WW International, Inc.

Good afternoon and welcome to the WW International fourth quarter and full year 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 Cori Kinjer, Vice President of Investor Relations. Please go ahead.

Thank you, everyone, for joining us today for WW International's fourth quarter and full year 2022 conference call. At about 4 or 5 p.m. Eastern Time today, we issued a press release reporting our fourth quarter and full year 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 in 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 uncertainties 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 foreign-looking statements and the risk and uncertainties of such statements. All foreign-looking statements are made as of today and, except as required by law, the company undertakes no obligation to publicly update or revise any foreign-looking statements, whether as a result of new information, future events, or otherwise. Joining today's call are Seema Sastani, CEO, and Heather Stark, Interim Principal Financial Officer. I will now turn the call over to Seema.

Thanks, Corey. Good afternoon, everyone, and thank you for joining us today. Before I get into our results, I want to highlight our plans to enter the clinical weight management space. Weight Watchers is the most trusted provider of proven and sustainable weight loss, grounded in the latest nutritional and behavioral science. We support members across the full weight loss spectrum. Obesity is a complex chronic condition that includes both biological and behavioral components. There's growing scientific evidence that for some, prescription chronic weight management medications can address the biological components of obesity. To support and accelerate our entry into this space, we have entered into a definitive agreement to acquire Weekend Health, doing business as sequence, a subscription digital health platform offering clinical access to prescription chronic weight management medications. Sequence is a technology platform that integrates patient and clinician experience, providing eligible members with ongoing access to online clinical care and medication management. We will be pairing Weight Watchers' nutrition and behavioral science expertise and community with the Sequence platform to create a comprehensive solution. Importantly, This solution will not be for everyone. We are hard at work enhancing our member experience around coaching, accountability, and community with a number of features on our product roadmap rolling out this year in order to make Weight Watchers even better. At the same time, we will expand our scope to also serve the cohort of people in need of a solution that incorporates prescription medications. I will discuss the details on this acquisition and our clinical strategy more shortly. But first, turning to our 2022 results and recent performance. We ended 2022 with 3.5 million subscribers, approximately 100,000 higher than our forecast due to signups and cancellation trends outperforming our expectations, improving our starting point and momentum heading into the new year. It has been nearly one year since I joined Weight Watchers, and that year has been a time of significant transition, rationalization, and bold moves throughout the organization to position the company for tomorrow. Over the past year, we took several decisive actions to streamline the business, centralize our global teams, establish data-informed processes and culture, simplify our program, and execute on the ambitious roadmap focused on community, accountability, and coaching, setting the foundation for an improving member experience and returning subscribers to a growth trajectory. Turning to our peak season performance, the execution of our marketing approach was very different from what you have seen from us previously. With improved global team operations driven By more accurate forecasting, data visibility, and in-housing our performance marketing, we were able to drive stronger results. We made the strategic decision to focus on efficient performance marketing, prioritizing high-quality signups while spending less. This drove a greater ROI, with LTV CAC for these signups being 10% more efficient than at the same time last year. So while signups are down year over year, this was an intentional decision we took to better maximize the impact of our dollars throughout the year. Historically, approximately 40% of annual sign-ups occurred during Q1, and the cadence of our marketing spend reflected this approach. This year, we are intentionally shifting a portion of our annual marketing spend from Q1 into the fall as we look to focus our spend alongside the launch of digital plus community-first product experiences. Therefore, we expect marketing expenses to increase year over year in the second half of the year, likely putting our full year spend to be roughly flat with 2022. In addition, we are encouraged by improvements we are seeing in our member engagement and satisfaction metrics, which indicate that our actions to improve our product experience and brand are having a positive impact. Three examples. First, activation rate, which had been on a downward trajectory, began to uptick in the second half of last year. It caught up with the previous year in November and in 2023 has been up over 5% year over year. As a reminder, activation rate, a relatively new metric we've been tracking internally, is defined by a member's engagement and progress during the first month on the program and is directly tied to success. Our data shows that activated members turn at a rate that is roughly half of a non-activated member. In addition, these members will be more successful on Weight Watchers over the longer term. Second, MPS, a measure of member satisfaction for our app experience, is up 7 points year-over-year in Q1 among digital members and up 10 points year-over-year among workshop members. And third, brand affinity is up four points this January versus 2022, with more surveyed members agreeing that Weight Watchers is the plan for them. At the same time, we are in the midst of an evolving landscape in how the medical community and many consumers view weight loss. The science is evolving. More people are now recognizing obesity as a chronic condition, understanding its causes, including behavior and biology, and therefore an increased openness to clinical interventions to help. Weight Watchers is at a pivotal point where we can build new capabilities that expand our market reinforced by our foundational strengths. In addition to our ongoing focus on digital and community enablement, our highest priority in 2023 is to deliver clinical interventions pairing the coaching, accountability, and community that we know delivers effective weight loss with the option for new pharma pathways that can improve outcomes for some consumers living with obesity. To be clear, clinical intervention and medications are not for everyone. We will absolutely continue to deliver the proven weight management program we are famous for. But for those who medically qualify, meaning they have a BMI of 27 or greater and have been diagnosed with one weight-related ailment, or have a BMI of 30 or greater and choose these medications, we will be creating a new offering specifically for their unique needs. In short, Weight Watchers will be the science-backed trusted solution of choice for everyone. The last 18 months has been marked by rapid growing consumer interest in these chronic weight management medications. Research is finding a new generation of medications as more effective. However, among people living with obesity, only 2% are treated with anti-obesity medications. The number of people using such medications, particularly GLP-1s, was relatively low in 2022 due to their newness, limited availability, injectable formulation, and often significant financial expense. Now that supply chain challenges are being resolved and more insurance plans are covering these medications, access is expected to increase. The FDA indicates that chronic weight management medications should only be prescribed as an adjunct to behavioral lifestyle changes. However, there has been a lack of holistic care to partner with these medications. They are not magic pills. Like anything, there are side effects and challenges to navigate and manage while taking these medications. A behavioral program paired with clinical intervention is critical to help people on medications develop and maintain healthy habits. From prioritizing nutrient-dense food, managing against muscle loss, to understanding that these medications may be a lifelong commitment, these are the areas where Weight Watchers can provide the guidance and support to ensure members' weight loss journeys are done in a healthy, sustainable way. Startup culture is often known for the mantra, move fast and break things. When it comes to something as emotional as weight loss and as critical as health, that approach can be highly irresponsible. Weight Watchers does not participate in fads or quick fix trends that we do not view as healthy or sustainable, even when they are highly popular. But we view the use of certain prescription weight management medications under the guidance of a medical professional very differently. If someone has a condition that one of these GLP-1s can medically treat, they deserve to fully understand what these medications are, how they work, and how best to leverage them on an ongoing basis. These pharma-enabled pathways are considered important scientific breakthroughs, and when administered responsibly alongside lifestyle changes, can provide people with effective and sustainable weight management, as well as significant improvement in their obesity-related medical conditions. As noted before, we entered into an agreement to acquire Weekend Health, or Sequence, a subscription telehealth provider offering access to prescription chronic weight management medications. I'm excited for Weight Watchers to enter the clinical space. Consumers trust our brand because of our science and our community. We can bring that differentiation to this emerging space. It seems that every day there is a new headline about GLP-1s Standing major networks, newspapers, all over social media, it's everywhere. And so is misinformation. It is our responsibility to lead the conversation from a point of science and to support those interested in exploring if clinical interventions are right for them. There is significant opportunity to improve consumer outcomes with better education, access, care management, community, and integration of a complementary lifestyle program. In addition, as we integrate and build out this vertical, we will be learning and likely tailoring our nutrition program for this distinct member journey. Members on medications, particularly GLP-1s, will have different needs than members that are not. We want to ensure we have the best programs and experiences for both. As science advances, Weight Watchers does too. This is a market in which we are well positioned to lead as it builds off our core program strengths and competitive moat. Six in particular come to mind. One, unmatched expertise in food science and behavior change, having the number one doctor-recommended program, a diabetes-tailored plan, an expert advisory board, and our own science team. We have the expertise and the credentials to meet consumer needs and continue to push the science forward as we have with our 140 published scientific peer-reviewed studies and including over 35 randomized clinical trials over more than four decades. Two, brand trust. With 60 years of experience and ranking as the U.S. News and World Report's number one best diet for weight loss the last 13 years in a row, we have earned the trust of our members. Three, community. With millions of members and a high level of member engagement, we have a network like no other. Four, omnichannel presence. With a digital first product mindset complemented by IRL premium experiences in our studios and studio apps. Five, while startups look to stand up B2B relationships, Weight Watchers Health Solutions is already partnered with over 500 employers and payors including clients such as the City of New York and the Cleveland Clinic. N6, scale. With LTV CAC efficiencies in marketing to ongoing partnerships, we are uniquely in a position to grow this market profitably. In short, while the clinical market provides an innovative solution for those who can benefit from biologically-based treatments, When combined with a lifestyle solution, it is an important opportunity to help more people and drive additional scale. But I want to stress that while the acquisition of sequence is expected to have near-term benefits following closing, it will take time to integrate and scale up this offering. That said, we strongly believe the multi-year growth opportunity is significant. We know weight loss isn't one-size-fits-all, and we remain committed to bringing scalable, science-based solutions to all weight management pathways, whether medications are a part of an individual's journey or not. Our current program will continue to remain the recommended pathway for millions. But for others who decide to use them and qualify, we will offer Weight Watchers expertise alongside prescription medications and full-service care. As we approach Weight Watchers' 60th anniversary, I am energized by the permanence of our brand, but I don't take for granted that in order to maintain our leadership, we need to be fearless, introspective, and embrace change. I will now turn the call over to Heather for a financial update, and we'll then come back to provide more color on the upcoming milestones on our product roadmap.