AdaptHealth Corp. (NASDAQ: AHCO) (“AdaptHealth” or the
“Company”), a national leader in providing patient-centered,
healthcare-at-home solutions including home medical equipment,
medical supplies, and related services, announced today financial
results for the second quarter ended June 30, 2022.
Second Quarter Results and
Highlights
- AdaptHealth delivered net revenue and Adjusted EBITDA for the
second quarter consistent with internal expectations, as it
continues to overcome challenges resulting from industry shortages
of CPAP equipment.
- Net revenue was $727.6 million compared to $617.0 million in
the second quarter of 2021, an increase of 17.9%.
- Net income attributable to AdaptHealth Corp. was $14.0 million,
or $0.09 per diluted share, compared to $79.1 million, or $0.12 per
diluted share, in the second quarter of 2021.
- Non-acquired net revenue for the second quarter declined
0.3%.
- Sleep categories showed strong sequential growth, as the supply
of PAP machines continues to improve relative to recent
quarters.
- Adjusted EBITDA was $150.0 million, compared to $147.4 million
in the second quarter of 2021, an increase of 1.8%. On a sequential
basis, Adjusted EBITDA margin increased 110 basis points to 20.6%,
as the Company continues to manage well through the inflationary
environment and supply chain challenges.
- During the quarter, the Company completed four acquisitions,
all of which were previously announced, bringing the year-to-date
total to six acquisitions of HME and Sleep providers.
- Cash flow from operations was $103.5 million, compared to
$129.2 million in the second quarter of 2021.
- The Company repurchased $3.4 million of its common stock in the
open market during the quarter using available cash, pursuant to
the previously-announced share repurchase authorization.
Guidance Maintained for Fiscal Year
2022
The Company is maintaining its previously issued financial
guidance for fiscal year 2022, as follows:
- Net revenue of $2.840 billion to $3.040 billion;
- Adjusted EBITDA of $615 million to $675 million; and
- Total capital expenditures representing 9-11% of net
revenue.
Guidance for fiscal year 2022 does not include any contribution
from acquisitions that have not yet closed, or continuing Public
Health Emergency benefits beyond the currently scheduled expiration
date.
Management Commentary
Steve Griggs, Chief Executive Officer, commented, “We are very
pleased with our performance through the first half of the year.
During the quarter we have seen continued resilience in our HME and
Sleep product lines as CPAP patient set ups remain at or near
record levels resulting in rental census up 16% from February
levels, and our diabetes product line continues to post
double-digit growth.
AdaptHealth continues to meet expectations for growth and
profitability, and drive operating leverage even in the face of
considerable inflation, fuel, freight, and labor market pressures.
Our performance and results continue to demonstrate the crucial
role we play in the lives of our approximately 3.9 million patients
across the U.S. as a leading national provider of medical
equipment, supplies, and services.”
Josh Parnes, President, commented, “AdaptHealth continues to
make important investments in technology throughout the
organization that will drive improved operating performance, lower
cost of care, and better outcomes for patients. As our results and
expectations demonstrate, these investments are leading to
increased efficiencies to help offset challenges in the operating
environment, and adding value for shareholders as well as the
broader healthcare continuum. We will continue to pursue
arrangements to make home health easier for payors, patients, and
providers, and believe we can gain share and volume within the
industry.”
Conference Call
Management will host a conference call at 8:30 am ET today to
discuss the results and business activities. Interested parties may
participate in the call by dialing:
- (877) 407-6176 (Domestic) or
- (201) 689-8451 (International)
Webcast registration: Click here
Following the live call, a replay will be available for six
months on the Company's website, www.adapthealth.com under
"Investor Relations."
About AdaptHealth Corp.
AdaptHealth is a national leader in providing patient-centered,
healthcare-at-home solutions including home medical equipment
(HME), medical supplies, and related services. The Company provides
a full suite of medical products and solutions designed to help
patients manage chronic conditions in the home, adapt to challenges
in their activities of daily living, and thrive. Product and
service offerings include (i) sleep therapy equipment, supplies,
and related services (including CPAP and bi PAP services) to
individuals suffering from obstructive sleep apnea, (ii) medical
devices and supplies to patients for the treatment of diabetes
(including continuous glucose monitors and insulin pumps), (iii)
HME to patients discharged from acute care and other facilities,
(iv) oxygen and related chronic therapy services in the home, and
(v) other HME devices and supplies on behalf of chronically ill
patients with wound care, urological, incontinence, ostomy and
nutritional supply needs. The Company is proud to partner with an
extensive and highly diversified network of referral sources,
including acute care hospitals, sleep labs, pulmonologists, skilled
nursing facilities, and clinics. AdaptHealth services beneficiaries
of Medicare, Medicaid, and commercial insurance payors, reaching
approximately 3.9 million patients annually in all 50 states
through its network of over 750 locations in 47 states.
Forward-Looking
Statements
This press release includes certain statements that are not
historical facts but are forward-looking statements for purposes of
the safe harbor provisions under the United States Private
Securities Litigation Reform Act of 1995. Forward-looking
statements generally are accompanied by words such as “believe,”
“may,” “will,” “estimate,” “continue,” “anticipate,” “intend,”
“expect,” “should,” “would,” “plan,” “predict,” “potential,”
“seem,” “seek,” “future,” “outlook,” and similar expressions that
predict or indicate future events or trends or that are not
statements of historical matters. These forward-looking statements
include, but are not limited to, statements regarding projections,
estimates and forecasts of revenue and other financial and
performance metrics and projections of market opportunity and
expectations and the Company’s acquisition pipeline. These
statements are based on various assumptions and on the current
expectations of AdaptHealth management and are not predictions of
actual performance. These forward-looking statements are provided
for illustrative purposes only and are not intended to serve as,
and must not be relied on, by any investor as, a guarantee, an
assurance, a prediction or a definitive statement of fact or
probability. Actual events and circumstances are difficult or
impossible to predict and will differ from assumptions. Many actual
events and circumstances are beyond the control of the Company.
These forward-looking statements are subject to a number of
risks and uncertainties, including the outcome of judicial and
administrative proceedings to which the Company may become a party
or governmental investigations to which the Company may become
subject that could interrupt or limit the Company’s operations,
result in adverse judgments, settlements or fines and create
negative publicity; changes in the Company’s customers’
preferences, prospects and the competitive conditions prevailing in
the healthcare sector; and the impact of the coronavirus (COVID-19)
pandemic and the Company’s response to it. A further description of
such risks and uncertainties can be found in the Company’s filings
with the Securities and Exchange Commission. If the risks
materialize or assumptions prove incorrect, actual results could
differ materially from the results implied by these forward-looking
statements. There may be additional risks that the Company
presently knows or that the Company currently believes are
immaterial that could also cause actual results to differ from
those contained in the forward-looking statements. In addition,
forward-looking statements reflect the Company’s expectations,
plans or forecasts of future events and views as of the date of
this press release. The Company anticipates that subsequent events
and developments will cause the Company’s assessments to change.
However, while the Company may elect to update these
forward-looking statements at some point in the future, the Company
specifically disclaims any obligation to do so. These
forward-looking statements should not be relied upon as
representing the Company’s assessments as of any date subsequent to
the date of this press release. Accordingly, undue reliance should
not be placed upon the forward-looking statements.
Use of Non-GAAP Financial Information
and Financial Guidance
This release contains non-GAAP financial guidance, which is
adjusted to exclude certain costs, expenses, gains and losses and
other specified items that are evaluated on an individual basis.
These non-GAAP items are adjusted after considering their
quantitative and qualitative aspects and typically have one or more
of the following characteristics, such as being highly variable,
difficult to project, unusual in nature, significant to the results
of a particular period or not indicative of future operating
results. Similar charges or gains were recognized in prior periods
and will likely reoccur in future periods.
The Company uses EBITDA and Adjusted EBITDA, which are financial
measures that are not prepared in accordance with generally
accepted accounting principles in the United States, or U.S. GAAP,
to analyze its financial results and believes that they are useful
to investors, as a supplement to U.S. GAAP measures.
The Company believes Adjusted EBITDA is useful to investors in
evaluating the Company’s financial performance. The Company uses
this metric as the profitability measure in its incentive
compensation plans that have a profitability component and to
evaluate acquisition opportunities, where it is most often used for
purposes of contingent consideration arrangements.
EBITDA and Adjusted EBITDA should not be considered as measures
of financial performance under U.S. GAAP, and the items excluded
from EBITDA and Adjusted EBITDA are significant components in
understanding and assessing financial performance. Accordingly,
these key business metrics have limitations as an analytical tool.
They should not be considered as an alternative to net income or
any other performance measures derived in accordance with U.S. GAAP
or as an alternative to cash flows from operating activities as a
measure of the Company’s liquidity.
There is no reliable or reasonably estimable comparable GAAP
measure for the Company’s non-GAAP financial guidance because the
Company is not able to reliably predict the impact of certain
items, including equity-based compensation expense, transaction
costs, changes in fair value of the warrant liability, and other
non-recurring items of expense or income in full year 2022. As a
result, reconciliation of these non-GAAP measures to the most
directly comparable GAAP measure is not available without
unreasonable effort. In addition, the Company believes such a
reconciliation would imply a degree of precision and certainty that
could be confusing to investors. The variability of the specified
items may have a significant and unpredictable impact on the
Company’s future GAAP results.
In addition, the Company’s non-GAAP financial guidance in this
release excludes the impact of any potential additional future
strategic acquisitions and any specified items that have not yet
been identified and quantified. The guidance also excludes
macro-economic effects due to the COVID-19 pandemic that are not
yet quantifiable. The financial guidance is subject to risks and
uncertainties applicable to all forward-looking statements as
described elsewhere in this press release.
ADAPTHEALTH CORP.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
June 30, 2022
December 31, 2021
Assets
Current assets: Cash and cash equivalents $
118,809
$
149,627
Accounts receivable
355,345
359,896
Inventory
102,675
123,095
Prepaid and other current assets
28,387
37,440
Total current assets
605,216
670,058
Equipment and other fixed assets, net
454,773
398,577
Operating lease right-of-use assets
135,748
147,760
Goodwill
3,515,612
3,512,567
Identifiable intangible assets, net
182,771
202,231
Other assets
15,674
15,098
Deferred tax assets
292,218
304,193
Total Assets $
5,202,012
$
5,250,484
Liabilities and Stockholders'
Equity
Current liabilities: Accounts payable and accrued expenses $
314,973
$
358,384
Current portion of finance lease obligations
4,347
15,446
Current portion of operating lease obligations
29,597
31,418
Current portion of long-term debt
25,000
20,000
Contract liabilities
31,411
31,370
Other liabilities
30,128
43,194
Total current liabilities
435,456
499,812
Long-term debt, less current portion
2,170,909
2,183,552
Operating lease obligations, less current portion
110,093
120,180
Other long-term liabilities
309,101
322,487
Warrant liability
38,760
57,764
Total Liabilities
3,064,319
3,183,795
Total Stockholders' Equity
2,137,693
2,066,689
Total Liabilities and Stockholders' Equity $
5,202,012
$
5,250,484
ADAPTHEALTH CORP.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
Six Months Ended
(in thousands, except per share data)
June 30,
June 30,
2022
2021
2022
2021
Net revenue $
727,614
$
617,017
$
1,433,817
$
1,099,136
Costs and expenses: Cost of net revenue
610,011
490,720
1,207,133
887,418
General and administrative expenses
42,548
42,946
83,992
99,578
Depreciation and amortization, excluding patient equipment
depreciation
15,877
17,944
31,962
31,324
Total costs and expenses
668,436
551,610
1,323,087
1,018,320
Operating income
59,178
65,407
110,730
80,816
Interest expense, net
25,608
23,147
50,384
45,332
Change in fair value of warrant liability
8,208
(37,454
)
(18,509
)
(40,622
)
Change in fair value of contingent consideration common shares
liability
—
(22,079
)
—
(24,044
)
Loss on extinguishment of debt
—
7,736
—
11,949
Other loss, net
1,262
1,669
6,922
1,150
Income before income taxes
24,100
92,388
71,933
87,051
Income tax expense
8,853
12,330
14,456
10,635
Net income
15,247
80,058
57,477
76,416
Income attributable to noncontrolling interest
1,215
951
1,695
1,275
Net income attributable to AdaptHealth Corp. $
14,032
$
79,107
$
55,782
$
75,141
Weighted average common shares outstanding - basic
134,332
129,664
134,178
120,438
Weighted average common shares outstanding - diluted
137,015
136,582
138,335
127,720
Basic net income per share $
0.10
$
0.56
$
0.38
$
0.56
Diluted net income per share $
0.09
$
0.12
$
0.24
$
0.06
ADAPTHEALTH CORP.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Six Months Ended June
30,
2022
2021
Cash flows from operating activities: Net income $
57,477
$
76,416
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization, including
patient equipment depreciation
156,504
110,999
Equity-based compensation
11,222
16,029
Change in fair value of warrant liability
(18,509
)
(40,622
)
Change in fair value of contingent consideration common shares
liability
—
(24,044
)
Reduction in the carrying amount of operating lease right-of-use
assets
9,530
15,368
Deferred income tax expense
11,975
6,544
Change in fair value of interest rate swaps, net of
reclassification adjustment
(1,460
)
(1,443
)
Amortization of deferred financing costs
2,617
2,306
Write-off of deferred financing costs
—
3,495
Loss on extinguishment of debt from prepayment penalty
—
8,454
Other
(2,262
)
428
Changes in operating assets and liabilities, net of effects from
acquisitions: Accounts receivable
7,027
(4,608
)
Inventory
18,807
15,841
Prepaid and other assets
10,406
8,678
Operating lease obligations
(9,452
)
(15,016
)
Operating liabilities
(83,958
)
(31,201
)
Net cash provided by operating activities
169,924
147,624
Cash flows from investing activities: Payments for business
acquisitions, net of cash acquired
(15,324
)
(1,292,631
)
Purchases of equipment and other fixed assets
(154,340
)
(79,396
)
Payments for cost method investments
(367
)
—
Net cash used in investing activities
(170,031
)
(1,372,027
)
Cash flows from financing activities: Proceeds from borrowings on
long-term debt and lines of credit
—
1,070,000
Repayments on long-term debt and lines of credit
(10,000
)
(470,521
)
Repayments of finance lease obligations
(12,547
)
(19,767
)
Payments for shares purchased under share repurchase program
(3,375
)
—
Proceeds from the exercise of stock options
723
2,300
Proceeds received in connection with employee stock purchase plan
753
314
Proceeds from the issuance of senior unsecured notes
—
500,000
Proceeds from the issuance of Class A Common Stock
—
278,850
Payments for equity issuance costs
—
(13,832
)
Payments of deferred financing costs
—
(18,039
)
Payments for tax withholdings from restricted stock vesting and
stock option exercises
(1,882
)
(810
)
Payments of contingent consideration and deferred purchase price
from acquisitions
(2,383
)
(16,341
)
Distributions to noncontrolling interests
(2,000
)
(1,070
)
Payments for debt prepayment penalties
—
(8,454
)
Net cash (used in) provided by financing activities
(30,711
)
1,302,630
Net (decrease) increase in cash and cash equivalents
(30,818
)
78,227
Cash and cash equivalents at beginning of period
149,627
99,962
Cash and cash equivalents at end of period $
118,809
$
178,189
Non-GAAP Financial
Measures
This press release presents AdaptHealth’s EBITDA and Adjusted
EBITDA for the three and six months ended June 30, 2022 and
2021.
AdaptHealth defines EBITDA as net income (loss) attributable to
AdaptHealth Corp., plus net income (loss) attributable to
noncontrolling interests, interest expense, net, income tax expense
(benefit), and depreciation and amortization.
AdaptHealth defines Adjusted EBITDA as EBITDA (as defined
above), plus loss on extinguishment of debt, equity‑based
compensation expense, transaction costs, change in fair value of
the contingent consideration common shares liability, change in
fair value of the warrant liability, and other non-recurring items
of expense or income.
The following unaudited table presents the reconciliation of net
income (loss) attributable to AdaptHealth Corp. to EBITDA and
Adjusted EBITDA for the three and six months ended June 30, 2022
and 2021:
Three Months Ended
Six Months Ended
(in thousands)
June 30,
June 30,
2022
2021
2022
2021
Net income attributable to AdaptHealth Corp. $
14,032
$
79,107
$
55,782
$
75,141
Income attributable to noncontrolling interest
1,215
951
1,695
1,275
Interest expense, net
25,608
23,147
50,384
45,332
Income tax expense
8,853
12,330
14,456
10,635
Depreciation and amortization, including patient equipment
depreciation
79,474
63,793
156,504
110,999
EBITDA
129,182
179,328
278,821
243,382
Loss on extinguishment of debt (a)
—
7,736
—
11,949
Equity-based compensation expense (b)
5,720
7,447
11,222
16,029
Transaction costs (c)
2,205
8,100
5,313
39,954
Change in fair value of warrant liability (d)
8,208
(37,454
)
(18,509
)
(40,622
)
Change in fair value of contingent consideration common shares
liability (e)
—
(22,079
)
—
(24,044
)
Other non-recurring expense, net (f)
4,692
4,313
10,804
4,918
Adjusted EBITDA $
150,007
$
147,391
$
287,651
$
251,566
(a)
Represents the write-off of
unamortized deferred financing costs and other expenses related to
refinancing of debt and pre-payment penalties for early debt
payoff.
(b)
Represents equity-based
compensation expense for awards granted to employees and
non-employee directors.
(c)
Represents transaction costs and
expenses related to integration efforts related to
acquisitions.
(d)
Represents a non-cash charge or
gain for the change in the estimated fair value of the warrant
liability.
(e)
Represents a non-cash gain for
the change in the estimated fair value of the contingent
consideration common shares liability.
(f)
The 2022 year-to-date period
consists of a $4.5 million expense related to changes in
AdaptHealth’s estimated TRA liability, $3.6 million of expenses
associated with litigation claims, $0.6 million of expenses
associated with lease terminations, a $0.8 million loss related to
the write-off of an investment, and $1.3 million of net other
non-recurring expenses. The 2021 year-to-date period consists of
$1.5 million of expenses related to legal and other costs
associated with the separation of the Company’s former Co-CEO, $0.9
million of expenses associated with legal settlements for employee
and other matters, $1.0 million of expenses associated with lease
terminations, and $1.5 million of severance expense.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220809005368/en/
AdaptHealth Corp. Jason Clemens, CFA Chief Financial
Officer
Anton Hie Vice President, Investor Relations
IR@adapthealth.com
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