Hanger, Inc.

Good morning and welcome to the Hanger Second Quarter 2021 Earnings Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Seth Frank, Vice President, Investor Relations. Please go ahead.

Seth Frank Good morning. Thank you. Welcome to Hanger's second quarter 2021 earnings conference call. With us today are Vinod Asar, Hanger's President and Chief Executive Officer, and Thomas Corrales, Executive Vice President and Chief Financial Officer. Some of the information discussed today will include forward-looking statements in the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause Hanger's actual results to materially differ from those we discussed today. Those risks include, among others, matters we have identified in the forward-looking statements portion of our latest earnings release and in our filings with the SEC. Hanger disclaims any obligation to update forward-looking information discussed on this call. And now let's hand the call over to Vinny.

Thank you, Seth. Good morning and thank you for joining Hanger's second quarter 2021 earnings call. As anticipated, Hanger's second quarter results reflected a significant recovery compared to 2020. We saw a broad year-over-year rebound due to the severe demand drop experienced at the height of the COVID pandemic last year. Looking at the quarter, our patient care segment was at 96% of pre-pandemic levels. As such, the second half of the year is of critical importance in our ability to achieve our financial goals for the year. The current issues that are impacting the rate of further recovery in the near term, such as the stall in vaccination rates and the COVID variants, are ultimately transitory. That said, irrespective of the actual pace of the end of the pandemic, we believe Hanger is by far the best positioned O&P company to lead and benefit from restored growth. Reviewing our consolidated second quarter results, net revenue totaled $280.8 million, which reflected growth of 20.3% compared to the same period of 2020. Adjusted EBITDA was $31 million compared to $36.5 million last year. You will recall that we took aggressive but temporary cost reduction measures in the second quarter of 2020 that reduced our second quarter personnel and other expenses by $35 million. Looking at our two business segments, inpatient care, we saw significant year-over-year growth and a return of the historical seasonal pattern of sequential improvement that we had compared to the first quarter. For Q2, patient care segment net revenue grew 20.9%, while same clinic growth was 18.2%. When we look at trends within the segment, as a reminder, our orthotics business had experienced a significantly greater downturn than prosthetics during the early part of the pandemic. As a result, we are seeing a more pronounced year-over-year growth in orthotics than prosthetics when comparing to 2020. Orthotics revenues rebounded 40.4%. Customer orthotic devices such as ankle foot orthoses, spinal, cranial, and other categories posted strong growth as surgeries and elective procedures picked back up. In addition, our newly established national cranial care network is helping drive growth in customer orthotics. Off-the-shelf devices, as well as shoes and inserts, experienced recovery, but at a rate less than customer products. This is generally positive for our segment margins. Excluding the impact of acquisitions, prosthetic revenue growth was 4.3%. Microprocessor-based prosthetic volumes, in general, grew relatively modestly. These devices tend to be utilized by otherwise healthy and younger individuals who continued coming in to see us even during the height of the pandemic. This contrasts to prosthetic categories typically utilized by lower mobility older patients, many with chronic illnesses. The growth in this older, less mobile population aligns with what we saw in our practice last year, as these patients were profoundly impacted by care access limitations at the height of the pandemic. A key metric for Hanger as a leading healthcare provider is patient satisfaction. And as you know, we view our Net Promoter Score as a key indicator. I am pleased to share with you that despite the challenges of the ramp in patient volumes that are occurring, Hanger Clinic NPS remains solid at 86. From an operational perspective, we are facing, as are many companies, what we anticipate are temporary challenges due to the economic recovery and macroeconomic environment. Specifically, Hourly or non-exempt labor remains at high demand. Certain of our staff positions, such as distribution center workers, fabrication technicians, and front office administrators, are most impacted. Widely reported inflationary signals and capacity constraints have also created some near-term challenges. These factors are naturally creating additional demands on clinic staff and our associates in the distribution and fabrication areas. Even through this, I am encouraged and heartened by the execution and commitment to our patients and our organizational values by our associates. The current environment asks for extra effort, pitching in and maintaining a professional attitude after a long and difficult 18 months. We are fortunate to have built an environment with a DNA that embodies our corporate values and a durable service-oriented culture. Turning to the products and services segment, we also saw a return to growth. as independent O&P providers saw patient volumes improve. Segment revenue growth was 17.2% year over year. Hanger's O&P distribution business grew by 25.4% and is at approximately 89% of pre-pandemic levels. We remain focused on the transition to our new state-of-the-art distribution facility in Alpharetta, Georgia. Tom will take you through the margins in patient care as well as products and services. While our reported adjusted EBITDA declined due to normalized levels of personnel expenses in 2021, we continue to do a solid job managing G&A expense growth given current revenue levels. Operationally, we continue to build on Hanger's key differentiators and are increasingly focused on maximize our assets to accelerate and sustain growth. During the second quarter, we held our national meeting for clinic leadership. There was a lot of excitement and energy as this was the first time our regional leaders gathered in person in a year and a half. The focus was on our vision for Hanger over the next several years. We have begun to look at increasing discipline and consistency across our network to drive alignment and tighter integration within the broader healthcare system. This is becoming an imperative in a risk-based healthcare environment. and we believe Hanger is appropriately positioned as the leading partner for ONP services on a national scale. Hanger's commitment to putting the patient first, backed by our substantial investments in clinical research and a focus on excellence, continues to support and advance our reputation among medical professionals and payers nationally. We have a solid clinical systems platform, patient connectivity, and an integrated revenue cycle process all of which enable payer compliance and documentation requirements while ensuring low friction access to vital O&P services. Focusing on centers of excellence and establishing regional specialty hubs present longer-term opportunities to enhance productivity while optimizing patient outcomes. With regards to acquisitions, I am pleased with our initial progress since the pandemic-related pause we took in 2020 after the landmark acquisition of Shekin Cyrus. We've acquired six independent O&P providers in 2021 through the end of June, bringing our total nationwide clinic count to 835. These new clinic locations span the southwest part of the country, California, the southeast, and the mid-Atlantic areas. We welcome these associates and patients to hanger. Looking ahead to the remainder of 2021, we continue to be optimistic in our ability to add to our network through selective acquisitions that will strengthen Hanger's growth strategy. It is important to note that several team members that have come to us via acquisitions have taken on significant management positions across Hanger in regional and national roles. It is an indication of the strength of the teams we are bringing into Hanger combined with the myriad of career opportunities available to them as they join us. In conclusion, we achieved solid results this quarter and are in a good position for the year to date. As Tom will discuss, our outlook for the remainder of the year is predicated on a continued improvement of the business environment. Despite these immediate term challenges, when you combine the strength of our experienced senior leadership team, our financial condition, and the benefits of our portfolio gaining better understanding and recognition broadly. We continue to be optimistic about Hanger's growth prospects as the pandemic ends. Thank you for your interest in us. I will now turn the call over so we can get more details on the financials. Tom. Thanks, Bennett.