Good afternoon, and welcome to the Weight Watchers First Quarter 2014 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Corey Kinger. Please go ahead.

Thank you, Ed, and thank you to everyone for joining us today for Weight Watchers International first quarter 2014 Conference Call. With us on the call are Jim Chambers, our President and Chief Executive Officer; Nick Hotchkin, our Chief Financial Officer and Dan Crowe, our Chief Technology Officer. At about 4:00 p.m. Eastern Time today, the company issued a press release reporting the fiscal 2014 first quarter 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 www.weightwatchersinternational.com. Reconciliations of non-GAAP measures disclosed on this conference call to the most directly comparable GAAP financial measures are also available as part of the press release. Before we begin, let me remind everyone that this call will contain forward-looking statements. Investors should be aware that any forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here today. These risk factors are explained in detail in the company’s filings with the Securities and Exchange Commission. Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of such statements. All forward-looking statements are made as of today and except as required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. I would now like to turn the call over to Jim.

Thanks, Corey, and good afternoon everyone. Thank you for joining us. Since our last earnings call on February 13th, we have been focused on advancing our transformation plan and my remarks today will cover our progress. In addition to taking you through the details of our Q1 financial results, Nick, will give you a progress update on our cost management initiatives and review our outlook for 2014. Also here with me today is our Chief Technology Officer, Dan Crow, who joined the company late last year. As we indicated our last call, we have asked Dan to speak directly with you today about our technology reinvention, with an emphasis on how it relates to creating new products. I'll get started with a progress update on our transformation plan. To recap our four strategic pillars are, one driving immediate performance improvement. Two, reimagining our core offering. Three, growing our healthcare business. Four, strengthening our organization. Turning to our first pillar, driving immediate performance improvement, the competitive frame of the weight loss market continues to evolve as free apps and activity monitors generate significant consumer interest and influence to trial dynamics in the category. In that context, our pillar one performance priorities for 2014 are centered on consumer activation, member engagement and cost reduction. Q1 revenue of $409 million and net income of $21.5 million or $0.38 per share came in better than expected. The continued significant year-over-year declines reflect the fact that we are still facing serious challenges, especially in North America and the U.K., which saw declines in paid weeks, both in meetings and online. That said, our recruitment trends while still negative are no longer getting worse. In response to continued weak recruitment performance early in Q1, our business units took quick action, which helped our result somewhat as…

Thanks, Jim. I am very excited to join Weight Watchers as the new CTO. Technology is central to the company's future. I believe we have a great opportunity to uplift our technology capability and drive real product innovation, which combined with our considerable assets will help return this company to growth and expand our leadership position. A little background, I have a broad technology perspective developed as a consultant with IBM, Delloitte and Accenture and as an operator. This is my third sea-level executive role leading a technology and product organization. Previously, I was Chief Information Officer and then Chief Product Officer AutoTrader.com, the leading online automotive marketplace. My kind of fame there was that I helped to build a tremendous product development capability that jumpstarting innovation and propelled AutoTrader.com to market leadership. We won many J.D. Power awards for consumer experience and we were able to compete and win against other nimble startup as well as free alternatives like Craigslist and Google Organic Search. I am bringing that same commitment to innovation and startup energy to Weight Watchers. We need to uncork the pent-up demand for innovation and I feel confident that we can do so. I have been here five months now and I feel like I have my arms around the situation. It's obvious that Weight Watchers has had success in the past with technology. The online offering had been successful in what I would characterize as a mid-2000s technology model and when I arrived the team is still working in that model. We should all appreciate that Weight Watchers' technology runs a large-scale operations, supporting millions of members, millions of downloaded apps around the world and tracking over 1 billion food items in our database, but that is not enough. The great commercial success of our…

Thanks, Dan. To repeat what Dan said, we are all committed to a 12-month horizon for turning our technology base from the legacy challenge into an enabling asset. We have the resources and I'm confident if we are resolute and act with urgency, the team can do it. Now, I will turn it over to Nick for more detail on our financial performance and a look ahead for the balance of 2014. Nick.

Thanks, Jim, and good afternoon everyone. As previously discussed, at the start of 2014, we realign our organizational and reporting structure, shifting to geographic segments reflecting the managerial integration of our meetings and online businesses. We now have four reportable segments. North America, United Kingdom, Continental Europe and Other. Reported EPS was $0.38 compared to $0.87 in the prior year's first quarter. My remarks regarding company performance will exclude both, the acquisition related Brazil gain and the Q1 restructuring expense. Excluding these two items, which I will touch on a bit later, we delivered EPS of $0.31. Total company revenue declined 16.6% in Q1. Meeting fees and online revenues experienced declines of 16.5% and 11.7%, respectively. In-Meeting product sales declined 25.3% and all other revenue declined 17.4%. During Q1, we saw some signs of stabilization in our top-line trends as we made some adjustments to our advertising, which had a positive impact on recruitment trends relative to what we have been seeing prior to the advertising changes, particularly in the U.K. and in our North American Meetings business. First quarter total paid weeks were down 13.9%, primarily driven by declines in meetings and online in the U.K. and North America. End of period total global active subscribers declined 13.7% to 3.6 million from 4.2 million a year ago. Monthly pass active subscribers declined 12.6% to 1.5 million and active online subscribers declined 14.5% on a year-over-year basis to 2.2 million. Despite nimble cost management, our lower revenue had a substantial pressure on the P&L, resulting in a Q1 operating income decline of $52.1 million or 50.5%. Turning to our results by geographic segment, which I will discuss on a constant currency basis, our North America business remained under pressure. In the first quarter, total North America revenues declined 20.6%. Within…

Thank you, Nick. In closing, we still have a lot of work ahead of us, but I am encouraged by the progress we have made in our transformation plan so far this year. The remainder 2014 will certainly be challenging as we face a difficult recruitment environment. With the team as energized, motivated and focused. I'm confident we have the plan, people and tools in place to deliver into 2015. Thanks for joining our call today. We will now open it up for questions.

Thank you. We will now begin the question and answer session. (Operator Instructions) Our first question comes from Glen Santangelo of Credit Suisse. Please go ahead.

Yes. Thanks and good evening. Jim, I just wanted to kind of follow-up on some of the comments you all made in your prepared remarks and your recruitment trends are no longer getting worse. It kind of sounds like, when we spoke last time in February, you were clearly seen year-over-year declines that to some extent I guess were a little bit steeper more concerning than maybe what you had expected in Analyst Day. Can you give us a better sense for maybe what changed in March, and have you seen that sort of continue throughout April here. I think someone in the prepared remarks suggested that it was some of the advertising changes. Could you just maybe give us a sense for maybe what you are doing different that maybe drove that inflection point, because it certainly doesn't seem like the competitive landscape has really changed any.

Yes. Sure, but I am actually ask Nick to comment on that, but just dimension wise is, we are talking about smaller changes not larger changes. Nick, you want to take that?

Yes. Look, I think that's absolutely right Jim. The environment is a little bit better, but the headline here's result forecasting revenue of roughly a $1.4 billion, so still $300 million below last year and that's what's driving the P&L. Yes, but versus our Analyst Day, going into the first quarter, at start of the first quarter things did deteriorate and we are pleased to see that they are no longer getting worse. We were seeing signs of stability. As you mentioned, Glen, the competitive frame isn't really different, so what I think we are seeing in '14 is what we hope to see that Weight Watchers team translating the energy sore on own cost in '13 into innovation and marketing for the tech innovation that Dan talked about. We introduced the new ads with Jessica, we mentioned like all the new foods-focused that initiated in the U.K. now we bought the U.S. for U.S. spring campaign. I think, the business as a whole worked well on the effective promotional tools, including at CRM. There was a little bit local marketing in the U.K. There is a lot of little things on the - it feels a little bit better, but recruitment trends are still very weak for this business.

I appreciate the color on the recruitment side. Jim, I think, if I heard you, you said that the retention what you are seeing is being sorted in line with the past. I mean, can you maybe elaborate in terms of your sort of customer duration. I mean, it sounds like no changes to that kind of eight months sort of estimate and I am just trying to figure out as we sort of model out the water flow here for the rest of the year. Basically, should we assume that the retention based on some of your reference, you are not really seen any meaningful changes in retention at this time. Is that a fair assessment?

Yes. Far as you are modeling, that will be your modeling, obviously, but we are seeing stability in that statistic. That's correct.

Okay. Then Nick, last question, I mean, you obviously shutdown Denmark, I mean some of these closures of some of these money-losing operation. Is that really helping EPS in any meaningful way that's worth mentioning?

No. That is really not a big driver of the year's results. We were pleased to be able to focus our activities on better near-term opportunities and that was the rationale behind increasing investments in Brazil.

Okay. Thanks for the color.

Our next question comes from Jason Anderson of Stifel. Please go ahead.

Good evening, guys. Thanks for all the color on the technology plan. I guess, it seems quite like a tremendous task ahead and you were mentioning a 12-month plan. I assume maybe not all of that is happening or maybe could you provide some more color on maybe a little bit more what you expect in a 12-month is it. I am thinking your meaning and 12 months, you'll be able to address the healthcare opportunity more with your systems or technology platform is. Could you elaborate?

Sure. This is Dan. Actually, I think, we can do a little better than that. We need to have the platforms in place for healthcare initiative by the end of the year and we are targeting on that. We definitely are focusing on product and innovation and then healthcare platforms to make that happen. I do believe that a year from now we can say we have significantly moved away from our legacy systems, we have developed a much faster much more robust product innovation engine sitting on a new platform and then really the investment in the core business systems that are driven by healthcare initiative will be in place.

Great. Thanks. Then could you provide any framing on maybe cost or the investment into that? I know you guys have done a lot already, but it seems like there's still plenty more to go and how should we think about that in relation to the cost-cutting?

Well, I'll jump in and let Nick help me out, but we invest a lot in tech already and we've approved a major investment in healthcare. I think, we have a fair bit to work with and we need to get more out of that investment. What I'm trying to do is, redirect legacy spend and shrink that down and a lot of our legacy spend is somewhat discretionary, because it is with the professional fees and we can dial that back or redirect it if we want to, so I think we have some degree of freedom there, so I'm trying to work with what I have, any additional investment that's been authorized for the healthcare initiative and work within our exiting plan.

Look, I think that's absolutely right, Dan. This year as Dan said, the focus is on using tech reinvention to improve our innovation and product building capabilities. Frankly, that's partly why we were forecasting our G&A to decrease low single-digit this year, so tech efficiencies and savings on a meaningful driver of our G&A forecast this year going forward in the out years as Dan pursues his reinvention, it could be a useful lever going forward.

Great. Thanks for all the color.

Our next question comes from Sean Kraus of Barclays. Please go ahead.

This is actually Meredith Adler from Barclays. I guess, I would like to talk about two things. I think this question was sort of asked, but I was hoping to get even a little more detail. Can you actually tie the recruitment behavior to new ad that comes out, did weather have any kind of an impact? Then I guess kind of what gives you the confidence that what we are seeing, you say it's stabilized, but how do you know that we are just not, I hate to say it, but just a fluke in the last month or two.

Yes. Look, there was certainly a lot of bad weather, particularly in the U.S.A. in the first few weeks of the year and we had multiple meeting closures versus year ago, but weather I don't think is a big driver of the stabilization. I think it's all focused on having the ads connect better with the folks from the promotional activity I described.

Just let me add. This is Jim, Meredith. This is not a particularly easy business to forecast. Further, given the high variable margins there is a pretty good flow through if estimates go one way or the other, so we should we should take this as our best view, but it is a difficult business to forecast.

Obviously, talking of forecast just one thing I would add. Look, I am aware that Q1 results as a whole of course are ahead of consensus, so we acknowledge that results came in a little bit better than we were expecting, but of course, we don't give details of quarterly guidance such as things were a little bit better, the fundamental of the situation of the business hasn't changed.

Okay. Then I have a sort of more big picture question. I remember something you said Jim, I think, back in October about comparing weightwatchers.com to match.com. To get the math, it really do something like match.com. You not only have to ask people the right questions, do you have to be able to give them an outcome that is different and unique for each person and is it fair to say that that is the goal that you will have different. I think you also at that time used the word flavors. Our people will be able to go online and get guidance as to the best way for them individually to lose weight?

Meredith, first off please don't tell my wife I was on match.com. Second, I don't want to talk much more specifically than I did in the prepared remarks about commercial direction and particularly near-term as in January, but strategically and thinking of it in the context of the big picture as you asked it, I think there's two ways to think about the strategic direction. One is the content, do we bring something that is different for member A than member B that helps them with their weight loss journey. The second is the engagement model. Do we bring that through connection with Weight Watchers service provider, do we bring that on a one-to-one model, do we do that from a group perspective, or do we do that purely digitally, but all of those things to me represent the potential for flavors as you used the term.

Then my final question would be - out of my head. I will turn it over to somebody else.

Thank you. Our next question comes from R. J. Hottovy of Morningstar. Please go ahead.

Thanks and good afternoon. Just wanted to ask a question about the Wello acquisition, because I do think it's an interesting way to tie together the legacy business. I was hoping to get a little more color about the actual rollout and how to integrate it with the existing business, how to communicate that members and more importantly, I guess, what are the opportunities to create new product based on the technology that they have?

Thanks for the question. I mean, just to go back and tie in a bit to what Dan said. I mean, there are three main areas of excitement around the Wello acquisition for us. First of all, we should all recognize that, in a good way this is a typical startup. This is a small company, but they have done some great things developing insights around how to serve our client base in a one-to-one model. They have a great team and pieces of their technology platform we think will be really significant for us as we evolve our products. I don't want to run too far down the road imagining exactly what the implications are and I won't comment more to them for the same reason I mentioned to Meredith that we won't talk to commercial implications, but those are real reasons that we are excited about the Wello acquisition.

Then I guess I had one follow-up question and Jim, your line about not having to everything on your kind of struck the cord of me there, particularly with regards to integration with activity monitors and some partnerships that you might have there, I just want to get more details about what that might entail, kind of the timing behind that. Then as kind of a follow-up to that also, what kind of tracking you are seeing with your actively length program namely adoption and [engagement] as well. Thanks.

Well, we still see a strong participation with our members on ActiveLink, and with no surprise we know from research that consumers view the process of managing their weight as one that's very closely related to how they think of exercise, how they think of fitness, so this sits in a very, very close consumer space from an adjacency perspective. We have got most of the technology work done. We anticipate that we are going to be live with a leading player in that category very soon beginning in Europe as I mentioned and throughout the balance of this year, you should see quite a bit more openness as in the ability for us to integrate with other API-driven devices. Not just activity monitors, but I think that's about as far as, our comment on.

…agree the ActiveLink always about good learning from seamless integration experience and the open architecture opportunities that could lead to, but yet we sold over 400,000 ActiveLink devices and the take-up rate in our monthly pass Active's penetration is in the 10% range, so it's a good learning for us.

Thanks. Our next question comes from Alvin Concepcion of Citi. Please go ahead.

I just wanted to follow-up on the Wello acquisition. It does sound promising. Just wondering appetite for acquisitions are going forward, do you believe there are other areas you need to build out or this sort of fill the needs that you are looking for?

Look, I think, Wello and Brazil show that we will selectively pursue acquisitions, but get us into good businesses or help us build capabilities faster than we might do ourselves on new capabilities. I think, based on what I know now, I would look at last year, where we had several franchised, domestic franchised acquisitions our view as being less acquisitive this year being selective and our capital structure priority is paying down debt.

Great. Then trying to understand that correctly and correct me if I am wrong, but it sounds like we shouldn't expect revenue growth for the full year 2015, but we should in 2016. With healthcare coming online and being a more significant driver of revenues in 2016, how much of your ability to grow revenues in 2016 is dependent on that contribution from healthcare?

I think, look, healthcare is an important growth contributor was us overall. This side we can [correct] $300 million plus business by '18, but the key to us returning to growth is first and foremost the B2C reinvention and yes, look at our Analyst Day, we said that we would aim to move to positive recruitment trajectory sometime during '15, which would lead to revenue growth in '16. Obviously, it's far too early to talk about what '15 revenue might, but I think you see from Jim and Dan that we are focused on probably the best winter diet season 15 that we can.

Yes. Clearly, as Nick said in putting the cost together. These things they sit together the strength of our B2B business and our healthcare business over time has really been the strength of B2C business. It's part of what's attractive about us to that channel. We are also a known brand, we are a proven brand or brand that can drive engagement, so the strategies by which we strengthened our B2C business place straight into the B2B business…

Thank you.

Our next question comes from John Faucher of JPMorgan. Please go ahead.

Yes. Thanks. I want to talk a little bit about the guidance, because I think I am having trouble trying to figure out. I understand that things aren't fixed yet and then maybe there is a little bit of a just a temporary tailwind, but if I look at the upside in the quarter and look at particularly the gross margin guidance and try align kind of the year-over-year changes and things like that. I am having a hard time to sort of seeing numbers going up by just a small increase that you sort of ran through relative to the upside in this quarter, so can you talk about maybe some of the other offsets that were not seen. Then also just particularly on the gross margin, your guidance would indicate and I realize it's sort of up 400 basis points I think is the language, but we indicated actually things getting worse against some of your comps in the back half of the year, so what's driving that in particular? Thank you.

Thanks, John. Let me kind of walk through the P&L a little bit and give you some color on that. Prior guidance, $1.30 to $1.60, new guidance $1.45 to $1.70, so $1.575 admin point of the range, a 9% increase in the midpoint, increasing the flow by $0.15, the top end by $0.10. Starting with the top-line, the top-line is a little bit better as we have discussed, but still at $1.4 billion company. Gross margin, previous guidance was 400, now it's up to 400 reflecting slight improvement. Q1 was a 300-basis point deterioration. It gets worse through the year as we ramp up our investments in a strategic initiative and also through the year given the fact that our .com business is shrinking a high-margin .com business we are down by $75 million or so year-over-year. Note that mix impact saw our gross margin performance as we go through the year. Previously guided marking to be reduced by $20 million, the marking is a little bit better here, so decreased marketing is spend by at least 25. Then finally G&A, the first quarter G&A blueprint was a little bit artificially lower, so it also is accurate and correct, but it was driven by some one-time items that won't be repeatable through the year and G&A through the year will be impacted also by investments in our strategic initiatives, so I would expect the G&A to be higher as we go through the year versus what we achieved in the first quarter.

Okay. Thank you very much.

This concludes our question and answer session. I would like to turn the conference back over to Jim Chambers, CEO for any closing remarks.

Once again thank you all for your interest in our company and for joining us on the call today. Thank you.

The conference is now included. Thank you for attending today's presentation. You may now disconnect.