Good afternoon, and welcome to the Weight Watchers Third Quarter 2014 Earnings 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 Ms. Corey Kinger, Investor Relations. Ms. Kinger, the floor is yours, ma'am.

Thank you, Mike, and thank you to everyone for joining us today for Weight Watchers International third quarter 2014 Conference Call. With us on the call are Jim Chambers, our President and Chief Executive Officer; Lesya Lysyj, the President of our North American business; and Nick Hotchkin, our Chief Financial Officer. At about 4 'O clock p.m. Eastern Time today, the Company issued a press release reporting the fiscal 2014 third 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 Web site 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 Chambers, President and Chief Executive Officer of Weight Watchers International. Jim?

Thanks, Corey. Good afternoon, everyone and thank you for joining us. As Corey said, here with me today are Lesya Lysyj, the President of our North American Business and Nick Hotchkin, our CFO. Let me begin by outlining what we will cover today in our prepared remarks. We will start by updating you on our business performance as well as the progress we are marking on our transformation initiatives. Lesya will provide additional commentary on our Pillar 2 work with a particular focus on our initiatives to reposition our brand in support of our growth agenda. Nick will then take you through the details of the Q3 financial results, give a progress update on our cost management actions, review our outlook for the balance of 2014 and provide color on the building blocks for 2015. It’s been about a year since we first shares with your our transformation plan, starting with our situation assessment and resultant core strategies. Since that time we have updated you regularly on our strategies for returning our business to growth, including the strengthening of our organizational capabilities in key areas like consumer insights, innovation and the application of technology. 2015 represents a critical period in our multiyear plan. It begins with the key winter season, where we will take the first market visible steps in direction of our new strategies. As indicated, I will continue the dialogue on our transformation progress by talking to each of the four strategic pillars of our plan, which by way of remainder are one, driving immediate performance improvement; two, reimagining our core offering; three, growing our healthcare business; and four, strengthening our organization. First our business performance. In the third quarter, we delivered total revenue of $345 million, adjusted operating margins of 27% and adjusted earnings per share of…

Thanks Jim. Having now been in the North America President role for just about a year, I'm excited to share with you my part in the journey to transform our business. By way of background I have a long carrier with consumer packaged goods companies like Cadbury, Kraft and most recently Heineken. As a brand marketer, I have worked on 20 different brands and 9 categories along the spectrum of brands with tangible benefits like Hall's cough drops to highly lifestyle driven ones like Dos Equis. I have also been a Weight Watchers meetings member for over 20 years. Not only do I come to the company with a love of what Weight Watchers does, I also have a huge appreciation for the thousands of service providers at Weight Watchers. They are the backbone of our organization and I personally have benefitted from and can appreciate the inspiration, accountability and support that they provide for our members. Let me start by saying North Americas performance, both for meetings and online is obviously not where it needs to be. I fully expect that as the largest contributor to overall Weight Watchers performance, North America will lead the turnaround of our business. The most important factor in driving this turnaround is attracting new consumers to Weight Watchers. As Jim mentioned, Pillar 2 is about both our offerings and our brand and I see three big areas to improve under this pillar, which represent significant opportunity for us. First, enhancing the unique value that Weight Watchers provides which is inspiration, accountability and support in all parts of our offering. Second, better adapting to changing consumer expectations for personalization and convenience. And third, evolving our brand, which is already iconic and highly credible to be more relevant and aspirational to a wider audience. To…

Thanks Lesya, and good afternoon everyone. Let me start by walking you through our Q3 results. In Q3 we saw some improvement in our top line trend, with total company revenue declining 12.9% to $345 million. Third quarter global paid weeks were down 12.4%, driven by declines in online and meetings. End of period global active subscribers declined 12.5% to 2.9 million with active online subscribers at 1.7 million and month pass active subscribers of 1.2 million. While the competitive environment remains challenging as we work to attract consumers to our brand, one thing gauged with Weight Watchers, consumer value our service, as shown by our continuing solid retention levels. Average length of stay in Q3 remained steady at roughly eight months for monthly pass members and nine months for Weight Watchers online subscribers. As we have seen throughout 2014, despite continued cost discipline, our lower revenue has put substantial pressure on the P&L and this resulted in an adjusted operating income decline of 26% in the third quarter versus prior. EPS was $0.68 on an adjusted basis in the third quarter. This excludes $0.01 impact from previously announced restructuring activity. Our Pillar 1 initiatives to drive short term improvement are helping with revenue and cost improvement across many areas of our business and as a result Q3 EPS came in ahead of our internal expectations. In the quarter foreign currency was $0.01 benefit and in the prior year, third quarter recorded and adjusted EPS was $0.07. Turning down to our results by geographic segment, which I’ll discuss on a constant currency basis. Our North America business continues to be our most previous market, due to volume declines. In the third quarter total North America revenues declined 17.3% with meeting fees down 15% and online revenue down 20.8%. Meeting paid…

Thank you Nick. To reiterate, we are excited and confident we can execute our plan. We are focused on near term delivery, reimagining our offering and repositioning our brand, healthcare market readiness and strengthening our organization. For 2015, turning our recruitment trajectory around is our top priority. There remains a lot of work to be done but we are encouraged by our early progress. Thanks again for joining our call today and we will now open it up for questions.

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions]. The first question we have comes from Glen Santangelo of Credit Suisse. Please go ahead.

Jim I just want to follow up on some of the prepared remarks you made with respect to your winter season initiatives. I know you don't want to give up too much to the competition at this point and it kind of sounds like that the product is going to have a lot more human connection, both on the meeting side as well as on the dot.com side of the business. This is the last sort of public communication you will have. Is there going to be any way you're going to disseminate your marketing strategy and we’re just going to kind of watch it unfold at this point and then discuss after the fact -- and so I’m just kind of curious maybe elaborate or give us any more color, if some of the marketing initiatives will follow trends that we’ve seen historically with either sponsors or TV time, or any different way you’re going to market the product this year that you can give us color on?

Thanks for the question. I wish I could but as your lead in suggested, I won’t provide additional detail on what we’re doing. I will reiterate what you referenced, is that we will be providing more human support in our offerings going into winter season and I think you will have to just watch it unfold, hopefully excitedly, but I think you’ll have to watch it unfold.

Maybe if I can just shift gears. Nick, I just want to follow up on this 2015 guidance. It kind of sounds like maybe the recruitment waterfall maybe improved a little bit from last conference call. So the whole restarting in for ’15 maybe sounds a little bit better than maybe what you thought 90 days ago and I’m assuming that if that’s the case, just kind of following -- I think you said there would be recruitment growth in 2015, but we won’t have revenue growth until ’16. Is that kind of implying that revenue growth will still be negative in 2015?

Yes. Glen, thanks for that and before I answer that question, just let me clarify some of my prepared remarks. I think I might have said online paid weeks, but Continental Europe increased 13.8%. I should have said 3.8%. So Glen, turning to your question, yes look, we did see incremental improvements in our trend since we last spoke and that’s why whereas previously we estimated the negative EPS impact associated with our lowest [indiscernible] space at $0.60 of EPS, now it’s up to $0.55. As you've heard from Jim and Lesya, we’re excited about what we’re bringing to market and how we will advertise that if we iterated that this will be the inflection point for our business and we expect recruitments to turn positive during ’15; when exactly and what were recruitments would be -- I think I'd be foolhardy to try to estimate that and that's why we give guidance in February.

Okay, and Lesya, maybe if I can just ask you one question. In your prepared remarks you seem to suggest that North America you feel confident can kind of lead the turnaround at the Company but, just trying to listen to the other commentary on Continental Europe and it’s obviously been the best geography for the Company and so maybe you can just reflect on -- or Jim perhaps reflect on what works well in continental Europe that doesn’t work in the North American market? Because I'm just not sure exactly, the differences between the geographies, maybe it's a cultural difference, but it just seems like you have strategies working elsewhere that don’t work here and vice versa?

I think at the highest level, the biggest difference in performance is around our competitive frame, in the U.S. at a greater pace and with greater consumer interest than the other markets -- if I'm generalizing, we saw the emergence of these new competitors that competed with us for trial. We’ve been of the opinion that the percentage of folks for whom these new competitors represent a full and successful solution is not that high but nonetheless we’ve been consistent in saying that the impact on trial was there. So those forces are greatest in the U.S. That’s created the greatest headwind in U.S. Beyond that there are some secondary considerations but that’s really the biggest difference.

John Faucher, JPMorgan.

I was wondering if you can just provide a little bit more detail on the gross -- you made some comments about healthcare and the investments in healthcare impacting the gross margin. Can you talk a little bit about how it is that those investments are impacting gross margin? What type of investments they are? And then as we think about modeling that through, is that something where that’s just going to be a short term impact or is that a longer term impact going forward on the gross margin? Thanks.

It's Nick. Let me take that for '14 starting with -- in Q1 and Q2 you saw our gross margin decline in the 300 basis points range, driven primarily by operating deleverage and increased service provider compensation. As we -- for the back half of this year, the deterioration in gross margin has worsened primarily due to ramping up investments and healthcare and also lower cost associated with our winter launch. So that’s why we’re still guiding for 400 basis points decline in gross margin this year as a whole, which as you will see -- up to a 600 basis points deterioration this fourth quarter. Looking forward we’ve noted in today’s call that we’ve made some strides our investments to reinvent our technology system this year and build our healthcare capabilities, but we’re not done and that’s we’ve indicated in today’s call an incremental investment of $25 million of ’14 over ’15. I think the other thing of note to reiterate on our gross margin is that we’ve noted that we’re adding cost to our product delivery and we expect that to impact gross margin rate modestly. I hope that helps.

Next we have Greg Badishkanian of Citigroup. Greg Badishkanian – Citigroup: Just -- is fourth quarter EPS guidance about negative $0.01 to $0.09 just as housekeeping?

Yes, like I said within that -- sort of within that range, I believe our adjusted EPS year-to-date is $1.97. So when you look at the guidance for Q4, obviously it's the smallest quarter we have in the year from a revenue standpoint and we’ve noticed that the GM, the gross margin environment I've just discussed and we’ve also noted that marketing is going to be tough year-over-year, probably due to the 53rd week and our launch activities. So obviously a lot of un-mounting [ph] Q4, timing of investments and exactly what revenue will be, but you’re understanding our guidance correctly.

And maybe I would expect you to -- a little bit higher guidance just given the consecutive beats that you've had, but it sounds like you're also being all the conservative too. But I understand that?

Yes, in other words, I think you can looked at the beat we’ve had this quarter, obviously when you looked at it, I would say a third of the week was probably the timing of the international packs issues, two-thirds operational issues, little bit of extra revenue net [ph] of this in our high margin business and so we deliberately shifted from Q3 marketing spend into Q4. So those are the major moving parts.

Yes, okay, fair enough. You mentioned that recruitment is down, but it's improved. How is the competitive environment? Has that been changing over the last few months or is it been pretty consistent throughout the year? And as a second part to that question, just looking into 2015, do you think that your new innovation that you’ll be launching will be enough to improve your value proposition for your online business and/or your classroom business versus the competition right now? Are you going to really kind of change that value proposition in a meaningful way?

So, I think the competitive frame changes and we'll have changes in the players, but the fundamentals of being the large attractive market, that it's bringing people in who feel they can compete with fast and light footprints if you will, that’s not changing. As we head into the holiday season, I think we’re going to see lots of participation by folks who compete with us from a consideration perspective. Turning that more broadly, as I referenced before, while that’s a general comment across the markets, the things that we are doing we think directly will effect -- address rather the value proposition on our business. And from a timing perspective I think we will be getting earlier into the competitive frame development in the non-U.S. markets than we have in U.S. So the results of our activities where will actually improve our competitive position and improve our value proposition. So yes, I think that at a high level, what has created magic in this business for a long time in the meeting side of the business, we’re doing more of that. We’re doing more of it in between the meetings business for those folks and we are bringing that to the digital side of our business for the first time. That’s the fundamental change that we are amping up those value creation moments and that’s going to address -- that’s to going to add strength in our value proposition.

And just finally in terms of advertising marketing because that’s going to be really critical to driving recruitment and sales. How far long are you in that process and how comfortable do you feel that you’ll be able to maybe step up the effectiveness of advertising for the new innovations that you’re going to be launching?

Yes, I will take that. I think we’re far along and I think we're feeling very good about it. At a high level there is an opportunity to be more engaging, more relevant and more memorable and as I said, I think as we're talking to people in a more authentic voice, consumers have told us that that is important to them and it's credible to them and inspires hope. So we're far along and we're feeling good about it.

Jerry Herman, Stifel.

Jim, I wanted to ask about the new product. And can you talk about the process of launch and how it’s been say tested or piloted regarding the launch? Historically there's been sort of a soft launch to Weight Watchers products. Can you just talk about how you’ll go about that process?

Yes, I think both in terms of the pieces of offerings that change as well as the pieces of consumer activation and how they relate to one another. We do go through rounds of exposure for consumer reaction all the way through formal testing and it’s a mix of those kinds of tactics. This is a trickier category than some that I’ve been in to feel that you’ve gotten a perfect read such that you then say what’s going to happen when you go live, but we have worked hard to present as much as of it in real world situations to our consumers as possible and we feel confident with the reactions that we have been getting from them.

How about, is there a soft launch plan in terms of timing?

I think that falls a bit into the camp of information from a competitive perspective that we'd be sensitive to, but I think it’s safe to say that we will flow these offering changes into the marketplace in a way that gives us increasing confidence that we’re going in the right direction.

Okay great and a question about corporate market and forgive me if this is nitpicking, but I thought you guys had previously framed some visibility around the corporate market as an announcement this year for a major partnership, that you said a launch in 2015. The question obviously is, is there a drift in any way of your -- on ability to deliver or sale cycles extending in any way?

I don’t think it’s much around our ability to deliver. I think -- we have always thought that the major market entry point is 2016. We hope to have some early partnerships in '15. We I think had assumed it might be faster to actually signing and announcing that but we’re still confident that will happen. It’s a long and deliberate sales cycle and we are doing something for the first time that maybe we’ve been talking about for a long time, but for the first time we are standing at these capabilities. So it just takes a lot of back and forth to insure that we’re all conformable with what the relationship would be. But I'm still confident that we will have an early relationship in '15 and still confident the strategic potential is there for '16 and beyond.

Okay, Nick, and just one clarification on guidance. The $0.60 versus the $0.55, I think previously you’ve talked about a mid-teens decline in subscribers. I'm assuming that’s more like low double digits at this point. And then with regard to your assumption around that, I'm trying to understand what it implies for the new subscribers next year? Does that effectively assume that the activity on new is flat first of this year or identical to this year’s trend? Is that the way we should think about that?

I think Jerry, if I understand the question, we're not giving any indication today of what we think recruitments will be next year other than the fact that we think we've got some great program news adding value for our online offering which has been a particular pain point for us this year and you know it's been the first year our online business has shrunk year-over-year and $75 million of revenue this year. So that will help. In terms of the starting position, that $0.60 now up 55%, I would describe it is a slight change, given the incremental better top line environment we’ve seen since we last spoke. But we'll start 2015 with some region of 400,000 fewer people in the brand we started in [indiscernible] with.

Next we have R. J. Hottovy of Morningstar.

I had a question, a technology related question. Just wondering and I realize it's pretty early stage with your relationship with Fitbit and the HealthKit [ph] relationship as well, but wondering if you have any early learnings from that to share with us, particularly with regards to recruitment opportunities, engagement levels with members as well as potential direct marketing? Just any color that you had early on with those relationships would be helpful?

It is early but in general the relationships have had a bit very positive impact on our service providers. a positive impact on our members. So we’re very encouraged by the potential that these relationships indicate for our strategies in general because as we know people think about they think about fitness and they think about weight management very closely together. There are good statistics that over 50% of the weight management attempts are accompanied by a similar consideration around exercise or fitness. And so bringing these things together, is very positive from a strategic perspective. The early stages to your question have been very positive.

And a follow up questions for Nick. Just trying to get some clarity for 2015 capital expenditures, trying to get some sense where directionally they may stand relative to 2014 and how that $25 million incremental investment you talked about for next year, is that in addition potentially to what we saw in 2014. Just trying to get a little bit more color for modeling purposes?

Yes. If I start with the second question first, at the start of this year, we said we'd have approximately $20 million of expense related to investments in technology, healthcare and innovation capabilities and we have. So the $25 million that we've disclosed today is on top of that 2014 spend. In terms of CapEx, CapEx this year in the $50 million range is down of the highs last couple of years, as went through our retail portfolio update. The CapEx is to the point where it's almost exclusively driven by our tech transformation to expand and associated software capitalization. So not in a place today to guide on exactly what CapEx will be for next year, but I wouldn't expect it to return to sort of high you see over the last couple of years.

Well, this concludes our question-and-answer session and today's conference call. We thank you all for attending today's presentation. At this time you may disconnect your lines. Thank you and have a great day everyone.