10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2022 

or

☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _____  to _____

Commission file number 000-19364

TIVITY HEALTH, INC.

(Exact name of registrant as specified in its charter)

Delaware	62-1117144
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

701 Cool Springs Boulevard, Franklin, TN  37067

(Address of principal executive offices) (Zip code)

(800) 869-5311

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock - $.001 par value	TVTY	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐	Smaller reporting company	☐
Non-accelerated filer	☐			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of April 29, 2022, there were outstanding 49,878,312 shares of the registrant’s common stock, par value $.001 per share (“Common Stock”).

Tivity Health, Inc.

Form 10-Q

Table of Contents

			Page
Part I
	Item 1.	Financial Statements	3
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
	Item 4.	Controls and Procedures	36
Part II
	Item 1.	Legal Proceedings	37
	Item 1A.	Risk Factors	37
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
	Item 6.	Exhibits	42

2

PART I

Item 1. Financial Statements

TIVITY HEALTH, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited) 

	March 31, 2022			December 31, 2021
Current assets:
Cash and cash equivalents	$	92,076		$	60,132
Accounts receivable		58,011			62,730
Prepaid expenses		5,420			6,465
Income taxes receivable		—			3,095
Investment in equity securities		27,366			49,746
Other current assets		8,308			13,733
Total current assets		191,181			195,901
Property and equipment, net of accumulated depreciation of    $47,280 and $44,229, respectively		25,721			25,247
Right-of-use assets		8,811			10,695
Intangible assets, net		29,049			29,049
Goodwill, net		334,680			334,680
Other assets		5,723			2,969
Total assets	$	595,165		$	598,541
Current liabilities:
Accounts payable	$	25,376		$	25,325
Accrued salaries and benefits		4,065			11,825
Accrued liabilities		31,624			28,270
Deferred revenue		3,201			3,371
Income taxes payable		2,774			—
Current portion of lease liabilities		7,388			8,007
Current portion of other long-term liabilities		2,832			10,625
Total current liabilities		77,260			87,423
Long-term debt		379,960			380,504
Long-term lease liabilities		2,072			3,487
Long-term deferred tax liability		7,789			3,183
Other long-term liabilities		137			5,037
Commitments and contingent liabilities
Stockholders' equity:
Preferred stock $.001 par value, 5,000,000 shares authorized,    none outstanding		—			—
Common Stock $.001 par value, 120,000,000 shares authorized,    49,854,631 and 49,800,756 shares outstanding, respectively		50			50
Additional paid-in capital		516,113			514,461
Accumulated deficit		(358,590	)		(359,171	)
Treasury stock, at cost, 2,254,953 shares in treasury		(28,182	)		(28,182	)
Accumulated other comprehensive loss		(1,444	)		(8,251	)
Total stockholders' equity		127,947			118,907
Total liabilities and stockholders' equity	$	595,165		$	598,541

See accompanying notes to the consolidated financial statements.

3

TIVITY HEALTH, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except earnings per share data)

(Unaudited)

	Three Months Ended March 31,
	2022			2021
Revenues	$	127,513		$	108,085
Cost of revenue (exclusive of depreciation of $3,065 and $2,531,    respectively included below)		78,415			57,285
Marketing expense		2,784			1,231
Selling, general and administrative expenses		10,700			9,696
Depreciation expense		3,206			2,683
Operating income		32,408			37,190
Interest expense		6,993			10,756
Other (income) expense, net		16,685			(1,130	)
Total non-operating expense, net		23,678			9,626
Income before income taxes		8,730			27,564
Income tax expense		8,086			7,620
Income from continuing operations	$	644		$	19,944
Loss from discontinued operations, net of income tax benefit of $21    and $277, respectively		(63	)		(808	)
Net income	$	581		$	19,136
Earnings (loss) per share - basic:
Continuing operations	$	0.01		$	0.41
Discontinued operations	$	(0.00	)	$	(0.02	)
Net income	$	0.01		$	0.39
Earnings (loss) per share - diluted:
Continuing operations	$	0.01		$	0.40
Discontinued operations	$	(0.00	)	$	(0.02	)
Net income	$	0.01		$	0.38
Comprehensive income	$	7,388		$	21,938
Weighted average common shares and equivalents:
Basic		49,838			49,222
Diluted		50,557			50,340

See accompanying notes to the consolidated financial statements.

4

TIVITY HEALTH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2022		2021
Net income	$	581	$	19,136
Net change in fair value of effective portion of interest rate swaps    designated as cash flow hedges, net of tax expense of    $2,264 and $882, respectively		6,600		2,576
Reclassification adjustment for previously deferred loss from    interest rate swaps included in "Interest expense," net of tax of    $71 and $78, respectively		207		226
Total other comprehensive income, net of tax	$	6,807	$	2,802
Comprehensive income	$	7,388	$	21,938

See accompanying notes to the consolidated financial statements.

5

TIVITY HEALTH, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

For the Three Months Ended March 31, 2022 and 2021

(In thousands)

(Unaudited)

	Preferred Stock		Common Stock		Additional Paid-in Capital			Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Loss			Total
Balance, January 1, 2021	$                           —		$	49	$	513,263		$	(464,085	)	$	(28,182	)	$	(17,389	)	$	3,656
Comprehensive income		—		—		—			19,136			—			2,802			21,938
Exercise and vesting of share-based compensation awards		—		—		164			—			—			—			164
Tax withholding for share-based compensation		—		—		(2,502	)		—			—			—			(2,502	)
Share-based employee compensation expense		—		—		2,998			—			—			—			2,998
Balance, March 31, 2021	$	—	$	49	$	513,923		$	(444,949	)	$	(28,182	)	$	(14,587	)	$	26,254
Balance, January 1, 2022	$	—	$	50	$	514,461		$	(359,171	)	$	(28,182	)	$	(8,251	)	$	118,907
Comprehensive income		—		—		—			581			—			6,807			7,388
Exercise and vesting of share-based compensation awards		—		—		205			—			—			—			205
Tax withholding for share-based compensation		—		—		(472	)		—			—			—			(472	)
Share-based employee compensation expense		—		—		1,919			—			—			—			1,919
Balance, March 31, 2022	$	—	$	50	$	516,113		$	(358,590	)	$	(28,182	)	$	(1,444	)	$	127,947

See accompanying notes to the consolidated financial statements.

6

TIVITY HEALTH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2022			2021
Cash flows from operating activities:
Income from continuing operations	$	644		$	19,944
Loss from discontinued operations		(63	)		(808	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,206			2,683
Amortization and write-off of deferred loan costs		492			1,183
Amortization and write-off of debt discount		63			1,077
Share-based employee compensation expense		1,919			2,998
Unrealized gain on derivatives		(5,695	)		(1,130	)
Unrealized loss on investments in equity securities		22,380			—
Deferred income taxes		2,272			1,454
Decrease (increase) in accounts receivable		4,719			(18,978	)
Changes in income taxes receivable and payable		5,869			10,217
Decrease in other current assets		1,992			529
Decrease in accounts payable		(945	)		(42	)
Decrease in accrued salaries and benefits		(7,760	)		(3,685	)
Increase in other current liabilities		7,553			5,594
Other		369			1,582
Net cash flows provided by operating activities	$	37,015		$	22,618
Cash flows from investing activities:
Acquisition of property and equipment	$	(2,715	)	$	(1,561	)
Settlement on derivatives not designated as hedges		(1,390	)		(1,633	)
Net cash flows used in investing activities	$	(4,105	)	$	(3,194	)
Cash flows from financing activities:
Payments of long-term debt		(1,000	)		(63,600	)
Payments related to tax withholding for share-based compensation		(472	)		(2,502	)
Exercise of stock options		205			164
Change in cash overdraft and other		301			(1,443	)
Net cash flows used in financing activities	$	(966	)	$	(67,381	)
Net increase (decrease) in cash and cash equivalents	$	31,944		$	(47,957	)
Cash and cash equivalents, beginning of period	$	60,132		$	100,385
Cash and cash equivalents, end of period	$	92,076		$	52,428

See accompanying notes to the consolidated financial statements.

7

TIVITY HEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).  In our opinion, the accompanying consolidated financial statements of Tivity Health, Inc. and its wholly owned subsidiaries (collectively, “Tivity Health,” the “Company,” or such terms as “we,” “us,” or “our”) reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement.  We have reclassified certain items in prior periods to conform to current classifications.

Our results from continuing operations do not include the results of Nutrisystem, Inc. (“Nutrisystem”), which we sold effective December 9, 2020. Results of operations for Nutrisystem have been classified as discontinued operations for all periods presented in the accompanying consolidated financial statements. 

We have omitted certain financial information that is normally included in financial statements prepared in accordance with U.S. GAAP but that is not required for interim reporting purposes.  You should read the accompanying consolidated financial statements in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. 

2. Recent Relevant Accounting Standards

In October 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-16, "Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes" (“ASU 2018-16”), which adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition and provide lead time for entities to prepare for changes to interest rate risk hedging strategies. ASU 2018-16 is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted.  As of March 31, 2022, the benchmark interest rate in our existing interest rate swap agreements is LIBOR. The adoption of this standard did not have an impact on our financial position, results of operations, or cash flows. 

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (“ASC 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform: Scope”, which refines the scope of ASC 848 and clarifies the application of its guidance. ASC 848 contains temporary optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform, such as a transition away from the use of LIBOR.  ASC 848 was effective for the Company as of January 1, 2020.  The provisions of ASC 848 are available through December 31, 2022, at which time the reference rate replacement activity is expected to have been completed.  The provisions of ASC 848 must be applied at a Topic, Subtopic or Industry Subtopic level for all transactions other than derivatives, which may be applied at a hedging relationship level.  The accounting relief provided by ASC 848 is applicable only to legacy contracts if the amendments made to the agreements are solely for reference rate reform activities. Modifications that are unrelated to reference rate reform will scope out a given contract.  ASC 848 allows for different elections to be made at different points in time, and the timing of those elections will be documented as applicable.  For the avoidance of doubt, we intend to reassess the elections of optional expedients and exceptions included within ASC 848 related to our hedging activities and will document the election of these items on a quarterly basis.  In March 2020, we elected the expedient that allows us to assume that our hedged interest payments are probable of occurring regardless of any expected modification in their terms related to reference rate reform.  In addition, we have the option to change the method of assessing effectiveness upon a change in the critical terms of the derivative or the hedged transactions and upon the end of relief under ASC 848.  In June 2020, we elected to (i) continue the method of assessing effectiveness as documented in the original hedge documentation and (ii) apply the expedient wherein the reference rate on the hypothetical derivative matches the reference rate on the hedging instrument.  We will also apply the aforementioned elections to any future designated cash flow hedging relationship.

8

3. Discontinued Operations 

Effective as of December 9, 2020, we completed the sale of Nutrisystem. The following table presents financial results of our former Nutrition business included in “loss from discontinued operations" for the three months ended March 31, 2022 and 2021.

	Three Months Ended March 31,
(In thousands)	2022			2021
Selling, general and administrative expenses (1)		84			1,085
Pretax loss from discontinued operations		(84	)		(1,085	)
Income tax benefit		(21	)		(277	)
Loss from discontinued operations, net    of income tax benefit	$	(63	)	$	(808	)

(1) Expenses from discontinued operations primarily relate to legal and other professional fees and separation costs.

4. Revenue Recognition

We account for revenue from contracts with customers in accordance with Accounting Standards Codification (“ASC”) Topic 606.  The unit of account in ASC Topic 606 is a performance obligation, which is a promise in a contract to transfer to a customer either a distinct good or service (or bundle of goods or services) or a series of distinct goods or services provided over a period of time. ASC Topic 606 requires that a contract's transaction price, which is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, is to be allocated to each performance obligation in the contract based on relative standalone selling prices and recognized as revenue when or as the performance obligation is satisfied.

We earn revenue primarily from three programs: SilverSneakers^® senior fitness, Prime Fitness^®, and WholeHealth Living^TM.  We provide the SilverSneakers senior fitness program to members of Medicare Advantage, Medicare Supplement, and group retiree plans through our contracts with such plans.  We offer Prime Fitness, a fitness facility access program, through contracts with commercial health plans, employers, and other sponsoring organizations that allow their members to individually purchase the program.  We sell our WholeHealth Living program primarily to health plans.

Except for Prime Fitness, our customer contracts generally have initial terms of approximately three years.  Some contracts allow the customer to terminate early and/or determine on an annual basis to which of their members they will offer our programs.  For Prime Fitness, our contracts with commercial health plans, employers, and other sponsoring organizations generally have initial terms of approximately three years, while individuals who purchase the Prime Fitness program through these organizations may cancel at any time (on a monthly basis) after an initial period of one to three months.  The significant majority of our customer contracts contain one performance obligation - to stand ready to provide access to our network of fitness locations and fitness programming - which is satisfied over time as services are rendered each month over the contract term. Unsatisfied performance obligations at the end of a particular month primarily relate to certain monthly memberships for our Prime Fitness program, which are recorded as deferred revenue on the consolidated balance sheet and recognized as revenue during the immediately subsequent month. There was $0.1 million of revenue recognized during the three months ended March 31, 2022 from performance obligations satisfied in a prior period. Deferred revenue was $3.2 million and $3.4 million at March 31, 2022 and December 31, 2021, respectively. Significant changes in the deferred revenue balance during the period are as follows:

9

	Three Months Ended March 31,			Three Months Ended March 31,
(In thousands)	2022			2021
Revenue recognized that was included in deferred    revenue at the beginning of the period	$	(3,204	)	$	(3,781	)
Increases due to cash received from customers,    excluding amounts recognized as revenue during    the period	$	3,034		$	3,672

Our fees are variable month to month and are generally billed per member per month (“PMPM”) or billed based on a combination of PMPM and member visits to a network location.  We bill PMPM fees by multiplying the contractually negotiated PMPM rate by the number of members eligible for or receiving our services during the month.  For the three months ended March 31, 2022, total SilverSneakers visits and revenues were higher than the same period in 2021 as the effects of the COVID-19 pandemic lessened compared to the prior year period. As a result, revenues from PMPM fees (which are not derived from visits) as a percentage of total SilverSneakers revenue declined to 41% for the three months ended March 31, 2022, compared to 53% for the three months ended March 31, 2021.  We bill for member visits approximately one month in arrears once actual member visits are known.  Payments from customers are typically due within 30 days of invoice date.  When material, we capitalize costs to obtain contracts with customers and amortize them over the expected recovery period. At March 31, 2022 and December 31, 2021, $0.3 million of such costs were capitalized. Amortization expense related to such capitalized costs was $0.1 million and $0.2 million during the three months ended March 31, 2022 and 2021, respectively. 

Our customer contracts include variable consideration, which is allocated to each distinct month over the contract term based on eligible members and/or member visits each month.  The allocated consideration corresponds directly with the value to our customers of our services completed for the month.  Under the majority of our contracts, we recognize revenue each month using the practical expedient available under ASC 606-10-55-18, which provides that revenue is recognized in the amount for which we have the right to invoice. ASC 606-10-50-14(b) provides an optional exemption, which we have elected to apply, from disclosing remaining performance obligations when revenue is recognized from the satisfaction of the performance obligation in accordance with the “right to invoice” practical expedient.

Although we evaluate our financial performance and make resource allocation decisions based upon the results of our single operating and reportable segment, we believe the following information depicts how our revenues and cash flows from continuing operations are affected by economic factors.  

The following table sets forth revenue from continuing operations disaggregated by program.  Revenue from our SilverSneakers program is predominantly contracted with Medicare Advantage and Medicare Supplement plans.

(In thousands)	Three Months Ended March 31,
	2022		2021
SilverSneakers	$	96,114	$	79,827
Prime Fitness		25,036		22,593
WholeHealth Living		6,118		5,637
Other		245		28
	$	127,513	$	108,085

Sales and usage-based taxes are excluded from revenues.    

5. Share-Based Compensation

We currently have three types of share-based awards outstanding to our employees and directors: stock options, restricted stock units, and market stock units.  We believe that our share-based awards align the interests of our employees and directors with those of our stockholders. Vesting terms for each of these award types generally range from one to three years.

10

We recognize share-based compensation expense for the market stock units if the requisite service is rendered, even if the market condition is never satisfied. For the three months ended March 31, 2022 and 2021, we recognized total share-based compensation costs of $1.9 million and $3.0 million, respectively.  We account for forfeitures as they occur. 

In March 2022, we granted annual long-term incentive awards to our employees consisting of (i) approximately 162,000 stock options with a weighted average exercise price of $31.27 per share and a weighted average grant date fair value of $15.75 per share, and (ii) approximately 90,000 restricted stock units with a weighted average grant date fair value of $28.43 per share.  These awards generally vest over or at the end of three years, subject to the underlying award agreements.

6. Income Taxes

For the three months ended March 31, 2022 and 2021, we had an effective income tax rate from continuing operations of 92.6% and 27.6%, respectively.  The higher effective income tax rate in 2022 is primarily due to the increase in the portion of valuation allowance for deferred tax assets related to capital loss carryforwards during the first quarter of 2022, as described in Note 10.

We file income tax returns in the U.S. Federal jurisdiction and in various state and foreign jurisdictions. Tax years remaining subject to examination in the U.S. Federal jurisdiction include 2018 to present.

7.  Leases

We maintain lease agreements principally for our office spaces and certain equipment. We maintain two sublease agreements with respect to one of our office locations, each of which continues through the initial term of our master lease agreement.  Such sublease income and payments, while they reduce our rent expense, are not considered in the value of the right-of-use asset or lease liability. With the exception of two finance leases related to a network server and office equipment, all of our leases are classified as operating leases.  In the aggregate, our leases generally have remaining lease terms of four to 30 months, some of which include options to extend the lease for additional periods. Such extension options were not considered in the value of the right-of-use asset or lease liability because it is not probable that we will exercise the options to extend.  If applicable, allocations among lease and non-lease components would be achieved using relative standalone selling prices.

The following table shows the components of lease expense for the three months ended March 31, 2022 and 2021:

	Three Months Ended March 31,
(In thousands)	2022			2021
Finance lease cost:
Amortization of leased assets	$	156		$	158
Interest of lease liabilities		4			14
Operating lease cost		1,861			1,915
Total lease cost before subleases	$	2,021		$	2,087
Sublease income		(1,344	)		(1,344	)
Total lease cost, net	$	677		$	743

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Supplemental cash flow information related to leases is as follows:

	Three Months Ended March 31,
(In thousands)	2022			2021
Cash received (paid) for amounts included in the measurement of lease liabilities
Operating cash flow attributable to operating leases (1)	$	1,009		$	(1,550	)
Operating cash flow attributable to finance leases		(4	)		(14	)
Financing cash flow attributable to finance leases		(167	)		(157	)

(1) For the three months ended March 31, 2022, due to catch-up payments received from certain sublessors, cash received from subleases exceeded our cash paid for the related leases.

For the three months ended March 31, 2022 and 2021, there were no noncash transactions related to leases.

8. Debt

The Company's debt, net of unamortized deferred loan costs and original issue discount, consisted of the following at March 31, 2022 and December 31, 2021:

(In thousands)	March 31, 2022			December 31, 2021
Term Loan B		393,000			394,000
Less: deferred loan costs and original issue discount		(13,040	)		(13,496	)
Total debt		379,960			380,504

Credit Facilities

On June 30, 2021, we entered into a new Credit Agreement (the “Credit Agreement”) with a group of lenders, Morgan Stanley Senior Funding, Inc., as general administrative agent, term loan facility administrative agent and collateral agent (“Morgan Stanley”), and Truist Bank, as revolving facility agent and swingline lender (“Truist”). The Credit Agreement replaced our prior Credit and Guaranty Agreement, dated March 8, 2019 (the “Prior Credit Agreement”), with a group of lenders, Credit Suisse AG, Cayman Islands Branch, as general administrative agent, term facility agent and collateral agent, and Truist, as revolving facility agent and swingline lender. The Credit Agreement provides us with (i) a $400.0 million term loan B facility (the “Term Loan B”), (ii) a $100.0 million revolving credit facility that includes a $30.0 million sublimit for swingline loans and a $40.0 million sublimit for letters of credit (the “Revolving Credit Facility”), and (iii) uncommitted incremental accordion facilities in an aggregate amount at any date equal to the greater of $167.5 million or 100% of our Consolidated EBITDA (as defined in the Credit Agreement) for the then-preceding four fiscal quarters, plus additional amounts based on, among other things, satisfaction of certain financial ratio requirements. As of March 31, 2022, outstanding debt under the Credit Agreement was $380.0 million, and availability under the revolving credit facility totaled $99.5 million as calculated under the most restrictive covenant.

Upon execution of the Credit Agreement, we recorded a non-cash loss on extinguishment of debt of $18.2 million, which related to the write-off of certain unamortized original issue discount and deferred loan costs associated with the Prior Credit Agreement. Additionally, we incurred third-party costs of $0.8 million related to the execution of the Credit Agreement and the transactions that are the subject thereof, which were recorded as loss on modification of debt.                

We used the proceeds of the Term Loan B and cash on hand to repay all of the outstanding indebtedness under the Prior Credit Agreement, and to pay transaction costs and expenses. Proceeds of the Revolving Credit Facility also may be used for general corporate purposes of the Company and its subsidiaries.

We are required to repay Term Loan B loans in consecutive quarterly installments, each in the amount of 0.25% of the aggregate initial amount of such loans, payable on September 30, 2021 and on the last day of each succeeding quarter thereafter until maturity on June 30, 2028, at which time the entire outstanding principal balance

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of such loans is due and payable in full. We are permitted to make voluntary prepayments of borrowings under the Term Loan B at any time without penalty, except for a 1% premium with respect to the principal of Term Loan B loans prepaid within six months after the date of the Credit Agreement using proceeds from certain specified repricing transactions.  From June 30, 2021 through March 31, 2022, we made payments of $7.0 million on the Term Loan B, which included prepayments of all amounts due through March 31, 2023.

We are required to repay in full any outstanding swingline loans and revolving loans, and to terminate or cash collateralize any outstanding letters of credit, under the Revolving Credit Facility on June 30, 2026. In addition, the Credit Agreement contains provisions that, beginning with fiscal year 2022, may require annual excess cash flow (as defined in the Credit Agreement and generally designed to equal cash generated by our business in excess of cash used in the business) to be applied towards the prepayment of the Term Loan B or the reduction of the Revolving Credit Facility, as determined by the Company in our discretion (“Excess Cash Flow Payment”).  An Excess Cash Flow Payment is only required in the amount, if any, by which the Excess Cash Flow Amount exceeds $10.0 million for the applicable fiscal year.  “Excess Cash Flow Amount” is equal to our excess cash flow for a given fiscal year multiplied by the following excess cash flow percentages based on our First Lien Net Leverage Ratio (as defined in the Credit Agreement) on the last day of such fiscal year: (a) 50% if the First Lien Net Leverage Ratio is greater than 3.25:1, (b) 25% if the First Lien Net Leverage Ratio is less than or equal to 3.25:1 but greater than 2.75:1, and (c) 0% if the First Lien Net Leverage Ratio is less than or equal to 2.75:1.  Any potential mandatory Excess Cash Flow Payments are reduced by among other things, prepayments of the Term Loan B, any reductions of the Revolving Credit Facility, and prepayments of certain other indebtedness made during the applicable fiscal year.  We were not required to make an Excess Cash Flow Payment for fiscal 2021.

Borrowings under the Credit Agreement bear interest at variable rates based on a margin or spread in excess of either (1) one-month, three-month or six-month LIBOR (or, if available to all lenders holding the particular class of loans, 12-month LIBOR), which may not be less than 0.00%, or (2) the greatest of (a) the prime lending rate of the agent bank for the particular facility, (b) the federal funds rate plus 0.50%, and (c) one-month LIBOR plus 1.00% (the “Base Rate”), in each case as selected by the Company. The Base Rate may not be less than 1.00%. The LIBOR margin for Term Loan B loans is 4.25%, and the LIBOR margin for revolving loans varies between 4.25% and 3.75% depending on our First Lien Net Leverage Ratio (as defined in the Credit Agreement). The Base Rate margin for Term Loan B loans is 3.25%, and the Base Rate margin for revolving loans varies between 3.25% and 2.75%, depending on our First Lien Net Leverage Ratio.

Based on the Company’s elections, borrowings under the Prior Credit Agreement bore interest at variable rates based on a margin or spread in excess of one-month LIBOR, which could not be less than zero. The LIBOR margin for Term Loan A loans was 4.25%, the LIBOR margin for Term Loan B loans was 5.25%, and the LIBOR margin for revolving loans varied between 3.75% and 4.25%, depending on our total Net Leverage Ratio, as defined in the Prior Credit Agreement.

In May 2019, we entered into eight amortizing interest rate swap agreements, each of which matures in May 2024.  Under these interest rate swap agreements, we receive a variable rate of interest based on LIBOR, and we pay a fixed rate of interest equal to approximately 2.2%. As further explained in Note 12, during the fourth quarter of 2020 we concluded that five of the eight interest rate swaps no longer qualified for hedge accounting treatment, and we de-designated these derivatives. As of March 31, 2022, the eight interest rate swap agreements had current notional amounts totaling $600.0 million, of which $333.3 million related to effective hedges.

The Credit Agreement also provides for annual commitment fees ranging between 0.250% and 0.375% of the unused commitments under the Revolving Credit Facility, depending on our Total Net Leverage Ratio (as defined in the Credit Agreement), and annual letter of credit fees on the daily maximum amount available under outstanding letters of credit at the LIBOR margin for the Revolving Credit Facility. The Prior Credit Agreement provided for annual commitment fees ranging between 0.250% and 0.500% of the unused commitments under the prior revolving credit facility, depending on our total Net Leverage Ratio (as defined in the Prior Credit Agreement), and annual letter of credit fees on the daily outstanding availability under outstanding letters of credit at the applicable LIBOR margin for the prior revolving credit facility, depending on our total Net Leverage Ratio (as defined in the Prior Credit Agreement).

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Extensions of credit under the Credit Agreement are secured by guarantees from substantially all of the Company’s active material domestic subsidiaries and by security interests in substantially all of the Company’s and such subsidiaries’ assets, subject to certain specified exceptions.

With respect to the Revolving Credit Facility, the Credit Agreement contains a financial covenant that requires us to comply with a specified maximum First Lien Net Leverage Ratio if utilization of the Revolving Credit Facility exceeds a specified level as of the last day of any period of four consecutive fiscal quarters. The Credit Agreement also contains various other affirmative and negative covenants customary for financings of this type that, subject to certain exceptions, impose restrictions and limitations on the Company and certain of the Company’s subsidiaries with respect to, among other things, liens; indebtedness; changes in the nature of business; mergers and other fundamental changes; sales and other dispositions of assets (including equity interests in subsidiaries); loans, advances, guarantees, acquisitions and other investments; restricted payments (including dividends, distributions, buybacks, redemptions and repurchases with respect to equity interests); change in fiscal year; prepayments, redemptions or acquisitions for value with respect to junior lien, subordinated or unsecured debt; changes in organizational documents and junior debt agreements; negative pledges; restrictions on subsidiary distributions; transfers of material assets to subsidiaries that are not guarantors; and transactions with affiliates. As of March 31, 2022, we were in compliance with all of the financial covenant requirements of the Credit Agreement.

9. Commitments and Contingencies

Shareholder Lawsuits: Strougo, Cobb, and Delaware Lawsuits

On February 25, 2020, Robert Strougo, claiming to be a stockholder of the Company, filed a complaint in the United States District Court for the Middle District of Tennessee (the "Strougo Lawsuit"). On August 18, 2020, the Court appointed Sheet Metal Workers Local No. 33, Cleveland District, Pension Fund as lead plaintiff. Plaintiff filed its amended complaint on November 13, 2020. The amended complaint is on behalf of a putative class of stockholders who purchased shares of the Company’s common stock, par value $0.001 per share (“Common Stock”) between March 8, 2019 and February 19, 2020 and names as defendants the Company, the Company's chief financial officer, former chief executive officer, and former president and chief operating officer. The amended complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated under the Exchange Act in making false and misleading statements and omissions related to the performance of and accounting for the Nutrisystem business that the Company acquired on March 8, 2019.  The defendants filed a motion to dismiss the amended complaint on December 4, 2020.  On July 29, 2021, the Court issued an order denying the defendants’ motion to dismiss.  On October 26, 2021, Plaintiff filed a motion for class certification, which Defendants have opposed. The parties are currently engaged in discovery, and a trial date has been set for September 12, 2023.

On April 9, 2020, John Cobb, claiming to be a stockholder of the Company, filed a derivative complaint in the United States District Court for the Middle District of Tennessee naming the Company as a nominal defendant and certain current and former directors and officers as defendants (the “Cobb Lawsuit”). The complaint asserts claims for breach of Section 14(a) of the Exchange Act, breach of fiduciary duty, unjust enrichment, and waste of corporate assets, largely tracking the factual allegations in the Strougo Lawsuit. The plaintiff seeks monetary damages on behalf of the Company, restitution, and certain corporate governance and internal procedural reforms. On June 9, 2020, the United States Magistrate Judge approved the parties’ stipulation to stay the case pending the resolution of defendants’ motion to dismiss in the Strougo Lawsuit. On August 23, 2021, the parties submitted another joint stipulation proposing to further extend the stay.

In July 2020, three putative derivative complaints were filed in the United States District Court for the District of Delaware by the following individuals claiming to be stockholders of the Company: Patrick Yerby, Thomas R. Conte, Melvyn Klein, and Mark Ridendour (the “Delaware Derivative Lawsuits”).  The complaints largely track the allegations, named defendants, asserted claims, and requested relief of the Cobb Lawsuit. The three Delaware Derivative Lawsuits have been consolidated.  On August 24, 2021, the court entered an order staying the case.

Given the uncertainty of litigation and the preliminary stage of the Strougo Lawsuit, Cobb Lawsuit, and Delaware Derivative Lawsuits, we are not currently able to predict the probable outcome of the matter or to reasonably estimate a range of potential loss, if any.  We intend to vigorously defend ourselves against these

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lawsuits.

Trademark Lawsuit: Pacific Packaging Lawsuit

On May 31, 2019, Pacific Packaging Concepts, Inc. (“Pacific Packaging”) filed a complaint in the U.S. District Court for the Central District of California, Western Division, naming as defendants two former subsidiaries of the Company; Nutrisystem, Inc. and Nutri/System IPHC, Inc (“Pacific Packaging Lawsuit”). In its complaint, Pacific Packaging alleged that the defendants’ use of Pacific Packaging’s federally registered trademark, Fresh Start, in advertisements for its weight management program and shakes constitutes federal trademark infringement, counterfeit trademark infringement, false designation of origin, federal trademark dilution, unfair competition, false advertising, common law unfair competition, and common law trademark infringement. The complaint seeks injunctive relief and monetary damages in an unspecified amount.  On August 29, 2019, the defendants filed their Answer to Complaint.  On July 23, 2021, the Court granted the defendant’s motion for summary judgment dismissing certain of plaintiff’s damages claims, namely any claim for royalty damages and claims related to profits based on reverse confusion.  The case was set for trial on March 1, 2022.  In connection with the sale of Nutrisystem, the Company agreed to indemnify Kainos for losses arising out of this matter and retained the right to control the defense thereof.  On January 11, 2022, the parties reached a settlement in principle of the Pacific Packaging Lawsuit pursuant to which defendants’ insurers would pay the entire settlement amount except for the amount of $25,000 representing the deductible on the policy, which would be paid by the Company pursuant to its indemnification agreement with Kainos.  On March 11, 2022, the parties executed a definitive written settlement agreement, and all amounts were paid by the insurers and the Company in March 2022.

Other

Additionally, from time to time, we are subject to contractual disputes, claims and legal proceedings that arise in the ordinary course of our business.  Some of the legal proceedings pending against us as of the date of this report are expected to be covered by insurance policies.  As these matters are subject to inherent uncertainties, our view of these matters may change in the future.  We expense legal costs as incurred.

10. Investment in Equity Securities

Prior to July 1, 2021, we owned 159,309 shares of common stock of a predecessor (“Legacy Sharecare”) of Sharecare, Inc. (“Sharecare”) that we acquired in connection with the sale of our total population health services business to Legacy Sharecare in July 2016. These shares did not have a readily determinable fair value through June 30, 2021. As permitted under ASC 321, “Investments – Equity Securities” (“ASC 321”), we elected to measure such shares at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer (of which there were none).  

On February 12, 2021, Legacy Sharecare announced that it had entered into a merger agreement with Falcon Capital Acquisition Corp. (“FCAC”) and FCAC Merger Sub, Inc. (“FCAC Merger Sub”) pursuant to which Legacy Sharecare would merge with and into FCAC Merger Sub with Sharecare surviving as a wholly owned subsidiary of FCAC (the “Sharecare Transaction”).  The Sharecare Transaction was consummated effective July 1, 2021. As a result, our shares of common stock of Legacy Sharecare were converted into shares of common stock of Sharecare (“Sharecare Common Stock”), with 2.4% of such shares being converted into and paid to us in cash. Consequently, in July 2021, we received $2.7 million in cash as well as 11,079,331 shares of Sharecare Common Stock (“Sharecare Equity Security”).  Our cost basis in the Sharecare Equity Security is $10.5 million or $0.95 average cost per share. Sharecare Common Stock began trading on The Nasdaq Stock Market LLC on July 2, 2021 under the trading symbol “SHCR.”

The Sharecare Equity Security is subject to restrictions on resale, including a customary lockup period.  The lockup period continues until the earlier of one year after the effective time of the Sharecare Transaction or such other time at which the Sharecare Common Stock trades at a certain minimum price for 20 trading days in any 30-day trading period beginning on or after November 28, 2021.  In addition, between December 28, 2021 and March 27, 2022 (the “First Sale Window”), we were permitted to, but did not, sell up to 750,000 shares.  Between March 28, 2022 and July 1, 2022, we may sell up to 750,000 shares plus the 750,000 shares we were permitted to, but did not, sell during the First Sale Window.

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Subsequent to the consummation of the Sharecare Transaction in July 2021, the fair value of the Sharecare Equity Security became readily determinable. Accordingly, beginning in July 2021, we carry the Sharecare Equity Security on our consolidated balance sheet at fair value, and we recognize any changes in fair value of the Sharecare Equity Security in net income as unrealized gains or losses, as required under ASC 321. At March 31, 2022, the Sharecare Equity Security is reported as a current asset on our consolidated balance sheet in “Investment in equity securities”. During the three months ended March 31, 2022, we recorded an unrealized loss of $22.4 million based on the change in fair value of the Sharecare Equity Security. The unrealized loss was recorded to other (income) expense, net (see Note 15).

At December 31, 2021, we provided a valuation allowance of $135.4 million for deferred tax assets related to capital loss carryforwards. During the first quarter of 2022, we increased the valuation allowance by $5.7 million based on changes in expectations about the realizability of capital gains from a future disposal of the Sharecare Equity Security that would be available to utilize these capital loss carryforwards. The capital loss carryforwards expire on December 31, 2025, if unused.  We currently expect to dispose of the Sharecare Equity Security during fiscal 2022.

11. Fair Value Measurements

We account for certain assets and liabilities at fair value. Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date, assuming the transaction occurs in the principal or most advantageous market for that asset or liability.

Fair Value Hierarchy

The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 1:  Quoted prices in active markets for identical assets or liabilities;

Level 2:  Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-based valuation techniques in which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3:  Unobservable inputs that are supported by little or no market activity and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents our assets and liabilities measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021.

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	March 31, 2022						December 31, 2021
	Fair Value Measurements Using Input Types						Fair Value Measurements Using Input Types
(In thousands)	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:
Investment in equity securities (1)	$	27,366	$	—	$	27,366	$	49,746	$	—	$	49,746
Derivatives designated as effective hedging instruments
Interest rate swap agreements	$	—	$	1,738	$	1,738	$	—	$	—	$	—
Non-designated derivatives
Interest rate swap agreements	$	—	$	1,397	$	1,397	$	—	$	—	$	—
Total assets	$	27,366	$	3,135	$	30,501	$	49,746	$	—	$	49,746
Liabilities:
Derivatives designated as effective hedging instruments
Interest rate swap agreements	$	—	$	1,580	$	1,580	$	—	$	8,705	$	8,705
Non-designated derivatives
Interest rate swap agreements	$	—	$	1,252	$	1,252	$	—	$	6,938	$	6,938
Total liabilities	$	—	$	2,832	$	2,832	$	—	$	15,643	$	15,643

(1) Reflects ownership of 11,079,331 shares of Sharecare Common Stock, as described in Note 10. 

The fair value of the Sharecare Equity Security is determined based on the closing price of Sharecare’s common stock on the last trading day of the reporting period.  

The fair values of interest rate swap agreements are primarily determined based on the present value of future cash flows using internal models and third-party pricing services with observable inputs, including interest rates, yield curves and applicable credit spreads.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

We measure certain assets at fair value on a nonrecurring basis in the fourth quarter of each year, or more frequently whenever events or circumstances indicate that the carrying value may not be recoverable, including the following:

• reporting units measured at fair value as part of a goodwill impairment test; and

• indefinite-lived intangible assets measured at fair value for impairment assessment.

Each of these assets above is classified as Level 3 within the fair value hierarchy.

The fair value of a reporting unit is the price that would be received upon a sale of the unit as a whole in an orderly transaction between market participants at the measurement date.  We have a single reporting unit.     

Fair Value of Other Financial Instruments

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The estimated fair value of each class of financial instruments at March 31, 2022 was as follows:

Cash and cash equivalents – The carrying amount of $92.1 million approximates fair value due to the short maturity of those instruments (less than three months).

Debt – The estimated fair value of outstanding borrowings under the Credit Agreement, which includes a term loan facility and a revolving credit facility (see Note 8), is determined based on the fair value hierarchy as discussed above.

The Term Loan B is actively traded and therefore is classified as a Level 1 valuation. The estimated fair value is based on an average of quotes as of March 31, 2022 from dealers who stand ready and willing to transact at those prices. We use a mid-market pricing convention (i.e., the mid-point of average bid and ask prices). The Revolving Credit Facility is not actively traded and therefore is classified as a Level 2 valuation based on the market for similar instruments. The estimated fair value and carrying amount of outstanding borrowings under the Term Loan B (excluding original issue discount and deferred loan costs) were $389.1 million and $393.0 million, respectively. There were no outstanding borrowings under the Revolving Credit Facility at March 31, 2022.  

12. Derivative Instruments and Hedging Activities

We use derivative instruments to manage differences in the amount, timing, and duration of our known or expected cash payments related to our outstanding debt (i.e., interest rate risk).  Some of these derivatives are designated and qualify as a hedge of the exposure to variability in expected future cash flows and are therefore considered cash flow hedges.  We account for derivatives in accordance with FASB ASC Topic 815, which establishes accounting and reporting standards requiring that derivative instruments be recorded on the balance sheet at fair value as either an asset or liability.  The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Changes in the derivative’s fair value will be recognized currently in earnings unless specific hedge accounting criteria are met. We classify cash flows from settlement of our effective cash flow hedges in the same category as the cash flows from the related hedged items, generally within the operating activities in the consolidated statements of cash flows. We classify cash flows from settlement of our non-designated derivatives within the investing section of the consolidated statements of cash flows.

Cash Flow Hedges of Interest Rate Risk and Non-Designated Derivatives

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy.  The counterparties to the interest rate swap agreements expose us to credit risk in the event of nonperformance by such counterparties. However, at March 31, 2022, we do not anticipate nonperformance by these counterparties.  Our interest rate swap agreements with each of the counterparties contain a provision whereby if we either default or are capable of being declared in default on any of our indebtedness, whether or not such default results in repayment of the indebtedness being accelerated by the lender, then we could also be declared in default on our derivative obligations.

Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for our making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur in the initially identified time period or within a subsequent two-month time period. Deferred gains and losses in accumulated other comprehensive income or loss ("accumulated OCI") associated with such derivative instruments are reclassified into earnings in the period of de-designation.  

In May 2019, we entered into eight amortizing interest rate swap agreements, each of which matures in May 2024 and was initially designated as an effective cash flow hedge.  Under these agreements, we receive a variable rate of interest based on LIBOR, and we pay a fixed rate of interest equal to approximately 2.2%. In October 2020, we determined that some of our hedged transactions would not materially occur in the initially identified time period due to the sale of Nutrisystem, since we expected to use the majority of the net proceeds from the sale to pay down a significant portion of outstanding debt. As a result, we concluded that five of our eight interest rate swaps no longer

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qualified for hedge accounting treatment. Accordingly, in the fourth quarter of 2020 we de-designated these five derivatives (“de-designated swaps”) and accelerated the reclassification of deferred gains and losses in accumulated OCI to income (loss) from discontinued operations as a result of the hedged forecasted transactions becoming probable not to occur. Upon de-designation in the fourth quarter of 2020, we recognized a pre-tax loss of $14.3 million in income (loss) from discontinued operations.

Additionally, upon de-designation in October 2020, we froze $3.2 million of previously deferred losses in accumulated OCI related to forecasted payments that are probable of occurring. We reclassify such deferred losses from accumulated OCI into earnings as an adjustment to interest expense during periods in which the forecasted transactions impact earnings, consistent with hedge accounting treatment. In the event that the related forecasted payments are probable of not occurring, the related loss in accumulated OCI will be recognized in earnings immediately.

We continue to maintain the effective hedging relationship between three interest rate swap agreements and the portion of our forecasted payments that is expected to remain highly probable of occurring. Our entering into the Credit Agreement on June 30, 2021 had no effect on the hedging designation of our interest rate swaps as the hedges are not tied to a specific debt instrument and the economic characteristics of the Credit Agreement are similar to those of the Prior Credit Agreement.

During the fourth quarter of 2020 we evaluated the likelihood and extent of potential future losses from the de-designated swaps. Such potential future losses are capped since the variable interest rate of our swaps is subject to a floor of 0%. Based on the LIBOR rates in effect at the time of de-designation, we decided to hold the de-designated swaps as derivative instruments requiring mark-to-market accounting treatment, with any change in fair value recognized each period in current earnings.

At March 31, 2022, our interest rate swap agreements designated as effective cash flow hedges had current notional amounts totaling $333.3 million, and our de-designated interest rate swap agreements had current notional amounts totaling $266.7 million.

We record all derivatives at estimated fair value in the consolidated balance sheet. Gains and losses on derivatives designated as effective cash flow hedges are recorded in accumulated OCI and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings.  Amounts reported in accumulated OCI related to cash flow hedge derivatives will be reclassified to interest expense as we make interest payments on our variable-rate debt. As of March 31, 2022, we expect to reclassify $2.4 million, pre-tax, from accumulated OCI as an increase to interest expense within the next 12 months due to the scheduled payment of interest associated with our debt. Gains and losses on derivatives de-designated as effective cash flow hedges are recorded in the consolidated statement of operations as other (income) expense, net.

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The estimated gross fair values of derivative instruments and their classification on the consolidated balance sheet at March 31, 2022 and December 31, 2021 were as follows:

(In thousands)	March 31, 2022		December 31, 2021
Assets:
Derivatives designated as effective hedging    instruments:
Other assets	$	1,738	$	—
Non-designated derivatives:
Other assets	$	1,397	$	—
Liabilities:
Derivatives designated as effective hedging    instruments:
Current portion of long-term liabilities	$	1,580	$	5,911
Other long-term liabilities		—		2,794
	$	1,580	$	8,705
Non-designated derivatives:
Current portion of long-term liabilities	$	1,252	$	4,714
Other long-term liabilities		—		2,224
	$	1,252	$	6,938

The following table presents the effect of cash flow hedge accounting on accumulated OCI as of March 31, 2022 and 2021:

(In thousands)	For the Three Months Ended
	March 31, 2022			March 31, 2021
Derivatives designated as effective hedging instruments:
Gain related to effective portion of    derivatives recognized in accumulated    OCI, gross of tax effect	$	(7,125	)	$	(1,412	)
Loss related to effective portion of derivatives    reclassified from accumulated OCI to    interest expense, gross of tax effect		(1,739	)		(2,046	)
Non-designated derivatives:
Previously deferred loss on interest rate swap    agreements reclassified from accumulated    OCI to interest expense, gross of tax effect	$	(278	)	$	(304	)
Total other comprehensive income,    gross of tax	$	(9,142	)	$	(3,762	)

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The following table presents the impact that non-designated derivatives had on our consolidated statement of operations for the three months ended March 31, 2022 and 2021:

(In thousands)	Statement of Operations Classification	March 31, 2022			March 31, 2021
Interest rate swap agreements:
Net gain related to ineffective portion of    derivatives, gross of tax effect	Other (income) expense, net	$	(5,695	)	$	(1,130	)
Previously deferred loss related to    de-designated swaps reclassified from    accumulated OCI, gross of tax effect	Interest expense		278			304
		$	(5,417	)	$	(826	)

13.Earnings (Loss) Per Share

The following is a reconciliation of the numerator and denominator of basic and diluted earnings (loss) per share for the three months ended March 31, 2022 and 2021:

(In thousands except per share data)	Three Months Ended March 31,
	2022			2021
Numerator:
Income from continuing operations - numerator for earnings (loss) per share	$	644		$	19,944
Loss from discontinued operations - numerator for earnings (loss) per share		(63	)		(808	)
Net income	$	581		$	19,136
Denominator:
Shares used for basic income (loss) per share		49,838			49,222
Effect of dilutive stock options and stock units outstanding:
Non-qualified stock options		77			62
Restricted stock units		363			844
Performance-based stock units		—			61
Market stock units		279			151
Shares used for diluted income (loss) per share		50,557			50,340
Earnings (loss) per share - basic:
Continuing operations	$	0.01		$	0.41
Discontinued operations	$	(0.00	)	$	(0.02	)
Net income	$	0.01		$	0.39
Earnings (loss) per share - diluted:
Continuing operations	$	0.01		$	0.40
Discontinued operations	$	(0.00	)	$	(0.02	)
Net income	$	0.01		$	0.38
Dilutive securities outstanding not included in the computation of earnings per share because their effect is anti-dilutive:
Non-qualified stock options		262			268
Restricted stock units		35			9

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Market stock units and performance-based stock units outstanding are considered contingently issuable shares, and certain of these stock units were excluded from the calculations of diluted earnings per share as the performance criteria had not been met as of the end of the applicable reporting period.

14. Accumulated OCI

The following tables summarize the changes in accumulated OCI, net of tax, for the three months ended March 31, 2022 and 2021:

(In thousands)	Net Change in Fair Value of Interest Rate Swaps
Accumulated OCI, net of tax, as of January 1, 2022	$	(8,251	)
Other comprehensive income (loss) before reclassifications, net of tax of $1,820		5,305
Amounts reclassified from accumulated OCI, net of tax of $515		1,502
Accumulated OCI, net of tax, as of March 31, 2022	$	(1,444	)
(In thousands)	Net Change in Fair Value of Interest Rate Swaps
Accumulated OCI, net of tax, as of January 1, 2021	$	(17,389	)
Other comprehensive income (loss) before reclassifications, net of tax of $360		1,052
Amounts reclassified from accumulated OCI, net of tax of $600		1,750
Accumulated OCI, net of tax, as of March 31, 2021	$	(14,587	)

The following table presents details about reclassifications out of accumulated OCI for the three months ended March 31, 2022 and 2021:

	Three Months Ended
(In thousands)	March 31, 2022			March 31, 2021			Statement of Operations Classification
Interest rate swaps	$	2,017		$	2,350		Interest expense
		(515	)		(600	)	Income tax expense
Total amounts reclassified from accumulated OCI	$	1,502		$	1,750		Net of tax

See Note 12 for a further discussion of our interest rate swaps.

15. Other (Income) Expense, Net

The following table shows the detail of Other (income) expense, net for the three months ended March 31, 2022 and 2021.

	Three Months Ended March 31,
(In thousands)	2022			2021
Unrealized loss on investment in equity securities (Note 10)	$	22,380		$	—
Unrealized gain related to ineffective portion of derivatives (Note 12)		(5,695	)		(1,130	)
Other (income) expense, net	$	16,685		$	(1,130	)

16. Subsequent Event

On April 5, 2022, we entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with Titan-Atlas Parent, Inc. (“Parent”) and Titan-Atlas Merger Sub, Inc., a direct, wholly-owned subsidiary of Parent

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(“Merger Sub”), providing for the acquisition of the Company by affiliates of Stone Point Capital LLC, a Delaware limited liability company (“Stone Point Capital”), subject to the terms and conditions set forth in the Merger Agreement. Pursuant to the terms of the Merger Agreement and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Merger Sub will be merged with and into the Company (the “Merger”) effective as of the effective time of the Merger (the “Effective Time”). As a result of the Merger, Merger Sub will cease to exist, and the Company will survive as a wholly-owned subsidiary of Parent.

As a result of the Merger, except as otherwise provided in the Merger Agreement, at the Effective Time, each share of Common Stock issued and outstanding immediately prior to the Effective Time will be converted into the right to receive $32.50 in cash, without interest (the “Transaction Consideration”).  In addition, at the Effective Time:

• Each option to purchase Common Stock outstanding immediately prior to the Effective Time (each, a “Company Option”), whether vested or unvested, will be cancelled and will entitle the holder to receive an amount in cash (without interest and subject to applicable withholding taxes) equal to the product of (i) the number of shares of Common Stock subject to such Company Option as of immediately prior to the Effective Time and (ii) the excess, if any, of the Transaction Consideration over the exercise price per share of such Company Option. Any Company Options outstanding with exercise prices equal to or in excess of the per share Transaction Consideration will be cancelled without any payment to the holder thereof;

• Each market stock unit award of the Company (each, a “Company MSU Award”) outstanding immediately prior to the Effective Time will become vested, will be cancelled and will entitle the holder thereof to receive an amount in cash (without interest and subject to applicable withholding taxes) equal to the product of (i) the number of shares of Common Stock that would have vested pursuant to the terms of such Company MSU Award based on actual performance through the Effective Time and (ii) the Transaction Consideration; and

• Each restricted stock unit award of the Company (each, a “Company RSU Award”) outstanding immediately prior to the Effective Time will become fully vested, will be cancelled and will entitle the holder to receive an amount in cash (without interest and subject to applicable withholding taxes) equal to the product of (i) the number of shares of Common Stock subject to the Company RSU Award and (ii) the Transaction Consideration.

The consummation of the Merger is subject to the satisfaction or waiver of various customary conditions set forth in the Merger Agreement, including, but not limited to, (i) the Company’s stockholders’ approval of the Merger Agreement, (ii) the expiration or termination of any applicable waiting period (or any extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), (iii) the absence of any restraint or law preventing or prohibiting the consummation of the Merger, (iv) the accuracy of Parent’s, Merger Sub’s, and the Company’s representations and warranties (subject to certain materiality qualifiers), (v) Parent’s, Merger Sub’s and the Company’s compliance in all material respects with their respective obligations under the Merger Agreement, and (vi) the absence of any Company Material Adverse Effect (as defined in the Merger Agreement) since the date of the Merger Agreement. The consummation of the Merger is not subject to a financing condition.

During the three months ended March 31, 2022, we incurred expenses of $1.1 million related to the proposed Merger, which primarily consisted of legal and other professional fees and are reported as selling, general and administrative expenses in the consolidated statements of operations. On April 5, 2022, upon entering into the Merger Agreement, we incurred $2.5 million of financial advisory fees, which we recorded during the second quarter of 2022.  

See Item IA. Risk Factors for a discussion of the risks related to the Merger.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

As used throughout this Quarterly Report on Form 10-Q, unless the context otherwise indicates, the terms “we,” “us,” “our,” “Tivity Health,” or the “Company” refer collectively to Tivity Health, Inc. and its wholly-owned subsidiaries.  Please read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included under Item 1. “Financial Statements” of this report.

Overview

Tivity Health, Inc. was founded and incorporated in Delaware in 1981.  We are a leading provider of healthy life-changing solutions, including SilverSneakers, Prime Fitness, and WholeHealth Living. We help adults improve their health and support them on life’s journey by providing access to in-person and virtual physical activity, social engagement, and mental enrichment programs. We deliver resources that enable members to live healthier, happier, more connected lives. Our solutions support health plans and employers nationwide as they seek to reduce costs and improve health outcomes.  

We offer SilverSneakers to approximately 18 million eligible members of Medicare Advantage, Medicare Supplement, and group retiree plans.  We also offer Prime Fitness, a fitness facility access program, through commercial health plans, employers, and other sponsoring organizations.  Our national network of fitness centers delivers both SilverSneakers and Prime Fitness. In January 2022, we launched a customizable, premium fitness network for SilverSneakers that increased our total SilverSneakers fitness network to approximately 23,000 locations. We also offer virtual fitness experiences, including live instructor-led classes.  Through our WholeHealth Living program, which we sell primarily to health plans, we offer a continuum of services related to physical and integrative medicine.  Our WholeHealth Living network includes relationships with approximately 30,000 physical and integrative medicine practitioner locations to serve individuals through health plans and employers who seek health services such as chiropractic care, acupuncture, physical therapy, occupational therapy, massage therapy, and more.  

Effective as of December 9, 2020, we completed the sale of Nutrisystem.  Results of operations for Nutrisystem have been classified as discontinued operations for all periods presented in the consolidated financial statements.

Merger Agreement

As described more fully in Note 16 of the notes to consolidated financial statements included in this report, on April 5, 2022, we entered into a Merger Agreement providing for the acquisition of the Company by affiliates of Stone Point Capital, subject to the terms and conditions set forth in the Merger Agreement.  

Subject to the terms and conditions of the Merger Agreement, at the Effective Time, each share of Common Stock issued and outstanding immediately prior to the Effective Time will be converted into the right to receive $32.50 in cash, without interest.  The consummation of the Merger is subject to the satisfaction or waiver of various customary conditions set forth in the Merger Agreement, including, but not limited to, the adoption of the Merger Agreement by the Company’s stockholders and the receipt of certain regulatory approvals.  The consummation of the Merger is not subject to a financing condition.

COVID-19

COVID-19, the global pandemic first recognized by the U.S. Department of Health and Human Services as a national public health emergency in January 2020, continues to spread throughout the United States and other countries.  During 2020, the average monthly total participation levels of our SilverSneakers members were significantly below historical levels.  Since 2020, participation levels have increased but remain below pre-pandemic levels, thus adversely impacting our revenues because a significant portion of revenues from our SilverSneakers program is based on member visits.  SilverSneakers in-person visits totaled 16.9 million and 11.2 million for three months ended March 31, 2022 and 2021, respectively. In addition, while the number of active subscribers for Prime Fitness declined from April through December 2020, as of March 31, 2022, the number of active subscribers had increased slightly since the beginning of 2021.  

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Forward-Looking Statements

This report contains forward-looking statements, 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. 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, revenues, financial condition, business strategies, and results of operations.  Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may vary from those in the forward-looking statements as a result of various factors, including, but not limited to:

• the risk that the proposed Merger may not be completed in a timely manner or at all, which may adversely affect our business and the price of our Common Stock;

• the failure to satisfy any of the conditions to the consummation of the proposed Merger, including the adoption of the Merger Agreement by our stockholders and the receipt of certain regulatory approvals;

• the occurrence of any event, change or other circumstance or condition that could give rise to the termination of the Merger Agreement, including in circumstances requiring us to pay a termination fee;

• the effect of the announcement or pendency of the proposed Merger on our business relationships, operating results and business generally;

• risks that the proposed Merger disrupts our current plans and operations;

• our ability to retain and hire key personnel in light of the proposed Merger;

• risks that the proposed Merger diverts management’s attention from our ongoing business operations;

• unexpected costs, charges or expenses resulting from the proposed Merger;

• the ability of Stone Point Capital to obtain the necessary financing arrangements set forth in the commitment letters received in connection with the Merger;

• potential litigation relating to the Merger that could be instituted against Stone Point Capital, the Company or their respective directors, managers or officers, including the effects of any outcomes related thereto;

• continued availability of capital and financing;

• certain restrictions during the pendency of the Merger that may impact our ability to pursue certain business opportunities or strategic transactions;

• impacts from the COVID-19 pandemic (including the response of governmental authorities to combat and contain the pandemic; the development, availability, distribution, and effectiveness of vaccines and treatments, and public confidence in such vaccines and treatments; the closure of fitness centers in our national network (or operational restrictions imposed on such fitness centers), reclosures, and potential additional reclosures or restrictions as a result of surges in positive COVID-19 cases) on our business, operations or liquidity;

• the risks associated with changes in macroeconomic conditions (including the impacts of any recession or changes in consumer spending resulting from the COVID-19 pandemic), widespread epidemics, pandemics (such as the current COVID-19 pandemic, including variant strains of COVID-19) or other outbreaks of disease, geopolitical turmoil, and the continuing threat of domestic or international terrorism;

• our ability to collect accounts receivable from our customers and amounts due under our sublease agreements;

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• the market’s acceptance of our new products and services;

• our ability to develop and implement effective strategies and to anticipate and respond to strategic changes, opportunities, and emerging trends in our industry and/or business, as well as to accurately forecast the related impact on our revenues and earnings;

• the impact of any impairment of our goodwill, intangible assets, or other long-term assets;

• changes in fair value of the Sharecare Equity Security and the expected timing and amount of cash proceeds from any potential disposition of this security;

• the expected timing, amount, and impact of any share repurchases made by the Company;

• our ability to attract, hire, or retain key personnel or other qualified employees and to control labor costs;

• our ability to effectively compete against other entities, whose financial, research, staff, and marketing resources may exceed our resources;

• the impact of legal proceedings involving us and/or our subsidiaries, products, or services, including any claims related to intellectual property rights, as well as our ability to maintain insurance coverage with respect to such legal proceedings and claims on terms that would be favorable to us;

• the impact of severe or adverse weather conditions, the current COVID-19 pandemic (including variant strains of COVID-19), and the potential emergence of additional health pandemics or infectious disease outbreaks on member participation in our programs;

• the risks associated with deriving a significant concentration of our revenues from a limited number of our customers, many of whom are health plans;

• our ability and/or the ability of our customers to enroll participants and to accurately forecast their level of enrollment and participation in our programs in a manner and within the timeframe we anticipate;

• our ability to sign, renew and/or maintain contracts with our customers and/or our fitness partner locations under existing terms or to restructure these contracts on terms that would not have a material negative impact on our results of operations;

• the ability of our health plan customers to maintain the number of covered lives enrolled in those health plans during the terms of our agreements;

• our ability to add and/or retain active subscribers in our Prime Fitness program;

• the impact of any changes in tax rates, enactment of new tax laws, revisions of tax regulations, or any claims or litigation with taxing authorities;

• the impact of a reduction in Medicare Advantage health plan reimbursement rates or changes in plan design;

• the impact of any new or proposed legislation, regulations and interpretations relating to Medicare, Medicare Advantage, Medicare Supplement and privacy and security laws;

• the impact of healthcare reform on our business;

• the risks associated with increased focus from investors and other stakeholders regarding ESG practices, which could result in additional costs, regulation, or risks and adversely impact our reputation, employee recruiting and retention, and willingness of customers and suppliers to do business with us;

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• the risks associated with potential failures of our information systems or those of our third-party vendors, including as a result of telecommuting issues associated with personnel working remotely, which may include a failure to execute on policies and processes in a work-from-home or remote model;

• 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, including those risks that result from the increase in personnel working remotely, which may result in unauthorized access by third parties, loss, misappropriation, disclosure or corruption of customer, employee or our information, or other data subject to privacy laws and may lead to a disruption in our business, costs to modify, enhance, or remediate our cybersecurity measures, enforcement actions, fines or litigation against us, or damage to our business reputation;

• the risks associated with changes to traditional office-centered business processes and/or conducting operations out of the office in a work-from-home or remote model by us or our third-party vendors during adverse situations (e.g., during a crisis, disaster, or pandemic), which may result in additional costs and/or may negatively impact productivity and cause other disruptions to our business;

• our ability to enforce our intellectual property rights;

• the risk that our indebtedness may limit our ability to adapt to changes in the economy or market conditions, expose us 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;

• our ability to service our debt, make principal and interest payments as those payments become due, and remain in compliance with our debt covenants;

• our ability to obtain adequate financing to provide the capital that may be necessary to support our current or future operations;

• counterparty risk associated with our interest rate swap agreements and changes in fair value of the de-designated swaps; and

• other risks detailed in this report and our other filings with the U.S. Securities and Exchange Commission (the “SEC”).

We undertake no obligation to update or revise any such forward-looking statements.

Business Strategy

Our strategy is to enable healthier, happier and more connected lives as a digital platform engagement company that not only provides in-person and virtual fitness, social engagement and mental enrichment opportunities, but also an insights-driven, personalized experience.  Our goal is to increase the number of eligible and enrolled SilverSneakers members and broaden engagement through strong health plan partnerships, a robust national network of approximately 23,000 fitness locations, live-with-instructor and on-demand virtual classes, and non-fitness activities that support social connection and lifelong learning. We will also focus on increasing the number of subscribers to Prime Fitness, targeting adults aged 18-64 who are members of sponsoring organizations, through our national network of approximately 12,500 participating locations and our daily live streaming classes. In addition, we plan to accelerate growth in our WholeHealth Living offering through market share expansion and improved technology.  

Critical Accounting Policies

We describe our significant accounting policies in Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (“2021 Form 10-K”).  We prepare the consolidated financial statements in conformity with generally accepted accounting principles in the United States

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(“U.S. GAAP”), which requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and related disclosures at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

We believe the following accounting policies are the most critical in understanding the estimates and judgments that are involved in preparing our financial statements and the uncertainties that could impact our results of operations, financial condition, and cash flows.  

Revenue Recognition

We account for revenue from contracts with customers in accordance with Accounting Standards Codification (“ASC”) Topic 606 “Revenue from Contracts with Customers” (“ASC Topic 606”).  The unit of account in ASC Topic 606 is a performance obligation, which is a promise in a contract to transfer to a customer either a distinct good or service (or bundle of goods or services) or a series of distinct goods or services provided over a period of time. ASC Topic 606 requires that a contract’s transaction price, which is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, is to be allocated to each performance obligation in the contract based on relative standalone selling prices and recognized as revenue when or as the performance obligation is satisfied.

We earn revenue from continuing operations primarily from three programs: SilverSneakers senior fitness, Prime Fitness and WholeHealth Living.  We provide the SilverSneakers senior fitness program to members of Medicare Advantage, Medicare Supplement, and group retiree plans through our contracts with those plans.  We offer Prime Fitness, a fitness facility access program, through contracts with commercial health plans, employers, and other sponsoring organizations that allow their members to individually purchase the program.  We sell our WholeHealth Living program primarily to health plans.

The significant majority of our customer contracts contain one performance obligation - to stand ready to provide access to our network of fitness locations and fitness programming - which is satisfied over time as services are rendered each month over the contract term.  Unsatisfied performance obligations at the end of a particular month primarily relate to certain monthly memberships for our Prime Fitness program, which are recorded as deferred revenue on the consolidated balance sheet and recognized as revenue during the immediately subsequent month. There was $0.1 million of revenue recognized during the three months ended March 31, 2022 from performance obligations satisfied in a prior period.

Our fees are variable month to month and are generally billed per member per month (“PMPM”) or billed based on a combination of PMPM and member visits to a network location.  We bill PMPM fees by multiplying the contractually negotiated PMPM rate by the number of members eligible for or receiving our services during the month.  We bill for member visits approximately one month in arrears once actual member visits are known.  Payments from customers are typically due within 30 days of invoice date.  When material, we capitalize costs to obtain contracts with customers and amortize them over the expected recovery period.  

Our customer contracts include variable consideration, which is allocated to each distinct month over the contract term based on eligible members and/or member visits each month.  The allocated consideration corresponds directly with the value to our customers of our services completed for the month.  Under the majority of our contracts, we recognize revenue each month using the practical expedient available under ASC 606-10-55-18, which provides that revenue is recognized in the amount for which we have the right to invoice.  ASC 606-10-50-14(b) provides an optional exemption, which we have elected to apply, from disclosing remaining performance obligations when revenue is recognized from the satisfaction of the performance obligation in accordance with the “right to invoice” practical expedient.

Although we evaluate our financial performance and make resource allocation decisions based upon the results of our single operating and reportable segment, we believe the following information depicts how our revenues and cash flows from continuing operations are affected by economic factors.  For the three months ended March 31, 2022, revenue from our SilverSneakers program, which is predominantly contracted with Medicare Advantage and Medicare Supplement plans, comprised 75% of revenues from continuing operations, while revenue from our Prime

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Fitness and WholeHealth Living programs comprised 20% and 5%, respectively, of revenues from continuing operations.

Sales and usage-based taxes are excluded from revenues.

Impairment of Intangible Assets and Goodwill

We review goodwill for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (during the fourth quarter of our fiscal year) or more frequently whenever events or circumstances indicate that the carrying value may not be recoverable.  We have a single reporting unit.

As part of the annual impairment test, we may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If we elect not to perform a qualitative assessment or we determine that it is more likely than not that the fair value of the reporting unit is less than its carrying value, we perform a quantitative review.  During the quantitative review, if the estimated fair value of the reporting unit exceeds its carrying amount, no impairment is indicated. If the estimated fair value of the reporting unit is less than its carrying amount, impairment of goodwill is measured as the excess of the carrying amount over fair value.

We review indefinite-lived intangible assets for impairment on an annual basis (during the fourth quarter of our fiscal year) or more frequently whenever events or circumstances indicate that the carrying value may not be recoverable. We estimate the fair value of our indefinite-lived tradename using the relief-from-royalty method, which requires us to estimate significant assumptions such as the long-term growth rates of future revenues associated with the tradename, the royalty rate for such revenue, the terminal growth rate of revenue, the tax rate, and a discount rate.  Changes in these estimates and assumptions could materially affect the estimates of fair value for the tradename.

Key Performance Indicators

In managing our business, we regularly review and analyze a number of key performance indicators (“KPIs”), including revenues, adjusted EBITDA (both in dollars and as a percentage of revenues), and free cash flow. Adjusted EBITDA and free cash flow are not calculated in accordance with U.S. GAAP (“non-GAAP”).  These KPIs help us monitor our performance, identify trends affecting our business, determine the allocation of resources, and assess the quality and potential variability of our cash flows and earnings.  We believe they are useful to investors in evaluating and understanding our business.

We have one reportable segment and therefore do not review and analyze revenues or adjusted EBITDA on a segment-level basis or as KPIs. Instead, we review and analyze revenues from continuing operations and adjusted EBITDA from continuing operations.  We updated our definition of adjusted EBITDA as follows: (i) during the first quarter of 2021 to exclude other (income) expense related to de-designated swaps; (ii) during the second quarter of 2021 to exclude loss on extinguishment and modification of debt; and (iii) during the third quarter of 2021 to exclude other (income) expense related to realized and unrealized gains and losses on our Sharecare Equity Security, as further described in Note 10 of the notes to consolidated financial statements included in this report.  We consider such items to be outside the performance of our ongoing core business operations and believe that presenting Adjusted EBITDA excluding these items provides increased transparency as to the operating costs of our current business performance. We did not revise the prior periods’ Adjusted EBITDA amounts because there were no costs similar in nature to these items.  

(In $000s)	Three Months Ended March 31,
	2022			2021
Revenues from continuing operations	$	127,513		$	108,085
Adjusted EBITDA from continuing operations		37,351			41,194
Adjusted EBITDA as a percentage of revenues from continuing operations		29.3	%		38.1	%

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• Revenues – we review year-over-year changes in revenue from continuing operations as a key measure of our success in growing our business.  In addition to measuring revenue in total, we also measure and report revenue by program type or source of revenue, as detailed in Note 4 of the notes to the consolidated financial statements included in this report, i.e., SilverSneakers, Prime Fitness, WholeHealth Living, and Other.  Evaluating revenue by program type or source helps us identify and address changes in product mix, broad market factors that may affect our revenues, and opportunities for future growth.

• Adjusted EBITDA is a non-GAAP measure and is defined by the Company as earnings before interest, taxes, depreciation and amortization, integration, project, and CEO transition costs and other (income) expense.  We believe adjusted EBITDA provides investors a helpful measure for comparing our operating performance with our historical operating results as well as the performance of other companies that may have different financing and capital structures or tax rates. We believe it is a useful indicator of the operational strength and performance of our business.  Because adjusted EBITDA may be defined differently by other companies in our industry, the financial measure presented herein may not be comparable to similarly titled measures of other companies.  A reconciliation of adjusted EBITDA to income from continuing operations (the most comparable U.S. GAAP measure) is set forth below.

	Three Months Ended March 31,
(In thousands)	2022		2021
Income from continuing operations, GAAP basis	$	644	$	19,944
Income tax expense		8,086		7,620
Interest expense		6,993		10,756
Depreciation expense		3,206		2,683
EBITDA from continuing operations, non-GAAP basis (1)	$	18,929	$	41,003
Integration, project and CEO transition costs (2)		1,737		1,321
Other (income) expense (3)		16,685		(1,130	)
Adjusted EBITDA from continuing operations, non-GAAP basis (4)	$	37,351	$	41,194

(1) EBITDA from continuing operations is a non-GAAP financial measure.  We believe it is useful to investors to provide disclosures of our operating results and guidance on the same basis as that used by management.  You should not consider EBITDA from continuing operations in isolation or as a substitute for income from continuing operations determined in accordance with U.S. GAAP.

(2) Integration, project, and CEO transition costs consist of pre-tax charges of $1,737 and $1,321 for the three months ended March 31, 2022 and 2021, respectively, primarily incurred in connection with strategic projects (including the proposed Merger) and with the termination of our former CEO in February 2020 and the hiring of our new CEO in June 2020.

(3) Other (income) expense consists of pre-tax expense of $16,685 and pre-tax income of ($1,130) for the three months ended March 31, 2022 and 2021, respectively, related to (i) unrealized losses on the Sharecare Equity Security during the first quarter of 2022, as further described in Note 10 of the notes to consolidated financial statements included in this report, and (ii) unrealized gains on de-designated swaps, as further described in Note 12 of the notes to consolidated financial statements included in this report.

(4) Adjusted EBITDA from continuing operations is a non-GAAP financial measure.  We exclude integration, project, and CEO transition costs, and other (income) expense from this measure because of its comparability to our historical operating results.  We believe it is useful to investors to provide disclosures of our operating results 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 U.S. GAAP.  Additionally, because Adjusted EBITDA from continuing operations may be defined differently by other companies in the Company’s industry, the non-GAAP financial measure presented here may not be comparable to similarly titled measures of other companies.

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• Free cash flow is a non-GAAP measure and is defined by the Company as net cash flows provided by operating activities less acquisition of property and equipment and settlement on derivatives not designated as hedges.  We believe free cash flow is useful to management and investors to measure (i) our performance, (ii) the strength of the Company and its ability to generate cash, and (iii) the amount of cash that is available to repay debt or make other investments.  A reconciliation of free cash flow to cash flows from operating activities (the most comparable GAAP measure) is set forth below.

(In thousands)	Three Months Ended March 31,
	2022			2021
Net cash flows provided by operating activities	$	37,015		$	22,618
Acquisition of property and equipment		(2,715	)		(1,561	)
Settlement on derivatives not designated as hedges		(1,390	)		(1,633	)
Free cash flow	$	32,910		$	19,424

Outlook

Although there is significant uncertainty relating to the potential impacts of the ongoing COVID-19 pandemic on our business going forward, including the impact on member participation in our SilverSneakers programs, our ability to continue to attract paying subscribers for our Prime Fitness program, and the ultimate medium- and long-term impact of the pandemic on the global economy, we expect our results from continuing operations for the short term to continue to be adversely impacted by COVID-19 compared to pre-pandemic periods.

Executive Overview of Results

The key financial results for the three months ended March 31, 2022 are:

• Revenues from continuing operations of $127.5 million for the three months ended March 31, 2022 compared to $108.1 million for the three months ended March 31, 2021.

• Pre-tax income from continuing operations of $8.7 million for the three months ended March 31, 2022 compared to $27.6 million for the three months ended March 31, 2021.  Pre-tax income for the three months ended March 31, 2022 includes:

o $22.4 million of unrealized losses related to our equity ownership in Sharecare, compared to $0 for the same period in 2021;

o $7.0 million of interest expense compared to $10.8 million for the same period in 2021;

o $5.7 million of unrealized gains related to de-designated swaps, compared to $1.1 million for the same period in 2021;

o $2.8 million of marketing expenses compared to $1.2 million for the same period in 2021; and

o $1.7 million of integration, project, and CEO transition costs compared to $1.3 million for the same period in 2021.

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Results of Operations

The following table sets forth the components of the consolidated statements of operations for the three months ended March 31, 2022 and 2021 expressed as a percentage of revenues from continuing operations.

	Three Months Ended March 31,
	2022			2021
Revenues		100.0	%		100.0	%
Cost of revenue (exclusive of depreciation included below)		61.5	%		53.0	%
Marketing expenses		2.2	%		1.1	%
Selling, general and administrative expenses		8.4	%		9.0	%
Depreciation expense		2.5	%		2.5	%
Operating income (1)		25.4	%		34.4	%
Interest expense		5.5	%		10.0	%
Other (income) expense, net		13.1	%		(1.0	)%
Total non-operating (income) expense, net (1)		18.6	%		8.9	%
Income before income taxes (1)		6.8	%		25.5	%
Income tax expense		6.3	%		7.1	%
Income from continuing operations (1)		0.5	%		18.5	%

(1) Figures may not add due to rounding.

Revenues

Revenues from continuing operations were $127.5 million for the first quarter of 2022 compared to $108.1 million for the same period in 2021, an increase of $19.4 million, primarily as a result of a net increase in SilverSneakers revenue of $16.3 million driven by an increase in revenue-generating visits as the effects of the COVID-19 pandemic lessened compared to the prior year period.  For the first quarter of 2021, the average monthly total participation levels of our SilverSneakers members were significantly below historical levels.  As a result, revenues from PMPM fees represented 53% of SilverSneakers revenue for the three months ended March 31, 2021, compared to 41% for the same period in 2022.  In addition, revenue from Prime Fitness increased by $2.4 million due to an increase in active subscribers during the first quarter of 2022 compared to the same period in 2021.  

Cost of Revenue

Cost of revenue from continuing operations (excluding depreciation) (“cost of revenue”) as a percentage of revenues increased from the three months ended March 31, 2021 (53.0%) to the three months ended March 31, 2022 (61.5%), primarily due to an increase in participation levels, which led to higher visit costs as a percentage of revenues, particularly revenues from PMPM fees.

Marketing Expenses

Marketing expenses from continuing operations as a percentage of revenues increased from the three months ended March 31, 2021 (1.1%) to the three months ended March 31, 2022 (2.2%) primarily driven by decreased spending in the first quarter of 2021 due to the COVID-19 pandemic.  

Selling, General and Administrative Expenses

Selling, general and administrative expenses from continuing operations as a percentage of revenues decreased from the three months ended March 31, 2021 (9.0%) to the three months ended March 31, 2022 (8.4%) primarily due to (i) a decrease in share-based compensation expense primarily driven by (a) lower CEO transition-related expenses associated with the termination of our former CEO in February 2020 and the hiring of a new CEO in June 2020, and (b) lower expense related to certain incremental long-term incentive awards granted in 2020 that

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vested in 2021.  This decrease was mostly offset by an increase in legal and other professional expenses, including expenses related to the proposed Merger described in Note 16 of the notes to the consolidated financial statements.  

Depreciation Expense

Depreciation expense from continuing operations increased by $0.5 million for the three months ended March 31, 2022 compared to the same period in 2021, primarily due to an increase in the amount of depreciable computer software.

Interest Expense

Interest expense from continuing operations decreased by $3.8 million for the three months ended March 31, 2022 compared to the same period in 2021, primarily driven by (i) a decrease in cash interest due to a lower average level of outstanding borrowings in 2022 compared to 2021 as well as a reduction in the LIBOR margin for Term B Loans under the Credit Agreement compared to the Prior Credit Agreement and (ii) a decrease in non-cash interest related to accelerated amortization of original issue discount and deferred loan costs that occurred in the first quarter of 2021 due to voluntary prepayments at such time.

Other (Income) Expense, Net

Other (income) expense, net was $16.7 million for the first quarter of 2022 compared to ($1.1) million for the same period in 2021 due to (i) unrealized losses on the Sharecare Equity Security totaling $22.4 million in the first quarter of 2022, as further described in Note 10 of the notes to the consolidated financial statements included in this report, and (ii) changes in fair value of the de-designated swaps.  The unrealized losses on the Sharecare Equity Security of $22.4 million decreased earnings per diluted share by $0.44 during the three months ended March 31, 2022.

Income Tax Expense

See Note 6 of the notes to consolidated financial statements in this report for a discussion of income tax expense from continuing operations.

Liquidity and Capital Resources

Overview

As of March 31, 2022, outstanding debt under the Credit Agreement was $380.0 million, which represented $393.0 million of principal on the Term Loan B less deferred loan costs and original issue discount, and we had $92.1 million of cash and cash equivalents. In addition, we had working capital of $113.9 million, including the Sharecare Equity Security of $27.4 million, which is subject to restrictions on resale as further described in Note 10 of the notes to consolidated financial statements included in this report.  

Sources of Liquidity

Our sources of liquidity primarily include cash on hand, cash flows from operations, and available credit under the Credit Agreement.  As of March 31, 2022, availability under the Revolving Credit Facility totaled $99.5 million as calculated under the most restrictive covenant.  We believe we have sufficient liquidity to fund our operations and meet our short-term and long-term obligations.

Cash Flows Provided by Operating Activities

Operating activities during the three months ended March 31, 2022 provided cash of $37.0 million compared to $22.6 million during the three months ended March 31, 2021. The increase is primarily due to increased cash collections from accounts receivable, partially offset by higher payments related to visit costs and reduced cash receipts from tax refunds.

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Cash Flows Used in Investing Activities

Investing activities during the three months ended March 31, 2022 used $4.1 million in cash, compared to $3.2 million during the three months ended March 31, 2021. This change is primarily due to increased capital expenditures during the first quarter of 2022.

Cash Flows Used in Financing Activities

Financing activities during the three months ended March 31, 2022 used $1.0 million of cash, compared to $67.4 million during the three months ended March 31, 2021.  This change is primarily due to voluntary prepayments under the Credit Agreement of $1.0 million during the first quarter of 2022, compared to $63.6 million under the Prior Credit Agreement for the same period in 2021.

Material Cash Requirements

Our material cash requirements from known contractual and other obligations primarily relate to our debt and lease obligations.  We generally do not have binding and enforceable purchase orders beyond the short term.  In September 2021, our board of directors authorized the repurchase of up to $100 million of our Common Stock, with no expiration date. We are not obligated to repurchase any specific number of shares, and the timing and actual number of shares repurchased will depend on a variety of factors, including our stock price, general economic, business and market conditions, and alternative investment opportunities. The repurchase program may be modified or terminated by the Company’s board of directors at any time.

We are required to repay the outstanding principal of $393.0 million under our Term Loan B in quarterly installments of $1.0 million, payable on the last day of each quarter until maturity on June 30, 2028, at which time the entire outstanding principal balance is due and payable in full.  As a result of prepayments made in 2021 and 2022, our next quarterly installment of $1.0 million is due in June 2023. We maintain eight amortizing interest rate swap agreements maturing in May 2024, of which three qualify for hedge accounting treatment and five are de-designated swaps. Based on our outstanding borrowings under the Credit Agreement and the applicable interest rates as of March 31, 2022, we estimate that our total interest commitments are $125.5 million, with $24.2 million expected within the next twelve months.  In addition, based on the applicable interest rates as of March 31, 2022, we estimate that our total cash settlement obligations for the de-designated swaps are $7.7 million, with $4.4 million expected during the next twelve months.  Actual future payments may differ from estimates.  Refer to Notes 8 and 12 of the notes to the consolidated financial statements for further details on debt and interest rate swaps. Based on our current assumptions with respect to the COVID-19 pandemic, as well as geopolitical and macroeconomic conditions, including, among other things, the outstanding principal on the term loan under our Credit Agreement and the anticipated average monthly total participation levels of our members at our fitness partner locations, we currently believe we will be in compliance with the covenants under the Credit Agreement over the next 12 months.

Additionally, we have operating and financing leases for office space, equipment, and a network server. Our two operating leases have remaining lease terms of eleven months and 30 months, and our two financing leases have remaining lease terms of less than one year. We maintain two sublease agreements with respect to one of our office locations, each of which continues through the initial term of our master agreement. At March 31, 2022, total future operating and finance lease payments are expected to be $9.6 million and $0.2 million, respectively. For the next twelve months, operating and finance lease payments are expected to be $7.4 million and $0.2 million, respectively. The majority of future operating lease payments, including those due within the next twelve months, are expected to be offset by cash receipts from sublease contracts. Refer to Note 7 of the notes to the consolidated financial statements for further details. During 2022, we are required to pay $0.5 million per month to a vendor as a deposit to be applied against our actual fees incurred during 2022 and beyond.  Any unused portion of the deposit will be refunded at the end of the contract term.

While there is significant uncertainty as to general economic and market conditions for 2022 and beyond, including but not limited to impacts from the COVID-19 pandemic, geopolitical turmoil, and macroeconomic conditions, as of the date of issuance of this report, we believe our cash on hand, expected cash flows from operations, and anticipated available credit under the Credit Agreement will be sufficient to fund our operations, principal and interest payments, and capital expenditures for the next 12 months.  We cannot assure you that we

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will be able to secure additional financing if needed and, if such funds are available, whether the terms or conditions will be favorable to us.  Due to the aforementioned uncertainty, our ability to engage in financing transactions may be constrained by (i) volatile or tight economic, capital, credit and/or financial market conditions, (ii) moderated investor and/or lender interest or capacity, (iii) restrictions under our Credit Agreement, and/or (iv) our liquidity, leverage and net worth, and we can provide no assurance as to successfully completing, the costs of, or the operational limitations arising from, any one or series of such transactions.

Recent Relevant Accounting Standards

See Note 2 of the notes to consolidated financial statements included in this report for discussion of recent relevant accounting standards.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We are subject to market risk related to interest rate changes, primarily as a result of the Credit Agreement and certain interest rate swap agreements that, effective October 2020, no longer qualify for hedge accounting treatment (see further discussion below).

Borrowings under the Credit Agreement bear interest at variable rates based on a margin or spread in excess of either (1) one-month, three-month or six-month LIBOR (or, if available to all lenders holding the particular class of loans, 12-month LIBOR), which may not be less than 0.00%, or (2) the greatest of (a) the prime lending rate of the agent bank for the particular facility, (b) the federal funds rate plus 0.50%, and (c) one-month LIBOR plus 1.00% (the “Base Rate”), as selected by the Company. The Base Rate may not be less than 1.00%. The LIBOR margin for Term Loan B loans is 4.25% and the LIBOR margin for revolving loans varies between 4.25% and 3.75% depending on our First Lien Net Leverage Ratio (as defined in the Credit Agreement). The Base Rate margin for Term Loan B loans is 3.25%, and the Base Rate margin for revolving loans varies between 3.25% and 2.75%, depending on our First Lien Net Leverage Ratio.

Effective May 31, 2019, we maintain eight amortizing interest rate swap agreements with current notional amounts totaling $600.0 million, through which we receive a variable rate of interest based on LIBOR, and we pay a fixed rate of interest equal to approximately 2.2%. At March 31, 2022, five of these interest rate swap agreements, with current notional amounts totaling $266.7 million, do not qualify for hedge accounting treatment. The Credit Agreement and each of the interest rate swap agreements contain a zero percent “floor” with respect to LIBOR (i.e., if the LIBOR rate is negative it will be deemed to be zero). Our exposure to interest rate risk is capped by such floor. During the three months ended March 31, 2022, the actual LIBOR rates under these agreements ranged between 0.10% and 0.21%. For the three months ended March 31, 2022, a hypothetical 100-basis point decrease in LIBOR, subject to a zero percent floor, would have decreased our net cash flows by less than $0.1 million, which reflects increased payments on our interest rate swaps (for which we pay a fixed interest rate of approximately 2.2% and receive a variable interest rate based on LIBOR), partially offset by lower interest payments on variable rate debt outstanding under the Credit Agreement.

Market Price Risk

We are exposed to equity price risk on our Sharecare Equity Security. Beginning in July 2021, changes in the fair value of our Sharecare Equity Security are included in other (income) expense, net in the consolidated statements of operations. For the three months ended March 31, 2022, we recorded $22.4 million of net unrealized losses on equity securities in other (income) expense, net.  A hypothetical one-dollar change in the closing stock price of Sharecare’s common stock on March 31, 2022 would have impacted other (income) expense, net by $11.1 million.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company's principal executive officer and principal financial officer have reviewed and evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of March 31, 2022.  Based on that evaluation, the principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures are effective as of March 31, 2022.  They are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms and to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company's internal controls over financial reporting during the three months ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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Part II Other Information

Item 1. Legal Proceedings

See Note 9 of the notes to consolidated financial statements included in this report for discussion of recent legal proceedings.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risks and uncertainties previously reported under the caption Part I, Item 1A. “Risk Factors” in the 2021 Form 10-K, the occurrence of which could materially and adversely affect our business, prospects, financial condition and operating results. The risks previously reported and described in the 2021 Form 10-K and in this report do not describe all risks applicable to us and are intended only as a summary of certain material factors that could impact our operations in the industry in which we operate. Except for the additional risk factors as described below, there have been no material changes from the risk factors disclosed in Part 1, Item 1A. Risk Factors, of the 2021 Form 10-K.

Risks Relating to the Proposed Merger

The consummation of the Merger is subject to approval of our stockholders as well as the satisfaction of other closing conditions, some or all of which may not be satisfied or waived in a timely manner or at all.

In April 2022, we entered into the Merger Agreement with Parent and Merger Sub. Consummation of the Merger is subject to customary closing conditions, including, but not limited to, (i) the Company’s stockholders’ approval of the Merger Agreement (the “Company Stockholder Approval”), (ii) the expiration or termination of any applicable waiting period (or any extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) the absence of any restraint or law preventing or prohibiting the consummation of the Merger, (iv) the accuracy of Parent’s, Merger Sub’s, and the Company’s representations and warranties (subject to certain materiality qualifiers), (v) Parent’s, Merger Sub’s and the Company’s compliance in all material respects with their respective obligations under the Merger Agreement, and (vi) the absence of any Company Material Adverse Effect (as defined in the Merger Agreement) since the date of the Merger Agreement.

In addition, while the Merger is not subject to a financing condition, Parent will need to obtain debt financing in order to satisfy its payment obligations and pay other costs and expenses related to the Merger. In connection with the execution of the Merger Agreement, Parent has obtained a debt commitment letter from a group of lenders for debt financing in an aggregate principal amount of up to $1.2 billion, on the terms and subject to the conditions set forth in the debt commitment letter.

We intend to pursue the satisfaction or waiver, as applicable, of each condition to the consummation of the Merger, including the receipt of the Company Stockholder Approval. However, no assurance can be given that such conditions to the consummation of the Merger will be satisfied or waived in a timely manner, or at all. We also cannot provide any assurance regarding whether the Company will have to comply with any terms or conditions imposed by third parties in order to satisfy or waive the conditions to the consummation of the Merger. Similarly, we cannot provide any assurance that Parent will be able to satisfy the conditions set forth in its debt commitment letter or otherwise procure sufficient financing to comply with its obligation to consummate the Merger. Many of the conditions to the consummation of the Merger are not within our control, and we cannot predict if or when these conditions will be satisfied or waived.

The failure to satisfy or obtain waiver of conditions to the consummation of the Merger in a timely manner could delay the consummation of the Merger and exacerbate the risks and uncertainties associated with the announcement and pendency of the Merger, which are discussed below under the headings “The announcement of the Merger Agreement and pendency of the Merger could negatively impact our business, financial condition and results of operations” and “While the Merger remains pending, we will be required to comply with various interim operating covenants that may constrain our business operations and to take certain actions that may divert our management’s focus from our ongoing business.”

In addition, if all of the conditions to the consummation of the Merger are not satisfied or waived, we may be unable

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to consummate the Merger at all. The risks and uncertainties associated with a failure to consummate the Merger are discussed below under the heading “Failure to consummate the Merger could adversely affect our stock price, business, financial condition and results of operations.”

Future litigation challenging the Merger could prevent the Merger from occurring or adversely affect our business, financial condition or results of operations.

In connection with the announcement of the Merger Agreement, as is common in the context of mergers and acquisitions of publicly-traded companies, the Company (along with our directors and officers) may attract lawsuits seeking to enjoin us from proceeding with or consummating the Merger, or seeking to have the Merger rescinded after its consummation. One of the conditions to the consummation of the Merger is the absence of any restraint preventing or prohibiting the consummation of the Merger. If any future plaintiffs are successful in obtaining an injunction or other order prohibiting the Merger, we may be unable to consummate the Merger. The risks and uncertainties associated with a failure to consummate the Merger are discussed below under the heading “Failure to consummate the Merger could adversely affect our stock price, business, financial condition and results of operations.”

In addition, responding to any litigation targeting the Merger, even those without merit, will cause us to incur legal costs and expenses, which may negatively impact our financial condition. Responding to lawsuits may also divert the time and attention of our management away from our ongoing business operations and adversely affect our business and results of operations.

No lawsuits challenging the Merger have been filed as of May 5, 2022.

Failure to consummate the Merger could adversely affect our stock price, business, financial condition and results of operations.

As noted above, the various conditions to the consummation of the Merger may not be satisfied or waived in a timely manner, or at all. Some of these conditions are not within our control. We cannot provide assurance that any of the conditions to the consummation of the Merger will be satisfied or waived. Pursuant to the Merger Agreement, the Merger will not be consummated until all of the conditions are satisfied or waived.

In addition, either the Company or Parent may terminate the Merger Agreement in certain circumstances, including if (i) the Merger has not been consummated on or prior to 12:01 a.m. (New York City time) on October 5, 2022 (the “Outside Date”), (ii) a governmental authority of competent jurisdiction has issued a final non-appealable order prohibiting the consummation of the Merger, (iii) the Company Stockholder Approval is not obtained at the stockholders’ meeting duly convened therefor, or (iv) the other party materially breaches, and does not cure, any representation or covenant that would cause the related condition to the other party’s obligation to consummate the Merger not to be satisfied, in each case subject to certain limitations set forth in the Merger Agreement. The terms and conditions, and other circumstances under which the Merger Agreement may be terminated in accordance with its terms are described in more detail in the Merger Agreement, which is attached as Exhibit 2.1 to the Current Report on Form 8-K we filed with the SEC on April 6, 2022.

If the Merger is not consummated for any reason, holders of our common stock will not receive the Transaction Consideration for their shares in connection with the Merger. Instead, our Common Stock will continue to be listed and traded on The Nasdaq Stock Market LLC and registered under the Exchange Act, and we will continue to file periodic reports with the SEC on account of our Common Stock. In addition, we would be subject to a number of risks and uncertainties, including but not limited to:

• the completion of the Merger on the anticipated terms and timing, including obtaining required stockholder and regulatory approvals, and the satisfaction of other conditions to the completion of the Merger;

• the ability of Stone Point Capital to obtain the necessary financing arrangements set forth in the commitment letters received in connection with the Merger;

• potential litigation relating to the Merger that could be instituted against Stone Point Capital, the Company or their respective directors, managers or officers, including the effects of any outcomes related thereto;

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• the risk that disruptions from the Merger will harm the Company’s business, including current plans and operations;

• the ability of the Company to retain and hire key personnel;

• potential adverse reactions or changes to business relationships resulting from the announcement or completion of the Merger;

• continued availability of capital and financing;

• legislative, regulatory and economic developments;

• potential business uncertainty, including changes to existing business relationships, during the pendency of the Merger that could affect the Company’s financial performance;

• certain restrictions during the pendency of the Merger that may impact the Company’s ability to pursue certain business opportunities or strategic transactions;

• unpredictability and severity of catastrophic events, including but not limited to acts of terrorism, outbreaks of war or hostilities or the COVID-19 pandemic, as well as management’s response to any of the aforementioned factors;

• the possibility that the Merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events; and

• the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger, including in circumstances requiring the Company to pay a termination fee.

If the Merger is not consummated, the risk and uncertainties described above may materialize and adversely affect our business, financial condition or results of operations.

If the Merger Agreement is terminated, under certain conditions, we may be obligated to pay Parent a substantial termination fee, which could require us to incur additional debt or reduce the amount of cash we have available to fund our operations.

Under the Merger Agreement, the Company may terminate the Merger Agreement if, prior to receipt of the Company Stockholder Approval, the Company’s board of directors authorizes the Company to enter into an acquisition agreement providing for a Company Superior Proposal (as defined in the Merger Agreement) and, concurrently with such termination, the Company pays a termination fee of approximately $54.4 million (the “Company Termination Fee”) to Parent.

Further, Parent may terminate the Merger Agreement, and receive the Company Termination Fee from the Company, if the Company’s board of directors has made a Company Adverse Recommendation Change (as defined in the Merger Agreement), which termination right expires upon the Company Stockholder Approval having been obtained.

The Company will also be required to pay the Company Termination Fee if (A) a third party publicly discloses a Company Takeover Proposal (as defined in the Merger Agreement) after the date of the Merger Agreement and such Company Takeover Proposal is not withdrawn prior to a termination of the Merger Agreement, and thereafter the Merger Agreement is terminated by (i) either the Company or Parent as a result of the Merger not having been consummated on or prior to the Outside Date, (ii) Parent as a result of a material breach by the Company of any representation or covenant which breach is not cured and would result in a failure of certain conditions to closing to not be satisfied, subject to certain limitations set forth in the Merger Agreement or (iii) Parent or the Company as a result of the Company failing to obtain Company Stockholder Approval; and (B) at any time within the 12 months following such termination, the Company enters into a definitive agreement involving a Company Superior Proposal that is subsequently consummated (whether within such 12-month period or thereafter).

If we are required to pay the Company Termination Fee, we may be required to incur additional debt or use funds that we would otherwise have been able to use for general corporate expenses, capital expenditures or for other purposes.

The announcement of the Merger Agreement and pendency of the Merger could negatively impact our business, financial condition and results of operations.

Our business could experience material disruptions due to the announcement of our entry into the Merger

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Agreement and during the pendency of the Merger. Our current and prospective employees, including certain key personnel, may experience uncertainty regarding their future roles with the Company or desire different employment in anticipation of the consummation of the Merger. As a result, we may not be able to retain such employees, find adequate replacements for any employees we are unable to retain, or otherwise recruit new employees to join the Company. The uncertainty caused by the pendency of the Merger could also negatively impact our employees’ performance. If the announcement or pendency of the Merger causes us to lose and be unable to replace our employees, impairs our ability to attract new employees, or negatively affects the performance of our employees, our business, financial condition and results of operations could suffer.

In addition, third parties, including our lenders, vendors and customers, may experience uncertainty regarding our business relationships due to the announcement of our entry into the Merger Agreement and during the pendency of the Merger. As a result, such third parties may seek to terminate or renegotiate our existing business relationships in connection with the potential Merger. Such disruptions to our business relationships could negatively impact our business, financial condition and results of operations.

The announcement of the Merger Agreement may also cause regulators to apply additional scrutiny to our business, potentially increasing our regulatory burden, including costs of compliance. If we are required to expend additional employee time or other resources to address such additional scrutiny or increased regulatory burden, our business, financial condition and results of operations could be negatively impacted.

While the Merger remains pending, we will be required to comply with various interim operating covenants that may constrain our business operations and to take certain actions that may divert our management’s focus from our ongoing business.

Pursuant to the Merger Agreement, during the period between April 5, 2022 and the earlier to occur of (i) the consummation of the Merger or (i) the termination of the Merger Agreement (the “Interim Operating Period”), we agreed to use our commercially reasonable efforts to conduct our business in the ordinary course and to not engage in specified types of transactions during this period, subject to certain terms, limitations and exceptions. In particular, among other things, we agreed to refrain from taking certain actions without Parent’s consent, including (i) making acquisitions and capital expenditures above certain thresholds, (ii) incurring indebtedness above a certain threshold, (iii) granting equity awards other than as specified in the Merger Agreement, (iv) entering into, amending or terminating certain material contracts, and (v) declaring or paying dividends to stockholders, in each case subject to the terms, limitations and exceptions set forth in the Merger Agreement. Complying with these obligations could limit our ability to operate our business as previously conducted, to pursue strategic transactions, or to otherwise exploit business opportunities as they arise. Our management will be primarily responsible for ensuring that the Company complies with such obligations during the Interim Operating Period, and this additional responsibility may divert the focus of our management away from our ongoing business operations.

In addition, our management will also need to take certain other actions during the Interim Operating Period in connection with the proposed Merger, including, among other things, convening a meeting of our stockholders for the purpose of considering and voting on the Merger, filing a proxy statement, in both preliminary and definitive form, in connection with our solicitation of proxies from our stockholders for such meeting, using reasonable best efforts to obtain all necessary consents and approvals required in connection with the Merger and to satisfy the other conditions to the consummation of the Merger, addressing any litigation brought against the Company in connection with the Merger, and responding to questions we may receive from our stockholders, employees, vendors and other interested stakeholders regarding the Merger. Taking these actions could require our management to expend time and resources, reducing the time and resources our management could otherwise direct towards our ongoing business operations. If our management is unable to expend the necessary time and resources on our business, our results of operations could be negatively impacted.

The Merger Agreement contains provisions that could make it difficult for a third party to make a superior acquisition proposal.

The Merger Agreement contains certain customary restrictions on our ability to solicit proposals from third parties for an acquisition of the Company during the Interim Operating Period. In addition, subject to certain customary “fiduciary out” exceptions, the Company’s board of directors is required to recommend that our stockholders vote in

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favor of the approval of the Merger, the Merger Agreement and the transactions contemplated thereby.

As discussed in further detail above under the heading “If the Merger Agreement is terminated, under certain conditions, we may be obligated to pay Parent a substantial termination fee, which could require us to incur additional debt or reduce the amount of cash we have available to fund our operations,” we would also be required to pay Parent the Company Termination Fee under certain conditions in connection with the termination of the Merger Agreement.

These provisions might discourage an otherwise-interested third party from considering or proposing an acquisition of the Company, including proposals that may be deemed to offer greater value to our stockholders than the Transaction Consideration of $32.50 per share. Furthermore, even if a third party elects to propose an acquisition, the requirement that we must pay a termination fee to accept any such proposal may cause that third party to offer a lower price to our stockholders than such third party might otherwise have offered.

Actions of activist shareholders or other parties may impair our ability to consummate the Merger or otherwise negatively impact our business.

Actions taken by activist shareholders could impair our ability to satisfy conditions to the consummation of the Merger, including receiving the Company Stockholder Approval, or otherwise preclude us from consummating the Merger. Activist shareholders could also take actions that disrupt our business, divert the time and attention of management and our employees away from our business operations, cause us to incur substantial additional expense, create perceived uncertainties among current and potential customers, clients, suppliers, employees and other constituencies as to our future direction as a consequence thereof, which may result in lost sales or other business arrangements and the loss of potential business opportunities, and make it more difficult to attract and retain qualified personnel and business partners.

Actions that our board of directors may take in response to any actions by activist stockholders may result in litigation against us, which could also be a significant distraction for our management and employees and may require us to incur significant costs or otherwise result in an adverse effect on the Company. In addition, actual or perceived actions of activist stockholders may cause significant fluctuations in the trading price of our common stock that do not necessarily reflect the underlying fundamentals and prospects of our business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

No stock repurchases were made during the three months ended March 31, 2022.

ISSUER PURCHASES OF EQUITY SECURITIES
Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
1/1/2022 - 1/31/2022		—	$	—		—	$	99,248,662
2/1/2022 - 2/28/2022		—		—		—		99,248,662
3/1/2022 - 3/31/2022		—		—		—		99,248,662
Total		—	$	—		—

(1) On September 27, 2021, we announced that our board of directors authorized a $100 million share repurchase program. The program authorizes repurchases from time to time using a variety of methods, including pursuant to a Rule 10b5-1 plan, open market purchases, block trades and privately negotiated transactions, all in compliance with the rules of the United States Securities and Exchange Commission and other applicable legal requirements. The timing and number of shares repurchased is determined by the board of directors based on an ongoing assessment of the capital needs of the business, the market price of the Company’s stock, general business and market conditions, and alternative investment

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opportunities. The repurchase program may be modified or terminated by the Company’s board of directors at any time and does not have an expiration date.

Item 6. Exhibits

(a) Exhibits

2.1	Agreement and Plan of Merger, dated as of April 5, 2022, by and among Tivity Health, Inc., Titan-Atlas Parent, Inc. and Titan-Atlas Merger Sub, Inc. [incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated April 6, 2022, File No. 000-19364]
10.1	Special Incentive Bonus Award Agreement, dated February 11, 2022, by and between Tivity Health, Inc. and Richard Ashworth [incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated February 11, 2022, File No. 000-19364]
31.1	Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 made by Richard Ashworth, Chief Executive Officer*
31.2	Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 made by Adam Holland, Chief Financial Officer*
32	Certification pursuant to 18 U.S.C section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 made by Richard Ashworth, Chief Executive Officer, and Adam Holland, Chief Financial Officer*
101	The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline XBRL: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statement of Changes in Stockholders' Equity (Deficit); (v) Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements
104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline XBRL (included in Exhibit 101 hereto)
*	Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

			Tivity Health, Inc.
			(Registrant)
Date:	May 5, 2022	By	/s/ Adam C. Holland
			Chief Financial Officer
			(Principal Financial Officer)

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Richard M. Ashworth, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Tivity Health, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:    May 5, 2022

/s/ Richard M. Ashworth

Richard M. Ashworth

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Adam C. Holland, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Tivity Health, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:    May 5, 2022

/s/ Adam C. Holland

Adam C. Holland

Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Tivity Health, Inc. (the "Company") on Form 10-Q for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Richard M. Ashworth, Chief Executive Officer of the Company, and Adam C. Holland, Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Richard M. Ashworth

Richard M. Ashworth

Chief Executive Officer

May 5, 2022

/s/ Adam C. Holland

Adam C. Holland

Chief Financial Officer

May 5, 2022

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2022	Apr. 29, 2022
Cover [Abstract]
Entity Registrant Name	TIVITY HEALTH, INC.
Entity Central Index Key	0000704415
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Entity Shell Company	false
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q1
Trading Symbol	TVTY
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2022
Entity Common Stock, Shares Outstanding		49,878,312
Entity File Number	000-19364
Entity Tax Identification Number	62-1117144
Entity Address, Address Line One	701 Cool Springs Boulevard
Entity Address, City or Town	Franklin
Entity Address, State or Province	TN
Entity Address, Postal Zip Code	37067
City Area Code	800
Local Phone Number	869-5311
Entity Interactive Data Current	Yes
Title of 12(b) Security	Common Stock - $.001 par value
Security Exchange Name	NASDAQ
Document Quarterly Report	true
Document Transition Report	false
Entity Incorporation, State or Country Code	DE

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CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 92,076	$ 60,132
Accounts receivable	58,011	62,730
Prepaid expenses	5,420	6,465
Income taxes receivable		3,095
Investment in equity securities	27,366	49,746
Other current assets	8,308	13,733
Total current assets	191,181	195,901
Property and equipment, net of accumulated depreciation of $47,280 and $44,229, respectively	25,721	25,247
Right-of-use assets	8,811	10,695
Intangible assets, net	29,049	29,049
Goodwill, net	334,680	334,680
Other assets	5,723	2,969
Total assets	595,165	598,541
Current liabilities:
Accounts payable	25,376	25,325
Accrued salaries and benefits	4,065	11,825
Accrued liabilities	31,624	28,270
Deferred revenue	3,201	3,371
Income taxes payable	2,774
Current portion of lease liabilities	7,388	8,007
Current portion of other long-term liabilities	2,832	10,625
Total current liabilities	77,260	87,423
Long-term debt	379,960	380,504
Long-term lease liabilities	2,072	3,487
Long-term deferred tax liability	7,789	3,183
Other long-term liabilities	137	5,037
Commitments and contingent liabilities
Stockholders' equity:
Preferred stock $.001 par value, 5,000,000 shares authorized, none outstanding
Common Stock $.001 par value, 120,000,000 shares authorized, 49,854,631 and 49,800,756 shares outstanding, respectively	50	50
Additional paid-in capital	516,113	514,461
Accumulated deficit	(358,590)	(359,171)
Treasury stock, at cost, 2,254,953 shares in treasury	(28,182)	(28,182)
Accumulated other comprehensive loss	(1,444)	(8,251)
Total stockholders' equity	127,947	118,907
Total liabilities and stockholders' equity	$ 595,165	$ 598,541

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CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Statement Of Financial Position [Abstract]
Accumulated depreciation	$ 47,280	$ 44,229
Stockholders' equity:
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	120,000,000	120,000,000
Common stock, shares outstanding (in shares)	49,854,631	49,800,756
Treasury stock (in shares)	2,254,953	2,254,953

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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Income Statement [Abstract]
Revenues	$ 127,513	$ 108,085
Cost of revenue (exclusive of depreciation of $3,065 and $2,531, respectively included below)	78,415	57,285
Marketing expense	2,784	1,231
Selling, general and administrative expenses	10,700	9,696
Depreciation expense	3,206	2,683
Operating income	32,408	37,190
Interest expense	6,993	10,756
Other (income) expense, net	16,685	(1,130)
Total non-operating expense, net	23,678	9,626
Income before income taxes	8,730	27,564
Income tax expense	8,086	7,620
Income from continuing operations	644	19,944
Loss from discontinued operations, net of income tax benefit of $21 and $277, respectively	(63)	(808)
Net income	$ 581	$ 19,136
Earnings (loss) per share - basic:
Continuing operations	$ 0.01	$ 0.41
Discontinued operations	0.00	(0.02)
Net income	0.01	0.39
Earnings (loss) per share - diluted:
Continuing operations	0.01	0.40
Discontinued operations	0.00	(0.02)
Net income	$ 0.01	$ 0.38
Comprehensive income	$ 7,388	$ 21,938
Weighted average common shares and equivalents:
Basic	49,838	49,222
Diluted	50,557	50,340

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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Income Statement [Abstract]
Depreciation	$ 3,065	$ 2,531
Discontinued operation, income tax (benefit)	$ 21	$ 277

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 581	$ 19,136
Net change in fair value of effective portion of interest rate swaps designated as cash flow hedges, net of tax expense of $2,264 and $882, respectively	6,600	2,576
Reclassification adjustment for previously deferred loss from interest rate swaps included in "Interest expense," net of tax of $71 and $78, respectively	207	226
Total other comprehensive income, net of tax	6,807	2,802
Comprehensive income	$ 7,388	$ 21,938

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Statement Of Income And Comprehensive Income [Abstract]
Net change in fair value of effective portion of interest rate swaps designated as cash flow hedges, tax expense	$ 2,264	$ 882
Reclassification adjustment for previously deferred loss from interest rate swaps, tax	$ 71	$ 78

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CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (Unaudited) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Treasury Stock	Accumulated Other Comprehensive Loss
Balance at Dec. 31, 2020	$ 3,656	$ 49	$ 513,263	$ (464,085)	$ (28,182)	$ (17,389)
Comprehensive income	21,938			19,136		2,802
Exercise and vesting of share-based compensation awards	164		164
Tax withholding for share-based compensation	(2,502)		(2,502)
Share-based employee compensation expense	2,998		2,998
Balance at Mar. 31, 2021	26,254	49	513,923	(444,949)	(28,182)	(14,587)
Balance at Dec. 31, 2021	118,907	50	514,461	(359,171)	(28,182)	(8,251)
Comprehensive income	7,388			581		6,807
Exercise and vesting of share-based compensation awards	205		205
Tax withholding for share-based compensation	(472)		(472)
Share-based employee compensation expense	1,919		1,919
Balance at Mar. 31, 2022	$ 127,947	$ 50	$ 516,113	$ (358,590)	$ (28,182)	$ (1,444)

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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Cash flows from operating activities:
Income from continuing operations	$ 644	$ 19,944
Loss from discontinued operations	(63)	(808)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,206	2,683
Amortization and write-off of deferred loan costs	492	1,183
Amortization and write-off of debt discount	63	1,077
Share-based employee compensation expense	1,919	2,998
Unrealized gain on derivatives	(5,695)	(1,130)
Unrealized loss on investments in equity securities	22,380
Deferred income taxes	2,272	1,454
Decrease (increase) in accounts receivable	4,719	(18,978)
Changes in income taxes receivable and payable	5,869	10,217
Decrease in other current assets	1,992	529
Decrease in accounts payable	(945)	(42)
Decrease in accrued salaries and benefits	(7,760)	(3,685)
Increase in other current liabilities	7,553	5,594
Other	369	1,582
Net cash flows provided by operating activities	37,015	22,618
Cash flows from investing activities:
Acquisition of property and equipment	(2,715)	(1,561)
Settlement on derivatives not designated as hedges	(1,390)	(1,633)
Net cash flows used in investing activities	(4,105)	(3,194)
Cash flows from financing activities:
Payments of long-term debt	(1,000)	(63,600)
Payments related to tax withholding for share-based compensation	(472)	(2,502)
Exercise of stock options	205	164
Change in cash overdraft and other	301	(1,443)
Net cash flows used in financing activities	(966)	(67,381)
Net increase (decrease) in cash and cash equivalents	31,944	(47,957)
Cash and cash equivalents, beginning of period	60,132	100,385
Cash and cash equivalents, end of period	$ 92,076	$ 52,428

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Basis of Presentation

3 Months Ended

Mar. 31, 2022

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Presentation

1. Basis of Presentation

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).  In our opinion, the accompanying consolidated financial statements of Tivity Health, Inc. and its wholly owned subsidiaries (collectively, “Tivity Health,” the “Company,” or such terms as “we,” “us,” or “our”) reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement.  We have reclassified certain items in prior periods to conform to current classifications.

Our results from continuing operations do not include the results of Nutrisystem, Inc. (“Nutrisystem”), which we sold effective December 9, 2020. Results of operations for Nutrisystem have been classified as discontinued operations for all periods presented in the accompanying consolidated financial statements. 

We have omitted certain financial information that is normally included in financial statements prepared in accordance with U.S. GAAP but that is not required for interim reporting purposes.  You should read the accompanying consolidated financial statements in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. 

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Recent Relevant Accounting Standards

3 Months Ended

Mar. 31, 2022

New Accounting Pronouncements And Changes In Accounting Principles [Abstract]

Recent Relevant Accounting Standards

2. Recent Relevant Accounting Standards

In October 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-16, "Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes" (“ASU 2018-16”), which adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition and provide lead time for entities to prepare for changes to interest rate risk hedging strategies. ASU 2018-16 is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted.  As of March 31, 2022, the benchmark interest rate in our existing interest rate swap agreements is LIBOR. The adoption of this standard did not have an impact on our financial position, results of operations, or cash flows. 

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (“ASC 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform: Scope”, which refines the scope of ASC 848 and clarifies the application of its guidance. ASC 848 contains temporary optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform, such as a transition away from the use of LIBOR.  ASC 848 was effective for the Company as of January 1, 2020.  The provisions of ASC 848 are available through December 31, 2022, at which time the reference rate replacement activity is expected to have been completed.  The provisions of ASC 848 must be applied at a Topic, Subtopic or Industry Subtopic level for all transactions other than derivatives, which may be applied at a hedging relationship level.  The accounting relief provided by ASC 848 is applicable only to legacy contracts if the amendments made to the agreements are solely for reference rate reform activities. Modifications that are unrelated to reference rate reform will scope out a given contract.  ASC 848 allows for different elections to be made at different points in time, and the timing of those elections will be documented as applicable.  For the avoidance of doubt, we intend to reassess the elections of optional expedients and exceptions included within ASC 848 related to our hedging activities and will document the election of these items on a quarterly basis.  In March 2020, we elected the expedient that allows us to assume that our hedged interest payments are probable of occurring regardless of any expected modification in their terms related to reference rate reform.  In addition, we have the option to change the method of assessing effectiveness upon a change in the critical terms of the derivative or the hedged transactions and upon the end of relief under ASC 848.  In June 2020, we elected to (i) continue the method of assessing effectiveness as documented in the original hedge documentation and (ii) apply the expedient wherein the reference rate on the hypothetical derivative matches the reference rate on the hedging instrument.  We will also apply the aforementioned elections to any future designated cash flow hedging relationship.

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Discontinued Operations

3 Months Ended

Mar. 31, 2022

Discontinued Operations And Disposal Groups [Abstract]

Discontinued Operations

3. Discontinued Operations 

Effective as of December 9, 2020, we completed the sale of Nutrisystem. The following table presents financial results of our former Nutrition business included in “loss from discontinued operations" for the three months ended March 31, 2022 and 2021.

	Three Months Ended March 31,
(In thousands)	2022			2021
Selling, general and administrative expenses (1)		84			1,085
Pretax loss from discontinued operations		(84	)		(1,085	)
Income tax benefit		(21	)		(277	)
Loss from discontinued operations, net    of income tax benefit	$	(63	)	$	(808	)

(1) Expenses from discontinued operations primarily relate to legal and other professional fees and separation costs.

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Revenue Recognition

3 Months Ended

Mar. 31, 2022

Revenue From Contract With Customer [Abstract]

Revenue Recognition

4. Revenue Recognition

We account for revenue from contracts with customers in accordance with Accounting Standards Codification (“ASC”) Topic 606.  The unit of account in ASC Topic 606 is a performance obligation, which is a promise in a contract to transfer to a customer either a distinct good or service (or bundle of goods or services) or a series of distinct goods or services provided over a period of time. ASC Topic 606 requires that a contract's transaction price, which is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, is to be allocated to each performance obligation in the contract based on relative standalone selling prices and recognized as revenue when or as the performance obligation is satisfied.

We earn revenue primarily from three programs: SilverSneakers^® senior fitness, Prime Fitness^®, and WholeHealth Living^TM.  We provide the SilverSneakers senior fitness program to members of Medicare Advantage, Medicare Supplement, and group retiree plans through our contracts with such plans.  We offer Prime Fitness, a fitness facility access program, through contracts with commercial health plans, employers, and other sponsoring organizations that allow their members to individually purchase the program.  We sell our WholeHealth Living program primarily to health plans.

Except for Prime Fitness, our customer contracts generally have initial terms of approximately three years.  Some contracts allow the customer to terminate early and/or determine on an annual basis to which of their members they will offer our programs.  For Prime Fitness, our contracts with commercial health plans, employers, and other sponsoring organizations generally have initial terms of approximately three years, while individuals who purchase the Prime Fitness program through these organizations may cancel at any time (on a monthly basis) after an initial period of one to three months.  The significant majority of our customer contracts contain one performance obligation - to stand ready to provide access to our network of fitness locations and fitness programming - which is satisfied over time as services are rendered each month over the contract term. Unsatisfied performance obligations at the end of a particular month primarily relate to certain monthly memberships for our Prime Fitness program, which are recorded as deferred revenue on the consolidated balance sheet and recognized as revenue during the immediately subsequent month. There was $0.1 million of revenue recognized during the three months ended March 31, 2022 from performance obligations satisfied in a prior period. Deferred revenue was $3.2 million and $3.4 million at March 31, 2022 and December 31, 2021, respectively. Significant changes in the deferred revenue balance during the period are as follows:

	Three Months Ended March 31,			Three Months Ended March 31,
(In thousands)	2022			2021
Revenue recognized that was included in deferred    revenue at the beginning of the period	$	(3,204	)	$	(3,781	)
Increases due to cash received from customers,    excluding amounts recognized as revenue during    the period	$	3,034		$	3,672

Our fees are variable month to month and are generally billed per member per month (“PMPM”) or billed based on a combination of PMPM and member visits to a network location.  We bill PMPM fees by multiplying the contractually negotiated PMPM rate by the number of members eligible for or receiving our services during the month.  For the three months ended March 31, 2022, total SilverSneakers visits and revenues were higher than the same period in 2021 as the effects of the COVID-19 pandemic lessened compared to the prior year period. As a result, revenues from PMPM fees (which are not derived from visits) as a percentage of total SilverSneakers revenue declined to 41% for the three months ended March 31, 2022, compared to 53% for the three months ended March 31, 2021.  We bill for member visits approximately one month in arrears once actual member visits are known.  Payments from customers are typically due within 30 days of invoice date.  When material, we capitalize costs to obtain contracts with customers and amortize them over the expected recovery period. At March 31, 2022 and December 31, 2021, $0.3 million of such costs were capitalized. Amortization expense related to such capitalized costs was $0.1 million and $0.2 million during the three months ended March 31, 2022 and 2021, respectively. 

Our customer contracts include variable consideration, which is allocated to each distinct month over the contract term based on eligible members and/or member visits each month.  The allocated consideration corresponds directly with the value to our customers of our services completed for the month.  Under the majority of our contracts, we recognize revenue each month using the practical expedient available under ASC 606-10-55-18, which provides that revenue is recognized in the amount for which we have the right to invoice. ASC 606-10-50-14(b) provides an optional exemption, which we have elected to apply, from disclosing remaining performance obligations when revenue is recognized from the satisfaction of the performance obligation in accordance with the “right to invoice” practical expedient.

Although we evaluate our financial performance and make resource allocation decisions based upon the results of our single operating and reportable segment, we believe the following information depicts how our revenues and cash flows from continuing operations are affected by economic factors.  

The following table sets forth revenue from continuing operations disaggregated by program.  Revenue from our SilverSneakers program is predominantly contracted with Medicare Advantage and Medicare Supplement plans.

(In thousands)	Three Months Ended March 31,
	2022		2021
SilverSneakers	$	96,114	$	79,827
Prime Fitness		25,036		22,593
WholeHealth Living		6,118		5,637
Other		245		28
	$	127,513	$	108,085

Sales and usage-based taxes are excluded from revenues.    

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Share-Based Compensation

3 Months Ended

Mar. 31, 2022

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Share-Based Compensation

5. Share-Based Compensation

We currently have three types of share-based awards outstanding to our employees and directors: stock options, restricted stock units, and market stock units.  We believe that our share-based awards align the interests of our employees and directors with those of our stockholders. Vesting terms for each of these award types generally range from one to three years.

We recognize share-based compensation expense for the market stock units if the requisite service is rendered, even if the market condition is never satisfied. For the three months ended March 31, 2022 and 2021, we recognized total share-based compensation costs of $1.9 million and $3.0 million, respectively.  We account for forfeitures as they occur. 

In March 2022, we granted annual long-term incentive awards to our employees consisting of (i) approximately 162,000 stock options with a weighted average exercise price of $31.27 per share and a weighted average grant date fair value of $15.75 per share, and (ii) approximately 90,000 restricted stock units with a weighted average grant date fair value of $28.43 per share.  These awards generally vest over or at the end of three years, subject to the underlying award agreements.

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Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

6. Income Taxes

For the three months ended March 31, 2022 and 2021, we had an effective income tax rate from continuing operations of 92.6% and 27.6%, respectively.  The higher effective income tax rate in 2022 is primarily due to the increase in the portion of valuation allowance for deferred tax assets related to capital loss carryforwards during the first quarter of 2022, as described in Note 10.

We file income tax returns in the U.S. Federal jurisdiction and in various state and foreign jurisdictions. Tax years remaining subject to examination in the U.S. Federal jurisdiction include 2018 to present.

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Leases

3 Months Ended

Mar. 31, 2022

Leases [Abstract]

Leases

7.  Leases

We maintain lease agreements principally for our office spaces and certain equipment. We maintain two sublease agreements with respect to one of our office locations, each of which continues through the initial term of our master lease agreement.  Such sublease income and payments, while they reduce our rent expense, are not considered in the value of the right-of-use asset or lease liability. With the exception of two finance leases related to a network server and office equipment, all of our leases are classified as operating leases.  In the aggregate, our leases generally have remaining lease terms of four to 30 months, some of which include options to extend the lease for additional periods. Such extension options were not considered in the value of the right-of-use asset or lease liability because it is not probable that we will exercise the options to extend.  If applicable, allocations among lease and non-lease components would be achieved using relative standalone selling prices.

The following table shows the components of lease expense for the three months ended March 31, 2022 and 2021:

	Three Months Ended March 31,
(In thousands)	2022			2021
Finance lease cost:
Amortization of leased assets	$	156		$	158
Interest of lease liabilities		4			14
Operating lease cost		1,861			1,915
Total lease cost before subleases	$	2,021		$	2,087
Sublease income		(1,344	)		(1,344	)
Total lease cost, net	$	677		$	743

Supplemental cash flow information related to leases is as follows:

	Three Months Ended March 31,
(In thousands)	2022			2021
Cash received (paid) for amounts included in the measurement of lease liabilities
Operating cash flow attributable to operating leases (1)	$	1,009		$	(1,550	)
Operating cash flow attributable to finance leases		(4	)		(14	)
Financing cash flow attributable to finance leases		(167	)		(157	)

(1) For the three months ended March 31, 2022, due to catch-up payments received from certain sublessors, cash received from subleases exceeded our cash paid for the related leases.

For the three months ended March 31, 2022 and 2021, there were no noncash transactions related to leases.

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Debt

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

Debt

8. Debt

The Company's debt, net of unamortized deferred loan costs and original issue discount, consisted of the following at March 31, 2022 and December 31, 2021:

(In thousands)	March 31, 2022			December 31, 2021
Term Loan B		393,000			394,000
Less: deferred loan costs and original issue discount		(13,040	)		(13,496	)
Total debt		379,960			380,504

Credit Facilities

On June 30, 2021, we entered into a new Credit Agreement (the “Credit Agreement”) with a group of lenders, Morgan Stanley Senior Funding, Inc., as general administrative agent, term loan facility administrative agent and collateral agent (“Morgan Stanley”), and Truist Bank, as revolving facility agent and swingline lender (“Truist”). The Credit Agreement replaced our prior Credit and Guaranty Agreement, dated March 8, 2019 (the “Prior Credit Agreement”), with a group of lenders, Credit Suisse AG, Cayman Islands Branch, as general administrative agent, term facility agent and collateral agent, and Truist, as revolving facility agent and swingline lender. The Credit Agreement provides us with (i) a $400.0 million term loan B facility (the “Term Loan B”), (ii) a $100.0 million revolving credit facility that includes a $30.0 million sublimit for swingline loans and a $40.0 million sublimit for letters of credit (the “Revolving Credit Facility”), and (iii) uncommitted incremental accordion facilities in an aggregate amount at any date equal to the greater of $167.5 million or 100% of our Consolidated EBITDA (as defined in the Credit Agreement) for the then-preceding four fiscal quarters, plus additional amounts based on, among other things, satisfaction of certain financial ratio requirements. As of March 31, 2022, outstanding debt under the Credit Agreement was $380.0 million, and availability under the revolving credit facility totaled $99.5 million as calculated under the most restrictive covenant.

Upon execution of the Credit Agreement, we recorded a non-cash loss on extinguishment of debt of $18.2 million, which related to the write-off of certain unamortized original issue discount and deferred loan costs associated with the Prior Credit Agreement. Additionally, we incurred third-party costs of $0.8 million related to the execution of the Credit Agreement and the transactions that are the subject thereof, which were recorded as loss on modification of debt.                

We used the proceeds of the Term Loan B and cash on hand to repay all of the outstanding indebtedness under the Prior Credit Agreement, and to pay transaction costs and expenses. Proceeds of the Revolving Credit Facility also may be used for general corporate purposes of the Company and its subsidiaries.

We are required to repay Term Loan B loans in consecutive quarterly installments, each in the amount of 0.25% of the aggregate initial amount of such loans, payable on September 30, 2021 and on the last day of each succeeding quarter thereafter until maturity on June 30, 2028, at which time the entire outstanding principal balance

of such loans is due and payable in full. We are permitted to make voluntary prepayments of borrowings under the Term Loan B at any time without penalty, except for a 1% premium with respect to the principal of Term Loan B loans prepaid within six months after the date of the Credit Agreement using proceeds from certain specified repricing transactions.  From June 30, 2021 through March 31, 2022, we made payments of $7.0 million on the Term Loan B, which included prepayments of all amounts due through March 31, 2023.

We are required to repay in full any outstanding swingline loans and revolving loans, and to terminate or cash collateralize any outstanding letters of credit, under the Revolving Credit Facility on June 30, 2026. In addition, the Credit Agreement contains provisions that, beginning with fiscal year 2022, may require annual excess cash flow (as defined in the Credit Agreement and generally designed to equal cash generated by our business in excess of cash used in the business) to be applied towards the prepayment of the Term Loan B or the reduction of the Revolving Credit Facility, as determined by the Company in our discretion (“Excess Cash Flow Payment”).  An Excess Cash Flow Payment is only required in the amount, if any, by which the Excess Cash Flow Amount exceeds $10.0 million for the applicable fiscal year.  “Excess Cash Flow Amount” is equal to our excess cash flow for a given fiscal year multiplied by the following excess cash flow percentages based on our First Lien Net Leverage Ratio (as defined in the Credit Agreement) on the last day of such fiscal year: (a) 50% if the First Lien Net Leverage Ratio is greater than 3.25:1, (b) 25% if the First Lien Net Leverage Ratio is less than or equal to 3.25:1 but greater than 2.75:1, and (c) 0% if the First Lien Net Leverage Ratio is less than or equal to 2.75:1.  Any potential mandatory Excess Cash Flow Payments are reduced by among other things, prepayments of the Term Loan B, any reductions of the Revolving Credit Facility, and prepayments of certain other indebtedness made during the applicable fiscal year.  We were not required to make an Excess Cash Flow Payment for fiscal 2021.

Borrowings under the Credit Agreement bear interest at variable rates based on a margin or spread in excess of either (1) one-month, three-month or six-month LIBOR (or, if available to all lenders holding the particular class of loans, 12-month LIBOR), which may not be less than 0.00%, or (2) the greatest of (a) the prime lending rate of the agent bank for the particular facility, (b) the federal funds rate plus 0.50%, and (c) one-month LIBOR plus 1.00% (the “Base Rate”), in each case as selected by the Company. The Base Rate may not be less than 1.00%. The LIBOR margin for Term Loan B loans is 4.25%, and the LIBOR margin for revolving loans varies between 4.25% and 3.75% depending on our First Lien Net Leverage Ratio (as defined in the Credit Agreement). The Base Rate margin for Term Loan B loans is 3.25%, and the Base Rate margin for revolving loans varies between 3.25% and 2.75%, depending on our First Lien Net Leverage Ratio.

Based on the Company’s elections, borrowings under the Prior Credit Agreement bore interest at variable rates based on a margin or spread in excess of one-month LIBOR, which could not be less than zero. The LIBOR margin for Term Loan A loans was 4.25%, the LIBOR margin for Term Loan B loans was 5.25%, and the LIBOR margin for revolving loans varied between 3.75% and 4.25%, depending on our total Net Leverage Ratio, as defined in the Prior Credit Agreement.

In May 2019, we entered into eight amortizing interest rate swap agreements, each of which matures in May 2024.  Under these interest rate swap agreements, we receive a variable rate of interest based on LIBOR, and we pay a fixed rate of interest equal to approximately 2.2%. As further explained in Note 12, during the fourth quarter of 2020 we concluded that five of the eight interest rate swaps no longer qualified for hedge accounting treatment, and we de-designated these derivatives. As of March 31, 2022, the eight interest rate swap agreements had current notional amounts totaling $600.0 million, of which $333.3 million related to effective hedges.

The Credit Agreement also provides for annual commitment fees ranging between 0.250% and 0.375% of the unused commitments under the Revolving Credit Facility, depending on our Total Net Leverage Ratio (as defined in the Credit Agreement), and annual letter of credit fees on the daily maximum amount available under outstanding letters of credit at the LIBOR margin for the Revolving Credit Facility. The Prior Credit Agreement provided for annual commitment fees ranging between 0.250% and 0.500% of the unused commitments under the prior revolving credit facility, depending on our total Net Leverage Ratio (as defined in the Prior Credit Agreement), and annual letter of credit fees on the daily outstanding availability under outstanding letters of credit at the applicable LIBOR margin for the prior revolving credit facility, depending on our total Net Leverage Ratio (as defined in the Prior Credit Agreement).

Extensions of credit under the Credit Agreement are secured by guarantees from substantially all of the Company’s active material domestic subsidiaries and by security interests in substantially all of the Company’s and such subsidiaries’ assets, subject to certain specified exceptions.

With respect to the Revolving Credit Facility, the Credit Agreement contains a financial covenant that requires us to comply with a specified maximum First Lien Net Leverage Ratio if utilization of the Revolving Credit Facility exceeds a specified level as of the last day of any period of four consecutive fiscal quarters. The Credit Agreement also contains various other affirmative and negative covenants customary for financings of this type that, subject to certain exceptions, impose restrictions and limitations on the Company and certain of the Company’s subsidiaries with respect to, among other things, liens; indebtedness; changes in the nature of business; mergers and other fundamental changes; sales and other dispositions of assets (including equity interests in subsidiaries); loans, advances, guarantees, acquisitions and other investments; restricted payments (including dividends, distributions, buybacks, redemptions and repurchases with respect to equity interests); change in fiscal year; prepayments, redemptions or acquisitions for value with respect to junior lien, subordinated or unsecured debt; changes in organizational documents and junior debt agreements; negative pledges; restrictions on subsidiary distributions; transfers of material assets to subsidiaries that are not guarantors; and transactions with affiliates. As of March 31, 2022, we were in compliance with all of the financial covenant requirements of the Credit Agreement.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2022

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

9. Commitments and Contingencies

Shareholder Lawsuits: Strougo, Cobb, and Delaware Lawsuits

On February 25, 2020, Robert Strougo, claiming to be a stockholder of the Company, filed a complaint in the United States District Court for the Middle District of Tennessee (the "Strougo Lawsuit"). On August 18, 2020, the Court appointed Sheet Metal Workers Local No. 33, Cleveland District, Pension Fund as lead plaintiff. Plaintiff filed its amended complaint on November 13, 2020. The amended complaint is on behalf of a putative class of stockholders who purchased shares of the Company’s common stock, par value $0.001 per share (“Common Stock”) between March 8, 2019 and February 19, 2020 and names as defendants the Company, the Company's chief financial officer, former chief executive officer, and former president and chief operating officer. The amended complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated under the Exchange Act in making false and misleading statements and omissions related to the performance of and accounting for the Nutrisystem business that the Company acquired on March 8, 2019.  The defendants filed a motion to dismiss the amended complaint on December 4, 2020.  On July 29, 2021, the Court issued an order denying the defendants’ motion to dismiss.  On October 26, 2021, Plaintiff filed a motion for class certification, which Defendants have opposed. The parties are currently engaged in discovery, and a trial date has been set for September 12, 2023.

On April 9, 2020, John Cobb, claiming to be a stockholder of the Company, filed a derivative complaint in the United States District Court for the Middle District of Tennessee naming the Company as a nominal defendant and certain current and former directors and officers as defendants (the “Cobb Lawsuit”). The complaint asserts claims for breach of Section 14(a) of the Exchange Act, breach of fiduciary duty, unjust enrichment, and waste of corporate assets, largely tracking the factual allegations in the Strougo Lawsuit. The plaintiff seeks monetary damages on behalf of the Company, restitution, and certain corporate governance and internal procedural reforms. On June 9, 2020, the United States Magistrate Judge approved the parties’ stipulation to stay the case pending the resolution of defendants’ motion to dismiss in the Strougo Lawsuit. On August 23, 2021, the parties submitted another joint stipulation proposing to further extend the stay.

In July 2020, three putative derivative complaints were filed in the United States District Court for the District of Delaware by the following individuals claiming to be stockholders of the Company: Patrick Yerby, Thomas R. Conte, Melvyn Klein, and Mark Ridendour (the “Delaware Derivative Lawsuits”).  The complaints largely track the allegations, named defendants, asserted claims, and requested relief of the Cobb Lawsuit. The three Delaware Derivative Lawsuits have been consolidated.  On August 24, 2021, the court entered an order staying the case.

Given the uncertainty of litigation and the preliminary stage of the Strougo Lawsuit, Cobb Lawsuit, and Delaware Derivative Lawsuits, we are not currently able to predict the probable outcome of the matter or to reasonably estimate a range of potential loss, if any.  We intend to vigorously defend ourselves against these

lawsuits.

Trademark Lawsuit: Pacific Packaging Lawsuit

On May 31, 2019, Pacific Packaging Concepts, Inc. (“Pacific Packaging”) filed a complaint in the U.S. District Court for the Central District of California, Western Division, naming as defendants two former subsidiaries of the Company; Nutrisystem, Inc. and Nutri/System IPHC, Inc (“Pacific Packaging Lawsuit”). In its complaint, Pacific Packaging alleged that the defendants’ use of Pacific Packaging’s federally registered trademark, Fresh Start, in advertisements for its weight management program and shakes constitutes federal trademark infringement, counterfeit trademark infringement, false designation of origin, federal trademark dilution, unfair competition, false advertising, common law unfair competition, and common law trademark infringement. The complaint seeks injunctive relief and monetary damages in an unspecified amount.  On August 29, 2019, the defendants filed their Answer to Complaint.  On July 23, 2021, the Court granted the defendant’s motion for summary judgment dismissing certain of plaintiff’s damages claims, namely any claim for royalty damages and claims related to profits based on reverse confusion.  The case was set for trial on March 1, 2022.  In connection with the sale of Nutrisystem, the Company agreed to indemnify Kainos for losses arising out of this matter and retained the right to control the defense thereof.  On January 11, 2022, the parties reached a settlement in principle of the Pacific Packaging Lawsuit pursuant to which defendants’ insurers would pay the entire settlement amount except for the amount of $25,000 representing the deductible on the policy, which would be paid by the Company pursuant to its indemnification agreement with Kainos.  On March 11, 2022, the parties executed a definitive written settlement agreement, and all amounts were paid by the insurers and the Company in March 2022.

Other

Additionally, from time to time, we are subject to contractual disputes, claims and legal proceedings that arise in the ordinary course of our business.  Some of the legal proceedings pending against us as of the date of this report are expected to be covered by insurance policies.  As these matters are subject to inherent uncertainties, our view of these matters may change in the future.  We expense legal costs as incurred.

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Investment in Equity Securities

3 Months Ended

Mar. 31, 2022

Equity Method Investments And Joint Ventures [Abstract]

Investment in Equity Securities

10. Investment in Equity Securities

Prior to July 1, 2021, we owned 159,309 shares of common stock of a predecessor (“Legacy Sharecare”) of Sharecare, Inc. (“Sharecare”) that we acquired in connection with the sale of our total population health services business to Legacy Sharecare in July 2016. These shares did not have a readily determinable fair value through June 30, 2021. As permitted under ASC 321, “Investments – Equity Securities” (“ASC 321”), we elected to measure such shares at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer (of which there were none).  

On February 12, 2021, Legacy Sharecare announced that it had entered into a merger agreement with Falcon Capital Acquisition Corp. (“FCAC”) and FCAC Merger Sub, Inc. (“FCAC Merger Sub”) pursuant to which Legacy Sharecare would merge with and into FCAC Merger Sub with Sharecare surviving as a wholly owned subsidiary of FCAC (the “Sharecare Transaction”).  The Sharecare Transaction was consummated effective July 1, 2021. As a result, our shares of common stock of Legacy Sharecare were converted into shares of common stock of Sharecare (“Sharecare Common Stock”), with 2.4% of such shares being converted into and paid to us in cash. Consequently, in July 2021, we received $2.7 million in cash as well as 11,079,331 shares of Sharecare Common Stock (“Sharecare Equity Security”).  Our cost basis in the Sharecare Equity Security is $10.5 million or $0.95 average cost per share. Sharecare Common Stock began trading on The Nasdaq Stock Market LLC on July 2, 2021 under the trading symbol “SHCR.”

The Sharecare Equity Security is subject to restrictions on resale, including a customary lockup period.  The lockup period continues until the earlier of one year after the effective time of the Sharecare Transaction or such other time at which the Sharecare Common Stock trades at a certain minimum price for 20 trading days in any 30-day trading period beginning on or after November 28, 2021.  In addition, between December 28, 2021 and March 27, 2022 (the “First Sale Window”), we were permitted to, but did not, sell up to 750,000 shares.  Between March 28, 2022 and July 1, 2022, we may sell up to 750,000 shares plus the 750,000 shares we were permitted to, but did not, sell during the First Sale Window.

Subsequent to the consummation of the Sharecare Transaction in July 2021, the fair value of the Sharecare Equity Security became readily determinable. Accordingly, beginning in July 2021, we carry the Sharecare Equity Security on our consolidated balance sheet at fair value, and we recognize any changes in fair value of the Sharecare Equity Security in net income as unrealized gains or losses, as required under ASC 321. At March 31, 2022, the Sharecare Equity Security is reported as a current asset on our consolidated balance sheet in “Investment in equity securities”. During the three months ended March 31, 2022, we recorded an unrealized loss of $22.4 million based on the change in fair value of the Sharecare Equity Security. The unrealized loss was recorded to other (income) expense, net (see Note 15).

At December 31, 2021, we provided a valuation allowance of $135.4 million for deferred tax assets related to capital loss carryforwards. During the first quarter of 2022, we increased the valuation allowance by $5.7 million based on changes in expectations about the realizability of capital gains from a future disposal of the Sharecare Equity Security that would be available to utilize these capital loss carryforwards. The capital loss carryforwards expire on December 31, 2025, if unused.  We currently expect to dispose of the Sharecare Equity Security during fiscal 2022.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

11. Fair Value Measurements

We account for certain assets and liabilities at fair value. Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date, assuming the transaction occurs in the principal or most advantageous market for that asset or liability.

Fair Value Hierarchy

The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 1:  Quoted prices in active markets for identical assets or liabilities;

Level 2:  Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-based valuation techniques in which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3:  Unobservable inputs that are supported by little or no market activity and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents our assets and liabilities measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021.

	March 31, 2022						December 31, 2021
	Fair Value Measurements Using Input Types						Fair Value Measurements Using Input Types
(In thousands)	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:
Investment in equity securities (1)	$	27,366	$	—	$	27,366	$	49,746	$	—	$	49,746
Derivatives designated as effective hedging instruments
Interest rate swap agreements	$	—	$	1,738	$	1,738	$	—	$	—	$	—
Non-designated derivatives
Interest rate swap agreements	$	—	$	1,397	$	1,397	$	—	$	—	$	—
Total assets	$	27,366	$	3,135	$	30,501	$	49,746	$	—	$	49,746
Liabilities:
Derivatives designated as effective hedging instruments
Interest rate swap agreements	$	—	$	1,580	$	1,580	$	—	$	8,705	$	8,705
Non-designated derivatives
Interest rate swap agreements	$	—	$	1,252	$	1,252	$	—	$	6,938	$	6,938
Total liabilities	$	—	$	2,832	$	2,832	$	—	$	15,643	$	15,643

(1) Reflects ownership of 11,079,331 shares of Sharecare Common Stock, as described in Note 10. 

The fair value of the Sharecare Equity Security is determined based on the closing price of Sharecare’s common stock on the last trading day of the reporting period.  

The fair values of interest rate swap agreements are primarily determined based on the present value of future cash flows using internal models and third-party pricing services with observable inputs, including interest rates, yield curves and applicable credit spreads.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

We measure certain assets at fair value on a nonrecurring basis in the fourth quarter of each year, or more frequently whenever events or circumstances indicate that the carrying value may not be recoverable, including the following:

• reporting units measured at fair value as part of a goodwill impairment test; and

• indefinite-lived intangible assets measured at fair value for impairment assessment.

Each of these assets above is classified as Level 3 within the fair value hierarchy.

The fair value of a reporting unit is the price that would be received upon a sale of the unit as a whole in an orderly transaction between market participants at the measurement date.  We have a single reporting unit.     

Fair Value of Other Financial Instruments

The estimated fair value of each class of financial instruments at March 31, 2022 was as follows:

Cash and cash equivalents – The carrying amount of $92.1 million approximates fair value due to the short maturity of those instruments (less than three months).

Debt – The estimated fair value of outstanding borrowings under the Credit Agreement, which includes a term loan facility and a revolving credit facility (see Note 8), is determined based on the fair value hierarchy as discussed above.

The Term Loan B is actively traded and therefore is classified as a Level 1 valuation. The estimated fair value is based on an average of quotes as of March 31, 2022 from dealers who stand ready and willing to transact at those prices. We use a mid-market pricing convention (i.e., the mid-point of average bid and ask prices). The Revolving Credit Facility is not actively traded and therefore is classified as a Level 2 valuation based on the market for similar instruments. The estimated fair value and carrying amount of outstanding borrowings under the Term Loan B (excluding original issue discount and deferred loan costs) were $389.1 million and $393.0 million, respectively. There were no outstanding borrowings under the Revolving Credit Facility at March 31, 2022.  

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Derivative Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2022

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

12. Derivative Instruments and Hedging Activities

We use derivative instruments to manage differences in the amount, timing, and duration of our known or expected cash payments related to our outstanding debt (i.e., interest rate risk).  Some of these derivatives are designated and qualify as a hedge of the exposure to variability in expected future cash flows and are therefore considered cash flow hedges.  We account for derivatives in accordance with FASB ASC Topic 815, which establishes accounting and reporting standards requiring that derivative instruments be recorded on the balance sheet at fair value as either an asset or liability.  The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Changes in the derivative’s fair value will be recognized currently in earnings unless specific hedge accounting criteria are met. We classify cash flows from settlement of our effective cash flow hedges in the same category as the cash flows from the related hedged items, generally within the operating activities in the consolidated statements of cash flows. We classify cash flows from settlement of our non-designated derivatives within the investing section of the consolidated statements of cash flows.

Cash Flow Hedges of Interest Rate Risk and Non-Designated Derivatives

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy.  The counterparties to the interest rate swap agreements expose us to credit risk in the event of nonperformance by such counterparties. However, at March 31, 2022, we do not anticipate nonperformance by these counterparties.  Our interest rate swap agreements with each of the counterparties contain a provision whereby if we either default or are capable of being declared in default on any of our indebtedness, whether or not such default results in repayment of the indebtedness being accelerated by the lender, then we could also be declared in default on our derivative obligations.

Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for our making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur in the initially identified time period or within a subsequent two-month time period. Deferred gains and losses in accumulated other comprehensive income or loss ("accumulated OCI") associated with such derivative instruments are reclassified into earnings in the period of de-designation.  

In May 2019, we entered into eight amortizing interest rate swap agreements, each of which matures in May 2024 and was initially designated as an effective cash flow hedge.  Under these agreements, we receive a variable rate of interest based on LIBOR, and we pay a fixed rate of interest equal to approximately 2.2%. In October 2020, we determined that some of our hedged transactions would not materially occur in the initially identified time period due to the sale of Nutrisystem, since we expected to use the majority of the net proceeds from the sale to pay down a significant portion of outstanding debt. As a result, we concluded that five of our eight interest rate swaps no longer

qualified for hedge accounting treatment. Accordingly, in the fourth quarter of 2020 we de-designated these five derivatives (“de-designated swaps”) and accelerated the reclassification of deferred gains and losses in accumulated OCI to income (loss) from discontinued operations as a result of the hedged forecasted transactions becoming probable not to occur. Upon de-designation in the fourth quarter of 2020, we recognized a pre-tax loss of $14.3 million in income (loss) from discontinued operations.

Additionally, upon de-designation in October 2020, we froze $3.2 million of previously deferred losses in accumulated OCI related to forecasted payments that are probable of occurring. We reclassify such deferred losses from accumulated OCI into earnings as an adjustment to interest expense during periods in which the forecasted transactions impact earnings, consistent with hedge accounting treatment. In the event that the related forecasted payments are probable of not occurring, the related loss in accumulated OCI will be recognized in earnings immediately.

We continue to maintain the effective hedging relationship between three interest rate swap agreements and the portion of our forecasted payments that is expected to remain highly probable of occurring. Our entering into the Credit Agreement on June 30, 2021 had no effect on the hedging designation of our interest rate swaps as the hedges are not tied to a specific debt instrument and the economic characteristics of the Credit Agreement are similar to those of the Prior Credit Agreement.

During the fourth quarter of 2020 we evaluated the likelihood and extent of potential future losses from the de-designated swaps. Such potential future losses are capped since the variable interest rate of our swaps is subject to a floor of 0%. Based on the LIBOR rates in effect at the time of de-designation, we decided to hold the de-designated swaps as derivative instruments requiring mark-to-market accounting treatment, with any change in fair value recognized each period in current earnings.

At March 31, 2022, our interest rate swap agreements designated as effective cash flow hedges had current notional amounts totaling $333.3 million, and our de-designated interest rate swap agreements had current notional amounts totaling $266.7 million.

We record all derivatives at estimated fair value in the consolidated balance sheet. Gains and losses on derivatives designated as effective cash flow hedges are recorded in accumulated OCI and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings.  Amounts reported in accumulated OCI related to cash flow hedge derivatives will be reclassified to interest expense as we make interest payments on our variable-rate debt. As of March 31, 2022, we expect to reclassify $2.4 million, pre-tax, from accumulated OCI as an increase to interest expense within the next 12 months due to the scheduled payment of interest associated with our debt. Gains and losses on derivatives de-designated as effective cash flow hedges are recorded in the consolidated statement of operations as other (income) expense, net.

The estimated gross fair values of derivative instruments and their classification on the consolidated balance sheet at March 31, 2022 and December 31, 2021 were as follows:

(In thousands)	March 31, 2022		December 31, 2021
Assets:
Derivatives designated as effective hedging    instruments:
Other assets	$	1,738	$	—
Non-designated derivatives:
Other assets	$	1,397	$	—
Liabilities:
Derivatives designated as effective hedging    instruments:
Current portion of long-term liabilities	$	1,580	$	5,911
Other long-term liabilities		—		2,794
	$	1,580	$	8,705
Non-designated derivatives:
Current portion of long-term liabilities	$	1,252	$	4,714
Other long-term liabilities		—		2,224
	$	1,252	$	6,938

The following table presents the effect of cash flow hedge accounting on accumulated OCI as of March 31, 2022 and 2021:

(In thousands)	For the Three Months Ended
	March 31, 2022			March 31, 2021
Derivatives designated as effective hedging instruments:
Gain related to effective portion of    derivatives recognized in accumulated    OCI, gross of tax effect	$	(7,125	)	$	(1,412	)
Loss related to effective portion of derivatives    reclassified from accumulated OCI to    interest expense, gross of tax effect		(1,739	)		(2,046	)
Non-designated derivatives:
Previously deferred loss on interest rate swap    agreements reclassified from accumulated    OCI to interest expense, gross of tax effect	$	(278	)	$	(304	)
Total other comprehensive income,    gross of tax	$	(9,142	)	$	(3,762	)

The following table presents the impact that non-designated derivatives had on our consolidated statement of operations for the three months ended March 31, 2022 and 2021:

(In thousands)	Statement of Operations Classification	March 31, 2022			March 31, 2021
Interest rate swap agreements:
Net gain related to ineffective portion of    derivatives, gross of tax effect	Other (income) expense, net	$	(5,695	)	$	(1,130	)
Previously deferred loss related to    de-designated swaps reclassified from    accumulated OCI, gross of tax effect	Interest expense		278			304
		$	(5,417	)	$	(826	)

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Earnings (Loss) Per Share

3 Months Ended

Mar. 31, 2022

Earnings Per Share [Abstract]

Earnings (Loss) Per Share

13.Earnings (Loss) Per Share

The following is a reconciliation of the numerator and denominator of basic and diluted earnings (loss) per share for the three months ended March 31, 2022 and 2021:

(In thousands except per share data)	Three Months Ended March 31,
	2022			2021
Numerator:
Income from continuing operations - numerator for earnings (loss) per share	$	644		$	19,944
Loss from discontinued operations - numerator for earnings (loss) per share		(63	)		(808	)
Net income	$	581		$	19,136
Denominator:
Shares used for basic income (loss) per share		49,838			49,222
Effect of dilutive stock options and stock units outstanding:
Non-qualified stock options		77			62
Restricted stock units		363			844
Performance-based stock units		—			61
Market stock units		279			151
Shares used for diluted income (loss) per share		50,557			50,340
Earnings (loss) per share - basic:
Continuing operations	$	0.01		$	0.41
Discontinued operations	$	(0.00	)	$	(0.02	)
Net income	$	0.01		$	0.39
Earnings (loss) per share - diluted:
Continuing operations	$	0.01		$	0.40
Discontinued operations	$	(0.00	)	$	(0.02	)
Net income	$	0.01		$	0.38
Dilutive securities outstanding not included in the computation of earnings per share because their effect is anti-dilutive:
Non-qualified stock options		262			268
Restricted stock units		35			9

Market stock units and performance-based stock units outstanding are considered contingently issuable shares, and certain of these stock units were excluded from the calculations of diluted earnings per share as the performance criteria had not been met as of the end of the applicable reporting period.

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Accumulated OCI

3 Months Ended

Mar. 31, 2022

Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]

Accumulated OCI

14. Accumulated OCI

The following tables summarize the changes in accumulated OCI, net of tax, for the three months ended March 31, 2022 and 2021:

(In thousands)	Net Change in Fair Value of Interest Rate Swaps
Accumulated OCI, net of tax, as of January 1, 2022	$	(8,251	)
Other comprehensive income (loss) before reclassifications, net of tax of $1,820		5,305
Amounts reclassified from accumulated OCI, net of tax of $515		1,502
Accumulated OCI, net of tax, as of March 31, 2022	$	(1,444	)
(In thousands)	Net Change in Fair Value of Interest Rate Swaps
Accumulated OCI, net of tax, as of January 1, 2021	$	(17,389	)
Other comprehensive income (loss) before reclassifications, net of tax of $360		1,052
Amounts reclassified from accumulated OCI, net of tax of $600		1,750
Accumulated OCI, net of tax, as of March 31, 2021	$	(14,587	)

The following table presents details about reclassifications out of accumulated OCI for the three months ended March 31, 2022 and 2021:

	Three Months Ended
(In thousands)	March 31, 2022			March 31, 2021			Statement of Operations Classification
Interest rate swaps	$	2,017		$	2,350		Interest expense
		(515	)		(600	)	Income tax expense
Total amounts reclassified from accumulated OCI	$	1,502		$	1,750		Net of tax

See Note 12 for a further discussion of our interest rate swaps.

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Other (Income) Expense, Net

3 Months Ended

Mar. 31, 2022

Other Income And Expenses [Abstract]

Other (Income) Expense, Net

15. Other (Income) Expense, Net

The following table shows the detail of Other (income) expense, net for the three months ended March 31, 2022 and 2021.

	Three Months Ended March 31,
(In thousands)	2022			2021
Unrealized loss on investment in equity securities (Note 10)	$	22,380		$	—
Unrealized gain related to ineffective portion of derivatives (Note 12)		(5,695	)		(1,130	)
Other (income) expense, net	$	16,685		$	(1,130	)

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Subsequent Event

3 Months Ended

Mar. 31, 2022

Subsequent Events [Abstract]

Subsequent Event

16. Subsequent Event

On April 5, 2022, we entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with Titan-Atlas Parent, Inc. (“Parent”) and Titan-Atlas Merger Sub, Inc., a direct, wholly-owned subsidiary of Parent

(“Merger Sub”), providing for the acquisition of the Company by affiliates of Stone Point Capital LLC, a Delaware limited liability company (“Stone Point Capital”), subject to the terms and conditions set forth in the Merger Agreement. Pursuant to the terms of the Merger Agreement and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Merger Sub will be merged with and into the Company (the “Merger”) effective as of the effective time of the Merger (the “Effective Time”). As a result of the Merger, Merger Sub will cease to exist, and the Company will survive as a wholly-owned subsidiary of Parent.

As a result of the Merger, except as otherwise provided in the Merger Agreement, at the Effective Time, each share of Common Stock issued and outstanding immediately prior to the Effective Time will be converted into the right to receive $32.50 in cash, without interest (the “Transaction Consideration”).  In addition, at the Effective Time:

• Each option to purchase Common Stock outstanding immediately prior to the Effective Time (each, a “Company Option”), whether vested or unvested, will be cancelled and will entitle the holder to receive an amount in cash (without interest and subject to applicable withholding taxes) equal to the product of (i) the number of shares of Common Stock subject to such Company Option as of immediately prior to the Effective Time and (ii) the excess, if any, of the Transaction Consideration over the exercise price per share of such Company Option. Any Company Options outstanding with exercise prices equal to or in excess of the per share Transaction Consideration will be cancelled without any payment to the holder thereof;

• Each market stock unit award of the Company (each, a “Company MSU Award”) outstanding immediately prior to the Effective Time will become vested, will be cancelled and will entitle the holder thereof to receive an amount in cash (without interest and subject to applicable withholding taxes) equal to the product of (i) the number of shares of Common Stock that would have vested pursuant to the terms of such Company MSU Award based on actual performance through the Effective Time and (ii) the Transaction Consideration; and

• Each restricted stock unit award of the Company (each, a “Company RSU Award”) outstanding immediately prior to the Effective Time will become fully vested, will be cancelled and will entitle the holder to receive an amount in cash (without interest and subject to applicable withholding taxes) equal to the product of (i) the number of shares of Common Stock subject to the Company RSU Award and (ii) the Transaction Consideration.

The consummation of the Merger is subject to the satisfaction or waiver of various customary conditions set forth in the Merger Agreement, including, but not limited to, (i) the Company’s stockholders’ approval of the Merger Agreement, (ii) the expiration or termination of any applicable waiting period (or any extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), (iii) the absence of any restraint or law preventing or prohibiting the consummation of the Merger, (iv) the accuracy of Parent’s, Merger Sub’s, and the Company’s representations and warranties (subject to certain materiality qualifiers), (v) Parent’s, Merger Sub’s and the Company’s compliance in all material respects with their respective obligations under the Merger Agreement, and (vi) the absence of any Company Material Adverse Effect (as defined in the Merger Agreement) since the date of the Merger Agreement. The consummation of the Merger is not subject to a financing condition.

During the three months ended March 31, 2022, we incurred expenses of $1.1 million related to the proposed Merger, which primarily consisted of legal and other professional fees and are reported as selling, general and administrative expenses in the consolidated statements of operations. On April 5, 2022, upon entering into the Merger Agreement, we incurred $2.5 million of financial advisory fees, which we recorded during the second quarter of 2022.  

See Item IA. Risk Factors for a discussion of the risks related to the Merger.

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Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2022

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Presentation

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).  In our opinion, the accompanying consolidated financial statements of Tivity Health, Inc. and its wholly owned subsidiaries (collectively, “Tivity Health,” the “Company,” or such terms as “we,” “us,” or “our”) reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement.  We have reclassified certain items in prior periods to conform to current classifications.

Our results from continuing operations do not include the results of Nutrisystem, Inc. (“Nutrisystem”), which we sold effective December 9, 2020. Results of operations for Nutrisystem have been classified as discontinued operations for all periods presented in the accompanying consolidated financial statements. 

We have omitted certain financial information that is normally included in financial statements prepared in accordance with U.S. GAAP but that is not required for interim reporting purposes.  You should read the accompanying consolidated financial statements in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. 

Recent Relevant Accounting Standards

In October 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-16, "Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes" (“ASU 2018-16”), which adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition and provide lead time for entities to prepare for changes to interest rate risk hedging strategies. ASU 2018-16 is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted.  As of March 31, 2022, the benchmark interest rate in our existing interest rate swap agreements is LIBOR. The adoption of this standard did not have an impact on our financial position, results of operations, or cash flows. 

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (“ASC 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform: Scope”, which refines the scope of ASC 848 and clarifies the application of its guidance. ASC 848 contains temporary optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform, such as a transition away from the use of LIBOR.  ASC 848 was effective for the Company as of January 1, 2020.  The provisions of ASC 848 are available through December 31, 2022, at which time the reference rate replacement activity is expected to have been completed.  The provisions of ASC 848 must be applied at a Topic, Subtopic or Industry Subtopic level for all transactions other than derivatives, which may be applied at a hedging relationship level.  The accounting relief provided by ASC 848 is applicable only to legacy contracts if the amendments made to the agreements are solely for reference rate reform activities. Modifications that are unrelated to reference rate reform will scope out a given contract.  ASC 848 allows for different elections to be made at different points in time, and the timing of those elections will be documented as applicable.  For the avoidance of doubt, we intend to reassess the elections of optional expedients and exceptions included within ASC 848 related to our hedging activities and will document the election of these items on a quarterly basis.  In March 2020, we elected the expedient that allows us to assume that our hedged interest payments are probable of occurring regardless of any expected modification in their terms related to reference rate reform.  In addition, we have the option to change the method of assessing effectiveness upon a change in the critical terms of the derivative or the hedged transactions and upon the end of relief under ASC 848.  In June 2020, we elected to (i) continue the method of assessing effectiveness as documented in the original hedge documentation and (ii) apply the expedient wherein the reference rate on the hypothetical derivative matches the reference rate on the hedging instrument.  We will also apply the aforementioned elections to any future designated cash flow hedging relationship.

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Discontinued Operations (Tables)

3 Months Ended

Mar. 31, 2022

Discontinued Operations And Disposal Groups [Abstract]

Summary of Financial Results Included in Income (Loss) from Discontinued Operations

Effective as of December 9, 2020, we completed the sale of Nutrisystem. The following table presents financial results of our former Nutrition business included in “loss from discontinued operations" for the three months ended March 31, 2022 and 2021.

	Three Months Ended March 31,
(In thousands)	2022			2021
Selling, general and administrative expenses (1)		84			1,085
Pretax loss from discontinued operations		(84	)		(1,085	)
Income tax benefit		(21	)		(277	)
Loss from discontinued operations, net    of income tax benefit	$	(63	)	$	(808	)

(1) Expenses from discontinued operations primarily relate to legal and other professional fees and separation costs.

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Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 2022

Revenue From Contract With Customer [Abstract]

Summary of Significant Changes in Deferred Revenue Balance

Significant changes in the deferred revenue balance during the period are as follows:

	Three Months Ended March 31,			Three Months Ended March 31,
(In thousands)	2022			2021
Revenue recognized that was included in deferred    revenue at the beginning of the period	$	(3,204	)	$	(3,781	)
Increases due to cash received from customers,    excluding amounts recognized as revenue during    the period	$	3,034		$	3,672

Summary of Revenue Disaggregated

The following table sets forth revenue from continuing operations disaggregated by program.  Revenue from our SilverSneakers program is predominantly contracted with Medicare Advantage and Medicare Supplement plans.

(In thousands)	Three Months Ended March 31,
	2022		2021
SilverSneakers	$	96,114	$	79,827
Prime Fitness		25,036		22,593
WholeHealth Living		6,118		5,637
Other		245		28
	$	127,513	$	108,085

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Leases (Tables)

3 Months Ended

Mar. 31, 2022

Leases [Abstract]

Schedule of Components of Lease Expense

The following table shows the components of lease expense for the three months ended March 31, 2022 and 2021:

	Three Months Ended March 31,
(In thousands)	2022			2021
Finance lease cost:
Amortization of leased assets	$	156		$	158
Interest of lease liabilities		4			14
Operating lease cost		1,861			1,915
Total lease cost before subleases	$	2,021		$	2,087
Sublease income		(1,344	)		(1,344	)
Total lease cost, net	$	677		$	743

Schedule of Supplemental Cash Flow Information Related to Leases

Supplemental cash flow information related to leases is as follows:

	Three Months Ended March 31,
(In thousands)	2022			2021
Cash received (paid) for amounts included in the measurement of lease liabilities
Operating cash flow attributable to operating leases (1)	$	1,009		$	(1,550	)
Operating cash flow attributable to finance leases		(4	)		(14	)
Financing cash flow attributable to finance leases		(167	)		(157	)

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Debt (Tables)

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

Summary of Debt, Net of Unamortized Deferred Loan Costs And Original Issue Discount

The Company's debt, net of unamortized deferred loan costs and original issue discount, consisted of the following at March 31, 2022 and December 31, 2021:

(In thousands)	March 31, 2022			December 31, 2021
Term Loan B		393,000			394,000
Less: deferred loan costs and original issue discount		(13,040	)		(13,496	)
Total debt		379,960			380,504

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents our assets and liabilities measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021.

	March 31, 2022						December 31, 2021
	Fair Value Measurements Using Input Types						Fair Value Measurements Using Input Types
(In thousands)	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:
Investment in equity securities (1)	$	27,366	$	—	$	27,366	$	49,746	$	—	$	49,746
Derivatives designated as effective hedging instruments
Interest rate swap agreements	$	—	$	1,738	$	1,738	$	—	$	—	$	—
Non-designated derivatives
Interest rate swap agreements	$	—	$	1,397	$	1,397	$	—	$	—	$	—
Total assets	$	27,366	$	3,135	$	30,501	$	49,746	$	—	$	49,746
Liabilities:
Derivatives designated as effective hedging instruments
Interest rate swap agreements	$	—	$	1,580	$	1,580	$	—	$	8,705	$	8,705
Non-designated derivatives
Interest rate swap agreements	$	—	$	1,252	$	1,252	$	—	$	6,938	$	6,938
Total liabilities	$	—	$	2,832	$	2,832	$	—	$	15,643	$	15,643

(1) Reflects ownership of 11,079,331 shares of Sharecare Common Stock, as described in Note 10. 

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Derivative Instruments and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2022

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Schedule of Estimated Gross Fair Values of Derivative Instruments and Their Classification on Consolidated Balance Sheet

The estimated gross fair values of derivative instruments and their classification on the consolidated balance sheet at March 31, 2022 and December 31, 2021 were as follows:

(In thousands)	March 31, 2022		December 31, 2021
Assets:
Derivatives designated as effective hedging    instruments:
Other assets	$	1,738	$	—
Non-designated derivatives:
Other assets	$	1,397	$	—
Liabilities:
Derivatives designated as effective hedging    instruments:
Current portion of long-term liabilities	$	1,580	$	5,911
Other long-term liabilities		—		2,794
	$	1,580	$	8,705
Non-designated derivatives:
Current portion of long-term liabilities	$	1,252	$	4,714
Other long-term liabilities		—		2,224
	$	1,252	$	6,938

Schedule of Effect of Cash Flow Hedge Accounting on Accumulated OCI

The following table presents the effect of cash flow hedge accounting on accumulated OCI as of March 31, 2022 and 2021:

(In thousands)	For the Three Months Ended
	March 31, 2022			March 31, 2021
Derivatives designated as effective hedging instruments:
Gain related to effective portion of    derivatives recognized in accumulated    OCI, gross of tax effect	$	(7,125	)	$	(1,412	)
Loss related to effective portion of derivatives    reclassified from accumulated OCI to    interest expense, gross of tax effect		(1,739	)		(2,046	)
Non-designated derivatives:
Previously deferred loss on interest rate swap    agreements reclassified from accumulated    OCI to interest expense, gross of tax effect	$	(278	)	$	(304	)
Total other comprehensive income,    gross of tax	$	(9,142	)	$	(3,762	)

Schedule of Impact of Derivatives Not Designated as Hedges on Consolidated Statement of Operations

The following table presents the impact that non-designated derivatives had on our consolidated statement of operations for the three months ended March 31, 2022 and 2021:

(In thousands)	Statement of Operations Classification	March 31, 2022			March 31, 2021
Interest rate swap agreements:
Net gain related to ineffective portion of    derivatives, gross of tax effect	Other (income) expense, net	$	(5,695	)	$	(1,130	)
Previously deferred loss related to    de-designated swaps reclassified from    accumulated OCI, gross of tax effect	Interest expense		278			304
		$	(5,417	)	$	(826	)

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Earnings (Loss) Per Share (Tables)

3 Months Ended

Mar. 31, 2022

Earnings Per Share [Abstract]

Reconciliation of the Numerator and Denominator of Basic and Diluted Earnings (Loss) Per Share

The following is a reconciliation of the numerator and denominator of basic and diluted earnings (loss) per share for the three months ended March 31, 2022 and 2021:

(In thousands except per share data)	Three Months Ended March 31,
	2022			2021
Numerator:
Income from continuing operations - numerator for earnings (loss) per share	$	644		$	19,944
Loss from discontinued operations - numerator for earnings (loss) per share		(63	)		(808	)
Net income	$	581		$	19,136
Denominator:
Shares used for basic income (loss) per share		49,838			49,222
Effect of dilutive stock options and stock units outstanding:
Non-qualified stock options		77			62
Restricted stock units		363			844
Performance-based stock units		—			61
Market stock units		279			151
Shares used for diluted income (loss) per share		50,557			50,340
Earnings (loss) per share - basic:
Continuing operations	$	0.01		$	0.41
Discontinued operations	$	(0.00	)	$	(0.02	)
Net income	$	0.01		$	0.39
Earnings (loss) per share - diluted:
Continuing operations	$	0.01		$	0.40
Discontinued operations	$	(0.00	)	$	(0.02	)
Net income	$	0.01		$	0.38
Dilutive securities outstanding not included in the computation of earnings per share because their effect is anti-dilutive:
Non-qualified stock options		262			268
Restricted stock units		35			9

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Accumulated OCI (Tables)

3 Months Ended

Mar. 31, 2022

Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]

Changes in Accumulated OCI

The following tables summarize the changes in accumulated OCI, net of tax, for the three months ended March 31, 2022 and 2021:

(In thousands)	Net Change in Fair Value of Interest Rate Swaps
Accumulated OCI, net of tax, as of January 1, 2022	$	(8,251	)
Other comprehensive income (loss) before reclassifications, net of tax of $1,820		5,305
Amounts reclassified from accumulated OCI, net of tax of $515		1,502
Accumulated OCI, net of tax, as of March 31, 2022	$	(1,444	)
(In thousands)	Net Change in Fair Value of Interest Rate Swaps
Accumulated OCI, net of tax, as of January 1, 2021	$	(17,389	)
Other comprehensive income (loss) before reclassifications, net of tax of $360		1,052
Amounts reclassified from accumulated OCI, net of tax of $600		1,750
Accumulated OCI, net of tax, as of March 31, 2021	$	(14,587	)

Schedule of Reclassifications Out of Accumulated OCI

The following table presents details about reclassifications out of accumulated OCI for the three months ended March 31, 2022 and 2021:

	Three Months Ended
(In thousands)	March 31, 2022			March 31, 2021			Statement of Operations Classification
Interest rate swaps	$	2,017		$	2,350		Interest expense
		(515	)		(600	)	Income tax expense
Total amounts reclassified from accumulated OCI	$	1,502		$	1,750		Net of tax

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Other (Income) Expense, Net (Tables)

3 Months Ended

Mar. 31, 2022

Other Income And Expenses [Abstract]

Summary of Other (Income) Expense, Net

The following table shows the detail of Other (income) expense, net for the three months ended March 31, 2022 and 2021.

	Three Months Ended March 31,
(In thousands)	2022			2021
Unrealized loss on investment in equity securities (Note 10)	$	22,380		$	—
Unrealized gain related to ineffective portion of derivatives (Note 12)		(5,695	)		(1,130	)
Other (income) expense, net	$	16,685		$	(1,130	)

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Discontinued Operations - Summary of Financial Results Included in Income (Loss) from Discontinued Operations (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2022	Mar. 31, 2021
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Income tax benefit		$ 21	$ 277
Loss from discontinued operations, net of income tax benefit		(63)	(808)
Nutrisystem Incorporation
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Selling, general and administrative expenses	[1]	84	1,085
Pretax loss from discontinued operations		(84)	(1,085)
Income tax benefit		(21)	(277)
Loss from discontinued operations, net of income tax benefit		$ (63)	$ (808)

[1] Expenses from discontinued operations primarily relate to legal and other professional fees and separation costs.

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Revenue Recognition - Additional Information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($) Program Obligation Segment	Mar. 31, 2021 USD ($)	Dec. 31, 2021 USD ($)
Disaggregation Of Revenue [Line Items]
Deferred revenue	$ 3,201		$ 3,371
Continuing Operations
Disaggregation Of Revenue [Line Items]
Number of programs | Program	3
Number of performance obligations | Obligation	1
Revenue recognized from performance obligations satisfied in prior period	$ 100
Deferred revenue	$ 3,200		3,400
Period of billing in arrears once timing of services to customers is known	1 month
Number of days for customer to make payment after being invoiced	30 days
Capitalized costs	$ 300		$ 300
Capitalized costs, amortization expense	$ 100	$ 100
Number of reportable segments | Segment	1
Continuing Operations | SilverSneakers
Disaggregation Of Revenue [Line Items]
Revenues from PMPM fees percentage	41.00%	53.00%

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Revenue Recognition - Summary of Significant Change in Deferred Revenue Balance (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Revenue From Contract With Customer [Abstract]
Revenue recognized that was included in deferred revenue at the beginning of the period	$ (3,204)	$ (3,781)
Increases due to cash received from customers, excluding amounts recognized as revenue during the period	$ 3,034	$ 3,672

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Revenue Recognition - Summary of Revenue Disaggregated by Program (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Disaggregation Of Revenue [Line Items]
Revenue	$ 127,513	$ 108,085
Continuing Operations
Disaggregation Of Revenue [Line Items]
Revenue	127,513	108,085
Continuing Operations | SilverSneakers
Disaggregation Of Revenue [Line Items]
Revenue	96,114	79,827
Continuing Operations | Prime Fitness
Disaggregation Of Revenue [Line Items]
Revenue	25,036	22,593
Continuing Operations | WholeHealth Living
Disaggregation Of Revenue [Line Items]
Revenue	6,118	5,637
Continuing Operations | Other
Disaggregation Of Revenue [Line Items]
Revenue	$ 245	$ 28

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Share-Based Compensation - Additional Information (Details) $ / shares in Units, $ in Millions	1 Months Ended	3 Months Ended
	Mar. 31, 2022 $ / shares shares	Mar. 31, 2022 USD ($) Type	Mar. 31, 2021 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Types of share based awards | Type		3
Share based awards, description		We currently have three types of share-based awards outstanding to our employees and directors: stock options, restricted stock units, and market stock units.
Share-based compensation costs | $		$ 1.9	$ 3.0
Stock Options | Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Each of share based awards, vesting period	3 years
Stock options granted | shares	162,000
Stock options, weighted average exercise price per share	$ 31.27
Stock options, weighted average grant date fair value per share	$ 15.75
Restricted Stock Units (RSUs) | Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Each of share based awards, vesting period	3 years
Restricted stock units granted | shares	90,000
Restricted stock units, weighted average grant date fair value per share	$ 28.43
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Each of share based awards, vesting period		1 year
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Each of share based awards, vesting period		3 years

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Income Taxes- Additional Information (Details)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Operating Loss Carryforwards [Line Items]
Effective tax rate	92.60%	27.60%
Earliest Tax Year
Operating Loss Carryforwards [Line Items]
Open tax year	2018

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Leases - Additional Information (Details)	3 Months Ended
	Mar. 31, 2022 Agreement
Lessee Lease Description [Line Items]
Number of sublease agreements	2
Minimum
Lessee Lease Description [Line Items]
Remaining lease terms	4 months
Maximum
Lessee Lease Description [Line Items]
Remaining lease terms	30 months

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Leases - Schedule of Components of Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Leases [Abstract]
Amortization of leased assets	$ 156	$ 158
Interest of lease liabilities	4	14
Operating lease cost	1,861	1,915
Total lease cost before subleases	2,021	2,087
Sublease income	(1,344)	(1,344)
Total lease cost, net	$ 677	$ 743

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Leases - Schedule of Supplemental Cash Flow Information Related to Leases (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2022	Mar. 31, 2021
Cash received (paid) for amounts included in the measurement of lease liabilities
Operating cash flow attributable to operating leases	[1]	$ 1,009	$ (1,550)
Operating cash flow attributable to finance leases		(4)	(14)
Financing cash flow attributable to finance leases		$ (167)	$ (157)

[1] For the three months ended March 31, 2022, due to catch-up payments received from certain sublessors, cash received from subleases exceeded our cash paid for the related leases.

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Debt - Summary of Debt, Net of Unamortized Deferred Loan Costs And Original Issue Discount (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Less: deferred loan costs and original issue discount	$ (13,040)	$ (13,496)
Total debt	379,960	380,504
Term Loan B
Debt Instrument [Line Items]
Debt, net of unamortized original issue discount	$ 393,000	$ 394,000

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Debt - Credit Facility - Additional Information (Details)			1 Months Ended	3 Months Ended	9 Months Ended
	Jun. 30, 2021 USD ($)	Mar. 08, 2019	May 31, 2019 Agreement	Mar. 31, 2022 USD ($) Agreement	Mar. 31, 2022 USD ($) Agreement	Dec. 31, 2021 USD ($)
Line Of Credit Facility [Line Items]
Outstanding debt				$ 379,960,000	$ 379,960,000	$ 380,504,000
Interest Rate Swap Agreements
Line Of Credit Facility [Line Items]
Number of agreements held for maturity | Agreement			8	8	8
Derivative maturity month and year			2024-05
Interest Rate Swap Agreements | LIBOR
Line Of Credit Facility [Line Items]
Derivative, fixed interest rate			2.20%
Eight Interest Rate Swaps
Line Of Credit Facility [Line Items]
Derivative, notional amount				$ 600,000,000.0	$ 600,000,000.0
Eight Interest Rate Swaps | Hedges
Line Of Credit Facility [Line Items]
Derivative, notional amount				$ 333,300,000	333,300,000
Description of interest rate swaps on derivatives				we concluded that five of the eight interest rate swaps no longer qualified for hedge accounting treatment, and we de-designated these derivatives.
Revolving Credit Facility
Line Of Credit Facility [Line Items]
Available borrowing capacity				$ 99,500,000	99,500,000
Credit Agreement
Line Of Credit Facility [Line Items]
Initiation date	Jun. 30, 2021
Outstanding debt				$ 380,000,000.0	$ 380,000,000.0
Non-cash loss on extinguishment of debt	$ 18,200,000
Loss on modification of debt	800,000
Excess cash flow amount	$ 10,000,000.0
Credit Agreement | Federal Funds Rate
Line Of Credit Facility [Line Items]
Basis spread on variable rate	0.50%
Credit Agreement | One-Month LIBOR
Line Of Credit Facility [Line Items]
Basis spread on variable rate	1.00%
Credit Agreement | Minimum
Line Of Credit Facility [Line Items]
Unused commitment fee percentage	0.25%
Credit Agreement | Minimum | LIBOR
Line Of Credit Facility [Line Items]
Variable rate basis	0.00%
Credit Agreement | Minimum | Base Rate
Line Of Credit Facility [Line Items]
Basis spread on variable rate	1.00%
Credit Agreement | Maximum
Line Of Credit Facility [Line Items]
Unused commitment fee percentage	0.375%
Credit Agreement | Revolving Credit Facility
Line Of Credit Facility [Line Items]
Maximum borrowing capacity	$ 100,000,000.0
Maturity date				Jun. 30, 2026
Credit Agreement | Revolving Credit Facility | Minimum | LIBOR
Line Of Credit Facility [Line Items]
Margin rate	3.75%
Credit Agreement | Revolving Credit Facility | Minimum | Base Rate
Line Of Credit Facility [Line Items]
Margin rate	2.75%
Credit Agreement | Revolving Credit Facility | Maximum | LIBOR
Line Of Credit Facility [Line Items]
Margin rate	4.25%
Credit Agreement | Revolving Credit Facility | Maximum | Base Rate
Line Of Credit Facility [Line Items]
Margin rate	3.25%
Credit Agreement | Prior Credit Agreement
Line Of Credit Facility [Line Items]
Initiation date	Mar. 08, 2019
Credit Agreement | Swingline Sub Facility
Line Of Credit Facility [Line Items]
Maximum borrowing capacity	$ 30,000,000.0
Credit Agreement | Letters of Credit Sub Facility
Line Of Credit Facility [Line Items]
Maximum borrowing capacity	40,000,000.0
Credit Agreement | Term Loan Facility B
Line Of Credit Facility [Line Items]
Debt instrument, face amount	$ 400,000,000.0
Periodic principal payment as percentage of aggregate principal amount	0.25%
Maturity date	Jun. 30, 2028				Mar. 31, 2023
Percentage of premium with respect to the principal of term loan B	1.00%
Debt instrument, term	6 months
Payments on term loans					$ 7,000,000.0
Credit Agreement | Term Loan Facility B | LIBOR
Line Of Credit Facility [Line Items]
Margin rate	4.25%
Credit Agreement | Term Loan Facility B | Base Rate
Line Of Credit Facility [Line Items]
Margin rate	3.25%
Credit Agreement | Uncommitted Incremental Accordion Facility | Minimum
Line Of Credit Facility [Line Items]
Maximum borrowing capacity	$ 167,500,000
Percentage of consolidated EBITDA requirement	100.00%
Credit Agreement | First Lien Net Leverage Ratio is Less than or Equal to 2.75:1
Line Of Credit Facility [Line Items]
Excess cash flow percentages	0.00%
Credit Agreement | First Lien Net Leverage Ratio is Greater than 3.25:1
Line Of Credit Facility [Line Items]
Excess cash flow percentages	50.00%
Credit Agreement | First Lien Net Leverage Ratio Is Less than Or Equal to 3.25:1 But Greater than 2.75:1
Line Of Credit Facility [Line Items]
Excess cash flow percentages	25.00%
Prior Credit Agreement | Minimum
Line Of Credit Facility [Line Items]
Unused commitment fee percentage		0.25%
Prior Credit Agreement | Maximum
Line Of Credit Facility [Line Items]
Unused commitment fee percentage		0.50%
Prior Credit Agreement | Revolving Credit Facility | Minimum | LIBOR
Line Of Credit Facility [Line Items]
Margin rate				3.75%
Prior Credit Agreement | Revolving Credit Facility | Maximum | LIBOR
Line Of Credit Facility [Line Items]
Margin rate				4.25%
Prior Credit Agreement | Term Loan Facility B | LIBOR
Line Of Credit Facility [Line Items]
Margin rate				5.25%
Prior Credit Agreement | Term Loan Facility A | LIBOR
Line Of Credit Facility [Line Items]
Margin rate				4.25%

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Commitments and Contingencies - Additional Information - (Details) - USD ($)	Jan. 11, 2022	Mar. 31, 2022	Dec. 31, 2021	Nov. 13, 2020
Loss Contingencies [Line Items]
Common stock, par value (in dollars per share)		$ 0.001	$ 0.001	$ 0.001
Indemnification Agreement
Loss Contingencies [Line Items]
Litigation settlement, amount	$ 25,000

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Investment in Equity Securities - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions		1 Months Ended	3 Months Ended
	Jul. 01, 2021	Jul. 31, 2021	Mar. 31, 2022	Dec. 31, 2021	Jun. 30, 2021
Schedule Of Equity Method Investments [Line Items]
Common stock, shares outstanding (in shares)			49,854,631	49,800,756
Business combination percentage of share converted into and paid in cash	2.40%
Sharecare equity security, Cost basis	$ 10.5
Average cost per share	$ 0.95
Number of common stock shares permitted to sell			120,000,000	120,000,000
Unrealized loss			$ 22.4
Valuation allowance of deferred tax assets related to capital loss carryforwards				$ 135.4
Increase in valuation allowance of deferred tax assets related to capital loss carryforwards			$ 5.7
Period Between December 28, 2021 and March 27, 2022
Schedule Of Equity Method Investments [Line Items]
Number of common stock shares permitted to sell			750,000
Period Between March 28, 2022 and July 1, 2022
Schedule Of Equity Method Investments [Line Items]
Number of common stock shares permitted to sell			750,000
Legacy Sharecare
Schedule Of Equity Method Investments [Line Items]
Common stock, shares outstanding (in shares)					159,309
Sharecare
Schedule Of Equity Method Investments [Line Items]
Common stock, shares outstanding (in shares)		11,079,331
Business combination, cash received		$ 2.7

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Fair Value Measurements - Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Assets:
Investment in equity securities	$ 27,366	$ 49,746
Total assets	30,501	49,746
Liabilities:
Liabilities measured at fair value	2,832	15,643
Level 1
Assets:
Investment in equity securities	27,366	49,746
Total assets	27,366	49,746
Level 2
Assets:
Total assets	3,135
Liabilities:
Liabilities measured at fair value	2,832	15,643
Interest Rate Swap Agreements | Derivatives Designated as Effective Hedging Instruments
Assets:
Total assets	1,738
Liabilities:
Liabilities measured at fair value	1,580	8,705
Interest Rate Swap Agreements | Derivatives Designated as Effective Hedging Instruments | Level 2
Assets:
Total assets	1,738
Liabilities:
Liabilities measured at fair value	1,580	8,705
Interest Rate Swap Agreements | Derivatives Not Designated as Hedging Instruments
Assets:
Total assets	1,397
Liabilities:
Liabilities measured at fair value	1,252	6,938
Interest Rate Swap Agreements | Derivatives Not Designated as Hedging Instruments | Level 2
Assets:
Total assets	1,397
Liabilities:
Liabilities measured at fair value	$ 1,252	$ 6,938

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Fair Value Measurements - Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis (Parenthetical) (Details) - shares	Mar. 31, 2022	Dec. 31, 2021	Jul. 31, 2021
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Common stock, shares outstanding (in shares)	49,854,631	49,800,756
Sharecare
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Common stock, shares outstanding (in shares)			11,079,331
Other Income | Sharecare
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Common stock, shares outstanding (in shares)	11,079,331

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Fair Value Measurements - Additional Information (Details)	Mar. 31, 2022 USD ($)
Term Loan B
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Debt instrument net fair value	$ 389,100,000
Debt instrument net carrying amount	393,000,000.0
Revolving Credit Facility
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Line of credit	0
Carrying Value
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Cash and cash equivalents	$ 92,100,000

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Derivative Instruments and Hedging Activities - Additional Information (Details) - Interest Rate Swap Agreements	1 Months Ended		3 Months Ended
	Oct. 31, 2020 USD ($)	May 31, 2019 Agreement	Mar. 31, 2022 USD ($) Agreement	Dec. 31, 2020 USD ($)
Derivative [Line Items]
Number of interest rate swap agreements not qualified for hedge accounting treatment | Agreement			5
Number of interest rate swap agreements maintains hedging relationship | Agreement			3
Derivatives Designated as Effective Hedging Instruments | Cash Flow Hedges
Derivative [Line Items]
Number of amortizing interest rate swap agreements | Agreement		8
Derivative maturity month and year		2024-05
Derivative, fixed interest rate		2.20%
Derivative, notional amount			$ 333,300,000
Derivative amount reclassify pre-tax from accumulated OCI to interest expense within next 12 months			$ 2,400,000
Derivatives Not Designated as Hedging Instruments
Derivative [Line Items]
Number of de-designated amortizing interest rate swap agreements | Agreement			5
Recognized pre-tax loss on derivatives in discontinued operations				$ 14,300,000
Amount frozen that are previously deferred	$ 3,200,000
Floor interest rate of swaps			0.00%
Derivative, notional amount			$ 266,700,000

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Derivative Instruments and Hedging Activities - Schedule of Estimated Gross Fair Values of Derivative Instruments and Their Classification on Consolidated Balance Sheet (Details) - Interest Rate Swap Agreements - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Derivatives Designated as Effective Hedging Instruments | Cash Flow Hedges
Liabilities:
Derivative liabilities	$ 1,580	$ 8,705
Derivatives Not Designated as Hedging Instruments
Liabilities:
Derivative liabilities	1,252	6,938
Other Assets | Derivatives Designated as Effective Hedging Instruments | Cash Flow Hedges
Assets:
Other assets	1,738
Other Assets | Derivatives Not Designated as Hedging Instruments
Assets:
Other assets	1,397
Current Portion of Long-term Liabilities | Derivatives Designated as Effective Hedging Instruments | Cash Flow Hedges
Liabilities:
Current portion of long-term liabilities	1,580	5,911
Current Portion of Long-term Liabilities | Derivatives Not Designated as Hedging Instruments
Liabilities:
Current portion of long-term liabilities	$ 1,252	4,714
Other Long-term Liabilities | Derivatives Designated as Effective Hedging Instruments | Cash Flow Hedges
Liabilities:
Other long-term liabilities		2,794
Other Long-term Liabilities | Derivatives Not Designated as Hedging Instruments
Liabilities:
Other long-term liabilities		$ 2,224

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Derivative Instruments and Hedging Activities - Schedule of Effect of Cash Flow Hedge Accounting on Accumulated OCI (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Derivative Instruments Gain Loss [Line Items]
Total other comprehensive income, gross of tax	$ 6,807	$ 2,802
Interest Rate Swap Agreements
Derivative Instruments Gain Loss [Line Items]
Total other comprehensive income, gross of tax	(9,142)	(3,762)
Interest Rate Swap Agreements | Derivatives Designated as Effective Hedging Instruments | Cash Flow Hedges
Derivative Instruments Gain Loss [Line Items]
Gain related to effective portion of derivatives recognized in accumulated OCI, gross of tax effect	(7,125)	(1,412)
Interest Expense | Interest Rate Swap Agreements | Derivatives Designated as Effective Hedging Instruments | Cash Flow Hedges
Derivative Instruments Gain Loss [Line Items]
Loss related to effective portion of derivatives reclassified from accumulated OCI to interest expense, gross of tax effect	(1,739)	(2,046)
Interest Expense | Interest Rate Swap Agreements | Derivatives Not Designated as Hedging Instruments
Derivative Instruments Gain Loss [Line Items]
Previously deferred loss on interest rate swap agreements reclassified from accumulated OCI to interest expense, gross of tax effect	$ (278)	$ (304)

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Derivative Instruments and Hedging Activities - Schedule of Impact of Derivatives Not Designated as Hedges on Consolidated Statement of Operations (Details) - Derivatives Not Designated as Hedging Instruments - Interest Rate Swap Agreements - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Derivative Instruments Gain Loss [Line Items]
Impact of derivative instruments not designated as hedges	$ (5,417)	$ (826)
Other (Income) Expense, Net
Derivative Instruments Gain Loss [Line Items]
Net gain related to ineffective portion of derivatives, gross of tax effect	(5,695)	(1,130)
Interest Expense
Derivative Instruments Gain Loss [Line Items]
Previously deferred loss related to de-designated swaps reclassified from accumulated OCI, gross of tax effect	$ 278	$ 304

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Earnings (Loss) Per Share - Reconciliation of the Numerator and Denominator of Basic and Diluted Earnings (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Numerator [Abstract]
Income from continuing operations - numerator for earnings (loss) per share	$ 644	$ 19,944
Loss from discontinued operations - numerator for earnings (loss) per share	(63)	(808)
Net income	$ 581	$ 19,136
Denominator [Abstract]
Shares used for basic income (loss) per share	49,838	49,222
Effect of dilutive stock options and stock units outstanding [Abstract]
Shares used for diluted income (loss) per share	50,557	50,340
Earnings (loss) per share attributable to - basic [Abstract]
Continuing operations (in dollars per share)	$ 0.01	$ 0.41
Discontinued operations (in dollars per share)	0.00	(0.02)
Net income	0.01	0.39
Earnings (loss) per share - diluted [Abstract]
Continuing operations (in dollars per share)	0.01	0.40
Discontinued operations (in dollars per share)	0.00	(0.02)
Net income	$ 0.01	$ 0.38
Non-Qualified Stock Options
Effect of dilutive stock options and stock units outstanding [Abstract]
Effect of dilutive stock options and restricted stock units outstanding (in shares)	77	62
Restricted Stock Units (RSUs)
Effect of dilutive stock options and stock units outstanding [Abstract]
Effect of dilutive stock options and restricted stock units outstanding (in shares)	363	844
Market Stock Units
Effect of dilutive stock options and stock units outstanding [Abstract]
Effect of dilutive stock options and restricted stock units outstanding (in shares)	279	151
Performance-Based Stock Units
Effect of dilutive stock options and stock units outstanding [Abstract]
Effect of dilutive stock options and restricted stock units outstanding (in shares)		61
Non-Qualified Stock Options
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Dilutive securities outstanding not included in the computation of earnings per share because their effect is anti-dilutive (in shares)	262	268
Restricted Stock Units (RSUs)
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Dilutive securities outstanding not included in the computation of earnings per share because their effect is anti-dilutive (in shares)	35	9

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Accumulated OCI - Changes in Accumulated OCI, Net of Tax (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Changes in accumulated OCI, net of tax [Roll Forward]
Amounts reclassified from accumulated OCI, net of tax	$ 1,502	$ 1,750
Interest Rate Swap
Changes in accumulated OCI, net of tax [Roll Forward]
Balance	(8,251)	(17,389)
Other comprehensive income (loss) before reclassifications, net	5,305	1,052
Amounts reclassified from accumulated OCI, net of tax	1,502	1,750
Balance	$ (1,444)	$ (14,587)

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Accumulated OCI - Changes in Accumulated OCI, Net of Tax (Parenthetical) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]
Other comprehensive income before reclassifications, tax	$ 1,820	$ 360
Amounts reclassified from accumulated OCI, tax	$ 515	$ 600

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Accumulated OCI - Schedule of Reclassifications Out of Accumulated OCI (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Interest expense	$ 6,993	$ 10,756
Income tax expense	(8,086)	(7,620)
Total amounts reclassified from accumulated OCI	1,502	1,750
Interest Rate Swap Agreements
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Total amounts reclassified from accumulated OCI	1,502	1,750
Reclassifications Out of Accumulate OCI
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Income tax expense	(515)	(600)
Reclassifications Out of Accumulate OCI | Interest Rate Swap Agreements
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Interest expense	$ 2,017	$ 2,350

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Other (Income) Expense, Net - Summary of Other (Income) Expense, Net (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Other Income And Expenses [Abstract]
Unrealized loss on investments in equity securities	$ 22,380
Unrealized gain on derivatives	(5,695)	$ (1,130)
Other (income) expense, net	$ 16,685	$ (1,130)

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Subsequent Event - Additional Information (Details) - Merger Agreement - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2022	Apr. 05, 2022
Subsequent Event [Line Items]
Date of acquisition agreement	Apr. 05, 2022
Selling, General and Administrative Expenses
Subsequent Event [Line Items]
Incurred expenses related to Merger	$ 1.1
Subsequent Event
Subsequent Event [Line Items]
Business acquisition related financial advisory fees		$ 2.5
Common Stock | Subsequent Event
Subsequent Event [Line Items]
Business acquisition, share price		$ 32.50