Good afternoon, and welcome to WW International Fourth 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 that this event is being recorded. Now I’d like to turn the conference over to Ms. Corey Kinger, Vice President of Investor Relations.

Thank you, everyone for joining us today for WW International’s fourth quarter and full year 2020 conference call. At about 4:00 PM Eastern Time today, we issued a press release reporting our fourth quarter and full year 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 & 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; Nick Hotchkin, COO; and Amy O’Keefe, CFO. I will now turn the call over to Mindy.

Thanks, Corey. Good afternoon, everyone, and thank you for joining us today. It’s hard to believe that it was only a year ago that we were preparing for the finale of the spectacular WW Presents Oprah’s 2020 Vision tour in Denver on March 7. At that time, none of us could have predicted that 2020 would change suddenly and dramatically. I am extremely proud of the work of our teams around the world and what they were able to accomplish in a period of extreme challenges. Certainly not the year we had imagined, but nonetheless a year that showcased our ability to innovate, adapt, collaborate, foster an incredible sense of community and validate the resilience of our teams and our business. In 2020, our global teams had a singular focus on delivering a high quality differentiated technology-enabled member experience, providing guidance, support, community, and inspiration all while ensuring science-based proven efficacious and sustainable wellness and weight loss at a time when our members and the world needed us more than ever. Our focus has always been on innovation, accelerating our digital transformation and reinforcing our position as a technology experience company, as well as our member-first mindset, which will continue to drive our strategic priorities and our performance as we go forward. Let me highlight our 2020 achievements and performance. By aggressively responding to the changes in the environment and delivering a 360-degree holistic member experience through our innovative digital platform, virtual content experiences, and new virtual workshop formats to meet our members where they are and foster community, we were able to drive membership growth, with digital subscribers up 24%, maintain all-time high member retention and engagement, enhance e-commerce growth capabilities and product expansion, and successfully launched back-to-back innovations: myWW and myWW+, both of which have created a completely new personalized experience for our members. As a result of these achievements, WW ended 2020 with 4.4 million subscribers, up 4% year-over-year, at an all-time year-end high, delivered full-year revenue of $1.4 billion, significantly expanded adjusted gross margin to 60% for the past three quarters and achieved adjusted EBITDA of $358 million. By successfully driving strong year-over-year growth in digital, with subscriptions up an impressive 24% and revenues up 21% on a constant currency basis, we were largely able to offset the significant pressures that COVID had on our workshop business globally. By actively managing our cost structure, we preserved cash flows and profitability, ending 2020 with ample financial flexibility as we navigate what is still an uncertain and dynamic environment. The critical and agile actions of our team made this possible, including the launch of myWW, executing the first-ever nine-city Oprah’s 2020 Vision tour, and quickly pivoting to a global multi-week virtual experience delivering much-needed support and inspiration to millions of people around the globe. We built our first-ever virtual workshop experience, bringing a new era of coaching and community to members, added even more value to the member experience with more in-app features, content, personalization, and gamification with sleep and hydration tracking, workout videos and challenges, and even more community enablement in our Connect platform. We integrated our e-commerce platform into our app and expanded consumer product offerings, driving over 300% growth in U.S. e-commerce revenues in 2020. We advanced our WW health solutions business through technology investments and new partnerships such as CVS and Welltok. We amplified our commitment to inclusion and diversity and founded the Healthy Living Coalition, advancing our efforts to democratize wellness and healthy living as a human right. In 2021, we will continue to innovate with a focus on the member experience fueled by technology and personalization, built as always on the power of community. The global launch of myWW+, our first holistic non-food program innovation, is delivering a deeply enriching, more interactive and personalized app experience. Utilizing a personal assessment, myWW+ has been well received by members and was the focus of our winter marketing campaign. The announcement of our newest global ambassador, James Corden, was enthusiastically received, driving significant media coverage at the start of the year. And once again, for the 11th year in a row, WW is ranked as the number one best diet for weight loss by U.S. News & World Report. When I came to WW over three years ago, I was confident that we could have greater impact by elevating the brand, enhancing and modernizing the digital experience, and evolving and expanding our expertise and leadership in coaching. Digital 360, our new mid-tier membership vertical, is an entirely new experience built on the platform of myWW+, adding a one-to-many coaching and content experience unlike anything that exists today. Digital 360 provides daily inspiration, engaging coach live sessions and real-time connection delivered in a modern and unique way through an entirely new cohort of inspiring and relatable coaches featured in our newest campaign assets. To bring Digital 360 to life, our production team who created our live arena tour and virtual experiences partnered with our technology, digital product and brand teams together creating a truly reimagined member and coaching experience. Digital 360 has been a standout success with over 100,000 sign-ups to date. Without any external marketing, prior to our new TV and digital creative campaign highlighting D360, over 30% of the sign-ups were new to WW and over 40% were returning digital members, demonstrating the potential as both an upsell and a way to attract new cohorts. Today, D360 is only available in the U.S. and UK, and as I will discuss later, we’ll be rolling out globally, which will be a key lever of growth, new audience acquisition, retention, and brand evolution. The same team was also behind our recent live virtual experience, WW Presents Oprah’s Your Life in Focus: Be the Love You Need. We offered this free interactive virtual experience on Saturday, February 13, which had over 1 million views and generated nearly 5 billion media impressions, hosted by Oprah and featuring Jennifer Garner, Ciara, Dr. Shefali and a first-time sit-down interview with James Corden discussing his WW journey and more. The event kicked off with the pre-show featuring our D360 coaches allowing attendees to see the unique experience they’re creating every day. Oprah’s Your Life in Focus series will be held quarterly throughout 2021. And we’ll showcase the power of the WW community and create an opportunity to attract new members to the brand. It is important to remember why all of these innovations have been so critical. In Q1, we are comping the launch of myWW, Oprah’s 2020 Vision tour, and the resulting media avalanche, in addition to an exceptionally strong workshop sign-up period. As a result in Q1 2021, we’re facing significant headwinds, primarily from our workshop business. Most consumers, particularly lapsed members, associate this vertical with in-person workshops, the majority of which have been closed. Importantly, however, we expect to deliver strong digital end-of-period subscriber growth in Q1 to include Digital 360. Looking ahead to our upcoming spring marketing, our integrated campaign will highlight the inspiring real stories of our members, including James Corden, who will be featured in our TV commercials in the U.S. and UK. I will speak later on our 2021 priorities and future outlook, but I will now turn it over to Nick to discuss key highlights and quarter-to-date operating performance.

Thank you, Mindy. Our business has gone through a significant shift to a digital subscription model over the past several years. We expect that by the end of 2021, our subscriber base will be 90% digital, including Digital 360, and 10% workshops, which includes in-person and virtual workshops. This is a notable shift from a 70/30 mix in 2019 and an 85/15 mix in 2020. As it relates to revenue a year ago, digital subscription revenues were equal to our workshop plus digital revenues. In Q4, digital subscription revenues are now more than 2x workshop and growing in every geographic market. We were already well down this path pre-COVID, but in the past year, we have been able to significantly accelerate this transition. Our continued focus and investments in technology are critical to driving our business in 2021 and beyond. We have three tech hubs and additional resources around the globe to support WW product and tech innovation, our growth levers, and our always-on focus on our app experience. As it relates to the geographic markets, it has been a unique year in that member signup trends have varied more than usual for a number of reasons, with COVID restrictions. Markets such as the UK, which had a higher penetration of workshops, have had greater pressure, whereas Germany and France have benefited from a higher mix of digital subscribers. The lockdown rules have also affected consumer behavior, especially as it relates to the reset mentality at the beginning of the year. The one thing that is true everywhere is that consumers are seeking economic value and trust. And so we have worked to test and create relevant office strategies that emphasize economic value, but also have the benefit of longer-term commitments. On a global basis, average retention remains over 10 months, which is a record level for WW, showing continued strength in total retention. We continue to focus on LTV longer-term commitment plans and reducing churn. In-app purchase continues to work well for us, with a conversion rate from free trial of about 55% and accounting for about 10% of member signups. The addition of our assessment tool leading to a two-week free trial has been a strong recruitment vehicle. Important to note that we do not count free trials as signups until they convert to a paid membership at the conclusion of the free trial. In-app purchase members tend to be first-time WW members, 65% are younger individuals. Digital 360 has had a strong start. At $2.95 per month, it is a premium to our digital membership. As Mindy mentioned, we have already had over 100,000 people sign up for D360 in the U.S. and the UK. The TV and digital campaigns have just launched featuring our new coaches and experience. We’ll be rolling out D360 to Germany, France, and Canada during the first half of this year. Given the successful launch of Digital 360 and trends in our core $2.19 per month digital offering, we expect digital subscriber growth and gross margin improvements in 2021. Let me give you some context on our workshops business, where we are today versus a year ago, and how we are strategically planning and managing for the future. Globally, at the beginning of 2020, we had approximately 16,000 coaches and guides, 1,100 WW branded studios, and 10,000 third-party locations. In 2021, we expect to have roughly 7,000 coaches and guides, 600 studios, and depending on country-specific COVID restrictions, about 2,000 third-party locations. For additional context within the U.S., our largest market, we began 2020 with a real estate footprint of 800 WW branded studios and 2,300 third-party locations. In 2021, we’ll have about 400 studios and 250 third-party locations. So as you can clearly see, we’ve taken aggressive actions to right-size this segment. We continue to focus on aligning the workshop cost structure, managing for maximum flexibility, and leveraging strategic partnerships. While our workshop plus digital business has become a smaller part of our mix, its high-touch premium offering at $4.49 per month is an important differentiator in our portfolio and for our brand. Over our history, millions of people have successfully lost weight by following the WW program and the guidance and inspiration from our coaches and the workshop member community. And today, we are finding new ways to provide the same support. Virtual workshops, which we launched just a year ago, play a pivotal role in keeping workshop members engaged. The typical virtual workshop attracts approximately 100 members per session, and some workshops are becoming mega-events attracting up to 500 members. To provide some perspective, we are operating virtual workshops in the U.S. 16 hours a day, seven days a week, to create as much flexibility for our members as possible. As you know, subscriptions represent about 85% of our total revenue. Product sales and other represent the remaining 15%. We are extremely pleased with the performance of our e-commerce business, which, to remind you, launched in our app less than a year ago, after significant investments in the integrated experience and product assortment expansion, which has helped us to offset sales in studios. Previously, the primary sales channel was the buyer of physical studios. Today, e-commerce represents 80% of our product sales, up from 30% a year ago. We expect that in 2021, e-commerce will continue on a strong growth trajectory. We continue to build our branded, co-branded, and marketplace product portfolio, and you can expect to see continued expansion and collaborations, such as our recently announced collaboration with the Vitamin Shoppe. Finally, I’m also focused on the opportunity in healthcare and diabetes. Our health solutions business continues to be a key strategic growth lever for us. In addition to growth, we’re expanding our relationships with employers, providers, payers and physicians. We now have plans to develop a dedicated consumer offering, specifically designed for people with diabetes. In the U.S. alone, more than 30 million people are living with diabetes. And despite the high correlation between obesity and Type 2 diabetes, this population is underrepresented in the WW membership base. I’m thrilled that Dr. Adam Kaufman has joined WW to oversee our healthcare and diabetes business with direct responsibility for our WW health solutions business and partnership expansion in areas such as telehealth and telemedicine. In addition to his deep expertise in diabetes, Adam has unique experience applying technology to improve healthcare services. We are building momentum and expect strong WW health solutions revenue growth in 2021 with accelerated growth potential in 2022 and beyond. And now, I’ll turn it over to Amy to discuss our financial performance and outlook.

Thank you, Nick. As Mindy mentioned, we ended 2020 with a record 4.4 million subscribers, up 4% from the end of 2019, with digital subscriber growth of 24%, up 20% or more in all of our major geographic markets. We are extremely pleased that the growth in digital subscribers offset the substantial workshop pressures in this unusual year. For the full year 2020, total revenue was $1.4 billion, down just 3% year-over-year on a constant currency basis, an impressive result considering that workshop subscription revenue declined over $150 million, in addition to significantly lower in-studio product sales due to the COVID environment. Digital subscription revenue was up 21% on a constant currency basis for the full year. Adjusted gross margin was 58.1%, up approximately 250 basis points from the prior year, a testament to quick actions taken on our cost structure. In addition, the shift to a larger digital subscriber mix benefited gross margin, which is over 80% in our digital business. Adjusted EBITDA was $358 million in 2020, reflecting the impact of the digital mix shift and our ability to flex the workshop business cost structure to demand. During Q4, we made the decision to implement additional cost reductions to our global workshop operations by closing certain of our six locations. As a result, our full-year 2020 restructuring charge was $33.1 million, up from our prior estimate of $22.5 million. Incorporating the $0.63 negative impact from restructuring and other one-time items, full-year 2020 GAAP EPS was $1.07. Turning now to our outlook, as Mindy highlighted, prior to the impact of COVID in mid-March of 2020, we had an exceptional start last year. We had just launched a new food program, had significant media momentum from Oprah’s 2020 Vision tour and strong member signups in both workshop and digital. In that context, for the first quarter of 2021, we expect revenue to decline compared to a record revenue quarter in Q1 of 2020, primarily driven by our workshop business, which we expect to be down approximately 50% year-over-year and the non-recurring $16 million revenue benefit we had in 2020 from the Vision tour. As a result, we expect Q1 total revenue decline in the mid to high teens. Gross margins, however, are expected to increase over 500 basis points, benefiting from the growth in digital subscribers, aggressive cost management efforts in our workshops business, and the absence of costs related to the 2020 Vision tour. Due to the downsizing of our studio footprint, we anticipate taking an $18 million restructuring charge in 2021, with the majority falling in Q1. Marketing and G&A are expected to be relatively in line with Q1 2020 levels. Given all these factors and excluding the impact from restructuring charges, we expect Q1 adjusted operating income to be down from last year’s $25 million, leading to Q1 operating income in the low single-digit millions. In just a few short weeks, we will begin to anniversary the negative effects COVID has had on our business, particularly regarding its impact on workshops. Looking beyond Q1, we expect Q2 to Q4 to deliver strengthening results on a year-over-year basis. Therefore, our objective for 2021 is to meet, if not exceed full-year 2020 revenue and adjusted operating income. We expect to see strong year-over-year member signup growth starting in the last few weeks of Q1. Therefore, for the remaining nine months of the year in aggregate, we expect to return to year-over-year revenue and earnings growth. We expect this will be led by continued revenue and subscriber growth in our digital business, accelerated by the success of the D360 and a strong spring marketing campaign. We also expect that year-over-year signups in our workshop business will turn positive and build over time as consumers get more comfortable returning to an in-person environment, in addition to having access to unlimited virtual workshops. We expect to expand gross margin by over 200 basis points for the full year, driven by strong digital growth. We will continue our focus on right-sizing our cost structure throughout the organization. However, please note that in 2020, G&A benefited from a $25 million temporary reduction in compensation. As we demonstrated in 2020, we will be responsive to an evolving environment and we’ll balance cost discipline with investments to best position WW for growth in 2022. Turning to our capital structure and cash priorities, at year-end 2020, we had approximately $166 million in cash and an undrawn revolver. We ended the year with a net debt to EBITDA leverage ratio of 3.7 times, or 2.8 times levered on a first lien debt basis. Reflecting the current interest rates on our debt at this time, our full-year interest expense is expected to be $111 million. Given the strength of our balance sheet and depending on market conditions, we are evaluating opportunities to reprice our debt in the near-term. For illustration purposes, a 100 basis point reduction in our blended interest rate would equate to $15 million in pretax savings annually. Excluding the impact of restructuring charges on our P&L, we expect our full-year tax rates to be approximately 24%, which assumes no changes to the current statutory rate. CapEx, primarily driven by tax spend and capitalized software, is anticipated to be in the $40 million range in 2021. G&A is expected to be $52 million. In addition to investing in technology and digital product resources and talent, which fueled the future growth of the business, we will continue to evaluate potential tuck-in acquisitions of technology companies. We are also seeing opportunities for acquiring franchise territories and are in discussions with several franchisees. In summary, we believe we are focused on the right initiatives to fuel long-term growth in revenue and earnings, drive strong cash generation, and maximize financial flexibility. I will now turn the call back to Mindy.

Thanks, Amy. Today, WW is the leading weight loss and wellness digital subscription platform with multiple membership verticals and revenue streams, creating a healthier, more profitable and more sustainable business model. It was clear pre-COVID and even more so, given what we’ve experienced over the past year, that the world needs health and wellness now more than ever before. We are singularly focused on making WW the weight loss and wellness partner of choice, for people, families, communities, the world—and for everyone. Consumers are seeking solutions, but they are looking for more than tactical tools. They are looking for coaching, community, personalized solutions and connection. We have reflected this in our marketing, our technology experience, our platform engagement, and our programmatic offerings. To achieve these objectives, we have established a culture of rigorous prioritization, focusing our efforts and resources on the initiatives in 2021 that will have the greatest impact for today and for the future. To that, we are focused on the following key priorities: First, the member experience. Investments in our app experience and an always-on innovation roadmap to give our members the intuitive and personalized experience that they need. This is key to both the recruitment pathway and increase retention. From the moment of consideration to our assessment onboarding and ongoing engagement, we will continue to innovate and invest in the technology to create a frictionless and differentiated digital experience. We are building a new data platform and proprietary dashboard to measure and guide everything from the efficacy of onboarding to habit formation, to greater personalization, enhanced discoverability, and ultimately expanding LTV. These proprietary engagement KPIs look at our member cohorts in an entirely new way. Instead of grouping them by demographics, we will focus on their behaviors and then within these behavior-driven groups, measuring activation, engagement, tenure and efficacy to deliver actionable insights into how we can optimize the member experience. Second, Digital 360. As I mentioned, we are thrilled with the launch of D360 in the U.S. and UK, with strong sign-ups from new WW members as well as from returning digital members choosing D360 as an upsell on rejoining. Members are enjoying, engaging with our coaches and content, particularly the live coaching experiences. We will accelerate our global rollout for 2021 as well as continue to optimize the experience and expand and amplify our coaching expertise. This will be an advance of the relaunch of our one-on-one platform; however, we will continue to offer the one-on-one coaching experience that we have today. The focus on Digital 360 will benefit the entirety of our coaching experiences across digital, virtual and one-on-one. Third, our 2022 food innovation. Our science team are experts in constantly using the best in breakthrough innovation across nutrition, behavior change, technology and psychology to identify ways to make our members' success across wellness and weight loss even more simple, more livable, more efficacious and more sustainable. Our entire team has never been more excited about food innovation. The development process, technology and testing are ahead of any other year; we’ve seen strong consumer feedback so far, and we believe it will be a significant member recruitment driver for 2022. And finally, healthcare and diabetes. As Nick mentioned, we have invested in our WW health solutions business over the past three years, building an entirely new technology platform, expanding our resources, team and talent while advancing relationships with employers, providers, payers, and physicians. But the opportunity is greater. We will be focused on the broader healthcare markets, as well as diabetes as a core WW vertical offering. We are thrilled to have Dr. Adam Kaufman join our team to lead these efforts, which will include WW health solutions, diabetes, and strategic partnerships in telehealth and telemedicine, working with the teams globally. We are confident in our ability to drive revenue and earnings growth over the course of the year. We have an expansive vision and a radical focus, which will drive our efforts and sequential progress in 2021 and allow us to deliver multi-year growth and profit objectives as well as improve people’s lives through their partnership with WW. In closing, this past year has reinforced our vision and belief in the strength of our new business model, the discipline that we’ve applied to our investment thesis, and the talented team that we’ve cultivated to maximize our opportunity and solidify our path for value creation and growth. With that, I will now take your questions.

First question comes from Steph Wissink, Jefferies. Please go ahead.

Thank you. Good afternoon, everyone. We have a couple of questions. The first is actually, Mindy, on your comments at the end. I think you mentioned confidence in sales and EPS growth this year. Maybe we could contrast that a bit to the guidance, which implies kind of a stable rate. Maybe share with us a little bit about where you see some of the upside potential coming. And then if you could just walk us through the first quarter again. I think you mentioned workshops down 50% and the digital business up. Maybe help us think through the composition of the start to the year and how you expect that arc for that waterfall to progress as the year progresses. Thank you.

Sure. I think the first thing I would say is, this is definitely not a typical year in terms of a normal arc of seasonality because of COVID. So you’re going to have to look at it a little differently. What we were articulating is that particularly on the studio side of the business, because at the beginning of 2020, we had very strong studio sign-ups, particularly in that first quarter. And that’s what we are comping. So even though we mentioned that we will have strong digital growth at the end of Q1, that’s where you have the gap. Starting at the back of March, you will go into the sequential improvement and cadence of comp, particularly in the digital business. The second piece is, I mentioned D360, which is a premium to our digital business. And to that point right now, just in the U.S. and UK with no marketing efforts whatsoever, we’re already seeing over 100,000 signups. So that will be a trajectory throughout the balance of the year in addition to our other marketing efforts. Nick spoke about our WW health solutions business and our efforts in that, which also does not have the typical cadence of seasonality, because it really is based on sales into employers, etc. So it’s a different cadence of business. With our partnerships with CVS, Welltok, and we just announced Castlight, you will be building on memberships over that time. In addition, we did not launch e-commerce in our app until March 7 of 2020. That business is scaling significantly as we have more of our members and we have more product expansion in the business. So it’s why we have been talking about a different curve of trajectory for the year than you would traditionally see, which is why we feel the revenue and earnings growth over the course of the year is achievable.

Great. And if I could follow-up in the one comment you just made, which is your e-commerce business within your app. Is there an opportunity to develop a third-party partnership or a marketplace model, where you feel like you could curate and deliver a selection of products, and maybe even services that would be beneficial to your user base that would be done through…

Yes. I’m really glad you brought that up because our goal is to be a fully health and wellness operational marketplace. So just to give you some perspective, when I came into the company, basically all our sales of products or in our studios, and they weren’t products that we felt fit the brand. Over the course of the time, we got out of 100% of the products we sold, relaunched all our new products, and have been rolling that out while we rebuilt our e-commerce platform globally. That new global platform is what launched March 7, in addition to product expansion. Currently, the product assortments are branded WW products that we develop and source. We’ve built a co-branded portfolio, so for example, smaller electronics with Gas, our partnership with Vitamin Shoppe for supplements, and you’ll see more co-branded initiatives. The third aspect is really building out more of a marketplace. And you will see a lot more of that as we expand our drop ship capabilities and even potentially have other subscription businesses integrate within the app. For me, coming from a product background and development, it’s exciting to see both the member engagement and engagement in general with what we’re doing on the product side.

Thank you. Next question comes from Lauren Schenk of Morgan Stanley. Please go ahead.

Hi, this is Nathan on for Lauren. Just a quick one for me. Can you provide some color on what you’re seeing in the early Digital 360 customer behavior, engagement, and retention, when compared to a core digital or studio member?

Yes. What we’re really excited about is that in addition to attracting new audience and really being an upsell for lapsed digital, we are definitely seeing a significant portion of that consumer as under 45. And again, that was before we did our heavier marketing that really exposed our coaches to a significant degree. Just one comment on the coaching; those coaches who we developed and identified for D360 are influencers on their own and are creating their own recruitment mechanism. So that’s exciting as well. Looking at our ability to offer this new vertical, which also has margins closer to our digital margins, we see this as a very important growth element. Lastly, for us as a brand, the one-to-many coaching has been part of who we are and now we’re able to do it through a robust digital platform where we can integrate content. We also have worked towards high-profile partnerships and collaborations with people like Oprah, Sanjay Gupta, and Matthew McConaughey, creating highly engaged content. Our satisfaction scores are very high, which gives us the confidence to be aggressive on both the rollout and the marketing.

Yes. It’s Nick. I just would add that we are excited about the D360 launch and are seeing retention characteristics similar to digital members, but at $2.95 price point, it can have higher LTV than our core digital offering.

Thank you. The next question comes from Alex Fuhrman with Craig-Hallum. Please go ahead.

Great. Thanks very much for taking my question. I wanted to ask about it seems like you have kind of a once in a lifetime opportunity here to really rebuild the studio business for the modern era. Other than the many points of distribution and where we could see the meetings taking place, are there any other big picture changes that you’re envisioning over the next couple of years as you build that business back in terms of the experience and how the workshops are conducted?

Absolutely. If you look at the aggressive changes we made, this is why we wanted to give everybody a global perspective on just how significantly we looked at the business. Where we are today gives us the optionality as we see people come back to react very quickly on a flexible basis. It also gives us the ability to pilot new experience concepts that are very different from what we traditionally had in branded studio locations. Additionally, it gives us the ability to meld the virtual and the physical to amplify and serve our audience in a very different way. They could have their local physical studio, but they can also have access to virtual studios with different cohorts and coaches. People are responding to that. In the short-term, many of our markets are still closed, but we have the opportunity to reframe what this entire membership vertical will be for the future.

Thank you. Next question comes from Edward Yruma, KeyBanc Capital Markets. Please go ahead.

Hi, this is someone on for Ed. You’ve had a year since you relaunched CPG. What are your thoughts on its performance and how can you accelerate growth in that area?

We have a great opportunity in our consumer products business. The areas that we’re very focused on right now are what we call healthy eats, which encompasses all our food products that have been expanded significantly beyond just snack products; it includes pasta and coffee products, and you’re going to see continued marketplace expansion there. Healthy kitchen products, which include kitchen tools, measurement tools, etc., are also key areas along with health tech and healthy lifestyle. You’ll start to see built out beyond our scale businesses, exploring opportunities in marketplace collaborations more robustly. Using our partnership with the Vitamin Shoppe as an example, we are looking beyond product creation to collaborate on health and wellness. We’re delivering this commerce through both Vitamin Shoppe’s digital and physical platforms, with trained associates in-store for WW, providing an opportunity for sign-ups. What we’re trying to do is be creative in these strategic partnerships, which allows us to reach a larger audience.

Yes, if I could, Mindy, I just had to say, we are thrilled with the growth in e-commerce. In 2020, we tripled our product offerings and doubled both penetration with our members and our repeat purchase rate. We feel we’re just scratching the surface of this e-commerce opportunity, and that’s why we’re very confident in strong growth in 2021 and beyond.

Thank you. Next question comes from Michael Lasser, UBS. Please go ahead.

Hi, this is Mike Schwartz on behalf of Michael Lasser. Thanks for taking our questions. One of the key aspects of the WW story has been its ability to build durable relationships with members over a long period of time. Even if there were gaps along the way, leading to templates in your relationships. As you begin to target a younger demographic with digital offerings, do you think you can create a similar relationship with this age cohort, even if you don’t have that personal connection to peer-to-peer workshops?

Actually, we’re already seeing that. Our digital retention is significant and we’ve seen an increase. The real key to that is engagement. Everything that we built and integrated, from the personal assessment before you joined to being matched to a program, to all of the personalization throughout your journey, as well as building the digital community in our core platform with Connect, and now with D360, which builds strong coach relationships. This gives us confidence regardless of the age range, and it’s been consistent across.

Thank you. And it’s a quick follow-up. Can you give a sense of how customer acquisition cost has turned over the past year and whether you’re still around that target five to one ratio with LTV?

Yes. Look, LTV to CAC comfortably remains at five to one. We maintain a very efficient marketing model and the team’s doing a great job by shifting from TV and video to building our digital marketing strategy. I expect that trend to continue into 2021.

Thank you. Next question is from Brian Nagel, Oppenheimer. Please go ahead.

Hi, good evening.

Hi, Brian.

So I think this has been asked before, so I apologize, but I’m still not totally certain regarding the current trajectory of digital subscription growth here in 2021. And within the guidance you gave for Q1, how should we think about digital growth there?

Well, what we spoke to is that we’re going to see strong digital growth in Q1. The pressure is on the studio business.

And then as we’re tracking right now, you’re up against the difficult comparisons. Is there a contention that the business should get better as Q1 progresses?

Absolutely. Yes. As we mentioned, we will begin to comp against the COVID effects in 2020 in just a couple of weeks. Mindy mentioned that we had a record quarter in Q1 of 2020 with strong workshop and digital signups, plus the Oprah Vision tour and a strong marketing campaign. So we are seeing comparative pressure to a peak Q1 performance, which is why we are guiding some revenue down in Q1 in the mid-to-high teens, but we do expect revenue and earnings growth from Q2 to Q4 in the aggregate as we move past these tough comp quarters. You will still see healthy digital subscriber growth at the end of Q1.

Got it. Okay. Thank you. And then the second, I guess a little bit longer-term in nature, but maybe more for Nick. You talked about how the business is shifting to digital, and then you also have this shift happening with your legacy studio business going virtual from physical. How should we think about it? Is that transition against a backdrop where the COVID headwinds are abating, but how should we think about the expenses associated with it?

Actually, I’ll let Nick go into it in more detail, but the actions we took to right-size the studio business have given us tremendous flexibility to respond to what we’re seeing in consumer behavior, which will also enhance margins in that segment of the business. While it’s a smaller portion of the business, digital and D360 operate at significantly higher margins.

That’s right, because if you look in many countries, like the UK, France, Canada, our studios are still closed. We’re incurring costs. That’s why the shift to virtual workshops has been essential to keep our members engaged. As COVID improves and people become more comfortable meeting in person, we’ll have a wonderfully flexible workshop cost structure, with social distancing allowing for 10 to 12 people in a location, even when it’s open, and we can quickly increase capacity in our remaining 400 locations in the United States and add a studio at a very cost-effective rate to meet demand.

Thank you. Next question is from Linda Bolton Weiser, D.A. Davidson. Please go ahead.

Thanks. So I guess we’re up to the point here where it’s a year in diet season 2022, where we would have a major program innovation. Is that something you’re planning for? Is there any color you can give us on the magnitude of that coming up for the next diet season? Thanks.

Yes, we have the 2022 innovation launching. I tried to express my excitement about it based on what we’re seeing. It’s very innovative. It’s groundbreaking, and early results are very encouraging. We felt really good going into 2020 and as you know, we launch at the end of 2021. So we’ll be able to see benefits from that as well, but it’s looking strong.

Thanks. I just wanted to clarify that I understood what you said about the cadence of seasonality. Are you suggesting that subscribers could actually grow sequentially as we go through the year, or will we still end the year with subscribers below the first quarter level?

What you’re going to see is sequential improvement quarter-by-quarter. So we’re going to see the reverse; I’m calling it more of a COVID year than a traditional seasonality year. You will see growth sequentially over the course of the year.

Thank you. Next question is from Jason English of Goldman Sachs. Please go ahead.

Hey, good evening, folks.

Hi.

I guess a couple of questions. I want to come back to the expectation of the typical slope. But first and foremost, clarity on the first quarter; just sort of back of the envelope, I’m walking into – walking back to an applied digital revenue figure of around $200 million. Does that—a, does that strike you as reasonable? And b, what does it imply in terms of recruitment for digital? It looks like you are carrying over a fair amount of sub growth or a high degree of subscribers. And that would be one of the weakest and one of the absolutely weakest sequential growth figures we’ve seen from a 4Q to 1Q.

To start with just right setting expectations for Q1, we do expect significant headwinds. So to be clear, we believe that our Q1 total revenue will decline in the mid-to-high teens driven by workshops. As a result, our digital revenue is expected to be up significantly on a year-over-year basis.

Yes. You gave the 50% number and then you can back in and it implies sequentially that there’s if not up at all. I just want to make sure. I know it’ll be up year-on-year because you finished the year up. I’m just trying to make sure I’m contextualizing the slope correctly.

So we actually, so I don’t think we’ll see sequential decline in that digital revenue. So we are expecting growth. We’re not prepared to provide the split at this point, but we are expecting higher growth, yes, higher growth in that revenue in Q1.

Yes, because you also have to remember even with the decline, what percentage of the overall business it is.

Yes, yes, I do. That’s helpful though. Are you expecting only sizable year-on-year growth, but real quarter-on-quarter growth? So that is helpful. Okay. And Mindy, clearly where you’re guiding Q1 suggests that we use normal seasonality, that your revenue is on track to decline by 7%, 8%. You’re expecting to defy normal seasonality because they’re coming out of COVID. I hear you. So where are you looking for a new off-cycle resolution period, which is nothing what I hope happens. What are the guideposts you think we should be looking at to see if this is coming to fruition?

Well, similar to how we’ve looked at the balance of the year, it’s also what we’re doing that’s going to drive that growth. It’s not just a comp; you have myWW+ and a strong engagement in our digital business. You have the growth and expansion of D360. You have a reset around the comp of studios, and then you have growth in other areas of business such as commerce and consumer growth with WW health solutions. So you start building on that quarter-by-quarter, and we will see sequential growth.

In the near-term, I’m really excited for our spring marketing campaign, including James Corden, who will be featured in our TV commercials in the U.S. and UK. I think that’s going to drive a lot of interest in our brand.

And just to circle back to your digital question, don’t forget that we had a $16 million revenue comp year-over-year from the Oprah Vision tour. In addition, in-store product sales will be down significantly with workshop revenue. So I think that’s the piece that you’re missing.

Yes. The $16 million could be the piece. Thank you.

And our final question today comes from Vikram Kesavabhotla of Guggenheim. Please go ahead.

Yes. Thanks for taking the question. You talked about the opportunity on the health solutions business a few times. I’m curious if you can give us some more color on some of the specific goals you have there for fiscal 2021. And what would you be looking for throughout the year to measure progress on that front? Thanks.

Sure. I’m just going to give you some background, and I’m going to let Nick talk to it as well. We’ve had the WW health solutions business for a year. I came in and realized this is not the business that is really going to take us into the future. In the first couple of years, which you didn’t hear me talk about very much, we were completely rebuilding that business, the platform, the technology, that’s why we opened the tech hub in Toronto, the team, and our offering across employers, payers, and physicians. So the platform now that we have is what we can really move forward with. So as I mentioned, we’re now with CVS and Welltok’s and other areas, and that is going to build based on the timing of when they sell in over the course of the year. So we have fairly good visibility to be confident we’re going to see growth in that business over the course of 2021 that could then scale significantly in 2022 based on that timing.

I think that’s fine, Mindy. There are multiple growth levers here focusing on small and medium size businesses, of course the aggregate is CVS, Welltok, and Castlight, as Mindy’s mentioned, physician referral is also a strong focus area. With Adam Kaufman joining us to lead the WW health solutions business and now developing a diabetes offering, there are real synergies between healthcare and diabetes. I think the future is bright for this combined business vertical.

Now we’ll be able to give you updates on this every quarter, but we are confident in the growth vehicle.

This concludes our question-and-answer session. I would like to turn the conference back over to Mindy Grossman, CEO, for closing remarks.

Well, thank you, everyone. I think you can tell I’m confident in our strategy, as well as the rigorous focus we have on the key initiatives that will have the greatest impact. What we’re focused on is the recruitment, retention, and diversification of our member base, delivering strong digital subscriber and revenue growth, driving total revenue and earnings growth to the balance of 2021 to accelerate growth in 2022 and beyond. I just want to once again thank our talented teams around the world for their exceptional work during this time, which has reinforced our leadership as a technology experience company through our differentiated member experience at a time when it’s more critical than ever. So thank you, everyone for joining us today, and I look forward to keeping you updated throughout the year.

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