AHCO AdaptHealth Corporation

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 fourth quarter and fiscal year ended December 31, 2023.

Full Year 2023 Results and Highlights

All comparisons are to the year ended December 31, 2022 unless otherwise stated.

• Net revenue was $3,200.2 million compared to $2,970.6 million, an increase of 7.7% driven by non-acquired growth of 7.3%.
• Net loss attributable to AdaptHealth Corp. was $678.9 million compared to net income of $69.3 million, largely resulting from a $830.8 million pre-tax write down of goodwill.
• Adjusted EBITDA increased to $670.8 million from $593.8 million, an increase of 13.0%.
• Cash flow from operations increased to $480.7 million from $373.9 million, an increase of 28.6%.
• Free cash flow increased to $143.2 million from $(17.6) million.

Fourth Quarter 2023 Results and Highlights

All comparisons are to the quarter ended December 31, 2022 unless otherwise stated.

• Net revenue was $858.2 million compared to $780.3 million, an increase of 10.0% driven by non-acquired growth of 9.7%.
• Net loss attributable to AdaptHealth Corp. was $254.5 million compared to net loss attributable to AdaptHealth Corp. of $2.6 million, largely resulting from a $318.9 million pre-tax write down of goodwill.
• Adjusted EBITDA increased to $204.6 million from $146.0 million, an increase of 40.2%.
• Cash flow from operations increased to $155.3 million from $96.9 million, an increase of 60.2%.
• Free cash flow was $66.6 million, compared to $(46.0) million.

Guidance for Fiscal Year 2024

The Company is providing its initial financial guidance for fiscal year 2024, as follows:

• Net revenue of $3.25 billion to $3.35 billion;
• Adjusted EBITDA of $650 million to $710 million;
• Free cash flow of $150 million to $180 million

Guidance for fiscal year 2024 does not include any contributions from acquisitions that have not yet closed and assumes that the 75/25 blended Medicare reimbursement rate adjustment in non-rural, non-competitive bid areas is not extended.

Management Commentary

Richard Barasch, Chairman and Interim CEO of AdaptHealth, commented, “We closed out 2023 with strong performance across the board in the fourth quarter. Driven by continued strength in sleep and respiratory, we generated record revenue of $3.2 billion, up 7.7% year-over-year, nearly all from non-acquired sources. We are also quite pleased that Adjusted EBITDA for the year increased at an even faster rate, giving us confidence that the strategic initiatives we undertook to improve efficiency have started to produce results.”

“Another highlight of the year was the material increase in cash flow from operations and free cash flow. We are particularly pleased that our leverage ratio declined from 3.69x to 3.16x as of the end of the year.”

Mr. Barasch continued, “AdaptHealth provides needed medical equipment and supplies to approximately 4.1 million patients annually. Our nearly 11,000 employees, including approximately 1,000 healthcare professionals, are committed to constant improvement in our service and value to these patients so they can live better and healthier lives.”

Conference Call

Management will host a teleconference today, Tuesday, February 27, 2024, 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: AHCO4Q23

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 4.1 million patients annually in all 50 states through its network of approximately 680 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

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. In addition, the Company’s ability to incur additional indebtedness and make investments under its existing credit agreement is governed, in part, by its ability to satisfy tests based on a variation of Adjusted EBITDA.

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, which is a financial measure that is not in accordance with U.S. GAAP, 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.

Free cash flow should not be considered as a measure of financial performance under U.S. GAAP. Accordingly, this key business metric has limitations as an analytical tool. It should not be considered as an alternative to any performance measures derived in accordance with U.S. GAAP or as an alternative to cash flows from operating activities as a measure of AdaptHealth’s liquidity.

This release contains non-GAAP financial guidance. 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 that 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. As a result, reconciliation of the non-GAAP financial guidance 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 financial guidance in this release excludes the impact of any potential additional future strategic acquisitions and any 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)

 

December 31, 2023

 

December 31, 2022

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash

 

$

77,132

 

$

46,272

Accounts receivable

 

 

388,910

 

 

359,146

Inventory

 

 

113,642

 

 

127,754

Prepaid and other current assets

 

 

69,338

 

 

52,136

Total current assets

 

 

649,022

 

 

585,308

Equipment and other fixed assets, net

 

 

495,101

 

 

487,079

Operating lease right-of-use assets

 

 

110,465

 

 

129,506

Finance lease right-of-use assets

 

 

31,962

 

 

5,423

Goodwill

 

 

2,724,958

 

 

3,545,297

Identifiable intangible assets, net

 

 

130,160

 

 

162,773

Other assets

 

 

21,128

 

 

22,415

Deferred tax assets

 

 

345,854

 

 

281,786

Total Assets

 

$

4,508,650

 

$

5,219,587

Liabilities and Stockholders' Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable and accrued expenses

 

$

391,994

 

$

337,498

Current portion of long-term debt

 

 

53,368

 

 

35,000

Current portion of operating lease obligations

 

 

29,270

 

 

30,001

Current portion of finance lease obligations

 

 

9,122

 

 

2,211

Contract liabilities

 

 

38,570

 

 

31,641

Warrant liability

 

 

4,021

 

 

—

Other liabilities

 

 

10,654

 

 

19,863

Total current liabilities

 

 

536,999

 

 

456,214

Long-term debt, less current portion

 

 

2,094,614

 

 

2,153,267

Operating lease obligations, less current portion

 

 

85,529

 

 

104,394

Finance lease obligations, less current portion

 

 

22,746

 

 

3,950

Other long-term liabilities

 

 

302,093

 

 

305,501

Warrant liability

 

 

—

 

 

38,503

Total Liabilities

 

 

3,041,981

 

 

3,061,829

Total Stockholders' Equity

 

 

1,466,669

 

 

2,157,758

Total Liabilities and Stockholders' Equity

 

$

4,508,650

 

$

5,219,587

 

ADAPTHEALTH CORP. Consolidated Statements of Operations (Unaudited)

 

 

 

Three Months Ended

 

Twelve months ended

(in thousands, except per share data)

 

December 31,

 

December 31,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net revenue

 

$

858,234

 

 

$

780,283

 

 

$

3,200,177

 

 

$

2,970,595

 

Costs and expenses:

 

 

 

 

 

 

 

 

Cost of net revenue

 

 

698,332

 

 

 

699,322

 

 

 

2,720,613

 

 

 

2,553,169

 

General and administrative expenses

 

 

47,294

 

 

 

37,452

 

 

 

190,091

 

 

 

162,125

 

Depreciation and amortization, excluding patient equipment depreciation

 

 

11,491

 

 

 

16,777

 

 

 

57,087

 

 

 

64,890

 

Goodwill impairment

 

 

318,921

 

 

 

—

 

 

 

830,787

 

 

 

—

 

Total costs and expenses

 

 

1,076,038

 

 

 

753,551

 

 

 

3,798,578

 

 

 

2,780,184

 

Operating (loss) income

 

 

(217,804

)

 

 

26,732

 

 

 

(598,401

)

 

 

190,411

 

Interest expense, net

 

 

33,486

 

 

 

30,509

 

 

 

130,299

 

 

 

109,414

 

Change in fair value of warrant liability

 

 

(2,596

)

 

 

(13

)

 

 

(34,482

)

 

 

(17,158

)

Other loss (income), net

 

 

22,992

 

 

 

(6,926

)

 

 

29,566

 

 

 

253

 

(Loss) income before income taxes

 

 

(271,686

)

 

 

3,162

 

 

 

(723,784

)

 

 

97,902

 

Income tax (benefit) expense

 

 

(18,111

)

 

 

4,733

 

 

 

(49,004

)

 

 

24,769

 

Net (loss) income

 

 

(253,575

)

 

 

(1,571

)

 

 

(674,780

)

 

 

73,133

 

Income attributable to noncontrolling interests

 

 

928

 

 

 

1,017

 

 

 

4,115

 

 

 

3,817

 

Net (loss) income attributable to AdaptHealth Corp.

 

$

(254,503

)

 

$

(2,588

)

 

$

(678,895

)

 

$

69,316

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic

 

 

132,990

 

 

 

134,139

 

 

 

134,156

 

 

 

134,175

 

Weighted average common shares outstanding - diluted

 

 

132,990

 

 

 

134,139

 

 

 

134,418

 

 

 

138,988

 

 

 

 

 

 

 

 

 

 

Basic net (loss) income per share

 

$

(1.91

)

 

$

(0.02

)

 

$

(5.06

)

 

$

0.47

 

Diluted net (loss) income per share

 

$

(1.91

)

 

$

(0.02

)

 

$

(5.31

)

 

$

0.33

 

 

ADAPTHEALTH CORP.

Consolidated Statements of Cash Flows (Unaudited)

   

(in thousands)

 

Twelve Months Ended December 31,

 

 

 

2023

 

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

Net (loss) income

 

$

(674,780

)

 

$

73,133

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization, including patient equipment depreciation

 

 

382,783

 

 

 

351,178

 

Goodwill impairment

 

 

830,787

 

 

 

—

 

Equity-based compensation

 

 

22,468

 

 

 

22,397

 

Change in fair value of warrant liability

 

 

(34,482

)

 

 

(17,158

)

Reduction in the carrying amount of operating lease right-of-use assets

 

 

31,873

 

 

 

32,264

 

Reduction in the carrying amount of finance lease right-of-use assets

 

 

5,938

 

 

 

—

 

Deferred income tax (benefit) expense

 

 

(62,595

)

 

 

18,036

 

Change in fair value of interest rate swaps, net of reclassification adjustment

 

 

(1,801

)

 

 

(2,936

)

Amortization of deferred financing costs

 

 

5,234

 

 

 

5,234

 

Other

 

 

350

 

 

 

(285

)

Changes in operating assets and liabilities, net of effects from acquisitions:

 

 

 

 

Accounts receivable

 

 

(28,862

)

 

 

(209

)

Inventory

 

 

15,531

 

 

 

(6,300

)

Prepaid and other assets

 

 

(20,305

)

 

 

(13,143

)

Operating lease obligations

 

 

(32,428

)

 

 

(31,213

)

Operating liabilities

 

 

40,955

 

 

 

(57,131

)

Net cash provided by operating activities

 

 

480,666

 

 

 

373,867

 

Cash flows from investing activities:

 

 

 

 

Purchases of equipment and other fixed assets

 

 

(337,463

)

 

 

(391,423

)

Payments for business acquisitions, net of cash acquired

 

 

(19,687

)

 

 

(19,017

)

Payments for cost method investments

 

 

(128

)

 

 

(731

)

Net cash used in investing activities

 

 

(357,278

)

 

 

(411,171

)

Cash flows from financing activities:

 

 

 

 

Proceeds from borrowings on long-term debt and lines of credit

 

 

50,000

 

 

 

—

 

Repayments on long-term debt and lines of credit

 

 

(95,000

)

 

 

(20,000

)

Repayments of finance lease obligations

 

 

(6,769

)

 

 

(16,176

)

Payments for shares purchased under share repurchase program

 

 

(29,275

)

 

 

(13,992

)

Payments for tax withholdings from restricted stock vestings and stock option exercises

 

 

(5,843

)

 

 

(3,516

)

Payments of contingent consideration and deferred purchase price from acquisitions

 

 

(2,535

)

 

 

(14,493

)

Payments related to the Tax Receivable Agreement

 

 

(3,224

)

 

 

—

 

Distributions to noncontrolling interests

 

 

(2,500

)

 

 

(2,000

)

Proceeds from the exercise of stock options

 

 

587

 

 

 

2,510

 

Proceeds received in connection with employee stock purchase plan

 

 

2,031

 

 

 

1,616

 

Net cash used in financing activities

 

 

(92,528

)

 

 

(66,051

)

Net increase (decrease) in cash

 

 

30,860

 

 

 

(103,355

)

Cash at beginning of period

 

 

46,272

 

 

 

149,627

 

Cash at end of period

 

$

77,132

 

 

$

46,272

 

 

Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA

This press release presents AdaptHealth’s EBITDA and Adjusted EBITDA for the three and twelve months ended December 31, 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, litigation settlement expense, and certain other non-recurring items of expense or income.

The following unaudited table presents the reconciliation of net (loss) income attributable to AdaptHealth Corp. to EBITDA and Adjusted EBITDA for the three and twelve months ended December 31, 2023 and 2022:

 

 

Three Months Ended

 

Twelve Months Ended

(in thousands)

 

December 31,

 

December 31,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net (loss) income attributable to AdaptHealth Corp.

 

$

(254,503

)

 

$

(2,588

)

 

$

(678,895

)

 

$

69,316

 

Income attributable to noncontrolling interest

 

 

928

 

 

 

1,017

 

 

 

4,115

 

 

 

3,817

 

Interest expense, net

 

 

33,486

 

 

 

30,509

 

 

 

130,299

 

 

 

109,414

 

Income tax (benefit) expense

 

 

(18,111

)

 

 

4,733

 

 

 

(49,004

)

 

 

24,769

 

Depreciation and amortization, including patient equipment depreciation

 

 

92,364

 

 

 

102,343

 

 

 

382,783

 

 

 

351,178

 

EBITDA

 

 

(145,836

)

 

 

136,014

 

 

 

(210,702

)

 

 

558,494

 

Equity-based compensation expense (a)

 

 

5,184

 

 

 

5,613

 

 

 

22,468

 

 

 

22,397

 

Transaction costs (b)

 

 

339

 

 

 

171

 

 

 

960

 

 

 

6,003

 

Change in fair value of warrant liability (c)

 

 

(2,596

)

 

 

(13

)

 

 

(34,482

)

 

 

(17,158

)

Goodwill impairment (d)

 

 

318,921

 

 

 

—

 

 

 

830,787

 

 

 

—

 

Litigation settlement expense (e)

 

 

25,140

 

 

 

—

 

 

 

25,140

 

 

 

—

 

Other non-recurring expense, net (f)

 

 

3,467

 

 

 

4,171

 

 

 

36,624

 

 

 

24,034

 

Adjusted EBITDA

 

$

204,619

 

 

$

145,956

 

 

$

670,795

 

 

$

593,770

 

Net (loss) income attributable to AdaptHealth Corp. as a percentage of net revenue

 

 

(29.7

)%

 

 

(0.3

)%

 

 

(21.2

)%

 

 

2.3

%

Adjusted EBITDA as a percentage of net revenue

 

 

23.8

%

 

 

18.7

%

 

 

21.0

%

 

 

20.0

%

 

(a)

Represents non-cash 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 non-cash gains for the changes in the estimated fair value of the warrant liability.

 

(d)

Represents non-cash goodwill impairment charges as a result of the fair value of the Company’s reporting unit being less than its carrying value.

 

(e)

Represents an expense relating to an agreement to settle a previously disclosed securities class action lawsuit, net of expected contributions from the Company’s insurers.

 

(f)

The 2023 year-to-date period consists of $13.9 million of expenses associated with litigation, $7.1 million of severance charges (of which $2.9 million relates to the separation of the Company's former CEO), $5.6 million of consulting expenses associated with systems implementations activities, $5.2 million of consulting expenses associated with cost savings initiatives, $4.8 million of lease termination costs associated with a cost management program, $0.9 million of net impairments of operating lease right-of-use assets as a result of vacating the leased facilities, and $1.6 million of other non-recurring expenses, offset by income of $2.5 million related to changes in AdaptHealth's estimated TRA liability. The 2022 period consists of $11.7 million of consulting expenses associated with systems implementation activities and post-implementation support services, $10.5 million of expenses associated with litigation, a $0.8 million loss related to the write-off of an investment, and $3.9 million of net other non-recurring expenses, offset by income of $2.9 million related to changes in AdaptHealth’s estimated TRA liability.

 

Free Cash Flow

This press release presents AdaptHealth’s Free Cash Flow for the three and twelve months ended December 31, 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 twelve months ended December 31, 2023 and 2022:

 

 

Three Months Ended

 

Twelve Months Ended

(in thousands)

 

December 31,

 

December 31,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net cash provided by operating activities

 

$

155,266

 

 

$

96,920

 

 

$

480,666

 

 

$

373,867

 

Purchases of equipment and other fixed assets

 

 

(88,647

)

 

 

(142,912

)

 

 

(337,463

)

 

 

(391,423

)

Free cash flow

 

$

66,619

 

 

$

(45,992

)

 

$

143,203

 

 

$

(17,556

)

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240227068013/en/

AdaptHealth Corp. Jason Clemens, CFA Chief Financial Officer IR@adapthealth.com