Hanger Reports Third Quarter 2019 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 third quarter and nine months ended September 30, 2019.

Financial Highlights for the Third Quarter of 2019

Net revenue was $279.6 million for the three months ended September 30, 2019, compared to $262.9 million for the same period in 2018, reflecting an increase of 6.3 percent. Within the Patient Care segment, net same clinic revenue on a day-adjusted basis grew by 2.1 percent.

GAAP net income totaled $5.7 million for the three months ended September 30, 2019, compared to $4.4 million for the same period in 2018. GAAP income from operations was $17.4 million for the quarter compared to $15.9 million for the same period in 2018.

Adjusted EBITDA was $32.6 million in the third quarter, compared to $31.1 million for the same period in 2018, reflecting an increase of $1.5 million or 4.8 percent. Growth in Adjusted EBITDA was driven by increased Patient Care segment revenue and contribution margin, which was partially offset by a decrease in contribution from the Products & Services segment, as well as an increase in Corporate & Other costs.

GAAP diluted earnings per share was $0.15 for the third quarter of 2019, compared to $0.12 for the same period in 2018. Adjusted diluted earnings per share was $0.25 for the three months ended September 30, 2019, compared to $0.22 for the same period in 2018, which reflected an increase of 13.6 percent.

The Company reaffirms its 2019 financial outlook (see "2019 Outlook" within this release).

Vinit Asar, President and Chief Executive Officer of Hanger, Inc., stated, "We are pleased with the solid revenue growth our Patient Care segment achieved in the third quarter. Our results reflected same clinic revenue growth of 2.1 percent which was driven by a 4.0 percent rate of growth in prosthetics. When coupled with the effect of acquisitions, this segment achieved a 7.9 percent overall rate of growth. With nine months of the year completed, we are continuing to execute within the mid-range of our financial outlook for 2019."

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, 2019

Patient Care Segment

For the three months ended September 30, 2019, Patient Care net revenue was $230.9 million, an increase of $16.9 million or 7.9 percent, compared to the same period in 2018. Total revenue growth for the segment includes $8.5 million of revenue from O&P clinics acquired in late 2018 and early 2019, net of consolidations and closures.

Net same clinic revenue on a day-adjusted basis grew by 2.1 percent during the quarter. Revenue from prosthetics, excluding acquisitions, increased 4.0 percent in the quarter on a day-adjusted basis. Net revenue from orthotics, excluding acquisitions, was consistent with the same period in 2018 on a day-adjusted basis as growth in orthotics was offset by a modest decline in shoes and inserts. Prosthetics comprised 55.0 percent of Patient Care segment net revenue during the third quarter of 2019 as compared with 54.0 percent during the same period in 2018.

Income from operations in the Patient Care segment was $36.1 million during the third quarter of 2019, reflecting growth of $3.6 million compared to the $32.5 million reported in the prior year. Adjusted EBITDA for the segment was $42.2 million, which reflected a $4.0 million or 10.4 percent increase compared to the prior year period. Adjusted EBITDA margin in the segment totaled 18.3 percent compared to 17.8 percent during the third quarter of 2018. Margin growth was driven by flow-through from the year-over-year increase in revenue, partially offset by higher materials costs and an increase in other expenses.

Products & Services Segment

For the three months ended September 30, 2019, Products & Services net revenue totaled $48.7 million, which was generally consistent with the same period in 2018. Revenue from the distribution of O&P componentry increased by $1.9 million, or 5.7 percent, and this growth was offset by a $2.1 million decrease in revenue from therapeutic solutions.

Income from operations for the Products & Services segment decreased by $1.7 million to $5.1 million in the third quarter of 2019 compared to the same period in 2018. Adjusted EBITDA for the Products & Services segment was $8.1 million for the third quarter of 2019, which reflected a $1.6 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 increased by $0.4 million to $23.8 million for the quarter ended September 30, 2019 compared to the same period in 2018. The increase in Corporate & Other expenses relates to costs associated with the initial planning and design for the implementation of new financial and supply chain systems.

Excluding the effect of depreciation and amortization, excess third party professional fees, non-cash equity compensation expense and certain acquisition-related expenses, the net cost of corporate and other activities increased by $0.9 million to $17.6 million in the third quarter of 2019.

Net Income; Interest Expense

Interest expense totaled $9.0 million in each of the three month periods ended September 30, 2019 and 2018.

For the three months ended September 30, 2019, net income was $5.7 million compared with $4.4 million for the same period in 2018. For the three months ended September 30, 2019, GAAP diluted earnings per share was $0.15, compared to $0.12 per share in 2018. Adjusted diluted earnings per share was $0.25 for the three months ended September 30, 2019, compared to $0.22 per share for the same period in 2018.

Financial Highlights for the Nine Months Ended September 30, 2019

Net revenue was $797.2 million for the nine months ended September 30, 2019, compared to $763.9 million for the same period of 2018, reflecting net revenue growth of 4.4 percent. For the nine month period, acquisitions that occurred in late 2018 and early 2019 contributed $19.1 million to net revenue, net of consolidations and closures.

Patient Care net revenue grew $32.0 million, or 5.1 percent, for the year-to-date period to $652.7 million. Net same clinic revenue on a day-adjusted basis for the first nine months of 2019 totaled 1.8 percent. Revenue from prosthetics increased by 2.7 percent on a day-adjusted basis, while orthotics revenue increased by 0.7 percent also on a day-adjusted basis.

Products & Services segment net revenue grew $1.3 million, or 0.9 percent, driven by growth of $6.8 million in distribution services, offset by a $5.5 million decrease in revenue from therapeutic solutions.

GAAP net income was $8.8 million for the nine months ended September 30, 2019, compared to a $5.3 million net loss for the same period in 2018. Results for the year-to-date period ending September 30, 2018 included a $17.0 million pre-tax loss on the extinguishment of debt related to the Company’s March 2018 refinancing, which was partially offset by a $3.7 million one-time gain related to favorable settlements.

Adjusted EBITDA of $81.9 million for the first nine months of 2019 compares with the $81.0 million reported in the prior year period.

For the nine months ended September 30, 2019, GAAP diluted earnings per share was $0.23, compared to a loss of $0.14 per share in 2018. Adjusted diluted earnings per share was $0.45 for the first nine months of 2019, compared to $0.38 per share for the same period in 2018.

Net Cash Provided by Operating Activities; Liquidity

Cash flows provided by operating activities for the three months ending September 30, 2019 were $23.5 million compared to $20.3 million for the same period in 2018.

On September 30, 2019, the Company had liquidity of $144.8 million, comprised of $49.9 million in cash and cash equivalents, and $94.8 million in available borrowing capacity under its revolving credit facility, compared to liquidity of $133.0 million on June 30, 2019.

2019 Outlook

Based on year-to-date results, the Company reaffirms its full-year 2019 net revenue and Adjusted EBITDA outlook of: Revenue in a range between $1.075 billion and $1.105 billion, and Adjusted EBITDA in a range between $121 million and $126 million. The Company plans to provide its financial outlook for 2020 when it reports its fourth quarter and full year 2019 results in March 2020.

This 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

The Company’s management team will host a conference call tomorrow, Friday, November 8, at 8:30 a.m. Eastern time to discuss the Company’s third quarter 2019 financial results and business outlook.

To participate, dial 866-270-1533 or 412-317-0797 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: investor.hanger.com/financial-reporting.

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. – 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, visit www.hanger.com.

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 of its 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.

Table 1

Hanger, Inc.

Condensed Consolidated Statements of Operations

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

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2019

2018

2019

2018

Net revenues

279,638

262,946

797,155

763,907

Material costs

92,034

84,805

261,810

247,677

Personnel costs

94,594

90,853

272,795

266,515

Other operating costs

32,771

30,999

100,067

92,631

General and administrative expenses

29,834

28,308

87,474

80,467

Professional accounting and legal fees

3,629

3,107

9,576

12,189

Depreciation and amortization

9,373

8,950

26,906

27,552

Income from operations

17,403

15,924

38,527

36,876

Interest expense, net

8,954

8,939

25,973

28,519

Loss on extinguishment of debt

—

16,998

Non-service defined benefit plan expense

173

176

519

528

Income (loss) before income taxes

8,276

6,809

12,035

(9,169

)

Provision (benefit) for income taxes

2,585

2,440

3,260

(3,848

)

Net income (loss)

5,691

4,369

8,775

(5,321

)

Basic and Diluted Per Common Share Data:

Basic earnings (loss) per share

0.15

0.12

0.24

(0.14

)

Weighted average shares used to compute basic earnings per common share

37,349,144

36,856,881

37,218,234

36,716,568

Diluted earnings (loss) per share

0.15

0.12

0.23

(0.14

)

Weighted average shares used to compute diluted earnings per common share

37,986,860

37,556,594

37,921,767

36,716,568

Table 2

Hanger, Inc.

Condensed Consolidated Balance Sheets

(Unaudited - in thousands)

As of September 30,

As of December 31,

2019

2018

ASSETS

Current assets:

Cash and cash equivalents

49,947

95,114

Accounts receivable, net

145,378

143,986

Inventories

75,693

67,690

Income taxes receivable

—

379

Other current assets

14,615

18,731

Total current assets

285,633

325,900

Non-current assets:

Property, plant and equipment, net

84,490

89,489

Goodwill

226,348

198,742

Other intangible assets, net

17,985

15,478

Deferred income taxes

68,581

65,635

Operating lease right-of-use assets

109,838

—

Other assets

8,537

7,766

Total assets

801,412

703,010

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:

Current portion of long-term debt

8,619

8,583

Accounts payable

53,831

55,797

Accrued expenses and other current liabilities

55,908

51,783

Accrued compensation related costs

39,633

55,111

Current portion of operating lease liabilities

32,437

—

Total current liabilities

190,428

171,274

Long-term liabilities:

Long-term debt, less current portion

488,620

502,090

Operating lease liabilities

88,719

—

Other liabilities

47,851

51,570

Total liabilities

815,618

724,934

Shareholders’ deficit:

Common stock

375

371

Additional paid-in capital

350,579

343,955

Accumulated other comprehensive loss

(13,777

)

(4,531

)

Accumulated deficit

(350,687

)

(361,023

)

Treasury stock, at cost

(696

)

(696

)

Total shareholders’ deficit

(14,206

)

(21,924

)

Total liabilities and shareholders’ deficit

801,412

703,010

Table 3

Hanger, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited - in thousands)

For the Nine Months Ended September 30,

2019

2018

Cash flows provided by operating activities:

Net income (loss)

8,775

(5,321

)

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

Depreciation and amortization

26,906

27,552

Amortization of right-of-use assets

27,657

—

Provision (benefit) for doubtful accounts

284

(578

)

Stock-based compensation expense

10,089

9,573

Deferred income taxes

(723

)

(4,114

)

Amortization of debt discounts and issuance costs

1,202

2,453

Loss on extinguishment of debt

—

16,998

Gain on sale and disposal of fixed assets

(1,200

)

(2,537

)

Changes in operating assets and liabilities:

Accounts receivable, net

1,914

14,464

Inventories

(6,310

)

(3,463

)

Other current assets and other assets

(1,769

)

1,770

Income taxes

2,613

11,356

Accounts payable

(1,751

)

5,680

Accrued expenses and other current liabilities

(2,144

)

(13,061

)

Accrued compensation related costs

(15,583

)

(20,650

)

Other liabilities

(1,736

)

(2,963

)

Operating lease liabilities

(28,279

)

—

Net cash provided by operating activities

19,945

37,159

Cash flows used in investing activities

Purchase of property, plant, and equipment

(20,262

)

(16,435

)

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

(5,165

)

(6,390

)

Acquisitions, net of cash acquired

(31,585

)

—

Purchase of company-owned life insurance investment

—

(598

)

Proceeds from sale of property, plant and equipment

2,181

3,583

Net cash used in investing activities

(54,831

)

(19,840

)

Cash flows (used in) provided by financing activities

Borrowings under term loan, net of discount

—

501,467

Repayment of term loan

(3,788

)

(434,400

)

Borrowings under revolving credit agreement

—

3,000

Repayments under revolving credit agreement

—

(8,000

)

Payment of employee taxes on stock-based compensation

(3,710

)

(2,568

)

Payment on seller notes

(2,688

)

(2,116

)

Payment of financing lease obligations

(344

)

(942

)

Payment of debt issuance costs

—

(6,757

)

Payment of debt extinguishment costs

—

(8,436

)

Proceeds from exercise of options

249

—

Net cash (used in) provided by financing activities

(10,281

)

41,248

(Decrease) increase in cash, cash equivalents, and restricted cash

(45,167

)

58,567

Cash, cash equivalents, and restricted cash, at beginning of period

95,114

4,779

Cash, cash equivalents, and restricted cash, at end of period

49,947

63,346

Reconciliation of Cash, Cash Equivalents, and Restricted Cash:

Cash and cash equivalents, at beginning of period

95,114

1,508

Restricted cash, at beginning of period

—

3,271

Cash, cash equivalents, and restricted cash, at beginning of period

95,114

4,779

Cash and cash equivalents, at end of period

49,947

61,035

Restricted cash, at end of period

—

2,311

Cash, cash equivalents, and restricted cash, at end of period

49,947

63,346

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, impairments of intangible assets, third-party professional fees in excess of normal amounts incurred in connection with our financial statement remediation, debt extinguishment costs, expenses associated with equity-based compensation, severance expenses, certain expenses incurred in connection with our acquisitions, 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 September 30,

For the Nine Months Ended September 30,

2019

2018

2019

2018

Net Revenue (a)

Patient Care

230,931

214,080

652,700

620,745

Products & Services

48,707

48,866

144,455

143,162

Net revenue

279,638

262,946

797,155

763,907

EBITDA (b)

Patient Care

41,073

37,153

107,658

99,162

Products & Services

7,834

9,403

21,995

27,740

Corporate & Other

(22,131

)

(21,682

)

(64,220

)

(62,474

)

EBITDA (Non-GAAP)

26,776

24,874

65,433

64,428

Adjusted EBITDA (b)

Patient Care

42,160

38,176

110,929

102,424

Products & Services

8,070

9,641

22,721

28,083

Corporate & Other

(17,594

)

(16,680

)

(51,761

)

(49,491

)

Adjusted EBITDA (Non-GAAP)

32,636

31,137

81,889

81,016

(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 (Loss) and Earnings (Loss) 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 diluted common shares during the applicable period. Adjusted EPS is defined as EPS adjusted for impairments of intangible assets, third-party professional fees in excess of normal amounts incurred in connection with our financial statement remediation, debt extinguishment costs, severance expenses, certain expenses incurred in connection with our acquisitions, 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 September 30,

For the Nine Months Ended September 30,

2019

2018

2019

2018

Net income (loss) - as reported (GAAP)

5,691

4,369

8,775

(5,321

)

Adjustments:

Amortization expense

1,561

1,497

3,917

5,264

Third-party professional fees

2,136

2,230

5,530

8,870

Loss on extinguishment of debt

—

16,998

Acquisition-related expenses

350

—

848

—

Disaster recovery / unclaimed property settlement

—

(3,729

)

Severance expenses

—

366

(11

)

366

Adjustments prior to tax effect

4,047

4,093

10,284

27,769

Tax effect of specified adjustments (a)

(373

)

(176

)

(2,097

)

(8,312

)

Adjustments after taxes

3,674

3,917

8,187

19,457

Adjusted net income (Non-GAAP)

9,365

8,286

16,962

14,136

Basic earnings (loss) per share - as reported (GAAP)

0.15

0.12

0.24

(0.14

)

Effect of above listed specified adjustments

0.10

0.22

0.53

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

0.25

0.22

0.46

0.39

Diluted earnings (loss) per share - as reported (GAAP)

0.15

0.12

0.23

(0.14

)

Effect of above listed specified adjustments

0.10

0.22

0.52

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

0.25

0.22

0.45

0.38

Shares used to compute basic earnings (loss) per share

37,349,144

36,856,881

37,218,234

36,716,568

Shares used to compute diluted earnings (loss) per share

37,986,860

37,556,594

37,921,767

37,397,012

(a) “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 2019 and 2018 periods to the Company's earnings from operations before taxes, after the incorporation of the identified above adjustments.

Table 6

Hanger, Inc.

Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA

(Unaudited - in thousands)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2019

2018

2019

2018

Net income (loss) - as reported (GAAP)

5,691

4,369

8,775

(5,321

)

Adjustments to calculate EBITDA:

Depreciation and amortization

9,373

8,950

26,906

27,552

Interest expense, net

8,954

8,939

25,973

28,519

Loss on extinguishment of debt

—

16,998

Non-service defined benefit plan expense

173

176

519

528

Provision (benefit) for income taxes

2,585

2,440

3,260

(3,848

)

Adjustments - net income (loss) to EBITDA

21,085

20,505

56,658

69,749

EBITDA (Non-GAAP)

26,776

24,874

65,433

64,428

Further adjustments to calculate Adjusted EBITDA:

Third-party professional fees

2,136

2,230

5,530

8,870

Equity-based compensation

3,374

3,667

10,089

9,573

Acquisition-related expenses

350

—

848

—

Disaster recovery / unclaimed property settlement

—

(2,221

)

Severance expenses

—

366

(11

)

366

Further adjustments - EBITDA to Adjusted EBITDA

5,860

6,263

16,456

16,588

Adjusted EBITDA (Non-GAAP)

32,636

31,137

81,889

81,016

Table 7

Hanger, Inc.

Segment Reconciliation of Income From Operations to EBITDA and Adjusted EBITDA

(Unaudited - in thousands)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2019

2018

2019

2018

Patient Care

Income from operations - as reported (GAAP)

36,130

32,502

93,661

84,615

Depreciation & amortization

4,943

4,651

13,997

14,547

EBITDA (Non-GAAP)

41,073

37,153

107,658

99,162

Further adjustments to calculate Adjusted EBITDA:

Equity-based compensation

1,087

1,023

3,282

3,262

Severance expenses

—

(11

)

—

Further adjustments - EBITDA to Adjusted EBITDA

1,087

1,023

3,271

3,262

Adjusted EBITDA (Non-GAAP)

42,160

38,176

110,929

102,424

Products & Services

Income from operations - as reported (GAAP)

5,111

6,839

14,133

20,171

Depreciation & amortization

2,723

2,564

7,862

7,569

EBITDA (Non-GAAP)

7,834

9,403

21,995

27,740

Further adjustments to calculate Adjusted EBITDA:

Equity-based compensation

236

238

726

343

Severance expenses

—

Further adjustments - EBITDA to Adjusted EBITDA

236

238

726

343

Adjusted EBITDA (Non-GAAP)

8,070

9,641

22,721

28,083

Corporate & Other

Loss from operations - as reported (GAAP)

(23,838

)

(23,417

)

(69,267

)

(67,910

)

Depreciation & amortization

1,707

1,735

5,047

5,436

EBITDA (Non-GAAP)

(22,131

)

(21,682

)

(64,220

)

(62,474

)

Further adjustments to calculate Adjusted EBITDA:

Third-party professional fees

2,136

2,230

5,530

8,870

Equity-based compensation

2,051

2,406

6,081

5,968

Acquisition related expenses

350

—

848

—

Disaster recovery / unclaimed property settlement

—

(2,221

)

Severance expenses

—

366

—

366

Further adjustments - EBITDA to Adjusted EBITDA

4,537

5,002

12,459

12,983

Adjusted EBITDA (Non-GAAP)

(17,594

)

(16,680

)

(51,761

)

(49,491

)

Total Adjusted EBITDA (Non-GAAP)

32,636

31,137

81,889

81,016

Table 8

Hanger, Inc.

Indebtedness

(Unaudited - in thousands)

As of September 30,

As of December 31,

2019

2018

Debt:

Term Loan B

497,425

501,213

Seller notes

7,138

4,506

Financing leases and other

1,192

14,361

Total debt before unamortized discount and debt issuance costs

505,755

520,080

Unamortized discount and debt issuance costs, net

(8,516

)

(9,407

)

Total debt

497,239

510,673

Current portion of long-term debt:

Term Loan B

5,050

Seller notes

3,152

2,513

Financing leases and other

417

1,020

Total current portion of long-term debt

8,619

8,583

Long-term debt:

488,620

502,090

Net indebtedness:

Total debt before unamortized discount and debt issuance costs

505,755

520,080

Cash and cash equivalents

(49,947

)

(95,114

)

Net indebtedness

455,808

424,966

Table 9

Hanger, Inc.

Key Operating Metrics

As of and For the Three Months Ended September 30,

As of and For the Nine Months Ended September 30,

2019

2018

2019

2018

Same clinic revenue:

Growth rate on net revenue

3.7%

2.1%

1.8%

1.7%

Growth rate day adjusted (a)

2.1%

0.5%

1.8%

1.1%

Clinical locations:

Patient care clinics

695

677

Satellite clinics

106

109

Total clinical locations

801

786

(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/20191107005910/en/

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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