Investor Presentation · 2020. 9. 2. · • Industry leader in orthotics & prosthetics services...

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InvestorPresentationAugust 2020

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Cautionary Note

2

Forward Looking Statements

This investor presentation contains statements that are forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include information concerning our liquidity and our

possible or assumed future results of operations, including descriptions of our business strategies. These statements often include words such as “believe,” “expect,” “project,” “potential,” “anticipate,” “intend,”

“plan,” “estimate,” “seek,” “will,” “may,” “would,” “should,” “could,” “forecasts” or similar words. These statements are based on certain assumptions that we have made in light of our experience in the industry as

well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate in these circumstances. We believe these assumptions are reasonable, but

you should understand that these statements are not guarantees of performance or results, and our actual results could differ materially from those expressed in the forward-looking statements due to a variety of

important factors, both positive and negative, that may be revised or supplemented in subsequent releases or reports. These statements involve risks, estimates, assumptions, and uncertainties that could cause

actual results to differ materially from those expressed in these statements and elsewhere in this presentation. These uncertainties include, but are not limited to, the financial and business impacts of COVID-19 on

our operations and the operations of our customers, suppliers, governmental and private payers and others in the healthcare industry and beyond; 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; changes in the demand for our O&P products and services, including

additional competition in the O&P services market; disruptions to our supply chain; our ability to enter into and derive benefits from managed-care contracts; our 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 Form 10-K for the year ended December 31,

2019 and Quarterly Report on Form 10-Q for the three months ended June 30, 2020, each as filed with the Securities and Exchange Commission. The information contained in this investor presentation is made only

as of the date hereof, even if subsequently made available by the Company on its website or otherwise.

Note Regarding the Presentation of non-GAAP Financial Measures: This presentation includes certain “non-GAAP financial measures” as defined in Regulation G under the federal Securities Exchange Act of 1934.

Non-GAAP measures include Adjusted EBITDA, Adjusted EBITDA Margin, adjusted earnings per share, leverage ratios, free cash flow. As required under Regulation G, Reconciliations of GAAP and non-GAAP financial

results are included in schedules at the Appendix. These schedules reconcile the non-GAAP financial measures included in this presentation to the most direct comparable financial measure under generally-accepted

accounting principles in the United States. The non- GAAP measures contained herein are used by the Company’s management to analyze the Company’s business results and are provided for informational and

analytical context.

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Agenda

3

Company Overview

The Orthotics and Prosthetics Market

Patient Care Segment

Products and Services Segment

Financial Performance

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Company Overview

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Hanger

5

At Glance

WHO WE ARE

BY THE NUMBERS3

1Source: Hanger Inc. estimates.2Adjusted EBITDA is a non GAAP-measure. Please see the Appendix for a reconciliation of GAAP

to non-GAAP metrics.3Calendar Year 2019 unless noted.

• Industry leader in orthotics & prosthetics services

• $4.3 billion1 addressable O&P domestic U.S. market

• Pioneered prosthetic devices in 1861

• Focus on custom devices

• Net Revenue $1.098 billion

• Adjusted EBITDA2 $124.2 million

• 4,900 FTEs (as of 6.30.20)

• 815 clinic & satellite locations in 46 states and D.C. (as of 6.30.20)

• Two segments:

• Patient Care (82.5% revenue)

• Products & Services (17.5% revenue)

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Hanger

O U R V A L U E S O U R V I S I O N

6

O U R P U R P O S E

Values, Vision and Purpose

Patient-focused, integrity,

outcomes, collaboration,

innovation – are the heartbeat of a

cultural evolution that places our

patients at the core of everything

we do

To lead the orthotic and

prosthetic markets by providing

superior patient care, outcomes,

services and value

Empowering Human Potential

Together

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Business Mix

7

Primary Focus on the Provision of Specialty Health Care

Net Revenue1

$1.098 BILLION

Adjusted EBITDA1, 2

$124.2 MILLION – 11.3% EBITDA MARGIN

Patient Care

$905.7 million

82.5% revenue

Products &

Services

$192.4 million

17.5% revenue

Patient Care

$164.6 million

18.2% margin

Corporate &

Other

($69.5) million

Products &

Services

$29.2 million

15.2% margin

1Calendar Year 2019.2Adjusted EBITDA is a non-GAAP measure. Please see the Appendix for a reconciliation of GAAP to non-GAAP metrics.

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Investment Thesis

S I Z E AB L E M A R KE T

8

D I F FE R E N T I AT OR S

Industry Leader Building Sustainable Competitive Advantage

The leading provider

of orthotic and prosthetic

services in the United States

Provides approximately 21% of

all O&P services

in the United States

$4.3 billion market for

prescription prostheses,

orthoses and prefabricated or

off-the-shelf orthoses

Broad demand drivers across

injuries and multiple, high

prevalence disease etiologies

Competitive differentiation

through investments in clinical

outcomes, centralized revenue

cycle management, patient

engagement and supply chain to

drive growth

G R O W T H L E V E R S

Multi-tier strategy to grow

organically, steadily expand

margins and pursue M&A to

drive incremental growth

opportunities

Premier scalable provider in a large market for specialized healthcare services

M A R KE T L E AD E R

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The Orthotics and Prosthetics Market

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10

Approximately 45% of Patient Care Revenue

• Orthotic devices modify the structural and

functional characteristics of the neuromuscular

and skeletal system

• Prescribed for injuries, musculoskeletal,

neurological or orthopedic disorders

• Hanger Clinic emphasizes fabrication of

customized devices

Orthotics

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Approximately 55% of Patient Care Revenue

• Prosthetic devices replace a missing limb or portion of a limb

• Provided to patients with amputated or congenitally absent limbs to replace the function and appearance of a limb

• Prosthetics are customized to meet the unique location and characteristics of the patient and their residual limb

• Prostheses have an average useful life ranging 3-5 years

Prosthetics

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Prosthetics: Large & Growing Addressable Market

12

Approximately 500,000 People Living with Major Limb Loss in the U.S.

• Approximately 350,000 people with major limb loss utilize a prosthesis

• Over 90% are lower extremity

• Traumatic amputations tend to have a positive long-term prognosis

• Typically have a 3-5 year replacement cycle (70% recurring revenue)

• Prosthetics total approximately 50% of the prescription O&P market

$400,000

$420,000

$440,000

$460,000

$480,000

$500,000

$520,000

2016 2017 2018 2019

Hanger Prosthetics Sales

Sources:

Ziegler-Graham, et al., “Estimating the Prevalence of Limb Loss in the United States: 2005 to 2050”,

Arch Phys Med Rehabil 2008:89, 422-429;

Dillingham et al., “Rehabilitation Setting and Associated Mortality and Medical Stability Among Persons

With Amputations”, Arch Phys Med Rehabil 2008:89, 1038-1045;

Ahmad N, Thomas GN, Gill P, Chan C, Torella F. Lower limb amputation in England: prevalence, regional

variation and relationship with revascularisation, deprivation and risk factors. A retrospective review of

hospital data. J R Soc Med 2014;107:483-9.

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O&P Market: $4.3 billion

13

Diverse Disease State Mix Drives Demand

Addressable market currently growing at 1.5-2.0% annually

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600 Injuries

Approximately 76,000 major amputations per year, 5-10% of which are due to injury.

+$1 billion spent on prosthetics secondary to injury

Endocrine & Circulatory

Endocrine and circulatory disorders drive the majority of major amputations. Mix of

prosthetics and orthotics

Musculoskeletal Disease

Arthritis, spinal and foot disease requiring braces, boots and supports. Orthotics-only

market

Other

Congenital, cancer and acute infections. May require prosthetics (i.e. congenital limb

difference) or orthotics (i.e. cranial orthosis for plagiocephaly)

Nervous System

795,000 strokes per year – 75% occur in people +65, cerebral palsy, multiple

sclerosis. Ankle-foot orthosis, braces

$ millions

$1.4

$1.2

$1.0

$0.5

$0.2

Sources: Hanger Estimates

Note: “Major amputation or limb loss refers to a lower extremity, above or below the knee and upper limb, or combination thereof”

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15

Building Sustainable Advantages in a Fragmented Industry

• National network and market leadership

• Unique ability to measure and improve patient

outcomes

• Driving patient engagement, connectivity and

satisfaction

• Optimizing reimbursement through centralized

revenue cycle management

• Enhancing productivity and efficiency through

an enterprise supply chain

Net

Revenue

Adjusted

EBITDA2

Products &

Services

Patient Care1

$905.7 million

82.5% revenue

G&A

Patient Care1

$164.6 million

18.2% margin

1Calendar Year 2019.2Adjusted EBITDA is a non GAAP measure. Please see the Appendix for a reconciliation of GAAP to non-GAAP metrics.

Products &

Services

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General Lower Extremity Patient Rehab Timeline

16

Schedule

prosthetist & pre-op

peer visit

• Apply post-op

protector

• Schedule post-op

peer visit

• Begin limb

shaping and pre-

prosthetic

training

• Remove sutures

• Wear shrinker to

manage limb

volume

• Initial prosthetic

evaluation

• Incision fully healed

• Measure for

prosthesis

• Limb volume

stabilization

• Ongoing therapy

and prosthetic

adjustments

• Fit first prosthesis

• Prosthetic gait

training

Pre-Op Post-Op Recovery Healing Initial Device Maturation Definitive Device

• First definitive

prosthesis

delivery

• Patient continues

to work toward

long term rehab

goals

• Follow-up adjustments

• Patient events and

continued peer support

• Device replacements every

3 – 5 years.

Holistic Care

Hanger provides comprehensive patient care for a lifetime

Note: Example timeline for a new amputee reflects a general rehabilitation for a lower extremity vascular amputation patient, actual experiences vary. Replacement devices average a 45-60 day replacement cycle.

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Scale as a Competitive Advantage

17

National Network Brings Hanger Closer to the Community

1,600 CLINICIANS

Hanger employs over 20% of the board certified O&P clinicians in the U.S.

Competitors are spread out in small local practitioner settings

N ATIONWIDE NET WORK

Hanger’s broad provider footprint allows for a healthy diversity of payor and referral sources

Geographic diversity insulates Hanger from local or market specific challenges

800+ PATIENT CARE LOCATIONS

Hanger is the only O&P provider operating a nationwide network of patient care clinics in 46 states and D.C.

2 MILLION ANNUAL PATIENT ENCOUNTERS

Hanger has the highest volume of O&P patients as compared with any provider

Enables Hanger to develop and deliver best practices in O&P care

Hanger Patient Care Clinics

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Market Leader

18

In a Fragmented Industry

O&P Patient Care Clinic Market1

(by location)

• Hanger currently operates 815 patient care locations nationally

• 707 patient care clinics

• 108 satellite locations

• 21% of private O&P clinics in the nation

• VA: Next largest at 2%

• Rest of market is comprised of diverse small providers

Approximately

3,300 Clinics1

79

349

2,160

Hanger Clinic

10 next largest

O&P providers• Ranging from

22-66 clinics

• Average of 35 clinics

707

Veteran’s

Administration

Rest of

Market

1Total clinic count includes VA plus approximately 3,200 private sector certified clinics.

Source: American Board For Certification 2019.

Figures reflect Hanger as of 6.30.20

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Patient Engagement& Connectivity

19

Enhance Consistency, Quality of Patient Experience

Strategic initiatives that engage and connect our community, measure and improve

patient satisfaction, driving growth

• Clinician and peer visitors

• Net promoter score: Average of 85 (Healthcare industry average – 75)

• Outcomes, patient satisfaction and quality life tracked and reported at the

patient and referral source level

• Patient events designed to support mobility and utilization of devices

• Comprehensive social media programs including patient and clinician stories

as well as community outreach

Net promoter score as of 6.30.20

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Clinical Focus on Patient Outcomes

C L I NI C A L T E A M A N D S E N I OR L E AD ER S HI P

T E C HN OLOG Y A N D P R O C ES S

20

O U T C O M ES , R E S E ARC H A N D E D U C AT I ON

Implementing Clinical Care Standards and Demonstrating Value

• Chief Clinical Officer and clinical

leadership group

• 1,600+ certified/licensed

clinicians

• 500 technicians and assistants

• Specialists and centers of

excellence

• Enterprise-wide electronic health

record captures more O&P

clinical outcomes than any other

source

• Implementing a patient portal

• Comprehensive outcomes programs

across Hanger Clinic, as standard of

care

• Collaborations with leading clinical

and academic institutions (i.e. 2020

DoD research grant on fall outcomes)

• Six multi-center publications released

to measure the impact of prosthetics

on mobility

• Annual education conference

Agenda expanding beyond prosthetics in 2020 to orthotics and health economics

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21

• O&P requires highly specialized customized devices

• Patient population is high acuity (similar to an acute setting) with volume of ambulatory care

• Importance of detailed documentation and demonstration of medical necessity, supported by referring provider records

• Central RCM significantly reduces clinician burden, allowing for focus on patient care

Revenue Cycle ManagementCentral Function Drives Lower Disallowed Revenue

• Operate within DMEPOS fee schedules

• Requires specialized knowledge of claim management, edits and denials management

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Advancing Supply Chain Capabilities

22

2 019 2 0 20 2 0 21 2 0 22 2 0 23 2 0 24

Industry Leading Product Selection

Same-Day Shipments

90+% E-Commerce Ordering

Enhanced Product Descriptions & Website Features

Vendor Consignment

Lower excess shipment costs through inventory

optimization*

Lower In-Bound Freight Costs*

Optimize Hanger Fabrication Network w/ Best-In-

Class Systems to Reduce Costs*

Hanger Distribution Center Throughput

& Productivity Increases Materially*

Transforming Through Technology and Process Re-engineering

*These capabilities are currently paused due to the impact of the COVID-19 pandemic and management’s asset allocation decisions. This representation is subject to additional change.

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Products and Services Segment

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Products and Services

24

National Scale Supports Profitable Growth

Net

Revenue1

Adjusted

EBITDA2

Patient

CareProducts & Services

$192.4 million

17.5% revenue

G&A

Products & Services

$29.2 million

15.2% margin

1Calendar Year 2019.2Adjusted EBITDA is a non GAAP measure. Please see the Appendix for a reconciliation of GAAP to non-GAAP metrics.

Patient

Care

Distribution of O&P components & related devices through SPS (75% of

segment net revenue)

• 5.4% net revenue growth in 2019

• Comprehensive catalog for independent O&P providers

• One-stop O&P industry destination with access to over 450,000 SKUs

across more than 300 manufactures

• Leading dedicated O&P distributor in the industry

Therapeutic solutions features innovative rehabilitation technology through

ACP (25% of segment net revenue)

• Rehabilitation technologies and clinical programs to skilled nursing

facilities (SNFs)

• Has faced headwinds due to challenging conditions and the reimbursement

environment in SNFs

• Initial signs of stabilization in late 2019

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Financial Performance

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Growth Model

26

Two-Fold Approach

SELECT, IN-MARKET ACQUISITIONS

DRIVE ORGANIC REVENUE GROW TH

Exceed industry growth rate of 1.5 - 2.0%

• Increase referral volumes through differentiation

• Focus on high-value custom O&P

• Capitalize on base of strong prosthetic growth

• Implement new delivery strategies for lower margin

orthotic categories

• Stabilize therapeutic solutions business

Disciplined approach to O&P acquisitions

• Focus on synergistic geographies and specialties

• Seek good cultural fit

• Ensure valuations are accretive

• Fully integrate into centralized infrastructure

Fixed infrastructure provides operating leverage with volume growth

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Financial Results

27

Second Quarter 2020 and 2020 Year to Date Revenue Performance

$281.1

$517.5

$233.4

$467.2

2019 2020

R E V E N U E D E C L I N E S A S A R E S U L T O F C O V I D - 1 9

• Q2 2020: Due to lower patient volumes as a result of the COVID-19 pandemic, same clinic revenue on a day-adjusted basis declined by 18.7% for the quarter.

• Net revenue from prosthetic services declined at a lower rate than net revenue from orthotic services.

• Product & Services segment revenue declined in Q2 mostly driven by the impact of the pandemic as well as the intentional exit of certain third party channels for some orthotics componentry.

• YTD 2020: Patient Care segment declined 11.7% on a same clinic day-adjusted net basis, revenue from prosthetics decreased 5.3%, while orthotics revenue declined by 18.6%.

• Products & Services segment revenue declined by 15.3% due to a $12.6 million decrease in distribution services and a $2.0 decrease in revenue from therapeutic solutions.

S E C O N D Q U A R T E R ‘ 2 0 Y T D 2 0 2 0

$ millions

-17.0% -9.7%

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Financial Results

28

Second Quarter 2020 and Year to Date 2020 Adjusted EBITDA1 Performance

$37.4

$49.3

$36.5

$41.8

2019 2020

T E M P O R A R Y C O S T R E D U C T T O N M E A S U R E S H E L P E D R E D U C E T H E I M P A C T O F L O W E R V O L U M E S

• Adjusted EBITDA benefited from decreases in operating costs associated with reduced salaries, employee furloughs and other cost reduction actions.

• In Q2 2020, Patient Care segment Adjusted EBITDA declined by 6.7%.

• Products & Services Adjusted EBITDA totaled $8.6 million, a $0.8 million increase compared with the same period of 2019.

• In the first six months of 2020, lower patient care volumes attributable to the COVID-19 pandemic onset resulted in a decrease of $7.5 million in Adjusted EBITDA compared to the same period of 2019.

• Adjusted EBITDA amounts above exclude the benefits of $20.5 million in CARES Act provider grants.

S E C O N D Q U A R T E R ‘ 2 0 Y T D 2 0 2 0

Margin %13.3% 15.6% 9.5% 8.9%1Adjusted EBITDA is a non-GAAP measures. Please see the Appendix for a reconciliation of GAAP to

non-GAAP metrics.

$ millions

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Quarterly % Change

Impact of COVID-19 began in the last two weeks of March,

2020 and continues through Q2 20

Same Clinic Rate of Growth

29

Net Revenue on Per Day Basis

Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q419

-18.7%

1.1% 1.7% 2.1%

0.3%

-0.1%

3.0%2.1%

2.9%

-3.2%

Q1 20 Q2 20

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Payor Mix and Accounts Receivable Trend

30

Multi-Year Improvements in Working Capital Conversion

• Commercial mix excludes Medicare and Medicaid Managed Care

• Diverse reimbursement mix combined with improved A/R aging has driven stronger working capital characteristics

• 45 Day Days Sales Outstanding as of 6.30.20 (decline 2 days year/year)

Payor Mix, Percentage of Patient

Care Net Revenue1

33%

Commercial 35%9%

7%

16%Medicaid Medicare

Private Pay

VA

30

35

40

45

50

55

60

0

20

40

60

80

100

120

140

160

180

200

2014 2015 2016 2017 2018 2019

B A L A NC E S A S O F D E C EM B ER 31

Accounts Receivable, net

(green bars) $ millions

Day Sales Outstanding

(orange line)

Peak in late 2014DSO 48 and A/R

balance at $159

million

1 YTD as of 6.30.20

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C A S H F L O W L I Q U I D I T Y & C A P I TAL E X P E N D I TU R E S

31

I N D E B TE D N E S S

Various cost saving measures were enacted to confront expected revenue declines from COVID-19 resulting in:

• a $21 million decrease in material costs

• $27 million in savings from exempt salary reductions, employee furloughs, reduced hours, benefits and associated payroll taxes

• $8 million in savings from reduced travel, professional fees, advertising, bad debt, office expenses and other operating expenses

TTM Q2 20201 Net Cash Flow (Adjusted EBITDA2 -CapEx) of $83.2 million

TTM Q2 20201 CapEx, including purchase of equipment leased to third parties, totaled $33.6 million

Cash Flow, Liquidity & Capital

1 Referenced amounts reflect TTM 6.30.20.2 Adjusted EBITDA is a non GAAP-measure. Please see the Appendix for a reconciliation of GAAP to non-GAAP metrics.3 As of 6.30.20.

$202.7 million in liquidity3, comprised of:

• $129.9 million in cash and cash equivalents

• $72.8 million of borrowing capacity

2020 Capital Expenditures of $30-$35 million

Total debt3 of $552.4 million:

• Term Loan B $493.6 million;

• Revolving Loan $22.0 million;

• Seller Notes $29.6 million;

• Finance Leases & other $7.2 million;

61% of term loan hedged

Approximately $32 million annualized cash

interest expense, or 5.5%, including revolver

Pro forma leverage of approximately 3.6x at

end of Q2 2020 (TTM Adjusted EBITDA)

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P R O TE C T PAT I E N T S , E M P L OY E E S U N I N TE R UPT E D A C C E S S T O C A R E

32

E N S UR E L I Q U I D I T Y F O R D U R AT I O N O F PA N D E M I C

Strategic Imperatives Ensure Hanger Emerges Post-Pandemic on a Strong Footing

• COVID-19 Crisis Management Team,

formed in January 2020, to ensure

employee and patient safety, ensure

business continuity and centralize

employee communications

• COVID-19 protocols in place to ensure a

safe clinical environment for patients and

Hanger staff

• Avoid permanent layoffs and protect all

eligible employees health benefits through

the crisis

COVID-19 Update

• Orthotic & prosthetics are “essential

health services” under the Affordable

Care Act

• Most Hanger Clinics remain open or see

patients by appointment for essential care

• Remote and telemedicine-based

consultations support continuity of care

• Picking up some volumes from closed or

limited operations of other providers

• Implemented temporary reductions in base

pay beginning in April for all salaried

employees, averaging 32% for up to six months

• CEO salary reduction of 100% scaling down to

47% initially for named executive officers

• Mandatory and voluntary furloughs; hourly

reductions for non-exempt employees

• Effective in June and July, salaries were

partially reinstated, resulting in an

approximate 11% reduction for the remainder

of the period (October)

• Focus on additional reduced operating

expenses

• Temporary pause of supply chain and financial

system implementation and other capital

expenditure reductions

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Investment Thesis

S I Z E AB L E M A R KE T

33

D I F FE R E N T I AT OR S

Industry Leader Building Sustainable Competitive Advantage

The leading provider

of orthotic and prosthetic

services in the United States

Provides approximately 21% of

all O&P services

in the United States

$4.3 billion market for

prescription prostheses,

orthoses and prefabricated or

off-the-shelf orthoses

Broad demand drivers across

injuries and multiple, high

prevalence disease etiologies

Competitive differentiation

through investments in clinical

outcomes, centralized revenue

cycle management, patient

engagement and supply chain to

drive growth

G R O W T H L E V E R S

Multi-tier strategy to grow

organically, steadily expand

margins and pursue M&A to

drive incremental growth

opportunities

Premier scalable provider in a large market for specialized healthcare services

M A R KE T L E AD E R

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Appendix Non-GAAP Reconciliations

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35

Net Income to Adjusted EBITDA 2019-2017

2019 2018 2017

Net Income (Loss) - as reported (GAAP) 27,525$ (858)$ (104,671)$

Adjustments to calculate EBITDA:

Depreciation and amortization 35,925 36,455 39,259

Interest expense, net 34,258 37,566 57,688

Loss on extinguishment of debt — 16,998 —

Non-service defined benefit plan expense 691 703 736

Benefit (provision) for income taxes 2,954 5,238 27,297

Adjustments - Net loss to EBITDA 73,828 96,960 124,980

EBITDA (Non-GAAP) 101,353 96,102 20,309

Further adjustments to calculate Adjusted EBITDA:

Impairment of intangible assets — 183 54,735

Third-party professional fees 8,548 12,461 32,301

Equity-based compensation 13,414 13,065 12,930

Acquisition-related expenses 939 510 —

Disaster recovery / unclaimed property settlement — (2,221) —

Severance expenses (11) 957 64

Further adjustments - EBITDA to Adjusted EBITDA 22,890 24,955 100,030

Adjusted EBITDA (Non-GAAP) 124,243$ 121,057$ 120,339$

For the Years Ended December 31,

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Net Income to Adjusted EBITDA June 30 2020 v. June 30 2019

2020 2019 2020 2019

Net income - as reported (GAAP) 31,054$ 10,035$ 15,306$ 3,084$

Adjustments to calculate EBITDA:

Depreciation and amortization 8,879 8,760 17,710 17,533

Interest expense, net 8,636 8,481 16,906 17,019

Non-service defined benefit plan expense 158 173 316 346

(Benefit) provision for income taxes (987) 4,414 (2,840) 675

Adjustments - Net income to EBITDA 16,686 21,828 32,092 35,573

EBITDA (Non-GAAP) 47,740 31,863 47,398 38,657


Third-party professional fees — 1,745 1,639 3,394

Equity-based compensation 8,984 3,450 12,485 6,715

Acquisition-related expenses 39 328 372 498

Hanger Supply Chain implementation costs 295 — 430 —

Severance expenses — (1) — (11)

Proceeds from grants under the CARES Act (20,533) — (20,533) —

Further adjustments - EBITDA to Adjusted EBITDA (11,215) 5,522 (5,607) 10,596

Adjusted EBITDA (Non-GAAP) 36,525$ 37,385$ 41,791$ 49,253$

For the Three Months Ended For the Six Months Ended

June 30, June 30,

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Net Income to Segment Adjusted EBITDA

2020 2019 2020 2019

Patient Care

Net income from operations - as reported (GAAP) 58,619$ 41,774$ 70,156$ 57,531$

Depreciation & amortization 4,827 4,502 9,303 9,054

EBITDA (Non-GAAP) 63,446 46,276 79,459 66,585


Impairment of intangible assets — — — —

Third-party professional fees — — — —


Hanger supply chain implementation costs 202 — 337 —

Severance expenses — — — (11)

Proceeds from grants under the CARES Act (20,533) — (20,533) —

Further adjustments - EBITDA to Adjusted EBITDA (19,253) 1,101 (17,940) 2,184

Adjusted EBITDA (Non-GAAP) 44,193 47,377 61,519 68,769

Products & Services

Net income from operations - as reported (GAAP) 5,758 4,924 7,838 9,022


EBITDA (Non-GAAP) 8,256 7,520 13,088 14,161


Impairment of intangible assets — — — —

Equity-based compensation 241 246 446 490

Severance expenses — — — —

Hanger supply chain implementation costs 93 — 93 —

Further adjustments - EBITDA to Adjusted EBITDA 334 246 539 490

Adjusted EBITDA (Non-GAAP) 8,590 7,766 13,627 14,651

Corporate & Other

Net loss from operations - as reported (GAAP) (25,516)$ (23,595)$ (48,306)$ (45,429)$


EBITDA (Non-GAAP) (23,962) (21,933) (45,149) (42,089)


Impairment of intangible assets — — —

Third-party professional fees — 1,745 1,639 3,394


Acquisition related expenses 39 328 372 498

Disaster recovery / unclaimed property settlement — — —

Severance expenses — (1) —

Further adjustments - EBITDA to Adjusted EBITDA 7,704 4,175 11,794 7,922

Adjusted EBITDA (Non-GAAP) (16,258) (17,758) (33,355) (34,167)

Total Adjusted EBITDA (Non-GAAP) 36,525$ 37,385$ 41,791$ 49,253$


June 30, June 30,

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Adjusted EBITDA Margin: Second Quarter 2020 v. 2019 and Year to Date 2020 v. 2019

2020 2019 2020 2019

Net Revenue (a)

Patient Care 195,859$ 231,168$ 386,042$ 421,769$

Products & Services 37,575 49,930 81,131 95,748

Net revenue 233,434$ 281,098$ 467,173$ 517,517$

EBITDA (b)

Patient Care 63,446$ 46,276$ 79,459$ 66,585$


Corporate & Other (23,962) (21,933) (45,149) (42,089)

EBITDA (Non-GAAP) 47,740$ 31,863$ 47,398$ 38,657$

Adjusted EBITDA (b)

Patient Care 44,193$ 47,377$ 61,519$ 68,769$


Corporate & Other (16,258) (17,758) (33,355) (34,167)

Adjusted EBITDA (Non-GAAP) 36,525$ 37,385$ 41,791$ 49,253$

Adjusted EBITDA Margin (Non-GAAP)

Patient Care 22.6 % 20.5 % 15.9 % 16.3 %

Products & Services 22.9 % 15.6 % 16.8 % 15.3 %

Net revenue 15.6 % 13.3 % 8.9 % 9.5 %

(a) Excludes intersegment revenue

(b) EBITDA and Adjusted EBITDA are "Non-GAAP" measures.


June 30, June 30,

Investor Presentation · 2020. 9. 2. · • Industry leader in orthotics & prosthetics services...

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