Earnings Call: Q2 2021

Aug 10, 2021

Good afternoon, and welcome to the WW International Second Quarter 2021 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Corey Kinder, Investor Relations. Please go ahead. Thank you to everyone for joining us today for WW International Second Quarter 2021 Conference Call. The purpose of this call is to provide investors with some further details regarding the company's financial results as well as 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 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 Securities and Exchange Commission. Please refer to these filings for a more detailed discussion of forward looking statements and the risks and uncertainties of such statements. All forward looking statements are made as of today and except as required by law, the company undertakes no obligation to publicly update or revise any forward looking statements whether as a result of new information, future events or otherwise. Joining today's call are Mindy Grossman, President and CEO Nick Hodgkin, COO and Amy O'Keefe, CFO. I will now turn the call over to Mindy. Thank you, Corey. Good afternoon, everyone. When we spoke to you in May, we believe that as the world reopened, the timing of which would vary by geography, Consumers would be increasingly inspired to restart their health and wellness journeys, creating a demand lift outside of our typical seasonal cadence and positively impacting the entire category. However, the strong digital year over year growth momentum in Q1 Slowed in the Q2 as we cycled against strong digital performance in 2020. Therefore, our results did not meet our revenue While people are acknowledging their need for recommitting to weight loss and wellness, our recent consumer research shows And at the moment, they're also asking for a pause to enjoy social reconnection. With both traffic and search under pressure, This sentiment shift appears to be across the weight loss and wellness category. Our updated financial outlook reflects our revised expectations for full year subscribers, revenue and operating income. Since we cannot assume that sentiment will snap back in our favor During the post Labor Day back to school season, which historically has been a reset moment, at this time, we're planning appropriately and are implementing a comprehensive plan to optimize our second half performance. We're extremely excited about our food program innovation launch and We are continuing to manage through the evolving environment with agility and flexibility while we make progress on developing and preparing for the upcoming innovation launch later this year. We will discuss our performance improvement actions in further detail shortly, but first I'd like to review the key highlights of the 2nd quarter. We ended Q2 with 4,900,000 subscribers, down slightly year over year and from Q1 end. We ended the quarter with digital subscribers of 4,100,000, up 6% year over year and a record high for a Q2 end with subscriber growth in each of our major markets, increasing retention And adoption of our new Digital 360 membership helping drive continued growth. While at strong level overall, it is down from 16% growth in Q1. Now available in our 5 largest geographic markets, Digital 360 ended the quarter with 230,000 subscribers, up from approximately 150,000 at the end of Q1. By modernizing how we deliver the WW program, this industry first interactive coaching and content experience is generating excitement for both new and returning WW Digital members who are upgrading to this premium membership. End of period workshop subscribers were 748,000 in Q2, up slightly from the end of Q1, A notable improvement in the trends as we unlock pent up demand from members who find an in person coach at community to be essential to their weight loss and wellness journey. Our Workshops business now has a more flexible cost structure. We are managing this business in a new way that can accommodate a range of volume scenarios, while still delivering strong gross margins. Overall, member retention continues to extend at an all time high of over 10 months. In addition to continued strong digital retention, which is now nearly 11 months. Workshop retention has improved sequentially each month since February, Recovering from the temporary contraction due to COVID. As we have discussed many times, we are highly focused on continuing to grow retention with the aim of having it exceed 1 year. Achieving that goal would provide a notable unlock in our subscription model and reduce the seasonality of our business. Turning to our consumer products business, which includes our e commerce channel. It is only 18 months since we incorporated e commerce into our app, And we believe it is a solid platform for continued growth. Total consumer product sales were in line with the prior year period, But below plan due to a combination of internal and macro factors and as we cycled against the extremely performance a year ago at the start of the pandemic. This is the 5th consecutive quarter we delivered an adjusted gross margin of approximately 60% or higher, demonstrating the strength of our high margin digital subscription model and the enhanced flexibility of our cost structure. In summary, over the past 12 months, our global teams accelerated our digital transformation and successfully drove our business forward through innovation, creativity and focus, all while navigating an uncertain and dynamic environment. Moving forward, we have a comprehensive plan to optimize performance in the second half and position WW for growth in 2022 and beyond. I will speak more about our go forward plans, including our upcoming 2022 Food Program Innovation and Marketing Plan shortly. But first, I will turn it over to Nick to discuss our operating performance in more detail. Thank you, Mindy. I'd like to share some additional color Underperformance of our global markets. We ended the quarter with digital subscribers of 4,100,000. While the Q2 ends high, this was lower than expected. As Mindy discussed, consumer behavior and motivation for weight loss and wellness Did not spike in the way we had anticipated. Instead, sign up trends followed a more typical seasonal pattern. Therefore, the extended June U. S. Campaign and incremental marketing investment in TV and digital Did not drive the impact that we had hoped. In April, D360 launched in Germany, France and Canada, Delivering an interactive in app coaching and content experience uniquely adapted to each market. Serving approximately 230,000 members in 5 global markets, our data and analytics capabilities continue to advance and inform our optimization of the D360 experience driving engagement, satisfaction and weight loss success. While workshop end of peer subscribers continued to be down year over year, which was due to the significantly low starting base As a result of the pandemic pressure on recruitment over the past year, the trend is improving. U. S. Workshop sign up trends have been positive, while the recovery is slowing countries that have not yet reopened or remain under tight frustrations. Over the past year, we have realigned our physical footprint. So we are now emerging with the most flexible cost structure we have ever had. We are managing this business in a new way with a small and fixed footprint augmented by highly flexible Studio apps or 3rd party locations as well as a highly scalable virtual workshop experience. We have initiatives underway to further optimize this business and we aim to return workshops to a 40% plus Gross margin in 2022. As part of our restructuring plans, we closed 64 of our U. S. Studios in Q2, resulting in the $5,000,000 restructuring charge in the quarter On top of the 127 closed during Q1 and about 150 closed during 2020. As a reminder, we expect to have approximately 450 WW Branded Studios in the U. S. At the end of 2021, down from about 800 pre COVID. These locations are augmented by a highly flexible network of 3rd party studio at locations, which are very short term, typically hourly rental arrangements. As the demand environment continues to improve, we anticipate ending the year with about 600 such locations in the U. S, Ensuring the availability of WW Workshops to the majority of the population with over 70% of U. S. Households within a 15 minute drive of a location and about 90% within a 30 minute drive. Our virtual workshops, which were created out of necessity at the beginning of COVID, continue to be a valued experience Even as members return to their local in person workshops, as many members enjoy the convenience of having both, We believe virtual workshops will continue to be a powerful tool for member engagement and retention. Finally, our Consumer Products business. We are confident in the e commerce growth opportunity and This channel to be an approximately $100,000,000 revenue business in 2021, up about 35% year over year, Positioning us for accelerated growth in 2022. Even with all the e commerce success we have seen over the last 18 months since we relaunched this business and integrated it into our IR app. We are still just scratching the surface. Our growth initiatives include further integration into the app experience, Driving repeat purchases, maximizing week 1 orders, enhancements to member marketing and offering a broadened assortment of products without carrying additional inventory through marketplace partners. While traffic to our e commerce shop was lower than anticipated in Q2, largely due to member sign ups coming in below forecast, We are pleased that members are back to shopping in our studios in the U. S. Total consumer product sales were relatively flat year over year on a global basis. On the broader macro side, a number of challenges are impacting global supply chain lead times, which resulted in many of our popular products Being out of stock during the quarter, we are addressing these issues and expect e commerce sales to return to growth in Q3. In summary, while our overall performance did not meet our expectations, we are taking course corrective actions and have a clear plan to maximize performance in the second half. Our record high 61% adjusted gross margin It's testament to the reductions in our fixed cost structure and to the strength of our digital subscription model. Before I turn it over to Amy to review our future financial performance and outlook in more detail, First, I'd like to reiterate our focus on the healthcare and diabetes market. As we have discussed, Diabetes is a particular area of focus. We see a clear opportunity and responsibility to provide a solution for this population's unique needs. According to the American Diabetes Association, In the U. S. Alone, nearly 27,000,000 adults have been diagnosed with diabetes and there is a high correlation between obesity in Type 2 diabetes. As Mindy will discuss shortly, by introducing a tailored food plan For people with diabetes, in 2022, we aim to better serve this population with our science based, effective and proven program. And now, I'll turn it over to Amy to discuss our financial performance and outlook. Thank you, Nick. Compared to our prior outlook, Q2 was a challenging quarter for the top line. Plan for digital subscription revenue and consumer product sales. While up 6%, we expected digital subscribers to be up in the double digits at the end of Q2, but strong digital performance in the prior year proved to be difficult to outpace in this environment. In Q2 of 2021, total revenue of $311,000,000 was down 10% year over year on a constant currency basis, with a workshop subscription revenue decline of nearly $50,000,000 or 43% in constant currency. This was partially offset by a growth in digital subscription revenue, which increased 11% year over year on a constant currency basis in Q2. Digital subscription revenue is now 75 percent of total subscription revenues. We ended Q2 with 4,900,000 Scribers down 2% year over year. The 6% increase in digital end of period subscribers largely offset the declines in workshop subscribers. At Q2 end, 85% of our members were digital subscribers. Adjusted gross margin was 61%, up approximately 100 basis points from the prior year as a result of the mix shift to a larger digital subscriber base. Additionally, timely cost reduction actions taken to right size the fixed cost base of the workshop business Mitigated further deleverage. The planned reductions to our workshop real estate footprint continued in Q2, resulting in a $5,000,000 restructuring charge in the quarter. In addition, our refinancing transaction closed within Q2, resulting in a one time debt extinguishment charge of $29,000,000 Incorporating the 0.3 $0.06 negative impact of restructuring and debt extinguishment costs, Q2 GAAP EPS was 0 point 12 dollars Turning to our outlook for the full year. In light of current trends, we are planning the second half of the year more conservatively than our prior plan and are reinstating our practice of providing full year guidance. Incorporating Q2 member sign up trends into our full year outlook, We now expect full year 2021 revenue to approach $1,300,000,000 Digital revenue is expected to be up approximately 10% year over year, offsetting more than half of the expected decline in workshop revenue. Consistent with current trends, we are modeling end of period subscribers to be more in line with historical seasonal patterns, despite continued improvement and retention and the support from the food program innovation launch in Q4. At year end, we expect the mix of digital and workshop subscribers to be consistent with last year. Gross margin for the full year is expected to expand by approximately 2 75 basis points from prior year, which is up from our prior estimate. As Mindy mentioned, we continue to be focused on cost management to maximize back half financial performance with a revised revenue outlook. The same disciplined approach that we took to evaluating our workshop fixed cost structure is applied to every investment decision, Prioritizing investments in digital product and technology growth initiatives that drive member engagement and retention. Excluding restructuring charges, we now expect full year G and A expense to be approximately $270,000,000 to $275,000,000 This reflects a more than $10,000,000 reduction of G and A expense compared to our prior 2021 outlook. In addition, we will continue to execute our marketing strategies efficiently, investing behind our fall and winter campaigns to maximize member recruitment, while remaining flexible to balance investment with impact. We expect Full year adjusted operating income in the range of $240,000,000 to 255,000,000 GAAP EPS, which incorporates an approximately $0.53 per share negative impact from one time items, Is expected to be in the range of $1.10 to $1.25 which is above the $1.07 we reported last year. Note this reflects the benefit of lower interest expense from our debt refinancing. To assist with your modeling of Q3, Revenue is expected to be down in the low single digits, which is an improvement from the workshop driven declines in the first half. Growth from digital revenue and consumer products and other revenues is expected to offset a nearly 25% Year over year decline in the workshop business. Marketing expense is expected to be approximately $40,000,000 in the quarter, relatively flat year over year. And G and A expense is expected to be under $70,000,000 up about $10,000,000 year over year as we lap The temporary cost savings initiatives in the year ago quarter. We expect to incur one time restructuring costs in the range of At Q2 end, we had approximately $126,000,000 in cash and an undrawn $175,000,000 revolver. We ended the quarter with a net debt to EBITDAS leverage ratio of 4.3 times. Reflecting the new interest rates on our debt, our full year interest expense is now expected to be 88,000,000 Excluding the impact of restructuring charges on our P and L, we expect our full year tax rate to be approximately 22%, which assumes no changes to the current statutory rate. CapEx, primarily driven by capitalized software, to be in the $40,000,000 range in 2021. D and A is expected to be $46,000,000 including accelerated depreciation related to Studio closures. We expected our year end net debt leverage ratio to be closer to 4 times by year end. In addition to continued investments in technology and digital product resources, which fuel the future growth of the business, We will continue to evaluate the potential to acquire remaining franchise territories. In summary, we are taking decisive actions to mitigate the impact of the current demand environment. We are confident that we are effectively balancing near term performance expectations with Advancing Growth Opportunities in 2022 and Beyond. I will now turn the call back to Mindy. Thanks, Amy. As we discussed on our last call, we have been focused on 4 key priorities for 2021: 1, creating greater engagement and elevating the member experience, which is clearly driving retention. 2nd, building out Digital 360 to expand and diversify our member base by elevating content, coaching and community. 3rd, preparing for the success of our 2022 Food Program Innovation, leveraging science leadership to drive growth. And 4th, expanding into health care and diabetes to reach new audiences and have a greater impact on health outcomes. In addition, we have developed a comprehensive plan to maximize performance in the back half of the year. Our focus is on Executing key marketing initiatives. As we plan our fall marketing campaign, our research shows that the livability of the WW program Continues to resonate with consumers who are in the mindset to start a weight loss and wellness journey. We intend to continue focusing And how WW allows you to achieve your goals while being able to enjoy life fully, reinforcing our superior weight loss efficacy And sustainability messaging. Our fall advertising creatives will feature Real WW members sharing their stories and celebrating success. You'll see these messages across all touch points across paid, earned and owned channels. As we prepare to launch our new food program innovation with the most comprehensive winter campaign in our history, We are thrilled that Oprah has been deeply involved and is excited about the potential to motivate people as they recommit to prioritizing their health and wellness. Now more than ever, she feels that WW can be that partner to help people live their best, healthiest lives. 2nd, advancing our data science and analytics capability. Over the past year, We have re architected many of our processes and systems to provide greater insights into member engagement and behaviors and instill a data driven culture across every area of the business. We're applying key insights from our data teams across every aspect of our operations to further Personalize the member experience, maximize engagement and efficacy, enhance marketing efficiency and expand lifetime value. And finally, managing costs tightly. As Amy discussed, we are applying strong cost discipline throughout our organization, taking costs out of G and A and investing only in the areas that will drive growth. Now I'd like to close with an update Our 2022 Food Program Innovation Plans. As we have previewed earlier, our 2022 Food Program Innovation We'll make our program even that much more personalized. Where MyWW created our first program That matched you with the food program that will work for you, our next program will design a plan uniquely and specifically for you by incorporating your personal preferences to create a flexible, customizable, holistic plan that is as unique as you are. In combination with an enhanced and engaging member onboarding experience, we are confident that the new program will make weight loss and wellness even more simple, livable, efficacious and sustainable. Our leadership and credibility in science based weight loss and wellness, The key competitive advantage and is why our members trust WW. We are highly encouraged by the 3 month data from University of Connecticut study of our new food program, which showed impressive improvements in weight as well as consumer acceptability, livability and well-being. Our upcoming 2022 food program is an essential part of launching a dedicated WW offering specifically designed for people with diabetes. As part of the overall food program innovation launch later this year, Members who indicate they have diabetes will receive an individualized food plan tailored for their food needs. We are currently conducting a clinical trial testing our diabetes program and consumer testing is also well underway. In our pilot, participants have been highly satisfied with our new food program and its tailoring to people with diabetes. Importantly, the 2022 food program innovation is just the first phase of offering a comprehensive WW diabetes program. We have a robust product road map for a broader launch in the second half of twenty twenty two, encompassing content, features and support specific to this expressed consumer need. The cross functional multiyear effort behind this innovation Was the most comprehensive and well executed that I have seen. We believe our food program innovation will be a significant member recruitment driver in 2022. Clearly, we are taking actions to improve the near term trajectory of the business, and we remain focused on executing the critical priorities that will drive profitable growth in 2022 and beyond. There is no shortage of statistics and stories about weight gain during the pandemic. A research letter published The Journal of American Medicine in March 2021 found that Americans who sheltered in place pay more than a half a pound every 10 days, which could mean £20 plus in a year. In the U. K, Public Health England survey of 5,000 adults found that 41% said they've gained weight since March 2020, putting on nearly half a stone on average and 21% putting on a stone or more. While the timing of everyone's next normal is highly personal and may vary greatly by market and individual situation, It is clear that the world needs WW more than ever. As the number one doctor recommended weight loss program, we will be there providing guidance, motivation and support whenever they are ready to begin their weight loss and wellness journey. So in closing, I want to highlight the following points. Overall member recruitment trends are following a more typical Seasonal pattern than we anticipated early this year. We continue to benefit from our flexible digital subscription based model With strong gross margins. We are seeing interest in workshops increase as the economy reopens, demonstrating the relevance of our workshop offering. Retention is at an all time high as we see strong engagement amongst our members. We are managing our cost structure, particularly in the second half of this year, and preparations for the launch of our 2022 Overall, we are confident we will expand our global impact and deliver on our vision for value creation and growth. Thanks for joining us today, and we are now happy to take your questions. We will now begin the question and answer session. The first question is from Steph Wissink of Jefferies. Please go ahead. Thank you. Good afternoon, everyone. Mindy, I want to come back to a comment in your opening remarks regarding just the overall level of fatigue with wellness and give us some other data points that you're seeing that might signal that it's not just WW, but maybe a more broader macro issue related to so overall level of attention on wellness. Sure. I'll answer that, but let me kind of give you some context of what we saw from the last We had a conversation about trends and why we were more bullish going into Q2. The momentum that we saw in Q1, which Was significant double digit growth, was continuing and feeling that with the world opening up That would incentivize people to want to go further on their weight and wellness journey. That did not happen to the degree we expected, particularly as we were comping very significant digital growth across Q2. As you know, we do significant qualitative and quantitative consumer sentiment work. We had done that in Q1 starting in January, and we did that again across multiple countries. What we did learn from that is that to my earlier point, with people in many Markets, particularly our largest market, North America in U. S. Coming out, people wanted to focus more on their enjoyment Then immediately going into a weight loss program, particularly in the summer months. Additionally, we've been following the data points of everything from Google Trends, other data points, And we have seen suppression overall in the weight loss category. So it's a combination of those things That did not enable us to achieve our original expectations for the quarter. Yes. Mindy, look, the only thing I'd like to add there is, as you heard in I'll remind you, given the prevalence of weight gain during the pandemic, It does feel like a temporary dislocation. We can't be exactly sure when it's going to bounce back, but we'll be ready with our spring We will have full campaign that starts September 1 to drive interest in our program. Okay. That's helpful. And then maybe Amy as a follow-up to that, just what's contemplated in the guidance for the year as you think about the second half and The effectiveness of that fall marketing campaign or are you carrying forward the current run rate that you saw exiting the 2nd quarter? Yes. If you look at the current spread of guidance, we felt it was appropriate to take a more conservative approach. Clearly, we're doing everything we can to maximize our performance and in particular our digital growth in the back half. As Nick mentioned, our campaign launches September 5. We felt strongly about it as well as you heard me speak a lot about Our launch of our innovation starting in November with our big marketing campaigns coming out after Christmas. So the Combination of those three things, obviously, we feel we have the potential to accelerate growth. But in the current guidance, given What we experienced in Q2, we're trying to be appropriate. And specifically, our guidance reflects Our end of period subscriber curve follows a more historic seasonal trend. And so, I think that you'll find it's a more conservative approach to the back half and we're looking at our cost base accordingly and making changes as appropriate. Okay, that's great. Thanks for all the help. The next question is from Michael Lasser of UBS. So it seems like the dynamic that's happening is People have been stuck at home. They're excited to get out. So the last thing or not as excited to go And focus on their wellness. How long do you think that's going to last? And are you seeing any regional differences, Whether it's in the U. S. Or around the world, you could point to as evidence to say, hey, for those markets that are going through X, Y and Z, I actually think that our trend is to provide us with some level of confidence or encouragement that this will be a short lived type dynamic. Yes. Just to give you a perspective, typically on the seasonality, you see the research up After Labor Day going into the fall season, that's the normal seasonal curve that we would normally expect. But as I mentioned before, we're trying to be strategic and appropriate in the guidance, but Clearly, we're putting all our efforts into maximizing the fall season going into winter. I can let Nick talk a little bit more about Kind of market differentiation? Yes. In terms of market differentiation, our Digital trends around the world, I would say, are more similar than different. The main difference in our Trends has been positive trends in workshops, particularly In the United States, as you'd expect with a lot of the international countries being effectively On lockdown in Q2. And as we look forward to your question, Michael, can't be exactly sure whether it will bounce back. Back to school season has definitely been a strong moment for this company. We do know that we've got a great food plant innovation coming and that Historically, it has lifted all boats and it's been a particularly good moment to bring Lapsed workshop and digital members back to the brand with a food plan innovation. And I know it's early, but as we look out towards 2022, you're going to have the new food innovation out, you're going to have The consumer being further into the reopening and maybe at that point a little bit more focused on wellness, You'll have more time with some of these strategies under your belt. Is 2022 a year that we can expect Your performance will be nicely higher than 2019. Were there any obstacles that you see standing in your way That will lead to longer lasting challenges that you're going to have to face? Yes, Michael, that would be our expectations. And if you recall, We entered 2020, having launched MyWW with tremendous strength. If you look at Q1 2020, even with the challenges in the last Few weeks when everything got shut down for COVID, it was very strong performance, particularly from Q4 to Q1 and then Just Q1 year on year in general, obviously, we spent a significant amount of time in 2020 Really focused on rightsizing the workshop business, some of the challenges there, continue to focus on our digital subscription business, our technology, etcetera. So we feel that the opportunity certainly in 2022 It's to get back to the trajectory that we feel the business has an opportunity to achieve. And even to put some more color on that, Michael, Mindy mentioned the Q4 to Q1 lift in a food innovation launch. If you go back to 20 Drivers by a little over 40%. And so we're really excited about the impact of the food program innovation and 2022 growth. Thank you so much. The next question is from Edward Yruma of KeyBanc Capital Markets, please go ahead. Hey, good afternoon. Thanks for taking the questions. I guess first, as you look at I know that you normally have a consumer that maybe back every couple of years to the program. Are you seeing any trends in the returning consumers in terms of the frequency by which you're coming or the interval? And in particular, are you seeing any changes in whether we enter digitally or in the physical studios? Then just kind of a bigger picture question. We've seen a lot of discussion over many years on body positivity. I know a lot of people lose weight for different Health and aesthetic, do you think that there are any bigger picture changes that are maybe changing the interest in weight loss? Thanks. Sure. I'll talk to them both. In terms of our member profile, what we didn't see is this Huge returning influx of studio members going to digital. What we're seeing now is Studio members that miss their studios coming back because they want that coach, they want that community. So I think that's important to note and we're seeing the trend of studios coming back obviously in the markets where Things are more open. What we also tend to see in particular In a food program innovation year is a very strong influx of lapsed. So if you recall in 2020, And not only did we have strong digital subscription growth in the quarter, we had strong studio Growth as well in both lapsed and new. So we see that opportunity there. I'd say the third thing with the launch of D360, we're seeing diversification of our member base As well as digital members coming in and upgrading to the more Wholesome vertical, which obviously is at a higher price point. So it's a benefit to us. So that's like the member side. I would say on the body positivity side, I think what people don't realize is we're probably the biggest proponents of body positivity And in the marketplace, we don't tell people what they should weigh. We say, what does healthy mean to you? And that was very significant in our move to a holistic approach to wellness, certainly incorporating weight loss. But to really build out our full ecosystem of health to be able for people to determine What they wanted to be. And that message from us is carried and very clear because to your point, it definitely is a movement. Thank you. The next question is from Lauren Schenck of Morgan Stanley. Please go ahead. Hi. This is Nathan Fether on for Lauren. Just two quick ones from me. On the first part, to what extent was Kind of a higher marketing rate environment, a headwind to recruitment within the quarter. And then, are you able to give any update on The Health Solutions business, I know previously you had talked about that being a potential boost, kind of countercyclically to second half subscribers. Are you still potentially expecting that in the back half? Thank you. Can you repeat the marketing question one more time? Yes. So just on marketing, did you see any potential headwinds from an efficiency perspective from the higher rates in the quarter? Yes. So we have done a tremendous amount of work over the past years and really working on the efficacy See of our marketing spend, clearly in some channels there are certain pressures. We've also diversified Our marketing spend across platforms and channels, so that's what we really focus on. And in particular, You'll see that focus in our fall marketing campaign across platforms. I'll let Nick talk to Health Solutions. Yes. Look, we are very bullish on our long term healthcare and diabetes Growth opportunities and Adam Kauffman and the team are very focused on delivering That growth. On the Health Solutions side, wonderful growth potential There, considering our sales efforts with our aggregator partnerships Such as CBS physician referral, etcetera. And as you heard, We're particularly excited about this entry into the diabetes market. In tandem with our Food plan innovation for people with diabetes being able to identify themselves and get a tailored individual food plan That suits their needs is a huge step forward for us and serving a very important segment. Okay, great. Thank you. The next question is from Jason English of Goldman Sachs. Please go ahead. Hey folks, thanks for stopping me in and good evening. A couple of quick questions. First, Mindy and team, I know in the past we've talked about Russell, Mark, and you've consistently said, listen, your biggest competition is your biggest opportunity to source from is do it as a DIY consumer, Which by nature implies the biggest competition. And if we look at packaged food sales, like Atkins is having a banner year right now with sales up handily about 2019. Last time I looked at SlimFast, it looks similar. So the data there doesn't suggest that the consumer is disengaged with weight loss. Instead, it suggests they just may be engaged with weight loss on a DIY basis. Love to hear you weigh in on that view, because it sounds like you've taken a holistic view of the market. I perhaps maybe have a bit more of a myopic view. Would love to be able to hear how you put that in perspective or what we're seeing on the DIY side versus what you're saying is a broader Consumer movement or lack of movement towards weight loss right now? Well, I would say it's a combination. We have Always said that our biggest competition is consumers trying to lose weight, get healthy themselves. That we don't see changing, right? I think that's been the history of the company whenever we talked about Competition, we've always said that competition is competition directly in the category, paid competition is DIY and competition, particularly in the digital world is the last great experience someone had. So all that being true, What we're saying is in addition to that, we definitely saw some macro pressure specifically around desire for Immediate weight loss coming out of kind of the COVID lockdown. That's kind of what we saw. Okay. But it does look like the bigger challenge is not getting consumers focused on losing weight, it's getting them focused on paying Or a subscription based service to lose weight. I think it's a combination. Maybe. It might be, I think, you what, 94% of the consumers DIY, and it's the 5% that pay. So it could be. But either way, I know Amy mentioned that this product program It's expected to bring a lot of energy. And I think you actually compared it to SmartPoints and Freestyle, which were Pretty big sweeping program changes. So maybe I'm not really underestimating this product upgrade if you're putting on the same playing field as those. So can you give us some more context and color around the magnitude, like what you're bringing, what is the support that's going to give us the kind of energy we saw from those 2 big program changes? And I would actually add a third, myWW was as significant. One of the things that is definitively one of our greatest assets is the Scientific work that we do around innovation and constantly iterating on our program to make it more livable, more efficacious And definitely in this circumstance more personalized. So think of every person having their Personalized WW program. That's very powerful. That's a very strong message. I mentioned before that we're Very pleased with our clinical trials. We're further ahead than we've been in years past. So being able to craft Our messaging, our launch strategies, and you can tell my enthusiasm, I was here for the launch of Free So this is a launch that we plan on amplifying significantly. Okay. I'm eager to hear more. Thank you so much. I'll pass it on. Sure. The next question is from Doug Lane of Lane Research. Please go ahead. Yes. Hi. Good afternoon, everybody. Can I drill down a little bit more on the Digital 360 effort? How is that performing relative to Expectations, what have you learned so far, a couple of quarters into it? And then what do you see on the horizon for changes heading into 2022? Yes. So we're very enthused about the opportunity for D360. If you recall, the reason we created this new vertical was very specifically to go after Younger audience, very specifically to focus on this idea of coaching On demand content and community, and that is what we are seeing. Now obviously, with a very new vertical that's Very different, an entirely new cohort of coaches in every market that's been launched, Much more external facing than what our traditional coaches were, for example, in the field. So the product teams have been working very closely with the content teams to really Keep honing the experience to keep elevating the engagement, which we're continuing to see, So we can be ready to really more aggressively market and go after new audience. But everything that we're seeing to date relative to the vertical is very positive. So I just said about 50% of first time D360 members So millennials, so it's really attracting a broader audience. Okay. Sorry, I stepped on you there, Nick, but is it living up to expectations? Yes. Yes. Attracting 50% millennials are younger in terms of first time D360 joiners. And As we in December, I would have said I'd be thrilled to have 230,000 subscribers. Okay. Thanks. That's helpful. This concludes our question and answer session. I would like to turn the Thank you, everyone. As you heard today, We have a very comprehensive plan to optimize performance in the second half of the year and in addition ensure that we're positioning ourselves for growth in 2022. Our fall campaign launches September 5 and will be amplified across all platforms to take advantage of what we know is the seasonal engagement in that area. We're excited to launch our new food program innovation in November, which we're confident will drive year over year growth in member recruitment and certainly position us For a successful 2022, we're seeing improved performance in the Studio business, now with a significantly more flexible cost structure. Retention continues to expand, D360 has momentum and our flexible digital subscription based model is delivering strong gross margins. And I think those are the important things to take away. I'd also like to thank our teams around the world for their work, their agility, their focus, which has certainly been essential in accelerating our digital transformation over the past 18 months, allowing us to provide even more value to members and delivering coaching and community in new ways. So thank you again for joining us today, and we certainly look forward to keeping you updated on our progress throughout the year. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.