Business Wire | Aug 4, 2021 04:10PM EDT

Hanger Reports Second Quarter 2021 Financial Results

Aug. 04, 2021

AUSTIN, Texas--(BUSINESS WIRE)--Aug. 04, 2021--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 For the Six Months Ended June 30, 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 32,721 8,277 64,181 44,163 costs

General andadministrative 33,177 33,623 64,118 65,392 expenses

Depreciation and 8,007 8,879 16,005 17,710 amortization

Income from 20,094 38,861 22,115 29,688 operations

Interest expense, 7,152 8,636 14,492 16,906 net

Non-service definedbenefit plan 167 158 334 316 expense

Income before 12,775 30,067 7,289 12,466 income taxes

Provision (benefit) 2,616 (987 ) 460 (2,840 )before income taxes

Net income $ 10,159 $ 31,054 $ 6,829 $ 15,306



Basic and DilutedPer Common Share Data:

Basic earnings per $ 0.26 $ 0.82 $ 0.18 $ 0.41 share

Weighted averageshares used tocompute basic 38,647,042 37,958,408 38,458,733 37,749,930 earnings per commonshare

Diluted income per $ 0.26 $ 0.81 $ 0.17 $ 0.40 share

Weighted averageshares used tocompute diluted 39,208,155 38,325,872 39,216,725 38,424,334 earnings per commonshare

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 2

Hanger, Inc.

Condensed Consolidated Balance Sheets

(Unaudited - in thousands)

As of June As of December 30, 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 63,333 62,861 liabilities

Accrued compensation related costs 51,256 72,541

Current portion of operating lease 35,586 35,002 liabilities

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 EndedJune 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.

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 (780 ) 2,403 right-of-use assets

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 (870 ) (3,065 )third parties under operating leases

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 - (57,000 )agreement

Payment of employee taxes on share-based (4,560 ) (6,828 )compensation

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 For the Six Months Ended Ended June 30, 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 $ 30,975 $ 36,525 $ 44,519 $ 41,791 (Non-GAAP)



(a) Excludes intersegment revenue.

(b) EBITDA and Adjusted EBITDA are "Non-GAAP" measures. Please refer to bothTable 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 For the Six Months Ended June 30, June 30,

2021 2020 2021 2020



Net income - as $ 10,159 $ 31,054 $ 6,829 $ 15,306 reported (GAAP)



Adjustments:

Modification of - 5,869 - 5,869 equity awards (a)

Amortization 1,315 1,783 2,549 3,274 expense

Third-party - - - 1,639 professional fees

Acquisition-related 170 39 330 372 expenses

Hanger supply chainimplementation 135 295 267 430 costs

Severance expenses - - 54 -

Proceeds fromgrants under the (670 ) (20,533 ) (670 ) (20,533 )CARES Act

Adjustments prior $ 950 $ (12,547 ) $ 2,530 $ (8,949 )to tax effect



Tax effect ofspecified (678 ) (5,192 ) (1,897 ) (3,684 )adjustments (a)

Adjustments after 272 (17,739 ) 633 (12,633 )taxes



Adjusted net income $ 10,431 $ 13,315 $ 7,462 $ 2,673 (Non-GAAP)



Basic earnings pershare - as reported $ 0.26 $ 0.82 $ 0.18 $ 0.41 (GAAP)

Effect of abovelisted specified 0.01 (0.47 ) 0.01 (0.34 )adjustments

Adjusted basicearnings per share $ 0.27 $ 0.35 $ 0.19 $ 0.07 - as reported(Non-GAAP)



Diluted earningsper share - as $ 0.26 $ 0.81 $ 0.17 $ 0.40 reported (GAAP)

Effect of abovelisted specified 0.01 (0.46 ) 0.02 (0.33 )adjustments

Adjusted dilutedearnings per share $ 0.27 $ 0.35 $ 0.19 $ 0.07 - as reported(Non-GAAP)



Shares used tocompute basic 38,647,042 37,958,408 38,458,733 37,749,930 earnings per share

Shares used tocompute diluted 39,208,155 38,325,872 39,216,725 38,424,334 earnings per share

(a) Modification of equity awards reflect a non-recurring charge in the secondquarter of 2020 for incremental equity-based compensation expense under ASC718, Stock Compensation, related to the modification of certain equity awardsgranted in 2017.

(b) "Tax effect of specified adjustments" reflects the difference between theCompany's effective provision for taxes and the application of a combinedfederal and state statutory tax rate of 24% for the 2021 and 2020 periods tothe Company's earnings from operations before taxes, after the incorporation ofthe 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 For the Six Months Ended Ended June 30, June 30,

2021 2020 2021 2020



Net income - as reported $ 10,159 $ 31,054 $ 6,829 $ 15,306 (GAAP)



Adjustments to calculate EBITDA:

Depreciation and 8,007 8,879 16,005 17,710 amortization

Interest expense, net 7,152 8,636 14,492 16,906

Non-service defined benefit 167 158 334 316 plan expense

Provision (benefit) for 2,616 (987 ) 460 (2,840 )income taxes

Adjustments - net income to 17,942 16,686 31,291 32,092 EBITDA

EBITDA (Non-GAAP) 28,101 47,740 38,120 47,398



Further adjustments to calculate Adjusted EBITDA:

Third-party professional - - - 1,639 fees

Equity-based compensation 3,239 8,984 6,418 12,485 (a)

Acquisition-related 170 39 330 372 expenses

Hanger supply chain 135 295 267 430 implementation costs

Severance expenses - - 54 -

Proceeds from grants under (670 ) (20,533 ) (670 ) (20,533 )the CARES Act

Further adjustments - 2,874 (11,215 ) 6,399 (5,607 )EBITDA to Adjusted EBITDA

Adjusted EBITDA (Non-GAAP) $ 30,975 $ 36,525 $ 44,519 $ 41,791

(a) Equity-based compensation expense includes an incremental charge in thesecond quarter of 2020 under ASC 718, Stock Compensation of approximately $5.9million 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 AdjustedEBITDA

(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 For the Six Months Ended Ended June 30, June 30,

2021 2020 2021 2020

Patient Care

Income from operations - as $ 39,640 $ 58,619 $ 58,690 $ 70,156 reported (GAAP)

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 135 202 267 337 implementation costs

Severance expenses - - 54 -

Proceeds from grants under (670 ) (20,533 ) (670 ) (20,533 )the CARES Act

Further adjustments - 418 (19,253 ) 1,501 (17,940 )EBITDA to Adjusted EBITDA

Adjusted EBITDA (Non-GAAP) 44,845 44,193 69,793 61,519



Products & Services

Income from operations - as 3,401 5,758 8,077 7,838 reported (GAAP)

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 - 93 - 93 implementation costs

Further adjustments - 283 334 542 539 EBITDA to Adjusted EBITDA

Adjusted EBITDA (Non-GAAP) 5,647 8,590 12,517 13,627



Corporate & Other

Loss from operations - as (22,947 ) (25,516 ) (44,652 ) (48,306 )reported (GAAP)

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 - - - 1,639 fees

Equity-based compensation 2,003 7,665 4,026 9,783

Acquisition related 170 39 330 372 expenses

Further adjustments - 2,173 7,704 4,356 11,794 EBITDA to Adjusted EBITDA

Adjusted EBITDA (Non-GAAP) (19,517 ) (16,258 ) (37,791 ) (33,355 )

Total Adjusted EBITDA $ 30,975 $ 36,525 $ 44,519 $ 41,791 (Non-GAAP)

(a) Equity-based compensation expense includes an incremental charge in thesecond quarter of 2020 under ASC 718, Stock Compensation of approximately $5.9million 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 8

Hanger, Inc.

Indebtedness

(Unaudited - in thousands)

As of June As of December 30, 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 514,130 510,492 issuance costs

Unamortized discount and debt issuance costs, (6,628 ) (7,395 )net

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 $ 514,130 $ 510,492 issuance costs

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210804005782/en/

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

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