described above. We recorded income tax expense for fresh start adjustments in the Predecessor period, consisting of tax expense for the increase in deferred tax liabilities resulting from fresh start accounting adjustments, which was partially offset by a tax benefit for the reduction in the valuation allowance on our deferred tax assets. The rate was also impacted by tax benefits from interim period tax accounting adjustments as described below.
The effective tax rate for the period from December 29, 2024 through June 24, 2025 (Predecessor) was determined using an annualized effective tax rate (“AETR”), adjusted for discrete items. The tax effects of statutory rate changes, significant, unusual or infrequently occurring items, and certain changes in the assessment of the realizability of deferred tax assets are excluded from the determination of our estimated AETR, as such, items were recognized as discrete items in the Predecessor and Successor Periods. The Predecessor Period includes the discrete tax impacts resulting from reorganization adjustments and fresh start accounting. Any changes to our deferred tax assets and liabilities for the Predecessor Period (whether resulting from reorganization adjustments, fresh start adjustments or otherwise) were partially offset with a corresponding adjustment to our valuation allowances.
As part of the Chapter 11 bankruptcy proceedings, our prepetition funded debt was extinguished. The Internal Revenue Code (the “Code”) provides that a debtor in a bankruptcy case may exclude CODI from taxable income but must reduce certain of its tax attributes by the amount of any CODI realized as a result of the consummation of a plan of reorganization. The amount of our CODI was estimated to be $951.5 million. As a result, our U.S. net operating loss (“NOL”) carryforwards and tax credit carryforwards will be reduced as required. The reductions in NOL carryforwards for the CODI have been fully offset by a corresponding decrease to our valuation allowance as of December 31, 2025 (Successor). The tax adjustments recorded in the Predecessor Period represent our best estimate using all available information at June 24, 2025. Further adjustments were recorded in the Successor Period at December 31, 2025 based on our final December 31, 2025 financial positions under the Code. The final tax impacts on the Company’s tax attributes could change significantly from the current estimates.
As a result of emergence from the Chapter 11 bankruptcy proceedings, we did experience an ownership change. Our ability to utilize disallowed business interest carryforwards to reduce future taxable income and federal income tax is subject to various limitations under Section 382 of the Code. The utilization of such attributes including state and local NOLs will be subject to an annual limitation under Section 382 of the Code and will be reduced as required.
The tax expense for the fiscal year ended December 28, 2024 (Predecessor) was impacted by a tax expense due to a valuation allowance and a tax expense related to share-based awards, partially offset by a tax benefit related to state tax and a tax benefit related to foreign-derived intangible income.
In addition, for the fiscal year ended December 28, 2024 (Predecessor), the effective tax rate was impacted by out-of-period income tax adjustments and tax expense from a valuation allowance established to offset certain non-U.S. deferred tax assets due to the uncertainty of realizing future tax benefits. The adoption of the Organization for Economic Cooperation and Development’s global tax reform initiative, which introduced a global minimum tax of 15% applicable to large multinational corporations, impacted our effective tax rate for the fiscal year ended December 28, 2024 (Predecessor) by (0.04%) related to Canadian top up tax.
Operating Results
Although GAAP requires that we report our results for the period from December 29, 2024 through June 24, 2025 (Predecessor) and the period from June 25, 2025 through December 31, 2025 (Successor) separately, management views certain metric and revenue information for the fiscal year ended December 31, 2025 by combining the results of the applicable Predecessor and Successor Periods because management believes such presentation provides the most meaningful comparison of our results to prior periods. Although the Predecessor and Successor Periods generally are not comparable as they are impacted by fresh start accounting, there are no fresh start adjustments affecting revenue and therefore revenue information has been combined to provide a meaningful understanding of operating trends, which would be consistent with a pro forma calculation under Article 11 of Regulation S-X. Nevertheless, the combined operating results do not reflect the actual results we would have achieved absent our emergence from the Chapter 11 Cases and may not be indicative of future results.
We cannot adequately benchmark the operating results of the period from June 25, 2025 through December 31, 2025 (Successor) against any of the previous periods reported in our consolidated financial statements without combining it with the period from December 29, 2024 through June 24, 2025 (Predecessor) and do not believe that reviewing the results of this period in isolation would be useful in identifying trends in or reaching conclusions regarding our overall operating performance. Management believes that the key performance metrics such as Subscription Revenue, Incoming and End of Period Subscribers and Monthly Subscription Revenue Per Average Subscriber for the Successor Period when combined with the Predecessor Period provides more meaningful comparisons to other periods and are useful in identifying current business trends. Accordingly, the tables below present the combined results for fiscal 2025.
Metrics and Business Trends
The following tables set forth key metrics for combined fiscal 2025 and the percentage change in those metrics versus fiscal 2024:
Subscription Revenue (in millions except percentages)
Behavioral
Clinical
Total
Nominal
Currency
Constant
Currency
Nominal
Currency
Constant
Currency
Nominal
Currency
Constant
Currency
Combined Fiscal 2025
Fiscal 2024
% Change
Subscribers (in thousands except percentages)
Behavioral
Clinical
Total
Incoming
End of Period
Incoming
End of Period
Incoming
End of Period
Combined Fiscal 2025
Fiscal 2024
% Change
Monthly Subscription Revenue Per Average Subscriber
Behavioral
Clinical
Total
Nominal
Currency
Constant
Currency
Nominal
Currency
Constant
Currency
Nominal
Currency
Constant
Currency
Combined Fiscal 2025
Fiscal 2024
% Change
Operating Performance
The decline in Behavioral Subscription Revenue was primarily due to the lower number of Incoming Behavioral Subscribers versus the prior year coupled with Behavioral recruitment challenges, which were further impacted by bankruptcy-related media coverage. The increase in Clinical Subscription Revenue was primarily due to an increase in the number of subscribers due to the demand for weight management medications, a portion of which was for our former compounded GLP-1 offering.
The change in Total Monthly Subscription Revenue Per Average Subscriber was driven primarily by a mix shift of our subscriber base to the Clinical business. Clinical Monthly Subscription Revenue Per Average Subscriber declined primarily driven by a shift to longer term commitment plans, which commit members for more months, but at a lower rate per month.
Liquidity and Capital Resources
We voluntarily commenced and completed a prepackaged bankruptcy filing under Chapter 11 of the Bankruptcy Code to restructure our debt and allow increased operating cash flow for funding our operations and strategic initiatives. We have experienced and expect to continue to experience significant market disruption and competitive pressures, and shifts in consumer behavior in the weight loss category. This includes a rapid adoption of GLP-1 and other medications available as weight-loss options, an evolving regulatory landscape, and significantly increased competition from new entrants. These factors have negatively impacted our business. While the Clinical business is growing, it has not yet been able to offset the declines in the Behavioral business, resulting in decreased revenue overall and decreased cash flows from operations. Further, we have historically had recurring net losses. We voluntarily commenced and completed a prepackaged bankruptcy filing under Chapter 11 to restructure our debt and allow increased operating cash flow for funding our operations and strategic initiatives.
On the Emergence Date, all outstanding liabilities under the Prepetition Credit Facilities and the Prepetition Credit Agreement totaling approximately $1,116.0 million and our 4.500% Senior Secured Notes due 2029 of $500.0 million were discharged and the liens and mortgages related thereto were released. Concurrently, we entered into the Senior Secured Credit Agreement dated June 24, 2025 which provided for the New Term Loan Facility in an aggregate principal amount of $465.0 million maturing on June 24, 2030. Prepayments for excess cash are required annually as further described below. The restructuring of our debt significantly reduces the amount of outstanding debt and ongoing interest payments.
Our principal sources of liquidity are cash and cash equivalents and cash flows from operations. Our primary cash needs are funding our operations and global strategic initiatives, meeting debt service requirements and other financing commitments. We had unrestricted cash on hand of $160.3 million as of December 31, 2025 (of which $65.6 million is maintained at foreign subsidiaries).
Following our emergence from bankruptcy and restructuring of our debt, we believe that our sources of liquidity are sufficient to meet our obligations for at least 12 months following the issuance of the consolidated financial statements found herein.
Balance Sheet Working Capital
The following table sets forth certain relevant measures of our balance sheet working capital deficit, excluding cash and cash equivalents, as of:
(In millions)
Successor
Predecessor
December 31,
December 28,
Total current assets
Total current liabilities
Working capital surplus (deficit)
Cash and cash equivalents
Working capital deficit, excluding cash and cash equivalents
Note: Totals may not sum due to rounding.
The following table sets forth a summary of the primary factors contributing to our balance sheet working capital deficit, excluding cash and cash equivalents, as of:
(In millions)
Successor
Predecessor
December 31,
December 28,
Operational liabilities and other, net of assets
Deferred revenue
Portion of operating lease liabilities due within one year
Prepaid income taxes
Accrued interest
Income taxes payable
Working capital deficit, excluding cash and cash equivalents
Note: Totals may not sum due to rounding.
Cash Flows
The following table sets forth a summary of our cash flows for the periods presented:
(In millions)
Successor
Predecessor
Period from
Period from
June 25, 2025
December 29, 2024
Fiscal Year Ended
through December 31, 2025
through June 24, 2025
December 28, 2024
Net cash provided by (used for) operating activities
Net cash used for investing activities
Net cash provided by (used for) financing activities
Operating Activities
Net cash provided by operating activities was $5.5 million for the period from June 25, 2025 through December 31, 2025 (Successor), net cash used for operating activities was $34.4 million for the period from December 29, 2024 through June 24, 2025 (Predecessor) and net cash used for operating activities was $16.8 million for the fiscal year ended December 28, 2024 (Predecessor). The change in net cash provided by (used for) operating activities was primarily attributable to a decrease in other non-cash add-back adjustments driven by the decline in franchise rights acquired impairments, partially offset by a decrease in net loss after excluding the non-cash impact of the reorganization items, net and an increase in cash provided by operating assets and liabilities.
Investing Activities
Net cash used for investing activities was $13.2 million for the period from June 25, 2025 through December 31, 2025 (Successor), $6.3 million for the period from December 29, 2024 through June 24, 2025 (Predecessor) and $16.4 million for the fiscal year ended December 28, 2024 (Predecessor). The change in net cash used for investing activities was primarily attributable to an increase in cash paid for acquisitions, net of cash acquired and an increase in capitalized software and website development expenditures.
Financing Activities
There were no financing cash flows for the period from June 25, 2025 through December 31, 2025 (Successor). Net cash provided by financing activities was $153.9 million for the period from December 29, 2024 through June 24, 2025 (Predecessor) and net cash used for financing activities was $17.3 million for the fiscal year ended December 28, 2024 (Predecessor). The change in net cash provided by (used for) financing activities was primarily attributable to an increase in borrowings on the Prepetition Revolving Credit Facility.
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 as of December 31, 2025 (Successor):
(In millions)
Successor
December 31,
New Term Loan Facility due June 24, 2030
Less: Current portion
Less: Unamortized deferred financing costs
Plus: Unamortized debt premium
Total long-term debt
Note: Totals may not sum due to rounding.
Total interest expense on long-term debt, inclusive of amortization of deferred financing costs and debt premium or discount, as applicable, amounted to $26.9 million for the period from June 25, 2025 through December 31, 2025 (Successor), $34.3 million for the period from December 29, 2024 through June 24, 2025 (Predecessor) and $110.6 million for the fiscal year ended December 28, 2024 (Predecessor).
As of December 31, 2025 (Successor), our debt consisted of variable-rate instruments and as of December 28, 2024 (Predecessor), our debt consisted of both fixed and variable-rate instruments. We have historically entered into interest rate swaps to hedge a portion of the cash flow exposure associated with our variable-rate borrowings. As of December 31, 2025 (Successor), we did not have any interest rate swaps in effect. The weighted average interest rate (which includes amortization of deferred financing costs and debt premium or discount, as applicable) on our outstanding debt, exclusive of the impact of any applicable interest rate swaps, was approximately 10.91% and 7.75% per annum at December 31, 2025 (Successor) and December 28, 2024 (Predecessor), respectively, or 7.47% per annum at December 28, 2024 (Predecessor) including the impact of any applicable interest rate swaps, based on interest rates on these dates.
Senior Secured Credit Agreement
In connection with our emergence from bankruptcy, on June 24, 2025 we, as borrower, the lenders party thereto, and WSFS, as administrative agent, entered into a senior secured credit agreement (the “Senior Secured Credit Agreement”) which provides for the New Term Loan Facility.
The New Term Loan Facility bears a variable interest rate based on either (1) the sum of (x) a base rate determined by reference to the highest of (a) 0.50% per annum plus the Federal Funds Effective Rate (as defined in the Senior Secured Credit Agreement), (b) the prime rate announced by WSFS and (c) one-month Term SOFR plus 1.00%; provided that such rate is not lower than a floor of 1.50%, plus (y) 5.80% per annum, or (2) the sum of (x) Term SOFR plus (y) 6.80% per annum, provided that Term SOFR is not lower than a floor of 0.50%.
All obligations under the Senior Secured Credit Agreement are guaranteed by, subject to certain exceptions, each of our current and future material subsidiaries. All obligations under the Senior Secured Credit Agreement, and the guarantees of those obligations, are or will be secured by substantially all of the assets of the Company and each guarantor organized in the United States, the United Kingdom and the Netherlands (each, a “Secured Guarantor”).
We are required to prepay (a) 100% of the unrestricted cash held by us and our subsidiaries in excess of $100.0 million applicable to the last 10 calendar days of the first quarter of fiscal year 2026, (b) 100% of the proceeds from the sale of certain assets and proceeds of certain casualty events, and (c) 100% of incurrence of any new debt proceeds unless such incurrence is permitted under the credit agreement. Other than the mandatory prepayments of excess unrestricted cash as described above, we are also required to pay a prepayment premium of: (a) for the first eighteen months following the Emergence Date, 2.00% of the aggregate principal amount of prepayments or refinancings of the New Term Loan Facility in excess of $200.0 million, (b) from the eighteen-month anniversary of the Emergence Date to the second anniversary of the Emergence Date, 2.00% of the aggregate principal amount of prepayments or refinancings of the New Term Loan Facility, and (c) from the second anniversary of the Emergence Date to the third anniversary of the Emergence Date, 1.00% of the aggregate principal amount of prepayments or refinancings of the New Term Loan Facility. All prepayments of the principal balance of outstanding loans under the New Term Loan Facility are subject to customary “breakage” costs with respect to Term SOFR loans under the New Term Loan Facility.
Refer to “—Emergence from Bankruptcy” for additional information.
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, 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 may deem relevant. In addition, our ability to pay dividends may be limited by covenants in our existing indebtedness, including the Senior Secured Credit Agreement, and may be limited by the agreements governing other indebtedness we or our subsidiaries incur in the future.
EBITDA and Adjusted EBITDA
We define EBITDA, a non-GAAP financial measure, as earnings before interest, taxes, depreciation and amortization expenses and share-based compensation expense and Adjusted EBITDA, a non-GAAP financial measure, as EBITDA adjusted for franchise rights acquired impairments, reorganization items, net, transaction costs related to strategic alternatives and Chapter 11 financial reorganization, net restructuring charges, former CEO separation expenses, and other items that management believes are not indicative of ongoing operations, as applicable.
The table below sets forth the reconciliations for EBITDA and Adjusted EBITDA, each a non-GAAP financial measure, to net (loss) income, the most comparable GAAP financial measure, for the period from June 25, 2025 through December 31, 2025 (Successor), the period from December 29, 2024 through June 24, 2025 (Predecessor) and the fiscal year ended December 28, 2024 (Predecessor):
(In millions)
Successor
Predecessor
Period from
Period from
June 25, 2025
December 29, 2024
Fiscal Year Ended
through December 31, 2025
through June 24, 2025
December 28, 2024
Net (loss) income
Interest
Taxes
Depreciation and amortization expenses
Share-based compensation expense
EBITDA
Franchise rights acquired impairments
Reorganization items, net
Transaction costs
Restructuring charges (1)
Former CEO separation expenses
Other (2)
Adjusted EBITDA
Note: Totals may not sum due to rounding.
Restructuring charges consist of expenses associated with the reduction in headcount as a result of certain strategic re-alignments. Restructuring charges include the 2025 Plan, the 2024 Plan, the 2023 Plan and the 2022 Plan. Refer to Note 22 “Restructuring” of the notes to the audited consolidated financial statements, contained in Part IV, Item 15 of this Annual Report on Form 10-K, for further information.
Primarily consists of the impact of foreign exchange gains and losses.
We present EBITDA and Adjusted EBITDA because we consider them to be useful supplemental measures of our performance and useful for period-over-period comparisons. In addition, we believe EBITDA and Adjusted EBITDA are useful to investors and analysts. See “—Non-GAAP Financial Measures” herein for an explanation of our use of these non-GAAP financial measures.
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 the period from June 25, 2025 through December 31, 2025 (Successor) and the period from December 29, 2024 through June 24, 2025 (Predecessor) was approximately $0.9 million and $7.3 million, respectively.
The following table summarizes our future contractual obligations as of the end of fiscal 2025:
Payment Due by Period
Less than
More than
Total
1 Year
1-3 Years
3-5 Years
5 Years
(in millions)
Long-Term Debt (1)
Principal
Interest
Operating leases, finance leases and non-cancelable agreements
Total (2)
Note: Totals may not sum due to rounding.
Due to the fact that 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 2025 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.
Acquisition of Peoplehood
On August 6, 2025, we acquired certain assets from, and offered employment to certain employees of, Peoplehood, Inc. (“Peoplehood”), a wellness support platform co-founded by Julie Rice, who previously served as a member of the Board. We purchased the assets for $1.0 million in cash upon closing and $1.0 million in deferred consideration that was paid in cash on November 5, 2025.
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.
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 have experienced 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 has been 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 Qualitat ive 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 2025 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 Term SOFR or the base rates which are used to determine the applicable interest rates for borrowings under the New Term Loan Facility.
As of December 31, 2025 (Successor), borrowings under the New Term Loan Facility bore interest at Term SOFR plus an applicable margin of 6.80%. For the New Term Loan Facility, the minimum interest rate for Term SOFR applicable to such facility pursuant to the terms of the Senior Secured Credit Agreement was set at 0.50% (the “Term SOFR Floor”). Accordingly, as of December 31, 2025 (Successor), based on the amount of variable rate debt outstanding and the then-current Term SOFR rate, after giving consideration to the Term SOFR Floor, a hypothetical 125 basis point increase in interest rates would have increased annual interest expense by approximately $5.8 million and a hypothetical 125 basis point decrease in interest rates would have decreased annual interest expense by approximately $5.8 million. This decrease in market risk exposure from the end of fiscal 2024 was primarily due to the Chapter 11 financial reorganization of the Company, with an overall reduction in our variable rate debt.
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 revenue 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 revenue 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. Revenue 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 income (loss). In addition, exchange rate fluctuations will cause the U.S. dollar translated amounts to change in comparison to prior periods.
Item 8. Financial Statemen ts and Supplementary Data
This information is incorporated by reference to our consolidated financial statements on pages F-1 through F-58 and our financial statement schedule on page S-1, including the report thereon of PricewaterhouseCoopers LLP on pages F-2 to F-6.
