WW International, Inc.

Good afternoon and welcome to the WW International Second 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. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then 2. 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, everyone, for joining us today for WW International's second quarter 2023 conference call. At about 4.05 p.m. Eastern Time today, we issued a press release reporting our second 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 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 Heather Stark, CFO. I will now turn the call over to Seema.

Thanks, Corey. Good afternoon, everyone, and thank you for joining us today. 2023 continues to be a pivotal and transformative year for Weight Watchers, a year where we return our core business to subscriber growth and catalyze our entry into the nascent but significant clinical category. Our second quarter results only give me further confidence that we are on the right trajectory We are focused on executing a narrow list of priorities that will deliver great impact across not only our business, but also global health outcomes. To reiterate, across the organization, we are focused on four key areas. One, reinvigorating our core business and hitting our raised end-of-period subscriber targets for the year, including continuing year-over-year signup growth in the second half of the year. Two, compounding our Head Start into clinical space by continuing to drive efficient member acquisition to sequence, increasing brand awareness, and expanding member retention. Three, being the partner of choice for health providers, payers, and employers by leveraging our expertise, relationships, and a step program engagement model that delivers cost-effective end-to-end behavioral and clinical weight management solutions, setting a new standard of care in this space. And four, building community experiences, both in real life and digital, that will broaden our reach and increase engagement and satisfaction for both behavioral and clinical pathways. We are also committed to doing our part to increase education and access to the weight health spectrum for communities in need. Now turning to our Q2 results. We ended Q2 with 4.1 million subscribers, including approximately 37,000 clinical subscribers. Notably, in our Weight Watchers business, we ended Q2 with more subscribers than we did in Q1, with clinical only adding further to our subscriber base. This is the first time in our company's reporting history that we have achieved an in-year quarter-over-quarter total subscriber step-up. Q2 sign-ups or growth subscriber additions for our Weight Watchers business, excluding clinical, were both above our expectations and up year-over-year for the first year-over-year increase since Q4 of 2020. delivering our return to sign-up growth one quarter earlier than our previously provided forecast. Notably, we achieved this without increasing our marketing spend year-over-year. While as anticipated, revenue was down year-over-year due to headwinds from 2022's ending subscriber base, our actions to optimize our real estate footprint and organizational structure drove a record high adjusted gross margin. Additionally, our activation rate, a metric defined by a member's engagement and progress during their first 30 days on the program, continued to increase and trend in the right direction with Q2 up approximately 10% year-over-year compared to Q1, which was approximately 6% year-over-year. As a reminder, activation rate matters because activated members' attrition rate is roughly half of a non-activated member and are more successful on Weight Watchers over the long term. Similarly, our engagement rate, which is measured across our entire membership base beyond those in the first 30 days, also continued to trend positively with Q2 of approximately 12% year over year. These results are further evidence that we are reinvigorating our core business and that our evergreen approach to innovation, along with our data-informed approach to product improvements and performance marketing are taking hold, setting us up for a return to profitable growth. Let's take a step back for a moment, as I want to share more on our mission as the global leader in weight health. As you will recall from our last earnings we introduced this term to reframe the conversation around weight management in order to destigmatize obesity and make evidence-based solutions achievable and accessible to those in need. The scientific community's understanding of obesity is advancing rapidly. Weight health is a spectrum, and there is a large and growing population that's due to genetic, Environmental and biological factors cannot lose or maintain weight loss through diet and exercise alone. This is a watershed moment in the treatment of obesity, and we're prepared to challenge long-held misperceptions of weight. And more importantly, we're prepared to help our members understand their options so they can get the treatment they need. But let me be clear. This does not discount the importance of lifestyle intervention. The advancements in clinical medications on the market today do not replace lifestyle change. They help it become more possible for people living with obesity to adhere to lifestyle change. And that's where our solution sets us apart. Weight Watchers is the gold standard for lifestyle change, and Sequence provides much more than a prescription. Weight Watchers has been ranked as the number one best diet for weight loss by U.S. News and World Report for the last 13 years. We are the number one doctor-recommended program. We have a clinically proven diabetes-tailored program, and we have over 60 years of experience and over 150 peer-reviewed studies, including more than 35 randomized trials. With Sequence, members are supported by a team of board-certified clinicians, registered dietitians, fitness coaches, and a care team, plus access to Weight Watchers Behavior Change Program. Today, we are posting a brief presentation about the Sequence experience on our investor website to help investors better understand our clinical offering. We now have a portfolio of science-backed solutions that improve weight health. The Weight Watchers Lifestyle Program, Sequence, our virtual clinic, and our B2B program for health providers, payers, and employers, WW Health Solutions. We are uniquely positioned to pair with the evolving clinical solutions to cover the entire weight health spectrum. Our work will be at the forefront of the emerging science of overweight and obesity and the leading voice in weight health. Turning to our digital first product roadmap focused on the three pillars of coaching, accountability, and community. As discussed previously, we are in beta testing of our new member chat feature and improved peer-to-peer user experience for connection and support. From the beginning, community and social experience of Weight Watchers is what makes our program work. We believe chat will be foundational for enriching our digital community, allowing members to create relationships, thereby driving engagement, which then increases retention and LTV. We recently launched our new coach platform in North America, a dashboard for our coaches to improve engagement and precision with members, both digitally and in real life. Coaches are the touchpoint to our members, providing an important source of motivation and support, and this platform will help them manage relationships at scale. We also completed the integration with Abbott's Freestyle Libre Continuous Glucose Monitor. Now in one place, members living with diabetes can learn how food activity directly impacts their glucose levels. We remain on track to deliver more feature improvements on our roadmap later in Q3 and in Q4 with a What to Eat tab to support eating decisions and progress and trends to more easily track and monitor a member's weight health journey, all of which are expected to drive the continued improvement in our members' success with the program, which ultimately leads to better engagement, retention, and LTV. As we build our digital first product to support all member journeys, we continue to look into the most effective ways to bring the in-person human connection found in our workshops to new life. We are not walking away from workshops, quite the opposite. We know that connecting our members in real life to be an impactful part of the Weight Watchers experience and that we have an opportunity to bring more of that impact to our entire community of members. We believe the combination of a digital experience with an in-person one is a powerful, differentiated, and highly effective solution for those on a weight loss journey. Rather, we're adjusting to the realities of a primarily digital-first community by optimizing our workshop real estate footprint. We are exploring avenues to reinvent what in-person experiences could look like in the years ahead. I'm confident in our ability to unlock more ways where our members can come together in real life as well as digitally to create lasting communities. Shifting to our clinical business. We're learning rapidly and are pleased with Q2 results, which ended the quarter with 37,000 subscribers. up nearly 40% since the closing of the acquisition on April 10th. We have started to see that the incredible demand for these medications has outpaced supply with shortages reported for Ozempic, Gove, Monjourno, and even Saxenda. While these supply issues will have a revenue impact, which you will hear more from Heather about, please keep in mind that access to these medications is still at a very early stage, but we expect it will grow exponentially in the years ahead. Of course, as with any new industry, there are fits and starts, such as we are seeing with the current supply capacity of all GLP-1 medications. Our clinicians and care team are helping members navigate the current environment by being transparent on the situation, and when appropriate, prescribing alternatives across a wide formulary. We see this time as an opportunity where we can utilize this window to scale up operations and increase readiness ahead of the return of supply, as well as ahead of our peak season. In short, this is a near-term speed bump, and we remain bullish on the long-term potential for our clinical offering. Additionally, during this time, we are focused on three things. One, clarifying misinformation and driving awareness and education about clinical pathways. Two, introducing a dedicated lifestyle program for members on medication. There are different needs for someone on a clinical pathway. Medications do not replace the benefits of behavior change, but instead allow those benefits to be possible. We are using our expertise to develop a tailored lifestyle program that addresses those needs, such as prioritizing a nutrient-dense diet and protecting lean muscle mass. We expect a rollout to the market, including to our sequence subscribers, to occur prior to our upcoming peak season. And three, integrating the sequence and Weight Watchers platforms for holistic solutions as members go through different phases of their weight loss journeys. Weight Watchers and Sequence are highly complementary to one another, and we now have a portfolio of solutions to meet the broad and evolving needs of members. In addition to direct-to-consumer with Sequence, there is also our B2B business. Given our robust portfolio of solutions, I believe WW Health Solutions will be the partner of choice for health providers, payers, and employers alike. The emergence of this new class of chronic weight management medications, while highly effective, are posing challenges for payers. We are hearing from employers that they want to enable access, especially as their employees advocate for coverage. But they are looking for guidance as to how to manage costs. In addition, consistent feedback from employers is that they're coming to us because they need their solution to be science-backed, with a track record and proven results, all of which Weight Watchers delivers. WW Health Solutions has over 500 clients and an experienced service model and infrastructure to meet enterprise needs. And now it also has a best-in-class program to provide cost-effective pathways to clinicians and medication, along with necessary behavior change support while managing costs and delivering value-based care to their employee population. In summary, I'm encouraged by our results halfway through 2023, which only reinforces my view that we are focused in on the right areas and confident about the future. I will now turn the call over to Heather to discuss our Q2 financial results and outlook. Thanks, Seema.