Delaware
|
000-19364
|
62-1117144
|
||
(State or other jurisdiction of incorporation)
|
(Commission
File Number)
|
(IRS Employer
Identification No.)
|
701 Cool Springs Boulevard
Franklin, Tennessee
|
37067
|
|
(Address of principal executive offices)
|
(Zip Code)
|
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
|
TIVITY HEALTH, INC.
|
||
By:
|
/s/ Adam Holland
|
|
Name: Adam Holland
|
||
Title: Chief Financial Officer
|
Exhibit 99.1
|
|
Press Release dated July 27, 2017
|
·
|
Revenues increased by 11.1% to $138.9 million compared with $125.0 million for the second quarter of 2016, driven by growth in all three of the Company's product lines.
|
·
|
Net income from continuing operations was $17.2 million, or $0.41 per diluted share, compared with $20.0 million, or $0.54 per diluted share, for the second quarter of 2016. Results for the second quarter of 2017 include an effective income tax rate of 35.7%. Results for the second quarter of 2016 include an effective income tax rate of 0%, due to tax benefits derived from utilizing net operating loss carryforwards from 2015 that were previously subject to a valuation allowance. For illustration, had net income from continuing operations for the second quarter of 2016 been subject to a normalized tax rate of 40.0%, net income would have been $12.0 million or $0.32 per diluted share.
|
·
|
Weighted average diluted shares outstanding for the second quarter of 2017 increased to 42.4 million, 13.8% higher than the second quarter of 2016. The diluted share count increase was significantly impacted by the 191% increase in the Company's weighted average stock price in the second quarter of 2017 compared with the second quarter of 2016.
|
·
|
EBITDA increased 21.9% to $31.7 million compared with $26.0 million for the second quarter of 2016. EBITDA margin increased to 22.8% for the second quarter of 2017 compared with 20.8% for the second quarter of 2016. See pages 9-10 for a reconciliation of non-GAAP financial measures.
|
·
|
Cash flow from operations was $37.0 million for the second quarter of 2017, and free cash flow totaled $36.0 million. Funded debt was $189.8 million at the end of the second quarter of 2017, and the ratio of total debt to trailing 12 months EBITDA, as calculated under the Company's credit facility, improved to 1.5 from 1.9 at the end of 2016. At June 30, 2017, the Company had cash and cash equivalents of $7.8 million.
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||
Revenues
|
$
|
138.9
|
$
|
125.0
|
$
|
279.9
|
$
|
251.0
|
||||
Per diluted share:
|
||||||||||||
Net income from continuing operations,
GAAP basis
|
$
|
0.41
|
$
|
0.54
|
$
|
0.79
|
$
|
1.06
|
||||
Business separation expense
|
-
|
-
|
0.02
|
-
|
||||||||
Restructuring charges
|
-
|
-
|
0.01
|
-
|
||||||||
Adjusted net income from continuing
operations, non-GAAP basis
|
$
|
0.41
|
$
|
0.54
|
$
|
0.82
|
$ |
1.06
|
||||
Weighted average diluted common shares
outstanding (in thousands)
|
42,369
|
37,227
|
41,456
|
37,043
|
·
|
revenues in a range of $550 million to $558 million;
|
·
|
adjusted EBITDA in a range of $119 million to $123 million; and
|
·
|
adjusted earnings per diluted share in a range of $1.50 to $1.58.
|
·
|
depreciation and amortization expense of approximately $3 million;
|
·
|
total interest expense of approximately $15 million;
|
·
|
a federal income tax rate for the remainder of the year of approximately 39%;
|
·
|
weighted average diluted shares outstanding of approximately 42.5 million for the full year, with an expected fourth quarter diluted share count of approximately 43.5 million;
|
·
|
free cash flow of $90 million to $95 million; and
|
·
|
capital expenditures of $8 million to $10 million.
|
·
|
the risks associated with recent changes in the Company's senior management team;
|
·
|
the Company's ability to sign and implement new contracts for its solutions;
|
·
|
the Company's ability to accurately forecast the costs required to successfully implement new contracts;
|
·
|
the Company's ability to anticipate change and respond to emerging trends for healthcare and the impact of the same on demand for the Company's products and services;
|
·
|
the Company's ability to develop new products;
|
·
|
the Company's ability to anticipate and respond to strategic changes, opportunities and emerging trends in the Company's industry and/or business and to accurately forecast the related impact on the Company's revenues and earnings;
|
·
|
the Company's ability to renew and/or maintain contracts with its customers under existing terms or restructure these contracts on terms that would not have a material negative impact on the Company's results of operations;
TVTY Reports Second-Quarter Results
Page 4
July 27, 2017
|
·
|
the Company's ability to accurately forecast the Company's revenues, margins, earnings and net income, as well as any potential charges that the Company may incur as a result of changes in its business and leadership;
|
·
|
the Company's ability and/or the ability of its customers to enroll participants and to accurately forecast their level of enrollment and participation in the Company's programs in a manner and within the timeframe anticipated by the Company;
|
·
|
the risks associated with deriving a significant concentration of revenues from a limited number of customers;
|
·
|
the risks associated with data privacy or security breaches, computer hacking, network penetration and other illegal intrusions of our information systems or those of third-party vendors or other service providers, which may result in unauthorized access by third parties to customer, employee or Company information or protected health information and lead to enforcement actions, fines and other litigation against the Company;
|
·
|
the Company's ability to effectively compete against other entities, whose financial, research, staff, and marketing resources may exceed the Company's resources;
|
·
|
the Company's ability to service its debt and remain in compliance with its debt covenants;
|
·
|
the Company's ability to obtain adequate financing to provide the capital that may be necessary to support its operations;
|
·
|
the ability of the Company's customers to maintain the number of covered lives enrolled in the plans during the terms of its agreements;
|
·
|
counterparty risk associated with the Company's cash convertible notes hedges;
|
·
|
the risks associated with valuation of the cash convertible notes hedges and the cash conversion derivative, which may result in volatility to the Company's consolidated statements of comprehensive income (loss) if these transactions do not completely offset one another;
|
·
|
the impact of any new or proposed legislation, regulations and interpretations relating to Medicare or Medicare Advantage;
|
·
|
the impact of litigation involving the Company and/or its subsidiaries;
|
·
|
the impact on the Company's operations and/or demand for its services of future state and federal legislation and regulations applicable to the Company's business, including the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010;
|
·
|
current geopolitical turmoil, the continuing threat of domestic or international terrorism, and the potential emergence of a health pandemic or infectious disease outbreak; and
|
·
|
other risks detailed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and other filings with the Securities and Exchange Commission.
|
|
|
June 30,
2017
|
|
|
December 31,
2016
|
||||
Current assets:
|
|
|
|
||||||
Cash and cash equivalents
|
|
$
|
7,796
|
|
|
$
|
1,602
|
||
Accounts receivable, net
|
|
|
54,900
|
|
|
|
50,424
|
||
Prepaid expenses
|
|
|
4,225
|
|
|
|
3,409
|
||
Other current assets
|
|
|
2,193
|
|
|
|
2,250
|
||
Cash convertible notes hedges, current
|
160,876
|
—
|
|||||||
Income taxes receivable
|
|
|
—
|
|
|
|
426
|
||
Total current assets
|
|
|
229,990
|
|
|
|
58,111
|
||
|
|
|
|
|
|
|
|
||
Property and equipment:
|
|
|
|
|
|
|
|
||
Leasehold improvements
|
|
|
10,338
|
|
|
|
10,144
|
||
Computer equipment and related software
|
|
|
25,097
|
|
|
|
23,024
|
||
Furniture and office equipment
|
|
|
8,153
|
|
|
|
8,670
|
||
Capital projects in process
|
|
|
1,633
|
|
|
|
2,079
|
||
|
|
|
45,221
|
|
|
|
43,917
|
||
Less accumulated depreciation
|
|
|
(36,225
|
)
|
|
|
(35,586
|
)
|
|
|
|
|
8,996
|
|
|
|
8,331
|
||
|
|
|
|
|
|
|
|
||
Other assets
|
|
|
8,406
|
|
|
|
6,688
|
||
Cash convertible notes hedges, long-term
|
—
|
48,361
|
|||||||
Long-term deferred tax asset
|
|
|
47,346
|
|
|
|
59,562
|
||
Intangible assets, net
|
29,049
|
29,049
|
|||||||
Goodwill, net
|
334,680
|
|
|
|
334,680
|
||||
Total assets
|
|
$
|
658,467
|
|
|
$
|
544,782
|
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
||
Current liabilities:
|
|
|
|
|
||||
Accounts payable
|
|
$
|
25,649
|
|
|
$
|
26,029
|
|
Accrued salaries and benefits
|
|
|
8,818
|
|
|
|
18,686
|
|
Accrued liabilities
|
|
|
35,242
|
|
|
|
33,623
|
|
Other current liabilities
|
|
|
327
|
|
|
|
397
|
|
Cash conversion derivative, current
|
160,876
|
—
|
||||||
Current portion of long-term debt
|
|
|
142,979
|
|
|
|
46,046
|
|
Current portion of long-term liabilities
|
|
|
4,895
|
|
|
|
7,582
|
|
Total current liabilities
|
|
|
378,786
|
|
|
|
132,363
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
39,412
|
|
|
|
164,297
|
|
Cash conversion derivative, long-term
|
—
|
48,361
|
||||||
Other long-term liabilities
|
|
|
6,263
|
|
|
|
10,463
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock $.001 par value, 5,000,000 shares authorized, none outstanding
|
|
|
—
|
|
|
|
—
|
|
Common stock $.001 par value, 120,000,000 shares authorized, 39,350,726 and 38,933,580 shares outstanding, respectively
|
|
|
39
|
|
|
|
39
|
|
Additional paid-in capital
|
|
|
346,185
|
|
|
|
341,270
|
|
Accumulated deficit
|
|
|
(84,036
|
)
|
|
|
(119,327
|
)
|
Treasury stock, at cost, 2,254,953 shares in treasury
|
|
|
(28,182
|
)
|
|
|
(28,182
|
)
|
Accumulated other comprehensive loss
|
|
|
—
|
|
|
(4,502
|
)
|
|
Total stockholders' equity
|
|
|
234,006
|
|
|
|
189,298
|
|
Total liabilities and stockholders' equity
|
|
$
|
658,467
|
|
|
$
|
544,782
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|||||||||||||||
|
June 30,
|
|
June 30,
|
|
|
||||||||||||||
|
2017
|
2016
|
|
2017
|
|
|
2016
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Revenues
|
$
|
138,914
|
|
|
$
|
125,003
|
|
$
|
279,884
|
|
|
$
|
251,016
|
|
|
||||
Cost of services (exclusive of depreciation and amortization of $648, $1,534, $1,305 and $3,064, respectively, included below)
|
|
99,071
|
|
|
|
88,879
|
|
|
201,470
|
|
|
|
180,258
|
|
|
||||
Selling, general & administrative expenses
|
|
8,176
|
|
|
|
10,107
|
|
|
16,538
|
|
|
|
19,519
|
|
|
||||
Depreciation and amortization
|
|
789
|
|
|
|
1,877
|
|
|
1,576
|
|
|
|
3,749
|
|
|
||||
Restructuring and related charges
|
|
(52
|
)
|
|
|
2
|
|
|
685
|
|
|
|
41
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income
|
|
30,930
|
|
|
|
24,138
|
|
|
59,615
|
|
|
|
47,449
|
|
|
||||
Interest expense
|
|
4,130
|
|
|
|
4,176
|
|
|
7,964
|
|
|
|
8,281
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income before income taxes
|
|
26,800
|
|
|
|
19,962
|
|
|
51,651
|
|
|
|
39,168
|
|
|
||||
Income tax expense
|
|
9,560
|
|
|
|
—
|
|
|
18,931
|
|
|
|
—
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income from continuing operations
|
|
17,240
|
|
|
|
19,962
|
|
|
32,720
|
|
|
|
39,168
|
|
|
||||
Loss from discontinued operations, net of income tax
|
|
(3,673
|
)
|
|
|
(195,454
|
)
|
|
(3,893
|
)
|
|
|
(228,557
|
)
|
|
||||
Net income (loss)
|
|
13,567
|
|
|
|
(175,492
|
)
|
|
28,827
|
|
|
|
(189,389
|
)
|
|
||||
Less: net income attributable to non-controlling interest
|
|
—
|
|
|
|
104
|
|
|
—
|
|
|
|
416
|
||||||
Net income (loss) attributable to Tivity Health, Inc.
|
$
|
13,567
|
|
|
$
|
(175,596
|
)
|
$
|
28,827
|
|
|
$
|
(189,805
|
)
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings (loss) per share attributable to
Tivity Health, Inc. - basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Continuing operations
|
$
|
0.44
|
|
|
$
|
0.55
|
|
$
|
0.84
|
|
|
$
|
1.08
|
|
|
||||
Discontinued operations
|
$
|
(0.09
|
)
|
|
$
|
(5.41
|
)
|
$
|
(0.10
|
)
|
|
$
|
(6.34
|
)
|
|
||||
Net income (loss) (1)
|
$
|
0.35
|
|
|
$
|
(4.85
|
)
|
$
|
0.74
|
|
|
$
|
(5.25
|
)
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings (loss) per share attributable to
Tivity Health, Inc. - diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Continuing operations
|
$
|
0.41
|
|
|
$
|
0.54
|
|
$
|
0.79
|
|
|
$
|
1.06
|
|
|
||||
Discontinued operations
|
$
|
(0.09
|
)
|
|
$
|
(5.25
|
)
|
$
|
(0.09
|
)
|
|
$
|
(6.18
|
)
|
|
||||
Net income (loss) (1)
|
$
|
0.32
|
|
|
$
|
(4.72
|
)
|
$
|
0.70
|
|
|
$
|
(5.12
|
)
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Comprehensive income (loss)
|
$
|
17,957
|
|
|
$
|
(175,656
|
)
|
$
|
33,329
|
|
|
$
|
(188,507
|
)
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
and equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
|
39,246
|
|
|
|
36,172
|
|
|
39,158
|
|
|
|
36,140
|
|
|
||||
Diluted
|
|
42,369
|
|
|
|
37,227
|
|
|
41,456
|
|
|
|
37,043
|
|
|
||||
(1) Figures may not add due to rounding.
|
|
|
Six Months Ended
June 30,
|
|||||||||
|
|
2017
|
|
|
2016
|
|
|||||
Cash flows from operating activities:
|
|
|
|
|
|||||||
Net income from continuing operations
|
|
$
|
32,720
|
|
$
|
39,168
|
|||||
Net loss from discontinued operations
|
(3,893
|
)
|
(228,557
|
)
|
|||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities, net of business acquisitions:
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization
|
|
|
1,589
|
|
|
|
25,324
|
|
|||
Amortization of deferred loan costs
|
|
|
1,246
|
|
|
|
1,103
|
|
|||
Amortization of debt discount
|
|
|
3,911
|
|
|
|
3,698
|
|
|||
Share-based employee compensation expense
|
|
|
3,362
|
|
|
|
5,323
|
|
|||
Loss on impairment of held for sale assets
|
—
|
156,198
|
|||||||||
Loss on sale of TPHS business
|
444
|
4,826
|
|||||||||
Loss on release of cumulative translation adjustment
|
3,044
|
—
|
|||||||||
Equity in income from joint ventures
|
|
|
—
|
|
|
|
(303
|
)
|
|||
Deferred income taxes
|
|
|
18,755
|
|
|
7,835
|
|||||
(Increase) decrease in accounts receivable, net
|
|
|
(4,398
|
)
|
|
|
17,263
|
|
|||
Decrease in other current assets
|
|
|
869
|
|
|
|
3,329
|
|
|||
Decrease in accounts payable
|
|
|
(1,480
|
)
|
|
|
(4,100
|
)
|
|||
(Decrease) increase in accrued salaries and benefits
|
|
|
(11,953
|
)
|
|
|
4,989
|
|
|||
Decrease in other current liabilities
|
|
|
(2,268
|
)
|
|
|
(737
|
)
|
|||
Other
|
|
|
(1,888
|
)
|
|
|
(3,124
|
)
|
|||
Net cash flows provided by operating activities
|
|
$
|
40,060
|
|
|
$
|
32,235
|
|
|||
|
|
|
|
|
|
|
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|||
Acquisition of property and equipment
|
|
$
|
(2,244
|
)
|
|
$
|
(10,330
|
)
|
|||
Investment in joint ventures
|
|
|
—
|
|
|
(865
|
)
|
||||
Proceeds from sale of MeYou Health
|
—
|
5,156
|
|||||||||
Other
|
|
|
—
|
|
|
(537
|
)
|
||||
Net cash flows used in investing activities
|
|
$
|
(2,244
|
)
|
|
$
|
(6,576
|
)
|
|||
|
|
|
|
|
|
|
|
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|||
Proceeds from issuance of long-term debt
|
|
|
274,425
|
|
|
|
242,301
|
|
|||
Payments of long-term debt
|
|
|
(308,496
|
)
|
|
|
(253,902
|
)
|
|||
Payments related to tax withholding for share-based compensation
|
|
|
(1,066
|
)
|
|
|
(548
|
)
|
|||
Exercise of stock options
|
|
|
2,757
|
|
|
|
30
|
|
|||
Deferred loan costs
|
(2,452
|
)
|
—
|
||||||||
Change in cash overdraft and other
|
|
|
1,558
|
|
|
|
(8,726
|
)
|
|||
Net cash flows used in financing activities
|
|
$
|
(33,274
|
)
|
|
$
|
(20,845
|
)
|
|||
|
|
|
|
|
|
|
|
|
|||
Effect of exchange rate changes on cash
|
|
$
|
1,652
|
|
$
|
538
|
|||||
|
|
|
|
|
|
|
|
|
|||
Less: net increase in discontinued operations cash and cash equivalents
|
$
|
—
|
$
|
950
|
|||||||
Net increase in cash and cash equivalents
|
|
$
|
6,194
|
|
|
$
|
4,402
|
|
|||
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents, beginning of period
|
|
|
1,602
|
|
|
|
233
|
|
|||
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents, end of period
|
|
$
|
7,796
|
|
|
$
|
4,635
|
|
|||
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2017
|
Three Months Ended
June 30, 2016
|
||||||||||||||
$ in thousands
|
$ in thousands
|
||||||||||||||
EBITDA from continuing operations, non-GAAP basis (1)
|
$
|
31,719
|
$
|
26,015
|
|||||||||||
Depreciation and amortization
|
(789
|
)
|
(1,877
|
)
|
|||||||||||
Interest expense
|
(4,130
|
)
|
(4,176
|
)
|
|||||||||||
Income tax expense
|
(9,560
|
)
|
—
|
||||||||||||
Net income from continuing operations, GAAP basis
|
$
|
17,240
|
$
|
19,962
|
Six Months Ended
June 30, 2017
|
|||||
Adjusted EPS, non-GAAP basis (2)
|
$
|
0.82
|
|||
EPS (loss) attributable to business separation costs (3)
|
(0.02
|
)
|
|||
EPS (loss) attributable to restructuring charges (4)
|
(0.01
|
)
|
|||
EPS guidance, GAAP basis (5)
|
$
|
0.79
|
Fiscal Year Ending December 31, 2017
|
|||||
Adjusted EPS guidance, non-GAAP basis (6)
|
$
|
1.50 - 1.58
|
|||
EPS (loss) guidance attributable to business separation costs (7)
|
(0.02
|
)
|
|||
EPS (loss) guidance attributable to restructuring charges (8)
|
(0.01
|
)
|
|||
EPS guidance, GAAP basis
|
$
|
1.47 – 1.55
|