Weight Watchers International (WW) reported its Q3 2024 earnings, revealing a decline in revenue and subscribers, but highlighted significant growth in clinical subscriber numbers. The stock saw a 5.65% drop in regular trading, closing at $1.67, and continued to fall 1.2% in aftermarket trading. The company maintained its full-year guidance despite these challenges.
Key Takeaways
- Q3 2024 revenue totaled $193 million, with a 9% decline in subscribers.
- Clinical subscribers grew by 71% year-over-year.
- Stock dropped 5.65% in regular trading and 1.2% in aftermarket.
- The company maintained its 2024 revenue guidance of at least $770 million.
Company Performance
WW International (NASDAQ:WW) faced a challenging Q3 2024, with total revenue reaching $193 million, a decline compared to previous quarters. The company reported a decrease in overall subscribers to 3.7 million, a 9% drop year-over-year. However, clinical subscribers grew significantly, reflecting the company's strategic shift towards integrating clinical solutions with traditional weight management.
Financial Highlights
- Revenue: $193 million (year-over-year decline)
- Subscribers: 3.7 million (9% decline)
- Subscription revenues: $191 million (6% decline)
- Clinical subscribers: 78,000 (71% growth)
- Adjusted gross margin: 69.1% (record high)
- Adjusted operating income: $36 million (18.5% margin)
Market Reaction
WW International's stock closed at $1.67, a 5.65% decrease from the previous close, and further declined by 1.2% in aftermarket trading. The stock's movement reflects investor concerns over declining subscriber numbers and revenue, despite the company's strategic initiatives and growth in clinical subscriptions. The stock remains closer to its 52-week low of $0.671, indicating ongoing market challenges.
Outlook & Guidance
WW International maintained its full-year 2024 guidance, projecting at least $770 million in revenue and adjusted operating income of at least $100 million. The company aims to have at least 3.1 million subscribers by year-end. Strategic initiatives include expanding clinical and behavioral solutions and enhancing digital member experiences.
Executive Commentary
Interim CEO Tara Comont emphasized the need to "ruthlessly assess and fix parts of our business not currently performing to the levels required." She highlighted the company's belief in combining clinical options with behavioral solutions as the future of weight management. CFO Heather Stark noted, "Our business is a highly cash generative business pre debt servicing charges."
Q&A
During the earnings call, analysts raised questions about the launch of compounded semaglutide, which saw the highest sign-ups in 2024. The company reported improved retention for clinical subscribers, increasing from 6.5 to 7.5 months. However, consumer acquisition costs remain elevated, posing a challenge for growth.
Risks and Challenges
- Declining subscriber base: A continued decrease in subscribers could impact revenue.
- Rising customer acquisition costs: High costs may affect profitability.
- Competitive landscape: Increased competition in the weight management market.
- Market evolution: Adapting to the growing use of GLP-1 medications.
- Economic pressures: Macroeconomic factors could influence consumer spending.
Full transcript - WW International Inc (WW) Q3 2024:
Conference Operator: Good day, and welcome to the WW International Third Quarter 20 24 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to hand the call over to David Helderman, Director of Investor Relations.
Please go ahead.
David Helderman, Director of Investor Relations, Weight Watchers: Thank you, everyone, for joining us today for WW International's Q3 2024 Conference Call. This morning, we issued a press release reporting our Q3 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, both at corporate. Www.com.
Supplemental investor materials are also available on the company's corporate website under Events and Presentations. Reconciliations of non GAAP measures discussed on this conference call today to the most directly comparable GAAP financial measures are also available as part of this 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 most recently filed Annual Report on Form 10 ks as updated by the company's other 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 Tara Comont, Interim President and Chief Executive Officer Heather Stark, Chief Financial Officer and Donna Boyer, Chief Product Officer. I will now turn the call over to Tara.
Tara Comont, Interim President and CEO, Weight Watchers: Thanks, David. Thank you all for joining us this morning. For those of you who don't know me, I've been a member of the Weight Watchers Board since mid-twenty 23, and I'm now serving as Interim President and CEO following Seema Sestani's departure last month. I'm confident I speak to the entire Board when I say how grateful we are to Seema for her leadership navigating the business through these times of significant change in our industry, while also laying a strong foundation for our future. I'm extremely pleased to now be part of this management team as we take on the task of building on that foundation and creating the plan to revert this business back to sustainable growth.
While our results in the Q3 were broadly on track with expectations, it's clear we have significant work ahead to change the trajectory of the business. This is an industry undergoing massive transition and as a result Weight Watchers has experienced meaningful disruption over recent years. However, I am optimistic about our ability to lay a path to future growth. From the value of our full and expanding spectrum of solutions to the strength of our brands and our important role in the evolving global healthcare landscape, we have the fundamentals of what we need to be successful. We know that the future of weight management is one where clinical options are paired with behavioral solutions, not eitheror, and that Weight Watchers is uniquely positioned to provide this to consumers at scale.
This is a defining time for our field and our company. We need to ruthlessly assess and fix parts of our business not currently performing to the levels required. The team is committed to moving fast to make change, yet we know the scale of the task at hand will take time. However, let's remind ourselves that Weight Watchers have successfully navigated disruptions and transformation many times in our 61 years, emerging each time with greater strength and clarity of purpose. We are confident in the importance and relevance of our mission to empower people to live healthier, longer lives through our trusted leadership position and our many advantages that give us the right to win.
As we look ahead to the future of this business, I see many areas of unquestionable strength. Firstly, and perhaps most importantly, we have a portfolio advantage. While many newer entrants to our base focus on just one part of our solution set, we have built with intentional breadth, not only depth. Our full spectrum weight management platform is uniquely positioned to meet members' needs wherever they are on their weight journey. Under the leadership of Chief Product Officer, Donna Boyer, who's with us on the call today, we're actively focused on making it much easier for our members to more fluidly move in and out of and across the various components of our program.
We believe in building solutions for a healthy life tailored to a member's individual needs, not isolated products for specific moments in time. This is perhaps our biggest opportunity and the area in which we have the most immediate and sizable work to do. Secondly, we have a scientific advantage. We've spent decades investing in research and development to bring our members programs that work. With over 175 published papers of clinical research and more underway specific to our GLP-one program, we time and time again prove the efficacy of our solutions.
As for one example, we know our behavioral program is 3.5x more effective for our members than trying to lose weight only with standard nutritional guidance. We also know that our Weight Watchers Clinic members taking weight loss medication paired with our nutritional points program lose 11% more than those using medications alone and that 81% of Weight Watchers' clinic members agree that compared to primary care, we provide better ongoing care and support. There are so many more proof points and they matter more and more in a world of increasing volumes of false claims and misinformation. Thirdly, our community is a distinct advantage and a highly motivated one. We've seen 60,000,000 plus members over our history, supported by thousands of our incredibly dedicated coaches, clinicians, care team and field staff.
Each member has access to a dynamic online community through our app, which sees high levels of engagement as well as in person and virtual communities through our workshops. Roughly 20% of our members at any time are on our program with a friend and those referred by a friend have both a 20% higher retention rate and lose approximately 45% more weight by week 12 compared to other members on the program. Talk about the benefit of community. In addition, we have a vast community of prior members, a significant portion of whom return to Weight Watchers at various stages of their weight management journeys and who represent a meaningful opportunity. This is particularly evident in Weight Watchers Clinic, where over 60% of sign ups year to date have come from existing and prior Weight Watchers members.
Our entire business was formed on the basis of people coming together to help and support one another, and we continue to have a workshop business that while evolving for a digital world remains an important part of our competitive offering. Don't ever underestimate the power of an engaged community. And finally, our clear advantage was our iconic trusted brand. We have 60 plus years of expertise in legacy and time and time again, our consumer research has shown that we remain a brand that people trust with proven programs. We started some initial work to refresh our brand under the leadership of our recently appointed Chief Brand Officer, Philip Piccardi, to bring renewed energy to how we engage with both existing members and potential future customers.
I'm excited for the first glimpse of this work during the Q1 and our peak season. While the visual updates will include a fresh direction and move us forward, our messaging will reflect the values that have always set us apart: community, joy and livability. Weight Watchers continues to have roughly twice the brand consideration of our nearest competitor, so we have a strong starting point from which we're excited to build upon and grow. As well as refreshing our brand, we'll be doubling down on our end to end marketing strategy. Too often, our marketing feels confused and lacking a clear call to action or a reason to engage.
As we've expanded our solutions to include clinical and adapted to a rapidly evolving market, we need to refocus on clearly communicating the full value and breadth of our comprehensive offerings. A common theme in our focus for the coming quarters is the need to untangle complexity across different areas of
: our
Tara Comont, Interim President and CEO, Weight Watchers: business, simplifying our approach to drive improved results. Stepping back, we're confident we have the assets needed to thrive in today's high growth weight management space. However, there's urgent and significant work ahead to bring it all together into a cohesive solution to more effectively communicate the value and impact and to meaningfully improve the experience once you're in the Weight Watchers ecosystem. We're fully committed to realizing this potential and look forward to sharing our progress along the way. Moving on to our portfolio of solutions, there's been a lot of focus on our clinical business since our acquisition of Sequence.
This is an area of the market in significant demand with some predicting that up to 30,000,000 people in the U. S. May be using GLP-1s by 2,030. As expected in early growth cycles, this surge in demand has also drawn new competitors, increasing customer acquisition costs and flooding key channels with content and information. The rapid adoption has also outpaced supply, resulting in drug shortages and prompting the introduction of compounding solutions to meet demand.
To address continued drug shortages, expanding both accessibility and affordability of our clinical weight management solution, we recently added compounded semaglutide to our wide formulary of branded and other generic medications. Lack of access and affordability are the primary reasons for the churn of a clinic subscriber. The combination of a slowly improving supply trend, albeit still low, with a number of improvements in our member journey helped us improve clinic member retention to 7.5 months in the 3rd quarter from 6.5 months in the second. In addition to shortages, insurance coverage remains a prohibitive factor for most. Over the last 6 months, approximately 45% of Weight Watchers' clinic members eligible for and prescribed a GLP-one by their clinician have been denied coverage by their insurance after 3 prior authorization requests.
In fact, over 50% of current Weight Watchers members have expressed consideration of a compounded GLP-one largely due to these factors. And that's why after thorough research and careful evaluation, we partnered with a trusted FDA registered 503B outsourcing facility that meets our high standards for quality and patient care. We saw an immediate and positive impact on sign ups in our clinical business following this launch with the single highest day for clinic sign ups in 2024. Performance has continued to be positive to date with sign ups remaining elevated to prior months, albeit we do not expect compounding to have a material impact on our 2024 overall business results due to the relatively small number of new clinical subscribers in proportion to our overall business. However, we're pleased to see the positive trends continue into the 4th quarter with our clinic subscribers today representing growth from the end of Q3.
We're committed to ensuring our members have access to the solutions they need while maintaining full regulatory compliance. We're optimistic that supply issues can be resolved allowing branded medications to reach even more people who need them and Weight Watchers is best positioned to meet that additional demand. Although competition continues to drive a significantly higher cost of acquisition compared to the same time last year, which caused us to be cautious with marketing spend in the Q3 and ongoing medication shortages have impacted this area of our business throughout the year, we're confident in the meaningful growth opportunity the clinical offering represents for our business over the long term. While we're expanding our clinical offering, our research shows that only about 10% of GLP-one users intend to remain on these medications for the rest of their lives. This is where the comprehensive Weight Watchers behavioral program, specifically the program we tailored for those on GLP-1s, can serve both as an effective foundation while on medication, ensuring critical complementary nutritional elements as well as a sustainable off ramp for these numbers moving forward.
Moving to the rest of our platform, we must materially improve our digital member journey. We need to eliminate years of accumulated friction and more seamlessly integrate across the solution set. We make it too hard to be a Weight Watchers member today. Our vision is to create a seamless experience that allows members to explore our full range of weight management solutions from behavioral programs to clinical support and community engagement and additional support as we add on services like registered dietitians. Our priority is to integrate and modernize so members can more easily benefit from the full suite of tools the Weight Watchers program has to offer and the results it delivers.
All of this is specific to our direct to consumer business. Let me talk about B2B. The emergence of effective clinical solutions is having a profound impact on both employers and payers as demand for access to weight loss medication continues to explode. We believe it's going to be increasingly hard for employers not to offer coverage for weight loss medication given their positive health benefits, particularly as more suppliers enter the markets over time and drive down cost. This represents a clear and growing long term opportunity for Weight Watchers with the breadth and effectiveness of our program, a unique differentiator.
Our B2B offering delivers a robust ROI for employers and insurers across all program options with our clinic program achieving nearly a 4 to 1 payback. We're strategically adapting our solutions to meet this evolving market led by Scott Honken, who recently joined us as Chief Commercial Officer. Wrapping up, there's no shortage of opportunity for Weight Watchers today and in the future in the U. S. And abroad.
To revert this business to growth, we need to double down on our strengths and the foundation and breadth of our value proposition, which is more relevant today than ever before. We need to obsess about our member experience and leverage our full toolkit, not only its component products. We need to be bold and clear as we engage both with our existing members and potential future customers. At a high level looking forward, we're focused on: 1, the simplification and integration of our digital experience, creating the ability to move easily in, out and across all we have to offer, irrespective of where a member is on their journey, listening to our members and truly building to the power of 1 Weight Watchers 2, a revitalization of our brand, clarifying and unifying our apparently disparate marketing messaging, particularly in a world of elevated CAC and prolific competition in the clinical space 3, continuing to leverage our deep science backed heritage in this new world of GLP-1s, not only in the doctor's office, but as a fully integrated, sustainable and livable solution with our nutritional expertise and community support as crucial differentiators that support maximum results 4, partnering with employers and health plans to help them provide access in an affordable and scalable manner to the tens of millions of employees and members seeking support and 5, innovating and adding to our platform where we see value for both members and our business for the short and longer term.
Much of this work will take time and as we move forward, the team is taking a disciplined approach to spending and resource allocation, recognizing that some initiatives will need to be sequenced as we build for 2025 and beyond. We'll move forward thoughtfully but decisively, balancing near term performance with investments in our future growth opportunities. And with that, let me turn it over to Heather to walk us through the quarter and our outlook in more detail.
Heather Stark, Chief Financial Officer, Weight Watchers: Thanks, Tara. As Tara emphasized, despite near term sign up challenges, we remain confident in our strong competitive advantage, unique market position and talented team to ultimately drive this business back to growth. We remain on track to deliver the full year guidance that was communicated last quarter. We continue to act to improve our profitability and liquidity profile, and I'm encouraged to see our cost savings efforts bearing fruit as evidenced by our strong gross margin expansion, which sequentially increased and is up 6 25 basis points year to date versus last year. We're on track for our $100,000,000 cost action announced last quarter with meaningful savings in both gross margin and G and A expected in Q4 and beyond.
And I'm pleased to see our average revenue per user stabilize through the 1st 3 quarters of the year with stability being driven primarily by subscriber mix and in line with expectations. Turning to our Q3 2024 results, note that all year over year financial comparisons are on a constant currency basis. We ended Q3 with 3,700,000 subscribers, a decline of 9% year over year, reflecting year to date recruitment declines as consumer acquisition costs increased substantially compared to last year. Revenue totaled $193,000,000 Within this, subscription revenues were $191,000,000 down 6% year over year with declines in our digital and workshops subscription revenue. Subscription revenues benefited from $19,100,000 of clinical subscription revenues.
Digital and workshops revenue was primarily driven by lower sign ups and incoming subscribers, coupled with the continued mix shift from workshops to digital and a higher portion of digital subscribers within their initial lower price commitment periods. Clinical subscribers of 78,000 at the end of the third quarter represented growth of 71% compared to prior year, driving a $9,000,000 increase in subscription revenue. Sign up trends across the business have been challenging in this environment and significantly impacted by competition driven increases to consumer acquisition costs. Other revenue of $2,000,000 declined $10,000,000 year on year due to the discontinuation of our low margin consumer products business at the end of 2023. Adjusted gross margin was yet another record high at 69.1%, up from 66.2 percent in the prior year and 67.9 percent last quarter.
Expansion year over year was driven primarily by actions to reduce the fixed cost base within our business and the discontinuation of our lower margin consumer products business. Marketing expenses of $44,000,000 were down 8% year over year and almost 20% sequentially as we continue to manage to a prudent LTV CAC ratio. In the Q3, we experienced a roughly 30% year on year increase in cost to acquire, which resulted in a decision to pull back marketing dollars to preserve spend for the Q4, aligned with the timing of program news and creative execution, while keeping full year spend flat to prior. Adjusted G and A of $53,000,000 was down 7% versus prior year. Q3 2024 G and A included a 9 month or 3 quarter compensation accrual as compared to a 3 month or 1 quarter compensation accrual in the Q3 2023.
This resulted in higher G and A of $7,000,000 in this year's Q3. Excluding the $7,000,000 impact, adjusted G and A would have decreased by 20% or $11,000,000 versus the prior year period. The year over year reduction in adjusted G and A reflects the impact of our previously announced cost savings initiative and we are on track to achieve the run rate $100,000,000 cost savings by the end of 2025. We expect to realize approximately $20,000,000 of cost savings in 2024 and the remainder in 2025, with cost savings in 2025 to be split across adjusted G and A and cost of revenue with slightly more of an impact to G and A. Adjusted operating income in the Q3 was $36,000,000 reflecting an operating margin of 18.5%, a year on year increase of almost 150 basis points.
Adjusted EBITDAS was $40,000,000 which was negatively impacted by approximately $6,000,000 of other expenses recorded below operating income, primarily driven by the negative impact of foreign currency on intercompany transactions. During Q3 2024, we recorded non cash impairment charges of franchise rights acquired totaling $57,000,000 These impairments were primarily driven by an increase in the company's weighted average cost of capital reflecting market factors. Adjusted EPS was $0.24 and included a $0.33 tax benefit from the valuation allowance mentioned in our press release. You can find a detailed summary of the adjustments within our supplemental materials and in the financial detail section of our earnings press release posted on our site earlier this morning. Shifting to our outlook for the rest of the year.
While the recent launch of compounded semaglutide was encouraging in terms of momentum, we are pleased to be expanding access to medication for our members. As Tara mentioned, we expect it to have minimal impact on our consolidated 2024 results. We are reiterating our previously provided guidance for end of period subscribers, revenue, adjusted operating income and adjusted EBITDAS. For the full year 2024, we expect year end total subscribers of at least 3,100,000, which represents a decline from the end of 2023 and will create a material headwind to revenue in 2025 total revenue of at least $770,000,000 adjusted operating income of at least $100,000,000 and adjusted EBITDAS of at least $150,000,000 which is consistent with previously provided guidance, but for clarity now also excludes the non cash intangible impairment charges and former CEO separation costs that occurred in Q3. Cash outlays for the 2024 restructuring plan and remaining payments for prior year actions are expected to be approximately $30,000,000 in 2024 with approximately $5,000,000 remaining in Q4.
Full year interest expense is expected to be between $105,000,000 $110,000,000 a year over year increase of approximately 10% to 15%, largely driven by the expiration of our $500,000,000 hedge at the start of Q2 2024. We expect modest benefit from the recent reduction in interest rates and remain within our prior guidance range. For the full year, we expect income tax expense of up to $10,000,000 Excluding the impact of the valuation allowance, impairments and other discrete tax items, we continue to expect an income tax benefit of up to $10,000,000 We expect cash taxes net of refunds to be approximately $20,000,000 for the year. As anticipated and communicated in prior quarters, we are pleased to see cash flow from operations improve and revert to positive in the Q3. We continue to expect to have a modest use of cash from operations for the full year 2024.
As a reminder, our business is a highly cash generative business pre debt servicing charges and is bolstered by our subscription billing model and the stickiness of our subscriber base. CapEx, which is primarily capitalized software, is expected to be approximately $20,000,000 Depreciation and amortization is expected to be around $40,000,000 Turning to our capital structure. We ended Q3 with approximately $57,000,000 of cash, up from $43,000,000 at the end of the second quarter, plus undrawn revolver access of $61,000,000 With our cash position, plus our revolving credit facility and bolstered by the cost actions underway, we believe we have sufficient liquidity for our working capital needs, including cash outlays related to our headcount actions and servicing our debt. We have attractive debt terms with no maturities for our term loan or senior notes until 20282029. However, we acknowledge that our debt burden is significant with our net debt to adjusted EBITDA slivered ratio at 10.4 times at the end of the Q3.
As such, we have recently appointed advisors to assist us in the evaluation of options related to our overall capital structure. We have nothing further to share on this at this time. 2024 reflects a focus on profitability as we navigate a challenging sign up environment in a rapidly changing industry, and we remain on track with our prior expectations. I have confidence we are taking the right steps that will best enable the company to revert growth while managing liquidity and setting us up for longer term success. I'll now turn the call back to Tara.
Tara Comont, Interim President and CEO, Weight Watchers: Thanks, Heather. For over 6 decades, Weight Watchers has helped tens of millions of people transform their lives through our proven approach to weight management. As we navigate an evolving health landscape, it's crucial that we return to those core strengths that have defined Weight Watchers from the beginning: innovation, continuous learning, a commitment to science backed solutions, the importance of community and livable solutions for a healthy life. As Interim CEO, I'm fully focused on leading the company through this next phase and driving meaningful progress in these strategic initiatives over at least the next 6 months. I'm honored to work with our team on behalf of our current and future members in this incredible company.
With that, we'll be happy to take questions.
Conference Operator: We will now begin the question and answer session. And our first question will come from Nathan Feather of Morgan Stanley (NYSE:MS). Please go ahead.
Nathan Feather, Analyst, Morgan Stanley: Hey, everyone.
David Helderman, Director of Investor Relations, Weight Watchers: Thanks for the question.
Tara Comont, Interim President and CEO, Weight Watchers: It will be helpful to
Nathan Feather, Analyst, Morgan Stanley: get your thoughts on what has worked early in the compounding launch across conversion, retention and the ability to market and taking that together. Are you seeing meaningful uplift in LTV to CAC there?
Tara Comont, Interim President and CEO, Weight Watchers: Hey, Nathan. Yes, listen, we as we mentioned on the call, we were extremely pleased with the launch of compounding, which was really only a few weeks ago at this point. And I really give the team here a huge amount of credit for the extensive work and diligence that went into that launch over many, many months. And actually, Donna, your team led that work. So perhaps you want to comment on some of those positive trends.
We also gave some of those statistics in the call. But do you want
Donna Boyer, Chief Product Officer, Weight Watchers: to add some further color? Sure. I'm happy to. Thanks for the question. Immediately after our compounding launch, we saw a positive impact on both our sign ups and our TAC.
Our launch day was our highest, as Tara mentioned, our single highest launch in 2024, and we are continuing to see sign ups that are exceeding our end of Q3 trends. As to the success, there's multiple factors there. One is really the offering of compounded semaglutide in itself, resolving shortages that has been a challenge for conversion overall. So having the availability of supply has contributed to that. In addition to that though, a combination of always looking at our pricing strategy and the availability of flexibility of how members are able to access that.
In combination with, as Tara mentioned, some of the friction on our website and our conversion funnels have been resolved with this launch. So primarily the availability of the drug, being able to provide members access has been a factor in and of itself coupled with some of the member experience changes that we've seen affecting both conversion and with that in turn TAC.
Tara Comont, Interim President and CEO, Weight Watchers: I would just add
Heather Stark, Chief Financial Officer, Weight Watchers: to that. Thanks, Donna. Just an overall reminder that we don't expect this to have a material impact to the overall business due to the proportion of clinic versus behavioral subscribers at this time.
Nathan Feather, Analyst, Morgan Stanley: Okay, great. That's all helpful. And then, sorry, you walked through a lot of initiatives in the pipeline at various different time lines. I guess near term, what are the maybe 2 or 3 primary priorities that you're looking to get in place ahead of peak season to hopefully drive some reacceleration in the core clinical?
Tara Comont, Interim President and CEO, Weight Watchers: Sorry, was that Nicole, I missed the beginning of the question. Was that specific to our clinical business or a more general question?
Nathan Feather, Analyst, Morgan Stanley: More general, just kind of the key priorities ahead of peak.
Tara Comont, Interim President and CEO, Weight Watchers: Yes, absolutely. Well, listen, I think we spoke to many of them on the phone in the prepared remarks. I think what you're hearing is a focus on awareness of the breadth and strength of our offering. And while that may seem somewhat obvious, I think we haven't done as good a job as we could have done reminding the market of all that is part of the full spectrum of VoIP Watchers solutions. We actually have a very low awareness, for example, around the fact that we even have a clinical solution.
And so when we think about peak, we're really going to be doubling down on those core strengths, the values of the Weight Watchers platform that have always been in place. This is livable. This is not a fad. This is these are solutions for life. But we're also going to be very focused on awareness and engagement as we really hammer home that messaging.
I mentioned the brand refresh. We're not doing any major rebranding, but I think the brand refresh is going to be fantastic. I'm looking forward to seeing it in the Q1. A little more modern, a little more Weight Watchers, a little more human, a lot more community, a lot more joy and just sort of getting back to the roots of who we are, but certainly with a focus on the breadth of all we bring to offer.
Nathan Feather, Analyst, Morgan Stanley: Great. Very helpful. Thank you. Welcome.
Conference Operator: The next question comes from Alex Fuhrman of Craig Hallum Capital Group. Please go ahead.
Alex Fuhrman, Analyst, Craig Hallum Capital Group: Hey guys, thanks for taking my question. Wanted to ask about retention on the clinical side of the business. I think you mentioned that you've seen retention improve from 6.5 months to 7.5 months. Can you give us a little bit of color on why your clinical members are typically churning out? Is it a matter of side effects or having reached their weight loss goals?
Or is it more about cost and access? And how has that been evolving over the course of the year?
Tara Comont, Interim President and CEO, Weight Watchers: Yes. Hey, Alex.
: I mean, I
Tara Comont, Interim President and CEO, Weight Watchers: think we maybe said it in the script, but it's absolutely cost and access. They are the biggest contributing factors to why a clinical subscriber churns. So as we've launched compounding, but also as Don alluded to some additional product improvements just in the member experience, those are really it's super encouraging to see those have such a tangible and immediate impact on our retention.
Alex Fuhrman, Analyst, Craig Hallum Capital Group: Okay. That's really helpful to hear. And then is it your kind of hope or expectation going forward that longer term you could get clinical retention up above and beyond what you see or up to the levels that you see in the clinical program? Or is it more about, I guess, kind of keeping people on on the traditional program as well when they transition off the clinical program as a means of keeping them engaged with the brand?
Tara Comont, Interim President and CEO, Weight Watchers: Absolutely, the latter. So look, we gave you a stat that about 10% of our GLP-one members do not intend to remain on those meds for life. And again, when we talk about building to 1 Weight Watchers, we are talking about being able to meet members wherever they are on their weight journey. That may be entering the Weight Watchers ecosystem at a point where you're looking for medication solutions. But the pairing of those with our nutritional program, both while you're on medication and as you ramp off medication for the longer term, we believe is a really, really critical part of this solution here for our members and ultimately successful long term outcomes.
So look, we're not giving any targets today on things like retention, but suffice to say that yes, we're very optimistic and ambitious about what this business can look
Nathan Feather, Analyst, Morgan Stanley: like over the long term.
Alex Fuhrman, Analyst, Craig Hallum Capital Group: Okay. That's really helpful. Thank you very much.
Conference Operator: The next question comes from Karru Martinson of Jefferies. Please go ahead.
Karru Martinson, Analyst, Jefferies: Good morning. When we kind of do this rebranding the building to a 1 Weight Watchers, I mean how much of the $80,000,000 in cost cut savings that you're looking at for 2025 will need to be kind of reinvested in the business and how much will come to the bottom line?
Heather Stark, Chief Financial Officer, Weight Watchers: Hi, Karru. We definitely looked at investment needed as we were designing the $100,000,000 cost action. There is investment required as we build into next year and we are not guiding to 2025 at this time, but we are absolutely laser focused on profitability and managing our liquidity through the turnaround. And we expect to see that full run rate, dollars 100,000,000 cost savings reading through by the end of 2025.
Karru Martinson, Analyst, Jefferies: And when we look at that liquidity, we feel comfortable that we can carry that liquidity, let's say, at least to the revolver maturity?
Heather Stark, Chief Financial Officer, Weight Watchers: Yes. We know we've shared our comfort with our cash and liquidity position and we've designed our cash management and cost management exercise. With that in mind, I would, as we look through the year, remind you that our first half of the year is heavier cash use than the back half of the year, but also remind you that we're a cash generative business and working through the $100,000,000 cost savings to preserve liquidity through the turnaround.
Tara Comont, Interim President and CEO, Weight Watchers: And hey, Karri, the only thing I would add to that is, look, I speaking personally, I'm 4 weeks into this role. John, I think you're, what, 6 months? So this is your first both of our first 2025 planning season at Weight Watchers. And I really do give the team a lot of credit for the tough decisions they took as it relates to those cost actions. But we absolutely will also be investing in the business throughout 2025 to get this business back to growth.
We see huge opportunity in terms of really leveraging the assets we already have. So as Heather said, we're not guiding to 2025 today and we'll be going through our strategic planning and those budget allocations over the next couple of months and updating you in Q1 next year.
Nathan Feather, Analyst, Morgan Stanley: Okay.
Karru Martinson, Analyst, Jefferies: And just lastly, in terms of those consumer acquisition costs, I mean, have you seen any change in the overall competitive market as I think it was ZEP bound and others came off of the shortage list? Is that having any impact on the competitive response out there?
Heather Stark, Chief Financial Officer, Weight Watchers: Yes. So expectations at the start of Q4, we're definitely seeing some early relief from the significant increases we referenced having seen last quarter. But look, CACs are still elevated. There's competition and noise in this space. It's evolving and we are managing through that and managing through that presently, working to compete more effectively, where the LTV TAC makes better sense and going from there.
But the move to offering compounding as well, Our ability to speak to 1 Weight Watchers is reading through. And as I said, there's still pressure, but as I said, the start of the Q4, some early release.
Karru Martinson, Analyst, Jefferies: Thank you very much. I'm sorry.
Tara Comont, Interim President and CEO, Weight Watchers: Yes. I was just going to add to that as a general comment, not a sort of specific one. But as a general comment, we have the ability to ease our marketing efficiency and effectiveness as we become more cohesive in how we both build our product when you land somewhere in the Weight Watchers ecosystem and as we communicate our product. So I just want to make that point. It doesn't change the scale and the impact of the competitive market around us, but I do think there are things that Donna in particular and her team and Phil and his team and the marketing crew that we can do to make life a little easier for ourselves in that competitive environment as it relates to elevated cap.
Karru Martinson, Analyst, Jefferies: Thank you very much. Appreciate it.
Nathan Feather, Analyst, Morgan Stanley: Welcome.
Conference Operator: The next question comes from Michael Lasser of UBS. Please go ahead.
: Good morning. This is Henry Carr on for Michael Lasser. Thanks so much for taking our question. I wanted to start just by asking, what gives you confidence that employers will need to offer more weight loss solutions to employees in the future? And why is Weight Watchers positioned well to be part of that solution?
Tara Comont, Interim President and CEO, Weight Watchers: Yes. Hey, Henry. Look, we're pretty early here in the overall innings in terms of how obesity meds fit within this marketplace. And obviously, insurance coverage remains pretty low right now, particularly given the high cost. But we believe that ultimately, employers and insurers are going to really struggle and find it very hard not to cover these medications in light of their board health benefits.
So we do think that there are real tailwinds in this space. It's obviously a longer lead time. But we're super bullish on this over future years and particularly our position in this marketplace with the breadth of that offering. I think employers are looking for a much more extensive suite of solutions than a single point solution, and certainly that's where Weight Watchers really, really plays. So we feel good about this over the long term.
Heather Stark, Chief Financial Officer, Weight Watchers: And just to add to that too, we've seen a positive 4th quarter selling season. We do expect that to read through into 2025 with newly contracted and expanded channel partnerships and direct to employer relationships. But as a reminder, we're building off a small base and we do expect the pace of growth in B2B. While we're bullish on the opportunity, we do expect it to be gradual.
Nathan Feather, Analyst, Morgan Stanley: Thanks so much.
: And I just wanted to ask a little bit more about the acquisition costs. I believe they were up 30% year over year. With marketing spend being shifted into 3Q not exactly panning out, was a lot of that due to just increased expenses related to the election, in digital channels? And should this abate moving forward and into 2025? Any clarity about how that's trended and what could come would be super helpful.
Thank you.
Heather Stark, Chief Financial Officer, Weight Watchers: Sure. We're seeing this as largely competition in the space driving cost to acquire up. There's obviously media inflation going on in the space as well across channels. I don't see this defined as one channel. I think the U.
S. Election potentially impacted it as well and that drew into the start of the Q4 as well. But as I mentioned before, our expectations for the Q4, as we referenced, we do see some early relief there, but I would say the tax are still elevated going into the Q4.
Nathan Feather, Analyst, Morgan Stanley: Great. Thank you so much. Welcome.
Conference Operator: This concludes our question and answer session. I would like to turn the call over to Tara Kalman for any closing remarks.
Tara Comont, Interim President and CEO, Weight Watchers: Yes. Thanks, everyone. We really appreciate you joining us this morning, particularly on as busy a morning as it is here in the U. S. And look forward to following up with you over the course of the quarter and in our call next quarter.
So thanks, everyone.
Conference Operator: The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
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