Coker Capital’s Healthcare Services Review First Half of 2019

Healthcare M&A Advisory

Coker Capital's Healthcare Services Review ? First Half of 2019

In this issue of the Coker Capital Healthcare Services Newsletter, we provide an overview of Healthcare Services activity for the 1st Half of 2019.

Market Performance

?

The S&P Healthcare Services Select Index(1) underperformed the broader market

in the first six months of 2019, increasing 6.1% versus a 17.3% and 20.7%

increase for the S&P 500 and NASDAQ, respectively

? HCIT, 36.3%, Contract Research Organizations, 30.7%, and Clinical Laboratories, 29.5%, were the best performing sub-sectors in the first six months of 2019 while Specialty Pharmacy Services, (18.6%), Other Outsourced Services, (2.9%), and Payors, (0.2%), were the worst

? eHealth (EHTH), 124.1%, Veeva Systems (VEEV), 81.5%, and NeoGenomics (NEO), 74.0%, were the top performing stocks, while Nobilis (HLTH), (65.6%), Evolent Health (EVH), (60.2%), and Diplomat Pharmacy (DPLO), (54.8%), were the worst performing stocks

?

The S&P Healthcare Services Select Index(1) experienced a decline of (3.8%) as

compared to an 8.2% and 6.6% increase for the S&P 500 and NASDAQ,

respectively, over the last twelve months ending June 2019

? This Index underperformed most other S&P sector indices during this period, with a decrease of (3.8%), ranking 11th out of twelve S&P sector indices

Refer to Pages 2 ? 5 for additional detail

Valuation Update

? The average Firm Value (FV) / 2019P EBITDA multiple for the 88 companies in Coker Capital's Healthcare Services Comp Set was 11.5x as of 6/30/2019 ? This compares to a 10.3x and 11.1x valuation for the same Comp Set as of 12/31/2018 and 12/29/2017, respectively ? Valuation for individual sub-sectors ranged from 18.8x (Hospice and Home Care) to 8.6x (Acute-Care Hospitals)

Refer to Page 6 for additional detail

M&A Activity

? Middle Market M&A volume and transaction counts have declined slightly in 2019 relative to 2017 and 2018 across all industries, including Healthcare Services, though remain strong relative to historical levels

Refer to Pages 7 ? 8 for additional detail

Trading Comps

? Refer to Pages 9 ? 12 for detailed trading comps for the 88 companies in Coker Capital's Healthcare Services Comp Set broken out by sub-sector

July 8, 2019

Coker Capital Advisors provides mergers and acquisitions advisory services to middle market healthcare companies throughout the United States. Coker Capital Advisors operates from offices in Atlanta, Charlotte, and New York. Coker Capital operates as a subsidiary of Fifth Third Securities, Inc. ("Fifth Third")

For more information, please visit

If you are considering an M&A transaction, or would like to discuss other strategic alternatives, please contact one of the professionals below.

Dan Davidson Managing Director 678.832.2003 ddavidson@

James Heidbreder Managing Director 212.776.1145 jheidbreder@

Bo Hinton Managing Director 704.417.5939 bhinton@

John Reiboldt Managing Director 678.832.2008 jreiboldt@

McNeill Wester Managing Director 704.417.5940 mwester@

Adrian Susmano Executive Director 646.852.9279 asusmano@

(1) The S&P Healthcare Services Select Index trades under tracker SPSIHP

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If you have additional colleagues that would like to be added to this distribution or if you would like to be removed from this distribution, please contact one of the professionals listed above.

Coker Capital Advisors First Half of 2019 in Review: Market Performance

Healthcare Services Index Stock Performance

? The S&P Healthcare Services Index underperformed the broader market indices in the last twelve months ending June 2019 due in part to the counter-cyclicality of the industry. The Index decreased (3.8%) compared to an 8.2% and 6.6% increase for the S&P 500 and NASDAQ, respectively

? Since the Presidential election on 11/08/16, the S&P Healthcare Services Index has increased 33.3% versus a 37.5% and 54.2% increase for the S&P 500 and NASDAQ, respectively ? Since the mid-term elections on 11/06/18, this Index has decreased (9.7%) versus a 6.8% and 8.5% increase for the S&P 500 and NASDAQ, respectively

15%

10% 5%

S&P 500 Index: 8.2% NASDAQ Index: 6.6%

(5%)

HC Services Index: (3.8%)

(10%)

(15%)

(20%) Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19

S&P 500 Index

Q3 2018 7.2%

Q4 2018 (14.0%)

Q1 2019 13.1%

Q2 2019 3.8%

NASDAQ Index

7.1%

(17.5%)

16.5%

3.6%

HC Services Index

10.1%

(17.7%)

2.7%

3.3%

Healthcare Services 2019 YTD Company Stock Performance

? Coker Capital's healthcare services comp set includes 88 companies across 14 sub-sectors. 59 of the 88 companies (67.0%) have produced positive returns in 2019 YTD while 29 companies (33.0%) realized a decline. 24 companies (27.3%) experienced gains in excess of 25% while 13 companies (14.8%) experienced declines in excess of 25% in 2019 YTD

30%

25%

20% 15%

15% 10%

10%

5%

Greater than -25% -10% to -24%

8% -10% to 0%

19% 0% to 10%

27% 20%

10% to 24% 25% and Greater

Note: Refer to pages 9 ? 12 for details on the specific companies included in each Healthcare Services sub-sector noted above

Source: Capital IQ

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Coker Capital Advisors First Half of 2019 in Review: Market Performance

Healthcare Services Sub-sector Performance ? First Half 2019

? Individual sub-sector performance has also diverged materially in 2019 as HCIT, 36.3%, Contract Research Organizations, 30.7%, and Clinical Laboratories, 29.5%, were among sub-sectors that significantly outperformed, while Specialty Pharmacy Services, (18.6%), Other Outsourced Services, (2.9%), and Payors, (0.2%), significantly underperformed

60.0% 40.0% 20.0%

(20.0%) (40.0%)

36.3%

30.7%

29.5%

21.4%

18.8%

15.9%

12.9%

10.1%

9.4%

4.9%

4.9%

(0.2%) (2.9%) (18.6%)

HCIT Contract Research

Organizations Clinical Laboratories

Assisted Living and Long-Term Care

Hospice and Home Care Behavioral Health Physician Services / Alternate Site Distribution and Supplies Acute-Care

Hospitals Rehabilitation

Staffing Payors Other Outsourced Services Specialty Pharmacy Services

Top-Ten 1H 2019 Performers

Bottom-Ten 1H 2019 Performers

Company

Sub-Sector

eHealth

Payor Focus HCIT

Veeva Systems

Other HCIT

NeoGenomics

Clinical Laboratories

R1 RCM

Provider Focus HCIT

National Research Corporation Provider Focus HCIT

Castlight Health

Consumer Focused HCIT

Ensign Group

Assisted Living and Long-Term Care

Corvel

Other Outsourced Services

Omnicell

Provider Focus HCIT

Cerner

Provider Focus HCIT

Ticker

EHTH VEEV NEO RCM NRC CSLT ENSG CRVL OMCL CERN

% Change

124.1% 81.5% 74.0% 58.2% 51.0% 48.8% 46.7% 41.0% 40.5% 39.8%

Company

Nobilis Evolent Health Diplomat Pharmacy Quorum Health Owens and Minor Rite Aid Benefit Focus American Addiction Centers Psychemedics American Renal Associates

Sub-Sector

Physician Services / Alternate Site Provider Focus HCIT Specialty Pharmacy Services Acute-Care Hospitals Distribution and Supplies Specialty Pharmacy Services Consumer Focused HCIT Behavioral Health Clinical Laboratories Physician Services / Alternate Site

Ticker

HLTH EVH DPLO QHC OMI RAD BNFT AAC PMD ARA

% Change

(65.6%) (60.2%) (54.8%) (51.9%) (49.4%) (43.5%) (40.6%) (38.6%) (36.4%) (35.4%)

Note: Refer to pages 9 ? 12 for details on the specific companies included in each Healthcare Services sub-sector noted above

Source: Capital IQ

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Coker Capital Advisors First Half of 2019 in Review: Market Performance

Sector Performance Comparison: LTM 6/30/19 and 1st Half 2019

? The S&P Healthcare Services Index underperformed all other sub-sectors except for the Energy sector in the last 12 months and underperformed all other sub-sectors during the first six months of 2019

Change in First Half 2019

Energy

S&P Health Care Services

30% Technology

25%

20%

Industrials

Financials

15% Materials

10%

Telecom

Consumer Discretionary S&P 500

Consumer Staples

Utilities

Healthcare 5%

(20%)

(15%)

(10%)

-

(5%)

-

5%

10%

15%

20%

Note: Sector indices reflect S&P Sector ETFs

Change Over Last 12 Months (6/30/18 ? 6/30/19)

Performance By Sector

LTM Performance (6/30/18 ? 6/30/19) Ticker

Utilities Consumer Staples Technology Healthcare Consumer Discretionary S&P 500 Industrials Telecom Financials Materials S&P Health Care Services Energy

XLU XLP XLK XLV XLY SPX XLI IXP XLF XLB SPSIHP XLE

% Change

14.8% 12.7% 12.3% 11.0% 9.1% 8.2% 8.1% 5.9% 3.8% 0.7% (3.8%) (16.1%)

1st Half 2019 Performance

Technology Consumer Discretionary Industrials S&P 500 Financials Materials Consumer Staples Telecom Utilities Energy Healthcare S&P Health Care Services

Ticker

XLK XLY XLI SPX XLF XLB XLP IXP XLU XLE XLV SPSIHP

% Change

25.9% 20.4% 20.2% 17.3% 15.9% 15.8% 14.4% 14.1% 12.7% 11.1% 7.1%

6.1%

Source: Capital IQ

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Coker Capital Advisors First Half of 2019 in Review: Market Performance

Healthcare Services Sub-sector Performance Comparison: LTM 6/30/19 and 1st Half 2019

? The Contract Research Organizations, 40.6%, HCIT, 32.2%, and Hospice and Home Care, 27.3%, sub-sectors were the best performers over the last 12 months while the HCIT, 36.3%, Contract Research Organizations, 30.7%, and Clinical Laboratories, 29.5%, sub-sectors showed the strongest first half of 2019.

Change in First Half 2019

40%

Clinical Laboratories

30%

Assisted Living and

HCIT Contract Research Organizations

Physician Services / Alternate Site

Long-Term Care Hospice and Home Care

20% Distribution and Supplies Behavioral Health

10%

Acute-Care Hospitals

Staffing

Rehabilitation

-

(30%)

(20%)

(10%)

-Payors

10%

20%

30%

40%

50%

Other Outsourced Services

(10%)

Specialty Pharmacy Services

(20%) (30%)

Change Over Last 12 Months (6/30/18 ? 6/30/19)

LTM Performance (6/30/18 ? 6/30/19)

Contract Research Organizations HCIT Hospice and Home Care Acute-Care Hospitals Assisted Living and Long-Term Care Behavioral Health Payors Clinical Laboratories Distribution and Supplies Rehabilitation Specialty Pharmacy Services Staffing Other Outsourced Services Physician Services / Alternate Site

Performance By Sub-sector

% Change

40.6% 32.2% 27.3% 23.2% 11.0% 7.3% 1.6% (1.8%) (2.1%) (2.9%) (14.1%) (16.4%) (20.9%) (23.5%)

1st Half 2019 Performance

HCIT Contract Research Organizations Clinical Laboratories Assisted Living and Long-Term Care Hospice and Home Care Behavioral Health Physician Services / Alternate Site Distribution and Supplies Acute-Care Hospitals Rehabilitation Staffing Payors Other Outsourced Services Specialty Pharmacy Services

% Change

36.3% 30.7% 29.5% 21.4% 18.8% 15.9% 12.9% 10.1%

9.4% 4.9% 4.9% (0.2%) (2.9%) (18.6%)

Note: Refer to pages 9 ? 12 for details on the specific companies included in each Healthcare Services sub-sector noted above; index values weighted by market capitalization

Source: Capital IQ

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