Segment Disclosures and Concentrations of Risk

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Segment Disclosures and Concentrations of Risk

16. Segment Disclosures and Concentrations of Risk  

Background and Basis of Organization

Following the acquisition of Nutrisystem in March 2019, we organize and manage our operations within two reportable segments, based on the types of products and services they offer: Healthcare and Nutrition.  The Healthcare segment derives its revenues primarily from SilverSneakers senior fitness, Prime Fitness and WholeHealth Living.  The Nutrition segment provides weight management products and services and derives its revenues from Nutrisystem and South Beach Diet products. Prior to the acquisition of Nutrisystem, we had one reportable segment.   

Segment Revenues, Profit or Loss, and Assets

Our chief operating decision maker evaluates performance and allocates resources based on each segment’s EBITDA excluding acquisition and integration costs, impairment loss, restructuring and related charges, CEO transition costs, and direct, incremental costs related to COVID-19.  The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Transactions between the segments primarily consist of payments made by one segment on behalf of the other segment, which are recorded as current assets and eliminated in consolidation. Intersegment revenues and costs related to Wisely Well totaled $0.1 million and $2.0 million for the three and nine months ended September 30, 2020, respectively. The following tables present information about reported segment revenues and profit or loss, net of intersegment eliminations, as well as reconciliations of each such amount to consolidated totals:

(In thousands)
	Three Months Ended September 30,
	2020							2019
	Healthcare		Nutrition		Total Segments			Healthcare		Nutrition		Total Segments
Revenues	$	95,481	$	159,428	$	254,909		$	159,979	$	143,918	$	303,897	(1)
Consolidated income (loss) before income taxes					$	(40,174	)					$	18,593
Acquisition, integration and project costs						2,485							5,259
Transaction-related costs						2,755							—
Impairment loss						66,198							—
CEO transition costs						1,991							—
COVID-19 costs						591							—
Restructuring and related charges						1,136							281
Interest expense						20,395							23,006
Depreciation and amortization						13,315							9,700
Adjusted EBITDA	$	40,965	$	27,727	$	68,692		$	39,177	$	17,662	$	56,839

(In thousands)
	Nine Months Ended September 30,
	2020							2019
	Healthcare		Nutrition		Total Segments			Healthcare		Nutrition		Total Segments
Revenues	$	337,096	$	518,066	$	855,162		$	473,987	$	384,382	$	858,369	(1)
Consolidated income (loss) before income taxes					$	(218,808	)					$	54,428
Acquisition, integration and project costs						7,331							31,306
Transaction-related costs						2,755							—
Impairment loss						265,698							—
CEO transition costs						6,323							—
COVID-19 costs						1,851							—
Restructuring and related charges						2,888							4,225
Interest expense						63,294							54,334
Depreciation and amortization						40,997							22,366
Adjusted EBITDA	$	112,686	$	59,643	$	172,329		$	100,986	$	65,673	$	166,659

(1) The figure for total segments equals the consolidated figure for such item.

Our total assets by segment were as follows:

(In thousands)	September 30, 2020		December 31, 2019
Healthcare	$	508,188	$	526,013
Nutrition		788,587		1,099,892
Total assets	$	1,296,775	$	1,625,905

Concentrations of Risk

As of September 30, 2020, we were subject to concentration of revenue risk related to the services that we provide.  For the three and nine months ended September 30, 2020, a significant portion (27% and 28%, respectively) of our consolidated revenues was derived from our SilverSneakers senior fitness offering, in which a meaningful amount of our fees is earned based on member visits to fitness partner locations.  Due to widespread closures of our partner locations beginning in March 2020 related to the COVID-19 pandemic, there was a significant decrease in member participation and the related revenues during March 2020, with visits decreasing sharply by the end of March. A substantial number of our fitness partner locations remained closed for at least a portion of the second quarter.  During the second and third quarters of 2020, the average monthly total participation levels of our SilverSneakers members were significantly below historical levels, and we also experienced a decline in paid subscribers for Prime Fitness, each of which adversely impacted revenues in our Healthcare segment.  These adverse impacts to revenue were somewhat mitigated by a reduction in cost of services as our visit costs decreased in a corresponding manner.