Good day and welcome to the WW International First Quarter 2020 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, VP Investor Relations. Please go ahead.

Thank you to everyone for joining us today for WW International's first quarter 2020 conference call. At about 4:05 PM Eastern Time today, we issued a press release reporting our first quarter 2020 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 corporate.ww.com. Supplemental investor materials are also available on the company's corporate website in the Investors 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. 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, President and CEO; and Nick Hotchkin, CFO, Operating Officer, North America and President, Emerging Markets. I'll now turn the call over to Mindy.

Thanks, Corey. Good afternoon everyone. Thank you for joining our call today, and I hope all is well with you and yours. It goes without saying that a lot has changed since our last earnings call only two months ago. Our commitment to our members and the WW community we have created is more important than ever. Our purpose is to inspire healthy habits for real life for people, families, communities, the world for everyone. That was true two months ago. It's true today and will continue to guide everything we do long into the future. I could not be more proud of how our team has come together globally to support our members, the WW community, and each other during this unprecedented time. A few overarching principles that are guiding our actions: first, the health, safety and support of our employees and members is paramount. In mid-March, when the COVID-19 situation escalated, we took quick globally coordinated action and paused our in-person workshops and implemented virtual workshops in order to continue to provide studio members with the support, encouragement and community that is integral to the WW experience. Again, we know our members and let's continue to meet them where they are. Overnight the world changed, as did the consumer mindset. We immediately revamped all of our content and communication to address the concerns they are having today. In addition, we ramped up the frequency and volume of our content to ensure our members feel supported, cared for and connected. We're closely listening to our members through quantitative surveys and our virtual workshop and on Connect. These daily real-time insights are guiding our approach to all content, both member marketing and recruitment-oriented marketing. Third, we will continue to invest to innovate. While we are certainly being aggressive on the expense management at this uncertain macro environment, we're also prioritizing the actions that will enhance the member experience and engagement, and maintain WW's position as the trusted leader in weight loss and wellness, delivering a connected, digital and deeply human community experience. We will continue to advance the experience with new value-added features, tools, creative content and thought leadership to promote both recruitment and retention. Turning to our Q1 results, our winter season of 2020 is off to a strong start. The global launch of the new more customized myWW program resonated in every global market. The WW Presents: Oprah’s 2020 Vision tour raised our brand awareness, generating a stunning 88 billion media impressions, along with visibility, majority and thought leadership, and our global marketing efforts had great impact, driving member signups and reinforcing our leading position in weight loss and wellness. We ended Q1 with 5 million subscribers, up 9% year-over-year and a record level for the end of Q1. Member recruitment trends were strong to mid-March, but then turned negative in the last two weeks of our quarter, when the COVID-19 situation rapidly escalated. So, while Q1 end of period subscriber level was up nicely year-over-year, it fell short of the mid-teens growth we had anticipated. The strong growth in subscribers drove revenues of $400 million, adjusted operating income of $29 million, and a net loss of $0.09 per share ahead of our prior expectations for the quarter, due to good cost management. Our strong start to Q1 and record subscriber level provide a solid foundation as we manage through the current environment and position WW for a post-COVID world. WW is a technology company delivering a human experience. Our transformation from primarily offline to a digitally enabled experience has been underway for several years, with all members enjoying the tools, features, content and connect community available in the WW app. In mid-March to ensure the health and safety of our members and our coaches, we proactively pivoted from in-person workshops for our global studio members, which represent approximately 25% of our overall membership to an entirely virtual experience. Over a six-day sprint, our studio operations, technology and digital product teams developed a solution for our coaches to host their workshops virtually. We trained over 14,000 coaches and guides globally for virtual workshops, and created Connect groups for each studio, so that members can continue to engage with each other inside the WW ecosystem in between workshops. On March 19th, we simultaneously launched virtual workshops across 12 countries, with over 12,500 workshops in that first week alone. We've received highly positive reviews from our members on the virtual workshop experience with a 97% satisfaction rate. I have personally attended many virtual workshops held by coaches all across the world, and to hear directly from our members on how much they appreciate the opportunity to connect and support each other has been particularly gratifying and inspiring. The move to virtual workshops has accelerated our digital-first strategy. While face-to-face experiences will always be a core part of WW, we are strategically repositioning our studio business to have a smaller real estate footprint with fewer locations. To be clear, the virtual workshop experience that has temporarily replaced in-person studio experience today is not a pull forward of the launch of virtual group coaching, which we have previously discussed and has been in the plan, and we'll be launching later this year. We will continue with virtual workshops as we phase-in our studio openings. Over the past two months, our digital product and technology teams have been launching new feature after feature in the WW app, and coming very soon we will be adding sleep tracking as a new wellness vertical for WW. Especially, in the current environment, our ability to continue to gamify and personalize our app experience is important for member engagement. Since March, we have launched new in-app features to meet our members' needs, including hydration and water tracking streaks, and filter and sort tools. Each of these new features are ones our community has specifically requested, and we have seen great utilization since launch. Members' continued engagement with our app is critical, driving greater success and extending retention. In addition to these new in-app features, we also recently scaled up our content engine to give members even more reason to engage. For example, we launched in-app video content, and a new connect channel called WW Now featuring live virtual fitness, cooking and wellness content from our WW ambassadors. We have seen very high member sentiment and engagement with this content, and we will continue to use it as a way to drive engagement in the app. The response to these initiatives has been strong, with the number of video views increasing 40% year-over-year. We've also increased the frequency of our communication with more app notifications and launched WW Daily to provide members with the tips they need now to stay healthy while at home. And on social #WWFreshstart a four-week challenge to help members get back on track. Almost 100,000 members are participating. COVID has shaken up consumers' health and wellness routines. Our quantitative consumer surveys indicate that consumers are looking for structure, routine and help with habit creation during this time of upheaval. In addition, community and connection are critical, particularly with those they already know and trust versus creating new relationships. Importantly, we have seen WW brand equity continue to grow in the current environment with gains across current, former and non-members. Measures of brand trust and leadership are strong and have increased significantly across all audiences, with the majority of survey respondents globally agreeing that not only are we a leader in the weight loss industry, but also a leader in the healthy living industry, and that WW is a program I trust. Turning to our marketing, across social channels our WW member ambassadors have activated during this crisis, feeling motivated to inspire and connect with others, marks for a record content creation from our member ambassadors, with 1,600 pieces of creative content generating 3.3 million total impressions. Taking a fresh look at all of our content and communication also applies to our spring marketing campaign. It is essential to hit the right chord, demonstrating that we are there for members with a message that is aligned with the current reality. Right now, we are running a two-week TV campaign in the U.S. to reinforce brand awareness, and our position at WW is here to be your partner in health. The creative is entirely member-generated content, with our real members sharing how they're staying healthy, and encouraging each other while social distancing. These authentic and heartfelt videos are all the stories, successes, and struggles of real members. We're reacting in real-time to an ever-changing landscape. We plan to be back on TV starting in mid-May with fresh content, which will also feature member content, including from Oprah. However, we are navigating the now and will be attentive and nimble in our investment, messaging and approach across channels in what is a very fluid environment. I've also talked about the importance of partnering with other people and organizations that share our mission to generate a positive impact on the world, and for us, that's by delivering wellness for all. On April 15th, we launched a global healthy giving challenge, encouraging our members to do more, earn more and give more by redeeming their wellness wins rewards for donations to charities, including those that provide fresh fruits and vegetables and healthy meals to communities in need. The ability to donate to our charitable foundation, WW Good, has always been a huge part of our wellness wins program. This healthy giving challenge will directly support WW's charitable partners, such as Feeding America, Wholesome Wave and other U.S. and global charitable organizations, who are on the frontlines of getting food into the hands of people in need. Including WW's match of wellness wins member contributions, we're currently on pace to exceed our commitment of $2 million, to provide local food banks with 10 million meals and 3 million pounds of fresh produce. To-date, nearly 114,000 wins or over $0.5 million has been donated and we've seen heightened member engagement to track food, fitness and weight in order to gain more wins for this WW Good challenge. In addition, we were proud to support and be part of several COVID-19 relief efforts, including Global Citizens April 18th event, One World: Together At Home, as well as BET's Saving Ourselves. We know that people now have a greater awareness of the higher health risks correlated to obesity, and while we don't know how behavior will change as a result of this crisis, we know that having a trusted partner in health is more important now than ever. WW is clearly positioned to be that partner. I will now turn the call over to Nick to review our Q1 performance, current business trends, more on our digital transformation in our studio business strategy and our revised cost plans for the year. I'll then come back to discuss our 2020 priorities, and our key initiatives.

Thanks, Mindy. As discussed, WW had a strong start to 2020, due to the successful launch of our new myWW program, a well-executed global marketing campaign, and high visibility from the WW Presents: Oprah’s 2020 Vision tour. From January through mid-March, total member signups were up in the double digits year-over-year, with growth across each of our major geographic markets. We saw growth not only in digital, but also in studio signups with digital far outpacing studio. These solid trends drove our Q1 subscriber level to an all-time high of over 5 million. Q1 revenue was $400 million, up 11% year-over-year on a constant currency basis, and our GAAP EPS loss was $0.09. Q1 EPS was negatively impacted by $0.05 due to our one-time goodwill impairment charge, related to the strategic decision to shift our Brazil business to focus on our digital and virtual studio offerings. This compared to a loss of $0.16 in the prior year first quarter, which included a $0.07 charge related to restructuring. Overall, our better than anticipated EPS performance versus our guidance is due to strong business momentum throughout the majority of Q1, the tour expenses coming in lower than anticipated, and quick cost containment actions in March. Our Q1 results include approximately $16 million in direct tour revenue, and approximately the same amount, $16 million, in tour expenses. Our positive double-digit member recruitment growth trends held through mid-March until the COVID-19 situation rapidly escalated. In the last two weeks of March, we saw a sudden drop-off in member signups. At that time both digital and studio turned sharply negative year-over-year, with more severe declines in studio. While recruitment trends were very weak, given our launch of personal workshops and our member engagement activities, member cancellation rates did not spike significantly. And we are pleased that so far retention is holding steady at 10 months. Given the weakened recruitment trends in late March, we ended Q1 with 5 million subscribers, still up a notable 9% year-over-year, but below the mid-teens growth rates we had been trending towards previously. Note, digital subscribers were up 16% and studio subscribers were down 5%, replacing weak studio recruitment in March. In the first two weeks of April, while member signups continue to be negative for both digital and studio, the trend moderated somewhat for digital, winding the gap between digital and studio trends. In any given year, Easter is typically the beginning of our spring season, and the time when signup trends experience seasonal lift. We are encouraged that in the two weeks since April 12, our digital recruitment trends have seen some good recovery, and in fact, total digital recruitment has been positive for the past two weeks. Given these trends, at this time, we have approximately 4.9 million subscribers globally versus 5 million at the first quarter end, primarily driven by negative studio signup trends. And for your modeling purposes, note that as the monthly price of a studio subscription is about twice that of a digital subscription, due to our weak studio recruitment trends, studio revenue is expected to be significantly below prior year in Q2, and will remain pressured during the COVID crisis. As a reminder, approximately 40% of our annual recruits typically join us in Q1. And in addition, Q1 is traditionally our annual peak, and end of period subscribers sloping to Q4 trough. While last year, our membership base was flat from Q1 to Q2, note that since we have already seen a sequential decline during Q2 this year, it is uncertain where it will end 2020 versus the past five years Q1 to Q4 seasonal membership average decline of 13%. Due to the disruption and uncertainty related to COVID-19, we are withdrawing our previously provided full-year fiscal 2020 revenue and EPS guidance. Our operating and financial objectives for 2020 are to maximize recruitment and retention with a focus on subscription lifetime value, ensure we continue to deliver a high-quality and engaging member experience across all platforms, strategically reposition our studio business to have a smaller real estate footprint continuing to offer virtual workshops to maximize retention among studio subscribers, continue to focus on ecommerce given last consumer product sales while studios closed, implement a $100 million of cost savings initiative, continue to invest in our products and tech capabilities to take advantage of future opportunities, and finally, maintain strong liquidity. As I mentioned, we are implementing a cost savings initiative of $100 million, versus our initial 2020 annual operating plan. We've taken these cost actions to maintain our flexibility to respond to evolving business and consumer conditions, while at the same time, ensuring our ability to continue to invest in innovating our program and experience to position the company for future growth. The $100 million reduction in expenses will come from cost of revenues, marketing, and G&A. In marketing, we will continue to be agile and invest behind those initiatives that are producing results. On G&A expense, we are taking a number of actions to reduce corporate overhead. As you will have seen in our 8-K filed today, Mindy, myself and the Executive Committee and our Board of Directors will be taking reductions in compensation. Additional cost reduction actions, including temporary salary reductions for corporate employees, and lower contributions to employee benefit programs vary by country. As we make these decisions, we are carefully focused on maintaining an efficient and effective organizational structure to drive our key business priorities. In our cost of services for the year will reflect a smaller studio business footprint and associated labor savings. We expect a phased reopening of our in-person workshops globally, with no studio reopening prior to May 30th. Health and safety will come first in the decision-making before any individual studio location reopens. While we don't know how the macro environment and the impacts on our business will play out in the coming months, we believe this cost plan provides protection in a challenging environment. In addition, as you may recall, on December 16th, we announced the extension of our partnership with Oprah Winfrey through May 2025. Subject to shareholder approval of the associated 3.3 million share option grant at our Annual Meeting in May, we expect to record a one-time charge in the second quarter of 2020. The amount of this charge will reflect the then-current stock price. We are a highly cash-generative business, with strong liquidity. Therefore, purely as a precautionary measure, we conservatively drew down $148 million on our revolver on March 23rd. Bear in mind, that Q1 is always our weakest quarter of cash flow due to winter season marketing spend, and we expect to generate cash during the rest of 2020. Including the revolver draw, we ended Q1 with a cash position of $292 million. Recall, we have a covenant-lite debt structure, and our term loan and bonds maturity dates are not until November 2024 and December 2025, respectively. Full-year interest expense assuming the revolver remains drawn through year-end is approximately $123 million. In summary, we are focused on the items within our control, taking decisive actions to deliver and enhance the value of WW to members, and non-members alike, preserve financial flexibility and liquidity and best position WW for both the immediate and longer-term growth opportunities with our leading digital platform. And with that, I would like to turn it back to Mindy.

Thanks, Nick. We remain confident that we're focused on the right actions, not only to best serve our members today, but to position WW as a leader in delivering human impacts through technology. At the highest level, the themes of our 2020 priorities are unchanged. And our key objectives of recruit, retain and elevate the WW brand will continue to guide all our actions as an organization. As Nick mentioned, we are making a number of critical decisions and cost reductions to manage through this challenging time, and therefore, have an even higher degree of prioritization to ensure we are best allocating resources toward the actions that will help us better serve members and drive the business today, tomorrow and beyond. Our 2020 priorities are: one, amplifying the power of community through coaching, accelerating our digital transformation to deliver virtual coaching and community in an enhanced way is now even more essential. We are on track for our launch of an entirely new, digitally enabled, community-focused and coach-led business vertical later this year. This new offering will not only reflect the immense learning from running virtual workshops at scale and our ongoing test pilots of virtual group coaching, but also our 57 years of experience in creating community. We believe this new vertical will provide a unique differentiator and tier to the WW experience and drive both new recruitment and retention. As we evolve and create more personalized offerings and build highly skilled coaching talent, we're focused on providing solutions to our members in the format that best fits their lives. Second, we will continue to build our wellness ecosystem, deepening the app experience and gamification. It's important that we continue to evolve and be recognized as a trusted partner in total wellness, spanning nutrition, activity, mindset, motivation, hydration and sleep. We are rapidly introducing new features and tools to help our members improve their overall health and wellness, forming a deeper integration between all these important factors. In early May, we will be launching sleep tracking. Our science team has completed a body of work on sleep. And we know that consumers and in particular, our members, have a strong interest in sleep-related measurement and tracking, as well as actionable content for improvement. Sleep is even more top of mind these days, so we are eager to give our members added tools to help them during this time. In addition to the features and content we build ourselves, we've been expanding our partnerships to bring even more value-added complementary experience to WW members. In our fitness vertical, WW has just launched a partnership with Fit On to bring members in-home video fitness classes via the WW app. Fit On content integrated into the WW app is currently in our Australia and Canada market and will be launching in the U.S. in the coming weeks. The experience will provide members with curated video fitness programs that will be personalized based on member engagement and will span a variety of workout types. Fit On joins our fitness partner Active, which has been providing audio fitness content, and ClassPass, which will offer in-person content. We look forward to expanding our relationship with ClassPass when fitness centers begin their reopening. In our mindset vertical, we continue to offer our members Headspace and have expanded our expert content around mindset stress and support. People love to find ways to be challenged and compete, whether it be in the analog or virtual world, and we know the more fun they can have and the more incentive they have while doing it, the more engaged they will be. Challenges, streaks and other forms of friendly gamification will be accelerated. Third, as Nick mentioned, ecommerce growth and product expansion is a significant opportunity. I'm pleased to say that on March 23rd, we integrated WW Shop into our app versus only being available online. We are ramping up our ecommerce plans and intend to make WW Shop a primary way to purchase our consumer products, in addition to in-studio purchasing. In just a few months, our U.S. ecommerce sales have already exceeded U.S. ecommerce sales for all of 2019. Our digital-only members now have awareness and accessibility and are responding. In addition, we will be expanding the assortment of our current product categories and launching new product verticals for WW over the course of the year. Health Solutions is the partner of choice. As we've discussed before, we see a significantly larger opportunity for our health solutions business in the years to come. Our health solutions team has done considerable foundational work in building out the talent and technology to support and drive this business. We've made the needed investments and believe we now have the technology and platform to allow us to enhance the experience and value for our current partners and to attract new partners. As people look for solutions to improve their overall health by managing their weight, we intend to be the partner of choice for wellness and weight loss across employers, providers, physicians and payers. We are focused on increasing awareness of WW as a wellness benefit and demonstrating not only the economic, but the human value of WW and population health. And finally, community activation events and created content will allow us to accelerate our efforts to both diversify our customer base and maximize engagement. We believe community activation events and content are even more important now than ever before. We're focused on producing unique and engaging live virtual content that fosters real-life connections and inspires people to live their best life. On March 7th, we wrapped the nine city nationwide sold-out WW Presents: Oprah’s 2020 Vision tour. The campaign for wellness was a standout success, and we extended the conversation beyond the arena with WW Now, our new social channel. The response was incredible. These sold-out full-day wellness events were filled with inspiration, community and fun and helped to demonstrate the power and appeal of WW, reinforced our brand transformation and highlighted how WW is your partner in both weight loss and wellness. Inspired by Oprah's 2020 Vision tour, we are thrilled to share that Oprah will continue to inspire people to live their healthiest and most well lives, even in the most challenging times. In the coming weeks, we will announce details of our launch of a free global virtual experience that will leverage Oprah's powerful role with WW to accelerate our mission to democratize wellness for all, at a time the world needs it most. Stay tuned for more exciting details. I'm personally so grateful to Oprah for her incredible commitment and passion for galvanizing people to live their healthiest and best lives. Having worked with her over the past several years, her insights, collaboration and inspiration are truly unmatched. Oprah and WW are fully aligned on the opportunity for WW to lead the democratization of wellness, making a positive impact on the health and wellness of society as a whole. We believe that healthy living is a human right, and we aspire to make wellness accessible to all. Protecting the health and safety of our employees and our members is our highest priority at this critical time. We are being focused on being responsive to our members' needs, and continuing to provide them with effective tools to plan healthy meals, stay active, maintain a positive mindset and feel in control while their normal routines are interrupted. I'm incredibly proud of our team for their dedication to supporting each other and our members during this time. Now more than ever before, the value of good health is top of mind for everyone. People are recognizing that they may have higher health risks due to their weight, and they have a greater sense of urgency to take action to reduce their personal risk. We know that good health and community are essential. Having the tools to better manage your health should not be considered a luxury but a necessity. We do not know what the future holds, but we believe the current environment will have a lasting impact on consumer behavior. In just a few weeks, we've all changed the way we communicate, work and play. While we are all very eager for the day when we will be able to congregate in person again, we believe virtual connections will only increase, and we are accelerating our digital transformation to meet this need, bring people together and inspire healthy habits for real life. And let me reiterate that whenever consumers put weight loss and wellness in the forefront of their mind, WW will be there for them in whatever format members choose. Our authority, trust and community will be more critical than ever before. Thanks for joining us on the call today. And with that, we will now turn the call to the operator for Q&A.

Thank you. We will now begin the question-and-answer session. Our first question will come from Lauren Cassel with Morgan Stanley. Please go ahead.

Great. Thanks for taking my question and for all the color, it's really helpful. The color on total digital recruitment over the last two weeks turning positive is obviously great to hear. Just curious, have those subscribers looked any different than your average digital subscriber? Just trying to understand if maybe you're attracting a new subscriber in this environment? And then my second question is just any way to quantify the increase in engagement that you're seeing, change in minutes per day being spent any sort of quantification around that would be great? Thanks.

Sure. So, we've obviously been pleased to see the digital recruitments, particularly in the last couple of weeks. And we will be identifying specifically. But overall, we've seen diversification of our digital memberships continue to accelerate. So we would see that being part of it. The one thing that's been very interesting is we've been really looking at the comments of new digital members coming into Connect. What we are really seeing is this heightened sense of, I need to be healthy for myself and what is really driving people to join in this environment. One of the benefits we have because of our Connect platform and now with virtual group coaching, both qualitatively from our tracking measurement, and quantitatively from hearing and listening to people, we do a daily behavior change in real-time. And even over the course of this crisis, we've seen escalating recognition that people need to take a different assessment of their health, and it's got to be more of a necessity than a luxury. We also have definitely seen everything from changes in food tracking. So for example, flour ranking goods are up 52%; people are at home, they're baking. We've pivoted to provide what are our healthy recipes that we can give people. What are they looking for? You heard us say just in our ecommerce, our snacks, we just launched very quickly a whole flavored, do-it-yourself movie popcorn. I mean, we're really seeing what people are doing. In activity we're seeing, not surprisingly, more workouts during the day not just morning and night, as people are home. Members are logging much longer walks; yoga frequency is up. So, that's really the level that we can see. Because we put in the healthy giving challenge, we're really seeing our wellness wins escalate. Food tracking has definitely grown over the past couple of weeks. So, we will continue to be able to track behavior in real-time.

Great. Thanks so much.

Our next question comes from Wendy Nicholson with Citibank. Please go ahead.

Hi, good evening. My first question, I just wasn't clear on the $100 million in cost savings. I assume some of those are temporary. The executive compensation I assume will bump back up once we get through this. But what percentage of that $100 million in cost savings are permanent reductions to sort of the cost structure of the company?

Great question. Thank you. Yes, the $100 million cost savings plan we had coming into 2020 is about getting the balance right between our excitement and our future opportunities and wanting to invest in the future, with the reality of this situation and wanting to take strong cost action to protect the downside. In three buckets, as you saw, G&A, marketing and operating expenses. To your point, a lot of those G&A savings on the salary cuts are a temporary move to a more efficient organization of course has lasting benefits. On the marketing side, be clear, we're always going to invest behind marketing ideas that are working. On the cost of good sales side, look, as we shift to even more digital-first strategy and wind up having a smaller studio footprint with fewer locations, that certainly has long-standing cost implications in terms of real estate.

Okay. That's very helpful. And then my question on, I think, if I heard it right, you're increasing some of your marketing spending here in the June quarter, which is terrific. But, I guess, looking past-COVID and maybe when we all get back to more normal, not totally normal but more normal behavior, I guess the concern I have is on the lingering tail of sort of economic pressure and people who have lost their job, who might not be coming back to the workforce. So my question is, as you think about maybe increasing promotional spending, maybe lowering the cost of subscription, how do you think about that relative to advertising in terms of how much you want to invest and in which bucket to sort of get as many members into the program on an affordable basis? Thanks.

Yes. Well, I think we can look at things two ways. One is and we have always felt that we want to be very much considered an accessible resource for people. So if you look at our digital membership, for example, and certain promotions that we've done on an x number of months free. We've seen longer commitment plans. So we're very agile in that. Actually what we've been doing is giving more and more value for what people are paying for. And I think that's really important. If you look at what people are getting for a digital subscription today, it is incredibly robust. It becomes a real part of their life and day, and that's what's been important. The new vertical that we're going to be launching which is digital plus virtual group coaching, we see as another opportunity to not only give people the tools in digital, but to give them the coaching platform that people really want. And then we will still have our premium membership. Of course, we're going to constantly look at what our promotions are. But really, what we're seeing, and I think the team has done an incredible job in marketing is to really quickly adjust the tone, the tenor, and what it is that people are really looking for and how are we going to approach them. We're very fluid, and that's how we're looking at it right now.

I think it sounds right. Just to add, we've got such a high incremental margin model that it always makes sense for us to spend marketing dollars where it's working. As you can imagine, we're prepared for a wide range of scenarios here and looking at lots of modeling. The future is hard to predict, but in the context of that $100 million savings plan, a reasonable going-in assumption is that the split of the savings could be roughly a third for marketing, a third for G&A, and a third for cost of services. But of course, if marketing is working, we'll put the dollars where they are working.

Got it. That's very helpful color. Thank you so much.

Our next question comes from Alex Fuhrman with Craig-Hallum. Please go ahead.

Hi. Thank you very much for taking my question. Certainly, hope everyone at WW is doing well. One thing I wanted to ask about is Mindy, I think you'd commented in your prepared remarks that as you kind of look to 2021 and beyond, WW will likely have a smaller physical real estate footprint. I was wondering if you could talk a little bit more about that. Is that in some ways, kind of a reaction to what's been going on in the last couple of months? Or is there's always been within your plan that you've been executing over the last few years? Just curious how we should think about your physical locations and in terms of WW branded locations versus third-party locations. And then, as you're starting to test more things like your partnership with Kohl's, how we should think about your footprint over the next few years?

Right. So, I'll make a few comments and I'll let Nick speak to this too. So, Alex, as you know, this has been an ongoing transformation of the business for a number of years. And as you know, our studio business is about 25% of the business. We've been investing heavily in our digital assets and our evolution, frankly, to both diversify and broaden our base, as well as give members and give everyone really what they need. This is not an overnight reaction. However, it obviously stands to make sense that given the current environment, some of our plans will accelerate. As you know, around the world, we have branded locations and then we have other locations. Our primary focus right now is obviously safety and security, and when we do decide to open it will be very staggered. We definitely have an opportunity with partners to diversify both locations, whether they be for workshops, whether they be wellness check-ins, and a lot of different opportunities; we will continue to pursue those as well. Nick's been working very closely obviously with his role as the Head of North America, and working with the teams on the real estate strategy in the field. So, I'll let him talk a little bit about it. But it is definitely a work in process because we're not planning to entertain any kind of reopening strategy until the end of May. Even then, it will be very controlled and measured and we will learn.

I think that's absolutely right, Mindy. Hi, Alex. Just to give a little bit of U.S. color, but to echo Mindy as well. It's a work in process, position it. Imagine this as a location-by-location analysis and discussions with landlords, et cetera. But in the United States, we've got about 3,300 locations right now, and 2,500 of those are what we call studio at third party, very casual locations. 800 of those locations are studios. As we look at how best to serve our members going forward, you can imagine we're more likely to look at those studio ads that are close to our branded studios and look at the opportunity to focus our footprint in some of those areas. But, especially since we've been so thrilled with the response to virtual studio and seeing our members enjoying it, we will be very thoughtful in our assessment.

Great. Thanks that's really helpful. I appreciate the color. Thank you.

Our next question comes from Kara Anderson with B. Riley FBR. Please go ahead.

So, you've kind of touched on it a little bit Mindy, but I just wanted to get your perspective on how you think this business performs in a recessionary environment. Do you think that the work you've done to become more of a wellness company focused on health, with a pretty strong digital asset at this point makes you less susceptible to sort of in consumer discretionary budgets? And have you done any surveys or gathered any feedback from your members to see where they position you?

Yes. We've looked at historically, and actually Nick can talk to this more over the course of different years, including 2008, 2007, et cetera. We haven't had the big swings of impact; I think part of it is because of our accessibility and very importantly, the fact that we have community that's particularly powerful from a retention point of view. Clearly, everybody's seeing impact right now, but what I'm very focused on is as consumers move out of this, what are they going to be looking for? As I mentioned earlier, this idea of health and wellness not being a luxury but a necessity in people's minds. If you marry that to community motivation and support, this idea of healthy habit formation as a ritual is more important than ever, and so is trust. For us, our focus has been how do we leverage 57 years of what we've been able to provide people, and do that even more and even more broadly; how we reach people coming out of this, is going to be more important than ever.

Totally agreed. As you can imagine, we look at a lot of historical data, especially in the context that it's clear here that our revenue and our financial performance will be below what we had planned when we entered the year. However, when you look back to the last recession, if you look at the 2008 to 2009 period, the company was so different. The digital business was in its infancy; we didn't have an app. The subscription business, the shift to monthly pass was in its infancy. Like any other company here, will we be impacted while our studios are closed? Absolutely. But what we're seeing here, especially from virtual studio, there's such a customer need for coaching in a virtual world. So adding our coaching strategy to content focus and the community that we've always excelled at providing, now that's kind of how we're thinking through managing in a potentially recessionary environment. To be clear, I mentioned we're prepared for a wide range of scenarios. We're not expecting a quick snap back here, and we're forming our plans assuming that the economy and consumer behavior will be impacted for more than a few months.

And a quick follow-up on some other comments, just curious if you've seen any patterns or trends in recruitment, in this pandemic as things have improved in some areas, if you've seen any specific geographic trends emerging?

Yes. The impact as well as the recovery, particularly in digital has been global. It's been pretty consistent.

Great. Thank you so much.

Our next question will come from Edward Yruma with KeyBanc Capital Markets. Please go ahead.

Hey, guys. Thanks for taking my question. I hope all is well and I hope you and your teams are. I guess first, on the studios business, are you paying rent while the studios are closed? And do you have any potential relief from your landlords? And then I guess, second, as you think about I think as mentioned, kind of length of stay is still around 10 months. What behaviors are you seeing of the traditional studio customer from a retention perspective? And I guess, is it fair to assume that despite kind of virtual studio opportunities that their retention may see some temporary impact given the studio closures?

Yes. Let me take the real estate question first. Going back to my illustration of 2,500 third-party locations in the United States. We pay for those when we use them. On the 800 branded studios, we have been fulfilling our lease obligations, as you can imagine. We are and we will be in conversations with the landlords going forward in this environment. In terms of retention, I've been pleased that we haven't seen a meaningful uptick in cancellation rates, and that retention has held at 10 months. Obviously, I can't predict the future, but I'm pleased that our strategy of adding content, and so quickly transitioning to a virtual studio product has been working well for us.

Thank you.

Our next question comes from Brian Nagel with Oppenheimer. Please go ahead.

Good afternoon. Thank you for taking my questions. I have a follow-up from the previous queries. I'd like to focus on the improving subscriber growth trend you've observed in the last few weeks. To understand it better, you mentioned in your prepared comments that Easter historically acted as a catalyst for this trend. Has there also been enhanced messaging from WW that has contributed to this positive trend?

So we take it two ways. As I said, growth in digital membership is where we've seen the uptick. But what we did when this entire crisis started, we withdrew every piece of content that we had in market. That team pivoted, as I said in kind of my prepared remarks, we ramped up our content machine, both in social as well as our digital platforms. The TV that we've been running for the past couple of weeks, it's real people, real stories, real world support. The tone and tenor has obviously been relevant to the environment. Our next phase of our TV campaign is also inclusive of real members, including Oprah, and that will launch. The message is really we're here for you; we are here for all your wellness needs, certainly, weight being part of that and community being part of that. I think that message is resonating. We do have this ability to listen and hear in real-time. So what the marketing teams have done is work to have the highest degree of flexibility in terms of both what the content is as well as what the content platforms are. We'll continue to do that.

That's very helpful. As a follow-up, I've been talking to several consumer-focused companies throughout this crisis. A common theme I'm hearing is the decline in digital marketing rates. My question is, considering Nick's comments on cost savings, are you experiencing these declining rates? Additionally, as you begin to recover, is it possible that you could invest even more in your marketing due to these lower rates?

Look, what Nick has said, as we've outlined even our cost efficiencies, particularly in the marketing area, if we see performance and if we see what we're doing working and great efficiency, we're going to spend against it because it's going to have impact.

Thank you very much.

Our next question will come from Michael Lasser with UBS. Please go ahead.

Good evening. Thank you all for taking my question. Nick, I know you're not providing guidance, but trying to model your second quarter is uniquely difficult. Can you provide some help on how we should be framing at least the studio business? The digital business is pretty straightforward, but studio business, how should we be thinking about modeling that in the second quarter?

Yes. Hi, Michael. If you look at the components of the revenue, as you clearly say, having the digital business trends and growing in the last two weeks is very encouraging. Retention has also been a bright spot. The remaining two key factors on the revenue side, of course, are studio recruits from the middle of March through now, which have been very weak. The studio revenue picture is impacted by that. The other final contributor to the revenue picture is product sales. We've been pleased with our growth in our ecommerce business, as Mindy mentioned, in the Q2 where the studios are closed. It’s unlikely that while ecommerce is growing, it won’t offset the fact that we’re not selling any consumer products in our studios right now. Those are the moving parts on the revenue side. And then, of course, on the cost side, you see us moving very quickly on every aspect of our cost structure to ensure that we can maintain our margins.

I'm sorry if I missed this, but do you still collect revenue from paid weeks from your studio subscribers while the studios are closed?

So, I think it's really important to note that this pivot that we made to virtual studios, as well as enhance Connect Group, and as well as the online digital content, we're actually providing our studio members with the same coach level of support and their community, as well as new enhanced Connect Groups in between, which is why our retention is holding at that 10 months.

Absolutely.

Understood. Thank you very much, and good luck.

Thanks. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mindy Grossman for any closing remarks. Well, thank you, everyone. We're confident that we're focused on the right actions certainly not only to best serve our members today, but to position WW as a leader in delivering human impact through technology. Creating community has always been at the heart of what we do. I think it's even more important today to create meaningful communities that allow our existing members to connect. But it's also going to allow us to diversify our consumer base and maximize engagement. I believe that this combined with consumers' heightened awareness and need for weight loss and healthy living solutions positions us well for the future. We're going to continue to focus and prioritize coaching, community, created content, and thought leadership to our members in ways that are personal and authentic. I really want to once again, thank our passionate and talented WW team for always keeping our members at the forefront and continuing to innovate and create value for them and for WW. So thanks, everyone for joining us today. I hope you and yours are well. I look forward to speaking with everyone again soon.

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