Market Overview

Hanger Announces Financial Results for the First Quarter of 2019


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 first quarter ended March 31, 2019.

Financial Highlights for the First Quarter of 2019

  • Net revenue was $236.4 million for the three months ended March 31,
    2019, compared to $234.0 million for the same period in 2018,
    reflecting a net revenue increase of 1.0 percent year-over-year.
  • GAAP net loss totaled $7.0 million for the three months ended
    March 31, 2019, compared to a net loss of $22.6 million for the same
    period in 2018. The net loss in the first quarter of 2018 included the
    impact of a $17.0 million pre-tax loss on the extinguishment of debt
    as well as higher interest expense compared to the first quarter of
  • GAAP loss from operations totaled $2.0 million for the three months
    ended March 31, 2019, compared to income from operations of $0.6
    million for the same period in 2018.
  • Adjusted EBITDA was $11.9 million in the first quarter of 2019,
    compared to $16.2 million for the same period in 2018, reflecting a
    decrease of $4.3 million. The decline in Adjusted EBITDA was driven
    primarily by expected increases of $1.8 million in benefits expense
    and $1.0 million in rent expense, as well as expected lower margins
    within the Products and Services segment.
  • GAAP loss per share was ($0.19) for the first quarter of 2019,
    compared to a loss per share of ($0.62) for the same period in 2018.
    The reduction in GAAP loss per share related primarily to the prior
    year refinancing costs, a reduction in interest expense and lower
    third party professional fees.
  • Adjusted diluted loss per share was ($0.16) for the three months ended
    March 31, 2019, compared to loss per share of ($0.13) for the same
    period in 2018.
  • The Company reaffirmed its 2019 financial outlook (see "2019 Outlook"
    within this release).

Vinit Asar, President and Chief Executive Officer of Hanger, Inc.,
stated, "While revenue growth in the quarter was below our expectations,
we believe this relates primarily to the timing of our prosthetics
deliveries. As a result, we are reaffirming both our revenue and
earnings guidance for 2019. We remain positive in our view of the demand
for our O&P services, strength in our referrals patterns, and the
overall industry fundamentals."

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 March 31, 2019

Patient Care Segment

For the three months ended March 31, 2019, Patient Care net revenue was
$190.6 million, an increase of $2.1 million or 1.1 percent, compared to
the same period in 2018. Growth on a reported basis was attributed to
$4.8 million of revenue during the quarter from O&P clinics acquired in
late 2018 and early 2019.

After adjusting for one less revenue day in the first quarter, same
clinic revenue for the three months ended March 31, 2019 was consistent
with the prior year period. Revenue from prosthetic services decreased
0.7 percent on a day-adjusted basis compared to the prior year and
revenue from orthotics increased by 0.9 percent on a day-adjusted basis.

Income from operations in the Patient Care segment was $15.8 million
during the first quarter of 2019, which reflected a $1.3 million
decline, compared to $17.1 million reported in the prior year. Adjusted
EBITDA for the segment was $21.4 million, which reflected a $1.6 million
or 7.0 percent decline compared to the $23.0 million reported in the
prior year period. Results reflected higher health benefit and rent
expenses as compared with the prior year period, with the Patient Care
segment bearing $1.5 million of the Company's $1.8 million increase in
benefits costs and $0.9 million of the $1.0 million total increase in
rent expense. Benefits costs are inherently volatile from one period to
the next as they are dependent on the Company's underlying claim
experience, which was favorable in the first quarter of 2018. Of the
total rent increase, $0.3 million related to the adoption of the new
lease accounting standard, Accounting Standards Codification (ASC) 842,
and the remainder of the increase related to rent increases and
completed acquisitions.

Products & Services Segment

For the three months ended March 31, 2019, Products & Services net
revenue totaled $45.8 million, which reflected a $0.3 million, or 0.7
percent increase compared to the same period in 2018. Revenue growth was
driven by a $1.8 million, or 5.9 percent increase from the distribution
of O&P componentry to independent providers, which was partially offset
by a $1.5 million decrease in revenue from therapeutic solutions.

Income from operations for the Products & Services segment decreased by
$1.8 million to $4.1 million in the first quarter of 2019 compared to
the same period in 2018. Adjusted EBITDA for the Products & Services
segment was $6.9 million for the first quarter of 2019, which reflected
a $1.8 million decrease compared with the same period of 2018. The
decline in therapeutic solutions revenue as well as lower margins within
O&P distribution impacted segment earnings in the quarter.

Corporate & Other

The loss from operations relating to corporate and other activities
decreased by $0.5 million to $21.8 million for the quarter ended
March 31, 2019 compared to the same period in 2018. This decrease
primarily related to a $2.1 million reduction in professional accounting
and legal fees year-over-year. Excluding the effect of excess third
party professional fees, depreciation and amortization, certain
acquisition related transaction costs and non-cash equity compensation
expense, the net cost of corporate and other activities increased by
$1.0 million to $16.4 million in the first quarter of 2019. Increases in
costs for Corporate & Other activities related primarily to initial
planning for the implementation of new financial and supply chain
systems as well as an increase in compensation costs, franchise tax
expense and other tax-related costs.

Net Income; Interest Expense

For the three months ended March 31, 2019, net loss was $7.0 million
compared with a net loss of $22.6 million in the same period in 2018.
The $15.7 million improvement in net income year-over-year was due
primarily to a $17.0 million pre-tax loss on the extinguishment of debt
associated with the 2018 debt refinancing as well as decreases in
interest expense.


On March 31, 2019, the Company had liquidity of $115.3 million,
comprised of $20.5 million in cash and cash equivalents, and $94.8
million in available borrowing capacity under its revolving credit
facility, compared to liquidity of $189.2 million on December 31, 2018.

The decrease in liquidity was primarily attributable to the use of $36.5
million for the payment of annual incentive bonuses, tax payments on
stock vesting, and the employer 401(k) matching contribution, the use of
$27.7 million for an acquisition closed in the first quarter, and a $5.6
million net reduction in accounts payable.

2019 Outlook

Hanger reaffirms its full-year 2019 net revenue and Adjusted EBITDA
outlook as follows:

Revenue in a range between $1.075 billion and $1.105 billion, and
Adjusted EBITDA in a range between $121 million and $126 million.

Hanger's financial outlook for 2019 does not incorporate contributions
from potential future acquisitions. Adjusted EBITDA 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

Hanger's management team will host a conference call tomorrow, Thursday,
May 9, at 8:30 a.m. Eastern time to discuss the Company's first quarter
2019 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 13689515. A live
webcast and replay of the call will be available at the Investor
Relations section of the Company's web site at,
and a replay of the webcast will remain available for one year.

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

About Hanger, Inc. – Built on the legacy of James Edward Hanger,
the first amputee of the American Civil War, Hanger, Inc. (NYSE: HNGR) delivers orthotic and prosthetic (O&P) patient care, and
distributes O&P products and rehabilitative solutions. Hanger's Patient
Care segment is the largest owner and operator of O&P patient care
clinics with approximately 800 patient care locations nationwide.
Through its Products & Services segment, Hanger distributes O&P devices,
products and components, and provides rehabilitative solutions. With
over 150 years of clinical excellence and innovation, Hanger's vision is
to lead the orthotic & prosthetic markets by providing superior patient
care, outcomes, services and value. For more information on Hanger,

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."
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 of
our identified material weaknesses in the Company's internal control
over financial reporting adversely affecting its ability to report its
financial condition and results of operations in a timely and accurate
manner; any 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, 2018 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.

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Table 1
Hanger, Inc.
Condensed Consolidated Statements of Operations

(Unaudited - dollars in thousands, except share and per share

For the Three Months Ended
March 31,
2019     2018
Net revenues $ 236,419 $ 233,995
Material costs 78,377 76,356
Personnel costs 86,711 86,108
Other operating costs 33,555 31,096
General and administrative expenses 28,282 25,636
Professional accounting and legal fees 2,700 4,846
Depreciation and amortization   8,773     9,330  
(Loss) income from operations (1,979 ) 623
Interest expense, net 8,538 12,263
Loss on extinguishment of debt 16,998
Non-service defined benefit plan expense   173     176  
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