November 8, 2018
Increase in Patient Care margin provides earnings growth
AUSTIN, Texas–(BUSINESS WIRE)–Nov. 8, 2018– Hanger, Inc. (NYSE: HNGR), a leading provider of orthotic and prosthetic patient care services and solutions, today announced its financial results for the third quarter ended September 30, 2018.
Financial Highlights for the Third Quarter of 2018
- Net revenue of $262.9 million for the three months ended September 30, 2018, compared to $258.0 million for the same period in 2017, reflecting net revenue growth of 1.9 percent year-over-year.
- GAAP net income totaled $4.4 million for the three months ended September 30, 2018, compared to a net loss of $4.2 million for the same period in 2017.
- Adjusted EBITDA was $31.1 million in the third quarter of 2018 compared to $29.6 million in the third quarter of 2017, an increase of $1.5 million, or 5.1 percent. Growth in Adjusted EBITDA was driven by margin improvement, resulting primarily from higher revenue flow-through within the Patient Care segment.
- GAAP diluted earnings per share was $0.12 for the third quarter of 2018, compared to a loss of $0.11 per share in the third quarter of 2017.
- Adjusted diluted earnings per share was $0.22 for the three months ended September 30, 2018, compared to earnings of $0.06 per share for the same period in 2017, due primarily to growth in Patient Care segment earnings as well as lower interest expense.
- Net cash provided by operating activities was $20.3 million for the three months ended September 30, 2018, compared to $5.3 million for the same period in 2017.
- The Company reaffirms its 2018 outlook that it anticipates net revenue and Adjusted EBITDA to be generally consistent with 2017 results.
Vinit Asar, President and Chief Executive Officer of Hanger, Inc., stated, “Hanger’s third quarter results were in-line with our expectations, as we achieved revenue growth in both of Hanger’s business segments and overall Adjusted EBITDA growth, driven by our Patient Care segment. The third quarter was a memorable one for Hanger as we re-listed on the New York Stock Exchange, a key milestone in our efforts to re-establish the Company with investors. Looking ahead, we remain focused on strategies and investment priorities that drive growth through superior patient outcomes.”
Complete reconciliations of GAAP to non-GAAP financial measures are provided in the tables located at the end of this press release.
Segment Results for Three Months Ended September 30, 2018
Patient Care Segment
For the three months ended September 30, 2018, Patient Care net revenue was $214.1 million, an increase of $3.4 million or 1.6 percent, compared to the same period of 2017. Same clinic revenue growth was 2.1 percent, or 0.5 percent on a day-adjusted basis, for the three months ended September 30, 2018. Growth was primarily driven by a 3.1 percent increase in revenue from prosthetic services in the third quarter compared to the prior year.
Income from operations in the Patient Care segment was $32.5 million during the third quarter of 2018, which reflects an increase of $4.0 million, compared to $28.5 million reported in the prior year. Adjusted EBITDA for the segment was $38.2 million, which reflected a $3.1 million or 9.0 percent increase over the prior year period. Earnings flow-through benefited from decreases in bad debt and personnel expenses.
Products & Services Segment
For the three months ended September 30, 2018, Products & Services net revenue totaled $48.9 million, which reflected a $1.5 million, or 3.2 percent, increase compared to the same period in 2017. Revenue growth was driven by a $2.2 million, or 6.9 percent, growth from distribution of O&P componentry to independent providers, which was partially offset by a $0.7 million decrease in revenue from therapeutic solutions when compared to the prior year.
Income from operations for the Products & Services segment decreased by $0.3 million to $6.8 million in the third quarter of 2018 compared to the same period in 2017. Adjusted EBITDA for the Products & Services segment was $9.6 million for the third quarter of 2018, which reflected a $0.3 million decrease compared with the same period of 2017. Earnings flow-through from increased O&P distribution revenue was offset by a decrease in therapeutic solutions revenue and associated income and by higher personnel costs, primarily incentive compensation.
Corporate & Other
The loss from operations relating to corporate and other activities decreased by $2.7 million to $23.4 million for the quarter ended September 30, 2018 compared to the same period in 2017. This decrease primarily related to a $4.7 million reduction in professional accounting and legal fees year-over-year. Excluding the effect of third party professional fees related to financial statement remediation, depreciation and amortization, and non-cash equity compensation expense, the net cost of corporate and other activities increased by $1.4 million to a $16.7 million burden on Adjusted EBITDA in the third quarter of 2018. Increases in costs for Corporate & Other activities related primarily to continuing investments in growth and other corporate initiatives.
Net Income; Interest Expense
For the three months ended September 30, 2018, net income was $4.4 million compared with a net loss of $4.2 million in the same period of 2017. The $8.5 million improvement in net income year-over-year was due primarily to lower interest expense, professional accounting and legal fees, and depreciation and amortization expense.
Liquidity
On September 30, 2018, the Company had liquidity of $155.1 million, comprised of $61.0 million in cash and cash equivalents, and $94.1 million in available borrowing capacity under its revolving credit facility, compared to liquidity of $142.9 million on June 30, 2018. The increase in liquidity of $12.2 million from June 30, 2018 resulted from the positive cash flow from operations of $20.3 million in the third quarter of 2018 after the impact of capital expenditures and debt service.
2018 Outlook
The Company reaffirms its 2018 outlook, as first provided on May 14, 2018, that it anticipates net revenue and Adjusted EBITDA to be generally consistent with 2017 results. Hanger expects to provide its financial outlook for 2019 on its fourth quarter and full year 2018 conference call to be held during the first quarter of 2019.
Conference and Webcast Details
Hanger’s management team will host a conference call tomorrow, Friday, November 9, at 8:30 a.m. Eastern time to discuss the Company’s third quarter 2018 financial results and business outlook.
To participate, dial 877-407-6184 or 201-389-0877 outside the U.S. and Canada, and use conference code number 13682163. A live webcast and replay of the call will be available at the Investor Relations section of the Company’s web site at www.hanger.com/investors, and a replay of the webcast will remain available for 90 days.
Accompanying supplemental information will be posted to the Investor Relations section of Hanger’s web site at www.hanger.com/investors.
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.
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]