- Earnings call transcript Q3 2022

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Operator

Good afternoon, and welcome to the WW International Third Quarter 2022 Conference Call. All participants will be in listen-only mode. [Operator instructions] After today's presentation, there will be an opportunity to ask questions. [Operator instructions] Please note that this event is being recorded. I would now like to turn the conference over to Corey Kinger, Investor Relations. ahead. go Please

Corey Kinger

third is release for at some quarter everyone, Events. press Investor on provide Eastern today of WW financial to are well reporting measures for The today, of directly on as materials the The also Thank call on located progress. as results details company's this Presentations available the Reconciliations conference also joining general regarding the call. a website corporate the available measures most third is our release press XXXX disclosed issued investors p.m. comparable website this corporate.ww.com. are to XXXX GAAP and At International's press company's non-GAAP section update results. the we purpose with you, provide part release. under a in us quarter further investor about as conference Time financial company's X:XX Supplemental of the company's call available on corporate to the

we everyone discussed to risk statements. as in me and of the obligation and Commission. or cause are law, are uncertainties results future call made could uncertainties and or to result that from by to aware materially for in are various publicly detail except undertakes this discussion and Please forward-looking a statements, risks remind These any company's filings company otherwise. forward-looking subject forward-looking no Exchange required any these that that information, let statements, such should the detailed the be the as forward-looking refer risks today whether Securities Investors actual revise forward-looking update contain here statements. and a more of of events, explained will new as statements to All today. with differ those Before begin, factors statements also filings of

turn Sima. call Joining Sistani, CFO. over I today's now O'Keefe, CEO; Sima Amy will the call are to and

Sima Sistani

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

We pillars by wide early that our That time. and indicators our to turnaround open four community, data-informed eyes of and we results. our are that coaching approach take focused will are said, positive encouraged accountability being product development yielding

to the sequential We compelling our have update year-over-year solution, improvement time work our but of most substantial to driven in short deliver to the product in do resulting that are here been amount a in initiatives a sign-ups trend. the already, I've

are continue confident the the and have us We critical increase to leaning will experience our for year identified member category. and that our building we next position grow moments I'm headwinds, Despite through momentum in to as retention in beyond. leader

We that a years who have program entrants in space XX efficacy new love come a where of us, and members works, go.

foundation solid into that turning experience the a for future. best-in-class are We digital

transition, what XXXX a away initiatives and to shifting back do of have resources else, member that be better been year driving we not consistent We the impact that experience. and off and from an were complicating anyone than would focus waive

We with done urgency. have that

sustainable weight and growth. company and confident. solutions, need on loss a for We the are return have for to trends improved remain The focused efficacious positioning

Our sign-up the differently and of were pressure weight. campaign, be a creative in building. in agreement acquisition internal efficient where an Relative our want with The pleased trajectory proven as in messaging sign-ups still to is up solution energy US with performance weight well simplified during notice. our member with loss Watchers, for quarter, a campaign a here our stance effective, make message modern, to brand in ran broke has above who consumers for has coming on the through. unapologetic The positive and a demand simple despite choice. while to being delivered took Watchers about expectations, basis, as is down Weight We that lose we our improvement year-over-year of the to modestly QX, category. high spot our We Weight both showed fall people

cohorts. members, in not among with consideration. is significant Ad campaigns, and awareness on Importantly, also consumer conversation topic to Weight and of our spend. social despite media, par spots we through up on new became only significantly year-over-year former winter Watchers The brand significantly ability but lower a showcasing culturally saw [ph] break increases

our We team shift all are to progress with spend, to to to making from will during and media America, leveraging we season. traditional buying we and But cancellations By marketing. are performance modest positive media impacts also in the uptick global commitment quarter, learnings faster headed while of to market, in as related more ended we trends from we the responsive seeing data-driven July. efficient a North creative and on sign-up trends, are peak six-month largely that our in plans be in-housing these we saw

compared points a issue We programs, knew product engaging member for. simply member found an what and and our have following has simple actively are our to declined reinforces we satisfaction already experience. that provide we must that with This and prior personal program engagement

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that activated non-activated member. is churn roughly at that rate shows data half Our of a members a

successful data our more will be and supports over term. science that the these Weight Watchers on long members addition, In the

will we efficient member promising that recent are to the network driving made observed a longer acquisition lead the activation have create behaviors rates, uptick app months and are delivers retention. connections have a that that we the demonstrating working, and Now in we to changes success effect measuring that

positive in to engagement better in increased that products. food this lineups products, have of With of double-digit our month, improvements weight leads the a techniques order product encouragement we mind, choosing results our our short, about calibrate update and planned which velocity, funnel onboarding to future, mouth, now excited changes increasing US, to to which churn, new streamlining a greater driving program moving satisfaction, lever, demonstrated of food our the I reduction makes we tracking with and tracking has able there activity and better the our and weight in test a to material forward. to has in to is organization, leads quarters. usage search that loss This contributed road accountability, gamification a we a retention Recent more last rate. considerably future believe and out meaningful iterations a continuously consistent to are and efficient our of contact greater a our map premium activation In we ultimately are the in-app activation in the to future service of enhance in coming We need operations, choosing customer marketing retention the share technical of drive which increase needs engagement, in our meaningful agile, algorithm improved weight testing, and evolving clear as sites. learning include, be increase reduction fit the and members. an driving in demonstrated that, showing rolled increase greater word are by we

innovation. a are and action, We culture decision-making to to company bias instilling evergreen committed a data-informed

a a actions, understand survey we should activation implemented plan new analytics rolling the our personal to been it the scale all overwhelmingly months. our Early on quickly. shown uncovered Weight program members in have what and have better. MPS, current the noted coming personal We tremendous members under a laser weight achieve could the for our analysis program and focus food member weeks. members during subset that out the this we goals. earnings rate, believe changes points effort, simplified supporting test decision been and follow been to feedback Because we simplified asking members in will of help results inform decision how ourselves in out did has And and behave loss show performed After and time easier to for. As outperformed has -- to direction, coaches first We positive. call change Watchers validated through that AV diagnosed their following the And our to issues our plan on have their their announced August, this three to an recently last of points new this results inform plan rolled with a ever, has data make further through to to we the begin challenging and

We certain a we point just the that healthy elements trials. been will us a XX in to we brand from better, with improved look XXX will of fats be that peer-reviewed and documented program to no key to more as a a that performance. personal advances studies science, We experience There is latest have product incorporates well program fiber, has in randomized a on it and and deliver including controlled ability peak and the path than diabetes retaining the put works. added deliver nutritional winter strong members Watchers to the including sugar. question season, for Weight deliver in member algorithm place That standpoint, the living points, need for ahead essentials both

connected of However, subscriber to I is performance do deliver turn to our our I IRL call and drive work the outlook. good intersection a to QX over to future, still community growth. -- that have digital which the and of will will deal the we believe Amy discuss at

Amy O'Keefe

we was ahead of our cost the down pressure, in -- despite to X.X including have The our delivering million efficiencies. the address income Thanks, revenue QX We subscribers, XXXX, taken actions expectations Sima. quarter operating year. FX are we that Adjusted with XX% quarter headwinds. prior from for the finished base

QX. As sign-up trends we mentioned, sequentially in year-over-year improved our

revenue unfavorable the modest revenues. XX% Adjusted to of down to However, million XX of points margin the just mix increase and basis slipped gross down with this primarily to due year, related was including FX subscription basis from third XX% offset to approximately subscription lower $XXX under points retention basis – quarter. primarily a was XXX cancellations. XXX decline of Revenue prior points months in FX. approximately average due XX of was in headwinds, by of

X% revenue due prior $XX of pressure and the restructuring as actions, was and the a year, working with margin gross with marketing, studio margin in prior optimize XXX basis, taken workshop adjusted increased currency down a result down from million, $XX FX. strong of benefit million million actions discipline, well year-over-year, as by savings headwinds. ago expense million from was to Marketing in our just the quarter, primarily offset G&A spend over overall year of Adjusted reflecting to Adjusted $X from constant the gross on versus FX. income efficiencies nonworking $XX marketing million of up footprint. adjusted operating as $XX remains quarter FX basis was points year or improving slightly However, versus a benefit

by of $X.XX During share impact an identified which updates capital. the charges franchise we net of totaling the performance, our testing. GAAP $XXX in and of interest intangible a triggering items XXXX, that The charges. million. acquired, including weighted recorded impairment we average to rates cost capitalization was rights including were previously noncash business for several incorporates and A charges announced indicated impairments net QX $X.XX, quarter, loss event entirely noncash comparability, factors, restructuring almost negative few plan. per driven the increase impairment market affecting of In restructuring impairment

cash increasing restructuring year prior You action structure, to forward. of G&A. and charges impairment million $X report $X resulting assets impact $XX in of organizational full reported $XX in estimate our will QX, primarily streamlining $XX million approximately increase QX, million this operating In on versus costs the to noncash estimate office will related we in expect focused in savings reflects that restructuring recall to lease of approximately reduction The corporate our was estimate annual space, the of going of million. million which

have to consumer SKU in markets, and decision These North to sales products consumer discontinue both we lines addition in In of rationalizing count online. unprofitable. workshops in product our of America, business international our the made were

first to expect the half XXXX. have started process the and complete it in be We of wind-down

we $XX remains a Importantly, over markets, of continue we sublease channel actions In in total, expanding XXXX consumer income, from now up our which to license includes within from priority. estimate $XX restructuring to expect and million. million, annual savings savings, international products year million, will $XX approaching our this be prior

a of subscribers and pressure lower a the We of as at result in headwind. QX revenue expect further end end-of-period significant FX QX

Adjusted XX% FX XXXX at gross down a to similar to basis. XX%. the margin reflecting X.X down $X.XX subscribers. end mid-teens lower expect year on be is is subscribers, full approximately on the at basis, now to year pressure and million approximately to We expected year will be Revenue expected year-over-year a approximately for reported in which for be the billion, the

XXXX. full year-over-year. expected $XX anticipate we $XXX down for the million million to Adjusted approximately be be down range marketing, is from G&A year in the spend to year full For XX%

are income is to income year rate lower reflect million expected and We approximately million operating adjusted operating XX%. FX effective year revising the the $XXX to headwinds. revenue adjusted range. $XXX be The guidance expect for to now We incorporate be to our additional tax full in

our For the this excludes of Full to $XXX on rising expense and term our million. $XXX million and against hedge a notes affecting clarity, fixed other loan impairment protect impact of is have rate. rates variable approximately are Note expected interest million restructuring, comparability. be year that to million items we $XX $XXX interest

interest at million be current Therefore, range in negative GAAP our of is $X.XX anticipate net of debt other items floating. expense to So of XXXX. level, debt per is in diluted $X.XX be share, only to comparability. expected the our total XX% affecting restructuring, and EPS which $XX $X.XX impact to the impairment we Therefore, incorporates approximately of our loss approximately

Turning to sheet. the balance

CapEx flow X.X at strong QX an an X.X from cash our million versus model benefit of leverage with QX approximately capital. revolver. low end We continue times $XXX million plus ended QX, subscription working from cash, $XX was net-debt-to-EBITDA from and the to We of generate of ratio times, up QX. undrawn increase and

the the into first in trailing under QX, XXXX. leverage to facility, our which expect lien revolving exceed our XX-month QX ratio credit we ratio expect to further We will limit in Therefore, leverage be and increase both in to due $XX.XX are range. more-than-ample primarily revolver $XX a access which still provide expected to the our cushion. and CapEx capitalized million, should D&A million liquidity software to to

levels manage From the of our our continue and liquidity term declining cash current of will stock perspective, in revenue. price. as and is trading responsibly notes are capital this We allocation to a attractive loan period discounted certainly

XXXX given sign-up peak liquidity, our believe However, we the headwind preserve to it risk, expected entering overall through macro is prudent and subscriber particularly, season.

as expect active our opportunistic to to no but reevaluate headwind have view prepayments foreseeable significant to repurchase shares Related XXXX, given will year-over-year revenue in XXXX, in We we future. subscribers. the excess on for compared in plans have the we cash a debt opening XXXX, expected utilizing decline discussed,

before headwind translate business lower subscription of Using $XX component and subscription XXXX the opening is sign-ups. XXXX starting year-over-year would to would flat expected nature over subscriber mix Given year-over-year. scenario and factoring same a rate, change the basis help a in over $XX million for important FX currency pricing any $X.X in subscriber level our ending sign-ups XXXX revenue the in base XXXX of revenue model, with now illustrate are an million the be in constant in of on revenue into even of the million XXXX, subscription where lower subscribers and a assuming

consumer adjusted summary, in favorable in exceeded quarter, rationalize the exit of impact into international and the on we and pressure third also create base further in negative a while In to impact lower operating from and opening a performance XXXX in a headwind markets albeit will expectation financial income $XX working taken product will active XXXX. actions North FX we've with the QX impact capital. million, our earnings negligible to a sales addition, products and approximately In America during

the are to now taking to Sima. appropriate so call the the to will the through we'll We do trough. are I confident business that we earnings back and as actions manage cost continue required turn

Sima Sistani

year strong returning we throughout member of growth following; in-app narrow that ahead on retention, priorities, of on a believe members first which so Amy. I better women are XXXX we growth from the focus community the shipping year-over-year clear they key they the in in returning Gen lifetime is make bulk They the XXXX us Abbott, translate half With drivers Thanks, Watcher. support. of came that critical are later of list us over and product in Their retention digital are the a new looking with second era, we United be sign-up to movement. and gains Watchers the experience executing cost and product education, integrated improving show improving which year, is and was love exercising possible branch. in tell a and new members. company trajectory the believe course the I discipline that when to trajectory. including our right. for were These milestones, a organization are into proud that to the feature me for our features the meaningful, trends the Whenever XXXX, to of get long-lasting People Weight identity but wrapped our to half up context, for the we and Weight a would activation, to when meet members more

in community, into match As science-backed position to Technology to premium counterpart. Culture members our our apart. integration, in-person with significant The needs. us intervention. there we studio our for our clinical and our experience XXth part needs features digital-first and truly to to Coaching experience health strategy community is deliver of has being now our of community meet being with are education members is across DNA From opportunities and device the tools, a seeking continue us must tool to human effected as consumer better have screen must set digital led must are from experience. at for digital-only And and growth mimic to will we to workshops XX% enhanced indicators premium evolve changed. a weight sustainable leader those today. changing, we move and of And insights management, consumer has changed. support, global evolve year, the maintain

the relevant delivers will places you now members. Question-and-Answer believe, against workshops, culturally in to to have namely We and brand us for needs right by excellence, that questions. our reasons livability with And sustainability. Watchers science, that right Thank to success the program noise We ensure Session your through Weight must we the for our open the and a are today. happy take today. know working the we're to staffed coaches, with drive right we break community, be joining to deliver

Operator

Research. begin from session. will with Wolfe now first go Please is Spencer Instructions] question-and-answer the Our ahead. Hanus We [Operator question

Spencer Hanus

driving for up-tick Thanks think Good has about to And been you a be member quarter? a retention? you afternoon. need what's And taking cancellations? exiting how do in that from question. bit the little my Can talk trending any the made pricing to standpoint improve changes

Sima Sistani

Spencer. Hi

was So mentioned, the by we saw six-month up-tick was about cancellations, plan. in it XX driven that mostly we as the

addressing So points to anticipate personal take program. focused Rather, itself. personal don't we that. on as a satisfaction last on And actions tested we address our that three saw any program that with points that and we've is on noted, back new to And different the pricing that the we a out relate rolled of months cohort having outperforming. to version, around members people within have based and

we're that in So in activation an associated that. excited with to anticipate be few again lift next rolling and the out rate weeks

Spencer Hanus

make this forward, the about then, simplifying has you're thinking going whether that's you season, just past? That's ways the as on how to we team how program the easier membership to than look the next program use. And tiers to approaching any or helpful. diet other the Okay. And in one thoughts additional differently are

Sima Sistani

Sure.

bit asked Sorry, a think diet there's on little hear, season. you to some that's line, but our I making feedback about the it hard

an We're exciting and innovation more it's program than evolving member a is And innovation working existing evergreen cycle. from into members And and are our which different And this is heard loud way our clear simplification. coaches taking a and we've -- So years. simplified them. base we're the to for program. from more think I for that they our account what's asking traditional

observed, seen improved have outperformed mentioned, I a and and by not the we loss. as success. engagement And also that, so we UX, that weight And specific we have cohort more mean have only has

the we and showing that peak we really brand something to is speak can consideration that as fall conversion. is standpoint, into consideration a meaningfully with that to turning about in so, all the about from up And and look season

really going we're peak have consumer. to so And to we're what value meaningful And the our season. to target focused on that's into to, moving speak

Spencer Hanus

Yeah. Great. so Thank you much.

Operator

from English Jason Goldman The ahead. with next Please question Sachs. go is

Jason English

slotting evening. A folks. Yes. Good of me Hey, couple Thanks in. questions. for

expect talking front about guess, simplify recruitment basics, be marketing on program kind the any in I first, stick spokesperson, diet of really and about? keep the we're cycle. the season anything So to topic on news we going approaching message back like the is of or to that, the like simple new Should it a

Sima Sistani

we've and this asking we've the new members Yes. seeing, members, to heard listening moment, they're Look, drive observed at And that have those that think That's simplification. are I new program the again, and version really not only relied That's of for. in right. and the again, news success. our better past, better -- and what on activated we're on that is we're we've interest, that's news that, about the but

And need new community, member -- And our powerful reason the change, to there who our who's last so, base all customer reasoning also livability who believe. and it's message around that to I are asking for science, members that's think, cohorts a the been there. to this but the existing

excited new and so, those messages. the that in learnings being about we're with and of up marketing what around when way. muscle more from we And in-house past matching really deliver performance And and our our how nimble sort showing works

to feature So in to season that that's improvements roll forward community will what peak the exciting QX. throughout out we're in some addition looking

Jason English

from world intel, if getting it? out or competitor consumers canceled it like pharma going, Thanks pay do any do where or Wegovy maybe these the program. off be like the And And have a for whether like solutions to cancellations, that DIY new of into that. intel and just you you've on have are you the what learned you can good on Noom share

Sima Sistani

That's question. interesting an

at more space think the broadly, market wellness that, in it the and look our think for demand, we is there. overall, about I we still when

who overweight got to You've they're struggling of XX% obesity. looking And adult Americans for with and support. -- are opportunities for

ultimately, when really that everybody industrious. think competitive mean, more the -- it it's competition be about so, intensified we our more COVID, learning over I how doing yourself. than our husband was to to was guitar, brother play try My media how fixing support my lose himself and teaching to find washer. gosh, resources -- different to is the And And weight. to was where landscape, and turn social anything, the to to people have

we off And we're on, or to not people see they ensure for it's value pay in the because are giving value the so, outsized that's when what for. and canceling them we're that the moving giving and our that in we're product, focused the confident plan, program we -- doing what work we're

NPS really, program. what's with there is, were we happy I people think, on personal not that's the So happening points, saw with that

leave mouth, and addressing and in styles that able for I think and more And we those that. know to going them let to more leads have for we're to that we our We're come people have us, that so, can continuing members taking the been program to it. think about elevate thinking continue is works lot program did of we think to to big more opportunity a trying versus leads And because there Again, there of application of go efficient problem. that about the we've rolled And to I us innovation new about that make the addressed know leads for it better news evergreen packages. there. and when make which choose back word in it that's different more -- We're to when program real off shiny, always diagnose came, the And the a opportunity have that sign-ups. positive speak to deliver it. how better is to to something they who to we to

that's to so cycle the virtuous what we're focused that we're And and here on. create trying

pharmaceuticals their did to and to part the that still for think the just there mention you a that, address is think your start though, and really Look, I is for it's question, outside -- a loss I weight those schools. in and are generally, lose market terms people, -- population for -- barriers way financial clinical in we're order And weight to where their them there Now necessary here to drug of manage mass to -- -- drugs the help help to there needs. of of the exciting. intervention significant to is second jump

And can so not responsibly see people get that and excited pharmacology we interventions so that with for drug really so evolve the the and off to living those lives. we're that introduce eventually their the they're of to partner rest

partner And looking so ways pharmaceutical bring that who's very to a weight -- leader market interesting the companies responsible it's great for to especially that for us, is that management are I as the think the XX been a I to around for in space years, clearly, population. believe make we

Jason English

sense. Makes Thank you. it. Got

Operator

next Instructions] question is Capital [Operator with Group. The Fuhrman Craig-Hallum from Please go ahead. Alex

Alex Fuhrman

Europe of And more be question. particularly in new to brand that program? cancellations? many what personal the that then the give Is how same? about members to of regions in are year personal comment the signed membership and I of share percentage it of inflation, of Can your during some points? would if the for Just get like a outsized much I'd curious chunk like compare UK off talk And high membership are operate what in typically kind after made of Hi, more taking that bit your in very a how seeing. curious an a rolling of people for points. in could experiencing, the November seeing that that would you're about program color little just six-month you membership cancellations new membership? bit you on us about my thanks today up has the in the little sense point if signed increase you I'm personal up your they a

Sima Sistani

personal last for which Weight higher signing And you mentioned. for of as Anybody our thank a question. during point. than have year sign-ups certainly, your would six-month up prior for the up who's season signed for canceled up signing we a Watchers plan, as peak XX% Well, about been rate

this believe a address be uptick QX we I'm ability be really to So this our would confident to event. in And it.

through we are where that success. This us. able in before, a metric based as at is specific to days. XX noted first way model data activation rate. in we're member key we I that look And the It's -- a that on of making engagement been As for measurement actions new have leading new indicator a science, the we now we've

so when January and XXXX -- in when X% that to activation XXXX the we And was looked the direction. moving you at looking point, at drop had were wrong a trend in we at seen activation levels, already compared in

Now you smile. amount to able I've have joined I a turn ago, about I'll short time, that been and incredibly seven that impressed months that it line been and around in remind make of we

around yet. we're X% So and drop back we our the that levels, rolled velocity in doing, activation shipping and mentioned, features is to through we've happening our out and that work new that even program XXXX new simplified that that gap I already narrowed haven't

reduce event, in So was also we because I think improve improve cancellations QX as looking meaningfully to again, that we it that, a activation, and uptick we're churn.

Alex Fuhrman

the you and was seen or Okay. the globe, a seeing helpful. drop UK. evenly that then Europe part hit long off in it the throughout are you particularly And of a That's question have big is, really sorry, other the -- question

Sima Sistani

even the was globe. around It

Alex Fuhrman

helpful. much. very you That’s very Thank Okay.

Sima Sistani

you. of End Thank Q&A

Operator

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

Sima Sistani

on loss with build foundation a efficacy nearly a future. weight which for of -- to we millions digital have So experience a and strong the of XX community years

We future, our community is have going the to on connected I to company I'm a have experience. deliver that the know strong improved work sustainable we that in us do to and essentials a but growth. is our to to performance return This put for path confident place deliver member

season We are looking and the much. Thank forward so you connecting to future. our in with winter you again peak

Operator

now has you for today's The presentation. Thank conference attending concluded.

You may now disconnect.

WW International (WW) 4 Nov 222022 Q3 Earnings call transcript