WW Q1 2018 Earnings Call

Operator: Good day, and welcome to the Weight Watchers First Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Corey Kinger, Investor Relations. Please go ahead. Corey Kinger - Weight Watchers International, Inc.: Thank you, Cameron, and thank you to everyone for joining us today for Weight Watchers International's first quarter 2018 conference call. At about 4:15 PM Eastern Time today, the company issued a press release reporting the first quarter 2018 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 weightwatchersinternational.com. 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. 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 uncertainties of such statements. All forward-looking statements are made as of today, and except as required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Joining today's call are Mindy Grossman, the company's President and CEO, and Nick Hotchkin, CFO. I will now turn the call over to Mindy. Mindy F. Grossman - Weight Watchers International, Inc.: Thanks, Corey. Good afternoon, everyone. Great to be speaking with you today. We ended the quarter with 4.6 million subscribers worldwide, the highest level in the history of Weight Watchers, driven by the enthusiastic global response to our new program. To put that into context, that's an increase of 1 million subscribers from a year ago. Furthermore, our average retention is well over nine months, also the highest level in our company history. Our member recruitment performance coupled with record retention fueled strong financial performance in the first quarter. And the power of our high margin subscription business model was readily apparent with strong flow-through to profitability. On a year-over-year and constant currency basis, revenue was up 20%, an acceleration from prior year level. Gross margins expanded 410 basis points, and operating income nearly doubled. Importantly, the strength was global with North America, Continental Europe and the UK markets all delivering double-digit revenue growth and higher profitability. Weight Watchers has always been the authority on healthy effective sustainable weight loss and weight management. 2018 is no different with our new program supported by excellent marketing propelling growth worldwide. WW Freestyle, as it is known in the U.S., is our most flexible, livable program ever. Ahead of our winter season, we enhanced our highly successful and effective SmartPoints system by expanding zero Points foods from only fruits and vegetables to more than 200 delicious satisfying foods, which encourage members to eat healthier. Across the world, our members are realizing weight loss that meets or exceeds that from our prior program, which is notable considering our members now have more than 200 zero Points foods they can enjoy without tracking. Member engagement has been incredible. Our impactful program and marketing message resonated with consumers in all of our major markets, driving strong member recruitment throughout Q1. And in fact, our top global signup days in our history occurred in the first two weeks of 2018. Our winter marketing campaign was our most globally coordinated and integrated to-date, spanning TV, digital and social media, and highlighting the freedom and flexibility of the Weight Watchers program with enthusiasm and joy from real members. In addition to our largest market, North America, delivering a third strong winter season in a row, our international markets performed very well with our largest Continental European markets, France and Germany, achieving record member recruits in the quarter. France was our strongest performing market in Q1 with a breakthrough marketing campaign featuring singer Hélène Ségara. Across all our markets, we are making significant progress in integrating our marketing campaigns across all channels, including TV, digital media and social. In Germany, using our creative both on television and in online video with effective and expanding our reach. And in the U.S., our ad campaigns featuring Oprah Winfrey highlighted the freedom and simplicity of WW Freestyle. Starting in January, WW Ambassador, DJ Khaled engaged with and entertained millions on social media, and the enthusiastic positive response by his followers has been remarkable. To demonstrate the livability of the program, we went on the road during DJ Khaled's North America concert tour in a one of a kind activation. Khaled's Kitchen, an immersive food truck experience, gave people a taste of WW Freestyle, and showed how healthy can fit it into any lifestyle anywhere. I had the opportunity to attend the Chicago stop, and it was an amazing fun experience to see DJ Khaled and Chef Melissa share the freedom and flexibility of WW Freestyle with fans. The themes that drove our performance in Q1 have continued into the spring season with integrated marketing campaigns encompassing television, digital, social and leveraging our influencers and ambassadors. For example, in the UK, we work with the Chef'd social media influencer to launch our new Bakes cookbook, with a social media campaign including a #wwbakesmembercompetition (00:07:10) and inspiring coach-led bake-offs and meetings. And just recently, we announced filmmaker, actor and writer, Kevin Smith has joined the WW family with the goal of reclaiming his health, adopting healthy and sustainable habits for himself and for his family. Kevin is documentaring his experience on the new WW Freestyle programs in his assented voice and quick-witted humor his fans and everyone love to help inspire others to join him on his journey and lead healthier lives. He has been sharing his experience on his social channels, including with his 2.7 million Facebook followers. By presenting Weight Watchers, in new ways and with new voices, we are appealing to a broader audience, who may not have considered Weight Watchers as a program for them in the past. Looking at the U.S., as an example, approximately 40% of our member signups in Q1 were new to Weight Watchers, an increase in the proportion of first-time members compared to recent years. This strong performance today is a direct result of our execution across all of the elements of our strategic plan: excellent, effective, integrated marketing campaigns and enhanced member experience due to the efficacy and simplicity of our new WW Freestyle program; the enthusiasm and experience of our coaches and ambassadors; and the ongoing enhancements and capabilities found in our mobile app. As a technology experience company with human impact having an engaging mobile app with compelling content is essential. Our highly rated WW app is fully available to all of our 4.6 million subscribers providing tools, content, connection and inspiration anytime anywhere. Our aspiration is for the Weight Watchers app to become the world's everything app for wellness, the first app you open when you wake up in the morning and the last one you check in with before you go to bed. Now, looking at the WW app usage more closely, on a global basis, in the first quarter, each month more than 1.3 million unique members have synced the fitness device, more than 1.7 million unique members engaged on Connect, our digital social network community, more than 2.5 million unique members use our convenient barcode scanner, and members tracked foods more than 260 million times. That's 260 million times they can engage with us. And for our 1.6 million members, who are also looking to an in-person experience, globally we held approximately 30,000 meetings a week, led by more than 8,000 coaches. Our business has never been stronger, supported by a mobile-first technology platform. And agile development approach, (00:10:18) mindset, the beginnings of a brand-led culture with integrated marketing and a relentless focus on consumer insights, as we expand Our Impact Manifesto to encompass wellness. As we make bold moves to capture the opportunities before us, I am confident in the sustainability of our growth, and excited about the new opportunities we have in front of us. But before I discuss our future direction and next steps, I will first hand the call over to Nick to discuss our Q1 performance and 2018 outlook. Nicholas P. Hotchkin - Weight Watchers International, Inc.: Thanks, Mindy. Our momentum accelerated in the first quarter of 2018 with strong global recruitment and retention, driving top line growth and margin expansion. But before I get into the results, for those of you who are newer to our story, the core of our business is our high-margin subscription business model. Monthly subscriptions account for approximately 80% of our total revenue, and we are able to use marketing very effectively to drive recruitment. Using the U.S. as an example, the majority of our members join with a three month or longer commitment and receive a discount for that initial period, followed by monthly renewals at our full rate of $19.95 a month for online or $44.95 a month to also include meetings. We have predictable seasonal trends with approximately 40% of our annual member recruitment and annual marketing expense occurring in the first quarter. As such, Q1 bears the lion's share of the costs of attracting new members that captures only a portion of the associated revenue. On a global basis, average retention is now well over nine months in both meetings and online, representing more than 15% increase versus three years ago. This reflects improvements in the member experience and increasing engagement with tools like Connect, our social media platform, embedded in our app. We have also seen success in our long-term commitment plan offerings. Looking at the U.S. signups in Q1, 25% chose an initial six-month plan versus only 5% taking the six-month option a year ago. Turning to our Q1 performance, year-over-year recruitment growth rates comfortably exceeded levels attained during our last two winter seasons, bringing our end-of-period subscribers to 4.6 million, up 1 million or 29% from prior year, driven by very strong WW online performance. Total paid weeks were up 27% year-over-year in Q1, with double-digit gains in all of our major geographies. Q1 total revenue of $408 million increased $64 million or 20% year over year on a constant currency basis, an acceleration from the 14% year-over-year growth rate we saw in Q3 and Q4 of 2017. The strong operating leverage in our business model is reflected in the strong flow-through to profitability in the quarter. Gross margin rate was 54%, up 410 basis points year-over-year on constant currency. And operating income of $62 million increased $29 million or nearly doubled on a constant currency basis from the prior year first quarter, with 580 basis points of operating margin expansion. And while marketing expense was higher on a year-over-year basis, it declined as a percent of sales, as we focused on the efficiency of our spend. To demonstrate the effectiveness of our marketing, looking at our U.S. signups in Q1, the ratio of subscriber value to cost per acquisition was 5:1, which is the highest ratio we've seen in years. We delivered Q1 GAAP EPS of $0.56, which included a one-time positive tax benefit of $0.25 related to Ms. Winfrey exercising a portion of her offerings. This compares to GAAP EPS of $0.16 in Q1 2017, which included a net benefit of $0.17 related to the cessation of operations in Spain. At quarter end, our cash balance was $118 million with an undrawn revolver, up notably from year-end 2017. EBITDAS was $78 million in the first quarter, up from $45 million in the prior year quarter. Turning to our performance by geographic market, in Q1 North America revenue increased 20% on constant currency, and end-of-period subscribers increased 28%. Continental Europe revenue increased 26% on constant currency and end-of-period subscribers increased 34%. In the UK, revenue was up 12% on constant currency, and end-of-period subscribers increased 19%. With this Q1 performance and our spring season off to a good start, we are confident that our top line strength will continue for the rest of 2018. We now expect full-year 2018 revenue slightly north of $1.55 billion, almost 20% growth year-over-year driven by continued member recruitment growth, solid retention, as well as the flow through from the higher subscriber base at the start of this year. Our guidance assumes we will end 2018 with roughly 4 million subscribers, which would be 25% higher than the 3.2 million end-of-period subscribers in 2017, setting us up for a revenue and profit tailwind heading into 2019. This revenue guidance includes an estimated foreign exchange benefit of roughly $35 million. We're increasing our full-year GAAP EPS guidance to a range of $3 to $3.20, representing substantial earnings growth compared to 2017, driven by our continued operating strength. And this guidance assumes about 70 million shares outstanding for the full year. For the remainder of my comments, I'll speak to the mid-point of our full-year EPS range and on a constant currency basis. To provide a bit more color on our revenue forecast, in North America, our largest market, we anticipate full year revenues to be up in the mid-teens. In Continental Europe, we now expect full year revenue to be up in the mid-20% range. And in the UK, we expect full-year revenue to be up in the mid-teens. We expect gross margin to be up approximately 400 basis points in 2018. This reflects operating leverage and the strength of our online business, partially offset by targeted technology and brand investments that will advance our long-term business momentum. Marketing expense in 2018 is expected to be approximately $240 million or flat year-over-year as a percentage of sales. The year-over-year increase in absolute spend is largely due to investments in digital marketing initiatives and our Summer of Impact campaign. We expect marketing expense of up to $60 million in the second quarter. G&A expense in 2018 is expected to be about $245 million and down as a percentage of sales. The increase in the dollars spend is primarily due to high investments in revenue driving areas, particularly tech and product capabilities in addition to higher equity compensation expense. Below the line, we expect full-year interest expense to be $144 million versus the $113 million in the prior year. The increase is a direct result of the refinancing we completed in Q4 2017 to extend the maturities of our debt. And given our financial and balance sheet momentum, at the appropriate time, we may explore a re-pricing about that in order to lower our interest expense. We are currently assuming a tax rate of about 18% for the full year, which reflects the Q1 one-time benefit with the expectation of a roughly 25% tax rate for the remaining quarters of the year. For the full year, we now expect EBITDAS of approximately $470 million. Based on this outlook, our leverage is expected to be below 3.5 times net debt to EBITDAS at the end of 2018, down another full turn from 4.5 times leverage at the end of Q1. As we continue to be highly focused on reducing leverage, we may also consider small acquisitions with a good strategic and financially attractive rationale. We expect CapEx, primarily driven by tech spend, capitalized software, and office space investments, to be in the $60 million range. D&A is expected to be approximately $45 million. And finally, looking further ahead, we recently outlined our three-year goal to increase our revenue to more than $2 billion in 2020 versus $1.3 billion in 2017. We expect about 80% of this revenue growth to be driven by continued positive recruitment and improvements in retention with opportunities in products, licensing, partnerships, B2B and new geographies also contributing to the overall growth picture. As seen in our performance, recruitment growth results in gross margin expansion. In addition, we are managing the business to keep marketing and G&A expenses as a percent of sales relatively flat. Therefore, we believe we have future margin expansion upside and we expect our growth rate of profit to exceed our growth rate of sales. With that, I'd like to turn it back to Mindy. Mindy F. Grossman - Weight Watchers International, Inc.: Thanks, Nick. In February, we shared our bold move, our new purpose and vision to become a leading global healthy living brand. Our purpose is to inspire healthy habits for real life for people, families, communities, the world, for everyone. Not only am I pleased with our strong performance in Q1, and even more pleased and impressed by the progress our team has made in internalizing our purpose and operationalizing our bold moves. Our ambition is to be the health partner for everyone, democratizing access to wellness. 95% of people trying to lose weight are doing it on their own. We want to help them inspire them and be part of their journey to lead healthier lives. The world doesn't need another diet. The world needs a leader in wellness and a brand that can bring wellness to everyone, not just a few. We want to bring wellness to all people, no matter age, gender, race, ethnicity, life stage, geographic location or income. It is our intention to bring science and scale not only to weight management, but also increasingly to activity and positive mindset through partnerships and collaboration. Everything we do is first screened to our purpose filter and through the lens of member recruitment and retention. And I'd like to highlight five key initiatives that will have impact on 2018 and beyond. The first is Summer of Impact, people want to get healthy year-around, not just in January. All you need to do is look at Google Search trends to know that. We're preparing to launch our Summer of Impact, a global campaign, celebrating the Freestyle You (00:23:50), highlighting food, family and fun and showing how Weight Watchers can be a powerful partner for health in people's lives year-around. Historically, we have had little to know marketing presence during the summer months. In 2018, expect to see us inspiring people to be healthier, not just by using traditional marketing channels, but more importantly by reaching people where they are. This summer, we'll also be partnering with several non-profit organizations, whose mission and values align with ours. At the same time, we'll be kicking off an Invite a Friend referral program, which will be embedded in the WW app to encourage and reward members for doing Weight Watchers together, which are strong factors in driving both member recruitment and retention, and advancing the ripple effect of change. We piloted the Invite a Friend program in Canada, where it tested well in terms of member recruitment and it also had a positive impact on retention. Our science-based proven program can make a social impact and will create a movement to help underserve communities become healthier by making healthy habit accessible to all. As part of this campaign and to build community, we will be taking WW on the road and to events. In addition to our kitchen truck going back on tour, we will be part of the fourth annual Harlem EatUp! Festival, a week-long festival later this month, celebrating the food, art and culture of Harlem. Acclaimed chef and our ambassador, Marcus Samuelsson is creating WW Freestyle-inspired dishes that he will demonstrate on the culinary demonstration stage. Those dishes will also be served in our tent in the (00:25:41) marketplace where up to 5,000 people per day will have a chance to sample how delicious life on WW Freestyle tastes. We're expanding our partnerships. We have said that we want to own the healthy kitchen in products, food, content and experience. So to make healthy cooking accessible to everyone, including those leading busier lives, we're evaluating fresh food programs and how we can bring value to this space. As announced previously, in the U.S., we're working with FreshRealm, who brings national scale and expertise in food logistics towards launching WW Fresh, quick-prep, pre-portioned meal kits and individual fresh food products. We expect WW Fresh to be available at grocery retail later this year. We aim to expand this type and other fresh food programs globally. Together, with our partner, Gibson Overseas, a leading producer of kitchenware, we debuted the WW Healthy Kitchen line of tools and products at the International Home + Housewares Show in March. The line includes more than 100 health-conscious items from prep to cookware to storage, all designed to make it easier than ever to cook any healthier at home and on the go. Joining us at the show was Chef Eric Greenspan, acclaimed chef and restaurant tour author and television host, a new WW member and brand ambassador. Known as the king of comfort food, Chef Eric is seeing success on WW Freestyle by incorporating healthier techniques and approaches to recipe development into his dishes. We are focused on community and personalization, which we know are important to our members. Connect is our digital social network community and what is so unique is that the overwhelming majority of all of the posts are positive. It is such a safe and powerful community for our members to share their journeys and we have seen its positive impact on engagement and retention. We recently added notification badges, a reply button and the ability to like a comment. All these enhancements make it easier to stay engaged by keeping conversations going and encouragement flowing and, thereby, helping to create even stronger communities. We are continuously enhancing the experience to make it even better and keep members engaged longer. And later this year, we'll be adding new capabilities to make it even more personalized experience, including the ability to form topical or likeminded groups and tailored update feeds. And we're actively building out our data analytics team and capabilities to create greater personalization in the member journey in the years ahead. Rewards and recognition; we provide members with a deeply human and personal experience, an experience where they are inspired, motivated and connected. And I'm excited that later this year, we will be launching WW's first-ever integrated rewards and recognition program. But unlike other loyalty programs you may be familiar with, WW rewards will not be about dollars spent. We will be rewarding members for positive behavior and actions that we know lead to healthy habits, recognizing success with WW curated products and experiences. The testing results have been highly positive with linkage to increased engagement, satisfaction and retention. Built on behavioral science and motivational practices, we are excited about the potential for this program and think it may be a game changer for many members. And finally, our brand. A brand is so much more than a logo or a font or a color. Our brand is the articulation of everything we stand for and it starts with our purpose. And I passionately believe that the next wave of successful and sustainable brands will be those that help people live a connected life of meaning. And across everything we do, we are changing the conversation about what makes us unique and changing our mindset, so we can change how the world sees us. We want the world to see us not as a diet, but as a partner for healthy habits and wellness. Members are responding very well to our more frequent use of the WW mark, WW Freestyle, WW Healthy Kitchen, WW Fresh, as we modernize our branding to be even more culturally relevant and highlighting wellness. More to come on this evolution later this year. We do not see Weight Watchers as a program you join only for a few months. Our intention is to be your partner for life. Life is not static before and after. It's a continuous journey, and we believe healthy should fit into your life, not the other way around. We see a future where we touch every person's life, inspiring families and communities, and truly creating a world where wellness is accessible to all. So, thank you for joining us on the call today. And with that, we'll now turn the call to the operator for Q&A.

Operator: Thank you. Your first question comes from Alex Fuhrman from Craig-Hallum Capital Group. Please go ahead.

Alex Joseph Fuhrman - Craig-Hallum Capital Group LLC: Hi. Thank you very much for taking my question, and congratulations on a really terrific start to the year. Mindy F. Grossman - Weight Watchers International, Inc.: Thanks. Alex.

Alex Joseph Fuhrman - Craig-Hallum Capital Group LLC: So, wanted to ask a little bit more about the Freestyle program. Seems like that that's been a real home run for the company this year. A couple of things I'm curious about, now that you have a few months under the belt, I mean it's obviously a much more simple program for members to follow. Have people been losing the same amount of weight or are reaching the same health goals as they have under the prior program? And then, just thinking more broadly about the new people that you've been attracting, since you switched over to the Freestyle program, how does that cohort look compared to the people who joined under the prior program? Do people have the same health goals? Is it still looking to lose the same amount of weight? And then, you mentioned some very impressive statistics about user engagement and how many items are being tracked and scanned and logged. Has that changed at all since the program has turned over to Freestyle? Mindy F. Grossman - Weight Watchers International, Inc.: Sure. So, we could not be more pleased with the engagement with Freestyle, and actually our members have been losing equal to more weight on the program and that's with the addition of the 200 free foods. And you used the word simplicity, it's so important for our members they have a program that so easily fit into their and their families' lives, and that's what they're really appreciating and, of course, it works. So that's a proof point. In terms of – I think you saw the 40% number of new recruits. What we are seeing is a big change in the conversation around Weight Watchers around a broader set of cohorts, and that's what we're excited about. So, if you look at Kevin Smith, DJ Khaled, Chef Eric Greenspan, all of a sudden, there's conversations around young dads. So, we have very specific goals and in today's worlds of marketing, we can be a discrete around custom audiences, we can target the right influencers who are going to inspire other people. So, you will see over the course of the year and the next year, the diversification of our marketing and our influencer base to be able to do that. And we're definitely seeing and we do a lot of customer insight surveys that there is a greater awareness of Weight Watchers and a greater awareness of us as a wellness company, not just as a weight company. Now, I do want to say that we will never lose our position as the number one leader in healthy weight loss management around the globe. We know it's still very critical. We want to impact the health of people, but if we can move that into a bigger, broader perspective, that's even stronger as we integrate activity and mindset, because that is people's all the tools that are going to help them on that journey. Nicholas P. Hotchkin - Weight Watchers International, Inc.: Hey, Alex. This is Nick. Just to add, Freestyle is our homerun, but we're really reaping the benefits of having developed a world-class digital app to support all of our 4.6 million subscribers, and that's why that retention now is well over nine months, an all-time high.

Alex Joseph Fuhrman - Craig-Hallum Capital Group LLC: That's great. Thank you both. And then, would love to ask, if I could, it's about your advertising. I'm sure a lot of people on the call have seen the commercials that you started coming out with a couple of weeks ago. If I recall, I don't think you really did much advertising in the first few weeks of April last year, and it sounds like the campaign has gone well. So, looking ahead to your Summer of Impact campaign, and you haven't really advertised historically much in the summer. Can you talk a little bit about the opportunity to become a little bit more of a year-around presence on advertising? If I recall there were some times also in the fall in October and November, where there wasn't a lot of advertising? Is the plan to be having some level of marketing and advertising consistently throughout the year now? Mindy F. Grossman - Weight Watchers International, Inc.: Yes. So, we believe that we should have an ongoing presence around healthy living. Now, that does not mean there aren't going to be, what I call, the Pavlovian times of year that you will ramp that up, whether that's January, whether that's in summer. But we believe that a more regular cadence is how we want to approach it. I think you also heard from Nick that (00:36:54) are advertising, because we are being extremely diligent around testing both in our digital efforts, our social efforts and even in our TV spots. And you mentioned the most recent spot in the U.S., which is testing extremely well. But we're also planning for summer within the marketing that we'll be doing. We're going to be doing a lot of testing as well, so we can take those learnings for when we go into our winter campaign. So, having that strategic cadence has a multiple benefits. Nicholas P. Hotchkin - Weight Watchers International, Inc.: Okay. Look, I think the strategy of ambassadors and influencers is really enabling us to be visible throughout the year also.

Alex Joseph Fuhrman - Craig-Hallum Capital Group LLC: Thank you very much. And then, lastly, if I could just ask, I think you mentioned in the prepared remarks that it struck me that – correct me, if I'm wrong about the numbers. But I think it was 25% of new members this year signed up for the six-month version of the initial signup versus 5% a year ago. If those were in fact the right numbers, what was driving such a huge increase in that, you have been marketing the offerings differently or is it just really people just that much more gung ho about joining Weight Watchers? Nicholas P. Hotchkin - Weight Watchers International, Inc.: Yeah. It's – the numbers in the U.S. mix in Q1, absolutely right, 25% of signups in six months versus 5%. And I think it's the team kind of showing real good nimbleness and agile testing and learning to get the marketing messages and get our behavioral economics messages right. Oftentimes, best offers aren't the biggest discounts per se. The ones that psychological hooks that get people to join. That's why Lose 10 Lbs on Us was so successful for us. And that's why I think offering people the chance to join on six months plan upfront is working well for us too.

Alex Joseph Fuhrman - Craig-Hallum Capital Group LLC: That's very helpful. Thank you both very much. Mindy F. Grossman - Weight Watchers International, Inc.: Thanks.

Operator: Thank you. Your next question comes from Kara Anderson from B. Riley, FBR. Please go ahead. Kara L. Anderson - B. Riley FBR, Inc.: Hi. Good afternoon. Mindy F. Grossman - Weight Watchers International, Inc.: Hi, Kara. Kara L. Anderson - B. Riley FBR, Inc.: Just one for me. When you think about the big picture of being a total wellness app or company that really works for everybody, what do you think you can do better or how do you think you can do better on the fitness side? And how is the utilization of the fitness portion of the program among your members today? Mindy F. Grossman - Weight Watchers International, Inc.: Yeah, I think we have a huge opportunity, Kara. And we've got dedicated teams focused both on the activity side, as well as the mindfulness side. We have tech and product teams, as well as those teams working on what potential partnership we would have. So, if you look today, people are tracking activity. They have a certain number of activity points a week. But we feel the integration is going to be that much deeper. The second opportunity is the more we can use data to prompt and anticipate and recommend both on the food side as well as activity and mindfulness. So, we have a long range plan, where we'll add additional elements within the app journey as well as within the content journey and what we discussed in our physical environment. So, you will continue to see implementations over the course of the next couple of years. Kara L. Anderson - B. Riley FBR, Inc.: Thanks.

Operator: Thank you. Your next question comes Greg Badishkanian from Citi. Please go ahead. Frederick Wightman - Citigroup Global Markets, Inc.: Hey, guys. It's actually Fred Wightman on for Greg. Mindy F. Grossman - Weight Watchers International, Inc.: Hi, Fred. Frederick Wightman - Citigroup Global Markets, Inc.: If we look at the strength that you guys have seen in international markets, I mean they accelerated again this quarter. Is that changing how you are thinking about rolling out the platform into some of the markets that you are not in today? Mindy F. Grossman - Weight Watchers International, Inc.: So, here is how we're thinking. We are definitely thinking that we have the potential to be a truly global business. And we are really working diligently to ensure our technology, our processes will allow us to be able to have the capabilities for further expansion. So, the way you should think about it, our focus right now is in the markets we're in, and growing them and strengthening them. Then, what we are doing is the strategy under Nick in emerging markets. The strategy of what markets, what timeframe and making sure that we have the technology or the potential partners or the right strategy going in for the brand. So, if you look at the goals that we set through end-2020, we did say that there will be new countries and or markets, but that will be later relative to launching after we've done the strategic and technology work. Nicholas P. Hotchkin - Weight Watchers International, Inc.: (00:42:41) because, Fred, when you look at our business, I mean we are barely in Latin America. We've got a small business in Brazil, and don't have a presence at all in Asia Pacific. So, we've got terrific long-term opportunities. Frederick Wightman - Citigroup Global Markets, Inc.: Makes sense. And then, I think you said length of stay was up 15% versus three years ago. Can you just talk a little bit more about that? I mean how much more room is there to grow that into the future? And do you have a sort of a target in mind? Mindy F. Grossman - Weight Watchers International, Inc.: So, my target is that I'd like to be talking about retention in terms of years not months. And saying that, as I said, the lens that we're looking through for the prioritization of our investments, our strategies are around recruitment and retention. And we know that if we keep adding value for our members in our program, in our engagement, in our community, that will have an impact. And the more we talk about holistic wellness, not just weight, we become a different partner and we can serve a different content. And then, lastly, the more we can personalize the journey, the more we will see that. So, we do a tremendous amount of tests and learn, our efforts are all around that. We get constant feedback loops to make sure that we're servicing as much as we can for people at no matter what phase of their lives. Frederick Wightman - Citigroup Global Markets, Inc.: Great. And then the last one, you sounded a little bit more open to M&A going forward. Could you talk a bit more about what you meant by that? And what areas you might be looking to get involved in? Nicholas P. Hotchkin - Weight Watchers International, Inc.: I would say that improving our balance sheet as clear capital structure priority and look that's happening rapidly with us being 4.5 times levered now, down from just 5 times last quarter. So, growing the business and improving our balance sheet is our priority. But within that, as you us do successfully with small start-up acquisitions on the West Coast, selectively, if there are good strategic and economic rational, small tuck-in acquisitions, we'll consider them. Frederick Wightman - Citigroup Global Markets, Inc.: Thank you.

Operator: Thank you. Your next question comes from R.J. Hottovy from Morningstar Research. Please go ahead. R.J. Hottovy - Morningstar, Inc. (Research): Thanks, and good afternoon. I had a follow-up question regarding both, I guess the new first time users that have come on to the platform as well as the retention rates. You've already talked about this as a broader demographic that you've been able to attract that first time user. And just curious to get your thoughts as you kind of start to hit the nine month period with all these first time users, whether or not there is going to be any new tactics to keep that retention rate going. Obviously, Mindy, you just talked about some of the techniques that you plan, but assuming that the WW rewards is a big part of that, but some of the other things that with a broader group, what are some of the new tactics that you'll be looking at particularly over the near future to really promote that retention rate? Mindy F. Grossman - Weight Watchers International, Inc.: Yeah. We still have so much room to grow in terms of diversifying our base. So, that's the first thing. And today, because of the capabilities within digital, both marketing and data, we could be so much more relevant to different segments of people, because we know who they are. So, that's definitely part of it. The second is really focusing and utilizing content in a different way for different audiences. And then, third, which – you mentioned rewards which is obviously going to be important, but allowing people within our digital community to find and form their own communities of like persons, like for example, we have a group called WWBros, right? They're in the Connect community, they connect with one and another and they've actually had a physical meet-up. So the more that people feel comfortable with people like themselves that they can share their journey, get inspired and communicate, that all becomes part and parcel of retention. R.J. Hottovy - Morningstar, Inc. (Research): Thanks. And the second question I had just had to do with partnerships that are out there and, potentially, maybe out there down the road. With the Healthy Kitchen relationship, it really shows that you are thinking outside the box, and looking to new avenues that can really take and put the brand and – but how do you manage that? And at what point do you maybe – are you – you balance it with maybe stretching yourself too far on some of these potential partnerships? Just trying to get a thought, how you're thinking about that. I mean, it's a very interesting partnership, the Healthy Kitchen relationship. Obviously, something the company's never done before, but how do you kind of test these different things that might be out there and maybe moving too fast in some of these categories? So, just curious to hear your thoughts on that. Mindy F. Grossman - Weight Watchers International, Inc.: Yeah. We're being very, very strategic. We're testing things in certain markets before we roll them out to other markets. There has been a lot of work underway here and we're testing and learning. And the global teams are organized so much better today around global sharing and leveraging and so, we will certainly do that. And I think, my background is in product, licensing, merchandising, marketing. So, having an understanding of that and knowing what the right capacity is to roll out, we will make sure that it makes sense. And we really did develop this purpose filter, which is what allowed us to look at the Healthy Kitchen. When we came out and said we're taking our name off of anything that has artificial ingredients, et cetera, and we are in the process of reformulating a lot of our direct source products that we sell to fit into this. So, it actually gave us more permission and capability to have the kind of partnerships that we'll be able to have in this space that we wouldn't have been able to do before. R.J. Hottovy - Morningstar, Inc. (Research): Thanks.

Operator: Thank you. Your next question comes from Frank Camma from Sidoti. Please go ahead. Frank Camma - Sidoti & Co. LLC: Good afternoon, guys. Mindy F. Grossman - Weight Watchers International, Inc.: Hi, Frank. Nicholas P. Hotchkin - Weight Watchers International, Inc.: Hi, Frank. Frank Camma - Sidoti & Co. LLC: Thanks for taking the call. Just one quick clarification on the average length of stay here. Are you closer to 9.5 months then? Is that what you said? You said significantly well – you used that wording, I mean is there a way you can actually like define that? That would be one. But the other point maybe I just need to understand is, if I'm a meetings member, and I get to my goal weight, do I continue to pay when I'm on my goal weight? Mindy F. Grossman - Weight Watchers International, Inc.: So, I'll take the second question. It's really interesting, what we're finding is, yes, they may get to their goal weight, but it's the desire to have that community to give them the inspiration to keep themselves where they are. And it really is up to the individual, like what I'd like to say is let people discover the WW, that's going to resonate and work best for them. And in some cases, it's the digital app and the digital community; in some cases it's the meetings; in some cases people want to go to meetings, and then they want to take a break. I mean we're just trying to make the engagement, the content and the community such that whatever they choose, they want to stay. Frank Camma - Sidoti & Co. LLC: I thought, maybe I had it wrong, at one point in time, didn't customer sort of – if they maintain their goal weight for a certain amount of time, they basically got comp program or do I have that wrong completely? Mindy F. Grossman - Weight Watchers International, Inc.: No, no, no, you do. Frank Camma - Sidoti & Co. LLC: Oh. Mindy F. Grossman - Weight Watchers International, Inc.: But there's – yeah, if they've maintained their goal weight for a fairly long amount of time, then they can continue to comp, yes. Frank Camma - Sidoti & Co. LLC: Okay, okay. Nicholas P. Hotchkin - Weight Watchers International, Inc.: And, Frank, yeah, you heard the number right. I mean versus three years ago, retention was eight to nine months for a long time. So however (00:51:48) increase by over 15% in the three years is well over nine months. I don't want to get into passing between 9 and 10, but it's well over nine months. The more important thing is what's driving it. It's primarily been driven by engagement and things like Connect and our leading world-class digital app. Long-term commitment plans are helping too, and (00:52:18) strategies. But it's the engagement strategy that is really paying off for us. Frank Camma - Sidoti & Co. LLC: Okay. My second question is, being a man, the only thing good about being on a diet is stopping it. I was wondering have you made any improvements with your mix with men? And the, second part of that is just demographics, in general, since you have this brand ambassador with Khaled and other people, have you seen any shift at all yet? It's been about six months – well, I guess not even six months. But are you seeing a younger demographic or are we still basically, female, 50-year-old is your primary consumer? Mindy F. Grossman - Weight Watchers International, Inc.: Yeah. So, how I'd answer that is, we're seeing movement. But that takes time. It's both movement of members. But what I'm really excited about we really see movement in perception, right, which is the start of where you have to go. And to your point... Frank Camma - Sidoti & Co. LLC: Do you have targeted marketing for men like specific programs or anything, because I haven't seen that? Mindy F. Grossman - Weight Watchers International, Inc.: Yeah. What you're not going to see from us is some big announcement of Weight Watchers for men. That is not our strategy. Our program Freestyle works unbelievable for men, it works for women. It works across demographics. What we will be doing is targeting our – you'll see overall diversity in our marketing, like if you look at the commercial that we're running right now. And then you will see our marketing efforts in certain channels going after certain cohorts definitively. And as far as length, what we're trying to do within the program is become like just a monitor for healthy living and healthy eating and activity beyond just, I lost – because how many people we know, we lose the weight and then we turn around two months later. So, if you can have an ongoing dialogue around what it means to be healthy, ultimately people are going to have a better experience. Frank Camma - Sidoti & Co. LLC: Does your app track other metrics such as blood pressure, et cetera, that would therefore tie those elements into health (00:54:33)? Mindy F. Grossman - Weight Watchers International, Inc.: Yeah. Today, we don't have, what I would call, the medical side of things. Our Chief Scientific Officer – we're constantly looking at what other elements could be valuable. Right now, we're focused on activity and mindset as the next wave of integration within the app. Frank Camma - Sidoti & Co. LLC: Great. Thank you.

Operator: Thank you. That concludes our question-and-answer session. I'd now like to turn the conference back to Mindy Grossman for closing remarks.