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spk02: who participated with us. We will continue to focus on testing and optimizing for personalization that drives increased revenue. During future calls, I'll provide specific examples of how our digital engagement strategy can drive increased utilization in 2022. As I mentioned earlier, I'm pleased that we'll begin combating seniors' social isolation with our SilverSneakers Connect offering, which delivers a personalized social network for our seniors intended to improve health and wellness. The pandemic dramatically exacerbated feelings of isolation, and we are excited and ready to help our members make meaningful social connections. SilverSneakers Connect will go live with two large clients beginning in January of 2022, and I look forward to updating you on our progress. In conclusion, I'm pleased with the strong growth in revenue and visits during the second quarter, underscoring that our expectations for a return to pre-COVID participation level in 2022 are on track. Our continued momentum on our strategic initiatives is advancing our progress toward becoming the modern destination for healthy living. I continue to be impressed with our team and their focus and attention on supporting our members on their path to better health. I'll now turn the call over to Adam.
spk04: Thank you, Richard. Today we reported adjusted EBITDA of $41.5 billion, reflecting the continued strength of our business. Revenues for the second quarter were $120.1 million. SilverSneakers revenue was $90.7 million, an increase of $42 million, or 85%, over the prior year period, driven by an increase in revenue-generating visits. As expected, revenue from fixed per-member per-month fees declined to 47% of our total SilverSneakers revenue, compared to 88% in the same period last year. We expect this percentage to continue to decline as we move through the remainder of 2021 and generate more member visits as part of our overall revenue mix, getting us closer to our more typical mix as the country continues to emerge from the pandemic. We ended the quarter with 17.7 million health plan members eligible for silver sneakers, an increase of 8% year over year. And we are on track to meet our expectations of approximately 18 million eligible members by year end through monthly age ends. Total SilverSneakers visits were 15.3 million during the second quarter of 2021 compared to 3.1 million for the same period last year, with monthly average participation of 3.8% compared to 1.1% last year. Within the 15.3 million visits, 875,000 visits were live virtual with Instructor. And now to Prime. We generated 23.4 million of revenue in Q2, an increase of 4.3 million over the same period last year. We ended the quarter with 228,000 active Prime subscribers compared to 235,000 subscribers at the end of the second quarter in 2020. Although we average a lower subscriber count during the second quarter of 2021 compared to last year, Prime revenue was higher due to the reactivation of certain large corporate clients such as Walmart, which had temporarily suspended its Prime program during the height of the pandemic last year. We had approximately 3.3 million gym visits from Prime in the second quarter of 2021 compared to 800,000 in the prior year period. For Whole Health Living, during Q2, we recognized $5.7 million in revenue, a slight increase to last year. Finally, other revenue decreased by approximately $9 million over the second quarter of 2020 due to a decrease in wisely well revenue, as well as revenue from a well-being program with a large employer. Consistent with our remarks in last year's Q2 call, the revenue for this well-being program did not recur this year. Turning to our Q2 2021 balance sheet and cash flow, we ended the second quarter with cash on hand of $24.2 million, total liquidity of $124 million, and a leverage ratio of 2.18 times. As previously announced, we successfully completed refinancing of our term loan and revolving credit facilities for $400 million and $100 million, respectively. The new credit agreement strengthens our financial position and provides increased flexibility by lowering our annual amortization and extending the maturity date. It is also expected to result in cash interest savings of over $3 million during the first 12 months. As of June 30, 2021, net debt totaled $361.4 million. Our first quarterly amortization payment of $1 million is due on September 30th, 2021. Now turning to guidance. We affirmed our 2021 revenue and adjusted EBITDA guidance in today's press release given our continued strong recovery in both SilverSneakers and Prime. As we've mentioned throughout the pandemic, we anticipate our second half total gross margin percentage will decline relative to the first half of 2021 as the number of in-person SilverSneakers and Prime visits increase. We also anticipate a slightly elevated level of operating expenses compared to the first half of 2021, driven by investments in omnichannel marketing, SilverSneakers Connect, and data capabilities related to the engagement platform. all of which are investments intended to drive growth in 2022. Together, these items are expected to reduce our adjusted EBITDA in the back half of 2021, which is why we are maintaining adjusted EBITDA guidance at the top end of $155 million. Finally, our 2021 guidance does not reflect any impact for our ownership and share care. Today, we own approximately 11.1 million shares of ShareCare's common stock. From an accounting standpoint, beginning in July of 2021, we record these shares at their fair value in accordance with U.S. GAAP and recognize any changes in fair value in net income as unrealized gains or losses. There can be no assurance as to what value our shares will have in the future or when we will sell our shares. I'll now turn the call back over to the operator to open the call for Q&A.
spk00: Thank you. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Again, that is star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. We have our first question coming from the line of Steve Halpern with Contour. Your line is open.
spk03: Just a couple of financial follow-ups. First, on the United Impact for 2022, you said it was $20 million. So if you annualize that, you say it's a $40 million contribution this year, but is that You know, how should we think about that relative to COVID? Was that impacted by COVID? Or is the $20 million assuming that it was a more normal year in 2022?
spk04: Hey, Stephen, great question. It's Adam. The United business was a PMPM business, so it was not affected by COVID. So the $40 million in revenue that we have this year, which we've disclosed before, is essentially getting cut in half for next year. So we're going from $40 million to $20 million, and that's what we expect in 2022 from a revenue perspective.
spk03: And then how would you characterize the margin on that business?
spk04: You know, we can't get into specific margin dynamics with specific customers, but I'd say it's generally in line with our other major clients.
spk03: And then last question. Over the last two quarters, your accounts receivable have crept up a little bit, sort of pinching the operating cash flow. Could you just sort of explain that?
spk04: Yeah, part of that is the dynamic, Steve, of when we get reimbursed from our payers versus when we pay our gyms. And as last year, as all the gyms shut down, we basically saw AR go to zero because we were collecting and had to do cash and fusion and didn't have to reimburse the gyms because the gyms were shut down. So this year, as the gyms are spinning back up, what we're seeing is a little working capital headwind where we're paying the gyms faster than we're getting reimbursed from the health plans. Now, it's not a big difference in the terms of number of days, but when you've got a dynamic where you're ramping up gym visits as rapidly as we are, you're seeing that headwind. Now, what we've seen the back half of the year, Steve, is that headwind is diminishing And so that's not going to be as big of a working capital drag as you saw in the first quarter. It was a lot less in Q2. Okay.
spk03: Thank you.
spk00: We have our next question coming from the line of Ryan Daniels with William Blair. Your line is open.
spk02: Hey, guys. Nick Spica. I'm for Ryan. Thanks for taking my question. I guess to start, Do you guys know kind of what portion of those UNH, those eligible lives that are coming off more active? Or do you have any sort of kind of, you know, way to splice that out? And how many eligible lives are kind of in that 20 million that's coming off next year? Yeah, thanks, Nick. It's Richard. You know, pretty consistent utilization across the lives that will be remaining versus staying. So, I would say they're kind of in the mid, you know, kind of fairway position if you think of it that way. And in terms of the lives, it's really half the lives, kind of half the revenue is the way to think about it. So, it's coming down half. And even though they were a PMPM client, you know, a lot of the clients we're adding new for this year are also PMPM clients. So, we're seeing you know, our hybrid is going to grow because our big clients continue to grow and, you know, getting more agents and they're getting to more markets. The hybrid model is the one that aligns our incentives with payers. But I think all in with the United stepping back a little bit, it's pretty much in the middle of utilization, half the lives and half the revenue. Got it. Thanks, Glenn. You know, looking back over kind of the last, you know, call it two years, it's been fairly messy. But I'm wondering... When you guys see yourselves more heading into kind of a steady state now with the virtual visit aspect and in-person, where do you kind of see your target gross margins leveling out in more of a steady state over the next, call it, three years? I'll start and then let Adam weigh in here. The way I think about that is on the core fitness business, I think that margin, Adam, weigh in, but I think that margin will get back to kind of pre-COVID consistent levels. And we see You know, the puts and takes of the supplier network are gems and virtual, which is helpful in margin. vis-a-vis what, you know, giving our payers, you know, what they need for good value. But as we think about the non-fitness revenue, you know, I see there's areas to offset some margin compression with some, you know, consistent or maybe slightly higher margin. To chum all that together will depend on how well that non-fitness revenue takes off and to what degree. But, Adam, anything you want to?
spk04: No, I don't think there's any more to add. We just feel confident we can certainly get back to that, you know, circa 2020. 30% gross margin level, and then exactly what Richard said, upside opportunity with the new digital initiatives on top of that.
spk02: Great. Thanks, guys. I appreciate the call. Thanks, Nick.
spk00: Again, in order to ask a question, simply press star, then the number one on your telephone keypad. We have our next question coming from the line of Matthew Shea with Piper Sandler. Your line is open.
spk01: Hey, thanks for taking the question. Maybe one for you, Richard, as you've talked about this transition from a fitness company to an engagement company, one common theme has been this, to employ a test and learn strategy as you roll out new adjacencies. Wondering what you've been able to test and, you know, as a result learn so far and how that's helped inform where you're going next.
spk02: Yeah, great question, Matt. Thanks. I think there's a couple of things from my point of view. One is that we needed to get the foundational elements in place. Now that we've been able to get the MarTech stack and the omnichannel capabilities in place, this new kind of test and learn discipline is one that we're bringing to the market. That philosophy is one of getting member specific feedback and putting the investment dollars to make sure, yeah, we're getting the appropriate returns, of course, but we're actually creating those right experiences. We've got some really good partnerships. You know, S Mills is a great example of that. We've got a few others we haven't maybe publicly announced, but they're really helping us in our capabilities to to deliver new experiences for our seniors. The big one is helping us drive SilverSneakers Connect in the marketplace. What I've seen with the two large clients buying onto Connect and our early tests and trials there is got a lot of optimism for our ability to engage seniors outside of fitness. The other big thing is trying to get more people activated. What we're finding with these new tools is that they're activating a different subset of the eligible SilverSneakers population. So I think that's another positive. You know, with 40% of people engaging with us digitally being first-time users for silver sneakers compared to about 25% for the ones that are going to the gym, that tells us this is a great activation channel. And then all of that to say that once the engagement platform is fully up and running, meaning we've got some more first-party data, a little time under our belt, we know exactly how and when to talk to them, starting to activate the other services over time is going to be a big future driver of value creation for all of our stakeholders.
spk01: Got it. Yeah. And then maybe just following up on that, you know, during the quarter, you guys launched the biweekly senior healthy living survey, kind of intended to be an always on barometer and then share that data with stakeholders. Has there been enough time to produce any actionable insights? And if so, how have you used them? And if not, how do you kind of envision to use them go forward?
spk02: Yeah, short answer is yes. That's Richard again. Longer answer is, you know, working directly with the government, too, as we're getting into, you know, different phases of the COVID kind of pandemic and really just putting some questions in our surveys that are specific questions that they may want answers to. And we're also seeing a lot of our partnerships with other associations, whether that be those that are focused on people that are aging in rural communities. And we can target urban versus suburban. The surveying capability is quite mature and modern, so we're able to get all kinds of slices of data plus the amount of respondents that we get are statistically significant so we're able to have findings that are you know actionable and usable but actually where we're finding most of the values in our own business right now so you know tommy's team really uses this data to help us you know either lens the way we're marketing and how we're doing it or even in our product and innovation team around what's the next you know, experience that we want to bring to members. We ask them what they're missing, what they want, or what they're experiencing, and we're using that data in real time to help fuel some of our new product launches. You know, the pilot we did with nutrition, I think we announced that last quarter, the one before, that's continuing to progress really well. We're using a lot of the data and insights to help us fuel that pilot so we can have, you know, the right actions to take when the time is right to scale.
spk01: Got it. Appreciate it. Congrats on the quarter, guys. Yeah, thanks.
spk00: Thank you. There are no further questions at this time. I will now turn the call back over to Richard Ashworth for any closing remarks.
spk02: I want to thank everybody who dialed in to listen to the earnings. I hope everyone has a fantastic week. Thanks for your time.
spk00: This concludes today's conference call. Thank you for participating.
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