EX-99.2 3 tvty-ex992_43.htm EX-99.2 tvty-ex992_43.pptx.htm

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Tivity Health Q2 2019 Earnings Release Supplemental Material August 7, 2019 Exhibit 99.2

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Note on Forward-Looking Statements This communication contains certain statements that are “forward-looking” statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based upon current expectations and include all statements that are not historical statements of fact and those regarding the intent, belief or expectations, including, without limitation, statements that are accompanied by words such as “will,” “expect,” “outlook,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “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 Tivity Health, Inc.’s (the “Company”) 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 communication 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 expectations contained in 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 potential 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 Cautionary Note on Forward-Looking Statements

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Cautionary Note on Forward-Looking Statements 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.

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Measure Q2 2019 Results Q2 2018 Comparison Revenue $340.4 million $151.9 million Income from continuing operations $18.1 million $22.7 million Adjusted Income from continuing operations 1 $31.2 million $22.8 million Adjusted EBITDA 1 $70.3 million $35.1 million Adjusted EBITDA margin 1 20.7% 23.1% Income from continuing operations per diluted share $0.37 $0.52 Adjusted income from continuing operations per diluted share 1 $0.64 $0.53 2019 term loan reduction $90 million paid as of July 31, 2019 N/A Cost Synergies $1.3 million N/A Q2 2019 Financial Results Adjusted income from continuing operations, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted income from continuing operations per diluted share are non-GAAP financial measures. Reconciliation of these non-GAAP financial measures is included in Tivity Health’s earnings release included as an exhibit to Tivity Health’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 7, 2019.

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Enterprise Level Investment Highlights & Updates Strong Free Cash Flow Business Paid Down Debt Ahead of Schedule On Track to Achieve Target Debt Ratios for 2020 and 2021 On Plan to Achieve Cost Synergies Revenue Synergies Beginning to Take Shape as Evidenced by: Strong Early Demand for Payor Integrated Service Offering (physical activity, loneliness, nutrition) - Benefits both Business Units 2 Post-Discharge Meal Delivery Contract Wins Combining Fitness and Nutrition Solutions 2 Chronic Condition Pilots Initiated Focused on Diabetes (employer and health plan) Nutrisystem Contact Center and Media Expertise now Supporting Enrollment & Engagement in SilverSneakers/Prime. Additionally, the Healthcare Fitness Center Network and Health Plan Partnerships Now Supporting New Channels for Nutrisystem

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Healthcare Business Unit Investment Highlights & Updates Digital / Media Strategies Driving Higher Revenues Customer Renewals at 99 Percent for 2020 Strong Selling Season with New Client Wins and Return of Past Clients has Yielded Approximately 600,000 New Eligible Lives SilverSneakers Eligible Lives Expected to be 16.0 – 16.5 million in 2020 Medicare Supplement Expansion – Won One of the Largest Non-Health Plan Insurers United Health Retention – 20-25% of Current Individual Lives Now Expected to be Retained –All of the Group Lives Expected to Continue in 2020 Won Two Post-Discharge Meal Delivery Contracts - Combining Fitness and Nutrition Solutions Chronic Condition Pilots – 2 Initiated - Focused on Diabetes (Employer and Health Plan)

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Nutrition Business Unit Investment Highlights & Updates Two-Pronged Strategy (O-E) Optimization of the Core Nutrition Business Underway to Ensure a Successful 2020 Diet Season and Beyond Expansion into New Channels by (a) expanding beyond direct-to-consumer including opportunities with our health plan partners and fitness partner locations and (b) leveraging our food science capabilities beyond weight loss so that we can address the broader opportunity of nutrition-based solutions and continue to differentiate ourselves in the market. Nutrition Business Unit Continues to Generate Meaningful EBITDA and Free Cash Flow

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Healthcare Segment Q2 2019 Segment Highlights Revenue $157.5M SilverSneakers 78% Prime19% WholeHealth Living3% Adjusted EBITDA $35.7M1 Investment in media in first half triggered better than expected visits despite a decrease in eligible members Higher mix of revenue generating visits than prior year Digital marketing programs in first half for Prime Fitness continue to yield results Quarterly Visits (millions) Quarterly Prime Subscriptions (000’s) Adjusted EBITDA is a non-GAAP financial measure. Reconciliation of this non-GAAP financial measure is included in Tivity Health’s earnings release included as an exhibit to Tivity Health’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 7, 2019.

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Q2 2019 Segment Highlights Nutrition Segment Adjusted EBITDA is a non-GAAP financial measure. Reconciliation of this non-GAAP financial measure is included in Tivity Health’s earnings release included as an exhibit to Tivity Health’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 7, 2019. $182.9 million of Revenue $170.4 million from Direct to Consumer (“DTC”), down 5% compared to Q2 2018 New customer revenue declined 11% compared to the prior year, but was partially offset by gains in customer paid length of stay and revenue per customer Reactivation revenue increased 8% as compared to Q2 2018, as we continue to leverage our customer database QVC and Retail revenues are relatively consistent with the prior year $34.7 Million of Adjusted EBITDA1 Gross margin percentage was favorable both year-over-year and sequential quarter-over-quarter

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Consolidated Basis – Updated 2019 Financial Guidance Metric 2019 Guidance Updated 2019 Guidance Original Consolidated Revenues $1,127 - $1,142 $1,146 - $1,177 Healthcare Segment Revenues $625 - $630 $612 - $627 Nutrition Segment Revenues Stub Period (3/8 – 12/31) $502 - $512 $534 - $550 ** Consolidated Adjusted EBITDA 1, 2 $229 - $239 * $240 - $258 Healthcare Segment Adjusted EBITDA 1, 2 $140 - $143 $140 - $145 Nutrition Segment Adjusted EBITDA Stub Period (3/8 – 12/31) 1, 2 $80 - $84 * $91 - $101 ** Anticipated Cost Synergies $9 - $12 $9 - $12 Consolidated Earnings Per Diluted Share $1.11 – $1.32 $1.35 - $1.67 Consolidated Adjusted Earnings Per Diluted Share 1, 2 $2.14 - $2.32 $2.24 - $2.52 Footnotes shown on following page * Includes approximately $3 million in investments associated with the two pronged “O-E” strategy that were not contemplated in the 2019 original guidance. ** Nutrition revenues and adjusted EBITDA ranges are implied based on February 19, 2019 guidance $ in millions except per share amounts

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Consolidated Basis – Updated 2019 Financial Guidance Footnotes Adjusted EBITDA and Adjusted Earnings per Diluted Share are forward-looking non-GAAP financial measures.  A reconciliation of Adjusted Earnings per Diluted Share guidance for the year ending December 31, 2019 to the comparable GAAP financial measure is included as an exhibit to Tivity Health’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 7, 2019.  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 reconciliations without unreasonable effort due to the uncertainty and inherent difficulty of predicting the financial impact of certain items. We believe Adjusted EBITDA and Adjusted Earnings per Diluted Share are useful measures of performance. You should not consider Adjusted EBITDA and Adjusted Earnings per Diluted Share in isolation or as a substitute for net income or Earnings per Diluted Share, respectively, in each case, determined in accordance with GAAP. Additionally, because Adjusted EBITDA and Adjusted Earnings per Diluted Share may be defined differently by other companies in the Company’s industry, the non-GAAP financial measures presented here may not be comparable to similarly titled measures of other companies. 

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Appendix

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Nutrisystem Stand-Alone 2019 Full Year Review on a Stand-Alone Basis

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Nutrisystem Stand-Alone Full Year Basis – Updated 2019 Financial Guidance Metric 2019 Guidance Updated 2019 Guidance Original Nutrition Segment Revenues (1/1 - 12/31) 4 $635 - $645 $682 - $702 Nutrition Segment Adjusted EBITDA (1/1 – 12/31) 1, 2, 3, 4 $71 - $75 * $90 - $100 *Includes approximately $3 million in investments associated with the two pronged “O-E” strategy that were not contemplated in the 2019 original guidance. Adjusted EBITDA and Adjusted Earnings per Diluted Share are forward-looking non-GAAP financial measures.  A reconciliation of Adjusted Earnings per Diluted Share guidance for the year ending December 31, 2019 to the comparable GAAP financial measure is included as an exhibit to Tivity Health’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 7, 2019.  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 reconciliations without unreasonable effort due to the uncertainty and inherent difficulty of predicting the financial impact of certain items. We believe Adjusted EBITDA and Adjusted Earnings per Diluted Share are useful measures of performance. You should not consider Adjusted EBITDA and Adjusted Earnings per Diluted Share in isolation or as a substitute for net income or Earnings per Diluted Share, respectively, in each case, determined in accordance with GAAP. Additionally, because Adjusted EBITDA and Adjusted Earnings per Diluted Share may be defined differently by other companies in the Company’s industry, the non-GAAP financial measures presented here may not be comparable to similarly titled measures of other companies.  In order to conform to Tivity Health’s historical reporting methodology, Adjusted EBITDA guidance for the Nutrition segment as presented includes non-cash share-based compensation expense. Nutrisystem removed this expense from Adjusted EBITDA as reported in its Current Report on Form 8-K filed with the Securities and Exchange Commission on February 19, 2019. Nutrition segment Revenues and Adjusted EBITDA on a stand-alone full year basis include Nutrisystem actual results from 1/1/19 to 3/7/19. These figures are being provided for comparison purposes to the original 2019 stand-alone guidance and to prior year results. $ in millions