Q1 2023 Weight Watchers International Inc Earnings Call

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Operator: Good day, and welcome to the WW International Incorporated first quarter 2023 earnings conference call.

Operator: 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.

Operator: I would now like to turn the conference over to Corey Kinger of Investor Relations. Please go ahead.

Corey Kinger: Thank you everyone for joining us today for WW International's first quarter 2023 conference call.

Corey Kinger: 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 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.

Corey Kinger: 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.

Supplemental investor materials are also available on the company's corporate website in the investors section under presentations and events.

Corey Kinger: Reconciliation 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.

Corey Kinger: 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. 

Corey Kinger: 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.

Corey Kinger: Joining today's call are Sima Sistani, CEO, and Heather Stark, CFO. I will now turn the call over to Sima.

Sima Sistani: 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 areas, operating model, our financial trajectory, and most importantly, the member lives we positively impact.

<unk> trajectory and most importantly, the member lives we positively impact.

Sima Sistani: As we enter our 60th anniversary and plan for upcoming celebrations with our members, I've been reflecting on the incredible history of the company and looking back at photos of our founder Jean Nidetch and and crowds of members that parade Madison Square Garden and workshops.

And crowds members at Grace Madison Square Garden and workshops.

Sima Sistani: Weight Watchers started a movement 60 years ago. And that excitement stems from a strong sense of community, has been the foundation of our longevity. The in-person human connection found in our workshop is what Weight Watchers has been known for. Then the evolution to digital expanded our subscriber base and sustained the company through the pandemic.

And that excitement stems from our strong sense of community has been the foundation of our longevity.

The in person human connection found in our workshop is what weight watchers has been known for.

And then the evolution to digital and in our subscriber base and sustain the company through the pandemic.

Sima Sistani: 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.

But our digital experience can be so much more it can bring people together in new ways.

Spanned 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.

And it can enhance the in person experience better enabling connectivity between members and members and coaches.

Sima Sistani: 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 US News and World reports 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 signed back pathways such as clinical.

We have earned trust in a space, where new entrants come and go we.

We are turning that solid foundation into best in class experiences for the future. Including building new signed back pathways such as clinical.

Including building new signed back pathways such as clinical.

Sima Sistani: 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. This exceeded 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.

We ended the quarter with just over 4 million subscribers slightly above our march guidance of approaching $4 million.

This exceeded our forecast.

This represents net additions of nearly 500000 subscribers up from the $3 5 million subs, we had at the year end.

This is a quarter over quarter step up of 100000 more net additions than in the year ago first quarter.

Importantly, this was accomplished with $19 million less marketing spend.

Sima Sistani: To reiterate, we achieved more net addition, with 18% 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 float into adjusted operating income result, beating our guidance.

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 float into adjusted operating income result, beating our guidance.

Sima Sistani: We are better utilizing data throughout our business from digital engagement and activation to product experience, from LCD [inaudible] to financial forecasting. This data informed culture is improving the way we operate, making the company more agile and results more predictable.

This data informed culture is improving the way, we operate making the company more agile and results more predictable.

Sima Sistani: 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% 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 rates demonstrates that the changes we have made to the product in our program are working.

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 as a key focus across our entire organization.

So driving this metric upward as a key focus across our entire organization.

The sustainability of holding this year over year improvement in activation rates demonstrates that the changes we have made to the product in our program are working.

Sima Sistani: In addition to our activation rate, which is measured only in a member's first month, our engagement rate, which as 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.

Further indication that our product updates are working for our members.

Sima Sistani: As discussed, our current digital product roadmap is focused on creating community and enabling good decisions. As measured by a member's first month activation and resultingly subscriber retention and member success.

As measured by members first month activation of Resultingly subscriber retention and member success.

Sima Sistani: 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 on your existing network if you wish to bring them along your journey.

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 on your existing network. If you wish to bring them along your journey.

Sima Sistani: Also coming in 2023 will be new streamline 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.

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.

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.

Sima Sistani: The longevity of Weight Watchers brand has sustained because of ongoing innovation to maintain our position as a 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 intervention with our eye on the North star of connecting people meaningfully through the shared experience of a weight management journey.

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 intervention with our eye on the North star of connecting people meaningfully through the shared experience of a weight management journey.

Sima Sistani: 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 improved 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 evidenced-based solutions more achievable and accessible to those in need.

Wait health.

Similar to how heart health or mental health reframe the conversation around their chronic conditions reduce stigma and improved accessibility and standards of care, we believe weight health should be the future of our space.

We are focused on leading this change do you stigmatizing and Demystifying obesity, and weight management, and making evidenced based solutions more achievable and accessible to those in need.

Sima Sistani: Weight health is the degree to which an individual's weight affects their metabolic health and wellbeing. 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-two diabetes, high cholesterol, and cardiovascular disease with the ultimate goal of improving health, well being, and quality of life. 

Wait health is impacted by genetic biological hormonal environmental and behavioral factors unique to each individual.

Wait healthy living aims to prevent and better manage the chronic diseases that result from excess body fat, including type two diabetes high cholesterol and cardiovascular disease with the ultimate goal of improving health, well being and quality of life.

Yeah.

Sima Sistani: Weight Watchers will be synonymous with delivering weight health through our pillars of coaching, accountability, and community through evidence-based intervention. Which brings me to our acquisition of weekend health doing business as Sequence. 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.

Which brings me to our acquisition of weekend health. <unk> business S sequence.

<unk> business S sequence.

This announcement captured significant attention and generated a lot of excitement.

And excitement that we share about the opportunity ahead to impact many more lives with improved health outcomes.

Sima Sistani: Sequence is a subscription digital health platform offering clinical access to prescription chronic weight management medication, 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.

I'm, starting our entry into the clinical space. Sequences 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.

Sequences 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.

We strongly believe the multi year growth opportunity for sequence is significant.

Sima Sistani: But importantly, this year, we are carefully balancing the continued strong growth momentum of this business, while taking a thoughtful approach to integration of 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 ones and Weight Watchers' entrants into the clinical market has been widespread and we now have an opportunity to build upon our position in weight health.

And efficient acquisition.

Conversation around G. L P ones in weight watchers entrants into the clinical market has been widespread and we now have an opportunity to build upon our position in weight health.

Sima Sistani: Encouragingly, our customer is viewing the news positively. In a survey we conducted last months, 60% of our core demographics said the acquisition made them think more positively about Weight Watchers and 80% of those surveyed believed Weight Watchers is keeping up with the latest scientific research with this announcement.

And 80% of those surveyed believed weight watchers is keeping up with the latest scientific research with this announcement.

Sima Sistani: 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.

Our communication is critical we are focused on educating that pursuing a clinical pathway as 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.

Sima Sistani: 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.

Trusting us to bring credibility to the space. So there is an opportunity to better serve these members with an integrated clinical solution.

Sima Sistani: Their top three expectations for our clinical program are access to GLP One 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 One 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 One or another medication is appropriate. And if the medication is prescribed Sequence has a seamless easy process for prescription fulfillment and for managing dosing overtime.

Our access to G O P. One medication insurance coordination and the 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 G. L. P. One 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 G. L. P. One or another medication is appropriate. And if the medication as prescribed sequence has a seamless easy process for prescription fulfillment and for managing dosing overtime.

And if the medication as prescribed sequence has a seamless easy process for prescription fulfillment and for managing dosing overtime.

Sima Sistani: Second, insurance coordination. A prevailing concern about GLP Ones 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 preauthorization 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.

A prevailing concern about G. L. Pic ones 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 Preauthorization 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, the streamlined much of this process, adding accuracy thoroughness and speed of insurance approvals.

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 Preauthorization 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, the streamlined much of this process, adding accuracy thoroughness and speed of insurance approvals.

The insurance Preauthorization 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, the streamlined much of this process, adding accuracy thoroughness and speed of insurance approvals.

Sequence has put the insurance process on tech rails, the streamlined much of this process, adding accuracy thoroughness and speed of insurance approvals.

Sima Sistani: And third, our 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 lapsed member base who know and trust Weight Watchers, but who are also looking for a clinical solution. And 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 food to managing against muscle loss, there are several key areas where Weight Watchers can provide guidance and support to ensure our members' weight loss journeys are done in a healthy sustainable way.

I believe this will be another key differentiator, particularly for our lapsed member base, who know and trust weight watchers, but who are.

also looking for a clinical solution. And 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 food to managing against muscle loss, there are several key areas where Weight Watchers can provide guidance and support to ensure our members' weight loss journeys are done in a healthy sustainable way.

And 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 food to managing against muscle loss. There are several key areas, where weight watchers can provide guidance and support to ensure our members' weight loss journeys are done in a healthy sustainable way.

From prioritizing nutrient dense food to managing against muscle loss. There are several key areas, where weight watchers can provide guidance and support to ensure our members' weight loss journeys are done in a healthy sustainable way.

Sima Sistani: Finally, we believe a well-designed community experience will add value to those taking these medications. While community isn't the the top driver for members to sign up for a clinical solution, we know from interviews with people using weight management medication that they would appreciate a community of people to learn from and compare notes.

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Sima Sistani: 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 Watcher's 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.

We will be paring 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.

Sima Sistani: 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 waste management.

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.

Improving member activation, which would drive gains in retention. Exercising strong cost discipline throughout the organization.

Exercising strong cost discipline throughout the organization.

And executing on a narrow list of objectives, including our entrance into clinical interventions for waste management.

Sima Sistani: 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 has 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 will then come back to further discuss our strategic priorities for 2023.

Since taking on the interim role in December how there has been an incredible partner to me and the entire leadership team her experience, including 12 years at weight Watchers and operational finance forecasting managing teams are navigating change have been a tremendous asset to this organization.

I look forward to continuing to work with her and its elevated position I.

I will now turn the call over to Heather.

And we will then come back to further discuss our strategic priorities for 2023.

Heather Stark: Thanks Sima. I'm honored to be taking on the Chief Financial Officer role at Weight Watchers. It's rare to work at a company that positively impacts the lives of millions in such a personal and important way. I look forward to continuing to work with Sima and the rest of our leadership team and being part of the next stage of this company's transformation.

Honored to be taking on the chief financial officer role at weight Watchers, It's rare to work at a company that positively impact the lives of millions in such a personal and important way.

I look forward to continuing to work with FEMA and the rest of our leadership team and being part of the next stage of this company's transformation.

Heather Stark: Turning to our first quarter results, we ended Q1 with 4 million subscribers with both sign ups and cancel slightly outperforming our forecast in the quarter. As Sima mentioned, this is a quarter over quarter increase of nearly 500,000 subscribers, which is a step up of approximately 100,000 more than the step up of nearly 400,000 in the year ago first quarter. Revenue totaled 242 million which is slightly above our forecast, but down 19% year over year or 17% on a constant currency basis versus the prior year period, primarily due to the lower subscriber levels entering the year as well as the planned scale down of our consumer products business.

We ended Q1 with 4 million subscribers with both sign ups and cancel slightly outperforming our forecast in the quarter.

I've seen I mentioned this is a quarter over quarter increase of nearly 500000 subscribers, which is a step up of approximately 100000 more than the step up of nearly 400000 in the year ago first quarter.

Revenue totaled 242 million.

Which is slightly above our forecast, but down 19% year over year or 17% on a constant currency basis versus the prior year period, primarily due to the lower subscriber levels entering the year as well as the planned scale down of our consumer products business.

Heather Stark: Adjusted gross margin of 57.1% for the quarter was down 335 basis points from the prior year with overdrive on cost savings, resulting in a beat versus our guidance. The year over year decline was primarily due to a revenue mix shift from our higher margin digital business, deleverage as well as the accounting for subscription and consumer product promotional bundles in the quarter.

The year over year decline was primarily due to a revenue mix shift from our higher margin digital business.

Leverage as well as the accounting for subscription and consumer product promotional bundles in the quarter.

Heather Stark: Marketing expenses of $88 million were down 18% year over year, reflecting lower spend on television advertising and lower non-working spend as we optimize our performance marketing approach and drive member acquisition with strong LTV to CAC subscription lifetime value to customer acquisition cost efficiency.

Subscription lifetime value to customer acquisition cost efficiency.

Heather Stark: Adjusted G&A of 56 million was down 12% versus the prior year, reflecting savings from our restructuring actions and overall expense discipline, partially offset by $3 million in costs related to the Sequence acquisition.

Heather Stark: We had an adjusted operating loss of $6 million in the first quarter, beating our expectations. Restructuring charges totaled $23 million in the quarter.

Restructuring charges totaled $23 million in the quarter.

Heather Stark: As previously announced, in 2023, we are further streamlining and centralizing our organizational structure, rationalizing certain non strategic business line and continuing the rebalancing of our real estate portfolio.

Heather Stark: Income tax expense in Q1, 2023, was $68 million, which reflected the impact of an unusually high negative annual effective tax rate driven by a valuation allowance and small pretax loss reflected in the company's full year fiscal 2023 guidance.

Heather Stark: GAAP net loss per share was $1.68, which incorporates the negative impact of $1.54 of items impacting comparability, including net restructuring charges and the valuation allowance.

Heather Stark: Turning to Sequence, as we discussed at the time of our announcement in early March, since Sequence's launch in late 2021 the company has quickly grown to serve thousands of members across the US by effectively scaling its technology platform through word of mouth.

Heather Stark: We closed the acquisition on April 10, so it will be reflected in our results starting next quarter's earnings report. At closing, Sequence had approximately 27,000 members. At this time, new members to Sequence initially pay of $49 consultation fee and should they qualify and except treatment subscribed for $99 per month thereafter. Only after they begin the $99 monthly plan are they counted as a subscriber.

Clothing sequence had approximately 27000 members. At this time, new members to sequence initially pay of $49 consultation fee and should they qualify and except treatment subscribed for $99 per month thereafter. Only after they begin the $99 monthly plan are they counted as a subscriber.

At this time, new members to sequence initially pay of $49 consultation fee and should they qualify and except treatment subscribed for $99 per month thereafter. Only after they begin the $99 monthly plan are they counted as a subscriber.

Only after they begin the $99 monthly plan are they counted as a subscriber.

Heather Stark: Gross margins for sequence are north of 40%, so a bit better than those in our workshop business and on annualized operating income basis, the business is modestly profitable at current revenue levels that has significant upside opportunity upon achieving greater scale.

Heather Stark: After transaction expenses are behind us, the acquisition is expected to be accretive to WW's earnings per share by the fourth quarter.

Heather Stark: While Sequence is expected to continue its growth trajectory in 2023, it will take time to integrate and truly scale up this offering. That said, we strongly believe the multi year growth opportunity is significant. 

Yeah.

Heather Stark: We expect performance trends in our principal Weight Watchers business to improve through the year as we benefit from our data informed approach to member acquisition, increased operating efficiency from our streamlined operations, and as we deliver on an enhanced member experience following upcoming launches to our product roadmap. In addition, the sequence acquisition will be reflected in our results starting in Q2.

In addition, the sequence acquisition will be reflected in our results starting in Q2.

Heather Stark: We plan to redeploy our Q1 year over year marketing savings primarily into Q3, where we can better maximize LTV to CAC efficiency essentially driving more sign ups per dollar spent. We are confident that shifting the timing of this investment will help drive sign ups year over year in Q3.

We are confident that shifting the timing of this investment will help drive sign ups year over year in Q3.

Heather Stark: For the full year, we expect to end the year with Weight Watcher's subscribers, excluding sequence subscribers, roughly flat to year end 2022. Including Sequence for clinical subscribers, total subscribers are expected to approach $3.6 million.

Heather Stark: The last time we ended a year with flat or higher subscribers year over year was 2020, so this will be a notable achievement and a testament to the work our teams are delivering in our product experience and acquisition channels.

Heather Stark: As a reminder, Q1 is traditionally our annual peak and end of period subscribers sloping to a Q4 trough with an average decline of 14% over the past five years.

Heather Stark: Our outlook of ending the year with $3.6 million subscribers represents a Q1 to Q4 decline of only 10%, significantly improved from a decline of 22% in 2022.

Heather Stark: Full year revenue is expected to be in the range of $910 million to $930 million, reflecting reducing year over year declines in subscription revenue as we move through the year.

Heather Stark: Approximately 40% of our subscribers are currently in the long term treatment period of their membership, which ranges anywhere from one to 12 months, depending on the joining offer. These offers reduced the average rate per paid week, but lock in subscribers for a longer duration, resulting in higher LTV.

These offers reduced the average rate per paid week, but locking subscribers for a longer duration, resulting in higher LTV.

Heather Stark: In Q1, approximately 80% of global sign ups chose a six months or longer plan up from about 70% year ago, and most notably 41% of total sign ups are for a nine months or longer plan, up from only 12% a year ago. We now expect consumer products and others to contribute approximately $65 million in revenue during 2023, which is lower than our previous estimates as we simplify our business and focus our consumer product offerings on our best selling SKUs.

We now expect consumer products another to contribute approximately $65 million in revenue during 2023, which is lower than our previous estimates.

as we simplify our business and focus our consumer product offerings on our best selling SKUs.

Heather Stark: Revenues from Sequence are currently expected to contribute $45 million from Q2 to Q4 in aggregate. Adjusted gross margin is expected to be in the range of 61% to 62% for the full year as we continue to reduce our fixed cost base.

Adjusted gross margin is expected to be in the range of 61% to 62% for the full year as we continue to reduce our fixed cost base are.

Heather Stark: Our workshop restructuring is expected to reduce our cost structure by approximately $40 million on an annualized basis with approximately $25 million of in year savings excluding reinvestments in the organization.

Heather Stark: We expect full year marketing spend to be flat with 2022 at approximately $245 million.

Heather Stark: G&A expense is also expected to be approximately $245 million for the year. This includes approximately $15 million in Sequence G&A plus $6 million in transaction costs, including the $3 million we recorded in Q1. Therefore, we expect adjusted operating income in the range of $80 million to $85 million for the full year 2023.

Spend is also expected to be approximately $245 million for the year. This includes approximately $15 million in sequence G&A plus $6 million in transaction costs, including the 3 million we recorded in Q1.

Therefore, we expect adjusted operating income in the range of $80 million to $85 million for the full year 2023.

Heather Stark: We estimate that the remaining charges related to the 2023 restructuring plan will be up to $10 million. 

For the full year.

Heather Stark: For the full year, excluding the impact of restructuring, we expect income tax expense to be approximately $15 million to $20 million largely driven by the full year impact of valuation allowance discussed earlier.

Heather Stark: Given the seasonal nature of our principal business, our Q1 income tax expense is expected to largely reverse in the remaining quarters of fiscal 2023, when we expect to earn pretax income. So excluding the impact of the valuation allowance and restructuring, we would expect an income tax benefit of up to $5 million for the full year. Given the small pretax loss reflected in the company's full year fiscal 2023 guidance, any updates to the expected pretax loss or income tax expense can result in significant impacts in quarterly income tax results.

So excluding the impact of the valuation allowance and restructuring we would expect an income tax benefit of up to $5 million for the full year. Give them a small pretax loss reflected in the company's full year fiscal 2023 guidance any updates to the expected pretax loss or income tax expense can result in significant impacts in quarterly income tax results.

Give them a small pretax loss reflected in the company's full year fiscal 2023 guidance any updates to the expected pretax loss or income tax expense can result in significant impacts in quarterly income tax results.

Heather Stark: Turning to our capital structure and cash flows, we ended Q1 with approximately $141 million of cash plus an undrawn revolver. With our cash position, plus our revolving credit facility, we have more than sufficient liquidity for our working capital needs, including in year cash outlays related to our restructuring actions, servicing our debt, and approximately 40 million in cash for the purchase of Sequence in Q2, and reflecting our assumption that cash from operations will be a modest use of cash for the year.

We ended Q1 with approximately $141 million of cash plus an undrawn revolver with our cash position plus our revolving credit facility, we have more than sufficient liquidity for working capital needs, including in your cash outlays related to our restructuring actions servicing our debt and approximately 40 million.

And cash for the purchase of sequence in Q2, and reflecting our assumption that cash from operations will be a modest use of cash for the year.

Heather Stark: At quarter end, our net debt to adjusted EBITDA to leverage ratio was 6.7 times, up from six times at the end of 2022. We expect our trailing 12 months leverage ratio to further increase in 2023 due to lower EBITDA levels through most of the year.

We expect our trailing 12 months leverage ratio to further increase in 2023 due to lower EBITDA levels through most of the year.

Heather Stark: At this time, full year interest expense is expected to be approximately $95 million. Note that we had a $500 million hedge through Q1 2024 to protect against rising interest rates on our variable rate term loan of $945 million and our 500 million notes are fixed rate. Therefore, only 31% of our total debt is floating and we are currently exploring options for forward-starting swaps.

Therefore, only 31% of our total debt is floating and we are currently exploring options for forward starting swaps.

Heather Stark: Capex, which was primarily due to capitalized software as well as depreciation and amortization, are both expected to be in the $45 million range for the full year 2023.

Heather Stark: In summary, we are stabilizing the business, improving our execution, and looking forward to upcoming key milestones on our product roadmap and our entry into clinical. With our lower cost base and increased agility in our organization, we have greater flexibility in our operating model positioning us well to improve our profitability profile following a return to growth. I'll now turn the call back to Sima.

With our lower cost base and increased agility in our organization, we have greater flexibility in our operating model positioning us well to improve our profitability profile following a return to growth.

I'll now turn the call back to Sema.

Sima Sistani: Thanks Heather. We have significant opportunities for expanding our reach and returning Weight Watchers to growth. To achieve that, we are focused on a narrow list of priorities in order to best execute on the initiatives that will deliver the greatest impact.

Sima Sistani: Across the organization, we are focused on four key areas, one, reinvigorating our principal business and hitting our end of period subscriber targets for the year, which will be achieved through our more efficient acquisition funnel and increased member engagement for both digital and workshop members alike.

Sima Sistani: Two, compounding our head start in the clinical space by continuing to drive efficient member acquisition to Sequence, increasing brand awareness, and expanding member retention.

Compounding our headstart in the clinical space by continuing to drive efficient member acquisition to sequence, increasing brand awareness and expanding member retention three.

Sima Sistani: Three, leveraging our expertise and enhancing our capabilities to be the partner of choice for self insured employers and health system payers and delivering 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 in digital that will broaden our reach, increase engagement and satisfaction for both behavioral and clinical pathways.

Sima Sistani: Three, leveraging our expertise and enhancing our capabilities to be the partner of choice for self insured employers and health system payers and delivering end to end behavioral and clinical weight management solutions, setting a new standard of care in this space.

And for building community experiences both in real life and in digital that will broaden our reach increase engagement and satisfaction for both behavioral and clinical pathways.

Sima Sistani: And four, building community experiences, both in real life and in digital that will broaden our reach, increase engagement and satisfaction for both behavioral and clinical pathways.

Sima Sistani: In summary, our team's hard work, innovative thinking and strong execution is paying off and I'm confident that we are turning the corner and getting Weight Watchers back on a growth trajectory. With a leaner, more agile organization, we are improving our operating model to drive profitable growth. Thanks for joining us today, and we are now happy to take your questions.

With a leaner more agile organization, we are improving our operating model to drive profitable growth.

Thanks for joining us today, and we are now happy to take your questions.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two.

To ask a question you May Press Star then one on your Touchtone phone.

If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

Operator: At this time, we will pause momentarily to assemble our roster.

Operator: Our first question comes from Jason English from Goldman Sachs. Please go ahead.

Jason M. English: Good afternoon folks, thanks for slipping me in. Hey, congrats on finding some stability on the core subscriber base. Good to see it. On Sequence, your guidance implies you expect to have about 100,000 subs a year. A couple of questions, last time, you gave us an update there were 4000 on it. Where do we stand today, whether that be people who've already paid the 99 or just people who've come in and add to the program? What gives you confidence that you can build to that the 100? And what's the cadence of activation? When should we start to see or expect to see you bring the marketing campaign and activate and start promoting this to try to get the on ramp going?

Hey, congrats on finding some stability on the core subscriber base.

Good to see on sequence your guidance implies you expect to have about 100000 subs a year right.

Well I guess. Couple of questions last time, you gave us an update there were 4000 on it.

Couple of questions last time, you gave us an update there were 4000 on it.

Where do we stand today, whether that be people who've already paid the 99 or just people who've come in and add to the program. What gives you confidence that you can build to that the 100. And what's the cadence of activation when should we start to see or expect to see you bring the marketing campaign and activate and start promoting this to try to get the Onramp Kelly.

And what's the cadence of activation when should we start to see or expect to see you bring the marketing campaign and activate and start promoting this to try to get the Onramp Kelly.

Heather Stark: Hi, Jason and thanks for your question. This is Heather. Sequence, yes ramping up through the year. So as we said in the comments, we closed the acquisition with 27,000 active subscribers. We are measuring subscribers at a different pace than a typical Weight Watcher subscriber where you are a sign ups and an active subscriber rate on day one. So those 27,000 are people who have come in and qualified for treatment and accepted treatment and moved into the $99 monthly subscription plan. So there's a bit of a lag there between when someone enters the sign up flow and actually becomes a subscriber, which is a little different as I said. So in terms of scaling, we're confident that the 2023 expectations that we have will land us in that range of of growth and we recognize that there's a good scalable space in this business and expect to hit the subscriber base that we're targeting.

Weight watchers subscriber, where you are a sign ups and an active subscriber rate on day. One. So those 27000 are people who have come in and qualified for treatment and accepted treatment and moved into the us and $99 a month monthly subscription plan. So there's a bit of a lag there between when someone enters the sign up flow and actually becomes a subscriber. Which is a little different as I said, so in terms of scaling.

So there's a bit of a lag there between when someone enters the sign up flow and actually becomes a subscriber. Which is a little different as I said, so in terms of scaling.

Which is a little different as I said, so in terms of scaling.

We're confident that the 2023 expectations that we have will will land us in that range of of growth and we recognize that there's a good scalable space in this business and expect to hit the subscriber base that we're targeting.

Sima Sistani: And Jason, hey, it's Sima, I just wanted to add to that regarding marketing activation. So as you know, Sequence has built up their subscription base, primarily on word of mouth, and we're saying that they are continuing to scale through that channel. Then on top of that, we have the opportunity to tap into the Weight Watchers lapsed membership base to really cross per boat for those obviously where it's medically appropriate. And that being said, we did push our marketing budget to the second half of the year and we're going to be driving that top of funnel across our businesses as a whole. One of the thesis here was that there would be CAC efficiencies and we believe that will be true. And so we're going to be looking at where we have the most leverage, whether it's through clinical or our behavioral pathway.

Then on top of that we have the opportunity to tap into the weight watchers lapsed membership base to really cross per boat.

For those obviously, where it's medically appropriate.

And that being said, we did push our marketing budget to the second half of the year and we're going to be driving that top of funnel across. Our businesses as a whole there are you know one of the thesis here was that there would be CAC efficiencies and we believe that will be true and so. You know, we're going to be looking at where we have the most leverage whether it's through clinical or our behavioral pathway.

Our businesses as a whole there are you know one of the thesis here was that there would be CAC efficiencies and we believe that will be true and so. You know, we're going to be looking at where we have the most leverage whether it's through clinical or our behavioral pathway.

You know, we're going to be looking at where we have the most leverage whether it's through clinical or our behavioral pathway.

Jason M. English: Okay, one more question then I'll pass it on although I realize I cheated upfront with a three part question. You had some interesting comments to make on insurance coverage, I was wondering if you have any sense of numbers you can put around that like what percentage of this population or even better your current lapsed users would be covered on this program, just a carte Blanche with no caveat and then how does that percentage change when we rename the caveat of it must be a company that's been sort of behavioral modification program?

You had some interesting comments to make on insurance coverage I was wondering if you have any sense of numbers you can put around that like what percentage of your.

This population or even better your current lapsed users would be covered on this program just a carte Blanche with no caveat and then how does that percentage change when we renamed the caveat of it must be a company that's been sort of behavioral modification program.

Sima Sistani: So our insurance coverage isn't something that we previously really pulled our members regarding but we know they typically have an above average household income. So most do have health insurance through an employer, I think that's a fair assumption. And the benefit of Sequence here or is that they've put the insurance process on [inaudible] such that it makes navigating the preauthorization process so much easier, which helps with access obviously. And on top of that, I think we just have an opportunity to be an indispensable partner to, not only members who need help navigating the insurance process, but also employers who are looking to figure out how to provide these critical medications to their population. And we're hearing from our B2B population that they're interested in step therapy plans and so that's an engagement model that we're designing and navigating through. And I think more to come on that.

And and the the benefit of sequence here or is that they've put the insurance process on tegra all such that it makes navigating the preauthorization process, so much easier, which helps with access obviously and you know on top of that I think we're just hum. Have enough and opportunity to be an indispensable partner to not only members who need help navigating the insurance process, but also employers who are looking to figure out how to provide these critical medications to their population and we're hearing. From our and B to B population that they're interested in step therapy plans and so that's an engagement model that we're designing in navigating through. And I think you know more to come on that.

Have enough and opportunity to be an indispensable partner to not only members who need help navigating the insurance process, but also employers who are looking to figure out how to provide these critical medications to their population and we're hearing. From our and B to B population that they're interested in step therapy plans and so that's an engagement model that we're designing in navigating through. And I think you know more to come on that.

From our and B to B population that they're interested in step therapy plans and so that's an engagement model that we're designing in navigating through. And I think you know more to come on that.

And I think you know more to come on that.

Jason M. English: Yes, it makes sense. Exciting stuff. I'll pass it on. 

Sima Sistani: Thank you.

Operator: The next question comes from Linda Bolton Weiser from D. A Davidson. Please go ahead.

Linda Bolton Weiser: Yes, hi. So based on your comments, it sounds like you're going to start this cross promotional opportunity by tapping into your former members in the second half of the year. Is there any way to quantify how much of the marketing budget would be put towards that versus the Weight Watchers advertising because at this point, they're not integrated right, so it's still two separate endeavors. So is there any way to quantify the spending you would put toward the Sequence side?

So based on your comments it sounds like you're going to start this cross promotional opportunity by tapping into your former members in the second half of the year is there any way to quantify how much of the marketing budget would be put towards that versus the weight watchers advertising because at this point, they're not integrated right. So it's still too.

Two separate endeavors. So is there any way to quantify the spending you would put toward the sequence side.

Sima Sistani: The CAC efficiencies are what we're going to be keeping an eye on so the opportunity here is going to really be driven by the product and where we have leverage so where we're seeing efficient LTV CAC, that's where we will spend. And being able to go to market with a portfolio of options I think is what really differentiates us and sets us apart. So we are not specifying any specific part of our budget, but what I feel confident about is that we have around $160 million still earmarked for the rest of the year to drive our top of funnel and no other companies in the space are gonna be near us in terms of the ability to go out and really speak to a B2C platform such as ours.

The the opportunity here is going to really be driven by the product and where we have leverage so where we're seeing efficient LTV CAC, that's where we will spend and. Being able to go to market with a portfolio of options I think is what really differentiates us and sets us apart. So we are not.

Being able to go to market with a portfolio of options I think is what really differentiates us and sets us apart. So we are not.

Specify any specific part of our budget, but what I, what I feel confident about is that we have around $160 million still earmarked for the rest of the year to drive our top of funnel and no. Other companies in the space, we're gonna be near US in terms of the ability to go out.

And and really speak to a D to C platforms, such as ours.

Linda Bolton Weiser: Right. And then can you give us some rough estimation as to how long it may take to integrate the two platforms and come up with their integrated marketing methods and kind of work that through? Is that like a year from now or is there any rough timeframe for that?

Can you give us some rough estimation as to how long it may take to integrate the two platforms and come up with their integrated marketing methods and kind of work that through is that like a year from now or is there any rough timeframe for that.

Sima Sistani: Yeah, we're not really ready to talk too much about that at this point Linda. I mean, I want to be more thoughtful and given we just closed a couple of weeks ago, we need time to co-create with our new colleagues on how we do this well and how we do this quickly. But as I noted, so one of the core objectives here, the focus of our company is taking advantage of this head start that we have in the clinical space. So you can imagine that it is absolutely a priority and top of mind for us.

Here for are the focus of our company is you. Taking advantage of this head start that we have in the clinical space. So. You can.

Taking advantage of this head start that we have in the clinical space. So. You can.

You can.

I imagine that it is absolutely a priority and top of mind for us.

Sima Sistani: And the nice thing is I will add there is that we just complement very well in terms of the things that we are doing really well and the things that Sequence are doing really well, there's a really good match up there that I think we look forward to talking and sharing more about in the next few calls.

Complement very well in terms of the things that we.

We.

Are doing really well and the things that sequence are doing really well, there's oh, a really good match up there that I think.

We look forward to talking and sharing more about in the next in the.

Next few calls.

Linda Bolton Weiser: Yes, that sounds great. And just my final question, I know that historically there was some partnership that Weight Watchers did with Offering the Drug [inaudible] I think that's what it's called, I don't know the context of that and I don't know why it was never successful or do you have any history on that and why that wasn't any big deal with that drug offering?

It wasn't any big deal with that drug offerings.

Sima Sistani: Linda, I'm gonna be honest, I don't have too much context there to share with you on that front. But  what I can note I think that is it are we can all agree that these new next generation medications are unlike anything that have come before it and the landscape has really shifted.

Linda Bolton Weiser: Yes. Thank you, I really appreciate it. 

Sima Sistani: Thank you.

Operator: Our next question comes from Michael Lasser from UBS. Please go ahead.

Henry Carr: Hi, this is Henry Carr on behalf of Michael Lasser. Thanks a lot for taking our question tonight. If and when Sequence tries to find an affordable GLP One solution, what's stopping them from taking that to their primary care provider? In other words, why stick around when a solution is found?

It's been one sequence.

Driver finding affordable T. L. P. One solution, what's stopping them from taking that to their primary care provider in other words why you stick around what our solution is found.

Sima Sistani: Thanks, Henry. So the process with these chronic weight loss medications is that it takes a high support chair team around it. You need to titrate your dosages, along your weight loss journey, and that's really different than for instance, getting an ED medication and script that you can get and walk away from. So there is a a level of support that is needed that is different than other types of medications. Also the preauthorization process, you're going to continue to need that throughout the journey as these dosages are changed and titrated. What's fascinating is that we actually saw the highest retention during the time when Monjoro was couponed the most. People were clearly finding value in the program, not just in insurance.

Is that it takes a high support chair team around it you need to.

Titrate your dosages, along your weight loss journey, and that's really different than for instance, getting an E D medication and script that you can get and walk away from a so so there is a a level of support that is needed that is different than other types of medications.

Also the Preauthorization process, you're going to continue to need that throughout the journey as these dosages are change and titrate. What's fascinating is that we actually saw the highest retention during the time. When Mondro was coupon the most people were clearly finding value in the program not just in insurance.

What's fascinating is that we actually saw the highest retention during the time. When Mondro was coupon the most people were clearly finding value in the program not just in insurance.

When Mondro was coupon the most people were clearly finding value in the program not just in insurance.

Henry Carr: Thank you, that's really helpful. And just as a follow up, when and if these drugs come up the FDA shortly could probably list and they're more accessible, does that erode the value proposition of the Sequence subscription? In other words, should these drugs become cheaper and more accessible in two or three years as generic versions come to market, how would you look to protect the subscriber base?

When when and if these drugs come off the FDA shortly could probably list and they're more accessible does that erode the value proposition of subscription.

Other words with these drugs become cheaper and more accessible in two or three years as generic versions come to market. How would you look to protect.

Subscriber base.

Sima Sistani: So it's an interesting point that you brought up and I don't want to get too into the weeds here as I'm not a scientist, but I can tell you that because these are biologic, it's not the same sort of discounting when it comes to generics. But that being said, we're in the business the subscription business, not the prescription business, and what we're offering is a turnkey model and that's what we've heard and where the N. P. S is so high such that Sequence has been able to build its business by word of mouth that they're going to a telehealth platform in order to be able to not only acquire these medications when medically appropriate, but then to be able to alongside of that get the fitness, nutrition coaching alongside the medication to be able to have the same type of simple UX that you might even find in for instance consumer messaging apps and then obviously and this is where the thesis for us acquiring this business just makes so much sense is you want to build ongoing healthy habits above and beyond being able to take the medications.

You know discounting when it comes to generics, but that being said God. We're in the business the subscription business not the prescription business and what we're offering is a turnkey model and that's what we've heard and where the N. P. S is so high such that sequel.

<unk> has been able to build its business by word of mouth that they're going to.

Theyre going to a telehealth platform in order to be able to not only acquire these medications when medically appropriate, but then to be able to alongside of that.

Get the fitness nutrition coaching alone alongside the medication to be able to have the same type of simple UX that you might even find in for instance. Consumer messaging apps and then obviously and this is where the thesis for US acquiring this business. Just makes so much sense is you want to build ongoing healthy habits above and beyond being able to take their medications.

Consumer messaging apps and then obviously and this is where the thesis for US acquiring this business. Just makes so much sense is you want to build ongoing healthy habits above and beyond being able to take their medications.

Sima Sistani: And I think it's worth noting too that there are new drugs in development. This is the start of what we're starting to see around these medications where there's already talk about you say medications coming in pill form, right now they're all injectables. So it's still a very nascent market and there's a lot of evolution to come.

There's already talk about you say medications coming in pill form right now Theyre all injectables. So it's still a very nascent market and there's a lot of evolution to come.

Henry Carr: Super helpful. Thank you so much.

Operator: Our next question comes from Lauren Shank from Morgan Stanley . Please go ahead.

Nathaniel Jay Feather: Hey, it's Nathan Feather on for Lauren. It's exciting to see the step up in net adds despite the lower marketing year over year. I guess can you dig in a bit more what you believe is working on the marketing side and how you can leverage that learning through the year. And then a second one, can you talk to any early trends in Sequence since the acquisition? I mean, it certainly seem to get a lot of media attention. I'm not sure if the trends are behind this. Thank you.

I'm not sure if the trends are behind us. Thank you.

Heather Stark: So in terms of marketing, if I heard your question correctly, in terms of what's working well, in Q1, we spent $20 million less than in the prior year, so 18% less. And year over year, our Q1, LTV CAC improved by about 14%. So we can clearly see this read through in our performance trends. And as Sima and I both referenced in the call, we see the step up in our active space from Q4 into our first quarter end. If you go from Q4 2022 into Q1 2023 ending subscribers, we saw a step up of 13% in our end of period subs versus 9% in the prior year and we did that on $20 million less of marketing spend. So it's is reading through in terms of working. And your second question--

In terms of what's working well in Q1, we spent $20 million less than in the prior year, so 18% less.

And year over year, our Q1, LTV CAC improves by about 14%. So we can clearly see this read through in our performance trends and as Jim and I both referenced in the call. We see the step up in our active base from Q4 into our first quarter and if you go from Q4 2022 into Q1.

Thousand twenty-three ending subscribers, we saw a step up 13% and our end of period subs versus 9% in the prior year and we did that on $20 million lots of marketing spend.

So it's you know it is reading through in terms of working.

Yeah.

Sima Sistani: You're going to have to repeat your second question Nathan, we didn't quite catch it. 

Okay.

I mean youre going to have to repeat your second question Nathan.

Nathaniel Jay Feather: Can you just talk to any early trends with Sequence since the acquisition? It certainly seem to get a lot of attention in the media, but just wondering if that translates into kind of initial sign ups and interest.

A lot of attention in the media, but just wondering if that translate into kind of initial sign ups and of interest.

Sima Sistani: Definitely. So we're not speaking specifically to sign ups or to Sequence in isolation at this point, but we did see a a huge step up in interest in Sequence right at the point of announcing the acquisition and an actual step change in their subscriber volume from the point of that announcement. So, yes, definitely an increased interest and increased subscriber interest and activation.

But we did see a a huge step up in interest in and sequence right at the point of announcing the acquisition and an actual step change in there.

Subscriber volume.

From the point of bat announcement, so, yes, definitely a increased interest and increased.

Subscriber into.

Interest in and activation.

Heather Stark: I just want to add on the marketing point though real quick and I think it's worth noting is that it's really less about the creative that we're deploying and it's more about the ways in which we are buying and valuing media going back to building a data informed culture, and that we were able to then couple that with key brand moments, which are driving immediate response and really putting us back into the consideration set for so many so. And I would also add that the initial attention on the acquisition and Weight Watchers recognizing the chronic conditions around living with overweight and obesity has been positively viewed by the market. So not only is it impacting Sequence sign up but also our core business as well, so that's nice to see. And also important why we continue to help really drive the conversation around weight health. Sequence is still a very nascent brand and it did provide this boost to brand awareness, but the association to Weight Watchers, a brand with 60 years of heritage, of trust is helping to drive trust for the clinical pathway as well.

And that we were able to then couple that with key brand moments.

Which which are driving immediate response are really putting us back into the consideration set for for so many so and and I would also add that the initial. Attention on the acquisition and. Weight watchers. Recognizing the chronic conditions around <unk>. Living with overweight and obesity has been positively viewed by the market. So not only is it impacting sequence sign up but also our core business as well so that's nice to see.

Attention on the acquisition and. Weight watchers. Recognizing the chronic conditions around <unk>. Living with overweight and obesity has been positively viewed by the market. So not only is it impacting sequence sign up but also our core business as well so that's nice to see.

Weight watchers. Recognizing the chronic conditions around <unk>. Living with overweight and obesity has been positively viewed by the market. So not only is it impacting sequence sign up but also our core business as well so that's nice to see.

Recognizing the chronic conditions around <unk>. Living with overweight and obesity has been positively viewed by the market. So not only is it impacting sequence sign up but also our core business as well so that's nice to see.

Living with overweight and obesity has been positively viewed by the market. So not only is it impacting sequence sign up but also our core business as well so that's nice to see.

And also important why we continue to. Help really drive the conversation around <unk>. Wait health. The sequence is sequence is still a very nascent brand and it did provide this boost brand awareness, but the association to weight Watchers Ah Ah Ah brand was 60 years of Heritage Trust is helping to drive trust for the clinical paths. Way as well.

Help really drive the conversation around <unk>. Wait health. The sequence is sequence is still a very nascent brand and it did provide this boost brand awareness, but the association to weight Watchers Ah Ah Ah brand was 60 years of Heritage Trust is helping to drive trust for the clinical paths. Way as well.

Help really drive the conversation around <unk>. Wait health. The sequence is sequence is still a very nascent brand and it did provide this boost brand awareness, but the association to weight Watchers Ah Ah Ah brand was 60 years of Heritage Trust is helping to drive trust for the clinical paths. Way as well.

Wait health. The sequence is sequence is still a very nascent brand and it did provide this boost brand awareness, but the association to weight Watchers Ah Ah Ah brand was 60 years of Heritage Trust is helping to drive trust for the clinical paths. Way as well.

The sequence is sequence is still a very nascent brand and it did provide this boost brand awareness, but the association to weight Watchers Ah Ah Ah brand was 60 years of Heritage Trust is helping to drive trust for the clinical paths. Way as well.

Way as well.

Operator: Our last question comes from Alex Fuhrman from Craig Hallum. Please go ahead.

Alex Fuhrman: Hey, guys. Thanks very much for taking my question and congratulations on closing the Sequence acquisition. I wanted to ask about advertising and customer acquisition in the telehealth space. I think Weight Watchers of course has a great reputation in the category. You have a lot of competitors in the telehealth space there that are advertising GLP One very aggressively in a way that I imagine Weight Watchers never really would, but can you talk a little bit about how you were able to get through to customers? Is it mostly about marketing to people in your kind of own ecosystem in terms of the members and former members? I'm curious what you're seeing, I know it's early days, but in terms of customer acquisition cost on the Sequence side of the business.

Beth I think weight Watchers of course has a great reputation in the category you have a lot of competitors in the telehealth space there that our advertising G. L. P. One very aggressively in a way that I imagine a weight watchers never really would but can you talk a little bit about how you were able to. Get through to customers as it is it mostly about marketing to people in your kind of old ecosystem in terms of the members and former members and Im curious what Youre seeing I know, it's early days, but in terms of customer acquisition cost on the sequent side of the business.

Get through to customers as it is it mostly about marketing to people in your kind of old ecosystem in terms of the members and former members and Im curious what Youre seeing I know, it's early days, but in terms of customer acquisition cost on the sequent side of the business.

Sima Sistani: Thanks, Alex. So this is when 60 years of brand equity comes to play. We're talking about our LTV CAC and the efficiencies that we can drive by locking in on a brand that people know and trust and recognize, and so yeah, you're right, but we think we can do this more efficiently. And I think that there are also synergies and our ability to retarget across our database as well as the former members. And that ultimately the same thing that I said before about our core business applies to the telehealth business, which is that the product needs to market itself. And this product has incredibly high NPS, both for consumers and the clinicians because remember both the supply and demand side here are important for a best-in-class experience. And what we are seeing is that people are telling other people that Sequence is a great product and it makes the insurance process easy and it's like a care team in your pocket, and on top of that, when we combine with the behavior change program that we anticipate bringing to market, we're going to have a real differentiated offering. And I'm very bullish on what that means for our ability to drive the top of funnel.

We're talking about our LTV CAC and the efficiencies that we can drive by.

Locking in on a brand that people know and trust and recognize and so yeah, you're right, but we think we can do this more efficiently.

And I think that there are also synergies and our ability to retarget.

Across our database as well as the former members.

And that ultimately the same thing that I said before about our core business applies to the telehealth business, which is not the product needs to market itself.

And this product has incredibly high N P S. Both for consumers and the clinician because remember both the supply and demand side here are important for our best in class experience. And what what we are seeing is that people are calling other people that sequence is a great product and it makes the insurance process easy and it's like a care team in your pocket and on top of that when we combine with the behavior change program that. We anticipate bringing to market, we're going to have a real differentiated offering and I'm you know I'm very bullish on what that means for our ability to drive the top of funnel.

And what what we are seeing is that people are calling other people that sequence is a great product and it makes the insurance process easy and it's like a care team in your pocket and on top of that when we combine with the behavior change program that. We anticipate bringing to market, we're going to have a real differentiated offering and I'm you know I'm very bullish on what that means for our ability to drive the top of funnel.

We anticipate bringing to market, we're going to have a real differentiated offering and I'm you know I'm very bullish on what that means for our ability to drive the top of funnel.

Alex Fuhrman: Okay, thanks Sima, that's very helpful. I appreciate that.

Okay. Thanks, that's very helpful. I appreciate that.

Sima Sistani: Thanks.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Sima Sistani for any closing remarks.

Sima Sistani: Thanks Al. I am so confident that we are approaching an inflection point in our business and we will return the company to a growth trajectory in 2023. As I said earlier, our key initiatives and decisive actions are shaping the future of our product experience operating model, our financial trajectory, and the lives we positively impact. Thank you for joining us today. I'm looking forward to speaking with many of you at upcoming conferences, including [inaudible] Healthcare Conference and the Goldman Sachs Consumer Staples Conference, and keeping you updated on the initiatives we have underway. May the force be with you. 

<unk> impact. Thank you for joining us today I'm looking forward to speaking with many of you at upcoming conferences, including Bofa Health care Conference and the Goldman Sachs Consumer Staples Conference. And keeping you updated on the initiatives we have underway. May the fourth be with you. [laughter].

And keeping you updated on the initiatives we have underway. May the fourth be with you. [laughter].

May the fourth be with you. [laughter].

[laughter].

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. 

[music].