Earnings Call: Q1 2021

May 5, 2021

Good afternoon, and welcome to the WW International First Quarter 2021 Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Corey Kinder, VP, Investor Relations. Please go ahead. Thank you to everyone for joining us today for WW International's Q1 2021 Conference Call. At about 4:0:5 p. M. Eastern Time today, we issued a press release reporting our Q1 2021 results. The purpose of this call is to provide investors With some further details regarding the company's financial results as well as to provide a general update on the company's progress. The press release is available on the company's corporate website located at corporate. Www.com. Supplemental investor materials are also available on the company's 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. 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 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 Mindy Grossman, President and CEO Nick Hodgkin, COO and Amy O'Keefe, CFO. I will now turn the call over to Mindy. Thanks, Corey. Good afternoon, everyone, and thank you for joining us today. 2021 has strong momentum, Driven by continued growth in our digital business and the concentrated efforts across the organization to optimize the member experience, streamline our operations, maximize our marketing efforts and build on the collective power of community to deliver on our strategies across all touch points in the WW With multiple membership verticals and diverse revenue streams, creating a healthier, more profitable and more sustainable business model. Our continued digital transformation to a personalized technology experience company was clearly evident in our Q1 results With our high margin digital membership growth driving performance above our expectations and positioning us for subscriber, Revenue and profit growth over the balance of 2021. Let me highlight our achievements in the quarter. Q1 ended period subscribers reached 5,000,000 driven by the success of MyWW Plus, our first non food innovation. This is significant as we match the record high we achieved in Q1 2020 following the launch of the MyWW Food Innovation, The sold out WW Presents Oprah's 2020 Vision Tour and comping strength in both digital and workshops. To reach this watermark level while still operating in a COVID environment is a testament to the work of the teams and further demonstrates the resilience of our business model as well as the true demand for WW at a time when people need a weight loss and wellness partner more than ever. We achieved year over year digital end of period subscriber growth of 16% in Q1, Reaching a new all time high for digital subscribers of 4,200,000 and our 7th consecutive quarter of double digit digital subscriber growth. Recall that this strong growth is on top of the 60% digital subscriber growth we delivered in Q1 2020, demonstrating the continued appeal and the large addressable market opportunity for our digital offerings. Member retention continues at all time high levels of over And with digital subscribers now at 85% of our member base, it is clearly evident that the engagement that we are seeing with our digital members is extending our retention levels and will be the driver of further expansion in the future. Adoption of our new Digital 360 Membership offering has been strong. To remind you, D360 is our new mid tier membership vertical, which provides a wholly unique experience built on the platform of MyWW Plus, but adding a one to many coaching and content That is like anything else in the market. We ended Q1 with over 150,000 D360 subscribers In just the U. S. And the U. K, an impressive level given this new tier didn't fully launch until January. And with the recent expansion to new countries, marketing efforts are just now starting to ramp up globally. This completely new and modern way to experience WW is appealing to new members as well as returning WW digital members Who are upgrading to this new vertical. Developed with a focus on a younger and more diverse cohort, we are seeing positive results. In fact, among D360 sign ups who are first time members, almost 50% are millennials or younger. In the last few weeks, we introduced D360 in Germany, France and Canada, and the early response has been strong. Measuring the engagement of the D360 experiences and coach interactions has been a valuable and real time opportunity to see what is resonating with members and what will enable them to have greater success. Our unique Coach Live experiences Are at the core of D360, enabling us to build out a library of on demand content that is both highly valuable and scalable. We believe that D360 will be a key driver of broadening our reach across new and diverse audiences and helping unlock our potential to Buyer and support millions more people in their weight loss and wellness journeys as well as provide us with a premium offering to our core digital experience. Our team is ahead of our targeted efforts to realign the cost structure of our workshops business and has initiatives underway to further optimize this business and expand margins, all while continuing to deliver an enhanced member Even while operating with significant in person capacity restrictions in the U. S. And most of our international markets still being in lockdown for all or most of Q1, we were able to expand our workshop gross margins. This improvement combined with the strong margins of our digital business drove total company adjusted gross margins of 60%, exceeding expectations and demonstrating the increased flexibility of our business model. It is clear that many members are craving in and are eager to return to workshops as the environment evolves. In fact, for the last 2 weeks, our U. S. In person weekly workshop attendance Surpassed our virtual workshop participation, the first time in over a year. So we truly are meeting all our members where they are and providing them with the support that will enable them to have the greatest success. E commerce has continued its strong growth momentum in Q1 with sales increasing over 150% year over year. Nick will provide more detail on our e commerce and consumer products growth strategies. In January, we announced our newest global ambassador, James Corden. In addition to driving significant Media coverage at the start of the year, James has been an incredible partner, sharing his journey with Oprah during our February live virtual experience, WW presents Oprah's Your Life and Be the Love You Need, which garnered nearly 3,000,000 views. In April, James appeared in his first series of WW TV commercials, speaking to his 20 pound weight loss The incredible livability of the WW program sharing his story in a lighthearted and fun way that only James can. And to wrap up the accomplishments, once again, WW is the finalist for the prestigious Webby Awards for both our app and our social media campaigns. I will speak more about our go forward plans, expectations and upcoming events and milestones, We'll first turn it over to Nick to discuss our operating performance in more detail. Thank you, Mindy. I'd like to share some additional color on the performance of our global markets. The digital business continued to be strong in Q1 With double digit end of period subscriber growth in each of our major markets. As you would expect, workshop trends were still challenged, Particularly given lockdowns in several countries, workshop member sign up trends are now trending positively year over year in Q2 As we cycle against the onset of COVID last year. The launch of D360 last month in Germany, France and Canada Was an important milestone in bringing this new modern and tech enabled coaching experience to more members worldwide. Each local market is working on content creation with our centralized D360 team. The same internal production team behind Oprah's virtual experiences and last year's sold out arena tour. With its mid tier pricing, Digital 360 has a relatively low cost to serve incremental sign ups. So we believe that at scale, it can be a 60% plus gross margin business. We are focused on ensuring D360 Turning to workshops. Our team has done an incredible job in rightsizing the fixed cost structure of our studio footprint and staffing levels to adjust to the current market realities. In Q1, our workshops business achieved a 31% adjusted gross margin as we continue to make progress from the 27% margin trough in Q3 2020. Importantly, once we are able to safely reduce social distancing measures, we have the capacity to serve double the current number of in person attendees before adding a single workshop. Once the COVID environment is behind us, We are aiming to return the workshop business to an approximately 40% gross margin level. As discussed on our last call, we've significantly reduced our WW branded studio footprint. In some cases, we are to renegotiate favorable terms, including month to month arrangements. Therefore, we now expect to have approximately 450 studios in the U. S. At the end of 2021, which is up from our prior expectation of about 400. We are implementing cost effective third party venues for our workshops with significant capacity for both social distancing in the current environment and for future expansion. For example, in Manhattan, we have closed all of our permanent fixed locations and are opening workshops At the Beacon Theatre, a major hotel and a portion of our Manhattan office space. To illustrate the scale of our U. S. Real estate portfolio restructuring, note that our remaining studios provide in person workshop access within a reasonable distance to over 70% of the U. S. Population. In addition, we are utilizing cost effective And flexible third party studio apps to provide broader market coverage as demand for in person workshops returns. Through our footprint realignment, we have saved about $25,000,000 in rent costs on an annual run rate basis Since 2019, our studios have an average remaining lease life of 19 months, And we continue to have opportunities to further optimize our network. As we highlighted on our February call, We believe our Health Solutions business will be a key strategic growth lever over the long term. The business is on track for double digit revenue growth in 2021 and is positioned for accelerated growth in 2022 as we ramp up with our healthcare aggregator partners and our physician referral initiative. In addition, we have a clinical trial underway for people with Type 2 diabetes And our team is developing a dedicated consumer offering specifically designed for people with diabetes that we plan to launch during 2022. Finally, our Consumer Products business. Looking back to 2019, about 85% of our product sales were in studio by our workshop members. In 2021, we expect about 80% of our product sales revenue to be via e commerce. Over 500,000 WW members globally have shopped on our e commerce platforms already in 2021, Fueling our over 150 percent revenue growth in Q1 and also demonstrating the long term opportunity for this business, Since only about 10% of members are currently purchasing our products online. Encouragingly, Approximately 60% of these e commerce purchases are being made by digital members. And this rapid shift Reflects the changes we've made to our e commerce platform, in app integration, product assortments And member marketing to drive growth in all of our geographic markets. We are now also adding to our product assortment The availability of new partner brands on the WWshop marketplace. We are also focused on expanding the margins of our consumer products business Through operational improvements, including the addition of drop ship capabilities and optimizing our supply chain For an increasingly e commerce focused business. In short, WW is executing well In what continues to be an uncertain environment, we are nimbly managing our cost structure, while making investments to advance Digital Transformation. And now, I'll turn it over to Amy to discuss our financial performance and outlook. Thank you, Nick. Before I discuss the Q1 financials, I would like to highlight the successful refinancing of our debt maturities, which was completed on April 13, and thank the lender community for their continued support. This refinancing has significantly lowered our interest rates, resulting in an annualized saving of nearly $30,000,000 compared to our prior rates, providing us with even greater flexibility in our capital structure. Now turning to the Q1. As Mindy mentioned, the year ago Q1 had exceptional performance fueled by the MyWW Food Innovation and further amplified by the 2020 Vision Tour. COVID escalated in mid March 2020, So it only had a minimal impact on our Q1 2020 results. As a result, going in, Q1 of 2021 had a very tough year over year comparison. In addition, 2020 had a 53rd week that ended on January 2, 2021. So looking at the comparable 13 calendar weeks in the 2 years, Digital member recruitment, which includes D360, was up double digits year over year in 2021, On top of significant growth in 2020, we ended Q1 with 5,000,000 subscribers, up 12% from the end of Q4 and in line with Q1 a year ago. The 16% Year over year growth in digital end of period subscribers largely offset the substantial workshop pressures in the continued COVID environment. The strong digital growth is continuing our mix shift to an increasingly digital first business. At Q1 end, 85% of our members were digital subscribers. Total revenue was $332,000,000 down 20% year over year on a constant currency basis, consistent with our expectations and primarily reflecting the workshop Subscription revenue decline of over $75,000,000 year over year, in addition to significantly lower in studio product sales due to the COVID environment and the $16,000,000 revenue from the Vision tour in the year ago Q1. This was partially offset by growth in digital subscription revenue, which increased 14% year over year on a constant currency basis in Q1. Digital subscription revenue is now more than 60% of total revenues. Adjusted gross margin was 60%, up approximately 7 20 basis points from the prior year due to better than cost reductions and productivity in the workshops business. In addition, the shift to a larger digital subscriber mix benefited gross margin. This is the 4th consecutive quarter where we have delivered an adjusted gross margin of approximately 60% or better. As Nick discussed, we further reduced our fixed studio footprint in Q1, resulting in a $6,000,000 restructuring charge in the Q1, In part due to better than expected lease exit costs and the closure of fewer locations, we now project workshop restructuring expenses to total $11,000,000 in the year, down from our prior expectations of 18,000,000 Adjusted EBITDA was $26,000,000 and incorporating the $0.06 negative impact from restructuring and other one time items, Q1 GAAP EPS was a loss of $0.26 Turning now to our outlook. Despite continued global economic uncertainty for the full year 2021, we now expect to exceed 2020 revenue and adjusted operating income. Our Q1 results have us on track to deliver on that objective. In addition, we expect that our successful refinancing will benefit EPS by $0.21 for the full year. For the remaining 9 months of the year in aggregate, we continue to expect to return to year over year revenue and earnings growth With the year over year trend to improve sequentially over the balance of the year, we expect that the trajectory of end of period That the year over year growth rate in total end of period subscribers will improve sequentially for the balance of the year and that year end subscribers will slightly exceed the Q1 ending level. The anticipated change in Seasonality trends is driven by rebounding consumer sentiment as we head into the summer months, Member recruitment driven by the strong spring campaign, the early success of D360 and its launch into major European markets. The increase in retention with the mix shift to digital And further support in late Q4 from the launch of the food innovation. At the core of all of our membership plans is our digital platform And our personalized MyWW Plus experience, we expect to end 2021 with 90% of our subscribers being digital, including D360, a significant shift from 85% at the end of 2020 70% at the end of 2019. Digital revenues are expected to be up in the mid to high teens on a constant currency basis for the full year, more than offsetting the decline in workshop revenues. Importantly, however, we expect workshop revenues will decline at a decreasing year over year rate sequentially. Gross margin for the full year is and by cost reductions in workshops that have exceeded our expectations, all at a lower restructuring cost. And as we mentioned on the last call, in 2020, G and A benefited from $25,000,000 in temporary compensation reductions That will not recur in 2021. In addition, we are accelerating investment in digital product and technology resources to fuel 2022 growth. To assist with your modeling of Q2, revenue is expected to be in line with the prior year, which is from the workshop driven decline in Q1, strong continued double digit digital revenue growth plus growth in consumer product sales It's expected to offset revenue pressure in the workshop business. And a reminder that in 2020, the company's cost savings initiatives Had a significant impact on Q2 expenses, particularly in marketing, where we reduced spend by approximately $10,000,000 in the quarter. We expect that marketing in Q2 of 2021 will be approximately $55,000,000 as we focus on capturing the benefit of rebounding consumer sentiment heading into summer, while maintaining an efficient customer acquisition cost. Turning to our capital structure and cash priorities. At Q1 end, we had approximately $113,000,000 in cash and an undrawn revolver. Recall that the year ago cash balance of $292,000,000 included a full revolver draw of $148,000,000 We ended the quarter with a net debt to EBITDA's leverage ratio of 4 times. Reflecting the new interest rates on our debt, Our full year interest expense is now expected to be $91,000,000 a $20,000,000 reduction from our prior outlook due to the debt refinancing. Excluding the impact of restructuring charges on our P and L, we now expect our full year tax rate to Approximately 22%, which assumes no changes to the current statutory rate. CapEx, primarily driven by tech spend and capitalized software, is anticipated to be in the $40,000,000 range in 2021 And D and A is now expected to be $43,000,000 In addition to investing in technology and digital product resources and talent, which fuel the future growth of the business. We will continue to evaluate potential tuck in acquisitions of technology companies. We are also seeing opportunities for acquiring franchise territories. And in Q1, we acquired our Michigan and Ontario franchise, which was our largest remaining franchise for $21,000,000 In summary, we executed above plan in Q1 and are confident in our strategies and initiatives to drive performance and shareholder value in 2021 And the years ahead, I will now turn the call back to Mindy. Thanks, Amy. Our team has done an exceptional job over the past year. We've accelerated our digital transformation, restructured our organization to give us greater operational and financial flexibility and focus our investments behind the initiatives that are important to our members that we have today and that will resonate with the members of tomorrow. We are confident in our ability to drive revenue and earnings growth for the balance of 2021 and position WW for Our Q1 operating and financial performance gives us increased confidence The value that WW can deliver with the world's weight loss and wellness program of choice as the world reopens. Now into the 2nd year of the pandemic, consumers certainly continue to feel the pressures of the current environment, But with increasing vaccine availability, consumers are now experiencing renewed hope and optimism. While the exact timing of everyone's next normal crystal clear and will certainly vary greatly by geographic market and by individual, there is a building eagerness for reconnection and increased focus on health and wellness. We consistently introduce new marketing creative throughout our campaigns To keep the conversation new, I'll take our call on key messages resonant to the moment. As the consumer is gearing up for the world reopening Looking to show up as a renewed better version of themselves, we plan to lean into this behavioral shift, marketing that motivates, inspires Shows people that this is their moment and that WW is the partner to help them ease that moment. We are intensely focused on the mindset of our consumers, their evolving needs, what resonates and what gives them hope. Our next virtual experience with Oprah Winfrey is launching on Saturday, May 8. This special event, VISTA Life and Focus Spring Forward Stronger is designed to celebrate and empower mothers along with all parents, caregivers And anyone who is forced to set their needs aside during this time to spring forward stronger and lead their best, healthier life. Along with special guests, Drew Barrymore and Doctor. Anita Phillips, Moore will also be joined by a special audience Aspiring mothers, parents and caregivers focused on reclaiming their health. These virtual experiences, which are free and open to all, members and non members alike are proving to be an incredible new way to engage with audiences worldwide In a manner that is authentic, resonant and impactful. Since launch a year ago, these live virtual experiences with Oprah Have resulted in over 5,000,000 views. Our most recent event alone generated nearly 5,000,000,000 media impressions. In addition to creating a wealth of unique content, we believe these special events drive incremental engagement, interest and increased awareness of WW as a wellness and weight loss brand. We continue to focus on our 4 key priorities for the year. To briefly touch on recent progress milestones for each. 1st, continuing to enhance the member experience. As we know, a frictionless and differentiated digital experience We see even greater member success, longer retention and ultimately will expand subscription lifetime value. The pre paywall personal assessment that we launched with MyWW Plus is working very well for us in driving sign up conversion. We are continuing to iterate and optimize that experience to further improve its effectiveness in onboarding members and make the experience more personalized, Getting new members off to a strong start in their weight loss and wellness journey. We know that member engagement in their 1st 4 weeks Correlates to greater weight loss success, overall satisfaction and longer retention. This is just one example of how we are focused Making our app experience even more personalized. We want every member to feel like WW is made just for them, making their weight and wellness journey easier. We're focused on always on innovation, while we continue to build and iterate on the consumer journey. 2nd, building out Digital 360 and setting the new membership vertical up for further growth. Now that we've launched D360 in 5 markets, In 2021, we remain focused on further optimizing the experience and amplifying our coaching expertise. Coaching and community are at the core of our competitive advantage. With D360, I'm confident that with this new cohort of Talented, inspiring and relatable coaches delivering coaching in a modern and unique way can diversify our member base, meet more people where they are and build inspired lasting communities. 3rd, we continue to build momentum and make incredible progress The launch of our new 2022 food innovation, the most comprehensive in our history and rooted in nutritional and behavioral science. Clinical trials are underway and launch and marketing plans are in development. Make member success across wellness and weight loss even more simple, more livable, more efficacious The more sustainable, our next food innovation will make our program that much more personalized. Our leadership and credibility in science based weight loss and wellness is a key competitive advantage and is a key driver of our members' trust in WW. We believe this innovation will be a significant member recruitment driver in 2022. And 4, expanding into healthcare and diabetes. The broader healthcare market represents a significant opportunity for WW over the long term. We're focused on developing strategic partnerships across the healthcare Ecosystem, where WW can be offered as a nutrition and behavioral science based weight management and wellness program. With these partnerships, we hope to make it even easier for more people to join WW. I'm proud of our performance and achievements year to date, The greatest achievement is the efficacy of our science based sustainable weight loss and wellness program that is the foundation of member success. This is the core value of the incredible trust that our members have in WW. As we have said many times before, Wellness is a necessity, not a luxury. Through our work in founding the Healthy Living Coalition, an alliance for action and solutions focused Through our 501c3, WW Good and partnering with organizations such as Global Citizen, we are focused on advancing our social impact Delivering on a global promise to democratize wellness. Our Healthy Living Coalition membership became a Quickly And is now up to 26 partners with new partners like Impossible Foods, Fresh Foods and ButcherBox having recently joined. The HLC's 1st mobilization campaign to promote SDG2 Advocacy Hubs, good food for all narrative Ended in January and resulted in an organic reach of over $20,000,000 focusing on the issues of nutrition insecurity and food justice. In February, we launched the WW Wellness Impact Award, a new initiative that aims to uplift leaders and organizations They are democratizing wellness in their communities. In the U. S, an acknowledgment of the Star Health Inequities Impacting community of color that were exacerbated by COVID-nineteen, for our inaugural year, we committed to exclusively selecting organizations led by and dedicated to the advancement of wellness in Black, indigenous and communities of color. In the U. S. Alone, we received nearly 400 nominations from our member community and 170 applications. We'll be announcing our global finalists on May 7. Right now, the world needs WW more than ever. Stresses of the past year are taking the toll on health. The American Psychological Association's latest Stress in America poll Since the pandemic started, 42% of participants reported a weight gain on average of £29 10% having gained over £50. As the world reopens, WW will be there to help people, all people, themselves and get back on a path to live their best, healthiest lives. As the leading weight loss and wellness digital subscription platform, Multiple membership verticals and revenue streams, we are positioned to emerge from the COVID environment with an even stronger consumer value proposition and a healthier, more profitable and more sustainable business model. Thank you for joining us today and we're now happy to take your questions. The first question is from Glenn Santangelo of Guggenheim. Please go ahead. Yes. Thanks for taking my question. Mindy, I wanted to talk to you about this, the shift towards digital a little bit more. Could you maybe talk a little bit about the changing Graphics of your customer and the impact that it may be having on retention rates. In your prepared remarks, you talked a little bit about this in Digital 360, But maybe if you could address that in a little bit more detail on how this shift may impact your marketing strategy? Thanks. Sure. So if you look at the core of our business, so every member has our digital assets of MyWW Plus. And right now, about 15% of our members Still want the benefit of community, whether it's virtual or physical. But as you could see, The digital plus digital 360 growth is obviously at a much greater percentage. Now the benefits of that to your point We're seeing diversification within our membership base. Obviously, younger, more diverse. Obviously, that has been strategic for us over the course of time. And if you look at our marketing efforts, And just to give you a perspective, you heard us say we have our next virtual tour on Saturday, and then we have a whole new suite Marketing assets launching on Sunday and you will see that across the balance of the quarter with new creative Really kind of addressing what people are feeling right now. But with a significant amount of our marketing assets Now being digital, we have the opportunity to really focus on diverse cohorts. And that's really what we've been seeing and why we're seeing, for example, in D360, 50% New members being millennial or younger and we see that trend opportunity certainly to increase. Glenn, I just want to add on retention because it's another powerful part of the story here. Obviously, you see the quarter in quarter out double digit growth in digital subscribers. But The fact that we're still at all time high retention levels over 10 months with a rapid mix shift to digital Shows that digital members are staying over 10 months too, we're driving fantastic digital member retention. Yes. And obviously, that is a result of heightened engagement because of all the work that we've done Creating a full ecosystem of experiences within that digital framework along with the coaching capabilities. Okay. Thanks for that. And maybe if I just ask a quick follow-up to Nick on the Health Solutions business. Nick, I think you said double digit revenue growth in 2021, But you think that accelerates into 2022 and it wasn't clear to me as to why you expect that inflection next year given That was still in the first half of twenty twenty one. So if you could just elaborate on that a little bit, that would be helpful. And I'll thank you in advance. I think part of it with the post pandemic economy, people needing WW, more than ever, that applies to corporate and healthcare partners too. Part of it is that some of our Strategies in Health Solutions have a longer sales Ramp up, if you will, particularly in aggregators and physician referral, it takes a little bit of time for those initiatives to fully scale. And then the thing I'm probably most excited about is the launch of a specific program next year, a dedicated consumer offering Specifically designed for people with diabetes that we'll be launching in 2022, I think that's an unlock for us. Okay. Thank you. The next question is from Sebastian Barbero of Jefferies. Please go ahead. Hi, team. Thanks for taking my questions. First one, as you mentioned, the workshop subscriber growth reflected in early Q2. I was wondering if you could talk a little bit more of your expectations for the full year to expect end of period subscribers At the end of 2021 to be higher than that at the end of 2020? Just to clarify, we said that work So recruitment year over year has turned positive in Q2 as we've started to Anniversary COVID. Based on those positive nonrecruitment trends, Amy mentioned that the The financial metrics for workshop, including revenue, will get better throughout the year. The only thing I would add to that is we had peak end of period workshop subscribers at the end of Q1 of 2020. And so we'll still be comping end of period subscriber, the sequential decline in 2020, and that gap will close over the course of the year. Got it. Okay. Thank you for that. And then my second one is just a follow-up on the retention. We've been trending at over 10 months For a couple of years now, but can you help me understand what you're going to take for that to jump to 11 months or more and how close are we to that level? Yes. Look, I think the fact that we've gotten through COVID where you can imagine the workshop retention, you've In our numbers was under pressure. The fact that we're over 10 months shows the strength of retention And the digital business and the power of the engagement strategy and those you've heard I say many times before, we want to be talking about retention being over 12 months. And I think we've got the right long term strategies The next question is from Alex Fuhrman of Craig Hallum Capital Group. Please go ahead. Great. Thanks very much for taking my question. I wanted to ask about the online marketplace. It seems like a very new area for WW and seems like there's still a lot of room for that platform to be expanded. So Would love it if you could tell us a little bit more about how you think about adding partners to the marketplace, both in terms of the Brands that you're partnering with as well as the products and capabilities that these brands bring and how many new partners you might expect to see you add this year? Sure. Hi, Alex. As you know, I feel strongly that we have an opportunity Both with our product our WW products, our co branded products And in building out a wellness marketplace, presents an opportunity and a member and even non member Benefit. So if you look at the progression, Phase 1 was launched 100% new products Across all our categories that represent what a healthy living brand is and that we did in 2019. Phase 2 We launched that March 17th last year. So all the numbers we're quoting today really is Really the impact that that has had. Phase 3 is what we're Launching starting now and you'll see moving forward, which is enhanced capabilities to be able to Expand our assortments across all three of those categories, have drop ship capabilities, As well as expanded assortment. We have a significant number New partners that we'll be launching over the next week and beyond to help build out that ecosystem In a more efficient and ultimately even more profitable way, where the big opportunity is, is Yes, of course, building out the marketplace. But second is to be able to have even more of our member base Shopping within our ecosystem because all 5,000,000 have the app and those capabilities. So we really think this has benefits that will continue to grow. And if you just look at the Last quarter with 150% increase in e commerce and that was before any of these new capabilities that we launched. Great. That's really helpful. Thanks, Manit. Just to add Alex, look, the economics of it are great. Wonderful top Offline growth and within our 60% plus gross margins, again you see quarter after quarter here Within that, in the e commerce business delivering margins in the 20s within that mix, it's a fantastic revenue driver. It's a good gross profit dollar contributor also. Yes. And I'll just make one more comment. We are still And expansion of our own WW branded products, both products that we develop as well as future licensing discussions for certain That's great. Thank you. The next question is from Greg Badish Kamian of Wolfe Research, please go ahead. Good afternoon. This is Spencer Hanus on for Greg. I think you guys mentioned that membership trends are now trending positively versus last year for the workshop. But could you talk about how they're trending versus 2019. And then how are pure digital subscriber growth trending quarter to date? So let's kind of give a perspective on that. So as we said, Membership trends, digital membership trends have been consistently in the double digits and It continues to build momentum. On the studio side, what we're saying is we're seeing Certainly lapping Q1, more engagement and more sign ups, but we're not kind of in a comparison to 2019, but we do have the flexibility to be able to, as we said, Double, double our membership attendance in studios without incurring more costs. So Given the flexibility that we've created over the last year, we will be able to scale up As we see demand come in and so that's how we're really looking at it. The only thing I would add there is On the workshop side of the business, be mindful that around the world, many of our workshops are operating at reduced Capacity or not open at all. And so the comparison to 2019 is still going to be a puck for us at this point. Got it. That's helpful. And then on marketing spend, you mentioned $55,000,000 in 2Q, but how should we think about the level of marketing spend in the back half to The unseasonal bump in membership? And then just any update on the competitive environment and what you guys are seeing from Noom and Keto out there would be helpful. Thanks. From a marketing perspective, I mentioned in my remarks that starting in Q2, The aggressive cost savings initiatives really kicked in and the team really stepped on marketing expenses. So we And that impact compared to the original plan in Q2 was $10,000,000 In addition, Mindy has mentioned that we expect to lean into our marketing campaign as consumer sentiment rebounds over the summer. And so at $55,000,000 that will be up in Q2. And I expect that to read through On the full year, I expect back half levels to be fairly in line with 2020. And just to give you a sense, we are certainly maniacally focused on our business, but as well as evaluating the competitive environment at Look, health and wellness right now from a consumer mindset is Significant and there is a lot more emphasis certainly across the competitive landscape, but Also just in consumer mindset of what they want. And so what we're focused on is our differentiation, What we're providing, the science and behavioral science behind what we do and the efficacy of that And the power of community. So to Amy's point, we're certainly leading into the marketing behind that, But really taking advantage of what it is we have to provide to the customer at a time The next question is from Brian Nagel with Oppenheimer. Please go ahead. Hi, good afternoon. Thank you for taking my questions. So I wanted to ask a couple of questions with regard to subscribers. The first one, guess, I think Amy, you would probably talk about this, but just the what you expect to be a different trajectory here in 2021 Subscribers, you outlined the reasons behind that. The question I have is and I recognize you haven't given longer term guidance, but is this a dynamic that we should expect To persist past 2021 or is it unique to this year given the unique circumstances of the year? So Brian, hi. So let me just say that we had an objective prior to COVID to even out The slope and we had actually been seeing improvements. So if you look at 2019 even into 2020, obviously, COVID had an impact. So if you look at the curve this year, obviously, it's It's going to look very different, but our goal is to even out the seasonality and that was a stated goal starting in 2018, so that's really our focus going forward is To be able to be always on in terms of what we have to offer, and a big factor of that was certainly not Advocating our leadership in healthy weight loss, but building a much more fulsome ecosystem around year round wellness and being able articulate that, but yes, that's our goal. Got it. That's really helpful. And the second question I have, If you would, we talk a lot about the subscribers and splitting them between digital and I guess, I'd say, just non digital. So if we go look at closer at those numbers, I mean, have you seen a trend through this, the COVID period with the studios closed that Some of your say non digital members have become digital members or is there a dynamic where the non digital members are simply potentially waiting for the studio To reopen, it's almost like the shadow group of subscribers out there. Okay. So let me talk to that. One of the things that has obviously retained our digital members significantly, if you remember, When COVID hit, we were able to shift all our workshop members to virtual workshops. So our existing members have certainly taken advantage of that. It's obviously had more of an impact in new sign ups. What we are seeing, again, all our members are digital. It's just a subset of members also choose the workshop business. What we are seeing are former digital members upgrading to our new D360 memberships. And in some cases, some studio members going to digital, but we also see as things reopen So we're agnostic About how somebody wants to have their greatest success, but unquestionably our digital membership is going to Scale just based on consumer behavior and us diversifying our member base significantly will just grow at a faster rate. Thank you very much. The next question is from Edward Iruma with KeyBanc Capital Markets. Please go ahead. Hey, guys. Thanks for taking the question. A question On D360, obviously, there's a lot more interactivity, lots more options to coaching. What any metrics you can provide when A member is really engaging with the platform, maybe how their retention, customer satisfaction kind of improves and kind of any Initial tweaks that you're thinking of making to the platform to maybe reduce some of the friction? Thanks. Sure. The Whole genesis of D360 obviously was to really appeal to New audience, younger audience, millennial audience, we say built by millennials, for millennials. And a big part of that Was the integration of coaching, content and community. So the content team that actually Our team that built the original physical Oprah tour, the virtual tours have been working closely with the product and tech And develop a coaching community that not only will retain, but will also recruit because these are very external facing Coaches as well. So that's what we're seeing right now. Obviously, it's new to your point. So we're looking at every opportunity and as we go into new markets to refine the experience, create greater engagement, to create greater support, but we are very pleased with what we're seeing to date and what it means for the future. The next question is from Michael Lasser of UBS. Please go ahead. Good evening. Thanks a lot for taking my question. So, Vinny, I want you to can you clarify some of your comments previously about, so every studio subscriber is a digital subscriber, But how many of those who would have signed up for the digital business are now simply signing up for the These who would have signed up for the studio business are now simply signing up for the digital business such that Overall subscribers are flat. Does that make sense? So let me just say again. There has obviously, right, the Fact that studios are closed or at very limited capacity for quite some time, that has affected new studio sign ups And that makes sense. So clearly, we do have lapsed customers who've come in. And yes, Some of them have signed up to digital in the interim, but a big significant portion of our digital sign ups For new sign ups, both in Digital and Digital 360. Where we're seeing the upgrade is from Former digital members upgrading to D360. It's a different cohort, right, than the traditional studio Cohort? Yes. I mean, we've been talking about a fantastic quarter on quarter double digit Digital subscription growth story regardless of whether studio members are waiting for in person to come back. So in the meantime, are choosing This is Sean instead. During the pandemic, have we seen a little bit more switching activity toward upon workshops To additional, of course, we have. It's a very small driver of the strong quarter in quarter out digital subscription growth, sorry. That's not where the growth driver is coming from. And my follow-up question is on Gross dollars per subscriber, which is still down despite very strong digital growth or maybe because of very strong digital growth. So when do you think you're going to see that inflection in gross dollar per subscriber number? So I think of gross subscriber or gross dollars per subscriber in revenue per paid week. And you're right, the mix shift just like the impact on our revenue shifting from workshop to digital Has a significant impact on revenue per paid week. Candidly, I've been very pleased With the revenue per paid week on a sequential basis, given the environment. And so I believe that as we continue to see the mix shift to digital, you'll see the revenue per paid week Continue to decline slightly, but with the launch of D360 at the mid tier price point, We expect to be able to increase that total digital revenue per paid week. The other thing that we are Seeing is more people signing up for much longer term plans and that's been very important and positive as well. Yes. Look, in terms of the economic drivers of the business, but bear in mind that from an LTV standpoint, LTV given the 80% gross profit of the core digital member, LLTV during this mix shift has held pretty steady. Thanks, Dennis. Last quick question. Do you have a sense of what D3C subscribers as a percentage of total digital subscribers could eventually be? Yes. It's interesting. Clearly, we just launched in January. We're real pleased. We think it could be certainly A greater percentage of the business that we're seeing now even in the markets that we launched in January, We have not done significant marketing. We're refining. We're launching. But our goal is to have it be A much higher part of our digital ecosystem than it is now. I don't have an exact number Right now, but we're certainly focused on it. Thank you so much. This concludes our question and answer session. I would like to turn the conference back over to Mindy Grossman for closing remarks. Thanks everyone for being here today. So in closing, I just want to reinforce, business has strong momentum. We're well positioned to deliver subscriber revenue and profit growth over the balance of and for the full year. And I want to thank the exceptional work of our teams around the world around creativity, innovation and focus because that's been Essential in accelerating our digital transformation. Also, we've continued to focus on The efficacy and the innovation around our science based sustainable weight loss and expansion into wellness because that's Truly the foundation of member success, but really heightened around coaching and community, which really are at the core of our competitive advantage. So as the world reopens, which we're starting to see the glimmers of, as I think you've seen in the market as well, We are ready and focused on motivating and inspiring people worldwide because this is their moment and WW is the partner to their wellness So again, thank you for joining us today, and we very much look forward to keeping you updated throughout the year. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.