WW International, Inc.

recorded. I would now like to turn the conference over to David Helderman, Director of Investor Relations. Please go ahead.

Thank you everyone for joining us today for WW International's fourth quarter and full year 2024 conference call. This afternoon, we issued a press release reporting our fourth quarter and full year 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 located 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 disclosed on this conference call 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 company's latest annual report on Form 10-K and 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, President and Chief Executive Officer, Felicia Della Fortuna, Chief Financial Officer, and Donna Boyer, Chief Product Officer. I will now turn the call over to Tara.

Thank you, David. Thank you all for joining us today. And I'm pleased to officially welcome Felicia to her first Weight Watchers earnings call. Felicia joined as a CFO on the 1st of January and we're thrilled to benefit from her extensive strategic and financial leadership experience as part of the Weight Watchers team. In addition, and as you may have seen in our earnings press release, I'm pleased to lead our call today as the president and CEO of Weight Watchers, transitioning from my interim role over the last five months. I'd like to thank the board of directors for their trust in my leadership of this iconic brand and incredible company at such a critical time. I look forward to continuing to drive our business forward together with our very passionate and talented team. Ahead of Felicia taking me through the numbers, I'd like to share how we're thinking about the business, some recent trends, and where we're focused moving forward as we work to stabilize and lay the path back to long-term sustainable growth. Weight Watchers has experienced significant disruption in recent years. The lasting impact of COVID-19 led to widespread and, in many cases, permanent closures of our in-person workshops, and the rapid adoption of GLP-1 weight loss medication is fundamentally reshaping the weight management landscape. Over the same period, we wound down our consumer products business, scaled back licensing activities, and reduced focus on our international operations. Collectively, these changes have created a challenging period of transition for the business, which continues to be evidenced in our fourth quarter revenue, down 10% on the same period last year, with our behavioral business down 12%, partially offset, however, by a healthy 58% growth in our clinical business. Despite the challenges of recent times, the foundation upon which Weight Watchers was built 62 years ago and the core reason we exist has never been more relevant or important. As the trusted leader in weight management, Weight Watchers continues to combine science and community to help millions lead their healthiest lives. We're more than just a digital telehealth player. We exist in real life, fostering active, engaged communities supported by powerful digital tools. Our science-backed approach is well proven in its ability to help members build lifelong healthy habits. including for those members on or coming off weight loss medication. We believe our most successful members will be those who embrace our solutions holistically, integrating them into their daily lives as part of sustainable long-term journeys. In a world where more people than ever are considering medication, yet are also seeking livability in treatment and sustainability of results, this is where Weight Watchers excels. This strong foundation gives us a powerful platform for the future. However, we also recognize the realities of our current business landscape, the challenges of our existing capital structure, and the work ahead. We entered 2025 with a starting revenue headwind of approximately $45 million, driven by a lower 2024 ending subscriber base. At the same time, we committed to removing $100 million in run rate costs by the end of 2025, the vast majority of which has already been actioned. While these factors shape our starting point, 2025 is ultimately a year of significant reset, one where we focus on stabilization, recovery, and rebuilding to lay the groundwork for sustained future growth. We believe we have multiple growth levers over the mid to long term and hold a unique competitive position in this evolving market. That said, transformations take time, and they take investment, and our existing debt, which results in approximately $100 million of annual interest payments, is a significant ongoing burden for the company, not least in this period of necessary speed and innovation. Despite the limitations presented by our current leverage, our teams across the business are driving progress in several key priority areas, some of which we'll touch on today. One of those key areas of immediate focus, as mentioned on our last call, is improving the end-to-end member experience. Today, becoming and staying a Weight Watchers member is more complicated than it should be, with an unclear, disjointed journey from initial sign-up through the various components of our program once you are a member. Our product team has a clear plan to radically simplify and streamline this experience, eliminating unnecessary friction and better integrating and showcasing the full breadth of our offerings. This foundational work is essential to ensuring a more seamless, engaging and intuitive experience for all our members and continues to be a top priority. Part of this member journey initiative involves improved integration of our clinical business, both in terms of how it presents to new and existing members, as well as how we integrate our teams and functions internally. We acquired Weekend Health, also known as Sequence, in April 2023. This was a critically important acquisition for us, allowing us to meet a high growth, high demand, exciting new area in weight loss. However, we're only partway through the integration of this business and completing it fully is a priority for this year. This is important because we believe in the increasing power of a full continuum of care for our members, creating a seamless journey across our extensive spectrum of solutions. Our behavioral and clinical offerings strengthen and complement each other when we bring them together. We know that when members engage across this broader Weight Watchers journey, they do better. Case in point, members on weight management medication combined with our behavioral program lose 11% more weight than those on medication alone. We also know that not everyone wants to stay on medication forever, nor do they always have the ability to pay due to the price points. but when they come off, they're often worried about putting weight back on. However, in a recent internal study, we also saw that when our members who transitioned from our clinic program but continued to engage in our behavioral program, not only did they keep the weight off, they continued to lose weight over that measurement period. There is true and proven power in the breadth of our full Weight Watchers offering, and we're focused this year on bringing that to the forefront of our full product experience for all members. Currently, only a small percentage of our members fully utilize the breadth of solutions we offer, presenting a significant growth opportunity. By better showcasing, educating, and simplifying access to our full continuum of care, we can drive deeper engagement over time, ultimately leading to both stronger member experiences and superior outcomes. Beyond the deeper product integration, we also continue to enhance and expand our offerings. with a focus on increasing engagement and lifetime value. In recent months leading into peak season, we launched several new features designed to make weight management easier, more personalized, and more sustainable. These include an AI-powered food scanner that instantly calculates points from a photo, an online recipe importer that not only allows for easy tracking but also supports members in discovering and utilizing recipes within the app, and a much-requested macronutrient tracking feature. Early feedback has been encouraging, with fast-approaching 2 million meals tracked using the scanner, almost a million recipes already imported, and macros driving a 5% increase in tracked foods since launch. As well as providing value for actively engaged members, we're pleased to see this work directly and positively impact the engagement of members who've not recently tracked, something that can be challenging to do. Collectively, these new features translated into our highest activation rate for the start of a year since 2020, together with encouraging positive traction across many of our January brand survey metrics. While new features like these don't immediately translate to new subscribers or revenue, improving engagement, re-engagement, and brand metrics are positive leading indicators for the future. These types of ongoing innovations are a commitment moving forward and an important and integral part of how we will continue to drive incremental value for our members, critical in a recurring revenue subscription business. We also have vast amounts of data at our disposal and are well placed to much more aggressively lean into AI opportunities for continued personalization and other value creation opportunities in the future. More to come on our broader data strategy, but we see very real value over the long term in being much more proactive here. As well as improvements to the existing product, we recently expanded the ability for a U.S. member to access one-on-one registered dietitian services. This was previously available only to clinical members, but expanded to all members in December on both an insurance-covered and cash-pay basis. Uptake has been positive, requiring us to scale our credentialed dietitians faster than expected to keep up with demand. While this is, of course, a small part of our overall business today, we feel good about the opportunity for growth here moving forward, particularly as approximately half our current members have existing insurance coverage for this type of service. Our clinical business is an important part of how we expect to return to enterprise-level growth over the coming years, and we were pleased with fourth-quarter performance as well as a strong start to Q1. Weight Watchers Clinic prescribes both branded and generic weight loss medications, supported by our AI-enabled proprietary platform for prior authorization filing and fulfillment. Through our state-of-the-art tech-enabled process, we conduct thousands of stock checks per day to help members more easily find medication, sometimes within hours of obtaining a prescription. This level of support sets Weight Watchers apart in an increasingly transactional market, ensuring our members receive seamless, real-time access to care. Above all, we've always cared about access at Weight Watchers. For years, we've provided access to science-backed nutritional and behavioral guidance, and our approach to our clinical care remains the same, whether that's access to these life-changing medications or access to care by obesity-trained clinicians. And it's clearly important to our members. Both clinical NPS and retention have improved significantly versus a year ago, with both metrics meaningfully impacted by members' access to medications. I'm sure everyone on this call saw the announcement last week that the FDA determined that one of the GLP-1 medications, semaglutide, is no longer in short supply. However, our supply monitoring efforts in the fourth quarter demonstrated continuing significant challenges in accessing supply of branded GLP-1 medications. Of the nearly 750,000 pharmacy stock checks conducted in the fourth quarter, branded semaglutide and trizepatide were in stock just 6% and 5% of the time respectively. These availability levels have remained consistent in our checks throughout January and February. As we've consistently communicated, we're committed to providing medication access to our members in a manner that's compliant with all applicable laws and regulations. Accordingly, we're carefully monitoring the impact of the FDA's decision and potential implications on our ability to provide compounded semaglutide in the future. We have strong conviction in the long-term potential of the weight loss medication market, fueled by continued innovation, increasing investments in supply expansion, and growing recognition from insurers of the downstream health benefits of obesity treatment. Beyond direct-to-consumer growth, our capabilities also support our B2B expansion, a key focus for the coming years. While this business has a longer lead time, Employers and payers are under growing pressure to cover weight loss medications. In evaluating this, they increasingly seek comprehensive weight management solutions that combine medication support with lifestyle coaching and personalized care. We're seeing promising traction in this space. LabCorp, a new 2024 partner, now has utilization above 11% of eligible lives. and our first client through our new personifying partnership has already reached nearly 10% utilization within a couple of months. Additionally, in December, we expanded our relationship with CVS, allowing employer clients of CVS Caremark to integrate our behavioral and clinical programs, optimizing GLP-1 effectiveness through personalized nutrition and coaching while managing the cost of weight-related chronic conditions. I want to underscore But while top-line revenue growth remains a priority, we are equally focused on optimizing how we operate to drive long-term profitable growth. A significant portion of our revenue is allocated to paid marketing, a strategy that has grown increasingly dominant alongside a reliance on heavy discounting. While promotions have their place, our brand's strengths, differentiated offerings, and proven outcomes should be the foundation of sustainable growth. Transitioning away from this model will take time and trade-offs, but we're confident in the effectiveness of our program, the trust in our brand, and the strength of our community to fuel organic growth over the long term. Alongside these efforts, we're also elevating and modernizing our marketing, shifting towards a bolder, more confident, and modern aesthetic, one that celebrates the unique and powerful strengths of Weight Watchers. as well as the real-life success stories of our incredible members. I'm particularly proud of the team's work during peak season, which showcased authentic member experiences through a simplified, unified message highlighting our full spectrum of care model. Additionally, we're strengthening our capabilities by recently welcoming top-tier talent, including new leadership in both our social and our influencer teams. Over the past 12 months and in prior years, we've taken out significant cost, reducing adjusted G&A by over 25% when comparing 2024 to 2021. We remain on track to achieve our previously committed $100 million in run rate cost savings by the end of 2025, but our work doesn't stop there. In addition to our weekend health integration, we're conducting a comprehensive review of resourcing, operations, and spend across the business to unlock greater efficiency and effectiveness For example, integrating multiple disparate functions and systems across the company, including engineering, product, marketing, member support, and operations. In parallel, we're actively increasing adoption of existing automation and AI-driven solutions across the organization. I give the team a huge amount of credit for the hard work to date on these cost savings, which is never easy. It is, however, evidenced in a near record fourth quarter adjusted gross margin of 69.1%. In addition, adjusted operating income margin was 20% and adjusted EBITDA margin was 27.4%, both of which represent the highest level since the third quarter 2022. While we're ambitious and committed to our path towards recovery and long-term growth, we know that meaningful transformation takes time. This journey will extend beyond 2025, and it's essential that we set clear and realistic near-term expectations. Our immediate priority is stabilization, but our focus remains firmly on positioning Weight Watchers for sustained long-term success. At the same time, we recognize that executing on our vision, both in the near term and for future growth, requires sufficient deployment of capital. Many of the initiatives we've discussed, as well as others on the horizon, will require investment. We must balance these opportunities with the realities of our current financial obligations. The benefit of our capital light, high gross margin, cash generative subscription model that underpins our business is almost fully offset by the strain and cost of our balance sheet. This is why we engaged strategic advisors towards the end of 2024 to help us assess our capital structure strategy moving forward. We publicly announced a few weeks ago that we anticipate engaging in discussions with our lenders and bondholders to explore transactions to increase our financial flexibility. And we won't be taking questions today on this particular topic. As a leader in weight management, we have 62 years of proven results and a legacy of positively impacting millions on their weight loss journey. Rooted in best-in-class science and innovation, we are a globally trusted brand with a passionate community of over 3 million members. Our broad spectrum of proven solutions meet members wherever they are on their journey, giving us a unique opportunity to drive lasting impact. These are exciting times for Weight Watchers, but challenging ones nonetheless. With that, I'll hand over to Felicia to take us through the financials.