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

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