WW International, Inc.

Good day, and welcome to the WW International Incorporated First Quarter 2023 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. Please note this event is being recorded. I would now like to turn the conference over to Corey Kincher of Investor Relations. Please go ahead.

Thank you, everyone, for joining us today for WW International's first quarter 2023 conference call. At about 4.05 p.m. Eastern time today, we issued a press release reporting our first quarter 2023 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 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 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 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 Seema Sistani, CEO, and Heather Stark, CFO. I will now turn the call over to Seema.

Thanks, Corey. Good afternoon, everyone. Thank you for joining us today. 2023 is shaping up to be a pivotal and transformative year for Weight Watchers, one where our key initiatives and decisive actions will shape the future of our product experience, operating model, our financial trajectory, and most importantly, the member lives we positively impact. As we enter our 60th anniversary and plan for upcoming celebrations with our members, I've been reflecting upon the incredible history of the company and looking back at photos of our founder, Gene Neidich, and crowds of members at parades, Madison Square Garden, and workshops, Weight Watchers started a movement 60 years ago, and that excitement stemmed from a strong sense of community has been the foundation of our longevity. The in-person human connection found in our workshops is what Weight Watchers has been known for. Then the evolution to digital expanded our subscriber base and sustained the company through the pandemic. 80% of our members now access Weight Watchers via a mobile-first experience. But our digital experience can be so much more. It can bring people together in new ways, expand our reach, and provide members with immediate support and inspiration. And it can enhance the in-person experience, better enabling connectivity between members and members and coaches. The Weight Watchers that our members know and love is our gold standard with a program that works. Millions of members, 60 years of experience and ranking as U.S. News and World Report's number one best diet for weight loss the last 13 years in a row. We have earned trust in a space where new entrants come and go. We are turning that solid foundation into best-in-class experiences for the future. including building new science-backed pathways such as clinical. Turning to our first quarter results, we ended the quarter with just over 4 million subscribers, slightly above our March guidance of approaching 4 million, a sign of succeeded our forecast. This represents net additions of nearly 500,000 subscribers, up from the 3.5 million subs we had at the year end. This is a quarter-over-quarter step up of 100,000 more net additions than in the year-ago first quarter. Importantly, this was accomplished with 19 million less marketing spend. To reiterate, we achieved more net addition with 18 percent less marketing spend versus the prior year first quarter. This demonstrates that our new approach to marketing and our improved program are working. and driving efficient acquisition. This outperformance in subscriber growth resulted in revenues coming in higher than forecast, and combined with greater cost discipline, flowed into adjusted operating income results, feeding our guidance. We are better utilizing data throughout our business, from digital engagement and activation to product experience, from LTV tech to financial forecasting. This data-informed culture is improving the ways we operate, making the company more agile and results more predictable. Our activation rate, defined by a member's engagement and progress during their first month on the program, has been trending up between 4 to 8 percent year-over-year so far in 2023. As a reminder, Activation rate matters because activated members turn at a rate that is roughly half of a non-activated member and are more successful on Weight Watchers over the long term. So driving this metric upward is a key focus across our entire organization. The sustainability of holding this year-over-year improvement in activation rate demonstrates that the changes we have made to the product and our program are working well. In addition to our activation rate, which is measured only in a member's first month, our engagement rate, which is measured across our entire membership base, has turned positive and has been trending up between 6% to 7% year over year, further indication that our product updates are working for our members. As discussed, our current digital product roadmap is focused on creating community and enabling food decisions, as measured by a member's first month activation and, resultantly, subscriber retention and member success. One of the key features, Member Chat, has recently launched in beta, and we look forward to learning, iterating, and expanding its rollout in the months ahead. We believe chat will be foundational for enriching our digital community, allowing members to create relationships they are excited about, members with each other, coaches with members, workshop groups, even people in your existing network if you wish to bring them along your journey. Also coming in 2023 will be new streamlined spaces in our app, including a What to Eat tab, which will help support members' eating decisions, and a space dedicated to progress and trends, allowing members to better see the connection between core behaviors like food, activity, and weight tracking as it relates to their weight management progress. And to improve our coach experience, we plan to launch a new platform for our coaches that will help them better engage with members in real life as well as digitally. The longevity of Weight Watchers brand has sustained because of ongoing innovation to maintain our position as the global leader in sustainable science-backed weight management. As the world evolves around a new understanding of living with overweight and obesity, we will sustain our leadership by leaning into our heritage while also evolving alongside new interventions with our eye on the North Star of connecting people meaningfully through the shared experience of a weight management journey. With that in mind, we are coining a new term, weight health. Similar to how heart health or mental health reframe the conversation around their chronic conditions, reduce stigma, and improve accessibility and standards of care, we believe weight health should be the future of our space. We are focused on leading this change, destigmatizing and demystifying obesity and weight management and making evidence-based solutions more achievable and accessible to those in need. Weight health is the degree to which an individual's weight affects their metabolic health and well-being. Weight health is impacted by genetic, biological, hormonal, environmental, and behavioral factors unique to each individual. Weight healthy living aims to prevent and better manage the chronic diseases that result from excess body fat including type 2 diabetes, high cholesterol, and cardiovascular disease with the ultimate goal of improving health, well-being, and quality of life. Weight Watchers will be synonymous with delivering weight health through our pillars of coaching, accountability, and community through evidence-based interventions, which brings me to our acquisition of Weekend Health, doing business as sequenced. This announcement captured significant attention and generated a lot of excitement, an excitement that we share about the opportunity ahead to impact many more lives with improved health outcomes. Sequence is a subscription digital health platform offering clinical access to prescription chronic weight management medications, jump-starting our entry into the clinical space. Sequence's technology platform integrates patient and clinician experience, providing eligible members with ongoing access to online clinical care and medication for weight management. We strongly believe the multi-year growth opportunity for Sequence is significant. But importantly, this year we are carefully balancing the continued strong growth momentum of this business while taking a thoughtful approach to integration and scaling to ensure we continue to deliver a high-quality, differentiated member experience that exceeds expectations, with high satisfaction driving both stickiness and efficient acquisition. Conversation around GLP-1s and Weight Watchers' entrance into the clinical market has been widespread, and we now have an opportunity to build upon our position in weight health. Encouragingly, Our customer is viewing the news positively. In a survey we conducted last month, 60% of our core demographic said the acquisition made them think more positively about Weight Watchers. And 80% of those surveyed believe Weight Watchers is keeping up with the latest scientific research with this announcement. At the same time, we need to bring our current members along with the evolution. Our communication is critical. We are focused on educating that pursuing a clinical pathway is a personal choice and not something we are actively pushing them to do. The Weight Watchers they know and love will continue to be the gold standard of what we deliver. At the same time, in our survey, among those who are currently Weight Watchers members, 18% said they are interested in trying weight loss medication. trusting us to bring credibility to the space so there is an opportunity to better serve these members with an integrated clinical solution. Their top three expectations for our clinical program are access to GLP-1 medication, insurance coordination, and a program designed for people living on these medications. We are focused on delivering a differentiated experience across these needs and more. To expand on each, first, access to GLP-1 medication. What we deliver through sequence is a connection with a clinician who is experienced in prescribing chronic weight management medication. In consultation with the patient, the clinician can determine if a GLP-1 or another medication is appropriate. And if the medication is prescribed, sequence has a seamless, easy process for prescription fulfillment and for managing dosing over time. Second, insurance coordination. A prevailing concern about GLP-1s is that they are not widely covered by medical insurance and therefore are prohibitively expensive for most people. While not covered on all health plans, they are increasingly covered at some level for those who medically qualify and who have previously and are actively participating in a behavior change program. The insurance pre-authorization process is known to be highly manual, slow, error-prone, and a frequent pain point for patients and medical professionals. Sequence has put the insurance process on tech rails to streamline much of this process, adding accuracy, thoroughness, and speed of insurance approvals. And third, a lifestyle program encompassing nutrition, fitness, and coaching. specifically designed for people living on these medications. As we integrate and build out this vertical, we will be learning and creating a behavior change program for this distinct member journey. I believe this will be another key differentiator, particularly for our LAPS member base who know and trust Weight Watchers, but who are also looking for a clinical solution. A behavioral program paired with a clinical intervention is critical and FDA recommended to help people on medications develop and maintain healthy habits. From prioritizing nutrient-dense foods to managing against muscle loss, there are several key areas where Weight Watchers can provide guidance and support to ensure members' weight loss journeys are done in a healthy, sustainable way. Finally, We believe a well-designed community experience will add value to those taking these medications. While community isn't the top driver for members to sign up for a clinical solution, we know from interviews with people using weight management medications that they would appreciate a community of people to learn from and compare notes. Similar to what we see in our principal program, People come for weight loss, but they stay for community. And we look forward to creating a robust community experience for all our members. We will be pairing Weight Watchers nutrition and behavioral science expertise and community with the sequence platform to create a comprehensive solution. More to come on our plans as they develop in the quarters ahead. I am encouraged by our early results in 2023 which only further increases my confidence that the initiatives we have underway are working. We continue to be focused on improving our sign-up trends and for the second half of the year, returning to year-over-year sign-up growth, improving member activation, which would drive gains in retention, exercising strong cost discipline throughout the organization, and executing on a narrow list of objectives including our entrance into clinical interventions for weight management. Before our financial update, I'm pleased to announce that Heather Stark has been appointed Chief Financial Officer of Weight Watchers. Since taking on the interim role in December, Heather has been an incredible partner to me and the entire leadership team. Her experience, including 12 years at Weight Watchers, in operational finance, forecasting, managing teams, and navigating change have been a tremendous asset to this organization. I look forward to continuing to work with her in this elevated position. I will now turn the call over to Heather, and we'll then come back to further discuss our strategic priorities for 2023.