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spk06: SilverSneakers proprietary digital programming reach by leveraging increasingly common smart devices, including our recent launch on connected TV with Roku. Now, with the SilverSneakers Go application, members can use their smartphones and tablets to register and attend all of our live virtual experiences. Research with our members indicates that these enhanced digital offerings are not a temporary fix to pandemic-driven isolation and are becoming a part of a new normal that members expect to persist as the pandemic fades over time. According to a recent SilverSneakers poll survey, almost 80% of respondents said they will continue using digital offerings in addition to the gym. This digital adoption is also opening new partnership opportunities with our health plan. As an example, we've been able to partner with Humana to pivot their popular neighborhood centers to a virtual engagement model, offering virtual programs for their members that would have otherwise not been able to occur. Collaborations such as these are a testament to the innovation of our team and the strong partnership we maintained with our clients through the pandemic to continue to deliver value and keep members engaged. A combination of physical locations and digital will be a permanent part of our offerings, allowing our members to use the benefit where they want, in gyms, at home, and in the community. From our recent research on Silver Sneakers member activity, we found that members expect to engage in non-gym community locations more often post-COVID. This insight is evident from the data we see as well. Our community-based Silver Sneakers fitness classes are growing by nearly 40% quarter over quarter. These classes not only represent important physical activity for our members, but also offer the social connections our members need. Community fitness continues to play a central role in SilverSneakers experiences. SilverSneakers Flex has been offered in non-traditional venues and communities for almost 10 years now. And we anticipate continued accelerated growth in this area because many of our SilverSneakers members expect to do their workouts in the community as opposed to in the gym as they had pre-pandemic. Our health plan clients remain highly supportive of our efforts to engage their members physically and virtually. They continue to leverage the SilverSneakers brand as a significant differentiator during the Medicare annual enrollment period. Our top clients are integrating SilverSneakers into their sales messaging, broker and agent training, commercials, and member materials as a key element of their 2021 benefits and are specifically highlighting our virtual offerings as exciting features for their beneficiaries to use during the pandemic. As an example, One of our larger helpline clients has included SilverSneakers references in five of its commercials plus distributed flyers. We concluded our selling season with the following highlight. Addition of over 350,000 new SilverSneakers lives for 2021, including new clients and market expansion within our existing clients, the new clients represented by both hybrid and PMPM revenue models. Expansion of our whole health living acupuncture and massage services with new and existing clients representing 250,000 additional members. And 2021 client renewals are 99% even in this challenging year. Just a reminder that SilverSneakers continues to have the tailwinds of the intrinsic growth of Medicare Advantage, with 10,000 Americans turning 65 each day. Add to that our own organic growth through signing new clients or market expansion. Turning to Prime, our comprehensive network increased this quarter to more than 12,700 partner locations. In the third quarter, Prime accounted for 23% of health care revenue. We ended the quarter with 227,000 paying Prime subscribers, down from 235,000 at the end of the second quarter. We are still adding new lives to Prime. Roughly 7,500 of the subscribers joined us in September. We are also engaging members through partnerships for digital expansion of our Prime program. During the pandemic, we were able to introduce live instructor-led virtual classes for Prime members as an alternative to gym locations that were unavailable. We also recently finalized a partnership with a leading health and wellness platform to add thousands of on-demand classes offered by hundreds of instructors. This partnership approach is a demonstration of how we intend to rapidly evolve the value of prime beyond the gym. I'll now turn the call over to Tommy to review the nutrition business. Tommy.
spk04: Thanks, Richard. Following up strong first and second quarters, we closed out another solid quarter for the nutrition business in Q3 with revenue up over 10%, and adjusted EBITDA up roughly 57% year-over-year. The Nutrisystem brand DTC continues to perform well, delivering revenue growth of approximately 20% in Q3 year-over-year with strong EBITDA contribution. Our revenue drivers and key KPIs continue to trend well. Nutrisystem DTC new customer starts have increased 21% year-over-year. We added nearly six days to length of stay year over year. Revenue per customer increased $70 year over year. Due to our ongoing shift to digital and solid execution by our marketing team, cost per order decreased year over year for the sixth straight month. These results are a testament to the focus and dedication to excellence of our great team. Like the last two quarters, new customer starts for Nutrisystem DTC were strong at a 21% year-over-year increase. That momentum continued in October. Consumers have discovered that we have great-tasting food with a great deal of variety and a program that is simple to use, and it works, and we deliver right to the door. In September, we announced the launch of our new Nutrisystem Partner Plan. Studies have indicated that dieting with a partner leads to greater success and helps people maintain their weight loss. We know that eating is a social event, and now we have a solution that allows partners to experience the journey together and hold each other accountable while enjoying great meal occasions. It's still early, but we are seeing good uptake on the partner plan, and it is yielding a meaningful increase in revenue per customer as well as length of stay. In the retail channel, our all-new Nutrisystem Body Select lineup has been well-received by our retail partners. Our new lineup includes new five-day weight loss kits, protein and probiotic shakes, plant-based Fuel Me Up snacks to help power you through the day, and nightcap snacks for a little evening indulgence that limits late-night sugar spikes. In conclusion, we're very pleased with another strong quarter for Nutrisystem. Our ongoing efforts around modernizing our brand, transforming our marketing, innovating around product, and a supportive customer experience ecosystem are all working together to generate continued momentum in our business. We believe this momentum will serve us well as we transition from Q4 into diet season. Now I'll turn the call over to Adam to review the financials. Adam? Thank you and good afternoon, everyone.
spk06: Tiffany's healthcare segment generated revenues of $95.5 million, a decrease of 40% from the same period in 2019. SilverSneakers revenue was approximately $69 million, down 45% compared to last year, as expected, due to fewer revenue-generating visits as a result of COVID-19. Similar to last quarter, SilverSneakers revenue profile during the third quarter of 2020 was substantially different from the same period last year. Revenue from per member per month fees represented 59% of our total SilverSneakers revenue compared to 33% in the same period last year. We ended the quarter with 16.6 million health plan members eligible for SilverSneakers. an increase of 9% over the same time in 2019. Total silver sneakers visits were 9.1 million during the third quarter of 2020, compared to 26.2 million during the third quarter of 2019, with average monthly participation decreasing during the quarter to 2.4% compared to 7.8% last year. Approximately 494,000 visits during Q3 were digital. The third quarter ended with 3.6 million enrolled SilverSneakers members. And now to Prime. We generated 21.7 million of revenue in Q3, a decrease of 29% from last year. We ended Q3 2020 with 227,000 paying Prime subscribers, compared to 342,000 subscribers at the end of Q3 last year. This subscriber decline accounted for the majority of the year-over-year revenue decline. We had approximately 2.3 million gym visits from Prime in Q3 this year, compared to 4.8 million last year. Moving on to Whole Health Living and other health care revenue. During Q3, we recognized $5 million in whole health living revenue, up 6% from Q3 last year. Our wisely well revenue during the third quarter was immaterial. As a summary for our healthcare division, COVID-19 and the related gym closures negatively affected our silver sneakers and prime revenue for the third quarter as we expected. As we discussed on the August call, The considerable drop in variable gym visit costs allowed for a strong flow-through of revenue to gross margin. Additionally, the healthcare division continued to benefit from earlier cost reduction initiatives. Therefore, this division ended Q3 with $41 million of adjusted EBITDA, a 4.6% increase over Q3 last year. Turning our attention to the Q3 results for the nutrition segment, total nutrition segment revenues came in at approximately $159 million, a 10.8% increase compared to the same quarter last year. Following strong performance all year, the Nutrisystem brand DTC business generated approximately $147 million in revenue, an increase of 20% compared to the prior year. This increase was driven by Nutrisystem new customer revenue of $95 million, which was up 30% year-over-year, coupled with an increase in reactivation revenue, which was up 6% at $53 million. Moving on, South Beach Diet revenue was $6.3 million, down 48% year-over-year, and QVC and retail contributed a combined $5.4 million in revenue, down 42% year-over-year. Third quarter nutrition adjusted EBITDA was $28 million, or 17% of segment revenues. This compares to $18 million, or 12% of segment revenues in the prior year period. This year-over-year increase was driven by a decrease in marketing, and general and administrative costs, both in dollars and as a percentage of segment revenues compared to last year. Turning to our Q3 balance sheet and cash flow, we ended the third quarter with cash on hand of $56 million. We ended Q3 with $975 million of term loan debt, and we prepaid $39.7 million of principal amortization during the third quarter. Our next quarterly amortization payment is not due until March of 2022. We ended the quarter with a maintenance covenant ratio of 3.81 times, well below the maximum ratio of 5.75 times as calculated under our credit agreement. Our free cash flow for Q3 was strong at $31 million, reflecting the positive operational performance of both divisions partially offset by working capital dynamics. Year to date, we have produced free cash flow of $152 million. As Richard mentioned, we expect the transaction with Kainos to close before the end of the fourth quarter. We will use a significant majority of the net proceeds of the transaction to pay down our Term Loan A and Term Loan B in proportion to their outstanding balances. as required by our credit agreement. Following the close of the transaction, we estimate a trailing 12-month covenant ratio of no more than 2.8 times at year end, as calculated under our credit facility. During the third quarter, we recorded a non-cash impairment charge to Nutrisystem Goodwill of approximately $66 million, which reflects the difference between our carrying costs and estimated net proceeds from the transaction with KNOs. This impairment charge will not have any impact on current or future operations, nor affect our liquidity, cash flows from operations, or compliance with the financial covenants set forth in our agreement. Based on the healthcare segment's revenue and adjusted EBITDA performance through the third quarter of 2020, and the outlook for the remainder of 2020, we are providing guidance for annual healthcare segment revenue in a range of $425 million to $432 million, and adjusted EBITDA in a range of $143 million to $145 million. We believe the financial and operational performance of our healthcare segment in the second and third quarters reflect the ability of our business to address the challenges of the pandemic. Based on early fourth quarter activity, we anticipate some pressure in our prime revenue coupled with an increase in utilization costs for both prime and whole health living as compared to the third quarter. We remain focused on managing the business with financial discipline and completing the nutrition segment divestiture. And we also look forward to investing in our healthcare business for 2021 and beyond. I'll now turn the call back over to Richard. Richard. Thank you, Adam. I'd like to thank our dedicated colleagues for their efforts and for the results this quarter. We are pleased with our performance, and I am particularly excited about the possibilities around our strategic initiatives and plans to organize our teams to deliver growth. The Nutrisystem transaction is a good outcome for Tiviti Health and its stakeholders. As mentioned, It will allow us to focus on our core healthcare business and build value for shareholders. We will now open the call to your questions. Operator?
spk03: As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. And your first question comes from a line of Jillinder Singh from Credit Suisse. Your line is open.
spk00: Jalendra Singh, your line is open. Sorry, I was on mute. Hi, good evening, guys. This is actually Jermaine Brown filling in for Jalendra. So impressive growth on your digital initiatives. Given the financial flexibility that you'll have post the nutrition sale, I'm curious about your long-term plans. Is the primary growth opportunity focused on the digital health initiatives? And if so, can you just provide any color on the level of investment required to just continue to grow within these programs?
spk06: Yeah, thanks, Jermaine. Richard, I'll start, and then Adam, you want to pick up the investment side of the question. I think, you know, the growth is going to come in both areas, Jermaine. We're going to see, as you saw in the physical visits coming back on silver sneakers and in prime both relative from Q2 to Q3, what we're seeing so far is a continuation of that trend. So we see in-visit you know, in participating location visits continuing to grow. And, of course, you saw the digital acceleration as well. My view is that both of those are going to continue to grow, and we are going to continue to invest in both. And the investments we've made on the digital side is what has given us the growth you've seen here, the million visits and the quarter-over-quarter growth. And we'll continue to do that. In terms of the total investment profile, Adam, any comments you want to make on that? I think, Richard, hard to add on top of that. The important thing to remember is that we're unlocking new members through this. As we said in the prepared remarks, we've got about 25%, similar to last quarter, of SilverSneakers members that are brand new to the program that are coming in via digital channels. I think that's important. I think it shows the opportunity for the SilverSneakers brand to branch out and tap members who may not be able to or want to go to a physical gym. And so we'll invest appropriately behind that. The good news is we have a solid platform to build off of. We're not doing this from scratch. We have a network of members and instructors who understand how to use digital. And so we'll have more to say as we get through probably our February earnings call. I expect we'll lay out some more details in terms of how much of investments each of these channels will require. But very excited to see the growth.
spk00: got it and then uh just to follow up on that um any updates on the ability to monetize this further in the future is is the plan primarily to you know grow the user base improve the engagement improve the retention and then focus on monetizing somewhere down the road well yeah i mean so yes and no i guess what i would say is that digital will be a part of our offering going forward i think the new world will be a combination of physical visits and digital visits
spk06: And we're working in partnership with our plans to make sure that those visits are, you know, realized as valuable visits and have you know, appropriate remuneration attached to them. It's still, you know, we're still here in COVID land getting started. You know, nobody knows what the output will be, but pretty confident that we'll have, you know, a monetizable digital experience along with our monetizable physical visits. I don't know, Adam, if you want to. Yeah, and I'll just point out, you know, the 494,000 virtual instructor visits that we have that's in our supplemental deck, you know, we do get reimbursed for those. So those are billable today.
spk00: Thanks, audience.
spk03: Thank you. Your next question comes from the line of Ryan Daniels from William Blair. Your line is open.
spk06: Hey, guys. Nick Spiegelman for Ryan. Thanks for taking my questions. I guess to start off, given kind of the shift of seniors that we've just been discussing, kind of digital, at-home-based fitness, are you anticipating or have you been experiencing kind of any pricing pressures coming from plans as obviously that's, you know, a little bit cheaper avenue to provide fitness services? Thanks, Nick. Short answer is no. Longer answer is, you know, we need to make sure that the combination value proposition for our plans works for them and for us. And so, so far we haven't had any, you know, any issues on the, you know, on the rates or, you know, the reimbursement for digital versus physical, et cetera. But, you know, we're getting through COVID, and as we come out on the other end, we'll work in partnership with our plans to make sure that, you know, the amount of money that, you know, they're expending on their members' behalf is valuable and working for them. So far that feedback is very positive, and so we're happy to see that. More importantly, I think, you know, and our survey data tells us that members really want this. And post-COVID, they believe a few things. They believe digital will still continue to be a part of their workout routine. They'll move more into community and outside. They'll still use the gym, but they're going to think about their fitness a little broader than they did going into COVID. And so our health plans care about the health of the member, as do we. And so working together in that pursuit, I believe will mean that digital and physical will both be a part of the uh, the experience journey for our members and that both will be, uh, will be billable. Great. Thanks. And then kind of, um, On the other side of that, pre-COVID, it seems kind of the silver sneakers, the fitness division was experiencing a little bit of cost pressures coming up from the gyms, who were kind of asking to kind of pull a little bit of that margin from the guys. I'm assuming, you know, given the kind of decrease in visits, that's kind of subsided a little bit. I was just wondering kind of what's your updated outlook there as we continue to kind of normalize Do you anticipate any increased pressure there, or is that mostly kind of been shaken out at this point? Yeah, Nick, I'll start, and then Adam, if you want to weigh in on this. I think one for me is that there's always network pressure on the top side and the bottom side, right? Whether it be the product you're delivering or the person who's who's funding it and so i think those dynamics are still at play but with what's happening in the market um you know what we provided for q4 is to give you a view of kind of where we see um you know our our performance to be and in within that is our view of what happens on the network side in terms of cost but Adam, anything you want to add? Yeah, I think overall the relationship with our gym partners are still very positive. It's been a very tough year for them. We have lost, I believe, less than 2% of our gym network during the quarter, and we typically have some churn in our network of 16,000 gyms, but we've been very pleased to see that we've maintained a relative level similar to pre-COVID. And we will look forward to working with them through the pandemic because, as Richard said, they're still going to be an important outlet for the SilverSneakers brand. Folks have been crystal clear. They want a return to the gym. They want the social aspect. And we want to make sure that we still provide that. And we're working with them to make sure it works similar to health plans. works uh good for us and the gym partners yeah i think the relationships that we have on the plan side are strong and the relationships we have on the gym side are just as strong and so you know what we want is members to be healthier and for many of our members that means they want to go to the to the gym and so maintaining a robust network and good places for them to go is going to continue to be important for us awesome thanks for taking the questions guys have a good night
spk03: Your next question comes from a line of Alex Herman from Craig Hallam Capital. Your line is open.
spk02: Great. Thanks very much for taking my question. You know, I wanted to talk about the healthcare segment, which I guess is going to be the bulk of the business going forward now after the sale. of the nutrition segment. I know it's so hard to, you know, give a give a forecast for next year, but just considering some of the new wins and the enrollment growth and eligible lives and what you're going to be seeing and considering, you know, it sounds like the ultimate EBITDA number for this year is going to end up pretty close to where you thought it was at the beginning of the year, even at the high end of the guidance. Is there any reason to think that that sort of base of 143 to 145 million is, you know, a good or maybe not a good sort of base case to build off of for 2021? Or there may be opportunities to grow that given the 350 new eligible lives that you think you're going to have next year?
spk06: Hey, Alex. It's Adam. Good to hear your voice. Well, you know, can't comment on EBITDA levels for 2021 yet. You know, we plan on doing that when we have our February Q4 call, so more to come there. I think, you know, the dynamics we've seen this year are highly unusual. Never seen them before with the higher flow through of PMPM dollars going to gross margin with low gym visits. I think the important thing to understand is the dynamic of the business is such that as gym visits come back, you'll probably see margin levels go back to pre-COVID levels, which is a good thing because that means we're coming out of the pandemic. But the foundational strength of the business, that being the membership base, the gym contracts, the health plan contracts, are all intact. And so we feel like we can certainly over the long term grow off of this base and although I don't want to be specific to what exactly next year would look like compared to this year because this year is so unusual.
spk02: Okay, that makes a lot of sense. Thanks a lot for that. And just thinking about, you know, the fact that retention has been so strong, I mean, clearly seems as though health plans are, you know, valuing you as a partner. How do you kind of work with the health plans, have a better plan for monetizing your digital engagement? I mean, it seems like I'm sure the plans are happy that you've had a million digital imprints like that. Clearly, your members want it. Are you working on maybe more formal ways to capture that and really measure that with the health plan?
spk06: Yeah, Alex, for sure. That's a big part of what we're doing right now is working in partnership with our health plans to understand what the combination looks like. The key here is for the plan is to keep members physically active, mentally stimulated, and socially connected. And working out actually does all three of those, right? And so the plan knows that our offering is, to your point, the value of our offering is resonating well. In terms of the monetization and the go-forward future of it, yes, we have very strong plans for that. And working with our health plan so far, I would say that the responses have been very strong. do one of these virtual workouts, you know, get a little sweat in, get some fun in with your other members and the instructor, and you can see why there's value in these live with instructor-led visits. It's a pretty powerful socially connecting and physical experience. So I think that's why it's being received well is because it works. And I think that's the biggest testament to the experience. That's terrific. Thank you very much. Yep.
spk03: Your next question comes from a line of Dave from Jefferies. Your line is open.
spk01: Hi, Heather. Thanks for the question. Richard, first one's for you.
spk06: I know earlier you were talking about at some point talking to adjacencies that you'd want to grow into? And I took from your comments that, for now, the growth would be to focus in on the in-person visits, and then you talked a little bit about expanding on the digital, of course.
spk02: But beyond that, can you give us a preview a little bit of what you're thinking in terms of adjacencies that make sense to help augment the growth?
spk06: Yeah, good question, Dave. I mean, you know, we're still a little early in coming out with the, you know, the details of the strategy, but a lot of work has been done here. And we plan to do that on the next earnings call so we can get you more, you know, definitive information here. But in the supplemental materials, we put out just kind of a graphic to kind of lay out the idea. One of them, not specific to your question on adjacencies, which I'll get to, is the engagement, you know, platform and our ability to engage members better than we do today, more efficiently than we do today, all in pursuit of working with our health plan partners to activate and engage members overall. And that could be more than just physical fitness and more than just in the gym and gym will still continue to be important but so will outside of the gym and looking at the adjacencies market um you know you can see many different choices that we can go out and we'll bring in we'll bring more clarity clarity for you on that uh in in q4 one thing i want you to know as we approach that conversation is that we're going to do that very methodically very thoughtfully you'll see some tests and pilots you'll see some you know sequence of events for us to get in there. We're not going to, you know, just kind of jump in and then try and figure it out. We're going to be very disciplined in the way that we do that, but still just a little early for me to get into the details of what those are, but we plan to do that on the Q4 call. Fair enough. Okay. How about thoughts on capital deployment after the deal is closed? I know, you know, there's some options there where you can continue to put money to work organically.
spk02: I'm curious about, you know,
spk06: After that, do you have any sort of bias to maybe opening up and considering share repurchases? Or given the uncertain times, are you inclined to let the cash accumulate on the balance sheet? And then maybe to the extent you do want to talk about M&As or anything, maybe that would fold in with the strategy that you're going to maybe talk about if there's a small asset that makes sense to build off to augment strategy. But any color on that topic would be great. Now I'll start, and Adam, you can weigh in here too. So the first thing I would say is we're going to keep some optionality here in the short term so that we can deploy the capital in the exact right spot that's the most beneficial for our stakeholders. You know, my preference is to put that into the business to drive long-term terminal value growth. And I think, you know, our strategy is compelling that we'll be sharing with you soon. And inside there, I think you can see lots of places for for us to invest that can give good returns and better member experiences and enhance our relationships with all of our partners. With that said, we still have some remaining debt, as you know, based off the materials that we presented. So one option is to put some there. One could be, as you suggested, in a repurchase. Another one would be to just invest it in the business. There's a couple of different choices. As I sit here now, we want to deploy the capital in the most efficient way that gives us the greatest full stakeholder return. So we won't share any specifics on what we're going to do there. Definitely understand the root of the question. Adam, anything to add? No, nothing to add on top of that, Richard. Good question. Thank you. Sure. This is the last one. I think the guidance right now is assuming that the EBITDA in the fourth quarter declined about $9.5 million from the third quarter, and revenue is only declining by about $4.5 million. Can you help us understand the mechanics behind why the EBITDA shutdown is so much steeper?
spk02: Are there just some elements where you're making more investments, or is it the flip side where some of the visits are starting to come online and And as that happens, the natural hedge that was in effect in the second and third quarter starts to unwind.
spk06: I appreciate that question, Dave. Yeah, it's more the latter. So what we called out in the prepared comments was the prime business and the whole health living business. And as you know, those are both kind of fixed revenue models. We have seen a decline in Prime subscribers, and what we're seeing right now is that that could go down further in Q4, and that's more, I think, due to just some of the seasonality effects of how that membership kind of rolls off. Conversely, we also see an increase in visits in Prime. So you've got kind of a smaller subscription base with more folks who want to go to the gym. And we saw, you know, strong visits in October. And you'll notice just compared to Silver Sneakers, the Prime profile visits is really like 50% of historical pre-COVID, whereas Silver Sneakers is more of a third. And I think that just kind of goes to spell that it's a very different gym-going base than silver sneakers. And so when you have a smaller revenue input in Q4, you've got more visit costs, higher costs, you're going to have some Q3 to Q4 margin decline. With Whole Health Living, a completely different business, obviously, than gyms, but Those benefits are typically bookend on a calendar basis, and so as we reach the end of the year, a lot of folks have pent-up visits to their alternative care practice clinician, whether it be a chiropractor, acupuncture, massage therapist, and they have to use it or lose it in a sense. And so with the end of the year approaching and a lot of folks not going out at all earlier in the year, we think we're going to have some increased utilization costs in the fourth quarter. So a combo of those two things. And we typically sometimes see a smaller gross margin in silver sneakers due to seasonality in the fourth quarter, and that's more around the holidays, Thanksgiving, Christmas, and not having quite the same average visit profile. But All that said, there is room, too, for some small investments as we get launched on the strategy before we get into the new year. But the primary bulk, I'd say, is going to be driven in the gross margin arena. Very helpful. Thanks, guys.
spk03: Our next question comes from a line of Sean from Piper Sandler. Your line is open.
spk01: Hi, thanks very much. Are there any major renewals coming up at the end of the year that are worth calling out? And if so, how's the conversation going on pricing with those given the changing dynamics of utilization here?
spk06: Yeah, good question. And so what we put in our retention numbers and our net new lives is a total reflection of all of the ongoing discussions or negotiations for the year. So we feel good about that. And that's pretty typical for us over the history, having that 99% renewal. In terms of the economics, obviously not sharing individual deal dynamics, but overall we're pleased with the way that the margin is coming in on these plans relative to history and to what our expectations were. So what I would say right now is healthy relationships with the plan, very healthy renewals at 99% plus above market growth. with market expansions and new clients. That's across our business, not just in SilverSneakers, but also in Whole Health Living with 250,000 there. So feeling good about the selling season and the renewal season, which is a reflection of those numbers. So overall, very strong.
spk01: All right. Thanks for that. How many of the gyms do you think are going to in your network are going to survive this pandemic? Do you see any risk to losing any of those?
spk06: Yeah, good question. And something obviously we watched very, very closely. You know, the market, our network is down about 2%. You know, could that deteriorate further if COVID continues to cause some states to maybe, you know, reopen restrictions, et cetera? It's possible. You've seen some in the news, you know, with some, you know, liquidity challenges and others. But other of our gym providers are actually very strong financially and can weather much longer COVID impact. So it's hard to tell. Um, what I would say is there's many, many choices of of gems for our members to choose within a community. And we're working with in partnership with our gems to help them as well. You know, they're taking cove it very seriously, following protocols, making sure they're doing their safety and distancing and following whatever state you know restrictions or guidelines are there but it's really a hard question to to answer you know what I what I think that the the network would go down a little bit more over time I think that that could be likely uh but I really don't uh I really don't know the full the full um weight of that all right thanks very much again if you'd like to ask a question press star one in your telephone
spk03: Your next question comes from the line of Vikram Kasavahola from Guggenheim Securities. Your line is open.
spk05: Yeah, thank you for taking the question. Just to follow up on the previous question, I think in your prepared remarks, you talked about your new clients having a mix of both hybrid and PMPM contracts. Can you just talk about how the mix of those contract structures among your new clients and renewals compares to your existing book of business? It's very similar, very similar mix.
spk06: You know, we have clients who prefer hybrid model. We have clients for PMPM, and we're happy to serve both. Yeah, I would say that we haven't seen any intention change based off COVID relative to those two models. It still seems to be about the same. And part of that is, you know, our health plan clients see the world in longer horizons than just a few months of, you know, a pandemic hitting us, and they're really wanting to make sure that their supplemental offerings and for us is obviously primarily around fitness is still there for their members and the way that they contract for that haven't seen a material change in any of the approaches thus far.
spk05: Okay, great. And then maybe just to follow up, I'm curious if you can talk about how the current environment is impacting your overall marketing strategy and spending on the healthcare side in order to drive utilization and just how that strategy might evolve as you start to think about 2021. Thanks. Yeah, good question.
spk06: And something we've been talking a lot about here inside these walls. You know, we're shifting the investment from the traditional marketing strategy you know, behaviors that we used to, you know, reminding people to go to the gym, et cetera. And we've done it in two ways. One is we moved a lot of that. Well, some of the investment's gone down, so we've taken some savings and reduced some of the costs. But the other way that we've done it is moved it into digital and really making sure that our members on silversneakers.com and through our streaming platform have the availability and understanding of how to get to our live with instructor-led, billable services. And so the world just looks very different right now. I would say that our plans have continued to advertise or market silver sneakers in a pretty consistent fashion to previous years. We're prominently displayed on commercials. We're put on flyers that are going to home. Many of our health plans still want silver sneakers to be a prominent part of their AAP materials. In terms of our own marketing, it's really been a shift toward digital and a slight reduction in the total marketing spend. As we're putting together our plans for next year, depending on how COVID is behaving in the country will depend on how we deploy those marketing dollars. But I'm a firm believer in continuing to press on digital and working to get members activated. One key thing is 25% of our digital visits are from members who are newly enrolled silver sneakers you know these are folks that potentially never would have gotten activated outside of uh this situation and so we want to take advantage of that uh that that makes uh you know better for our health plan it makes it better for these individuals who are getting activated and so we want to continue to invest behind that great thank you your next question comes from the line of mike katusky from barrington research your line is open Hi, good evening. I think you may have just answered my first question. So of that 494, 25% were brand new or 25% of the folks that make up that 494,000? It's 25% of the folks that make up the 494. You got it. Okay. And I didn't quite catch it at the beginning. You said something about 80% will use digital offerings. Was that from a survey of silver sneakers eligible or active? So that was across our silver sneakers base. So all of the folks that we have the ability to, you know, connect with. So most of those would be enrollees, but it's not 100% enrollees, but I would say the majority of them are. Okay, so that 80%, those are folks that are already using, you know, are already in the program or are at least somewhat active, correct? Yeah, those are folks that are SilverSneakers members. That's the way I would say it, yes. All right, great. And I didn't catch it if you mentioned it. The collaboration on the virtual Prime, did you say who that was with? Yeah, we did not disclose the backbone of the digital. We didn't disclose that, so we're keeping that in-house. But it's a digital platform that enables thousands of videos to be available for members. Also helps us on the logistics of how people get on and how they're tracked and, you know, those types of things, the data coming out of it. Okay. And just in terms of Prime, do you have a sense of, You know, in terms of the membership, and I guess particularly the membership or subscribers that are still left, I mean, I would assume that a lot of that is sort of business, travel, usage. I mean, and given that that has been curtailed and probably will continue to be curtailed, I mean, is that something that's concerning? Is that top of mind in terms of when you think about that business or how should I think about it? Now I can see why you think that, but actually it's the opposite. So what we don't see, you know, business travelers using multi locations and because obviously travels reduced in the country that that's an impact. That's actually not what we're seeing. I think it just comes down to, you know, your your your you know, investing in a benefit or a gym that you're used to go into and whatever the restrictions are in your area, you know, can only be there at certain times or they limit capacity in there or you have to wear a mask the whole time you're working out, whatever the things are that may be a hindrance to you, you know, or you may just be uncomfortable, you know, because of the situation at home with, you know, kids or with, you know, grandparents, et cetera, and so are parents. And so, Well, we're not seeing that it's business travel related. We're just seeing it's people that are, you know, being thoughtful about how they're going to, you know, get back to their routine. The encouraging thing for me, and Adam, I think you just said this, but just to reiterate it is, you know, we're back to 50% of pre-COVID activity levels across our Prime book. And I think that speaks to the kind of accelerated return that, you know, active subscribers are coming back to, to the gym and as we see different pockets of the country depending on what state it might be and what time it reinstitute restrictions or opens up restrictions we do see that that has a material impact on on visits and how prime users are utilizing okay great and adam forgive i i didn't catch this but what the 143 to 145 that was guidance for uh fiscal 20 on on uh on the silver sinker side is that right Yeah, health care only. That's right. All right, that's all I've got. Thank you. Thank you.
spk03: If there are no further questions, Mr. Richard Ashworth, I turn the call back over to you for some closing comments.
spk06: I just want to thank everybody for their time and for the conversation today and look forward to connecting. Thank you.
spk03: ladies and gentlemen this concludes today's conference call thank you for participating you may now disconnect so
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