WW International, Inc.

Good day and welcome to the WW International Third Quarter 2024 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 hand the call over to David Helderman, Director of Investor Relations. Please go ahead.

Thank you, everyone, for joining us today for WW International's third quarter 2024 conference call. This morning, we issued a press release reporting our third quarter 2024 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 at corporate.ww.com. Supplemental investor materials are also available on the company's corporate website under events and presentations. Reconciliations of non-GATT measures discussed on this conference call today to the most directly comparable GATT financial measures are also available as part of this 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 most recently filed annual report on Form 10-K, as updated by the company's other 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 Tara Comant, Interim President and Chief Executive Officer Heather Stark, Chief Financial Officer, and Donna Boyer, Chief Product Officer. I will now turn the call over to Tara.

Thanks, David. Thank you all for joining us this morning. For those of you who don't know me, I've been a member of the Weight Watchers Board since mid-2023, and I'm now serving as Interim President and CEO following Seema Sastani's departure last month. I'm confident I speak for the entire board when I say how grateful we are to Seema for for her leadership navigating the business through these times of significant change in our industry, while also laying a strong foundation for our future. I'm extremely pleased to now be part of this management team as we take on the task of building on that foundation and creating the plan to revert this business back to sustainable growth. While our results in the third quarter were broadly on track with expectations, it's clear we have significant work ahead to change the trajectory of the business. This is an industry undergoing massive transition, and as a result, Weight Watchers has experienced meaningful disruption over recent years. However, I am optimistic about our ability to lay a path to future growth. From the value of our full and expanding spectrum of solutions to the strength of our brand and our important role in the evolving global healthcare landscape, we have the fundamentals of what we need to be successful. We know that the future of weight management is one where clinical options are paired with behavioral solutions, not either or, and that Weight Watchers is uniquely positioned to provide this to consumers at scale. This is a defining time for our field and our company. We need to ruthlessly assess and fix parts of our business not currently performing to the levels required. The team is committed to moving fast to make change, yet we know the scale of the task at hand will take time. However, let's remind ourselves that Weight Watchers have successfully navigated disruption and transformation many times in our 61 years, emerging each time with greater strength and clarity of purpose. We are confident in the importance and relevance of our mission to empower people to live healthier, longer lives through our trusted leadership position and our many advantages that give us the right to win. As we look ahead to the future of this business, I see many areas of unquestionable strengths. Firstly, and perhaps most importantly, we have a portfolio advantage. While many newer entrants to our base focus on just one part of our solution set, we have built with intentional breadth, not only depth. Our full-spectrum weight management platform is uniquely positioned to meet members' needs wherever they are on their weight journey. Under the leadership of Chief Product Officer Donna Boyer, who's with us on the call today, we're actively focused on making it much easier for our members to more fluidly move in and out of and across the various components of our program. We believe in building solutions for a healthy life, tailored to a member's individual needs, not isolated products for specific moments in time. This is perhaps our biggest opportunity and the area in which we have the most immediate and sizable work to do. Secondly, we have a scientific advantage. We've spent decades investing in research and development to bring our members programs that work. With over 175 published papers of clinical research and more underway specific to our GLP-1 program, we time and time again prove the efficacy of our solutions. As for one example, we know our behavioral program is three and a half times more effective for our members than trying to lose weight only with standard nutritional guidance. We also know that our Weight Watchers Clinic members taking weight loss medication paired with our Nutritional Points Program lose 11% more than those using medications alone, and that 81% of Weight Watchers Clinic members agree that compared to primary care, we provide better ongoing care and support. There are so many more proof points, and they matter more and more in a world of increasing volumes of false claims and misinformation. Thirdly, our community is a distinct advantage and a highly motivated one. We've seen 60 million plus members over our history, supported by thousands of our incredibly dedicated coaches, clinicians, care team, and field staff. Each member has access to a dynamic online community through our app, which sees high levels of engagement, as well as in-person and virtual communities through our workshops. Roughly 20% of our members at any time are on our program with a friend, and those referred by a friend have both a 20% higher retention rate and lose approximately 45% more weight by week 12 compared to other members on the program. Talk about the benefit of community. In addition, we have a vast community of prior members, a significant portion of whom returned to Weight Watchers at various stages of their weight management journeys, and who represent a meaningful opportunity. This is particularly evident in Weight Watchers Clinic, where over 60% of sign-ups year-to-date have come from existing and prior Weight Watchers members. Our entire business was formed on the basis of people coming together to help and support one another, and we continue to have a workshop business that while evolving for a digital world, remains an important part of our competitive offering. Don't ever underestimate the power of an engaged community. And finally, our clear advantage with our iconic trusted brand. We have 60 plus years of expertise and legacy, and time and time again, our consumer research has shown that we remain a brand that people trust with proven programs. We've started some initial work to refresh our brand under the leadership of our recently appointed Chief Brand Officer, Philip Bacardi, to bring renewed energy to how we engage with both existing members and potential future customers. I'm excited for the first glimpse of this work during the first quarter and our peak season. While the visual updates will include a fresh direction and move us forward, our messaging will reflect the values that have always set us apart, community, joy, and livability. Weight Watchers continues to have roughly twice the brand consideration of our nearest competitor, so we have a strong starting point from which we're excited to build upon and grow. As well as refreshing our brand, we'll be doubling down on our end-to-end marketing strategy. Too often, our marketing feels confused and lacking a clear call to action or a reason to engage. As we've expanded our solutions to include clinical and adapted to a rapidly evolving market, we need to refocus on clearly communicating the full value and breadth of our comprehensive offerings. A common theme in our focus for the coming quarters is the need to untangle complexity across different areas of our business, simplifying our approach to drive improved results. Stepping back, we're confident we have the assets needed to thrive in today's high-growth weight management space. However, there's urgent and significant work ahead to bring it all together into a cohesive solution. to more effectively communicate the value and impact, and to meaningfully improve the experience once you're in the Weight Watchers ecosystem. We're fully committed to realizing this potential and look forward to sharing our progress along the way. Moving on to our portfolio of solutions, there's been a lot of focus on our clinical business since our acquisition of Sequence. This is an area of the market in significant demand, with some predicting that up to 30 million people in the US may be using GLP-1s by 2030. As expected in early growth cycles, this surge in demand has also drawn new competitors, increasing customer acquisition costs and flooding key channels with content and information. The rapid adoption has also outpaced supply, resulting in drug shortages and prompting the introduction of compounding solutions to meet demand. To address continued drug shortages, expanding both accessibility and affordability of our clinical weight management solution, we recently added compounded semaglutide to our wide formulary of branded and other generic medications. Lack of access and affordability are the primary reasons for the churn of a clinic subscriber. The combination of a slowly improving supply trend, albeit still low, with a number of improvements in our member journey helped us improve clinic member retention to seven and a half months in the third quarter from six and a half months in the second. In addition to shortages, insurance coverage remains a prohibitive factor for most, Over the last six months, approximately 45% of Weight Watchers clinic members eligible for and prescribed the GLP-1 by their clinician have been denied coverage by their insurance after three prior authorization requests. In fact, over 50% of current Weight Watchers members have expressed consideration of a compounded GLP-1, largely due to these factors. And that's why after thorough research and careful evaluation, we partnered with a trusted FDA-registered 503 outsourcing facility. that meets our high standards for quality in patient care. We saw an immediate and positive impact on sign-ups in our clinical business following this launch, with the single highest day for clinic sign-ups in 2024. Performance has continued to be positive to date, with sign-ups remaining elevated to prior months, albeit we do not expect compounding to have a material impact on our 2024 overall business results due to the relatively small number of new clinical subscribers in proportion to our overall business. However, we're pleased to see the positive trends continue into the fourth quarter with our clinic subscribers today representing growth from the end of Q3. We're committed to ensuring our members have access to the solutions they need while maintaining full regulatory compliance. We're optimistic that supply issues can be resolved, allowing branded medications to reach even more people who need them, and Weight Watchers is best positioned to meet that additional demand. Although competition continues to drive a significantly higher cost of acquisition compared to the same time last year, which caused us to be cautious with marketing spend in the third quarter, and ongoing medication shortages have impacted this area of our business throughout the year, we're confident in the meaningful growth opportunity the clinical offering represents for our business over the long term. While we're expanding our clinical offering, our research shows that only about 10% of GLP-1 users intend to remain on these medications for the rest of their lives. This is where the comprehensive Weight Watchers Behavioral Program, specifically the program we tailored for those on GLP-1s, can serve both as an effective foundation while on medication, ensuring critical complementary nutritional elements, as well as a sustainable off-ramp for these members moving forward. Moving to the rest of our platform, we must materially improve our digital member journey. We need to eliminate years of accumulated friction and more seamlessly integrate across the solution set. We make it too hard to be a Weight Watchers member today. Our vision is to create a seamless experience that allows members to explore our full range of weight management solutions from behavioral programs to clinical support and community engagement and additional support as we add on services like registered dietitians. Our priority is to integrate and modernize so members can more easily benefit from the full suite of tools the Weight Watchers program has to offer and the results it delivers. All of this is specific to our direct consumer business. Let me talk about B2B. The emergence of effective clinical solutions is having a profound impact on both employers and payers as demand for access to weight loss medication continues to explode. We believe it's going to be increasingly hard for employers not to offer coverage for weight loss medication, given their positive health benefits, particularly as more suppliers enter the markets over time and drive down cost. This represents a clear and growing long-term opportunity for Weight Watchers, with the breadth and effectiveness of our program a unique differentiator. Our B2B offering delivers a robust ROI for employers and insurers across all program options. with our clinic program achieving nearly a four to one payback. We're strategically adapting our solutions to meet this evolving market, led by Scott Honkin, who recently joined us as Chief Commercial Officer. Wrapping up, there's no shortage of opportunity for Weight Watchers today and in the future, in the US and abroad. To revert this business to growth, we need to double down on our strengths and the foundation and breadth of our value proposition. which is more relevant today than ever before. We need to obsess about our member experience and leverage our full toolkit, not only its component parts. We need to be bold and clear as we engage both with our existing members and potential future customers. At a high level looking forward, we're focused on one, the simplification and integration of our digital experience, creating the ability to move easily in, out, and across all we have to offer irrespective of where a member is on their journey. Listening to our members and truly building to the power of one Weight Watchers. Two, a revitalization of our brand, clarifying and unifying our apparently disparate marketing messaging, particularly in a world of elevated CAC and prolific competition in the clinical space. Three, continuing to leverage our deep science-backed heritage in this new world of GLP-1s. not only in the doctor's office but as a fully integrated sustainable and livable solution with our nutritional expertise and community support as crucial differentiators that support maximum results four partnering with employers and health plans to help them provide access in an affordable and scalable manner to the tens of millions of employees and members seeking support and five innovating and adding to our platform where we see value for both members and our business for the short and longer term. Much of this work will take time and as we move forward, the team is taking a disciplined approach to spending and resource allocation, recognizing that some initiatives will need to be sequenced as we build for 2025 and beyond. We'll move forward thoughtfully but decisively, balancing near-term performance with investments in our future growth opportunities. And with that, let me turn it over to Heather to walk us through the core chart and our outlook in more detail.

Thanks, Tara. As Tara emphasized, despite near-term sign-up challenges, we remain confident in our strong competitive advantage, unique market position, and talented team to ultimately drive this business back to growth. We remain on track to deliver the full-year guidance that was communicated last quarter. We continue to act to improve our profitability and liquidity profile And I'm encouraged to see our cost savings efforts bearing fruit as evidenced by our strong gross margin expansion, which sequentially increased and is up 625 basis points year to date versus last year. We're on track for our $100 million cost action announced last quarter with meaningful savings in both gross margin and G&A expected in Q4 and beyond. And I'm pleased to see our average revenue per user stabilize through the first three quarters of the year with stability being driven primarily by subscriber mix and in line with expectations. Turning to our third quarter 2024 results, note that all year-over-year financial comparisons are on a constant currency basis. We ended Q3 with 3.7 million subscribers, a decline of 9% year-over-year, reflecting year-to-date recruitment declines as consumer acquisition costs increased substantially compared to last year. Revenue totaled $193 million. Within this, subscription revenues were $191 million, down 6% year-over-year, with declines in our digital and workshops subscription revenue. Subscription revenues benefited from $19.1 million of clinical subscription revenues. Digital and workshops revenue was primarily driven by lower sign-ups and incoming subscribers, coupled with the continued mix shift from workshops to digital, and a higher portion of digital subscribers within their initial lower-priced commitment periods. Clinical subscribers of 78,000 at the end of the third quarter represented growth of 71% compared to prior year, driving a $9 million increase in subscription revenue. Sign-up trends across the business have been challenging in this environment and significantly impacted by competition-driven increases to consumer acquisition costs. Other revenue of 2 million declined 10 million year-on-year due to the discontinuation of our low-margin consumer products business at the end of 2023. Adjusted gross margin was yet another record high at 69.1%, up from 66.2% in the prior year and 67.9% last quarter. Expansion year-over-year was driven primarily by actions to reduce the fixed cost base within our business and the discontinuation of our lower-margin consumer products business. Marketing expenses of $44 million were down 8% year-over-year and almost 20% sequentially, as we continued to manage to a prudent LTV-CAC ratio. In the third quarter, we experienced a roughly 30% year-on-year increase in cost to acquire, which resulted in a decision to pull back marketing dollars to preserve spend for the fourth quarter, aligned with the timing of program news and creative execution, while keeping full-year spend flat to prior. Adjusted GNA of $53 million was down 7% versus prior year. Q3 24 GNA included a nine-month or three-quarter compensation accrual as compared to a three-month or one-quarter compensation accrual in the third quarter 2023. This resulted in higher G&A of $7 million in this year's third quarter. Excluding the $7 million impact, adjusted G&A would have decreased by 20% or $11 million versus the prior year periods. The year-over-year reduction in adjusted G&A reflects the impact of our previously announced cost savings initiative and we are on track to achieve the run rate $100 million cost savings by the end of 2025. We expect to realize approximately $20 million of cost savings in 2024 and the remainder in 2025, with cost savings in 2025 to be split across adjusted G&A and cost of revenue with slightly more of an impact to G&A. Adjusted operating income in the third quarter was $36 million, reflecting an operating margin of 18.5% a year-on-year increase of almost 150 basis points. Adjusted EBITDAs was $40 million, which was negatively impacted by approximately $6 million of other expenses recorded below operating income, primarily driven by the negative impact of foreign currency on intercompany transactions. During Q3 2024, we recorded non-cash impairment charges of franchise rights acquired, totaling $57 million. These impairments were primarily driven by an increase in the company's weighted average cost of capital reflecting market factors. Adjusted EPS was 24 cents and included a 33 cent tax benefit from the valuation allowance mentioned in our press release. You can find a detailed summary of the adjustments within our supplemental materials and in the financial detail section of our earnings press release posted on our site earlier this morning. Shifting to our outlook for the rest of the year, While the recent launch of compounded semaglutide was encouraging in terms of momentum, we are pleased to be expanding access to medication for our members. As Tara mentioned, we expect it to have minimal impact on our consolidated 2024 results. We are reiterating our previously provided guidance for end-of-period subscribers, revenue, adjusted operating income, and adjusted EBITDA. For the full year 2024, we expect Year-end total subscribers of at least 3.1 million, which represents a decline from the end of 2023 and will create a material headwind to revenue in 2025. Total revenue of at least $770 million. Adjusted operating income of at least $100 million, and adjusted EBITDAs of at least $150 million, which is consistent with previously provided guidance, but for clarity, now also excludes the non-cash intangible impairment charges and former CEO separation costs that occurred in Q3. Cash outlays for the 2024 restructuring plan and remaining payments for prior year actions are expected to be approximately $30 million in 2024, with approximately $5 million remaining in Q4. Full year interest expense is expected to be between $105 and $110 million, a year-over-year increase of approximately 10% to 15%, largely driven by the expiration of our $500 million hedge at the start of Q2 2024. We expect modest benefit from the recent reduction in interest rates and remain within our prior guidance range. For the full year, we expect income tax expense of up to $10 million. Excluding the impact of the valuation allowance, impairments, and other discrete tax items, we continue to expect an income tax benefit of up to $10 million. We expect cash taxes, net of refunds, be approximately $20 million for the year. As anticipated and communicated in prior quarters, we are pleased to see cash flow from operations improve and revert to positive in the third quarter. We continue to expect to have a modest use of cash from operations for the full year 2024. As a reminder, our business is a highly cash-generative business pre-debt servicing charges and is bolstered by our subscription billing model and the stickiness of our subscriber base. CapEx, which is primarily capitalized software, is expected to be approximately $20 million. Depreciation and amortization is expected to be around $40 million. Turning to our capital structure, we ended Q3 with approximately $57 million of cash, up from $43 million at the end of the second quarter, plus undrawn revolver access of $61 million. With our cash position plus our revolving credit facility and bolstered by the cost actions underway, We believe we have sufficient liquidity for our working capital needs, including cash outlays related to our headcount actions and servicing our debt. We have attractive debt terms with no maturities for our term loan or senior notes until 2028 and 2029. However, we acknowledge that our debt burden is significant with our net debt to adjusted EBITDA silvered ratio at 10.4 times at the end of the third quarter. As such, we have recently appointed advisors to assist us in the evaluation of options related to our overall capital structure. We have nothing further to share on this at this time. 2024 reflects a focus on profitability as we navigate a challenging sign-up environment in a rapidly changing industry, and we remain on track with our prior expectations. I have confidence we are taking the right steps that will best enable the company to revert to growth while managing liquidity and setting us up for longer term success. I'll now turn the call back to Tara. Thanks, Heather.

For over six decades, Weight Watchers has helped tens of millions of people transform their lives through our proven approach to weight management. As we navigate an evolving health landscape, it's crucial that we return to those core strengths that have defined Weight Watchers from the beginning. Innovation, continuous learning, a commitment to science-backed solutions, the importance of community, and livable solutions for a healthy life. As interim CEO, I'm fully focused on leading the company through this next phase and driving meaningful progress in these strategic initiatives over at least the next six months. I'm honored to work with our team on behalf of our current and future members in this incredible company. With that, we'll be happy to take questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble the roster. And our first question will come from Nathan Feather of Morgan Stanley. Please go ahead.

Hey, everyone. Thanks for the question. It will be helpful to get your thoughts on what has worked early in the compounding launch across conversion, retention, and the ability to market and taking that together. Are you seeing meaningful uplift in LTV2CAC there?

Hey, Nathan. yeah listen we um as we mentioned on the call we were extremely pleased um with the launch of compounding which was really only a few weeks ago at this point um and i really give the team here a huge amount of credit um for the extensive work and diligence um that went into that launch over many many months um and actually donna your team led that work, so perhaps you want to comment on some of those positive trends. We also gave some of those statistics in the call, but do you want to add some further, Kelly?

Sure, I'm happy to. Thanks for the question. Immediately after our compounding launch, we saw a positive impact on both our signups and our attack. Our launch day was our highest, as Tara mentioned, our single highest launch in 2024, and we are continuing to see signups that are exceeding our end of Q3 trends. As to the success, there's multiple factors there. One is really the offering of compounded semaglutide in itself, resolving shortages. That has been a challenge for conversion overall. So having the availability of supply has contributed to that. In addition to that, though, a combination of always looking at our pricing strategy and the availability of flexibility how members are able to access that. In combination with, as Tara mentioned, some of the friction on our website and our conversion funnels have been resolved with this launch. So, primarily, the availability of the drug, being able to provide members access has been a factor in and of itself, coupled with some of the member experience changes that we've seen affecting both conversion and, with that, intern tech.

I would just add to that, thanks, Donna, just an overall reminder that we don't expect this to have a material impact to the overall business due to the proportion of clinic versus behavioral subscribers at this time.

Okay, great. That's helpful. And then, Tara, you walked through a lot of initiatives in the pipeline at various different timelines. I guess in your term, what are the, you know, maybe two or three primary priorities that you're looking to get in place ahead of peak season to hopefully drive some reacceleration and, you know, the core clinical.

Sorry, was that, Nathan, I missed the beginning of the question. Was that specific to our clinical business or a more general question?

More general, just kind of the key priorities ahead of peak.

Yeah, absolutely. Well, listen, I think we spoke to many of them on the phone, you know, in the prepared remarks. And I think what you're hearing is a focus on awareness, of the breadth and strength of our offering. And while that may seem somewhat obvious, I think we haven't done as good a job as we could have done reminding the market of all that is part of the full spectrum of Weight Watchers solutions. We actually have a very low awareness, for example, around the fact that we even have a clinical solution. When we think about PEAK, we're really going to be doubling down on those core strengths, the values of the Weight Watchers platform that have always been in place. This is livable. This is not a fad. These are solutions for life. But we're also going to be very focused on awareness and engagement as we really hammer home that messaging. I mentioned a brand refresh. We're not doing any major rebranding, but I think the brand refresh is going to be fantastic. I'm looking forward to seeing it in the first quarter. A little more modern, a little more Weight Watchers, a little more human, a lot more community, a lot more joy, and just sort of getting back to the roots of who we are, but certainly with a focus on the breadth of all we bring to offer.

Great. Very helpful. Thank you.

The next question comes from Alex Furman of Craig Hallam Capital Group. Please go ahead.

Hey, guys. Thanks for taking my question. I wanted to ask about retention on the clinical side of the business. I think you mentioned that you've seen retention improve from six and a half months to seven and a half months. Can you give us a little bit of color on why your clinical members are typically churning out? Is it a matter of side effects or having reached their weight loss goals? Or is it more about cost and access? And how has that been evolving over the course of the year?

Yeah. Hey, Alex. I mean, I think we maybe said it in the script, but it's absolutely cost and access. They are the biggest contributing factors to why a clinical subscriber churns. So as we've launched compounding, but also as Donna alluded to some additional product improvements just in the member experience, those are really, it's super encouraging to see those have such a tangible and immediate impact on our retention.

Okay, that's really helpful to hear. And then is it your kind of, you know, hope or expectation going forward that longer term you could get clinical retention, you know, up above and beyond what you see or up to the levels that you see in the clinical program? Or, you know, is it more about, I guess, kind of keeping people on the, you know, the traditional program as well when they transition off the clinical program as a means of keeping them engaged with the brand?

Absolutely, the latter. So, look, we... We gave you a stat that about 10% of our GLP-1 members do not intend to remain on those meds for life. And again, when we talk about building to one Weight Watchers, we are talking about being able to meet members wherever they are on their weight journey. That may be entering the Weight Watchers ecosystem at a point where you're looking for medication solutions. But the pairing of those with our nutritional program, both while you're on medication and as you ramp off medication for the longer term, we believe is a really, really critical part of this solution here for our members and ultimately successful long-term outcomes. So, look, we're not giving any targets today on things like retention, but suffice to say that, yeah, we're very optimistic and ambitious about what this business can look like over the long term.

Okay, that's really helpful. Thank you very much.

The next question comes from Karu Martinson of Jefferies. Please go ahead.

Good morning. When we do this rebranding the building to a one-way watchers, how much of the $80 million in cost-cut savings that you're looking at for 2025 will need to be reinvested in the business and how much will come to the bottom line?

Alison Jones- hey crew, and you know we definitely looked at investment needed, as we were designing the hundred million dollar cost action. Alison Jones- There you know, there is investment required as we build into next year, and you know we are not guiding to 2025 at this time, but we are absolutely laser focused on profitability and managing our liquidity through the turnaround. And we expect to see that full run rate, $100 million cost savings, reading through by the end of 2025.

And when we look at that liquidity, we feel comfortable that we can carry that liquidity, let's say, at least to the revolver maturity.

Yeah, we know we've shared our comfort with our cash and liquidity position, and we've We've designed our cash management and cost management exercise with that in mind. I would, you know, as we look through the year, remind you that our first half of the year is heavier cash use than the back half of the year, but also remind you that we're a cash generative business and, you know, working through the $100 million cost savings to preserve liquidity through the turnaround.

And, hey, Cruz, the only thing I would add to that is that I Speaking personally, I'm four weeks into this role. Don, I think you're, what, six months? So this is your first, both of our first 2025 planning season at Weight Watchers. And I really do give the team a lot of credit for the tough decisions they took as it relates to those cost actions. But we absolutely will also be investing in the business throughout 2025 to get this business back to growth. We see huge opportunity in terms of really leveraging the assets we already have. So as Heather said, we're not guiding to 2025 today, and we'll be going through our strategic planning and those budget allocations over the next couple of months and updating you in Q1 next year.

Okay. And just lastly, in terms of those consumer acquisition costs, I mean, have you seen any change in the overall competitive market as I think it was Zepbound and others came off of the shortage list. Is that having any impact on the competitive response out there?

Yeah. So, you know, expectations at the start of the fourth quarter, we're definitely seeing some early relief from the significant increases we referenced having seen last quarter. But look, CACs are still elevated. There's competition and noise in this space it's evolving and we are managing through that and managing through that uh presently you know working to compete more effectively uh where the LTV tack makes better sense and um and and going from there um but the you know the move to offering uh compounding as well uh our ability to speak to one Weight Watchers um is is reading through. And as I said, there's, there's still pressure, but, um, as I said, the start of the fourth quarter, some early release.

Thank you very much. I'm sorry.

Yeah. I was just going to add to that as a general comment, not a, not a sort of specific one, but as a general comment, um, uh, you know, we have the ability to ease our marketing efficiency and effectiveness as we become more cohesive in how we both, um, build our product when you land somewhere in the Weight Watchers ecosystem and as we communicate our product. So I just want to make that point. It doesn't change the scale and the impact of the competitive market around us, but I do think there are things that Donna in particular and her team and Phil and his team and the marketing crew that we can do to make life a little easier for ourselves in that competitive environment as it relates to elevated tax.

Thank you very much. Appreciate it.

The next question comes from Michael Lasser of UBS. Please go ahead.

Good morning. This is Henry Caron from Michael Lasser. Thanks so much for taking our question. I wanted to start just by asking, what gives you confidence that employers will need to offer more weight loss solutions to employees in the future? And why is Weight Watchers positioned well to be part of that solution?

Yeah. Hey, Henry. Look, we were pretty early here in the overall innings in terms of how obesity meds fit within this marketplace. And obviously insurance coverage remains pretty low right now, particularly given the high cost. But we believe that ultimately employers and insurers are going to really struggle and find it very hard not to cover these medications in light of their broad health benefits. So we do think that there are real tailwinds in this space. It's obviously a longer lead time, but we're super bullish on this over future years, and particularly our position in this marketplace with the breadth of that offering. I think employers are looking for a much more extensive suite of solutions than a single point solution, and certainly that's where Weight Watchers really, really plays. So we feel good about this over the long term.

Deirdre G Snyder- It just adds to that to we've we've seen a positive fourth quarter selling season, we do expect that to read through into 2025 with. Deirdre G Snyder- newly contracted and expanded channel partnerships and direct to employer relationships. Deirdre G Snyder- But as a reminder we're building off a small base and we do expect the pace of growth in b2b well we're we're bullish on the opportunity we do expect it to be gradual yeah sure.

Thanks so much. And I just wanted to ask a little bit more about the acquisition stocks. I believe they were up 30% year over year. With marketing spend being shifted into 3Q, not exactly panning out, was a lot of that due to just increased expenses related to the election, you know, and digital channels? And should this abate moving forward and into 2025? Any clarity about how that's trended and what could come would be super helpful. Thank you.

Sure, you know, we're seeing this as largely competition in the space, driving costs to acquire up. There's obviously media inflation going on in the space as well across channels. I don't see this defined as one channel. I think the US election potentially impacted it as well, and that threw into the start of the fourth quarter as well. But as I mentioned before, our expectations for the fourth quarter As we referenced, we do see some early relief there, but I would say the tax are still elevated going into the fourth quarter.

Great. Thank you so much. You're welcome.

This concludes our question and answer session. I would like to turn the call over to Tara Kalman for any closing remarks.

Yeah, thanks, everyone. We really appreciate you joining us this morning, particularly on as busy a morning as it is here in the U.S., and look forward to following up with you over the course of the quarter and in our call next quarter. So thanks, everyone.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.