WW International, Inc.

Good afternoon and welcome to the WW International second quarter 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw from the question queue, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Corey Kinjer, Investor Relations. Please go ahead.

Thank you to everyone for joining us today for WW International's second quarter 2021 conference call. At about 4 o'clock p.m. Eastern time today, we issued a press release reporting our second quarter 2021 results. The purpose of this call is to provide investors with some further details regarding the company's financial results as well as provide a general update on the company's progress. The press release is available on the company's corporate website located at corporate.ww.com. Supplemental investor materials are also available on the company's corporate website in the investor section under presentations and events. Reconciliations of non-GAAP measures disclosed on this conference call to the most directly comparable GAAP financial measures are also available as part of the press release. Before we begin, let me remind everyone that this call will contain forward-looking statements. Investors should be aware that any forward-looking statements are subject to various risks and certainties that could cause actual results to differ materially from those discussed here today. These risk factors are explained in detail in the company's filings with the Securities and Exchange Commission. Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of such statements. All forward-looking statements are made as of today and, except as required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Joining today's call are Mindy Grossman, President and CEO, Nick Hodgkins, COO, and Amy O'Keefe, CFO. I will now turn the call over to Mindy.

Thank you, Corey. Good afternoon, everyone. When we spoke to you in May, we believed that as the world reopened, the timing of which would vary by geography, consumers would be increasingly inspired to restart their health and wellness journeys, creating a demand list outside of our typical seasonal cadence and positively impacting the entire category. However, the strong digital year-over-year growth momentum in Q1 slowed in the second quarter as we cycled against strong digital performance in 2020. Therefore, our results did not meet our revenue and operating income expectations. While people are acknowledging their need for recommitting to weight loss and wellness, our recent consumer research shows that at the moment, they're also asking for a pause to enjoy social reconnection. With both traffic and search under pressure, this sentiment shift appears to be across the weight loss and wellness category. Our updated financial outlook reflects our revised expectations for full-year subscribers, revenue, and operating income. Since we cannot assume that sentiment will snap back in our favor during the post-Labor-Day back-to-school season, which historically has been a reset moment, at this time, we're planning appropriately and are implementing a comprehensive plan to optimize our second half performance. We're extremely excited about our food program innovation launch and trajectory for 2022. We are continuing to manage through the evolving environment with agility and flexibility while we make progress on developing and preparing for the upcoming innovation launch later this year. We will discuss our performance improvement actions in further detail shortly But first, I'd like to review the key highlights of the second quarter. We ended Q2 with 4.9 million subscribers, down slightly year over year and from Q1 end. We ended the quarter with digital subscribers of 4.1 million, up 6% year over year, and a record high for a Q2 end, with subscriber growth in each of our major markets, increasing retention, and adoption of our new Digital 360 membership helping drive continued growth. While a strong level overall, it is down from 16% growth in Q1. Now available in our five largest geographic markets, Digital 360 ended the quarter with approximately 230,000 subscribers, up from approximately 150,000 at the end of Q1. By modernizing how we deliver the WW program, this industry-first interactive coaching and content experience is generating excitement for both new and returning WW Digital members who are upgrading to this premium membership. End of period workshop subscribers were 748,000 in Q2, up slightly from the end of Q1, a notable improvement in the trends as we unlock pent-up demand from members who find an in-person coach and community to be essential to their weight loss and wellness journey. Our workshops business now has a more flexible cost structure. We are managing this business in a new way that can accommodate a range of volume scenarios while still delivering strong gross margins. Overall, member retention continues to extend at an all-time high of over 10 months. In addition to continued strong digital retention, which is now nearly 11 months Workshop retention has improved sequentially each month since February, recovering from a temporary contraction due to COVID. As we have discussed many times, we are highly focused on continuing to grow retention with the aim of having it exceed one year. Achieving that goal would provide a notable unlock in our subscription model and reduce the seasonality of our business. Turning to our consumer products business, which includes our e-commerce channel, It is only 18 months since we incorporated e-commerce into our app, and we believe it is a solid platform for continued growth. Total consumer product sales were in line with the prior year period, but below plan due to a combination of internal and macro factors, and as we cycled against the extremely strong performance a year ago at the start of the pandemic. This is the fifth consecutive quarter we delivered an adjusted gross margin of approximately 60% or higher, demonstrating the strength of our high margin digital subscription model and the enhanced flexibility of our cost structure. In summary, over the past 12 months, our global teams accelerated our digital transformation and successfully drove our business forward to innovation, creativity, and focus, all while navigating an uncertain and dynamic environment. Moving forward, we have a comprehensive plan to optimize performance in the second half and position WW for growth in 2022 and beyond. I will speak more about our go-forward plans, including our upcoming 2022 food program innovation and marketing plan shortly. But first, I will turn it over to Nick to discuss our operating performance in more detail.