June 14, 2018
AUSTIN, Texas, June 14, 2018 — Hanger, Inc. (OTC PINK: HNGR), a leading provider of orthotic and prosthetic patient care services and solutions, today announced the filing of its Quarterly Report on Form 10-Q for the three months ended March 31, 2018 with the Securities and Exchange Commission. The Company is now current with its periodic filings.
The Company intends to commence the process of relisting on a national securities exchange during the third quarter of 2018. As disclosed in the recent investor conference call held on May 15th, the Company does not plan to host a conference call regarding first quarter 2018 results.
Vinit Asar, President and Chief Executive Officer of Hanger, Inc., stated, “Our first quarter results were in-line with the preliminary expectations that we provided in May. Adjusted EBITDA growth outpaced revenue increases, as we benefited from lower operating expenses compared to the year-ago period.”
Mr. Asar continued, “We are pleased to report a continuation of the Patient Care growth trends we re-established during 2017. We’ve achieved a good start to 2018 and anticipate a solid performance for the year.”
Financial Highlights for the First Quarter of 2018
- Net revenue of $234.0 million for the three months ended March 31, 2018, compared to $233.7 million for the same period in 2017.
- GAAP net loss of $22.6 million for the three months ended March 31, 2018, compared to $17.7 million for the same period in 2017. Adjusted EBITDA was $16.2 million in the first quarter of 2018 compared to $14.3 million in the first quarter of 2017, an increase of $1.9 million.
- GAAP net loss includes $17.0 million in costs for the extinguishment of debt associated with the Company’s first quarter re-financing.
- GAAP diluted loss per share was $0.62 for the first quarter of 2018, compared to a loss of $0.49 per share in the first quarter of 2017. Adjusted diluted loss per share was $0.13 for the three months ended March 31, 2018, compared to a loss of $0.17 per share in the same period in 2017.
- The Company’s first quarter results are affected by seasonality. The first quarter is normally the lowest net revenue quarter of the year and the fourth quarter is ordinarily the highest.
Complete reconciliations of GAAP to non-GAAP financial measures are provided in the tables located at the end of this press release.
Detailed Results: Three Months Ended March 31, 2018
Patient Care Segment
For the three months ended March 31, 2018, the Company’s Patient Care net revenue totaled $188.5 million, an increase of $0.9 million compared to the same period of 2017. The net revenue growth was primarily the result of higher same clinic revenue growth in the first quarter of 2018.
- Same clinic revenue per day grew 1.1 percent for the three months ended March 31, 2018. The Company reported year-over-year growth in prosthetics revenue of 6.0 percent, which caused prosthetic revenue as a percentage of total revenue to increase to 51 percent as compared with 49 percent in the first quarter of 2017. Growth in prosthetics was partially offset by a decline in orthotics, specifically lower-margin off-the-shelf devices and corrective footwear, which the Company has deemphasized within its Patient Care clinics.
- The Company adopted Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“ASC 606”), a new revenue accounting standard, in the first quarter of 2018, which had the effect of reclassifying $0.9 million in charges for the Patient Care segment from bad debt expense to a reduction of revenue during the period. The standard did not apply to the comparative prior year first quarter period.
- The percentage of Patient Care’s disallowed gross revenue was 4.2 percent and 3.7 percent for the three months ended March 31, 2018 and 2017, respectively. The first quarter of 2018 disallowance rate was consistent with Patient Care disallowed revenue of 4.2 percent for the full year of 2017. While the Company is pursuing continued improvements in disallowed revenue, it does not currently anticipate a downward trend during 2018 similar to those seen over the past three years.
Income from operations in the Patient Care segment was $17.1 million during the first quarter of 2018, which reflected an increase of $2.6 million, or 17.5 percent, over the $14.5 million reported in the prior year. Adjusted EBITDA for the segment was $23.0 million, which reflected a $2.2 million, or 10.5 percent increase over the prior year period.
- In addition to the favorable effect of earnings from the growth in same clinic sales during the first quarter of 2018, the Patient Care segment also benefited from a decline of approximately $2.6 million in personnel and other operating expense reductions, primarily lower benefit and bad debt expense. These declines were partially offset by higher cost of materials, salary and travel expenses in the Patient Care segment.
- Income from operations also benefited from a $0.5 million decrease in depreciation and amortization expense, as compared to the prior year quarter.
Products & Services Segment
For the first three months of 2018, the Company’s Products & Services net revenue totaled $45.5 million, a $0.6 million decrease compared to the same period of 2017, which was a decline of 1.2 percent. The revenue decline was due to a $1.3 million decrease in revenue for therapeutic solutions, which are services primarily provided to the post-acute market within skilled nursing facilities.
- The Company recognized approximately $14.1 million in revenues from therapeutic solutions in the first three months of 2018. The first quarter 2018 result is consistent with the Company’s expectations as provided on its May 15th investor call that it anticipates a potential decline of approximately $8 million in revenue from these services in 2018. The Company is currently pursuing strategies to stabilize and maximize value from these services.
- Revenue from the distribution of O&P componentry to independent providers increased by $0.7 million, or 2.4 percent, for the first three months of 2018, partially offsetting the decline in therapeutic solutions. This was consistent with the Company’s expectations for modest growth of these offerings during 2018.
Income from operations for the Products & Services segment declined by $0.2 million to $5.9 million in the first three months of 2018. Adjusted EBITDA for the Products & Services segment was $8.7 million during the first quarter of 2018, which reflected a $0.3 million decline as compared with Adjusted EBITDA of $9.0 million in the same period of 2017.
Net Loss; Interest Expense
For the first three months of 2018, net loss was $22.6 million compared with a net loss of $17.7 million in the same period of 2017.
- The higher net loss was due to the $17.0 million charge for extinguishment of debt discussed above, recognized in the first quarter of 2018.
- Professional accounting and legal fees of $4.8 million reflected a decrease of $7.8 million as compared to the first quarter of 2017. This decrease was the result of a reduction in activities associated with the Company’s ongoing financial remediation efforts.
Interest expense for the first quarter of 2018 declined to $12.3 million from $14.0 million in the same period of 2017. This $1.7 million decrease resulted from a partial quarter of lower interest expense associated with the Company’s debt refinancing in March 2018.
Liquidity
On March 31, 2018, the Company had liquidity of $127.0 million, comprised of $32.9 million in cash and cash equivalents, and $94.1 million in available borrowing capacity under its revolving credit facility, compared to liquidity of $87.9 million on December 31, 2017, comprised of $1.5 million in cash and cash equivalents, and $86.4 million in available borrowing capacity under its revolving credit facility. The increase in liquidity from year-end 2017 resulted from the refinancing of the Company’s outstanding debt with a new, $605 million Senior Credit Facility, completed on March 6, 2018.
2018 Outlook
As previously disclosed on May 14th, for the full year 2018, the Company anticipates net revenue and Adjusted EBITDA to be generally consistent with actual 2017 results. Although the Company’s Adjusted EBITDA for the period ended March 31, 2018 reflected an increase over the comparable period in 2017, the Company believes this to be primarily related to the favorable timing of its expenses in that period. All amounts relating to the full year 2018 are subject to material change as the Company continues to evaluate its expectations for annual results.
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 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.
This press release contains certain “forward-looking statements” relating to the Company. All statements, other than statements of historical fact included herein, are “forward‑looking statements.” These forward-looking statements are often identified by the use of forward-looking terminology such as “preliminary,” “intends,” “expects,” “plans,” “anticipates,” “believes,” “views” or similar expressions and involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks, and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. These uncertainties include, but are not limited to, the risk that additional information may arise during the course of the Company’s ongoing financial statement preparation and closing processes that would require the Company to make additional adjustments or revisions to its estimates or financial statements and other financial data, to identify additional material weaknesses, or to take any other necessary action relating to the Company’s accounting practices; the time required to complete the Company’s financial statements and other financial data and accounting review; the time required to prepare its periodic reports for filings with the Securities and Exchange Commission; the impact of the Tax Cuts and Jobs Act on the Company’s financial statements; any regulatory review of, or litigation relating to, the Company’s accounting practices, financial statements and other financial data, periodic reports or other corporate actions;changes in the demand for the Company’s O&P products and services; uncertainties relating to the results of operations or recently acquired O&P patient care clinics; the Company’s ability to enter into and derive benefits from managed-care contracts; the Company’s ability to successfully attract and retain qualified O&P clinicians; federal laws governing the health care industry; uncertainties inherent in investigations and legal proceedings; governmental policies affecting O&P operations; 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, 2017 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.
###
About Hanger, Inc. – Headquartered in Austin, Texas, Hanger, Inc. is a leading provider of orthotic and prosthetic (O&P) patient care services and products. The company operates as an ecosystem of diversified companies delivering complementary solutions to individuals and providers with O&P needs, and is organized in two business segments – Patient Care and Products & Services. Through its Patient Care segment, Hanger provides comprehensive, outcomes-based O&P services to individuals of all ages at more than 925 Hanger Clinic locations nationwide. Through its Products & Services segment, Hanger serves the broader O&P community and skilled nursing facilities through designing and distributing branded and private label O&P devices, products and components, providing consulting services, and offering post-acute rehabilitative solutions. Rooted in clinical research, excellence, and innovation, Hanger is a purpose-driven company focused on empowering human potential. For more information, visit corporate.hanger.com.
Contact:
Annie Myers
External Relations Manager
(210) 440-7380 or [email protected]