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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2022

☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _____ to _____

Commission file number 000-19364

TIVITY HEALTH, INC.

(Exact name of registrant as specified in its charter)

Delaware		62-1117144
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

701 Cool Springs Boulevard, Franklin, TN 37067

(Address of principal executive offices) (Zip code)

(800) 869-5311

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading symbol		Name of each exchange on which registered
Common Stock - $.001 par value		TVTY		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒

No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒

No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐	Smaller reporting company	☐
Non-accelerated filer	☐			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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐

No ☒

As of April 29, 2022, there were outstanding 49,878,312 shares of the registrant’s common stock, par value $.001 per share (“Common Stock”).

Tivity Health, Inc.

Form 10-Q

Table of Contents

			Page
Part I
	Item 1.	Financial Statements	3
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
	Item 4.	Controls and Procedures	36

Part II
	Item 1.	Legal Proceedings	37
	Item 1A.	Risk Factors	37
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
	Item 6.	Exhibits	42

PART I

Item 1. Financial Statements

TIVITY HEALTH, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

	March 31, 2022			December 31, 2021
Current assets:
Cash and cash equivalents	$	92,076		$	60,132
Accounts receivable		58,011			62,730
Prepaid expenses		5,420			6,465
Income taxes receivable		—			3,095
Investment in equity securities		27,366			49,746
Other current assets		8,308			13,733
Total current assets		191,181			195,901

Property and equipment, net of accumulated depreciation of $47,280 and $44,229, respectively		25,721			25,247
Right-of-use assets		8,811			10,695
Intangible assets, net		29,049			29,049
Goodwill, net		334,680			334,680
Other assets		5,723			2,969
Total assets	$	595,165		$	598,541

Current liabilities:
Accounts payable	$	25,376		$	25,325
Accrued salaries and benefits		4,065			11,825
Accrued liabilities		31,624			28,270
Deferred revenue		3,201			3,371
Income taxes payable		2,774			—
Current portion of lease liabilities		7,388			8,007
Current portion of other long-term liabilities		2,832			10,625
Total current liabilities		77,260			87,423

Long-term debt		379,960			380,504
Long-term lease liabilities		2,072			3,487
Long-term deferred tax liability		7,789			3,183
Other long-term liabilities		137			5,037

Commitments and contingent liabilities

Stockholders' equity:
Preferred stock $.001 par value, 5,000,000 shares authorized, none outstanding		—			—
Common Stock $.001 par value, 120,000,000 shares authorized, 49,854,631 and 49,800,756 shares outstanding, respectively		50			50
Additional paid-in capital		516,113			514,461
Accumulated deficit		(358,590	)		(359,171	)
Treasury stock, at cost, 2,254,953 shares in treasury		(28,182	)		(28,182	)
Accumulated other comprehensive loss		(1,444	)		(8,251	)
Total stockholders' equity		127,947			118,907
Total liabilities and stockholders' equity	$	595,165		$	598,541

See accompanying notes to the consolidated financial statements.

TIVITY HEALTH, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except earnings per share data)

(Unaudited)

	Three Months Ended March 31,
	2022			2021
Revenues	$	127,513		$	108,085
Cost of revenue (exclusive of depreciation of $3,065 and $2,531, respectively included below)		78,415			57,285
Marketing expense		2,784			1,231
Selling, general and administrative expenses		10,700			9,696
Depreciation expense		3,206			2,683
Operating income		32,408			37,190

Interest expense		6,993			10,756
Other (income) expense, net		16,685			(1,130	)
Total non-operating expense, net		23,678			9,626
Income before income taxes		8,730			27,564

Income tax expense		8,086			7,620
Income from continuing operations	$	644		$	19,944

Loss from discontinued operations, net of income tax benefit of $21 and $277, respectively		(63	)		(808	)
Net income	$	581		$	19,136

Earnings (loss) per share - basic:
Continuing operations	$	0.01		$	0.41
Discontinued operations	$	(0.00	)	$	(0.02	)
Net income	$	0.01		$	0.39

Earnings (loss) per share - diluted:
Continuing operations	$	0.01		$	0.40
Discontinued operations	$	(0.00	)	$	(0.02	)
Net income	$	0.01		$	0.38

Comprehensive income	$	7,388		$	21,938

Weighted average common shares and equivalents:
Basic		49,838			49,222
Diluted		50,557			50,340

See accompanying notes to the consolidated financial statements.

TIVITY HEALTH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2022		2021
Net income	$	581	$	19,136

Net change in fair value of effective portion of interest rate swaps designated as cash flow hedges, net of tax expense of $2,264 and $882, respectively		6,600		2,576
Reclassification adjustment for previously deferred loss from interest rate swaps included in "Interest expense," net of tax of $71 and $78, respectively		207		226
Total other comprehensive income, net of tax	$	6,807	$	2,802
Comprehensive income	$	7,388	$	21,938

See accompanying notes to the consolidated financial statements.

TIVITY HEALTH, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

For the Three Months Ended March 31, 2022 and 2021

(In thousands)

(Unaudited)

	Preferred Stock		Common Stock		Additional Paid-in Capital			Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Loss			Total
Balance, January 1, 2021	$ —		$	49	$	513,263		$	(464,085	)	$	(28,182	)	$	(17,389	)	$	3,656
Comprehensive income		—		—		—			19,136			—			2,802			21,938
Exercise and vesting of share-based compensation awards		—		—		164			—			—			—			164
Tax withholding for share-based compensation		—		—		(2,502	)		—			—			—			(2,502	)
Share-based employee compensation expense		—		—		2,998			—			—			—			2,998
Balance, March 31, 2021	$	—	$	49	$	513,923		$	(444,949	)	$	(28,182	)	$	(14,587	)	$	26,254

Balance, January 1, 2022	$	—	$	50	$	514,461		$	(359,171	)	$	(28,182	)	$	(8,251	)	$	118,907
Comprehensive income		—		—		—			581			—			6,807			7,388
Exercise and vesting of share-based compensation awards		—		—		205			—			—			—			205
Tax withholding for share-based compensation		—		—		(472	)		—			—			—			(472	)
Share-based employee compensation expense		—		—		1,919			—			—			—			1,919
Balance, March 31, 2022	$	—	$	50	$	516,113		$	(358,590	)	$	(28,182	)	$	(1,444	)	$	127,947

See accompanying notes to the consolidated financial statements.

TIVITY HEALTH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2022			2021
Cash flows from operating activities:
Income from continuing operations	$	644		$	19,944
Loss from discontinued operations		(63	)		(808	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,206			2,683
Amortization and write-off of deferred loan costs		492			1,183
Amortization and write-off of debt discount		63			1,077
Share-based employee compensation expense		1,919			2,998
Unrealized gain on derivatives		(5,695	)		(1,130	)
Unrealized loss on investments in equity securities		22,380			—
Deferred income taxes		2,272			1,454
Decrease (increase) in accounts receivable		4,719			(18,978	)
Changes in income taxes receivable and payable		5,869			10,217
Decrease in other current assets		1,992			529
Decrease in accounts payable		(945	)		(42	)
Decrease in accrued salaries and benefits		(7,760	)		(3,685	)
Increase in other current liabilities		7,553			5,594
Other		369			1,582
Net cash flows provided by operating activities	$	37,015		$	22,618

Cash flows from investing activities:
Acquisition of property and equipment	$	(2,715	)	$	(1,561	)
Settlement on derivatives not designated as hedges		(1,390	)		(1,633	)
Net cash flows used in investing activities	$	(4,105	)	$	(3,194	)

Cash flows from financing activities:
Payments of long-term debt		(1,000	)		(63,600	)
Payments related to tax withholding for share-based compensation		(472	)		(2,502	)
Exercise of stock options		205			164
Change in cash overdraft and other		301			(1,443	)
Net cash flows used in financing activities	$	(966	)	$	(67,381	)

Net increase (decrease) in cash and cash equivalents	$	31,944		$	(47,957	)

Cash and cash equivalents, beginning of period	$	60,132		$	100,385

Cash and cash equivalents, end of period	$	92,076		$	52,428

See accompanying notes to the consolidated financial statements.

TIVITY HEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	Basis of Presentation

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). In our opinion, the accompanying consolidated financial statements of Tivity Health, Inc. and its wholly owned subsidiaries (collectively, “Tivity Health,” the “Company,” or such terms as “we,” “us,” or “our”) reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement. We have reclassified certain items in prior periods to conform to current classifications.

Our results from continuing operations do not include the results of Nutrisystem, Inc. (“Nutrisystem”), which we sold effective December 9, 2020. Results of operations for Nutrisystem have been classified as discontinued operations for all periods presented in the accompanying consolidated financial statements.

We have omitted certain financial information that is normally included in financial statements prepared in accordance with U.S. GAAP but that is not required for interim reporting purposes. You should read the accompanying consolidated financial statements in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021.

2.	Recent Relevant Accounting Standards

In October 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-16, "Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes" (“ASU 2018-16”), which adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition and provide lead time for entities to prepare for changes to interest rate risk hedging strategies. ASU 2018-16 is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. As of March 31, 2022, the benchmark interest rate in our existing interest rate swap agreements is LIBOR. The adoption of this standard did not have an impact on our financial position, results of operations, or cash flows.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (“ASC 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform: Scope”, which refines the scope of ASC 848 and clarifies the application of its guidance. ASC 848 contains temporary optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform, such as a transition away from the use of LIBOR. ASC 848 was effective for the Company as of January 1, 2020. The provisions of ASC 848 are available through December 31, 2022, at which time the reference rate replacement activity is expected to have been completed. The provisions of ASC 848 must be applied at a Topic, Subtopic or Industry Subtopic level for all transactions other than derivatives, which may be applied at a hedging relationship level. The accounting relief provided by ASC 848 is applicable only to legacy contracts if the amendments made to the agreements are solely for reference rate reform activities. Modifications that are unrelated to reference rate reform will scope out a given contract. ASC 848 allows for different elections to be made at different points in time, and the timing of those elections will be documented as applicable. For the avoidance of doubt, we intend to reassess the elections of optional expedients and exceptions included within ASC 848 related to our hedging activities and will document the election of these items on a quarterly basis. In March 2020, we elected the expedient that allows us to assume that our hedged interest payments are probable of occurring regardless of any expected modification in their terms related to reference rate reform. In addition, we have the option to change the method of assessing effectiveness upon a change in the critical terms of the derivative or the hedged transactions and upon the end of relief under ASC 848. In June 2020, we elected to (i) continue the method of assessing effectiveness as documented in the original hedge documentation and (ii) apply the expedient wherein the reference rate on the hypothetical derivative matches the reference rate on the hedging instrument. We will also apply the aforementioned elections to any future designated cash flow hedging relationship.

3.	Discontinued Operations

Effective as of December 9, 2020, we completed the sale of Nutrisystem. The following table presents financial results of our former Nutrition business included in “loss from discontinued operations" for the three months ended March 31, 2022 and 2021.

	Three Months Ended March 31,
(In thousands)	2022			2021
Selling, general and administrative expenses ⁽¹⁾		84			1,085
Pretax loss from discontinued operations		(84	)		(1,085	)
Income tax benefit		(21	)		(277	)
Loss from discontinued operations, net of income tax benefit	$	(63	)	$	(808	)

(1)

Expenses from discontinued operations primarily relate to legal and other professional fees and separation costs.

4.	Revenue Recognition

We account for revenue from contracts with customers in accordance with Accounting Standards Codification (“ASC”) Topic 606. The unit of account in ASC Topic 606 is a performance obligation, which is a promise in a contract to transfer to a customer either a distinct good or service (or bundle of goods or services) or a series of distinct goods or services provided over a period of time. ASC Topic 606 requires that a contract's transaction price, which is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, is to be allocated to each performance obligation in the contract based on relative standalone selling prices and recognized as revenue when or as the performance obligation is satisfied.

We earn revenue primarily from three programs: SilverSneakers^® senior fitness, Prime Fitness^®, and WholeHealth Living^TM. We provide the SilverSneakers senior fitness program to members of Medicare Advantage, Medicare Supplement, and group retiree plans through our contracts with such plans. We offer Prime Fitness, a fitness facility access program, through contracts with commercial health plans, employers, and other sponsoring organizations that allow their members to individually purchase the program. We sell our WholeHealth Living program primarily to health plans.

Except for Prime Fitness, our customer contracts generally have initial terms of approximately three years. Some contracts allow the customer to terminate early and/or determine on an annual basis to which of their members they will offer our programs. For Prime Fitness, our contracts with commercial health plans, employers, and other sponsoring organizations generally have initial terms of approximately three years, while individuals who purchase the Prime Fitness program through these organizations may cancel at any time (on a monthly basis) after an initial period of one to three months. The significant majority of our customer contracts contain one performance obligation - to stand ready to provide access to our network of fitness locations and fitness programming - which is satisfied over time as services are rendered each month over the contract term. Unsatisfied performance obligations at the end of a particular month primarily relate to certain monthly memberships for our Prime Fitness program, which are recorded as deferred revenue on the consolidated balance sheet and recognized as revenue during the immediately subsequent month. There was $0.1 million of revenue recognized during the three months ended March 31, 2022 from performance obligations satisfied in a prior period. Deferred revenue was $3.2 million and $3.4 million at March 31, 2022 and December 31, 2021, respectively. Significant changes in the deferred revenue balance during the period are as follows:

	Three Months Ended March 31,			Three Months Ended March 31,
(In thousands)	2022			2021
Revenue recognized that was included in deferred revenue at the beginning of the period	$	(3,204	)	$	(3,781	)
Increases due to cash received from customers, excluding amounts recognized as revenue during the period	$	3,034		$	3,672

Our fees are variable month to month and are generally billed per member per month (“PMPM”) or billed based on a combination of PMPM and member visits to a network location. We bill PMPM fees by multiplying the contractually negotiated PMPM rate by the number of members eligible for or receiving our services during the month. For the three months ended March 31, 2022, total SilverSneakers visits and revenues were higher than the same period in 2021 as the effects of the COVID-19 pandemic lessened compared to the prior year period. As a result, revenues from PMPM fees (which are not derived from visits) as a percentage of total SilverSneakers revenue declined to 41% for the three months ended March 31, 2022, compared to 53% for the three months ended March 31, 2021. We bill for member visits approximately one month in arrears once actual member visits are known. Payments from customers are typically due within 30 days of invoice date. When material, we capitalize costs to obtain contracts with customers and amortize them over the expected recovery period. At March 31, 2022 and December 31, 2021, $0.3 million of such costs were capitalized. Amortization expense related to such capitalized costs was $0.1 million and $0.2 million during the three months ended March 31, 2022 and 2021, respectively.

Our customer contracts include variable consideration, which is allocated to each distinct month over the contract term based on eligible members and/or member visits each month. The allocated consideration corresponds directly with the value to our customers of our services completed for the month. Under the majority of our contracts, we recognize revenue each month using the practical expedient available under ASC 606-10-55-18, which provides that revenue is recognized in the amount for which we have the right to invoice. ASC 606-10-50-14(b) provides an optional exemption, which we have elected to apply, from disclosing remaining performance obligations when revenue is recognized from the satisfaction of the performance obligation in accordance with the “right to invoice” practical expedient.

The following table sets forth revenue from continuing operations disaggregated by program. Revenue from our SilverSneakers program is predominantly contracted with Medicare Advantage and Medicare Supplement plans.

(In thousands)	Three Months Ended March 31,
	2022		2021
SilverSneakers	$	96,114	$	79,827
Prime Fitness		25,036		22,593
WholeHealth Living		6,118		5,637
Other		245		28
	$	127,513	$	108,085

Sales and usage-based taxes are excluded from revenues.

5.	Share-Based Compensation

We currently have three types of share-based awards outstanding to our employees and directors: stock options, restricted stock units, and market stock units. We believe that our share-based awards align the interests of our employees and directors with those of our stockholders. Vesting terms for each of these award types generally range from one to three years.

We recognize share-based compensation expense for the market stock units if the requisite service is rendered, even if the market condition is never satisfied. For the three months ended March 31, 2022 and 2021, we recognized total share-based compensation costs of $1.9 million and $3.0 million, respectively. We account for forfeitures as they occur.

In March 2022, we granted annual long-term incentive awards to our employees consisting of (i) approximately 162,000 stock options with a weighted average exercise price of $31.27 per share and a weighted average grant date fair value of $15.75 per share, and (ii) approximately 90,000 restricted stock units with a weighted average grant date fair value of $28.43 per share. These awards generally vest over or at the end of three years, subject to the underlying award agreements.

6.	Income Taxes

For the three months ended March 31, 2022 and 2021, we had an effective income tax rate from continuing operations of 92.6% and 27.6%, respectively. The higher effective income tax rate in 2022 is primarily due to the increase in the portion of valuation allowance for deferred tax assets related to capital loss carryforwards during the first quarter of 2022, as described in Note 10.

We file income tax returns in the U.S. Federal jurisdiction and in various state and foreign jurisdictions. Tax years remaining subject to examination in the U.S. Federal jurisdiction include 2018 to present.

7. Leases

We maintain lease agreements principally for our office spaces and certain equipment. We maintain two sublease agreements with respect to one of our office locations, each of which continues through the initial term of our master lease agreement. Such sublease income and payments, while they reduce our rent expense, are not considered in the value of the right-of-use asset or lease liability. With the exception of two finance leases related to a network server and office equipment, all of our leases are classified as operating leases. In the aggregate, our leases generally have remaining lease terms of four to 30 months, some of which include options to extend the lease for additional periods. Such extension options were not considered in the value of the right-of-use asset or lease liability because it is not probable that we will exercise the options to extend. If applicable, allocations among lease and non-lease components would be achieved using relative standalone selling prices.

The following table shows the components of lease expense for the three months ended March 31, 2022 and 2021:

	Three Months Ended March 31,
(In thousands)	2022			2021
Finance lease cost:
Amortization of leased assets	$	156		$	158
Interest of lease liabilities		4			14
Operating lease cost		1,861			1,915
Total lease cost before subleases	$	2,021		$	2,087
Sublease income		(1,344	)		(1,344	)
Total lease cost, net	$	677		$	743

Supplemental cash flow information related to leases is as follows:

	Three Months Ended March 31,
(In thousands)	2022			2021
Cash received (paid) for amounts included in the measurement of lease liabilities
Operating cash flow attributable to operating leases ⁽¹⁾	$	1,009		$	(1,550	)
Operating cash flow attributable to finance leases		(4	)		(14	)
Financing cash flow attributable to finance leases		(167	)		(157	)

(1)

For the three months ended March 31, 2022, due to catch-up payments received from certain sublessors, cash received from subleases exceeded our cash paid for the related leases.

For the three months ended March 31, 2022 and 2021, there were no noncash transactions related to leases.

Debt

The Company's debt, net of unamortized deferred loan costs and original issue discount, consisted of the following at March 31, 2022 and December 31, 2021:

(In thousands)	March 31, 2022			December 31, 2021
Term Loan B		393,000			394,000
Less: deferred loan costs and original issue discount		(13,040	)		(13,496	)
Total debt		379,960			380,504

Credit Facilities

On June 30, 2021, we entered into a new Credit Agreement (the “Credit Agreement”) with a group of lenders, Morgan Stanley Senior Funding, Inc., as general administrative agent, term loan facility administrative agent and collateral agent (“Morgan Stanley”), and Truist Bank, as revolving facility agent and swingline lender (“Truist”). The Credit Agreement replaced our prior Credit and Guaranty Agreement, dated March 8, 2019 (the “Prior Credit Agreement”), with a group of lenders, Credit Suisse AG, Cayman Islands Branch, as general administrative agent, term facility agent and collateral agent, and Truist, as revolving facility agent and swingline lender. The Credit Agreement provides us with (i) a $400.0 million term loan B facility (the “Term Loan B”), (ii) a $100.0 million revolving credit facility that includes a $30.0 million sublimit for swingline loans and a $40.0 million sublimit for letters of credit (the “Revolving Credit Facility”), and (iii) uncommitted incremental accordion facilities in an aggregate amount at any date equal to the greater of $167.5 million or 100% of our Consolidated EBITDA (as defined in the Credit Agreement) for the then-preceding four fiscal quarters, plus additional amounts based on, among other things, satisfaction of certain financial ratio requirements. As of March 31, 2022, outstanding debt under the Credit Agreement was $380.0 million, and availability under the revolving credit facility totaled $99.5 million as calculated under the most restrictive covenant.

Upon execution of the Credit Agreement, we recorded a non-cash loss on extinguishment of debt of $18.2 million, which related to the write-off of certain unamortized original issue discount and deferred loan costs associated with the Prior Credit Agreement. Additionally, we incurred third-party costs of $0.8 million related to the execution of the Credit Agreement and the transactions that are the subject thereof, which were recorded as loss on modification of debt.

We used the proceeds of the Term Loan B and cash on hand to repay all of the outstanding indebtedness under the Prior Credit Agreement, and to pay transaction costs and expenses. Proceeds of the Revolving Credit Facility also may be used for general corporate purposes of the Company and its subsidiaries.

We are required to repay Term Loan B loans in consecutive quarterly installments, each in the amount of 0.25% of the aggregate initial amount of such loans, payable on September 30, 2021 and on the last day of each succeeding quarter thereafter until maturity on June 30, 2028, at which time the entire outstanding principal balance

of such loans is due and payable in full. We are permitted to make voluntary prepayments of borrowings under the Term Loan B at any time without penalty, except for a 1% premium with respect to the principal of Term Loan B loans prepaid within six months after the date of the Credit Agreement using proceeds from certain specified repricing transactions. From June 30, 2021 through March 31, 2022, we made payments of $7.0 million on the Term Loan B, which included prepayments of all amounts due through March 31, 2023.

We are required to repay in full any outstanding swingline loans and revolving loans, and to terminate or cash collateralize any outstanding letters of credit, under the Revolving Credit Facility on June 30, 2026. In addition, the Credit Agreement contains provisions that, beginning with fiscal year 2022, may require annual excess cash flow (as defined in the Credit Agreement and generally designed to equal cash generated by our business in excess of cash used in the business) to be applied towards the prepayment of the Term Loan B or the reduction of the Revolving Credit Facility, as determined by the Company in our discretion (“Excess Cash Flow Payment”). An Excess Cash Flow Payment is only required in the amount, if any, by which the Excess Cash Flow Amount exceeds $10.0 million for the applicable fiscal year. “Excess Cash Flow Amount” is equal to our excess cash flow for a given fiscal year multiplied by the following excess cash flow percentages based on our First Lien Net Leverage Ratio (as defined in the Credit Agreement) on the last day of such fiscal year: (a) 50% if the First Lien Net Leverage Ratio is greater than 3.25:1, (b) 25% if the First Lien Net Leverage Ratio is less than or equal to 3.25:1 but greater than 2.75:1, and (c) 0% if the First Lien Net Leverage Ratio is less than or equal to 2.75:1. Any potential mandatory Excess Cash Flow Payments are reduced by among other things, prepayments of the Term Loan B, any reductions of the Revolving Credit Facility, and prepayments of certain other indebtedness made during the applicable fiscal year. We were not required to make an Excess Cash Flow Payment for fiscal 2021.

Borrowings under the Credit Agreement bear interest at variable rates based on a margin or spread in excess of either (1) one-month, three-month or six-month LIBOR (or, if available to all lenders holding the particular class of loans, 12-month LIBOR), which may not be less than 0.00%, or (2) the greatest of (a) the prime lending rate of the agent bank for the particular facility, (b) the federal funds rate plus 0.50%, and (c) one-month LIBOR plus 1.00% (the “Base Rate”), in each case as selected by the Company. The Base Rate may not be less than 1.00%. The LIBOR margin for Term Loan B loans is 4.25%, and the LIBOR margin for revolving loans varies between 4.25% and 3.75% depending on our First Lien Net Leverage Ratio (as defined in the Credit Agreement). The Base Rate margin for Term Loan B loans is 3.25%, and the Base Rate margin for revolving loans varies between 3.25% and 2.75%, depending on our First Lien Net Leverage Ratio.

Based on the Company’s elections, borrowings under the Prior Credit Agreement bore interest at variable rates based on a margin or spread in excess of one-month LIBOR, which could not be less than zero. The LIBOR margin for Term Loan A loans was 4.25%, the LIBOR margin for Term Loan B loans was 5.25%, and the LIBOR margin for revolving loans varied between 3.75% and 4.25%, depending on our total Net Leverage Ratio, as defined in the Prior Credit Agreement.

In May 2019, we entered into eight amortizing interest rate swap agreements, each of which matures in May 2024. Under these interest rate swap agreements, we receive a variable rate of interest based on LIBOR, and we pay a fixed rate of interest equal to approximately 2.2%. As further explained in Note 12, during the fourth quarter of 2020 we concluded that five of the eight interest rate swaps no longer qualified for hedge accounting treatment, and we de-designated these derivatives. As of March 31, 2022, the eight interest rate swap agreements had current notional amounts totaling $600.0 million, of which $333.3 million related to effective hedges.

The Credit Agreement also provides for annual commitment fees ranging between 0.250% and 0.375% of the unused commitments under the Revolving Credit Facility, depending on our Total Net Leverage Ratio (as defined in the Credit Agreement), and annual letter of credit fees on the daily maximum amount available under outstanding letters of credit at the LIBOR margin for the Revolving Credit Facility. The Prior Credit Agreement provided for annual commitment fees ranging between 0.250% and 0.500% of the unused commitments under the prior revolving credit facility, depending on our total Net Leverage Ratio (as defined in the Prior Credit Agreement), and annual letter of credit fees on the daily outstanding availability under outstanding letters of credit at the applicable LIBOR margin for the prior revolving credit facility, depending on our total Net Leverage Ratio (as defined in the Prior Credit Agreement).

Extensions of credit under the Credit Agreement are secured by guarantees from substantially all of the Company’s active material domestic subsidiaries and by security interests in substantially all of the Company’s and such subsidiaries’ assets, subject to certain specified exceptions.

With respect to the Revolving Credit Facility, the Credit Agreement contains a financial covenant that requires us to comply with a specified maximum First Lien Net Leverage Ratio if utilization of the Revolving Credit Facility exceeds a specified level as of the last day of any period of four consecutive fiscal quarters. The Credit Agreement also contains various other affirmative and negative covenants customary for financings of this type that, subject to certain exceptions, impose restrictions and limitations on the Company and certain of the Company’s subsidiaries with respect to, among other things, liens; indebtedness; changes in the nature of business; mergers and other fundamental changes; sales and other dispositions of assets (including equity interests in subsidiaries); loans, advances, guarantees, acquisitions and other investments; restricted payments (including dividends, distributions, buybacks, redemptions and repurchases with respect to equity interests); change in fiscal year; prepayments, redemptions or acquisitions for value with respect to junior lien, subordinated or unsecured debt; changes in organizational documents and junior debt agreements; negative pledges; restrictions on subsidiary distributions; transfers of material assets to subsidiaries that are not guarantors; and transactions with affiliates. As of March 31, 2022, we were in compliance with all of the financial covenant requirements of the Credit Agreement.

9.	Commitments and Contingencies

Shareholder Lawsuits: Strougo, Cobb, and Delaware Lawsuits

On February 25, 2020, Robert Strougo, claiming to be a stockholder of the Company, filed a complaint in the United States District Court for the Middle District of Tennessee (the "Strougo Lawsuit"). On August 18, 2020, the Court appointed Sheet Metal Workers Local No. 33, Cleveland District, Pension Fund as lead plaintiff. Plaintiff filed its amended complaint on November 13, 2020. The amended complaint is on behalf of a putative class of stockholders who purchased shares of the Company’s common stock, par value $0.001 per share (“Common Stock”) between March 8, 2019 and February 19, 2020 and names as defendants the Company, the Company's chief financial officer, former chief executive officer, and former president and chief operating officer. The amended complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated under the Exchange Act in making false and misleading statements and omissions related to the performance of and accounting for the Nutrisystem business that the Company acquired on March 8, 2019. The defendants filed a motion to dismiss the amended complaint on December 4, 2020. On July 29, 2021, the Court issued an order denying the defendants’ motion to dismiss. On October 26, 2021, Plaintiff filed a motion for class certification, which Defendants have opposed. The parties are currently engaged in discovery, and a trial date has been set for September 12, 2023.

On April 9, 2020, John Cobb, claiming to be a stockholder of the Company, filed a derivative complaint in the United States District Court for the Middle District of Tennessee naming the Company as a nominal defendant and certain current and former directors and officers as defendants (the “Cobb Lawsuit”). The complaint asserts claims for breach of Section 14(a) of the Exchange Act, breach of fiduciary duty, unjust enrichment, and waste of corporate assets, largely tracking the factual allegations in the Strougo Lawsuit. The plaintiff seeks monetary damages on behalf of the Company, restitution, and certain corporate governance and internal procedural reforms. On June 9, 2020, the United States Magistrate Judge approved the parties’ stipulation to stay the case pending the resolution of defendants’ motion to dismiss in the Strougo Lawsuit. On August 23, 2021, the parties submitted another joint stipulation proposing to further extend the stay.

In July 2020, three putative derivative complaints were filed in the United States District Court for the District of Delaware by the following individuals claiming to be stockholders of the Company: Patrick Yerby, Thomas R. Conte, Melvyn Klein, and Mark Ridendour (the “Delaware Derivative Lawsuits”). The complaints largely track the allegations, named defendants, asserted claims, and requested relief of the Cobb Lawsuit. The three Delaware Derivative Lawsuits have been consolidated. On August 24, 2021, the court entered an order staying the case.

Given the uncertainty of litigation and the preliminary stage of the Strougo Lawsuit, Cobb Lawsuit, and Delaware Derivative Lawsuits, we are not currently able to predict the probable outcome of the matter or to reasonably estimate a range of potential loss, if any. We intend to vigorously defend ourselves against these

lawsuits.

Trademark Lawsuit: Pacific Packaging Lawsuit

On May 31, 2019, Pacific Packaging Concepts, Inc. (“Pacific Packaging”) filed a complaint in the U.S. District Court for the Central District of California, Western Division, naming as defendants two former subsidiaries of the Company; Nutrisystem, Inc. and Nutri/System IPHC, Inc (“Pacific Packaging Lawsuit”). In its complaint, Pacific Packaging alleged that the defendants’ use of Pacific Packaging’s federally registered trademark, Fresh Start, in advertisements for its weight management program and shakes constitutes federal trademark infringement, counterfeit trademark infringement, false designation of origin, federal trademark dilution, unfair competition, false advertising, common law unfair competition, and common law trademark infringement. The complaint seeks injunctive relief and monetary damages in an unspecified amount. On August 29, 2019, the defendants filed their Answer to Complaint. On July 23, 2021, the Court granted the defendant’s motion for summary judgment dismissing certain of plaintiff’s damages claims, namely any claim for royalty damages and claims related to profits based on reverse confusion. The case was set for trial on March 1, 2022. In connection with the sale of Nutrisystem, the Company agreed to indemnify Kainos for losses arising out of this matter and retained the right to control the defense thereof. On January 11, 2022, the parties reached a settlement in principle of the Pacific Packaging Lawsuit pursuant to which defendants’ insurers would pay the entire settlement amount except for the amount of $25,000 representing the deductible on the policy, which would be paid by the Company pursuant to its indemnification agreement with Kainos. On March 11, 2022, the parties executed a definitive written settlement agreement, and all amounts were paid by the insurers and the Company in March 2022.

Other

Additionally, from time to time, we are subject to contractual disputes, claims and legal proceedings that arise in the ordinary course of our business. Some of the legal proceedings pending against us as of the date of this report are expected to be covered by insurance policies. As these matters are subject to inherent uncertainties, our view of these matters may change in the future. We expense legal costs as incurred.

10. Investment in Equity Securities

Prior to July 1, 2021, we owned 159,309 shares of common stock of a predecessor (“Legacy Sharecare”) of Sharecare, Inc. (“Sharecare”) that we acquired in connection with the sale of our total population health services business to Legacy Sharecare in July 2016. These shares did not have a readily determinable fair value through June 30, 2021. As permitted under ASC 321, “Investments – Equity Securities” (“ASC 321”), we elected to measure such shares at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer (of which there were none).

On February 12, 2021, Legacy Sharecare announced that it had entered into a merger agreement with Falcon Capital Acquisition Corp. (“FCAC”) and FCAC Merger Sub, Inc. (“FCAC Merger Sub”) pursuant to which Legacy Sharecare would merge with and into FCAC Merger Sub with Sharecare surviving as a wholly owned subsidiary of FCAC (the “Sharecare Transaction”). The Sharecare Transaction was consummated effective July 1, 2021. As a result, our shares of common stock of Legacy Sharecare were converted into shares of common stock of Sharecare (“Sharecare Common Stock”), with 2.4% of such shares being converted into and paid to us in cash. Consequently, in July 2021, we received $2.7 million in cash as well as 11,079,331 shares of Sharecare Common Stock (“Sharecare Equity Security”). Our cost basis in the Sharecare Equity Security is $10.5 million or $0.95 average cost per share. Sharecare Common Stock began trading on The Nasdaq Stock Market LLC on July 2, 2021 under the trading symbol “SHCR.”

The Sharecare Equity Security is subject to restrictions on resale, including a customary lockup period. The lockup period continues until the earlier of one year after the effective time of the Sharecare Transaction or such other time at which the Sharecare Common Stock trades at a certain minimum price for 20 trading days in any 30-day trading period beginning on or after November 28, 2021. In addition, between December 28, 2021 and March 27, 2022 (the “First Sale Window”), we were permitted to, but did not, sell up to 750,000 shares. Between March 28, 2022 and July 1, 2022, we may sell up to 750,000 shares plus the 750,000 shares we were permitted to, but did not, sell during the First Sale Window.

Subsequent to the consummation of the Sharecare Transaction in July 2021, the fair value of the Sharecare Equity Security became readily determinable. Accordingly, beginning in July 2021, we carry the Sharecare Equity Security on our consolidated balance sheet at fair value, and we recognize any changes in fair value of the Sharecare Equity Security in net income as unrealized gains or losses, as required under ASC 321. At March 31, 2022, the Sharecare Equity Security is reported as a current asset on our consolidated balance sheet in “Investment in equity securities”. During the three months ended March 31, 2022, we recorded an unrealized loss of $22.4 million based on the change in fair value of the Sharecare Equity Security. The unrealized loss was recorded to other (income) expense, net (see Note 15).

At December 31, 2021, we provided a valuation allowance of $135.4 million for deferred tax assets related to capital loss carryforwards. During the first quarter of 2022, we increased the valuation allowance by $5.7 million based on changes in expectations about the realizability of capital gains from a future disposal of the Sharecare Equity Security that would be available to utilize these capital loss carryforwards. The capital loss carryforwards expire on December 31, 2025, if unused. We currently expect to dispose of the Sharecare Equity Security during fiscal 2022.

11.	Fair Value Measurements

We account for certain assets and liabilities at fair value. Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date, assuming the transaction occurs in the principal or most advantageous market for that asset or liability.

Fair Value Hierarchy

The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 1:

Quoted prices in active markets for identical assets or liabilities;

Level 2:

Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-based valuation techniques in which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3:

Unobservable inputs that are supported by little or no market activity and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents our assets and liabilities measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021.

	March 31, 2022						December 31, 2021
	Fair Value Measurements Using Input Types						Fair Value Measurements Using Input Types
(In thousands)	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:
Investment in equity securities ⁽¹⁾	$	27,366	$	—	$	27,366	$	49,746	$	—	$	49,746

Derivatives designated as effective hedging instruments
Interest rate swap agreements	$	—	$	1,738	$	1,738	$	—	$	—	$	—

Non-designated derivatives
Interest rate swap agreements	$	—	$	1,397	$	1,397	$	—	$	—	$	—

Total assets	$	27,366	$	3,135	$	30,501	$	49,746	$	—	$	49,746

Liabilities:
Derivatives designated as effective hedging instruments
Interest rate swap agreements	$	—	$	1,580	$	1,580	$	—	$	8,705	$	8,705

Non-designated derivatives
Interest rate swap agreements	$	—	$	1,252	$	1,252	$	—	$	6,938	$	6,938

Total liabilities	$	—	$	2,832	$	2,832	$	—	$	15,643	$	15,643

(1)

Reflects ownership of 11,079,331 shares of Sharecare Common Stock, as described in Note 10.

The fair value of the Sharecare Equity Security is determined based on the closing price of Sharecare’s common stock on the last trading day of the reporting period.

The fair values of interest rate swap agreements are primarily determined based on the present value of future cash flows using internal models and third-party pricing services with observable inputs, including interest rates, yield curves and applicable credit spreads.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

We measure certain assets at fair value on a nonrecurring basis in the fourth quarter of each year, or more frequently whenever events or circumstances indicate that the carrying value may not be recoverable, including the following:

•

reporting units measured at fair value as part of a goodwill impairment test; and

•

indefinite-lived intangible assets measured at fair value for impairment assessment.

Each of these assets above is classified as Level 3 within the fair value hierarchy.

The fair value of a reporting unit is the price that would be received upon a sale of the unit as a whole in an orderly transaction between market participants at the measurement date. We have a single reporting unit.

Fair Value of Other Financial Instruments

The estimated fair value of each class of financial instruments at March 31, 2022 was as follows:

Cash and cash equivalents – The carrying amount of $92.1 million approximates fair value due to the short maturity of those instruments (less than three months).

Debt – The estimated fair value of outstanding borrowings under the Credit Agreement, which includes a term loan facility and a revolving credit facility (see Note 8), is determined based on the fair value hierarchy as discussed above.

The Term Loan B is actively traded and therefore is classified as a Level 1 valuation. The estimated fair value is based on an average of quotes as of March 31, 2022 from dealers who stand ready and willing to transact at those prices. We use a mid-market pricing convention (i.e., the mid-point of average bid and ask prices). The Revolving Credit Facility is not actively traded and therefore is classified as a Level 2 valuation based on the market for similar instruments. The estimated fair value and carrying amount of outstanding borrowings under the Term Loan B (excluding original issue discount and deferred loan costs) were $389.1 million and $393.0 million, respectively. There were no outstanding borrowings under the Revolving Credit Facility at March 31, 2022.

12.	Derivative Instruments and Hedging Activities

We use derivative instruments to manage differences in the amount, timing, and duration of our known or expected cash payments related to our outstanding debt (i.e., interest rate risk). Some of these derivatives are designated and qualify as a hedge of the exposure to variability in expected future cash flows and are therefore considered cash flow hedges. We account for derivatives in accordance with FASB ASC Topic 815, which establishes accounting and reporting standards requiring that derivative instruments be recorded on the balance sheet at fair value as either an asset or liability. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Changes in the derivative’s fair value will be recognized currently in earnings unless specific hedge accounting criteria are met. We classify cash flows from settlement of our effective cash flow hedges in the same category as the cash flows from the related hedged items, generally within the operating activities in the consolidated statements of cash flows. We classify cash flows from settlement of our non-designated derivatives within the investing section of the consolidated statements of cash flows.

Cash Flow Hedges of Interest Rate Risk and Non-Designated Derivatives

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. The counterparties to the interest rate swap agreements expose us to credit risk in the event of nonperformance by such counterparties. However, at March 31, 2022, we do not anticipate nonperformance by these counterparties. Our interest rate swap agreements with each of the counterparties contain a provision whereby if we either default or are capable of being declared in default on any of our indebtedness, whether or not such default results in repayment of the indebtedness being accelerated by the lender, then we could also be declared in default on our derivative obligations.

Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for our making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur in the initially identified time period or within a subsequent two-month time period. Deferred gains and losses in accumulated other comprehensive income or loss ("accumulated OCI") associated with such derivative instruments are reclassified into earnings in the period of de-designation.

In May 2019, we entered into eight amortizing interest rate swap agreements, each of which matures in May 2024 and was initially designated as an effective cash flow hedge. Under these agreements, we receive a variable rate of interest based on LIBOR, and we pay a fixed rate of interest equal to approximately 2.2%. In October 2020, we determined that some of our hedged transactions would not materially occur in the initially identified time period due to the sale of Nutrisystem, since we expected to use the majority of the net proceeds from the sale to pay down a significant portion of outstanding debt. As a result, we concluded that five of our eight interest rate swaps no longer

qualified for hedge accounting treatment. Accordingly, in the fourth quarter of 2020 we de-designated these five derivatives (“de-designated swaps”) and accelerated the reclassification of deferred gains and losses in accumulated OCI to income (loss) from discontinued operations as a result of the hedged forecasted transactions becoming probable not to occur. Upon de-designation in the fourth quarter of 2020, we recognized a pre-tax loss of $14.3 million in income (loss) from discontinued operations.

Additionally, upon de-designation in October 2020, we froze $3.2 million of previously deferred losses in accumulated OCI related to forecasted payments that are probable of occurring. We reclassify such deferred losses from accumulated OCI into earnings as an adjustment to interest expense during periods in which the forecasted transactions impact earnings, consistent with hedge accounting treatment. In the event that the related forecasted payments are probable of not occurring, the related loss in accumulated OCI will be recognized in earnings immediately.

We continue to maintain the effective hedging relationship between three interest rate swap agreements and the portion of our forecasted payments that is expected to remain highly probable of occurring. Our entering into the Credit Agreement on June 30, 2021 had no effect on the hedging designation of our interest rate swaps as the hedges are not tied to a specific debt instrument and the economic characteristics of the Credit Agreement are similar to those of the Prior Credit Agreement.

During the fourth quarter of 2020 we evaluated the likelihood and extent of potential future losses from the de-designated swaps. Such potential future losses are capped since the variable interest rate of our swaps is subject to a floor of 0%. Based on the LIBOR rates in effect at the time of de-designation, we decided to hold the de-designated swaps as derivative instruments requiring mark-to-market accounting treatment, with any change in fair value recognized each period in current earnings.

At March 31, 2022, our interest rate swap agreements designated as effective cash flow hedges had current notional amounts totaling $333.3 million, and our de-designated interest rate swap agreements had current notional amounts totaling $266.7 million.

We record all derivatives at estimated fair value in the consolidated balance sheet. Gains and losses on derivatives designated as effective cash flow hedges are recorded in accumulated OCI and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated OCI related to cash flow hedge derivatives will be reclassified to interest expense as we make interest payments on our variable-rate debt. As of March 31, 2022, we expect to reclassify $2.4 million, pre-tax, from accumulated OCI as an increase to interest expense within the next 12 months due to the scheduled payment of interest associated with our debt. Gains and losses on derivatives de-designated as effective cash flow hedges are recorded in the consolidated statement of operations as other (income) expense, net.

The estimated gross fair values of derivative instruments and their classification on the consolidated balance sheet at March 31, 2022 and December 31, 2021 were as follows:

(In thousands)	March 31, 2022		December 31, 2021
Assets:
Derivatives designated as effective hedging instruments:
Other assets	$	1,738	$	—

Non-designated derivatives:
Other assets	$	1,397	$	—

Liabilities:
Derivatives designated as effective hedging instruments:
Current portion of long-term liabilities	$	1,580	$	5,911
Other long-term liabilities		—		2,794
	$	1,580	$	8,705

Non-designated derivatives:
Current portion of long-term liabilities	$	1,252	$	4,714
Other long-term liabilities		—		2,224
	$	1,252	$	6,938

The following table presents the effect of cash flow hedge accounting on accumulated OCI as of March 31, 2022 and 2021:

(In thousands)	For the Three Months Ended
	March 31, 2022			March 31, 2021
Derivatives designated as effective hedging instruments:
Gain related to effective portion of derivatives recognized in accumulated OCI, gross of tax effect	$	(7,125	)	$	(1,412	)
Loss related to effective portion of derivatives reclassified from accumulated OCI to interest expense, gross of tax effect		(1,739	)		(2,046	)

Non-designated derivatives:
Previously deferred loss on interest rate swap agreements reclassified from accumulated OCI to interest expense, gross of tax effect	$	(278	)	$	(304	)
Total other comprehensive income, gross of tax	$	(9,142	)	$	(3,762	)

The following table presents the impact that non-designated derivatives had on our consolidated statement of operations for the three months ended March 31, 2022 and 2021:

(In thousands)	Statement of Operations Classification	March 31, 2022			March 31, 2021
Interest rate swap agreements:
Net gain related to ineffective portion of derivatives, gross of tax effect	Other (income) expense, net	$	(5,695	)	$	(1,130	)
Previously deferred loss related to de-designated swaps reclassified from accumulated OCI, gross of tax effect	Interest expense		278			304
		$	(5,417	)	$	(826	)

13.Earnings (Loss) Per Share

The following is a reconciliation of the numerator and denominator of basic and diluted earnings (loss) per share for the three months ended March 31, 2022 and 2021:

(In thousands except per share data)	Three Months Ended March 31,
	2022			2021
Numerator:
Income from continuing operations - numerator for earnings (loss) per share	$	644		$	19,944
Loss from discontinued operations - numerator for earnings (loss) per share		(63	)		(808	)
Net income	$	581		$	19,136

Denominator:
Shares used for basic income (loss) per share		49,838			49,222
Effect of dilutive stock options and stock units outstanding:
Non-qualified stock options		77			62
Restricted stock units		363			844
Performance-based stock units		—			61
Market stock units		279			151
Shares used for diluted income (loss) per share		50,557			50,340

Earnings (loss) per share - basic:
Continuing operations	$	0.01		$	0.41
Discontinued operations	$	(0.00	)	$	(0.02	)
Net income	$	0.01		$	0.39

Earnings (loss) per share - diluted:
Continuing operations	$	0.01		$	0.40
Discontinued operations	$	(0.00	)	$	(0.02	)
Net income	$	0.01		$	0.38

Dilutive securities outstanding not included in the computation of earnings per share because their effect is anti-dilutive:
Non-qualified stock options		262			268
Restricted stock units		35			9

Market stock units and performance-based stock units outstanding are considered contingently issuable shares, and certain of these stock units were excluded from the calculations of diluted earnings per share as the performance criteria had not been met as of the end of the applicable reporting period.

14. Accumulated OCI

The following tables summarize the changes in accumulated OCI, net of tax, for the three months ended March 31, 2022 and 2021:

(In thousands)	Net Change in Fair Value of Interest Rate Swaps
Accumulated OCI, net of tax, as of January 1, 2022	$	(8,251	)
Other comprehensive income (loss) before reclassifications, net of tax of $1,820		5,305
Amounts reclassified from accumulated OCI, net of tax of $515		1,502
Accumulated OCI, net of tax, as of March 31, 2022	$	(1,444	)

(In thousands)	Net Change in Fair Value of Interest Rate Swaps
Accumulated OCI, net of tax, as of January 1, 2021	$	(17,389	)
Other comprehensive income (loss) before reclassifications, net of tax of $360		1,052
Amounts reclassified from accumulated OCI, net of tax of $600		1,750
Accumulated OCI, net of tax, as of March 31, 2021	$	(14,587	)

The following table presents details about reclassifications out of accumulated OCI for the three months ended March 31, 2022 and 2021:

	Three Months Ended
(In thousands)	March 31, 2022			March 31, 2021			Statement of Operations Classification
Interest rate swaps	$	2,017		$	2,350		Interest expense
		(515	)		(600	)	Income tax expense
Total amounts reclassified from accumulated OCI	$	1,502		$	1,750		Net of tax

See Note 12 for a further discussion of our interest rate swaps.

15. Other (Income) Expense, Net

The following table shows the detail of Other (income) expense, net for the three months ended March 31, 2022 and 2021.

	Three Months Ended March 31,
(In thousands)	2022			2021
Unrealized loss on investment in equity securities (Note 10)	$	22,380		$	—
Unrealized gain related to ineffective portion of derivatives (Note 12)		(5,695	)		(1,130	)
Other (income) expense, net	$	16,685		$	(1,130	)

16. Subsequent Event

On April 5, 2022, we entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with Titan-Atlas Parent, Inc. (“Parent”) and Titan-Atlas Merger Sub, Inc., a direct, wholly-owned subsidiary of Parent

(“Merger Sub”), providing for the acquisition of the Company by affiliates of Stone Point Capital LLC, a Delaware limited liability company (“Stone Point Capital”), subject to the terms and conditions set forth in the Merger Agreement. Pursuant to the terms of the Merger Agreement and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Merger Sub will be merged with and into the Company (the “Merger”) effective as of the effective time of the Merger (the “Effective Time”). As a result of the Merger, Merger Sub will cease to exist, and the Company will survive as a wholly-owned subsidiary of Parent.

As a result of the Merger, except as otherwise provided in the Merger Agreement, at the Effective Time, each share of Common Stock issued and outstanding immediately prior to the Effective Time will be converted into the right to receive $32.50 in cash, without interest (the “Transaction Consideration”). In addition, at the Effective Time:

•

Each option to purchase Common Stock outstanding immediately prior to the Effective Time (each, a “Company Option”), whether vested or unvested, will be cancelled and will entitle the holder to receive an amount in cash (without interest and subject to applicable withholding taxes) equal to the product of (i) the number of shares of Common Stock subject to such Company Option as of immediately prior to the Effective Time and (ii) the excess, if any, of the Transaction Consideration over the exercise price per share of such Company Option. Any Company Options outstanding with exercise prices equal to or in excess of the per share Transaction Consideration will be cancelled without any payment to the holder thereof;

•

Each market stock unit award of the Company (each, a “Company MSU Award”) outstanding immediately prior to the Effective Time will become vested, will be cancelled and will entitle the holder thereof to receive an amount in cash (without interest and subject to applicable withholding taxes) equal to the product of (i) the number of shares of Common Stock that would have vested pursuant to the terms of such Company MSU Award based on actual performance through the Effective Time and (ii) the Transaction Consideration; and

•

Each restricted stock unit award of the Company (each, a “Company RSU Award”) outstanding immediately prior to the Effective Time will become fully vested, will be cancelled and will entitle the holder to receive an amount in cash (without interest and subject to applicable withholding taxes) equal to the product of (i) the number of shares of Common Stock subject to the Company RSU Award and (ii) the Transaction Consideration.

The consummation of the Merger is subject to the satisfaction or waiver of various customary conditions set forth in the Merger Agreement, including, but not limited to, (i) the Company’s stockholders’ approval of the Merger Agreement, (ii) the expiration or termination of any applicable waiting period (or any extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), (iii) the absence of any restraint or law preventing or prohibiting the consummation of the Merger, (iv) the accuracy of Parent’s, Merger Sub’s, and the Company’s representations and warranties (subject to certain materiality qualifiers), (v) Parent’s, Merger Sub’s and the Company’s compliance in all material respects with their respective obligations under the Merger Agreement, and (vi) the absence of any Company Material Adverse Effect (as defined in the Merger Agreement) since the date of the Merger Agreement. The consummation of the Merger is not subject to a financing condition.

During the three months ended March 31, 2022, we incurred expenses of $1.1 million related to the proposed Merger, which primarily consisted of legal and other professional fees and are reported as selling, general and administrative expenses in the consolidated statements of operations. On April 5, 2022, upon entering into the Merger Agreement, we incurred $2.5 million of financial advisory fees, which we recorded during the second quarter of 2022.

See Item IA. Risk Factors for a discussion of the risks related to the Merger.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

As used throughout this Quarterly Report on Form 10-Q, unless the context otherwise indicates, the terms “we,” “us,” “our,” “Tivity Health,” or the “Company” refer collectively to Tivity Health, Inc. and its wholly-owned subsidiaries. Please read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included under Item 1. “Financial Statements” of this report.

Overview

Tivity Health, Inc. was founded and incorporated in Delaware in 1981. We are a leading provider of healthy life-changing solutions, including SilverSneakers, Prime Fitness, and WholeHealth Living. We help adults improve their health and support them on life’s journey by providing access to in-person and virtual physical activity, social engagement, and mental enrichment programs. We deliver resources that enable members to live healthier, happier, more connected lives. Our solutions support health plans and employers nationwide as they seek to reduce costs and improve health outcomes.

We offer SilverSneakers to approximately 18 million eligible members of Medicare Advantage, Medicare Supplement, and group retiree plans. We also offer Prime Fitness, a fitness facility access program, through commercial health plans, employers, and other sponsoring organizations. Our national network of fitness centers delivers both SilverSneakers and Prime Fitness. In January 2022, we launched a customizable, premium fitness network for SilverSneakers that increased our total SilverSneakers fitness network to approximately 23,000 locations. We also offer virtual fitness experiences, including live instructor-led classes. Through our WholeHealth Living program, which we sell primarily to health plans, we offer a continuum of services related to physical and integrative medicine. Our WholeHealth Living network includes relationships with approximately 30,000 physical and integrative medicine practitioner locations to serve individuals through health plans and employers who seek health services such as chiropractic care, acupuncture, physical therapy, occupational therapy, massage therapy, and more.

Effective as of December 9, 2020, we completed the sale of Nutrisystem. Results of operations for Nutrisystem have been classified as discontinued operations for all periods presented in the consolidated financial statements.

Merger Agreement

As described more fully in Note 16 of the notes to consolidated financial statements included in this report, on April 5, 2022, we entered into a Merger Agreement providing for the acquisition of the Company by affiliates of Stone Point Capital, subject to the terms and conditions set forth in the Merger Agreement.

Subject to the terms and conditions of the Merger Agreement, at the Effective Time, each share of Common Stock issued and outstanding immediately prior to the Effective Time will be converted into the right to receive $32.50 in cash, without interest. The consummation of the Merger is subject to the satisfaction or waiver of various customary conditions set forth in the Merger Agreement, including, but not limited to, the adoption of the Merger Agreement by the Company’s stockholders and the receipt of certain regulatory approvals. The consummation of the Merger is not subject to a financing condition.

COVID-19

COVID-19, the global pandemic first recognized by the U.S. Department of Health and Human Services as a national public health emergency in January 2020, continues to spread throughout the United States and other countries. During 2020, the average monthly total participation levels of our SilverSneakers members were significantly below historical levels. Since 2020, participation levels have increased but remain below pre-pandemic levels, thus adversely impacting our revenues because a significant portion of revenues from our SilverSneakers program is based on member visits. SilverSneakers in-person visits totaled 16.9 million and 11.2 million for three months ended March 31, 2022 and 2021, respectively. In addition, while the number of active subscribers for Prime Fitness declined from April through December 2020, as of March 31, 2022, the number of active subscribers had increased slightly since the beginning of 2021.

Forward-Looking Statements

This report contains forward-looking statements, which are based upon current expectations, involve a number of risks and uncertainties, and are subject to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical statements of fact and those regarding the intent, belief, or expectations of the Company, including, without limitation, all statements regarding the Company's future earnings, revenues, financial condition, business strategies, and results of operations. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may vary from those in the forward-looking statements as a result of various factors, including, but not limited to:

•

the risk that the proposed Merger may not be completed in a timely manner or at all, which may adversely affect our business and the price of our Common Stock;

•

the failure to satisfy any of the conditions to the consummation of the proposed Merger, including the adoption of the Merger Agreement by our stockholders and the receipt of certain regulatory approvals;

•

the occurrence of any event, change or other circumstance or condition that could give rise to the termination of the Merger Agreement, including in circumstances requiring us to pay a termination fee;

•

the effect of the announcement or pendency of the proposed Merger on our business relationships, operating results and business generally;

•

risks that the proposed Merger disrupts our current plans and operations;

•

our ability to retain and hire key personnel in light of the proposed Merger;

•

risks that the proposed Merger diverts management’s attention from our ongoing business operations;

•

unexpected costs, charges or expenses resulting from the proposed Merger;

•

the ability of Stone Point Capital to obtain the necessary financing arrangements set forth in the commitment letters received in connection with the Merger;

•

potential litigation relating to the Merger that could be instituted against Stone Point Capital, the Company or their respective directors, managers or officers, including the effects of any outcomes related thereto;

•

continued availability of capital and financing;

•

certain restrictions during the pendency of the Merger that may impact our ability to pursue certain business opportunities or strategic transactions;

•

impacts from the COVID-19 pandemic (including the response of governmental authorities to combat and contain the pandemic; the development, availability, distribution, and effectiveness of vaccines and treatments, and public confidence in such vaccines and treatments; the closure of fitness centers in our national network (or operational restrictions imposed on such fitness centers), reclosures, and potential additional reclosures or restrictions as a result of surges in positive COVID-19 cases) on our business, operations or liquidity;

•

the risks associated with changes in macroeconomic conditions (including the impacts of any recession or changes in consumer spending resulting from the COVID-19 pandemic), widespread epidemics, pandemics (such as the current COVID-19 pandemic, including variant strains of COVID-19) or other outbreaks of disease, geopolitical turmoil, and the continuing threat of domestic or international terrorism;

•

our ability to collect accounts receivable from our customers and amounts due under our sublease agreements;

•

the market’s acceptance of our new products and services;

•

our ability to develop and implement effective strategies and to anticipate and respond to strategic changes, opportunities, and emerging trends in our industry and/or business, as well as to accurately forecast the related impact on our revenues and earnings;

•

the impact of any impairment of our goodwill, intangible assets, or other long-term assets;

•

changes in fair value of the Sharecare Equity Security and the expected timing and amount of cash proceeds from any potential disposition of this security;

•

the expected timing, amount, and impact of any share repurchases made by the Company;

•

our ability to attract, hire, or retain key personnel or other qualified employees and to control labor costs;

•

our ability to effectively compete against other entities, whose financial, research, staff, and marketing resources may exceed our resources;

•

the impact of legal proceedings involving us and/or our subsidiaries, products, or services, including any claims related to intellectual property rights, as well as our ability to maintain insurance coverage with respect to such legal proceedings and claims on terms that would be favorable to us;

•

the impact of severe or adverse weather conditions, the current COVID-19 pandemic (including variant strains of COVID-19), and the potential emergence of additional health pandemics or infectious disease outbreaks on member participation in our programs;

•

the risks associated with deriving a significant concentration of our revenues from a limited number of our customers, many of whom are health plans;

•

our ability and/or the ability of our customers to enroll participants and to accurately forecast their level of enrollment and participation in our programs in a manner and within the timeframe we anticipate;

•

our ability to sign, renew and/or maintain contracts with our customers and/or our fitness partner locations under existing terms or to restructure these contracts on terms that would not have a material negative impact on our results of operations;

•

the ability of our health plan customers to maintain the number of covered lives enrolled in those health plans during the terms of our agreements;

•

our ability to add and/or retain active subscribers in our Prime Fitness program;

•

the impact of any changes in tax rates, enactment of new tax laws, revisions of tax regulations, or any claims or litigation with taxing authorities;

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the impact of a reduction in Medicare Advantage health plan reimbursement rates or changes in plan design;

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the impact of any new or proposed legislation, regulations and interpretations relating to Medicare, Medicare Advantage, Medicare Supplement and privacy and security laws;

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the impact of healthcare reform on our business;

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the risks associated with increased focus from investors and other stakeholders regarding ESG practices, which could result in additional costs, regulation, or risks and adversely impact our reputation, employee recruiting and retention, and willingness of customers and suppliers to do business with us;

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the risks associated with potential failures of our information systems or those of our third-party vendors, including as a result of telecommuting issues associated with personnel working remotely, which may include a failure to execute on policies and processes in a work-from-home or remote model;

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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, including those risks that result from the increase in personnel working remotely, which may result in unauthorized access by third parties, loss, misappropriation, disclosure or corruption of customer, employee or our information, or other data subject to privacy laws and may lead to a disruption in our business, costs to modify, enhance, or remediate our cybersecurity measures, enforcement actions, fines or litigation against us, or damage to our business reputation;

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the risks associated with changes to traditional office-centered business processes and/or conducting operations out of the office in a work-from-home or remote model by us or our third-party vendors during adverse situations (e.g., during a crisis, disaster, or pandemic), which may result in additional costs and/or may negatively impact productivity and cause other disruptions to our business;

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our ability to enforce our intellectual property rights;

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the risk that our indebtedness may limit our ability to adapt to changes in the economy or market conditions, expose us to interest rate risk for the variable rate indebtedness and require a substantial portion of cash flows from operations to be dedicated to the payment of indebtedness;

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our ability to service our debt, make principal and interest payments as those payments become due, and remain in compliance with our debt covenants;

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our ability to obtain adequate financing to provide the capital that may be necessary to support our current or future operations;

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counterparty risk associated with our interest rate swap agreements and changes in fair value of the de-designated swaps; and

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other risks detailed in this report and our other filings with the U.S. Securities and Exchange Commission (the “SEC”).

We undertake no obligation to update or revise any such forward-looking statements.

Business Strategy

Our strategy is to enable healthier, happier and more connected lives as a digital platform engagement company that not only provides in-person and virtual fitness, social engagement and mental enrichment opportunities, but also an insights-driven, personalized experience. Our goal is to increase the number of eligible and enrolled SilverSneakers members and broaden engagement through strong health plan partnerships, a robust national network of approximately 23,000 fitness locations, live-with-instructor and on-demand virtual classes, and non-fitness activities that support social connection and lifelong learning. We will also focus on increasing the number of subscribers to Prime Fitness, targeting adults aged 18-64 who are members of sponsoring organizations, through our national network of approximately 12,500 participating locations and our daily live streaming classes. In addition, we plan to accelerate growth in our WholeHealth Living offering through market share expansion and improved technology.

Critical Accounting Policies

We describe our significant accounting policies in Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (“2021 Form 10-K”). We prepare the consolidated financial statements in conformity with generally accepted accounting principles in the United States

(“U.S. GAAP”), which requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and related disclosures at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

We believe the following accounting policies are the most critical in understanding the estimates and judgments that are involved in preparing our financial statements and the uncertainties that could impact our results of operations, financial condition, and cash flows.

Revenue Recognition

We account for revenue from contracts with customers in accordance with Accounting Standards Codification (“ASC”) Topic 606 “Revenue from Contracts with Customers” (“ASC Topic 606”). The unit of account in ASC Topic 606 is a performance obligation, which is a promise in a contract to transfer to a customer either a distinct good or service (or bundle of goods or services) or a series of distinct goods or services provided over a period of time. ASC Topic 606 requires that a contract’s transaction price, which is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, is to be allocated to each performance obligation in the contract based on relative standalone selling prices and recognized as revenue when or as the performance obligation is satisfied.

We earn revenue from continuing operations primarily from three programs: SilverSneakers senior fitness, Prime Fitness and WholeHealth Living. We provide the SilverSneakers senior fitness program to members of Medicare Advantage, Medicare Supplement, and group retiree plans through our contracts with those plans. We offer Prime Fitness, a fitness facility access program, through contracts with commercial health plans, employers, and other sponsoring organizations that allow their members to individually purchase the program. We sell our WholeHealth Living program primarily to health plans.

The significant majority of our customer contracts contain one performance obligation - to stand ready to provide access to our network of fitness locations and fitness programming - which is satisfied over time as services are rendered each month over the contract term. Unsatisfied performance obligations at the end of a particular month primarily relate to certain monthly memberships for our Prime Fitness program, which are recorded as deferred revenue on the consolidated balance sheet and recognized as revenue during the immediately subsequent month. There was $0.1 million of revenue recognized during the three months ended March 31, 2022 from performance obligations satisfied in a prior period.

Although we evaluate our financial performance and make resource allocation decisions based upon the results of our single operating and reportable segment, we believe the following information depicts how our revenues and cash flows from continuing operations are affected by economic factors. For the three months ended March 31, 2022, revenue from our SilverSneakers program, which is predominantly contracted with Medicare Advantage and Medicare Supplement plans, comprised 75% of revenues from continuing operations, while revenue from our Prime

Fitness and WholeHealth Living programs comprised 20% and 5%, respectively, of revenues from continuing operations.

Sales and usage-based taxes are excluded from revenues.

Impairment of Intangible Assets and Goodwill

We review goodwill for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (during the fourth quarter of our fiscal year) or more frequently whenever events or circumstances indicate that the carrying value may not be recoverable. We have a single reporting unit.

As part of the annual impairment test, we may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If we elect not to perform a qualitative assessment or we determine that it is more likely than not that the fair value of the reporting unit is less than its carrying value, we perform a quantitative review. During the quantitative review, if the estimated fair value of the reporting unit exceeds its carrying amount, no impairment is indicated. If the estimated fair value of the reporting unit is less than its carrying amount, impairment of goodwill is measured as the excess of the carrying amount over fair value.

We review indefinite-lived intangible assets for impairment on an annual basis (during the fourth quarter of our fiscal year) or more frequently whenever events or circumstances indicate that the carrying value may not be recoverable. We estimate the fair value of our indefinite-lived tradename using the relief-from-royalty method, which requires us to estimate significant assumptions such as the long-term growth rates of future revenues associated with the tradename, the royalty rate for such revenue, the terminal growth rate of revenue, the tax rate, and a discount rate. Changes in these estimates and assumptions could materially affect the estimates of fair value for the tradename.

Key Performance Indicators

In managing our business, we regularly review and analyze a number of key performance indicators (“KPIs”), including revenues, adjusted EBITDA (both in dollars and as a percentage of revenues), and free cash flow. Adjusted EBITDA and free cash flow are not calculated in accordance with U.S. GAAP (“non-GAAP”). These KPIs help us monitor our performance, identify trends affecting our business, determine the allocation of resources, and assess the quality and potential variability of our cash flows and earnings. We believe they are useful to investors in evaluating and understanding our business.

We have one reportable segment and therefore do not review and analyze revenues or adjusted EBITDA on a segment-level basis or as KPIs. Instead, we review and analyze revenues from continuing operations and adjusted EBITDA from continuing operations. We updated our definition of adjusted EBITDA as follows: (i) during the first quarter of 2021 to exclude other (income) expense related to de-designated swaps; (ii) during the second quarter of 2021 to exclude loss on extinguishment and modification of debt; and (iii) during the third quarter of 2021 to exclude other (income) expense related to realized and unrealized gains and losses on our Sharecare Equity Security, as further described in Note 10 of the notes to consolidated financial statements included in this report. We consider such items to be outside the performance of our ongoing core business operations and believe that presenting Adjusted EBITDA excluding these items provides increased transparency as to the operating costs of our current business performance. We did not revise the prior periods’ Adjusted EBITDA amounts because there were no costs similar in nature to these items.

(In $000s)	Three Months Ended March 31,
	2022			2021
Revenues from continuing operations	$	127,513		$	108,085
Adjusted EBITDA from continuing operations		37,351			41,194
Adjusted EBITDA as a percentage of revenues from continuing operations		29.3	%		38.1	%

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Revenues – we review year-over-year changes in revenue from continuing operations as a key measure of our success in growing our business. In addition to measuring revenue in total, we also measure and report revenue by program type or source of revenue, as detailed in Note 4 of the notes to the consolidated financial statements included in this report, i.e., SilverSneakers, Prime Fitness, WholeHealth Living, and Other. Evaluating revenue by program type or source helps us identify and address changes in product mix, broad market factors that may affect our revenues, and opportunities for future growth.

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Adjusted EBITDA is a non-GAAP measure and is defined by the Company as earnings before interest, taxes, depreciation and amortization, integration, project, and CEO transition costs and other (income) expense. We believe adjusted EBITDA provides investors a helpful measure for comparing our operating performance with our historical operating results as well as the performance of other companies that may have different financing and capital structures or tax rates. We believe it is a useful indicator of the operational strength and performance of our business. Because adjusted EBITDA may be defined differently by other companies in our industry, the financial measure presented herein may not be comparable to similarly titled measures of other companies. A reconciliation of adjusted EBITDA to income from continuing operations (the most comparable U.S. GAAP measure) is set forth below.

	Three Months Ended March 31,
(In thousands)	2022		2021
Income from continuing operations, GAAP basis	$	644	$	19,944
Income tax expense

TIVITY HEALTH, INC. 10-Q