Q3 2023 Weight Watchers International Inc Earnings Call

Speaker 1: Good day and welcome to the WW International Incorporated third quarter 2023.

Good day and welcome to the Ww International incorporated.

Third quarter 2023 earnings conference call, all participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation there'll be an opportunity to ask questions. Please note. This event is being recorded I would now like to turn the conference over to Corey King of Investor Relations.

Speaker 1: 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.

Speaker 1: After today's presentation, there will be an opportunity to ask questions.

Speaker 2: Please note this event is being recorded. I would now like to turn the conference over to Corey Kinger of Investor Relations. Please go ahead. Thank you, everyone, for joining us today for WW International's third quarter 2023 conference call.

<unk>. Please go ahead. Thank you everyone for joining us today for Ww International's third quarter 2023 conference call.

Speaker 2: At about 4 p.m. Eastern time today, we issued a press release reporting our third quarter of 2023 results.

At four P M. Eastern time today, we issued a press release reporting our third quarter 2023 with the.

Speaker 2: 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 and provide investors with some further details regarding the company's financial results as well to provide a general update on the company's progress.

Speaker 2: The price release is available on the company's corporate website located at corporate.ww.com. Supplemental investor materials are also available on the company's corporate website in the investor section under presentations and events.

Press release is available on the company's corporate website located at corporate Ww Dotcom.

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

Speaker 2: Reconciliations of non-GAAP measures disclosed on this conference call to the most directly comparable GAAP financial measures are also available as part of the presentation.

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.

Speaker 2: 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 certainties 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.

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.

Speaker 2: Please refer to these filings for a more detailed discussion of Board-looking statements and the risks and uncertainties of such statements.

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.

Speaker 2: All forward-looking statements are made as of today and, except as required by law, the company undertakes no obligation to publicly update or advise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Speaker 2: Joining today's call are Seema Sistani, CEO , and Heather Stark, CFO . I will now turn the call over to Seema.

Yes.

Joining today's call are Donnie CEO and Heather Stark CFO I will now turn the call over to Steve.

Speaker 3: Thanks, Corey. Good afternoon, everyone, and thank you for joining us today.

Thanks, Corey good afternoon, everyone and thank you for joining us today.

Speaker 3: I am thrilled and gratified to confirm that we have now successfully returned Weight Watchers to a subscriber growth trajectory, a significant achievement and a direct result of our work in reinvigorating our core business.

I am thrilled and gratified to confirm that we have now successfully returned weight watchers to a subscriber growth trajectory a significant achievement and a direct result of our work and reinvigorating our core business.

Speaker 3: Q3 end of period subscribers totaled 4 million, up 6% year over year. This Q2 to Q3 sequential change is the strongest in our reporting history.

Q3 end of period subscribers totaled $4 million up 6% year over year. This Q2 to Q3 sequential change is the strongest in our reporting history.

Speaker 2: In addition, this is our first quarter of reporting year-over-year subscriber growth since Q4 2020.

In addition, this is our first quarter of reporting year over year subscriber growth since Q4 2020.

Speaker 3: Before I dive into our results, I want to remind everyone of our four priority areas for 2023, which we've remained laser focused on as we turn around the bit.

Before I dive into our results I want to remind everyone of our four priority areas for 2023.

Which we've remained laser focused on as we turn around the business.

Speaker 3: One, reinvigorating our core business through an evergreen product innovation strategy and a modern marketing tool.

One reinvigorating our core business through an evergreen product innovation strategy and a modern marketing toolkit.

Speaker 3: Two, compounding our head start in the clinical space.

Two.

Compounding our head start in the clinical space clinic.

Speaker 3: Clinical is highly complimentary to our core offering, and we now have a portfolio of solutions to meet the broad and evolving needs of members.

Clinical is highly complementary to our core offering and we now have a portfolio of solutions to meet the broad and evolving needs of members.

Speaker 3: three, seeing a partner of choice for health providers, payers, and employers by leveraging our expertise and relationships, and a step-programmed solution that delivers a cost-effective, behavioral, and clinical weight management solution, setting a new standard of care in this space.

Three.

Being a partner of choice for health providers payers and employers by leveraging our expertise and relationships and if that program solution that delivers a cost effective behavioral and clinical weight management solution setting a new standard of care in this space.

Speaker 3: and four, building community experiences, both in real life and digital.

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

Speaker 3: that will broaden our reach and increase engagement and satisfaction for both behavioral and clinical pathways.

Speaker 3: We are executing well on each of these initiatives and have hit several key milestones in recent months. Let's start with our corpus.

We are executing well on each of these initiatives and have hit several key milestones in recent months.

Let's start with our core business.

Speaker 3: Our activation rate and metric defined by members food and weight tracking engagement and weight loss progress during their first 30 days on the program, continue to trend in the right direction with Q3 up approximately 7% year over year. As a reminder, activation rate matters because activated members, the Trition Rate, is roughly half of a non-activated member. And they are more successful on weight watchers over the long term.

Our activation rates and metric defined by numbers food and weight tracking engagement and weight loss progress during their first 30 days on the program.

Continue to trend in the right direction with Q3 up approximately 7% year over year.

As a reminder, activation rate matters because activated members attrition rate is roughly half of a non activated remember and they are more successful on weight watchers over the long term.

Speaker 3: Similarly, our engagement rate, which is measured across our entire membership phase beyond those in the first 30 days, also continued to transpositively with Q3 up approximately 13% Eurorear.

Similarly, our engagement rate, which as measured across our entire membership base beyond those in the first 30 days also continued to trend positively with Q3 up approximately 13% year over year.

Speaker 3: NPS or NEP promoter score as a measure of how likely our members are to recommend the program to a friend For our digital business also continues to improve up 12 points since Q1 2022

N P S or net promoter score as a measure of how likely are members are to recommend the program to a friend for our digital business also continues to improve up 12 points since Q1 2022.

Speaker 3: reaching its highest level in the last two years, demonstrating the enhancements to our product over the past year are driving member satisfaction.

In reaching its highest level in the last two years, demonstrating the enhancement drug product over the past year are driving member satisfaction.

Speaker 3: A key component of our core business reinvigoration is the introduction of high value product features that drives those member engagements and retention.

A key component of our core business Reinvigoration is the introduction of high value product features that drive both member engagement and retention.

Speaker 3: Two examples of this quarter include the recently launched What To Eat Tab in Our App, as well as Progress Intrunt.

Two examples this quarter include the recently launched what do you eat tab in our App as well as progress and trends.

Speaker 3: While as early days, these enhancements are driving an increase in food and weight tracking, which we know are critical to member success.

While it's early days. These enhancements are driving an increase in food and weight tracking, which we know are critical to remember success.

Speaker 3: As we outlined earlier this year, we shifted a portion of our annual marketing send from Q1 into Q3 to better optimize our CAC efficiency throughout the year. This strategy was successful in continuing our sign-up momentum and bolstering our starting subscriber position headed into next year.

As we outlined earlier this year, we shifted a portion of our annual marketing spend from Q1 into Q3 to better optimize our CAC efficiency throughout the year. This strategy was successful in continuing our sign up momentum and bolstering our starting subscriber position headed into next year.

We have been adept at managing to customer lifetime value acquired or L. T D.

Speaker 3: We've been adept at managing to customer lifetime value acquired or LTV.

Speaker 3: So far in 2023, approximately 80% of signups chose a six month or greater initial commitment.

So far in 2023, approximately 80% of the sign ups chose a six month or greater initial commitment.

Speaker 3: This is up from less than 70% in 2022.

This is up from less than 70% in 2022.

Speaker 3: This extends the period of time these subscribers receive commitment term pricing.

This extends the period of time these subscribers receive commitment term pricing.

Speaker 3: Therefore, lower and absolute dollar monthly revenue. Importantly, over the member subscription length, it improves our financial return and ensures we are building toward the long term health of the business.

Therefore, lowering absolute dollar monthly revenue.

Importantly, <unk>.

Over the member subscription length. It improves our financial return and ensures we are building towards the long term health of the business.

Turning to our clinical offering.

Speaker 3: Turning to our clinical offering. While GLFU on medication shortages continues, as expected, through all the quarter, we remain extremely pleased with our progress despite the supply-constrained environment.

G O P. One medication shortages continues as expected throughout the quarter, we remain extremely pleased with our progress despite the supply constrained environment clinic.

Speaker 3: Clinical subscribers ended the quarter at 45,000.

Clinical subscribers ended the quarter at 45000 and.

Speaker 3: an increase of approximately 23% from Q2. A growth rate which we believe exceeds the growth rate of the total number of GLP1 prescriptions dispensed, demonstrating that we are taking share in this developing market.

An increase of approximately 23% from Q2.

Our growth rate, which we believe exceeds the growth rate of the total number of G. L. P. One prescription dispensed demonstrating that we are taking share in this developing market.

Speaker 3: We are encouraged by the progress and the future potential for this critical and unique pathway.

We are encouraged by the progress and the future potential for this critical and unique pathway.

While the vast majority of our marketing to date has been focused on our core weight watchers business. We've also been conducting small scale marketing tests, primarily in digital social and email for our clinical offerings in order to continue to seed awareness and generate data informs learnings ahead of the return of G. L. P. One mehdi.

Speaker 3: While the vast majority of our marketing to date has been focused on our core weight watchers business, we have also been conducting small scale marketing tests, primarily in digital, social, and email for clinical offering. In order to continue to see the awareness and generate data informed learnings ahead of the return of GLP1 medication supply.

Kitchen supply.

Speaker 3: As I stated on our last earnings call, we see this time as an opportunity, where we can utilize this window to scale up operations.

I stated on our last earnings call.

We see this time as an opportunity where we can utilize this window to scale up operations, we continue to onboard new clinician up another 20% since the end of Q2.

Speaker 3: We continue to onboard new clinicians up another 20% since the end of Q2, as we are focused on delivering a strong and timely member experience.

As we are focused on delivering a strong and timely member experience.

Behind the scenes our teams have been hard at work integrating the sequence in weight watchers platforms.

Speaker 3: Behind the scenes are teams who have been hard at work at integrating the sequence and weight watchers platform.

Speaker 3: I'm impressed with the agility and dedication of our teams as they become one unified team to advance and enable a seamless member experience.

I'm impressed with the agility and dedication of our teams as they become one unified team to advance and enable a seamless member experience.

Speaker 3: And ahead of our peak season, we will be introducing a dedicated program for Weight Watchers members on GLP1 Medication.

None of our peak season, we will be introducing a dedicated program for weight watchers members on G. L. P. One medications.

Speaker 3: As we know, there are different needs for someone on chronic weight management medications. For many, these medications are highly effective. However, they are most effective when used in conjunction with lifestyle intervention.

As we know there are different needs for someone on chronic weight management medication for many these medications are highly effective. However, they are most effective when used in conjunction with lifestyle intervention.

Speaker 3: We are using our expertise to develop a tailored program that addresses those needs, such as prioritizing a nutrient-dense diet and protecting against loss of muscle during weight loss.

We are using our expertise to develop a tailored program that addresses those knee.

Such as prioritizing a nutrient dense diet and protecting against loss of muscle during weight loss.

Speaker 3: We believe this tailored offering will be a unique differentiator and competitive advantage for weight watchers. So, there are a member receives their prescription through us or not.

We believe this tailored offering will be a unique differentiator and competitive advantage for weight watchers, whether remember receives a prescription through us or not.

Speaker 3: While GOP1 seems to be in the headlines every day, it remains a confusing environment for BunARD-Hyperverted consumers and employers.

Well do you have Q1 seem to be in the headlines every day it remains a confusing environment for consumers.

Speaker 3: We are leading this conversation and will continue to be the trusted resource for those interested in exploring if FESSA Pathway is right for that.

We are leading this conversation and we will continue to be the trusted resource for those interested in exploring it central pathway is right for them.

Speaker 3: As a global leader in weight health, we are reframing the conversation around weight management in order to destigmatize obesity and make evidence-based solutions achievable and accessible to those in need.

As the global leader in weight health, we are reframing the conversation around weight management in order to Destigmatize obesity, and make evidenced based solutions achievable and accessible to those in need.

Speaker 3: The Health Organization navigates this new landscape, Weight Watchers for Business, which was previously referred to as WWHELP Solutions, is building on our existing employer-sponsored business with a full spectrum weight health platform called HALP.

To help organizations navigate this new landscape weight watchers for business, which was previously referred to as Ww health solution.

Building on our existing employer sponsored business with a full spectrum weight health platform called pathways.

Speaker 3: For employers and payers looking to manage costs and improve health outcomes for their population.

For employers and payers looking to manage costs and improve health outcomes for their population.

Speaker 3: Weight Watchers for Business utilizes evidence-based step therapy with proprietary de-escalation protocols designed to drive clinically significant weight loss outcomes while controlling costs.

Weight watchers for business utilizes evidence based stop therapy with proprietary de escalation protocols designed to drive clinically significant weight loss outcomes, while controlling cost.

Speaker 3: A leading third-party actuarial firm validated model shows that implementing the Weight Watchers Program could yield a 3.9 times ROI for employers covering GLP1 Medicaid.

Leading third party actuarial firm validated model shows that implementing the weight watchers program could yield a 3.9 times ROI for employers covering G. L. P. One medication with an estimated net savings of $3375 per participant per year.

Speaker 3: with an estimated net saving of $3,375 per participant per year over a two-year period. Take note. As you...

Over a two year period.

Note as this is worth saying again.

Speaker 3: Implementing the Weight Watchers model for those on GLP-1 can deliver both health outcomes and cost savings.

Implementing the weight watchers model for those on G. L. P. One can deliver both health outcome and cost savings.

Speaker 3: Given cost is top of mind concern for payers, we are confident that our proprietary pathway solution is best in class in the market and sets us well apart competitively.

Given cost is top of mind concern for payers. We are confident that our proprietary pathway solution is best in class in the market and sets us well apart competitively.

Speaker 3: I'm confident we are taking the right steps to deliver a B2B offering that is not just viewed as an employee perk, but as a true partner of choice for value-based care.

I'm confident we are taking the right steps to deliver our BTB offering that is not just viewed as an employee perk that as a true partner of choice for value based care.

Speaker 3: This is a process that won't be accomplished overnight, but one that I am very enthusiastic about for the mid and longer term.

This is a process that won't be accomplished overnight, but one that I'm very enthusiastic about for the mid and longer term.

Speaker 3: And finally, on our fourth priority, building community experiences. For my first day at Weight Watchers and as a longtime member myself, I have stressed the importance of the three pillars of coaching, accountability, and community.

And finally on our fourth priority building community experiences.

For my first day at weight Watchers, and as a longtime member myself I have to stress the importance of the three pillars of coaching accountability and community.

Speaker 3: The community of Weight Watchers members, both in workshops and digitally in our app, is a unique differentiator that is often essential to members' weight loss journey.

The community of weight Watchers members, both in workshops and digitally in our App is a unique differentiator that is often a central to members' weight loss journey.

Speaker 3: We know that members connecting in real life is an impactful and differentiated part of the Weight Watchers experience, and we are exploring ways to bring more of that impact to our entire community of members in the years ahead.

We know that members connecting in real life is an impactful and differentiated part of the weight watchers experience.

We are exploring ways to bring more of that impact to our entire community of members in the years ahead.

Speaker 3: I believe IRL is essential to building lasting communities.

I believe I arrow is essential to building lasting communities.

Speaker 3: Our teams are eagerly testing new features and service designs for how we foster and enable in-person connections while enhancing them digitally.

Our teams are eagerly testing new features and service design for how we foster and enable in person connections, while enhancing them digitally.

Speaker 3: In summary, 2023 has been a transformative year for Weight Watchers. We've returned our core business to subscriber growth, quickly positioned our cynical business as the gold standard in Weight Health with the ability to scale as supply comes back and launch the next wave of enhancements to our product and program that will provide the foundation for a more engaging digital experience.

In summary, 2023 has been a transformative year for weight Watchers, we've returned our core business to subscriber growth quickly positioned our clinical business as the gold standard in weight helped with the ability to scale our supply comes back.

And launch the next wave of an enhancement to our product and program that will provide the foundation for a more engaging digital experience.

Speaker 3: Each of these milestones on a stand-alone basis represents huge progress for our organization.

Each of these milestones on a standalone basis represents huge progress for our organization.

Speaker 3: When combined, the progress and advantage is exponential.

When combined the progress and advantage is exponential that's the white space, where we see a unique opportunity for weight watchers to drive huge value. There's no question in our mind that the combination of behavioral program, what's the clinical option for those who need it supported by both in person and digital.

Speaker 3: That's the white space where we see a unique opportunity for Weight Watchers to drive huge value. There is no question in our minds that the combination of behavioral programs with the clinical options for those who need it, supported by both in-person and digital communities, represents a sizable opportunity and one on which only Weight Watchers can deliver.

Communities represents a sizable opportunity and one on which only weight watchers can deliver.

Speaker 3: I will now turn the call over to Heather to discuss our Q3 financial results and 2023 outlook.

I'll now turn the call over to Heather to discuss our Q3 financial results and 2023 outlook.

Speaker 2: Thanks, Sima. Turning to our third quarter results. Note that all year-over-year financial comparisons are on a constant currency base.

Thanks, FEMA turning to our third quarter results note that all year over year financial comparisons are on a constant currency basis.

Speaker 2: We end a Q3 with 4 million subscribers, including 45,000 clinical subscribers. Our core Weight Watchers subscriber change from Q2 was the best third quarter sequential performance in our reporting history. The actions we're taking to stabilize and grow the business are working.

We ended Q3 with 4 million subscribers, including 45000 clinical subscribers, our core weight watchers subscriber change from Q2 was the best third quarter sequential performance in our reporting history.

The actions, we're taking to stabilize and grow the business are working.

Revenue totaled $215 million down $38 million year over year, breaking this down subscription revenues, which included $10 million in clinical revenue declined $20 million as we have a higher mix of subscribers within their initial pricing commitment periods and an increased mix of high margin digital subscribers.

Speaker 2: Importantly, consumer products and other revenues declined $18 million due to the strategic decision to wind down our low-margin consumer product business.

Accordingly, consumer products and other revenue declined $18 million due to the strategic decision to wind down our low margin consumer products business.

Speaker 2: Adjusted gross margin of 66.2% for the quarter set a new record high and was up 490 basis points from the prior year driven by our actions to reduce our fixed cost base with our workshop real estate restructuring combined with the effect of mixed shift to our higher margin digital bid.

Adjusted gross margin of 66, 2% for the quarter set a new record high and was up 490 basis points from the prior year driven by our actions to reduce our fixed cost base with our workshop real estate restructuring combined with the effect of mix shift to our higher margin digital business.

Marketing expenses at $48 million were up 33% year over year, but slightly below our planned spend as highlighted in prior calls we continue to focus on high value member acquisition and redeployed. The majority of our first half marketing savings primarily into Q3, which helped to drive a second consecutive quarter of year over year.

Speaker 2: Marketing expenses of $48 million were up 33% year-over-year, but slightly below our planned spend. As highlighted in prior calls, we continue to focus on high-value member acquisition and redeployed the majority of our first-half marketing savings, primarily into Q3, which helped drive a second consecutive quarter of year-over-year sign-up.

Sign up growth.

Speaker 2: Adjusted GNA of 57 million was at 4% versus prior year due to the inclusion of 5 million in clinical GNA expenses, including approximately 2 million in intangible amortizations from purchase price accounting considerations, which more than offset the benefits of restructuring and expense controls in the quarter. Adjustive operating income.

Adjusted G&A of $57 million was up 4% versus prior year due to the inclusion of $5 million in clinical G&A expenses, including approximately $2 million in intangible amortization from purchase price accounting considerations, which more than offset the benefits of restructuring and expense controls in the quarter.

Adjusted operating income was 37 million <unk>.

Speaker 2: Restructuring charges totaled $6 million in the quarter as we continue to streamline our organizational structure. While we expect to incur restructuring charges in the range of $50 million for the 2023 plan, it is driving approximately $50 million of in-year savings, roughly split between G&A and operating expenses benefiting gross margins.

Restructuring charges totaled $6 million in the quarter as we continue to streamline our organizational structure.

While we expect to incur restructuring charges in the range of $50 million for the 2023 plan is driving approximately $50 million of in year savings roughly split between G&A and operating expenses benefiting gross margin.

Speaker 2: income tax with a benefit of $38 million in the quarter, which, consistent with last quarter, reflects the impact of an unusually high negative annual effective tax rate driven by a valuation allowance and small pre-tax loss reflected in the company's full year fiscal 2023 guidance.

Income tax was a benefit of $38 million in the quarter, which consistent with last quarter reflects 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.

Speaker 2: That BPS was $0.54, which incorporates the net positive impact of $0.48 of items impacting comparability, which include the valuation allowance and net restructuring charges mentioned earlier.

GAAP EPS was <unk> 54 cents, which incorporates the net positive impact of 48 tenths of items impacting comparability, which include the valuation allowance and net restructuring charges mentioned earlier.

Turning to our clinical line of business. We are encouraged by the third quarter performance and ongoing integration efforts in the face of a challenging supply environment. As a reminder, on our Q2 earnings call. We noted that the demand for G. L. P. One medications has outpaced supply and that the shortages of these medications created a revenue impact versus our initial.

Speaker 2: We are encouraged by the third quarter performance and ongoing integration efforts in the face of a challenging supply environment. As a reminder, on our Q2 earnings call, we noted that the demand for GLP-1 medications has outpaced supply and that the shortages of these medications created a revenue impact versus our initial expectations from earlier in the year.

Expectations from earlier in the year.

Speaker 2: While shorter-term supply constraints remain, we have no change from the outlook we've provided in August . Nor is there any change in our conviction about the strong, multi-year growth opportunity and the significant market we believe this represents.

While shorter term supply constraints remain we have no change from the outlook. We provided in August nor is there any change in our conviction that the strong multiyear growth opportunity and the significant market. We believe this represents.

Speaker 2: We continue to utilize this time to increase our scaling readiness and integrate operations. While this negatively impacts near-term gross margins, we believe we will be ready for the pending improvement of supply. Therefore, Q3 adjusted gross margin was north of 30% compared to north of 40% previously, and we expect this to continue in Q4 before improving with revenue scaling.

We continue to utilize this time to increase our scaling readiness and integrate operations. While this negatively impacts near term gross margin. We believe we will be ready for the pending improvement of supply. Therefore Q3, adjusted gross margin was north of 30% compared to north of 40% previously and we expect this to continue in <unk>.

Four before improving with revenue scaling.

Shifting to our outlook.

Speaker 2: We are encouraged by the subscriber trends we are seeing. As a reminder, the seasonality trends in our business mean that Q1 is traditionally our annual peak in end-of-period subscribers, hoping to a Q4 trough, with Q4 tending to be the lowest recruitment quarter of the year.

We're encouraged by the subscriber trends, we are seeing as a reminder, the seasonality trends in our business I mean that Q1 is traditionally our annual peak and end of period subscribers flipping to a Q4 trough with Q4 tending to be the lowest recruitment quarter of the year.

Speaker 2: We expect to end the year with total subscribers above 3.7 million, modestly higher than the prior value of 3.7.

We expect to end the year with total subscribers above $3 7 million modestly higher than the prior guidance of $3 seven.

Speaker 2: Within this, we expect Weight Watcher subscribers, excluding clinical, to be above 3.6 million at your end, up from 3.5 million at the end of 2022.

Within this we expect weight-watcher subscribers, excluding clinical to be above $3 6 million at year end up from $3 5 million at the end of 2022.

Speaker 2: With respect to Q4 while we expect to continue to sign up momentum, core weight watchers signups are expected to be down the modestly year over year, largely due to the timing of week 52 in 2022, which included New Year's Eve, a high signup day for weight watch.

With respect to Q4, while we expect continued sign up momentum core weight watchers sign ups are expected to be down modestly year over year virtually due to the timing of week 52 in 2022, which included new year's Eve, a high sign up for weight watchers.

Speaker 2: Our outlook of ending your modestly above 3.7 million subscribers represents the best seasonal slope since we've been reporting total subscribers. As a reminder, in Q1, our highest volume quarter for sign-ups. 41% of sign-ups chose a nine-month or greater initial commitment up from 12% in prior year Q1, which effectively pushed out the timeline of when this larger cohort of members comes up for renewal from Q3 to Q4.

Our outlook of ending the year modestly above $3 7 million subscribers represents the best seasonal slope since we've been reporting total subscribers.

As a reminder, in Q1, our highest volume quarter for sign up 41% of sign ups chose a nine months or greater initial commitment up from 12% in prior year, Q1, which effectively pushed out the timeline of when this larger cohort of members comes up for renewal from Q3 to Q4.

Speaker 2: We expect full year revenues to be at the low end, previously provided range of 890 to 910 million due to the revenue dynamics in our core weight-waters business discussed earlier.

We expect full year revenue to be at the low end of previously provided range of $890 to $910 million due to the revenue dynamics in our core weight watchers business discussed earlier.

Speaker 2: We continue to expect clinical revenues to be 30 million for Q2 to Q4 in aggregate.

We continue to expect clinical revenues to be $30 million for Q2 to Q4 in aggregate.

Speaker 2: Given our anticipated increasing subscriber level year over year, we expect to have a modest subscription revenue tailwind into next year due to the addition of clinical. Partially offset by a slight revenue headwind in the core weight watcher's business.

Given our anticipated increasing subscriber levels year over year, we expect to have a modest subscription revenue tailwind into next year due to the addition of clinical partially offset by a slight revenue headwind in the core weight watchers business and.

Speaker 2: And as a reminder, with the nature of our subscription business model, there is a leg from subscriber growth to revenue.

And as a reminder, with the nature of our subscription business model. There is a lag from subscriber growth to revenue growth.

Speaker 2: 15 to consumer products and other. As we've previously communicated earlier this year, we made the decision to sunset our e-commerce and consumer products offering.

Shifting to consumer products and other as.

As we've previously communicated earlier this year, we made the decision to sunset, our ecommerce and consumer products offering.

Speaker 2: While we expect consumer products and other revenues to be in line with prior guidance and contribute roughly 65 million in revenues during 2023, approximately 50 million will not recur and will be a revenue headwind into 2024.

While we expect consumer products and other revenue to be in line with prior guidance and contribute roughly 65 million in revenues during 2023.

Also only 50 million will not recur and will be a revenue headwind into 2024.

Speaker 2: Importantly, however, we expect this to be roughly neutral to operating income and we still plan to continue our harmite high margin licensing business.

Importantly, however, we expect this to be roughly neutral to operating income and we still plan to continue our high margin licensing business.

Adjusted gross margin is still expected to be in the range of 62% to 63% for the full year as a higher mix shift to our digital business and continued read through workshop actions is partially offset by increases in scaling readiness within our clinical business ahead of supply increases.

Speaker 2: A gestic growth margin is still expected to be in the range of 62 to 63% for the full year. As a higher midship to our digital business and continued read through a workshop actions, it's partially offset by increases in scaling readiness within our clinical business ahead of supply increase.

Speaker 2: We expect full-year marketing spend to be approximately 240 million, slightly lower than previous guidance of 245 million, primarily due to the under-spending Q3 mentioned earlier.

We expect full year marketing spend to be approximately $240 million slightly lower than previous guidance of $245 million, primarily due to the under spend in Q3 mentioned earlier.

Speaker 2: Adjusted DNA expenses expected to be approximately 230 million per year, slightly lower than the previous guidance of 235 million due to strong continued cost discipline throughout the organization.

Adjusted G&A expense is expected to be approximately $230 million for the year slightly lower than the previous guidance of $235 million due to strong continued cost discipline throughout the organization.

Speaker 2: We continue to expect adjusted operating income to be at the high end of the previously provided guidance range of 80 to 85 million.

We continue to expect adjusted operating income to be at the high end of the previously provided guidance range of $80 million to $85 million.

Speaker 2: As a reminder, in Q2, we redefined adjusted operating income to exclude acquisition transaction costs related to the sequence acquisition, including approximately 4 million of costs previously included in Q1 adjusted operating income.

As a reminder, in Q2, we redefined adjusted operating income to exclude acquisition transaction costs related to the sequence acquisition, including approximately $4 million of costs. Previously included in Q1 adjusted operating income.

Speaker 2: Our full year, adjusted operating income guidance range, therefore does not include the acquisition transaction costs.

Our full year adjusted operating income guidance range. Therefore does not include these acquisition transaction costs.

Speaker 2: We estimate that the remaining charges related to the 2023 restructuring plan will be up to 10 million in Q4 slightly higher than our previous expectation as we continue to streamline our organizational structure

We estimate that the remaining charges related to the 2023 restructuring plan will be up to $10 million in Q4 slightly higher than our previous expectation as we continue to streamline our organizational structure.

Speaker 2: For the full year, excluding the impact of restructuring and acquisition transaction costs, we expect income tax expense to be approximately 15 to 20 million, largely driven by the full year impact of valuation allowance discussed earlier.

For the full year, excluding the impact of restructuring and acquisition transaction cost. 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.

Speaker 2: As we highlighted for the last two quarters, given the seasonal nature of our business, the outsized Q1 income tax expense was largely expected to reverse in the remaining quarters of fiscal 2023, when we expect to earn pre-tax income, which continued in Q3. Excluding the impact of the valuation allowance, we expect an income tax benefit about to five million for the full year, consistent with our expectations from last quarter.

We highlighted for the last two quarters, given the seasonal nature of our business. The outsized Q1 income tax expense was largely expected to reverse in the remaining quarters of fiscal 2023, when we expect to earn pretax income which continued in Q3.

Excluding the impact of the valuation allowance, we expect an income tax benefit of up to $5 million for the full year consistent with our expectation from last quarter.

Speaker 2: As a reminder, given the small pre-tax loss reflected in the company's full year fiscal 2023 guidance, any updates to the expected pre-tax loss or income tax expense can result in significant impacts in quarterly income tax results. Turning to our...

As a reminder, 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 and resulted in significant impacts in quarterly income tax results.

Turning to our capital structure and cash flows.

Speaker 2: We ended Q3 with approximately 107 million of cash plus an undrawn revolver.

We ended Q3 with approximately $107 million of cash plus an undrawn revolver.

Speaker 2: With our cash position plus our revolving credit facility, we have more than sufficient liquidity for our working capital needs, including in-your cash outlays related to our restructuring actions and servicing our debt. We continue to expect that cash from operations will be a modest use of cash for the year due to the approximately 45 million in expected restructuring cash payments, which is slightly higher than the prior expectations of 40 million.

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 and servicing our debt we.

We continue to expect the cash from operations will be a modest use of cash for the year due to the approximately $45 million unexpected restructuring cash payments, which is slightly higher than the prior expectations of $40 million.

Speaker 2: At quarter end, our net debt to adjusted EBITDAW's leverage ratio was 8.8 times. We expect our trailing 12-month leverage ratio to further increase in 2023 due to lower EBITDAW's levels through the rest of this transformative year.

At quarter end, our net debt to adjusted EBITDA leverage ratio was eight eight times, we expect our trailing 12 months leverage ratio to further increase in 2023 due to lower EBITDA levels through the rest of this transformative year.

Speaker 2: We remain committed to improving our leverage ratio as we execute the sizable turnaround, returning the business to cross-table growth and positive cash flow generation.

We remain committed to improving our leverage ratio as we execute the sizable turnaround returning the business to profitable growth and positive cash flow generation.

Speaker 2: As a reminder, we have very attractive long-term credit agreements with no maturities due until 2028 and 2029. Please give us ample time to deliver on our transformation and growth strategies while also opportunistically considering capital structure options that benefit all stakeholders.

As a reminder, we have very attractive long term credit agreements with no maturities due until 2028 and 2029, he's give us ample time to deliver on our transformation and growth strategies, while also opportunistically considering capital structure options to benefit all stakeholders.

Speaker 2: We still expect a full year interest expense to be approximately 95 million. As a reminder, we have 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. We are currently exploring options for when the current hedge is expire.

We still expect full year interest expense to be approximately $95 million. As a reminder, we have a 500 million hedge through Q1 2024.

Against rising interest rates on our variable rate term loan of $945 million and our 500 million note our fixed rate therefore, only 31% of our total debt is floating.

We're currently exploring options for when the current hedges expire.

Speaker 2: CAPEX, which is primarily due to capitalized software, is expected to be in the 40 million range, slightly lower than prior expectations of 45 million.

Capex, which was primarily due to capitalized software is expected to be in the $40 million range slightly lower than prior expectations of $45 million.

Speaker 2: Appreciation and amortization is expected to be in the 55 million range slightly higher than prior expectations of 50 million

Depreciation and amortization is expected to be in the $55 million range slightly higher than prior expectations of $50 million.

Speaker 2: While we are not providing operating or financial guidance for 2024 today, our intention is to maintain the leaner cost structure achieved through our recent restructuring as well as to operate within a similar marketing budget and approach of maximizing LTV acquired across the year.

While we are not providing operating our financial guidance for 2024 today. Our intention is to maintain the leaner cost structure achieved through our recent restructuring as well as to operate within a similar marketing budget and approach of maximizing LTV acquired across the year.

Speaker 2: In summary, we are executing well against our strategy and meeting and in some cases exceeding our 2023 objectives. Encouraging subscriber trends, record adjusted gross margins, and improved cross-structure position as well for profitable growth. I'll now turn the...

In summary, we are executing well against our strategy and meeting and in some cases exceeding our 2023 objectives encouraging subscriber trends record adjusted gross margins and improved cost structure position us well for profitable growth.

Now I'll turn the call back to Sema.

Speaker 3: Thanks, Heather. I am proud of our team's achievements in 2023. We are strongly positioned to continue our momentum into 2024. While the environment remains dynamic, we will continue to be agile in our approach, take data and form the actions across the organization, and focus what is best for the long term health of our business as we enter our next chapter with a portfolio of solutions to serve the full spectrum of weight health.

Thanks Heather.

Im proud of our team's achievements in 2023, we are strongly positioned to continue our momentum into 2024, while the environment remains dynamic we will continue to be agile in our approach take data informed actions across the organization and focus what is best for the long term health of our business as we enter.

Our next chapter with a portfolio of solutions to serve the full spectrum of weight health.

Speaker 3: To reiterate our key achievements, we have returned to year-over-year subscriber growth, even when excluding the benefit of clinical, driven by the return to incentive growth in our core business.

To reiterate our key achievements, we've returned to year over year subscriber growth, even when excluding the benefit of clinical driven by the return to sort of growth in our core business.

Speaker 3: Clinical subscribers have increased nearly 90% since we announced the acquisition of sequence earlier this year.

Political subscribers have increased nearly 90% since we announced the acquisition of sequence earlier this year.

Speaker 3: We have increased NPS, activation and engagement rates by advancing our digital first product roadmap. And we've delivered the highest growth margin in the company's history by reducing our cost structure and managing the business prudently.

We have increased NPS activation and engagement rates by advancing our digital first product roadmap and.

And we've delivered the highest gross margin in the company's history by reducing our cost structure and managing the business prudently.

Speaker 3: We look forward to introducing a dedicated program for Weight Watchers members on GLP1 medications, building momentum with Weight Watchers for Business, and serving more members through our portfolio of holistic solutions as members go through different phases of Weight Health.

We look forward to introducing a dedicated program for weight watchers members on G. L. P. One medications building momentum with weight watchers for business and serving more members through our portfolio of holistic solutions as members go through different phases of weight health.

Speaker 3: In short, we are focused on the actions that will return the company to profitable, sustainable growth in the years ahead. Thanks for joining us. We are now happy to take your question.

In short we are focused on the actions that will return the company to profitable sustainable growth in the years ahead.

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

We will now begin the question and answer session.

Speaker 1: 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 speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble a rock.

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 at.

At this time, we'll pause momentarily to assemble the roster.

Speaker 1: Our first question comes from Jason English from Goldman Sachs. Please go ahead.

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

Hey, good afternoon folks.

Speaker 4: So the revenue per subscriber compression that we're seeing.

I'd say for sure.

So the revenue per subscriber compression that we're seeing.

It contributed more than you expected.

Speaker 4: seems to be more than you expect it to be published from the negative revenue guidance division. Obviously more than we expected it to be from the revenue mass. Quick math, I think you were saying before you had dime hours, consumers were coming in, staying with your program 10 months.

The negative wasn't going through which is obviously more than we expected.

From a revenue much quicker.

Quick math I think you were saying before.

Consumers can call me and staying with the program to watch.

Speaker 4: Your average monthly revenue per sub now, it looks like we need to extend it out to around 12 months to hold the LCD flap.

Your average monthly revenue per sub.

We need to extend them out to around 12 months for whole LTV flat.

Speaker 4: Does that math sound about right to you, question one? And question two, what gives you confidence that you can actually keep them run out for 12 months? I know it looks like you're locking them in for generally 10 months right now with some of the promotions. What evidence do you have that they'll actually extend out by an extra couple of months?

Okay.

That's on the bottom right to question one question two.

What gives you confidence that you can execute them well for 12 months I know like it looks like youre locking them in for generally 10 months right now with some of the promotions what are going to harvest to actually extend that extra couple of months.

Yes.

Hey, Jason Thanks for your questions.

Speaker 2: Jason, thanks for your questions. First.

Speaker 2: I would reiterate on the first part of that question on revenue compression, we may have missed your expectations, but we do remain within our guidance of 800 to 910 on total revenue still within our range, albeit we gave the nod to the low end. And this is reflecting those expectations on our product mix, as well as the timing of signups that we expect through year.

First yeah, I would reiterate on the that's the first part of that question on revenue compression we.

You may have missed your expectations, but we do remain within our guidance.

800 to 910 on total revenue still within our range, albeit.

We gave the not the low end and this is reflecting those expectations on our our product mix as well as the timing of sign ups that we expect through year end.

Speaker 2: And I would just remind you that we've got mix between the subscription type. So it...

And I would just remind you that we've got mixed between the subscription type. So it's it's hard to compare former rate per paid week to future pace.

Speaker 2: It's hard to compare former rate per pay week to future pay rate per pay week as subscribers choose different plant types.

<unk> per week as subscribers choose.

Different plan types.

Speaker 2: And remember that we've got 80% of subscribers as well, choosing six-month or greater commitments. I think there's really a shift in the type of subscriber that we're seeing coming in. They're choosing our digital offerings over the workshop offering relative to prior year. And they're choosing to commit to us longer term.

And remember that we've got 80% of subscribers as well choosing six months or greater commitment.

I think there is really a shift in the type of subscriber that we're seeing coming in they are choosing our digital offerings.

The workshop offering relative to prior year.

And they're choosing to commit to us longer term.

Speaker 2: The second part of your question on retention. We're still seeing retention in the 10 month range, approaching 10 months. And.

The second part of your question on retention, we're still seeing retention in in the 10 months range approaching 10 months.

And you know, where we're doing things to the product roadmap to increase engagement and activation for our subscriber base, but ultimately those actions. The more engaged someone is there theyre half as likely to churn so you'd expect that to read through over time, but remember that the tail of the retention curve as well.

Speaker 2: You know, we're doing things through the product roadmap to increase engagement and activation for our subscriber base, but ultimately those actions, the more engaged someone is, their half is likely to turn. So you'd expect that to read through over time. But remember the tail of the retention curve is one that takes time to turn and shift, but I appreciate the question.

That takes time to turn on shifts but.

State your question.

Speaker 4: So you're locking them in for longer discount rate damage.

So you walk in the mood for longer discount windows.

Speaker 4: but they're not really staying any longer. They're you're still seeing around 10 month duration. It's just they're getting a discount for a longer period. They used to maybe I didn't get a six month discount and now they get the whole 10 months. So what's the word?

But theyre not withstand any longer.

C N around 10 months' duration. This is sort of a discount for a longer period east maybe I didn't get a strict focus Scott how do we get the whole time will show.

Speaker 4: We're just seeing straight out revenue per subscription. It sounds like a rebase. This isn't like a temporary thing that's going to recover. It's like we're rebasing our revenue per sub. Other than that, I'm isolating for the digital side because I appreciate if I do it for total. There's a lot of mixed noise within that.

Sure.

We're just seeing straight out revenue pushed up subscription sounds like a rebase. This this isn't like a temporary thing that's gonna recovery, where rebates you know revenue per se.

So the digital side, but I appreciate if I read for total with one additional weeks within that.

Speaker 4: At least that's what it sounds like and looks like to me. If I'm wrong, but it's not really a rebased and persuade me otherwise, because I don't, I don't.

At least that's what it sounds like it looks like for me.

If I'm wrong, but it's not really a rebased.

This wave me, otherwise because I don't want to share that outlook.

Speaker 2: I appreciate that. And I think, you know, the rebasing of the subscriber basis, absolutely. Consumers are choosing our digital subscription, the mixes shifting to digital versus workshop. And I think the rest of it, yes, consumers are locking in. They're locking in longer on the commitment pricing, but we're pushing them into longer durations in their journey with us. My, in the prior response though,

Okay, I appreciate that and I think the rebase of the subscriber basis, absolutely consumers are choosing our digital subscription.

The mix is shifting to digital versus workshop.

And I think the rest of it yes consumers are locking in they're locking in longer on the commitment.

Pricing, but we're pushing them into longer durations in their journey with US my in the prior response. So you would expect that to read through over a longer time.

Speaker 2: you'd expect that to read through over a longer time when you're trying to tie that through to retention.

When you're trying to tie that through to retention.

Speaker 5: The rebasing of the consumer base, though, I would say is more the mix between digital versus workshop, but then also you get the rate per paid week stretching out over a longer duration with people choosing the longer-term commitment plans, with the increase in people choosing six months and longer. I'll just add here, Jason, Hey, it's Sima, that we're focused on the total commitment dollars that we're bringing in. And your point on

The re basing of the consumer base. So I would say is more of a mix between.

Digital versus workshop, but then also you get the rate per paid week stretching out over a longer duration with people choosing the longer term commitment plans with it with the increase in people choosing six months or longer.

Just to add here, Jason Hey, it's two months that were focused on the total commitment dollars that we're bringing in.

And your point on the retention.

Speaker 5: the retention is, you gotta remember that all the work that we're doing on our product roadmap, that has been happening.

Is is you got to remember that all the work that we're doing on our product roadmap that had been happening throughout this year and that's why we continue to report out on our activation rate and our engagement, which.

Speaker 5: throughout this year. And that's why we continue to report out on our activation rate and our engagement, which as you can see in Q2 and now in Q3 has gone up. So.

As you can see in Q2 and now in Q3 has gone up so it would it would follow that we would see that translating into better retention over time and.

Speaker 5: it would it would follow that we would see that translating into better retention over time and the more the signups that we continue to bring in that starts to stack and build and so we're really confident that we're building towards the long-term health of the business.

The more the sign ups that we continue to bring in.

That starts to stack and build and so we're really confident that we're building towards the long term health of the business and.

Speaker 5: and improving engagement and retention.

And improving engagement and retention and we I would add to we have every reason to believe that the commitment pricing strategy as revenue and LTV accretive both in the quarter and going forward.

Speaker 2: And I would add, too, we have every reason to believe that the commitment pricing strategy is revenue and LTV accretive, both in the quarter and going forward, and in the market that we're in and with what consumers are choosing to engage on us with.

And then the market that we're in and with what consumers are choosing to engage honestly.

Speaker 5: We're still very much in our guidance range, so it's not a just to to to double down on that is that we are within our guidance range and and so this is playing out as we would have suspected.

We're still fairly true guidance range. So it's not a just to to double down on that is that within our guidance range.

And and so this is playing out as we would have suspected.

Speaker 4: Yeah, but your point is it's too early. We'll see that 10 months go to 12 plus. At which point we'll see the positive payback. It's just it's too early to see it. Wait for it. Trust you. Is that a fair summation?

Yes, but you could point to.

Too early we'll see that tend not to go to 12 plus.

We will see the positive payback.

Yeah, it's too early to see wait for it.

So is that a fair summation.

That's a fair explanation.

Speaker 4: Cool, I've been applased too much time already. All the three of us have a shot.

Cool monopolize too much time with all of them.

I will shop.

Thank you.

Yes.

Speaker 1: This question comes from Laura and Shank from Morgan Stanley . Please go ahead.

Next question comes from Laura and Schenk from Morgan Stanley. Please go ahead.

Speaker 6: Hey, everyone. Just Nathan Seller on for Lauren. Congrats on the results. Can you touch a little bit more on the impact of limited gel P-Watts Applying on Sequence within the quarter? And then understanding it, that's an impact. How should we contextualize the top of funnel demand your statement sequence and how that compares from last quarter and when you acquired the asset? Thank you.

Hey, everyone just anything further on for Lauren.

Congrats on the result, but can you touch a little bit more on the impact of limited GOP, what's the play out of sequence within the quarter and then understanding that that's an impact how should we contextualize the top of funnel demand you're seeing a sequence of how that compares from last quarter and when you acquired the asset. Thank you.

Speaker 3: Thanks, Nathan. Yeah, so the supply story here is still not a positive one. The shortages are continuing and we're seeing that pressure. But again, we had anticipated that happening through the back half of this year. And so really pleased that we've been able to continue to grow the business and we're up 23%. And...

Thanks, Kevin.

Yeah. So the supply story here, there's still a lot of positive one at shortages are continuing and we're seeing that pressure.

And again, we had anticipated that happening through the back half of this year and so really pleased that we've been able to continue to grow the business and where.

Up 23%.

Speaker 5: at 90% of the acquisition. And I think that that growth rate, we believe it exceeds the growth rate of the total number of GLP-1 prescriptions to spend, then even attributed that.

Up 90% since the acquisition and I think that that growth rate, we believe it exceeds the growth rate on the total number of <unk> prescriptions dispensed.

You couldn't.

Attributed that to.

Speaker 5: our ability to manage people through the shortage supply environment.

Our ability to manage people through the shortage of supply environment.

Speaker 5: The tech platform helps with insurance approvals, and then also the infrastructure is high support, helping people to actually find supply when available, and continuing to then move them throughout the wide formulary when it's not available.

The C Tech platform.

With insurance approvals and then also the infrastructure is high support helping people to actually find.

Supply when available and continuing to move them throughout a wide formulary when its not available and so we're we're pleased to see that we've been able to continue to keep that flywheel going.

Speaker 5: And so we're pleased to see that we've been able to continue to keep that fly well going, while we have heard some...

While we.

Have heard some.

Speaker 5: Some promising news this morning, obviously, from Lilly and Novo about what to expect moving forward.

Some promising news this morning, obviously from from Lilly and Novo about what you expect moving forward.

Yeah.

Speaker 1: The next question comes from Linda Bolton-Wiser from DA Davidson. Please go ahead.

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

Yes, Hi, Oh, so just from a sequence numbers.

Speaker 3: Yes, hi. So this one, the sequence numbers, I guess the subscriber number was quite a bit higher than we expected, but the revenue was actually lower. So is there something going on in terms of the realized subscription, revenue per month from subscriber or something like that? I'm just trying to figure out what's going on there.

Yes, the the subscriber number was quite a bit higher than we expected, but the revenue was absolutely lower so is there something going on in terms of the realized subscription revenue per month per subscriber or something like that I'm, just trying to figure out like what's going on there.

Speaker 2: I believe our revenue number was rate on consensus.

And then the I believe our revenue number was right on consensus.

Speaker 2: So I'm not sure what you're seeing. And I also just before we take the next question, I wanted to reiterate, I mistated a number earlier to clarify our revenue guidance of 890 to 910. I just wanted to make sure I clarified my.

I'm not sure what Youre seeing and I also just before we take the next question I wanted to reiterate I misstated, a number earlier to clarify our revenue guidance of 890 to 910, just wanted to make sure I clarify my statement.

Speaker 3: Okay, thanks. So just one follow up though on that. So I get the impression that the sequence subscriber numbers though are trending better than you would have expected. So if that's the case, how come the revenue for the year, it's still the same?

Okay. Thanks, So just one one follow up though on that so I get the impression that the sequence subscriber numbers, though are trending better than you would've expected.

If that's the case how come the revenue for the year, it's still the same.

I don't think we guided to the third quarter subs. So.

Speaker 2: I don't think we guided you to the third quarter sub. So.

Speaker 2: We're, we're on track to our expectations and we haven't changed our guidance range for sequence subs. Okay.

We're we're on track to our expectations and we haven't changed our guidance range for sequence hubs.

Okay and then.

Speaker 7: Can you give a little more detail on the integrated program for people on GLP-1 drugs? Did you say the timing of that is in time for diet season 2024? And can you just give a little more, like, are you gonna keep the sequence brand name or phase that out over time? Can you give us a little more color on the marketing strategy there?

Can you.

Give a little more detail on the integrated program for people on G. L. P. One drugs did you say the timing of that is in time for diet season, 2024, and can you just give a little more like are you going to keep those seem quite brand name or phased that out over time can you give us a little more color on the marketing.

That would be there.

And Linda Sema.

Speaker 5: So yeah, we are looking forward to launching our GLP 1 complimentary program ahead of peak season. And just as a reminder, the GLP 1 program is going to be a tailored version of our program that is for people who are on a clinical pathway, whether they get the medications through us or not. And it's prioritizing.

So you know where you are looking forward to launching a R. G. L. P. One complementary program.

Peak season.

And.

Just as a reminder, the <unk> one program is going to be a tailored version of our program that is for people who are on a clinical pathway, whether they get the medications through us or not and it's probably more timing the specific needs of somebody who is on NGL takeaway medication.

Speaker 5: specific needs of somebody who is on a GLP one medication. For instance, nutrient density, building lean muscle mass, et cetera.

For instance, nutrient density building lean muscle mass etcetera.

And.

Speaker 5: We have been hard at work on integrating the two platforms such that we could create one unified member journey. And we will have more to share on that very soon. Thank you.

We have been hard at work on integrating.

The two platforms such that we can create.

One unified member journey and.

We will have more to share on that very soon.

Okay. Thank you very much.

Yeah.

Speaker 1: The next question comes from Alex Furman from Craig Helen Capital Group. Please go ahead.

The next question comes from Alex Fuhrman from Craig Hallum Capital Group. Please go ahead.

Speaker 8: Hey guys, thanks for taking my question. You know, I was wondering if you could just kind of bridge the gap a little bit between, you know, it sounds like the commentary on subscribers and growth ads on the traditional side of the business is all positive. It is two quarters in a row though that the revenue target for the core business has been lowered. So just trying to square that. I don't know if maybe...

Hey, guys. Thanks for taking my question I was wondering if you could just kind of bridge the gap a little bit between it sounds like the commentary on subscribers and gross adds on the traditional side of the business is all positive.

It is two quarters in a row, though that the revenue target for the core business has been lowered so just trying to square that I don't know if maybe.

Speaker 8: jason's question about the longer-term lower-priced commitment plans fully explains that uh... but just you know wondering if there's an overarching explanation for why it seems like like revenue and and subscribers have kind of moved in in opposite directions of the last week order

Jason's question about the longer term lower priced commitment plans fully explains that but just wondering if there is an overarching explanation for why it seems like like revenue and subscribers kind of moved in opposite directions over the last few quarters.

Speaker 2: Um, thanks for your question, Alex. Um, and yeah, we're, we're really pleased with the, um, the signups, um, and, and subs positivity that we're seeing. And I think really what we're seeing is that mix shift, um, you know, we have people choosing those longer term commitments and, and choosing them at a, at a greater rate, um, they're choosing longer commitments and we're seeing that read through into our revenue.

Thanks for your question Alex.

Yeah.

We're really pleased with the the sign ups and subs positivity that we're seeing and I think really what we're seeing is that mix shift.

We have people choosing those longer term commitments.

And choosing them at a greater rate and they're choosing longer commitments and we're seeing that read through into our revenue and so we are still maintaining our guidance and are looking forward to continuing our subscriber and sign up for.

Speaker 2: So we are still maintaining our guidance and looking forward to continuing our subscriber and sign up for it.

Speaker 8: Okay, that's that's really helpful and then just on the question on the clinical side of the business. I don't know if you have You know a good handle on on you know, what this number would be or maybe just anecdotally based on you know What you're seeing with you know, kind of people coming into sequence and then and then quickly turning out but do you have a sense of?

Okay. That's really helpful. And then just on the question on the clinical side of the business I don't know if you have.

A good handle on what this number would be or maybe just anecdotally based on what youre seeing with kind of people coming in to sequence and then and then quickly turning out but do you have a sense of how many of your patients who are getting prescriptions from G. L. P ones are able to get any sort of meaningful insurance coverage of those.

Speaker 8: how many of your patients who are getting prescriptions from GLP-1s are able to get, you know, any sort of meaningful insurance coverage of those? And has that changed at all since April when you first made the acquisition?

And has that changed at all since April when you first made the acquisition.

Speaker 5: Hey, Alex, it's Seema. So I think that's our key differentiator with the platform is that right now insurance makes it, on top of supply constraints, insurance makes it hard for many to access the medications. And we see about a 30% to 35% approval of Pryoras through our clinical business, which is better than the average. The range of estimated insurance coverage on these meds is somewhere between 20% to 25%.

Hey, Alex at Sema.

So I think that's our key differentiator with the with the platform is that right now insurance makes it on top of a supply constraints insurance makes it hard for many to access their medications and we see about a 30% to 35% approval of probably roster our clinical business, which is.

Better than the average the range of estimated insurance coverage on these merger somewhere between 20% to 25% and that is a result of the deep.

Speaker 5: And, and that is a result of the, the, you know, insurance engine that we have here where.

Insurance engine that we have here, where it makes it better are able.

Speaker 5: It makes it better able to actually increase the likelihood of...

Table two to actually increase the likelihood of a coverage because so many mistakes are made in this process just due to errors that were clear.

Speaker 3: of coverage because so many mistakes are made in this process just due to

Speaker 5: errors that were clerical errors that can result in denials and.

Clerical errors that can result in denials and just better system support and in addition to the wide formulary. So we can file several ph, but at the same time on multiple medications to help increase again the likelihood of of coverage and then once once we do help them.

Speaker 3: Just better system support in addition to the wide formulary.

Speaker 5: so we can file several PAs at the same time on multiple meditant medications to help increase again the likelihood of coverage.

Speaker 5: Once we do help them with the preauthorization, we go into the part of the flow, which is around that med management, and there's a whole infrastructure there too.

With the Preauthorization, we go into the part of the flow, which is where all that bad.

Bed management, and there isn't a whole infrastructure there too.

Speaker 5: to support people with finding supply and it gets smart about which pharmacy actually has the supply and is able to benefit our population to have a better experience, frankly, while they're on the platform. But that's also why we have been very hesitant to...

To support people with with finding supply and and it get smart about which which pharmacy actually has the supply and is able to to benefit our population to have a better experience frankly, while while they're on the platform, but that's also why we have been.

Very hesitant to two market.

Speaker 3: to market the service right now. We wanna ensure that we retain the high NPS and the ability to get people.

The surface right now we want to ensure that we retain the high M. P S and the ability to.

Get people.

Speaker 5: the benefit that they're seeking when they come for the clinical option. And so we're looking forward to the hopeful, eventual approval of tri-andcipitide for obesity and then the ability to start marketing more aggressively.

The benefit that they are seeking when they come for the clinical option and so where we're looking forward to that.

So hopeful eventual approval of trying to step aside for obesity and then.

The ability to to to start marketing more aggressively.

Okay. That's really helpful. Thank you very much.

Speaker 1: The next question comes from Michael Lasser from UBS. Please go ahead.

The next question.

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

Speaker 9: Hi, this is Henry Carr on, good evening for Michael last year. I just wanted to start off with a sequence question. So you have 27,000 subs in April at the time of acquisition. And you've increased it about 8 to 10,000 per quarter. How should we think about this rate of about 8 to 10,000 subscribers per quarter going forward? So basically, once supply conditions improve, how do you expect this rate increasing? Can you speak a little bit more about that?

Hi, This is Henry car on good evening for Michael Lasser.

So I just want to start off with frequent question. So you have 27000 subs in April at the time of acquisition.

And we've increased it about eight to 10000 per quarter.

How should we think about this rate of about eight to 10000 subscribers per quarter.

Going forward.

Great.

Supply conditions improve how do you expect rate increasing can you speak a little more about that.

Speaker 2: Henry, thanks for your question. At this time, we're not guiding into 2024. So I would say we've been conservative in our approach to the balance of the year, understanding the environment that we're in with the supply constraints. So we've taken that thinking through the balance of these this year.

Henry.

Thanks for your question at this time, we're not guiding into 2024.

So I would say we've been.

Conservative in our approach to the balance of the year understanding the environment that we're in with the supply constraints. So we've taken that thinking through the balance of this year.

Speaker 9: Okay, thank you. And I just want to ask about student loan payments, and how much of your subscriber base is potentially exposed to that?

Okay. Thank you.

Just wanted to ask about student loan payments.

And how much of your subscriber base is potentially exposed to that.

Speaker 5: Yeah, I don't, that's not something that we have really observed, especially since, well, the majority of our population is between ages of 35 and 45. And so it's not something that is, we have noticed to be relevant to our business.

Yeah, I don't that's something that's not something that we have really observed, especially since oh the.

The majority of our population is between the ages of 35 and 45 and so it's not something that is.

We have noticed to be relevant to our business.

Great. Thank you so much.

Thank you.

Speaker 1: There are no more questions in the queue. This concludes our question and answer session. I would like to turn the conference back over to Seema Sastani for any closing remarks.

There are no more questions in the queue. This concludes our question and answer session I would like to turn the conference back over to CMS as Tony for any closing remarks.

Speaker 3: I just want to reiterate that I'm really encouraged by our performance and the momentum in our business and we're returning the company to the first Euro-Bier member sign-up growth. And now subscriber growth and accomplishing this again, on less marketing spend, year-to-date, was no small achievement.

I just want to reiterate that I'm really encouraged by our performance and the momentum in our business and we're returning the company to a first year over year member sign up growth and now subscriber growth and accomplishing this again unless marketing spend year to date was no small achievement.

Speaker 5: but one that demonstrates that we're making the right decisions to return Weight Watchers to profitable growth and prioritizing the long-term health of the business. We really look forward to speaking with many of you at upcoming conferences and events, including the Jeffries London Healthcare Conference on November 16th and at the BFA Leverage Finance Conference later this month. Thanks again for joining us.

But one that demonstrates that we're making the right decisions to return weight watchers to profitable growth and prioritizing the long term health of the business. We really look forward to speaking with many of you at upcoming conferences and events, including the Jefferies London Healthcare conference on November 16th and the Bofa.

Leveraged Finance conference later this month, thanks again for joining us.

Speaker 1: Conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker 10: You

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Speaker 10: and

Yeah.

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Yeah.