Tivity Health
Overview
Tivity Health, Inc (TVTY) is a leading provider of fitness and health improvement programs, with strong capabilities in developing and managing network solutions. Through its existing three networks, SilverSneakers® - the nation’s leading fitness program for older adults, Prime® Fitness and WholeHealth Living®, Tivity Health is focused on targeted population health for those 50 and over. With more than 15 million Americans eligible for SilverSneakers, over 10,000 fitness centers in the Prime Fitness Network, and more than 25 years of clinical and operational expertise in managing specialty health benefits and networks, including chiropractic services, physical therapy, occupational therapy, speech therapy, acupuncture, massage and complementary and alternative medicine (CAM) services, the company touches millions of consumers across the country and works directly with hundreds of healthcare practitioners and many of the nation’s largest payers and employers.1
Business Strategy
Tivity Health’s integrated portfolio of fitness, nutrition and social engagement solutions supports overall health and wellness programs, which we believe are critical to our health plan and employer-based customers. Following the acquisition of Nutrisystem, we believe the Company is well-positioned to address food insecurity, inactivity, weight management, chronic conditions, and social isolation, leading to a reduction of healthcare costs. We believe the diversification of our portfolio and increased scale will benefit all of the Company’s stakeholders – including government and commercial health plans, fitness partners, members and consumers – as our offerings support healthier lifestyles and can lower medical costs.2
Our comprehensive “A-B-C-D” strategy has been strengthened with the acquisition of Nutrisystem. Strategy (A), add new members, will leverage Nutrisystem’s media expertise and scale to increase awareness of the SilverSneakers program and drive more enrolled members. We will also cross-promote our nutrition and fitness solutions while adding new distribution channels for Nutrisystem. Strategy (B), build more awareness, empowerment and engagement, will lean on Nutrisystem’s precision marketing competency to drive visits and present a host of nutrition offerings to SilverSneakers and Prime Fitness members. Strategy (C), collaborate with health plan partners to introduce new products and services that leverage our brand trust, drove our acquisition of Nutrisystem and will position us to offer nutrition-based as well as combined offerings. Strategy (D), deepen relationships with our fitness center partners and their instructors within our national network, is bolstered through the Nutrisystem acquisition by providing new potential revenue streams for fitness partner locations while offering yet another distribution channel for Nutrisystem through those partner locations. Our focus on revenue synergies is to address chronic conditions and weight management and expand the channels of distribution for nutrition-based products.
The Nutrition segment operates in a competitive direct-to-consumer market that is experiencing significant change. To respond to these changes, in addition to the total company A-B-C-D strategy discussed above, we are applying a two-pronged “O-E” strategy to: (O) optimize the core nutrition business, and (E) expand the business by (1) expanding reach beyond direct-to-consumer, including opportunities with our health plan partners and fitness partner locations and (2) leveraging our food science capabilities beyond weight loss so that we can address the broader opportunity of nutrition-based solutions and continue to differentiate ourselves in the market.
Business Segments
Healthcare Segment
Our Healthcare segment earns revenue from our three programs, SilverSneakers senior fitness, Prime Fitness and WholeHealth Living. We provide the SilverSneakers senior fitness program to members of Medicare Advantage and Medicare Supplement plans through our contracts with those plans. We offer Prime Fitness, a fitness facility access program, through contracts with employers, commercial health plans, and other sponsoring organizations that allow their members to individually purchase the program. We sell our WholeHealth Living program primarily to health plans.
Nutrition Segment
Our Nutrition segment earns revenue from four sources: direct to consumer, retail, QVC and other. Revenue is measured based on the consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. As explained in more detail below, revenue is recognized upon satisfaction of the performance obligation by transferring control over a product to a Nutrition segment customer. The estimated breakage of gift cards (estimated amount of unused gift cards) is recognized over the pattern of redemption of the gift cards, and direct-mail advertising costs are expensed as incurred. We recognize an asset for the carrying amount of product to be returned and for costs to obtain a contract if the amortization is more than one year in duration. We expense costs to obtain a contract as incurred if the amortization period is less than one year.
Financial highlight
Revenues for 2019 increased to $1,131.2 million compared to $606.3 million for 2018, primarily due to $498.1 million of revenues attributable to the acquisition of Nutrisystem. Excluding the acquisition, revenues in the Healthcare segment increased by $26.8 million from 2018, primarily as a result of 
an increase in Prime Fitness revenue of $19.6 million driven by an increase in average subscribers for 2019 compared to 2018 and (ii) a net increase in SilverSneakers revenue of $5.2 million, primarily due to an increase in revenue-generating visits somewhat offset by a decrease in the number of eligible lives.
For fiscal year 2020, revenues from Retail and QVC are expected to decline year over year due primarily to a reduction in orders for, and the promotion of, our products by these third parties. In addition, revenues from South Beach Diet (which is included in direct to consumer revenue) are expected to decline in 2020 based on lower demand.
During the fourth quarter of 2019, we recorded an impairment loss of $377.1 million, including $240.0 million related to the Nutrisystem tradename and $137.1 million related to goodwill allocated to the Nutrition segment. These impairment losses resulted from a change in our long-term forecast for the Nutrition segment. See Note 13 to the notes to consolidated financial statements included in this report.
