Credit Suisse https://credit-suisse.com sees strong revenue growth for Tivity Health’s https://www.tivityhealth.com healthcare segment as the company stands to achieve strong growth in the Medicare Advantage (MA) population. This is expected since the company’s healthcare segment is a leading provider of fitness and health improvement programs for MA, Medicare Supplement, along with commercial health plans.
Nearly 10-11 thousand people are turning 65 every day resulting in an increasing penetration of MA among Medicare beneficiaries which is increasing the focus on social determinants of health, along with rising obesity rates. MA is one of the fastest growing health insurance markets in the country since seniors are becoming more active and health conscious.
SilverSneakers, Tivity’s fitness program represents around 75% of the segment’s annual revenue and has strong brand recognition among seniors. The program is offered free to seniors on MA plans and allows members to choose from approximately 18 thousand fitness locations.
However, with any business model with attractive underlying industry trends and high revenue predictability, an increase in competition can be a threat. In fact, one of the SilverSneakers’ largest health plan clients, UnitedHealthcare (UNH) https://www.uhc.com launched their own fitness program called “Renew Active” for members enrolled in MA plans and are rolling out the program in 36 states. As a result, UNH has shifted the majority of their individual MA members from Tivity to their “Renew Active” program.
While there is a long term risk of other MA plans switching from SilverSneakers to Renew Active or launching their own competitive offerings, research experts at Credit Suisse remain bullish on Tivity’s SilverSneakers’ growth, opportunities given the company’s strong brand recognition among seniors.
Tivity has also launched a mobile app related to SilverSneakers called “Silver Sneakers Connect”, a mobile app used to provide social opportunities among seniors. The app joins seniors with other who share similar interests through local events and is available via the web or through a mobile app.
Another app SilverSneakersGo, gives members access to tailored fitness programs by presenting an extensive library of guided workout programs, videos, tailored exercises, and the ability to log workouts to track fitness goals.
Tivity also offers a fitness facility access program called Prime Fitness through commercial health plans, employers, and other sponsoring organizations via a network of over 10,000 fitness locations. The program caters to the working population (18-64) and represents 19% of Tivity’s healthcare segment’s revenue. Prime Fitness is Tivity’s fastest growing segment with over 42 million eligible adults in about 324 thousand enrolled.
Overall, Credit Suisse experts although bullish on Tivity’s healthcare segment, are concerned with the company’s Nutrition segment. In March 2019, Tivity acquired Nutrisystem for $1.3 billion, a leading provider of health, wellness, and weight management products and services.
After several years of strong double digit top line growth, Nutrisystem has experienced a decline in revenues over the past two years. The thinking is that it remains to be seen if management’s initiatives, targeted spending etc., are likely to result in a segment turnaround which has become increasingly more difficult with the departure of Dawn Zier, the former COO of Tivity and the former CEO of Nutrisystem.
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For more information or to provide feedback, email Jailendra Singh, Research Analyst at jailendra.singh@credit-suisse.com or call 212-325-8121.