Q1 2024 WW International Inc Earnings Call

Operator: Good day, and welcome to Weight Watchers International's first quarter 2024 earnings conference call. All participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Corey Kinger, Investor Relations. Please go ahead.

Good day and welcome to the weight Watchers International's first quarter 'twenty 'twenty four earnings conference call. All participants are in a 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.

Operator: To ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please note. This event is being recorded.

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

Corey Kinger: Thank you, everyone, for joining us today for WW International's first quarter 2024 conference call. At about 4 p.m. Eastern time today, we issued a press release reporting our first quarter 2024 results. The purpose of this call is to provide investors with some further details regarding the company's financial results, as well as to provide a general update on the company's progress. The press release is available on the company's corporate website, located at www.corporate.ww.com.

Corey Kinger: Thank you everyone for joining us today for Ww International's first quarter 2024 conference call.

Corey Kinger: Supplemental investor materials are also available on the company's corporate website in the investor section under Presentations and Events. Reconciliations of non-GAAP measures disclosed on this conference call to the most directly comparable GAAP financial measures are also available as part of the press release. Before we begin, let me remind everyone that this call will contain forward-looking statements. Investors should be aware that any forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here today.

Corey Kinger: About four P M. Eastern time today, we issued a press release reporting our first quarter 'twenty to 'twenty four results.

Corey Kinger: Purpose of this call is to provide investors with some further details regarding the company's financial results. It sounds to provide a general update on the company's progress.

Corey Kinger: [noise] releases available on the company's corporate website located at.

Corey Kinger: W. W Dot com.

Corey Kinger: Supplemental investor materials are also available on the company's corporate website in the investors section under presentations.

Corey Kinger: Reconciliations of non-GAAP measures disclosed on this conference call to the most directly comparable GAAP financial measures are also available as part of the press release.

Corey Kinger: These risk factors are explained in detail in the company's filings with the Securities and Exchange Commission. Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and certainties of such statements. All forward-looking statements are made as of today, and, except as required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Joining today's call are Sima Sistani, CEO, and Heather Stark, CFO. I will now turn the call over to Sima.

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 certainties that could cause actual results to differ materially from those discussed here today.

Corey Kinger: These risk factors are explained in detail in the company's filings with the Securities Exchange Commission. Please refer to these filings for a more detailed discussion of forward looking statements and the risks and uncertainties of such statements. All forward looking statements are made as of today and except as required by law. The company undertakes no obligation to publicly update or revise any.

Sima Sistani: For looking statements, whether as a result of new information future events or otherwise.

Sima Sistani: Joining today's call are Siemens Sistani, CEO and Heather start CFO I will now turn the call over to see that.

Sima Sistani: Thanks, Corey. Good afternoon, everyone, and thank you for joining us today. I'm proud to announce that Weight Watchers is off to a strong start. First, we delivered on our Q1 commitments with both top and bottom line results. Second, we are succeeding in our expansion into clinical services, as reflected by clinical subscribers of ninety one thousand at the end of the first quarter ahead of our prior guidance of eighty five thousand subscribers.

Sima Sistani: Thanks, Corey and good afternoon, everyone and thank you for joining us today I'm proud to announce that weight watchers is off to a strong start first we delivered on our Q1 commitments with both top and bottom line results.

Sima Sistani: We are succeeding in our expansion in your clinical services as reflected by clinical subscribers of 91000 at the end of the first quarter ahead of our prior guidance of 85000 subscribers. Our clinical business has undergone tremendous growth over the past year now having nearly four times the subscribers since we announced the acquisition of <unk>.

Sima Sistani: Our clinical business has undergone tremendous growth over the past year, now having nearly four times the subscribers since we announced the acquisition of Sequence in March 2023. And we have grown this business in an environment of supply constraints for various-in-demand GLP-1 medications.

Sima Sistani: In March 2023.

Sima Sistani: And we have grown this business in an environment of supply constraints for varying demand G. L. P want medications.

Sima Sistani: Third, the improvements made to our core programs are yielding tangible improvements in engagement and retention. For example, our activation rate, a metric defined by a member's food and weight tracking engagement and weight loss progress during their first 30 days on the program, continues to trend positively, with Q1 up approximately 6% year-over-year and hitting its highest level since 2020. As a reminder, activation rate matters because activated members' attrition rate is roughly half that of a non-activated member, and they are more successful on Weight Watchers over the long term.

Sima Sistani: Third the improvements made to our core programs are yielding a tangible improvement in engagement and retention for example, 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 continues to trend positively with Q1 up approximately.

Sima Sistani: 6% year over year, and hitting its highest level since 2020.

Sima Sistani: 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.

Sima Sistani: We are seeing improved user retention, particularly among newer cohorts, with the average subscriber now on the plan for slightly higher than 11 months. And fourth, our focus on cost discipline is paying off. We delivered another record-adjusted gross margin quarter, an impressive 68%.

Sima Sistani: We are seeing improved user retention, particularly among newer cohorts, but the average subscriber now on the plan for slightly higher than 11 months.

Sima Sistani: And fourth our focus on cost discipline is paying off we delivered another record adjusted gross margin quarter and impressive 68%.

Sima Sistani: So, in short, we are executing on our plan by focusing on returning the company to profitable growth while transforming our business model for the future. And we remain confident in the full year guidance. While recent signup performance has been soft, much of this is due to an intentional shift in spend for an upcoming marketing campaign introducing our weight health approach. The coaching, accountability, and community found in Weight Watchers is key to our longevity and member satisfaction and success, but at the same time, we must evolve for the future, building out and enabling new offerings and features to serve a broader population with more solutions.

Sima Sistani: So in short we are executing on our plan by focusing on returning the company to profitable growth, while transforming our business model for the future and we remain confident in the full year guidance. While recent sign up performance has been soft much of this is due to an intentional shift in spend for an upcoming marketing campaign.

Sima Sistani: Introducing our weight health approach.

Sima Sistani: The coaching accountability and community founded weight Watchers is key to our longevity and member satisfaction and success, but at the same time, we must evolve for the future building out and enabling new offerings and features to serve a broader population with more solutions.

Sima Sistani: The future is in members having our foundational behavior change offering as a base and the ability to add on and move between membership types depending on the level of support needed. And when it comes to support, we have a distinct advantage with our 4 million member Weight Watcher community.

Sima Sistani: The future is in members, having our foundational behavior change offering as a basis and the ability to add on and move between membership types, depending on the level of support needed and when it comes to support we have a distinct advantage with our 4 million members Weight-watcher community.

Sima Sistani: As discussed in our last earnings call in February, we are focused on expanding care, expanding access, and expanding payment options. Together, the initiatives and project expansion will give us critical opportunities to further catalyze our growth, make our offerings more accessible to more people, transform our business model, and deliver on our mission as the global leader in weight health.

Sima Sistani: As discussed in our last earnings call in February we are focused on expanding chair extending access and expanding payment options.

Sima Sistani: Together the initiatives and project expansion will give us critical opportunities to further catalyze our growth make our offerings more accessible to more people transform our business model and deliver on our mission as a global leader in White House.

Sima Sistani: Turning to the three pillars of project expansion.

Sima Sistani: First expanding care.

Sima Sistani: We are focused on expanding and enhancing the care options that members can access based on their specific weight health needs. Our trusted behavioral program is the foundation, and we have a number of digital product improvements rolling out in 2024 to enhance the experience for members, including new features to simplify food decisions, greater in-app gamification, and new community spaces.

Sima Sistani: We are focused on expanding and enhancing the care options that members can access based on their specific weight health needs.

Sima Sistani: Our trusted behavioral program is the foundation and we have a number of digital product improvements rolling out in 2024 to enhance the experience to members, including new features to simplify food decisions greater enough gamification and new community spaces.

Sima Sistani: Second expanding access as we think about the future and growing recognition of the critical importance of weight health and our leadership in it we plan on making weight watchers, a covered benefit both for our core behavioral program and our clinic offering over time. This will take us from a D to C model to increase.

Sima Sistani: As we think about the future and growing recognition of the critical importance of weight health and our leadership in it, we plan on making Weight Watchers a covered benefit, both for our core behavioral program and our clinic offering. Over time, this will take us from a D to C model to increasingly a B to B to C business. Recent business wins and a substantially increased volume of new business conversations make us confident in our strategy.

Sima Sistani: <unk>, a b to B to C business recent business wins and substantially increased volume of new business conversations make us confident in our strategy.

Sima Sistani: Our brand, our science, our consumer-centric experience, and full-spectrum approach are all key differentiators that resonate with payers and employers alike. We are in active discussions with large national carriers, and we are also in talks with large existing customers. While this move has a long lead time, the expansion it represents for access to Weight Watchers is huge, and we believe this channel will be a critical driver of growth and momentum in the years ahead. And third, expanding payment options.

Sima Sistani: Our brand our science, our consumer centric experience and full spectrum approach are all key differentiators that resonate with payers and employers alike.

Sima Sistani: We are in active discussions with large national carriers and we are also in talks with large existing customers. While this motion has a long lead time expansion. It represents for access to weight watchers is huge and we believe this channel to be a critical driver of growth and momentum in the years ahead.

Sima Sistani: And third expanding payment options.

Sima Sistani: Our goal is to allow our members to use their insurance whenever possible, taking the cost burden off the consumer. This provides a greater opportunity for a larger pool of members to access incremental services and thereby drive greater RPS. Over the next few months, we will be making insurance-covered registered dietitians consultations available to eligible Weight Watchers members in the U.S. We believe the capability to directly process insurance claims for Weight Watchers services will also have a positive impact on sign-ups and retention over time.

Sima Sistani: Our goal is to allow our members to use their insurance whenever possible, taking the cost burden off the consumer this provides greater opportunity for a larger pool of members to access incremental services and thereby drive greater Arco.

Sima Sistani: Over the next few months, we will be making insurance covered registered dieticians.

Sima Sistani: Consultations available to eligible weight watchers members in the U S.

Sima Sistani: We believe that capability to directly process insurance claims for weight Watchers services will also have a positive impact of sign ups and retention over time.

Sima Sistani: In short, we are enthusiastic about project expansion and its potential to transform the Weight Watchers business model and make our offerings more accessible to more people. There is a lot to look forward to in 2024. In addition to returning our business to adjusted operating income growth, I am confident our actions are making the company stronger and better positioned to capture the opportunities ahead. I will now turn the call over to Heather to discuss our financial results and 2024 outlook.

Sima Sistani: In short we are enthusiastic about project expansion and its potential to transform the weight watchers business model and make our offerings more accessible to more people.

Sima Sistani: There is a lot to look forward to in 2024. In addition to returning our business to adjusted operating income growth I am confident our actions are making the company stronger and better positioned to capture the opportunities ahead I will now turn the call over to Heather to discuss our financial results and 2020 for outlook.

Sima Sistani: Yeah.

Heather: Thanks, Hema turning to our first quarter 2024 results note that all year over year financial comparisons are on a constant currency basis. We ended Q1 with 4 million subscribers. This included 91000 clinical subscribers and we continue to be encouraged by growth in the business revenue totaled $207 million.

Heather Stark: Sima, turning to our first quarter 2024 results. Note that all year over year financial comparisons are on a constant currency basis.

Heather Stark: We ended Q1 with 4 million subscribers, and this included 91,000 clinical subscribers, and we continue to be encouraged by growth in the business. Revenue totaled $207 million. Subscription revenues of $204 million declined 4% year-over-year, driven by a higher mix of subscribers within initial lower-priced commitment periods, a mixed shift from workshops to digital subscriptions, and lower sign-ups for our Weight Watchers behavioral offerings versus the prior year first quarter. With the signup trend reflecting the lower level of spend dedicated to the core program versus Q1 2023.

Heather Stark: This was partially offset by $19 million in clinical revenue. Adjusted growth margin of 67.9% was another record high and up from 57.1% in the prior year, primarily driven by our actions to reduce our fixed cost base and subscriber mix shift. In addition, the prior year quarter gross margin was negatively impacted by subscription and consumer product promotional bundles.

Heather Stark: Subscription revenues of $204 million declined 4% year over year, driven by a higher mix of subscribers within initial lower priced commitment periods.

Heather Stark: Shift from workshops to digital subscriptions and lower sign ups for our weight watchers behavioral offerings versus the prior year first quarter.

Heather Stark: With the sign up trend, reflecting the lower level of spend dedicated to the core program versus Q1 2023. This was partially offset by $19 million in clinical revenue <unk>.

Heather Stark: Adjusted gross margin of 67, 9% with another record high and up from 57, 1% in the prior year, primarily driven by our actions to reduce our fixed cost base and subscriber mix shift.

Heather Stark: In addition, the prior year quarter gross margin was negatively impacted by subscription and consumer product promotional bundle.

Heather Stark: Marketing expenses of $90 million were up 2% year-over-year, reflecting higher online advertising spend, including for our new clinical offering that was not in the year-ago period, partially offset by lower spend on TV advertising and non-working spend. Adjusted GNA of 56 million was up 7% versus the prior year, primarily due to the inclusion of expenses for our clinical business. Adjusted Operating Loss was $6 million. Restructuring charges totaled $6 million, and a quarter related to prior year plans.

Heather Stark: Marketing expenses of $90 million were up 2% year over year, reflecting higher online advertising spend including for our new clinical offering that was not in the year ago period, partially offset by lower spend of TV advertising and nonworking spend.

Unknown Attendee: Good day, and welcome to the Weight Watchers International's first quarter, 2024 Earnings Conference Call. All participants are in a listen-only mode. Should you need assistance, please signally conference specialists by pressing the star key followed by zero.

Heather Stark: Adjusted G&A at 56 million was up 7% versus prior year, primarily due to the inclusion of expenses for our clinical business.

Heather Stark: Adjusted operating loss of 6 million restructuring charges totaled $6 million in the quarter related to prior year plans we.

Unknown Attendee: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star than one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded.

Heather Stark: We recorded non-cash impairment charges in the quarter for franchise rights acquired balances, totaling approximately $258 million. These impairments were primarily driven by an increase in the company's weighted average cost of capital, reflecting market factors. Income tax expense was $55 million, which reflected the impact of an unusually high negative annual effective tax rate driven by the valuation allowance and small pre-tax loss reflected in the company's full year fiscal 2024 guidance. Gap EPS was a loss of $4.39, which incorporates the net negative impact of items impacting comparability, including the valuation allowance, non-cash impairment charges, and net restructuring charges.

Heather Stark: We recorded noncash impairment charges in the quarter for franchise rights acquired balances totaling approximately 258 million. These impairments were primarily driven by an increase in the company's weighted average cost of capital reflecting market factors.

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

Heather Stark: Income tax expense was $55 million, which reflected the impact of an unusually high negative annual effective tax rate driven by the valuation allowance and small pretax loss reflected in the company's full year fiscal 2020 for guidance.

Corey Kinger: Thank you everyone for joining us today for WW International's first quarter, 2024 Conference Call. At about 4 p.m. Eastern time today, we issued a press release reporting our first quarter, 2024 results. The purpose of this call is to provide investors with some further details regarding the company's financial results, as well as to provide a general update on the company's progress. The press release is available on the company's corporate website linked at corporate.ww.com.

Heather Stark: GAAP EPS was a loss of $4.39, which incorporates the net negative impact of items impacting comparability, including the valuation allowance noncash impairment charges and net restructuring charges.

Heather Stark: Moving to our outlook, we believe we are on the right track to start 2024. As Sima mentioned, we're seeing encouraging retention and LTV data and are enthusiastic about our product roadmap and marketing plans for the rest of the year. At the same time, we're operating more efficiently from a cost perspective.

Speaker Change: Shifting to our outlook.

Corey Kinger: Supplemental investor materials are also available on the company's corporate website in the investor section under presentations and events. Reconciliation of non-gap measures disclosed on this conference call to the most directly comparable gap financial measures are also available as part of the press release. Before we begin, let me remind everyone that this call will contain four looking statements. Investors should be aware that any four looking statements are subject to various risks and certainties that could cause actual results to differ materially from those discussed here today.

Heather Stark: We believe we are on the right track to start 2024, as Shimon mentioned, we're seeing encouraging retention and LTV data and are enthusiastic about our product roadmap and marketing plans for the rest of the year at the same time, we're operating more efficiently from a cost perspective.

Corey Kinger: These risk factors are explained in detail in the company's filings with the Securities and Exchange Commission. Please refer to these filings for a more detailed discussion of four looking statements and the risks and certainties of such statements. All four looking statements are made as of today, and except as required by law, the company undertakes no obligation to publicly update or revise any four looking statements, whether as a result of new information, future events or otherwise.

Heather Stark: We continue to leverage longer-term commitment offerings in order to maximize total LTV and revenue. We're beginning to see retention expansion with recent product improvements, and we continue to anticipate stable subscription LTV year over year in 2024. While we still expect behavioral ARPU, measured as revenue per paid week, to be down in the mid-single digits in 2024, we've seen green shoots with LTV starting to improve in Q2 versus the prior two quarters. To expand behavioral subscriber ARPU over time, it is essential to execute on the strategic initiatives Sima highlighted, including expanding care through the addition of new premium add-on services.

Heather Stark: We continue to leverage longer term commitment offerings in order to maximize total LTV and revenue, we're beginning to see retention expansion with recent product improvements and we continue to anticipate stable subscription LTV year over year in 2024.

Heather Stark: While we still expect behavioral arpin measured as revenue per paid weeks to be down in the mid single single digit in 2024, we've seen green shoots with LTV starting to improve in Q2 versus the prior two quarters.

Heather Stark: To expand behavioral subscriber are few overtime. It is essential to execute on our strategic initiatives sema highlighted including expanding care through the addition of new premium add on services.

Seema Sistani: Joining today's call are Seema Sastani, CEO and Heather Stark, CFP. I will now turn the call over to Seema. Thanks, Corey.

Heather Stark: We're maintaining our expectation to end the year with total Weight Watchers subscribers in the range of 3.8 to 4 million. Within our total subscriber guidance, we expect behavioral subscribers to end the year at least flat with 2023, despite a steep, nearly 20% decline in workshop subscribers. Clinical subscribers are expected to end the year in the range of 140 to 160,000, so more than doubling from the end of 2023. We continue to expect full-year total Weight Watchers revenue to be $830 to $860 million. Within this, we continue to expect clinical revenue to be between $100 and $110 million. This reflects a modest increase in subscriber revenue year over year.

Heather Stark: We're maintaining our expectation to end the year with total weight watchers subscribers in the range of 3.84 million.

Heather Stark: Within our total subscriber guidance, we expect behavioral subscribers to end the year at least flat with 2023, despite a steep nearly 20% decline in workshops subscribers clinical subscribers are expected to end the year in the range of 140 to 160000, so more than doubling from the end of 2023.

Seema Sistani: Good afternoon, everyone, and thank you for joining us today. I'm proud to announce that Weight Watchers is off to a strong start. First, we delivered on our Q1 commitments with both top and bottom line results. Second, we are succeeding in our expansion into clinical services as reflected by clinical subscribers of 91,000 at the end of the first quarter. Ahead of our prior guidance of 85,000 subscribers. Our clinical business has undergone tremendous growth over the past year, now having nearly four times the subscribers since we announced the acquisition of Sequence in March 2023.

Heather Stark: We continue to expect full year total weight watchers revenue to be 830 to 860 million within this we continue to expect clinical revenue to be between 101 hundred $10 million.

Heather Stark: This reflects a modest increase in subscriber revenue year over year.

Seema Sistani: And we have grown this business in an environment of supply constraints for very-in-demand GLP-1 medications. Third, the improvements made to our core programs are yielding a tangible improvement in engagement and retention. For example, our activation rate, a metric defined by a member's food and weight tracking engagement and weight loss progress during their first 30 days on the program, continues to trend positively with Q1 up approximately 6% year over year and hitting its high level since 2020.

Heather Stark: Other revenue, which is primarily our high-margin licensing business, is expected to contribute up to $10 million in 2024. Adjusted gross margin is expected to be approximately 66% for the full year, up from an adjusted gross margin of 62% in 2023, reflecting a mixed shift and continued read through a fixed cost action. We continue to expect full-year marketing spend to be roughly flat with 2023 and adjusted G&A expense to be between $210 and $220 million for the year, which is slightly lower than 2023 due to our restructuring efforts and cost discipline and reflecting strategic investment to expand our clinical offering and our B2B business.

Heather Stark: Other revenue, which is primarily our high margin licensing business is expected to contribute up to $10 million in 2024.

Heather Stark: Adjusted gross margin is expected to be approximately 66% for the full year up from adjusted gross margin of 62% in 2023, reflecting a mix shift and continued read through fixed cost actions.

Heather Stark: We continue to expect full year marketing spend to be roughly flat with 2023, and adjusted G&A expense to be between 210 and $220 million for the year, which is slightly lower than 2023, due to our restructuring efforts and cost discipline, and reflecting strategic investment to expand our clinical offering and our b to b business. Additionally, 22.

Seema Sistani: As a reminder, activation rate matters because activated members' attrition rate is roughly half of a non-activated member, and they are more successful on weight watchers over the long term. We are seeing improved user retention, particularly among newer cohorts, with the average subscriber now on the plan for slightly higher than 11 months. And fourth, our focus on cost discipline is paying off. We delivered another record-adjusted growth margin quarter and impressive 68%. So in short, we are executing on our plan by focusing on returning the company to profitable growth while transforming our business model for the future.

Heather Stark: 24 includes one additional quarter of clinical expenses compared to 2023.

Heather Stark: Additionally, 2024 includes one additional quarter of clinical expenses compared to 2023. Therefore, we expect adjusted operating income to be between $100 and $110 million and adjusted EBITDA to be between $155 and $165 million. For the full year, expect income tax expense to be up to $5 million, impacted by the valuation allowance and impairment mentioned earlier. Excluding the impact of the Valuation Allowance and Impairment, we continue to expect an income tax benefit of up to $10 million.

Heather Stark: Therefore, we expect adjusted operating income to be between 101 hundred $10 million and adjusted EBITDA to be between 155 and $165 million.

Heather Stark: For the full year expect income tax expense to be up to 5 million impacted by the valuation allowance and impairment mentioned earlier.

Heather Stark: <unk> the impact of the valuation allowance and impairment. We continue to expect an income tax benefit of up to $10 million, we expect cash taxes to be between 20 and $30 million for the year.

Heather Stark: We expect cash taxes to be between $20 and $30 million for the year. As a reminder, given the small pre-tax loss reflected in the company's full year fiscal 2024 guidance, any updates to the expected pre-tax loss or income tax expense can result in significant impacts on quarterly income tax results. Turning to our capital structure and cash flow, we ended Q1 with approximately $67 million of cash plus an undrawn revolver.

Seema Sistani: And we remain confident in the full-year guidance. While recent sign-up performance has been soft, much of this is due to an intentional shift in spend for an upcoming marketing campaign introducing our weight health approach. The coaching, accountability, and community-founded weight watchers is key to our longevity and member satisfaction and success. But at the same time, we must evolve for the future, building out and enabling new offerings and features to serve a broader population with more solutions.

Heather Stark: As a reminder, given the small pretax loss reflected in the company's full year of fiscal 2024 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 $67 million of cash plus an undrawn revolver.

Heather Stark: As a reminder, our first half of the year cash needs are much higher than the second due to increased marketing, compensation timing, and the sequence acquisition anniversary payment, with cash then expected to build through the balance of the year. With our cash position plus our revolving credit facility, we believe we have sufficient liquidity for our working capital needs, including in-year cash outlays related to our restructuring actions and servicing our debt. Cash from operations in 2024 is expected to increase modestly year over year.

Heather Stark: As a reminder, our first half of your cash needs are much higher than the second due to increased marketing compensation timing and sequence acquisition anniversary payment with cash than expected to build through the balance of the year.

Seema Sistani: The future is in members having our foundational behavior change offering as a basis. And the ability to add on and move between membership types depending on the level of support needed. And when it comes to support, we have a distinct advantage with our 4 million members weight watcher community. As discussed in our last earnings call in February, we are focused on expanding care, expanding access, and expanding payment options. Together, the initiatives and project expansion will give us critical opportunities to further catalyze our growth, make our offerings more accessible to more people, transform our business model and deliver on our mission as the global leader in weight health.

Heather Stark: With our cash position plus our revolving credit facility. We believe we have sufficient liquidity for working capital needs, including in your cash outlays related to our restructuring actions and servicing our debt.

Seema Sistani: Turning to the three pillars of project expansion. First, expanding care. We are focused on expanding and enhancing the care options that members can access based on their specific weight health needs. Our trusted behavioral program is the foundation, and we have a number of digital product improvements rolling out in 2024 to enhance the experience to members, including new features to simplify food decisions, greater in-app gamification, and new community spaces. Second, expanding access.

Heather Stark: Cash from operations in 2024 is expected to increase modestly year over year.

Heather Stark: As a reminder, 2023 included approximately $45 million of cash payments for restructuring, and we expect 2024 to include approximately $20 million of restructuring payments associated with the 2023 restructuring plan. Full-year interest expense is expected to be between $105 and $110 million, with the year-over-year increase largely driven by the expiration of our $500 million hedge at the start of Q2 2024. Given current market conditions, we have decided not to add new hedges at this time. CAPEX, which is primarily due to capitalized software, is still expected to be in the $20 to $25 million dollar range. Depreciation and amortization is expected to be in the $40 million range.

Heather Stark: As a reminder, 2023 included approximately $45 million of cash payments for restructuring and we expect 2024 to include approximately $20 million of restructuring payments associated with the 2023 restructuring plan.

Heather Stark: Capex, which is primarily due to capitalized software is still expected to be in the $20 million to $25 million range depreciation and amortization is expected to be in the $40 million range.

Sima Sistani: At Q1, our net debt to adjusted EBITDA leverage ratio was 9.4 times. With our 2024 outlook, we expect our trailing 12-month leverage ratio to further increase in the coming quarters due to lower EBITDA levels before showing year-over-year improvement at year-end 2024. As a reminder, we have very attractive debt terms, with no maturities until 2028 and 2029, and we are comfortable with our liquidity profile, which gives us ample time to deliver on our transformation strategy.

Heather Stark: At Q1, our net debt to adjusted EBITDA leverage ratio was nine four times with our 'twenty 'twenty four outlook, we expect our trailing 12 months leverage ratio to further increase in the coming quarters due to lower EBITDA levels before showing year over year improvement at year end 2024.

Seema Sistani: As we think about the future and growing recognition of the critical importance of weight health, and our leadership in it, we plan on making weight watchers a covered benefit, both for our core behavioral program and our clinic offering. Over time, this will take us from a D to C model to increasingly a B to B to C business. Recent business wins and substantially increased volume of new business conversations make us confident in our strategy.

Sima Sistani: We will continue to opportunistically evaluate options to reduce our leverage ratio on terms we believe are strategically beneficial. In summary, we are operating more efficiently and are strategically positioning Weight Watchers for the future. We believe by scaling the clinic and executing on our expansion initiatives, we will drive another year of operating income growth in 2025 with momentum and revenue returning to the business. I'll now turn the call back to Sima.

Seema Sistani: Our brand, our science, our consumer-centric experience, and full spectrum approach are all key differentiators that resonate with payers and employers alike. We are in active discussions with large national carriers and we are also in talks with large existing customers. While this motion has a long lead time, the expansion it represents for access to weight watchers is huge, and we believe this channel to be a critical driver of growth and momentum in the years ahead, and third, expanding payment options.

Sima Sistani: Thanks, Heather. 2024 and 2025 are critical years, and execution is of paramount importance. We've made significant progress with the integration of sequence and learned a lot during the winter season about key product and brand opportunities. We've been moving rapidly to incorporate those learnings into our product roadmap and marketing plans. At the same time, we believe Weight Watchers is uniquely positioned to dominate in the B2B and payer space. We expect this area of the business to contribute more meaningfully from a financial perspective in 2025 and beyond.

Sima Sistani: Thanks, Heather 'twenty 'twenty, four and 'twenty 25 are critical years and execution is of Paramount importance. We've made significant progress with the integration of sequence and learned a lot during the winter season on key product and brand opportunities. We have been moving rapidly to incorporate those learnings into our product roadmap and marketing plans.

Seema Sistani: Our goal is to allow our members to use their insurance whenever possible, taking the cost burden off the consumer. This provides greater opportunity for a larger pool of members to access incremental services and thereby drive greater arpo. Over the next few months, we will be making insurance-covered registered dieticians, consultations available to eligible Weight Watchers members in the U.S. We believe the capability to directly process insurance claims for Weight Watchers services will also have a positive impact to sign-ups and retention over time. In short, we are enthusiastic about project expansion and its potential to transform the Weight Watchers business model and make our offerings more accessible to more people.

Sima Sistani: We have conviction that payers and employers are the key unlocks for weight health in the medium to long term, and we need to start winning share in this market today. Before we wrap up, I would like to welcome Donna Boyer, our new Chief Product Officer at Weight Watchers. Most recently, Donna was the Chief Operating Officer at Teladoc Health, where she led the strategic shift from a single product to a multiproduct portfolio organization.

Sima Sistani: Prior to Teladoc, Donna held product leadership positions at Stitch Fix and Airbnb. Our execution can only be as strong as a team executing, and I am confident that Donna is the right product leader to ensure a cohesive one membership value proposition across core, IRL, B2B, and clinic. Thanks for joining us. We are now happy to take your questions.

Seema Sistani: There is a lot to look forward to in 2024. In addition to returning our business to adjusted operating income growth, I am confident our actions are making the company stronger and better positioned to capture the opportunities ahead.

Heather Stark: I will now turn the call over to Heather to discuss our financial results and 2024 outlook. Thanks, Sima. Turning to our first quarter 2024 results. Note that all year-over-year financial comparisons are on a constant currency basis. We ended Q1 with 4 million subscribers. This included 91,000 clinical subscribers and we continue to be encouraged by growth in the business. Revenue totaled 207 million. Subscription revenues of 204 million to climb 4% year-over-year driven by a higher mix of subscribers within initial lower price commitment periods.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star, then 2. Our first question comes from Jack Wallace on Guggenheim. Please go ahead.

Jack Dawson Wallace: Hey, thanks for taking my questions, and congrats on a really nice start to the year. I just wanted to ask you a little bit about what you're seeing in terms of market conditions as we enter into the second quarter, particularly advertising, inventory, pricing, as well as competitive behavior, particularly in light of just how expensive advertising was in the first quarter and what appeared to be some really aggressive competitive behavior.

Sima Sistani: I think that's why we have a great performance marketing function that, you know, accounts for those types of movements. And we have seen some softness in the base business in April, but we're not overly concerned about that. That was an intentional shift in money out of April and into May so that we can align to more of our marketing milestones, which, in general, obviously improve the funnel and make the dollar spent more efficient. So we're really confident in our full-year outlook. And excited, also, of course, about our clinical subscription business and how it's scaling.

Heather Stark: Mixed ships from workshops to digital subscriptions and lower sign-ups for our Weight Watchers behavioral offerings versus the prior year-first quarter. With the sign-up trend reflecting the lower level of spend dedicated to the core program versus Q1 2023. This was partially offset by 19 million dollars in clinical revenue. Adjusted growth margin of 67.9% was another record high and up from 57.1% in the prior year, primarily driven by our actions to reduce our fixed cost base and subscriber mix shift.

Heather Stark: In addition, the prior year-quarter growth margin was negatively impacted by subscription and consumer product promotional bundles. Marketing expenses of 90 million were up 2% year-over-year, reflecting higher online advertising spend, including for our new clinical offering that was not in the year-to-year period, partially offset by lower spend of TV advertising and non-working spend. Adjusted GNA of 56 million was up 7% versus prior year, primarily due to the inclusion of expenses for our clinical business.

Heather Stark: Adjusted operating loss was 6 million, restructuring charges totaled 6 million in the quarter related to prior year plans. We recorded non-cash impairment charges in the quarter for franchise rights acquired balances, totaling approximately 258 million. These impairments were primarily driven by an increase in the company's weighted average cost of capital, reflecting market factors. Income tax expense was 55 million, which reflected the impact of an unusually high negative annual effective tax rate, driven by the valuation allowance, and small pre-tax loss reflected in the company's full year fiscal 2024 guidance, campaigns. Gap EPS was a loss of $4.39, which incorporates the net negative impact of items impacting comparability, including evaluation allowance, non-tash impairment charges, and net restructuring charges.

Jack Dawson Wallace: And then to that last point, you mentioned in your prepared remarks that there'll be an increased focus on promoting the clinical business. Obviously, we've got the special with Oprah later this month. Are there any other points of emphasis you'd like to disclose today in terms of your marketing strategy around clinical and maybe the percentage of the budget being dedicated to the clinical strategy? Thank you.

Heather Stark: Shifting to our outlook, we believe we are on the right track to start 2024. As Sima mentioned, we're seeing encouraging retention and LTV data and our enthusiastic about our product roadmap and marketing plans for the rest of the year. At the same time, we're operating more efficiently from a cost perspective. We continue to leverage longer-term commitment offerings in order to maximize total LTV and revenue. We're beginning to see retention expansion with recent product improvements, and we continue to anticipate stable subscription LTV year-over-year in 2024.

Sima Sistani: Right, so the overall marketing strategy is a one membership strategy. And I think that that's what we can uniquely do, by marketing and speaking to the benefit of Weight Health and Weight Watchers, a brand that has been around for 60 years, that is the number one doctor-recommended program, and the most clinically tested program that we are able to make a more efficient acquisition. Also, as we noted previously, we're seeing conversion from within our core business to clinic.

Heather Stark: While we still expect behavioral RPU, measured as revenue per paid week, to be down in the mid-single-digit in 2024. We've seen screenshots with LTV starting to improve in Q2 versus the prior two quarters. To expand behavioral subscriber RPU over time, it is essential to execute on the strategic initiatives Sima highlighted, including expanding care through the addition of new premium add-on services. We're maintaining our expectation to end the year with total weight-upture subscribers in the range of 3.8 to 4 million.

Sima Sistani: So it behooves us to take a more aggressive approach in terms of our acquisition strategy towards the core business. And we're seeing that this is providing a lot of efficiency overall in how we go to market, not to mention our labs database that we're able to continue to utilize as a when we see opportunities between our performance strategy and our non-paid strategy.

Heather Stark: Within our total subscriber guidance, we expect behavioral subscribers to end the year at least flat with 2023, despite a steep nearly 20% decline in workshops subscribers. Clinical subscribers are expected to end the year in the range of 140 to 160,000, so more than doubling from the end of 2023. We continue to expect full-year total weight-watchers revenue to be 830 to 860 million. Within this, we continue to expect clinical revenue to be between 100 and 110 million.

Jack Dawson Wallace: That's helpful. Thank you. I'll hop back in queue.

Nathaniel Jay Feather: The next question comes from Nathan Feather with Morgan Stanley. Please go ahead. Hey, everyone.

Nathaniel Jay Feather: Hey, everyone. Thanks for taking the question. So the end-of-year behavioral sub-guide does imply some acceleration through the year. Is it primarily the marketing campaign that you're launching to get you confidence in that? And then can you give more detail on that marketing campaign, you know, timing, expected impact on marketing costs, those kinds of things? Thank you.

Heather Stark: This reflects a modest increase in subscriber revenue year over year. Other revenue, which is primarily our high margin licensing business, is expected to contribute up to 10 million in 2024. Adjusted gross margin is expected to be approximately 66% for the full year, up from adjusted gross margin of 62% in 2023, reflecting a mixed shift and continued read through fixed cost actions. We continue to expect full-year marketing spend to be roughly flat with 2023, and adjusted GNA expense to be between 210 and 220 million for the year, which is slightly lower than 2023 due to our restructuring efforts and cost discipline and reflecting strategic investment to expand our clinical offering and our B2B business.

Sima Sistani: Um, yeah, I mean, there's not a lot that we're ready to share at this point. But obviously, we've announced our event next week with Oprah.

Sima Sistani: But in general, it's about coming to the market as one membership. And we learned a lot from the winter season that, between all of the different ways, we can, we were confusing the market with a lot of different solutions. And so Moving forward, it's all about One Membership. Come to Weight Watchers, our program can increase in its personalization and support based on the level of care that's needed, and we're there for people throughout their various life stages.

Heather Stark: Additionally, 2024 includes one additional quarter of clinical expenses compared to 2023. Therefore, we expect adjusted operating income to be between 100 and 110 million and adjusted EBITDOS to be between 155 and 165 million. For the full year, expect income tax expense to be up to 5 million, impacted by the valuation allowance and impairment mentioned earlier. Excluding the impact of the valuation allowance and impairment, we continue to expect an income tax benefit of up to 10 million.

Sima Sistani: Moving forward, it's all about one membership come to weight Watchers, our program can increase in its personalization and support based on the.

Sima Sistani: A lot of care that's needed.

Sima Sistani: And where are there for people throughout their various life stages.

Nathaniel Jay Feather: Great, that's helpful. And then you beat the clinical sub guide for 1Q. Maintain the full year guide. I guess, how should we think about the key puts and takes that could lead that to come in at the high end or beat the range? Yeah, so

Speaker Change: Great. That's helpful. And then you beat the clinical sub guide for <unk> maintained our full year guide. It should we think about the key puts and takes that could lead that to come in at the high Ed or beat the range for the year.

Heather Stark: We expect cash taxes to be between 20 and 30 million for the year. As a reminder, given the small pre-tax loss reflected in the company's full year fiscal 2024 guidance, any updates to the expected pre-tax loss or income tax expense can result in significant impacts in quarterly income tax results.

Sima Sistani: Yeah, so we, as we mentioned, you know, if you follow that, and even at the bottom end of the subscriber guidance, we're really confident in our revenue and adjusted OI. So we made some intentional shifts based on what we were seeing in the market, as well as to maximize within that weight health marketing campaign strategy. So, yeah, we do expect to see some acceleration throughout the year.

Speaker Change: Yeah. So we are as we mentioned you know if you.

Heather Stark: Turning to our capital structure and cash flows. We ended Q1 with approximately 67 million of cash plus an undramed revolver. As a reminder, our first half of the year cash needs are much higher than the second due to increased marketing, compensation timing, and the sequence acquisition anniversary payment, with cash then expected to build through the balance of the year. With our cash position plus our revolving credit facility, we believe we have sufficient liquidity for our working capital needs, including in-your cash outlays related to our restructuring actions and servicing our debt.

Sima Sistani: So yeah, we do expect to see some acceleration moving throughout the year.

Speaker Change: Great. Thank you.

Linda Bolton: And the next question comes from Linda Bolton with D.A. Davidson. Please go ahead.

Speaker Change: And the next question.

Linda Bolton: It comes from Linda Bolton with D. A davidson.

Linda Bolton: Please go ahead.

Linda Bolton: Yes, hi. Um, so, um... And you refer to this intentional strategy of shifting marketing spend, which you talked about on the last call. Given that, Was the new member growth weaker than even what you would have expected, or is it kind of in line? Given that you had planned this strategy to shift marketing, how is it relative to your expectations?

Linda Bolton: Yes, hi, so.

Heather Stark: Cash from operations in 2024 is expected to increase most of the year over year. As a reminder, 2023 included approximately $45 million of cash payments for restructuring, and we expect 2024 to include approximately 20 million of restructuring payments associated with the 2023 restructuring plan. Full year interest expense is expected to be between 105 and 110 million, with the year over year increase largely driven by the expiration of our $500 million hedge at the start of Q2 2024.

Linda Bolton: So we you know you referred to this.

Linda Bolton: Ooh intentional strategy of shifting marketing spend which you know you talked about on the laptop.

Linda Bolton: Isn't that.

Linda Bolton: Given that you had planned this strategy to shift marketing so how is it relative to your expectations.

Linda Bolton: Yeah.

Heather Stark: Given current market conditions, we have decided not to add new hedges at this time. CapEx, which is primarily due to capitalized software, is still expected to be in the 20 to $25 million range. Depreciation and amortization is expected to be in the 40 million range. At Q1, our net debt to adjust the DEPADOS leverage ratio is 9.4 times. With our 2024 outlook, we expect our trailing 12-month leverage ratio to further increase in the coming quarters due to lower DEPADOS levels before showing year over year improvement at year end 2024.

Sima Sistani: So, Linda, thanks for the question. Looking at the comments we made, we did see lower growth in new subscribers in April, and this is related to the marketing shift that we're referencing. So we shifted our marketing spend to line up better with the activities that we're executing on, specifically starting with the event next week, and then further into the marketing campaign that Sima was referencing.

Sima Sistani: <unk> spend to line up better with the activities that we're executing on specifically starting with the event next week and then further into the the the marketing campaign that Cmos referencing.

Heather Stark: As a reminder, we have very attractive debt terms with Noviturities until 2028 and 2029, and we are comfortable with our liquidity profile, which gives us ample time to deliver on our transformation strategy. We will continue to opportunistically evaluate options to reduce our leverage ratio on terms we believe are strategically beneficial.

Linda Bolton: So was that in line with what you would have expected given the marketing plan?

Sima Sistani: So it is, I'm not, it's a different timing than what we expected when we spoke last in February, and we shifted that based on the timing of our May event execution.

Heather Stark: In summary, we are operating more efficiently and are strategically positioning weight watchers for the future. We believe by scaling clinic and executing on our expansion initiatives, we will drive another year of operating income growth in 2025 with momentum and revenue returning to the business.

Linda Bolton: Okay, and then, um, in terms of the ARPU being down mid single digits for the year, um... You said you saw green shoots of improvement, I guess, in the second quarter, or you said you saw green shoots here. So are you saying there's a point at which during the year the ARPA will actually inflect to be flat to up year over year, or will it be down through each point in the year? So, yeah, so the, the,

Seema Sistani: I'll now turn the call back to SEMA. Thanks Heather.

Seema Sistani: 2024 and 2025 are critical years and execution is of paramount importance. We've made significant progress with the integration of sequence and learned a lot during the winter season on key products and brand opportunities. We've been moving rapidly to incorporate those learnings into our product roadmap and marketing plans. At the same time, we believe weight watchers is uniquely positioned to dominate in the B2B and payer space. We expect this area of the business will contribute more meaningfully from a financial perspective in 2025 and beyond. We have conviction that payers and employers are the unlock for weight health in the medium to long term and we need to start winning share in this market today.

Sima Sistani: So yeah, so the ARPU that we've referenced, that's the total subscriber base. So if I speak just to a digital subscriber, as an example, it's easier to talk about one at a time. I think this is about the mix of in-commitment versus recurrence bill membership, so we expect to see ARPU expanding over time. And specific to comments that Sima made on the call, we do expect it to further expand as we execute on the plans to add clinical services for all members in the US.

Seema Sistani: Before we wrap up, I would like to welcome Donna Boyer, our new chief product officer to weight watchers. Most recently Donna was the chief product officer at Teladoc Health, where she led the strategic shift from a single product to a multi-product portfolio organization. Prior to Teladoc, Donna held product leadership positions at StitchFix and AirBMD. Our execution can only be as strong as a team executing, and I am confident that Donna is the right product leader to ensure a cohesive, one membership value proposition across core, IRL, V2B, and clinic. Thanks for joining us. We are now happy to take your questions.

Linda Bolton: Just on the clinical side, are you doing promotions to gather clinical subscribers? And are those promotions in line with what you originally planned? Or are you having to do more promotion to get those subscribers? I think Sima already spoke.

Unknown Attendee: We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two.

Sima Sistani: Sima already spoke about marketing execution being focused on one membership, but when you talk about promotions, we look at long-term commitment plans for our subscribers, and we have started doing long-term commitment plans for our clinical subscribers, and I would say they're in line with how we operate promotional activity across all of our memberships.

Jack Wallace: Our first question comes from Jack Wallace with Guggenheim. Please go ahead. Thanks for taking my questions and you can grab plenty of really nice start to the year. Just wanted to ask you a little bit about what you are seeing in terms of market conditions as we entered the second quarter, particularly with advertising inventory pricing and as well as competitive behavior. You are particularly in light with just how expensive advertising was in the first quarter and would appear to be some really aggressive competitive behavior.

Sima Sistani: Promotional activity across all of our membership.

Linda Bolton: Okay, and then can you talk about under what conditions you would lose access to your revolver? Like if your EBITDA were to drop to a certain level, or just what? What would trigger not having access to that revolver? Now, there's no further trigger.

Speaker Change: Okay, and then can you talk about under what conditions, you would lose access to your revolver like if your EBITDA were to drop to a certain level or just what what.

Linda Bolton: What would trigger not having access to that revolver.

Sima Sistani: note that there's no further trigger to lose to on the revolver. So we have, we have access to $61 million in the revolver.

Linda Bolton: No there's no further trigger to losing them to on the revolver.

Jack Wallace: Thank you. Jack, thank you. Yes, we have seen the cost of media going up and in general, I think that's why we have a great performance marketing function that accounts for those types of movements. We have seen some softness in the base business in April but we are not overly concerned about that. That was an intentional shift in money out of April and into May so that we can align to more of our marketing milestones which in general, obviously, improve the funnel and make the dollar spent more efficient.

Sima Sistani: So we have we had on us too.

Sima Sistani: $61 million with the revolver.

Sima Sistani: Okay.

Linda Bolton: Okay, thanks. I'll leave it there.

Speaker Change: Okay. Thanks, I'll leave it there.

Speaker Change: Thanks Linda.

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

Linda Bolton: The next question comes from Michael Lasser with UBS. Please go ahead.

Henry Carr: Good evening, this is Henry Carr on behalf of Michael Lass. Thanks a lot for taking our question. So Weight Watchers recently sent out a letter to its members and former members noting that it understands frustration with the closure of many of the physical meeting locations. How does Weight Watchers plan to address this? And is this why the segment's sub metric is under so much pressure?

Michael Lasser: Good evening. This is Henry car on for Michael Lasser makes a lot for taking our question. So weight watchers recently sent a letter to its members and former members, noting that understand the frustration with the closure of many of its physical meeting locations.

Henry Carr: Does weight watchers plan to address this and is this why the segments sub metric is under so much pressure.

Jack Wallace: We are really confident in our full-year outlook and I am excited also of course about our clinical subscription business and how it's galing. Excellent, that's helpful and then to that last point you mentioned in your prepared remarks that will be an increased focus on promoting the clinical business. As you've got the special with Oprah later this month, are there any other points of emphasis you'd like to disclose today in terms of your marketing strategy around a clinical and maybe the percentage of the budget being dedicated towards the clinical strategy?

Henry Carr: Yeah.

Sima Sistani: Thanks, Henry, for the question. So the workshop business has been under pressure for several years now, as we have transitioned to a more flexible model and had to close out some of the businesses and move to new locations. And yeah, that's impacted our members, as you can imagine. And so we are still really committed to IRL. I believe that being in community in person is still the best way to be together, and some of the things that we outlined in that letter were ways that we were committed to the workshop business.

Speaker Change: Thanks, Henry for the question. So the workshop business has been under pressure for several years now as we have.

Sima Sistani: Transition to a more flexible model and had to.

Sima Sistani: Closed out some of the.

Sima Sistani: The businesses and moved to at locations.

Sima Sistani: And yeah, that's impacted members as you can imagine and so we are still really committed to I R. L. I I believe that being in community in person is still the best way to be together and some of the things that we outlined in that letter waves that we were committed to to the workshop business for instance.

Sima Sistani: For instance, opening up specific coach group chats that allow them to stay connected in case their current location is a further drive than their original location used to be, creating new affinity-based groups through virtual workshop meetings, and giving them the opportunity to let us know if they have a location that they would like to suggest for us to open a new office space. And so that's still something we're extremely committed to doing and excited about some of the sentiment that we're seeing from those members receiving those communications.

Sima Sistani: Opening up specific coach group chats that allow them to stay connected in case there at location is a further drive than their original location used to be creating new affinity based groups through virtual workshop meeting and giving them the opportunity to.

Jack Wallace: Thank you. Right, so the overall marketing strategy is a one membership strategy and I think that that's what we can uniquely do is by marketing and speaking to the benefit of weight health and weight watchers, a brand that has been around for 60 years, that is the number one doctor recommended program, most clinically tested program. That we are able to make a more efficient acquisition also as we had noted previously. We're seeing conversion from within our core business to clinic, so it behooves us to take more aggressive approach in terms of our acquisition strategy towards the core business.

Sima Sistani: To let us know if they have a a a location that they would like to suggest for us to open a new app space and so.

Sima Sistani: That is that's still something we're extremely committed to doing and are excited about some of the the sentiment that we're seeing from those members receiving those communications.

Henry Carr: Thank you. And as a follow-up, I just want to ask, as the competitive landscape continues to get more and more intense. It's, I think a large warehouse retailer just recently announced the partnership with a marketplace to offer GLP one memberships and access to memberships. I guess, how does this intensifying competitive landscape play into your promotional strategy? And how is Weight Watchers going to? How is its ability to attract new members? It is going to change when we move off of this promotional strategy. Right, so

Speaker Change: Thank you.

Henry Carr: As a follow up I just wanted to ask is the competitive landscape continues to get more and more intense.

Jack Wallace: And we're saying that, you know, this is providing a lot of efficiency overall in how we go to market, not to mention, you know, our last database that we're able to continue to, you know, utilize as a, when, when we see opportunities between our performance strategy and our non-page strategy, that's helpful.

Henry Carr: I think a large warehouse retailer just recently.

Henry Carr:

Henry Carr: With a marketplace to offer G O P. One a member.

Henry Carr: Memberships and access to memberships.

Henry Carr: I guess how does this.

Henry Carr: Intensifying competitive landscape play into your promotional strategy and.

Henry Carr: How's weight watchers going to how.

Henry Carr: How has the ability to attract new members.

Unknown Attendee: Thank you, I'll back in few.

Henry Carr: Going to change.

Nathan Feather: Next question comes from Nathan Feather with Morgan Stanley, please go ahead. Hey everyone, they're just taking a question. So the end of year behavioral sub-guy doesn't apply some acceleration to the year, is it primarily the marketing campaign that you're launching, gives you confidence in that, and then it can give you more detail on that marketing campaign, you know, timing, stick to the impact on marketing costs.

Henry Carr: Change when.

Henry Carr: When we move off of this promotional strategy.

Sima Sistani: Right. So at the moment, I would say that our focus right now isn't about acquisition; it's really about retention in the clinic business. And, you know, you've probably seen us take a more cautious posture still on that part of our business, given the supply constraints, which we're certainly still experiencing. And so we haven't really dedicated a significant portion of our marketing motion to that effort because of the supply constraints.

Henry Carr: Right. So at the I would say that our focus right. Now is is it's it's not about our acquisition, it's really about retention with the clinic business and.

Sima Sistani: You've probably seen us take a more cautious posture still on that part of our business, but given the supply constraints, which we're certainly still seeing and so we haven't really dedicated a significant portion of of of marketing motion to that effort.

Sima Sistani: And, you know, it's important to us; people are coming to us for a subscription, and that subscription is only as powerful as their ability to get a comprehensive care plan, which includes, you know, insurance support for those medications. And so if the medications are not there, that reflects poorly on us. And that means we're going to grow this business thoughtfully and over time. And so, honestly, I'm not that worried about the competitive landscape, rather than making sure that we are doing our best with regard to the member experience.

Seema Sistani: Thank you. Yeah, I mean, there's not a lot that we were ready to share at this point, but obviously we've announced our event next next week with Oprah, but in general, it, you know, it's about coming to the market as one membership. And we learned a lot from the winter season that between all of the different ways, you know, we can, that we were confusing the market with a lot of different solutions.

Sima Sistani: Hurt because of the supply constraints and you know.

Sima Sistani: It's important to us people are coming to us for a.

Sima Sistani: Subscription.

Sima Sistani: And that subscription is is only as powerful as their ability to get a comprehensive care plan, which includes and you know insurance support for those medications and so if the medications are not there that reflects poorly on us and that means we're going to grow this business thoughtfully and over time and so.

Seema Sistani: And so moving forward, it's all about one membership, come-to-way watchers, our program can increase in its personalization and support based on the love of care that's needed. And we're there for people throughout their various life stages.

Sima Sistani: Honestly I'm not that worried about the competitive landscape rather than making sure that we are doing our best with regard to the member experience and I'm I'm I'm really happy to see some of the supply coming back on market and our ability to help members get insured we're still say.

Seema Sistani: Great, that's helpful. And then you beat the clinical sub-guy for one, you maintained a full year guide, is how should we think about the key puts and takes that can lead us to come in at the high end, or beat the range of the year? Yeah, so we, as we mentioned, you know, if you follow that and even at the bottom end of the subscriber guidance, we're really confident in our revenue and adjusted OI.

Sima Sistani: And I'm, I'm, I'm really happy to see some of the supply coming back into the market and our ability to help members get insured. We're still seeing about a forty to forty five percent rate on the pre-ops, which is, you know, we believe better than what's out there for the insured population.

Sima Sistani: A four about a 40% to 45% rate on the pre ops, which is you know we believe better than what's out there for the insured population.

Speaker Change: But thank you so much.

Sima Sistani: Thanks.

Seema Sistani: So we had made some intentional shifts based on what we were seeing in the market as well as to maximize within that weight health marketing campaign strategy. So, yeah, we do expect to see some acceleration moving throughout the year.

Alex Joseph Fuhrman: The next question comes from Alex Fuhrman of Craig Hallam Capital Group.

Sima Sistani: The next question comes from Alex Fuhrman with Craig Hallum Capital Group. Please go ahead.

Alex Joseph Fuhrman: Hey, guys, thanks very much for taking my question. Sima, you talked a little bit on the conference call about making Weight Watchers a covered benefit. I think some of your predecessors talked about trying to strike insurance and B2B partnerships over the years that, you know, never really turned into anything too substantial. Can you just kind of tell us what makes things different this time and when we might expect to see some progress on that front?

Alex Joseph Fuhrman: Hey, guys. Thanks, very much for taking my question Sema, you talked a little bit on the conference call about making weight watchers, a covered benefit I think some of your predecessors had talked about trying to strike insurance and <unk> partnerships.

Unknown Attendee: Great, thank you.

Linda Bolton: And the next question comes from Linda Bolton with DA Davidson. Please go ahead. Yes, hi. So, you know, you referred to this intentional strategy of shifting marketing spend, which, you know, you talked about on the last call, given that was the new member grow weaker than even what you would have expected. Or is it kind of in line given that you had to plan the strategy to shift marketing? So, how is it relative to your expectation?

Alex Joseph Fuhrman: Over the years that you know never really turned into anything too substantial can you just kind of tell us what makes things different this time and when we might expect to see some progress on that front.

Sima Sistani: Thanks for the question Alex I think the main thing that is different is our understanding of weight and weight health has considerably changed in <unk>.

Sima Sistani: Thanks for the question, Alex. I think the main thing that is different is our understanding of weight and weight health has considerably changed, and the recognition around it being a disease, and we're seeing that these medications are lifesaving. And I believe in the same way that we saw a change over time with cardiovascular health, and then with mental health, you are going to see the same thing happen with weight health. Yes, we have new changes here within Weight Watchers, but this is a complete paradigm shift in our industry and in this category.

Sima Sistani: You know the recognition in the around it being a and disease and and we're saying that these medications are lifesaving and I believe in the same way that we saw a change over time with cardio <unk> vascular health and then with mental health you work.

Sima Sistani: Going to see the same thing happened with great health and so.

Sima Sistani: Yes, we have new changes here within weight watchers, but this is a complete paradigm shift in our and in the space and in this category and so that's the main thing that has changed outside of that I think.

Linda Bolton: So in this, thanks for the question, looking at the comments we made, we did see lower growth in new subscribers in April, and this is related to the marketing shift that we're referencing. So we shifted our marketing spend to line up better with the activities that we're executing on specifically starting with the event next week and then further into the marketing campaign that's the most referencing. So was that in line with what you would have expected given the marketing plan?

Sima Sistani: And so that's the main thing that has changed. Outside of that, I think we're spending a lot of time with payers, and their employees are asking for this, and it's going to start with the private sector. In my mind, it's going to move to public policy. But the future of our business is as a covered benefit, and it's just a matter of time that that starts rolling out, and we are already making progress in terms of the, the, conversations.

Sima Sistani: You know, where we're spending a lot of time with payers and their employees are asking for this and it's going to start with the private sector in my mind, it's going to move to pallet policy, but the.

Sima Sistani: The future of our business is as a covered benefit and it's.

Linda Bolton: So it is, I'm not, it's a different timing than what we expected when we spoke last in February, and we shifted that based on the timing of our May event execution. Okay, and then in terms of the R-approving damage single-digit for the year, you said you saw green shoots of improvement, I guess, in the second quarter, or you said you saw the R-appro will actually inflect to be flat to up year of year, or will it be down through each point in the year?

Sima Sistani: The the conversations and our.

Sima Sistani: And our ability to do this is really more of an operational lift. Honestly, we started that with the registered dietitian consultations, which we mentioned on the call began. We'll start rolling that out in the next few months. Obviously, we do insurance support right now within the clinic business, and then claims billing will start to come in time. And we're very encouraged by the conversations that we're having with insurance companies.

Sima Sistani: Our ability to do this is really more of an operational lift honestly, we started that with the registered dietitians consultations, which we mentioned on the call begin will start rolling out in the neck that out in the next few months, obviously, we do insurance support right now within the clinic business and then <unk>.

Sima Sistani: Spelling will start to come over time, and and were very encouraged by the conversations that we're having are.

Alex Joseph Fuhrman: Okay, that's really helpful. Thanks, Sima.

Linda Bolton: So yeah, so the R-appro that we've referenced, that's the total subscriber base. So if I speak just to a digital subscriber as an example, it's easier to talk about one at a time, I think this is about the mix of in-commitment versus recur bill membership. We do see green shoots as we reference to this stabilizing, and in fact in the core business, Q-1 24's R-appro was stable to Q-4 23, and that's even with proportionately more subscribers in long-term commitment.

Stephanie July Davis: The next question comes from Stephanie Davis with Barclays. Please go ahead.

Stephanie July Davis: Hey guys, thank you for taking my question. Sima.

Stephanie July Davis: Hey, guys. Thank you for taking my question he met.

Sima Sistani: I applaud the B2B shift. I do think it makes a lot of sense. But I do want to acknowledge that when digital health companies make a pivot from D2C to B2B, there's a lot of investment costs around back-end rebuilds and salesforce structure that's necessary to accept insurance and sell to employers and payers. And that also means a lot of headcount costs. So with that in mind, can you just walk us through how we should think about the forward investment spend to make some of these shifts you've talked about?

Stephanie July Davis: I applaud the BW shift I do think it makes a lot of sense, but I do want to acknowledge that digital health companies made the pivot from D. C to B B Theres, a lot of investment cost around backend rebuilds and sales force structure, that's necessary to accept insurance themselves employers and payers and that also means.

Sima Sistani: A lot of head count golf.

Linda Bolton: So we had about 56% of members in long-term commitment exiting Q-4, whereas 59% in long-term commitment exiting Q-1. So we expect to see R-appro expanding over time, and you know, specific to comments that seem to made on the call, we do expect it to further expand as we execute on the plans to add clinical services for all members in the U.S. Okay, and just on the clinical side, are you doing promotions to gather clinical subscribers, and are those promotions in line with what you're originally planned, or are you having to do more promotion to get those subscribers?

Sima Sistani: So with that in mind can you just walk us through how we should think about the forward investments then make some of these shifts we've talked about and given the scrutiny being put on vendor helped by some of the payers and employers as they look to go and sign up new folks I know you guys looked like Brad, but how are you talking through your leverage as you have these conversations.

Sima Sistani: And given the scrutiny being put on vendor health by some of these payers and employers as they look to go and sign up new folks, I know you guys have a great brand, but how are you talking through your leverage as you have these conversations?

Sima Sistani: Thanks for the question, Stephanie. Good news. I'm here to report it.

Speaker Change: Thanks for that question Stephanie Good news I'm here to report we've been in this business for like two decades, and so the infrastructure is there and yes. The sales motion is a bit different now as we move from perks to a covered benefit but.

Sima Sistani: We've been in this business for like two decades, and so the infrastructure is there. And yes, the sales motion is a bit different now as we move from perks to a covered benefit, but a lot of that infrastructure is already here and had been simmering, and it's really exciting that we get to put that business to work now. And in terms of the build-out, as I mentioned, you would be surprised; most of it, I would say, is already in our DNA.

Sima Sistani: A lot of that infrastructure, if it's already here and had been simmering and its really exciting that are we got to put that that.

Sima Sistani: That business to work now and in terms of the build out there's third as I've mentioned, you would be surprised most of it I would say it's already in our G&A. So this is really just about engaging and the strategic conversations and and you know what we're finding is a.

Linda Bolton: I think it seems already to the marketing execution being focused on one membership, but when you talk about promotions, we look at long-term commitment plans for our subscribers, and we have started doing long-term commitment plans for our clinical subscribers, and I would say they're in line with how we operate promotional activity across all of our membership. Okay, and then can you talk about under what conditions you would lose access to your revolver, like if your e-bita were to drop to a certain level, or just what... What would trigger not having access to that revolver? No, there's no further trigger to leaving on the revolver. So we have we have to $61 million at the revolver. Okay. Okay, thank you very much.

Sima Sistani: So this is really just about engaging in the strategic conversations, and what we're finding is a lot of excitement for a trusted brand to drive the right level of enrollment and engagement that makes the ROI worth it. And the payers, they're looking for cost mitigation. They're looking for lasting outcomes. They want ROI for metabolic conditions, and we have a unified solution.

Sima Sistani: The the right level of enrollment and engagement that makes the ROI worth it and and and the payers there theyre looking for cost mitigation theyre looking for lasting outcomes.

Sima Sistani: They want ROI for metabolic conditions, and we have a unified solution.

Heather Stark: I just want to add to that, Stephanie, in response to Sima's comment on GNA, we have guidance for expecting GNA of 210 to 220 million, which is down from 223 million in 2023, and that includes the net new clinical business, obviously, but also the investment in B2B. So when Sima says it's included in there, it's included in there, but it's done with holding our GNA below flat year over year with the investment that we're making.

Speaker Change: I just want to add onto that Stephanie, but it just seem as comment on G&A, we have guided to expecting G&A of $210 million to $220 million, which is down.

Heather Stark: For 'twenty 223 in 2023 and that includes the net new clinical business, obviously, but also the investment in baby. So when Siemens says it's included in there.

Michael Lasser: The next question comes from Michael Lasser with UBS. Please go ahead. Good evening.

Henry Carr: This is Henry Carr on from Michael Lasser. Thanks a lot for taking our question.

Stephanie July Davis: A quick follow-up on that. I understand that you've sold to employers before. I've seen the B2B booth, but accepting insurance requires a lot of back-end programming in an app.

Speaker Change: I just had a quick follow up on that I get that you've sold to employers before like I seem to be to be booed by extending insurance requires a lot of like backend programming and an app. So.

Henry Carr: How does Weight Watchers plan to address this? And is this why this segment's sub metric is under so much pressure?

Stephanie July Davis: Is that all factored in and G&A is that like a buildout that you've already done and hired back on head count.

Stephanie July Davis: How should we think about that and then you touched on this my actual follow up.

Seema Sistani: Thanks, Henry for the question. So the workshop business has been under pressure for several years now as we have transitioned to a more flexible model and had to close out some of the businesses and move to at locations. And yeah, that's impacted members as you can imagine. And so we are still really committed to IRL. I believe that being a community in person is still the best way to be together. And some of the things that we outlined in that letter were ways that we were committed to the workshop business.

Stephanie July Davis: About accessibility headwinds, but it was brought up with them the drug distributors or something that could be a headwind for the year. So how are you managing access to the treatment and are you have any willingness adhere to compounded alternatives that there's demand.

Speaker Change: Okay, Let me I'll I'll I'll follow up with one question I know Barry one o'clock I know Jos.

Sima Sistani: Okay, let me follow up. Long question, I know. Very long question. Okay, no, I'll let Heather handle leverage, but on the follow-up, I think what you're talking about more is the claims billing. And, obviously, that is obviously an operational process to go through. To that, who, exactly. And so, yes, we are doing that work.

Sima Sistani: I'll, let her handle leverage but on the on the the the follow up I think what so what you're talking about more as the claims billing and yes that is obviously there is a a and I'm always.

Seema Sistani: For instance, opening up specific coach group chats that allow them to stay connected in case their application is a further drive, then their original location used to be creating new affinity-based groups through virtual workshop meetings. And giving them the opportunity to let us know if they have a location that they would like to suggest for us to open a new app space. And so that is that's still something we're extremely committed to doing and excited about some of the sentiment that we're seeing from those members receiving those communications.

Sima Sistani: It's an annoying process to go through.

Sima Sistani: As they go through to that yet.

Unknown Attendee: Thank you.

Sima Sistani: The on the Rds that we mentioned, but we'll be getting into labs, as well as clinician clinicians and doing all the right with it contracting and provisioning.

Heather Stark: Unknown Attendee And then the other part of your question was around system and people investments. And yes, those are included in our DNA. Some of it is in our, in our gross margin, depending on the type of system that it is, but these are factored in. Awesome.

Seema Sistani: And as a follow-up, I just want to ask, the competitive landscape continues to get more and more intense. I think a large warehouse retailer just recently announced the affirmative with a marketplace to offer GLP1 memberships and access to memberships. I guess how does this intensifying competitive landscape play into your promotional strategy? And how is the ability to attract new members going to change when we move off with this promotional strategy? Right.

Stephanie July Davis: Awesome, thank you guys!

Speaker Change: Awesome. Thank you guys.

Stephanie July Davis: Welcome.

Unknown Attendee: The next question comes from Carew Martinson with Jeffreys. Please go ahead.

Stephanie July Davis: The next question comes from Korea, <unk> Martinson with Jefferies. Please go ahead.

Unknown Attendee: Good afternoon. I think the last caller referenced this, but in terms of the medication supply, what are you seeing there? And is that a headwind for you guys in terms of growing clinical this year?

Unknown Attendee: Good afternoon.

Unknown Attendee: I think the last caller referenced this but in terms of the medication supply what are you seeing there and is that a headwind for you guys in terms of our growing clinical this year.

Sima Sistani: Yeah, I mean, yes, we're in a cautious posture, as I mentioned there, but we are seeing that, you know, with the entries that found that there is some more opportunity there. And I, you know, we can only report on what we're seeing between Novo and Lily.

Seema Sistani: So I would say that our focus right now is it's not about acquisition. It's really about retention with the clinic business. And you've probably seen us take a more cautious posture still on that part of our business, given the supply constraints, which we're certainly still seeing. And so we haven't really dedicated a significant portion of marketing motion to that effort because of the supply constraints. And you know, it's important to us.

Sima Sistani: You know what the Novo and literally are are are sharing out but what we are doing is within the clinic business we have a.

Sima Sistani: But what we are doing is within the clinic business, we have a programmatic way of reporting out which pharmacies have supplies. And so when a member is unable to get their supply from a certain location, we can then basically point them to the nearest location with supply. And this has been really successful.

Sima Sistani: Programmatic programmatic way of reporting out which pharmacies have.

Seema Sistani: People are coming to us for a subscription. And that subscription is only as powerful as their ability to get a comprehensive care plan, which includes, you know, insurance support for those medications. And so if the medications are not there, that reflects poorly on us. And that means we're going to grow this business thoughtfully and over time. And so, honestly, I'm not that worried about the competitive landscape rather than making sure that we are doing our best with regard to the member experience.

Sima Sistani: Great feature that has helped our retention. It's proprietary data, and we have been using that to help our members in the meantime, but yeah, we. We have the same public information that you all do, but alongside this proprietary information that we're getting through the pharmacies, we feel good about our ability to sort of work through the supply-constrained environment.

Sima Sistani: <unk> proprietary data and we have been using that to help our members in the meantime, but yeah. We we have that put the you know the same public information that you all do and but alongside this proprietary information that we're getting them through the pharmacies, we feel good about our ability to.

Heather Stark: Okay, and then when we look at liquidity, for the first quarter, if you can remind me again, about $20 million of cash went out for the restructuring that you had accrued last year, and then kind of what are the remaining cash payments for the restructuring that you need to make?

Seema Sistani: And I'm really happy to see some of the supply coming back on market and our ability to help members get insured. We're still seeing about a 40 to 45% rate on the pre-offs, which is, you know, we believe better than what's out there for the insured population.

Sima Sistani: Okay, and then when we look at liquidity first quarter.

Heather Stark: Yeah, so the $20 million that we referenced associated with cash going out for restructuring is the full year 2024 estimate. Q1 was approximately $13 in cash of that $20. And in terms of cash use, our first quarter is obviously a high cash use first quarter with marketing, certain compensation items like bonuses, and then entering the second quarter, we also had the sequence acquisition and then obviously our interest coverage as well.

Speaker Change: Yeah. So we the the $20 million that we referenced associated with cash going out for restructuring is the full year of 2024 estimate and.

Unknown Attendee: Thank you so much. Thanks.

Alex Fuhrman: The next question comes from Alex Fuhrman with Craig Hallem Capital Group. Please go ahead. Hey guys, thanks very much for taking my question. Sima, you talked a little bit on the conference call about making weight watchers a covered benefit. I think insurance and B2B partnerships over the years that never really turned into anything to substantial. Can you just kind of tell us what makes things different this time and when we might expect to see some progress on that front?

Heather Stark: Q1 was approximately 13 in cash if that 20 and in terms of of cash use them. Our first quarter is obviously, a high cash use first quarter with marketing and it.

Heather Stark: Certain compensation items like bonus and then entering the second quarter. We also had the sequence acquisition.

Heather Stark: And and then obviously our interest coverage as well.

Heather Stark: And that sequence acquisition was made on April 10th, I believe? That's right. All right.

Heather Stark: And that sequence acquisition was made on April 10th that relief.

Speaker Change: That's right.

Heather Stark: So, we do expect cash to build through the second half of the year, and as we shared, we expect a modest increase in cash from operations year over year.

Seema Sistani: Thanks for the question, Alex. I think the main thing that is different is our understanding of weight and weight health has considerably changed and the recognition and the around it being a disease and we're saying that these medications are lifesaving and I believe in the same way that we saw a change over time with cardiovascular health and then with mental health you are going to see the same thing happen with weight health and so yes we have new changes here within weight watchers but this is a complete paradigm shift in the space and in this category and so that's the main thing that has changed outside of that.

Heather Stark: Alright.

Heather Stark: We do expect we do expect cash to build through the second half of the year.

Heather Stark: And as we shared we expect a modest increase in cash from operations year over year.

Unknown Attendee: Thank you very much. I appreciate it.

Speaker Change: Thank you very much appreciate it.

Unknown Attendee: That's first.

Jack Dawson Wallace: The next question comes from Jack Wallace with Guggenheim. Please go ahead.

Jack Dawson Wallace: Hey, thanks for letting me back in the queue. I just wanted to ask about the Personify Health Partnership you announced earlier this month and how that's been accelerating your B2B strategy. Thank you.

Jack Dawson Wallace: Hey, Thanks for let me back in the queue I just wanted to ask about the personify health partnership.

Jack Dawson Wallace: Earlier, this month and how that's really accelerating your BW strategy. Thank you.

Sima Sistani: Sure. Welcome back, Jack.

Jack Dawson Wallace: Sure.

Speaker Change: Welcome back Jack we are really excited about this channel and we have a few large prospects that are asking to work with us but have requested that we.

Sima Sistani: We are really excited about this channel. We have a few large prospects that are asking to work with us but have Unknown Attendee, Michael Lasser, Henry Carr, Ray Yousefian, Nathaniel Feather, and Michael Lasser. And yeah, Personify Health works with thousands of large and jumbo employers, and they're the preferred wellness platform for Cigna employers. So we're hoping to start turning that on to customers by mid-year through the end of the year.

Seema Sistani: I think we're spending a lot of time with payers and their employees are asking for this and it's going to start with private sector in my mind. It's going to move to public policy but the future of our business is as a covered benefit and it's just a matter of time that that starts rolling out and you are already making progress in terms of the conversations and our ability to do this is really more of an operational lift honestly and we started that with the registered dietitians consultations which we mentioned on the call again we'll start rolling that in the next that out in the next few months obviously we do insurance support right now within the clinic business and then claims billing will start to come over time and we're very encouraged by the conversations that we're having with insurance companies. Okay that's that's really helpful thanks Seema.

Sima Sistani: Come through either their carrier or or Virgin pulse. So landing these deals are really critical.

Sima Sistani: And to our overall strategy with some of those larger employers employers.

Sima Sistani:

Sima Sistani: And yeah, personify half works with thousands of large and jumbo employers and there are the preferred wellness platform for Cigna employers. So we're hoping to start turning that on to customers by mid year through the end of the year.

Jack Dawson Wallace: And should we think about this as the start of, as opposed to one part, of a partnership strategy on the B2B front?

Sima Sistani: Yes.

Sima Sistani: Should we think about this as the start up as opposed to a one off or a partnership strategy.

Jack Dawson Wallace: On the VW front.

Jack Dawson Wallace: This is the and the ongoing work that we're doing on the on the beta be front, that's certainly not a one off there's a lot of and a lot of volume happening in terms of our b to B conversations right now.

Sima Sistani: This is the ongoing work that we're doing on the B2B front that's certainly not a one-off. There's a lot of volume happening in terms of our B2B conversations right now.

Jack Dawson Wallace: Great. Thank you.

Speaker Change: Great. Thank you.

Nathaniel Jay Feather: And the next question comes from Nathan Feather with Morgan Stanley. Please go ahead.

Jack Dawson Wallace: And the next question comes from Nathan Feather with Morgan Stanley. Please go ahead.

Nathaniel Jay Feather: I just wanted to look at some of the product improvements, so any interesting improvements you have scheduled for 24 that you put out in the deck, you know, maybe to help think about the potential impact, it may be interesting to go back and do a bit of a retrospective on the major products that featured in 23, and I think it primarily peer-to-peer messaging and the What to Eat tab, and how those have impacted the product experience, and maybe, Well, so you can

Nathaniel Jay Feather: Okay. Okay I just wanted to look at some of the product improvement and interest, saying any improvements you have scheduled for 2000 and for that you put out in the deck.

Stephanie Davis: The next question comes from Stephanie Davis with Barclays please go ahead. Hey guys thank you for taking my question.

Seema Sistani: Seema I applaud the B2B shift I do think it makes a lot of sense but I do want to acknowledge that when digital health companies make a visit from D2C to B2B there's a lot of investment costs around back-end rebuild and sales force structure that's necessary to accept insurance and sell them for years and payers and that also means a lot of headcount costs. So with that in mind can you just walk us through how we should think about this forward investment to make some of these shifts you've talked about and given the scrutiny being put on vendor health by some of these payers and employers as I look to go and sign up you folks I know you got to be a great brand but how are you talking through your leverage that you have these conversations Thanks for the question, Stephanie.

Nathaniel Jay Feather: Maybe to help think about the potential impact may be interesting to go back and do a bit of a retrospective on the major product updates from 'twenty three I don't think I, primarily peer to peer messaging and know what to eat tab.

Nathaniel Jay Feather: How those have impacted the product experience and integrate this one of the things that are driving up activation rate of the quarter.

Sima Sistani: Right, well, so you may have noticed that we talked about how our activation rate is the best that it's been since 2020. You know, we are seeing core retention now for 11 months, and a lot of product improvements also happening on the clinic side as well.

Speaker Change: Right well, so you man I'm sure noticed that we talked about how our activation rate is the best that it's been since 2020, you know we are seeing core retention now over 11 months a lot of product improvements also happening on the clinic side as well and so.

Sima Sistani: It takes time for these the these improvements to read through and so much of our business businesses is word of mouth and the more activated.

Sima Sistani: And so It takes time for these improvements to read through, and so much of our business is word of mouth, and the more activated our members are, the more we are able to activate our members, the more likely they are to be successful and tell a friend. And so, you know, we're really excited about the next sort of fleet of changes, if you will, and really kind of honing in on that care experience and feeling like somebody who comes in is just going to have everything that they need to be successful and make the healthy habits that they need.

Seema Sistani: Good news. I'm here to report. We've been in this business for like two decades, and so the infrastructure is there, and yes, the sales motion is a bit different now. As we move from perks to a covered benefit, but a lot of that infrastructure is already here and have been simmering, and it's really exciting that we get to put that business to work now. And in terms of the build out, as I mentioned, you would be surprised.

Sima Sistani: They are the more we are able to activate our members the more likely they are to be successful and telephoned and so.

Sima Sistani: We're really excited about the next sort of fleet of of changes if you will and really kind of honing in on that care experiences and feeling like somebody who comes in is just going to have everything after that they need to be successful and make the healthy.

Seema Sistani: Most of it, I would say, is already in our GNA. So this is really just about engaging in the strategic conversations, and what we're finding is a lot of excitement for entrusted brands to drive the right level of enrollment and engagement that makes the ROI worth it. And the payers, they're looking for a way to do that. I just want to add on to that, Stephanie, but to seem as comment on GNA, we have guided to expecting GNA of 210 to 220 million, which is down from 223 in 2023.

Sima Sistani: That's.

Sima Sistani: And ultimately, you know, any great product roadmap starts with solving member problems. And so, as we continue to sort of get to know the insights and the data from each new cohort, we continue to develop and shift our roadmap alongside of that. And so, a lot of those things that you're seeing are the problems that we are addressing having to do with, you know, making better food decisions that build on, for instance, the What to Eat strategy from last year, or, you know, the work that we are doing on WW Together, and the opening up of the clinic tab is also an extension of the work that we started to do around progress and community. And so, these are just ongoing builds to helping Does that help answer the question, Nathan, or do you have a follow-up?

Sima Sistani: They that they need and ultimately are you know.

Sima Sistani: Any great product roadmap starts with solving member problems and so as we continue to sort of get to know there's the insights and the data are.

Sima Sistani: From from each new cohort, we continue to develop and shift our roadmap alongside of that and so what a lot of those things that you're seeing or are the problems that we are addressing having to do with making better food decisions that built on for instance, the what to eat strategy from last year.

Nathaniel Jay Feather: Yep, sorry, I don't understand it. Yes, that's helpful. Thank you.

Nathan: Air or you know the.

Nathan: Work that we are doing on Ww together and.

Nathaniel Jay Feather: The opening up at the clinic Caf is also a extension of the work that we started to do a to do around progress on community and so these are just ongoing builds to helping our members be more activated have more success.

Seema Sistani: And that includes the net new clinical business, obviously, but also the investment in BB. So when Sima says it's included in there, it's easier with the investment that we're making. The quick follow up on that, I guess that you've sold employers before, like I've seen the B to B booth, but accepting insurance requires a lot of back end programming in an app. So is that all factored in in GNA? Is that like a build out that you've already done and you hired that kind of headcount? How should we think about that?

Nathaniel Jay Feather: Increases N P F.

Nathaniel Jay Feather: But does that help answer the question Nathan or any other follow up.

Nathan: Yep Yep.

Nathan: Yes, that's helpful. Thank you.

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

Nathaniel Jay Feather: This concludes our question and answer session I would like to turn the conference back over to Cmos Sistani for any closing remarks.

Sima Sistani: So, just to recap, we are proud of the results we are seeing so far in 2024, really encouraged by our progress and improving retention in our core Weight Watchers program, growing our clinical business, and building momentum in B2B. I'm looking forward to our live virtual event next week, making the shift a new way to think about weight loss with Oprah Winfrey. Joining the conversation will be diverse and influential voices and leading medical experts.

Sima Sistani: So just to recap we are proud of the results. We are seeing so far in 2024 really encourage by our progress in improving retention and our core weight Watchers program.

Seema Sistani: And then you touched on this, my actual follow up about accessibility headwind, but it was brought up by some of the drug distributors or something that could be a headwind for the year. So how are you managing access to the treatment? And are you having a will and what this year to compound will turn to as there's demand? Okay, let me, I'll follow up on that. Long question, I know. Very long question.

Sima Sistani: Growing our clinical business and building momentum and B to B I'm looking forward to our live virtual event next week, making the shift a new way to think about weight with Oprah Winfrey joined.

Sima Sistani: The May 9th event is going to start at 6 p.m. Eastern, will be live-streamed on YouTube, and will remain available for on-demand viewing. We are really dedicated to shifting the culture, changing the conversation from weight loss to weight health. And I believe this will be a highly visible cultural moment that's going to help us amplify that commitment. And I thank you all.

Sima Sistani: Joining the conversation will be diverse and influential voices and leading medical experts. The may 9th event, it's going to start at six P. M. Eastern will be live streamed on Youtube and remain available for on demand viewing are we are really dedicated to shifting the culture changing the conversation from weight loss to wait house.

Seema Sistani: I'll let Heather handle the leverage, but on the follow up, I think what you're talking about more is the claims billing. And yes, that is obviously there is an operational. Exactly. And so, yes, we are doing that work to contract with insurance carriers to allow for billing for services. Currently, we're pursuing both in-house strategies as well as partnerships, and we expect to be rolling this out in phases, the first of which was on the RDS that we mentioned, but we'll be getting into labs as well as clinician, clinicians, and doing all the requisite contracting and provisioning that is required.

Sima Sistani: And I believe this will be a highly visible cultural moment, that's going to help us amplify that commitment and I. Thank you all.

Sima Sistani: Yeah.

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

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

Seema Sistani: So absolutely, that's a list and shift and it's happening. And then the other part of your question was around system and people investments, and yes, those are included in our, our DNA. Some of it is in our gross margin, depending the type of system that it is, but these are factored in. Thank you guys. Welcome.

Operator: Yeah.

Karru Martinson: The next question comes from Karru Martinson with Jeffries, please go ahead.

Seema Sistani: Good afternoon. I think the last caller reference this, but in terms of the medication supply, what are you seeing there? Is that a headwind for you guys in terms of growing clinical this year? I mean, yes, we're at[inaudible] a program, a program, a program, a program, a program, a program, a program, a program, a program, a program, a program, a program, a program, a program, a program, a program, a program, a program, a program, a program, Strategy. Thank you. Sure.

Seema Sistani: Welcome back, Jack. We are really excited about this channel. We have a few large prospects that are asking to work with us but have requested that we come through either their carrier or Virgin Paul. So landing these deals are really critical and to our overall strategy, some of those larger employers. And yeah, personified health works with thousands of large and jumbo employers, and they're the preferred wellness platform for our sigma employers.

Seema Sistani: So we're hoping to start turning that on to customers by mid-year through the end of the year. And should we think about this as the start of as opposed to a one-off of a partnership strategy on the B2B front? This is the ongoing work that we're doing on the B2B front that's certainly not a one-off. There's a lot of volume happening in terms of our B2B conversations right now.

Unknown Attendee: Great. Thank you.

Nathan Feather: And the next question comes from Nathan Feather with Morgan Stanley. Please go ahead. I just wanted to look at some of the product in Brooklyn.

Seema Sistani: So it's an interesting, any improvements you have scheduled for 24 that you put out in the deck. You know, maybe to help think about the potential impact. Maybe interesting to go back and do a bit of a retrospective on the major product that we want to eat to have. And how those have impacted the product experience and integrate those some of the things that are driving up activation rate in the corner.

Seema Sistani: Great. Well, so you may, I'm sure notice that we talked about how our activation rate is the best that it's been since 2020. You know, we are seeing core retention now over 11 months. A lot of improvements also happening on the clinic side as well. And so it takes time for these these improvements to read through. And so much of our businesses is word of mouth. And the more activated that we are, the more we are able to activate our members, the more likely they are to be successful and tell a friend.

Seema Sistani: And so you know, we're really excited about the next sort of fleet of changes, if you will, and really honing in on that care experience and feeling like somebody who comes in is just going to have everything that they need to be successful and make the healthy habits that they need. And ultimately, you know, any great product roadmap starts with solving member problems. And so as we continue to sort of get to know the insights and the data from each new cohort, we continue to develop and shift our roadmap alongside of that.

Seema Sistani: And so what a lot of those things that you're seeing are the problems that we are addressing having to do with, you know, making better food decisions that's built on, for instance, the what to eat strategy from last year. Or, you know, the work that we are doing on WWW together and the opening up of the clinic tab is also an extension of the work that we started to do around progress and community.

Seema Sistani: And so these are just ongoing builds to helping our members be more activated, have more success. Conference, increases NPS. Does that help answer the question Nathan, or any of the follow-up? Yep, there's a bit. Yep, that's helpful. Thank you.

Seema Sistani: This concludes our question and answer session. I would like to turn the conference back over to Sima Sistani for any closing remarks. So just to recap, we are proud of the results we are seeing so far in 2024, really encouraged by a progress in improving retention in our four-way watchers program, growing our clinical business and building momentum in B2B. I'm looking forward to our live virtual event next week, making the shift a new way to think about weight with Oprah Winfrey.

Seema Sistani: Joining the conversation will be diverse and influential voices and leading medical experts. The May 9th event is going to start at 6 p.m. Eastern. We'll be live streamed on YouTube and remain available for on-demand viewing. We are really dedicated to shifting the culture, changing the conversation from weight loss to weight health. And I believe this will be a highly visible cultural moment that's going to help us amplify that commitment. And I thank you all.

Unknown Attendee: The conference is now concluded. Thank you for attending today's presentation.

Unknown Attendee: You may now disconnect.