Good afternoon, and welcome to the Weight Watchers Third Quarter 2017 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, Investor Relations. Please go ahead.

Thank you, Gary, and thank you to everyone for joining us today for Weight Watchers International's third quarter 2017 conference call. At about 4:15 PM Eastern Time today, the company issued a press release, reporting the third quarter 2017 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 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. Joining today's call are Mindy Grossman, the company's President and CEO; and Nick Hotchkin, CFO. I'll now turn the call over to Mindy.

Thanks, Corey. Good afternoon and thank you for joining us. And it's great to speak with everyone again today. In the four months since I've joined the company, I've done deep dives across our business, met with our teams worldwide, and spent time assessing the opportunities ahead. Now more than ever, I am confident about the opportunity and scalability of the business. There is a tremendous potential to expand the Weight Watchers brand and purpose to help millions of people lead healthier lives. As we map out our vision and strategy for the future, our third quarter results have clearly demonstrated that we continue to have good momentum, and importantly, we have a compelling and comprehensive plan for the forthcoming winter season, which I will discuss shortly. Nick will go into more detail on our financial performance but to summarize we delivered another strong quarter with double-digit revenue growth, good margin expansion, and high quality earnings growth. On a year-over-year and constant currency basis revenue was up 14%, gross margin expanded 320 basis points, and operating income was up 34%. Importantly growth was global with North America, Continental Europe, and the UK markets all increasing revenue and profitability. Year-over-year total Paid Weeks grew 20% and End of Period subscribers increased 18% again with growth from every major geographic segment. Our business is performing well giving us a strong sustainable foundation upon which to innovate, expand our offerings, and broaden our base in the months and years ahead. With that backdrop, let me provide an update on a few key areas where I've identified both strength and opportunity which are an indication of where we'll focus and prioritize going forward. Everything we do is now centered on being a company that is global, brand led, and human centric, and will be…

Thanks Mindy. Our top-line momentum continued in the third quarter. This is our eighth consecutive quarter of member recruitment growth and reflected a balanced disciplined approach to pricing and promotions. For the quarter on a global basis, member average length of stay improved to over nine months an uptick from eight to nine months previously driven by improvements in the product experience and increasing engagement with tools like Connect, as well as success in joining options for longer-term commitment plans. End of Period subscribers increased 18% year-over-year to $3.4 million with Meetings End of Period subscribers up 11% to $1.3 million and Online End of Period subscribers up 24% to $2 million. Momentum in Paid Weeks continued in Q3 with Total Paid Weeks up 20% with Meetings up 11% and Online up 27% versus prior year. This strength resulted in Q3 revenue of $324 million which was up 14% year-over-year on a constant currency basis, an acceleration from 9% and 12% growth in Q1 and Q2 respectively. The strong operating leverage in our business model flowed through to profitability in the quarter. Gross margin rate was 54.7% and on a constant currency basis gross margin increased 320 basis points year-over-year. Operating income was $91 million, up 34% year-over-year on constant currency. GAAP EPS was $0.65, up from $0.53 in Q3 of last year. Note that both periods benefited from lower than usual tax rates. Q3 2017 EPS benefited by $0.03 from the reversal of certain tax reserves and in Q3 2016 EPS included a positive net benefit of $0.13 from tax incentives primarily related to investments in technology in prior years. Turning to our performance by geographic market, North America our largest market continues to generate positive momentum. In Q3 North American revenue increased 16% on constant currency and End…

Thanks Nick. Weight Watchers has a tremendous opportunity to continue to evolve our business into a global healthy living brand. At our core, where science-based evidence proven approach for weight loss and weight management, we will continue to leverage the authority of our science and the critical importance of understanding behavior change with engaging touch points across the member experience. As I mentioned earlier, we are very excited about the upcoming launch of our new program which is delivering fantastic results. As we continue to innovate with a focus on livability, we can continue to evolve consumers' perceptions about what it means to be a part of Weight Watchers and begin to broaden our appeal to new audiences and member cohorts in the U.S. and globally. I'm confident that we have the expertise to become an even more dynamic, immersive, and relevant consumer driven global company. The Weight Watchers of the future will be an integrated technology and experience company with significant opportunities to drive continued sustainable growth. We will continue to implement new agile approaches to product development in order to shorten innovation cycles, deliver and improves member experience, and enhance scalability. We also plan to leverage our rich content to create more personal interactions and greater meaning for our members and we will continue to strategically invest in key capabilities including data analytics to create greater personalization for members with a focus on improving interaction, retention, and engagement. Continuously modernizing the product offering through digital capabilities is essential as is fostering the enriching physical human experience. By leveraging the power of community, we can build a 360 degree experience that integrates our technology platform with physical user communities all with the intention to inspire members, encourage engagement, and create experiences to enhance satisfaction and to support success. If we do this well, we will achieve our goal of attracting a broader more diverse audience by gender, ethnicity, age, and lifestage. Weight Watchers has the permission and privilege to help people worldwide live a connected healthy life of meaning. We have work ahead of us but I'm confident that we have the foundation, momentum, and motivation to achieve this mission. So thanks for joining us on the call today and with that, we'll now turn the call over to the operator for Q&A.

We will now begin the question-and-answer session. [Operator Instructions]. The first question comes from Alex Fuhrman with Craig-Hallum Capital. Please go ahead.

Hi guys, thank you very much for taking my question and congratulations on another really exceptional quarter. Something I really wanted to ask about seems like to me probably the biggest take away from the prepared remarks here is this is the second quarter in a row that you've called out increased retention and paid length of stay and here even going so far to quantify that it looks like it's a little bit above nine months, can you give us a little bit of color on what you think is driving that and that seems like a pretty big increase for a paid length of stay that historically hasn't moved a whole lot on. Are you seeing the same trends in different markets and online versus in meetings and curious if you have enough perhaps data at this point to parse out whether or not your user too have been active on the Connect platform or perhaps contributing an outsized amount to that increase in retention? Thanks.

Hi Alex, thanks for that great question. And yes, we are seeing improved retention across our markets and in both our digital and physical assets. And there's a lot of reasons for that. We have focused a tremendous amount on the digital tools that we have to create greater member engagement, we have focused on our content, and you mentioned Connect, that's been a very powerful asset for people within the digital community. In our physical environment, we've really worked to create more and more engaging content and member interaction and really have educated certainly all our members on how they can interact with Weight Watchers every day to further their ability to be successful on the program. And I think all of that has contributed to the success. Certainly the work of the technology teams over the last years to create a really best-in-class product and we will continue to iterate on that. And then, finally, the success of the program, people are seeing success, they’re staying with the program longer and they're engaging with the brand.

Yes, I would just add Alex kind of both Meetings and digital retention are over nine months globally on the United States are over nine months. I mean it's really good progress and the engagement progress that Mindy talked about and also we've been having success offering people longer-term commitment plans on their initial signups but really pleased to see more engagement in the program.

Great. That's really helpful. Thank you. And then following up also on Mindy you mentioned in the prepared remarks the opportunity to become perhaps a bigger global brand with more of a global presence, does that mean you guys are looking at potentially expanding into some markets outside of Europe internationally. And then just kind of curious how you're thinking about the allocation of capital as you consider potentially new international markets versus perhaps taking in-house and buying out maybe some of your domestic meetings, franchisees, if you could maybe talk a little bit about how you potentially balance that allocation of resources?

So let me talk about what I mean by truly becoming a global company because it's not just about geography. It's really about becoming one Weight Watchers around the globe. Having the technology to recognize all members no matter where they are in the world, how we connect our communities globally. To the point about geography though, how do we expand and develop the capabilities for further geographical expansion that we can do efficiently and successfully, how are we going to globalize our food database to be the most comprehensive in the world, and then certainly leverage our talent. We know that there is a need for what we do everywhere and that certainly is an opportunity but what I don't want to do is get ahead of myself. We really want to maximize and continue the growth of the markets we have while we develop the strategies and the capabilities for further expansion. As far as our other opportunities with markets in the U.S. or other markets that we may own or not globally we're certainly doing an assessment of the business all the time to see what makes the most of that.

Yes, if I could just add, Alex, as we look for other opportunities, we've got an awful lot of flexibility given just how good and how cash generative this business model is. So you see us having the ability to invest in our future and improve our balance sheet rapidly at the same time. If you look at the flow through of top-line growth to operating income growth in Q3, we're generating $23 million more OI constant currency on $39 million of revenue that's almost a 60% flow through to the bottom-line. So we can improve our balance sheet quickly as you see in our declining debt-to-EBITDAs leverage and invest in the future too with this sustainable growth.

That's really helpful. Thank you very much.

Thanks, Alex.

The next question comes from Greg Badishkanian with Citi. Please go ahead.

Great. Can you talk a little bit about the key components that drove the EPS guidance upside from $1.77 to $1.88 from $1.57 to $1.67? So you keep the consensus estimate by about $0.14, I'm assuming you're continuing to see momentum in the fourth quarter?

Hey Greg, it’s Nick. Yes continued good momentum in Q3 globally fall campaign was successful and importantly this is a global growth story in 2017. So revenue came in a little bit higher than we thought partly due to a good fall campaign, partly due to the really good retention metrics that we've discussed. So I would say when I look at midpoint of our guidance increasing from what $1.62 to $1.80, $0.18 I'd probably say about half of that is real good performance revenue and retention driving the business and to be fair probably the other roughly half of it is the fact that our tax rate forecast for the year is now 28% versus the prior 31%.

Right. Good color again. And just regarding the launch of the new upcoming winter season program, what's the key reason why the consumers provided enthusiastic feedback in your opinion, is that a good indicator for the success of that program for the upcoming year?

Yes. So what we've seen with the new program and the members response to it. They feel it's giving them simplicity, it's giving them more livability, and more important, it's having results not just on their weight but in their overall feeling of health and contentment and all of that together is what's really fueling the success. And we have thousands of members and non-members on the program as well as 10,000 people in the field and having personally been on the prior program and this program myself, I can echo those same sentiments and yes I have lost weight.

Okay, great. Thank you so much.

The next question comes from Frank Camma with Sidoti & Company. Please go ahead.

Thanks for the results. It's not that surprising to me that you're getting better what's the phrase given that you took a more -- it's a more holistic approach here for the [indiscernible] and the behavioral side of the stuff. I was wondering, now that you've done all that, what sort of the biggest reason someone steps off the program is it that they've reached their goal weight or is it because they didn't feel they don't need it anymore just kind of went from your survey like why do people ultimately cancel their subscription so to speak.

Yes, that's very varied. To your earlier point they may had success on the program but what's interesting is as we continue to engage with content around health, around food, around mindfulness, and other areas of livability, members are being value even when they gotten to their goal and particularly when continuing to engage with the communities that they've built. Certainly people have come off programs because, they went sideways I mean it happens. But we usually find and what we're seeing right now in the results we have a lot of members coming back and we know that when we have new news particularly like the new program that we are launching, we tend to have a significant amount of increased engagement particularly with less members so we're excited about that as well.

Okay. Another question just on the licensing piece. Nick, I think you gave us some numbers around that year-over-year I think it was about $1 million decline from $16 million to $17 million. I'm just if you tell us a little bit more about sort of what product categories that represented and maybe if you could provide some color on now that the brands are bit of a revival or uptick of interest maybe again.

Yes, let me talk to that. As you know, I have a lot of products background and I think that product and licensing business for us is definitely an opportunity. So what we've been doing I've been doing kind of a global assessment and inventory from around the globe of what products we're in, what products we've been in the past, where we feel that there are additional opportunities which I think are many. And so you really will be seeing as we go forward us articulating what we see in those businesses, what new businesses we can potentially be in. But I do think it's definitely an opportunity and to your last point given where the business is today, we're a very valuable partner. Just the fact that our cost of acquisition compared to a lot of companies is so efficient because of the engagement of our audience not just in our digital platforms, but if you think about it in the U.S. alone we have 15,000 meetings a week. So our ability to communicate on end market products is certainly significant and I'm excited about the opportunity.

Yes, you certainly have captive audience. Thanks guys.

Thanks.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Mindy Grossman for any closing remarks.

Well, thank you everyone for joining us today and I want to give a special thanks to our Weight Watchers teams worldwide for all the great work that you are doing in serving our millions of numbers every day so, thank you.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.