Tivity Health (TVTY) 25 Feb 222021 Q4 Earnings call transcript

Ladies and gentlemen, hello and welcome to the Tivity Health Fourth Quarter and Full Year 2021 Earnings Conference Call. My name is Maxine and I will be coordinating the call today. [Operator Instructions] I will now hand you over to your host, Matt Milunovich, Vice President of Investor Relations to begin. Matt, please go ahead, when you are ready.

Good afternoon and welcome to the Tivity Health fourth quarter and full year 2021 financial results conference call.

our you supplemental already filed information SEC available if the a with begin, are release, tivityhealth.com. earnings and on we do have not copy, the Before at website related X-K would press and divestiture today’s of like presentation of segment. Nutrition are release highlight our supplemental that I financial also within the reflective materials the to Therefore, within discontinued reported all are business now results of that operations related to operations. measure of To also is measure any the financial discussed will directly reconciliation non-GAAP call, GAAP in most calculated find today’s the which today’s a measure news the on in that company’s posted with in to you financial release, extent comparable also website. is accordance of may This for others, meaning statements among the quarterly XXXX regarding contain Tivity the Health’s Act beyond. annual and within performance including forward-looking financial conference operating and expected statements, Private call of and XXXX Reform Securities Litigation

call historical to forward-looking For limiting plans, during statements. made not words believes, intended similar this this expects, be to forward-looking are deemed anticipates, and of any expressions purpose, statements. foregoing, maybe the are that statements identify the statements Without fact

Tivity are and events new the filings results future obligation Ashworth. the publicly turn forward-looking any to You these affected in President maybe information, the as otherwise. I update with factors, result undertakes to CEO, the company’s forward-looking materially The from actual of differ cautioned may no in among release. Richard forth over company statements. statements whether And set the call discussed statements a important SEC And and will or now, news in others and today’s by consequently, hereby Health’s operations results the

Health’s to and for call today Thank fourth earnings year and joining XXXX afternoon discuss thanks, Matt. results. you quarter Good full the Tivity

results focus of during and for excellent our year. and by their perseverance, all Matt Joining Tommy discipline Adam of our want I start our CFO; VP thanking that Tivity Milanovich, to Health our IR. Holland, COO; another Lewis, delivered difficult me are colleagues

has in-person continuously be to engage and in connection changing new adapted mental us launch now love needs our solutions. expand members able the virtual it of SilverSneakers and and business members enrichment with our recent to of social the will with platform Our offerings. they to and clients ways our

Now, results. on to XXXX’s

operations As reported release, you today’s million raised in performance our expectations characterized adjusted and throughout press million. exceeding with XXXX strong full from saw revenue to in revenue results financial was $XXX.X our year $XXX.X times continuing year. adjusted of guidance EBITDA We we the as multiple by and EBITDA

XXXX XX.X a finished high eligible with SilverSneakers million lives. record Additionally,

pleased very $XX.X are SilverSneakers We with and increase is of our in in Total coming XXXX, were more operational results XXXX. about what even million an XXXX. financial XX% from XXXX and excited visits

have our from of XX our nearly to visits of intend and indicate million poll our the continue quarter, in vaccinated the recent fully we percentage to While SilverSneakers variant immunization XXXX, we proprietary that XXXX, X.X have being from XX% trainers. the almost the February with by Omicron Omicron solidifying approximately in through a virtual experience driven expect the experienced during grew programming visits fourth rates returned to adults early to nation, return significant members SilverSneakers in-person gym. headwinds trends confidence in the Further increase subsiding our doubling national in outstanding as and continue by surveys will the have XXXX. to that of over strengthened XX highest or effects XXXX some are designed

home activation virtual be participants half of nearly are one. classes where an they channel or and to that because that never virtual in live year, with allows use before gym, efficient had at it the strategy, demonstrating remains our the our instructor in the combination members proprietary digital to participated SilverSneakers community. During fitness The the in our continues to benefit physical the of core want,

be our addition engagement ahead growth virtual in fitness by accelerated in expect the to virtual addition we of to programming. mental social ‘XX, Looking to enrichment engagement solutions and

customizable XX% locations, history, company than fitness network for we network Beginning quarter increase by fourth our of as increased ended clients remains total XX,XXX since more the today’s largest our size XX,XXX SilverSneakers approximately SilverSneakers the size brands we with is XXXX, approximately a XXXX, in healthy and in fitness bringing Our of to our that end making the the XXXX. growing locations. new adding significantly network of

average, consistent an the encouraged of are national X.X in We to in the home renewal members network. and with their continue historical rates network future. longer move within to our term Network On our providing urban and the partners markets. be both some we and and stability visibility miles and partners location miles high trends SilverSneakers access continued by contracts offers gyms interest to from X.X for remained to suburban

the quarter our since we XX,XXX approximately partner XXX,XXX where on cancellations. continues fourth locations, the business and ended to similar Moving The year Prime active restrictions key are subscribers. a have membership began on of we impact an with to COVID pandemic Prime, to driver

mind acquisition delivering getting the Prime expected. subsides for employers as member We pandemic is the back and employee becomes anticipate as health growth top benefits. who new to However, modest of offer

rate our share to health year want among with closed the XXXX plan provide strong occurred retained on switching we renewal client of an retention high-XXs base. a SilverSneakers our that I relationships. and our update Next, We fair

consistent selling years. had plans season in XXXX also than XXXX more began prior new for We We bringing our strong with ‘XX. lives a ended eligible with we

role Medicare eligible large a played the will one important an annual clients our clients to during spring in and agents of with lives. expect by We the add period. continue of We our this growth group enrollment plan addition

events to States. Our team and XXX brokers facilitated has nearly the across United XX,XXX close trained

of the love well as and brand as health clients for be for the to ability its tool improve retention Our a SilverSneakers recruiting, to both members engagement.

have our to our we the at XX. clients, NPS deliver history value XX% highest healthcare company the score in we to costs members testament lower for and are a As enrolled

our have in XX% SilverSneakers member clients. a We satisfaction for is engagement recruitment, a addition. retention attractive supremely tool score and

on evolution moving connection we for seniors specifically activities, and month, to connect and our we adults. in health, strategy, and for enrichment launched and experience. our to happier. improve improved to physical more virtual personalized and programs their Research seamless more seniors connection SilverSneakers older social to make social designed continue a solutions mental Last supports while brain that health providing offer addition healthier Now

members give Our more permission solutions offer social address the to clients to health. determinants of us and

our better launched best and architecture, and platform or a are data that in we enable understand expect their fitness journey members recommendations in for whether action we where Additionally, the virtual. which will offer health new in-person us XXXX, to be next

forward look on you As to the updating our year progresses, progress. I

a strong aging core business XXXX. with growth are through strong population market Medicare We that and and is the tailwinds support leader growing. a The advantage of

our with plans contracts strong renewal long-term rates. have We health consistently and

Our mental more which and members digital offerings, to solutions. enrichment social we our deliver tell connection they us want our to now in addition in-person

and are Our sheet balance cash stable. flow strong and

is model expanding platform XXXX We and business engagement first plan building digital by an strategic Our our our on offerings. asset-light. delivered

adjusted for guidance free flow. Our revenue and growth in EBITDA XXXX financial for cash calls

what turn Adam. over for lies the We to are excited call ahead XXXX. will incredibly I in now

Richard. Thank you,

XX% for to from was XXXX. the approximately visits. last the compared a SilverSneakers more into were same results, to XX% year the million, revenue revenues of quarter fourth period million, $XX increase quarter due revenue fourth increase in Now generating the $XXX.X an

in plan We last per As in year. eligible X% revenue members month SilverSneakers average of visits participation to the expected, year, XX% with million of per quarter X.X% increasing period fourth an our year. simply health XX% our visits. over with positive member compared QX continued to we Total total compared were the SilverSneakers, to same and are to during represented X.X% XXXX. year XX.X quarter increase with our last ended from fees And the XX.X million pleased SilverSneakers million for revenue $XX.X put, last of the XXXX compared momentum

XXX,XXX XX.X visits. instructor-led were visits, approximately the Within virtual million

these QX, revenue XXXX larger over which increase an XXXX. our to XXXX. majority is Prime fitness We interactive were on average subscriber increase virtual This instructors the to of of visits with compared of with higher XXX,XXX rate the believe subscribers of XX% generated in to format, ended which XXX,XXX national subscribers by from we coupled end revenue slightly SilverSneakers the Prime, And increase. format, be now in of in last virtual year. Additionally, our a of our paying million own $XX.X the visits a for year-over-year is led accounted we majority XX% at comprised live going in

approximately had visits we million XXXX in the X.X QX to million expected, in compared from Prime gym prior year. X.X As

revenue. in QX, recognized For WholeHealth million during we Living $X.X

contributed season. and fitness $X.X Our million with visit fourth are momentum trends. our QX the million marketing November mentioned, believe to EBITDA positive our XXXX, in drive $XX.X end And still generated Richard pleased for adjusted EBITDA of at for of critical quarter And early while guidance. expense we in higher $XXX.X activity to as was SilverSneakers we the for that million live very year, recent QX. our of We these adjusted generated marketing

of mark-to-market methodology. Sharecare common valued to using stock, position, XX.X balance our a million are shares which equity on hold Sharecare we our Regarding continue sheet

for unrealized This the to value a December position XXXX, adjustment loss approximately fair as a entire million. During of XX. stock $XX Sharecare closing year QX equity of we quarter fourth approximately in price and its $XX the resulted gain our of unrealized in non-cash the non-cash million in adjusted of of for resulted

loan balance $XXX prepaid leverage In with our million quarterly hand Turning million amortization, X.XXx and as of we agreement. under to due calculated term of ended credit the principal our of with makes and next on of we which required payment cash of XXXX, October March in year end cash XXXX. debt flow, a year our of $X ratio million $XX sheet

Tivity previously share quarter, our also of stock XX,XXX During shares the program. under repurchase fourth we repurchased announced

million this our to turning guidance earnings to in guidance, range million. supplemental and XXXX highlighted we $XXX materials release $XXX our revenues afternoon. XXXX anticipated Total between are our and Now,

$XXX EBITDA expect and million range to $XXX million. We adjusted between

to revenue XX% during approximately SilverSneakers for revenue. assumptions Total is as follows. represent total Our of performance XXXX are SilverSneakers expected

approaching eligible We expect members. $XX.X XXXX SilverSneakers in million

Our on is to plan increase expected membership with eligible began count and XXXX month normal agents. each

XX% of increase from one in group clients plan. hybrid a a our our in our in under lives SilverSneakers type Additionally, large planned be late are a Approximately, guidance of contract spring meaningful expected lives addition with eligible their eligible to XXXX. of and top includes

SilverSneakers X to million approximately range XXXX, from visits to XX million, total For XX including million visits. virtual we forecast

members of expanded Regarding members digital eligible number the quarter of members, the offerings. increased both and XXXX boosted shape more an to the our year, each SilverSneakers utilizing visits sequentially of revenue will gym, increase anticipate returning by we more and

the our first more assumptions expected As Switching in projects of expected SilverSneakers flat a Prime back result, revenue total to total of revenues. in versus our half. XXXX, visits modest are average in This fitness increase total XX% revenue in count. XXXX Prime to guidance subscriber the represent annual half for is a to and

Prime We million to XX to expect annual range from XX million. visits

of Turning expected X% total company XXXX. is of expected to Living, a total revenue XXXX is WholeHealth margin, XXXX in-person approximately be revenues more Prime to as in percent in WholeHealth lower revenues, to projected SilverSneakers represent and Living visits. gross than to due Total

levels. cadence the will anticipate above for and for XXXX QX year, margin remainder each ending level year. the XXXX pre-pandemic modestly below margin be with still QX we anticipate a the percent Regarding quarter percent then our gross We of of decreased of of the XXXX gross slightly

Regarding other X.X% revenues. components expense guidance, and XXXX between to we of of X% total anticipate marketing range

allocation returned planned members our investment heavier to is XXXX to the QX QX expected of capitalize in to marketing gym. Our of be on the and

projected our as support as first cadence expenses annual to re-categorization adjusted each certain clients’ to be XXXX SG&A from in adjusted a totals estimated dollars EBITDA between for quarter to and sales, coming is $XX expected $XX half. half strong approximately $XXX operational X.X% of marketing. of to And lower efforts cost with in XXXX. dollars projects dollars XXXX. to are position excluding range $X EBITDA of Adjusted SG&A anticipate This which increase In with XXXX. to million range $XXX addition $XX slightly of Sharecare. the increase want from million. a and potential year-over-year to percent range free million. revenues in capital flow any over our total are XXXX’s first in into XXXX is cash to due sequentially EBITDA of adjusted range the monetization million, a million lower XXXX X.X% $XX half to project of back million to compared to control revenues We also SG&A and We total we million from of expenditures to in AEP both projected the QX, of to in in EBITDA half of

we this to are optional ensure operating Regarding we our evaluate we ratio, pay-downs to and our at comfortable optimizing continue are debt leverage current will capital level structure.

Additionally, options to to share we Directors Board shareholders the to for return turn ensure a Q&A. now for open maximized authorization. we $XXX capital to the evaluate will I deliver million our of operator work with the continually over allocation our best call including our back repurchase

[Operator from Instructions] Our Jailendra first Credit Suisse. question comes from Singh

ahead. Your line is go now open. Please

thanks and taking questions. you for my Thank

understand in visits and quick sequentially a trends intra-quarter your then you to like levels? if is Omicron on there variant Richard, clarification I October in to pre-Omicron visits because XQ, still did sequentially back lingering kind for and have around trying declining in or December First, so to October-November flat run-rate? resulting in of recovered of and November was see comments impact more SilverSneakers Omicron growing back of recent that weeks in fully

Jailendra. thanks question. Yes, Good

February, that see then recovery ranges to I So saw way early as came when seeing anything here SilverSneakers early full after a a you What on the you behavior, will in can and see would clear the And Tommy, with start to into going members’ is – we even want is we What that Tommy but return. not timelines. December is get say post-Omicron, picture Omicron the February to you there recovery behavior and the outlined encouraging the I behavior clear like and add? for well. to Thanksgiving January weigh in the would into we in off change clearly are pre-Omicron year. clear in you

as seniors back is Hi we from getting Jailendra. to as are related sentiment to public. The I gym, socializing starting would only to well in thing see that add improving the

we are the optimistic So, about patterns. trends and

question fitness I and one puts more growth Okay. had are I know Prime around the much ‘XX. And not some there, then, there in expectations. Clearly takes expected

some example? landscape how understand around in United just insurance do and with to in that understand rational programs commercial is solutions activity of insurance that business to and plans, And trying for recent the you including the then place? like Just announcements trying fitness for companies, having the one offering see

on you want want start to then maybe, will and Adam, I Yes, if to weigh that.

sentiment Jailendra, Prime overall positive to market your for I like think point. the a program is

back and care about as employee employers tailwind at And person getting their an a be deeply also at and environment we work gym, are think for think will into I health. of back where in then this the course, people together Prime. are I

some what for in we some program to just have Adam, restrictions what different was saw to off the of people challenges all been are having someone the the you whole terms through in But we not add? saw we we and they restrictions, year’s still what going year, the In require see the for are anything in kind to pandemic. across to yet And of restraint last of still gym. terms engaging want from the go the geographies lifted, country what due

a solution slight Jailendra we count. guidance is programs the Yes. great uptick feel employers. have be of an see demand you is them. going also increased high Prime with The like have And important this side a an for we we for subscriber like point, to on large

really December, out seen lot is The that what actually Richard early a there. the month driven on bit just so January, a have is side. even termination touched through our We on well belief the of that of restrictions acquisitions then And by Omicron. is little challenge really going that’s

those there. good hopefully can seeing some As But the start But saw what today. see why the of it to now, right for this in improvement business. really is are you we guidance we we the abate, about future feel reflected

And marketing now of more spending plan spending color than play Okay. person if guys And and quarter, you will Last that plan on to some were visits. out in then ‘XX any you there is and digital you specific dollar back before course, Did increase allocated some that last that of that spending because COVID one, you noted be had helpful. Thank or expected, I channels, did as surge? outlook, guys focus of in spending on you. leave. scale others

for pan momentum did by SilverSneakers Yes. and Hi build increase We to QX our start number the emphasis process marketing really and Jailendra, into of Tommy and again. in the to for offering digital January busy to of health plan on did enrollment a a out. that going virtual two, investment put clients lot our couple in One, our support reasons. for annual season

in are We back over getting so getting And quarter to its to routines. are XXXX. have more far seeing in their step And expenses XXXX SilverSneakers live. the comfortable good up the marketing does total performance related a to seniors back gym,

solutions we for and And terms half and will We also AEP the in all have are that to cycle again. back of enrichment mental starts reserve and rebuild some engagement. we the new social offering over then momentum again related to that and,

Alright. Thanks, guys. Excellent.

Thank you.

question Matthew from next Sandler. Our comes from Piper Shea

ahead. Please Your now open. is line go

services comment and Wondering services Hey, you thank and the plan. the recently payer specifically additional question. improvement mentioned space demand margin you benefits. for I benefits for the of could health the Humana know if supplemental outside from on of using

can So, in achieve SilverSneakers increasingly wondering leverage goals to pairs help how their margin an environment? these you competitive

Yes.

you. question. thank Great So, Matthew,

supplemental great it’s that to health difference And not in the a in also of their engagement have its finding the history, XX-year they providers. benefit And think time. strongest SilverSneakers in are think is some population the they discussions through our and but to partners really are only bullish, different had be lot very I support. all value long of that it acquisition of I makes seeing plan drive members, with we – different overall, probably do the brand but a And its its able a also the retention lives needs. to ability the with

inclusion for that in on in healthier ways engage I is type they are an their behavior choices, environment healthcare, what appetite and support members so the in benefit what of see you the helping a that or And more have depending stronger about. supplemental benefits has of to talking supplemental

supplemental be to we benefit is members. substantial we for to benefits So, that then continue as draw what to with opportunity believe the to I it marketplace, in I that are plans. show continues your will are encouraged hearing, And believe the point, a a margin

So, as will over their time. they be engage a engage, behavior, get can members burden lower in to cost healthier there

I where I really factor. kind yes, you environmental So it’s are, strong a am of think strong,

had outcome that then helpful. I know that have the deployments, past, that programs increasingly raise an it. the of that to Got didn’t take plans. visits social your has those and proposition on communicating the can a virtual the much and the that outcomes could And include assuming data you this impact outcome potential hold, the That’s payers? Avalere SilverSneakers curious enrichment higher as study on in skew that And lot mental how health to data of and value proposition value drive, referenced in

answer And Yes. short is I appreciate the yes. question. the

and coming was just powerful profile, we people And then still have has cost and on their who of them in a conditions, sense when with people struggle chronic study drivers, Medicare yes. the the to been maybe ability it Avalere different like-for-like I activity population cost. saying, Historically, lower are in healthier diseases, but for or upside then engage other it’s do over healthier putting at also better. of there to members, brand propensity elicit. physical think that back engage behavior. primarily matched, the who also focused to traditional and longer, like to weight have engagement community, of great very does, and example types a that they together the time, SilverSneakers look which studying and And study be the live behavior SilverSneakers in has is

mental that for their – faith benefit They all we tailwind plans social of our our reduction, driving will as plans in Now, also and engagement a some of information members, have data the believe good care cost that too. with And that work are be about well, on and and enrichment our of that a in lot we of of plans course. course. I this,

continue that people that we the at will to engage help point Therefore, home members and continue think we get in we this SilverSneakers so look And Overall, to, be to behavior. get to overall will we I And very engagement been wider more the healthier digital can should cost disparate. more it’s received. impact as drive profile. more well will

you, Thank guys. it. Got

Thanks for the question.

Ryan Blair. Instructions] Daniels next comes from question Our [Operator from William

with Your proceed now line is open. Please question. your

on Thanks for space Ryan. taking in guys, guess Hey, the I theme. competition kind Nick out to continue just for my speaking MA on of questions.

shaking the what larger legacy relationships like We Humana, front? dynamics you on wondering have wondering that. your how that been seen kind guys, payers a of of churn as I have of am etcetera couple with considering of bit for result kind a of cite a out those –

I Yes, question, Nick. Tommy on after good I will my ask make comments. weigh to it’s And

activate in and work of long lot competitors working marketing have to and rest. that plans for long out them work try we during AP There we goes and in XX% and hard much. activation fantastic renewal together behavior. plans. value work hard terms tenured that contract, don’t and don’t every to we plans our very drive you plans a not with to tenured a partnership we a proposition renewal. members market is a the with We in to have are It’s there lot in really we And value for respect healthier high between think our in we rates, then continue good of the remain is retention. happens get to make have, our that strong day that the And There sure just marketplace. that I

demand the strong to is supplemental for a previous there question. benefits think I back So,

Tommy, a you have offering, I moment? but on we long anything the client on tenured space standard, that. a rest add think don’t at would gold we

Yes. see given various switching you among year, are the some any Hi, In Advantage Medicare plans. Nick. going to

have We relatively high share. a market

And so retention they one the value of vehicle the our switching, acquisition oftentimes just there strategic a for But been we SilverSneakers the it’s great our MA bit value brand and other they a is they are plans. when and from plans, appreciate direction.

we out how pleased this things are shaped So, for about season. us

I you came data enables the Thanks. appreciate target I mentioned color. have who you that SilverSneakers bit then to which have And next, past guess, platform – quite market while. that a made have in folks or your of may off investments platform, for in the you a left

to Just after success back on brand you Omicron are from during that wondering seeing or they dipped something folks off that? of what maybe like kind SilverSneakers

And great Richard. it’s Yes, so question.

is eligible. first I program, in one digital is were but very the not say enrolled that thing a or proven the members activated to channel So who would efficient be the at getting inordinately

the channel. engaged for And the get threshold so digital easier to through them brand the in been has

different On in drive data we to to see infrastructure our the now behavior investments on doing many omnichannel cases change, people right. to deployment, are use ways and

who differently. different a went for few way Someone and try than we gym, seen has gone very to a we never the someone a them them who we talk times haven’t while, maybe to

mails, what learnings of than be get intervention. weapon, highly do through will, And personalization different to different our so And class I they that phones, The what are enjoying and There and using rated. something say able the some in we ways. But seeing to And are many proven seeing virtual moment. good are as in that if digital. they them. crossover. people you far results SMS. were we not we so intervention offerings, the a are being has through many lot much would And do so far are cases our primary are to doing through post use that is people And engine we

lot fantastic. to we are seeing is So, brand, net just of which a new

see digital. national sure. live physical that’s physical cannibalization did our into of strong. the SilverSneakers some we kind But seeing of program our away kind once go to We kind not are be we variant see flex and of for back did of the pre-Omicron Delta went to continued live So, our

guys. thanks, Great,

That for you concludes for Thank our today. joining. Q&A session

now disconnect your You may lines.