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Tivity Health, Inc. (TVTY)
Q3 2019 Earnings Call
Nov 12, 2019, 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good afternoon and welcome to the Tivity Health Third Quarter 2019 Financial Results Conference Call. [Operator Instructions] To the extent any non-GAAP financial measure is discussed in today's call you will also find a reconciliation of that measure to the most directly comparable financial measure calculated in accordance with GAAP in today's news release which is also posted on the company's website. This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements among others regarding Tivity Health's expected quarterly and annual operating and financial performance for 2019 and beyond.
For this purpose any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting foregoing the word believes, anticipates, plans expects and similar expressions are intended to identify forward-looking statements. You are hereby cautioned that these statements may be affected by the important factors among others set forth in Tivity Health's filings with the Securities and Exchange Commission and in today's news release. And consequently, actual operations and results may differ materially from the forward results discussed in the forward-looking statements. The company undertakes no obligation to update publicly any forward-looking statements whether as a result of new information future events or otherwise.
And now I'll turn the call over to the company's Chief Executive Officer, Mr. Donato Tramuto. You may begin sir.
Donato J. Tramuto -- Chief Executive Officer
Thank you and welcome to everyone who has joined the call today. I'd like to start off thinking the nearly 1,000 Tivity Health colleagues whose dedication and commitment to advancing the 2019 strategic objectives helped drive the results for the third quarter. Despite this year of tremendous change for Tivity Health, our colleagues have continued to execute fiercely. I couldn't be prouder of all of you. Your hard work this year has prepared us well for 2020 and beyond. Today, I have with me Dawn Zier, Tivity Health’s President and Chief Operating Officer, Adam Holland, our CFO, as well as Tommy Lewis, our Chief Transformation Officer, who leads our Investor Relations and integration initiatives. He will be available during the question and answer session following our prepared remarks. I would also like to introduce two additional key executives here today, Steve Janecek, President of the Healthcare Business Unit, and Keira Krausz, President of the Nutrition Business Unit. Both will be available today for questions. So let me address Q3, if I may. I am pleased with our results this last quarter, and equally as important, all the progress we have achieved across our businesses. Today, I will provide an update on the Healthcare segment including the A-B-C-D strategy.
Dawn will update us regarding the nutrition business and specifically the OE strategy introduced to you on the August earnings call. And Adam will then update you on the financials before I conclude with remarks around where we are positioning this company for the long term.
Now for the Healthcare business unit update. Let's start with SilverSneakers. I am very happy to report that we closed out this selling season on a high note. As we continue to add new eligible members for next year. In August we announced new contract wins yielding an estimated 600,000 new members to start the new year. And during the third quarter, which includes the tail end of our selling season, we added yet another 200,000 eligible members from additional contract wins positioning us well heading into 2020. Congratulations to Steve and the entire sales team. By the end of 2019, we expect to have 15.3 million eligible SilverSneakers members, reinforcing our confidence in our stated goal from the last earnings call of approximately 16 million to 16.5 million SilverSneakers eligibles by the end of 2020. As shared, our growth in eligible members reflects the collective growth levers of the nearly 10,000 plus Americans turning 65 every day, more seniors choosing Medicare Advantage plans, successful client retention as well as a strong 2019 selling season. Let me continue.
We shared with you last quarter that UnitedHealth will retain SilverSneakers for a portion of the remaining individual lives for 2020. We believe the efforts employed through our A-B-C-D strategy are being recognized by UnitedHealth and others as they appreciate the power of the SilverSneakers brand and the investments made in the enrollment and engagement strategy. I'm also pleased to report that we now expect to retain the United Group lives for another two years beyond 2020. As an FYI, in 2019, the group business represented approximately $40 million in annual revenue. Turning now to an update on our relationship with Walmart, one that we are excited and one that we announced a few weeks ago. Tivity Health has partnered with Walmart in their newly launched health center. This agreement creates a ground-breaking opportunity to deliver health and wellness services at the community level. Walmart's state of the art facility will provide affordable quality healthcare services to the Dallas Georgia community. Tivity Health will offer our programs including best-in-class physical activity nutrition social engagement and well-being programming in a community room at the Walmart Health Center.
For example, we will host classes for groups of adults specialized courses to meet the needs of the community and workshops on topics ranging from healthy eating to goal setting. This disruptive healthcare model is consistent with our commitment to both meet our members where they gather and also at the same time address the social determinants of health, those nonmedical drivers that contribute to poor health such as social economic status access to healthy food, physical activity and access to quality care and health-related services. I'd like to take this opportunity. As you may imagine, these types of partnerships don't happen overnight. They happen over years of relationship development. And I'd like to take this opportunity to thank for Walmart, health and wellness leadership team for recognizing the value derived from collaboration, where two powerful brands can work together to address the ongoing opportunities within our health system. While on the topic of Walmart, the prime fitness offering signed with Walmart last April was launched on October 1 for the more than 1.5 million Walmart associates nationwide. We're very early in the process and pleased with the level of support that Walmart leadership has provided. Additionally we are happy with the early sign-ups and we will have more to report next quarter.
And lastly, the third leg to this exciting partnership too will follow when we are further along with the prime rollout. Specifically we will roll out a pilot for Walmart's associates where we will be offering the Nutrisystem D program to diabetic and prediabetic associates. Let me now provide a quick year-end update on our total fitness center locations. Since this leadership team assumed the helm in 2015, the growth of our fitness partner locations has expanded from just over 13,000 in 2015 to nearly 18,000 today and we are pleased to report our 2020 renewal rates to date is greater than 90% of the contracts have been renewed and over 700 net new locations have been added as well. My thanks to Caroline and her entire team who have managed the network in a very unmatched manner.
While having a broad-based network is important, driving members to those centers is the hallmark of our business model. Allow me for a moment to provide an update on another innovative venue employed to enroll and engage members. And that is, we have been looking to offer at home fitness options. As part of Tivity Health's ongoing A-B-C-D strategy, more specifically the B strategy around engagement, we rolled out a series of workout videos available to members through silversneakers.com.
This capability was tested in early 2019 with promotion occurring across the country over the summer months. Early insights are showing that bringing on-demand SilverSneakers programming into the home is actually an effective method of driving the enrollment and engagement aspects of our A-B-C-D strategy which simply put is to increase enrollment and gym visits. On average, eligible participants watch just two videos online before activating their membership at a gym location. Additionally, these new participants and reactivated participants are showing average visit rates on par or slightly better than the population at large. While we're still on the early side of overall adoption, we believe that these results prove that our investments in digital complements are having a positive impact on the underlying business value proposition.
But please keep in mind, this at-home on-demand enrollment intervention tailgates off the other successful enrollment engagement interventions launched over the last 36 months such as digital and TV media deployment of our territory managers across the nation co-marketing programs with our fitness centers, the CollegeSave incentive program and the outbound call strategy from our call center. As the old adage goes, all roads lead to Rome, while all of these interventions lead to the increase in enrollment and engagement. Reiterating what we said in the second quarter call, our preliminary 2020 projections for revenue growth in the healthcare business are somewhere between high single to low double digits driven by growth, both in SilverSneakers and Prime, however, we also are seeing growth in our WholeHealth Living business unit. As I'm sure you can tell, we're excited by the continued success in our healthcare business, as well as the progress related to our combined offering. And we see great potential for continued success going forward.
I'll now turn the call over to Dawn who will give you an view on the Nutrition business unit. Dawn?
Dawn M. Zier -- President and Chief Operating Officer
Thank you, Donato. The Nutrition business unit's third quarter results came in as expected and Q4 quarter-to-date performance is on plan. As we historically have done during the second half of the calendar year, our focus within the nutrition business unit shifts to preparing for a successful 2020 diet season. And we're also executing the OE strategy that we announced last quarter. As a reminder, the OE strategy encompasses one, optimizing the core business to support 2020 diet season growth and two, expanding the business to launch new revenue channels that will diversify us from being singularly dependent on the direct response advertising based approach. We believe the execution of this strategy will lead to stabilization, growth and reduce volatility. On today's call, I'll highlight several areas where we are making strides. Let's start with the optimization or O components of our OE strategy which consists of four major action areas. First, on the program innovation front we have hit all milestones in product and program development for both Nutrisystem and the South Beach diet, as we prepare for the 2020 diet season. Nutrisystem's program is its most innovative since 2014 requiring significant e-commerce and food development.
We're pleased to be the leader among our top competitors in weight loss efficacy and clinical based results and will introduce the highest number of new foods this year versus any of the prior six years. And we have some very exciting news around the South Beach diet that we believe will draw a lot of positive attention to this brand. As always we will share the details around the 2020 Nutrisystem and South Beach Diet program next month per our normal announcement cadence.
Second, we've also continued to enhance our customer engagement technology, often referred to as Martech or AdTech. In the third quarter, we onboarded new demand side and data management platform and completed the first phase of our customer data platform. These technologies will enable enhanced personalization across all touch points, better sequencing and messaging and more precise cost management as we head into 2020. Third is digital marketing. Expanding reach is critical to our success in 2020. And with that in mind we've invested in building out our digital team and resources and have achieved significant growth in profitable digital marketing spend and its associated reach. Our strategy has been to reach new customers wherever they are with expansion and growth of our digital channels being a central enabler.
The rapid year-over-year acceleration of digital marketing referenced on the last earnings call has continued to build in the third quarter and we expect to expand further at the start of 2020 to capitalize to the fullest on the busy diet season. Year-to-date, approximately 70% of our orders are coming through digital channels. Now closely aligned with digital marketing are our apps, which enhance the customer experience and improve engagement. We have very strong engagement on our NuMi map which was built to complement the Nutrisystem program. Roughly 80% of our customers use our apps and we have a 4.6 star rating in the app stores. Sessions and uses per user are up this year and revenue from in-app purchases is up double digits from last year, all of which are important indicators of customer satisfaction.
Of note, our apps are free complements to our programs that are not stand-alone, as we believe our customers benefit from a holistic approach in which we supply the food, the technology and the human support necessary to achieve optimal results. Additionally, the apps allow us to extend relationships as customers still use the apps and the content after moving on from their initial weight loss program. And finally, we're also refining the creative messaging and approaches, as well as testing a number of new channels as we prepare for 2020.
We are encouraged by the initial feedback in results as we are seeing some early successes and intend to add these new channels into our Q1 media mix. More to come on this in our next call.
I'll now provide an update on some of our revenue synergies to date. The two business units are working closely together to drive forward opportunities that capitalize on each business unit strength. These initiatives will help us realize our expansion or E strategy. We're leveraging our nutrition science and food development capabilities to create new programs with new macro nutrient profile specifically designed for seniors and to serve those with food and security issues separate from weight loss. To that end, you may have seen our press release yesterday announcing that we will be launching our brand-new Wisely Well line of products in January which will offer fully prepared meals that are nutrient dense and made with care to not only satisfy hunger but to nurture and energize the body. These are foods designed to fuel healthy living and will service our post-discharge programs and our food and security pilots launching in January.
This line of products will also service other senior care program initiatives that are being actively worked on which we will share more news on throughout 2020. This represents a major expansion opportunity for us beyond weight loss and differentiates us from our traditional set of competitors giving us more breadth and more reach. In addition to the Walmart pilot that Donato mentioned earlier the Humana food security pilot plans in two markets for January 2020 is on track and commitment from Humana is high. The pilot will leverage the combined capabilities of healthcare providers, case management meal delivery and nutrition counseling, as well as referral local social need services capabilities to deliver innovative streamlined workflows and delivery solutions to food and secure health plan Medicare Advantage members. We're also in conversations with other health plans as well. In closing, I'm pleased with the Nutrition business unit’s performance this quarter and the progress we're making on the revenue synergy front. We're on track related to our inventory planning, 2020 diet season preparation and we are executing on the OE strategy.
I'll now turn the call over to Adam for a financial update. Adam?
Adam Holland -- Chief Financial Officer
Thank you, Donato and Dawn, and good afternoon everyone. Similar to last quarter, we provided supplemental financial information on the Investor Relations page of our website that will aid understanding of our Q3 results and 2019 guidance. Further, please note today's press release includes non-GAAP reconciliation tables with related explanations. Turning now to our third quarter combined results. As Donato and Dawn mentioned, we are pleased with our results and are tracking within our annual guidance communicated in the August earnings release. Total revenue for the third quarter of 2019 was $303.9 million, an increase of 100.6% over the same period last year. Net income was $13.9 million compared to $25.4 million in the third quarter of last year. Adjusted net income in Q3 of 2019 was $22.2 million compared to $25.4 million in Q3 of last year. Adjusted net income for the third quarter excludes certain pre-tax and post-tax items incurred in connection with the acquisition of Nutrisystem. Q3 GAAP earnings per diluted share was $0.29 with adjusted earnings per diluted share of $0.46.
Adjusted EBITDA for Q3 of 2019 was $56.8 million compared to EBITDA of $36.6 million last year. This year's amount includes the benefit of approximately $2.9 million of realized cost synergies during Q3. Moving on to healthcare. Our Healthcare segment continues to perform well. The segment generated third quarter revenues of $160 million, an increase of 5.6% over the same period in 2018. SilverSneakers revenue represented 78% of segment revenues or $124.6 million, a 2.2% increase over Q3 of 2018. Total SilverSneakers visits for Q3 of 2019 were 26.2 million, up 1.3% to last year and this is despite the fact we started the quarter with 700,000 fewer eligible lives. In addition, of those visits, more visits were revenue-generating this year versus last year. We ended the quarter with 15.2 million eligible SilverSneakers members with approximately 3.6 million enrolled and a 7.9% active monthly participation rate during Q3, an increase of 30 basis points over Q3 last year. Prime Fitness accounted for 19% of total Healthcare segment revenue or $30.5 million for the quarter, an increase of 20.2% over the same period last year. Prime's growth over Q3 of 2018 was primarily driven by a 16.4% net increase in member pay Prime subscribers, ending the quarter with approximately 342,000 subscribers.
Our Healthcare segment's non-GAAP adjusted EBITDA for the third quarter totaled $39.2 million or 24.5% of segment revenues compared to $36.6 million or 24.2% of segment revenues for Q3 last year. This year's amount includes approximately $700,000 of benefits from cost synergies. Turning now to the Nutrition segment. Third quarter revenues for the Nutrition segment came in at $143.9 million, a 9.6% decrease compared to the same quarter last year. This decline was primarily driven by a decrease in the DTC business which generated $134.6 million in revenue. Within DTC, Q3 revenues from customers in their initial diet cycle were down 14% year-over-year primarily due to fewer new customer starts. Q3 2019 reactivation revenue which made up 39% of our total DTC revenue was up 2% year-over-year, helping offset some of the decline in the new customer revenue. Rounding out Q3 revenue, the retail channel contributed $6.3 million and revenue from QVC was $2.9 million. Similar to last quarter the Nutrition segment gross margin as a percentage of revenue showed improvement compared to last year by balancing promotional offers and optimizing supply chain costs.
And as expected, marketing expense increased 3.5% to $44.5 million in the third quarter. Additionally, we incurred costs related to our recently announced OE strategy during Q3 which accounted for about $1 million of incremental expense during the quarter. Our Q3 adjusted EBITDA for the Nutrition segment was $17.7 million or 12.3% of segment revenues. This amount includes approximately $2.2 million in benefits from cost synergies. As a reminder, the Nutrition segment's historical quarterly EBITDA cadence typically delivers the largest contribution during the second quarter each year. This year's sequential decline from Q2 to Q3 landed within our expectations based on its historical pattern and the new OE investment activity under way during the third quarter.
Turning to our balance sheet. In conjunction with the closing of the acquisition of Nutrisystem on March 8, we entered into a credit agreement to provide Tivity Health a senior secured loan Term loan A and Term Loan B facility totaling $1.18 billion, as well as a $125 million revolving facility. I'm pleased to report that as of today's call we have repaid $105 million of the initial amounts borrowed under the term loan facilities. Because we have addressed all required amortization payments until March of 2021, we do not expect to pay down material amounts through the remainder of 2019.
We expect to meet our objective of achieving a leverage ratio of less than 3.5 times by the end of 2020. Turning to our outlook for 2019. As noted in today's press release, we reaffirmed our 2019 guidance provided in August. This guidance anticipates year-over-year growth in our fourth quarter Healthcare segment revenue, driven by growth in our Prime Fitness segment which includes Walmart. The nutrition segment's fourth quarter revenues are expected to decrease year-over-year in the high single-digit range from declines in both DTC and retail. The reaffirmed annual guidance anticipates fourth quarter combined EBITDA to benefit from a better healthcare segment EBITDA margin as compared to Q3, driven by stronger margins in our Prime business and reduced marketing and operational costs. We expect fourth quarter nutrition segment EBITDA margins to improve sequentially from Q3 and Q4, due to improving gross margin trends and lower marketing expenses as a percentage of revenues. Finally, we are on track to deliver 2019 cost energy savings of nine to $12 million. The fourth quarter will be the first full quarter for a number of initiatives implemented during Q3, which includes labor synergies from excess of highly compensated employees, facilities, call center operations and other vendor savings.
I will now turn the call back over to Donato. Donato?
Donato J. Tramuto -- Chief Executive Officer
Thank you, Dawn and Adam. Allow me now to briefly touch on the future of Tivity Health. In the last year there have been scores of articles published around social determinants of health, ranging from the acknowledgment that food is medicine loneliness and social isolation are as toxic as smoking 15 cigarettes per day and in activity can contribute to poor health outcomes. All of these specific social determinants of health have been validated as having a major impact on the number of self-reported healthy and/or unhealthy days. We believe Tivity Health has great platform to address these three critical areas for our health plan partners, the members and their caregivers. Our holistic approach encompasses nutritional intervention and management, physical activity, community engagement and behavioral modification. We have long been and continue to be the industry thought leader on aging rural health and loneliness. Our health-oriented consumer brands offer nutrition, fitness and social connectivity that allows us to address the social determinants of health in a truly unique way.
We are long recognized as a leader in helping the aging consumer live a more healthy life through activity. And our own study support that increasing physical activity can indeed lower loneliness and improve the number of healthy days by as much as 10%. We sit firm on three consecutive years with a Net Promoter Score of 81, signifying a strong brand trust, as well as consumer support and permission to expand beyond physical activity and to address nutrition as well as loneliness and social isolation not only to the senior population, but also to a younger demographic as well. Our acquisition of Nutrisystem, our thought leadership on aging and loneliness and social isolation and our history of collaboration and partnership are key enablers in supporting this movement to address healthcare and not sick care.
So let me make it crystal clear. Tivity Health is an active player in addressing social determinants of health. We believe there is no other company today well positioned to address through a combined offering, as well as a strong platform of health plan partners. The following key areas all of which impact healthy days and that is physical inactivity, social isolation and loneliness and nutrition. In closing, the following key points summarize our last quarter and year-to-date progress.
Just eight months post close of our Nutrisystem acquisition we have, number one, gained solid momentum in our healthcare business; and two we have launched for our health plans a combined product offering gaining traction. And as you have heard today, we have gained traction both with our current and new partners, all of which is leading to further increase in enrollment in eligible lives. And thirdly, we have positioned our Nutrisystem segment with a focus on the right strategic imperatives to return that business to growth. And fourth, we have made the necessary investments in the last quarter within the Nutrition business unit to ensure positive momentum, entering into the 2020 diet season. And fifth we have paid $105 million of obligatory loan payments as of September 30, nearly 15 months ahead of the required schedule. This is clearly a result of the company's ability to generate strong cash and a big shout out to the great work our finance team has been doing and managing cash and paying debt ahead of schedule.
And sixth we have executed on the collaborative partnership with Walmart with the potential to leverage our highway of members as well as their employee population around a more holistic approach to managing healthcare. And seven, we now have a collective suite of intervention programs driving enrollment as a result of the A-B-C-D strategy positioning us well to deliver on our preliminary 2020 projections. And eighth, we have executed fiercely to deliver on our cost synergies a key focal point to this organization's strategic imperative in 2019.
And lastly, we have positioned ourselves well to both execute and expand on the short and long-term revenue opportunities in 2020. In closing, none of the key points I just established are achievable without a dedicated team, loyal customers and collaborative partners. As we approach the Thanksgiving Day holiday, let me express my sincere thanks to all of you who've made this company successful.
We'll now take your questions.
Questions and Answers:
Operator
[Operator Instructions] Your first question comes from Alex Furman from Craig-Hallum Capital.
Alex Fuhrman -- Craig-Hallum Capital -- Analyst
Great. Hi, everyone. Thanks very much for taking my question. I wanted to ask about yesterday's announcement about the new nutrition offering Wisely Well. Certainly sounds like a big opportunity and kind of a continuation of the integration here and the strategy you've been talking about for some time. I'm just trying to get a sense of what this business could look like. Is it your expectation that it will be up and running at the beginning of 2020? And then just thinking about the marketing model, obviously, the Nutrisystem brand is a very TV heavy marketing program. Are you anticipating a similar marketing strategy for Wisely Well? Or it sounds like there's going to be some insurance paying as well. Is that going to be -- do you think the bulk of your new customer acquisition? Just curious how you're thinking about that and how we should be thinking about that and what it can do for your business.
Donato J. Tramuto -- Chief Executive Officer
Sure. Let's have Dawn answer that.
Dawn M. Zier -- President and Chief Operating Officer
Hi Alex, how are you.
Alex Fuhrman -- Craig-Hallum Capital -- Analyst
I am good Dawn.
Dawn M. Zier -- President and Chief Operating Officer
Good. Great. This is our first rollout of something that truly is separate from weight loss and takes advantage of our food science capabilities. What we've talked about so far and how we're using it we're going to be using it in three different ways. It's totally separate from the Nutrisystem brand but it will be used for our post discharge rollout that we have happening in January. It will be used for our chronic condition pilots and then we see an opportunity to use it for our caregiver’s strategy which will be something that we'll be talking to more down the road. The first two things that we're talking about, they're not direct consumer. They're more of the business-to-business plays and will not have any marketing or advertising in the traditional way that you think of Nutrisystem against it. But as we start building out more programs around caregivers or wrap around to post-discharge after the reimbursement would end, we could see some more of our typical marketing efforts. But for now, primarily will be through the B2B channels with rollout for more B2C to come later in 2020. We're not giving any revenue projections on this at this time. It's a brand-new program.
Alex Fuhrman -- Craig-Hallum Capital -- Analyst
Okay. That makes sense. And then I guess it sounds like there's going to be less marketing on that business. I mean as it scales in the years to come, would you anticipate it being a similar overall EBITDA margins to the core Nutrisystem business?
Adam Holland -- Chief Financial Officer
I think it's -- hi Alex this is Adam. I think it's probably too soon to tell on that quite yet. But I think more to come, as Dawn said, right when we get into the new year.
Alex Fuhrman -- Craig-Hallum Capital -- Analyst
Okay. That makes a lot of sense. And then if I could just ask on the balance sheet. You guys have paid down a lot of debt early. Can you just talk about what the factors that you've been looking at over the course of the year that have guided that decision that would be helpful for us to think about. Thanks.
Adam Holland -- Chief Financial Officer
Yes sure, Alex. A couple of things. First we want to make sure that we don't put at risk either the businesses in terms of capital investment. It's important to feed both of these businesses. Both businesses are healthy businesses, albeit they are capital-light by nature. We want to make sure that we're investing appropriately for the short-term and the long term which we are. That said, the team has been focused on utilizing available free cash flow to pay down debt. This is something we committed to very early on and was our commitment from management that while we are open to options this is the thing we want to focus on first and beneficial in getting the balance down, getting the leverage ratio down, getting interest expense down for next year. And that's really the reason we've been focused on it and complement the team. They're continuing to manage working capital and improve working capital profile for both segments over this year and I think we'll continue to do so as we move into next year and get a more efficient balance sheet.
That's great. Thank you very much, everyone.
Operator
Your next question comes from David MacDonald from SunTrust.
Adam Holland -- Chief Financial Officer
Hi, David.
David MacDonald -- SunTrust -- Analyst
Good afternoon guys. A couple of quick questions. One, Adam, just on the cash flow, if I look at free cash flow for the year, it's running well ahead and guidance hasn't changed. Is there anything we should think about in terms of just timing of working capital? And just anything to call out there?
Adam Holland -- Chief Financial Officer
Yes it's a great question. Probably the biggest factor is if you look at inventory levels as they would typically build from Q3 to Q4 and ahead of the diet season, that's going to be one of the influencers that could bring that year-to-date number down to the range we've given guidance.
David MacDonald -- SunTrust -- Analyst
Okay. Donato, can you just talk about what the SilverSneakers business continues to kind of outperform in terms of wins? And I've got to imagine when you're chatting with some of these potential clients, Nutrition is being mentioned in potential bundled contracts. Can you kind of take us inside the room a little bit in terms of level of interest from some of the folks who have signed up for SilverSneakers and the ability to cross sell that?
Donato J. Tramuto -- Chief Executive Officer
Absolutely. I'm going to answer then I want to have Steve answer as well. So first of all it's not nutrition. It has been the trifecta. It has been the loneliness and social connections. If in fact and we know now that there are 9 million seniors who are food insecure 7 million are living in poverty. If you're living in poverty and you’re food insecure, you also have unfortunately loneliness that seeps in. And so what we have learned in the health plan, and over the last 12 weeks I probably have been with at least 6 or 7 health plan CEOs. Without question, the way they are viewing Tivity today is that you already have these relationships with seniors. You have this trusted brand. They want to hear from you. And so, as Steve is out there selling, what Steve is now hearing is that there is a dialogue not just in terms of a renewal of a Silversneakers contract or a interest in coming back because they may have left us. There is a dialogue around these three key areas. Steve?
Steven Janicak -- President, Healthcare Business Unit
I would agree with you 100% Donato. So the conversations that we tried to change. We have -- when we talk about it, everybody understands the value of SilverSneakers and the excitement that comes along with that, our ability to engage members. But now the conversation really is around taking more of a leadership role in regards to social determinants developed and where that is all going. So the kind of the low-hanging fruit is there's clearly conversations around post-discharge meal delivery which we will have and we have the ability to do that. And then the conversation really turns around how do we take all of our components and address what their objectives are in trying to manage their Medicare Advantage population.
Donato J. Tramuto -- Chief Executive Officer
And I think a lot of that, fortunately we're writing on the bandwagon of a lot of policy changes that have happened over the last 24, 36 months. Let’s be perfectly honest. SilverSneakers didn't become successful just because of our selling efforts. The Medicare changes in 2003, the Medicare Modernization Act, all that helped to drive success. And the Chronic Care Act that was passed two years ago, the changes in CMS with respect to post discharge, all of that is tailgating and all of this information right now, my gosh, and in Sunday's New York Times, a whole article on loneliness and social isolation. We were one of the first to call that out. So the dialogue is not about let's renew our Silversneakers contract, the dialogue is about how can you be a partner in all three venues that we see as critical to bringing healthcare costs down in that population.
David MacDonald -- SunTrust -- Analyst
Okay. Just a couple of other quick questions. Donato, you mentioned in your prepared remarks, just home fitness and folks watching these videos at home. Should we think about that as something that right now is more of an engagement feeder? And over time, you could be paid for or are you being paid for those as regular visits? Just how do we think about that?
Donato J. Tramuto -- Chief Executive Officer
I think it's all of the above. I think we started it quite frankly as another venue to have, if you will. Remember the flu season a few years ago that caught us by surprise. And we kept on asking ourselves could there be another venue that when you have something like the high flu season epidemic of a few years ago, could you have an alternative to engage these members? So we started off first by can we get this up and running and be reimbursed for it. We're not at all putting that to the side. But it was very interesting, what we found in these studies that it can also be used to get these individuals to sign up at the gym and go there and participate in the workout. So we'll have both venues as part of the future business model.
David MacDonald -- SunTrust -- Analyst
Okay. And then just last question. You mentioned in terms of the new product rollout on the nutrition side that commitment from Humana is high. Is there any additional detail there just in terms of this is a product that they're looking for or any additional comments in terms of other payers who may be looking at this in a meaningful way?
Donato J. Tramuto -- Chief Executive Officer
Yes. I want to specifically call out Humana and what they've done with the BOGO [phonetic] initiative. We could not have had -- we couldn't have a better partner to be perfectly upfront of you, one that understands that what we bring up is an understanding of how to deal with seniors. What we bring is an execution focus. And so this is a pilot that's moving into 2020. The same thing with Walmart, a very similar kind of pilot around can we define how do you price it? How do you define the product? How do you define what name you call it. And quite frankly what are the outcomes. But we're not limiting it to just Walmart and Humana. But that said, as Yogi Berra, my favorite philosopher once said, you don't want to make the wrong mistake. We want to be able to know when we go to that second opportunity it shouldn't have to be a pilot. We should bring, if you will, the lessons learned out of these pilots and begin to have actual contracts going into 2021.
David MacDonald -- SunTrust -- Analyst
Okay, thanks very much.
Operator
[Operator Instructions] The next question comes from David Styblo from Jefferies.
David Styblo -- Jefferies -- Analyst
Hi, there. Good afternoon, and thanks for the questions. It sounds like the healthcare business had some positive updates and good results in the quarter. I think you guys had mentioned, adding on another 200,000 eligible lives. I'm curious to kind of square the map on that because I think your 2020 expectation is still roughly the $16 million to 16.5 million. So was that 200,000 already contemplated in the 16 million to $16.5 million? And can you give us some more color on sort of the source of that 200,000 was that one account that sort of came in late? I would have thought you guys maybe would have known by June ahead of the bid season and so forth. So maybe just walk us through the progression there.
Donato J. Tramuto -- Chief Executive Officer
As Chip used to say, I love you Chip. This is a mosaic that you lose from the left pocket and you gain in the right pocket. And what we have now is, Steve, thanks to his team and his efforts, we had 800,000 eligible lives that were new. Obviously, we've lost a few lives as well. But net-net, we are staying within that range that we shared with all of you last August, we'll end 2020 between 16 million and 16.5 million. That's the mosaic that has happened for as long as I've been CEO of this company. And for as long as we've had SilverSneakers. Each year, you will lose markets or you may lose a customer. But the sales folks go out there and they expand the markets and they also are fortunate to win customers back, and that's 800,000 total lives. To your question about this does the 200,000 represent one customer specifically? No.
David Styblo -- Jefferies -- Analyst
Okay great. Thanks, Donato. I appreciate the comments about the fitness partner locations and how you guys have continued to expand those and drive those higher. I guess I've gotten a few questions from investors about a partner in Tennessee where you guys couldn't come to an agreement in terms of extending that next year. And it sounded like the – the rub there might have been just a large price increase that that provider wanted to have. Along those lines, the question comes as well how much pricing pressure do you guys face on a regular basis in the business from the gyms and fitness centers perhaps wanting more as they look forward? And then to what extent are you guys able to pass those price increases on to the insurers, other step up vehicles in the contracts? Or sort of how willing is the -- the insurer willing -- are they to accept the price increases?
Donato J. Tramuto -- Chief Executive Officer
This one do you want to take?
Adam Holland -- Chief Financial Officer
Yes sure David. There's a lot in that, maybe I'll package some of the pieces to start off maybe where you ended. One of the advantages, look we have deals that come and go inside the network every year. It is not a static number of 18,000s. And we are constantly moving folks in and out of the network. Sometimes it's voluntary, sometimes it's involuntary. And one of the advantages of having a large network like this especially in a state like Tennessee is that when you lose members you're able -- or you lose TLs, you're able to redirect those SilverSneakers members to other locations and you're adding new locations along the same way. And that's one way we're able to control the margin pressure to some degree. And there's always pockets of pressure, there always has been. But we've been effective in managing that by growing the network and working with our partners who are better suited to meet with the way that our MA plans want to pay us.
Donato J. Tramuto -- Chief Executive Officer
And I think the one thing I would add to that is that, listen, we are focused on -- now that we have been able to really define and get the company more stabilized since my arrival as CEO four years ago. The first thing was that we had approved to our health plans that we could move the needle and getting people enrolled and engaged, check that box off. We've done that. The second is that we had to demonstrate that the name SilverSneakers matters to the members. And the fact that you see health plans coming back to us is indicative of their understanding that when you lose SilverSneakers brand, you're going to have some havoc in your enrollment membership. Now what we are focused on is demonstrating health outcomes. And you asked a question can you pass that on to health plans, I believe we can as long as we can start to demonstrate that what we're passing on to them is not coming out of their profit bucket.
That what we're passing on to them is coming out of their medical loss ratio bucket. That we're really able to demonstrate reduction in hospital visits improve the number of healthy days, reduce the number of unhealthy days. This is although a new initiative that has really blossomed over the last 14, 16 months. I am confident. I believe as we go into 2021, Steve is going to have some outcomes tools that he will be able to take to is health care plans. And by the way, the other thing to keep in mind is that I think we have to do a better job. Obviously, I'm excited by the Walmart partnership that I think that we have to also think outside the box. Where do members want to gather? And the uniqueness about the relationship with Walmart is that, as you know, they have a lot of traffic of 150 million consumers trafficking through their stores and having a SilverSneaker class potentially at every store could also be a nice way to balance, if you will, the pricing pressure. Makes sense?
David Styblo -- Jefferies -- Analyst
Yes that's great. That's really helpful. Last one for you, Donato, is you guys obviously have a lot of new things that you're on the cusp of right now, some pilots, everything from Walmart to Wisely Well that you just launched. I'm curious through your lens what are you most excited about from a revenue opportunity standpoint that just might have the biggest bang for its buck over kind of the next three to five years?
Donato J. Tramuto -- Chief Executive Officer
Yes. I think I would answer that in three ways. I think that when you look at -- and that's why my closing remarks was that there is a new revenue stream on the horizon which is at overarching social determinants of health. And I'm excited there because, just take, for example, foot ulcers. Foot ulcers, for all the health plans probably is a $5 billion to $7 billion cost. When you look at foot ulcers, it's associated to elevated hemoglobin A1c, it's associated to diabetic patients. And yet we have an opportunity, most of the hemoglobin A1c is associated with the reality that you're not eating correctly or you're not eating at all or you're not active. And I think the two verticals we have, the nutrition vertical and the physical fitness vertical feeds into this whole new revenue stream.
But quite honestly, I would be remiss to say that in each one of these verticals, in Steve's business, we are making the investments that you've seen this year that's driving more to enroll and more to get engaged. And I am clearly optimistic there. And I also think now on the Nutrition business unit. Listen, I travel all the time and I see two trends as I travel. People are getting bigger, not taller, wider. And the population is aging. And I think the investments of innovation under Keira's leadership and Dawn's leadership we're making those investments that quite frankly I think we will begin to enter into the diet season with momentum for growth. So I think those three areas are what I get excited over.
David Styblo -- Jefferies -- Analyst
Very good. Thanks much.
Operator
Your next question comes from Ryan Daniels from William Blair.
Nick Spiekhout -- William Blair -- Analyst
Hey, guys, this is Nick Spiekhout in for Ryan, thanks for taking my questions. I guess to start off. For this Wisely Well product, I was wondering how you are going to go about marketing that? Like would that be something that's much more focused on the consumer? Or is there going to be like a pretty big sales effort towards kind of health plans?
Donato J. Tramuto -- Chief Executive Officer
Well let me say this and I'll have Keira comment on this. Everybody forgets and maybe it's easy to forget because we don't talk about the years of having nearly 70 health plan customers. And when you look at the health plan customers, the reason why Steve was able to bring in two post-discharge contracts is because, when he's in front of them he's able now to talk about the entire portfolio. So instantly we have the sales organization prepped and prepared to now talk about this relative to the interaction they have with their health plans. Keira do you want to maybe take the second part in terms of how we can extend Wisely Well into the non-health plan segments.
Keira Krausz -- President, Nutrition Business Unit
Sure Donato. Thank you. I think Dawn touched on it briefly but I'll just add to it. So yes, at the beginning it's going to be primarily B2B and B2B2C. And then as we get going, we do see there's opportunity to expand into DTC primarily through contacts that we make through the B2B. So people who want to extend what they've received for post-discharge or for caregivers.
Nick Spiekhout -- William Blair -- Analyst
Got you. And then would that be mostly through like online order similar to Nutrisystem?
Keira Krausz -- President, Nutrition Business Unit
That is how we're envisioning it though. First, we have to start with the B2B and the B2B2C.
Nick Spiekhout -- William Blair -- Analyst
Got you. And I guess -- sorry go ahead.
Donato J. Tramuto -- Chief Executive Officer
And Nick, also keep in mind and again there's so much that has changed in the last four years that we forget to acknowledge it. By design, we have been building up our silversneakers.com. We now have nearly over 4 million members. When I became CEO we had 500,000 members. And that is also going to be another channel vehicle to be able to reach that population. We have been telegraphing, if you will, that we have 16,000 fitness centers who not only deal with the Tivity Health Prime and SilverSneakers population, they also deal with a broader membership population. And so partnering with them will be another channel. So I am a firm believer, think big, start small execute quickly. Right now let's execute with the health plans and this will begin to build out over the next 6 to 18 months.
Nick Spiekhout -- William Blair -- Analyst
Got it. Great, thanks. And then I guess kind of going off of your comment about SilverSneakers online I guess mobile there too. I know in the past you talked about potentially being able to monetize when SilverSneakers members will do a mobile class or an online class and kind of getting their plans to pay for that. I was wondering if there's been any sort of updates there? Is that's an area you still look at kind of accessing in the future?
Donato J. Tramuto -- Chief Executive Officer
Steve, you want to take that?
Steven Janicak -- President, Healthcare Business Unit
Yes, I'll take that Donato. Yes. So as Donato said, what we're really doing is when we started this program the going theory was that we can build for this and that we thought it would primarily just be somebody who executed and view this video at home. What we have found is that people are viewing two videos and then they're actually going to the gym and they're actually engaging at the same level that a full participant would. Our hypothesis is that we believe people are looking at the videos and going, you know what, I can do this. It's not intimidating as I thought it would be, which makes it going into the facility a lot easier. That's the approach going in. Once we continue to do this, we will look at all options including do we just go with the gym visits? Or do we build for something upfront? Or is there a combination thereof. We have to get a little bit more data as we continue to progress through it.
Donato J. Tramuto -- Chief Executive Officer
Yes. And if your question is we had conversations with health plans. I have discussed with various health plans. And obviously they are as interested. We could not be more aligned to what the outcome and what the goal is. That is to get people active. And so this was a huge finding and now it may be used as a vehicle to get people to the gym. But that said, to Steve's point, we're not going to stop exploring whether or not there could be a direct payment. We'll continue to explore that.
Nick Spiekhout -- William Blair -- Analyst
Got it. Great. Thanks, guys. I appreciate taking my question.
Operator
Your next question comes from Jessica Tassan from Piper Jaffray.
Jessica Tassan -- Piper Jaffray -- Analyst
Hi, thanks for taking—hi, thanks for taking the question. I'm on for Sean Wieland. Just hoping to understand a little bit more detail about how you guys are monetizing the NuMi app today. And then just any opportunities to expand the extent of that monetization in the future?
Donato J. Tramuto -- Chief Executive Officer
Perfect. Keira?
Keira Krausz -- President, Nutrition Business Unit
Yes. Hi, this is Keira. So today NuMi is built and run as a complement to our food delivery weight loss program. So it's a tracker. It's a way that we share content, whether that's advice recipes etc. And it's also a way that we sell to increase the revenue per customer. We will be looking in the future as ways that we might take NuMi as a way to meet people, but right now it’s a complement and it's a way of increasing revenue, basically, per each customer. Is that --
Jessica Tassan -- Piper Jaffray -- Analyst
I think that's perfect. Thank you.
Keira Krausz -- President, Nutrition Business Unit
Okay. Good
Operator
And there are no additional questions at this time. I will turn the call back over to the presenters.
Donato J. Tramuto -- Chief Executive Officer
Well thank you all and I do appreciate the time on this late day and look forward to again connecting with all of you and wish you again a happy Thanksgiving.
Operator
[Operator Closing Remarks]
Duration: 59 minutes
Call participants:
Donato J. Tramuto -- Chief Executive Officer
Dawn M. Zier -- President and Chief Operating Officer
Adam Holland -- Chief Financial Officer
Steven Janicak -- President, Healthcare Business Unit
Keira Krausz -- President, Nutrition Business Unit
Alex Fuhrman -- Craig-Hallum Capital -- Analyst
David MacDonald -- SunTrust -- Analyst
David Styblo -- Jefferies -- Analyst
Nick Spiekhout -- William Blair -- Analyst
Jessica -- Piper Jaffray -- Analyst
