Hanger, Inc.

Hello and welcome to the Hanger's Third Quarter 2021 Early Development School. My name is Alex and I'll be coordinating the call today. If you would like to ask a question, you can press star 1 on your telephone keypad. If you would like to withdraw your question, you can press star 2. I'll now hand over to your host, Seth Frank, Vice President of Investor Relations. Seth, over to you.

Good morning. Thank you. Welcome to Hanger's third quarter 2021 earnings conference call. With us today are Vinted Officer, Hanger's President and Chief Executive Officer, and Thomas Crowley, 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 Bennett. Thank you, Seth.

Good morning, and thank you for joining Hanger's third quarter 2021 earnings call. I am pleased with our performance in Q3, despite the headwinds we faced as a result of the Delta variant. Reviewing our consolidated results, net revenue totaled $289.8 million, reflecting a 12.9% growth over the same period last year. Adjusted EBITDA, was $37.2 million compared to $27.9 million last year. These results reflect a continuing organic recovery in our patient care business, complemented by acquisitions of independent O&P clinics across the United States. As we have seen with other healthcare service companies, the impact of the Delta variant adversely affected our Q3 results, especially in August and September, which we had anticipated would be stronger. We believe there are three key pandemic-driven factors that have affected our business and provide insight into how our patients and the O&P industry at large has fared. First, during this pandemic, there has been a significant reduction in both outpatient and inpatient procedures, which decreased the ability of patients to access our referral sources at ambulatory clinics. Personnel shortages and delayed appointment times have created further pressures in the rate of utilization within healthcare facilities for non-COVID related procedures. This is an important data point as people with disabilities have been disproportionately impacted by the pandemic because of serious disruptions to the services they rely on. As access to outpatient clinics and elective procedures increase and return to normal levels, we believe our business at Hanger will be in a position to benefit from these improving trends. While the pace of this recovery may not be as swift as we would want it to be, we have confidence that it will occur over a period of time. A second factor relates to patient hesitancy. Because of concerns about COVID-19, patients are avoiding or delaying both emergent and routine medical care. Many of these individuals, predisposed by the nature of their health status and age or both, have mobility challenges. Some patients who require orthotic and prosthetic care or therapeutic footwear are delaying appointments. Others are putting off the refurbishment or replacement of a device because they are hesitant. As the pandemic continues to subside, patient hesitancy will diminish and we will likely see increased patient visits as a result. The effect of the pandemic on the healthcare system and the resulting delays in healthcare has also had a harmful impact on people with diabetes-related foot problems, resulting in more severe infections and will likely necessitate more amputations. While we cannot predict the pace and volume of these additional pandemic-related amputations, we feel that the realization of this pent-up demand for our services will occur over time. Third, for many of our patients, this hesitancy and the challenges associated with accessing medical services increases the mortality associated with both chronic and acute health conditions. We continue to review data to inform us of the impact that COVID has had and continues to have on the patients we serve. It is inevitable that a percentage of our patients and those with chronic core morbidities such as cardiovascular disease, hypertension, diabetes, and pulmonary disease have been more prone to severe and fatal COVID-19 outcomes. In addition to these three factors, there are a number of capacity and personnel-related constraints secondary to macroeconomic challenges impacting operations. As discussed in our Q2 call, we, along with many businesses in the broad economy, are facing a tight labor market which primarily impacts us in the front office of our clinics, in our fabrication facilities, and in our distribution centers. Supply chain logistics, such as longer delivery freight times, are also a challenge, but are not alone determinative. I would note, year to date, we have had relatively good success with the supply chain and are remaining vigilant on inflation. Overall, these are challenges that we believe Hanger is better positioned to deal with in the near term than the broader O&P industry because of our scale and infrastructure, as well as the talent pool we have assembled. Ultimately, these pandemic-related challenges will subside. And as they do, we anticipate an above-market growth trajectory based on our organic growth strategy and our previously discussed differentiators, supplemented by a prudent deployment of capital for acquisitions. Let me take a few moments and share more details on our progress within the business during Q3. In our patient care business, revenues grew 14.9% compared to prior year as reported. On a same clinic basis, segment net revenue grew 10.7% for the quarter compared to a year ago. When we look at quarterly net revenue trends for the segment, compared to pre-pandemic levels on a same clinic basis, patient care improved to approximately 99% of the comparable quarter in 2019. Although we are pleased with the recovery, we had anticipated stronger results. There is a clear trend showing recovery in prosthetics and custom orthotics. and a decline in the lower margin off-the-shelf orthotic products. This decline is more pronounced than anticipated. As an example, revenues for our higher technology devices for lower extremity prosthetic patients are at 107% of pre-pandemic levels, while our lower margin off-the-shelf orthotic products are at 77%. We believe that the reduction in elective procedures and the previously announced competitive bidding process of select codes is driving this lagging trend in off-the-shelf orthotics. On the acquisition front, we acquired four additional independent O&P clinic businesses during the quarter. These new clinics are located in Minnesota, Montana, Texas, and our first site in Alaska. We welcome these associates and their patients to Hanger. With the transactions completed thus far, we are on track for a significant year of acquisitions. This is a reflection of the unparalleled value proposition that Hanger brings to independent O&P providers. Shifting to the products and services segment, revenue growth was 3.4% compared to the third quarter of 2020. Within the segment, our O&P distribution business grew by 6% on a reported basis, implying a continued gradual recovery from 2020 in the rest of the O&P industry. Relative to 2019, on a pro forma basis, adjusting for new distribution clients we acquired and the exit of low margin channels, we estimate 2021 third quarter revenue to be running at approximately 94% of pre-pandemic levels. This marks a continued improvement from 89% in the second quarter of this year. Regarding our overall business results, as I stated earlier, we are satisfied with the quarter, yet, Our lower than anticipated exit rate from the quarter due to the Delta variant points to a softer second half than we would have liked. Given that we had assumed COVID-19 to have been behind us by the end of Q2 in our original guidance for this year, we are adjusting our outlook to reflect this lingering impact on our business for the back half of 2021. Tom will walk you through this and other financials in detail. Meanwhile, as you heard today, there are additional pressures on independent O&P providers above and beyond normal reimbursement challenges and the complexity of administering their business. Current patient volume shortfalls, supply chain and personnel issues are further taxing independent providers which we believe will catalyze an accelerated movement of legacy providers to partner or leave the business altogether. Hanger is ideally positioned to deploy our capital and acquire independent O&P businesses that provide a sound strategic, cultural, and geographic fit within our network, while providing shareholders an excellent long-term return through earnings growth and increased scale. We have closed 10 different transactions through the third quarter this year, and we see meaningful additional activity in the fourth quarter and into 2022. To wrap up, I am truly appreciative of the efforts put forth by our teams nationwide through the pandemic, and now particularly in light of the recent Delta surge. We believe several transient pandemic-related factors have impacted the rate of our recovery back to pre-pandemic levels. Because we have learned so much during this painful time, I am more confident in the soundness of our strategy and overall market positions. Thank you for your interest in us. I will now turn the call over to Tom so we can get more detail on the financials. Tom?