Good afternoon, and welcome to the WW International Third Quarter 2022 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. I would now like to turn the conference over to Corey Kinger, Investor Relations. Please go ahead.

Thank you, everyone, for joining us today for WW International's third quarter 2022 conference call. At about 4:00 p.m. Eastern Time today, we issued a press release reporting our third quarter 2022 results. The purpose of this call is to provide investors with 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 Investor section under Presentations and Events. Reconciliations of non-GAAP measures disclosed on this conference call to the most directly comparable GAAP financial measures are also available as part of the press release. Before we begin, let me remind everyone that this call will contain forward-looking statements. Investors should be aware that any forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here today. These risk factors are also 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 Sima Sistani, CEO; and Amy O'Keefe, CFO. I will now turn the call over to Sima.

Thanks, Corey. Good afternoon, everyone, and thank you for joining us today. We are encouraged by early indicators that our data-informed approach to product development, focused on our four pillars of community, accountability, and coaching, is yielding positive results. That being said, we are aware that our turnaround will take time. We have substantial work to do to update our product to deliver the most compelling solution, but the initiatives driven in the short time that I've been here are already resulting in a sequential improvement in our year-over-year sign-ups trend. We have identified critical experience moments to increase member retention and are focusing on building momentum for us through the next year and beyond. Despite headwinds, I'm confident that we will continue to grow our position as the leader in our category. We have a program that works, members who love us, and 60 years of efficacy in a space where new entrants come and go. We are turning that solid foundation into a best-in-class digital experience for the future. We have been consistent that 2022 would be a year of transition, shifting focus and resources back to what we do better than anyone else, moving away from initiatives that do not drive impact and complicate the member experience. We have done that with urgency. We have improved trends and are focused on positioning the company for a return to growth. The need for efficacious and sustainable weight loss solutions remains strong. Our aim is to make Weight Watchers the solution of choice. Relative to Q2, while still down on a year-over-year basis, we delivered an improvement in sign-up trajectory during the quarter, with sign-ups coming in modestly above our internal expectations despite demand pressure in our category. We were pleased with the performance of our creative in the fall campaign, where our simplified messaging and our stance has been unapologetic about weight loss. The US ran a modern, high energy spot with a simple message: that Weight Watchers is here for people who want to lose weight. The campaign has proven to be effective for both efficient member acquisition as well as positive brand building. We showed up differently, and consumers took notice. Importantly, we saw this response not only among former Weight Watchers members, but also new consumer cohorts. Ad awareness is up significantly year-over-year and on par with winter campaigns, despite significantly lower spend. The spots became a topic of conversation on social media, showcasing our ability to break through culturally, and we saw significant increases in brand consideration. We are seeing positive impacts from the shift from traditional media buying to data-driven global performance marketing. By in-housing our team in North America, we are faster to market, responsive to media and creative trends, and more efficient with spend. We will be leveraging all of these learnings as we head into our peak season. However, while we are making progress on sign-up trends, we also saw a modest uptick in cancellations during the quarter, largely related to six-month commitment plans that ended in July. We have identified that member engagement and satisfaction has declined with personal points compared to prior programs, an issue we are actively monitoring. This reinforces what we already knew—that our program and product must provide a simple and engaging member experience. As a result, our teams have begun tracking a new measure, activation rates. Activation rate is defined by a member's engagement and progress during their first month on the program and is directly tied to member success. Our data shows that activated members churn at a rate that is roughly half of a non-activated member. The science and our data support that these members will be more successful on Weight Watchers over the long term. Now that we are measuring activation rates, we have observed a promising uptick in recent months demonstrating that the changes we have made to the app are working—driving the behaviors and connections that lead to member success—which will create a network effect that drives efficient acquisition and longer retention. We are now better able to calibrate our product roadmap moving forward. With that in mind, we have considerably increased our technical velocity, choosing future improvements to boost engagement and retention in our products. Recent changes include a meaningful update to our food search algorithm with test results showing a double-digit reduction in customer service contact and a decrease in churn, streamlining weight tracking to drive consistent accountability, and demonstrated by a material increase in the usage of this feature. Last month, we rolled out a new onboarding funnel in the US, increasing the share of sign-ups choosing our premium products, and we enhanced our in-app encouragement of weight and food tracking activity, contributing to the increase in our activation rate. This has shown that our gamification techniques are a meaningful lever, and we are excited about future iterations planned in the coming quarters. In short, there is a clear order of operations: greater activation leads to improved engagement, which leads to greater weight loss and satisfaction, ultimately driving greater retention and positive word-of-mouth, making marketing more efficient. I believe that, as an organization, we need to be agile—continuously testing, learning, and evolving the program to better fit the needs of members. We are committed to instilling a company culture of bias to action, data-informed decision-making, and evergreen innovation. As we noted during our last earnings call in August, our analysis showed that personal points could have and should have performed better. After challenging ourselves to understand how members behave through analytics and a laser focus on activation rates, we implemented the following actions: we uncovered and diagnosed issues with our current program to inform a new direction, and for the first time ever, rolled out an A/B test to a subset of new members to inform a food plan change through data and further validated the results. Early member survey results show that the simplified plan outperformed personal points on MPS, supporting our decision to scale quickly. And we did it all in under three months. Due to this tremendous effort, we plan to begin rolling out the simplified program in the coming weeks. We believe the changes will make Weight Watchers easier to follow and help members achieve their weight loss goals. We announced this decision to our coaches recently, and their feedback has been overwhelmingly positive. This has been what their members have been asking for. We will be retaining certain key elements of personal points, including the ability to deliver a program for members living with diabetes and a point algorithm that incorporates the latest nutritional science, including advances in fiber, healthy fats, and added sugar. There is no question that the Weight Watchers program works. That has been well documented in more than 130 peer-reviewed studies and 35 randomized controlled trials. We just need to deliver it better, both from a product and brand standpoint. As we look ahead to the peak winter season, we have the essentials in place to deliver a strong member experience that will set us on a path for improved performance. However, we still have a good deal of work to do to deliver the connected community at the intersection of digital and IRL that I believe is our future, which will drive subscriber growth. I will turn the call over to Amy to discuss Q3 performance and our outlook.

Thanks, Sima. Adjusted operating income was ahead of our expectations in the quarter despite revenue pressure, including FX headwinds. The actions that we have taken to address our cost base are delivering efficiencies. For Q3 2022, we finished the quarter with 3.8 million subscribers, down 15% from the prior year. As we mentioned, our year-over-year sign-up trends improved sequentially in Q3. However, this was offset by a modest increase in cancellations. Average retention slipped to just under 10 months in the third quarter. Revenue of $250 million was down 15%, including approximately 420 basis points of FX headwinds, primarily due to lower subscription revenues. Adjusted gross margin of 61% was down approximately 130 basis points from the prior year, primarily related to the mix of subscription revenue with 50 basis points of decline due to unfavorable FX. However, adjusted gross margin remains strong with workshop adjusted gross margin improving over 400 basis points from the prior year on a constant currency basis as a result of actions taken to optimize the studio footprint. Marketing spend in the quarter of $36 million was up just slightly year-over-year, with increased working marketing offset by efficiencies in non-working marketing and the benefit of FX. Adjusted G&A of $55 million was down $5 million or 9% versus the prior year, reflecting savings from our restructuring actions, overall expense discipline, as well as a benefit from FX. Adjusted operating income was $62 million, down $26 million versus the year-ago quarter, primarily due to revenue pressure and FX headwinds. During the quarter, we identified several factors, including business performance, market capitalization, and interest rates that indicated a triggering event for impairment testing. In Q3 2022, we recorded non-cash impairment charges of franchise rights acquired, totaling $313 million. The impairment charges were almost entirely driven by an increase in the weighted average cost of capital. GAAP net loss per share was $2.93, which incorporates the negative impact of $3.38 of items affecting comparability, including non-cash intangible impairments and net restructuring charges. A few updates to our previously announced restructuring plan. You will recall that this action was focused on streamlining the organizational structure, which will primarily impact G&A. In Q3, we reported approximately $4 million of restructuring costs and expect to report $10 million in restructuring charges in Q4, increasing our full-year estimate to $33 million versus our prior estimate of $27 million. The increase in estimate reflects the non-cash impairment of operating lease assets related to the reduction of corporate office space, resulting in approximately $5 million of annual cash savings going forward. In addition to rationalizing our consumer product SKU count in North America, we have made the decision to discontinue sales of consumer products in our international markets, both in workshops and online. These lines of business were unprofitable. We have started the wind-down process and expect it to be complete in the first half of 2023. Importantly, we will continue to license consumer products in international markets, and expanding this channel remains a priority. In total, we now expect annual savings from our restructuring actions to be over $40 million, which includes sublease income, up from our prior estimate of $35 million, with year 2022 savings approaching $20 million. We expect further revenue pressure in Q4 as a result of lower end-of-period subscribers at the end of Q3 and a significant FX headwind. We expect to end the year at approximately 3.4 million subscribers, which will be down 18% on a year-over-year basis. Revenue for the full year is now expected to be approximately $1.04 billion, down in the mid-teens on a reported basis, reflecting FX pressure and lower subscribers. Adjusted gross margin for the year is expected to be similar to 2021 at approximately 51%. For marketing, we anticipate full-year spend to be down approximately $15 million from 2021. Adjusted G&A for the full year is expected to be in the $235 million range, down 10% year-over-year. We are revising our adjusted operating income guidance to reflect lower revenue and incorporate additional FX headwinds. We now expect full-year adjusted operating income to be in the $150 million to $155 million range. The effective tax rate for the year is expected to be approximately 23%. For clarity, this excludes the impact of restructuring, impairment, and other items affecting comparability. Full-year interest expense is expected to be approximately $81 million. Note that we have a $500 million hedge to protect against rising interest rates on our variable term loan of $945 million, and our $500 million notes are fixed-rate. So only 31% of our total debt is floating. Therefore, at our current debt level, we anticipate interest expense to be approximately $90 million in 2023. Therefore, our GAAP EPS loss is expected to be in the range of $3.16 to $3.21 per diluted share, which incorporates the net negative impact of approximately $3.94 of restructuring, impairment, and other items affecting comparability. Turning to the balance sheet, we continue to generate strong cash flow from our subscription model and benefit from low CapEx and working capital. We ended Q3 with approximately $188 million of cash, an increase of $40 million versus Q2, plus an undrawn revolver. Q3 net-debt-to-EBITDA leverage ratio was 5.2 times, up from 4.8 times at the end of Q2. We expect our trailing 12-month leverage ratio to further increase in Q4 and into 2023. Therefore, in Q4, we expect to exceed the first lien leverage ratio under our revolving credit facility, which will limit our access to the revolver to $61.25 million, which should still provide a more-than-ample liquidity cushion. CapEx and D&A, primarily due to capitalized software, are both expected to be in the $45 million range. We will continue to manage cash and liquidity responsibly in this period of declining revenue. From a capital allocation perspective, the current discounted trading levels of our term loan and notes are certainly attractive, as is our stock price. However, given the expected subscriber headwind entering 2023 and overall macro risk, we believe it is prudent to preserve liquidity, particularly through our peak sign-up season. We will reevaluate our view on utilizing excess cash for opportunistic debt prepayments in 2023, but have no plans to repurchase shares in the foreseeable future. Related to 2023, as we have discussed, we expect a significant revenue headwind compared to 2022, given the expected year-over-year decline in opening active subscribers. Given the nature of our subscription business model, the starting subscriber base is an important component of revenue even before factoring in any year-over-year change in sign-ups. Using the expected ending subscriber level of 3.4 million for 2022, the lower 2023 opening subscribers would now translate into a subscription revenue headwind in 2023 of over $90 million on a constant currency basis. To help illustrate, in a scenario where sign-ups in 2023 are flat with 2022, assuming the same pricing mix and FX rate, subscription revenue would be over $90 million lower year-over-year. In addition, the actions we've taken to rationalize consumer products in North America and exit in international markets will also create a product sales headwind in 2023 of approximately $20 million, albeit with a negligible impact on earnings and a favorable impact on working capital. In summary, while we exceeded our adjusted operating income expectation during the third quarter, the negative impact from FX and a lower opening active base will further pressure financial performance in Q4 and into 2023. We are confident that we are taking the appropriate cost actions and will continue to do so to manage the business through the earnings trough. I will now turn the call back to Sima.

Thanks, Amy. With that context, we are looking ahead to 2023 and focusing on the following; improving our sign-up trends over the course of the year and returning to a year-over-year growth trajectory in the second half of 2023, enhancing new member activation, which would translate into gains in retention, shipping key digital product milestones, including new in-app community features in the first half of 2023, and later in the year, our integrated product feature with Abbott, exercising strong cost discipline throughout the organization, and executing on a narrow list of clear priorities, which we believe are the critical drivers for returning the company to a growth trajectory. I believe that we are better when Weight Watchers was a movement. People were proud to be members. They came to us for education, but more so for support. Whenever I meet members from the Gen United era, they love to tell me that they are Weight Watchers. Their identity is wrapped in our brand. These women make up the bulk of lifetime members and show us that meaningful, long-lasting retention is possible when we get the experience right. As we move into our 60th year, we must evolve to deliver today's experience. The consumer has changed. Culture has changed. Technology is changing. To maintain our position as the global leader in sustainable science-backed weight management, we have to better meet consumer needs across education and tools, human-led support, health indicators and insights, and clinical intervention. Our growth strategy must mimic those needs. Coaching and community are part of our DNA, with 80% of our members now being digital-only. We must evolve from being a effective screen tool to a truly digital-first experience. From enhanced community features to device integration, there are significant opportunities for us to match our premium and studio experience with a premium digital counterpart. For members seeking in-person community, workshops will continue to set us apart. We are working to ensure we have the right workshops open in the right places and staffed by the right coaches, to deliver excellently the program that we know will drive success for our members. Weight Watchers needs to be a culturally relevant brand that delivers against today's needs. We must break through the noise with our reasons to believe, namely science, community, livability, and sustainability. Thank you for joining us today, and we're now happy to take your questions.

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

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

Hi Spencer. So the uptick in cancellations, as we mentioned, was driven mostly by the six-month plan. We attribute that to personal points and member satisfaction with that program. We do not anticipate making different pricing actions to address that. Rather, our focus is on improving the program itself. As noted, within the last three months, we rolled out and tested a new version that is based on a cohort of members on personal points that we saw outperforming. So we're excited to be rolling that out in the next few weeks and anticipate an associated lift in activation rate with that.

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

Sure. Sorry, there's some feedback on the line, that's making it a little hard to hear, but I think you asked about our diet season. This program simplification is different from our more traditional innovation years. I think it's exciting the way we're evolving to an evergreen innovation cycle. We're considering our existing member base and what's working for them. We've heard loud and clear from coaches and our members that they are asking for a more simplified program. So not only have we improved the UX, but we have also observed, as I mentioned, a specific cohort that has outperformed and has seen more success, evidenced by engagement and weight loss. We can meaningfully convey this as we look towards the fall with our focus on conversion during our peak season.

Yeah. Great. Thank you so much.

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

Yes. Hey, folks. Good evening. Thanks for slotting me in. A couple of questions. So first, I guess, sticking on the topic of the approaching diet season and the recruitment cycle. Should we expect any new news on a marketing front like spokesperson, or is the message really going to be about keeping it simple with the simplified program?

Yes, that's right. In the past, we've relied on new news to drive interest, and we're seeing, at the moment, that the new news is really about simplification. We're listening and we've heard our members, and that's what they're asking for. Those members on this version of the program are better activated and have better success, which sends a powerful message to both our existing member base and to new customer cohorts. The science, livability, community—it’s all there. We are excited about delivering that message and matching our learnings from the past with our new in-house performance marketing approach.

Thanks for that. And on cancellations, do you have any intel on where the canceled consumers are going, whether it be to new pharma solutions like Wegovy or to a competitor like Noom or just going DIY?

That’s an interesting question. When we look at our market broadly, the demand for support in the wellness space remains strong. There are 70% of adult Americans who are struggling with overweight and obesity looking for opportunities. When we see people canceling or moving off our plan, it's typically because we're not providing them with enough value, and that is what we're focused on. We are diagnosing issues and addressing them. We plan to reach out to those members who chose to leave our program to let them know that we are working on solutions. The competition mainly lies in the DIY approach, which became more pronounced during COVID when people were learning to be more self-sufficient.

Got it. Makes sense. Thank you.

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

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

To your point, any new sign-up for Weight Watchers would have been through personal points. About 50% of our sign-ups during the last peak season signed up for a six-month plan, which canceled at a higher rate than the prior year. We believe this uptick is a Q3 event. I’m confident in our ability to address it. Our new measure, activation rate, is a key metric for us, defined by member engagement in the first 30 days and considered a leading indicator of success. We've already narrowed the gap in activation back to 2021 levels, and we haven’t even rolled out our new simplified program.

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

It has been even across the globe.

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

Thank you.

This concludes our Q&A session. I would like to turn the conference back over to Sima Sistani for any closing remarks.

With nearly 60 years of weight loss efficacy and a community of millions, we have a strong foundation on which to build a digital experience for the future. We have work to do to deliver the connected community that I know is our future, but I'm confident that we have the essentials in place to deliver a strong member experience. This will set us on a path for improved performance and return our company to sustainable growth. We look forward to our peak winter season and connecting with you again in the future. Thank you so much.

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