Tivity Health, Inc.

Good day and thank you for standing by. Welcome to the Divity Health Third Quarter 2021 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 part one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, head of investor relations, Matt Milanovich. Please go ahead.

Good afternoon and welcome to the Tivoli Health third quarter 2021 financial results conference call. Before we begin, if you do not already have a copy, the earnings release supplemental information and related 8K filed with the SEC are available on our website, 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 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 note the 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 believed, anticipate, planned, expect, 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 CIVITY Health filings with the SEC and in today's news release. And consequently, Actual operations and results may differ materially from the results discussed in the forward-looking statement. 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 thanks, Matt. Thank you for joining the call today to discuss Tiviti Health's third quarter earnings results. Joining me on the call are Adam Holland, our CFO, Tommy Lewis, our COO, and Matt Milanovich, our VP of IR. As you saw in today's press release, our performance for the third quarter of 2021 was characterized by strong results in revenue, adjusted EBITDA, and cash flow. We reported revenues of $126.3 million adjusted EBITDA from continued operations of $40.5 million and free cash flow of $27.2 million. SilverSneakers continued its positive momentum during the third quarter, growing to 17.1 million total visits, a 12% increase compared to the second quarter of 2021. In-person SilverSneakers visits were 16.4 million, growing 13% from the second quarter, even though government mask mandates were still present in 11% of our fitness partner locations. While we experienced some headwind from the Delta variant during the quarter, our recent trends have strengthened during October as the effects of Delta have somewhat subsided, and we continue to expect that in-person visits will accelerate next year. Further solidifying our confidence in 2022, adults over 65 continue to have the highest immunization rate in the nation, with 85% being fully vaccinated and 97% having received one dose, according to the CDC. And our SilverSneakers poll surveys indicate that a significant percentage of our members have returned or intend to return to the gym. SilverSneakers digital visits were approximately 700,000 during the third quarter, a decline from the second quarter. Going into the fourth quarter, we are planning to increase marketing spend focused on digital and in-person visits. Our virtual platforms are an important channel for our SilverSneakers members. Through the first three quarters of 2021, 45% of the participants in our live with instructor virtual classes had never participated in SilverSneakers before, demonstrating that our proprietary virtual channel continues to attract and engage eligible SilverSneakers members who may not have otherwise engaged with us. The combination of physical and digital fitness remains core to our strategy because it allows our members to use the benefit where they want, in the gym, at home, or in the community. Looking ahead to 2022, we expect growth in virtual to be accelerated by social engagement and mental enrichment offerings in addition to our evolving virtual fitness programming. Our gym network remains strong as we enter the third quarter of 2021 with approximately 16,000 silver sneaker locations. On average, our national gym network offers members access to a location within 3.6 miles of their homes and 1.6 miles in urban and suburban markets. As we recently announced, we're launching a customizable premium gym network in the first quarter of 2022. This expansion is expected to increase our total available network to more than 22,000 locations, one of the largest senior fitness networks available. Network renewals continue to meet our expectations, with many characterized by multi-year contracts, providing both visibility and stability for the future. Moving on to prime, our prime business is meeting expectations. We ended the third quarter with approximately 12,500 partner locations, similar to where we began the year, and 226,000 active prime subscribers. Subscriber count remained consistent with the end of June, even with the impacts of the Delta variant, and remains higher than where we began the year. We anticipate that our subscriber base at the end of 2021 will position us nicely to grow subscribers in January, which is the beginning of gym season. Next, I just want to provide an update on our SilverSneakers health plan relationships. We're pleased with the continued strength of our client partnerships. As mentioned on our last call, this year's renewal season was very successful in the high 90% range consistent with prior years, and some of our largest accounts are committed to contract lengths that are longer than our average duration. We play an important role with our clients during the Medicare annual enrollment period. So far this fall, our teams have facilitated nearly 400 events and trained close to 12,000 brokers across the U.S. In addition, we built an online resource center at silversneakers.com for clients and brokers that includes educational overviews, member-facing materials in multiple languages, videos, and testimonials. Our clients are integrating these resources into their sales messaging, broker and agent training, and television commercials. as a key element of 2022 annual enrollment because the SilverSneakers brand is a key differentiator. Our clients love the brand for its ability to draw new MA members and drive decreased medical costs for our members. As a reminder from research earlier this year, an Avalere independent research study concluded that the total cost of medical care for SilverSneakers participants was 16% lower than for non-participants. Now moving to an update on our strategy and our brand. We previously stated our intentions to expand beyond a gym access company into a member-focused, data-driven engagement platform company. Our objective of engaging members through our trusted 30-year SilverSneakers brand beyond physical fitness is continuing to materialize with our recent partnerships for mental enrichment with Get Setup and social connection with Stitch. In 2022, we expect these partnerships to contribute to top-line growth and profitability. Our SilverSneakers brand is extremely strong and valuable. We recently refreshed our Net Promoter Score survey, and it increased from 81 to 83, demonstrating growing brand equity. Our brand awareness among the general population of Medicare Advantage enrollees is 78%. This includes SilverSneakers members and non-members and is far higher than the next most recognized senior fitness brand. And for seniors that are not yet of Medicare age, when asked what comes to mind when thinking about wellness and fitness plans, nearly 40% are already familiar with the SilverSneakers brand. We are continuing to leverage the strength of our brand when building our member platform to drive additional channels of engagement. Before wrapping up my prepared remarks, I'd like to highlight the strength of our balance sheet. Over the last 12 months, we've divested Nutrisystem, reduced our leverage ratio from 3.81 to 2.02, refinanced our capital structure, and announced a $100 million share repurchase authorization. Our strong cash flow generation, as further evidenced by this quarter's results, allows us to continue investing in growth. and return cash to our shareholders. I'm really excited about the future of Tiviti Health. Our core business is strong and growing. We're adding new channels for our members to engage with the SilverSneakers brand. We're broadening the access that our members have to physical locations and digital access points. This gives us confidence in our expectation that we'll grow revenue, adjusted EBITDA, and free cash flow in 2022. We would not have this type of strong performance without a fantastic team behind me. I'd like to thank our team for continuing to execute with great results to help our members and our clients. I'll now turn the call over to Adam.