Hanger Reports Fourth Quarter 2019 Results and Provides 2020 Outlook
AUSTIN, Texas –
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 fourth quarter and year ended December 31, 2019.
Financial Highlights for the Fourth Quarter of 2019
- Net revenue was $300.9 million for the three months ended December 31, 2019, compared to $284.9 million for the same period in 2018, reflecting growth of 5.6 percent. Patient Care segment net same clinic revenue grew by 2.9 percent.
- Net income was $18.8 million for the three months ended December 31, 2019, compared to $4.5 million for the same period in 2018. Fourth quarter 2019 net income benefited from a $7.1 million reduction of certain tax valuation allowances relating to state tax deferred assets.
- Adjusted EBITDA was $42.4 million in the fourth quarter, compared to $40.0 million for the same period in 2018, reflecting an increase of $2.3 million or 5.8 percent. Growth in Adjusted EBITDA was driven by a $16.4 million increase in Patient Care segment revenue and a resulting $5.2 million increase in segment Adjusted EBITDA.
- GAAP diluted earnings per share was $0.49 for the fourth quarter of 2019, compared to $0.12 for the same period in 2018. Adjusted diluted earnings per share was $0.45 for the three months ended December 31, 2019, compared to $0.40 for the same period in 2018, a 12.5 percent increase year-over-year.
- The Company introduced its 2020 financial outlook for revenue and earnings growth (see "2020 Outlook" within this release).
Vinit Asar, President and Chief Executive Officer of Hanger, Inc., stated, "I'm pleased with our strong finish to the year. We accomplished the key operating and financial objectives that we established at the start of 2019. Our patient care segment achieved same clinic revenue growth of 2.1 percent for the year through growth in both our prosthetics and orthotics portfolios. I believe these results have demonstrated the benefits of our strategy to elevate the value of our clinical care through a focus on patient outcomes and services, positioning us for continued momentum in 2020."
Segment Results for Three Months Ended December 31, 2019
Patient Care Segment
For the three months ended December 31, 2019, Patient Care net revenue was $253.0 million, an increase of $16.4 million or 6.9 percent, compared to the same period in 2018. Total revenue growth for the segment includes $9.1 million of revenue from O&P clinics acquired in late 2018 and early 2019, inclusive of consolidations.
Net same clinic revenue grew by 2.9 percent during the quarter. Revenue from prosthetics increased 4.4 percent and net revenue from orthotics grew 1.3 percent. Prosthetics comprised 57.3 percent of Patient Care segment net revenue during the fourth quarter of 2019 as compared with 56.5 percent during the same period in 2018.
Income from operations in the Patient Care segment was $47.9 million during the fourth quarter of 2019, reflecting growth of $5.7 million or 13.6 percent compared to the $42.2 million reported in the prior year. Adjusted EBITDA for the segment was $53.6 million, which reflected a $5.2 million or 10.7 percent increase compared to the prior year period. Adjusted EBITDA margin in the segment totaled 21.2 percent compared to 20.5 percent during the fourth quarter of 2018.
Products & Services Segment
For the three months ended December 31, 2019, Products & Services net revenue totaled $47.9 million, which reflected a decline of $0.3 million compared with the same period in 2018. Revenue from the distribution of O&P componentry increased by $0.6 million and revenue from therapeutic solutions decreased by $0.9 million.
Income from operations for the Products & Services segment decreased by $1.5 million to $3.8 million in the fourth quarter of 2019 compared to the same period in 2018. Adjusted EBITDA for the Products & Services segment was $6.5 million for the fourth quarter of 2019, which reflected a $1.9 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
Corporate and other activities segment operating expenses totaled $24.8 million for the quarter and were consistent with the same period in 2018. An increase in costs related to information technology, including the initial planning and design for the implementation of new financial and supply chain systems was offset by a decline in other overhead-related costs.
Excluding the effects 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 $17.8 million during the quarter, which reflected a 5.5 percent increase.
Net Income; Interest Expense
Interest expense totaled $8.3 million in the three month period ended December 31, 2019, a decline of $0.8 million compared to the same period of 2018.
Due primarily to favorable patient care segment results, income before taxes grew by 36.1 percent in the quarter to $18.4 million. After incorporating the effect of taxes, net income totaled $18.8 million compared with $4.5 million for the same period in 2018. Growth in net income benefited in part by the reduction of a $7.1 million valuation allowance on certain state deferred tax assets.
For the three months ended December 31, 2019, GAAP diluted earnings per share was $0.49, compared to $0.12 per share in 2018. Adjusted diluted earnings per share was $0.45 for the three months ended December 31, 2019, compared to $0.40 per share for the same period in 2018.
Financial Highlights for the Year Ended December 31, 2019
Net revenue was $1,098.0 million for the year ended December 31, 2019, compared to $1,048.8 million for the same period of 2018, reflecting net revenue growth of 4.7 percent. For the twelve month period, acquisitions that occurred in late 2018 and early 2019 contributed $28.9 million to net revenue growth, inclusive of consolidations.
Patient Care net revenue grew $48.3 million, or 5.6 percent, for the year to $905.7 million. Net same clinic revenue growth for 2019 totaled 2.1 percent. The number of clinic operating days was equivalent for both 2019 and 2018.
For the full year of 2019, excluding the effect of acquisitions, revenue from prosthetics increased by 3.2 percent, while orthotics revenue increased by 0.9 percent.
Products & Services segment net revenue grew $1.0 million, or 0.5 percent, driven by growth of $7.4 million in distribution services, offset by a $6.4 million decrease in revenue from therapeutic solutions. The revenue decline in therapeutic solutions was within the range originally anticipated for 2019.
Net income was $27.5 million for the year ended December 31, 2019, compared to a $0.9 million net loss for the same period in 2018. Results for the period ending December 31, 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 $124.2 million for 2019 compares with the $121.1 million reported in the prior year.
For the year ended December 31, 2019, GAAP diluted earnings per share was $0.72, compared to a loss of $0.02 per share in 2018. Adjusted diluted earnings per share was $0.90 for 2019, compared to $0.78 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 December 31, 2019 were $38.9 million compared to $41.4 million for the same period in 2018. This decrease related in part to expenditures of $1.7 million incurred in the fourth quarter of 2019 related to the Company's implementation of cloud computing systems associated with its supply chain and financial systems project.
On December 31, 2019, the Company had liquidity of $169.2 million, comprised of $74.4 million in cash and cash equivalents, and $94.8 million in available borrowing capacity under its revolving credit facility, compared to liquidity of $144.8 million on September 30, 2019.
2020 Outlook
The Company currently anticipates 2020 net revenue in a range between $1.125 billion and $1.155 billion, and Adjusted EBITDA in a range between $129.0 million and $134.0 million.
It is expected that revenue and earnings growth will primarily be driven by continued same clinic growth and margin expansion in its Patient Care segment. Products & Services segment revenue is anticipated to decline modestly due to the discontinuance of the distribution of some low-margin orthotics products to podiatrists.
The Company's outlook for 2020 includes approximately $27 million in revenue relating to the full year of contribution of acquisitions previously completed in 2019 and acquisitions having signed definitive agreements as of March 5, 2020.
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, Thursday, March 12, at 8:30 a.m. Eastern time to discuss the Company’s fourth quarter and full year 2019 financial results and business outlook for 2020.
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: www.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, 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; impacts of a pandemic, epidemic or widespread outbreak of an infectious disease in the United States; changes in the demand for the Company’s O&P products and services, including additional competition in the O&P services market; disruptions to the Company’s supply chain; 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; and other risks and uncertainties generally affecting the health care industry. For additional information and risk factors that could affect the Company, see its annual, quarterly and other reports filed with the Securities and Exchange Commission from time to time. 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. |
||||||||||||||||
Consolidated Statements of Operations |
||||||||||||||||
(in thousands, except share and per share amounts) |
||||||||||||||||
|
|
For the Three Months Ended
|
|
For the Years Ended
|
||||||||||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
Net revenues |
|
$ |
300,891 |
|
|
$ |
284,853 |
|
|
$ |
1,098,046 |
|
|
$ |
1,048,760 |
|
Material costs |
|
95,961 |
|
|
90,340 |
|
|
357,771 |
|
|
338,017 |
|
||||
Personnel costs |
|
99,430 |
|
|
97,574 |
|
|
372,225 |
|
|
364,089 |
|
||||
Other operating costs |
|
34,876 |
|
|
31,271 |
|
|
134,943 |
|
|
123,902 |
|
||||
General and administrative expenses |
|
30,591 |
|
|
29,085 |
|
|
118,065 |
|
|
109,552 |
|
||||
Professional accounting and legal fees |
|
4,113 |
|
|
4,726 |
|
|
13,689 |
|
|
16,915 |
|
||||
Depreciation and amortization |
|
9,019 |
|
|
8,903 |
|
|
35,925 |
|
|
36,455 |
|
||||
Impairment of intangible assets |
|
— |
|
|
183 |
|
|
— |
|
|
183 |
|
||||
Income from operations |
|
26,901 |
|
|
22,771 |
|
|
65,428 |
|
|
59,647 |
|
||||
Interest expense, net |
|
8,285 |
|
|
9,046 |
|
|
34,258 |
|
|
37,566 |
|
||||
Loss on extinguishment of debt |
|
— |
|
|
— |
|
|
— |
|
|
16,998 |
|
||||
Non-service defined benefit plan expense |
|
172 |
|
|
176 |
|
|
691 |
|
|
703 |
|
||||
Income before income taxes |
|
18,444 |
|
|
13,549 |
|
|
30,479 |
|
|
4,380 |
|
||||
(Benefit) provision for income taxes |
|
(306 |
) |
|
9,086 |
|
|
2,954 |
|
|
5,238 |
|
||||
Net income (loss) |
|
$ |
18,750 |
|
|
$ |
4,463 |
|
|
$ |
27,525 |
|
|
$ |
(858 |
) |
|
|
|
|
|
|
|
|
|
||||||||
Basic and Diluted Per Common Share Data: |
|
|
|
|
|
|
|
|
||||||||
Basic earnings (loss) per share |
|
$ |
0.50 |
|
|
$ |
0.12 |
|
|
$ |
0.74 |
|
|
$ |
(0.02 |
) |
Weighted average shares used to compute basic earnings per common share |
|
37,411,847 |
|
|
36,906,938 |
|
|
37,267,188 |
|
|
36,764,551 |
|
||||
Diluted earnings (loss) per share |
|
$ |
0.49 |
|
|
$ |
0.12 |
|
|
$ |
0.72 |
|
|
$ |
(0.02 |
) |
Weighted average shares used to compute diluted earnings per common share |
|
38,415,108 |
|
|
37,721,662 |
|
|
38,064,617 |
|
|
36,764,551 |
|
||||
Table 2 |
||||||||
Hanger, Inc. |
||||||||
Consolidated Balance Sheets |
||||||||
(in thousands) |
||||||||
|
|
As of December 31, |
||||||
|
|
2019 |
|
2018 |
||||
ASSETS |
|
|
|
|
||||
Current assets: |
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
74,419 |
|
|
$ |
95,114 |
|
Accounts receivable, net |
|
159,359 |
|
|
143,986 |
|
||
Inventories |
|
68,204 |
|
|
67,690 |
|
||
Income taxes receivable |
|
— |
|
|
379 |
|
||
Other current assets |
|
13,673 |
|
|
18,731 |
|
||
Total current assets |
|
315,655 |
|
|
325,900 |
|
||
Non-current assets: |
|
|
|
|
||||
Property, plant, and equipment, net |
|
84,057 |
|
|
89,489 |
|
||
Goodwill |
|
232,244 |
|
|
198,742 |
|
||
Other intangible assets, net |
|
17,952 |
|
|
15,478 |
|
||
Deferred income taxes |
|
70,481 |
|
|
65,635 |
|
||
Operating lease right-of-use assets |
|
110,559 |
|
|
— |
|
||
Other assets |
|
11,305 |
|
|
7,766 |
|
||
Total assets |
|
$ |
842,253 |
|
|
$ |
703,010 |
|
|
|
|
|
|
||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) |
|
|
||||||
Current liabilities: |
|
|
|
|
||||
Current portion of long-term debt
|
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Hanger Announces Date of 2020 Fourth Quarter Earnings Release and Conference CallAUSTIN, Texas – Hanger, Inc. (NYSE: HNGR), a leading provider of orthotic and prosthetic patient care services and solutions, today announced it will report its financial results for ...weiterlesen
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