Q3 2021 Tivity Health Inc Earnings Call
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Good day and thank you for standing by welcome to the <unk> third quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to had a conference over to your speaker today head of Investor Relations map and a lot of it. Please go head.
Good afternoon, and welcome to the activity, how third quarter 2021 financial results Conference call.
Before we begin if you do not already have a copy of the earnings release supplemental information and related 8-K filed with the SEC are available on our website activity helped dot com.
I would also like to highlight that our financial presentation within today's press release and supplemental materials are reflective of the divestiture of the nutrition segment.
Therefore, all results of operations related to that business.
Now reported within discontinued operations.
To the extent any non-GAAP financial measure is discussed in today's call. You will also find a reconciliation of that measure 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 Tivoli health expected quarterly and annual operating and financial performance for 2021 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 the foregoing the words 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 activity health filings with the SEC and in today's news release.
And consequently, actual operations and results may differ materially from the 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 President and CEO Richard Ashworth.
Good afternoon, and thanks, Matt. Thank you for joining the call today to discuss <unk> health third quarter earnings results. Joining me on the call are Adam Holland, Our CFO, Tommy Lewis, our CFO and Matt <unk>, our VP of IR.
As you saw in today's press release, our performance for the third quarter of 2021 was characterized by strong results in revenue adjusted EBITDA and cash flow, we reported revenues of $126 3 million adjusted EBITDA from continuing operations of $40 5 million in free cash flow of $27 2 million Silversneakers.
Its positive momentum during the third quarter growing to $17 1 million total visits.
<unk> percent increase compared to the second quarter of 2021 in person Silversneakers visits were $16 4 million growing 13% from the second quarter, even though government masked mandates, we're still present and 11% of our fitness partner locations.
While we experienced some headwind from the Delta variant during the quarter. Our recent trends have strengthened during October as the effects of Delta have somewhat subsided and we continue to expect that in person visits will accelerate.
<unk> next year.
Further solidifying our confidence in 2022 adults over 65 continue to have the highest immunization rate in the nation with 85% being fully vaccinated and 97% having received one dose according to the CDC.
And our Silversneakers pulse surveys indicate that a significant percentage of our members have returned or intend to return to the gym Silversneakers digital visits were approximately 700000 during the third quarter a decline from the second quarter going into the fourth quarter. We are planning to increase marketing spend focused on digital and in person visits or virtual <unk>.
Platforms are an important channel for our Silversneakers members.
Through the first three quarters of 2021, 45% of the participants in our live with instructor instructor virtual classes had never participated in Silversneakers before.
Demonstrating that our proprietary virtual channel continues to attract and engage eligible silversneakers members, who may not have otherwise engaged with us.
Combination of physical and digital fitness remains core to our strategy because it allows our members to use the benefit where they want in the gym at home or in the community. Looking ahead to 2022, we expect growth in virtual to be accelerated by social engagement and mental enrichment offerings. In addition to our evolving virtual fitness.
Granting.
Our gym network remains strong as we ended the third quarter of 2021 with approximately 16000 silversneakers locations.
On average our National Gym network offers members access to a location within $3 six miles of their homes and $1 six miles in urban and suburban markets. As we've recently announced we're launching a customizable premium gym network in the first quarter of 2022. This expansion is expected to increase our total available network to more than 22.
<unk> thousand locations one of the largest senior fitness networks available network renewals continue to meet our expectations with many characterized by multiyear contracts, providing both visibility and stability for the future.
Moving on to prime or Prime business is meeting expectation. We ended the third quarter with approximately 12500 partner locations similar to where we began the year and 226000 active prime subscribers.
Subscriber count remained consistent with the end of June even with the impacts of the Delta variant and remains higher than where we began the year, we anticipate that our subscriber base at the end of 2021 will position us nicely to grow subscribers in January which is the beginning of Jim season next I just want to provide an update on our Silversneakers health plan.
Relationships were pleased with the continued strength of our client partnerships as mentioned on our last call. This year's renewal season was very successful in the high 90% range consistent with prior years and some of our largest accounts are committed to contract lengths that are longer than our average duration.
We play an important role with our clients during the Medicare annual enrollment period. So far this fall our teams that facilitated nearly 400 events and trained close to 12000 brokers across the U S. In addition, we built an online resource center at Silversneakers Dot com for clients and brokers that includes educational overviews member facing materials in multiple languages.
And testimonials are clients of integrating these resources into their sales messaging broker and agent training and TV commercials is a key element of 2022 annual enrollment because of the Silversneakers brand is a key differentiator.
Clients Love the brand for its ability to draw new MA members and drive decreased medical cross for our members.
As a reminder from research earlier this year and Avalere Independent Research study concluded that the total cost of medical care for seniors Silversneakers participants was 16% lower than for non participants.
Now moving to an update on our strategy and our brand. We previously stated our intention to expand beyond Jim access company into a member focused data driven engagement platform company our objective of.
Of engaged members through our trusted 30 years Silversneakers brand beyond physical fitness is continuing to materialize with our recent partnerships for mental enrichment with get setup and social connection with stitch. In 2022, we expect these partnerships to contribute to top line growth and profitability our Silversneakers brand.
Is extremely strong and valuable we recently refreshed our net promoter score survey and it increased from 81 to 83, demonstrating growing brand equity our brand awareness among the general population of Medicare advantage Enrollees is 78%. This includes silversneakers members and non members and is far higher than the <unk>.
<unk> most recognized senior fitness brand.
And for seniors that are not yet of Medicare age when asked what comes to mind when thinking about wellness and fitness plans nearly 40% are already familiar with the Silversneakers brand. We are continuing to leverage the strength of our brand when building our member platform to drive additional channels of engagement before wrapping up my prepared remarks I'd like to highlight.
The strength of our balance sheet over the last 12 months, we've divested nutrisystem reduced our leverage ratio from 381% to 2.0 to refinanced our capital structure and announced a $100 million share repurchase authorization.
Our strong cash flow generation as further evidenced by this quarter's results allows us to continue investing in growth and return cash to our shareholders I'm really excited about the future activity help our core business is strong and growing we're adding new channels for our members to engage with the Silversneakers brand. We're broadening the access that our members have the fish.
Nicole locations and digital access points. This gives us confidence in our expectation that we'll grow revenue adjusted EBITDA and free cash flow in 2022, we would not have this type of strong performance without a fantastic team behind me I'd like to thank our team for continuing to execute with great results to help our members and our clients.
Now I'll turn the call over to Adam.
Thank you Richard today, we reported adjusted EBITDA of $40 5 billion, reflecting the continued strength of our business revenues.
Revenues for the third quarter were $126 3 million Silversneakers.
<unk> revenue was $95 8 billion, an increase of $27 million or 40% over the prior year driven by an increase in revenue generating visits.
As expected revenue from fixed per member per month fees declined to 44% of our total silversneakers revenue compared to 59% in the same period last year.
We expect this percentage to continue to decline as we move into 2022 and generate more member visits as part of our overall revenue mix.
We ended the quarter with $17 8 million health plan members eligible for Silversneakers and increase of 7% year over year.
Through anticipated monthly AGM, we are on track to meet our goal of approximately 18 million eligible members by year end and objectively we stated at the beginning of the year.
Total silversneakers visits were $17 1 billion during the third quarter of 2021 compared to $9 1 million for the same period last year with monthly average participation of four 2% compared to two 4% last year.
Within the $17 1 million visits 714000 visits were live virtual with instructor.
And now to prime we.
We generated $24 3 million of revenue in Q3.
An increase of $2 $6 million over the same period last year.
We ended the quarter with 226000 active prime subscribers compared to 227000 subscribers at the end of the third quarter in 2020.
We had approximately $3 3 million gym visits from prime in the third quarter of 2021 compared to $2 3 million in the prior year period.
For whole health living during Q3, we recognized $6 2 million in revenue a $1 2 million.
Year over year increase.
Yes.
Turning to our Q3 2021 balance sheet and cash flow. We ended the third quarter with cash on hand of $51 $8 million.
Liquidity of $151 million and a leverage ratio of 2.02 times.
As of September 32021, net debt totaled $333 3 million.
During October we made all required amortization payments through 2022.
Our free cash flow for Q3 was strong at $27 $2 million, reflecting positive operational performance, partially offset by working capital.
Year to date, we have produced free cash flow of $56 3 million.
Now turning to guidance, we raised our 2021 revenue adjusted EBITDA and cash flow guidance in today's press release, given our continued strong performance in both Silversneakers and prime specifically, we tightened our revenue range to $475 million to $485 million.
We increased our adjusted EBITDA range to $156 million to $159 million and we increased our free cash flow range to 70 million to $79 million.
We now expect Silversneakers participation to return to approximately 60% of pre COVID-19 levels by the end of 2021 and total Silversneakers visits for 2021 to range from 60 to 63 million visits.
Finally, with respect to capital deployment, we will maintain a disciplined and thoughtful approach to capital allocation by deploying capital, where we believe it can drive the greatest value to our shareholders.
Our recently announced $100 million share repurchase program is aligned with that commitment and underscores our company's ability to generate strong cash flow.
I'll now turn the call back over to the operator to open the call for Q&A operator.
Ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad and to withdraw your question press the pound key to your first question comes from Ryan Daniels with William Blair. Your line is open.
Thanks, so much for taking the question and congrats on the strong quarter.
Wanted to dig into the virtual visits you mentioned that 45% through the year now our new members and I'm curious how sticky are those members and are you seeing them convert to gyms or are those new members sticking with the digital platform.
Hey, Ryan Thanks for the question, it's Richard I'll start and maybe telling me. If there is something you want to weigh in I think.
In general the virtual members are starting to switch back to in person, which is what we've seen all the way along and we stated virtual continue to be important for us in the Omnichannel offering I think the biggest point is into the heart of your question, we see 45% of those virtual users are new to Silversneakers that's about <unk>.
What we see for people walking into our fitness locations as being first time users. So we see it as a great acquisition channel in terms of stickiness for finding them to be pretty sticky right now and we're still early on in digital.
But we are finding some some comfort in the fact that those those users are are maintaining Tom anything you want to add the only thing Hey, Ryan the only thing I would add is that the 45% that are new to silversneakers.
They have never utilized the gym benefit before so this is a great acquisition vehicle for us and we're finding those that came in through <unk>.
The digital channel.
Tend to be that tends to be there their preferred channel there is a little bit of crossover there, but those that join and began in virtual tend to stick with virtual.
Got it that's helpful and then.
Great expansion of the gym network up to 22000, I'm curious can you go into a little bit more detail.
The opportunity that affords you I think you mentioned, it's a customizable networks Im curious if youre going to allow payers to kind of pick and choose what Jim's go into network based on their location and maybe how that changes the revenue model or how that impacted renewals or contract terms during the period as it sounds like those were pretty favorable.
Yes, good question and in general the short.
Short answer to your question is yes.
We're going to make this available for health plans to consider we've made it where it is customizable so that they can have some some choice into which which locations are really important to them and they want to add what we were doing is listening to our members and our health plans, the boutiques or kind of an important part of some of our members lives and by adding them into our.
Sure.
Into our premium network, we can make those locations available again, it's still going to come down to a discussion with the health plan to your point on how they want to construct that.
They want a constructive.
Okay, and then final one ill hop off I don't know if you want to go into this level of detail, but on the contract renewals given that youre seeing an uptick in virtual visits which are probably lower cost and higher margin for you or are there any pressures you faced or concerns among payers about continuing with the same.
Fee structure, such that we might see a shift in the level of <unk> <unk> per visit fees.
Absent a change in end market utilization, just because of any contract changes yes.
Yes, Thanks, Ryan three good questions.
What I would say in general is that the macro setup for virtual and the value equation of it is resonating with with our health plan clients. So they really appreciate the virtual the level of that visit the engagement that they are getting from their members and the value that you get from it looked like any.
Contract negotiations.
Those conversations are always ongoing on.
On the revenue side, just like it does on the cost side on the network side.
The way I would describe it is that it's going to stay in line with what we've historically seen.
And as we drive more volume into digital there may be more margin there, but in good faith, we work with our health plans to make sure they're comfortable with with the economics. Tom is there anything that youre seeing in health plan around digital now those that were were hybrid or utilization base that tended to renew that way and the same for <unk>.
<unk>, we're really excited about the renewal season as Richard mentioned in the prepared remarks, a high 90% renewal rate, we were able to add some new geographies to existing clients.
As well as add some some new plant a new logo. So did renewal season and those all include digital too right. So I think thats, an important part of a demonstration of the value of the digital channel.
Yes, definitely alright, thanks, guys I appreciate all the color.
Thanks, Ron.
Your next question comes from Jay Landry with Credit Suisse. Your line is open.
Okay. Thank you and thanks for taking questions. So I understand we need to wait till <unk> those for 2020 outlook and the Oerlikon.
You guys just gave about new blonde at each in new geography, with the EMEA AEP underway and based on your current contract with <unk> bonds and data what are you seeing their market I was wondering if youre willing to share any expectations with respect to the eligible lives for Silversneakers in 2022 of course, excluding the UNH contract and related to that.
<unk> 2022 will be the first year, where we start seeing some meaningful impact of all the initiatives around engagement platform deepening relationship with health plan partners et cetera is it still too early.
I'll just start and then Adam I think for the.
I'll take the latter part first yes, we believe that our new initiatives will contribute to top line revenue and profitability for 2022.
And then you're right look Julian will wait a little bit until the Q4 comes out on more specifics, but as we've said I mean revenue adjusted EBITDA and free cash flow will all be greater in 'twenty, two and that'll be a corresponding with an increase in life count Adam Yeah, Jill Andrew I. Appreciate the question hope you're doing well.
With United taken out we still won new business. This past year, we had expanded markets with other clients and of course, we have the natural organic tailwind of Medicare advantage growth. So those three combined offset the loss of the United markets and we expect to start next year with more eligible.
And then grow with the normal course age ends as we proceed through 2022.
So at least a minimum.
In line with the overall market growth, what Medicare advantage right.
Probably at least a good starting point, yes, that's a decent starting point when you adjust for the United lives being taken out.
And on Silversneakers visit outlook.
Which was our newest for both total and virtual.
Is that driven by visits in third quarter falling short of expectations.
That you are taking more conservative view about Q4 or is it a combination of both can you just provide some color there.
I think it's a little bit of both Gilenya, we saw bit.
Have a slowdown from our expectations is in the kind of the later part of Q3.
As October matured and Delta subsided.
That has rebounded a bit but.
Where we guided to a slight decrease in visits we do have that normal holiday seasonality, which we're also accounting for which happens every year, but overall still feel very strong about where the growth prospects are we're still increasing participation percent and we see a lot of great green shoots coming out of the ground for next years.
Jim season, which as you know starts in January and think that what we're doing internally plus the increase in eligible lives will be in a good starting point for 2022.
Okay, and just one last one hop off here with respect to get setup platform you guys planned to launch in January of next year is that essentially one more way of deepening your relationship with your members or is there any direct.
Financial benefit from <unk>, which we should be keeping in mind, just trying to understand like what executive the benefit will be data from political you. Yeah. I. Appreciate the question Julian the way I think about it as two two main areas one is.
Absolutely for the remember, it's a great experience of continuing.
Educating and learning.
Being able to establish new new relationships all under the eyes of our kind of mental enrichment similar with our stitch relationship, which is more purely social where get setup has some kind of mental stimulation and learning to it. So we know members our value from that we know that social connection and loneliness is a big issue and drives health care costs in isolation is a real problem with.
Our member base, So we love for what it does for the members from a health plan perspective.
They won engagement of this group they want this group to want to look forward to things to have things to experience and to just be healthier and happier and we know that mental enrichment social connection and physical activity are the three top drivers of your overall outcomes cost.
Outside of your genetic code and so for US that's why we went after social connection and mental enrichment and so it will be similar to the silversneakers in terms of the commercial setup.
Depending on how it applies for hybrid and for <unk>. We're excited about is to see how many people we can get engaging in this new this new experience and new offerings.
Great Thanks, and congrats on a good quarter.
Thanks Rhonda.
Your next question comes from Steve Halper with Cantor Your line is open.
Hi, I was just wondering about.
Sequential decline in virtual visits again.
And.
Where did that come in relative to your expectations.
I understand that.
People are going back to the gyms, but I felt as though that number would have been higher.
Yes, it's a great question, Steve good to hear from you.
And remember that our virtual visits kind of came in two main buckets right. One was our live instructor led visits that are done by our traders that was about roughly half of the virtual visits and the other half came from our flex instructors, which are smaller more community based more local the significant reduction in virtual came.
From our flex instructors are live instructors have actually held very consistent in volume.
Over the over the months and over the quarters, we havent put any marketing against it at all really we've been very quiet about it.
And the drive back to physical took a lot of that volume out to your point, what we like to have seen more in digital for sure and that's why we're going to invest in Q4 and that they believe that we're going to have a really strong start for.
For for Q1, moving on but the one thing we are still continuing to see is more first time users. If you recall a quarter or two ago, we were in the 35% to 36% range for new through that channel and now we're tracking closer to $45, 46% and so we're going to invest behind more acquisition, which we know are health plans also appreciate.
So we will do that going into Q1.
Thank you.
Thanks, Steve.
Your next question comes from the line of Sean Wieland with Piper Sandler Your line is open.
Hi, Thanks, very much so I just wanted to confirm given what you're talking about on the United contract.
We should still be modeling at $20 million hit in that business next year.
And have you renewed the remaining all of the remaining group contracts that you need there.
Hey, Sean it's Richard.
Yes, I mean, the same value that we had placed on that contract remains the same nothing's changed there. If your question is on the remainder of the United Group lives. We still have those contracted through the end of this year and we're having active discussions with them to finalize for 'twenty three and beyond we feel really positive about that and it's going it's going well in terms of all the rest.
The group lives plus the individual lives of all the contracts that need to be renewed all of those are secured and thats why were seeing life growth for the beginning of next year and then of course throughout the year with the agents.
And so all of those group lives amount to how much approximately and revenue a year.
I don't think we've disclosed that specifically, Sean but I'll get back to you on it.
Alright, well, that's why I was asking.
And then.
When.
Thank you said that Silversneakers is it 60% of pre COVID-19 levels.
Is that right correct.
Right.
When we measure that Sean just just to be clear is that that's the monthly average participation rate.
The total number of participants in a given month divided by the total eligible compared to pre Covid. So call. It December of 2021 versus December of 2019, and so we think we'll be at roughly 60% of those 2019 levels.
Okay, and so what is the path back to pre COVID-19 levels look like how long.
Will that take and and.
<unk>.
And what are the levers to get you there.
Yes, I think.
The levers are not having restrictions at Jim networks and across the states.
New cycles around variance and things like that that Delta variant, plus having 10 or 11% of our partner locations, having to have some restrictions and the ability to attend timing mask wearing and things like that I think still still have some some pressure on us going into Q4, which is normal gen. Jim kind of lull season anyway, and so we've.
We've got plans for marketing to make sure. The awareness is there our fitness partner locations are driving heavy on safety and making sure. They're following the rules are doing what they're supposed to do they've been good partners in that and.
And I think for us continuing to drive an acquisition channel and digital.
And to work like we have through AEP with our health plans on co marketing and messaging.
Which we were we were very prominently displayed through AEP and still are.
I think we'll be a big driver of getting people back it back into the program exactly when that is it's hard to know at this point.
The recovery in quotations has been somewhat volatile across and as a generality not just in fitness season, our fitness business, but.
But we're looking for a strong start and Jim season in January we sold we feel confident about that based off of our survey data and what we're seeing in October thus far.
Alright, Thank you very much.
Hey, Sean.
And your next question comes from Mike <unk>.
Wed Barrington Research your line is open.
Hey, good evening guys a few questions.
Richard.
Have you guys I guess I should ask do you have the ability to sort of look at the folks that have not come back to the gym and have not engaged virtually and sort of target market.
Sort of.
Really sort of drill down to those folks that have just simply not come back but are still around in.
Theoretically capable of coming back.
Yes.
That's one of the benefits of the investments we made in the data platform and the Omnichannel.
Investments those are enabling us to target market direct plus using social and other ways to go at the.
We talk about here is kind of the low hanging fruit right people, who have demonstrated in the history. The willingness to want to engage in the program, but recently have have not so we do that in our prime business as well for those that suspended or those that canceled. We know that those are good places to start to try and get those that behavior gyms back up again, so short answer Mike is yes.
Okay.
And then I guess on.
This is sort of a longer range question I'm not exactly sure how to ask it but as you sort of look at the four 2% participation rate and obviously youre, making progress from.
Over the last several quarters, but as you sort of think about that longer term.
I'm just curious if we're looking out three to five years.
Guidance, but if youre looking out three to five years I mean is 10% participation is that the right figure and if let's just say for if it is the right figure like how much of that would be in your view physical versus social and a man.
<unk> enrichment and maybe other down the road I mean, how much of sort of the ultimate target do you think.
Related to your physical offerings.
Yes, it's a good question.
Obviously, not giving specific guidance around this type of question, but I understand why you're asking it I mean, the way I see it as three to five years from now we'd be much higher than 10%. So I think we'd be at significant engagement levels that are.
Much higher than 10, and I think you know exactly what the compartmentalization would be between the two new offerings. We just launched plus the many more that are coming in addition to our existing fitness business I think if you put it all together, we should be a significant and material engagement driver for health plans in the MA space with seniors.
And it'll just depend.
Mike on which ones are really successful, which ones. Our members are finding a lot of value.
Value out of the engagement on we're going to keep getting smarter, we're going to keep getting better and we're going to keep offering new content, new class times, new genres, new new opportunities across all three of these businesses between physical mental and social.
And so it's hard to give you an exact obviously, we've done a lot of work and thinking about what the future could be like but in terms of getting guidance around it obviously, we're not doing that but I would just say that it's going to be significantly higher than what we've historically had here.
Do you think it's likely that.
Social enrichment and other could someday actually be more in aggregate than than physical in terms of the participation rate I mean is that what you envision long term work for them.
Getting way ahead of myself.
Probably not I mean, maybe maybe an actual quantity of events occurring but in terms of value and things like that I think physical has really demonstrated a strong value proposition over the years.
Significant number of health plans are continue to invest behind physical fitness for for supplemental benefit and in Medicare advantage and it's a true differentiator for acquisition and retention not only for the healthcare benefit so I think as as social engagement and mental enrichment.
Over time continue to prove contributory to outcomes that that will get better, but I still think our fitness business is going to be very very large and continue to grow from where it is today into the outer years.
Okay last question on this on the social connection mental enrichment piece.
Alluded to the fact that you.
Do you expect to actually see a financial impact from those initiatives in 'twenty two.
Can you just give an.
An example, or two of Hey, this is how we monetize. This this is what mental enrichment looks like this is what social connection looks like this is how does this actually occurs with the end user customer.
Yes, so the end user customer comes into Silversneakers Dot com if their health plan allows them to be eligible for that that experience they have that opportunity to once they sign in to be able to go to that experience.
They consume the experience just like they do with our live virtual.
Classes on fitness because these are all live classes that are actually in counters that are live with individuals that can do that on the social side or they can do that on the mental enrichment side and that is similar to our silversneakers fitness.
Economic setup is the way that I would think about it and then Thats just remunerated back to the plan who who.
Who funds those as part of their portfolio of Silversneakers experiences.
Sorry can you just give an example of like a mental enrichment experience.
Yeah sure. So I mean, one example could be.
Someone wants to learn how to do healthy cooking at home and so there are classes on our mental enrichment platform to get set up that are how to cook healthy four four for low dollar amount so how to cook a healthy meal under $5 could be one of the classes. You can go on their learn how to go to the grocery store, which things to buy then you can actually cook your meal while other.
Our cooking their meals to and you have a person leading that who is a <unk>.
Tired chef who was.
Schaeffer for many many years and so that's one example, there are others. There is even mindful games that people can play in that can compete with each other on there.
We are.
Get setup, if you go and even look at it on your own Youll see all the types of content. The content is so wide ranging.
Steve It's crazy, it's there are so many opportunities okay.
Okay fantastic Thanks, guys.
And our last question comes from David Macdonald with <unk>. Your line is open.
Hey, good afternoon, guys I just have one question left.
To circle back and actually just follow up on Ryans question from earlier around contracting.
You guys mentioned length of contract and seeing some of your renewals.
We're due for a longer contract cycles I've always thought of this as kind of three.
Three year contract.
About a third of the book up for renewal every year.
Should we be thinking about in a lower percentage annually up for renewal, maybe moving more towards every four years and about 25% of the book or how much are those being extended I guess.
That's great great questions. So two of our top five plans renewed for five years and so that's just two data points I think in general what we're seeing is more of a spirit of.
Less from vendor and more kind of a partner and so it's like Hey, maybe if we go into a longer arrangement. We can we can invest more together, we can do more together over time and so I don't know if its every four or if it's 20 or 25% every year, but it's definitely going to come down a little bit from the kind of third a third a third because we are seeing longer contract.
Terms with many of our larger clients too.
So we go into these conversations trying to figure out how to get a win win burst for the health plan and for us in the longer term of those contracts are I think the more stability there as we start to perform we have to do everything that we say, we're going to do for our health plan of course, and that's our commitment.
But the longer terms I think are a demonstration of the value that those health plans find with <unk>. Okay. And then just last question when you guys talk to payers.
Is there actually a preference for.
Some of these remote visits where they can actually tell when.
When someone signs on when they sign off how much they are actually exercising as opposed to they go to the gym and once they sign and it's a little bit of a black hole in terms of.
Knowing exactly how much exercise that person's actually getting.
Yes, great question, and it's a little all over the place to be honest, but we're seeing a lot of our health plans are finding the data that's coming back from virtual to be very helpful.
To your point when they go to the gym were not exactly sure what they did that day, how long they were there how many calories they burned exactly what equipment they use to use et cetera, and in our digital visits we know a lot more because we know how long they are there and we know the type of activity that we're that we're doing with them I would just say that.
Our plans are just really appreciative that the digital channel was created and exists and that theyre getting their members to use.
Back to an earlier question around the volume of digital I think another thing we're going to start to find here as plans are going to help us.
And trying to point their members to digital as one of the choices, we want to be where members are not forced them to go anywhere. So if they want a community activation or if they want a gym network or if they want a virtual we're going to have all three of those available for them and I think our health plans are becoming more part of the process and that in terms of making those other options like <unk>.
<unk> or like virtual in addition to this the gym network.
In their messaging to their members and I think thats going to help over time and overall volume.
Okay. Thank you.
Thanks, Dave.
Alright, Thank you I'll hand, the call back to Richard Ashworth.
Thanks, Tom I appreciate everybody's time and attention. Thank you for dialing in hope everybody has a wonderful week take care.
Thank you, ladies and gentlemen, and that concludes today's conference. Thank you all for joining you may now disconnect.
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