The board of Tivity Health has hired an investment bank to explore options for the Nutrisystem business the local company bought a mere 15 months ago.
Franklin-based Tivity paid $1.3 billion for Nutrisystem but the business has disappointed since then and the possible benefits of combining fitness programs for seniors with weight-loss options haven't yet started materializing at scale. Tivity executives early this year wrote down the nutrition division’s value by more than $377 million to reflect its changed condition. Since then, they have booked another non-cash impairment charge on the value of Nutrisystem of nearly $200 million as they assessed the impact of the COVID-19 pandemic and changed some of their cost-of-capital assumptions.
On a conference call with analysts and investors Wednesday afternoon, Interim CEO Bob Greczyn stressed that there is no guarantee the strategic alternatives process led by investment bankers at Lazard will lead to any particular outcome. Greczyn added that Tivity’s directors decided to explore options after reviewing the company’s overall strategies in the wake of the departure of former CEO Donato Tramuto in February and former Nutrisystem boss Dawn Zier in December.
The Tivity team announced its plan to look for options for the Nutrisystem deal as part of its first-quarter results. Excluding the impairment charge and other expenses — including $2.6 million related to Tramuto’s exit — the company’s adjusted EBITDA came in at $28.8 million versus $39.5 million in the same period of 2019. Tivity’s fitness division grew its adjusted EBITDA more than 10 percent to $30.2 million, but Nutrisystem lost $1.5 million on an adjusted basis after earning $13.3 million a year earlier.
Tommy Lewis, Tivity’s COO and the interim president of its nutrition business unit, told analysts there were nevertheless bright spots for that group’s Nutrisystem and South Beach Diet lineups in the first quarter. As COVID-19 spread, he said, many customers responded well to the company’s pitch to deliver meals to their homes. Also, average selling prices — while still below those of a year ago — rose steadily during the quarter.
Shares of Tivity (Ticker: TVTY) rose nearly 7 percent to $10.48 after hours Wednesday after adding nearly 2 percent in regular trading. Year to date, the stock is down about 50 percent.