Welcome to WW International's Second Quarter 2024 Earnings Conference Call. I would now like to hand the call over to your host, Corey Kinger, VP of Investor Relations. You may proceed.

Thank you everyone for joining us today for WW International’s second quarter 2024 conference call. At about 7:00 a.m. Eastern Time today, we issued a press release reporting our second quarter 2024 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 Sima Sistani, CEO and Heather Stark, CFO. I’ll now turn the call over to Sima.

Thanks, Corey. Good morning, everyone. Thank you for joining us today. Weight Watchers has the right strategy to return the business to growth. In order to win in this dynamic GLP-1 environment, we are completely reimagining how we operate to catalyze our path as the leading digital weight health provider. We have taken decisive actions to navigate through this dynamic landscape. While the top line is pressured in the short-term, we continue to expect strong adjusted operating income this year, which gives us ample runway for what will be a monumental transformation of not only our business, but also how culture at large treats and cares for people living with overweight and obesity. Weight Watchers has the unique ability to provide a weight health solution that aligns with this major cultural shift. The specialized expertise we offer members and payers is critical to both managing costs and improving health outcomes. Our clinically proven program escalates or de-escalates in intensity based on a consumer’s needs at every step along their journey. For instance, a member can start on our core behavioral program, then add on clinic services such as registered dietician visits or metabolic panel, and if appropriate, a doctor visit and medication access. Alternatively, many of our members want to move from clinic access to a behavioral maintenance program once their medications have been titrated. This is our one membership strategy, which is made possible by over 60 years of expertise in behavior change and the trusted community we have built over decades, paired with an innovative telehealth service and specialized clinicians who can prescribe a wide formulary. Our progress has been tempered near-term by the complex and rapidly shifting external environment over the last few months. While we continue to experience GLP-1 shortages, we have seen an increasing quantum of compounded and, in certain cases, even counterfeit medications enter the ecosystem. This causes both a more fragmented landscape for consumers to navigate as well as increasing cost of media for the same audience. With regard to media, we continue to take a performance approach to subscriber acquisition, managing to a prudent LTV:CAC ratio. The increase in tax resulted in a decision to pull back marketing dollars initially dedicated to Clinic acquisition. In addition, we postponed the rollout of our refresh marketing campaign, which was initially planned for Q2 to integrate our latest findings and insights in this evolving environment. Last week, we soft launched the FitsU marketing campaign celebrating individuality, sharing real member stories and showcasing our comprehensive support, including clinically proven behavior change and medication for those who need it. Additionally, despite the fact that obesity is widely recognized as a chronic disease, we are disappointed to see health plans contracting coverage. For instance, Michigan’s largest insurance company said it would discontinue coverage of obesity medications in its commercial plans. These trends raise health equity concerns and are a meaningful setback in the effort to destigmatize a vulnerable population, largely women and people of color, who are deserving of equitable care and access to life-saving medications. While our growth trajectory has been affected by the evolving medication supply constraints, our comprehensive approach to weight loss is perfectly positioned for growth. Despite pulling back marketing dollars amid supply shortages, our end-of-period clinical subscribers increased 120% year-over-year, in part due to our existing membership base, with about 30% of May and June clinic sign-ups converting from our behavioral program. In addition, we are seeing 10% of lapsed clinic subscribers move to our behavioral membership, evidence of our one membership strategy, meeting our members’ needs along their weight health journeys. With obesity, specialized clinicians, our proven behavioral program, dedicated care team, insurance support, and engaged community, we are the number one doctor recommended way to lose and maintain weight loss. On average, Weight Watchers clinic members achieve a 19.4% body weight loss at 12 months. The combination of personalized medication management with our behavior change program is compelling, delivering Weight Watchers clinic members 11% more weight loss compared to those taking medications alone. These impressive weight loss efficacy results demonstrate that we have a differentiated, proven offering and increase our confidence that the initiatives in our expansion strategy will give us opportunities to catalyze our growth as we transform our business model, make our offerings accessible to more people, and deliver on our mission as the global leader in Weight Health. We are making progress, hitting early milestones across each of the three pillars of project expansion. On the first pillar of expanding care, this summer, we began making insurance-covered nutrition counseling with registered dietitians available to eligible members, starting with a pilot in New Jersey. In this pilot, 24% of new clinic members added on NRD visits. Given the exciting uptake, we have started a phased rollout in 10 more states. Also, this week, we expanded our pilot to eligible behavioral members. Over time, we believe such incremental services will expand ARPU while providing a value-added experience for members. We also launched a programmatic GLP-1 medication supply tracker to all clinic members. For over a year, Weight Watchers clinic has been actively assisting members in locating supply. But with this enhancement, we are able to point our members to the pharmacy nearest them with medication in stock immediately after a prescription is written. This service has contributed to an increased retention now approaching six and a half months, which is up from last quarter, as well as a 12-month high NPS. Other supply trackers in the market depend on crowd-sourced medication availability, which is prone to error and puts the onus on the user to find and report medications. Our supply tracker provides up-to-date information on medication shortages directly from our proprietary pharmacy stop database. You may have noticed that we recently refreshed the entire design of the Weight Watchers app to make it a more intuitive and unified user experience, providing members quick and easy access to all of our weight management tools. This revamp is driving improvements to login rates, lists in tracking, and longer sessions, all of which are positive for engagement, as demonstrated by a 16% surge in NPS last month. For our second pillar, expanding access, we continue to make progress toward making Weight Watchers a covered benefit. Despite some providers pulling back coverage, our B2B team is in active discussions with a large number of potential and existing customers. While an increasing number of vendors are claiming to have the right solution, Weight Watchers offers what the vast majority of them cannot: a comprehensive program addressing cost, member experience, and sustainability. With over 33 years of enterprise experience, more than 500 enterprise clients and clinically proven results, Weight Watchers is the science-backed leader in the Weight Health category. At Labcorp, which is one of our most recent B2B wins, the subscriber conversion rate is nearing 10% only six months in, proving that, when our program becomes a covered benefit, we have the brand recognition and solutions for sizable enrollment. Scaling our B2B business will take time, but we continue to believe this channel will be a critical driver of growth and momentum in the years ahead, especially when enrolled ARPU generated from each subscriber is substantial while also delivering health outcomes to the employee and ROI to the employer. And on our third pillar, expanding payment options. In addition to our B2B efforts, our goal is to also enable D2C members to use their insurance to reduce their cost burden and increase their access to incremental services, thereby driving greater ARPU. As mentioned, we are now offering insurance-covered registered dietician visits to eligible Weight Watchers members in the U.S. The ability to process insurance claims for Weight Watchers services will have a positive impact on signups and retention and is a natural extension of our existing ability to provide insurance support for Weight Watchers Clinic members. While these initiatives will expand our reach and enable us to serve a broader population, catalyzing our return to top-line growth, we are maximizing profitability and running a more efficient organization. Today, we are executing a strategic streamlining of our operational structure, which will result in a significantly lower cost base and allow us to focus on a narrow list of high-impact product initiatives, increase our nimbleness and impact across the product roadmap and bolster profitability and our cash position. Our organizational changes start with revamping our product organization under the leadership of our new Chief Product Officer, Donna Boyer. We are all aligning on cross-functional teams focused on outcomes that enhance collaboration, creativity, and velocity and ultimately tied to financial outcomes. This simplified structure will allow for agile teamwork and reduced overhead in a rapidly evolving environment. It’s crucial that we operate faster and empower teams to adapt quickly. Weight Watchers is positioned to lead; we are adopting fast tech-forward operating principles while benefiting from a 60-year track record of proven results with behavior modification. This provides the foundation of member support and trust, which fuels long-term success. I will now turn the call over to Heather to discuss our financial results and outlook.

Thanks, Sima. As Sima highlighted, despite current headwinds, we are confident that we have the strategy, positioning, and resources to return the business to growth. In the immediate term, we are laser-focused on profitability and making the right decisions that will best enable the company for the long term. Turning to our second quarter 2024 results. Note that all year-over-year financial comparisons are on a constant currency basis. We ended Q2 with 3.8 million subscribers, a decline of 6% year-over-year. Revenue totaled $202 million. Subscription revenues of $200 million declined 5% year-over-year, driven by a higher mix of subscribers within initial lower-priced commitment periods, mixed shift from workshops to digital subscriptions, and lower signups for our Weight Watchers behavioral offerings, partially offset by a nearly 120% increase in clinical subscribers year-over-year, driving $20 million in clinical revenue, up $12 million year-over-year. Other revenue declined $13 million due to the discontinuation of our low margin consumer products business. Adjusted gross margin was a record high of 67.9% and up from 63.4% in the prior year, primarily driven by the discontinuation of the lower margin consumer products business at the end of 2023. In addition, gross margin reflects our actions in reducing our fixed cost base. Marketing expenses of $54 million were up 5% year-over-year, reflecting higher online advertising partially offset by lower spend on TV advertising and production agency fees. Adjusted G&A of $46 million was down 22% versus the prior year, primarily due to compensation and related costs. Adjusted operating income was $38 million, an increase of 13% reflecting our efforts to improve margins and contain costs. Restructuring charges totaled $2 million in the quarter related to prior year plans. Income tax was a benefit of $16 million, which, consistent with last quarter, reflected the impact of an unusually high negative annual effective tax rate driven by a valuation allowance and a small pre-tax loss reflected in the company’s full year fiscal 2024 guidance. GAAP EPS was $0.29 compared to $0.65 in the year-ago quarter. As Sima discussed, we are streamlining our operational structure to optimize our product portfolio, focusing on high impact initiatives to enhance efficiency, accountability, and speed. We are reducing our global headcount, primarily in corporate roles, including a 40% reduction in VP and above positions, resulting in approximately $60 million in annualized cash savings, mainly benefiting G&A. We expect to take a restructuring charge of $12 million to $15 million in the second half of the year. Cash outlays for restructuring, including the 2024 plan and remaining payments for prior year actions, are expected to be approximately $30 million in 2024 and $10 million in 2025. Importantly, this action reduces our employee-related cash expenses this year versus our prior expectations. These actions are part of a broader cost reduction initiative targeting $100 million in annualized savings, including $20 million of savings currently reflected in our 2024 guidance. Shifting to our outlook for the full year 2024, we now expect year-end total subscribers of at least 3.1 million, which, given our subscription business model, will drive a revenue headwind into 2025. Total revenue of at least $770 million, adjusted operating income of at least $100 million, and adjusted EBITDA of at least $150 million. The cost actions we announced today, as well as the actions we have taken thus far, demonstrate our ability to control what we can in this dynamic industry environment by tightly controlling costs and improving efficiencies. We are focused on maximizing profitability as we manage through a challenging sign-up environment. For the full year, we expect income tax expense of up to $10 million, excluding the impact of the valuation allowance, Q1 impairment and other discrete tax items, we continue to expect an income tax benefit of up to $10 million. We continue to expect cash taxes to be between $20 million and $30 million for the year. As a reminder, given the small pre-tax loss reflected in the company’s full year fiscal 2024 guidance, any updates to the expected pre-tax loss or income tax expense can result in significant impacts in quarterly income tax results. Full year interest expense is expected to be between $105 million and $110 million, with the year-over-year increase largely driven by the expiration of our $500 million hedge at the start of Q2 ‘24. Due to lower subscriber and revenue levels than previously anticipated, we expect to have a modest use of cash from operations for the full year 2024. CapEx, which is primarily capitalized software, is expected to be in the $20 million to $25 million range. Depreciation and amortization is expected to be around $40 million. Turning to our capital structure, we ended Q2 with approximately $43 million of cash plus an undrawn revolver. Our cash needs in the first half of the year were much higher than our expectations for the second due to increased marketing, compensation timing, and the sequence acquisition anniversary payment. With our cash position, plus our revolving credit facility and bolstered by the cost actions we are taking today, we believe we have sufficient liquidity for our working capital needs, including cash outlays related to our restructuring actions and servicing our debt. At Q2 end, our net debt to adjusted EBITDA leverage ratio was 9.6x. As a reminder, we have very attractive debt terms with no maturities until 2028 and 2029, and we are comfortable with our liquidity profile, which gives us ample time to deliver on our transformation strategy. We will continue to opportunistically evaluate options to reduce our leverage ratio on terms we believe are strategically beneficial.

We are executing against our strategic pillars to expand care, expand access, and expand payment options for our members. These initiatives enable us to serve a broader population as the leading digital health provider of weight health, catalyzing our return to growth and positioning Weight Watchers for long-term success. Weight Watchers had an impressive competitive moat and high barriers to entry. With our significant subscriber base, extensive database of former members, strong retention, solid NPS, positive customer perception, brand trust, and clinically proven program, a significant opportunity lies before us, and we have the foundation, strategies, and structure to successfully navigate the current environment and emerge stronger. Thanks for joining us. We are now happy to take your questions.

And our first question comes from Jack Wallace from Guggenheim Securities. Please go ahead, Jack.

Hi, good morning. Thanks for taking my questions. I want to ask about the clinical business, and it sounds like there are some number of headwinds in the quarter. It sounds like mostly marketing. But can you talk a little bit about whether it’s the perceived impact from the compounded GLP-1s? Have you noticed or you’ve got any feedback on attrition there? Again, recognizing the difficult marketing environment and the delay in the marketing refresh, just thinking about the competitive threat there. Thank you.

Thanks, Jack. Yes, we saw a significant increase in our clinic CAC in the second quarter, really driven by the increased number of competitors in programmatic channels such as search. There’s probably about 50% more competitors in 2024 than 2023, many of them offering compounded medications. I think we’re also seeing just the cost of media is going up due to this being an election year, and going off of the Olympics. I fully believe that this business is set up to grow. We are seeing increased retention in that business to 6.5 months. We’re at a 12-month high in NPS. Our general ability to move people between programs and realizing our one membership strategy is something we’re seeing. Ultimately, this is about managing to the long-term health of the business. We decided to pull back marketing dollars given external turbulence and just take a real performance marketing focus on the path forward with the clinic.

Appreciate that, makes sense. Following up your response there about the one membership and being able to get members to toggle up and down based on their needs. It seems like that’s an attractive proposition for employers. You made some comments about the B2B pipeline in your prepared remarks. Can you give us an updated thoughts on the materiality of expected contribution next year? And then just also give us a reminder for how we should be expecting once a benefits customer comes online, what the enrollment or utilization trends should look like over the course of the year? Thank you.

Yes. Thank you for that question. Certainly, the flip side of the popularity and efficacy of these medications is the cost. We’re the leaders in this market, and we can enable employers and insurance companies to provide coverage in cost-effective ways that really generate ROI and proven health outcomes. The key to that is you can’t generate that ROI without the population actually enrolling and then engaging, which requires a strong brand and a proven program. Nobody comes close to us on that front, and we are pleased with the sales momentum we’ve seen. Large players obviously have longer sales cycles, but they’re enthusiastic. We closed five deals last quarter. We already have four lined up for this quarter. All these deals represent 10,000 plus lives in these larger player categories, but no single deal is going to be material to our bottom line in a year. However, we are really pleased with the activity we are seeing now, even though there is this overall trend of contraction; employers seem to be picking up where the insurers are contracting.

And I just want to add on to that regarding the sizing question. We are enthusiastic obviously, about the B2B expansion and opportunity. For reference point, this year we’re expecting about $30 million of revenue from the business. But I would just repeat what Sima said: singular contracts aren’t necessarily material for the total business, but it is encouraging to see traction in the sales motion and as well on conversion we’re seeing in our most recently signed contracts that we shared in the prepared remarks.

Got it. Appreciate it. Thanks again.

And our next question comes from Michael Lasser from UBS. Please go ahead, Michael.

Good morning. This is Henry Carr on for Michael Lasser. Thanks a lot for taking our questions this morning. So, I want to ask about the guided subscriber count of at least 3.1 million. Last year in 2023, Weight Watchers made significant progress on kind of stopping that subscriber decline from Q1 to the end of the year. This new guidance implies that we’re right back to that historical pattern of subscriber leakage. So, I guess is the promotional strategy that’s helping aid and drive subscriber growth? Is that still being successful? Or are you seeing a lot of subscribers ending their subscription after that promotional period ends? Thanks.

Yes. Thanks for the question, Henry. Regarding the efficacy of the long-term commitment plans, we’re seeing these still working as expected, and we’re seeing continued lengthening average commitment. For instance, our digital average commitment length has increased to 8.9 months in Q2 '24, up from 7.6 months this time last year. We’re going to continue to leverage LTCs to optimize for LTV, CAC and ultimately maximize our revenue and end-of-period subscribers. We’re always open and will continue to test to find the offer structure that both attracts and retains the most customers over time.

Yes. I’ll just add to that: we are seeing that our retention is up 1% quarter-over-quarter. These basis point moves compoud, and our activation rate is up 5% year-over-year. It’s really tempting to spend into growth, but we want to spend where it’s most effective, when it is most effective. We’re making decisions in real time in order to maximize, as Heather said, our LTV, CAC.

Great. Thanks so much. And just as a follow-up, I think earlier in the call you mentioned about 10% of lapsed members for clinical are instead moving to the behavioral program. I just want to understand what’s happening here?

Henry, you cut out there for a minute. Can you repeat your question? I heard you were asking about the one membership strategy. Could you just repeat that again?

Yes, I think earlier on the call, you stated the metric of 10% of subscribers are shifting from clinical to behavioral programs. Could you just explain that metric a little bit better or unpack it for me? Is that clinical members shifting from that clinical subscription to a base behavioral change program? I want to understand that better. Thanks.

That’s exactly it. What you said. Essentially, the one membership strategy is such that we want to be able to grow and/or de-escalate in intensity based on what the consumer needs. We are seeing behavioral members decide that when they hit a plateau, they are interested in meeting with a clinician and seeing if medication support is right for them. Then there are those who, once they’ve been on the plan, we’re seeing that 68% of consumers do want and intend to come off medications and we work with the medical professional to help them find the best way to maintain their weight loss. Part of that is helping them move to the behavioral program, which maintains their lifestyle intervention. I think this is the path forward. Weight health is complicated. Every journey is unique, and we need to be able to move up and down with a person’s unique needs, whether that’s someone living with diabetes who needs to track their A1C or someone on a lifestyle intervention in our behavioral program who decides that they want a registered dietician visit to better understand their nutrition and nutrient density. Or, obviously, if it’s someone who needs to see a doctor and we help them with the medication and the insurance support, if appropriate. They’re going to move up and down that spectrum, and we are unique in our ability to provide a care model that provides that kind of service.

Okay, great. Thanks so much.

Thank you.

And our next question comes from Nathan Feather from Morgan Stanley. Please go ahead, Nathan.

Hey everyone, thanks for taking the question. Just a quick one. How do you return the clinic business to sequential growth in the back half of the year in ‘25 if the market remains highly competitive and CAC rates stay elevated? Thank you.

Thanks for the question, Nathan. We are working on that within the context of our Weight Watchers as one platform strategy. We’re in an environment where CAC has been challenging, and competition is tough. The impact of GLP-1 on our space is quite dramatic. We’ve put forward a prudent plan and expect to continue to work through that. We’re not pulling back on spend. We will aim to continue to lean in where it’s appropriate and efficient from a marketing perspective, and would call it—we’re also doing things that we see expand NPS and retention behaviors and ultimately ARPU by adding things like registered dietitian visits. The early indicators of the pilot we’ve put out are promising, and we look forward to sharing more in the next quarter as we continue to grow this.

Yes, I want to add that our strategy here is to tell a story in a compelling way, which is going to break through this noise. As we’ve said, it’s a complicated landscape, but that’s also impacting consumers looking for solutions, who are looking for trusted solutions. We hope our latest campaign, Fits You, is going to drive more CAC efficiency and do a better job of telling the story of our entire suite of products. We took a conservative approach to modeling our CAC outlook, given the cost of media, both from new entrants and the one-off driving cost up such as the election. But that’s all reflected in our guidance. We are really excited to see this campaign and our one membership strategy come to life.

Okay, great. That’s helpful. And then any way to frame how much of the $100 million annualized cost savings is variable versus fixed, and how should we think about those in terms of expense line buckets of savings? Thank you.

Thanks, Nathan. So as we shared in the prepared remarks, we are expecting this cost action to deliver about $100 million of total savings, $20 million of which should read through into 2024 and an incremental $80 million into 2025. We haven’t guided to the specific P&L items, but I would say it’s largely fixed and largely impacting G&A. You should expect that. It’s impacting our ability to sustain our way into the future.

And our next question comes from Alex Fuhrman from Craig-Hallum. Please go ahead, Alex.

Hey guys. Thanks for taking my question. It seems like consumers are really demanding more affordable access to medically supported weight loss. Sima, what is your plan in the future to offer that to customers? I know in the past, you have talked about Weight Watchers being against compounded medications. I don’t know if there is any scenario, maybe in the future, if there is more efficacy data that would cause you to rethink that or maybe opportunities to offer generic versions of older GLP-1s, because it sounds like insurance coverage is getting worse, not better. I would love to just hear your strategy to tap into that demand for more affordable medical weight loss.

Thanks for your question, Alex. Look, members come to us because they trust us and we are only going to consider medication options that are safe, effective, and high quality. FDA-approved medications are our preferred path. That being said, with shortages expected to persist for some time and coverage being in limbo, we are investigating alternative paths to best serve our members, which is about improving their access and health equity. It’s about helping to bring safe solutions to a broader population.

And our next question comes from Stephanie Davis from Barclays. Please go ahead, Stephanie.

Hey folks. Thank you for taking my questions. I have, I guess two on the B2B channel. So, first, when we look at your B2B channel, is that all direct sales or have you established broader partnerships and broker channels? How are you thinking about that account manager role in direct sales given the 40% reductions in your VP and above roles?

Thank you, Stephanie. Yes, it’s both. We announced some of our broker relationships like Personify, Health, and CVS, but we also have a direct sales motion. I think we are really well positioned and well equipped thanks to our leading brand and 60 years of science-backed evidence, a full suite of integrated services, and a 3.9x ROI to employers, which was validated by a third-party actuarial firm. We are really well positioned here, and the number of RFPs submitted just in this last quarter was the same amount as we did for the entire full year previously. The foundation of our 33 years and over 500 existing clients just makes it such that we can have a leaner, smarter sales motion. We continue to expect to invest in this area. In fact, we will be adding some sales leadership talent here as well.

I would love to hear about the talent, but I also have a question just in the go-to-market motions and that’s becoming a bigger part of your strategy. Given vendor fatigue for digital health solutions, some large employers are putting in more stringent financial and compliance reviews. I understand you just announced the turnaround, but how are you thinking about the impact of the restructuring as you are kind of going to market with these employers given some of the more stringent requirements?

Well, the strategic requirements around compliance—can you be more specific, Stephanie? Are you talking about features or just the market contraction in general?

So, for example, at a large employer like Barclays or JPMorgan, you will have a pretty thorough financial review and compliance review. And oftentimes they will look at things like leverage or sustainability of the vendor.

Okay, got it. So far, we haven’t seen that come up. If anything, the fact that we are a public company with a track record has really benefited us; a lot of the other vendors we see in this marketplace have much less sophistication and infrastructure than we do. Also, regarding the market in general, we are seeing some overall contraction and RFPs switching over from full access to core care. However, there is still an appetite for weight health solutions. It’s become clear that even if the payers aren’t willing to cover full-spectrum care, the GLP-1s, they are interested in providing our core program as a covered benefit. Just this morning, new evidence from a Lilly trial showed transvestites reduced the risk of heart failure outcomes by 38%. We are going in this direction. It’s a slow burn, but the medications are proving tangible health benefits while treating obesity and multiple comorbidities. We are best set up with the right infrastructure across account management, support, and compliance to help these businesses.

Helpful. Thank you.

Thank you.

And our next question comes from Karru Martinson from Jefferies. Please go ahead, Karru.

Good morning. Just trying to understand the year-end sub-count here. You’re saying you don’t want to spend into growth, that it’s tempting, but at the same time saying you are not pulling back on spend or it’s sufficient. So, trying to understand what’s driving the reduction. Is it that we have a different view on clinical? Is it that we feel there will be pressure in our core? What’s driving that revision?

Thanks for the question, Karru. We experienced a dramatic rise in competition, largely driven by compounding in our space. It’s rapidly evolving, and we are positioned to win in it. The moment drove an increase in cost to acquire with the crowding in the space. As we looked forward and wanted to project guidance for the balance of the year, we factored these new realities which may worsen through the back half of the year. We have built that into our forward assumptions and have been prudent in planning for them, hence the assumption that CACs continue to rise and GLP-1 competition continues. Importantly, we have a cost action designed to preserve our adjusted operating income as we build for the future. I recognize that we are short of our prior guidance. I want to ensure that we’ve provided you with an outlook we are confident is achievable. We are operating in a dynamic and difficult-to-predict environment and focusing on achieving our profitability targets.

I just want to add that when we talk about prudent LTV:CAC, this is really an outcome of this dynamic market and our optimization for unit economics that are still attractive—definitely less attractive than we thought at the beginning of the year. But with our new campaign, we look forward to seeing better CAC efficiency while also continuing to pull into this One Membership strategy, which we noted is our ability to move a core member who we can acquire at an attractive LTV:CAC. We are seeing that 30% rate transferring over to clinic. That’s a winning strategy for the long-term health of the business.

Alright. And just with the compounding front, you mentioned the shortages are expected to continue. What’s the timetable there? And as you investigate alternatives for yourself, what’s the timetable that could potentially there as well?

I appreciate the question, Karru, but I don’t really have anything further to share at this time on that topic.

Alright. And then just lastly, you mentioned capital structure. Given where it is today, how are you guys approaching that?

So we are committed to improving our leverage as we execute this turnaround. We are focused on growing EBITDA. I will remind you, we have very attractive long-term debt agreements with no maturities until 2028 and 2029. We continue to be comfortable operating with our current cash on hand and do have access to $61.25 million of revolving credit for additional cushion. We’ll continue to evaluate options to reduce our leverage ratio on terms we believe are strategically beneficial.

Thank you very much. Appreciate it.

And at this time, there are no further questions. I would like to turn the call back over to Sima Sistani for closing remarks.

Thank you all for the questions. Weight Watchers has a bold transformation strategy to expand access, expand care, and expand payment options. Our operational changes will motivate and strengthen our execution against project expansion. It’s difficult to part with many talented colleagues; these are our employees who have made important contributions to Weight Watchers and helped to make us a great company. I thank each and every one of them for their service and wish them all the best in their future. Thank you for joining us today. I look forward to updating you on our progress.

This concludes today’s conference call. Thank you for attending. You may now disconnect.