Tivity Health Reports Third-Quarter 2019 Results

NASHVILLE, Tenn., Nov. 12, 2019 /PRNewswire/ -- Tivity Health, Inc. (NASDAQ:TVTY) today announced financial results for the third quarter ended September 30, 2019.

Third-Quarter 2019 Financial Highlights

• Revenues increased 100.6% to $303.9 million, including nutrition segment revenues of $143.9 million. This compares to revenues of $151.5 million for the third quarter of 2018.
• Net income was $13.9 million compared to $25.4 million for the third quarter of 2018. Adjusted net income was $22.2 million compared to $25.4 million for the third quarter of 2018. Adjusted net income for the third quarter of 2019 is a non-GAAP financial measure and excludes a total of $5.5 million of pre-tax acquisition, integration, and restructuring costs incurred primarily in connection with the acquisition of Nutrisystem, $4.6 million of pre-tax amortization of intangible assets, and $0.7 million of tax adjustments related to the acquisition. See pages 11-13 for a reconciliation of non-GAAP financial measures.
• Net income per diluted share was $0.29 compared to $0.59 for the third quarter of 2018. Adjusted net income per diluted share was $0.46 compared to $0.59 for the third quarter of 2018. Adjusted net income per diluted share for the third quarter of 2019 is a non-GAAP financial measure and excludes $0.09 per diluted share related to acquisition, integration, and restructuring costs in connection with the Nutrisystem acquisition, $0.07 per diluted share related to amortization of intangible assets, and $0.01 per diluted share related to tax adjustments. See pages 11-13 for a reconciliation of non-GAAP financial measures.
• Adjusted EBITDA for the third quarter of 2019 was $56.8 million, which benefited from combined cost synergies of $2.9 million. Adjusted EBITDA includes $17.7 million from the Nutrition segment (inclusive of synergies) and excludes $5.5 million of acquisition, integration, and restructuring costs associated with the Nutrisystem acquisition. This compares to EBITDA of $36.6 million for the third quarter of 2018. See pages 11-13 for a reconciliation of non-GAAP financial measures.

"We are pleased to deliver strong results from the healthcare segment with visits meeting our expectations.  Additionally, we finished the selling season strong by adding 200,000 new eligible SilverSneakers lives for 2020 since August supporting the continued value that the SilverSneakers brand offers to our customers.  The nutrition segment also met our expectations reflecting an improved focus on execution and new investments in the O-E strategy," said Donato Tramuto, Tivity Health's Chief Executive Officer.  "As the popularity of Medicare Advantage plans continues to grow, we are well-positioned to provide solutions to support healthcare improvements through physical activity, nutrition and social connectivity, critical variables to addressing the social determinants of health."

Segment Results

Healthcare segment:  Revenue for the third quarter of 2019 was $160.0 million, which is 5.6% higher than revenue for the third quarter of 2018.  Adjusted EBITDA for the third quarter of 2019 was $39.2 million, including $0.7 million of cost synergies, which is 7.0% higher than EBITDA for the third quarter of 2018. 

Nutrition segment:  Revenue was $143.9 million and adjusted EBITDA was $17.7 million, including $2.2 million of cost synergies, for the third quarter of 2019.

See pages 11-13 for a reconciliation of non-GAAP financial measures.

Reaffirms 2019 Financial Guidance

Based on the Company's performance through the first three quarters of 2019 and its outlook for the remainder of 2019, Tivity Health reaffirmed financial guidance for 2019 as follows:

The guidance for consolidated adjusted EBITDA and consolidated adjusted earnings per diluted share excludes:

• expected pre-tax acquisition, integration, and restructuring expenses in a range of $38 million to $40 million, which includes both cash and non-cash expenses;
• expected amortization expense of approximately $15 million related to intangible assets; and
• expected tax adjustments related to the acquisition of Nutrisystem of approximately $7 million.

The Company's guidance for consolidated adjusted EBITDA and consolidated adjusted earnings per diluted share includes:

• depreciation expense of approximately $17 million;
• interest expense in a range of $77 million to $79 million, of which approximately $8 million is non-cash expense;
• an effective tax rate of approximately 29% for the remaining quarter of 2019;
• weighted average diluted shares outstanding of approximately 47 million;
• free cash flow, including cash paid for interest, in a range of $55 million to $60 million; and
• capital expenditures in a range of $22 million to $24 million.

See pages 11-13 for a reconciliation of adjusted earnings per diluted share guidance to earnings per diluted share guidance.  The Company does not provide a reconciliation of adjusted EBITDA guidance to the most directly comparable GAAP financial measure because it is unable to provide such reconciliation without unreasonable effort due to the uncertainty and inherent difficulty of predicting the financial impact of certain items.

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 877-683-2218 or 647-689-5447 for international callers and referencing code 8286362 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 800-585-8367 or 416-621-4642 for international callers, code 8286362, and the replay will also be available on the Company's website for the next 12 months.

About Tivity Health

Tivity Health^® Inc. (Nasdaq: TVTY) is a leading provider of nutrition, fitness and social connection solutions. With its family of healthy life-changing solutions, including SilverSneakers, Nutrisystem, South Beach Diet, Prime Fitness, Wisely Well and WholeHealth Living, Tivity Health is impacting the lives of millions. By working with a diverse set of partners, including payers, healthcare practitioners and employers, to provide more opportunities to empower people to feel, do and be better, Tivity Health is transforming the way we do health. Learn more at TivityHealth.com.

Non-GAAP Financial Measures

This press release contains certain non-GAAP financial measures. Reconciliations of certain of these non-GAAP measures to the comparable GAAP measures are included on pages 11-13. Certain of the non-GAAP measures included in this press release are forward-looking, and reconciliations of these forward-looking non-GAAP financial measures (including adjusted EBITDA guidance) to the most directly comparable GAAP financial measures are not provided because the Company is unable to provide such reconciliations without unreasonable effort due to the uncertainty and inherent difficulty of predicting the financial impact of certain items.    

Cautionary Statement Regarding Forward-Looking Statements

This press release contains certain statements that are "forward-looking" statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based upon current expectations and include all statements that are not historical statements of fact and those regarding the intent, belief or expectations, including, without limitation, statements that are accompanied by words such as "will," "expect," "outlook," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," "target," or other similar words, phrases or expressions and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding the Company's future financial performance and the Company's acquisition of Nutrisystem, Inc. ("Nutrisystem"), as well as the expected benefits, synergies or opportunities of such acquisition. Readers of this press release should understand that these statements are not guarantees of performance or results. Many risks and uncertainties could affect actual results and cause them to vary materially from the forward-looking statements.

These risks and uncertainties include, among other things: the market's acceptance of the Company's new products and services; the Company's ability to develop and implement effective strategies and to anticipate and respond to strategic changes, opportunities, and emerging trends in the Company's industry and/or business, as well as to accurately forecast the related impact on the Company's revenues and earnings; the risk that expected benefits, synergies and growth opportunities of the Company's acquisition of Nutrisystem may not be achieved in a timely manner or at all, including that the acquisition may not be accretive within the expected timeframe or to the extent anticipated; the Company's ability to successfully integrate Nutrisystem's business or any other new or acquired businesses, services, technologies, solutions, or products into the Company's business and to accurately forecast the related costs; the risk that the significant indebtedness incurred in connection with the Company's acquisition of Nutrisystem may limit the Company's ability to adapt to changes in the economy or market conditions, expose the Company to interest rate risk for the variable rate indebtedness and require a substantial portion of cash flows from operations to be dedicated to the payment of indebtedness; the Company's ability to service its debt, make principal and interest payments as those payments become due, and remain in compliance with its debt covenants; the Company's ability to obtain adequate financing to provide the capital that may be necessary to support its current or future operations; the risks associated with changes in macroeconomic conditions, geopolitical turmoil and the continuing threat of domestic or international terrorism; the impact of any impairment of the Company's goodwill, intangible assets, or other long-term assets; the risks associated with the potential failures of the Company's information systems; the risks associated with data privacy or security breaches, computer hacking, network penetration and other illegal intrusions of the Company's information systems or those of third-party vendors or other service providers, which may result in unauthorized access by third parties, loss, misappropriation, disclosure or corruption of customer, employee or Company information, or other data subject to privacy laws and may lead to a disruption in the Company's business, costs to modify, enhance, or remediate the Company's cybersecurity measures, enforcement actions, fines or litigation against the Company, or damage to its business reputation; the impact of any new or proposed legislation, regulations and interpretations relating to Medicare, Medicare Advantage, Medicare Supplement, as well as privacy and security laws; the Company's ability to attract, hire, or retain key personnel or other qualified employees and to control labor costs; the effectiveness of the reorganization of the Company's business and its ability to realize the anticipated benefits thereof; the Company's ability to effectively compete against other entities, whose financial, research, staff, and marketing resources may exceed its resources; the impact of legal proceedings involving the Company and/or its subsidiaries, including any claims related to intellectual property rights; the Company's ability to enforce its intellectual property rights; the risks associated with deriving a significant concentration of the Company's revenues from a limited number of its Healthcare segment customers, many of whom are health plans; the Company's ability and/or the ability of its Healthcare segment 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 Company's ability to sign, renew and/or maintain contracts with the Company's Healthcare segment customers and/or its partner locations 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 ability of the Company's Healthcare segment customers to maintain the number of covered lives enrolled in the plans during the terms of the Company's agreements; the impact of severe or adverse weather conditions and the potential emergence of a health pandemic or an infectious disease outbreak on member participation in the Company's Healthcare segment programs; the impact of healthcare reform on the Company's business; the effectiveness of the Company's marketing and advertising programs; loss, or disruption in the business, of any of the Company's food suppliers or its fulfillment provider, or disruptions in the shipping of the Company's food products for its Nutrition segment; the impact of any claims that the Company's Nutrition segment personnel are unqualified to provide proper weight loss advice; the impact of health or advertising related claims by the Company's Nutrition segment customers; competition from other weight management industry participants or the development of more effective or more favorably perceived weight management methods; loss of any of the Company's Nutrition segment third-party retailer agreements and any obligations associated with such loss; the Company's ability to continue to develop innovative weight loss programs and enhance its existing programs, or the failure of the Company's programs to continue to appeal to the market; the impact of claims from the Company's Nutrition segment competitors regarding advertising or other marketing practices; the Company's ability to develop and commercially introduce new products and services; the Company's ability to receive referrals from existing Nutrition segment customers, a decline in which could adversely impact customer acquisition costs; failure to attract or negative publicity with respect to any of the Company's spokespersons; the Company's ability to anticipate change and respond to emerging trends for customer preferences and the impact of the same on demand for the Company's services and products; negative publicity with respect to the weight loss industry; the impact of increased governmental regulation on the Company's Nutrition segment; claims arising from the sale of ingested products; and other risks detailed in the Company's filings with the Securities and Exchange Commission.

For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to the Company's filings with the SEC. Except as required by law, the Company undertakes no obligation to update any such forward-looking statements to reflect new information, subsequent events or circumstances.

SOURCE Tivity Health