Tivity Health, Inc.
Q1 2013 Earnings Call Transcript

Published: 19 Apr 2013

[Operator:]

Good afternoon, and welcome to Healthways' First Quarter 2013 Conference Call. Today's call is being recorded and will be available for replay beginning today and through April 27, by dialing [phone]. The replay passcode is 4565899. The replay may also be accessed for the next 12 months on the company's website. To the extent any non-GAAP financial measure is discussed in today's call, you'll also find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP in today's news release, which is also posted on the company's website. This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Healthways' expected quarterly and annual operating and financial performance for 2013, 2014, and beyond. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to identify forward-looking statements. You're hereby cautioned that these statements may be affected by the important factors, among others, set forth in Healthways' filings with the Securities and Exchange Commission and in today's news release. And consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. The company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. At this time, for opening remarks, I'd like to turn the conference over to the company's President and Chief Executive Officer, Mr. Ben Leedle. Please go ahead, sir.

[Ben R. Leedle:]

Good afternoon, everyone, thank you for being with us today for our First Quarter 2013 Conference Call. I'm here today with Healthways CFO, Alfred Lumsdaine, and we'll both make some remarks about our results for the first quarter, as well as our outlook and guidance for the rest of the year. Following those remarks, we'll be happy to open the floor for your questions. Since our last call with you was only 8 weeks ago, there's not a lot of new ground I need to cover this afternoon with regard to our financial performance for the first quarter or our guidance for the year. As you saw in the release, both the top and bottom lines for the quarter reflected the expectations we laid out for you on that call. In short, our first quarter results put us squarely on track to achieve our previously issued 2013 financial guidance. In addition, because of the nature of the new business we have signed, we have clear sight from just our existing book of business, to further revenue and margin expansion in 2014, which will mark our return to long-term profitable growth. Those of you who have followed us for the past 6 years know that the path to Healthways having achieved its current position as the acknowledged market leader in well-being improvement was neither short, nor without challenges. Those of you who followed us since the mid-'90s, however, are probably not surprised since that path is very similar to the one we followed back then to become the acknowledged market leader in disease management. We built and advanced our solution the right way then, and we are doing it the right way now. And I believe you'll see the increasing evidence of our diligence in that effort throughout the rest of 2013 and 2014 and beyond. Now you may recall that when we introduced the concept of well-being in 2007, along with our joint effort with Gallup to develop and promulgate the Well-Being Index, not many people knew what we were talking about. Today, if you read the About Us material from almost any healthcare or healthcare services organization, you'll find that a large percentage of incorporated language about well-being improvement into their statements, and into their value claims. But it's one thing to talk about well-being improvement, and it's another to actually be able to make it happen, be able to deliver on its value proposition of improved health, improved performance, and lower health-related costs. Today, as a result of our efforts over the past 6 years, Healthways leads the industry with an ever-increasing body of hard scientific proof that shows our intervention model does just that, repeatedly, and at scale. It was Peter Drucker who famously said, "If you can't measure it, you can't manage it." And Healthways has always subscribed to that principle and has consistently led the industry in the development of measurement methodologies that accurately establish the value of improved health. In 2007, after 25 years experience in helping people improve their physical health, we articulated the premise that a better solution to the global problems of increasing poor health, increasing chronic disease, loss productivity and continued higher costs, lay in helping every individual stay as healthy as possible, for as long as possible. We also realize that a model for achieving that result, what we call well-being improvement, could not just focus on physical health and healthy behaviors but would have to acknowledge and address the impact of emotional, social, financial community and workplace factors. We began our journey by engaging with Gallup to develop the Well-Being Index, both to have a credible measure of well-being and to create the data source in science upon which a well-being improvement program could be designed, tested and built. We followed that first step with an exacting analytic process to scientifically demonstrate the accuracy and predictive strength of that measurement system for individuals, organizations and geographies. Simultaneously, we began developing, acquiring or partnering for the capabilities that our research revealed would be necessary to develop an intervention model that would actually move the needle to a degree that would both improve well-being and produce net values superior to what had been achieved by less comprehensive approaches. Today, as a result of our efforts over the past 6 years, Healthways stands alone in the industry with a proven system to accurately measure well-being, to track it over time and to use those measurements to individually customize the capabilities in our intervention model and platform to actually improve well-being, both for individuals and entire populations. At each step in the process of developing our Well-Being Improvement Solution and our value measurement methodology, we have submitted our work to rigorous scientific scrutiny. As a result, more than a dozen studies have been conducted and the positive results peer-reviewed and published in various scientific journals. The purpose of these studies was to definitively answer the following questions

[Alfred Lumsdaine:]

Thanks, Ben. Good afternoon, everyone. First quarter revenues of $165.2 million equaled revenues for the first quarter of 2012. However, if you excluded the final runoff from the 2 terminated contracts, our revenues grew by 12.6%, as we replaced more than $18 million of revenue from the first quarter of last year, attributable to these 2 contracts. Our net loss of $0.12 per share for the quarter was lower than the $0.15 per share loss that we'd anticipated. Earnings per share for the first quarter included a benefit of approximately $0.02 per share from an earlier-than-expected insurance recoupment for legal expenses that were incurred primarily in the fourth quarter of 2012. Our financial guidance for 2013 included an expectation for the majority of this insurance recoupment to occur later this year. Accordingly, our earnings performance is very much in line with our overall expectations, and with the guidance we provided for the first quarter when we spoke with you in February. As a reminder, the size, scope, complexity and number of new and expanded contracts that we signed in 2012, resulted in implementation costs ahead of revenue. More importantly, several of these contracts contain mechanisms, some of which are new and unique that, as Ben mentioned in his comments, require us to execute to drive revenues by growing volumes and/or by expanding scope of services over time. As a result, we expect these contracts to deliver ramping revenues, which, in some cases, will occur over a multiyear period. Accordingly, the margin profile for these contracts is at its lowest point in their early stages and our results for the first quarter reflect these dynamics. We were very pleased with cash flow from operations for the quarter which totaled $26 million. This result includes our collection of 2 specific accounts receivable that carried over from the fourth quarter of 2012. Capital expenditures for the quarter were just over $11 million. As a result of our positive free cash flow, we were able to reduce our long-term debt by over $21 million, and correspondingly, reduce our leverage ratio under our credit agreement to 3.1x. This is down from 3.4x at the end of last year. So now, let's turn to our financial guidance for 2013. As you saw in our earnings release, we've affirmed the financial guidance for 2013 that we provided in February. We continue to expect revenues and earnings to grow sequentially throughout the year from first quarter levels, primarily as a result of some specific factors which we've mentioned before. First, as is typical, we have some new business wins that are scheduled to launch at various times throughout the year. Second, we have performance-based fees that are tied to targets that require a certain amount of time to measure results. Accordingly, the vast majority of our performance-based revenue is expected to be measured in the latter half of the year for results and corresponding revenue recognitions. And finally, it's important to again note that several of our new and larger health plan and health system contracts have an ongoing revenue ramp expected from growth in volumes or by the expansion of the scope of services over time or in some cases, by both characteristics. We continue to expect 2013 revenues to be in a range of $710 million to $750 million. This revenue range implies a growth range of 5% to 11% in comparison to 2012 revenues. As I mentioned on our call in February, we're expecting to realize approximately 55% of full-year revenues in the second half of 2013. As we've noted in a number of releases and presentations, our existing signed contract base is expected to provide not only significant growth within 2013, but also expected to produce incremental organic revenue growth of at least $85 million in 2014 over 2013. This is without signing any net new business in 2013. Similarly, we continue to expect full-year earnings per diluted share to be in a range of $0.25 to $0.35, and EBITDA margins to be in a range of 10.5% to 12.5%. As with revenue, we expect to grow -- we expect margins to grow sequentially throughout the year. And as we've previously discussed, there are a couple significant factors influencing our overall margin expectations for 2013. The first factor is the impact of the approximately $80 million revenue decline from the 2 terminated contracts. We've discussed many times that due to the scale, duration and nature of the legacy platforms, these revenues carried higher than average margins. The second significant factor is, again, the margin dynamics that result from the implementation costs and revenue ramp expected from several of our large new and expanded contracts. In some cases, this revenue ramp is expected to take 24 to 36 months before we reach the average revenue run rate targeted over the contract term. Because costs begin in a much more fully expressed way than revenues, we expect our margins on these contracts to expand as the revenues grow. Accordingly, we expect these contracts to drive margin expansion not only within 2013, but also for 2014 and beyond. So to summarize our revenue and earnings profile for 2013, we expect revenue and earnings to strengthen throughout the year, quarter by quarter, particularly in the back half of the year. We expect that ramping revenues on existing contracts, new contract starts, the timing of recognizing performance-based revenues, and the abatement of some of the implementation costs for new, large and expanded contracts, will all lead to earnings that will strengthen each quarter. Following the $0.12 per share loss in the first quarter, we anticipate a second quarter loss of approximately $0.05 per share. And then a return to profitability in the third quarter as we move towards achieving our full year earnings guidance. I'd like to make a few additional comments regarding cash flow expectations for 2013. We continue to expect operating cash flows for the full year to be in a range of $70 million to $80 million, and capital expenditures to be approximately $45 million. We'd expect that free cash flow will be applied primarily towards debt repayment. While we clearly expect to maintain the necessary liquidity to fund our operations and our expected growth throughout the year, we would expect the debt-to-EBITDA ratio under our credit agreement to rise modestly over the next 2 quarters from the current level of 3.1x before ending the year below 3x. So just a few final comments. So far, this year, we've signed new contracts across all of our markets, including our new international business with SulAmérica. Our initial partnership contracts with health systems are in various stages of implementation, and are beginning to deliver meaningful revenue with both revenues and margins that are expected to expand over the course of this year, and for 2014 and beyond. We no longer have the historical concentration of higher than average margin business with just a few large health plans. Instead, we have a more consistent target margin profile across our customer base. In addition, much of our business up for renewal the past several years has moved into more strategic, longer-term and more comprehensive solutions focused on total population management. As a result, we continue to believe we're now moving into a period with visibility to sustainable top and bottom line growth. With that, operator, we'll go to Q&A.

[Operator:]

[Operator Instructions] And we'll take our first question from Ryan Daniels with William Blair.

[Ryan Daniels:]

Let me start with a little bit of a big picture one. I'm curious, based on your comments regarding the assistance you're able to provide to providers for population health, are you seeing more of an uptick or more demand in the pipeline for that? Or did we really see some of the early adopters move aggressively last year and kind of move forward such that you're seeing a little bit of a slowdown there? Just any color of kind of what's going on in the pipeline.

[Ben R. Leedle:]

Yes. Ryan, it's Ben. Just, I guess, the simple answer to that is a lot of activity in the pipeline. Good production out of that pipeline, we think. As you know, that was 1 year ago, April, when we signed the first one of these with THR. Since then we've added 4 more, 1 already this year. I don't know how these will come in terms of throughput, whether they'll be in bunches or whether they'll just be a constant cadence of this. But in no way do we see a diminished interest or demand on our time and efforts to help assess, evaluate and move the business development along on these opportunities.

[Alfred Lumsdaine:]

I do think, Ryan, the early adopters put pressure on the rest of the market. I think that is just the reality that we see. And so, yes, to echo Ben's comments, the activity continues at a strong pace.

[Ryan Daniels:]

And I guess, as a follow-up to that specific comment, are you seeing in any marketplaces where a large provider system has moved forward with a commercial payer in an ACO, or entered into a pioneer ACO and then others in the market kind of realize if they don't move more rapidly, they could get left behind? And is that driving any demand for the pipeline as well?

[Ben R. Leedle:]

Yes. I mean, I think, there are people that are keeping track of kind of the national account of how many of these type of commercial ACOs are being brought up. And it's several hundred-plus now as compared to a couple dozen 1 year ago. So I do think that there has been an explosion of the development of the relationships and the business structures. I do think it will take time, though, for whatever initial amount of lives that are flowing through those relationships to grow and for those to become a dominant or significant component of a health systems business. I still think it's early in the ratio of traditional fee-for-service economics to value-based economics expressed as business I have today versus a business I'm going to get into the future.

[Ryan Daniels:]

Okay. And then one more and I'll hop off. I'm just curious, since these wins started last April, you now have 1 year, if you will, of a case study moving forward with the health system. Has there been any greater granularity on the speed at which they may move forward and has that changed your impression of the revenue ramp? I know in past calls, you hadn't mentioned the ability to continue to grow not only into year 2, but maybe into year 3 as well. Is that just seeing a bigger opportunity or is that -- maybe the ramp is a little bit slower than you thought initially? Just any color there would be helpful.

[Ben R. Leedle:]

It was hard for us to set kind of exacting expectations around it. We knew it was going to ramp. We had estimates of how chunky that would be if you think about it kind of on an annualized basis over the first 3 years. I don't think that there's anything that materially has changed our mind about kind of the economic potential of these type of partnerships, nor of the relative rate of expansion of those relationships. I could tell you this, it won't be a straight line. And so as you think about our year and going forward, there will be points of surge and points of probably a plateau before the next surge. And so these are going to be in somewhat of a stair-step fashion that provide that you kind of combine because they're on different timeframes and different points and milestones per service expansion. But it's going to be a blend of multiple contracts that gives this more of a kind of holistic ramp for the company.

[Operator:]

And we'll take our next question from Mohan Naidu.

[Mohan A. Naidu:]

Ben, a quick one for you. On the health system deals, nice wins there. How are these contracts different from your traditional deals that you do with payors or employers? Are there any difference at all or there isn't? Can you walk us through it?

[Ben R. Leedle:]

Yes. I think, fundamentally, the biggest thing that we're trying to get people to understand is the scope of these relationships and the duration and expectations associated with these health system partnerships

[Mohan A. Naidu:]

Yes. Great. Second question on the competition. I'm seeing increasingly more the Internet-based, social network-based health management or like in healthy living. I know you guys have MeYou Health. What are you seeing there? Any traction in MeYou Health and how should we look onto MeYou Health in the next 2, 3, 4 years?

[Ben R. Leedle:]

Yes. I think, MeYou Health is going to continue to grow to be a significant part of our both engagement model for consumers, as well as kind of an alternative modality for driving behavior change. We've seen that evidenced, we've taken the MeYou Health product called Daily Challenge. It's gone through a controlled trial studies showing pre and post, the ability over a very short period of time, 6-month period, to be able to meaningfully and statistically change the underlying well-being and health of populations who are participating with it. So I mentioned about the rigor of our science and the approach that we take, we've done that also in the world of social media, not really aware of other social media applications or models that have put those to the test in terms of what are the engagement rates that you get out of those, not just initially, but sustained over time. So 1 year out after being introduced into the MeYou Health model, over 1/3 of the people that started are still active in day-to-day participation in this. Those are engagement numbers that, if you go do your homework, are multiples of other models of any type of modality. So we think it's going to play a big role in continuing to reach people through mobile device, to be able to leverage the social network science that says, our friends and family, the people we spend time with, can have a huge influence in terms of how we make decisions around our habits and how we live our lives and that well-planned, well-designed solutions can drive engagement and drive differential behavior change as a function of leveraging that science.

[Mohan A. Naidu:]

Great. One question for Alfred. On the 21 contracts signed this quarter, the costs associated with these new contracts or expansions, are they included in the guidance, in the current 2013 guidance?

[Alfred Lumsdaine:]

Yes, they are.

[Mohan A. Naidu:]

Okay. And last quarter, you talked about 3 contracts up for renewal later in December this year. Were they renewed in this quarter at all?

[Ben R. Leedle:]

Those 3 -- let's just review quickly what you're referring to, for everybody listening. So we always talk about any contracts that represent more than 2% of prior-year revenue. We've got 3 of those. Those all come to their term on 12/31 of '13. So these represent about 7.5% of 2012 revenue. And all of those are in progress and making good headway. None of the renewals were completed in the first quarter, though. And we wouldn't have expected to have completed those in the first quarter.

[Operator:]

And we'll take our next question from Joshua Raskin with Barclays.

[Joshua R. Raskin:]

So just on the SulAmérica, I understand it's, I guess, now included in guidance. Could you talk about -- it sounds like the short-term opportunity is probably not going to be meaningful from an earnings perspective, but maybe you could talk about what the initial relationship looks like with the risk assessments or the population health assessments? And then what's the timing around additional services and maybe what are the most likely services that you think you can -- you'll be providing to SulAmérica?

[Ben R. Leedle:]

Sure. Great question. And so when you think about SulAmérica, think of the opening work that we would do with them, would be to embed our Well-Being Assessment and Web and mobile platform for Well-Being Connect and GO, which are kind of the self-directed online and mobile tools in order for people to work on a well-being plan that gets generated, post them taking the assessment. And so the idea for SulAmérica is -- we're in America, we depend a lot on the data and analytics of claims tied to payment, which we all know is not a comprehensive data set for the population because in any given year, half the population doesn't file a claim, so they're not in that type of database. In South America, they're having the opportunity to take relatively the last 20 years of our advancement and put it to work in an early market for managed care, and they want to start with an ability to establish a database on their population. And so the initial work will be that phase. And you're right, this will be a profitable accretive contract to our business. It's not going to be material in the sense of 2013, where the opportunity for it to grow significantly, and to answer your question about where it would likely expand next, would be to actually take the output from that database being established and restratify the population with predictive logic out of those well-being factors and begin to apply different levels and intensity of coaching for behavior change on those lifestyle risks. And also, to target those as we help create disease registries for them in their population. And to begin to early address either those at accelerated risk for developing chronic disease or those with a known chronic disease with disease management interventions, and those would be the next 2 likely sources of expansion inside of that relationship that's been established.

[Joshua R. Raskin:]

So that sounds like higher revenue opportunity now...

[Ben R. Leedle:]

Yes. Yes.

[Joshua R. Raskin:]

And assuming -- and it sounds like because some of these services that are coming in the early stage are web-based or self-directed, probably not a ton of startup costs, is that fair?

[Ben R. Leedle:]

I think that's fair as well.

[Joshua R. Raskin:]

Okay. So really no real impact. And then just a second question on the guidance -- no, I'm sorry, no real start up costs. The performance fees, I know you guys included a sentence in the press release now around guidance that wasn't in there last quarter, but I know you've mentioned it before. So not a surprise at all to hear performance fees coming later in the year. But is the magnitude, the amount of performance fees expected, is that a larger number or is it wholly consistent with what you guys have seen 8 weeks ago?

[Alfred Lumsdaine:]

It is consistent with 8 weeks ago. I think we said, as I recall correctly, 8 weeks ago, that for the year, we might actually see a lower percentage of performance fees than we did in 2012, simply because 1 of the 2 terminated contracts had a significant component of performance-based fees. But in terms of how they're shaped, it's going to be significantly weighted towards the back half. We -- obviously, as we've talked, it's a little difficult to predict exact quarter timing, but I think it's fair to say we expect a significant majority of those to be in the latter half of the year.

[Joshua R. Raskin:]

Okay. That makes sense. And so you're still sticking with the percentage will be lower, so the...

[Alfred Lumsdaine:]

Yes, it will be. It should be a tick lower. I think, for the quarter, we only had maybe 2% of our revenues recognized were fees at risk. For the year, that number is going to be greater, obviously, because we didn't have a lot -- we had so little recognized in Q1. We -- I think, last year, fees -- performance-based fees were maybe 7%. We could see that number 5% this year, 4% or 5%. But obviously, that's still a big increase from where we are in Q1.

[Operator:]

And we'll take our next question from Tom Carroll with Stifel, Nicolaus.

[Thomas A. Carroll:]

So a quick question on SilverSneakers. While those final CMS rates were certainly not as bad as they could have been, MA still sees some hurdles for next year. Can you give us a sense of if you're seeing any kind of new or renewed pressures as you sell and kind of renew SilverSneakers contracts into next year? And then one just follow-up on Josh's question on SulAmérica. Will this -- if I'm hearing you right, it sounds like the contract will be profitable in 2013, just not really material. Is that an appropriate way to characterize it?

[Ben R. Leedle:]

That's a fair way to think about it, both in terms of kind of the timing, the cost and the revenue associated with its early operation.

[Alfred Lumsdaine:]

That's right. That's right.

[Ben R. Leedle:]

Let me go back. So did that address your SulAmérica question?

[Thomas A. Carroll:]

Yes. It was just a follow-up.

[Ben R. Leedle:]

So let me go back to SilverSneakers. We had a very robust year last year, both in terms of growth renewal. The terms on which we renewed and extended relationships with all sizes, including our largest customers were very, very strong. Out of the gate this year, we've added 3 new Medicare Advantage Plans with SilverSneakers. There's not a lot of renewal pressure within this year for SilverSneakers. And we expect this to continue to be a strong part of our business. Even in the face of what I know, you may hear from certain MCOs, which may be more a function of how well did they forecast where the spinal rates would be and what does that mean specifically for them in the markets that they operate and those types of things. But we believe SilverSneakers will just continue to be a very strong product despite the fact that there's probably going to be some noise for some time as people digest the rate changes and where they ended up.

[Alfred Lumsdaine:]

To Ben's point, Tom, this is, to our knowledge, the only benefit that has a firmly established ROI attached to it, so we think, in a rate-pressured environment, that this stands up very well.

[Thomas A. Carroll:]

And again, my question is on what commentary are you hearing relative to 2014, not necessarily 2013? So are you answering my question relative to '13 or relative to what your expectations are on '14?

[Ben R. Leedle:]

At this point, they're consistent for both. We're not having people say to us, "We're okay with what we're doing with you guys in '13, but '14 is another matter." To date, that's just not been a core conversation. And could that develop? Who knows. But at this point, we're not being pressured on that front.

[Operator:]

And we'll take our next question from Brooks O'Neil with Dougherty and Company.

[Brooks G. O'Neil:]

I have a couple of questions. Just following on the SulAmérica. It sounds to me like this health plan is quite significant, and the number of lives, in total, you have the opportunity to address is quite meaningful. So would I be wrong in thinking that a long-term opportunity there could be quite significant for you guys?

[Alfred Lumsdaine:]

No, you would not be wrong in thinking that. It's, I think, the largest private health plan in Brazil and we see a robust long-term opportunity.

[Brooks G. O'Neil:]

Good. And then, I guess, I read a lot of commentary about people suspecting that payers, employers, et cetera, are somewhat frozen this year, sort of beginning to think about the prospects for the implementation of the Affordable Care Act in '14, and kind of waiting to see what that may bring. If I'm hearing you guys correctly, you're not really seeing that. You're seeing people being much more proactive, particularly as it relates to the kind of products and services that you offer. Is that a fair way to characterize what you guys are seeing in the marketplace today?

[Ben R. Leedle:]

Yes, I think so. Let me make sure that you're hearing us and we're saying this clearly. Our pipelines continue to have a lot of activity in them. The activity is robust, meaning there's a lot of discussion and advancement of progress. As you both well know, until you get further down the progress in the year on the annual cycle of these types of decisions, most decisions are made in the back half of the year. So it's still a bit too early for us to conclude, will the momentum of the activity produce throughput that's consistent with what we saw last year and even the year before? That's hard for us to know. We're looking at process and believing that we're tracking very similarly to how we have with good business development and sales throughput in the last couple of years. I do think that people are being very thoughtful about trying to understand what the implications of further implementation of healthcare reform law will bring. And if you're hearing that on the employer front that there may be more hesitation in terms of, "Well, it's just a simple decision; I'm just going to dump my employees out to the exchanges because the economic difference is a no-brainer," I do think that there's a heavy evaluation going on for employers to try to balance and determine what these exchanges really mean, what's the difference between a federal exchange, a state exchange and the private exchanges that are being set up and what are my different options and which directions will I go. Our belief is, required in those solutions are going to be the demand for the types of services we have to engage people wholly in their health, and to be able to help advance and support the idea that healthy behaviors and risks being reduced is still going to be an order of the day for any product that gets put out on any of these versions of the exchanges. So maybe part of what you're hearing is the marketplace trying to make decisions about what to do. I think it's more decisions about what to do in terms of benefit design and insurance product and access to those different structures than it is whether they're trying to decide whether or not they need to have improved health and well-being in their workforce. Those are different decisions.

[Brooks G. O'Neil:]

Sure. Okay, that's all helpful. I know you're not breaking out international anymore. And obviously, I'm personally pretty excited about SulAmérica. But can you give us any sort of broad color on your progress with your existing customers internationally and what you see in the pipeline there?

[Ben R. Leedle:]

I think we're on plan with every client that we have, so no surprises or anomalies there. We have a very healthy and robust pipeline for business development. And SulAmérica is an example of the throughput of that type of activity that's been building and continues to build. We've got a great team on it and we expect that the OUS business will continue to offer us opportunity to both grow new business, expand with current customers, renew contracts, all the above.

[Brooks G. O'Neil:]

Great. And then just one last question and maybe you can't comment a lot about it but, obviously, you have some litigation going on with SilverSneakers, and I'm just curious if you think that's material impediment to you or you have material risk there, or whether you think it'll all take care of itself in the normal course of things?

[Alfred Lumsdaine:]

Yes. Obviously, because anytime you have litigation, Brooks, we're not going to provide any specific comments in detail. I think there was some recent activity with a recent motion that ASH filed out in California. No new facts have been alleged from our perspective and we continue to believe there's no merit to the claim. So -- but really, that's about all we can comment.

[Operator:]

We have no further questions at this time. I'd like to turn the call back over to Mr. Leedle for any concluding remarks.

[Ben R. Leedle:]

I just want to thank everybody for being on the call today. We're around if you want to touch base and we look forward to talking with you soon.

[Operator:]

This concludes today's conference. We thank you for your participation.