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 third quarter ended September 30, 2023.
Third Quarter Results and
Highlights
All comparisons are to the quarter ended September 30, 2022
unless otherwise stated.
- Net revenue was $804.0 million compared to $756.5 million, an
increase of 6.3%.
- Net loss attributable to AdaptHealth Corp. was $454.1 million
compared to net income of $16.1 million, largely resulting from a
$511.9 million pre-tax write down of goodwill.
- Adjusted EBITDA was $161.2 million, compared to $160.2 million,
an increase of 0.6%.
- Cash flow from operations was $325.4 million year-to-date 2023,
an increase from $276.9 million during the comparable period in
2022.
- Free cash flow was $76.6 million year-to-date 2023, increase
from $28.4 million during the comparable period in 2022.
- Subsequent to September 30, 2023 and through the end of market
close on November 6, 2023, the Company repurchased $19.4 million of
its common stock in the open market, pursuant to the Company’s
previously-announced share repurchase authorization.
Management Commentary
“We are pleased with the results of the third quarter,” said
Richard Barasch, Chairman and Interim CEO of AdaptHealth. “Powered
by our sleep products, we generated 6.3% growth over last year,
leading to record revenues for the quarter. Equally important, we
generated cash flow from operations of $98.8 million and free cash
flow of $21.7 million. Adjusted EBITDA fell short of our
expectations largely as a result of unplanned delays in the
implementation of the Humana contract. Nevertheless we believe that
this contract will prove to be profitable for AdaptHealth.” Mr.
Barasch continued, “We believe we are well-positioned to continue
our historical trend of year over year growth in revenue and
profitability.”
Financial Outlook
The Company is updating previous financial guidance for fiscal
year 2023 as follows:
- Net revenue of $3.160 to $3.185 billion, from $3.16 to $3.20
billion
- Adjusted EBITDA of $630 to $650 million, from $650 to $680
million
- Total capital expenditures representing 10-12% of net revenue,
unchanged
- Free cash flow representing 3-4% of net revenue, unchanged
Conference Call Details
Management will host a teleconference today, Tuesday, November
7, 2023, at 8:30 am ET to discuss the results and business
activities with analysts and investors.
Interested parties may participate in the call by
dialing:
- (800) 245-3047 (Domestic) or
- (203) 518-9765 (International)
When prompted, reference Conference ID: AHCO3Q23
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 4.0 million patients annually in all 50 states
through its network of approximately 690 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. 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, Adjusted EBITDA and Free Cash Flow,
which are financial measures that are not 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.
The Company uses free cash flow in its operational and financial
decision-making and believes free cash flow is useful to investors
because similar measures are frequently used by securities
analysts, investors, ratings agencies and other interested parties
to evaluate the Company's competitors and to measure the ability of
companies to service their debt. The Company's presentation of free
cash flow should not be construed as a measure of liquidity or
discretionary cash available to the Company to fund its cash needs,
including investing in the growth of its business and meeting its
obligations.
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 2023. 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 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)
September 30, 2023
December 31, 2022
Assets
Current assets:
Cash
$
56,143
$
46,272
Accounts receivable
370,740
359,146
Inventory
116,332
127,754
Prepaid and other current assets
41,852
52,136
Total current assets
585,067
585,308
Equipment and other fixed assets, net
490,053
487,079
Operating lease right-of-use assets
110,007
129,506
Finance lease right-of-use assets
21,528
5,423
Goodwill
3,041,446
3,545,297
Identifiable intangible assets, net
135,728
162,773
Other assets
22,504
22,415
Deferred tax assets
318,915
281,786
Total Assets
$
4,725,248
$
5,219,587
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable and accrued expenses
$
314,452
$
337,498
Current portion of long-term debt
40,000
35,000
Current portion of operating lease
obligations
28,736
30,001
Current portion of finance lease
obligations
5,947
2,211
Contract liabilities
47,981
31,641
Other liabilities
11,069
19,863
Total current liabilities
448,185
456,214
Long-term debt, less current portion
2,126,803
2,153,267
Operating lease obligations, less current
portion
85,700
104,394
Finance lease obligations, less current
portion
15,581
3,950
Other long-term liabilities
302,590
305,501
Warrant liability
6,617
38,503
Total Liabilities
2,985,476
3,061,829
Total Stockholders' Equity
1,739,772
2,157,758
Total Liabilities and Stockholders'
Equity
$
4,725,248
$
5,219,587
ADAPTHEALTH CORP.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
(in thousands, except per share
data)
2023
2022
2023
2022
Net revenue
$
804,031
$
756,495
$
2,341,943
$
2,190,312
Costs and expenses:
Cost of net revenue
693,488
646,714
2,022,281
1,853,847
General and administrative expenses
45,198
40,681
142,797
124,673
Depreciation and amortization, excluding
patient equipment depreciation
14,515
16,151
45,596
48,113
Goodwill impairment
511,866
—
511,866
—
Total costs and expenses
1,265,067
703,546
2,722,540
2,026,633
Operating (loss) income
(461,036
)
52,949
(380,597
)
163,679
Interest expense, net
32,306
28,521
96,813
78,905
Change in fair value of warrant
liability
(9,160
)
1,364
(31,886
)
(17,145
)
Other loss, net
3,317
257
6,574
7,179
(Loss) income before income taxes
(487,499
)
22,807
(452,098
)
94,740
Income tax (benefit) expense
(34,578
)
5,580
(30,893
)
20,036
Net (loss) income
(452,921
)
17,227
(421,205
)
74,704
Income attributable to noncontrolling
interest
1,155
1,105
3,187
2,800
Net (loss) income attributable to
AdaptHealth Corp.
$
(454,076
)
$
16,122
$
(424,392
)
$
71,904
Weighted average common shares outstanding
- basic
134,825
134,227
134,549
134,186
Weighted average common shares outstanding
- diluted
134,982
137,583
135,202
138,599
Basic net (loss) income per share
$
(3.37
)
$
0.11
$
(3.15
)
$
0.49
Diluted net (loss) income per share
$
(3.43
)
$
0.11
$
(3.37
)
$
0.35
ADAPTHEALTH CORP.
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
(in thousands)
2023
2022
Cash flows from operating activities:
Net (loss) income
$
(421,205
)
$
74,704
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization, including
patient equipment depreciation
290,419
248,835
Goodwill impairment
511,866
—
Equity-based compensation
17,284
16,784
Change in fair value of warrant
liability
(31,886
)
(17,145
)
Reduction in the carrying amount of
operating lease right-of-use assets
26,309
16,924
Reduction in the carrying amount of
finance lease right-of-use assets
3,821
—
Deferred income tax (benefit) expense
(37,033
)
18,058
Change in fair value of interest rate
swaps, net of reclassification adjustment
(1,394
)
(2,202
)
Amortization of deferred financing
costs
3,926
3,926
Other
350
(2,023
)
Changes in operating assets and
liabilities, net of effects from acquisitions:
Accounts receivable
(10,043
)
2,357
Inventory
12,769
(3,992
)
Prepaid and other assets
10,956
4,211
Operating lease obligations
(26,959
)
(16,794
)
Operating liabilities
(23,780
)
(66,696
)
Net cash provided by operating
activities
325,400
276,947
Cash flows from investing activities:
Purchases of equipment and other fixed
assets
(248,816
)
(248,511
)
Payments for business acquisitions, net of
cash acquired
(17,917
)
(16,134
)
Payments for cost method investments
(128
)
(731
)
Net cash used in investing activities
(266,861
)
(265,376
)
Cash flows from financing activities:
Proceeds from borrowings on long-term
debt
50,000
—
Repayments on long-term debt
(75,000
)
(15,000
)
Repayments of finance lease
liabilities
(4,558
)
(14,219
)
Payments for shares purchased under share
repurchase program
(9,224
)
(13,992
)
Proceeds from the exercise of stock
options
538
1,388
Proceeds received in connection with
employee stock purchase plan
2,031
1,616
Payments relating to the Tax Receivable
Agreement
(3,202
)
—
Distributions to noncontrolling
interest
(2,500
)
(2,000
)
Payments for tax withholdings from
restricted stock vesting and stock option exercises
(5,253
)
(2,690
)
Payments of contingent consideration and
deferred purchase price from acquisitions
(1,500
)
(5,563
)
Net cash used in financing activities
(48,668
)
(50,460
)
Net increase (decrease) in cash
9,871
(38,889
)
Cash at beginning of period
46,272
149,627
Cash at end of period
$
56,143
$
110,738
Non-GAAP Financial
Measures
EBITDA and Adjusted EBITDA
This press release presents AdaptHealth’s EBITDA and Adjusted
EBITDA for the three and nine months ended September 30, 2023 and
2022.
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, including patient
depreciation.
AdaptHealth defines Adjusted EBITDA as EBITDA (as defined
above), plus equity-based compensation expense, transaction costs,
change in fair value of the warrant liability, goodwill impairment
and certain other non-recurring items of expense or income.
The following unaudited table presents the reconciliation of net
income attributable to AdaptHealth Corp. to EBITDA and Adjusted
EBITDA for the three and nine months ended September 30, 2023 and
2022:
Three Months Ended
Nine Months Ended
(in thousands)
September 30,
September 30,
2023
2022
2023
2022
Net (loss) income attributable to
AdaptHealth Corp.
$
(454,076
)
$
16,122
$
(424,392
)
$
71,904
Income attributable to noncontrolling
interest
1,155
1,105
3,187
2,800
Interest expense, net
32,306
28,521
96,813
78,905
Income tax (benefit) expense
(34,578
)
5,580
(30,893
)
20,036
Depreciation and amortization, including
patient equipment depreciation
97,310
92,331
290,419
248,835
EBITDA
(357,883
)
143,659
(64,866
)
422,480
Equity-based compensation expense (a)
4,521
5,562
17,284
16,784
Transaction costs (b)
337
519
621
5,832
Change in fair value of warrant liability
(c)
(9,160
)
1,364
(31,886
)
(17,145
)
Goodwill impairment (d)
511,866
—
511,866
—
Other non-recurring expenses, net (e)
11,486
9,059
33,157
19,863
Adjusted EBITDA
$
161,167
$
160,163
$
466,176
$
447,814
Net (loss) income attributable to
AdaptHealth Corp. as a percentage of net revenue
(56.5
)%
2.1
%
(18.1
)%
3.3
%
Adjusted EBITDA as a percentage of net
revenue
20.0
%
21.2
%
19.9
%
20.4
%
(a)
Represents equity-based compensation
expense for awards granted to employees and non-employee
directors.
(b)
Represents transaction costs and expenses
related to integration efforts related to acquisitions.
(c)
Represents a non-cash charge or gain for
the change in the estimated fair value of the warrant
liability.
(d)
Represents a non-cash goodwill impairment
charge as a result of the fair value of the Company’s reporting
unit being less than its carrying value.
(e)
The 2023 year-to-date period consists of
$12.5 million of expenses associated with litigation, $6.3 million
of severance charges (of which $2.9 million relates to the
separation of the Company's former CEO), $4.1 million of lease
termination costs associated with a cost management program, $3.9
million of consulting expenses associated with systems
implementation activities, $0.9 million of net impairments of
operating lease right-of-use assets, and $5.5 million of other
non-recurring expenses. The 2022 year-to-date period consists of a
$9.0 million of consulting expenses associated with systems
implementation activities and post-implementation support services,
a $4.5 million expense related to changes in AdaptHealth's
estimated liability related to its Tax Receivable Agreement, $3.8
million of expenses associated with litigation, claims and
settlements, $0.7 million of lease termination costs, a $0.8
million loss related to the write-off of an investment, and $1.1
million of net other non-recurring expenses.
Free Cash Flow
This press release presents AdaptHealth’s Free Cash Flow for the
three and nine months ended September 30, 2023 and 2022.
AdaptHealth defines Free Cash Flow as net cash provided by
operating activities less cash paid for purchases of equipment and
other fixed assets.
The following unaudited table reconciles net cash provided by
operating activities to the free cash flow measure for the three
and nine months ended September 30, 2023 and 2022:
Three Months Ended
Nine Months Ended
(in thousands)
September 30,
September 30,
2023
2022
2023
2022
Net cash provided by operating
activities
$
98,833
$
107,023
$
325,400
$
276,947
Purchases of equipment and other fixed
assets
(77,086
)
(94,171
)
(248,816
)
(248,511
)
Free cash flow
$
21,747
$
12,852
$
76,584
$
28,436
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231107678058/en/
AdaptHealth Corp. Jason Clemens, CFA Chief Financial
Officer IR@adapthealth.com
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