WW International, Inc.

Good afternoon and welcome to the WW International first quarter 2022 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 telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Corey Kinjer of Investor Relations. Please go ahead.

Thank you to everyone for joining us today for WW International's first quarter 2022 conference call. At about 4 p.m. Eastern time today, we issued a press release reporting our first quarter 2022 results. The purpose of this call is to provide investors with some further details regarding the company's financial results as well as to 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 Investors 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 certainties 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 Seema Sastani, CEO, and Amy O'Keefe, CFO. I will now turn the call over to Seema.

Thanks, Corey. Good afternoon, everyone, and thank you for joining us today on my very first earnings call as the CEO of WW International. I'd like to thank our board of directors, especially Ray DeBain and Oprah Winfrey, for the opportunity to lead this iconic company at a pivotal time. I joined the company seven weeks ago and have enjoyed digging in with the team across all aspects of our product and business. There is so much to cover, and I want to give you a better opportunity to get to know me. So to help do that, as mentioned in our earnings release, a short video is available in the investor relations section of our website, speaking further to my experience and my decision to join Weight Watchers. But for today, I will focus on an assessment of the business, immediate priorities, and thoughts about where we're headed. Amy will then cover our Q1 financial performance and outlook. I've spent the better part of my career building digital communities, specifically with empathy at their core. I look at Weight Watchers, and I see the original social network. We gather people around a shared interest of health and weight loss. For almost 60 years, we have met the need of members looking for a sustainable way to meet their weight loss goals. It's clear that in the last two years, there has been a shift in consumer sentiment, with many deferring action on these goals. But we believe we can deliver a product that gives them a renewed desire to address it. Weight Watchers, through its experience at the intersection of science and community, has been the gold standard in effectiveness, and frankly, still is. The digital product has come a long way But beyond the inspiring member community found in Connect, it has remained largely content and tracking tools, both of which are a commodity on a weight loss journey. 24-7 messaging chat with a coach was a good first step, but the level of coaching found in our workshops, where each week you meet with your coach and a group of like-minded members, remains lacking in the digital-only experience. What differentiates us is a human connection. Digital tools and features are table stakes. Real personal connection, that's the magic. The mixed shift to digital was accelerated by the pandemic, bringing us to today, where workshop subscribers have come to represent only 16% of the total, meaning nearly 85% of our members are not experiencing our gold standard. I am committed to changing that. Weight Watchers is one of the most trusted brands in the world. People need to get healthy, and weight loss is the first step for many. We have the foundation to deliver results for consumers, but we're trying to do too much and complicated our marketing and the product in the process. We know how to help people lose weight and get well because we've done it for almost 60 years. coaching, accountability, and community. We will continue to deliver that with warmth and humanity, utilizing the latest technology. People are begging for simplicity and efficacy in this space, and we can and must deliver that. The company has scaled up investments in the business over the last years, but not all of those investments have delivered impact. There are many paths to growth, However, the organization has been pursuing too many at once, creating complexity and overextending critical product and tech resources. With continuing pressure on our revenue, we will take action to stabilize subscriber trends of our existing offering while building a platform that will be the foundation for a path to profitable growth. To do so, it was clear to me that structural changes were required to create simplification, drive throughput, and ensure accountability. On April 22nd, we announced a restructuring to simplify and flatten the organization in order to minimize redundant workflows and improve decision-making. These actions were primarily focused on reducing layers of executive leadership with VP and above positions to decrease by about 30%. The organizational realignment combined with real estate is expected to deliver nearly $30 million of savings on an annualized basis. We need to narrow our focus to what we do best. Weight Watchers is the most clinically studied program in the world, and we do weight loss better than any other program, full stop. We need to focus all of our efforts into advancing this position by building a shared experience that keeps current members engaged and excites new members. So that means we're pulling back on certain initiatives. While many of these were strategically compelling, the investment and resources required were a distraction and didn't deliver the necessary return. Starting with Digital 360. D360 was the company's first attempt to bring coaching to digital subscribers and attract a younger demographic, which makes strategic sense. However, as it was designed, D360 did not accomplish these objectives. Engagement in the product was low. Therefore, we will be sunsetting the D360 products starting in the U.S. and Canada. As appropriate, we will upgrade these members for the same rate at their current membership. The decision to sunset serves as an important cultural shift to embracing data-informed product development and calibrating quickly off those learnings. We will take the learnings from D360 and develop a roadmap to bring coaching and community to our digital product in a compelling, holistic way for all members. Our team is focused on creating a new app experience that is streamlined around three pillars, coaching, accountability, and community. This is a process that will take up to 18 months, but there will be quick wins along the way as we improve the core experience through a data-informed feature pipeline with the goal to stabilize the business trends in 2022 and to return to member sign-up growth in 2023. At the same time, In-person workshops will become a priority. We are going to tech-enable our workshop experience to help coaches better serve our members. The studio is a critical differentiator. Though the digital experience is part of your everyday, it's convenient after all. 20 years in digital community building have taught me that nothing compares to IRO in real life. While end of period workshop subscribers were down year over year in Q1, global in-person attendance was up 95% year over year, demonstrating the desire to meet in person. With workshop subscribers down by nearly 700,000 since the pandemic, we have a near-term opportunity to build back this business while we work on our improved digital-only experience, which notably... has remained higher than pre-pandemic levels. We will continue to optimize our studio footprint, particularly the fixed location. We are also committed to investing in our studio teams. Effective May 1st, all U.S. member-facing employees are receiving a wage increase. I believe it's incredibly important for us to not only create an environment that allows people to do their best work, but to bring greater purpose to the employee experience across all areas of the business. These coaches are the touch point to our members, a source of motivation and support, not to mention a critical feedback loop to our product roadmap. As we narrow our focus to what we do best, we are also rationalizing other parts of the business. First, The enablement of our e-commerce platform has been essential to our consumer products business, particularly given the changes and limited accessibility to our studio footprint during the pandemic, which previously had been our primary channel for product sales. But over the last few years, we have also significantly expanded our SKU count to include products across a variety of wellness categories. However, the 80-20 rule applies here, we see that 80% of our product sales are concentrated on approximately 20% of our SKUs, namely our points-friendly snack foods, kitchen tools, and scales. Combined with margin pressure, we have decided to scale back our consumer product SKU count and instead focus on high-turn, high-profit items. Beyond those products, we are evaluating the opportunity to expand WW's presence via a high-margin licensing model. Second, we are reassessing our growth expectations for Health Solutions Channel. Breaking through a B2B2C model has been a challenge. It creates an extra layer not only in tech requirements, but also marketing the last mile to the member. We will continue to serve our partners with a focus on increasing penetration with our existing clients. We continue to be excited about the opportunity to better serve members living with diabetes. We've taken the first steps through our latest food program innovation to better serve this population. 6% of our US members are self-reported as people living with diabetes, compared to the 12% prevalence of diabetes among adults with a BMI over 25. We have a feature roadmap that tailors our core product for people living with diabetes that we believe will attract more members and close the prevalence gap. Before I turn the call over to Amy, I would like to thank Nick Hodgkin for his many contributions to the company over the past 10 years in his roles as COO and previously CFO. While the intention of the changes to our leadership team is to simplify and dematrix the decision-making process, I also recognize the personal impact of departing friends and colleagues. The contributions of the impacted employees are immense, and I thank them all for everything they've done for WW. Now to Amy.