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

Thank you. Okay, great. Good afternoon, everyone. Thank you so much for joining us. My name is Nathaniel Feather. I am Morgan Stanley's small and mid-cap internet analyst. I'm just doing one presentation here at the healthcare conference. Pleased to be joined today by Felicia DellaFortuna and Jonathan Volkmann, Weight Watchers Office of the CEO. Thank you so much for joining us today.

Well, thank you for having us. Thank you. Before we begin, a few quick housekeeping items from important disclosures. Please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. And with that, let's kick it off. I think a lot of investors with Weight Watchers as a brand, but not necessarily what the business looks like today. Can you give us an overview of where Weight Watchers is and how that's changed? Infrastructure pretty materially. It went from about $1.6 billion down to approximately $465 million. And so as part of that, we were also able to half our interest expense, and we went from about $100 million to $50 million, and now this year we do expect Weight Watchers to be free cash flow positive, which has allowed us to now start to reinvest in the business and really take shape in terms of, you know, this exciting GLP-1 stage. So just to give a bit of an overview on our products, so we have two business lines, behavioral and clinical. Within our behavioral line, we have two products. So for those of you that aren't familiar with Weight Watchers, we have a Core product and a Core+ product. Our Core product is access to our digital app, and most importantly, our Points nutrition program. So this is the most studied diet program, you know, across the world, and it does incorporate a lot of different factors into one easy points number to allow for more seamless food tracking for members. This is a business that has been in decline and that has been one of the things that has been most material and also an overhang to Weight Watchers. Post-bankruptcy, we did very much focus on our Core+ offering. So historically, people, when they think of Weight Watchers, they think of our Core+ offering, which is individuals going to meet meetings and getting, you know, advice from a coach that sits in a room. We had a hypothesis internally that there was still a need for community and support. It just needed to follow, you know, the new age. And so people were going to be less likely to drive to workshops, but they could maybe attend one virtually. And so we are very proud now that we have launched virtual experiences. And so whether people are looking for emotional support, whether people are looking for more details on GLP-1s or they're looking for just utility, like how to cook for a family of four. If you go on the app at any point in time, you will see that there's like a virtual experience that you can attend. And it's been a fantastic way of us curating community in this day and age. The other thing that we were also interested in is, are people still interested in structured behavioral programs for weight loss? And so what we were able to do is kind of up-level our overall general Points program, and we launched a GLP-1 Success program as well as a Menopause program in our Core+ SKU. So on our GLP-1 Success program, whether you are on meds with or without Weight Watchers, and I'll get to that in a moment, you can engage with our GLP-1 Success program, and that has been a fantastic update across our members. And we also have a Menopause program that more specifically focuses on menopausal weight gain and fiber intake to also assist individuals. The one thing I will mention on Core+, because we have been a business in decline, our Core+ revenue line within our behavioral business has shown now three sequential quarters of growth in our subscriber count, which has happened only one other time in the last 15 years. So we are definitely changing the way that our financial profile looks, and we are so proud of showing the growth in this Core+ SKU overall, and it's very important because it is showing us that, you know, people do still want the accountability and the ease and the support that Weight Watchers has always provided. They just want it to be in this day and age. That's exciting. The last is that we also have a clinical business where we do prescribe GLP-1s. I'll let Jonathan touch on that in just a moment. But this has also been an area of business that has shown accelerated growth. So in Q2 alone, we were able to grow our subscriber count by almost 56%. So I think it was like 55.7%, but very material growth. And this is a business line that has gone from 10% of our revenue in 2024 to an anticipated 25% to 30% of our revenue in 2026. So we now have multiple product lines that state true to Weight Watchers and that diversified support, but are also introducing GLP-1s. And so we are very excited about that. And Jonathan can touch a bit more on our clinical offerings. Thank you.

Sure. So GLP-1s are obviously one of the most significant clinical breakthroughs of our lifetime, and we at Weight Watchers have embraced them, but we've aimed to do so in a way that feels true to our roots. And so we have a telehealth business today that we call Weight Watchers Med+, where we have hundreds of clinicians providing specialized obesity care to patients across the country. And we really feel that it's important to go beyond the prescription and ensure that people are getting a high level, a high level of support and care in order to be successful while they're on that medication. And our members get unlimited access to their clinical team to help guide them through this process, which often can include things like side effects, dose titration. We want to make sure that members and clinicians have a high level of touch and communication as they go through that process. We also do guide people through the insurance process. And these medications have come down in price recently, which is great to see. But they still are very expensive if you're paying out of pocket. And so through our EHR, we're able to file prior authorizations at scale on behalf of our members and help get them covered for medication, such that if they do have insurance coverage, they're paying the lowest possible price out of pocket. And then with all of that clinical care, we pair it with our Weight Watchers behavioral programs to make sure that people are getting the behavioral support they need to build healthy habits to help them be successful, you know, potentially if they ever do transition off of medication. And so they get access to our diet tracking app, they get access to the virtual workshops that Felicia just mentioned. And it's great to see people go through this, something like a new medical offering with the care and the support of other people who are going through the same journey as they are, and they're able to share that experience. And so we're very excited about GLP-1s, and we're very excited about our Med+ business, and we feel like it's going to be important cornerstone for us to build around.

A lot in there I want to unpack, but before we get into the Core business, you just hired a new CEO. Can you break down why was the right fit and how it impacts your strategic direction from here?

Yes. Yes, so we just announced a new CEO, what, last week? I think it was. We are very excited for him to join. What you hear from Jonathan and I is a lot of work that has been done kind of strategically over the past couple of years and really setting Weight Watchers up for a bright future and we're very excited about that. And I think a lot of what he brings to the table is that excellence and subscription revenue growth. And so we are excited for someone to be able to accelerate, you know, what we have been able to set the groundwork for in this next phase for Weight Watchers. Thank you.

Okay. Now, let's dig into the Clinic business. For investors that are unfamiliar with what you offer today in Med+, what do you explicitly offer for consumers, and how does that fit into the broader GLP-1 ecosystem?

Yeah, that's a great question. Yeah, so what we offer is access to a telehealth business, to clinicians who can prescribe GLP-1s and manage care. And as I mentioned during the intro, we also help them go through the insurance process to make sure they're paying the lowest possible price for medication. There are a lot of people that are coming out to play in this space. GLP-1s are obviously very, very popular right now. But a lot of people are focused on just one part of the journey, just on how to onboard people onto medication. And we really feel like there is a bit of a false narrative out there that you can just give someone these medications and send them on their way and have them have a successful journey. And I think that shows up most prominently in the adherence that you hear from Big Pharma, that people on average are staying on these medications for about six months. And, you know, within those averages, there's people that are coming on and stopping right away because they're experiencing side effects. There's people who can't afford to stay on the medication or experience, you know, a work disruption and no longer have insurance coverage. And so what we're really about is providing people with the support they need to be successful while on the program, you know. You know, one stat that we love to talk about is our digital GLP-1 Success program that's included in our Med+ offering, when members engage with that, 72% of them have noted that they've been able to better manage their side effects, and that is really, really impactful. And so we really feel like our, with our Med+ program, we're going beyond the prescription and providing wraparound care so folks can be successful and build successful habits to maintain long-term health benefits.

You touched on a little bit there, but why should a consumer choose your clinical offering over a primary care provider, a different telehealth provider? Incredibly, how do you tell that message to consumers to help open up the top of funnel?

You know, you think about your last primary care appointment. It was probably about 12 to 15 minutes, and the clinician was probably trying to pack in a lot of clinical care on a number of topics within that visit. And then you probably didn't go back to see that person again for another year. What we're providing is really high touch, high quality obesity focused care within a clinical setting. And so our members have unlimited access to their clinician to do the video, the telehealth appointments that they need to do that are solely focused on weight care, and then able to follow up with them. They're able to log side effects. They're able to meet with registered dietitians. So the way you could look at it is it's really an obesity and weight care focused offering in a clinical setting versus just a clinical setting that's meant to get someone a prescription and send them on their way. And so we, in terms of how we tell that message, it is a, I would say, a more nuanced message than, you know, a lot of people are competing on price right now. And if you're trying to reach people through D2C and they're scrolling through a social platform, price is obviously an easy thing to communicate to try to get people interested in your platform. But what we're really trying to do is let people know that we are the place. We've been in business for over 60 years, solely focused on weight care, and that we are the place to come if you want to have a successful and supportive clinical weight care journey.

Now, in terms of the backwards looking, what that's actually translated to from a Clinic net adds perspective is when relatively volatile as you've seen, you know, a competitive and ever changing environment on an ongoing basis. What's the quarterly pace or what's the right way to think about subscriber growth in the clinical segment?

I think overall, you know, we are trying to manage across our portfolio of Weight Watchers. And like I mentioned, we have three product offerings. And, you know, they have differing margin profiles. And it's very important for us to be agnostic to where a member is in their weight loss journey. I do think as like the next wave of individuals who are interested in GLP-1s, GLP-1s start to engage with GLP-1s, you know, they are looking for more information, right? They are hearing stories of, you know, I was not able to drink a glass of wine at dinner because I was having side effects. And I don't want this to impact my social life or, you know, I want to be successful on the meds and, um, I want to be able to like, lose the weight and all of that. And so I do think with all of the things that like Jonathan had mentioned, that is really at the crux of where our model is differentiated, because it is about guided support from experts. And in that, I do think while our subscriber count has been volatile, we have shown consistent increases in our overall revenue. And so just as I mentioned earlier, going from Clinic revenue being about 10% of our total total in 2024 to that being about 25% to 30% of our revenue in terms of expectation for 2026 does show that we are still able to acquire members, you know, kind of in this ever-changing ecosystem, but what really matters is the adherence to the meds and the wraparound of care. And that is really where we are. We feel like our differentiation is.

You spent heavily on marketing the Clinic offering in Q1, really the first time you were able to go. Full thread on that. What are the learnings that you gained from that spend? How does it inform your willingness to apply incremental marketing dollars here going forward?

So overall, I did note, you know, kind of in 2025, we had a debt negotiation. And the way that we were able to effectuate that transaction is we did do a prepackaged Chapter 11 that that was about a month and a half. So we entered into that at the beginning of May, we exited before the end of June in 2025. And so what was coming up in Q1 of 2026 was this was, our first opportunity really to let folks know that like Weight Watchers is still here. And that, you know, GLP-1s didn't kill Weight Watchers. We actually, you know, do prescribe GLP-1s. And so in Q1, we did index more heavily into spend than what we normally do overall for marketing. So we spent around 40% to 45% of our total anticipated spend, where in previous years, we would we would spend about 30% to 35% of that. I think it was really important for us in terms of overall learnings. People know Weight Watchers. People know the brand of Weight Watchers, but just like we're sitting here today, the business has so materially changed that there is an education we need to do of what Weight Watchers today offers versus when people have lost thought of Weight Watchers and what that looks like. And so one of the things that has impacted our business the most is we have very, very high brand awareness, but we don't have a lot of brand awareness that we offer GLP-1s. And we definitely wanted to get that into market in Q1. I think we did it in the traditional sense in that we invested in television and we invested in top-of-funnel marketing. And we were anticipating that that would continue to create halo for us as we moved through the year as more people adopted, you know, our Weight Watchers Med+ offering. And what we had noticed is that that overall brand awareness had stagnated and that we stayed around 30% brand awareness, which is very different from the overall Weight Watchers brand awareness. So what we have learned from that is we do need to be more focused on how we create a steady drumbeat that we do we do offer meds and we do have multiple GLP-1 offerings even if an individual doesn't want to engage with meds with Weight Watchers. And so you see things coming from us along that spectrum. So one thing we just announced is our expansion with Sam's Club in in that being a way our brand awareness to get out there in terms of offering GLP-1s. And we've also done a lot with influencers that are happy to tell their story of how they lost weight with Weight Watchers. And so I think overall it's a great opportunity for Weight Watchers to cut through the noise and to really allow for our model to differentiate relative to others. And I think that's our biggest learning from Q1.

Okay. Great. Well, one more question on the Connect segment. Zooming out, you've grown the Connect business from effectively zero a few years ago to about 200,000 subscribers today. How should we think about translating the program quality and the competitive advantages you do have into the path from growth from here? And what are your levers you're able to pull to continue to drive that revenue growth on a multi-year basis?

I mean, I think one of the levers that we have is, because we've been in business for 60-plus years, we do have a huge database of customers that have engaged previously with Weight Watchers. And so what we had noticed kind of while for Q1 2026 is that overall consumer interest is increasing in GLP-1s, right? That is a fact. And being able to more specifically message to past members of Weight Watchers that we do now have this offering available, I think is a continuation of the way that we are going to be able to scale. I would also say that we have a wide spectrum of product offerings. It's not just important for us, for you to engage with meds with us. We want to be wherever you are on your weight loss journey. And we want you to be able to maintain your weight loss. So we are comfortable, right, if someone was a Weight Watchers Clinic subscriber downgrading to a Weight Watchers Core+ subscriber, if someone was the Core+ subscriber upgrading to that. So I do think overall, we have multiple levers that are available to us, not just in the marketing front, but also in the consumer database, in being able to continue to scale that business.

Yeah, and in addition, we've also, you know, direct-to-consumer is an effective acquisition channel, and it's one where you can add a lot of scale quickly, but during periods of heightened competition, it can be expensive. And so we've taken a lot of steps over the past 12 months to diversify our acquisition channels. And that's come through our B2B offering, which while still is small compared to the rest of our business, does bring in clinical members. Obviously employers want their employees to be healthy and they want to contribute funds to this type of endeavor, but they want to make sure that if they are going to contribute funds to GLP-1 access, that their employees are getting them from a reputable clinician who's going to provide high quality care and ensure that they're building healthy habits. We also went live as a preferred telehealth prescriber on Lilly Direct during the first half of the year, which was really exciting for us as well. So now when patients are Googling ZepBound or Foundayo and going to Lilly Direct, they'll see us on there as a preferred telehealth provider. So direct-to-consumer is always going to be a significant acquisition channel as well as tapping into our existing base of behavioral members, but we've made a lot of strides as well in establishing footing elsewhere to generate, you know, economically viable sign-ups over time.

Okay, great. Really interesting on the Clinic side. Let's switch over to the behavioral piece of the business. It has been an area with larger headwinds, seeing the revenue base contract for the past several years. What would you identify as the key macro headwinds you've been facing, and do you see a path for those to soften over time?

And overall, there has just been a lot of introduction in the space as it relates to nutrition. In our behavioral program, if you just think about Core, it's offering nutrition guidance. And you think about Core+, it's offering nutrition guidance alongside support and accountability. And so we're happy about the trend dynamic that we're showing in Core+ because it does mean a member is willing to pay for that incremental support and accountability. For Core, though, we've always said do-it-yourself has always been a competitor. AI is a competitor. There is a lot of places for people to get information about their nutrition. I think for us, though, it is in the Points program easier to track. One thing versus tracking caloric intake versus protein versus fiber and all of the macros that people are saying is very important. I would also say that one of the ways for us to kind of stem that bleed on Core is we have up-leveled our technology. So one of the, um, one of the hard parts, right, of having a debt burden like we had at Weight Watchers for so long is that we weren't able to invest in the tech. And so the tools became dated. And if you have like a new app that is immediately like giving you all of this information, it's like, why Weight Watchers? Well, the program works, right? That is fantastic and check on that. But we did need to make a lot of the tools more easily, usable. So we have introduced quite a bit, um, in terms of, uh, AI in our app. So now, if you take a photo of your food, we are able to give you the Points value just in one click. So some of the things we talk about, right, it's like very hard to, if you have like a bunch like a salad or whatever to get all of the ingredients in there. I will say our AI is pretty amazing and it can figure that out and give you the points. We've also introduced voice tracking so you can just talk into your phone and that is available to you. We have our code scanning now. So if you are at Trader Joe's and you just want to scan a product, that immediately tells you the Points intake. And so all of these tools we do think are going to be very impactful in getting folks then to track right and then getting the best on their at their weight loss journey.

Digital weight loss has always been a competitive industry. How would you say your behavioral offerings?