Tivity Health Reports Second-Quarter 2018 Results And Enters Into New Relationship With AARP

 

REPORTS EPS OF $0.52 AND ADJUSTED EPS OF $0.53 ON REVENUES OF $152 MILLION

NASHVILLE, Tenn., Aug. 2, 2018 /PRNewswire/ -- Tivity Health, Inc. (NASDAQ:TVTY) today announced financial results for the second quarter ended June 30, 2018.

Second-Quarter 2018 Financial Highlights

  • Revenues increased by 9.3% to $151.9 million compared to revenues of $138.9 million for the second quarter of 2017.
  • Income from continuing operations increased by 31.6% to $22.7 million, compared to $17.2 million for the second quarter of 2017. Adjusted income from continuing operations increased by 32.3% to $22.8 million, compared to $17.2 million for the second quarter of 2017. Adjusted income from continuing operations is a non-GAAP financial measure. See pages 9-11 for a reconciliation of non-GAAP financial measures.
  • Income from continuing operations per diluted share increased by 26.8% to $0.52, compared to $0.41 for the second quarter of 2017. Adjusted income from continuing operations per diluted share increased by 29.3% to $0.53 compared to $0.41 for the second quarter of 2017. Adjusted income from continuing operations per diluted share is a non-GAAP financial measure. See pages 9-11 for a reconciliation of non-GAAP financial measures.
  • EBITDA was $35.0 million, or 23.0% of revenues, compared to $31.7 million, or 22.8% of revenues, for the second quarter of 2017. Adjusted EBITDA was $35.1 million compared to $31.7 million for the second quarter of 2017, both of which exclude restructuring charges. See pages 9-11 for a reconciliation of non-GAAP financial measures.
  • Cash flow from operations was $28.9 million and free cash flow totaled $27.2 million. See pages 9-11 for a reconciliation of non-GAAP financial measures.

 

                                                 TIVITY HEALTH, INC.

                                                 Financial Highlights

                                     (Dollars in millions, except per-share data)

                          See pages 9-11 for a reconciliation of non-GAAP financial measures


                                                                                               Three Months Ended
                                                                                               June 30,
                                                                                               --------

                                                                                           2018                  2017
                                                                                           ----                  ----

     Revenues                                                                                         $151.9           138.9

     Per diluted share:

     Income from continuing operations, GAAP basis                                                     $0.52            0.41

     Restructuring charges                                                                              0.00          (0.00)

     Adjusted income from continuing operations, non-GAAP basis (1)                                    $0.53            0.41


     Weighted average diluted common shares outstanding (in thousands)                                43,284          42,369

    (1)             Figures may not add due
                    to rounding.

"We are pleased with our second-quarter financial results, which were driven by strong performance in our SilverSneakers® business," said Donato Tramuto, Tivity Health's Chief Executive Officer. "As expected, our SilverSneakers visits rebounded during the second quarter, reaffirming our belief that the reduction in visits during the first quarter was due in large part to the severe flu season and adverse weather.

"Our focus on increasing enrollment and participation of our SilverSneakers members is yielding early results and affirms our confidence in being able to reach our goal of 5 million enrolled SilverSneakers members by the end of 2020. Additionally, our new relationship announced today with AARP will continue to drive new growth in our Prime® Fitness business by focusing on an underserved segment of the age 50-plus population."

Reaffirms 2018 Financial Guidance

Based on the Company's performance through the first half of 2018 and its outlook for the remainder of 2018, Tivity Health reaffirmed financial guidance for 2018, which includes:

  • Revenues in a range of $607 million to $625 million;
  • EBITDA in a range of $139 million to $144 million; and
  • Earnings per diluted share in a range of $2.12 to $2.20.

This financial guidance for 2018 assumes:

  • Depreciation expense of approximately $4 million;
  • Interest expense of approximately $8 million, of which approximately $6 million is non-cash expense;
  • An effective tax rate of approximately 27%;
  • Weighted average diluted shares outstanding in a range of 43.5 million to 44.0 million;
  • Free cash flow in excess of $100 million (defined as cash flows from operations less capital expenditures); and
  • Capital expenditures of approximately $10 million.

Conference Call

Tivity Health will hold a conference call to discuss this release today at 5:00 p.m. Eastern Time. Investors will have the opportunity to listen to the conference call live by dialing 323-794-2588, code 2034426 or over the Internet by going to www.tivityhealth.com and clicking Investors at least 15 minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, a telephonic replay will be available for one week at 719-457-0820, code 2034426, and the replay will also be available on the Company's web site for the next 12 months.

Safe Harbor Provisions

This press release contains forward-looking statements, including our guidance and financial expectations for future periods, which are based upon current expectations, involve a number of risks and uncertainties and are subject to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements include all statements that are not historical statements of fact and those regarding the intent, belief or expectations of the Company, including, without limitation, all statements regarding the Company's future earnings and results of operations. Those forward-looking statements are subject to the finalization of the Company's quarterly financial accounting procedures and may be affected by certain risks and uncertainties, including, but not limited to:

  • the Company's ability to sign and implement new contracts for its solutions;
  • the Company's ability to accurately forecast the costs required to successfully implement new contracts;
  • the Company's ability to anticipate change and respond to emerging trends for healthcare and the impact of the same on demand for the Company's services;
  • the Company's ability to develop new products;
  • the Company's ability to anticipate and respond to strategic changes, opportunities and emerging trends in the Company's industry and/or business and to accurately forecast the related impact on the Company's revenues and earnings;
  • the Company's ability to renew and/or maintain contracts with its customers under existing terms or restructure these contracts on terms that would not have a material negative impact on the Company's results of operations;
  • the Company's ability to accurately forecast the Company's revenues, margins, earnings and net income, as well as any potential charges that the Company may incur as a result of changes in its business and leadership;
  • 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 the Company's programs in a manner and within the timeframe anticipated by the Company;
  • the risks associated with deriving a significant concentration of revenues from a limited number of customers;
  • the risks associated with changes in macroeconomic conditions;
  • the risks associated with data privacy or security breaches, computer hacking, network penetration and other illegal intrusions of our information systems or those of third-party vendors or other service providers, which may result in unauthorized access by third parties to customer, employee or Company information or protected health information and lead to enforcement actions, fines and other litigation against the Company;
  • 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 severe or adverse weather conditions on member participation in the Company's programs;
  • the ability of the Company's customers to maintain the number of covered lives enrolled in the plans during the terms of its agreements;
  • the impact of any new or proposed legislation, regulations and interpretations relating to Medicare or Medicare Advantage;
  • the impact of litigation involving the Company and/or its subsidiaries;
  • the impact on the Company's operations and/or demand for its services of future state and federal legislation and regulations applicable to the Company's business, including the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010;
  • current geopolitical turmoil, the continuing threat of domestic or international terrorism, and the potential emergence of a health pandemic or infectious disease outbreak; and
  • other risks detailed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and other filings with the Securities and Exchange Commission

The Company undertakes no obligation to update or revise any such forward-looking statements.

About Tivity Health

Tivity Health, Inc. is a leading provider of fitness and health improvement programs, with strong capabilities in developing and managing network solutions. Through its existing three networks, SilverSneakers® - the nation's leading community fitness program for older adults, Prime® Fitness, and WholeHealth Living™, Tivity Health is focused on targeted population health for those 50 and over. With more than 15.6 million Americans eligible for SilverSneakers, over 10,000 fitness centers in the Prime Fitness Network, and more than 25 years of clinical and operational expertise in managing specialty health benefits and networks, including chiropractic services, physical therapy, occupational therapy, speech therapy, acupuncture, massage and complementary and alternative medicine (CAM) services, the Company touches millions of consumers across the country and works directly with hundreds of healthcare practitioners and many of the nation's largest payers and employers. Learn more at www.tivityhealth.com.

                                TIVITY HEALTH, INC.

                            CONSOLIDATED BALANCE SHEETS

                                   (In thousands)

                                    (Unaudited)


                                       ASSETS


                  June 30,                              December 31,
                                                                2017
                       2018
                       ----

    Current
     assets:

    Cash and
     cash
     equivalents                          $66,995                      $28,440

    Accounts
     receivable,
     net                                   68,762                       55,113

    Prepaid
     expenses                               4,249                        3,444

    Other
     current
     assets                                 4,746                        2,180

    Cash
     convertible
     notes
     hedges                               141,246                      134,079

    Income taxes
     receivable                               636                           39
                                              ---                          ---

    Total
     current
     assets                               286,634                      223,295


    Property and
     equipment:

    Leasehold
     improvements                          10,396                       10,384

    Computer
     equipment
     and related
     software                              22,330                       19,508

    Furniture
     and office
     equipment                              8,193                        8,194

    Capital
     projects in
     process                                2,649                        1,105
                                            -----                        -----

                                           43,568                       39,191

    Less
     accumulated
     depreciation                        (30,791)                    (28,533)
                                          -------                      -------

                                           12,777                       10,658


    Other assets                           26,069                       13,315

    Long-term
     deferred
     tax asset                              9,912                       25,166

    Intangible
     assets, net                           29,049                       29,049

    Goodwill,
     net                                  334,680                      334,680
                                          -------                      -------

    Total assets                         $699,121                     $636,163
                                         ========                     ========

 

                                                    TIVITY HEALTH, INC.

                                                CONSOLIDATED BALANCE SHEETS

                                      (In thousands, except share and per share data)

                                                        (Unaudited)


                                           LIABILITIES AND STOCKHOLDERS' EQUITY


                                June 30,                                           December 31,
                                                                                           2017
                                     2018
                                     ----

    Current liabilities:

    Accounts payable                                         $26,622                              $26,804

    Accrued salaries and
     benefits                                                  5,993                               15,018

    Accrued liabilities                                       41,762                               33,527

    Other current liabilities                                  3,792                                  984

    Cash conversion derivative                               141,246                              134,079

    Current portion of debt                                  150,007                              145,959

    Current portion of long-
     term liabilities                                          2,244                                2,262
                                                               -----                                -----

    Total current liabilities                                371,666                              358,633


    Other long-term liabilities                                7,595                                5,577


    Stockholders' equity:


    Preferred stock $.001 par
     value, 5,000,000 shares
     authorized, none
     outstanding                                                   -                                   -

    Common stock $.001 par
     value, 120,000,000 shares
     authorized, 39,963,683 and
     39,729,580 shares
     outstanding, respectively                                    40                                   40

    Additional paid-in capital                               352,230                              349,243

    Accumulated deficit                                      (4,228)                            (49,148)

    Treasury stock, at cost,
     2,254,953 shares in
     treasury                                               (28,182)                            (28,182)
                                                             -------                              -------

    Total stockholders' equity                               319,860                              271,953
                                                             -------                              -------

    Total liabilities and
     stockholders' equity                                   $699,121                             $636,163
                                                            ========                             ========

 

                                                                                   TIVITY HEALTH, INC.

                                                                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

                                                                  (In thousands, except earnings (loss) per share data)

                                                                                       (Unaudited)


                                      Three Months Ended               Six Months Ended

                                           June 30,                      June 30,
                                           --------                      --------

                                                    2018                2017                                             2018      2017
                                                    ----                ----                                             ----      ----


    Revenues                                             $151,865                                           $138,914          $301,795  $279,884

    Cost of services (exclusive of
     depreciation and amortization of
     $995, $648, $1,970 and $1,305,
     respectively, included below)                        109,022                                             99,071           217,299   201,470

    Selling, general & administrative
     expenses                                               7,756                                              8,176            16,334    16,538

    Depreciation and amortization                           1,135                                                789             2,257     1,576

    Restructuring and related charges                         118                                               (52)              124       685
                                                              ---                                                ---               ---       ---


    Operating income                                       33,834                                             30,930            65,781    59,615

    Interest expense                                        3,482                                              4,130             6,936     7,964
                                                            -----                                              -----             -----     -----


    Income before income taxes                             30,352                                             26,800            58,845    51,651

    Income tax expense                                      7,669                                              9,560            14,826    18,931
                                                            -----                                              -----            ------    ------


    Income from continuing operations                      22,683                                             17,240            44,019    32,720

    Income (loss) from discontinued
     operations, net of income tax                            901                                            (3,673)              901   (3,893)
                                                              ---                                             ------               ---    ------

    Net income                                            $23,584                                            $13,567           $44,920   $28,827
                                                          =======                                            =======           =======   =======


    Earnings (loss) per share -
     basic:

    Continuing operations                                   $0.57                                              $0.44             $1.10     $0.84
                                                            =====                                              =====             =====     =====

    Discontinued operations                                 $0.02                                            $(0.09)            $0.02   $(0.10)
                                                            =====                                             ======             =====    ======

    Net income (loss)                                       $0.59                                              $0.35             $1.13     $0.74
                                                            =====                                              =====             =====     =====


    Earnings (loss) per share -
     diluted:

    Continuing operations                                   $0.52                                              $0.41             $1.01     $0.79
                                                            =====                                              =====             =====     =====

    Discontinued operations                                 $0.02                                            $(0.09)            $0.02   $(0.09)
                                                            =====                                             ======             =====    ======

    Net income (loss)                                       $0.54                                              $0.32             $1.03     $0.70
                                                            =====                                              =====             =====     =====


    Comprehensive income                                  $23,584                                            $17,957           $44,920   $33,329


    Weighted average common shares
     and equivalents:

    Basic                                                  39,899                                             39,246            39,841    39,158

    Diluted                                                43,284                                             42,369            43,437    41,456

 

                                                 TIVITY HEALTH, INC.

                                        CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                    (In thousands)

                                                     (Unaudited)


                                   Six Months Ended June 30,
                                 -------------------------

                                   2018                                       2017
                                   ----                                       ----

    Cash flows from operating
     activities:

    Income from continuing
     operations                                           $44,019                     $32,720

    Income (loss) from
     discontinued operations                                  901                     (3,893)

    Adjustments to reconcile net
     income to net cash provided
     by operating activities:

    Depreciation and
     amortization                                           2,257                       1,589

    Amortization of deferred
     loan costs                                             1,050                       1,246

    Amortization of debt
     discount                                               4,140                       3,911

    Share-based employee
     compensation expense                                   3,250                       3,362

    (Gain) Loss on sale of TPHS
     business                                             (1,304)                        444

    Loss on release of
     cumulative translation
     adjustment                                                 -                      3,044

    Deferred income taxes                                  15,254                      18,755

    Increase in accounts
     receivable, net                                     (13,890)                    (4,398)

    Decrease in other current
     assets                                                   756                         869

    Decrease in accounts payable                          (1,869)                    (1,480)

    Decrease in accrued salaries
     and benefits                                         (9,928)                   (11,953)

    Decrease in other current
     liabilities                                          (4,563)                    (2,268)

    Other                                                   1,227                     (1,888)
                                                            -----                      ------

    Net cash flows provided by
     operating activities                                 $41,300                     $40,060
                                                          -------                     -------


    Cash flows from investing
     activities:

    Acquisition of property and
     equipment                                           $(3,673)                   $(2,244)

    Proceeds from sale of MeYou
     Health                                                 1,416                           -
                                                            -----                         ---

    Net cash flows used in
     investing activities                                $(2,257)                   $(2,244)
                                                          -------                     -------


    Cash flows from financing
     activities:

    Proceeds from issuance of
     long-term debt                                       $13,675                    $274,425

    Payments of long-term debt                           (14,216)                  (308,496)

    Payments related to tax
     withholding for share-
     based compensation                                   (1,398)                    (1,066)

    Exercise of stock options                               1,135                       2,757

    Deferred loan costs                                         -                    (2,452)

    Change in cash overdraft and
     other                                                    343                       1,558
                                                              ---                       -----

    Net cash flows (used in)
     provided by financing
     activities                                            $(461)                  $(33,274)
                                                            -----                    --------


    Effect of exchange rate
     changes on cash                                        $(27)                     $1,652
                                                             ----                      ------


    Net increase in cash and
     cash equivalents                                     $38,555                      $6,194
                                                          -------                      ------


    Cash and cash equivalents,
     beginning of period                                  $28,440                      $1,602
                                                          -------                      ------


    Cash and cash equivalents,
     end of period                                        $66,995                      $7,796
                                                          =======                      ======

 

                                                              TIVITY HEALTH, INC.

                                              RECONCILIATION OF NON-GAAP MEASURES TO GAAP MEASURES

                                                                  (Unaudited)


                                  Reconciliation of Adjusted EBITDA from Continuing Operations, Non-GAAP Basis

                                                to Income from Continuing Operations, GAAP Basis

                                                                (In thousands)


                                                                                                Three Months
                                                                                                    Ended
                                                                                                                       Three Months
                                                                                                June 30, 2018              Ended

                                                                                                                       June 30, 2017
                                                                                                                       -------------

     Adjusted EBITDA from continuing operations, non-GAAP basis (1)                                            $35,087                $31,667

     Restructuring charges (2)                                                                                   (118)                    52


     EBITDA from continuing operations, non-GAAP basis (3)                                                     $34,969                $31,719

     Depreciation and amortization                                                                             (1,135)                 (789)

     Interest expense                                                                                          (3,482)               (4,130)

     Income tax expense                                                                                        (7,669)               (9,560)

     Income from continuing operations, GAAP basis                                                             $22,683                $17,240


    (1)              Adjusted EBITDA from continuing
                     operations is a non-GAAP financial
                     measure.  The Company excludes
                     restructuring charges 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 and guidance
                     on the same basis as that used by
                     management.  You should not
                     consider adjusted EBITDA from
                     continuing operations in isolation
                     or as a substitute for income from
                     continuing operations determined in
                     accordance with accounting
                     principles generally accepted in
                     the United States.


    (2)              Restructuring charges consists of
                     pre-tax charges of $118,000 for
                     the three months ended June 30,
                     2018 primarily due to additional
                     costs incurred related to a prior
                     restructuring.  Restructuring
                     charges for the three months ended
                     June 30, 2017 consists of
                     adjustments of ($52,000) primarily
                     due to actual employee tax and
                     benefit amounts differing from
                     previous estimates related to a
                     restructuring of our corporate
                     support infrastructure.


    (3)              EBITDA from continuing operations 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 adjusted EBITDA from
                     continuing operations in isolation
                     or as a substitute for net income
                     from continuing operations
                     determined in accordance with
                     accounting principles generally
                     accepted in the United States.

 

     Reconciliation of Adjusted Income from Continuing Operations, Non-GAAP Basis

                   to Income from Continuing Operations, GAAP Basis

                                    (In thousands)


                                                           Three Months Ended

                                                                June 30,
                                                           --------

                                                      2018                    2017
                                                      ----                    ----

      Adjusted income from continuing
      operations, non-GAAP basis (4)                            $22,770            $17,209

      Net income (loss) attributable
      to restructuring charges (5)                                 (87)                31

      Income from continuing
      operations, GAAP basis                                    $22,683            $17,240


    (4)              Adjusted income from continuing
                     operations is a non-GAAP financial
                     measure.  The Company excludes net
                     income (loss) attributable to
                     restructuring charges 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 and guidance
                     on the same basis as that used by
                     management.  You should not
                     consider adjusted income from
                     continuing operations as a
                     substitute for income from
                     continuing operations determined in
                     accordance with accounting
                     principles generally accepted in
                     the United States.


    (5)              Net income (loss) attributable to
                     restructuring charges consists of
                     pre-tax charges of $118,000 for
                     the three months ended June 30,
                     2018 and adjustments of ($52,000)
                     for the three months ended June 30,
                     2017.  See footnote 3 for further
                     explanation.  The tax rates applied
                     to these restructuring charges for
                     the three months ended June 30,
                     2018 and 2017 were 26.53% and
                     39.55%, respectively, which
                     represented the combined estimated
                     U.S. federal and state statutory
                     tax rate.

 

                                                         Reconciliation of Adjusted Income from Continuing Operations

                                                             Per Share ("EPS"), Non-GAAP Basis to EPS, GAAP Basis


                                                                                                                       Three Months Ended

                                                                                                                            June 30,
                                                                                                                            --------

                                                                                                                      2018                2017
                                                                                                                      ----                ----

    Adjusted EPS, non-GAAP basis (6)                                                                                           $0.53             $0.41

    EPS (loss) attributable to restructuring charges (7)                                                                    (0.00)             0.00
                                                                                                                             -----              ----

    EPS, GAAP basis (8)                                                                                                        $0.52             $0.41
                                                                                                                               =====             =====

    (6)              Adjusted EPS is a non-GAAP
                     financial measure.  The Company
                     excludes EPS (loss) attributable to
                     restructuring charges 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
                     EPS in isolation or as a substitute
                     for EPS determined in accordance
                     with accounting principles
                     generally accepted in the United
                     States.


    (7)              EPS (loss) attributable to
                     restructuring charges consists of
                     pre-tax charges of $118,000 for
                     the three months ended June 30,
                     2018 and adjustments of ($52,000)
                     for the three months ended June 30,
                     2017.  See footnote 3 for further
                     explanation.  The tax rates applied
                     to these restructuring charges for
                     the three months ended June 30,
                     2018 and 2017 were 26.53% and
                     39.55%, respectively, which
                     represented the combined estimated
                     U.S. federal and state statutory
                     tax rate.


    (8)             Figures may not add due to rounding.

 

                                    Reconciliation of Free Cash Flow, Non-GAAP Basis to

                         Net Cash Flows Provided By Operating Activities, GAAP Basis (in thousands)


                                                 Three Months Ended                                 Three Months Ended

                                                    June 30, 2018                                      June 30, 2017
                                                    -------------                                      -------------

    Free cash flow, non-
     GAAP basis (9)                                           $27,207                                             $36,026

    Acquisition of
     property and
     equipment                                                  1,727                                               1,010

    Net cash flows
     provided by
     operating
     activities, GAAP
     basis                                                    $28,934                                             $37,036
                                                              =======                                             =======

    (9)              Free cash flow is a non-GAAP
                     financial measure and is defined by
                     the Company as net cash flows
                     provided by operating activities
                     less acquisition of property and
                     equipment.  The Company believes
                     free cash flow is a useful measure
                     of performance and an indication of
                     the strength of the Company and its
                     ability to generate cash.  The
                     Company believes it is useful to
                     investors to provide disclosures of
                     its results on the same basis as
                     that used by management.  You
                     should not consider free cash flow
                     in isolation or as a substitute for
                     net cash flows provided by
                     operating activities determined in
                     accordance with U.S. GAAP.

 

            Reconciliation of EBITDA Guidance, Non-GAAP Basis

                   to Net Income Guidance, GAAP Basis

                              (In millions)


                                                   Year Ending

                                                    December
                                                   31, 2018
                                                ---------

      EBITDA guidance, non-GAAP basis
      (10)                                                     $139 - $144

     Depreciation and amortization                                     (4)

     Interest expense                                                  (8)

     Income tax expense                                          (34 - 36)

     Net income guidance, GAAP basis                             $93 - $96


    (10)                EBITDA guidance 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 guidance in
                        isolation or as a substitute for
                        net income guidance determined in
                        accordance with U.S. GAAP.

 

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SOURCE Tivity Health, Inc.

Company Codes: NASDAQ-NMS:TVTY

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