Fundamental Analysis of Hanger, Inc. (HNGR) Leading Up to its Acquisition
Hanger, Inc. was a leading provider of Orthotic and Prosthetic (O&P) patient care services and solutions in the United States. Traded under the ticker symbol HNGR on the New York Stock Exchange (NYSE), the company was a notable player in the specialized healthcare services industry until it was acquired by the private equity firm Patient Square Capital in October 2022.
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| Fundamental Analysis of Hanger, Inc. (HNGR) Leading Up to its Acquisition |
This article provides a fundamental analysis of Hanger, Inc.'s business model, financial performance, and market position in the period immediately preceding its acquisition, which sheds light on why it was valued at approximately $1.25 billion as a private-equity target.
Business Overview and Industry Dynamics
Hanger operated primarily through two segments: Patient Care and Products & Services.
Patient Care Segment
This was Hanger's core business, comprising the operation of the extensive Hanger Clinic network. These clinics specialize in the design, fabrication, and delivery of custom O&P devices. This segment was characterized by stable, recurring revenues driven by the needs of a growing patient population, the aging U.S. demographic (which increases the prevalence of related disabilities), and the necessity for periodic replacement and modification of existing O&P devices. The high barriers to entry in specialized patient care and the scale of Hanger's network (approximately 875 clinics nationwide as of the acquisition announcement) provided a significant competitive advantage.
Products & Services Segment
This segment focused on the distribution of various O&P components and devices—both branded and private-label—to independent O&P providers, as well as providing specialized rehabilitative solutions. While smaller than Patient Care, this segment offered diversification and leveraged the company's supply chain and clinical expertise.
The overall industry benefits from non-cyclical demand, as O&P services are medically necessary, typically covered by insurance, and tied to stable trends like chronic disease rates and an aging population.
Financial Health and Performance
Prior to the acquisition announcement in July 2022, Hanger was demonstrating solid financial momentum, indicating a successful turnaround and strong operational focus following previous challenges.
Revenue and Growth
The company consistently reported revenue growth, demonstrating its ability to capture increasing market demand and integrate strategic acquisitions.
Full Year 2021: Net revenues were reported at $1.12 billion, an increase of approximately 11.9% from 2020.
Q2 2022 (Last reported quarter pre-acquisition): Net revenues reached $312.0 million, marking an 11.1% increase year-over-year. The Patient Care segment, in particular, showed robust same-clinic revenue growth per day of 6.2%.
This consistent, high-single-digit to low-double-digit revenue growth was a key positive indicator of the company's strong market position and effective business strategy.
Profitability Metrics
Hanger's focus on operational efficiency was reflected in its profitability, particularly when looking at non-GAAP measures often favored in healthcare services like Adjusted EBITDA.
Adjusted EBITDA: For Q2 2022, Adjusted EBITDA was $35.5 million, a 14.5% increase from the prior year. This demonstrated improving margin performance and effective cost management.
Earnings Per Share (EPS): The GAAP diluted EPS for Q2 2022 was $0.26. More importantly, Adjusted Diluted EPS was $0.35, a significant rise from $0.27 in the year-ago quarter, suggesting strong underlying profitability growth.
Balance Sheet and Liquidity
Cash Flow: A notable improvement in the company's financial discipline was reflected in its cash flow. For the six months ended June 30, 2022, cash flows provided by operating activities were $30.9 million, a significant recovery from cash used in operating activities in the same period of 2021.
Liquidity: As of mid-2022, the company maintained healthy liquidity, comprised of cash and available borrowing capacity, which supported both its daily operations and its strategy of growth through strategic O&P clinic acquisitions.
Valuation and Acquisition Context
The ultimate fundamental valuation of Hanger, Inc. was determined by the all-cash acquisition price offered by Patient Square Capital.
Acquisition Price: Patient Square Capital offered $18.75 per share in cash.
Valuation Premium: This price represented an approximately 29% premium to the 30-day volume-weighted average price (VWAP) ending July 20, 2022. The total enterprise value was approximately $1.25 billion.
The significant premium paid suggests that the private equity buyer saw substantial untapped long-term value in the company's fundamentals that the public market may have underestimated, possibly due to short-term fluctuations or concerns over the company's history. Key fundamental factors driving this high valuation likely included:
Market Leadership: Hanger's dominant position and extensive national footprint in the fragmented O&P market.
Defensive Industry: The non-discretionary, recession-resistant nature of specialized healthcare services.
Growth Trajectory: The consistent, positive organic and acquisition-driven revenue and Adjusted EBITDA growth.
Operational Flexibility: The potential for a private owner to execute long-term, capital-intensive growth strategies (like technology investment and clinical expansion) without the quarterly scrutiny of public markets.
Conclusion
The fundamental analysis of Hanger, Inc. immediately prior to its acquisition reveals a financially stable, market-leading company operating in a high-growth, defensive sector of specialized healthcare. Strong revenue growth and improving profitability metrics made it an attractive target for a private equity firm specializing in the health sector.
For investors today, Hanger, Inc. (HNGR) is a delisted company. The acquisition at a premium confirms the strength of the company’s underlying business fundamentals, concluding its journey as a publicly traded stock on a positive valuation note for its former shareholders.
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