WW International, Inc. (NASDAQ:WW) Q2 2023 Earnings Call Transcript

WW International, Inc. (NASDAQ:WW) Q2 2023 Earnings Call Transcript August 3, 2023

WW International, Inc. beats earnings expectations. Reported EPS is $0.65, expectations were $0.08.

Operator: Good afternoon and welcome to the WW International Second Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Corey Kinger of Investor Relations. Please go ahead.

Corey Kinger: Thank you everyone for joining us today for WW International’s second quarter 2023 conference call. At about 04:05 P.M. Eastern Time today, we issued a press release reporting our second quarter 2023 results. The purpose of this call is to provide investors with some further details regarding the company’s financial results, as well as to provide a general update on the company’s progress. The press release is available on the company’s corporate website located at corporate.ww.com. Supplemental investor materials are also available on the company’s corporate website in the Investors section under Presentations and Events. 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 Sima Sistani, CEO; and Heather Stark, CFO. I will now turn the call over to Sima.

Sima Sistani: Thanks Corey. Good afternoon everyone and thank you for joining us today. 2023 continues to be a pivotal and transformative year for Weight Watchers, a year where we return our core business to subscriber growth and catalyze our entry into the nascent, but clinical category. Our second quarter results only give me further confidence that we are on the right trajectory. We are focused on executing a narrow list of priorities that will deliver great impact across not our business, but also global health outcomes. To reiterate, across the organization, we are focused on four key areas; one, reinvigorating our core business and hitting our raised end of period subscriber targets for the year, including continuing year-over-year sign up growth in the second half of the year.

Two, compounding our head start in the clinical space by continuing to drive efficient member acquisition to Sequence, increasing brand awareness, and expanding member retention. Three, being the partner of choice for health providers, payers, and employers by leveraging our expertise, relationships, and a step program engagement model that delivers cost effective end to end behavioral and clinical weight management solutions, setting a new standard-of-care in this space. And four, building community experiences, both in real life and digital that will broaden our reach and increase engagement and satisfaction for both behavioral and clinical pathways. We are also committed to doing our part to increase education and access to the weight health spectrum for communities in need.

Now, turning to our Q2 results. We ended Q2 with 4.1 million subscribers, including approximately 37,000 clinical subscribers. Notably, in our Weight Watchers business, we ended Q2 with more subscribers than we did in Q1 with clinical only adding further to our subscriber base. This is the first time in our company’s reporting history that we have achieved an in year quarter-over-quarter total subscribers step up. Q2 sign ups or growth subscriber additions for our Weight Watchers business, excluding clinical, were both above our expectations and up year-over-year for the first year-over-year increase since Q4 of 2020, delivering our return to sign up growth one quarter earlier than our previously forecast. Notably, we achieved this without increasing our marketing spend year-over-year.

While as anticipated, revenue was down year-over-year due to headwinds from 2022’s ending subscriber base, our actions to optimize our real estate footprint and organizational structure drove a record high adjusted gross margin. Additionally, our activation rate, a metric defined by a member’s engagement and progress during their first 30 days on the program, continue to increase and trend in the right direction with Q2 up approximately 10% year-over-year compared to Q1, which was approximately 6% year-over-year. As a reminder, activation rate matters because activated members attrition rate is roughly half of a non-activated member and are more successful on Weight Watchers over the long-term. Similarly, our engagement rate, which is measured across our entire membership base beyond those in the first 30 days also continued to trend positively with Q2 of approximately 12% year-over-year.

These results are further evidence that we are reinvigorating our core business and that our evergreen approach to innovation along with our data informed approach to product improvements and performance marketing are taking hold, setting us up for a return to profitable growth. Let’s take a step back for a moment as I want to share more on our mission as a global leader in weight health. As you will recall from our last earnings, we introduced this term to reframe the conversation around weight management in order to destigmatize obesity and make evidence-based solutions achievable and accessible to those in need. The scientific community’s understanding of obesity is advancing rapidly. Weight health is a spectrum and there is a large and growing population that due to genetic, environmental, and biological factors cannot lose or maintain weight loss through diet and exercise alone.

This is a watershed moment in the treatment of obesity, and we’re prepared to challenge long health misperceptions of weight. And more importantly, we’re prepared to help our members understand their options so they can get the treatment they need. But let me be clear, this does not discount the importance of lifestyle intervention. The advancements in clinical medications on the market to-date do not replace lifestyle change. They help it become more possible for people living with obesity to adhere to lifestyle change. And that’s where our solution sets us apart. Weight Watchers is the gold standard for lifestyle change and Sequence provides much more than a prescription. Weight Watchers has been ranked as the number one best diet for weight loss on US News and World Report for the last 13 years.

We are the number one doctor-recommended program. We have a clinically proven diabetes tailored program and we have over 60 years of experience and over 150 peer review studies including more than 35 randomized trials. With Sequence, members are supported by a team of Board-certified clinicians, registered dietitians, fitness coaches, and a care team, plus access to Weight Watchers’ behavior change program. Today, we are posting a brief presentation about the Sequence experience on our Investor website to help investors better understand our clinical offering. We now have a portfolio of science-backed solutions that improve weight health. The Weight Watchers Lifestyle program, Sequence, our virtual clinic, and our B2B program for health providers, payers, and employers; WW Health Solutions.

We are uniquely positioned to pair with the evolving clinical solutions to cover the entire weight health spectrum. Our work will be at the forefront of the emerging science of overweight and obesity and the leading voice in Weight Health. Turning to our digital-first product roadmap focused on the three pillars of coaching, accountability, and community. As discussed previously, we are in beta testing of our new member chat feature and improved peer-to-peer user experience for connection and support. From the beginning, the community and social experience of Weight Watchers is what makes our program work. We believe chat will be foundational for enriching our digital community, allowing members to create relationships, thereby driving engagement, which then increases retention and LTV.

We recently launched our coach platform in North America, a dashboard for our coaches to improve engagement and precision with members, both digitally and in real life. Coaches are the touch point to our members, providing an important source of motivation and support, and this platform will help them manage relationships at scale. We also completed the integration with Abbott’s FreeStyle Libre Continuous Glucose Monitor. Now, in one place, members living with diabetes can learn how food activity directly impacts our glucose levels. We remain on track to deliver more feature improvements on our roadmap later in and in Q4 with a wet to eat tab to support eating decisions and progress and trends to more easily track and monitor a member’s weight health journey.

All of which are expected to drive the continued improvement in our member’s success with the program, which ultimately leads to better engagement, retention and LTV. We continue to look into the most effective ways to bring the in person human connection found in our workshops to new life. We are not walking away from workshops, quite the opposite. We know that connecting our members to be an impactful part of the Weight Watchers experience and that we have an opportunity to bring more of that impact to our entire community members. We believe the combination of a digital experience with an in-person one is a powerful differentiated and highly effective solution for those on a weight loss journey. Rather, we’re adjusting to the realities of a primarily digital-first community by optimizing our workshop real estate footprint.

We are exploring avenues to reinvent what in person experiences could look like in the years ahead. I’m confident in our ability to unlock more ways where our members can come together in real life as well as digitally to create lasting community. Shifting to our clinical business. We’re learning rapidly and are pleased with Q2 results, which ended the quarter with 37,000 subscribers, up nearly 40% since the closing of the acquisition on April 10th. We have started to see that the incredible demand for these medications has outpaced supply with shortages reported for [Indiscernible]. While they supply issues will have a revenue impact which you will hear more from Heather about, please keep in mind that access to these medications is still at a very early stage.

But we expect it will grow exponentially in the years ahead. Of course, as with any new industry, there are fits and starts such as we are seeing with the current supply capacity of all GLP-1 medications. Our clinicians and care team are helping members navigate the current environment by being transparent on the situation and when appropriately, prescribing alternatives across the formulary. We see this time as an opportunity where we can utilize this window to scale up operations and increase readiness ahead of the return of supply as well as ahead of our peak season. In short, this is a near-term speed bump and we remain bullish on the long-term potential for our clinical offering. Additionally, during this time we are focused on three things: one, clarifying misinformation and driving awareness and education about clinical pathways.

Two, introducing a dedicated lifestyle program for members on medications. There are different needs for someone on a clinical pathway. Medications do not replace the benefits of behavior change, but instead allow those benefits to be possible. We are using our expertise to develop a tailored lifestyle program that addresses those needs, such as prioritizing a nutrient-dense diet and protecting lean muscle mass. We expect a rollout to the market, including to our Sequence subscribers to occur prior to our upcoming peak season. And three, integrating the Sequence and Weight Watchers platforms for holistic solutions as members go through different phases of their weight loss journeys. Weight Watchers and Sequence are highly complementary to one another, and we now have a portfolio of solutions to meet the broad and evolving needs of members.

In addition to direct-to-consumer with Sequence, there is also our B2B business. Given our robust portfolio of solutions, I believe WW Health Solutions will be the partner of choice for health providers, payers, and employers alike. The emergence of this new class of chronic weight management medications while highly effective are posing challenges for payers. We are hearing from employers that they want to enable access, especially as their employees advocate for coverage, but they are looking for guidance as to how to manage costs. In addition, consistent feedback from employers is that their coming to us because they need their solution to be science-back with a track record and proven results all of which Weight Watchers delivers. WW Health Solutions has over 500 clients and an experienced service model and infrastructure to meet enterprise needs.

And now it also has a best-in-class program to provide cost effective pathways to clinicians and medication, along with necessary behavior change support, while managing costs and delivering value based care to their employee population. In summary, I’m encouraged by our results halfway through 2023, which only reinforces my view that we are focusing on the right areas and confident about the future. I will now turn the call over to Heather to discuss our Q2 financial results and outlook.

Heather Stark: Thanks Sima. Turning to our second quarter results. As previously announced, we closed the acquisition of Sequence on April 10th, and results are now reflected in our financials as well as certain metrics are included in the clinical line of business. We ended Q2 with 4.1 million subscribers, including approximately 37,000 clinical subscribers, with both sign ups and canceled outperforming our forecast in the quarter. As Sima mentioned, this is the first time in our history of reporting subscribers that Q2 ended with a higher subscriber base than Q1. This is an additional proof point that the actions we are taking to stabilize and grow the business are working. Revenue totaled $227 million, which was 16% year-over-year, both on a reported and constant currency basis, primarily due to the lower subscriber base entering the year, coupled with the planned reductions in our consumer products business as we rationalized product skews in North America and continued the wind down of this line of business.

In our international markets. Clinical contributed $8 million in revenue as a partial offset. Adjusted gross margin of 63.4% for the quarter was a record high and up 150 basis points from the prior year, primarily due to actions to reduce our fixed cost base with our workshop real estate restructuring. Marketing expenses of $51 million were down 1% year-over-year and were below our planned spend with our improved performance marketing capabilities and nimbleness adjusting to trends, we were able to increase efficiency and achieve both sign ups and GLTV above plan. Adjusted G&A of $59 million was up 4% year-over-year. Restructuring savings and expense controls were offset by the inclusion of $4.5 million in clinical G&A expenses, including approximately $2 million in intangible amortization from purchase price accounting consideration patients.

Adjusted operating income was $34 million. Restructuring charges totaled $3 million in the quarter. We continued to further streamline and centralized our organizational structure and rationalize certain non-strategic business lines. We largely completed the rebalancing of our studio real estate portfolio by reducing our fixed lease studio count and shifting workshop delivery to flexible third-party or studio at locations, which helped drive our record high adjusted gross margins in Q2. And we are on track to deliver $30 million of anticipated 2023 savings from our actions. Related to the accounting for the Sequence transaction, we incurred approximately $5 million of non-recurring acquisition transaction costs for Sequence employee stock-based compensation attributable to post combination vesting and other transaction costs.

These charges are not included within adjusted operating income are non-cash and do not impact our net debt to adjusted EBITDA leverage ratio. Income tax was a benefit of $48 million in the quarter, which consistent with last quarter, reflects the impact of an unusually high negative annual effective tax rate, driven by evaluation allowance and small pre-tax loss reflected in the company’s full year fiscal 2023 guidance. GAAP EPS was $0.65, which incorporates the net positive impact of $0.69 of items impacting comparability including the valuation allowance, net restructuring charges, and the $5 million of acquisition transaction costs mentioned earlier. Turning to Sequence and our clinical line of business. We are pleased with the early performance and ongoing integration efforts of Sequence.

Q2 end of period subscribers were approximately 37,000 members, which is up from 27,000 at closing on April 10th. Q2 gross margins were north of 40% and after excluding acquisition-related expenses, we expect to generate modest operating income and cash flow in 2023. As Sima mentioned, while there are shorter term supply constraints due to overwhelming demand, we strongly believe the multi-year growth opportunity is significant and are utilizing this time to increase our scaling readiness. Shifting to our outlook, we are encouraged by the subscriber trends we are seeing in our core Weight Watchers business and expect them to continue for the balance of the year as we execute on our data-in-front approach to member acquisition, benefit from the increased operating efficiency, and deliver an enhanced member experience with our product roadmap.

We expect to end the year with total subscribers of 3.7 million, up from our prior guidance of approaching 3.6 million. Within this, we expect Weight Watchers subscribers excluding clinical to be above 3.6 million at the end of the year, up from 3.5 million at the end of 2022. For the clinical business, as Sima mentioned, we are assuming near-term medication supply challenges continue, thereby lowering our clinical subscriber expectations for the remainder of 2023. As a reminder, the seasonality trends in our business mean that Q1 is traditionally our annual peak and end of period subscribers sloping to a Q4 trough. Our outlook of ending the year at 3.7 million subscribers would represent one of the best seasonal slopes seen since we’ve been reporting total subscribers.

With the near-term supply constraints in our clinical business, coupled with a subscriber mix shift, we expect full year revenue to be in the range of $890 million to $910 million compared to prior guidance of $910 million to $930 million. We expect clinical revenues to be $30 million for Q2 to Q4 in aggregate, down from our previous guidance of $45 million, reflecting lower subscriber expectations due to medication shortages. While we have reduced our 2023 revenue expectations, given our anticipated increasing subscriber levels year-over-year and including the addition of clinical, for the first time since entering 2020, we expect we will have a modest subscription revenue tailwind into next year. Shifting to consumer products and other. As we prioritize the actions and initiatives that matter most to member success and will drive our return to growth, we have made the decision to sunset our e commerce and consumer products offerings.

As we’ve previously communicated, we began scaling back on the business, but an exit in the US will allow us to further streamline our operations and better allocate resources. Products will be sold until quantities run out with a planned completion by the end of 2023. While we expect consumer products and other revenues to be in line with prior guidance and contribute roughly $65 million in revenues during 2023, approximately $50 million will not recur and will be a revenue headwind into 2024. Importantly, however, we expect this to be roughly neutral operating income. We still plan to continue our high margin licensing business. Adjusted gross margin is expected to be in the range of 62% to 63% for the full year, up from 61% to 62% previously.

As we are seeing a higher mix shift to our digital business and we will have continued read through of the benefit of having reduced our fixed cost base by optimizing our real estate footprint. We continue to expect full year marketing spending to be flat for 2022 at approximately $245 million. As highlighted in prior calls, we continue to focus on high value member acquisition, and plan to redeploy our first half marketing savings, primarily into Q3, where we can maximize LTV to CAC efficiency. We are confident these actions will drive a second consecutive quarter of year-over-year sign up growth in Q3. Adjusted G&A expense is expected to be approximately $235 million for the year, lower than the previous guide of $245 million due to incremental restructuring and organizational savings.

Despite the back half revenue impact from clinical supply shortages previously mentioned and mix shift in our Weight Watchers business, we expect adjusted operating income to be towards the high end of the previously provided guidance range of $80 million to $85 million as we benefit from improved margins and expense control. As mentioned earlier, we incurred acquisition transaction costs that are now excluded from adjusted operating income including approximately $4 million of costs previously included in Q1 adjusted operating income. However, equally offsetting this change in presentation is the inclusion of $4 million of intangible amortization from purchase price accounting considerations, which do not impact EBITDA or net debt to adjusted EBITDA leverage.

We estimate that remaining charges related to the 2023 restructuring plan will be up to $10 million. For the full year, excluding the impact of restructuring and acquisition transaction costs, we expect income tax expense to be approximately $15 million to $20 million, largely driven by the full impact of the valuation allowance discussed earlier. As we highlighted last quarter, given the seasonal nature of our business, the outside Q1 income tax expense was largely expected to reverse. In the remaining quarters of fiscal 2023 when we expect to pre-tax income, which started to happen in Q2, as mentioned earlier. Excluding the impact of the valuation allowance, we expect an income tax benefit of up to $5 million for the full year, consistent with our expectation from last quarter.

As a reminder, given the small pre-tax loss reflected in the company’s full year fiscal 2023 guidance, any updates to the expected pre-tax loss or income tax expense can result in significant impacts in quarterly income tax results. Turning to our capital structure and cash flows. We ended Q2 with approximately $91 million of cash after paying $40 million in cash for the purchase of Sequence completed earlier in Q2, plus an undrawn revolver. With our cash position plus our revolving credit facility, we have more than sufficient liquidity for our working capital needs, including in near cash outlays related to our restructuring actions and servicing our debt. We continue to expect that cash from operations will be a modest use of cash for the full year due to the approximately $40 million in expected restructuring cash payments.

At quarter end, our net debt to adjusted EBITDA leverage ratio was 7.7 times. We expect our trailing 12 month leverage ratio to further increase in 2023 due to lower EBITDA levels through most of this transformative year. We are committed to improving our leverage ratio as we return the business to profitable growth. We still expect full year interest expense to be approximately $95 million. As a reminder, we have a $500 million hedged through Q1 2024 to protect against rising interest rates on our variable rate term loan of $945 million and our $500 million notes are fixed rate. Therefore, only 31% of our total debt is floating. We are currently exploring options for forward starting swaps for when the current hedges expire. Of note, effective June 30th, we transitioned the reference rate for our debt instruments and swaps away from LIBOR.

Our new reference rate is one month term SOFR plus a credit spread adjustment to largely remove any direct economic impact from the transition. As such, there is a limited impact on our interest expense. CapEx, which is primarily due to capitalized software is expected to be in the $45 million range. Depreciation and amortization is expected to be in the $50 million range, slightly higher than prior guidance of $45 million, to reflect the intangible amortization from the Sequence acquisition mentioned above. In summary, we are executing well against our strategy and meeting, and in some cases, exceeding our 2023 objectives. Encouraging subscriber trends, record gross margins, and improved cost structure position us well for profitable growth.

I will now return the call back to Sima.

Sima Sistani: Thanks Heather. Our team’s hard work and innovative thinking are paying off. We are turning the corner and getting Weight Watchers back on a subscriber growth trajectory while setting the foundation for our next chapter with a portfolio of solutions to serve the full spectrum of weight health. To reiterate, our Weight Watchers business has returned to sign-up growth without increasing our marketing budget, fueling our return to subscriber growth in the back half and driving a subscription revenue tailwind going into next year. We drove a nearly 40% increase in clinical subscribers, primarily for positive word of mouth since the close of the acquisition and are scaling up our operations, increasing readiness and developing a dedicated lifestyle program for members on medications.

We have increased our activation and engagement rates by advancing our digital first product roadmap, focused on coaching, accountability, and community. We are managing the business prudently, reducing our cost structure, and driving record high adjusted gross margins. And we are focused on returning the company to profitable growth, and are committed to reducing our leverage. Before we turn to Q&A, I would like to highlight the three new members of our Board of Directors since our last earnings call. Tracy Brown, EVP and President of Retail and U.S. Chief Customer Officer at Walgreens and the former CEO of the American Diabetes Association. Tara Kamat, former Chief Executive Officer and current board member of Tomorrow Life Sciences, and a board member of Strava, the leading subscription platform for Connected Fitness.

Dr. William Schrenk, venture partner, Bio and Health at Endres and Horowitz, and a former Chief Medical officer at Humana. With these additions, we are further extending our thought leadership to cover the entire weight health spectrum, something completely aligned with our vision as the global leader in weight health. Thank you for joining us. We are now happy to take your questions.

See also 15 Cheapest and Safest Countries to Retire In and 15 States That Produce the Most Corn.

Q&A Session

Operator: We will now begin the question and answer session. [Operator Instructions] The first question will come from Jason English of Goldman Sachs. Please go ahead.

Jason English: Hey, folks. Thanks for slotting me in, I appreciate it. Congrats on the uptick in base business subscribers, it’s a welcome surprise. I’m a little surprised though that you’re cutting the revenue forecast. Like I get the $15 million trim on new clinical because the capacity constraints on drugs, but still with the uptick on subs and the cut being more than just the $15 million, it suggests a decent drop in revenue per subscriber. What is driving that?

Sima Sistani: Hi, Jason. Thanks for the question. Yes, as you know, the majority of the revenue adjustment that we are making is driven by the external factors of medication supply on clinical. The balance of it really is about the mixed shift that we’re seeing between clinical core and workshop. So we’re seeing more folks signing up for the digital business versus the workshop business, which is a higher margin business as well. So we’re seeing that shift impact total revenue and also driving some of our improvement in gross margin.

Heather Stark : And I should like to add there too, hey Jason, is that part of that is consistent with the broader economic story. So we’re seeing some of our labs workshop members who are coming back in Q2 and choosing digital. And so that feels in line with what we’re seeing from a macro perspective. But, NPS has remained really stable versus February of 23 earlier this year, and in fact is up 22 points year over year. So we feel really good that people are staying connected to the brand and still seeing it as a must have and just choosing the digital option as their way of staying connected to the program.

Jason English: Understood. And one more follow up for me on the clinical side. I think, and sorry I was distracted, I think I heard you say you’re going to launch this more aggressively later this year before the New Year’s resolution sort of uptick or enrollment cycle, correct me if I’m wrong on that. But if so, what gives you confidence that the drug supply will be adequate enough? And secondly, where do you stand on clinician capacity? Because I understand I’ve always viewed this as a twin potential bottleneck. One is the clinicians. Do you have enough of them to operate the telehealth side? And the other is, do you have enough drugs to actually prescribe? So updates on both of those and the timing would be really helpful. Thank you.

Sima Sistani: Yes, no. So just to clarify what we had said there was that we are scaling up to be ready for when supply comes back and on the lifestyle program itself, the one that is specific for people on the GLP-1 journey, that that is going to be available ahead of peak season. And yes, I think this is a real opportunity. Look, we’re already 4X the number of clinicians since the Sequence acquisition, and we even have a wait list of onboarding on additional clinicians. And so this, the shortage is obviously, we don’t like this for our members and their experience and their needs, but in the meantime, what it’s allowing us to do is scaling up to be ready for when the supply comes back on.

Jason English: Got it. Thank you. Out of respect to my others, I’ll stop there and pass it on.

Operator: The next question comes from Lauren Schenk of Morgan Stanley. Please go ahead.

Nathan Feather: Hey, everyone. It’s Nathan Feather on for Lauren. Congrats on the strong core performance. I want to dig in a little bit on the lower expected Sequence revenue for the year and just the mechanics behind that. I mean, what’s the kind of key driver between the lower revenue? Is it lower gross ad demand, higher churn if people can get access to supply, or is there kind of a revenue per subscriber dynamic? And would you potentially not charge subscribers, or would they pause if they can’t find supply, just trying to think through dynamics and how it impacts your sub-base as we enter the year?

Sima Sistani: Thanks, Nathan. Yes, so, look, it’s really early days, and certainly we didn’t acquire Sequence for 2023, and we’re confident that supply issues are not going to be a barrier to our long-term outlook. Obviously, there are more medications within the pipeline and lots of investments being made by manufacturers to get this right. As you can imagine, we’re in touch with them and doing top-to-tops and understanding when and how we can expect that supply to come back on. What ends up happening, understandably, is this is a month-to-month program, and if we are unable to get somebody the medication, then that does impact churn. But more importantly, we’re just not going out – let me take a step back and say we offer a wide formulary, so in a lot of cases, we’re able to mitigate that by finding the, through our customer, through our care portal, finding the pharmacy that does have supply and or getting people started on a different medication while they’re waiting for one of their other dosages or bran.

In the meantime though, what it really means is we’re not pushing our top of funnel activity as you even noticed in your recent report, you haven’t seen us do much cross-selling and that is purposeful. We don’t want to impact NPS by driving a lot of people into the funnel who then have a poor experience because of supply issues. So, this ends up being, as I mentioned, an opportunity for us to spend this time thinking through scaling, making sure the current members are having a really great experience, and increasing our readiness overall.

Nathan Feather: Great. That’s really helpful. Thank you.

Operator: The next question comes from Linda Bolton-Weiser of D.A. Davidson. Please go ahead.