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.

 

AdaptHealth Corp. Jason Clemens, CFA Chief Financial Officer

Anton Hie Vice President, Investor Relations IR@adapthealth.com

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