WW 12.22.25

Okay, fair points. The biggest question mark here is whether the behavioral side of the business will actually start to normalize and stop declining. It does print cash at the moment. On the other hand, will the clinical side of the business actually be able to ramp up and scale as the bulls hope?

It's interesting to us because we've made many of our returns from companies that might not be as obvious in their inflection periods. Obviously, the market will misprice these assets because they're not very clear. It seems all the negatives are out in the open. I don't think anyone is contesting the negatives and risks associated with this company. So in our mind, it's a question of whether the market actually has it wrong.

Will the behavioral side actually normalize by the end of 2026 or sooner? Will the clinical side be ramping up even if compounding has put a thorn in its side? Will the new oral GLP-1s expected to be released in Q1 of next year actually meaningfully contribute to top-line growth? How are their partnerships actually materializing with hopefully new employers and insurance plans?

To piggyback on one thing I just said, we think the market is seriously underestimating Weight Watchers' potential to actually grab a significant foothold in the oral GLP-1 space once it launches. It's very nice to hear that they've confirmed Novo Nordisk will be launching their orals with Weight Watchers on their platform. That’s a plus because they haven't really voiced too many of those partnerships with other telehealth companies, like Hims, especially after their nasty breakup. We think that's a very meaningful catalyst.

We mentioned the negatives of the behavioral side, but in reality, if we're looking at the big picture, fundamental value proposition as opposed to competitors, medication alone doesn't solve the problem. Yes, it temporarily does, but for the longevity of success in weight loss, you actually need to have a behavioral side of changes on top of medication. Weight Watchers is obviously very well positioned there—the best name in the business for weight loss over the last fifty-some-odd years.

As you said, we're trading at 4x EBITDA. I think on a free cash flow basis, it's like five and a half times. The post-restructuring plan is really interesting because of that cash sweep provision. You basically have a deleveraging story into what is just a business stabilizing. That might not sound sexy to the average investor, but I don't know many deleveraging stories that haven't had the benefit of a re-rating, at least to some point in the future, where the equity value per share can meaningfully increase over time. I threw a lot at you there, but I'll let you dive into any of those if you want.

Broadly speaking, Trump is hell-bent on lowering drug prices, which I'm all for. It's just a land grab—how much of the space can someone actually take? Injectable GLP-1s are not new; they've been around for at least a few years on a mainstream basis, more recently this year, for obvious reasons between the on-and-off compounding.

Could the company see that negatively, given that in 2026, cash pay and insurance prices will come down even further? Obviously, that's very likely. But the thing I think is beneficial here, regarding pricing, is that if you're really good at customer acquisition—which Weight Watchers excels at—it actually benefits them more than competitors, even if prices come down, because you're hoping volumes go up. As I mentioned before regarding the oral side of things, I really think investors are underestimating that impact.

You can take it down to its fundamental basis. If your only options are injectables right now—forget the dosages for a moment, forget titration—it's just, do you want to inject yourself? If you looked at it with Saxenda a few years ago, that obviously sucked because you had to inject yourself every single day. It's not even a little poke; if you're a diabetic, it's a straight needle into you every day. Then you had Wegovy and Zepbound, which was once a week, so that was a little better, but you're still injecting yourself.

The good and bad thing about orals is that you just take it through your mouth. It’s digested in the stomach and enters the bloodstream. That's a plus because that actually increases what we believe is the addressable market. People who don't want to inject themselves can just take the pill. The downside is that injectables must be administered directly into the bloodstream to work effectively. With orals, because it's being digested into your digestive tract, the acid destroys a lot of the medication, so you actually have to take a higher dose to get relatively the same result. Higher doses may lead to potentially higher side effects, and more people might discontinue. But I think in the beginning, you're going to see a lot of people at least try the orals because they just don't want to inject themselves.

If you look at the pricing alone, cash-pay pricing is approximately half the price. It was $150 in the Trump RX, then $300, depending on the GLP-1 you're considering, starting with the injectables. So you have price disparity, a cost advantage, and wider adoption, because if you don't have to stab yourself, I'm sure people are going to sign up. That's how we see it. More adoption of oral GLP-1s. And obviously, with the cost, you don't have to send the packages like you do with an injectable. There are no pens, none of that going on.

I wanted to quickly touch on your B2B side. We do like that. It's very interesting because we looked at the insurance space this year, which has also been under assault from the Trump administration, probably rightfully so. We've come to the conclusion, as many others have, that GLP-1s are putting quite a strain on insurance companies, employer plans, and even the state level. Some of them actually require patients to seek behavioral changes before they get approved for these GLP-1 medications.

As we mentioned before, if you're looking at it holistically, Weight Watchers is great because it combines behavioral and medical approaches to achieve better results. Time will tell if that will actually materialize. We're not betting the farm that B2B will be a thing; we see it more as a call option on the upside if that does materialize. They've made some slight inroads with UnitedHealthcare and some other state-sponsored plans in the past.

Aside from underestimating the orals and the potential call option on the B2B side, we noticed that the comorbidities associated with weight loss are very high. You can be overweight or obese and have heart health problems, or if you're a woman, PCOS, endometriosis, menopause, etc. The fact that they branched into menopause is a plus in our mind, and the strategic shift to actually address more weight-related comorbidities is very bullish if they keep picking at that.

There's just so much going on. You're only paying 4x for this business. Either it shits the bed because the behavioral side collapses and the clinical side doesn't materialize, or you get a serious upside re-rating—not just the multiple from the deleveraging, but also from potentially the growth story of the adoption that comes up in 2026.

I don't even deny that in the general sense, so that's why we shorted it in the first place. I know you looked at it this year, but how far back did you go in the research?

Oprah was a great success story. She invested in the company, eventually sold her stake, and donated the remainder to charity, so she's out. They're bringing in Queen Latifah for menopause, which is great. Many telehealth companies have been partnering with celebrities—Ro has Charles Barkley and Alexis Ohanian's wife, Serena Williams.

The point I was going to make is that the behavioral side has historically been a highly promotional business, which obviously eats into margins when you have to convince people to spend a few dollars just to get on it. They've actually dialed back significantly on that. So when you're seeing these declines, especially on a percentage basis, that's still on the back of them not being as promotional as they used to be. Last year, in 2024, some of these behavioral plans were offered at like 60% off plus.

It is. You're wondering how much of this is people phasing out who are low intent, not committed, etc. The plus side regarding 2026 is, and I hate being so loose in this thesis, but you just have to believe that the improvements they're making to the app, the structure, and the feel help with customer retention and reducing overall churn.

What we find is that on the behavioral side, like you mentioned, you could lose twenty pounds with medication, no problem. But the issue that arises, and which the data has shown, is that once you get off these medications, you're more likely than not to regain all the weight back. So nothing is actually fundamentally changing. Not only do you just cost your insurance company a bunch of money for no gain, but you also cost yourself money for temporary gain.

It's really about believing that the future does require behavioral shifts. That's why you're starting to see, aside from Weight Watchers, so many other telehealth companies are now launching their own behavioral membership plans to help their patients not just inject themselves but also make more informed habits and changes that will help with prolonged and sustainable weight loss. That's what insurers want to see. It comes full circle again as long as things actually materialize.