WW International, Inc. (WW) Earnings Call Transcript & Summary

Thank you to everyone for joining us for our virtual event to discuss our new PersonalPoints program. Following management's presentation, we will host a Q&A session for analysts and investors. [Operator Instructions] Before we begin, let me remind everyone that this presentation 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. Thank you.

Hello, and thank you for joining us today. I'm Mindy Grossman, CEO of WW. Just last week, we launched PersonalPoints, our innovative new food program. PersonalPoints is the next major step on our personalization journey. As the most advanced WW program ever, we are confident that this revolutionary new program will resonate with new and former members alike, create excitement in the category as a whole and demonstrate our competitive advantages as we deliver a proven science-based program through an award-winning app with coaching, content and community. And because we believe PersonalPoints point is so important and powerful and has been of a great interest to many of you. Today, we will share more color on everything that went into this incredible innovation: from the development process, the science and insights to how we are bringing PersonalPoints to life in the digital experience, and as a very human personal experience through our coaches who encourage, inspire and motivate our members while living the WW program every day. And finally, how we are introducing PersonalPoints to the world and amplifying our messages this January. Every team and level of the entire WW organization played a critical role in the creation, development and execution of PersonalPoints. Science, nutritionists, UX design, engineering, studio operations, training, brand, content and so many more. The depth of the work in preparing for and executing a seamless synchronous launch to more than 4 million members across 12 different countries and in 7 languages cannot be underestimated. Spanning everything from concept development to updating our extensive food database of hundreds and hundreds of thousands of nutritionist-verified foods as well as our comprehensive recipe portfolio. So to take you back to the beginning. We start by learning about people's needs through talking to WW members as well as people following other programs and researching the latest science data and eating and lifestyle trends. With all of these insights, we try to solve the needs we heard, including less work, more livability and more excitement, curiosity, hope and yes, joy. Through this process, our cross-functional team landed on 3 different ideas that had the most potential. First, more personalization. The idea to personalize your ZeroPoint foods beyond just 3 plans was born. We adjusted the points budget according to members favorite ZeroPoint foods and explored new ZeroPoint foods. The results, members lost weight and loved exploring new things to eat. Second, accounting for consumer trends. Increased consumer interest in things like added sugar, fiber and healthy fats as well as the science of what makes a healthy pattern of eating led us to design several new versions of the points formula to see what effect they had on creating a healthy pattern of eating. This helped us create a brand new points algorithm. And third, more control over your budget and recognition for healthy habits. We then explored what would happen if certain healthy behaviors earn new points. It turns out when members earned points, they found the program easier to follow and more flexible for real life. And we know that when something is easy and flexible, people are more likely to stick with it, which helps them meet their weight loss goals long term. We piloted PersonalPoints with over 1,000 members. The results were nothing short of amazing. People lost weight and felt better than ever. We knew we had created something completely game-changing. And we believe everyone deserves a plan as unique as they are. No 2 plans are alike. Even the name PersonalPoints, 1 name with localized translations in our international markets truly showcases the nature of the innovation, putting members and consumers at the center. It is all about them, their journey, their success. Last week's launch was a tremendous success. On launch day alone, our announcement release have been syndicated to over 100 news outlets. And we've seen organic coverage in 40 articles, garnering over 1.2 billion impressions in the U.S. alone. Additionally, Kate Hudson's interview with Entertainment Tonight aired on launch date to nearly 3 million viewers. Kate also amplified the PersonalPoints launch on social media, along with many other of our celebrity partners, including Katie Lee Biegel, Daphne Oz, Kym Whitley, and Ross Mathews, just to name a few. Kate, Katie and Daphne told the world about what food is now ZeroPoints for them. Avocado, whole wheat pasta and potatoes, respectively, in case you were curious. And Kym shared a truly hilarious take on the fact that you can now earn points for drinking water and hydrating. This is a change that is beyond positive. It will allow us to better serve our current members, recruit new members and make a larger impact on the health trajectory of the world. Now let's learn about Innovation 2022.

My name is Gary Foster, and I am the Chief Scientific Officer of WW. After working in this field for over 30 years, I've seen countless ideas about how to make losing weight easier and more sustainable. But I have never seen something like this new program. We have leveraged the latest nutrition and behavior change science to update our points formula, create new ways to earn points and become even better at designing unique plans to fit how you live your life. Our updated points formula uses the latest science and food data by factoring in even more nutritional elements. This helps nudge members towards foods that are higher in healthy fats, fiber and protein and that are lower in added sugar saturated fat. Based on what you tell us, you love to eat, the PersonalPoints engine crafts a list of ZeroPoint foods and a personalized points budget unique to you and the foods that often and that you love. And WW now offers a PersonalPoints plan tailored for members who are living with diabetes, guiding them towards foods that are less likely to impact their blood sugar and consistent with the recommendations from the American Diabetes Association and the International Diabetes Federation. PersonalPoints teaches you how to take control and be healthier, eating, moving, thinking and even sleeping better with no restrictions or rules about what's off limits as we develop an innovation, what is first and foremost in our minds is that any WW program must be grounded in science. I'm going to walk you through the 3 new features of our new program and give you a quick snapshot of how they're based in science. First, individualization matters. And it matters because it feels like this is my plan. This is not something that's being imposed from someone else. But this is a plan for me. The science is clear, more personalized approaches to drive greater engagement. And we know that with greater engagement comes greater weight loss. Let's look at the second feature of our program, the newly updated algorithm. As with other algorithms that we've done in the history of WW, it nudges, doesn't mandate. All foods are on the menu, but it nudges towards foods that have been established by scientific guidelines, whether from the World Health Organization, the USDA or European Councils on Nutrition. They are remarkably consistent about the foods we should be eating more of and less of. Our updated algorithm gives us an opportunity to leverage additional nutritional science. So we now have more inputs into our algorithm. Importantly, all foods are still on the menu. You won't find prescriptions like, always eat this or never eat that. That's diet talk. We're not about labeling foods as good or bad. We're about creating a healthy pattern of eating that's sustainable for the long haul. We take all of the science around nutrition and embed it in a behavior change program. Recent guidelines from the U.S. and globally have really emphasized that it's one thing to know what to eat, but it's a whole other thing to help our members with the how, and that's exactly what we do. The third feature that has a scientific basis is the ability to earn PersonalPoints. The member response to this new feature was palpable from the start. I remember seeing a video of a member who was following our new program, and she just encapsulated it so well. She said that every other time that she had tried to lose weight, she talked about this depleting feeling that her budget could only go down. And the words she used for this program were, I have control, I'm in charge. Technically, that feeling is called self-efficacy, the degree to which I am in charge of my outcome and the science is remarkably clear, greater self-efficacy leads to greater weight loss. It's important at WW that not only are we science-based, but that we're science proven. To that end, we will not release a new program until it's tested by a third-party university. It's just the way we operate. It's part of our DNA. During a 6-month clinical trial of the WW PersonalPoints program conducted at the University of Connecticut, participants experienced clinically significant reductions in body weight. And not only that, we also saw notable improvements in overall quality of life and well-being. Here are just a few. We saw significant increases in the intake of healthier foods, including a 55% increase in the daily frequency of fruit consumption and a 61% increase in the daily frequency of vegetable consumption. There was also an increase in moderate physical activity by 27 minutes per day and a decrease in sitting time by 83 minutes per day. Research shows that increased physical activity, coupled with a healthier pattern of eating, leads to a 20% greater weight loss than changing eating habits alone. In addition, research has shown that physical activity is the single best predictor of weight loss maintenance. We also saw a 53% increase in the automaticity of healthy habits. In other words, participants began to repeat healthy habits without having to think about it, helping to make these habits part of their daily routines. This is what people have been waiting for, hoping for. And we are bringing PersonalPoints to everyone all around the world, delivering on our tenets to help people develop healthy habits rooted in science, and to meet people where they are. I will now turn it over to Deb to tell us more about what we've heard from our members and our consumer pilots.

Thanks, Gary. I'm Deb Benovitz, WW's SVP of Human Truths. Our work starts, continues and ends with understanding what our members and potential members need through consumer research, trend spotting, science advances, research among current members and users of other programs to understand all the insights driving this category. For the last 1.5 years, we've been running consumer pilots on PersonalPoints and hearing great things. 77% of people prefer this program to previous programs that they've been on. 85% are satisfied with the experience. 90% felt guided to healthy, good-for-me foods. And 79% said it was easy to follow, and we know ease and livability are key to success. We also heard a lot about how personalized it is, how empowering it is and how effective it is. 84% of people said the ZeroPoint foods felt very personalized to them. There's always an option and it's food I love to eat. 91% felt empowered by the idea of control by being able to earn points back. I love that I'm rewarded for making good choices and eating more vegetables, which I know is good. It gives me agency to not feel like, okay, I ran out of points, I'm done. And we saw a weight loss. Efficacy is so important because 1 person loses weight, and they talk about it to someone else, and there's a buzz about how exciting this program is, how easy it is and how it drives to weight loss. I told my friend about the pilot program, and she said she would love to join me on WW. So overall, qualitatively and quantitatively, great, great reviews from participants in our consumer pilot. The last 2 years have certainly been an unprecedented experience for consumers, our members, our potential members for everyone. According to a recent study in the U.S., 42% of consumers have gained an average of 29 pounds, and they are ready to take it off. Since the start of 2021, we've been out there listening to consumers almost every week, hearing the shifts from optimism, to intention, to enjoying the moment and to allowing a moment of grace. Consumers are telling us their human truth. They've said, if the last few years have taught us anything, it's to cherish every single moment. After all they've been through, they don't want to pause their lives while losing weight. They want to enjoy the things they love and have missed: the family, the friends, the fun. They want to be part of it all, experiencing joy in every possible way. So while they tell us that they'll be ready to join a weight loss program, it must be a program that allows them to live while they are losing. We know WW is and has always been about embracing all the joy that is life. Our consumers have been highly specific. They have told us the needs they will have for a weight loss program ranging from the functional to the emotional. First, they want to be living while losing. They don't want to feel restricted like they do on most diets, especially after being restricted for almost 2 years. They want to know it's going to work. WW works, and they need to hear about our science because they've been dabbling in things that don't work. They also told us they need help recovering when they slip up. They would love a program that has great features that allow them to recover. So this time, it will be sustainable. And they want something truly personalized and designed uniquely for them. But let's hear it directly from our WW members who are part of the PersonalPoints program consumer pilot. [Presentation]

Hello, everyone. I'm Michael Lysaght, Chief Digital Officer of WW. With PersonalPoints, WW's program is now truly personalized. We always ask ourselves how do we help every unique member have the most success on their journey and have the greatest experience doing so. And we understand the answer is completely different for everyone. After extensive research and testing, we developed entirely new ways to leverage our technology to make PersonalPoints our most advanced program possible. This high degree of customization on PersonalPoints parts has only been possible through the investments we have made in our digital platform. Over the last 5 plus years, we have built out an exceptional tech product and data leadership team and a team of world-class engineers, data scientists, product managers, designers and more. We've embraced modern technologies such as cloud and an event-driven architecture, and we have adopted new processes using agile, lean and design thinking to solve our members' needs. When it comes to a big food program innovation like PersonalPoints. There is not a part of the WW organization that is not involved in some way. Our digital products and technology teams collaborate closely with all of these global partners and are tasked with bringing it all to life in the app experience. Importantly, we want to put the member at the center of the experience. We want members to know that it is customized and tailored to them and that they have more support than ever. As you heard, PersonalPoints has 3 game-changing elements: individualized plans and new food algorithm and the ability to earn PersonalPoints for healthy behaviors. The experience now starts with an interactive onboarding to custom build an individualized plan for each member with a tailored PersonalPoints budget and their very own list of ZeroPoint foods. In adding all of these great benefits, we needed to ensure everything worked together, and it was all delivered in a seamless, easy-to-use and easy-to-understand app experience. And we needed to build this to scale to serve millions of people across the world. This was a truly global implementation with more than 20 work streams and task forces working together to ensure everything worked seamlessly in a cohesive member experience. And we are committed to keep innovating even after launch. We're going to keep testing and optimizing to ensure we are delivering the tools and features to set up our members for success in achieving their goals. But rather than me just talk about the experience show you the app experience as a member joins and goes through the first few moments of PersonalPoints. After the member creates their profile, we ask them whether or not they have diabetes. This allows us to start that personalization. We have created an assessment that we've been calling the conversational assessment. What this really allows us to do is to lead with the science while personalizing the member's plan in a conversational manner. It affords us the opportunity to reply to them, let them know that they've been heard and acknowledge them. It also allows us to educate them on the new program fundamentals such as earning points when we ask them about veggie consumption. In addition to food, activity is inherent part of WW's holistic program. We ask the member about physical activity. How many steps they take in a day and do they prefer to measure in minutes or in steps. The conversational assessment showcases our strong partnership with our team, working together to figure out what's the right tone and what's the right message for each step of the way. Once the member has completed their assessment, they now have a completely customized plan that is just for them. Now we enter the entertainment process. We educate the member about ZeroPoint foods and then provide them with their individualized list of ZeroPoint foods. Then we start to educate them on some of the new program fundamentals like earning points for non-starchy veggies, earnings points for water consumption and for activity. Once that's complete, we show them a custom-built plan just for them. This is where they will see their daily budget. They'll see their ZeroPoint foods again and also their activity target. Again, PersonalPoints is a lot more than just food. It is a complete end-to-end program that's personalized for them. Then when members get to MyDay and see their dashboard, they see that WW is making living the program easy and fun with an updated points experience, a quick way to track their veggies and water and keep track of their earned points. For new members specifically, we walk them through how the dashboard works and how to use their PersonalPoints while living on the program. In fact, we have a new onboarding experience. We developed a strategy to guide new members through the beginning of their journey and keep them on track as they are moving throughout the journey. This has been a massive technical feat with numerous involved in bringing this to life. With great collaboration, we have been able to deliver an onboarding system that serves behavioral content in a flexible, customizable and fun way for the members. The experience can also be tailored based on membership type. Contents can be updated and changed in real time without requiring an app release. And we have the ability to AB-test all elements of the experience from content to features. Members will feel encouraged and celebrated as they learn the new program in the WW ecosystem. And we will keep learning and iterating on what works best for them. Meeting our members where they are is core to our strategy. With PersonalPoints, we are delivering the individualized tools, support and inspiration at the right time.

Thanks, Michael. My name is Jon Mandell, and I'm WW's SVP of Global Membership and Commerce. As always, our primary focus at launch is onboarding our current members to the new program and experience. Building a network of millions of WW members who can advocate for the program and inspire others to join. We began a teaser campaign to members in the week before launch to generate interest about what was to come. Then on November 8, we launched an omnichannel member marketing campaign to celebrate the new program and make the transition as easy and as exciting as possible. All members received a digital PersonalPoints program guide, which is available in app showcasing what they need to know about the program, how it is individualized for them and how for the first time, we have 3 simple ways to earn more points. In addition, we have refreshed the packaging on our consumer products across all global markets and are launching new SKUs in retail and on our e-commerce marketplace. No program innovation will be complete without a new collection of WW healthy recipes. We launched an interactive PersonalPoints cookbook with easy app tracking built into every page. Our coaches are introducing members to PersonalPoints in our workshops, both in-person and virtual. We introduced the new program to our coaches in early September, providing them with the training and tools to experience PersonalPoints not only to be a resource for our members, but also to be our strongest advocates. Our Digital 360 coaches have been delivering members helpful and inspiring content and coaching about their life on the program. And tonight, for all members, we will be hosting a live virtual event led by our behavioral scientists and WW coaches to help members with strategies to adapt and stay on track. I will now turn it over to Cindy to talk about how we'll be marketing PersonalPoints.

Hi, everyone. I'm Cindy Gustafson, WW's Chief Marketing Officer. More than ever before, consumers are looking to lose weight to be healthy and to improve their lives. As the authority in weight loss and wellness, WW has a significant role to play as the leader in weight loss and wellness in this world. As we launch our groundbreaking new program innovation, we designed our most dynamic winter campaign to date, ensuring an unmissable presence as we launch the new WW PersonalPoints program. We started with campaign research, listening to our consumers, and we heard 1 theme reverberate throughout all markets, "I don't ever again want to pause my life to lose the weight." Inspired by this insight, our marketing campaign will highlight how the new PersonalPoints program fits seamlessly into your life because it is designed uniquely for you. Because no 2 plans are alike, you'll be able to live the life you love and lose the weight you want. Beginning this summer, we selected hundreds of current members to join us on the new PersonalPoints program to learn and to hear straight from their experiences what the new program has meant to them. And more than 3 dozen of them across our global markets joined us to share their powerful stories of weight loss success as a part of the winter creative campaign. It's these member stories of success in their own words that will bring the heart and the inspiration to this campaign launch. Our inspiring members will be joined alongside Oprah, our Chief Motivational Officer as we like to refer to her, and she's going to be sharing her passion, her influence and her perspective on the new program. She'll have a consistent presence in both our short form and our long-form digital-first video creative to build excitement and conversation around this campaign unlike anyone else can. And then we've got James Corden. He is so excited about his experience about his weight loss and most importantly, about the difference in how he feels as he's been on this journey with us. He plays a critical role in illustrating program efficacy with his own success story and bringing his sense of humor alongside members and prospects to really help showcase what makes this program so different from all the rest out there. We're also going to unleash James along with our fellow member and Tony Award-winning actress Annaleigh Ashford right in time for the holidays with longer-form seasonal video content to further seed the program and inspire others to have a very healthy, happy holiday. With our WW members alongside Oprah and James in the U.S. market; and then in our international markets, our ambassadors include Pernilla Wahlgren in Sweden, we've got Chris Marques in France, and we've got Jackie O in Australia, this campaign is set up for great success. Now let me just show you a little sneak peek, if not all of it, but a little sneak peek of a few of the things that we have in the works. [Presentation]

But of course our creative is only as impactful as the media that powers it. And we've designed an audience-first strategy to drive sign up to the new PersonalPoints program. In the past, we debuted the program in November and then we've aired on the quieter side until the big reveal on December 26. But being top of mind and driving buzz leading up to our core season has never been more critical. And as we enter the post-holiday season, WW will be unmissable with omnipresence across linear and streaming TV: YouTube, social, programmatic, audio, search, affiliate and branded content, along with high visibility placements across all major New Year's Eve broadcasts. In addition, we will drive scale with taste makers and influencers who are living the WW PersonalPoints program, demonstrating to million the power of WW and their results. This winter's marketing campaign is set up to recruit reps and prospects and inspire confidence for the new PersonalPoints program around the world. We are so excited to showcase this new innovation and WW's competitive advantage as the leader in weight loss and wellness. Thank you so much. And now I will turn it back over to Mindy.

Thank you, Cindy. As you can tell, we are confident that PersonalPoints will resonate with consumers, create excitement, expand our global impact and most importantly, provide a trajectory for profitable growth in 2022 and beyond. PersonalPoints has launched at just the right time. We believe the combination of this new program and the traditional New Year's reset moment, will spark increased interest as consumers recommit to their health and wellness during the important winter season. A big thank you to all our global teams, for all of your incredible work in the development, preparation and successful implementation of this innovation launch. The cross-functional effort that has to go into the creation of a food program like this and bringing it to life is unparalleled. And it truly showcases the competitive advantage of WW with our proven program based on nutrition and behavior change science. This is our moment. With our most advanced program ever, we have the power to deliver on our brand promise more than ever. PersonalPoints is absolutely revolutionizing everything we and others know about weight loss and wellness. PersonalPoints is the most personalized, flexible path to sustainable weight loss. It's your journey and you're in control, and no 2 plans are alike. You can live your fullest life with no restrictions and no deprivation while still losing weight. WW has been the leader in this space for over 50 years. But PersonalPoints is going to remind the world exactly why WW is the most trusted weight loss and wellness program. Our goal is to deliver on our mission. We inspire healthy habits for real life, for people, family, community, the world, for everyone and be the brand that truly democratizes wellness for all. Thank you. Hello, everyone. We hope you're as excited as we are about our new PersonalPoints program and our plans for the upcoming winter season. So joining me now are COO, Nick Hotchkin, and our Chief Scientific Officer, Dr. Gary Foster, and we are happy to take your questions about our program innovation. So I'll now turn it over to Corey Kinger, our VP of IR, who will be moderating.

[Operator Instructions] Thanks, Mindy. For our first question, are there any opportunity or features within the new program that you think will drive incremental stickiness? How is the new program designed with that in mind?

The entire process of designing the program was to create increased engagement, which obviously leads to members' success. So if you look at this, it's really 3 innovations in 1, and each part of the innovation increases engagement and interest. So if you look at personalization, which we know is critical to everyone right now and is an expectation, this is ultra personalized for you. No 2 plans or alike. The second is we know there's a lot of consumer interest in nutrition, especially amongst young consumers. So the change in algorithm reinforces the science of what we do. And then the third is this idea of adding positive points for healthy behaviors. And part of that is the behavior change of gamification. I'll do these things for myself, but it will also have a benefit. And clearly, that's what we're already seeing with the launch of the program, which is increased engagement across all the areas of the program.

Thanks, Mindy. Do you believe the new plan will resonate more strongly with the younger demographic? What features are new or incremental that you believe will drive that favorability?

Right. Well, similar to what I just said, this idea of both personalization and motivation for the things you do on behalf of your healthy habits is what we're already seeing. And I just [indiscernible] in a few days since launch, higher engagement across 2 million points won for hydration, 16 million points for eating healthy vegetables, 60 million points for fitness. So across every area, we're seeing that dynamic.

What initial feedback are you hearing from members? Are there any changes in cancellation trends? And point of clarity is everyone rolled on to the new program starting today?