Hanger, Inc.

Hello and welcome to the Hangar's first quarter 2022 earnings conference call. My name is Juan and I will be coordinating the call today. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session. To ask a question at that time, please press star followed by number one on your telephone keypad. I will now hand over to your host, Acer Duhos, Managing Director of WestWake, to begin. So, Acer, please go ahead when you're ready.

Good morning and welcome to Hanger's first quarter 2022 earnings conference call. With us today are Vinit Asar, Hanger's President and Chief Executive Officer, and Thomas Corrale, 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 risk uncertainties that can cause Hanger's actual results to materially differ from those that we discussed today. Those risks include Among other things, matters that we have identified in our forward-looking statement portion of our latest earnings call and in our filings with the SEC. Hanger disclaims any obligation to update forward-looking information discussed on this call. And now, I'll hand the call over to Vinit.

Thank you, Asher. Good morning, and thank you all for joining Hanger's first quarter 2022 earnings call. Joining me on today's call is Tom Corrale, Hanger's Chief Financial Officer. This morning, I would provide some high level thoughts on our first quarter 2022 results, followed by an update on our business segment and operational performance. Tom will then discuss our financial results in more detail, after which we will open the call for questions. We finished Q1 with a solid top line performance, despite starting the year facing the remnants of the Omicron surge and its effect on our operations. You will recall that the first six weeks of the year, were significantly impacted by COVID-related disruptions, which subsided towards the end of the quarter. First quarter revenue of $261.3 million reflected a strong top line growth of 10%. Our adjusted EBITDA of $8.9 million was impacted by a couple of short-term items that I'll get into in a minute. A few things I'd like to note about our quarterly results. First, a solid 6.9% same clinic revenue performance in our patient care segment and an overall 10% revenue growth has given us a strong start to the year. It reflects the efforts put in by our teams around the country that navigated a difficult operating environment, especially during the first half of Q1. We were pleased to see these results, which reflect continued recovery and return of patient volumes in our clinics. It is important to note that the strong revenue growth in Q1 this year compared to Q1 of last year was achieved despite the abnormally low revenue disallowance rate we had experienced last year. Tom will provide more color on the impact of this on our adjusted EBITDA comparisons in his prepared remarks. Second, as part of our supply chain strategy, we relocated one of our largest central fabrication centers into a purpose-built state-of-the-art 49,000 square foot central fabrication center in Phoenix. This new facility includes lean manufacturing, training, and automation areas consisting of digital carvers, 3D printers, and a robotic cell. This move, which experienced a delay during the quarter due to local permitting issues, is now fully operational and will be extremely beneficial to our operations on a go-forward basis. Third, the impact of Omicron was especially significant in the first half of Q1, driven by elevated levels of sick leave during this period. The combination of this staffing shortage as well as the temporary disruption caused by the delay of our fabrication center move required an extensive use of higher cost third party fabrication and temporary labor during this time. We expect the impact of these issues to subside in Q2. Fourth, during the quarter, despite the effects of Omicron, we were able to both deliver on the work in process that had built up at December 31st, as well as replenish our WIP balance to levels significantly higher than those we carried last year at this time. This sets the stage for continued positive growth trends in Q2. Lastly, as some of you know, the first quarter is seasonally the lowest contributing quarter for our business. and shouldn't be used to extrapolate our performance for the full year. We expect earnings growth in the second quarter to accelerate, which follows our normal seasonality. Now I'll drill down into the results of our two business segments. During the first quarter, patient care revenue increased 12.3% year over year, driven by 6.9% same clinic revenue growth. Our prosthetics business in this segment edged up to 52.1% of our portfolio, up from 51.7% compared to the same quarter in the prior year. On a same clinic basis, we were also pleased to see prosthetics revenue grow 7.7% in Q1 this year versus 2021. Products and services revenues of $41.5 million for the quarter remained largely in line with the prior year. While revenues in the distribution segment were slightly higher than the same period of 2021, we did see a margin degradation in the business driven by freight, the normalization of bad debt, and other operating costs. Our therapeutic solutions business showed a slight decline in revenues, mirroring the pressures faced by their skilled nursing customers and their reduced census. Overall, when we look at our results, we feel our first quarter patient care revenue growth of 12.3%, which constituted 84% of our revenues this quarter, establishes a solid foundation for the year as we return to normalcy. With regards to our progress on tuck-in acquisitions, we closed on one transaction during Q1, and our M&A pipeline remains robust as we expect deal activity to continue through the year. Our capital deployment strategy is diligent and balanced, as we look to grow and add to our business in an accretive manner, while also looking to reduce our leverage ratio as we keep a close eye on the interest rate environment. During our last update in early March, we discussed a number of strategic initiatives and clinical studies which highlight their importance and value creation for Hanger. We continue to push forward with these initiatives as we are convinced that this will help drive mindshare and incremental business over the long run. Separately, in early April, we published a new ESG report, which highlights the initiatives and processes underway as part of our ESG journey. Given the combination of our values and the purpose-based nature of what we do, Hanger's ESG philosophy aligns naturally with and is intended to support our core business strategy. You can access our ESG report at hanger.com. With regards to our full year 2022 guidance, given our solid revenue trends and strong patient volumes, we are maintaining our full year outlook. Before I turn the call over to Tom to discuss our first quarter financial results, I want to thank our entire organization for their hard work and dedication that enabled us to generate these results. Together, we will continue to focus forward and unleash the full potential of Hanger, building on our efforts over the last several years while gaining share and providing the highest quality care for patients and customers. I want to thank everyone on the call for your interest and anger. And with that, I turn the call over to Tom, who will provide more details on our financial results and guidance. Tom.