WW International Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 2, 2023

There are 9 speakers on the call.

Operator

Good day, and welcome to the WW International Incorporated Third Quarter 2023 Earnings Conference 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 turn the conference over to Corie Kinger of Investor Relations. Please go ahead.

Speaker 1

Thank you, everyone, for joining us today for WW International's Q3 2023 At about 4 p. M. Eastern Time today, we issued a press release reporting our Q3 2023 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 site located at corporate.

Speaker 1

Www.com. Supplemental investor materials are also available on the company's corporate website in the Investors section under Presentations and Events. Reconciliations of non GAAP measures disclosed on this conference call to the most directly comparable GAAP financial measures are also available as part of the press release. Before we begin, let me remind everyone that this call will contain forward looking statements. Investors should be aware that any forward looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here today.

Speaker 1

These risk factors are explained in detail in the company's filings with the Securities and Exchange Commission. Please refer to these filings for a more detailed discussion of forward looking statements and the risks and uncertainties of such statements. All forward looking statements are made as of today and except as required by law, The company undertakes no obligation to publicly update or revise any forward looking statements whether as a result of new information, future events or otherwise. Joining today's call are Seema Sistani, CEO and Heather Stark, CFO. I will now turn the call over to Seema.

Speaker 1

Thanks, Corey. Good afternoon, everyone, and thank you for joining us today. I am thrilled and gratified to confirm that we have now Successfully returned Weight Watchers to a subscriber growth trajectory, a significant achievement and a direct result of our work and reinvigorating our core business. Q3 end of period subscribers totaled 4,000,000, up 6% year over year. This Q2 to Q3 sequential change is the strongest in our reporting history.

Speaker 1

In addition, This is our Q1 of reporting year over year subscriber growth since Q4 2020. Before I dive into our results, I want to remind everyone of our 4 priority areas for 2023, which we've remained laser focused on as we turn around the business. 1, reinvigorating our core business through an evergreen product innovation strategy and a modern marketing toolkit. 2, compounding our head start in the clinical space. Clinical is highly complementary to our core offering and we now have a Portfolio of solutions to meet the broad and evolving needs of members.

Speaker 1

3, being a partner of choice For health providers, payers and employers by leveraging our expertise and relationships and a step program solution that delivers Behavioral and clinical weight management solution, setting a new standard of care in this space. And 4, Building community experiences, both in real life and digital that will broaden our reach and increase engagement and satisfaction for both Behavioral and Clinical Pathways. We are executing well on each of these initiatives and have hit several key milestones in recent months. Let's start with our core business. Our activation rate, a metric defined by a number of food and weight tracking engagement and weight loss progress During their 1st 30 days on the program, continued to trend in the right direction with Q3 up approximately 7% year over year.

Speaker 1

As a reminder, activation rate matters because activated members' attrition rate is roughly half of a nonactivated member And they are more successful on Weight Watchers over the long term. Similarly, our engagement rate, which is measured across our entire membership base Beyond those in the 1st 30 days also continued to trend positively with Q3 up approximately 13% year over year. NPS or Net Promoter Score as a measure of how likely our members are to recommend the program to a friend For our digital business also continued to improve, up 12 points since Q1 2022 And reaching its highest level in the last two years demonstrating the enhancements to our product over the past year are driving member satisfaction. A key component of our core business reinvigoration is the introduction of high value product features that drive both member engagement and retention. Two examples this quarter include the recently launched What to Eat tab in our app as well as progress and trends.

Speaker 1

While it's early days, these enhancements are driving an increase in food and weight tracking, which we know are critical to member success. As we outlined earlier this year, we shifted a portion of our annual marketing spend from Q1 into Q3 to better optimize our CAC efficiency throughout the year. This strategy was successful in continuing our sign Momentum and bolstering our starting subscriber position headed into next year. We've been adept at managing to customer lifetime value Required or LTV. So far in 2023, approximately 80% of sign ups chose a 6 month or greater initial commitment.

Speaker 1

This is up from less than 70% in 2022. This extends the period of time these subscribers receive commitment term pricing. It improves our financial return and ensures we are building towards the long term health of the business. Turning to our clinical offering. While GLP-one medication shortages continued as expected throughout the quarter, we remain extremely pleased with our progress Despite the supply constrained environment, clinical subscribers ended the quarter at 45,000, An increase of approximately 23% from Q2, a growth rate which we believe exceeds the growth rate of the total number of GLP-1 And the future potential for this critical and unique pathway.

Speaker 1

While the vast majority of our marketing to date has been focused on our Core Weight Watchers business, we have also been conducting small scale marketing tests, primarily in digital, social and e mail for In order to continue to seed awareness and generate data informed learnings ahead of the return of GLP-one medication supply. As I stated on our last earnings call, we see this time as an opportunity where we can utilize this window to Scale up operations. We continue to onboard new clinicians, up another 20% since the end of Q2, as we are focused on delivering a strong and timely member experience. Behind the scenes, our teams have been hard at work at integrating the Sequans and Weight Watchers platforms. I'm impressed with the agility And dedication of our teams as they become one unified team to advance and enable a seamless member experience.

Speaker 1

Ahead of our peak We will be introducing a dedicated program for Weight Watchers members on GLP-one medication. As we know, There are different needs for someone on chronic weight management medications. For many, these medications are highly effective. However, they are most effective when used in conjunction with lifestyle intervention. We are using our expertise to develop a tailored program that addresses those needs, such as prioritizing a nutrient dense diet And protecting against loss of muscle during weight loss.

Speaker 1

We believe this tailored offering will be a unique differentiator and competitive advantage for Weight Watchers, whether a member receives their prescription through us or not. While GFP1 seem to be in the headlines every day, It remains a confusing environment for consumers. We are leading this conversation and will continue to be the trusted resource for those interested exploring if such a pathway is right for them. As a global leader in weight health, we are reframing the conversation around weight management in order Destigmatize obesity and make evidence based solutions achievable and accessible to those in need. To help organizations navigate this new landscape, Weight Watchers for Business, which was previously referred to as WW Health Solutions, is building on our existing employer sponsored business with a full spectrum weight health platform called Pathways, for employers and payers looking to manage costs and improve health outcomes for their population.

Speaker 1

Weight Watchers for Business utilizes evidence based step therapy with proprietary de escalation protocols designed to drive Clinically significant weight loss outcomes while controlling cost. A leading third party actuarial firm validated model shows That implementing the Weight Watchers program could yield a 3.9 times ROI for employers covering GLP-one medication, With an estimated net savings of $3,375 per participant per year over a 2 year period. Take note, as this is worth saying again, implementing the Weight Watchers model for those on GLP-one can deliver both Health outcomes and cost savings. Given cost is top of mind concern for payers, we are confident that our proprietary Pathway Solutions is best in class in the market and sets us well apart competitively. I'm confident we are taking the right steps to deliver a B2B offering that is not just viewed as an employee perk, but as a true partner of choice for value based care.

Speaker 1

This is a process that won't be accomplished overnight, but one that I am very enthusiastic about for the mid and longer term. And finally, on our 4th priority, building community experiences. For my first day at Weight Watchers And as a long time member myself, I have stressed the importance of the 3 pillars of coaching, accountability and community. The community of Weight Watchers members, both in workshops and digitally in our app, is a unique differentiator that is often Essential to members' weight loss journey. We know that members connecting in real life is an impactful and differentiated part of the Weight Watchers experience And we are exploring ways to bring more of that impact to our entire community of members in the years ahead.

Speaker 1

I believe IRL is essential to building lasting communities. Our teams are eagerly testing new features and service designs for how we foster and enable in person connections while enhancing them digitally. In summary, 2023 It has been a transformative year for Weight Watchers. We have returned our core business to subscriber growth, quickly positioned our clinical business as The gold standard in weight health with the ability to scale as supply comes back and launch the next wave of enhancements to our product and program that will provide the foundation for a more engaging digital experience. Each of these milestones on a standalone basis represents Huge progress for our organization.

Speaker 1

When combined, the progress and advantage is exponential. That's the white space where we see a unique opportunity for Weight Watchers to drive huge value. There is no question in our mind That the combination of behavioral program with the clinical option for those who need it, supported by both And digital communities represents a sizable opportunity and one on which only Weight Watchers can deliver.

Speaker 2

I will now turn the call over to Heather to discuss our Q3 financial results and 2023 outlook. Thanks, Seema. Turning to our Q3 results. Note that all year over year financial comparisons are on a constant currency basis. We ended Q3 with 4,000,000 subscribers, including 45,000 clinical subscribers.

Speaker 2

Our core Weight Watchers subscriber change from Q2 Was the best Q3 sequential performance in our reporting history. The actions we're taking to stabilize and grow the business are working. Revenue totaled $215,000,000 down $38,000,000 year over year. Breaking this down, subscription revenues, which included $10,000,000 in clinical revenue, declined $20,000,000 as we have a higher mix of subscribers within their initial pricing commitment periods and an increased mix of high margin digital subscribers. Importantly, consumer products and other revenues declined $18,000,000 due to the strategic decision to wind down our low margin consumer products business.

Speaker 2

Adjusted gross margin of 66.2 percent for the quarter set a new record high and was up 4.90 basis points from the prior year driven by our actions to reduce our fixed cost base with our workshop real estate restructuring combined with the effect of mix shift to our higher margin digital business. Marketing expenses of $48,000,000 were up 33% year over year, but slightly below our planned spend. As highlighted in prior calls, We continue to focus on high value member acquisitions and redeployed the majority of our first half marketing savings, primarily into Q3, which helped drive a 2nd consecutive quarter of year over year sign up growth. Adjusted G and A of 57,000,000 was up 4% versus prior year due to the inclusion of $5,000,000 in clinical G and A expenses, including approximately $2,000,000 in intangible from purchase price accounting considerations, which more than offset the benefits of restructuring and expense controls in the quarter. Adjusted operating income was $37,000,000 Restructuring charges totaled $6,000,000 in the quarter as we continue to streamline our organizational structure.

Speaker 2

While we expect to incur restructuring charges in the range of $50,000,000 for the 2023 plan, it is driving approximately $50,000,000 of in year savings, roughly split between G and A and operating expenses benefiting gross margin. Income tax was a benefit of $38,000,000 in the quarter, which consistent with last quarter reflects the impact of an unusually high negative annual effective tax rate driven by evaluation allowance and small pre tax loss reflected in the company's full year fiscal 2023 guidance. GAAP EPS was $0.54 which incorporates the net positive impact of $0.48 of items impacting comparability, which includes the valuation allowance and net restructuring charges mentioned earlier. Turning to our clinical line of business. We are encouraged by the Q3 performance and ongoing integration efforts in the face of a challenging supply environment.

Speaker 2

As a reminder, on our Q2 earnings call, we noted The demand for GLP-one medications has outpaced supply and that the shortages of these medications created a revenue impact versus our initial expectations from earlier in the year. While shorter term supply constraints remain, we have no change from the outlook we provided in August, nor is there any change in our conviction about the strong multi year growth opportunity and the significant market we believe this represents. We continue to utilize this time to increase our scaling readiness and integrate operations. While this negatively impacts near term gross margin, we believe we will be ready for the pending improvement of Therefore, Q3 adjusted gross margin was north of 30% compared to north of 40% previously, and we expect this to continue in before improving with revenue scaling. Shifting to our outlook.

Speaker 2

We are encouraged by the subscriber trends we are seeing. As a reminder, the seasonality trends in our business mean that Q1 is traditionally our annual peak in end of period subscribers sloping to a Q4 trough, with Q4 tending to be the lowest recruitment quarter of the year. We expect to end the year with total subscribers above 3,700,000, modestly higher than the prior guidance of 3.7%. Within this, we expect Weight Watchers subscribers, excluding clinical, to be above $3,600,000 at year end, up from $3,500,000 at the end of 2022. With respect to Q4, while we expect Continued sign up momentum, core Weight Watchers sign ups are expected to be down modestly year over year, largely due to the timing of week 52 in 2022, which included New Year's Eve, a high sign up day for Weight Watchers.

Speaker 2

Our outlook of ending the year modestly above 3,700,000 subscribers Represents the best seasonal slope since we've been reporting total subscribers. As a reminder, in Q1, our highest volume quarter for sign ups, 41% of sign ups chose a 9 month or greater initial commitment, up from 12% in prior year Q1, which which effectively pushed out the timeline of when this larger cohort of members comes up for renewal from Q3 to Q4. We expect full year revenue to be at the low end of previously provided range of $890,000,000 to $910,000,000 due to the revenue dynamics in our core Weight Watchers business discussed earlier. We continue to expect clinical revenues to be $30,000,000 for Q2 to Q4 in aggregate. Given our anticipated increasing subscriber levels year over year, we expect to have a modest subscription revenue tailwind into next year due to the addition of Clinical, partially offset by a slight revenue headwind in the core Weight Watchers business.

Speaker 2

And as a reminder, with the nature of our subscription business model, There is a lag from subscriber growth to revenue growth. Shifting to consumer products and other. As we previously communicated, Earlier this year, we made the decision to sunset our e commerce and consumer products offering. While we expect consumer products and other revenue To be in line with prior guidance and contribute roughly $65,000,000 in revenues during 2023, approximately $50,000,000 will not recur and will be a revenue headwind into 2024. Importantly, however, we expect this to be roughly neutral to operating income and we still plan to continue our high margin licensing business.

Speaker 2

Adjusted gross margin is still expected to be in the range of 62% to 63% for the full year as a higher mix shift to our digital business and continued read through of workshop actions is partially offset by increases in scaling readiness within our clinical business ahead of supply increases. We expect full year marketing spend $240,000,000 slightly lower than previous guidance of $245,000,000 primarily due to the underspend in Q3 mentioned earlier. Adjusted G and A expense is expected to be approximately $230,000,000 for the year, slightly lower than the previous guidance of $235,000,000 due to strong continued cost discipline throughout the organization. We continue to expect adjusted operating income to be at the high end of the previously provided guidance range of $80,000,000 to $85,000,000 As a reminder, in Q2, we redefined adjusted operating income to exclude acquisition transaction costs related to the Sequans acquisition, including approximately $4,000,000 of costs previously included in Q1 adjusted operating income. Our full year adjusted operating income guidance range, therefore, does not include these acquisition transaction costs.

Speaker 2

We estimate that the remaining charges related to the 2023 restructuring plan will be up to $10,000,000 in Q4, slightly higher than our previous expectation as we continue to streamline our organizational structure. For the full year, excluding the impact of restructuring and acquisition transaction costs, We expect income tax expense to be approximately $15,000,000 to $20,000,000 largely driven by the full year impact of valuation Allowance discussed earlier. As we highlighted for the last two quarters, given the seasonal nature of our business, The outsized Q1 income tax expense was largely expected to reverse in the remaining quarters of fiscal 2023 when we expect to earn pre tax income, which continued in Q3. Excluding the impact of the valuation allowance, we expect an income tax benefit of up to 5 1,000,000 for the full year, consistent with our expectation from last quarter. As a reminder, given the small pre tax loss Reflected in the company's full year fiscal 2023 guidance, any updates to the expected pre tax loss or income tax expense can result in significant impacts in quarterly income tax results.

Speaker 2

Turning to our capital structure and cash flows. We ended Q3 with approximately $107,000,000 of cash, plus an undrawn revolver. With our cash position, Plus our revolving credit facility, we have more than sufficient liquidity for our working capital needs, including in year cash outlays related to our restructuring actions and servicing our debt. We continue to expect that cash from operations will be a modest use of cash for the year due to the approximately $45,000,000 in expected restructuring cash payments, which is slightly higher than the prior expectations of $40,000,000 At quarter end, our net debt to adjusted EBITDAS leverage ratio was 8.8 times. We expect our trailing 12 months leverage ratio To further increase in 2023 due to lower EBITDAS levels through the rest of this transformative year.

Speaker 2

We remain committed to improving our leverage ratio As we execute this sizable turnaround, returning the business to profitable growth and positive cash flow generation. As a reminder, we have very attractive long term credit agreements with no maturities due until 20282029. These give us ample time to deliver on our transformation and growth strategies, while also opportunistically considering capital structure options that benefit all Stakeholders, we still expect full year interest expense to be approximately $95,000,000 As a reminder, we have a $500,000,000 hedge Through Q1 2024 to protect against rising interest rates on our variable rate term loan of 945,000,000 And our $500,000,000 notes are fixed rate. Therefore, only 31% of our total debt is floating. We are currently exploring options for when the current hedges expire.

Speaker 2

CapEx, which is primarily due to capitalized software, is expected to be in the $40,000,000 range, slightly lower than prior expectations of 45,000,000 Depreciation and amortization is expected to be in the $55,000,000 range, slightly higher than prior expectations of $50,000,000 While we are not providing operating or financial guidance for 2024 today, our intention is to maintain the leaner cost structure achieved through our recent restructuring as well as to operate within a similar marketing budget and approach of maximizing LTV acquired across the year. In summary, we are executing well against Our strategy in meeting and in some cases exceeding our 2023 objectives, encouraging subscriber trends, record adjusted gross

Speaker 1

Thanks, Heather. I am proud of our team's achievements in 2023. We are strongly positioned to continue our momentum into 2024. While the environment Remains dynamic. We will continue to be agile in our approach, take data informed actions across the organization And focus what is best for the long term health of our business as we enter our next chapter with a portfolio of solutions to serve the Full spectrum of weight health.

Speaker 1

To reiterate our key achievements, we have returned to year over year subscriber growth, Even when excluding the benefit of clinical, driven by the return to incentive growth in our core business, clinical Scribers have increased nearly 90% since we announced the acquisition of Sequans earlier this year. We have increased NPS, Activation and engagement rates by advancing our digital first product roadmap and we've delivered the highest gross margin in the company's by reducing our cost structure and managing the business prudently. We look forward to introducing a dedicated program for Weight Watchers members to profitable, sustainable growth in the years ahead. Thanks for joining us. We are now happy to take your questions.

Operator

We will now begin the question and answer session. Our first question comes from Jason English from Goldman Sachs. Please go ahead.

Speaker 3

Hey, good afternoon, folks. Thanks for stopping in. So the revenue per subscriber compression that we're seeing, It seems to be more than what you expected, obviously, based on the negative revenue guidance revision, obviously, more than we expected Based on the revenue mix, quick math, I think you were saying before you had demand average consumers who are coming in staying with your program 10 months. Your average monthly revenue per sub now, it looks like we need to extend them out to around 12 months to hold the LTV flat. Does that math sound about right to you?

Speaker 3

Question 1. And question 2, what gives you confidence that you can actually keep them around for 12 months. I know it looks like you're locking in for generally 10 months right now with some of the promotions. What evidence do you have that they'll We extend that by an extra couple of months.

Speaker 2

Jason, thanks for your questions. First, Yes. I would reiterate on the first part of that question on revenue compression. We may have missed your expectations, but we do Remain within our guidance of $800,000,000 to $910,000,000 on total revenue, still within our range, albeit We gave the nod to the low end. And this is reflecting those expectations on Our product mix as well as the timing of sign ups that we expect through year end.

Speaker 2

And I would just remind you that We've got mix between the subscription types. So it's hard to compare former rate per paid week to future Rate per paid week as subscribers choose different plan types. And remember that we've got 80% of subscribers as well choosing 6 month or greater commitments. I think there's really a shift in the type of subscriber that we're seeing Coming in, they're choosing our digital offerings over the workshop offering relative to prior year, and they're choosing to commit to us Longer term. The second part of your question on retention, we're still seeing retention In the 10 month range, approaching 10 months.

Speaker 2

And we're doing things through the product roadmap To increase engagement and activation through our subscriber base that ultimately those actions, the more engaged someone is, their half is likely So you'd expect that to read through over time. But remember the tail of the retention curve is one that takes time To turn and shift, but appreciate the question.

Speaker 3

So you're locking them in for longer discount windows, But they're not really staying any longer. So you're still seeing around 10 month duration. It's just they're getting a discount for a longer period. They used to maybe I didn't get a 6 month discount. Now they get the whole 10 months.

Speaker 3

So we're just seeing straight out revenue per sub subscription. It sounds like a rebase. This isn't like a temporary thing that's going to recover. It's like we're rebasing our revenue per se. Other than I'm isolated to the digital side because I appreciate if I do for total, There's a lot of dictionaries within that.

Speaker 3

At least that's what it sounds like and looks like to me. If I'm wrong, but it's not really a rebased and Persuade me otherwise, because I don't understand how it's not.

Speaker 2

Yes. I appreciate that. And I think the rebasing of the subscriber base is absolutely Consumers are choosing our digital subscription. The mix is shifting to digital versus workshop. And I think the rest of it, yes, consumers are locking in.

Speaker 2

They're locking in longer on the commitment Pricing, but we're pushing them into longer durations in their journey with us. In the prior response though, You'd expect that to read through over a longer time, when you're trying to tie that through to retention. So The rebasing of the consumer base though, I would say is more than mix between digital versus workshop, but then also You get the rate per paid week stretching out over a longer duration with people choosing the longer term commitment plans with the increase in people choosing 6 months and longer.

Speaker 4

I'll just add here, Jason, hey, it's Seema, that we're focused on the total commitment dollars that we're bringing in. And your point on The retention is you got to remember that all the work that we're doing on our product roadmap that has been happening Throughout this year. And that's why we continue to report out on our activation rate and our engagement, which, as you can see in Q2 and now in Q3 Has gone up. So it would follow that we would see that translating into better retention over time. And The more the sign ups that we continue to bring in, that starts to stack and build.

Speaker 4

And so we're really confident that we're building towards the long term health The business and improving engagement and retention.

Speaker 2

And we I would add too, we have Every reason to believe that the commitment pricing strategy is revenue and LTV accretive, both in the quarter and going forward. And then the markets that we're in and with what consumers are choosing to engage on us with.

Speaker 3

We're still very much in our

Speaker 4

guidance range. So It's not a just to double down on that is that we are within our guidance range. And so this is Playing out as we would have suspected.

Speaker 3

Yes. But your point is, it's too early. We'll see that 10 month go to 12 plus, We're at which point we'll see the positive payback. It's just it's too early to see it, wait for it, trust you. That's is that a fair explanation?

Operator

This question comes from Lauren Schenck from Morgan Stanley. Please go ahead.

Speaker 5

Hey, everyone. This is Nathan Feather on for Lauren. Congrats on the results. Can you touch a little bit more on the impact of limited GLP-one supply on sequence within the quarter? And then understanding That's an impact.

Speaker 5

How should we contextualize the top of funnel demand you're seeing in that sequence and how that compares from last quarter and when you acquired the asset? Thank you.

Speaker 4

Thanks Nathan. Yes, so the supply story here is still not a positive one. It's the shortages Are continuing and we're seeing that pressure. But again, we had anticipated that happening through the back half This year and so really pleased that we've been able to continue to grow the business and we're up 23%, up 90% since the acquisition. And I think that that growth rate, we believe it exceeds the growth Right of the total number of GLP-one prescriptions dispensed, then you can attribute that to Our ability to manage people through the shortage supply environment, The tech platform helps with insurance approvals and then also the infrastructure Is high support helping people to actually find supply when available and continuing to then move them throughout the wide Formulary when it's not available.

Speaker 4

And so we're pleased to see that we've been able to continue to keep that flywheel going, While we have heard some promising news this morning, obviously, From Lily Inovo about what you expect moving forward.

Operator

The next question comes from Linda Bolton Weiser from D. A. Davidson. Please go ahead.

Speaker 6

Driver number was quite a bit higher than we expected, but the revenue was actually lower. So is there something going on in terms of the realized Subscription revenue per month per subscriber or something like that? I'm just trying to figure out like what's going on there.

Speaker 2

Hey, Linda. I believe our revenue number was right on consensus. So I'm not sure what you're seeing. And I also just Before we take the next question, wanted to reiterate, I misstated a number earlier. To clarify, our revenue guidance is 8.90 to 9.10 Just wanted to make sure I clarified my statement.

Speaker 6

Okay. Thanks. So just One follow-up though on that. So I get the impression that the Sequans subscriber numbers though are trending better than you would have expected. So if that's the case, how come the revenue for the year is still the same?

Speaker 2

I don't think we guided to the 3rd quarter subs. So We're on track to our expectations and we haven't changed our guidance range for sequenced subs.

Speaker 6

Okay. And then can you give a little more detail on the integrated program For people on GLP-one drugs, did you say the timing of that is in time for diet season 2020 4, and can you just give a little more like are you going to keep the SeaQuench brand name or phase that out over time? Can you give us a little more color on the marketing strategy there?

Speaker 4

Hey Linda, it's Seema. So yes, we are looking forward to launching our GLP-one complimentary program ahead of peak season. And just as a reminder, the GLP-one program is going to be a tailored version of our program that is for people who are on a clinical pathway, Whether they get the medications through us or not and it's prioritizing the specific needs of somebody who is on a GLP-one medication. For instance nutrient density, building lean muscle mass etcetera. And we have been hard at work on integrating The 2 platforms such that we could create 1 unified member journey and We will have more to share on that very soon.

Speaker 6

Okay. Thank you very much.

Operator

The next question comes from Alex Firdin from Craig Hallum Capital Group. Please go ahead. Call.

Speaker 5

I was wondering if you could just

Speaker 7

kind of bridge the gap a little bit between It sounds like the commentary on subscribers and gross adds on The traditional side of the business is all positive. It is 2 quarters in a row though that the revenue target for the core business has been Lower. So just trying to square that. I don't know if maybe Jason's question about the longer term lower priced commitment plans Fully explains that, but just wondering if there's an overarching explanation for why it seems like revenue and subscribers I've kind of moved in opposite directions over the last few quarters.

Speaker 2

Thanks for your question, Alex. And yes, we're Really pleased with the sign ups and subs positivity that we're seeing. And I think really what we're seeing is that mix shift. We have people choosing those longer term commitments and choosing them at a greater rate. They're choosing longer commitments and we're seeing that read through into our revenue.

Speaker 2

So we are still maintaining our guidance And looking forward to continuing our subscriber and sign up growth.

Speaker 7

Okay. That's really helpful. And then just On the question on the clinical side of the business, I don't know if you have a good handle on what this number would be or maybe just anecdotally Based on what you're seeing with kind of people coming into sequence and then quickly turning out. But do you have a sense of How many of your patients who are getting prescriptions from GLP-1s are able to get any sort of meaningful insurance coverage Of those and has that changed at all since April when you first made the acquisition?

Speaker 4

Hey, Alex, it's Seema. So I think that's our key differentiator with the platform is that right now insurance makes it On top of supply constraints, insurance makes it hard for many to access the medications. And we see about a 30% to 35% approval of prior auths through our clinical business, which is better than the average. The range of estimated insurance coverage on these meds is somewhere 20% to 25%. And that is a result of the Insurance engine that we have here where it makes it better able to actually increase the likelihood Of coverage because so many mistakes are made in this process just due to errors that were clerical errors that Can result in denials and just better system support in addition to the wide formulary, so we can file Several PAs at the same time on multiple medications to help increase again the likelihood of coverage.

Speaker 4

And Once we do help them with the pre authorization, we go into the part of the flow, which is around Med Management and there's a whole infrastructure there to support people with finding supply and it gets Smart about which pharmacy actually has the supply and is able to benefit our population To have a better experience frankly while they're on the platform. But that's also why we have been very hesitant To market the service right now, we want to ensure that we retain the high NPS and the ability to Get people the benefit that they're seeking when they come for the clinical option. And so we're looking forward to The hopeful eventual approval of triacipatide for obesity and then The ability to start marketing more aggressively.

Speaker 7

Okay. That's really helpful. Thank you very much.

Operator

Call. The next question comes from Michael Lasser from UBS. Please go ahead.

Speaker 8

Hi. This is Henry Carr on. Good evening for Michael Lasser. I just wanted to start off with a sequence question. So you had 27,000 in April at the time of acquisition and you've increased at about 8000 to 10000 per quarter.

Speaker 8

How should we think about this rate of about 8000 to 10000 Subscribers per quarter going forward. So basically, once supply conditions improve, how do you expect this rate increasing? Can you speak a little bit more about that?

Speaker 2

Henry, thanks for your question. At this time, we're not guiding into 2024, so I would say we've been conservative in our approach to the balance of the year, understanding The environment that we're in with the supply constraints. So we've taken that thinking through the balance of this year.

Speaker 8

Okay. Thank you. And I just want to ask about student loan payments and how much of your subscriber base is potentially exposed to that?

Speaker 4

Yes. I don't that's not something that we have really observed, especially since The majority of our population is between the ages of 3545. And so it's not something that is We have noticed to be relevant to our business.

Speaker 8

Great. Thank you so much.

Speaker 5

Thank you.

Operator

There are no more questions in the queue. This concludes our question and answer session. I would like to turn the conference back over to Seema Sistani

Speaker 3

for

Operator

any closing remarks.

Speaker 4

I just want to reiterate that I'm really encouraged by our performance and the momentum in our business and we're returning the company to the first Year over year member sign up growth and now subscriber growth and accomplishing this again on less marketing We spent year to date with no small achievements, but one that demonstrates that we're making the right decisions to return Weight Watchers to profitable growth and prioritizing the long term health of the business. We really look forward to speaking with many of you at upcoming conferences and events, including the Jefferies London Healthcare Conference on November 16 and at the BofA Leverage Finance Conference later this month. Thanks again for joining us.

Operator

The conference has now concluded. Thank you for attending today's presentation.

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Earnings Conference Call
WW International Q3 2023
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