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Hanger Reports Second Quarter 2021 Financial Results

Hanger Reports Second Quarter 2021 Financial Results

Hanger, Inc. (NYSE: HNGR), a leading provider of orthotic and prosthetic (O&P) patient care services and solutions, today announced its financial results for the second quarter and six months ended June 30, 2021.

Financial Highlights

  • Net revenue was $280.8 million for the three months ended June 30, 2021, compared to $233.4 million for the same period in 2020, reflecting growth of 20.3 percent.
  • Net income was $10.2 million for the three months ended June 30, 2021, compared to $31.1 million for the same period in 2020. Income from operations was $20.1 million for the quarter compared to $38.9 million for the same period in 2020. Second quarter 2020 GAAP income from operations and net income benefited from $20.5 million related to the Company's receipt of provider grants under the CARES Act, as well as $35.0 million in temporary cost reductions taken during that period in response to the COVID-19 pandemic.
  • Adjusted EBITDA was $31.0 million in the second quarter of 2021, compared to $36.5 million for the same period in 2020, a decline of $5.6 million or 15.2 percent. Results for the second quarter of 2020 benefited from the temporary cost reductions discussed above.
  • GAAP diluted earnings per share was $0.26 per share for the second quarter of 2021, compared to $0.81 per share for the same period in 2020. Adjusted diluted earnings per share was $0.27 for the three months ended June 30, 2021, compared to $0.35 for the same period in 2020.
  • The Company reaffirmed its full year guidance for 2021.

Vinit Asar, President and Chief Executive Officer of Hanger, Inc., stated, "Our second quarter results reflected an encouraging recovery in Hanger's business. Within the Patient Care segment, on a same-clinic basis, second quarter net revenue was approximately 96 percent of 2019 levels. While we remain concerned, as others do, with the lingering effects of the pandemic on the nation's business and labor environment, we are nevertheless pleased with our progress for the year to date and believe we are well positioned to further restore growth as the pandemic comes to an end."

Complete reconciliations of GAAP to non-GAAP financial measures are provided in the tables located at the end of this earnings release.

Segment Results for Three Months Ended June 30, 2021

Patient Care Segment

For the three months ended June 30, 2021, Patient Care net revenue was $236.8 million, an increase of $40.9 million, or 20.9 percent, compared to the same period in 2020. For the three month period, acquisitions of O&P clinics that were consummated in 2020 and 2021 contributed $6.0 million of incremental revenue.

Net same clinic revenue on a day-adjusted basis grew 18.2 percent during the second quarter of 2021 compared to the same quarter in the prior year period. Patient Care results benefited from a rebound in patient volumes from the decreased levels of demand experienced at the height of the COVID pandemic during the second quarter of 2020. In the second quarter of 2021, Hanger's Patient Care net revenue on a same-clinic basis, totaled approximately 96 percent of the level experienced in the second quarter of 2019.

Excluding the effect of acquisitions, net revenue from prosthetics grew 4.3 percent and net revenue from orthotics grew 40.4 percent, compared to the second quarter of 2020, Prosthetics comprised 54 percent of Patient Care segment net revenue compared to 61 percent in the same period of 2020. The changes in sales mix and growth in device categories for the second quarter of 2021 reflect the relative resiliency of prosthetic services during the pandemic compared to orthotics, the latter being more significantly impacted at the height of the pandemic.

Income from operations in the Patient Care segment was $39.6 million during the second quarter of 2021, a decrease of $19.0 million compared to the $58.6 million reported in the prior year. Patient Care's GAAP results for second quarter of 2021 and 2020 includes the benefit of $0.7 million and $20.5 million, respectively, to other operating costs related to the Company's receipt of CARES Act healthcare provider grants. These grants were received under the Public Health and Social Services Emergency Fund, also referred to as The Provider Relief Fund, established by the CARES Act and are excluded from Adjusted EBITDA.

Adjusted EBITDA for the segment was $44.8 million, a $0.7 million improvement compared to the second quarter of 2020. Adjusted EBITDA margin in the segment totaled 18.9 percent compared to 22.6 percent during the second quarter of 2020. Segment income from operations, Adjusted EBITDA and margins were impacted in the quarter compared to the prior year by the restoration of temporary labor and other cost reductions implemented during the second and third quarters of 2020.

Products & Services Segment

For the three months ended June 30, 2021, Products & Services net revenue totaled $44.0 million, reflecting growth of 17.2 percent compared with the same period in 2020. Revenue from the distribution of O&P componentry totaled $33.3 million, a growth of $6.7 million, or 25.4 percent. This growth was primarily the result of the adverse business conditions caused by the COVID-19 pandemic in the second quarter of 2020. Therapeutic solutions revenue in the second quarter totaled $10.8 million, a decline of $0.3 million, or 2.6 percent.

Income from operations for the Products & Services segment was $3.4 million in the second quarter of 2021 compared to $5.8 million in the same period of 2020. Adjusted EBITDA for the segment totaled $5.6 million for the second quarter of 2021, a $2.9 million decline compared with the same period of 2020. Adjusted EBITDA margin in the segment totaled 12.8 percent compared to 22.9 percent during the second quarter of 2020. Products & Services segment income from operations, Adjusted EBITDA and margin were impacted by the restoration of temporary labor and other cost reductions taken during the second and third quarters of 2020.

Corporate & Other

Expenses associated with corporate and other activities increased by $2.6 million to $22.9 million for the quarter ended June 30, 2021 compared to the same period in 2020. Excluding the effect of depreciation and amortization, and acquisition-related expense, the net cost of corporate and other activities increased by $3.3 million to $19.5 million in the second quarter of 2021.

Net Income; Interest Expense

Interest expense totaled $7.2 million for the three month period ended June 30, 2021, a decrease of $1.5 million from the prior year period.

For the three month period ended June 30, 2021, net income was $10.2 million compared with $31.1 million for the same period in 2020. GAAP diluted income per share was $0.26 compared to $0.81 per share in 2020. Adjusted diluted income per share was $0.27 for the three months ended June 30, 2021, compared to $0.35 per share for the same period in 2020.

Financial Highlights for the Six Months Ended June 30, 2021

  • For the six month period, net revenue was $518.3 million, compared to $467.2 million in 2020, reflecting a net revenue increase of 10.9 percent. Acquisitions of O&P clinics consummated in 2020 and 2021 contributed $15.0 million of incremental revenue for the six month period.
  • Patient Care net revenue grew $46.4 million, or 12.0 percent, to $432.5 million, while same clinic day-adjusted net revenue per day grew 9.9 percent. For the six month period of 2021, Hanger's Patient Care segment net revenue on a day-adjusted, same-clinic basis, totaled approximately 97 percent of the level reported for the equivalent period in 2019.
  • Net revenue from prosthetics, excluding acquisitions, grew 2.9 percent on a day-adjusted basis, while orthotics revenue grew by 19.2 percent, also on a net day-adjusted basis and excluding acquisitions. Year-to date in 2021, prosthetics constituted 53 percent of Patient Care segment net revenue.
  • Products & Services segment net revenue increased $4.7 million, or 5.8 percent, to $85.8 million, driven by an increase of $5.7 million in distribution services and a $1.0 million decline in revenue from therapeutic solutions for the period.
  • GAAP net income was $6.8 million compared to $15.3 million in 2020. Hanger's GAAP results for the first six months of 2020 included a benefit of $20.5 million to other operating costs related to the Company's receipt of CARES Act healthcare provider grants as compared to $0.7 million in the 2021 period.
  • Adjusted EBITDA totaled $44.5 million, an increase of $2.7 million as compared to the $41.8 million reported in 2020. The increase in Adjusted EBITDA for the six month period resulted from the improvement in net revenue partially offset by the restoration of temporary cost reductions taken during the second and third quarters of 2020.
  • GAAP diluted earnings per share was $0.17, compared to $0.40 per share in 2020. Adjusted diluted earnings per share was $0.19 for the first six months of 2021, compared to $0.07 for the same period in 2020.

Net Cash Provided by Operating Activities; Liquidity

Cash flows provided by operating activities for the three months ending June 30, 2021 were $33.1 million compared to cash flows provided by operating activities of $102.0 million for the same period in 2020. The Company continued to achieve strong cash collections during the second quarter of 2021 as its days sales outstanding decreased by five days to 40 days as of June 30, 2021 from 45 days on June 30, 2020.

On June 30, 2021, the Company had liquidity of $171.1 million, comprised of $76.2 million in cash and cash equivalents, and $94.9 million in available borrowing capacity under its revolving credit facility. This compares to total liquidity of $165.1 million on March 31, 2021.

2021 Outlook

The Company re-affirmed its financial outlook for 2021 as originally provided on March 1, 2021. Hanger anticipates net revenue in a range between $1.145 billion and $1.175 billion, and Adjusted EBITDA in a range between $130 million and $135 million.

The Company's outlook for 2021 includes approximately $36 million in revenue relating to the full year contribution of acquisitions consummated in 2020 and through June 30, 2021. Hanger's outlook assumes a continued sequential improvement in the third and fourth quarters of the orthotic and prosthetics business environment related to the continued cessation of the effects of COVID-19 on patient volumes.

Adjusted EBITDA in this outlook is provided on a non-GAAP basis only because a reconciliation to the most comparable GAAP financial measure, net income, is not available without unreasonable effort due to the unpredictable nature of reconciling items that render such a reconciliation not meaningful for investors.

Conference and Webcast Details

The Company’s management team will host a conference call tomorrow, Thursday, August 5, at 8:30 a.m. Eastern time to discuss the Company’s second quarter 2021 financial results and business outlook.

To participate, dial 844-750-4896 or 412-317-5292 outside the U.S. and Canada, and ask to be joined into the Hanger, Inc. call. A live webcast, replay of the call and earnings release, will be available on the Company’s Investor Relations website: https://investor.hanger.com/financial-reporting/quarterly-results/default.aspx.

Additional Notes

A reconciliation of GAAP and non-GAAP financial results is included in the tables provided at the back of this press release. The Company has provided certain supplemental key statistics relating to its results for certain prior periods. These key statistics are non-GAAP measures used by the Company’s management to analyze the Company’s business results that are being provided for informational and analytical context.

Accompanying supplemental information will be posted to the Investor Relations section of Hanger’s web site at www.hanger.com/investors.

About Hanger, Inc. – Headquartered in Austin, Texas, Hanger, Inc. (NYSE: HNGR) provides comprehensive, outcomes-based orthotic and prosthetic (O&P) services through its Patient Care segment, with approximately 800 Hanger Clinic locations nationwide. Through its Products & Services segment, Hanger distributes branded and private label O&P devices, products and components, and provides rehabilitative solutions. Recognized by Forbes as one of America’s Best Employers for 2021, and rooted in 160 years of clinical excellence and innovation, Hanger is a purpose-driven company with a vision to lead the O&P markets by providing superior patient care, outcomes, services and value, aimed at empowering human potential. For more information on Hanger, visit investor.hanger.com.

This earnings release contains statements that are forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include information concerning our liquidity and our possible or assumed future results of operations, including descriptions of our business strategies. These statements often include words such as “believe,” “expect,” “project,” “potential,” “anticipate,” “intend,” “plan,” “estimate,” “seek,” “will,” “may,” “would,” “should,” “could,” “forecasts” or similar words. These statements are based on certain assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate in these circumstances. We believe these assumptions are reasonable, but you should understand that these statements are not guarantees of performance or results, and our actual results could differ materially from those expressed in the forward-looking statements due to a variety of important factors, both positive and negative, that may be revised or supplemented in subsequent releases or reports. These statements involve risks, estimates, assumptions, and uncertainties that could cause actual results to differ materially from those expressed in these statements and elsewhere in this release. These uncertainties include, but are not limited to, the financial and business impacts of COVID-19 on our operations and the operations of our customers, suppliers, governmental and private payers and others in the healthcare industry and beyond; federal laws governing the health care industry; governmental policies affecting O&P operations, including with respect to reimbursement; failure to successfully implement a new enterprise resource planning system or other disruptions to information technology systems; the inability to successfully execute our acquisition strategy, including integration of recently acquired O&P clinics into our existing business; changes in the demand for our O&P products and services, including additional competition in the O&P services market; disruptions to our supply chain; our ability to enter into and derive benefits from managed-care contracts; our ability to successfully attract and retain qualified O&P clinicians; labor shortages and increased turnover in our employee base; contractual, inflationary and other general cost increases, including with regard to costs of labor, raw materials and freight; and other risks and uncertainties generally affecting the health care industry. For additional information and risk factors that could affect the Company, see its Form 10-K for the year ended December 31, 2020 and Quarterly Report on Form 10-Q for the three months ended March 31, 2021 and June 30, 2021, each as filed with the Securities and Exchange Commission. The information contained in this press release is made only as of the date hereof, even if subsequently made available by the Company on its website or otherwise.

 

Table 1

Hanger, Inc.

Condensed Consolidated Statements of Operations

(Unaudited - in thousands, except share and per share amounts)

 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

2021

 

2020

 

2021

 

2020

Net revenues

 

$

280,819

 

 

$

233,434

 

 

$

518,289

 

 

$

467,173

 

Material costs

 

89,271

 

 

69,972

 

 

164,441

 

 

147,213

 

Personnel costs

 

97,549

 

 

73,822

 

 

187,429

 

 

163,007

 

Other operating costs

 

32,721

 

 

8,277

 

 

64,181

 

 

44,163

 

General and administrative expenses

 

33,177

 

 

33,623

 

 

64,118

 

 

65,392

 

Depreciation and amortization

 

8,007

 

 

8,879

 

 

16,005

 

 

17,710

 

Income from operations

 

20,094

 

 

38,861

 

 

22,115

 

 

29,688

 

Interest expense, net

 

7,152

 

 

8,636

 

 

14,492

 

 

16,906

 

Non-service defined benefit plan expense

 

167

 

 

158

 

 

334

 

 

316

 

Income before income taxes

 

12,775

 

 

30,067

 

 

7,289

 

 

12,466

 

Provision (benefit) before income taxes

 

2,616

 

 

(987

)

 

460

 

 

(2,840

)

Net income

 

$

10,159

 

 

$

31,054

 

 

$

6,829

 

 

$

15,306

 

 

 

 

 

 

 

 

 

 

Basic and Diluted Per Common Share Data:

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.26

 

 

$

0.82

 

 

$

0.18

 

 

$

0.41

 

Weighted average shares used to compute basic earnings per common share

 

38,647,042

 

 

37,958,408

 

 

38,458,733

 

 

37,749,930

 

Diluted income per share

 

$

0.26

 

 

$

0.81

 

 

$

0.17

 

 

$

0.40

 

Weighted average shares used to compute diluted earnings per common share

 

39,208,155

 

 

38,325,872

 

 

39,216,725

 

 

38,424,334

 

 

Table 2

Hanger, Inc.

Condensed Consolidated Balance Sheets

(Unaudited - in thousands)

 

 

 

As of June 30,

 

As of December 31,

 

 

2021

 

2020

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

76,178

 

 

$

144,602

 

Accounts receivable, net

 

124,956

 

 

128,596

 

Inventories

 

83,959

 

 

76,429

 

Income taxes receivable

 

12,831

 

 

12,888

 

Other current assets

 

16,702

 

 

12,357

 

Total current assets

 

314,626

 

 

374,872

 

Non-current assets:

 

 

 

 

Property, plant, and equipment, net

 

85,241

 

 

84,873

 

Goodwill

 

318,383

 

 

277,223

 

Other intangible assets, net

 

20,751

 

 

18,431

 

Deferred income taxes

 

53,049

 

 

54,877

 

Operating lease right-of-use assets

 

122,030

 

 

124,741

 

Other assets

 

17,564

 

 

15,734

 

Total assets

 

$

931,644

 

 

$

950,751

 

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

Current liabilities:

 

 

 

 

Current portion of long-term debt

 

$

12,257

 

 

$

10,085

 

Accounts payable

 

58,400

 

 

65,091

 

Accrued expenses and other current liabilities

 

63,333

 

 

62,861

 

Accrued compensation related costs

 

51,256

 

 

72,541

 

Current portion of operating lease liabilities

 

35,586

 

 

35,002

 

Total current liabilities

 

220,832

 

 

245,580

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

Long-term debt, less current portion

 

495,245

 

 

493,012

 

Operating lease liabilities

 

100,515

 

 

104,589

 

Other liabilities

 

51,160

 

 

56,593

 

Total liabilities

 

867,752

 

 

899,774

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

Common stock

 

389

 

 

383

 

Additional paid-in capital

 

367,726

 

 

365,503

 

Accumulated other comprehensive loss

 

(16,358

)

 

(20,215

)

Accumulated deficit

 

(287,169

)

 

(293,998

)

Treasury stock, at cost

 

(696

)

 

(696

)

Total shareholders’ equity

 

63,892

 

 

50,977

 

Total liabilities and shareholders’ equity

 

$

931,644

 

 

$

950,751

 

 

Table 3

Hanger, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited - in thousands)

 

 

 

For the Six Months Ended
June 30,

 

 

2021

 

2020

Cash flows (used in) provided by operating activities:

 

 

 

 

Net income

 

$

6,829

 

 

$

15,306

 

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

 

 

 

 

Depreciation and amortization

 

16,005

 

 

17,710

 

(Benefit) provision for doubtful accounts

 

(292

)

 

1,084

 

Share-based compensation expense

 

6,418

 

 

12,485

 

Deferred income taxes

 

232

 

 

(9

)

Amortization of debt discounts and issuance costs

 

948

 

 

936

 

Gain on sale and disposal of fixed assets

 

(718

)

 

(531

)

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

Accounts receivable, net

 

5,363

 

 

44,917

 

Inventories

 

(5,899

)

 

5,072

 

Other current assets and other assets

 

(6,202

)

 

(4,882

)

Income taxes

 

57

 

 

(5,278

)

Accounts payable

 

(6,577

)

 

305

 

Accrued expenses and other current liabilities

 

(2,765

)

 

2,393

 

Accrued compensation related costs

 

(21,412

)

 

(15,536

)

Other liabilities

 

(522

)

 

3,686

 

Operating lease liabilities, net of amortization of right-of-use assets

 

(780

)

 

2,403

 

Net cash (used in) provided by operating activities

 

(9,315

)

 

80,061

 

Cash flows used in investing activities:

 

 

 

 

Acquisitions, net of cash acquired

 

(35,349

)

 

(16,788

)

Purchase of property, plant, and equipment

 

(13,339

)

 

(15,742

)

Purchase of therapeutic program equipment leased to third parties under operating leases

 

(870

)

 

(3,065

)

Proceeds from sale of property, plant, and equipment

 

1,332

 

 

1,134

 

Purchase of company-owned life insurance investment

 

 

 

(250

)

Net cash used in investing activities

 

(48,226

)

 

(34,711

)

Cash flows (used in) provided by financing activities:

 

 

 

 

Borrowings under revolving credit agreement

 

 

 

79,000

 

Repayment of borrowings under revolving credit agreement

 

 

 

(57,000

)

Payment of employee taxes on share-based compensation

 

(4,560

)

 

(6,828

)

Repayment of term loan

 

(2,525

)

 

(2,525

)

Payment on Seller Notes

 

(2,265

)

 

(1,799

)

Payments under vendor financing arrangements

 

(1,375

)

 

(275

)

Payments of financing lease obligations

 

(529

)

 

(314

)

Payment of debt issuance costs

 

 

 

(214

)

Proceeds from the exercise of options

 

371

 

 

39

 

Net cash (used in) provided by financing activities

 

(10,883

)

 

10,084

 

(Decrease) increase in cash and cash equivalents

 

(68,424

)

 

55,434

 

Cash and cash equivalents at beginning of period

 

144,602

 

 

74,419

 

Cash and cash equivalents at end of period

 

$

76,178

 

 

$

129,853

 

 
 

Table 4

Hanger, Inc.

Segment Information: Revenue, EBITDA and Adjusted EBITDA

(Unaudited - in thousands)

EBITDA is defined as operating income before depreciation and amortization. Adjusted EBITDA is defined as operating income before certain charges, third-party professional fees in excess of normal amounts incurred in connection with our financial statement remediation, expenses associated with equity-based compensation, severance expenses, certain expenses incurred in connection with our acquisitions, proceeds received from grants under the Coronavirus Aid, Relief and Economy Security Act ("CARES Act") and certain other charges.

We use EBITDA and Adjusted EBITDA as measures to assess the relative level of our indebtedness and our compliance with certain debt covenants which are based on these measures. Additionally, we utilize these measures to assess our operating and financial performance. We believe that these measures enhance a user’s understanding of normal operating income excluding certain charges, depreciation and amortization.

Neither EBITDA or Adjusted EBITDA are measures of financial performance computed in accordance with Generally Accepted Accounting Principles (“GAAP”) and should not be considered in isolation nor as a substitute for operating income, net income, cash flows from operations, or other statement of operations or cash flow data prepared in conformity with GAAP, or as a measure of profitability or liquidity. In addition, the calculation of EBITDA and Adjusted EBITDA is susceptible to varying interpretations and calculations, and the amounts presented may not be comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA may not be indicative of historical operating results, and we do not intend these measures to be predictive of future results of operations.

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

Net Revenue (a)

 

 

 

 

 

 

 

 

Patient Care

 

$

236,787

 

 

$

195,859

 

 

$

432,469

 

 

$

386,042

 

Products & Services

 

44,032

 

 

37,575

 

 

85,820

 

 

81,131

 

Net revenue

 

$

280,819

 

 

$

233,434

 

 

$

518,289

 

 

$

467,173

 

 

 

 

 

 

 

 

 

 

EBITDA (b)

 

 

 

 

 

 

 

 

Patient Care

 

$

44,427

 

 

$

63,446

 

 

$

68,292

 

 

$

79,459

 

Products & Services

 

5,364

 

 

8,256

 

 

11,975

 

 

13,088

 

Corporate & Other

 

(21,690

)

 

(23,962

)

 

(42,147

)

 

(45,149

)

EBITDA (Non-GAAP)

 

$

28,101

 

 

$

47,740

 

 

$

38,120

 

 

$

47,398

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (b)

 

 

 

 

 

 

 

 

Patient Care

 

$

44,845

 

 

$

44,193

 

 

$

69,793

 

 

$

61,519

 

Products & Services

 

5,647

 

 

8,590

 

 

12,517

 

 

13,627

 

Corporate & Other

 

(19,517

)

 

(16,258

)

 

(37,791

)

 

(33,355

)

Adjusted EBITDA (Non-GAAP)

 

$

30,975

 

 

$

36,525

 

 

$

44,519

 

 

$

41,791

 

 

 

 

 

 

 

 

 

 

(a) Excludes intersegment revenue.

(b) EBITDA and Adjusted EBITDA are "Non-GAAP" measures. Please refer to both Table 6 and Table 7 for a reconciliation of these measures to GAAP net income.

 
 
 

Table 5

Hanger, Inc.

Reconciliation of Net Income and Earnings Per Share to

Adjusted Net Income and Adjusted Earnings Per Share

(Unaudited - in thousands, except share and per share amounts)

Earnings Per Share (or “EPS”) is defined as net income divided by our basic or diluted common shares during the applicable period. Adjusted EPS is defined as EPS adjusted for certain equity-based compensation charges, third-party professional fees in excess of normal amounts incurred in connection with our financial statement remediation, severance expenses, certain expenses incurred in connection with our acquisitions, proceeds received from grants under the CARES Act, and certain other charges.

We utilize Adjusted EPS to assess our operating and financial performance. We believe that this measure enhances a user’s understanding of normal operating results excluding certain charges.

Adjusted EPS is not a measure of financial performance computed in accordance with GAAP and should not be considered in isolation nor as a substitute for operating income, net income, cash flows from operations, or other statement of operations or cash flow data prepared in conformity with GAAP, or as a measure of profitability or liquidity. In addition, the calculation of Adjusted EPS is susceptible to varying interpretations and calculations, and the amounts presented may not be comparable to similarly titled measures of other companies. Adjusted EPS may not be indicative of historical operating results, and we do not intend these measures to be predictive of future results of operations.

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

Net income - as reported (GAAP)

 

$

10,159

 

 

$

31,054

 

 

$

6,829

 

 

$

15,306

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

Modification of equity awards (a)

 

 

 

5,869

 

 

 

 

5,869

 

Amortization expense

 

1,315

 

 

1,783

 

 

2,549

 

 

3,274

 

Third-party professional fees

 

 

 

 

 

 

 

1,639

 

Acquisition-related expenses

 

170

 

 

39

 

 

330

 

 

372

 

Hanger supply chain implementation costs

 

135

 

 

295

 

 

267

 

 

430

 

Severance expenses

 

 

 

 

 

54

 

 

 

Proceeds from grants under the CARES Act

 

(670

)

 

(20,533

)

 

(670

)

 

(20,533

)

Adjustments prior to tax effect

 

$

950

 

 

$

(12,547

)

 

$

2,530

 

 

$

(8,949

)

 

 

 

 

 

 

 

 

 

Tax effect of specified adjustments (a)

 

(678

)

 

(5,192

)

 

(1,897

)

 

(3,684

)

Adjustments after taxes

 

272

 

 

(17,739

)

 

633

 

 

(12,633

)

 

 

 

 

 

 

 

 

 

Adjusted net income (Non-GAAP)

 

$

10,431

 

 

$

13,315

 

 

$

7,462

 

 

$

2,673

 

 

 

 

 

 

 

 

 

 

Basic earnings per share - as reported (GAAP)

 

$

0.26

 

 

$

0.82

 

 

$

0.18

 

 

$

0.41

 

Effect of above listed specified adjustments

 

0.01

 

 

(0.47

)

 

0.01

 

 

(0.34

)

Adjusted basic earnings per share - as reported (Non-GAAP)

 

$

0.27

 

 

$

0.35

 

 

$

0.19

 

 

$

0.07

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share - as reported (GAAP)

 

$

0.26

 

 

$

0.81

 

 

$

0.17

 

 

$

0.40

 

Effect of above listed specified adjustments

 

0.01

 

 

(0.46

)

 

0.02

 

 

(0.33

)

Adjusted diluted earnings per share - as reported (Non-GAAP)

 

$

0.27

 

 

$

0.35

 

 

$

0.19

 

 

$

0.07

 

 

 

 

 

 

 

 

 

 

Shares used to compute basic earnings per share

 

38,647,042

 

 

37,958,408

 

 

38,458,733

 

 

37,749,930

 

Shares used to compute diluted earnings per share

 

39,208,155

 

 

38,325,872

 

 

39,216,725

 

 

38,424,334

 

 

(a) Modification of equity awards reflect a non-recurring charge in the second quarter of 2020 for incremental equity-based compensation expense under ASC 718, Stock Compensation, related to the modification of certain equity awards granted in 2017.

 

(b) “Tax effect of specified adjustments” reflects the difference between the Company's effective provision for taxes and the application of a combined federal and state statutory tax rate of 24% for the 2021 and 2020 periods to the Company's earnings from operations before taxes, after the incorporation of the identified adjustments above.

 
 
 

Table 6

Hanger, Inc.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

(Unaudited - in thousands)

EBITDA is defined as operating income before depreciation and amortization. Adjusted EBITDA is defined as operating income before certain charges, third-party professional fees in excess of normal amounts incurred in connection with our financial statement remediation, expenses associated with equity-based compensation, severance expenses, certain expenses incurred in connection with our acquisitions, proceeds received from grants under the CARES Act and certain other charges.

We use EBITDA and Adjusted EBITDA as measures to assess the relative level of our indebtedness and our compliance with certain debt covenants which are based on these measures. Additionally, we utilize these measures to assess our operating and financial performance. We believe that these measures enhance a user’s understanding of normal operating income excluding certain charges, depreciation and amortization.

Neither EBITDA or Adjusted EBITDA are measures of financial performance computed in accordance with Generally Accepted Accounting Principles (“GAAP”) and should not be considered in isolation nor as a substitute for operating income, net income, cash flows from operations, or other statement of operations or cash flow data prepared in conformity with GAAP, or as a measure of profitability or liquidity. In addition, the calculation of EBITDA and Adjusted EBITDA is susceptible to varying interpretations and calculations, and the amounts presented may not be comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA may not be indicative of historical operating results, and we do not intend these measures to be predictive of future results of operations.

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

Net income - as reported (GAAP)

 

$

10,159

 

 

$

31,054

 

 

$

6,829

 

 

$

15,306

 

 

 

 

 

 

 

 

 

 

Adjustments to calculate EBITDA:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

8,007

 

 

8,879

 

 

16,005

 

 

17,710

 

Interest expense, net

 

7,152

 

 

8,636

 

 

14,492

 

 

16,906

 

Non-service defined benefit plan expense

 

167

 

 

158

 

 

334

 

 

316

 

Provision (benefit) for income taxes

 

2,616

 

 

(987

)

 

460

 

 

(2,840

)

Adjustments - net income to EBITDA

 

17,942

 

 

16,686

 

 

31,291

 

 

32,092

 

EBITDA (Non-GAAP)

 

28,101

 

 

47,740

 

 

38,120

 

 

47,398

 

 

 

 

 

 

 

 

 

 

Further adjustments to calculate Adjusted EBITDA:

 

 

 

 

 

 

 

 

Third-party professional fees

 

 

 

 

 

 

 

1,639

 

Equity-based compensation (a)

 

3,239

 

 

8,984

 

 

6,418

 

 

12,485

 

Acquisition-related expenses

 

170

 

 

39

 

 

330

 

 

372

 

Hanger supply chain implementation costs

 

135

 

 

295

 

 

267

 

 

430

 

Severance expenses

 

 

 

 

 

54

 

 

 

Proceeds from grants under the CARES Act

 

(670

)

 

(20,533

)

 

(670

)

 

(20,533

)

Further adjustments - EBITDA to Adjusted EBITDA

 

2,874

 

 

(11,215

)

 

6,399

 

 

(5,607

)

Adjusted EBITDA (Non-GAAP)

 

$

30,975

 

 

$

36,525

 

 

$

44,519

 

 

$

41,791

 

 

(a) Equity-based compensation expense includes an incremental charge in the second quarter of 2020 under ASC 718, Stock Compensation of approximately $5.9 million related to the modification of certain equity awards granted in 2017.

 
 
 

Table 7

Hanger, Inc.

Segment Reconciliation of Income (Loss) From Operations to EBITDA and Adjusted EBITDA

(Unaudited - in thousands)

EBITDA is defined as operating income before depreciation and amortization. Adjusted EBITDA is defined as operating income before certain charges, third-party professional fees in excess of normal amounts incurred in connection with our financial statement remediation, expenses associated with equity-based compensation, severance expenses, certain expenses incurred in connection with our acquisitions, proceeds received from grants under the CARES Act and certain other charges.

We use EBITDA and Adjusted EBITDA as measures to assess the relative level of our indebtedness and our compliance with certain debt covenants which are based on these measures. Additionally, we utilize these measures to assess our operating and financial performance. We believe that these measures enhance a user’s understanding of normal operating income excluding certain charges, depreciation and amortization.

Neither EBITDA or Adjusted EBITDA are measures of financial performance computed in accordance with Generally Accepted Accounting Principles (“GAAP”) and should not be considered in isolation nor as a substitute for operating income, net income, cash flows from operations, or other statement of operations or cash flow data prepared in conformity with GAAP, or as a measure of profitability or liquidity. In addition, the calculation of EBITDA and Adjusted EBITDA is susceptible to varying interpretations and calculations, and the amounts presented may not be comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA may not be indicative of historical operating results, and we do not intend these measures to be predictive of future results of operations.

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

2021

 

2020

 

2021

 

2020

Patient Care

 

 

 

 

 

 

 

 

Income from operations - as reported (GAAP)

 

$

39,640

 

 

$

58,619

 

 

$

58,690

 

 

$

70,156

 

Depreciation & amortization

 

4,787

 

 

4,827

 

 

9,602

 

 

9,303

 

EBITDA (Non-GAAP)

 

44,427

 

 

63,446

 

 

68,292

 

 

79,459

 

Further adjustments to calculate Adjusted EBITDA:

 

 

 

 

 

 

 

 

Equity-based compensation

 

953

 

 

1,078

 

 

1,850

 

 

2,256

 

Hanger supply chain implementation costs

 

135

 

 

202

 

 

267

 

 

337

 

Severance expenses

 

 

 

 

 

54

 

 

 

Proceeds from grants under the CARES Act

 

(670

)

 

(20,533

)

 

(670

)

 

(20,533

)

Further adjustments - EBITDA to Adjusted EBITDA

 

418

 

 

(19,253

)

 

1,501

 

 

(17,940

)

Adjusted EBITDA (Non-GAAP)

 

44,845

 

 

44,193

 

 

69,793

 

 

61,519

 

 

 

 

 

 

 

 

 

 

Products & Services

 

 

 

 

 

 

 

 

Income from operations - as reported (GAAP)

 

3,401

 

 

5,758

 

 

8,077

 

 

7,838

 

Depreciation & amortization

 

1,963

 

 

2,498

 

 

3,898

 

 

5,250

 

EBITDA (Non-GAAP)

 

5,364

 

 

8,256

 

 

11,975

 

 

13,088

 

Further adjustments to calculate Adjusted EBITDA:

 

 

 

 

 

 

 

 

Equity-based compensation

 

283

 

 

241

 

 

542

 

 

446

 

Hanger supply chain implementation costs

 

 

 

93

 

 

 

 

93

 

Further adjustments - EBITDA to Adjusted EBITDA

 

283

 

 

334

 

 

542

 

 

539

 

Adjusted EBITDA (Non-GAAP)

 

5,647

 

 

8,590

 

 

12,517

 

 

13,627

 

 

 

 

 

 

 

 

 

 

Corporate & Other

 

 

 

 

 

 

 

 

Loss from operations - as reported (GAAP)

 

(22,947

)

 

(25,516

)

 

(44,652

)

 

(48,306

)

Depreciation & amortization

 

1,257

 

 

1,554

 

 

2,505

 

 

3,157

 

EBITDA (Non-GAAP)

 

(21,690

)

 

(23,962

)

 

(42,147

)

 

(45,149

)

Further adjustments to calculate Adjusted EBITDA:

 

 

 

 

 

 

 

 

Third-party professional fees

 

 

 

 

 

 

 

1,639

 

Equity-based compensation

 

2,003

 

 

7,665

 

 

4,026

 

 

9,783

 

Acquisition related expenses

 

170

 

 

39

 

 

330

 

 

372

 

Further adjustments - EBITDA to Adjusted EBITDA

 

2,173

 

 

7,704

 

 

4,356

 

 

11,794

 

Adjusted EBITDA (Non-GAAP)

 

(19,517

)

 

(16,258

)

 

(37,791

)

 

(33,355

)

Total Adjusted EBITDA (Non-GAAP)

 

$

30,975

 

 

$

36,525

 

 

$

44,519

 

 

$

41,791

 

 

(a) Equity-based compensation expense includes an incremental charge in the second quarter of 2020 under ASC 718, Stock Compensation of approximately $5.9 million related to the modification of certain equity awards granted in 2017.

 

Table 8

Hanger, Inc.

Indebtedness

(Unaudited - in thousands)

 

 

 

As of June 30,

 

As of December 31,

 

 

2021

 

2020

Debt:

 

 

 

 

Term Loan B

 

$

488,588

 

 

$

491,113

 

Seller Notes

 

18,105

 

 

11,510

 

Deferred payment obligation

 

4,000

 

 

4,000

 

Finance lease liabilities and other

 

3,437

 

 

3,869

 

Total debt before unamortized discount and debt issuance costs

 

514,130

 

 

510,492

 

Unamortized discount and debt issuance costs, net

 

(6,628

)

 

(7,395

)

Total debt

 

$

507,502

 

 

$

503,097

 

 

 

 

 

 

Current portion of long-term debt:

 

 

 

 

Term Loan B

 

$

5,050

 

 

$

5,050

 

Seller Notes

 

6,303

 

 

4,060

 

Finance lease liabilities and other

 

904

 

 

975

 

Total current portion of long-term debt

 

12,257

 

 

10,085

 

Long-term debt

 

$

495,245

 

 

$

493,012

 

 

 

 

 

 

Net indebtedness:

 

 

 

 

Total debt before unamortized discount and debt issuance costs

 

$

514,130

 

 

$

510,492

 

Cash and cash equivalents

 

(76,178

)

 

(144,602

)

Net indebtedness

 

$

437,952

 

 

$

365,890

 

 

Table 9

Hanger, Inc.

Key Operating Metrics

 

 

 

As of and For the Three Months Ended
June 30,

 

For the Six Months Ended June 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

Same clinic revenue:

 

 

 

 

 

 

 

 

Growth (decline) rate on net revenue

 

18.2%

 

(18.7)%

 

8.2%

 

(11.0)%

Growth (decline) rate day adjusted (a)

 

18.2%

 

(18.7)%

 

9.9%

 

(11.7)%

 

 

 

 

 

 

 

 

 

Clinical locations:

 

 

 

 

 

 

 

 

Patient care clinics

 

723

 

707

 

 

 

 

Satellite clinics

 

112

 

108

 

 

 

 

Total clinical locations

 

835

 

815

 

 

 

 

 

(a) Same Clinic Revenue per Day - Same Clinic Revenue per Day normalizes revenue for the number of days a clinic was open in each comparable period. These measures are both non-GAAP and unaudited.

 

Investor Relations Contacts:
Thomas Kiraly, Executive Vice President and Chief Financial Officer, Hanger, Inc.
512-777-3600
tkiraly@hanger.com

Seth Frank, Vice President, Treasury and Investor Relations, Hanger, Inc.
512-777-3573
sfrank@hanger.com

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