You're tracking on your vision for the company.
Yeah, sounds good. So, I'll start by mentioning I joined 18 months ago. But I actually started Weight Watchers as a member first. Lost 60 pounds on the program, really believe in what we offer in terms of behavior change, weight loss. That being said, it was clear when I joined the company that there was a shift happening in our industry, where behavior change alone wasn't going to solve the clinical needs around obesity. 10 years ago, the AMA, the NIH, the WHO, they all declared obesity a chronic condition, and it had taken some time for our category to catch up, and so that has been the biggest shift, is around embracing a full spectrum of solutions. So in addition to thinking to our behavior change program, which for 60 years has been the number one doctor-recommended weight loss program.
It's evidence-backed, you know, with over 135 peer-reviewed studies, 35 clinical trials. We've now added a clinical pathway as well as functional pathways. So diabetes program connects to your CGM, helps you manage your A1C, and then, a telehealth platform, such that we can determine with medically appropriate for somebody to be on AOMs. And then, if so, provide a full formulary and, help support that person through not only their, their weight loss journey, through, through the insurance engine, being able to, to, to manage that process for them with, with clinician visits, but also with nutritional science support and behavior change support.
The other part that I'll add in terms of things that have really changed about the business since I joined is that, you know, over the course of the last few years and really accelerated by the pandemic, we've had 80% of our membership move to digital. So this is not your mom's Weight Watchers. And there's nothing wrong with that program. It, like I said, it absolutely works, and part of that is because of the community. People who would come together in person provide accountability around a really vulnerable topic around weight loss. Well, 80% of people weren't receiving that gold standard to build those healthy habits, and my background is in digitizing social relationships. So a big part of the product strategy and thesis has been to take a digital-first approach to the care that we're providing.
So, that means around the behavior change is really taking that third space, that community experience, and bringing it online. So obviously now, if you are coming in to the... to Weight Watchers, we're not only going to be able to provide a spectrum of solutions, but we're gonna be able to ground you in the community that's gonna help you support that lifestyle change for life. And I think that's a, that's a key part of it, and people who haven't struggled with weight, I, I think, miss what an important component that is to success.
Okay, so, let's talk a little bit about the digital transformation, if you will, and tie in Q3 earnings, because this is, this is the first conference you've done, since you guys put out results. And I realize we're at a healthcare conference, and everyone here would probably love it if we just talked about Zepbound and Sequence, for the next 20 minutes. But for core Weight Watchers, you know, sign-ups have been up for 2 quarters now. You know, active members are growing on a year-over-year basis, I think, for the first time since the end of 2020. You put up record-high margins, so, you know, some might dare to say that some of the things that you've put in place, the initiatives are, you know, starting to take hold, right?
But because revenue per user takes a step down, which seems like it was somewhat foreseeable-
Yeah
... it seems like all the positives have been washed out. So can you just talk about your focus on total commitment dollars for core Weight Watchers subscribers and why it's, you know, particularly important at this moment in time?
Definitely, and you've shared the Q3 results so well with you know, seeing a sequential performance that we saw from Q2- Q3 in our subscriber base with a return to subscriber growth. And that performance, as you said, at a record-high gross margins. We're really pleased with that. You know, obviously pleased to see our performance in the quarter. And when we look at the commitment price comment that you're making, the... I've just got completely jet-lagged, and my brain is...
So basically, what Heather wanted to explain, or I believe, is around the LTC.
Yeah.
I mean, the truth is what we just talked about, going digital first and having a more modern approach. That is taking place throughout the company, including our marketing. So this is about performance marketing, managing to LTV. And ultimately, if you come in through a long-term commitment, the total dollar value that we're taking in at that time is going to be less. But over the course of that member's life, we are actually acquiring a higher rate of dollars. And so when you see something like a 10 for 10, obviously, they're coming in for 10 months, but we're managing to the same amount of a churn that we have in the past, meaning you could expect to see that our retention and our engagement is going to go up.
We've spoken about activation rate and our focus on that. It has gone up year-over-year, so has our engagement rate, so has our NPS. We have early indicators that we continuously monitor to make sure that we are managing to the right LTV. So we have a full confidence that we're making the right decisions to bring members in to acquire them at the right LTV CAC, and then in doing so, managing to the long-term health of the business. And so that's, that is the key aspect here. The other part of this is what I mentioned before around workshops versus the digital community. We're seeing our workshop members are coming back, but they're choosing digital. And so digital is obviously higher margins, but it's again, a lower cost product and solution.
So we're seeing that mix shift happening. And then there are decisions that we've made, again, for the long-term health of the business to keep us focused on our strategy, put more wood behind fewer arrows, and that would be things like rationalizing parts of our business like e-commerce, you know, selling CPG. And that's taking a top-line hit, but again, OI is what we are looking at. Profitable growth is what we're looking at, and so we are making some decisions here that we're feeling in the short term, but we know is going to net out positively in the long term.
Yep.
Yeah.
Okay, so let's talk about Sequence, the clinical platform. If we assume most of the investors here at the conference know at a high level what-
Yeah
... Sequence does, can you talk about what the value proposition is, from both a patient and clinician perspective? You know, why, why it's more than just a gateway for-
Yeah
... someone to get on a GLP-1?
So basically, when you're coming to the Sequence platform or, you know, our clinical offering, I should mention that actually, we this week, we just started rolling out, in fact, today, a unified purchase funnel. And so when you come to WeightWatchers.com, you will direct you to the right solution no matter, you know, kind of where it, where it exists, and this is the first step of the integration that we've been talking about that is going to happen between Sequence and WeightWatchers. So there's a few steps to the process. The first is intake, really understanding, getting the profile of the member, making sure that it is that it's medically appropriate for them to be on the medications.
At that point, we do a clinician visit, and then, importantly, we manage the insurance process for them, and then there's ongoing med management, and there is the behavior change support as well with fitness and nutrition. And what I think is critical here is just the understanding around that insurance engine. It is the prior auth process for these medications. It's taxing on both the member as well as the clinician. And we're seeing that people who are utilizing Sequence are getting insured at a 35% rate, which the population at large is somewhere between 20%-25%. So we're more successful at that process, and that has a lot to do with just how manual and administrative it is.
And the team that built the Sequence platform, they are former AI engineers who were working on automated cars, so they've built a platform that is getting smarter, and so we're better able to support our clinicians as well as our members through that process. Now, the other thing that is happening is you see that we were able to grow within this, our membership of the clinical product through the supply shortages, and a part of that is because of the med management process. So able to really get people to the right pharmacies that actually have it in stock. We have a wide formulary, so if they weren't able to get on a specific medication, point them to first-generation medications.
And then, again, we're managing to the long-term health outcome for these, for these patients, and that comes with the behavior change support. That's where it's like when I, I'll just answer your question on the nose, which is like: Why is that not a commodity? Or what happens when you know, these things all go generic, or what - But in order to be successful on these medications, you need the behavior change alongside of it. The lifestyle intervention is a key component. All of the trials around these medications were done in conjunction with lifestyle intervention, and that is a key part of what we're offering in addition to all of these services. And so that's why we hear people are staying with the, the, the, the product ultimately.
Yes, we're going to manage the ongoing prior auths, 'cause again, remember, this isn't, you titrate the dosage, you, you're not, you're not getting a script and walking away. You, you have to change the dosage throughout the journey, so you're going to continue that process, and the med management and the ongoing lifestyle intervention is a critical part of it.
Yeah, and I think it's starting to make more sense, too, right? We saw SELECT, the outcomes trial read out last weekend, and you have lower... What people are using as an analog for real-world weight loss-
Yeah
... over a longer duration trial, right?
Yeah.
Why is that? It's harder to manage a patient for a longer period of time. So you obviously did plenty of diligence before you made the Sequence acquisition. Can you just talk about and you touched on a little bit of it as far as, like, the engineering chassis-
Yeah
of the software, just the unique aspects of Sequence and what gives the combination of WeightWatchers and Sequence just a durable advantage over any potential competition?
So during our diligence process, we met with, like, 30 different companies, and we felt like ultimately, what's going to be critical in our ability to scale is the platform itself. Both again, not just from the clinician side with the EMR, but the insurance management process, and then also the front-end experience that members are using to manage their clinician visits, their. They also get support, as I mentioned before, from registered dietitian, from fitness, a fitness consultant, and it's like having a care team in your pocket. The scalability of that is really important when you start to think especially of the B2B landscape and having to suddenly take on millions of covered lives.
When we're looking at unit economics and how we're going to, you know, be able to support that. For instance, right now, you know, we have 4 million-plus members on Weight Watchers. How are we going to do that? It's all about the platform. That's where we just thought, you know, this is a this is IP that really sets this company apart. The other piece of it, too, was that they had really taken a member-first approach to what they were building and a clinician-first approach to the EMR. The NPS, both on the clinician side and on the member side, is incredibly high, and so their membership ahead of our acquisition was all driven through word of mouth.
And, you know, you're seeing a lot of startups in the space struggle with the CAC around-
Yeah
Welcome.
Thanks.
Around these members because the media is so expensive, and so we were really impressed with their ability to grow by word of mouth. And when you think about pairing that with the Weight Watchers behavior change program, the Weight Watchers brand, and then obviously our community to underpin it all, we felt like that was going to be a deep moat for us.
So, you mentioned on the call the prior authorization engine. I mean, it seems like you're running 50% above, you know, what average for the GLP-1 class. How has that changed over time? Like, shouldn't I would expect it to kind of, you know, converge with the industry average for the class.
We, I was gonna say, we definitely would have expected that to converge with the class, and we haven't seen it deteriorate below 35%. You would expect that, though.
Okay. You haven't given, you know, a long-range plan, but I'm just trying to, you know, frame up Sequence member growth as it might look, and, I'm not talking directly about 2024 or any specific year.
Yeah.
But, you know, despite your best efforts to keep a lid on growth and, it seems like, keep members away from it, until supply comes back, you're, you know, you're at 45,000 members today versus 27 when we closed the deal. You've added 8,000-10,000 members a quarter. Is that the way we should think about it going forward if you, if you don't see supply improvement, and can you just remind us how you, you guided for the rest of the year on, on supply?
We guided for the rest of the year based on an expectation that supply wouldn't change significantly through the back end of the year. And obviously, with the news of Zepbound more recently, there's potential for that, but we expect it to pace over time, obviously, as supply then gets out into the market. So I would expect that level of growth through the back of the year. We didn't guide to ending subscribers, but we did, in Q3, outpace new prescriptions. So there's that there, and we've spent the time during the supply constraints, working on integration and so forth.
And the point about outpacing prescriptions, I think, is important because it speaks to, you know, taking share in the market. And obviously, we're in an unusual circumstance right now...
Yeah
... with the supply shortages, but we're seeing a lot of the interest is coming from our existing community, who is familiar with Weight Watchers, trusts Weight Watchers. And this is a space filled with bad actors, misinformation. People are looking for brands that they trust.
Okay. And then on the flip side, you know, Sequence had 27,000 members when you closed the deal. You've said you've 5X'd the clinicians on the platform since then. So, you know, is it safe to assume linearly you have theoretical capacity for 135,000 members?
We're scaling capacity, and it would. It depends on the timing, obviously, 'cause the most human-centric part of the onboarding is the moment where they meet with a clinician for the first time and are assessed for the appropriateness of medications. And we are working towards all of that scaling and readiness for peak season.
But, I would also add that the scaling, the whole point, going back to the technology and the stack that we're working with, is that it is better than linear.
Yeah.
Yeah.
It's, I would say, exponential, but we're seeing a lot of progress on that front.
Okay. You've got an Ozempic, Zepbound, and beyond webcasts tonight. You've unified the platform. You know, can you talk about what... You know, now that you have multiple offerings for a customer under one roof. You know, what's the marketing message into diet season this year? Are you starting to open up the funnel now on Sequence?
So I think it's funny, you said diet season. It tripped me up because what we call it is peak season. And that's important to your question because when we talk about how our storytelling and who we are and how we're approaching the space, is really moving it from weight loss to weight health.
Yeah.
We wanna be known for not just the weight that people lose, but the health-
Yeah
- that they gain. And we are truly a, you know, a digital health company, and in the past have been known for being more of a commercial diet program. Now, one that is evidence-based, one that is, you know, number one doctor recommended, and for all those reasons, really, have proven ourselves to be strong on the nutritional science side, on the behavior change side. But ultimately, right now, what we're learning around the chronic conditions of obesity is such that by addressing a person's adipose tissue, right? You are going to help with diabetes, you're gonna help with cardiovascular, you're gonna help with kidney health, you're going to help with the mortality rate, you're going to help with PCOS, thyroid conditions.
Like, the spectrum around how we're impacting people's health through weight loss is an important one. And so people were coming to us for weight loss, but we're able to help them and support them across the spectrum of conditions, obviously mentioning that we have the diabetes program. And so what our messaging into that peak season is going to be is like: Let us reintroduce ourselves because you might have thought about us as a place where you come, and you sit in a circle, and you get some coaching. We do a lot more than that now, and we can support people no matter where they are on their journey and no matter what kind of solution they're looking for.
And we're also seeing that that is a message that is resonating with payers as well, who are having a lot of employees coming to them and saying, "I need this," and, "You know, what's going on here, and can I have coverage?" And they're looking to partners right now who can help them understand this landscape, and manage their costs around it.
Okay, we only have 2.5 minutes left, and there's a lot I want to talk about. But I do want to address one thing 'cause we get the question, you know, if insurances or coverage, commercial specifically, is potentially going up, even if only slightly-
Mm-hmm
... you know, how does that impact Sequence, right? Do I still need-
Yeah
- Sequence?
Yeah. I think the great thing about what we're able to offer our members right now and clinicians is support in an environment where coverage is tough, and we wanna be helpful. Now, in a world where that ceases to be a question, and we are actively trying to help on that front, on the policy side, working on things like TROA to make sure that we do get coverage, particularly because the most marginalized communities are the ones who need these medications and don't have access to them. And so it's I feel like it's criminal at this point that there isn't coverage. But in that world, the need is going to be so great, and people are going to be looking to digital health providers.
We know that members who are going to their PCPs, first of all, they don't want to go to them. These are the same doctors who, they came to them with a hurt elbow, and they just said: "Hey, lose the weight." There's a lot of shame going into those rooms, and so they're more likely to choose a digital provider. But secondly, is the ongoing support. Your PCP doesn't have that experience. My brother's a doctor, so no shade here, but he had one nutrition class his entire tenure in medical school. And there is more support that is going to be needed.
You're going to need to be able to keep going back to understand your dosage, to be able to titrate across your journey, to make sure that finally now that you've quieted the food noise, that you understand the healthy habits you need to be building, the lifestyle intervention that goes along with it, and you're gonna want a community that supports you. So in either scenario, you're choosing Weight Watchers.
Yep, okay, makes sense. Last one, we might go into overtime a little bit.
Mm-hmm.
Since we're at a healthcare conference, you've talked a little bit about, you know, data that could come off the platform, and you've generated some of that in the past. So, you know, what data do you guys intend to generate? And I guess is there a timeframe when you might be able to share it?
Yeah. I think that we've talked a lot about Weight Watchers leading from a science standpoint, and now we have the ability—I mean, I think our membership base is probably one of the largest that's out there, or if not the largest that's out there. And now we have the largest in terms of people who are actually on these medications and understanding a lot about adherence, utilization, being able to also look at. We know a lot of people are coming, and they wanna de-escalate from the medications. Who are like—Who are the people who are likely to be able to de-escalate successfully, whether that's to a first-generation version of the medications, a generic or to behavior change? How that impacts set point, depending, again, on the person's medical history.
There's a lot that I think that is exciting, where we can help impact the science around this, since it is so new, since it is evolving. There's a lot that we are excited to be able to contribute from that front. The other piece of this that I will say, too, is this is a new industry that a lot of different places are curious about. That you're here hearing this question, the GLP-1 question, come up on calls with Krispy Kreme and airlines and retailers, and again, they're all looking to understand consumers who are on these medications. What does that mean for their habits?
And that is all data that we will be learning and have access to and thinking about how we can aggregate, anonymize, and provide in ways that could be interesting to help you know the other industries even understand the space and how it's evolving.
Heather, Sima, thank you so much.
Thank you.