WW International, Inc. Price & Performance (WW)

These risk factors are explained in detail in the company's latest annual report on Form 10 ks and other filings with the Securities and Exchange Commission. 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 Comant, President and Chief Executive Officer Felicia Della Fortuna, Chief Financial Officer and Donna Boyer, Chief Product Officer. I will now turn the call over to Tara.

Thank you, David. Thank you all for joining us today. And I'm pleased to officially welcome Flixhetter, the first Weight Watchers earnings call. Felicia joined as the CFO on the January 1 and we're thrilled to benefit from her extensive strategic and financial leadership experience. As part of the Weight Watchers team. In addition, and as you may have seen in our earnings press release, I'm pleased to lead our call today as the President and CEO of Weight Watchers, transitioning from my interim role over the last five months. I'd like to thank the Board of Directors for their trust and my leadership of this iconic brand and incredible company at such a critical time. I look forward to continuing to drive our business forward together with our very passionate and talented team. [indiscernible] Ahead of Fraser taking you through the numbers, I'd like to share how we're thinking about the business. Some recent trends, and where we're focused moving forward as we work to stabilize and lay the path back to long term sustainable growth. Weight Watchers have experienced significant disruption in recent years. The lasting impact of COVID-nineteen led to widespread in many cases permanent closures of our in person workshops.

And the rapid adoption of GLP-one weight loss medication is fundamentally reshaping the weight management landscape. Over the same period, [indiscernible] scales back licensing activities reduced focus on our international operations. [indiscernible] Collectively, these changes have created a challenging period of transition for the business. Which continues to be evidenced in our fourth quarter revenue.

Down 10% on the same period last year with our behavioral business down 12% to partially offset, however, by a healthy 58% growth in our clinical business Despite the challenges of recent times, the foundation upon which Weight Watchers was built sixty two years ago and the core reason we exist has never been more relevant As the trusted leader in weight management, [indiscernible] And community to help millions lead their healthiest lives. We're more than just a digital telehealth player, we exist in real life fostering active, engaged communities supported by powerful digital tools. Our science backed approach is well proven in its ability to help members build lifelong healthy habits including for those members on coming off We believe our most successful members will be those who embrace our solutions holistically. Integrating them into their daily lives as part of sustainable long term journeys. In a world where more people than ever are considering medication, yet are also seeking livability in treatment, and sustainability of results This is where Weight Watchers excels. This strong foundation gives us a powerful platform for the future However, we also recognize realities of our current business landscape the challenges of our existing capital structure, and the work ahead.

Entered 2025 with a starting revenue headwind of approximately $45,000,000 driven by a lower 2024 ending subscriber base.

At the same time, we committed to removing $100,000,000 in run rate costs by the end of twenty twenty five, the vast majority of which has already been actioned. While these factors shape our starting point, 2025 is ultimately a year of significant reset. One where we focus on stabilization, recovery and rebuilding. To lay the groundwork for sustained future growth. We believe we have multiple growth levers over the mid to long term and hold a unique competitive position in this evolving market. That said, transformations take time. And they take investments. And our existing debt, which results in approximately $100,000,000 of annual interest payments, is a significant ongoing burden for the company, not least in this period of necessary speed and innovation.

Despite the limitations presented by our current leverage, our teams across the business are driving progress in several key priority areas, some of which we'll touch on today. One of those key areas and immediate focus as mentioned on our last call, is improving the end to end member experience. Today, becoming and staying sign up through the various components of our program once you are a member. Our product team has a clear plan to radically simplify and streamline this experience, eliminating unnecessary friction and better integrating and showcasing the full breadth of our offerings. This foundational work is essential to ensuring a more seamless, engaging and intuitive experience for all our members continues to be a top priority. Part of this member journey initiative involves improved integration of our clinical business, both in terms of how it presents to new and existing members, as well as how we integrate our teams and functions internally. We acquired Weekend Health also known as Sequence, in April 2023. This was a critically important acquisition for us, allowing us to meet a high growth high demand, exciting new area in weight loss. However, we're only partway through the integration of this business and completing it fully is a priority for this year.

This is important because we believe in the increasing power of a full continuum of care for our members. Creating a seamless journey across our extensive spectrum of solutions behavioral and clinical offerings strengthen and complement each other when we bring them together. We know that when members engage across the broader Weight Watchers journey, they do better. [indiscernible] members on weight management medication combined with our behavioral program lose 11% more weight than those on medication alone. We also know that not everyone wants to stay on medication forever, nor do they always have the ability to pay due to the price point.

But when they come off, they're often worried about putting weight back on. However, in a recent internal study, we also saw when our members who transitioned from our clinic program but continued to engage in our behavioral program, Not only did they keep the weight off, they continued to lose weight over that measurement period. Is true and proven power in the breadth of our four Weight Watchers offering. And we're focused this year on bringing that to the forefront of our full product experience [indiscernible] Currently, only a small percentage of our members fully utilize the breadth of solutions we offer. Presenting a significant growth opportunity. By better showcasing educating and simplifying access to our full continuum of care, we can drive deeper engagement over time. Ultimately leading to both stronger member experiences and superior outcomes Beyond the deeper product integration, we also continue to enhance and expand our offerings. With a focus on increasing engagement and lifetime value. In recent months leading into peak season, we launched several new features designed to make weight management easier, more personalized and more sustainable. These include an AI powered food scanner that instantly calculates points for a photo, an online recipe importer that not only allows for easy tracking, but also supports members in discovering and utilizing recipes within the app and a much requested macro nutrient tracking feature.

Early feedback has been encouraging with fast approaching 2,000,000 meals tracked using the Scanner almost 1,000,000 recipes already imported and macros driving a $5 increase in tracked foods since launch.

As well as providing value for actively engaged members, we're pleased to see this work directly and positively impact the engagement of members who've not recently tracked, something that can be challenging to do. Collectively, these new features translated into our highest activation rate for the start of a year since 2020.

Together with encouraging posted traction across many of our January Brown survey metrics, While new features like these don't immediately translate to new revenue, improving engagement, reengagement and brand metrics are positive leading indicators for the future. These types of ongoing innovations are a commitment moving forward and an important and integral part of how we will continue to drive incremental value for our members. Critical in a recurring revenue subscription business.

We also have vast amounts of data at our disposal and are well placed to much more aggressively lean in AI opportunities for continued personalization and other value creation opportunities in the future. More to come on our broader data strategy, but we see very real value value over the long term in being much more proactive here. As well as improvements to the existing product, we recently expanded the ability for U. S. Member to access one on one dietitian services This was previously available only to clinical members but expanded to all members in December on both an insurance covered and cash pay basis While this is, of course, a small part of our overall business today, we feel good about the opportunity for growth here moving forward. Particularly as approximately half our current members have existing insurance coverage for this type of service. Our clinical business is an important part of how we expect returns enterprise level growth over the coming years, and we were pleased with fourth quarter performance as well as a strong start to Q1.

Weight Watchers Clinic prescribed both branded and generic weight loss medications supported by our AI enabled proprietary platform for prior authorization filing and fulfillment. Through our state of the art tech enabled process, we conduct thousands of stop checks per day to help members more easily find medication, sometimes within hours of obtaining a prescription. Level of support sets Weight Watchers apart in an increasingly transactional market ensuring our members receive seamless, real time access to care. Above all, we've always counter back access at Weight Watchers. For years, we've provided access to science backed nutritional and behavioral guidance. And our approach to our clinical care remains the same. Whether that's access to these life changing medications or access to care by obesity trained clinicians. And it's clearly important to our members Both clinical NPS and retention have improved significantly versus a year ago with both metrics meaningfully impacted by members' access to medication. I'm sure everyone on this call will be announced last week that the FDA determined one of the GLP-one medications semaglutide is no longer in short supply.

However, our supply monitoring efforts in the fourth quarter demonstrated continuing significant challenges in accessing supply of branded GLP-one medications Of the nearly 750,000 pharmacy stock checks conducted in the fourth quarter, branded semaglutide and tirzepatide in stock. Just 65% of the time respectively. These availability levels have remained consistent in our checks throughout January and February. As we've consistently communicated, we're committed to providing medication access to our members in a manner that's compliant with all applicable laws and regulations. Accordingly, we're carefully monitoring the impact of the SDA's decision and potential implications on our ability to provide compounded semaglutide in the future.

We have strong conviction in the long term potential of the weight loss medication market fueled by continued innovation, increasing investments in supply expansion and growing recognition from insurers of the downstream health benefits of obesity treatment. Beyond direct to consumer growth, our capabilities also support our B2B expansion. A key focus for the coming years. While this business for the longer lead time employers and payers are under growing pressure to cover weight loss medications. In evaluating this, they increasingly seek comprehensive weight management solutions that combine medication support with lifestyle coaching and personalized care. We're seeing promising traction in this space Labcor, a new 2024 partner, now has utilization above 11% of eligible lives. And our first client through our new Personify partnership has already reached nearly 10 Additionally, in December, we expanded our relationship with CVS allowing employer clients of CVS Caremark to integrate our behavioral and clinical programs. Optimizing GLP Well effectiveness through personalized nutrition and coach while managing the cost of weight related chronic conditions.

I want to underscore that while top line revenue growth remains a priority, are equally focused on optimizing how we operate. To drive long term profitable growth. Significant portion of our revenue is allocated to paid marketing. A strategy that has grown increasingly dominant alongside a reliance on heavy discounting. Our brand strength differentiated offerings, and proven outcome should be the foundation of sustainable growth. Transitioning away from this model will take time and trade offs. We're confident in the effectiveness of our program. The trust in our brands and the strength of our community to fuel organic growth over the long term. Alongside these efforts, we're also elevating and modernizing our marketing. Shifting towards a bolder, more confident, and modern aesthetic, one that celebrates the unique and powerful strengths of Weight Watchers. As well as the real life success stories of our incredible members, I'm particularly proud of the team's work during peak season which showcased authentic member experiences through a simplified, unified message highlighting our full spectrum of care model. Additionally, we're strengthening our capabilities by recently welcoming top tier talent including new leadership in both our social and our influencer teams. Over the past twelve months and in prior years, we've taken out significant cost reducing adjusted G and A by over 25% when comparing 2024 to 2021.

We remain on track to achieve our previously committed $100,000,000 in run rate cost savings by the end of twenty twenty five.

But our work doesn't stop there.

In addition to our weekend health integration, we conducting a comprehensive review of resourcing, operations and spend across the business to unlock greater efficiency and effectiveness. For example, integrating multiple disparate functions and systems across the company, including engineering, product, marketing, member support, [indiscernible] In parallel, we're actively increasing adoption of existing automation, and AI driven solutions across the organization. I give the team a huge amount of credit for the hard work to date on these cost savings. Is never easy is, however, evidenced in a near record fourth quarter adjusted gross margin as of 69.1%. In addition, adjusted operating income margin was 20% and adjusted EBITDAS margin was 27.4%. Of which represents the highest level since the third quarter twenty twenty two. While we're ambitious and committed to our path towards recovery and long term growth, We know that meaningful transformation takes time. This journey will extend beyond 2025. And it's essential that we set clear and realistic near term expectations. Our immediate priority is stabilization. But our focus remains firmly on positioning Weight Watchers for sustained long term success.

At the same time, we recognize that executing on our vision both in the near term and for future growth, requires sufficient deployment of capital Many of the initiatives we've discussed as well as others on the horizon will require investments. We must balance these opportunities with realities of our current financial obligations. The benefit of our capital light high gross margin, cash generative subscription model that underpins our business is almost fully offset by the strain and cost of our balance sheet This is why we engaged strategic advisors towards the end of twenty twenty four to help us assess our capital structure strategy moving forward. We publicly announced a few weeks ago that we anticipate engaging in the discussions with our lenders and bondholders to explore transactions to increase our finance flexibility, and we won't be taking questions today on this particular topic. As a leader in weight management, we have sixty two years of proven results and a legacy of positively impacting millions on their weight loss journey. Rooted in best in class science and innovation, we we are a globally trusted brand with a passionate community of over 3,000,000 members Our broad spectrum of proven solutions meet members, wherever they are on their journey giving us a unique opportunity to drive lasting impact.

These are exciting times for Weight Watchers, but challenging ones nonetheless. With that, I'll hand over to Felicia to take us through the financials.

Thank you, Taryn. I'm excited to join Weight Watchers at this pivotal time and to contribute to the ongoing transformation of this iconic brand. In my short time here, it's clear that significant work is already underway to drive the business forward, and I look forward to leveraging my experience to enhance operational efficiency, financial discipline and long term stability. A key part of this will be ensuring we have the right financial foundation to support our strategic priorities, balancing investment and growth with the necessary work on our balance sheet. Now turning to the quarter. Q4 results were largely as expected with full year's 2024 results around or ahead of previously shared guidance. End of period subscribers were 3,300,000, a decline of 12% year over year but above prior guidance of at least $3,100,000 While recent trends continued in our digital and workshop businesses, we were encouraged to see clinical subscribers return to sequential growth ending in the year in ninety two thousand growing 18% from the third quarter and 38% on the prior The subscriber transfer reflected in our full year 2024 revenue of $786,000,000 above prior guidance of at least $770,000,000 but a decline of 12% versus the prior year.

Within this, subscription revenue declined 6% year over year due to the ongoing headwinds in the behavioral business, partially offset by growth in clinical revenue, which totaled 78,000,000 As clinical subscribers deliver a significantly higher LTV, and rate per paid lease compared to digital and workshop subscribers our overall rate per paid week increased sequentially in the fourth quarter due to a higher mix of clinical subscribers. We continue to focus on maintaining high levels of profitability despite revenue headwinds.

Adjusted gross margin was 69.1% in the fourth quarter with full year 2024 adjusted gross margin spanning over six fifty basis points compared to the prior year. Adjusted EBITDA in the fourth quarter was $50,000,000 an increase of $17,000,000 year over year. This resulted in an adjusted EBITDA margin of 27.4% in the quarter. We ended 2024 with $53,000,000 of cash and cash equivalents on the balance sheet. For the full year, cash from operations was a use of $17,000,000 inclusive of $33,000,000 in one time restructuring payments and $97,000,000 of interest payments. Cash flow from operations excluding these items would have been positive $113,000,000 Additionally, dollars 16,000,000 of cash was paid on the first anniversary of this Sequimf acquisition. The profile of this business is one that is highly cash generative pre debt servicing charges, reflects of a recurring subscription revenue high incremental margins and low capital intensity.

And as you saw in our eight ks earlier this month, we drew the full amount under $175,000,000 revolving credit facility in order to provide maximum financial flexibility ahead of engaging with lenders and bondholders in the coming months. With our cash position plus our revolving facility and bolstered by recent and ongoing cost actions, we believe we have sufficient liquidity for our working capital needs. However, our current leverage and associated annual interest payments place a significant challenge around our ability to invest to the level we otherwise would in future growth initiatives.

Now turning to our fourth quarter twenty twenty four financial detail.

Revenue totaled $184,000,000 down 10% year over year reflecting continued headwinds in our digital and workshop businesses. And the closure of our consumer products business at the end of twenty twenty three, partially offset by nearly 60% growth in clinical revenue. Subscription revenue overall was down 7% in the quarter. Adjusted gross margin remained near record highs as 69.1%, up from 51.4% in the prior year. Driven primarily by cost actions taken and the closure of our lower gross margin consumer products business.

Marketing expenses of $48,000,000 was down 5% year over year in the quarter as we managed our LTV to CAC ratios. The fourth quarter, CAX remained elevated due to continued high levels of competitive [indiscernible] In G and A, we have maintained high levels of cost discipline with adjusted G and A of $42,000,000 down 22% or $12,000,000 versus the prior year, reflecting our previously announced cost savings initiative. As a result, we saw material leverage in G and A, bringing G and A as a percentage of revenue from 26% to 23% now in line with 2022 levels.

As mentioned previously, we remain on track to achieve a full run rate $100,000,000 cost savings by the end of twenty twenty five split roughly evenly across G and A and cost of revenue in 2025. Adjusted operating income was $37,000,000 reflecting an operating income margin of 20% a year over year increase of over nine fifty basis points primarily due to the adjusted gross margin expansion and lower adjusted Adjusted EBITDA was $50,000,000 and adjusted EPS was $0.32 and included a $28 tax benefit from the valuation allowance mentioned in our press release.

You can find a reconciliation between adjusted operating income and adjusted EBITDA as well as the P and L impacts of non GAAP adjustments within our supplemental materials and in the financial details section of our earnings press release posted on our Investors site.

In 2025, we are working to gradually stabilize the business and ensure we build the foundation for a future return to growth.

While we are not providing full year 2025 guidance at this time, we are providing some color on the quarter to date and highlighting a couple of other notable points for 2025.

Revenue starts with a significant headwind from 2024 ending subscriber level, but we continue to maintain high levels of disciplined cost management. We are encouraged by engagement following recent product enhancements, acquisition challenges remain within our behavioral business quarter to date.

And we do not expect to see material changes in this trend over the short to mid term. Meanwhile, clinical subscriber growth continued to be strong in January and February, albeit we may experience some volatility over the next few quarters due to uncertainties surrounding compounded semaglutide. In marketing, Q1 will be our highest spent quarter of the year with elevated tax continuing quarter to date. A trend that is expected given seasonality and tightened competition. We are committed to disciplined LTV to CAC efficiency and we'll look to capitalize on product experience improvements later in the year to drive further efficiency. As we assess our marketing strategy for the remainder of 2025, we are evaluating overall spend levels and may scale back less profitable spend in the short to mid term, reallocating resources to areas with higher longer term strategic impact. Our 2025 fiscal year includes a fifty third week something we last saw in fiscal twenty twenty. Our fiscal twenty twenty five year end, therefore, will bridge the last week of December 2025 and ends on 01/03/2026.

Given the importance of this fifty third week in our early peak period, it will likely include higher levels of marketing investment ahead of revenue.

As such, the inclusion of this additional week in our 2025 negative impact on EBITDA and operating income. Before I turn the call back to Tara, I want to emphasize our commitment to delivering results and protecting our cash position as we navigate the challenging and rapidly evolving industry. While we have made significant progress in reducing our cost structure, we remain highly focused on disciplined profitability management. At the same time, we recognize the constraints of operating with limited resources and a highly leveraged balance sheet with nearly $100,000,000 in annual interest expense impacting cash flow. This makes it even more critical that we take the right strategic steps. To balance short term stability with our longer term path, back to enterprise level growth. Turning it back to Tara. Thanks, Felicia.

As we've discussed today, we are operating in a challenging environment. One that requires both discipline and adaptability as we work towards stabilization recovery and ultimately a return to growth. We recognize the road ahead and take time and thoughtful execution. But we are clear eyed about the work required and committed to making the necessary moves to position Weight Watchers for long term success. With that, we'll happily take your questions.

We will now begin the question and answer session.

And your first question today will come from Nathan Feffer with Morgan Stanley. Hey, everyone. Thanks for taking the question. I want to dig a little bit more in into peak season and the trends you saw there. Have the changes you've made to the product and marketing translated to either improving gross adds or LTV to CAC? Just any way to get sense of kind of the early green juice, if any, there and then can you guys some color as to how the marketing environment evolved and what you're understanding that's been under pressure, but certainly seems like a lot of competitive activity. Thank you.

Yes. Nathan, thanks for the question. Yes, I mean, as it relates to peak, we shared obviously some color in the prepared remarks. We were encouraged with some of our trends coming out of quarter four and into peak as it relates to LizzoNex performance. More of the same candidly as it relates to challenges and headwinds in the behavioral business. And I think we're going to continue to see those for a while as we work through some of the strategic initiatives that we shared as it relates to both improving that experience and driving conversion and retention in that in that member experience. We Felicia maybe wants to jump on marketing. But yes, listen, before we do sort of the green shoots. We shared some of them. We have some great product launches and some feature launches for Peak, some much requested after extended periods of time from our members, not least from macros. And the engagement that we saw there, both in terms of actively engaged members and some less engaged members coming back to engage in those features was really encouraging. With some of the brands brands metrics that we talked about. So these are all leading indicators that are flow through to the P and L or sort of top line growth KPIs immediately.

But we think the signs that we're heading in the right direction with a lot of this work. But you're not wrong in the competitive marketing environment. Alicia, do you want to jump on that one?

Sure. And just to provide a bit more color to what Tara said. Last year, we did see a step up of about 5% from Q4 twenty twenty three to Q1 twenty twenty four, which is typical.

In a business like ours.

We, as she mentioned, did see the recruitment challenges on behavioral book clinic was great growth and we did sequentially see it grow from Q3 to Q4. By 18%. We did see that acceleration into the peak season. So overall, we do expect to be slightly lower in terms of a seasonal step up year over year as it relates to peak, but we are encouraged by of the product improvements that Donna has made during peak. And before I pass to Donna, just quickly on your question, as it relates to marketing, We have We have seen a lessening of declines on our LTV. Which is also an encouraging trend as we work towards product improvements and the return to growth. We have continued to see CAT cost increase. And as it relates to overall marketing, we are taking a very comprehensive look at our marketing throughout the twenty twenty five year. And there will be more to come on that topic. But, Sagas, do you want to go through some of the product improvements from peak? Sure. Taga covered it well. The only thing I think I would add to that is directly attributable to the features that we launched.

We are seeing our highest activation rate since 2020. That is the key engagement metric that is an early indicator of retention. Again, it's too early to pull that through into a direct financial impact, but between the usage we're seeing in the product and the reception from socials and in connect we are seeing green shoots in encourage.

Great. That's really helpful. And then just one follow-up. Mean, I guess, encouraging to see Clinique get back to net ad growth How important was the addition of generic GLP-one to the clinic outperformance in 4Q? And then just any way to give us a sense to kind of think about the mix of branded versus generic gross add as you've kind of gone through 4Q and NPT?

Sure. I'll take that one. Our focus has always been on ensuring member access to medication and due to the shortages enabling this access through comp pending in Q4 saw an increase across all of our key metrics, subscriptions, NPS and retention. So we're really encouraged by seeing that growth and that rebound. As we were able to alleviate the shortages [indiscernible] the mix to branded, well, we're expecting to see as well. As those shortages increase, a reminder or decrease, as a reminder, we unlike many of our competitors offer a broad formulary of medications including branded and generics. So we welcome the return to available supply. It's good for our members to be able to have that coverage through their insurance.

We had, as Tara noted in the earlier, we have an AI powered proprietary platform to expedite filing of prior auth and supply routing. So we feel very well positioned positioned to scale as supply and insurance coverage improves back [indiscernible] The only thing I'd answer that is I think we and that's why we shared some of those stop check [indiscernible] thrilled as supply comes back. It is our number one issue or has been as it relates to being able to meet member demand and which has been reflected in things like our NPS where our members cannot simply can't get access to medication. And so we were pleased to be able to launch compounding to help fill that gap.

To the extent that branded supply is coming back, fantastic. At the end of the day, as Donna said, we have a broad formulary whether it's branded, compounded, generic, off focus is on providing access. [indiscernible] safety through a trusted platform with extensive wraparound support in the form of our nutritional program or community all the other aspects of the Weight Watchers holistic care model. And so the data to date is not particularly encouraging as it relates to the short adjending. But again, we're encouraged if we start seeing that change.

And as a reminder, as it relates to us providing access to medication, we do require record our revenue net of the cost of medication. And so if you do look at Q4 with compounding launched in October, it did have a fairly material impact on our end of period subscribers. However, it did not have a material impact on our Q4 revenue. And so the large majority of that growth was through growth of our clinic business outside of compounding.

Very helpful.

Thank you.

And your next question today will come from Michael Lasser with UBS. Please go ahead.

Good evening. Thank you so much for taking my question.

Work to avoid this downward virtuous cycle where Weight Watchers had fewer subscribers thus less resources to drive subscriber growth and it becomes a virtuous cycle down especially at a time where there are so many distractions and alternatives for those who are looking to lose weight. Thank you very much. Hey, Michael.

We focus on substance. And when we look at Weight Watchers and everything that we have built over sixty two years, Why we were created sixty two years ago and why we exist today? We look at the value for that can offer all members and subscribers today and in the future and how we use those fundamentals to get back to growth along with innovation in New product features potentially product extensions and improving the existing product that we already have as well as some of the other initiatives that we touched on as it relates to adjacencies like OGs, how we think about going to back to the going to our marketing strategy and so on and so forth. And so fundamentally, we believe we have the world's leading trusted brand as it relates [indiscernible] [indiscernible] Management. As it relates to livable weight management, and shared a couple of these claims on the call. We have sixty two years' worth of claims that shows that Weight Watchers works. Now Weight Watchers was historically a nutritional and a community based program. Today it is a nutritional community based digital supported programs that also have clinical access. And we've were really unique in that breadth of offering.

To answer your question, listen, we're very talented about it. I'm very talented about it. We have a lot of work to do to Reminds the world that our existing consumers and our existing subscribers and future consumers' future subscribers. The extent of that value proposition that Weight Watchers really brings to bear. As more and more people seek medication, they're also seeking livability of that support around that treatment, guidance around that treatment. Many people don't want to stay on medication for the long term or can't stay on medication for the long term. How do they ramp up? How do we support them with that? We have this incredible platform [indiscernible] Refocusing on that as we talk about all these different product [indiscernible] as well as innovating around it. And we've shared a couple today, but there are many more, not we've touched high level today on phone data, we didn't go into any sort of detail, but we have this vast data platform and data set proprietary data set that candidly, we haven't done a ton with as it relates to product innovation, product improvements, and how we really leverage that in delivering greater benefit to our members.

So all of that to say, we believe we've got a huge suite of assets at our disposal as we stabilize and then reset this business for growth.

We have to use them We have to improve some of them. We have to invest in some of them, believe we can also expand around them. So we're really bullish about the levers that we have for the mid to long term. But this is a journey. We have worked to do to get there. But even sharing things like our activation rate, which was as we mentioned, our highest entering activation rates of 2020. NPS going up dramatically in our clinic business, retention extending, brand survey metrics going up, Green sheets are encouraging with the highly analytical in terms of how we're measuring our progress. And we believe we have a lot of what we need even in a world of restrained resources but it does mean that we need to be very smart with the capital that we have. And it's certainly the $100,000,000 of interest is certainly a a challenge of our business as it relates to proactively making significant investment ahead of the curve, but potentially others with a different balance sheet may be able to do. So it's challenging but we are focused, we are bullish, and we are doubling down on everything we've been through the last sixty two years and everything that we need for the next sixty two and that's high degree of confidence in our ability to get there in this team's ability to get there.

Thank you for that. My follow-up question is, and you alluded to this in the prepared remarks, but in the period As of the fourth quarter, There was nearly 40% growth in clinical subscribers Should we extrapolate those Those rates of change over the course of this year as we're calibrating our models, And is there a base level of traditional subscribers that Weight Watchers need in order to generate at least $100,000,000 of free cash flow. Cash flow to satisfy the interest obligation?

Yes, I can, I can take that? I think just to Tara's earlier point, like, while we are challenged on volume and overall subscriber counts, this specifically as it relates to our behavioral business. And we do anticipate The recruitment challenges will continue. In 2025 on our behavioral business. It is a very exciting stat for us that our ARPU did increase for Q4 sequentially and it did hit a record high of [indiscernible] as clinic becomes a larger percentage of total. So I do want us to take into account the mix as well of higher revenue, higher LTV, even though there is lower subscriber count. And I do think for clinical, we are we we did note earlier that we have seen an acceleration of our subscriber count in clinical in Q1 relative to Q4. And I think that is something we do anticipate to continue albeit we are still trying to understand the impact of compounding on the clinical business. But we are we are feeling good. As it relates to your cash question, we did end the year at $53,000,000 and we did have positive operating cash of 100 and last year. When you exclude the restructuring cost of $33,000,000 and the interest of $97,000,000 So dollars So the company did put up record adjusted EBITDA.

Margins in Q4 as well as operating margins. And I think that is largely due to the cost actions. So we will have the benefit of of four quarters in 2025 as a result of those cost actions as well.

Thank you very much and good luck. And your next question today will come from Alex Fuhrman with Craig Hallum Capital Group. Please go ahead. Hey, guys. Thanks very much for taking my question here. Can we talk through a little bit more the the possible outcomes this year based on whether you're able to continue selling semaglutide or not on a compounded basis. It seems to me like Weight Watchers is a little late to the game having a compounded offering and as a result the business really struggled last year, plateaued pretty early on in the year and kind of bled to subscribers. Up until the point where you've launched the compounded offering and seems to have really turned things around in Q4 and so far in Q1. Can you talk about the different strategies that you might have, whether you're able to continue offering compound at semaglutide or if you're not, is there really any strategy in place to keep the clinical business from resuming those sequential decline if you're forced to go back to a branded only business?

I think it's, also thinking one thing I want to stress is again the access.

When we launched compounding in Q4, the key motivator for that was the lack of branded availability.

For that and getting that access back where people were so supply constrained really was what drove that acceleration through Q4. So we are so well positioned to as shortages resolve to go back to branded medication that we continue to believe that both shortages will resolve and as new medications continue to go to market at lower prices that branded medication will be key part of our overall portfolio as it was when we entered the space. Again, overall, safe access remains our top priority and is quickly evolving situation with again understanding like we're still at more of our what we've seen from the data, as Tara mentioned, is still at 5% to 6%.

Of our overall supply stock as we continue to watch that.

We are actively evaluating our options. Again, expanding our formulary. We are considering lerizatide We have been offering Zepound Vials since September.

Right? And we are continuing to watch the changes quickly. As with the debt balance coming off shortages, we saw the timeline change with the FDA and we're continuing to watch that carefully as well. So it is a new freshly evolving situation. We are well prepared to go back to branded medication and continue to ramp that. Leveraging the platform that we built for this as those shortages continue to evolve and that grows. We are also prepared to look at other alternatives including the reboot side again and also continue to stay very in touch with the supply the actual supply and continuing to making sure that we have the availability our members as it evolves.

So it's rapidly evolving. We are continuing to evaluate our options, but given the breadth of our formulary, we do not expect to see the return to the slowdown that we saw when there just was no supply available rather be expect to see the growth that we had when we were focused on branded initially and supply was Okay. Yes, that's that's helpful. I guess I'd be curious how many how many takers you've had on the lower priced vials of the medication and what you're [indiscernible] with insurance coverage, I would imagine for a lot of your long time weight watchers members, it's equally about affordability as it is about access. Are you seeing any green shoots in terms of people kind of gravitating to that somewhat lower cost that bound vial or having more success getting their insurance to cover the full price branded drugs?

Yes. So with branded drugs are available and covered by insurance, that's the lowest cost alternative for our members. And so that's partially why we've so much focus on enabling prior authorizations go through quickly, supply shocks go through quickly so we can get medication into people's homes. As quickly as possible when insurance covers it. On the your question about files, I think files and seeing the announcements on lower cost there as well, As a cash pay option, the availability of our compound and when should supply when supply was on shortage was on lower priced option.

There with medication going off shortages. [indiscernible] [indiscernible] again, it's the lowest cost offering around around branded medication continues to be the most cost cost effective. As supply increases, we think we know that those who have access and prior authorization that alleviates that and we expect that insurance coverage will continue to expand as prices go down.

As a component option, we are actively evaluating compound of liver gluetides to provide a lower cost option for people who are cash pay.

Okay. That's very helpful. Thank you very much, guys.

This concludes our question and answer session. Would like to turn the conference back over to Tara Kamont, CEO for any closing remarks. [indiscernible] Yes. Just to make one clarification point, I said record. However, for ARPU, we're still very excited about it.

As it's the highest since Q1 twenty twenty three and adjusted EBITDA is the highest since Q3 twenty twenty two. Okay.

Thanks for that clarification. Well, thank you everyone for joining the call today. If we have no further questions, we will thank you for your time and look forward to following up with some of you directly in our next quarter call. Thank you.

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