Tivity Health Q4 2021 Earnings Release Supplemental Material - February 24, 2022
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Tivity Health Q4 2021 Earnings Release Supplemental Material February 24, 2022
Cautionary note on forward-looking statements
Note on Forward-Looking Statements
This communication contains certain statements that are “forward-looking” statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based upon current expectations and include all statements that are not
historical statements of fact and those regarding the intent, belief or expectations, including, without limitation, statements that are accompanied by words such as “will,” “expect,” “outlook,”
“anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “would,” “target,” or other similar words, phrases or expressions and variations or negatives of these words. These forward-looking
statements include, but are not limited to, the Company’s statements regarding its future financial performance. Readers of this press release should understand that these statements are not
guarantees of performance or results. Many risks and uncertainties could affect actual results and cause them to vary materially from the forward-looking statements.
These risks and uncertainties include, among other things: impacts from the COVID-19 pandemic (including the response of governmental authorities to combat and contain the pandemic; the
development, availability, distribution, and effectiveness of vaccines and treatments, and public confidence in such vaccines and treatments; the closure of fitness centers in the Company’s
national network (or operational restrictions imposed on such fitness centers), reclosures, and potential additional reclosures or restrictions as a result of surges in positive COVID-19 cases) on the
Company’s business, operations or liquidity; the risks associated with changes in macroeconomic conditions (including the impacts of any recession or changes in consumer spending resulting
from the COVID-19 pandemic), widespread epidemics, pandemics (such as the current COVID-19 pandemic, including variant strains of COVID-19) or other outbreaks of disease, geopolitical
turmoil, and the continuing threat of domestic or international terrorism; the Company’s ability to collect accounts receivable from its customers and amounts due under its sublease agreements;
the market’s acceptance of the Company’s new products and services; the Company’s ability to develop and implement effective strategies and to anticipate and respond to strategic changes,
opportunities, and emerging trends in its industry and/or business, as well as to accurately forecast the related impact on its revenues and earnings; the impact of any impairment of the
Company’s goodwill, intangible assets, or other long-term assets; changes in fair value of the Company’s equity ownership in Sharecare and the expected timing and amount of cash proceeds
from any potential disposition of this security; the expected timing, amount, and impact of any share repurchases made by the Company; the Company’s ability to attract, hire, or retain key
personnel or other qualified employees and to control labor costs; the Company’s ability to effectively compete against other entities, whose financial, research, staff, and marketing resources
may exceed the Company’s resources; the impact of legal proceedings involving the Company and/or its subsidiaries, products, or services, including any claims related to intellectual property
rights, as well as the Company’s ability to maintain insurance coverage with respect to such legal proceedings and claims on terms that would be favorable to the Company; the impact of severe
or adverse weather conditions, the current COVID-19 pandemic (including variant strains of COVID-19), and the potential emergence of additional health pandemics or infectious disease
outbreaks on member participation in the Company’s programs; the risks associated with the Company deriving a significant concentration of its revenues from a limited number of our
customers, many of whom are health plans; the Company’s ability and/or the ability of its customers to enroll participants and to accurately forecast their level of enrollment and participation in
its programs in a manner and within the timeframe it anticipates; the Company’s ability to sign, renew and/or maintain contracts with its customers and/or its fitness partner locations under
existing terms or to restructure these contracts on terms that would not have a material negative impact on the Company’s results of operations; the ability of the Company’s health plan
customers to maintain the number of covered lives enrolled in those health plans during the terms of the Company’s agreements; the Company’s ability to add and/or retain active subscribers in
its Prime Fitness program; the impact of any changes in tax rates, enactment of new tax laws, revisions of tax regulations, or any claims or litigation with taxing authorities; the impact of a
reduction in Medicare Advantage health plan reimbursement rates or changes in plan design; the impact of any new or proposed legislation, regulations and interpretations relating to Medicare,
Medicare Advantage, Medicare Supplement and privacy and security laws; the impact of healthcare reform on the Company’s business; the risks associated with increased focus from investors
and other stakeholders regarding ESG practices, which could result in additional costs, regulation, or risks and adversely impact the Company’s reputation, employee recruiting and retention, and
willingness of customers and suppliers to do business with the Company; the risks associated with potential failures of the Company’s information systems or those of its third-party vendors,
including as a result of telecommuting issues associated with personnel working remotely, which may include a failure to execute on policies and processes in a work-from-home or remote
model;
2 | © 2022 Tivity Health, Inc. All rights reserved.Cautionary note on forward-looking statements
the risks associated with data privacy or security breaches, computer hacking, network penetration and other illegal intrusions of the Company’s information systems or those of third-party
vendors or other service providers, including those risks that result from the increase in personnel working remotely, which may result in unauthorized access by third parties, loss,
misappropriation, disclosure or corruption of customer, employee or our information, or other data subject to privacy laws and may lead to a disruption in the Company’s business, costs to
modify, enhance, or remediate its cybersecurity measures, enforcement actions, fines or litigation against the Company, or damage to its business reputation; the risks associated with changes to
traditional office-centered business processes and/or conducting operations out of the office in a work-from-home or remote model by the Company or its third-party vendors during adverse
situations (e.g., during a crisis, disaster, or pandemic), which may result in additional costs and/or may negatively impact productivity and cause other disruptions to the Company’s business; the
Company’s ability to enforce its intellectual property rights; the risk that the Company’s indebtedness may limit its ability to adapt to changes in the economy or market conditions, expose it to
interest rate risk for the variable rate indebtedness and require a substantial portion of cash flows from operations to be dedicated to the payment of indebtedness; the Company’s ability to
service its debt, make principal and interest payments as those payments become due, and remain in compliance with its debt covenants; the Company’s ability to obtain adequate financing to
provide the capital that may be necessary to support its current or future operations; counterparty risk associated with the Company’s interest rate swap agreements and changes in fair value of
certain interest rate swap agreements that no longer qualify for hedge accounting treatment (“de-designated swaps”); and other risks detailed in the Company’s filings with the Securities and
Exchange Commission.
For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to the Company’s filings with the
SEC. Except as required by law, the Company undertakes no obligation to update any such forward-looking statements to reflect new information, subsequent events or circumstances.
3 | © 2022 Tivity Health, Inc. All rights reserved.Table of Contents
1 Mission, Vision and Strategic Pillars
2 Highlights
3 Recent Milestones
4 Q4 2021 Summary
5 SilverSneakers Results
6 Prime Results
7 2022 Guidance
Appendix: Financial and Operating Highlights
Financial Presentation: The results of operations and balance sheet data contained herein represent the continuing operations of the Company and exclude
results associated with Nutrisystem, which was divested effective December 9, 2020. Historical cash flow results include Nutrisystem cash flow except where
noted as Healthcare only.
4 | © 2022 Tivity Health, Inc. All rights reserved.1 Mission, Vision and Strategic Pillars
Vision
Healthier, happier, more connected lives
Mission
To empower people, communities and
partners through a shared passion to improve
health and support life’s journey
Launch new well-being Drive engagement
Grow participation Maximize SilverSneakers
products and services through a connected
through market-leading, brand value
platform
multi-channel fitness
services
| © 2022 Tivity Health, Inc. All rights reserved.2 Highlights
Tivity Health is uniquely positioned to enable
HEALTHIER, HAPPIER, MORE CONNECTED LIVES
Unmatched Brand with Strong Portfolio of Core Assets
Attractive Tailwinds from Strong Medicare Advantage Growth
Value Proposition that Resonates with Members, Payors and Network Partners
Expansive Digital Programming Opportunities Reaching More Members
Strong Balance Sheet, Strong Cash Flow and Asset Light Model
6 | © 2022 Tivity Health, Inc. All rights reserved.3 Recent Milestones
LEAN, EFFICIENT, WELL-CAPITALIZED ORGANIZATION OPTIMIZED FOR GROWTH
Delivered 4th quarter revenue growth of 26% and full year revenue growth of 10%
Total SilverSneakers visits grew 30% to 61.9 million in 2021
Virtual SilverSneakers visits grew over 100% to 3.4 million in 2021
Launching expanded, customizable gym network resulting in approximately 23,000 SilverSneakers locations
Generated full year adjusted EBITDA growth of nearly 7% to $158 million
Delivered on SilverSneakers strategy by expanding into non-fitness solutions
7 | © 2022 Tivity Health, Inc. All rights reserved.4 Q4 2021 Summary
Q4 2021 Q4 2020 Quarterly Visits (in Millions)
Revenue $126.8M $100.6M SilverSneakers Total Visits
Adjusted EBITDA (1) $34.9M $35.4M 17.1 17.1
15.3
Adjusted EBITDA Margin (1) 27.5% 35.2%
12.3
Free Cash Flow (1) $12.1M $5.8M (3) 10.1
Net Debt (1) $320.4M $366.3M
Leverage Ratio (2) 1.94x 2.36x
Q4 2021 Highlights Q4-2020 Q1-2021 Q2-2021 Q3-2021 Q4-2021
• Delivered strong results with revenues rising year-over-year by $26.2M, or 26%, mainly driven Prime Visits
by increased SilverSneakers visits, coupled with increase in Prime Fitness revenue.
3.1 3.3 3.3 3.2
• Adjusted EBITDA from continuing operations was $34.9 million, down $0.5 million from the
prior year. The decrease in adjusted EBITDA as a percentage of revenues is primarily due to a
2.5
lower mix of revenues from per-member-per-month fees for SilverSneakers coupled with an
increase in fitness location visit costs for SilverSneakers and Prime Fitness due to an increase
in participation levels.
• The Company ended the quarter with cash on hand of $60.1 million. During October 2021 the
Company prepaid all required amortization on its term loan through 2022, making the
Company’s next quarterly installment of $1M due in March 2023. The leverage ratio as
calculated under the new credit agreement at the end of the quarter/year was 1.94x.
Q4-2020 Q1-2021 Q2-2021 Q3-2021 Q4-2021
(1) Adjusted EBITDA, adjusted EBITDA margin, free cash flow, and net debt are non-GAAP financial measures. Reconciliations of these non-GAAP financial measures are included in Tivity Health’s earnings
release included as an exhibit to Tivity Health’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 24, 2022.
(2) Leverage Ratio calculated as defined in the Company’s Credit Agreement.
(3) Represents Free Cash Flow for the Healthcare segment only.
8 | © 2022 Tivity Health, Inc. All rights reserved.5 Total SilverSneakers Visits Grow 30% in 2021
Key Highlights: Quarterly SilverSneakers Visits
(in millions) Sequential Visit Growth
In-person visits grew 27% to 58.4 million in 2021
22% 24% 12% 0%
Virtual visits grew over 100% to 3.4 million in 2021 17.1 17.1
0.7 0.6
~16,000 SilverSneakers locations at end of 4Q21 15.3
0.9
13,000+ distinct monthly digital offerings for members 12.3
1.2
48% of 2021 virtual participants are new to SilverSneakers
16.4 16.5
14.5
11.1
1Q21 2Q21 3Q21 4Q21
In-Person Visits Virtual Visits
9 | © 2022 Tivity Health, Inc. All rights reserved.5 SilverSneakers Eligible Lives and Utilization
SilverSneakers Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021
Eligible Lives 16.7M 17.6M 17.7M 17.8M 17.9M
In-Person PL Visits 9.3M 11.1M 14.5M 16.4M 16.5M
➢ Eligible lives increased 1.2M, or 7%, from
Q4 2020 Virtual Visits 804K 1.2M 875K 714K 646K
➢ Total visits in the fourth quarter of 2021 Total Visits 10.1M 12.3M 15.3M 17.1M 17.1M
nearly 70% higher than prior year
➢ Participation % increased 160 bps during Average Monthly Participants 0.43M 0.50M 0.67M 0.75M 0.76M
2021
Participation % 2.6% 2.9% 3.8% 4.2% 4.2%
SilverSneakers On-Demand Views (1) 399K 554K 285K 282K 255K
70+ National & Regional Payors
10 | © 2022 Tivity Health, Inc. All rights reserved.
(1) Not billable directly to plans5 Adaptable SilverSneakers Commercial Model
Q4 2021
Eligible Lives SilverSneakers Revenue Financial Results
$126.8M
PMPM
22% Total PMPM
44%
Hybrid Visit Fees $34.9M
78% 56% 17.1M
SS Visits Total Company Adj EBITDA
Revenue
Q4 2020
Eligible Lives SilverSneakers Revenue Financial Results
$100.6M
PMPM
24%
Total PMPM Visit Fees
58% 42% $35.4M
Hybrid
76%
10.1M
SS Visits Total Company Adj EBITDA
Revenue
11 | © 2022 Tivity Health, Inc. All rights reserved.6 Prime Fitness Continues to Stabilize
Key Highlights Prime Active Subscribers (1)
(in thousands) 228 226 223
Prime visits were 3.2 million in 4Q21, up ~28% from prior year 218 220
~12,500 participating locations at end of Q4 including fitness centers, community
centers and alternative venues
Live streaming classes daily including offerings in partnership with Les Mills,
internationally recognized digital fitness content provider
Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021
Quarterly Prime Visits
(in millions)
3.1 3.3 3.3 3.2
2.5
(1) As of quarter end; excludes large employer members
Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021
Top Plan Sponsors and Employers
12 | © 2022 Tivity Health, Inc. All rights reserved.7 2022 Annual Guidance Considerations
2021 Actuals (2) 2022 Guidance Range (1) (2) Guidance Considerations(1) (2)
Revenues & Gross Margin:
Net Revenues $481.3M $540-$580M
• SilverSneakers projected to represent approximately 78% of total revenues,
Income from Continuing Operations $107.4M $86.6-$90.3M Prime Fitness approximately 17% of total revenues and Whole Health Living
Adjusted EBITDA $158.1M $161-$166M approximately 5% of total revenues
• Expect approximately 80% of SilverSneakers eligible lives under a hybrid-type
Depreciation $11.3M $14M
contract
Interest $34.8M $27M • Anticipate SilverSneakers visits and revenues will increase sequentially each
quarter
Effective Tax Rate 19.7% 26%
• Total company gross margin % is projected to be lower in 2022 than 2021 as
Weighted Avg. Diluted Shares 50.4M 50.5M-51.0M our expected SilverSneakers and Prime Fitness visits continue to increase
Earnings per Diluted Share $2.13 $1.70-$1.79 • Anticipate gross margin % for Q1 2022 to be slightly below Q4 2021
Adjusted Earnings per Diluted Share $1.60 $1.75-$1.84
Marketing & SG&A:
• Marketing projected to range approximately 1.6% to 2.0% of revenues
Cash Flows from Operating Activities $87.1M $102-$107M
• SG&A anticipated to range approximately 5.9% to 6.5% of revenues
Capital Expenditures $14.8M $15M-$20M Adjusted EBITDA:
Free Cash Flow $68.4M $77M-$87M • Adjusted EBITDA dollars projected to increase sequentially each quarter with
Year End SilverSneakers Eligible Members 17.9M 18.5M over half of the annual adjusted EBITDA coming in the back half of 2022. This
cadence also projects slightly lower total adjusted EBITDA dollars in the first
SilverSneakers Total Visits 61.9M 80M-90M half of 2022 as compared to the first half of 2021
(3)
SilverSneakers Virtual Visits 3.4M 5.0M Capital Allocation:
Prime Average Subscriber Count 223K 220K-225K • Maintain balance sheet strength and flexibility
• Prioritize investments in organic growth to accelerate strategic pillars (slide 5)
Prime Annual Visits 12.9M 13M-15M • Maximize shareholder returns through strong ROIC and opportunistic share
repurchases
(1) 2022 guidance excludes the impact of (I) unrealized gains or losses related to changes in the fair value of the Company's equity ownership in Sharecare, (ii) any potential disposition of the Company's equity ownership in Sharecare, (iii) unrealized gains or losses related to
certain interest rate swaps agreements that do not qualify for hedge accounting treatment, (iv) any potential share repurchases made by the Company, and (v) any acquisitions or non-organic strategic investments that the Company may contemplate during 2022.
(2) Adjusted EBITDA, adjusted earnings per share, and free cash flow are non-GAAP financial measures. Reconciliations of these non-GAAP financial measures are included in Tivity Health’s earnings release included as an exhibit to Tivity Health’s Current Report on Form 8-K
filed with the Securities and Exchange Commission on February 24, 2022.
(3) Virtual visits are a subset of total visit guidance. 13 | © 2022 Tivity Health, Inc. All rights reserved.Appendix
Financial and Operating Highlights
2021 2020
Q4 2021 Q3 2021 Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020 Q1 2020
Total Revenues from Continuing Operations $126.8M $126.3M $120.1M $108.1M $100.6M $95.5M $81.9M $159.7M
Income from Continuing Operations ($25.0M) $103.7M $8.8M $19.9M $14.6M $16.8M $17.2M $8.3M
Adjusted EBITDA from Continuing Operations (1) $34.9M $40.5M $41.5M $41.2M $35.4M $41.0M $41.5M $30.2M
Diluted Earnings Per Share from Continuing
($0.50) $2.06 $0.17 $0.40 $0.29 $0.34 $0.35 $0.17
Operations
Adjusted Earnings Per Share from Continuing
$0.30 $0.42 $0.48 $0.40 $0.39 $0.41 $0.41 $0.25
Operations (1)
Cash Flows from Operating Activities $21.9M $28.8M $13.8M $22.6M $8.4M (2) $11.6M (2) $47.7M (2) $25.7M (2)
Free Cash Flow (1) $12.1M $27.2M $9.7M $19.4M $5.8M (2) $10.5M (2) $44.3M (2) $22.5M (2)
Total Debt Balance at End of Period $380.5M $385.1M $385.6M $405.2M $466.7M $974.8M $1.01B $1.1B
Net Debt Balance at End of Period (1) $320.4M $333.3M $361.4M $352.8M $366.3M $918.3M $952.0M $1.0B
Leverage Ratio 1.94x 2.02x 2.18x 2.11x 2.36x 3.81x 4.08x 4.25x
SilverSneakers Visits 17.1M 17.1M 15.3M 12.3M 10.1M 9.1M 3.1M 25.3M
Prime Visits 3.2M 3.3M 3.3M 3.1M 2.5M 2.3M 0.8M 4.7M
(1) Adjusted EBITDA, adjusted diluted EPS, free cash flow, and net debt are non-GAAP financial measures. Reconciliations of these non-GAAP financial measures are included in
Tivity Health’s earnings release included as an exhibit to Tivity Health’s Current Reports on Form 8-K filed with the Securities and Exchange Commission on February 24, 2022,
November 2, 2021, August 4, 2021, and May 5, 2021.
(2) Represents results for the Healthcare segment only.
15 | © 2022 Tivity Health, Inc. All rights reserved.Tivity Health At A Glance
Leading fitness & health platform across Medicare Advantage, Medicare SilverSneakers Eligible Lives
Supplement, and commercial plans, with 30+ year track record (in millions)
’17A – ’21A CAGR: 4.7%
17.9 million SilverSneakers eligible lives, with approximately 52% of 27 16.7 17.9 18.5
14.9 16.0 15.3
million Medicare Advantage lives (2)
#1 market share in senior health & fitness, with differentiated brand
and member engagement
(1)
2017A 2018A 2019A 2020A 2021A 2022E
SilverSneakers 96% member satisfaction and 83 NPS (3) Total Revenue
(in millions) COVID Impacted
16% lower healthcare costs for SilverSneakers MA plan members, and
$557 $606 $633 $540-$580
42% fewer hospitalizations (4) $481
$438
17-Year average tenure of top 5 payor relationships
2017A 2018A 2019A 2020A 2021A 2022E (1)
104 million SilverSneakers visits across fitness facilities nationwide in Adj. EBITDA (5)
2019, prior to COVID-19 pandemic (in millions)
’17A – ’20A CAGR: 5.2%
Over 5 million virtual visits since the onset of COVID-19 in March 2020 $161-$166
$142 $143 $148 $158
$129
(1) Based on publicly disclosed company guidance
(2) Eligible lives as of December 31, 2021
(3) As of Fall 2021
(4) Based on April 20, 2021 Avalere Health study
(5) Adjusted EBITDA is a non-GAAP financial measure. See Appendix for a reconciliation of this measure for fiscal 2017-2020. 2017A 2018A 2019A 2020A 2021A 2022E (1)
Reconciliations of this non-GAAP financial measure for fiscal 2021-2022 are included in Tivity Health’s earnings release
included as an exhibit to Tivity Health’s Current Report on Form 8-K filed with the Securities and Exchange Commission on 16 | © 2022 Tivity Health, Inc. All rights reserved.
February 24, 2022.Reconciliation of Non-GAAP Measures
Adjusted EBITDA Reconciliation
Year Ended December 31,
2017 2018 2019 2020
Income from continuing operations, GAAP basis $61 $98 $45 $57
Depreciation and amortization 3 5 7 10
Interest expense 16 9 42 43
Income tax expense 44 27 20 18
EBITDA, non-GAAP basis (1) (6) $124 $138 $114 $128
Business separation costs (2) 2 - -
Acquisition, integration, project, and CEO transition costs (3) - 4 26 16
Restructuring charges (4) 3 - 2 4
Adjusted EBITDA, non-GAAP basis (5) (6) $129 $142 $143 $148
(1) EBITDA is a non-GAAP financial measure. The Company believes it is useful to investors to provide disclosures of its operating results and guidance on the same basis as that used by management. You should not
consider EBITDA in isolation or as a substitute for income from continuing operations determined in accordance with U.S. GAAP.
(2) Business separation costs consist of pre-tax charges of $1,639,000 fiscal 2017 related to the separation of the Network Solutions business from the disposed total population health business.
(3) Acquisition, integration, project, and CEO transition costs consist of pre-tax charges of $3,696,000, $26,230,000, and $15,691,000 for fiscal 2018, 2019, and 2020, respectively, incurred in connection with the
acquisition and integration of Nutrisystem and other strategic projects, as well as the termination of the Company’s former CEO in February 2020 and the hiring of a new CEO in June 2020.
(4) Restructuring charges consist of pre-tax charges of $3,223,000, $124,000, $1,881,000 and $4,358,000 for fiscal 2017, 2018, 2019, and 2020, respectively.
(5) Adjusted EBITDA is a non-GAAP financial measure. The Company excludes certain costs from this measure because of its comparability to the Company's historical operating results. The Company believes it is
useful to investors to provide disclosures of its operating results on the same basis as that used by management. You should not consider adjusted EBITDA in isolation or as a substitute for income from continuing
operations determined in accordance with U.S. GAAP. Additionally, because Adjusted EBITDA may be defined differently by other companies in the Company’s industry, the non-GAAP financial measure presented
here may not be comparable to similarly titled measures of other companies.
(6) Figures may not add due to rounding.
17 | © 2022 Tivity Health, Inc. All rights reserved.You can also read
