Good afternoon, and welcome to the Weight Watchers' Fourth Quarter and Full Year 2017 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 that today's event is being recorded. I would now like to turn the conference over to Corey Kinger, Investor Relations. Please go ahead.

Thank you, Andrea. And thank you to everyone for joining us today for Weight Watchers International's fourth quarter and full year 2017 conference call. At about 4:15 PM Eastern Time today, the company issued a press release reporting the fourth quarter and full year 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, everyone. And it's great to be speaking with you today. Our business has strong momentum and we have a bold new purpose and vision to become a leading global healthy living brand. On February 7, we shared that new vision with our global employee community at an event broadcast from Alice Tully Hall in New York City. We were glad that so many of you could join us via webcast and what a special moment it was to be joined on stage by Oprah Winfrey. We unveiled our company's new purpose. We inspire healthy habits for real life, for people, families, communities, the world, for everyone. Weight Watchers is a community of millions inspiring each other to build lives of health, joy and connection. We turn science into healthy life changing habits and we believe that health and wellness should fit into your life, not the other way around. So, we meet you where you are and we built our approach to work for your life. We will talk more about our vision, applying our purpose and our goals and bold new shortly, but first let me turn to our 2017 performance. 2017 was a terrific year for Weight Watchers with growth across all major geographic markets as we attracted more people to join us on their wellness journey. This momentum accelerated following our WW Freestyle program launch in December, driving growth at end-of-period subscribers up 23% year-over-year to 3.2 million. In addition to double-digit revenue growth, we expanded our margins and delivered high quality earnings growth for the year. On a year-over-year and constant currency basis, full year revenue was up 12%. Gross margin expanded 270 basis points and adjusted operating income was up 39%. Importantly, growth was global; with North America, Continental Europe, and…

Thanks, Mindy. Let me start by highlighting a few key items in our Q4 and full year 2017 financial performance. With the launch of WW Freestyle, global member recruitment trends accelerated bringing our end-of-period subscribers to 3.2 million, up approximately 600,000 or 23% from prior year and exceeding our expectations. Total paid weeks were up 19% year-over-year in Q4 with gains in all of our major geographies. Furthermore, global end-of-period subscribers paid weeks and revenue all grew double-digits in Q4 in both Online and meetings with particular outperformance from Online. Continued momentum throughout 2017 drove a full year total revenue increase of 12% year-over-year on a constant currency basis to $1.3 billion. Higher revenues and operating leverage in our business model flowed through to profitability, and for the year, gross margin rate was 53%, up 270 basis points year-over-year on constant currency and after adjusting for our $13 million Brazil impairment, which I'll discuss later, adjusted operating income of $281 million increased 39% on a constant currency basis. We delivered Q4 GAAP EPS of $0.91, which included an aggregate positive one-time impact of $0.54. Our November guidance implied Q4 EPS in the range of $0.29 to $0.35. With our new program launch accelerating our business momentum in the final weeks of the year, our operating performance came in ahead of our guidance. GAAP EPS for the year was $2.40 up from a $1.03 last year. As detailed in our earnings release, the $2.40 GAAP EPS for 2017 included an aggregate positive one-time impact of $0.75, which reflects a benefit from the new U.S. Tax Law, the cessation of our operations in Spain, the reversal of certain taxes reserves, the Brazil impairment and our refinancing and debt prepayment. Also, note that 2016 EPS included an $0.18 benefit from net tax incentives…

Thanks, Nick. There's a paradox in the world today. People all over the world want to be healthier. The global wellness economy is now a $3.7 trillion market. But even though people are thinking in a healthier way, they aren't getting healthier. Worldwide obesity has nearly tripled since 1975. As of 2016, more than 1.9 billion adults were overweight. Of this number, 650 million were obese. In the U.S. alone, more than 70% of adults and more than 33% of children are overweight or obese, and the rise in obesity is tied to a decline in life expectancy. In fact, this is the first time life expectancy in the U.S. has declined two years in a row since 1962 and 1963. We can help solve that paradox. People often ask me who our competition is. It's not another company. Our competition is the 90% plus of people believing they can become healthy or lose weight on their own. We want to become their partner of choice, a partner to help them, inspire them and to be part of their journey to lead healthier lives. The world doesn't need another diet. The world needs a leader in wellness and a brand that can bring wellness to everyone, not just a few. That's why the launch of our new purpose and our Impact Manifesto is a big step. Weight Watchers is a community. It's supportive. It's social. It's inspirational. It gives people everything they need to lead healthier lives. To be clear, we aren't changing who we are. We're changing the conversation about what makes us unique and changing mindset, so we can change how the world sees us. Today, healthy is the new skinny. Increasingly people who join Weight Watchers are interested in something more than getting into a size 8…

Thank you. We will now begin the question-and-answer session. Our first question comes from Alex Fuhrman of Craig-Hallum Capital Group. Please go ahead.

Great. Thank you very much for taking my question and congratulations on a really great year. I wanted to ask about a couple of things. One of them was with Connect and I know Mindy you mentioned it in your prepared remarks update, would love to get a sense of how many of your users in the program in North America and globally have interacted with Connect in some way either once ever or on a regular basis and as you think this year's diet fees and it sounds like this was the best recruiting quarter as you've had in quite some time, are the new members using Connect as frequently as your legacy members, are they adapting it as quickly, I'd be curious how your newer members are interacting with Connect?

Sure. Thanks, Alex. So, if you think about any member we have, the core foundation of what they have is our app and our technology platform and our access to our tools including Connect. So, the engagement is extremely high globally. What's interesting is, you do see a tremendous amount of new recruits on Connect, because they're looking for support of the community and they're asking questions, they want to get feedback and it's no different when someone new potentially comes in a meeting room, they want the support of those others. So, we're seeing Connect as a great retention tool for people who want to continue to engage, and we have many members who have achieved their original goals, who stay within, because they want to continue the support of the community as well as being able to continue on their health journey. We have been continuing to invest as I mentioned in things like more video sharing, and people being able to form their own communities, we know how important that is. So you will continue to see an evolution within the app, not just only on Connect, but with the entire member journey.

That's really helpful. Thanks, Mindy. And does that perhaps explain part of why the online business has been so much stronger, I mean, obviously the meetings business has been strong as well in 2017 and so far. This year the online business has far surpassed it, which was, kind of, the reverse of what we saw in 2016, when this inflection began. Is that somehow being driven by increased usage of Connect, or maybe some meetings members as they leave the meetings, they convert to online just curious, because it seems like...

Yeah, I think the reality is the most important device in our life today is our mobile device. And so everyone is going to have that as a constant engagement and we have members who've come in with that and they then have chosen to also go to meetings because they want the physical. And we do believe that online growth will continue to accelerate. But having said that, we're also investing a lot in our meeting experiences, we've changed over the last couple of years, our content to be that much more engaging, our technology tools to be integrated into the experience and we're also looking at certainly diversifying our member base and being relevant to more audience. So, I think you will continue to see the evolution of both. But in today's world, you will expect to see, kind of, mobile adoption to continue to accelerate.

I think that's absolutely right. And, Alex, when I look at how we performed in 2017 and how we started 2018, I love the fact that it's global growth. I'm also pleased that it's balanced growth. So, within that 23% increase in end-of-period subscribers at the end of 2017, was online growth higher at 29%? Absolutely, as we'd expect, but the fact that the meeting membership was up 13% also was good to see.

Great. That's helpful. And then lastly, if I could just ask about the plan you announced a few weeks ago to offer free memberships to teens who join with their parents over the summer. I mean it sounds like something that could really address a big public health need. You mentioned some of the statistics that are pretty daunting on childhood obesity and how those have tracked the last 10 years or so. What's the feedback been from your own members and your meetings leaders on that? I mean we've seen a wide range of opinions on the Internet from the dietician class, so to speak, ranging all over the place. But how do your community members feel about that?

Yeah. Thanks. So number one, I just want to make clear that there's nothing that we would do for our brand and for members and for individuals especially that population that's not rooted in science, that's not been thoughtfully addressed on all issues. So that's the most important thing. We do feel and we do know that when families look to get healthier together, it works, because they have support. Actually the response from internal, and our company and from the field is extremely positive. And by the way, we have had teens as members. This is about letting the family come in, if there's a teen, and we will have very specific parameters around this, who needs healthy habits and a different way of eating, they can come in with an adult. And we'll be announcing the very specifics around this. But it really is meant to be about families getting healthier together.

Thank you. That's great to hear. Thank you very much.

Our next question comes from Kara Anderson of B. Riley FBR. Please go ahead.

Hi. Good afternoon.

Hi.

Hi, Kara.

I'm wondering if you can provide more color on the pathway to grow recruitment off of the 20% revenue growth you're guiding to in FY 2018 that gets you to the $2 billion revenue goal in 2020. Are there new markets definitively built into that expectation or new program iterations like Freestyle that might excite and keep the recruitment momentum going? What are your thoughts?

I mean, I'd say, I think we're off to a really good start guiding to revenue approaching $1.55 billion this year, so up almost $250 million from 2017 levels. And that shows the power of combining really great value proposition for consumers and innovation and marketing it well in addition to having leading tech and digital platforms as I think we have. So, I think we're off to a good start and obviously being off to a good start and having a strong 2018 forecast, in the nature of our business model that flows through into 2019 revenue also. I think beyond that, I'd expect the lion's share of our pathway to that $2 billion plus revenue in 2020 to reflect continued focus on driving recruitment growth and increasing retention. But by the same token, we are also very excited about the new geography opportunities, opportunities in the healthcare space, and opportunity to re-energize our products and licensing business. But having such a great response to WW Freestyle and the programs around the world has been a strong start to that three-year goal.

Great. And then second question for me. Just wondering if you could talk about the response of the Weight Watchers Freestyle program with the male demographic and if you've seen any, I guess, acceleration or interest there.

We definitely have seen response. It has worked very aggressively with men. I mean they're having great success within the program, definitely have noticed within Connect more engagement with men. I think you saw in our marketing a lot of diversity within the marketing of real members, including men and women. And as I said before, we're really focused on the broad cross-section of diversity: age, gender, race, ethnicity, geography, and life stage. So you will see that continue in our marketing efforts to be inclusive because we know it works.

Thanks. That's it from me.

Our next question comes from Frank Camma of Sidoti. Please go ahead. Frank Camma - Sidoti & Co. LLC: Hi, guys, good afternoon.

Hey.

Hey, Frank. Frank Camma - Sidoti & Co. LLC: How does 5 million target, Nick, that you stated on the member goal, I think, it was 2020. How does that compare with the height of the company, whether online or meetings combined. How does it compare?

Yeah. We ended this year with 3.2 million people in the brand, based on – the recruitment growth so far has been the fastest we've seen since Q4 2015 and ahead of the double-digit levels in 2016 and 2017, I could easily see us having comfortably more than 4 million people in the brand when we report our first quarter and I believe a peak number of people in the brand is probably like 4.2 million or so going back to first quarter of 2012, I believe. Frank Camma - Sidoti & Co. LLC: Right. Okay. My other question really on the just the product side, well, first detailed question on the product side. The FreshRealm relationship, so that's not a at-home delivery model, that's purely grocery model?

That, yeah, that is quick meal prep, so packaged with all the ingredients and they are separately cooked at home in less than a half hour from our recipes that we've developed over a period of time in grocery. But we think that there's other global opportunities, which we'll be looking at in both the fresh food space and in the evolution of our current products. Frank Camma - Sidoti & Co. LLC: Sure.

And this idea of really being authoritative around what connotates a healthy kitchen is an area from a very broad cross-section of product point of view that we think is an opportunity. Frank Camma - Sidoti & Co. LLC: And that's a Q2 event, calendar Q2?

No. Actually, the target right now for Fresh is in the third quarter. Frank Camma - Sidoti & Co. LLC: Third quarter. And I guess final question around that, do you own the product, or is that going to be a licensing arrangement where you just get a licensing fee from FreshRealm?

That will be a licensing-partnering. Frank Camma - Sidoti & Co. LLC: Okay. So this is one of that levers, you have to bring the licensing back to, I mean, in the heyday this used to be a pretty sizable amount on revenue right?

Correct. Frank Camma - Sidoti & Co. LLC: Okay. And so when we think about product sales for 2018, I mean they're still – besides like FreshRealm which you announced, they are still mostly ancillary to the meetings right, so is that how we think about them when we drive that number so that meetings up, product revenue up, other than that, that licensing component? Is that a fair way to say it?

So, let me sit back and say what was historical and essentially what we see as opportunity. Frank Camma - Sidoti & Co. LLC: Sure.

So, the product sales that we talk about today, for the most part, what you're saying is correct, it's sold within the meeting framework, right. Frank Camma - Sidoti & Co. LLC: Okay.

However, where we see the opportunity is to elevate the product certainly that we sell there and make them more consistent with our brand but also to develop partnerships and more products that we can not only have that in that distribution, but in other distribution that makes sense for us. Frank Camma - Sidoti & Co. LLC: Okay. I have a final question if I could. Do you find more and more people using your app on the smartwatches or is that – they're still more using it on the phone? Just curious from a tracking standpoint or is it not as robust for that?

Yeah. I would say the predominant utilization is the app. However, we are integrated into smartwatch and we continue to work with our partners relative to what that experience is. Frank Camma - Sidoti & Co. LLC: Okay. Great. Thanks, guys.

Our next question comes from Greg Badishkanian of Citi. Please go ahead.

Hi, This is actually Jesse della Penna on for Greg. Thanks for taking my questions. So, to go back to the online subscribers versus the meeting subscribers, could you just may be talk a little bit about the cost differential you're seeing between each of those, like adding an incremental one?

So, Nick can talk to that, I just wanted to say it again. Every member is an online subscriber. That's, kind of, the base of being part of Weight Watchers. And then someone might also aim to, in addition to that, have the meeting experience. So, I just want to make sure when we talk about the bifurcation that's very important around the engagement and then Nick could talk to the monetization.

Yeah. When you look at our 270 basis points of gross margin improvement in 2017 and guiding to 300 basis points improvement in 2018, it just shows how well this business model responds to growth, whether it be somebody using our digital tools exclusively or paying a premium to also attend meetings and frankly that's why I am relatively agnostic where somebody chooses to join the incremental economics for us a very favorable as you see in our flow through of top line growth to operating income growth which has comfortably been in the 50% range. We've comfortably been translating a $1 of revenue growth into about $0.50 of operating income growth over the last few quarters.

Okay, great. And yeah I think the rest of my other questions were answered so this should be good for me. Thanks.

Our last question comes from R.J. Hottovy of Morningstar Research. Please go ahead.

Thanks. Nick, I wanted to follow-up on the three-year target, and take a little bit different perspective, and take a look at the profitability that might be there, obviously there is a lot of leverage in the business model assuming that you hit that $2 billion target, that should show through, there's some upside with the licensing deals you've talked about, but presumably some additional investments on things like technology and other areas. Is there anything structurally that's going to prevent you from getting above the historical numbers around 30% operating margins. Just want to, kind of, flush it out. I know it's probably a bit early and there's a lot of things that still have to play out. But just to, kind of, get a rough sense in terms of what the business model might look under some of the moves you made from a long-term profitability perspective?

Yeah. Thanks, R.J. Obviously, certainly as we plan the business we're looking forward rather than back as you'd expect and so we're very focused on driving growth to that $2 billion plus number by 2020. I think we've also been very clear that we'll invest to propel future growth, while also focusing on driving sustainable profitable growth. So, it's important to us that our growth rate of profit exceeds our growth rate of sales and you see that in 2018 guidance with revenue growth being up, approaching 20% to $1.55 billion and our EBITDAS guidance as an example being up by nicely over $100 million. So, you see we're driving profitability as well as revenue growth and we'll continue to do so. And you see that we're investing in marketing dollars and we're reinvesting in G&A dollars and we're investing in CapEx where we have clear business cases and where there are essential moves that we need to do to support our important new brand vision.

Thanks. And I guess my second question just has to do with the partnerships that you guys are embarking on. Obviously there has been a lot of discussion about the FreshRealm partnership, as well as the Weight Watchers Cruise. But one of the things that came out of the Global Community Event a few weeks back was the idea of finding a partner on the fitness side. Mindy, I just wanted to see, if you had have any early thoughts on that, what kind of form that may take, because that seems like it'd be pretty interesting and perhaps maybe a lot of potential partners that could be out there, just how you see that partnership kind of evolve over the next couple of years?

Yeah. So what we've articulated is that, if you think about the food, what you put in your body. First, we unequivocably are going to own that solely. We're going to develop the programs, we're going to own the science, we're going to do the research. That is ours to own. As it relates to activity, we're not going to become a fitness company. So, we believe the integration of activity and prompt and what we can offer will be something that we will do with multiple partners and we're working on that right now. And then on the mindset and mindfulness side, it will probably be a combination of content we develop and integrate as well as partnerships, so that's how we're approaching it and that's what we're in development on right now. And we will test things before we, kind of, move forward into a robust environment.

Thanks.

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

So, thank you everyone for joining us today, and thanks for your continued interest in the company. And I also want to thank all our global Weight Watchers team for all the incredible work you do in serving and inspiring our millions of members every day. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.