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

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

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

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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of ~~August 3, 2021,~~April 29, 2022, there were outstanding ~~49,642,307~~49,878,312 shares of the registrant’s common stock, par value $.001 per share (“Common Stock”).

	June 30, 2021			December 31, 2020			March 31, 2022			December 31, 2021
Current assets:
Cash and cash equivalents	$	24,226		$	100,385		$	92,076		$	60,132
Accounts receivable, net		53,140			25,981
Accounts receivable								58,011			62,730
Prepaid expenses		7,652			5,556			5,420			6,465
Income taxes receivable		7,460			10,996			—			3,095
Investment in equity securities								27,366			49,746
Other current assets		16,423			11,336			8,308			13,733
Total current assets		108,901			154,254			191,181			195,901

Property and equipment, net of accumulated depreciation of $43,297 and $38,188 respectively		20,010			20,959
Property and equipment, net of accumulated depreciation of $47,280 and $44,229, respectively								25,721			25,247
Right-of-use assets		14,436			18,139			8,811			10,695
Long-term deferred tax asset		917			3,601
Intangible assets, net		29,049			29,049			29,049			29,049
Goodwill, net		334,680			334,680			334,680			334,680
Other assets		15,755			18,301			5,723			2,969
Total assets	$	523,748		$	578,983		$	595,165		$	598,541

Current liabilities:
Accounts payable	$	18,982		$	19,741		$	25,376		$	25,325
Accrued salaries and benefits		5,657			8,949			4,065			11,825
Accrued liabilities		31,051			18,424			31,624			28,270
Deferred revenue		3,937			4,460			3,201			3,371
Current portion of long-term debt		4,000			7,456
Income taxes payable								2,774			—
Current portion of lease liabilities		8,121			8,052			7,388			8,007
Current portion of other long-term liabilities		13,724			14,753			2,832			10,625
Total current liabilities		85,472			81,835			77,260			87,423

Long-term debt		381,598			459,250			379,960			380,504
Long-term lease liabilities		7,401			11,494			2,072			3,487
Long-term deferred tax liability								7,789			3,183
Other long-term liabilities		14,490			22,748			137			5,037

Commitments and contingent liabilities

Stockholders' equity:
Preferred stock $.001 par value, 5,000,000 shares authorized, NaN outstanding		—			—			—			—
Common Stock $.001 par value, 120,000,000 shares authorized, 49,641,314 and 48,983,735 shares outstanding, respectively		49			49
Common Stock $.001 par value, 120,000,000 shares authorized, 49,854,631 and 49,800,756 shares outstanding, respectively								50			50
Additional paid-in capital		512,674			513,263			516,113			514,461
Accumulated deficit		(436,592	)		(464,085	)		(358,590	)		(359,171	)
Treasury stock, at cost, 2,254,953 shares in treasury		(28,182	)		(28,182	)		(28,182	)		(28,182	)
Accumulated other comprehensive loss		(13,162	)		(17,389	)		(1,444	)		(8,251	)
Total stockholders' equity		34,787			3,656			127,947			118,907
Total liabilities and stockholders' equity	$	523,748		$	578,983		$	595,165		$	598,541

	Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended March 31,
	2021			2020		2021			2020			2022			2021
Revenues	$	120,071		$	81,923	$	228,156		$	241,615		$	127,513		$	108,085
Cost of revenue (exclusive of depreciation of $2,595, $2,240, $5,126 and $4,071, respectively included below)		68,639			33,804		125,924			148,952
Cost of revenue (exclusive of depreciation of $3,065 and $2,531, respectively included below)													78,415			57,285
Marketing expense		1,396			765		2,627			8,064			2,784			1,231
Selling, general and administrative expenses		9,652			8,905		19,349			20,957			10,700			9,696
Depreciation expense		2,740			2,410		5,423			4,440			3,206			2,683
Restructuring and related charges		—			827		—			1,309
Operating income		37,644			35,212		74,833			57,893			32,408			37,190

Interest expense		9,400			11,253		20,156			22,523			6,993			10,756
Loss on extinguishment and modification of debt		19,027			—		19,027			—
Other expense (income), net		259			—		(872	)		—
Other (income) expense, net													16,685			(1,130	)
Total non-operating expense, net		28,686			11,253		38,311			22,523			23,678			9,626
Income before income taxes		8,958			23,959		36,522			35,370			8,730			27,564

Income tax expense		187			6,757		7,806			9,893			8,086			7,620
Income from continuing operations	$	8,771		$	17,202	$	28,716		$	25,477		$	644		$	19,944

Income (loss) from discontinued operations, net of income tax benefit of $142, $650, $419 and $18,931, respectively		(414	)		11,309		(1,223	)		(195,072	)
Net income (loss)	$	8,357		$	28,511	$	27,493		$	(169,595	)
Loss from discontinued operations, net of income tax benefit of $21 and $277, respectively													(63	)		(808	)
Net income												$	581		$	19,136

Earnings (loss) per share - basic:
Continuing operations	$	0.18		$	0.35	$	0.58		$	0.52		$	0.01		$	0.41
Discontinued operations	$	(0.01	)	$	0.23	$	(0.02	)	$	(4.01	)	$	(0.00	)	$	(0.02	)
Net income (loss) ⁽¹⁾	$	0.17		$	0.59	$	0.56		$	(3.49	)
Net income												$	0.01		$	0.39

Earnings (loss) per share - diluted:
Continuing operations	$	0.17		$	0.35	$	0.57		$	0.52		$	0.01		$	0.40
Discontinued operations	$	(0.01	)	$	0.23	$	(0.02	)	$	(4.00	)	$	(0.00	)	$	(0.02	)
Net income (loss) ⁽¹⁾	$	0.17		$	0.58	$	0.55		$	(3.47	)
Net income												$	0.01		$	0.38

Comprehensive income (loss)	$	9,782		$	27,366	$	31,720		$	(190,569	)
Comprehensive income												$	7,388		$	21,938

Weighted average common shares and equivalents:
Basic		49,470			48,711		49,361			48,662			49,838			49,222
Diluted		50,457			48,794		50,413			48,825			50,557			50,340

For the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

Preferred
Stock

Common
Stock

Additional
Paid-in
Capital

Accumulated
Deficit

Treasury
Stock

Accumulated Other Comprehensive Loss

Total

Balance, April 1, 2020

$
—

$
48

$
503,049

$
(438,581
)

$
(28,182
)

$
(31,920
)

$
4,414

Comprehensive income (loss)

—

—

—

28,511

—

(1,145
)

27,366

Tax withholding for share-based
   compensation

—

—

(154
)

—

—

—

(154
)
Share-based employee compensation
   expense

—

—

2,865

—

—

—

2,865

Other

—

—

—

20

—

—

20

Balance, June 30, 2020

$
—

$
48

$
505,760

$
(410,050
)

$
(28,182
)

$
(33,065
)

$
34,511

Balance, January 1, 2020

$
—

$
48

$
504,419

$
(240,494
)

$
(28,182
)

$
(12,091
)

$
223,700

Comprehensive income (loss)

—

—

—

(169,595
)

—

(20,974
)

(190,569
)
Exercise and vesting of share-based compensation awards

—

—

601

—

—

—

601

Tax withholding for share-based
   compensation

—

—

(2,949
)

—

—

—

(2,949
)
Share-based employee compensation
   expense

—

—

3,689

—

—

—

3,689

Other

—

—

—

39

—

—

39

Balance, June 30, 2020

$
—

$
48

$
505,760

$
(410,050
)

$
(28,182
)

$
(33,065
)

$
34,511

Balance, April 1, 2021

$
—

$
49

$
513,923

$
(444,949
)

$
(28,182
)

$
(14,587
)

$
26,254

Comprehensive income

—

—

—

8,357

—

1,425

9,782

Exercise and vesting of share-based compensation awards

—

—

194

—

—

—

194

Tax withholding for share-based
   compensation

—

—

(4,311
)

—

—

—

(4,311
)
Share-based employee compensation
   expense

—

—

2,868

—

—

—

2,868

Balance, June 30, 2021

$
—

$
49

$
512,674

$
(436,592
)

$
(28,182
)

$
(13,162
)

$
34,787

Balance, January 1, 2021

$
—

$
49

$
513,263

$
(464,085
)

$
(28,182
)

$
(17,389
)

$
3,656

Comprehensive income

—

—

—

27,493

—

4,227

31,720

Exercise and vesting of share-based compensation awards

—

—

358

—

—

—

358

Tax withholding for share-based
   compensation

—

—

(6,813
)

—

—

—

(6,813
)
Share-based employee compensation
   expense

—

—

5,866

—

—

—

5,866

Balance, June 30, 2021

$
—

$
49

$
512,674

$
(436,592
)

$
(28,182
)

$
(13,162
)

$
34,787

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

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

	Six Months Ended June 30,						Three Months Ended March 31,
	2021			2020			2022			2021
Cash flows from operating activities:
Income from continuing operations	$	28,716		$	25,477		$	644		$	19,944
Loss from discontinued operations		(1,223	)		(195,072	)		(63	)		(808	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Loss on extinguishment of debt		18,237			—
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		5,423			27,682			3,206			2,683
Amortization and write-off of deferred loan costs		1,993			2,315			492			1,183
Amortization and write-off of debt discount		1,735			2,049			63			1,077
Share-based employee compensation expense		5,866			3,689			1,919			2,998
Unrealized gain on derivatives		(872	)		—			(5,695	)		(1,130	)
Impairment of goodwill and intangible assets of discontinued operation		—			199,500
Unrealized loss on investments in equity securities								22,380			—
Deferred income taxes		1,234			(16,447	)		2,272			1,454
(Increase) decrease in accounts receivable, net		(27,159	)		61,257
Decrease in income taxes receivable		3,536			—
Decrease in inventory		—			14,319
(Increase) decrease in other current assets		(10,309	)		1,363
(Decrease) increase in accounts payable		(1,882	)		9,411
Decrease (increase) in accounts receivable								4,719			(18,978	)
Changes in income taxes receivable and payable								5,869			10,217
Decrease in other current assets								1,992			529
Decrease in accounts payable								(945	)		(42	)
Decrease in accrued salaries and benefits		(3,292	)		(2,532	)		(7,760	)		(3,685	)
Increase (decrease) in other current liabilities		13,005			(5,925	)
Increase in other current liabilities								7,553			5,594
Other		1,422			3,857			369			1,582
Net cash flows provided by operating activities	$	36,430		$	130,943		$	37,015		$	22,618

Cash flows from investing activities:
Acquisition of property and equipment	$	(4,039	)	$	(10,362	)	$	(2,715	)	$	(1,561	)
Proceeds from sale of business, net of cash transferred		2,747			—
Settlement on derivatives not designated as hedges		(3,301	)		—			(1,390	)		(1,633	)
Net cash flows used in investing activities	$	(4,593	)	$	(10,362	)	$	(4,105	)	$	(3,194	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt	$	398,000		$	196,525
Payments of long-term debt		(496,275	)		(236,375	)		(1,000	)		(63,600	)
Deferred loan costs		(3,953	)		—
Payments related to tax withholding for share-based compensation		(6,813	)		(2,949	)		(472	)		(2,502	)
Exercise of stock options		358			601			205			164
Change in cash overdraft and other		687			(20,595	)		301			(1,443	)
Net cash flows used in financing activities	$	(107,996	)	$	(62,793	)	$	(966	)	$	(67,381	)

Net (decrease) increase in cash and cash equivalents	$	(76,159	)	$	57,788
Net increase (decrease) in cash and cash equivalents							$	31,944		$	(47,957	)

Cash and cash equivalents, beginning of period	$	100,385		$	2,486		$	60,132		$	100,385

Cash and cash equivalents, end of period	$	24,226		$	60,274		$	92,076		$	52,428

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

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

We have omitted certain financial information that is normally included in financial statements prepared in accordance with U.S. GAAP but that is not required for interim reporting purposes. You should read the accompanying consolidated financial statements in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

In ~~March 2020,~~October 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-16, "Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes" (“ASU 2018-16”), which adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition and provide lead time for entities to prepare for changes to interest rate risk hedging strategies. ASU 2018-16 is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. As of March 31, 2022, the benchmark interest rate in our existing interest rate swap agreements is LIBOR. The adoption of this standard did not have an impact on our financial position, results of operations, or cash flows.

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

In October 2018, the FASB issued ASU 2018-16, "Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes" (“ASU 2018-16”), which adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition and provide lead time for entities to prepare for changes to interest rate risk hedging strategies. ASU 2018-16 is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. As of June 30, 2021, the benchmark interest rate in our existing interest rate swap agreements is LIBOR. The adoption of this standard did not have an impact on our financial position, results of operations, or cash flows.

On October 18, 2020, we entered into a Stock Purchase Agreement (“Purchase Agreement”) with Kainos NS Holdings LP (“Parent”) and KNS Acquisition Corp., an indirect wholly owned subsidiary of Parent (“Purchaser,” and collectively with Parent, “Kainos”) to sell to Kainos all of the issued and outstanding capital stock of Nutrisystem, ~~a wholly owned subsidiary of the Company~~.

Effective as of December 9, 2020, we completed the sale of ~~Nutrisystem to Kainos for~~ an aggregate purchase price, after giving effect to customary indebtedness and cash adjustments, of approximately $558.9 million, which amount was subject to a customary working capital adjustment post-closing. ~~Such working capital adjustment was finalized in the second quarter of 2021 and resulted in additional proceeds of $2.7 million.~~ ~~Additionally, we incurred $11.2 million of transaction costs in 2020 directly related to the disposition of Nutrisystem, resulting in net proceeds, after post-closing adjustment, of $550.4 million.~~Nutrisystem.

In accordance with ASC Topic 205, “Presentation of Financial Statements”, the Nutrition business met the criteria for discontinued operations, as it was a component of the Company and the sale represented a strategic shift in the Company’s operations and financial results. Accordingly, the results of operations of the Nutrition business have been classified as discontinued operations for 2020 and 2021.

The following table presents financial results of ~~the~~our former Nutrition business included in ~~“income (loss)~~“loss from discontinued operations" for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021.

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

2021

2020

2021

2020

Revenues

$
—

$
180,675

$
—

$
358,638

Cost of revenues

—

84,437

—

168,445

Marketing expenses

—

50,340

—

130,113

Selling, general and administrative expenses ⁽¹⁾

460

14,566

1,546

30,523

Depreciation and amortization

—

10,509

—

23,242

Impairment loss

—

—

—

199,500

Restructuring and related charges

—

182

—

443

Interest expense ⁽²⁾

—

9,982

—

20,375

Pretax (loss) income from discontinued operations

(460
)

10,659

(1,546
)

(214,003
)
Loss on sale of Nutrition business ⁽³⁾

(96
)

—

(96
)

—

Total pretax (loss) income from discontinued operations

(556
)

10,659

(1,642
)

(214,003
)
Income tax benefit

(142
)

(650
)

(419
)

(18,931
)
(Loss) income from discontinued operations, net
of income tax benefit

$
(414
)

$
11,309

$
(1,223
)

$
(195,072
)

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

~~The depreciation, amortization and significant operating and investing non-cash items of the discontinued operations were as follows:~~

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

We earn revenue ~~from continuing operations~~ primarily from 3 programs: SilverSneakers^® senior fitness, Prime Fitness^®, and WholeHealth Living^TM. We provide the SilverSneakers senior fitness program to members of Medicare Advantage, Medicare Supplement, and group retiree plans through our contracts with such plans. We offer Prime Fitness, a fitness facility access program, through contracts with commercial health plans, employers, and other sponsoring organizations that allow their members to individually purchase the program. We sell our WholeHealth Living program primarily to health plans.

Except for Prime Fitness, our customer contracts generally have initial terms of approximately three years. Some contracts allow the customer to terminate early and/or determine on an annual basis to which of their members they will offer our programs. For Prime Fitness, our contracts with commercial health plans, employers, and other sponsoring organizations generally have initial terms of approximately three years, while individuals who purchase the Prime Fitness program through these organizations may cancel at any time (on a monthly basis) after an initial period of one to three months. The significant majority of our customer contracts contain 1 performance obligation - to stand ready to provide access to our network of fitness locations and fitness programming - which is satisfied over time as services are rendered each month over the contract term. Unsatisfied performance obligations at the end of a particular month primarily relate to certain monthly memberships for our Prime Fitness program, which are recorded as deferred revenue on the consolidated balance sheet and recognized as revenue during the immediately subsequent month. There was $0.1 million of revenue recognized during the three months ended March 31, 2022 from performance obligations satisfied in a prior period. Deferred revenue was ~~$3.9~~$3.2 million and ~~$4.5~~$3.4 million at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. Significant changes in the deferred revenue balance during the period are as follows:

Our fees are variable month to month and are generally billed per member per month (“PMPM”) or billed based on a combination of PMPM and member visits to a network location. We bill PMPM fees by multiplying the contractually negotiated PMPM rate by the number of members eligible for or receiving our services during the month. ~~Due to the COVID-19 pandemic, the average monthly total participation levels of our members have fluctuated significantly since March 2020.~~ For the three months ended ~~June 30, 2021,~~March 31, 2022, total SilverSneakers visits

and revenues were ~~significantly~~ higher than the same period in ~~2020. For~~2021 as the ~~six months ended June 30, 2021, total SilverSneakers visits were not materially different from~~effects of the ~~same period in 2020.~~COVID-19 pandemic lessened compared to the prior year period. As a result, revenues from PMPM fees ~~represented 47% and 88%~~(which are not derived from visits) as a percentage of total SilverSneakers revenue declined to 41% for the three months ended ~~June 30, 2021 and 2020, respectively, and 50% and 51% of SilverSneakers revenue~~March 31, 2022, compared to 53% for the ~~six~~three months ended ~~June 30, 2021 and 2020, respectively.~~ March 31, 2021.We bill for member visits approximately one month in arrears once actual member visits are known. Payments from customers are typically due within 30 days of invoice date. When material, we capitalize costs to obtain contracts with customers and amortize them over the expected recovery period. At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020, $0.7 million and $0.8~~ ~~million, respectively,~~2021, $0.3 millionof such costs were capitalized. ~~During the three and six months ended June 30, 2021, amortization~~Amortization expense related to such capitalized costs was $0.1 million and $0.2 million ~~and $0.3 million, respectively. During~~during the three ~~and six~~ months ended ~~June 30, 2020, amortization expense related to such capitalized costs was $0.1 million.~~March 31, 2022 and 2021, respectively.

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

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

We currently have 43 types of share-based awards outstanding to our employees and directors: stock options, restricted stock units,~~performance-based stock units,~~ and market stock units. We believe that our share-based awards align the interests of our employees and directors with those of our stockholders. Vesting terms for each of these award types generally range from one to three years.

We recognize share-based compensation expense for the market stock units if the requisite service is rendered, even if the market condition is never satisfied. For the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, we recognized total share-based compensation costs of ~~$2.9~~$1.9 million and ~~$5.9~~$3.0 million, respectively. ~~For the three and six months ended June 30, 2020, we recognized total share-based compensation costs from continuing operations of $2.1 million and $2.9 million, respectively.~~ We account for forfeitures as they occur.

In March ~~2021,~~2022, we granted annual long-term incentive awards to our employees consisting of (i) approximately ~~150,000~~162,000 stock options with a weighted average exercise price of ~~$26.29~~$31.27 per share and a weighted average grant date fair value of ~~$13.21~~$15.75 per share, and (ii) approximately ~~83,000~~90,000 restricted stock units with a weighted average grant date fair value of ~~$23.90~~$28.43 per share. These awards generally vest over or at the end of three ~~years.~~

~~In May 2021, we granted annual long-term incentive awards~~years, subject to the independent members of our Board of Directors consisting of approximately 30,000 restricted stock units with a weighted average grant date fair value of $24.76 per share. These awards generally vest at the end of one year. underlying award agreements.

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, we had an effective income tax rate from continuing operations of ~~2.1%~~92.6% and ~~21.4%~~27.6%, respectively. ~~For the three and six months ended June 30, 2020, we had an effective income tax rate from continuing operations of 28.2% and 28.0%, respectively.~~ The ~~lower~~higher effective income tax rate in ~~2021~~2022 is primarily due to ~~recognized~~the increase in the portion of valuation allowance for deferred tax ~~benefits from the vesting and exercise of share-based compensation awards that occurred~~assets related to capital loss carryforwards during the ~~second~~first quarter of ~~2021.~~2022, as described in Note 10.

We file income tax returns in the U.S. Federal jurisdiction and in various state and foreign jurisdictions. Tax years remaining subject to examination in the U.S. Federal jurisdiction include ~~2017~~2018 to present.

We maintain lease agreements principally for our office spaces and certain equipment. We maintain 2 sublease agreements with respect to one of our office locations, each of which continues through the initial term of our master lease agreement. Such sublease income and payments, while they reduce our rent expense, are not considered in the value of the right-of-use asset or lease liability. With the exception of two finance leases related to a network server and office equipment, all of our leases are classified as operating leases. In the aggregate, our leases generally have remaining lease terms of ~~two~~four to 3930 months, some of which include options to extend the lease for additional periods. Such extension options were not considered in the value of the right-of-use asset or lease liability because it is not probable that we will exercise the options to extend. If applicable, allocations among lease and non-lease components would be achieved using relative standalone selling prices.

The following table shows the components of lease expense for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ there were no noncash transactions related to leases.

The Company's debt, net of unamortized deferred loan costs and original issue discount, consisted of the following at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:

On June 30, 2021, we entered into a new Credit Agreement (the “Credit Agreement”) with a group of lenders, Morgan Stanley Senior Funding, Inc., as general administrative agent, term loan facility administrative agent and collateral agent (“Morgan Stanley”), and Truist Bank, as revolving facility agent and swingline lender (“Truist”). The Credit Agreement replaced our prior Credit and Guaranty Agreement, dated March 8, 2019 (the “Prior Credit Agreement”), with a group of lenders, Credit Suisse AG, Cayman Islands Branch, as general administrative agent, term facility agent and collateral agent, and Truist, as revolving facility agent and swingline lender. The Credit Agreement provides us with (i) a $400.0 million term loan B facility (the “Term Loan B”), (ii) a $100.0 million revolving credit facility that includes a $30.0 million sublimit for swingline loans and a $40.0 million sublimit for letters of credit (the “Revolving Credit ~~Facility)~~Facility”), and (iii) uncommitted incremental accordion facilities in an aggregate amount at any date equal to the greater of $167.5 million or 100% of our Consolidated EBITDA (as defined in the Credit Agreement) for the then-preceding four fiscal quarters, plus additional amounts based on, among other things, satisfaction of certain financial ratio requirements. As of ~~June 30, 2021,~~March 31, 2022, outstanding debt under the Credit Agreement was ~~$385.6~~$380.0 million, and availability under the revolving credit facility totaled $99.5 million as calculated under the most restrictive covenant.

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

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

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

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

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

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

In May 2019, we entered into 8 amortizing interest rate swap agreements, each of which matures in May 2024. Under these interest rate swap agreements, we receive a variable rate of interest based on LIBOR, and we pay a fixed rate of interest equal to approximately 2.2%. As further explained in Note ~~11,~~12, during the fourth quarter of 2020 we concluded that five of the eight interest rate swaps no longer qualified for hedge accounting treatment, and we de-designated these derivatives. As of ~~June 30, 2021,~~March 31, 2022, the ~~eight~~8 interest rate swap agreements had current notional amounts totaling ~~$700.0~~$600.0 million, of which ~~$388.9~~$333.3 million related to effective hedges.

The Credit Agreement also provides for annual commitment fees ranging between ~~0.375%~~0.250% and ~~0.25%~~0.375% of the unused commitments under the Revolving Credit Facility, depending on our Total Net Leverage Ratio (as defined in the Credit Agreement), and annual letter of credit fees on the daily maximum amount available under outstanding letters of credit at the LIBOR margin for the Revolving Credit Facility. The Prior Credit Agreement provided for annual commitment fees ranging between 0.250% and 0.500% of the unused commitments under the prior revolving credit facility, depending on our total Net Leverage Ratio (as defined in the Prior Credit Agreement), and annual letter of credit fees on the daily outstanding availability under outstanding letters of credit at the applicable LIBOR margin for the prior revolving credit facility, depending on our total Net Leverage Ratio (as defined in the Prior Credit Agreement).

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

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

On November 6, 2017, United Healthcare issued a press release announcing expansion of its fitness benefits (“United Press Release”), and the market price of the Company's shares of common stock, par value $0.001 per share (“Common Stock”) dropped on that same day. The lawsuits filed in connection with the United Press Release are described below.

~~On November 20, 2017, Eric Weiner, claiming to be a stockholder of the Company, filed a complaint~~ ~~in the United States District Court for the Middle District of Tennessee~~ (“Weiner Lawsuit”). The Weiner Lawsuit names as defendants the Company, the Company's former chief executive officer, chief financial officer, and a former executive who served as both chief accounting officer and interim chief financial officer. The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated under the Exchange Act in making false and misleading statements and omissions related to the United Press Release. On April 3, 2018, the Court appointed the Oklahoma Firefighters Pension and Retirement System as lead plaintiff, and on January 29, 2020, the Court entered an order certifying the class of stockholders who purchased Company Common Stock between March 6, 2017 and November 6, 2017. On April 23, 2021, the parties reached a settlement in principle of the Weiner Lawsuit pursuant to which defendants’ insurers will pay the entire settlement amount in exchange for a release of claims.On June 10, 2021, the parties filed a joint stipulation and agreement of settlement with the Court, and plaintiffs filed a motion for preliminary approval of the settlement. On June 15, 2021, the Court issued an order preliminarily approving the

~~settlement, and scheduled a settlement approval hearing for October 4, 2021.The settlement remains subject to final court approval, which is not assured.~~

On January 26, 2018 and August 24, 2018, individuals claiming to be stockholders of the Company filed shareholder derivative actions, on behalf of the Company, in the United States District Court for the Middle District of Tennessee, naming the Company as a nominal defendant and certain current and former executives and directors as defendants. On October 15, 2018, the two complaints were consolidated (the “Consolidated Derivative Lawsuit”). On May 15, 2019, a consolidated amended complaint was filed. The consolidated amended complaint asserts claims for violation of Section 10(b), 14(a), and 29(b) of the Exchange Act, breach of fiduciary duty, waste of corporate assets, and unjust enrichment. Plaintiffs seek to recover damages on behalf of the Company, certain corporate governance and internal procedural reforms, and other equitable relief. On June 14, 2019, the defendants filed a Motion to Dismiss all claims and the plaintiffs filed their opposition to the Motion to Dismiss on July 17, 2019. On October 22, 2019, the Consolidated Derivative Lawsuit was dismissed with prejudice. On November 20, 2019, plaintiffs filed a notice of appeal with the United States Circuit Court for the Sixth Circuit. After the parties entered into a Memorandum of Understanding (“MOU”) to resolve the Consolidated Derivative Lawsuit, the case was remanded to the District Court. The parties filed a joint stipulation of settlement based on the terms set forth in the MOU and plaintiffs filed a motion to approve settlement on October 12, 2020. ~~The Court granted final approval to the settlement on February 19, 2021.~~ ~~The joint stipulation of settlement required the Company to implement certain corporate governance reforms and did not have a financial impact on the Company.~~

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

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

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

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

On May 31, 2019, Pacific Packaging Concepts, Inc. (“Pacific Packaging”) filed a complaint in the U.S. District Court for the Central District of California, Western Division, naming as defendants two former subsidiaries of the ~~Company:~~Company; Nutrisystem, Inc. and Nutri/System IPHC, ~~Inc.~~Inc (“Pacific Packaging Lawsuit”). In its complaint, Pacific Packaging alleged that the defendants’ use of Pacific Packaging’s federally registered trademark, Fresh Start, in advertisements for its weight management program and shakes constitutes federal trademark infringement, counterfeit trademark infringement, false designation of origin, federal trademark dilution, unfair competition, false advertising, common law unfair competition, and common law trademark infringement. The complaint seeks injunctive relief and monetary damages in an unspecified amount. On August 29, 2019, the defendants filed their Answer to Complaint. On July 23, 2021, the Court granted the defendant’s motion for summary judgment dismissing certain of plaintiff’s damages claims, namely any claim for royalty damages and claims related to profits based on reverse confusion. The case ~~is currently~~was set for trial on ~~October 19, 2021.~~March 1, 2022. In connection with the sale of Nutrisystem, the Company agreed to indemnify Kainos for losses arising out of this matter and retained the right to control the defense thereof. ~~Given~~On January 11, 2022, the ~~uncertainty~~parties reached a settlement in principle of ~~litigation~~the Pacific Packaging Lawsuit pursuant to which defendants’ insurers would pay the entire settlement amount except for the amount of $25,000 representing the deductible on the policy, which would be paid by the Company pursuant to its indemnification agreement with Kainos. On March 11, 2022, the parties executed a definitive written settlement agreement, and all amounts were paid by the insurers and the preliminary stage of the case, we are currently not able to predict the probable outcome of the matter or to reasonably estimate a range of potential loss, if any. We intend to vigorously defend ourselves against this complaint.Company in March 2022.

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

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

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

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

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

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

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

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

The following table presents our assets and liabilities measured at fair value on a recurring basis at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~ 2021.

					March 31, 2022						December 31, 2021
					Fair Value Measurements Using Input Types						Fair Value Measurements Using Input Types
(In thousands)	Level 2				Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:
Investment in equity securities ⁽¹⁾					$	27,366	$	—	$	27,366	$	49,746	$	—	$	49,746
	June 30, 2021		December 31, 2020
Derivatives designated as effective hedging instruments
Liabilities:
Interest rate swap agreements	$	15,151	$	20,377	$	—	$	1,738	$	1,738	$	—	$	—	$	—

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

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

Liabilities:
Derivatives designated as effective hedging instruments
Interest rate swap agreements	$	12,087	$	16,260	$	—	$	1,580	$	1,580	$	—	$	8,705	$	8,705

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

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

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

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

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

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

The fair value of a reporting unit is the price that would be received upon a sale of the unit as a whole in an orderly transaction between market participants at the measurement date. ~~Following the sale of Nutrisystem effective December 9, 2020, we~~We have a single reporting unit.

We also measure on a non-recurring basis our cost method investments that do not have readily determinable fair values. We have elected the measurement alternative to measure such investments at cost less impairment, adjusted by observable price changes, with any fair value changes recognized in earnings. ~~At June 30, 2021, w~~e owned 159,309 shares of common stock of a predecessor (“Legacy Sharecare”) of Sharecare, Inc. (“Sharecare”) that we acquired in connection with the sale of our total population health services business to Legacy Sharecare in July 2016. We reported such shares at their carrying value of $10.8 million in “Other assets” on our consolidated balance sheets. On February 12, 2021, Legacy Sharecare announced that it had entered into a merger agreement with Falcon Capital Acquisition Corp. (“FCAC”) and FCAC Merger Sub, Inc. (“Merger Sub”) pursuant to which Legacy Sharecare would merge with and into Merger Sub with Sharecare surviving as a wholly owned subsidiary of FCAC (the “Sharecare Transaction”). The Sharecare Transaction was consummated effective July 1, 2021. See Note 14 for further information.

The e~~stimated~~stimated fair valueof each classof financialinstruments at ~~June 30, 2021~~March 31, 2022 was asfollows:

Cash and cash equivalents – The carrying amount of $~~24.2~~92.1 million approximates fair value due to the short maturity of those instruments (less than three months).

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

The Term Loan B is actively traded and therefore is classified as a Level 1 valuation. Theestimatedfair valueisbasedonan average of quotes as of March 31, 2022 from dealers who stand ready and willing to transact at those prices. We use a mid-market pricing convention (i.e., the mid-point of average bid and ask prices). The Revolving Credit Facility is not actively traded and therefore is classified as a Level 2 valuation based on the market for similar instruments. ~~We entered into the Credit Agreement on June 30, 2021; as such, the~~The estimated fair value and carrying amount of outstanding borrowings under the Term

Loan B ~~at June 30, 2021 was estimated to equal the carrying value~~ (excluding original issue discount and deferred loan costs) ~~of $400~~ were $389.1 million and $393.0 million~~million.~~, respectively. There were 0 outstanding borrowings under the Revolving Credit Facility at March 31, 2022.~~June 30, 2021.~~

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

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. The counterparties to the interest rate swap agreements expose us to credit risk in the event of nonperformance by such counterparties. However, at ~~June 30, 2021~~March 31, 2022, we do not anticipate nonperformance by these counterparties. Our interest rate swap agreements with each of the counterparties contain a provision whereby if we either default or are capable of being declared in default on any of our indebtedness, whether or not such default results in repayment of the indebtedness being accelerated by the lender, then we could also be declared in default on our derivative obligations.

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

In May 2019, we entered into 8 amortizing interest rate swap agreements, each of which matures in May 2024 and was initially designated as an effective cash flow hedge. Under these agreements, we receive a variable rate of interest based on LIBOR, and we pay a fixed rate of interest equal to approximately 2.2%. In October~~Upon entering into the Purchase Agreement with Kainos on October 18,~~ 2020, we determined that some of our hedged transactions would not materially occur in the initially identified time period due to the sale of Nutrisystem, since we expected to use the majority of the net proceeds from the sale to pay down a significant portion of outstanding debt. As a result, we concluded that 5 of our 8 interest rate swaps no longer

qualified for hedge accounting treatment. Accordingly, in the fourth quarter of 2020 we de-designated these 5 derivatives (“de-designated swaps”) and accelerated the reclassification of deferred gains and losses in accumulated OCI to ~~earnings~~income (loss) from discontinued operations as a result of the hedged forecasted transactions becoming probable not to occur. Upon de-designation in the fourth quarter of 2020, we recognized a pre-tax loss of $14.3 million in income (loss) from discontinued operations.

Additionally, upon de-designation in October 2020, we froze $3.2 million of previously deferred losses in accumulated OCI related to forecasted payments that are probable of occurring. We reclassify such deferred losses from accumulated OCI into earnings as an adjustment to interest expense during periods in which the forecasted transactions impact earnings, consistent with hedge accounting treatment. In the event that the related forecasted payments are ~~no longer~~ probable of not occurring, the related loss in accumulated OCI will be recognized in earnings immediately.

We continue to maintain the effective hedging relationship between 3 interest rate swap agreements and the portion of our forecasted payments that is expected to remain highly probable of occurring. Our entering into the Credit Agreement on June 30, 2021 had no effect on the hedging designation of our interest rate swaps as the hedges are not tied to a specific debt instrument and the economic characteristics of the Credit Agreement are similar to those of the Prior Credit Agreement.

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

At ~~June 30, 2021,~~March 31, 2022, our interest rate swap agreements designated as effective cash flow hedges had current notional amounts totaling ~~$388.9~~$333.3 million, and our de-designated interest rate swap agreements had current notional amounts totaling ~~$311.1~~$266.7 million.

We record all derivatives at estimated fair value in the consolidated balance sheet. Gains and losses on derivatives designated as effective cash flow hedges are recorded in accumulated OCI and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated OCI related to cash flow hedge derivatives will be reclassified to interest expense as we make interest payments on our variable-rate debt. As of ~~June 30, 2021,~~March 31, 2022, we expect to reclassify ~~$8.3~~$2.4 million, pre-tax, from accumulated OCI as an increase to interest expense within the next 12 months due to the scheduled payment of interest associated with our debt. Gains and losses on derivatives de-designated as effective cash flow hedges are recorded in the consolidated statement of operations as other (income) expense, ~~(income),~~ net.

The estimated gross fair values of derivative instruments and their classification on the consolidated balance sheet at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 were as follows:

The following table presents the effect of cash flow hedge accounting on accumulated OCI as of ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:

The following table presents the impact that non-designated derivatives had on our consolidated statement of operations for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021:

~~During 2020, w~~e used the two-class method to calculate earnings per share as the unvested restricted stock awards outstanding under our equity incentive plan were participating shares with nonforfeitable rights to dividends. Under the two-class method, we compute earnings per share of Common Stock by dividing the sum of distributed earnings to common stockholders (currently not applicable as we do not pay dividends) and undistributed earnings allocated to common stockholders by the weighted average number of outstanding shares of Common Stock for the period. In applying the two-class method, we allocate undistributed earnings to both shares of Common Stock and participating securities based on the number of weighted average shares outstanding during the period. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company.

The following is a reconciliation of the numerator and denominator of basic and diluted earnings (loss) per share for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:

(In thousands except per share data)	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2021			2020			2021			2020			2022			2021
Numerator:
Income from continuing operations - numerator for earnings (loss) per share	$	8,771		$	17,202		$	28,716		$	25,477		$	644		$	19,944
Income (loss) from discontinued operations - numerator for earnings (loss) per share		(414	)		11,309			(1,223	)		(195,072	)
Net income (loss)		8,357			28,511			27,493			(169,595	)
Net income allocated to unvested restricted stock		—			(20	)		—			—
Net income (loss) allocated to shares of Common Stock	$	8,357		$	28,491		$	27,493		$	(169,595	)
Loss from discontinued operations - numerator for earnings (loss) per share														(63	)		(808	)
Net income													$	581		$	19,136

Denominator:
Shares used for basic income (loss) per share		49,470			48,711			49,361			48,662			49,838			49,222
Effect of dilutive stock options and stock units outstanding:
Non-qualified stock options		68			8			65			26			77			62
Restricted stock units		642			75			743			120			363			844
Performance-based stock units		67			—			64			17			—			61
Market stock units		210			—			180			—			279			151
Shares used for diluted income (loss) per share		50,457			48,794			50,413			48,825			50,557			50,340

Earnings (loss) per share - basic:
Continuing operations	$	0.18		$	0.35		$	0.58		$	0.52		$	0.01		$	0.41
Discontinued operations	$	(0.01	)	$	0.23		$	(0.02	)	$	(4.01	)	$	(0.00	)	$	(0.02	)
Net income (loss) ⁽¹⁾	$	0.17		$	0.59		$	0.56		$	(3.49	)
Net income													$	0.01		$	0.39

Earnings (loss) per share - diluted:
Continuing operations	$	0.17		$	0.35		$	0.57		$	0.52		$	0.01		$	0.40
Discontinued operations	$	(0.01	)	$	0.23		$	(0.02	)	$	(4.00	)	$	(0.00	)	$	(0.02	)
Net income (loss) ⁽¹⁾	$	0.17		$	0.58		$	0.55		$	(3.47	)
Net income													$	0.01		$	0.38

Dilutive securities outstanding not included in the computation of earnings per share because their effect is anti-dilutive:
Non-qualified stock options		204			235			236			176			262			268
Restricted stock units		1			750			5			424			35			9
Restricted stock awards		—			32			—			35
Performance-based stock units		—			95			—			47
Market-based stock units		—			49			—			25

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

The following tables summarize the changes in accumulated OCI, net of tax, for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:

The following table presents details about reclassifications out of accumulated OCI for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:

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

On April 5, 2022, we ~~held~~ ~~159,309 shares~~entered into a definitive Agreement and Plan of ~~common stock~~Merger (the “Merger Agreement”) with Titan-Atlas Parent, Inc. (“Parent”) and Titan-Atlas Merger Sub, Inc., a direct, wholly-owned subsidiary of Legacy Sharecare as of June 30, 2021. As a result of Legacy Sharecare’s business combination with FCAC on July 1, 2021, our shares of common stock of Legacy Sharecare were converted into shares of common stock of Sharecare (“Sharecare Common Stock”Parent

(“Merger Sub”), ~~with 2.4%~~providing for the acquisition of ~~such shares being converted into~~the Company by affiliates of Stone Point Capital LLC, a Delaware limited liability company (“Stone Point Capital”), subject to the terms and ~~paid to us in cash. Consequently, in July 2021, we received $2.7 million in cash as well as 11,079,331 shares of Sharecare Common Stock (“Sharecare Investment”). Our cost basis~~conditions set forth in the ~~Sharecare Investment is $10.5 million or $0.95 average cost per share. Sharecare Common Stock began trading on The Nasdaq Stock Market LLC on July 2, 2021 under~~Merger Agreement. Pursuant to the ~~trading symbol “SHCR”. The Sharecare Investment is~~terms of the Merger Agreement and subject to ~~restrictions on resale, including a customary lockup period.~~ ~~The lockup period continues until~~ the ~~earlier~~satisfaction or waiver of ~~one year after~~certain conditions set forth in the Merger Agreement, Merger Sub will be merged with and into the Company (the “Merger”) effective as of the effective time of the ~~Sharecare Transaction or such other time~~Merger (the “Effective Time”). As a result of the Merger, Merger Sub will cease to exist, and the Company will survive as a wholly-owned subsidiary of Parent.

As a result of the Merger, except as otherwise provided in the Merger Agreement, at ~~which~~ the ~~Sharecare~~Effective Time, each share of Common Stock ~~trades at a certain minimum price for 20 trading days in any 30-day trading period beginning on or after November 28, 2021. In addition, between December 28, 2021~~issued and March 27, 2022 (the “First Sale Window”), we are permitted to sell up to 750,000 shares. Between March 28, 2022 and July 1, 2022, we may sell up to 750,000 shares plus any portion of the 750,000 shares we were permitted to, but did not, sell during the First Sale Window.

Beginning in July 2021, we measure the Sharecare Investment at fair value and classify it as a Level 1 asset within the fair value hierarchy. As required under ASC 321, “Investments – Equity Securities”, we recognize any changes in fair value of the Sharecare Investment in net income as unrealized gains or losses. In addition, in July 2021, we recorded a realized gain of $2.5 million in non-operating income based on the $2.7 million cash proceeds received from the Sharecare Transaction.

~~At June 30, 2021, we provided a valuation allowance for $149.6 million of deferred tax assets related to capital loss carryforwards~~. We expect to reverse a portion of such valuation allowance in the third quarter of 2021 based on the positive evidence provided by both the realized and anticipated capital gains from the disposal of the Sharecare Investment that will be available to utilize these capital loss carryforwards. The ~~majority of these capital loss carryforwards expire on December 31, 2025, if unused. We expect to dispose of the Sharecare Investment~~outstanding immediately prior to the ~~expiration~~Effective Time will be converted into the right to receive $32.50 in cash, without interest (the “Transaction Consideration”). In addition, at the Effective Time:

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

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

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

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

In January 2020, the Secretary of the U.S. Department of Health and Human Services declared a national public health emergency due to a novel strain of coronavirus, which causes the disease known as “COVID-19.” In March 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic. By March 31, 2020, substantially all of the fitness centers in our national network were temporarily closed, which had an adverse impact on our results of operations for the first quarter of 2020 and beyond ~~because a significant~~ ~~portion of revenues from our SilverSneakers program is based on~~ ~~member visits to a fitness partner location.~~ ~~Some locations began~~reopening in May 2020 and additional locations reopened in June and throughout the remainder of 2020. As of June 30, 2021, a significant majority of our fitness partner locations were open. SilverSneakers in-person visits totaled 14.5 million for the second quarter of 2021, compared to 2.7 million and 11.2 million for the second quarter of 2020 and the first quarter of 2021, respectively. In addition, while the number of active subscribers for Prime Fitness declined from April through December 2020, it increased slightly during the first six months of 2021, and we expect it to stabilize for the rest of 2021.

As fitness locations closed as a result of the pandemic, we quickly adapted to the changing needs of our members and clients by launching a new and dynamic suite of virtual offerings beginning in March 2020, which we will continue to offer. Virtual visits were 0.4 million and 0.9 million for the three months ended June 30, 2020 and 2021, respectively. We believe these digital offerings not only allow our currently homebound members to stay active and connected with the help of SilverSneakers but that they will also be a critical contributor to our new digitally-enabled member engagement platform going forward.

Tivity Health, Inc. was founded and incorporated in Delaware in 1981. ~~Through our four programs,~~We are a leading provider of healthy life-changing solutions, including SilverSneakers, Prime Fitness, and WholeHealth ~~Living,~~Living. We help adults improve their health and ~~Wisely Well~~^TM,support them on life’s journey by providing access to in-person and virtual physical activity, social engagement, and mental enrichment programs. ~~we are focused on becoming the modern destination for healthy living, especially for seniors~~We deliver resources that enable members to live healthier, happier, more connected lives. Our solutions support health plans and ~~older adults~~employers nationwide as they seek to reduce costs and improve health outcomes.

We offer SilverSneakers to approximately 18 million eligible members of Medicare Advantage, Medicare Supplement, and group retiree plans. We also offer Prime Fitness, a fitness facility access program, through commercial health plans, employers, and other sponsoring organizations. Our national network of fitness centers delivers both SilverSneakers and Prime Fitness. ~~Our~~In January 2022, we launched a customizable, premium fitness ~~networks encompass over 16,000 partner locations and nearly 1,000 alternative locations~~network for SilverSneakers that ~~provide classes outside of traditional~~increased our total SilverSneakers fitness ~~centers.~~network to approximately 23,000 locations. We also offer virtual fitness experiences, including live instructor-led classes. Through our WholeHealth Living program, which we sell primarily to health plans, we offer a continuum of services related to ~~complementary, alternative,~~physical and ~~physical~~integrative medicine. Our WholeHealth Living network includes relationships with ~~over 20,000 complementary, alternative,~~approximately 30,000 physical and ~~physical~~integrative medicine practitioner locations to serve individuals through health plans and employers who seek health services such as chiropractic care, acupuncture, physical therapy, occupational therapy, massage therapy, and more. ~~Finally, through our Wisely Well brand, we offer meals designed to~~ ~~support individuals and caregivers who are seeking meal convenience as well as those recovering after a hospitalization or living with chronic conditions.~~

Effective as of December 9, 2020, we completed the sale of ~~Nutrisystem to Kainos pursuant to the terms~~Nutrisystem. Results of the Purchase Agreement. At the closing (the “Closing”) of the transactions contemplated by the Purchase Agreement, Nutrisystem and its subsidiaries were acquired by, and became wholly owned subsidiaries of, Kainos. Pursuant to the terms of the Purchase Agreement, Kainos paid to the Company an aggregate purchase price, after giving effect to customary indebtedness and cash adjustments, of approximately $559 million, which amount was subject to a customary working capital adjustment post-Closing. Such working capital adjustment was finalized in the second quarter of 2021 and resulted in $2.7 million of additional proceeds. We used the significant majority of the net proceeds from the divestiture to pay down principal on the term loans under our Prior Credit Agreement. Results of

operations for Nutrisystem have been classified as discontinued operations for all periods presented in the consolidated financial statements.

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

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

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

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

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

Our strategy is to ~~become~~enable healthier, happier and more connected lives as a digital platform engagement company that not only provides in-person and virtual fitness, social engagement and mental enrichment opportunities, but also an insights-driven, personalized experience. Our goal is to increase the ~~modern destination for healthy living.~~number of eligible and enrolled SilverSneakers members and broaden engagement through strong health plan partnerships, a robust national network of approximately 23,000 fitness locations, live-with-instructor and on-demand virtual classes, and non-fitness activities that support social connection and lifelong learning. We will ~~expand beyond fitness by establishing an engagement platform that enables personalized member interaction with all~~also focus on increasing the number of ~~our offerings, and we will partner with other payors and service providers~~subscribers to ~~aggregate services to members under the SilverSneakers umbrella. We plan to accelerate growth in our core SilverSneakers and~~ Prime Fitness, ~~businesses by expanding~~targeting adults aged 18-64 who are members of sponsoring organizations, through our national network of approximately 12,500 participating locations and ~~strengthening~~ our fitness partner network, continuing to grow and scale our new virtual offerings, and expanding our popular community-based offerings. The continued development of our suite of digital offerings will enable a more tailored, interactive, and impactful experience across a variety of areas, including fitness, social connection, community involvement, volunteering, and enrichment.daily live streaming classes. In addition, we plan to accelerate growth in our WholeHealth Living offering through market share expansion and improved technology.

We describe our significant accounting policies in Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020~~2021 (“~~2020~~2021 Form 10-K”). We prepare the consolidated financial statements in conformity with generally accepted accounting principles in the United States (“

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

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

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

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

The significant majority of our customer contracts contain one performance obligation - to stand ready to provide access to our network of fitness locations and fitness programming - which is satisfied over time as services are rendered each month over the contract term. Unsatisfied performance obligations at the end of a particular month primarily relate to certain monthly memberships for our Prime Fitness program, which are recorded as deferred revenue on the consolidated balance sheet and recognized as revenue during the immediately subsequent month.There was ~~no material~~$0.1 million of revenue recognized during the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 from performance obligations satisfied in a prior period.

Our fees are variable month to month and are generally billed per member per month (“PMPM”) or billed based on a combination of PMPM and member visits to a network location. We bill PMPM fees by multiplying the contractually negotiated PMPM rate by the number of members eligible for or receiving our services during the month. We bill for member visits approximately one month in arrears once actual member visits are known. Payments from customers are typically due within 30 days of invoice date. When material, wewe capitalize costs to obtain contracts with customers and amortize them over the expected recovery ~~period~~.period.

Although we evaluate our financial performance and make resource allocation decisions based upon the results of our single operating and reportable segment, we believe the following information depicts how our revenues and cash flows from continuing operations are affected by economic factors. For the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, revenue from our SilverSneakers program, which is predominantly contracted with Medicare Advantage and Medicare Supplement plans, comprised ~~approximately 76% and~~ 75%~~, respectively,~~ of revenues from continuing operations, while revenue from our Prime

Fitness ~~program~~and WholeHealth Living programs comprised ~~approximately 19%~~20% and ~~20%~~5%, respectively, of revenues ~~from continuing operations, and our WholeHealth Living program comprised approximately 5%, for each period, of revenue~~ from continuing operations.

We review goodwill for impairment at the reporting unit level (operating segment or onelevel ~~below~~ belowan ~~operating segment)~~operatingsegment) on an annual basis (during the fourth quarter of our fiscal year) or more frequently wheneverevents or circumstances indicate that the carrying value may not be recoverable. ~~Following the sale of Nutrisystem in December 2020, we~~We have a single reporting unit.

As part of the annual impairment test, we may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less thanits ca~~rryi~~ngcarrying value.If wewe elect not to perform a ~~qualitat~~ivequalitative assessment or we determine that it is more li~~kely~~likely than not that ~~the fair valueof the reporting unit is less thanits c~~a~~rryi~~n~~g value, we perform a quantitative review as descr~~i~~bed be~~l~~ow.~~

~~During a quantitative review of goodwill, we estimate~~ the fair value of the reporting unit ~~based on our market capitalization and compare such fair value to the~~is less than its carrying value, ofwe perform a quantitative review. During the ~~reporting unit. If~~quantitative review, if the estimated fair value of the reporting unit exceeds its carrying amount, no impairment is indicated. If the estimated fair value of the reporting unit is less than its carrying amount, impairment of goodwill is measured as the excess of the carrying amount over fair value.

~~Except for a tradename that has an indef~~init~~e life and is not subject to amort~~i~~zation, we amortize identifiable~~ i~~ntangib~~l~~e asset~~s ~~over their estimated usef~~u~~l lives on a stra~~i~~ght-l~~in~~e or accelerated basis based on the period for which the economic benefits of the asset are expected to be realized.We as~~se~~ss the potential~~ i~~mpair~~m~~ent of intangible assets subject to amortiz~~a~~tionwhenever e~~v~~ents orchanges in c~~i~~rcu~~m~~stances indicate thatthe carrying values may not be recoverable. If we determine thatthe carrying value of other identifiable intangible assetsmay n~~o~~t be recoverable,we calculateany impair~~me~~nt using an estimate of t~~he a~~sset's fair~~ v~~alue based on the estima~~t~~ed pr~~i~~ce that wou~~l~~d be received to sell the asset in an or~~d~~erly tra~~nsa~~ction b~~e~~tween m~~a~~rketpartici~~p~~ants.~~

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

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

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

Additionally, beginning in the fourth quarter of 2020, we revised the definition of free cash flow such that it is reduced by settlement on derivatives not designated as hedges, a new item for 2020 that did not exist in prior periods. Settlement on derivatives not designated as hedges arose in 2020 due to the de-designation of certain interest rate swaps in the fourth quarter of 2020 in connection with the repayment of a portion of the principal on the term loans under our Prior Credit Agreement, as further described in Note 11 of the notes to consolidated financial statements included in this report. We believe it is appropriate to exclude settlement on derivatives not designated as hedges from free cash flow because these payments are similar to interest payments (which are reflected in cash flow from operating activities) and they reduce our cash available to repay debt or make other investments.

Although there is significant uncertainty relating to the potential impacts of the ongoing COVID-19 pandemic on our business going forward, including ~~the duration of the outbreak, the timing and duration of any operational restrictions applicable to our fitness partner locations,~~ the impact on member participation in our SilverSneakers programs, our ability to continue to attract paying subscribers for our Prime Fitness program, and the ultimate medium- and long-term impact of the pandemic on the global economy, we expect our results from continuing operations for the short term to continue to be adversely impacted by ~~COVID-19.~~COVID-19 compared to pre-pandemic periods.

The key financial results for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 are:

The following table sets forth the components of the consolidated statements of operations for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ expressed as a percentage of revenues from continuing operations.

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2021			2020			2021			2020			2022			2021
Revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenue (exclusive of depreciation included below)		57.2	%		41.3	%		55.2	%		61.6	%		61.5	%		53.0	%
Marketing expenses		1.2	%		0.9	%		1.2	%		3.3	%		2.2	%		1.1	%
Selling, general and administrative expenses		8.0	%		10.9	%		8.5	%		8.7	%		8.4	%		9.0	%
Depreciation expense		2.3	%		2.9	%		2.4	%		1.8	%		2.5	%		2.5	%
Restructuring and related charges		0.0	%		1.0	%		0.0	%		0.5	%
Operating income ⁽¹⁾		31.4	%		43.0	%		32.8	%		24.0	%		25.4	%		34.4	%

Interest expense		7.8	%		13.7	%		8.8	%		9.3	%		5.5	%		10.0	%
Loss on extinguishment and modification of debt		15.8	%		0.0	%		8.3	%		0.0	%
Other expense (income), net		0.2	%		0.0	%		(0.4	)%		0.0	%
Total non-operating expense, net ⁽¹⁾		23.9	%		13.7	%		16.8	%		9.3	%
Other (income) expense, net														13.1	%		(1.0	)%
Total non-operating (income) expense, net ⁽¹⁾														18.6	%		8.9	%
Income before income taxes ⁽¹⁾		7.5	%		29.2	%		16.0	%		14.6	%		6.8	%		25.5	%

Income tax expense		0.2	%		8.2	%		3.4	%		4.1	%		6.3	%		7.1	%
Income from continuing operations ⁽¹⁾		7.3	%		21.0	%		12.6	%		10.5	%		0.5	%		18.5	%

Revenues from continuing operations were ~~$120.1~~$127.5 million for the ~~second~~first quarter of ~~2021~~2022 compared to ~~$81.9~~$108.1 million for the same period in ~~2020,~~2021, an increase of ~~$38.1~~$19.4 million, primarily as a result of a net increase in SilverSneakers revenue of ~~$41.6~~$16.3 million driven by an increase in revenue-generating visits as the effects of the COVID-19 pandemic ~~lessened. Beginning in March 2020, substantially all of our fitness partner locations temporarily closed, with some locations reopening in May and June of 2020.~~lessened compared to the prior year period. For the ~~second~~first quarter of ~~2020,~~2021, the average monthly total participation levels of our SilverSneakers members were significantly below historical levels. As a result, revenues from PMPM fees represented ~~88%~~53% of SilverSneakers revenue for the three months ended ~~June 30, 2020~~March 31, 2021, compared to ~~47%~~41% for the same period in ~~2021.~~2022. In addition, revenue from Prime Fitness increased by ~~$4.3~~$2.4 million due to an increase in ~~large employer revenue. These increases were partially offset by a decrease of $6.8 million due to other revenue earned~~active subscribers during the ~~second~~first quarter of ~~2020 (that did not recur in 2021) from a program with a large employer seeking to improve its employees’ well-being during the COVID-19 pandemic.~~

~~Revenues from continuing operations~~ ~~were $228.2 million~~ ~~for the six months ended June 30,~~ ~~2021compared to $241.6 million for the same period in 2020, a decrease of $13.5 million, primarily as a result of~~ ~~a decrease in other revenue of $6.8 million, as described in the preceding paragraph, and a decrease in Prime Fitness revenue of $5.9 million~~ ~~due to a decrease in active subscribers~~ ~~for~~ ~~the six months ended~~ ~~June 30, 2021~~2022 compared to the same period in ~~2020.~~2021.

Cost of revenue from continuing operations (excluding depreciation) (“cost of revenue”) as a percentage of revenues increased from the three months ended ~~June 30, 2020 (41.3%~~March 31, 2021 (53.0%) to the three months ended ~~June 30, 2021 (57.2%~~March 31, 2022 (61.5%), primarily ~~due to a lower mix of revenues from PMPM fees in the second quarter of 2021, as noted above, coupled with an increase in visit costs~~ due to an increase in participation levels,.

~~Cost of revenue~~ ~~from continuing operations (excluding depreciation)~~ ~~as a percentage of revenues decreased from the six months ended June 30, 2020 (61.6%)~~ which led to ~~the six months ended June 30, 2021 (55.2%),~~ ~~primarily due to a decrease in~~higher visit costs as a percentage of ~~revenue. This decrease is primarily attributable to (i) a net decrease in participation levels and (ii) a lower cost per visit resulting~~revenues, particularly revenues from ~~a higher mix of virtual visits as well as a greater number of visits exceeding the monthly maximums for paid visits~~PMPM fees.

Marketing expenses from continuing operations as a percentage of revenues ~~did not change materially~~increased from the three months ended ~~June 30, 2020 (0.9%~~March 31, 2021 (1.1%) to the three months ended ~~June 30, 2021 (1.2%).~~

~~Marketing expenses from continuing operations as a percentage of revenues decreased from the six months ended June 30, 2020 (3.3%~~March 31, 2022 (2.2%) ~~to the six months ended June 30, 2021 (1.2%),~~ primarily ~~due to~~driven by decreased spending in the first quarter of 2021 ~~on SilverSneakers television advertising,~~ due ~~in part~~ to the COVID-19 ~~pandemic as well as a shift in our media mix towards more targeted digital marketing.~~pandemic.

Selling, general and administrative expenses from continuing operations as a percentage of revenues decreased from the three months ended ~~June 30, 2020 (10.9%~~March 31, 2021 (9.0%) to the three months ended ~~June 30, 2021 (8.0%~~March 31, 2022 (8.4%) primarily due to (i) a decrease in ~~transition, acquisition, and integration costs, (ii) a decrease in~~share-based compensation expense primarily driven by (a) lower CEO transition-related expenses associated with the termination of our former CEO in February 2020 and the hiring of a new CEO in June 2020, and ~~(iii)~~ ~~the fixed nature of~~(b) lower expense related to certain ~~costs that do not increase proportionately with increases in revenue.~~ ~~These decreases were partially offset by increases in (i)~~ ~~costs to implement our strategic initiatives, such as our new omnichannel marketing platform, and (ii) share-based compensation expense due to (a) the timing and design of annual~~incremental long-term incentive awards ~~and (b) grants of long-term incentive awards~~granted in ~~May~~ 2020 and August 2020 to the Company’s Board of Directors, executive officers, and certain other employees, all of whose cash compensation was reduced for a significant portion of 2020 in order to preserve liquidity and manage cash flow in response to the COVID-19 pandemic, with the value of such grants being equal as closely as reasonably possible to the amount of the cash compensation reduction.

~~Selling, gen~~e~~ral and adm~~ini~~strative exp~~ense~~s from continuing operations~~ a~~s a percent~~a~~ge of r~~e~~venu~~e~~s decreased slightly from~~ ~~the~~ ~~six months ended June 30, 2020 (8.7%)~~ ~~to the~~ ~~six months ended June 30, 2021 (8.5%) primarily due to decreases in (i)~~ transition, acquisition, and integration costs, and (ii) CEO transition-related expenses associated with the termination of our former CEO in February 2020 and the hiring of a new CEO in June 2020. These decreases were partially offset by increases in (i) costs to implement our strategic initiatives, such as our new omnichannel marketing platform, and (ii) share-based compensation expense due to (a) the timing and design of annual long-term incentive awards, and (b) grants of long-term incentive awards in May 2020 and August 2020 to the Company’s Board of Directors, executive officers, and certain other employees, all of whose cash compensation was reduced for a significant portion of 2020 in order to preserve liquidity and manage cash flow in response to the COVID-19 pandemic, with the value of such grants being equal as closely as reasonably possible to the amount of the cash compensation reduction.

~~During the first quarter of 2019,~~ ~~we began a reorganization primarily related to integrating the Nutrisystem business and streamlining our corporate and operations support (the "2019 Restructuring Plan"). The 2019~~that

~~Restructuring Plan concluded during the first quarter of 2020. For the three~~vested in 2021. This decrease was mostly offset by an increase in legal and ~~six months ended June 30, 2020, we incurred restructuring charges from continuing operations of $0 and $0.5 million, respectively,~~other professional expenses, including expenses related to the ~~2019 Restructuring Plan. To date, we have incurred restructuring charges from continuing operations~~proposed Merger described in Note 16 of ~~$2.4 million related~~the notes to the ~~2019 Restructuring Plan. These expenses consist entirely of severance and other employee-related costs.~~ consolidated financial statements

~~During the second quarter of 2020,~~ we began a reorganization plan primarily related to eliminating certain compensation costs in response to the COVID-19 pandemic in order to preserve our liquidity and manage our cash flows (“2020 COVID Restructuring Plan”). ~~The 2020 COVID Restructuring Plan was completed during the third quarter of 2020. To date, and for the~~ ~~three and six months ended June 30, 2020, we incurred restructuring charges of $0.8 million related to the 2020 COVID Restructuring Plan. These expenses consist entirely of severance and other employee-related costs.~~

Depre~~ciationexpe~~nseDepreciation expense from continuing operationsincreased by ~~$0.3 million and $1.0~~$0.5 million for the three ~~and six~~ months ended ~~June 30, 2021, respectively,~~March 31, 2022 compared to the same ~~periods~~period in ~~2020,~~2021, primarily due to an increase in the amount of depreciable computer ~~software~~. software.

Interest expense from continuing operations decreased by ~~$1.9 million and $2.4~~$3.8 million for the three ~~and six~~ months ended ~~June 30, 2021, respectively,~~March 31, 2022 compared to the same ~~periods~~period in ~~2020,~~2021, primarily driven by (i) a decrease in cash interest due to a lower average level of outstanding borrowings in ~~2021~~2022 compared to ~~2020, partially offset by an increase~~2021 as well as a reduction in the LIBOR margin for Term B Loans under the Credit Agreement compared to the Prior Credit Agreement and (ii) a decrease in non-cash interest related to accelerated amortization of original issue discount and deferred loan costs ~~under~~that occurred in the ~~Prior Credit Agreement~~first quarter of 2021 due to voluntary ~~prepayments.~~ prepayments at such time.

~~Upon execution~~Other (income) expense, net was $16.7 million for the first quarter of 2022compared to ($1.1) million for the ~~Credit Agreement~~same period in 2021 due to (i) unrealized losses on ~~June 30, 2021, we~~ ~~recorded a loss on extinguishment~~the Sharecare Equity Security totaling $22.4 million in the first quarter of ~~debt of $18.2 million. In addition, we incurred third-party costs of $0.8 million, which were recorded~~2022, as ~~loss on modification of debt. See~~further described in Note 810 of the notes to the consolidated financial statements included in this report, ~~for further information.~~

~~Other expense (income), net was $0.3 million~~ and ~~($0.9) million for the three and six months ended June 30, 2021, respectively, compared to $0 for the same periods in 2020 due to mark-to-market adjustments on~~ (ii)~~certain interest rate swap agreements that, effective in the fourth quarter of 2020, no longer qualify for hedge accounting treatment (“de-designated swaps”). Changes~~ changes in fair value of the de-designated ~~swaps are required to be recognized each period in current earnings.~~swaps. The unrealized losses on the Sharecare Equity Security of $22.4 million decreased earnings per diluted share by $0.44 during the three months ended March 31, 2022.

See Note 6 of the notes to consolidated financial statements in this report for a discussion of income tax expense from continuing operations.

As of ~~June 30, 2021,~~March 31, 2022, outstanding debt under the Credit Agreement was ~~$385.6~~$380.0 million, which represented ~~$400.0~~$393.0 million of principal on the Term Loan B less deferred loan costs and original issue discount, and we had ~~$24.2~~$92.1 million of cash and cash equivalents.

~~As of~~ ~~June 30, 2021~~, In addition, we had working capital of $~~23.4 million.~~113.9 million, including the Sharecare Equity Security of $27.4 million, which is subject to restrictions on resale as further described in Note 10 ~~While~~of the notes to consolidated financial statements included in this report.

Our sources of liquidity primarily include cash on hand, cash flows from operations, and available credit under the Credit Agreement. As of March 31, 2022, availability under the Revolving Credit Facility totaled $99.5 million as calculated under the most restrictive covenant. We believe we have sufficient liquidity to fund our operations and meet our short-term and long-term obligations.

Operating activities during the three months ended March 31, 2022 provided cash of $37.0 million compared to $22.6 million during the three months ended March 31, 2021.The increase is primarily due to increased cash collections from accounts receivable, partially offset by higher payments related to visit costs and reduced cash receipts from tax refunds.

Investing activities during the three months ended March 31, 2022 used $4.1 million in cash, compared to $3.2 million during the three months ended March 31, 2021. This change is primarily due to increased capital expenditures during the first quarter of 2022.

Financing activities during the three months ended March 31, 2022 used $1.0 million of cash, compared to $67.4 million during the three months ended March 31, 2021. This change is primarily due to voluntary prepayments under the Credit Agreement of $1.0 million during the first quarter of 2022, compared to $63.6 million under the Prior Credit Agreement for the same period in 2021.

Our material cash requirements from known contractual and other obligations primarily relate to our debt and lease obligations. We generally do not have binding and enforceable purchase orders beyond the short term. In September 2021, our board of directors authorized the repurchase of up to $100 million of our Common Stock, with no expiration date. We are not obligated to repurchase any specific number of shares, and the timing and actual number of shares repurchased will depend on a variety of factors, including our stock price, general economic, business and market conditions, and alternative investment opportunities. The repurchase program may be modified or terminated by the Company’s board of directors at any time.

We are required to repay the outstanding principal of $393.0 million under our Term Loan B in quarterly installments of $1.0 million, payable on the last day of each quarter until maturity on June 30, 2028, at which time the entire outstanding principal balance is due and payable in full. As a result of prepayments made in 2021 and 2022, our next quarterly installment of $1.0 million is due in June 2023. We maintain eight amortizing interest rate swap agreements maturing in May 2024, of which three qualify for hedge accounting treatment and five are de-designated swaps. Based on our outstanding borrowings under the Credit Agreement and the applicable interest rates as of March 31, 2022, we estimate that our total interest commitments are $125.5 million, with $24.2 million expected within the next twelve months. In addition, based on the applicable interest rates as of March 31, 2022, we estimate that our total cash settlement obligations for the de-designated swaps are $7.7 million, with $4.4 million expected during the next twelve months. Actual future payments may differ from estimates. Refer to Notes 8 and 12 of the notes to the consolidated financial statements for further details on debt and interest rate swaps. Based on our current assumptions with respect to the COVID-19 pandemic, ~~has created~~as well as geopolitical and macroeconomic conditions, including,among other things, the outstanding principal on the term loan under our Credit Agreement and the anticipated average monthly total participation levels of our members at our fitness partner locations, we currently believe we will be in compliance with the covenants under the Credit Agreement over the next 12 months.

Additionally, we have operating and financing leases for office space, equipment, and a network server. Our two operating leases have remaining lease terms of eleven months and 30 months, and our two financing leases have remaining lease terms of less than one year. We maintain two sublease agreements with respect to one of our office locations, each of which continues through the initial term of our master agreement. At March 31, 2022, total future operating and finance lease payments are expected to be $9.6 million and $0.2 million, respectively. For the next twelve months, operating and finance lease payments are expected to be $7.4 million and $0.2 million, respectively. The majority of future operating lease payments, including those due within the next twelve months, are expected to be offset by cash receipts from sublease contracts. Refer to Note 7 of the notes to the consolidated financial statements for further details. During 2022, we are required to pay $0.5 million per month to a vendor as a deposit to be applied against our actual fees incurred during 2022 and beyond. Any unused portion of the deposit will be refunded at the end of the contract term.

While there is significant uncertainty as to general economic and market conditions for ~~the remainder of 2021~~2022 and beyond, including but not limited to impacts from the COVID-19 pandemic, geopolitical turmoil, and macroeconomic conditions, as of the date of issuance of this report, we believe our cash on hand, expected cash flows from operations, and anticipated available credit under the Credit Agreement will be sufficient to fund our operations, principal and interest payments, and capital expenditures for the next 12 months. We cannot assure you that we

will be able to secure additional financing if needed and, if such funds are available, whether the terms or conditions will be favorable to us. ~~With~~Due to the aforementioned uncertainty, ~~surrounding COVID-19,~~ our ability to engage in financing transactions may be constrained by (i) volatile or tight economic, capital, credit and/or financial market conditions, (ii) moderated investor and/or lender interest or capacity, (iii) restrictions under our Credit Agreement, and/or (iv) our liquidity, leverage and net worth, and we can provide no assurance as to successfully completing, the costs of, or the operational limitations arising from, any one or series of such transactions. ~~As of June 30, 2021, availability under the Revolving Credit Facility totaled $99.5 million as calculated under the most restrictive covenant.~~

On June 30, 2021, we entered into the Credit Agreement, which replaced the Prior Credit Agreement. The Credit Agreement provides us with (i) a $400.0 million Term Loan B, (ii) a $100.0 million revolving credit facility that includes a $30.0 million sublimit for swingline loans and a $40.0 million sublimit for letters of credit, and (iii) uncommitted incremental accordion facilities in an aggregate amount at any date equal to the greater of $167.5 million or 100% of our consolidated EBITDA (as defined in the Credit Agreement) for the then-preceding four fiscal quarters, plus additional amounts based on, among other things, satisfaction of certain financial ratio requirements.

We are required to repay Term Loan B loans in consecutive quarterly installments, each in the amount of 0.25% of the aggregate initial amount of such loans, payable on September 30, 2021 and on the last day of each succeeding quarter thereafter until maturity on June 30, 2028, at which time the entire outstanding principal balance of such loans is due and payable in full. We are permitted to make voluntary prepayments of borrowings under the Term Loan B at any time without penalty, except for a 1% premium with respect to the principal of Term Loan B loans prepaid within six months after the date of the Credit Agreement using proceeds from certain specified repricing transactions.

We are required to repay in full any outstanding swingline loans and revolving loans, and to terminate or cash collateralize any outstanding letters of credit, under the Revolving Credit Facility on June 30, 2026. In addition, the Credit Agreement contains provisions that, beginning with fiscal year 2022, may require annual excess cash flow (as defined in the Credit Agreement and generally designed to equal cash generated by our business in excess of cash used in the business) to be applied towards the prepayment of the Term Loan B or the reduction of the Revolving Credit Facility, as determined by the Company in our discretion (“Excess Cash Flow Payment”). An Excess Cash Flow Payment is only required in the amount, if any, by which the Excess Cash Flow Amount exceeds $10.0 million for the applicable fiscal year. “Excess Cash Flow Amount” is equal to our excess cash flow for a given fiscal year multiplied by the following excess cash flow percentages based on our First Lien Net Leverage Ratio (as defined in the Credit Agreement) on the last day of such fiscal year: (a) 50% if the First Lien Net Leverage Ratio is greater than 3.25:1, (b) 25% if the First Lien Net Leverage Ratio is less than or equal to 3.25:1 but greater than 2.75:1, and (c) 0% if the First Lien Net Leverage Ratio is less than or equal to 2.75:1. Any potential mandatory Excess Cash Flow Payments are reduced by among other things, prepayments of the Term Loan B, any reductions of the Revolving Credit Facility, and prepayments of certain other indebtedness made during the applicable fiscal year.

Based on our current assumptions with respect to the COVID-19 pandemic, including, among other things, the outstanding principal on the term loan under our Credit Agreement and the average monthly total participation levels of our members at our fitness partner locations, we currently believe we will be in compliance with the covenants under the Credit Agreement over the next 12 months.

~~Operating~~ a~~ctivities duri~~n~~g the six months ended June 30, 2021~~ p~~rovid~~e~~d c~~a~~sh of $36.4 mill~~i~~on co~~m~~par~~e~~d to $130.9 million d~~u~~ring the six months ended June 30, 2020.The decre~~ase is primarily due to (i) reduced cash flows from operating activities from Nutrisystem, which we sold in December 2020, and (ii) reduced cash collections on accounts receivable. These reductions were partially offset by decreased payments related to visit costs and interest.

~~Investing~~ a~~ctivities duri~~n~~g the six months ended June 30, 2021~~ use~~d $4.6 million in c~~a~~sh, co~~m~~par~~e~~d to $10.4 million d~~uring the six months ended June 30, 2020, primarily due to (i) a decrease in capital expenditures and (ii) proceeds received in 2021 upon final settlement of the post-closing working capital adjustment related to the sale of Nutrisystem, as described in Note 3 of the notes to consolidated financial statements included in this report. These changes were partially offset by settlement payments on non-designated derivatives.

~~Fina~~n~~cing~~ act~~ivities duri~~n~~g the six months ended June 30, 2021~~ ~~used $108.0 million~~ ~~of c~~a~~sh, compared to $62.8 million during the six months ended June 30, 2020. This change is p~~ri~~mari~~l~~y due to a higher amount of net payments under the Prior Credit Agreement and the Credit Agreement during the six months ended June 30, 2021.~~

See Note 2 of the notes to consolidated financial statements included in this report for discussion of recent relevant accounting standards.

We are subject to market risk related to interest rate changes, primarily as a result of ~~the Prior Credit Agreement,~~ the Credit Agreement and certain interest rate swap agreements that, effective October 2020, no longer qualify for hedge accounting treatment (see further discussion below).

Based on the Company’s elections, borrowings under the Prior Credit Agreement for the six months ended June 30, 2021 bore interest at variable rates based on a margin or spread in excess of one-month LIBOR, which could not be less than zero. The LIBOR margin for Term Loan A loans was 4.25%, the LIBOR margin for Term Loan B loans was 5.25%, and the LIBOR margin for revolving loans varied between 3.75% and 4.25%, depending on our total Net Leverage Ratio, as defined in the Prior Credit Agreement.

~~We entered into the Credit Agreement on June 30, 2021, and as such, it did not impact our market risk for the six months ended June 30, 2021.~~ Borrowings under the Credit Agreement bear interest at variable rates based on a margin or spread in excess of either (1) one-month, three-month or six-month LIBOR (or, if available to all lenders holding the particular class of loans, 12-month LIBOR), which may not be less than 0.00%, or (2) the greatest of (a) the prime lending rate of the agent bank for the particular facility, (b) the federal funds rate plus 0.50%, and (c) one-month LIBOR plus 1.00% (the “Base Rate”), as selected by the Company. The Base Rate may not be less than 1.00%. The LIBOR margin for Term Loan B loans is 4.25% and the LIBOR margin for revolving loans varies between 4.25% and 3.75% depending on our First Lien Net Leverage Ratio (as defined in the Credit Agreement). The Base Rate margin for Term Loan B loans is 3.25%, and the Base Rate margin for revolving loans varies between 3.25% and 2.75%, depending on our First Lien Net Leverage Ratio.

Effective May 31, 2019, we maintain eight amortizing interest rate swap agreements with current notional amounts totaling ~~$700.0~~$600.0 million, through which we receive a variable rate of interest based on LIBOR, and we pay a fixed rate of interest equal to approximately 2.2%. ~~All~~At March 31, 2022, five of these interest rate swap agreements, ~~were designated as cash flow hedges from their inception through October 18, 2020.~~ ~~Upon entering into the Purchase Agreement~~ with ~~Kainos on October 18, 2020, we determined that some of our hedged transactions would~~current notional amounts totaling $266.7 million, do not materially occur in the initially identified time period since we expected to use the majority of the net proceeds from the sale to pay down a significant portion of outstanding debt. As a result, we concluded that five of the eight interest rate swaps no longer qualifiedqualify for hedge accounting ~~treatment, and we discontinued the related hedging designation (“de-designated swaps”).~~treatment.

The ~~Prior~~ Credit Agreement and each of the interest rate swap agreements contain a zero percent “floor” with respect to LIBOR (i.e., if the LIBOR rate is negative it will be deemed to be zero). Our exposure to interest rate risk is capped by such floor. During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, the actual LIBOR rates under these agreements ranged between ~~0.09%~~0.10% and ~~0.15%~~0.21%. For the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, a hypothetical 100-basis point decrease in LIBOR, subject to a zero percent floor, would have decreased our net cash flows by less than $0.1 million, which reflects increased payments on our interest rate swaps (for which we pay a fixed interest rate of approximately 2.2% and receive a variable interest rate ~~base~~ based on LIBOR), partially offset by lower interest payments on variable rate debt outstanding under the ~~Prior~~ Credit Agreement.

We are exposed to equity price risk on our Sharecare Equity Security. Beginning in July 2021, changes in the fair value of our Sharecare Equity Security are included in other (income) expense, net in the consolidated statements of operations. For the three months ended March 31, 2022, we recorded $22.4 million of net unrealized losses on equity securities in other (income) expense, net. A hypothetical one-dollar change in the closing stock price of Sharecare’s common stock on March 31, 2022 would have impacted other (income) expense, net by $11.1 million.

The Company's principal executive officer and principal financial officer have reviewed and evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of ~~June 30, 2021.~~March 31, 2022. Based on that evaluation, the principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures are effective as of ~~June 30, 2021.~~March 31, 2022. They are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms and to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

There were no changes in the Company's internal controls over financial reporting during the three months ended ~~June 30, 2021~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

See Note 9 of the notes to consolidated financial statements included in this report for discussion of recent legal proceedings.

In addition to the ~~risks and uncertainties described below and~~ other information set forth in this report, you should carefully consider the risks and uncertainties previously reported under the caption Part I, Item 1A. “Risk Factors” in the ~~2020~~2021 Form 10-K, ~~and under Part II, Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 (the “First Quarter 2021 Form 10-Q”),~~ the occurrence of which could materially and adversely affect our business, prospects, financial condition and operating results. The risks previously reported and described in the ~~2020~~2021 Form 10-K ~~the First Quarter 2021 Form 10-Q,~~ and in this report do not describe all risks applicable to us and are intended only as a summary of certain material factors that could impact our operations in the industry in which we operate. Except for the additional risk factors as ~~disclosed in the First Quarter 2021 Form 10-Q,~~described below, there have been no material changes from the risk factors disclosed in Part 1, Item 1A. Risk Factors, of the 2021 Form 10-K.

The consummation of the Merger is subject to approval of our stockholders as well as the satisfaction of other closing conditions, some or all of which may not be satisfied or waived in a timely manner or at all.

In April 2022, we entered into the Merger Agreement with Parent and Merger Sub. Consummation of the Merger is subject to customary closing conditions, including, but not limited to, (i) the Company’s stockholders’ approval of the Merger Agreement (the “Company Stockholder Approval”), (ii) the expiration or termination of any applicable waiting period (or any extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) the absence of any restraint or law preventing or prohibiting the consummation of the Merger, (iv) the accuracy of Parent’s, Merger Sub’s, and the Company’s representations and warranties (subject to certain materiality qualifiers), (v) Parent’s, Merger Sub’s and the Company’s compliance in all material respects with their respective obligations under the Merger Agreement, and (vi) the absence of any Company Material Adverse Effect (as defined in the Merger Agreement) since the date of the Merger Agreement.

In addition, while the Merger is not subject to a financing condition, Parent will need to obtain debt financing in order to satisfy its payment obligations and pay other costs and expenses related to the Merger. In connection with the execution of the Merger Agreement, Parent has obtained a debt commitment letter from a group of lenders for debt financing in an aggregate principal amount of up to $1.2 billion, on the terms and subject to the conditions set forth in the debt commitment letter.

We intend to pursue the satisfaction or waiver, as applicable, of each condition to the consummation of the Merger, including the receipt of the Company Stockholder Approval. However, no assurance can be given that such conditions to the consummation of the Merger will be satisfied or waived in a timely manner, or at all. We also cannot provide any assurance regarding whether the Company will have to comply with any terms or conditions imposed by third parties in order to satisfy or waive the conditions to the consummation of the Merger. Similarly, we cannot provide any assurance that Parent will be able to satisfy the conditions set forth in its debt commitment letter or otherwise procure sufficient financing to comply with its obligation to consummate the Merger. Many of the conditions to the consummation of the Merger are not within our control, and we cannot predict if or when these conditions will be satisfied or waived.

The failure to satisfy or obtain waiver of conditions to the consummation of the Merger in a timely manner could delay the consummation of the Merger and exacerbate the risks and uncertainties associated with the announcement and pendency of the Merger, which are discussed below under the headings “The announcement of the Merger Agreement and pendency of the Merger could negatively impact our business, financial condition and results of operations” and “While the Merger remains pending, we will be required to comply with various interim operating covenants that may constrain our business operations and to take certain actions that may divert our management’s focus from our ongoing business.”

In addition, if all of the conditions to the consummation of the Merger are not satisfied or waived, we may be unable

to consummate the Merger at all. The risks and uncertainties associated with a failure to consummate the Merger are discussed below under the heading “Failure to consummate the Merger could adversely affect our stock price, business, financial condition and results of operations.”

Future litigation challenging the Merger could prevent the Merger from occurring or adversely affect our business, financial condition or results of operations.

In connection with the announcement of the Merger Agreement, as is common in the context of mergers and acquisitions of publicly-traded companies, the Company (along with our directors and officers) may attract lawsuits seeking to enjoin us from proceeding with or consummating the Merger, or seeking to have the Merger rescinded after its consummation. One of the conditions to the consummation of the Merger is the absence of any restraint preventing or prohibiting the consummation of the Merger. If any future plaintiffs are successful in obtaining an injunction or other order prohibiting the Merger, we may be unable to consummate the Merger. The risks and uncertainties associated with a failure to consummate the Merger are discussed below under the heading “Failure to consummate the Merger could adversely affect our stock price, business, financial condition and results of operations.”

In addition, responding to any litigation targeting the Merger, even those without merit, will cause us to incur legal costs and expenses, which may negatively impact our financial condition. Responding to lawsuits may also divert the time and attention of our management away from our ongoing business operations and adversely affect our business and results of operations.

Failure to consummate the Merger could adversely affect our stock price, business, financial condition and results of operations.

As noted above, the various conditions to the consummation of the Merger may not be satisfied or waived in a timely manner, or at all. Some of these conditions are not within our control. We cannot provide assurance that any of the conditions to the consummation of the Merger will be satisfied or waived. Pursuant to the Merger Agreement, the Merger will not be consummated until all of the conditions are satisfied or waived.

In addition, either the Company or Parent may terminate the Merger Agreement in certain circumstances, including if (i) the Merger has not been consummated on or prior to 12:01 a.m. (New York City time) on October 5, 2022 (the “Outside Date”), (ii) a governmental authority of competent jurisdiction has issued a final non-appealable order prohibiting the consummation of the Merger, (iii) the Company Stockholder Approval is not obtained at the stockholders’ meeting duly convened therefor, or (iv) the other party materially breaches, and does not cure, any representation or covenant that would cause the related condition to the other party’s obligation to consummate the Merger not to be satisfied, in each case subject to certain limitations set forth in the Merger Agreement. The terms and conditions, and other circumstances under which the Merger Agreement may be terminated in accordance with its terms are described in more detail in the Merger Agreement, which is attached as Exhibit 2.1 to the Current Report on Form 8-K we filed with the SEC on April 6, 2022.

If the Merger is not consummated for any reason, holders of our common stock will not receive the Transaction Consideration for their shares in connection with the Merger. Instead, our Common Stock will continue to be listed and traded on The Nasdaq Stock Market LLC and registered under the Exchange Act, and we will continue to file periodic reports with the SEC on account of our Common Stock. In addition, we would be subject to a number of risks and uncertainties, including but not limited to:

If the Merger is not consummated, the risk and uncertainties described above may materialize and adversely affect our business, financial condition or results of operations.

If the Merger Agreement is terminated, under certain conditions, we may be obligated to pay Parent a substantial termination fee, which could require us to incur additional debt or reduce the amount of cash we have available to fund our operations.

Under the Merger Agreement, the Company may terminate the Merger Agreement if, prior to receipt of the Company Stockholder Approval, the Company’s board of directors authorizes the Company to enter into an acquisition agreement providing for a Company Superior Proposal (as defined in the Merger Agreement) and, concurrently with such termination, the Company pays a termination fee of approximately $54.4 million (the “Company Termination Fee”) to Parent.

Further, Parent may terminate the Merger Agreement, and receive the Company Termination Fee from the Company, if the Company’s board of directors has made a Company Adverse Recommendation Change (as defined in the Merger Agreement), which termination right expires upon the Company Stockholder Approval having been obtained.

The Company will also be required to pay the Company Termination Fee if (A) a third party publicly discloses a Company Takeover Proposal (as defined in the Merger Agreement) after the date of the Merger Agreement and such Company Takeover Proposal is not withdrawn prior to a termination of the Merger Agreement, and thereafter the Merger Agreement is terminated by (i) either the Company or Parent as a result of the Merger not having been consummated on or prior to the Outside Date, (ii) Parent as a result of a material breach by the Company of any representation or covenant which breach is not cured and would result in a failure of certain conditions to closing to not be satisfied, subject to certain limitations set forth in the Merger Agreement or (iii) Parent or the Company as a result of the Company failing to obtain Company Stockholder Approval; and (B) at any time within the 12 months following such termination, the Company enters into a definitive agreement involving a Company Superior Proposal that is subsequently consummated (whether within such 12-month period or thereafter).

If we are required to pay the Company Termination Fee, we may be required to incur additional debt or use funds that we would otherwise have been able to use for general corporate expenses, capital expenditures or for other purposes.

The announcement of the Merger Agreement and pendency of the Merger could negatively impact our business, financial condition and results of operations.

Our business could experience material disruptions due to the announcement of our entry into the Merger

Agreement and during the pendency of the Merger. Our current and prospective employees, including certain key personnel, may experience uncertainty regarding their future roles with the Company or desire different employment in anticipation of the consummation of the Merger. As a result, we may not be able to retain such employees, find adequate replacements for any employees we are unable to retain, or otherwise recruit new employees to join the Company. The uncertainty caused by the pendency of the Merger could also negatively impact our employees’ performance. If the announcement or pendency of the Merger causes us to lose and be unable to replace our employees, impairs our ability to attract new employees, or negatively affects the performance of our employees, our business, financial condition and results of operations could suffer.

In addition, third parties, including our lenders, vendors and customers, may experience uncertainty regarding our business relationships due to the announcement of our entry into the Merger Agreement and during the pendency of the Merger. As a result, such third parties may seek to terminate or renegotiate our existing business relationships in connection with the potential Merger. Such disruptions to our ~~risk factors~~business relationships could negatively impact our business, financial condition and results of operations.

The announcement of the Merger Agreement may also cause regulators to apply additional scrutiny to our business, potentially increasing our regulatory burden, including costs of compliance. If we are required to expend additional employee time or other resources to address such additional scrutiny or increased regulatory burden, our business, financial condition and results of operations could be negatively impacted.

While the Merger remains pending, we will be required to comply with various interim operating covenants that may constrain our business operations and to take certain actions that may divert our management’s focus from our ongoing business.

Pursuant to the Merger Agreement, during the period between April 5, 2022 and the earlier to occur of (i) the consummation of the Merger or (i) the termination of the Merger Agreement (the “Interim Operating Period”), we agreed to use our commercially reasonable efforts to conduct our business in the ordinary course and to not engage in specified types of transactions during this period, subject to certain terms, limitations and exceptions. In particular, among other things, we agreed to refrain from taking certain actions without Parent’s consent, including (i) making acquisitions and capital expenditures above certain thresholds, (ii) incurring indebtedness above a certain threshold, (iii) granting equity awards other than as specified in the Merger Agreement, (iv) entering into, amending or terminating certain material contracts, and (v) declaring or paying dividends to stockholders, in each case subject to the terms, limitations and exceptions set forth in the Merger Agreement. Complying with these obligations could limit our ability to operate our business as previously ~~disclosed~~conducted, to pursue strategic transactions, or to otherwise exploit business opportunities as they arise. Our management will be primarily responsible for ensuring that the Company complies with such obligations during the Interim Operating Period, and this additional responsibility may divert the focus of our management away from our ongoing business operations.

In addition, our management will also need to take certain other actions during the Interim Operating Period in connection with the proposed Merger, including, among other things, convening a meeting of our ~~2020 Form 10-K.~~stockholders for the purpose of considering and voting on the Merger, filing a proxy statement, in both preliminary and definitive form, in connection with our solicitation of proxies from our stockholders for such meeting, using reasonable best efforts to obtain all necessary consents and approvals required in connection with the Merger and to satisfy the other conditions to the consummation of the Merger, addressing any litigation brought against the Company in connection with the Merger, and responding to questions we may receive from our stockholders, employees, vendors and other interested stakeholders regarding the Merger. Taking these actions could require our management to expend time and resources, reducing the time and resources our management could otherwise direct towards our ongoing business operations. If our management is unable to expend the necessary time and resources on our business, our results of operations could be negatively impacted.

The Merger Agreement contains provisions that could make it difficult for a third party to make a superior acquisition proposal.

The Merger Agreement contains certain customary restrictions on our ability to solicit proposals from third parties for an acquisition of the Company during the Interim Operating Period. In addition, subject to certain customary “fiduciary out” exceptions, the Company’s board of directors is required to recommend that our stockholders vote in

favor of the approval of the Merger, the Merger Agreement and the transactions contemplated thereby.

As discussed in further detail above under the heading “If the Merger Agreement is terminated, under certain conditions, we may be obligated to pay Parent a substantial termination fee, which could require us to incur additional debt or reduce the amount of cash we have available to fund our operations,” we would also be required to pay Parent the Company Termination Fee under certain conditions in connection with the termination of the Merger Agreement.

These provisions might discourage an otherwise-interested third party from considering or proposing an acquisition of the Company, including proposals that may be deemed to offer greater value to our stockholders than the Transaction Consideration of $32.50 per share. Furthermore, even if a third party elects to propose an acquisition, the requirement that we must pay a termination fee to accept any such proposal may cause that third party to offer a lower price to our stockholders than such third party might otherwise have offered.

Actions of activist shareholders or other parties may impair our ability to consummate the Merger or otherwise negatively impact our business.

Actions taken by activist shareholders could impair our ability to satisfy conditions to the consummation of the Merger, including receiving the Company Stockholder Approval, or otherwise preclude us from consummating the Merger. Activist shareholders could also take actions that disrupt our business, divert the time and attention of management and our employees away from our business operations, cause us to incur substantial additional expense, create perceived uncertainties among current and potential customers, clients, suppliers, employees and other constituencies as to our future direction as a consequence thereof, which may result in lost sales or other business arrangements and the loss of potential business opportunities, and make it more difficult to attract and retain qualified personnel and business partners.

Actions that our board of directors may take in response to any actions by activist stockholders may result in litigation against us, which could also be a significant distraction for our management and employees and may require us to incur significant costs or otherwise result in an adverse effect on the Company. In addition, actual or perceived actions of activist stockholders may cause significant fluctuations in the trading price of our common stock that do not necessarily reflect the underlying fundamentals and prospects of our business.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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

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

Large accelerated filer	☐☒	Accelerated filer	☒☐	Smaller reporting company	☐
Non-accelerated filer	☐			Emerging growth company	☐

			Page
Part I
	Item 1.	Financial Statements	3
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3635
	Item 4.	Controls and Procedures	3736

Part II
	Item 1.	Legal Proceedings	3837
	Item 1A.	Risk Factors	3837
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
	Item 6.	Exhibits	3842

	Three Months Ended June 30,			Six Months Ended June 30,
(In thousands)	2021			2021
Revenue recognized that was included in deferred revenue at the beginning of the period	$	(3,747	)	$	(4,206	)
Increases due to cash received from customers, excluding amounts recognized as revenue during the period	$	3,333		$	3,683

(In thousands)	For the Three Months Ended						For the Six Months Ended
	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Derivatives designated as effective hedging instruments:
Loss (gain) related to effective portion of derivatives recognized in accumulated OCI, gross of tax effect	$	323		$	5,020		$	(1,089	)	$	32,772
Loss related to effective portion of derivatives reclassified from accumulated OCI to interest expense, gross of tax effect		(2,091	)		(3,482	)		(4,137	)		(4,603	)

Non-designated derivatives:
Previously deferred loss on interest rate swap agreements reclassified from accumulated OCI to interest expense, gross of tax effect	$	(145	)	$	—		$	(450	)	$	—
Total other comprehensive (income) loss, gross of tax	$	(1,913	)	$	1,538		$	(5,676	)	$	28,169

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

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

(In thousands)	Statement of Operations Classification	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021			Statement of Operations Classification	March 31, 2022			March 31, 2021
Interest rate swap agreements:
Net (gain) loss related to ineffective portion of derivatives, gross of tax effect	Other expense (income), net	$	259	$	(872	)
Net gain related to ineffective portion of derivatives, gross of tax effect							Other (income) expense, net	$	(5,695	)	$	(1,130	)
Previously deferred loss related to de-designated swaps reclassified from accumulated OCI, gross of tax effect	Interest expense		145		450		Interest expense		278			304
		$	404	$	(422	)		$	(5,417	)	$	(826	)

(In thousands)	Net Change in Fair Value of Interest Rate Swaps
Accumulated OCI, net of tax, as of January 1, 2021	$	(17,389	)
Other comprehensive income (loss) before reclassifications, net of tax of $278		811
Amounts reclassified from accumulated OCI, net of tax of $1,171		3,416
Accumulated OCI, net of tax, as of June 30, 2021	$	(13,162	)

(In thousands)	Net Change in Fair Value of Interest Rate Swaps
Accumulated OCI, net of tax, as of January 1, 2020	$	(12,091	)
Other comprehensive income (loss) before reclassifications, net of tax of $8,370		(24,402	)
Amounts reclassified from accumulated OCI, net of tax of $1,175		3,428
Accumulated OCI, net of tax, as of June 30, 2020	$	(33,065	)

	Six Months Ended							Three Months Ended
(In thousands)	June 30, 2021			June, 2020			Statement of Operations Classification	March 31, 2022			March 31, 2021			Statement of Operations Classification
Interest rate swaps	$	4,587		$	4,603		Interest expense	$	2,017		$	2,350		Interest expense
		(1,171	)		(1,175	)	Income tax expense		(515	)		(600	)	Income tax expense
Total amounts reclassified from accumulated OCI	$	3,416		$	3,428		Net of tax	$	1,502		$	1,750		Net of tax

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

(In $000s)	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2021			2020			2021			2020			2022			2021
Revenues from continuing operations	$	120,071		$	81,923		$	228,156		$	241,615		$	127,513		$	108,085
Adjusted EBITDA from continuing operations		41,502			41,472			82,696			71,719			37,351			41,194
Adjusted EBITDA as a percentage of revenues from continuing operations		34.6	%		50.6	%		36.2	%		29.7	%		29.3	%		38.1	%

ISSUER PURCHASES OF EQUITY SECURITIES
Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ⁽¹⁾
1/1/2022 - 1/31/2022		—	$	—		—	$	99,248,662
2/1/2022 - 2/28/2022		—		—		—		99,248,662
3/1/2022 - 3/31/2022		—		—		—		99,248,662
Total		—	$	—		—


2.1		Agreement and Plan of Merger, dated as of April 5, 2022, by and among Tivity Health, Inc., Titan-Atlas Parent, Inc. and Titan-Atlas Merger Sub, Inc.[incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated April 6, 2022, File No. 000-19364]
10.1		~~Credit~~Special Incentive Bonus Award Agreement, dated ~~June 30, 2021,~~February 11, 2022, by and ~~among the Company, certain subsidiaries of the Company as guarantors, the lenders party thereto, Morgan Stanley Senior Funding,~~between Tivity Health, Inc.~~, as general administrative agent, term loan facility administrative agent~~ and ~~collateral agent, and Truist Bank, as revolving facility agent and swingline lender~~Richard Ashworth [incorporated by reference to Exhibit 10.1 to the ~~Company’s~~Company's Current Report on Form 8-K dated ~~June 30, 2021,~~February 11, 2022, File No. 000-19364]

31.1		Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 made by Richard Ashworth, Chief Executive Officer*

31.2		Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 made by Adam Holland, Chief Financial Officer*

32		Certification ~~Pursuant~~pursuant to 18 U.S.C section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 made by Richard Ashworth, Chief Executive Officer, and Adam Holland, Chief Financial Officer*

101		The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2021,~~March 31, 2022, formatted in Inline XBRL: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statement of Changes in Stockholders' ~~Equity;~~Equity (Deficit); (v) Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements

104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2021,~~March 31, 2022, formatted in Inline XBRL (included in Exhibit 101 hereto)

*		Filed herewith

			Tivity Health, Inc.
			(Registrant)

Date:	~~August 6, 2021~~May 5, 2022	By	/s/ Adam C. Holland

			Chief Financial Officer
			(Principal Financial Officer)