Okay, great. Good afternoon, everyone, and thank you for joining us. My name is Nathan Feather, and I work on Lauren Schenk's Small and Midcap Internet team here at Morgan Stanley. I am very excited to be joined by Sima Sistani, WeightWatchers' Chief Executive Officer, and Heather Stark, WeightWatchers' Chief Financial Officer. Thank you both so much for joining us today. Thank you. Thank you. Now, before we begin, a few quick housekeeping items. For 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 out of the way, I think it may be helpful to start with an overview for investors that may be new to the story. Okay. Sima, how does the core WeightWatchers business work, and how have you been evolving that model since you joined? Sure. Well, let me start with since I joined, because it's been a year and a half, and my background is in growth, tech, social, digitizing social relationships, a nd I think that's really important to bring up because WeightWatchers is the original social network. It's a community, and when you ask: What is the core WeightWatchers business? At its heart, that's what it is. Nutrition science, yes, of course. Behavior change, yes, of course, b ut what makes us special, what makes us different is the peer-to-peer and peer-to-coach accountability, keeping people accountable to healthy habits. I don't know if any of you guys are watching the Blue Zones documentary. Well, what do they say? It's not just how you move. It's not just what you eat. It's your social circles that help you define that, and so I think that's what we've done well from, you know, 60 years ago, when we were founded by Jean Nidetch, and that's what we continue to do. T he difference is, our membership base accelerated during COVID times to being 80% digital only, and what was happening was that gold standard experience of people coming together in those peer-to-peer groups wasn't happening in this third space. And so we're bringing in all of the design principles around disclosure, repeat encounters, reciprocity, rituals. We're bringing that to the digital landscape, and so those are the... That's a big evolution that we've been making as, a brand. The other part of it is the increase in our pathways. I t's not just about weight loss. It's about weight health, and there are several different solutions that can help you achieve weight health, whether that's functional, clinical, behavior change, s o we're going digital first, and we're expanding our pathways. Okay, awesome, and I'm one of those pathways. I want to talk about the recent Sequence acquisition. Can you spend a minute talking through how that model works? T hen more broadly, how are you thinking about the opportunity obesity medications provide across the entire business? Sure. Let me take the latter first, which is when you think about the space and what it means, we've been living in a world where there's so much stigma associated with living with overweight and obesity, and we are trying to reframe that conversation around weight health and reduce the shame and the stigma that is associated with it. It's really important to do that for people to advocate for themselves, for them to seek help. In fact, next week, September twentieth, we're you know, tune in. We're having an important conversation that Miss Oprah Winfrey is leading through Oprah Daily, basically to talk about the medications, and this is the first time that she will be doing that. I t's important because in addition to WeightWatchers being a brand that they trust, she is a trusted resource, and there's so much misinformation. There's still so many bad actors, and it's an important opportunity to harness the conversation, speak to the chronic condition, and so that's an important part of why we are talking about clinical interventions in the first place. So that brings me back to the first part of your question, which is Sequence. What is that? Telehealth platform. It's our virtual clinic. That's, you know, simply put, but you can really break it down into five core parts of the experience, which is intake. We ID you, get the weight verification, understand your medical behavior change, weight loss history, and we have rigorous constraints around making sure that it's an appropriate, y ou're an appropriate candidate. T hen there's the consultation, which is a visit with a clinician, and this is somebody who's been trained in obesity care and management, and that's a really important differentiator in what we're providing. There's insurance support. These medications, they require pre-authorization. There is a lot of titration that happens along the journey. They are expensive. Pre-auth engine is incredibly important. We make it simple for the clinician and for the member. Then there's medical management because, again, the dosages need to be titrated. We want to understand the care. We want to make sure that we're managing symptoms, and finally, it's a lifestyle component. That's where WeightWatchers comes in, where we are ensuring that you have the right behavior change and lifestyle intervention that is happening alongside the medications because, and that's how you get the great outcomes. The medications, they help you with satiety, but then once you have, you know, stopped the hunger, the noise, the brain fog, what we're trying to do is use that moment to help people adhere to the lifestyle changes that actually help them live healthy habits for the rest of their lives. So that's what Sequence is. Okay. Mm-hmm. Great. O ne of the more common questions we get is around Sequence's competitive advantages. C an you just spend a minute talking about why a patient would choose Sequence over even their primary care physician or another telehealth provider? Yeah, so, going back to let's start with telehealth provider. What I was saying before, the five different parts of this process. Insurance support is incredibly important. These medications are expensive, but it is a taxing process for both the clinician and the member. It's not like a, you know, a statin or an ED medication, where you just get the prescription and you walk away. You have to continue to titrate the dosage, and so that's happening throughout the process. So that is a differentiator. This basically putting the insurance process on tech rails. The part that I mentioned about training our clinicians in obesity care, most and this goes to the difference between going to your provider, most GPs don't have any training in nutritional science. I say that with love. My brother is a doctor. He had one nutrition class his entire tenure in medical school. Most doctors only have about 11 hours of training. It's really important because consumers, what they care about most is not just losing weight, but managing their symptoms, and in order to do that well, you need to be trained in the right type of care. And so we're doing both of those things, alongside, obviously, our behavior change program, which is the number one doctor-recommended program, and endorsed also by U.S. News & World Report as the best diet and behavior change program for the last 13 years. Okay, awesome. L ooking a little more recently, over the past few months, supply constraints across GLP-1s have been a material impact to this space, s o, how have those impacted Sequence? T hen, more broadly, how are you thinking about marketing spend on the brand as a result? I'll talk about the supply constraints, and obviously, yes, they are impacting us and the space in general. There are supply constraints going on in the space, and what I would share is all the good work we're doing to ready for when supply returns or starts to grow back to a normal or consistent growth rate. D uring this time, we are leaned into working on our integration, so integrating WeightWatchers and Sequence into a common platform, integrating the experience into our app. Getting ready our GLP-1 companion program to launch ahead of our peak season, and by that I mean, members can come into WeightWatchers and sign up for our core program, and it is a healthy habits building behavior change app based program. You can identify on the way into that program as, "I'm diabetic," and we're going to give you a tailored diabetic program, et cetera. We work to tailor to your needs, and we will be tailoring and launching a program tailored to the needs of people on a GLP-1 program and launching that ahead of our peak season. T hat will be complementary to a Sequence subscriber, but also available to our general membership, because there will be people who come through that would like the GLP-1 behavior change support, but maybe they have access elsewhere, or maybe they don't have an insurance need or some of the needs that are built into what we're providing, that Sima spoke to within Sequence, s o we're leaned into integration. We're also leaned into testing and learning during this timeframe. We've not really unleashed marketing yet. Okay. Sima, Sima can speak to the marketing efforts, but we're, we're readying and testing and, and thinking about, what to do, from a marketing perspective when the time comes that we're, we're comfortable that supply is returning. I think that what the shortages are showing us are our differentiators and how we are able to support members, because not only do we prescribe GLP-1s, but we have a wide formulary, so we're able to move people to generics or other forms of medication or to our core behavior change program as we work with them during this time. T he ability for our that tech stack that I mentioned, it's you know automation, AI-powered, to be able to inform which pharmacy is more likely to have a medication in stock, that's given us a real advantage. And that's why even within the scope of the supply constraints in... You know, since the acquisition, we, on our last call, reported a 40% step-up in subscribers, and I think that that was really meaningful given the constraints we were operating in. E ven so, we are holding back intentionally. We did not buy this business for 2023. It's important for us to maintain the high NPS, and the trust, and so we want to ensure that people who are coming into our platform, that we can ensure their continuity of care. Okay. We're also leaning into on the, like, readiness of our own scaling, s o with the integration and efforts that we're undertaking, we want to make sure that we're taking the time to scale up our clinicians. We have a rigorous 12-week training program that we put new clinicians through, back to Sima's point. And we actually have a wait list of clinicians waiting to be onboarded and work for us. We have a high NPS with clinicians. They want to work for us. They like our platform. We're working on continuing to scale that clinician capacity base so that we don't have a human capital constraint as supply unleashes. Mm-hmm. Okay, great. L ooking out over the medium term, once hopefully we get past some of these supply issues how are you thinking about the growth path for Sequence? T hen, given all the work you're doing now, to tackle some of the potential scaling issues, what do you kind of see as those potential difficulties again, once supply starts to come back online? I, I'll go. V ery bullish, obviously, on the long-term growth potential, medium-term growth potential. I think, again, the supply shortages has only given us an opportunity to make sure our readiness is there. And the other piece of this, though, with regards to constraints beyond this moment, because obviously the manufacturers are working on this. We're going to get this figured out, b ut what's really going to unlock this category is our payers, is policy. These medications are incredibly expensive, and so we are motivated to work with D.C. and you know, in a bipartisan fashion, such that we can help move you know, Medicare Part D and talk about the fact TROA Act that was reintroduced, and talk about the fact that these are life-saving medications. You're seeing that now with the SELECT trial showing that there's a 20% less likelihood of a cardiovascular event. The leading cause of death, heart disease. We're saying, you know, one out of every five people, we're going to save a life. That's amazing, and so we have to be focused on the health equity here, ensuring that all populations, not just those with, you know, who have private insurance, are able to access these medications. The other constraint is obviously the injectable format, and we know that manufacturers are working on pills. Those are moving through the process too, s o from a macro standpoint, there are a couple of different things that can really shake up this category. Okay, awesome. B efore we move back to core, you know, Heather, you mentioned that you're launching a new lifestyle program for patients on GLP-1s, regardless of whether they get them through Sequence or not. C an you expand a little bit on the rationale behind that program, and then how should investors think about the launch timeline, especially considering dieting season kind of next January? Sure. L aunch time frame, quite simply put, ahead of our next peak season, so ahead of January. And then in terms of the program itself, it is there and designed to help people on GLP-1s focus on the things that matter when you're on a GLP-1. There's a very real need to focus on good choices and healthy habits, so you're learning behavior change over time. But very specifically, while you're on the medications, the medications are designed to help you. You're going to lose body mass. We'd like you to lose fat mass versus muscle mass, so let's focus on lean, good proteins. Let's focus on muscle density building exercise, and let's focus on hydration to help you offset any of the symptoms you may feel while on these medications. So that's the real design, intent behind that. R eally looking and feeling like Weight Watchers even, I think, is important, so that as members want to move around within the services that we provide, it is a Weight Watchers platform that they're seeing in that healthy habit-building behavior change platform. W hy allow anybody to get it? I think that was an important part of the question right there, which was, yeah, whether or not you get... We're not in the prescription business, we're in the subscription business, s o whether or not you get those medications through us or not, we want to help people. O ur program is going to help people manage their symptoms, no matter where they get it from, a nd I think that that's a really important differentiator in our product also globally, where the you know insurance support, there's more insurance support. The medications are more affordable, and so we might see some different dynamics in terms of telehealth versus people going to their doctors, a nd so I think offering the program widely is important to us. Okay, great. Now, switching back over to the core, Q2 subscribers grew sequentially over Q1. The first time that's happened. Can you break down the key drivers of the better-than-traditional seasonality and whether those are sustainable? Product, product, product. No. Product, performance marketing, as well as an overall, more awareness and alignment with our weight health messaging. I'll come back to product. We've been talking about activation rate for a while, looking at the first 30 days when somebody onboards and being able to then have that, use that as a predictor of whether they are more likely to stay and retain to the program. That's allowed us to be evergreen, nimble, about our product roadmap, and so we've been making some really critical improvements to that experience, and t he best is yet to come in terms of that. We've got some really great launches coming up in terms of our progress and trends tab, as well as our what to eat tab in the app. I'd always said the product needs to do the marketing for it. This is a very word-of-mouth experience. On the marketing side, we're taking a modern approach, frankly. We came in, changed us from, you know, upfront TV buying and modernize. We've in-housed our performance marketing function. We are moving more nimbly across channels, across geo, and we're able to be more responsive to what's working. We're just taking a more modern lens on our marketing. And then finally, obviously, there's been a lot of interest in the space. We moved quickly into this new modality. There's been a lot of earned media around it. I also think what's really resonating is the authenticity with which we're approaching it, talking and speaking to where WeightWatchers didn't resonate in the past and where we got it wrong, and talking about the evolution in our understanding of living with overweight and obesity, and the fact that for some, it is a chronic condition, and that it's not just a matter of willpower, and talking about weight health broadly. This isn't just about weight loss. This is about what we can help you do to gain health. It's resonating, and so that's a part of the mix, too. Okay, great. Maybe thinking a little more broadly there, you've talked about the three key pillars for the digital-first roadmap of coaching, accountability, and community. Can you dig a little bit more into the digital experience you see evolving to properly tackle those three pillars? Yeah. Well, one of the things that we've talked about and I wanna take a step back and note that the IRL component is really important. What we were saying no to or goodbye to, should I say, is these, you know, brick-and-mortar spaces where we owned and operated and had a lease for a space that we used for a couple of hours a day and where we sold a bunch of products. Well, as we've rationalized that business and as we think about meeting people where they are, it doesn't necessarily make sense to have those spaces. Rather, we're doubling down on workshops and shared experiences. So we want people to continue to meet in person. We wanna inspire them with that, but I think we can do it in a much more meaningful way. Hey, I'm taking a walk in Bryant Park. Who wants to join me?" Why not have a workshop at a coffee shop? T here's just a lot more interesting things that we can do in that space, and we talked about the fact that we are introducing... Actually, let me take a step back. When you look at our membership base as a whole, we've noticed that the density of the ability of people to have, like, 100 other members around them within a certain radius, it's astounding. I mean, where I'm from, in Huntsville, Alabama, I mean, I have so many other members that I can get together with. We don't wanna gatekeep that to just our premium members, and so we're testing a concept called local chapters, where we're doing this based on location. We're really excited to see how we can actually amplify our IRL experience, that coaching, that accountability, that community, and have this clicks-to-bricks connection, such that even when I walk away, I'm holding the app, and I still can continue those connections, when I'm not there with you in person, or I start with a digital experience, and I'm delighted, I'm inspired to then come and meet you in person. Okay, great. Now, shifting gears a bit to the cost side, certainly, a lot has changed in the business over the past few years. C an you provide some color on the puts and takes for EBITDA's margin as we think about the next few years, and any reason why you couldn't get back to, you know, the kind of 20% levels or above? Definitely targeting getting back to those levels and above, and not satisfied with where they are at this moment, but we're in the turnaround point in time in the business. T o the point that Sima just made about our former sort of studio-heavy location side of the workshop business, we have really taken this year to rationalize non-strategic business lines, non-strategic retail locations, and our workforce, a nd that has really helped us get to what we shared in the Q2 earnings call, an all-time high growth margin. W e expect that to continue to read through in the business by all of this good work that we've done on the cost side of the business. As we return the business to growth, you know, back to the Q2 comment that you made, our step up in subscriber base, we expect to see that continued growth in signups, growth year over year in our subscriber base, while holding on these costs that we've done all sorts of good work to manage, while serving up a great service to all of our membership, where they would like us to be, how they would like to be served, and I would expect that all to read through in the future. Okay, great. Let's spend a minute on the capital structure. Where do you see the liquidity position of the business today, and how do you envision the capital structure evolving over the next few years? L iquidity position today, we exited Q2 with about $91 million in cash, a comfortable position, and I don't expect an uncomfortable position from a liquidity perspective. We are a high cash-generating business, and look, coming out of Q2 with $91 million, we had a cash burn or cash out the door for the Sequence acquisition and, and cash out the door for all of the restructuring work that we did, and still maintained a really healthy cash level. F rom a liquidity perspective, healthy cash levels, continuing to generate healthy cash levels, an undrawn revolver, feel good about that. From a future perspective, capital structure, and leverage perspective, we are looking at it, you know. We've got a credit agreement that is a comfortable one to be in. You know, we've got a comfortable amount of time to manage through that, but, you know, I'd be looking at options to think about what we could do, and I would be doing it in a way that manages the stakeholders in the business, for sure. Sorry, I would share, though, that the stock price that we're at right now, in the $10-$11 range, isn't one that I would be looking at making any moves in that regard, but- It's got 5-year maturity. 5-year maturity, you know, good. Mm-hmm. It's comfortable. Y eah, there's not a lot we need to do, but potentially, we would look at doing something if it made good sense for the business and all of our stakeholders. Okay, awesome. B efore we open up for audience Q&A, what are the one or two things you think investors most underappreciate or misunderstand about the story? Love this question. F irst of all, the core business. I mean, if the reaction to Q2 was any indication that people are undervaluing our core business, we are looking at year-over-year sign-up growth. We are looking at quarter-over-quarter sub growth. We are looking at activation growth, engagement growth. NPS is 22 points higher than it was, a nd yet, if you look at a sum of the parts, valuation is not baked into our stock price, s o I think some, you know, people are missing that the core business is going to move alongside of the excitement around clinical. That's going to give us leverage as we continue to go out to market, particularly with employers and payers. I mean, the B2B side of our business, we have over 500 clients. We've got the infrastructure in place to meet those needs. They want, alongside clinical interventions, behavior change program that is going to maximize the ROI of the cost of these medications. The second part of this, I keep hearing commodity. Anybody who's saying that has not been on a weight loss journey. The amount of the high support and attention that one needs, this is not an ED script. It is not the same thing. You don't get it, walk away. It's not the same thing, and the peer-to-peer accountability you need, the ongoing help around healthy habits. I can say this from experience: I lost 60 pounds on WeightWatchers, and I think that people are getting that wrong. And they should talk to... I invite them to talk to people who are on a weight loss journey to really understand why our high support subscription is needed in those cases, s o core and commodity, those are the things that I think investors, not you guys, of course, are getting wrong. Okay, great. And do we have any questions from the audience? Yeah, right here. Your mic's on? Yeah. Front row, I can hear you. I'm out shouting. Yeah. Can you just talk a little bit more about the B2B opportunity, post-acquisition of sequence? Have you seen working with other businesses, have you seen grown, and what's that look like compared to...? Sure. W e have, as I mentioned, over 500 clients, including this great state of New York. And an interesting part of the way what we've been hearing from our existing employers and from so many new employer inquiries is that they don't want the Sequence business alone. They are looking for pathways. It's important for us to be able to scope their employee population and be a center of excellence, to really be able to recommend where does it make sense? Who might be the right candidate, i.e., clinical obesity, and this is somebody where the medications make sense. Where it doesn't make sense for somebody to actually de-escalate from the medications, and perhaps get them to a settling point where then behavior change alone can work, or maybe moving them to a different class of medication, less expensive. T hen the third, being able to provide a behavior change solution, s o we're really bullish and excited about that opportunity and figuring that out along with our existing employers as well as the new ones coming to us, who are seeking out a covered benefit for their population. T he other part of this, there was something that you had mentioned in there that I really wanted to address from a B2B standpoint. It'll come back to me. Continue Right. Right, right, right. You know, certainly, yes, I know what it was. We don't have any of that upside modeled into, anything, any of the guidance we've been giving. Okay, great. We got about two minutes left. Any other questions from the audience? We got one back there. Curious, do you have any long-term studies ongoing, comparing medical with Sequence versus medical with patient choice or background choice? Just to try and understand, or, I guess, establish over time, the importance of all the Sequence, when it comes to compliance, lifestyle changes, ultimately outcomes. Mm-hmm. Is this something you're looking to partner with on the medical side, with some of the sponsors, the manufacturers? Because I guess it's in all of your interests to improve the patient experience and ultimately the outcomes. WeightWatchers is a evidence-backed program. We have done over 150 peer-reviewed studies, 35 clinical trials, and yes, we're actively doing clinical trials at the moment, partnered with the Cleveland Clinic. We have several different types of trials that we're doing, some that are mapping the you know, the journey with our program versus not, some that are mapping our program with different versions of the medication versus not, some that are mapping de-escalation and behavior change. The science is evolving, and we're going to be at the forefront of helping to provide a lot of information, given the you know, we've got one of the biggest data sets that's out there. Okay, awesome. And we'll wrap it there. Thank you so much, Sima and Heather, for joining us. Thank you. Hope you have a great-