Tivity Health, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Tiviti Health Q4 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Ryan Wagers, Chief Accounting Officer. Thank you. Please go ahead, sir.

Good afternoon and welcome to the activity health fourth quarter 2020 financial results conference call. Before we begin, if you do not already have a copy, the fourth quarter earnings release, supplemental information, and related 8K filed with the SEC are available on our website at activityhealth.com. I would also like to highlight that our financial presentation within today's press release and supplemental materials are reflective of the divestiture of the nutrition segment. Therefore, all results of operations and balance sheet data related to that business are now reported within discontinued operations. To the extent any non-GAAP financial measure is discussed in today's call, you will also find a reconciliation of that measure to the most directly comparable financial measure calculated in accordance with GAAP in today's news release, which is also posted on the company's website. This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding activity health, expected quarterly and annual operating and financial performance for 2021 and beyond. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words believes, anticipates, plans, expects, and similar expressions are intended to identify forward-looking statements. You are hereby cautioned that these statements may be affected by the important factors, among others, set forth in activity health filings with the Securities and Exchange Commission in today's news release. and consequentially, actual operations and results may differ materially from the results discussed in the forward-looking statements. The company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. And now, I'll turn the call over to the company's president and CEO, Richard Ashworth.

Good afternoon, and thank you, Ryan. Thank you all for joining the call today to discuss Tiviti Health's fourth quarter earnings results. Joining me on the call is Adam Holland, our CFO. Tommy Lewis, our COO, will join us during Q&A. I want to start by thanking all our Tiviti Health colleagues whose dedication, discipline, and focus continue to drive results for our clients, members, and shareholders. Looking back on 2020, I am proud of our colleagues and how they responded to an unprecedented pandemic. We were able to successfully improve the financial health of the company and our fitness business quickly adapted to the changing needs of our members and clients by launching a new and dynamic suite of virtual offerings. We believe these digital offerings not only allow our current homebound members to stay active and connected with the help of SilverSneakers, they will be a critical contributor to our new digitally enabled member engagement platform going forward, which we refer to as the SilverSneakers Connect Strategy. As you saw in today's press release, we exceeded our guidance expectations for 2020 with $438 million in revenue and adjusted EBITDA from continuing operations of $148 million. Our strong balance sheet with net debt of $366 million coupled with strong operational performance brought our leverage ratio below 2.4 times at year end. To increase our financial runway and save on interest, we paid down an additional $45 million of principal in late January, making our next amortization payment not due until December of 2022. We are very pleased with our healthy financial profile to start 2021. SilverSneakers generated 10.1 million visits in Q4, a sequential increase of 12% from the third quarter. Our virtual visits helped drive this growth as we had over 800,000 virtual visits in Q4, up 63% from Q3. Demand for our virtual offering continues to accelerate, and we've recently increased our number of weekend classes and bolstered our roster of instructors to keep up with growth. The success of the virtual offering is not only represented in the total number of visits, but also in the number of newly engaged SilverSneakers members. Typically, 18% of our in-person gym participants are newly enrolled, meaning they had not previously participated in SilverSneakers. In our new virtual offering, over 36% of participants are newly enrolled. We are engaging eligible members more effectively. These enhanced digital offerings are not a temporary response to pandemic-driven isolation. They are becoming a part of the new normal. We engage with our members, and they tell us they want digital offerings offered in the context of our trusted SilverSneakers brand. According to a recent SilverSneakers Pulse survey, almost 80% of respondents said they will continue using digital offerings in addition to the gym once the pandemic fades. We are leading the market in providing a uniquely robust, high-quality, omnichannel experience for our members. I think it's important to highlight the strength of our brand. Our health plan clients remain highly supportive of our efforts to engage their members physically and virtually because they know our brand resonates strongly with their eligible population and is an important part of their new member acquisition and member retention. During the Medicare Advantage annual enrollment period, they leveraged the SilverSneakers brand as a significant differentiator. Several of our top clients incorporated the SilverSneakers brand into their sales messaging and broker and agent training. Their commercials and member materials specifically highlighted our virtual offerings as a key differentiator of their 2021 benefits and a valuable feature for their beneficiaries to use during the pandemic. The combination of physical locations and digital solutions will be a permanent part of our offerings, supporting our members across settings, in gyms, at home, and in the community. While I am excited about our ability to grow the business through digital means, our gym network and our partnering locations will continue to be a foundation of our core fitness pillar. Throughout 2020, our dedicated network team was able to maintain the largest national senior fitness network in the country. We ended the year with over 16,000 participating locations and only a 1% reduction from a year ago. This is a testament to our deep relationships within the gym industry, as well as the flexibility of our business model, which allows us to add locations quickly and ensure we offer the best possible SilverSneakers member experience. Additionally, we were able to extend the terms of several key gym contracts during 2020, which positions us well for the omnichannel future. Turning to Prime, our network ended 2020 with more than 12,600 partner locations. In the fourth quarter, Prime accounted for 21% of revenue. We ended the quarter with 218,000 paying Prime subscribers, as expected. As Adam will discuss later, 2021 is expected to be a rebuilding year for Prime. Our commercial insurance and large employer relationships are healthy, and our gym network is robust and durable. We will first focus on stabilizing the subscriber base, then pivot to growth while employing new digital features for Prime. There is tremendous opportunity for further subscriber penetration, and I am confident we will build this business to be even better than before. As I look forward to the year ahead of us, we now have the financial flexibility to deliver on our strategy, thanks in part to the successful sale of Nutrisystems and significant reduction in our debt, the focusing of our healthcare business into a streamlined organization primed for growth, and our unrelenting drive for delivering strong operating results. Tiviti is poised for growth and will continue to deliver differentiated value to clients, members, and shareholders. We have started the transformation from being a fitness and gym access company into a leading member-focused platform engagement company with omnichannel capabilities. We will engage members through our trusted 30-year SilverSneakers brand and do so beyond physical fitness, utilizing new tools, new data, and new experiences. We will offer a broad assortment of solutions, fitness and other important areas of health and wellness. These solutions are highly curated to members' individual needs. Fundamentally, Tivoli will be a member-centric company that is evolving to meet member needs in the new normal, leveraging our market-leading brand as well as digital and in-person asset capabilities and expertise. As you will see in today's supplemental deck, our 2021 strategic priorities include modernizing our engagement platform, accelerating our core fitness programs, expanding our digital transformation, growing our whole health living network, and piloting new offerings through additional network partners. The backbone of our SilverSneakers Connect strategy will be the engagement platform, enabling us to develop a personalized, data-driven set of experiences for our members customized to their interests, needs, and goals, all in a way that maximizes value for our clients and benefits for our members. As our platform learns and engages the member, we will be able to drive utilization and engagement and extend our value proposition beyond the gym. Our individual member engagement platform will be supported by a sophisticated technology backbone and data analytics capability. We are implementing Snowflake, a well-regarded cloud-based data platform solution, and partnering with Redpoint, a leading omnichannel personalization firm, to help us deliver the right member experiences at the right time. We are confident the engagement platform will accelerate and amplify every part of our strategy. For example, our additional network strategy, which I will cover in more detail in a moment, could support many of the 22 traditional and expanded supplemental benefits offered under Medicare Advantage. The opportunity to aggregate fragmented networks is more meaningful when offered through an engagement platform as more members will be made aware of the benefits and those benefits will be easier to access and utilize. The engagement platform will also be a means to diversify revenue beyond our current fitness and gym access offering. A good example is an upcoming new product offering that will allow members to connect socially through the platform over shared interests, either virtually or in person. Our analysis shows that this type of connection reduces loneliness and social isolation among our participating population. Members will be able to see friendly faces, meet new people, share in conversation, connection, and laughter. We will move decisively and select the right engagement platform to have in place by the middle of this year. This will likely require investment both organic and inorganic. We have already vetted several opportunities and will continue to refine our selection. We do not expect it will meaningfully move our leverage ratio profile, which we plan to maintain below 3.0 times going forward. Our objective with the core fitness strategic pillar is to drive member activation and engagement in fitness while introducing new programs to expand our reach. An important part of this strategy is to improve engagement rates by offering alternatives in physical fitness, such as community-based fitness. As we mentioned last quarter, we found that members expect to engage in non-gym community locations more often post-COVID. This insight is evident from our own survey data and our growth in FlexLog virtual programs. SilverSneakers Flex has been offered in non-traditional venues and communities for almost 10 years now, and we anticipated continued accelerated growth in this area because many of our members expect to do their workouts in the community in addition to in the gym as they had pre-pandemic. Additionally, we expect to continue to invest in and grow our live virtual fitness offerings. Our members have responded enthusiastically to SilverSneakers Live and FlexLive. Not only has this proven to be an excellent new member acquisition vehicle, but it also increases utilization and engagement. Many members will not go to a gym but really enjoy being able to work out in the comfort and privacy of their home. At the same time, when the loyal gym goers want a diversion from the gym due to bad weather, scheduling constraints, or other factors, virtual is a convenient and easy option. Taken together, this positions Tiviti well for an omnichannel new normal where we continue to have the leading brand in senior fitness. Our digital transformation pillar is the expansion of our offerings to attract new members and extend the activity of enrolled members. Fundamentally, we believe introducing non-fitness digital offerings will attract a broader and more diverse set of new silver sneaker enrollees. Using the engagement platform and AI tools, we'll offer new condition-specific programs and services that will cater to members' unique health and wellness needs and interests. Potential member engagement opportunities include virtual personal training, interest-based social connection opportunities, mental enrichment, and personalized member content. Within the Whole Health Living, we are re-gentrifying our platform and expanding the solutions and services offered. This will allow us to pursue additional eligible lives and revenue. We will ensure our investments align with the highest growth areas, focusing on benefits and utilization management for acupuncture and massage therapy. This is a business we understand well. It is experiencing growing demand resulting from the opioid epidemic and Medicare national coverage determination changes as payers and providers seek to provide non-pharmacologic alternatives to pain management. The final pillar of our strategy is to pilot new offerings via new networks. Our ability to form cohesive networks in highly fragmented industries allows us to branch out and bring scale to payers in areas where it is challenging to do so. Examples include in-home services, nutrition offerings, and physical therapy, among others. We're looking for the right network partners with the right capabilities and member experiences. Our capital allocation approach will likely mirror that to the engagement platform that I mentioned and include some level of prudent and disciplined strategic investment. To be clear, any external investment would likely be bolt-ons and not transformative opportunities. In conclusion... The fundamentals of our business are strong. As more individuals age into Medicare, the demand for high-quality engagement will only increase. Our 2021 guidance reflects growth in revenue and adjusted EBITDA, and our balance sheet affords us the financial flexibility needed to accelerate our growth. I'm confident that our strong financial foundation and the investments we have made and will continue to make will drive diversified and sustainable growth. I'll now turn the call over to Adam.

Thank you, Richard. Now on to the fourth quarter results for continuing operations. Revenues for the fourth quarter were $100.6 million, a decrease of 37% from the same period in 2019. SilverSneakers revenue was approximately $74 million, down 39% as expected compared to last year due to fewer revenue-generating visits as a result of COVID-19. Similar to last quarter, SilverSneakers revenue profile during the fourth quarter of 2020 was substantially different from the same period last year. Revenue from per member per month fees represented 58% of our total SilverSneakers revenue compared to 34% in the same period last year. We ended the quarter and the year with 16.7 million health plan members eligible for SilverSneakers, an increase of 9% over 2019. The fourth quarter ended with 3.6 million enrolled. Total Silver Sneakers visits were 10.1 million during the fourth quarter of 2020. This compares to 25.6 million last year, with monthly average participation decreasing during the quarter to 2.6% compared to 7.7% last year. Within the 10.1 million visits, approximately 804,000 visits were digital. During Q4, 77% of our GMs reported at least one visit. Of note, January 2021's virtual visits of over 400,000 were the highest monthly total we have seen, and in-person visits for January 2021 are in line with our expectations, each of which is a very good start to the year. And now the prime. We generated $21.5 million of revenue in Q4, a decrease of 33% from last year. We ended 2020 with 218,000 paying Prime subscribers compared to 343,000 subscribers at the end of 2019. This subscriber decline accounted for the majority of the year-over-year revenue decline. We had approximately 2.5 million gym visits from Prime in Q4 2020 compared to 4.8 million in the prior year. For Whole Health Living, during Q4, we recognized $4.9 million of revenue. In summary, COVID-19 and the related gym closures negatively affected our SilverSneakers and Prime revenue for the fourth quarter as expected. Also, we deployed a fourth quarter marketing campaign of approximately $2 million to promote awareness of the SilverSneakers virtual offering and help drive digital visits. Our continuing operations generated adjusted EBITDA of $35.2 million for Q4. And for the year, we generated $147.9 million of adjusted EBITDA from continuing operations. Turning to our year-end balance sheet and cash flow, we ended the year with cash on hand of $100 million and term loan debt of $467 million with a leverage ratio of 2.36 times, well below the maximum ratio of 5.25 times as calculated under our credit agreement. In January 2021, we paid an additional $45 million of principal amortization, which makes our next required quarterly payment due in December of 2022. Now turning to our 2021 guidance. We highlighted our 2021 guidance in our earnings release and our supplemental materials this afternoon. Total revenues are anticipated to range between $455 million and $485 million. We estimate adjusted EBITDA from continuing operations to range between $150 million and $155 million. Our assumptions for SilverSneakers performance during 2021 are as follows. Total SilverSneakers revenue is expected to represent approximately 78% of total revenue. We expect to end 2021 with 18 million eligible members. We expect annual SilverSneakers visits to range from 59 million to 64 million, including digital visits, with participation levels reaching close to 70% of pre-pandemic levels at year end. Regarding the shape of the year, more SilverSneakers revenue and visits are expected in the back half of 2021, with over one-third of annual visits projected in Q4. This visit pattern is driven by our assumption that the COVID-19 vaccine should provide some degree of normalcy, allowing more members to return to the gym and participate in SilverSneakers community-based fitness programs. Switching to our assumptions of prime. Total prime fitness revenue is expected to represent 17% of total revenues. Based on our current subscriber levels, we are projecting an average subscriber count of 190,000 to 200,000. We are not anticipating a meaningful growth in total subscribers during 2021. We expect annual prime visits to range from 10 million to 12 million. Turning to whole health living, total whole health living revenue is expected to represent approximately 5% of total revenues with more revenue in the back half of 2021 as compared to the first half. Total company gross margin as a percentage of revenues is expected to begin the year at approximately the same level as Q4 of 2020 and then decrease through the year due to increasing silver sneakers, gym visits, and the related costs. Total company gross margin dollars and adjusted EBITDA dollars are anticipated to be slightly higher in the back half of 2021 compared to the first half as more silver sneakers visits from hybrid members drive more gross margin dollars. Regarding other components of guidance, we anticipate 2021 marketing expense and SG&A to be less in total dollars as compared to 2020. We anticipate free cash flow to range from $50 million to $60 million and capital expenditures to range from $20 million to $25 million. While the 2021 capital expenditure range is higher than historical levels, this year reflects a combination of delayed investments from 2020 and normal course investments for 2021, and new strategic investments to drive sustainable, profitable growth that Richard outlined earlier. With regard to our expected debt leverage ratio, it is our intention to maintain a leverage ratio below 3.0 times as we grow the business through both organic and non-organic means. I'll now turn the call back over to Richard. Richard?

Thank you, Adam. Well, now I'll open the call to your questions. Operator?

As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound or hash key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jalindra Singh with Credit Suisse. Your line is open.

Hi, good evening. This is actually Jermaine Brown filling in for Jalindra. So, first, on your guidance, during your prior quarter, you had enough confidence to give Q4 guidance. I'm curious, what factors have emerged that give you increased confidence in giving full-year guidance? And can you provide some color on the puts and takes that drive the upper and lower bounds of that? sales and EBITDA range?

Yeah, sure. Yeah, sure. Hey, great. Great to talk to you, Jermaine. Yeah, so what gives us confidence if you tick through and there's some supplemental information in the deck today that may be helpful? One of the key items is the eligible members. We began the year where we thought we would begin, and we expect to end the year with eligible members of 18 million, and that's a critical component. Another critical component is what we mentioned in the prepared remarks are January visits have started off very well. Over 400,000 virtual visits in January and our in-person gym visits have been right on our expectations. And, you know, aside from the weather in February, which, you know, obviously was going to be an impact, we are still looking good. So the start of the year has been as expected. Prime has begun the year as we've expected and as has Whole Health Living. And so with that, Coupled with the engagement information we've received from members in terms of the desire to return to the gym, the desire to return to community fitness, the desire to continue with virtual, we feel like our guidance expectations are not unreasonable at all. And with a, you know, obviously more of a back-end view with more visits in the back half of the year, more margin dollars in the back half, we feel like this is clearly have enough visibility to give the guidance we gave today.

Got it. And on your strategic transformation to member-centric platform engagement company, can you provide some color on the level of resources that are currently available in-house versus those that you'll have to partner with to get access to and those that the company will invest internally for?

Hey, Jermaine, it's Richard. Good question. So it's going to be a combination of both. I would say that, you know, we right-sized the organization to be ready for growth. and, you know, have folks on the team who are really focused on our digital offering and our virtual suite that's been successful, as you've seen from the performance for this year. But a lot of the expertise we are going to get from our partners. You know, as I mentioned, Snowflake and Redpoint. We also have some other companies that are well-known that we're bringing on board to help us in our platform capabilities. So I would say the majority of the expertise will come from partners. But we've kept, you know, a small and mighty team here with Intivity as we're orchestrating the overarching, you know, member journey and experience we want to create and then using outside capabilities to help us accelerate that.

Perfect. Thank you very much. Thanks, Ryan.

Your next question comes from the line of Dave Stiblo with Jefferies. Your line is open.

Hi there. Good evening. Thanks for the question. Richard, I'd love to just hear a little bit more about the way that that question ended with the number-centric activities. Can you just give us some more concrete examples of things that you're looking to do there and how activity can monetize those activities? Are those things that are going to be paid for by the senior in some way or from other partners, other MA plans perhaps, just to give us a little more sense of what that's going to look like over time?

Yeah, so thanks, Dave. Appreciate the question. You know, the way we're thinking about this is the engagement platform really drives value across all of the pillars that we put in the supplemental materials. So it's a way to bring, you know, eligible participants in and engage with them in a very personalized way. uh way and so you know getting you know the information from the member getting whatever needs and interests they have and i'll give you an example here in a moment and using some of our new capabilities uh with our partners so that we can increase awareness get more conversion get more engagement and utilization uh two two quick examples one would just be um you know social connection and social offerings you know a lot of our health plan partners are are really worried about social isolation and loneliness in this population not just the covet 19 but maybe exacerbated by that, but a problem even pre-pandemic. And so by launching this engagement platform and having, you know, social connection opportunities for our members, we believe that there's value in that and that, you know, our health plan partners find value in that as well. And so, you know, more to come on that as we begin that process and that offering in the market. Second would be one like nutrition. You know, we obviously have our Wisely Well brand, which is more on food distribution, but we could pivot more toward behavior and more toward, you know, upfront content and information. and engagement, not just the food delivery. And the engagement platform would enable us to do that. And as you know, nutrition is a covered supplemental benefit. To your question on where the pay comes from, generally my bias is not from the member, and it's more like it is today, traditionally through plans. But over time, there could be other entities that also get a benefit from us being able to engage this population. in a better way. So if I think about at-risk groups or I think about, you know, other partners in the market or other stakeholders in the market that are helping this population, our platform could be a great way for people to get that engagement and get that utilization. Now, we wouldn't be maybe providing that service. You know, the partner may be doing that. We would be the conduit by which they could get the exposure.

Okay, great. Thanks for that color. Maybe a question for Adam about the SilverSneakers-eligible bridge. So if I think about jumping from 16.7 at the end of 2020 up to 18 million, it's about 7%, 8% growth there. Can you talk us through the bridge components there? I know you guys have talked about some new wins that we're going to add, 350,000 or so new lives. Then you'd have normal market growth on top of that. So You know, putting those together, I could imagine, and it's not hard to envision, where you could have a silver sneakers eligible growth of double digits, well north of 10% since the underlying market is growing 9% this year. So is there some offset to that, or is guidance perhaps just biased to the conservative side for now as you're going through the plans?

Yeah, you hit the main components, Dave, and you're right. The biggest bridge component is the open enrollment period, right? And so that's the period of time where members have from October to December to switch plans and start a new plan on the new calendar year, January 1. And so for us, we started the year well ahead of where we ended 2020 at 16.7. And so, you know, we're shy of 18 million, which is typical every year. And every month we have age ends. folks that are turning 65 that become eligible for Medicare that can join the Medicare Advantage plan. And this is a case every year. We ramp up as those agents occur to get to the 18 million number by the end of the year. Okay. Thanks much.

Your next question comes from the line of Sean Weiland with Piper Sandler. Your line is open.

Hi. Thanks for taking the question. It's actually Jeff. I'm for Sean. I think our first question is, in the past, you guys have spoken about some high-frequency members in the Silver Sneakers membership driving a significant majority of the visits, people who go to the gym kind of five or six or seven times a month. Can you just give us maybe an update on the prevalence of those high-frequency members and just what they've been doing through the pandemic and what your expectations are for them in 2021 and thereafter?

Yeah, thanks, Jess. Richard here. I'll start, Adam, if you want to clean up here. I think, first of all, I would say that our average participant per member has been stable, if not slightly higher, you know, through pandemic for those that are actually going to the gym, which stands some rationale to that, right, that people that really want to go to the gym are finding a way to do that through the pandemic. The virtual channel is showing even a higher propensity for frequency, which is a good thing. So I think it's the ease of the vehicle, you know, easy to use our tools to be able to do the workout plus they're at home, right, so they don't have some of the barriers that may prevent them from hitting that frequency when they're going to a regular gym. So what I would say in terms of the behavior is that the average visit for participant is stable, if not a little higher, through the pandemic. We would expect that to come back to some other levels, you know, back to previous levels, but maybe a little bit better with our engagement platform coming online. And then the digital seems to be a higher frequency channel, which I think is a positive thing for plans and for members. But, Adam, anything you want to add there?

Yeah, the only thing I'd add, Jess, is one of the components of the core fitness strategy is to help improve that frequency even further. And so I think as those tools are deployed over the year, the omni-channel platform that we're putting into place this year is going to be critical to that. Have member-centric, customized communications to the members. You'd be amazed at just, you know, how much, you know, an email or communication from even an instructor can help to produce an additional visit and engagement experience. So I think we've got upside there. I'm happy to have where we are. We talked, you know, about I think in January how strong that ABPP was, but I think we can do better.

Awesome. And then just to follow up, I think we heard that you said 2021 marketing and SG&A should be less than 2020. Can you just help us understand that commentary just versus the new engagement engine coming online and maybe the, you know, responsibility to inform members that it's safe, again, to go to the gym and that things are kind of open and operating as usual?

Hey, Jess, Tommy here. We will not be using television in 2021, at least that's our plan at this point. So there's your increase from 2020 to 2021. We're planning on using digital to support our marketing efforts. We want to be more precise, use very targeted marketing approaches with search and social and email and other digital techniques. Now, Adam mentioned in the prepared remarks that the marketing will be loaded a little more heavily toward the back half. We want to reserve some marketing dollars for when people feel more comfortable going to the gym so that we can put some promotional efforts in place at that point.

Yeah, I think it's just really focusing more higher ROI, you know, than maybe some others. I would say TV actually was used from TV in Q4 quite successfully to help build momentum here. But our build on the SG&A side and on the marketing side is somewhat predicated on, you know, vaccine distribution and people wanting to go back to the gym, the horsepower or firepower that Tommy just mentioned, and also, you know, the digital means by which we use those engagement capabilities.

Thank you. That's so helpful.

Again, if you would like to ask a question, press star 1 on your telephone. Your next question comes from the line of Vikram Kesavahatla with Guggenheim. Your line is open.

Yeah, thank you for taking the question. I wanted to start on the free cash flow guidance for 2021. And, Adam, I think you talked about a handful of drivers around CapEx this year that made me a little more unique. If you just walk through those in a little more detail, and I guess on a longer-term basis, as you think about the business going forward, you actually think about the free cash flow profile of the company relative to what we've historically seen in the healthcare segment. Thanks.

Yeah, you know, you could really just bridge it, Vikram, with a few key components. So if you start with adjusted EBITDA, you're going to have cash taxes, you're going to have cash interest, you're going to have CapEx. I think the other big component is probably a negative move on working capital that's assumed in there. As our visits ramp up, there's a differential in when we get paid versus when we pay gyms. We pay gyms faster typically, and so as visits ramp, there may be a little bit of a dynamic in the back half of the year which puts pressure on that. I think from a historical perspective, you know, where, you know, pre-cash flow was a bit higher, I think you have to take into account we didn't have any cash interest to speak of, or at least a lot less. And we had a paying virtually no cash taxes as well. We had an NOL that had been carried forward from our divestiture with Healthways. So there are some kind of unique dynamics, I think, from, you know, three, four years ago that aren't here today, which bridges that difference.

Okay, great. And then maybe just one follow-up question. I think historically we've talked about each year just seeing some natural inflation and the gym costs that you pay to your network partners. Just curious if you can talk about how that dynamic played out in 2021 and if there's anything unique around that this year and any updated thoughts on that front. Thanks.

Hey, Vikram, Tommy. Our conversations with the gyms have been rational and constructive in what's really a very turbulent year. You know, every network has its puts and takes. The majority of our larger gym partners are in multi-year agreement, so we feel good about that. From time to time there's pressure, but this is core to our business. We've been doing this effectively for 30 years, so we're comfortable with how those discussions are going. Great. Thank you.

There are no further questions at this time. I will turn the call back over to Richard Ashworth.

I just want to thank everybody for their time listening to our Q4 2020 earnings release, and have a good evening. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.