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, 2021.
Highlights
- AdaptHealth delivered record net revenue and Adjusted EBITDA
for the third quarter and further increased fiscal 2021 guidance,
despite the challenging operating environment.
- During the quarter, the Company completed six
previously-discussed acquisitions, expanding HME operations in
Kentucky, Ohio, West Virginia, New Jersey, New York, South
Carolina, and Florida.
- Since quarter end, the Company has completed four additional
acquisitions: three HME providers in Florida, Washington, and
Wisconsin, and a diabetes supplier in Texas.
- In addition to the AeroCare merger, AdaptHealth has acquired
more than $400 million in annualized revenue to date in 2021.
- In August the Company completed an offering of $600 million
aggregate principal amount of 5.125% unsecured senior notes due
2030.
Third Quarter Results
- Net revenue was $653.3 million, compared to $284.4 million in
the third quarter of 2020, a 130% increase.
- Organic growth for the third quarter was 6.5%.
- Net income attributable to AdaptHealth Corp. was $58.1 million,
or $0.20 per diluted share, compared to a net loss of $51.0
million, or $0.89 per diluted share, in the third quarter of
2020.
- Adjusted EBITDA was $156.3 million, compared to $53.2 million
in the third quarter of 2020, a 194% increase.
- Adjusted EBITDA less Patient Equipment Capex was $106.1
million, compared to $35.9 million in the third quarter of 2020, a
196% increase.
Guidance Increased for
2021
Based on current business, market trends, and acquisitions
completed to date, the Company is increasing its previously issued
financial guidance for fiscal year 2021 as follows:
- Net revenue of $2.41 billion to $2.46 billion, up from prior
guidance of $2.38 billion to $2.48 billion;
- Adjusted EBITDA of $570 million to $580 million, up from prior
guidance of $555 million to $580 million; and
- Adjusted EBITDA less Patient Equipment Capex of $365 million to
$375 million, up from prior guidance of $360 million to $375
million.
Guidance Established for
2022
The Company is also establishing initial financial guidance for
fiscal year 2022 as follows:
- Net revenue of $2.70 billion to $2.90 billion;
- Adjusted EBITDA of $635 million to $695 million; and
- Total capital expenditures are expected to be 9-11% of net
revenue.
Guidance for 2021 and 2022 does not include any contribution
from acquisitions that have not yet closed. 2022 also excludes any
potential impact from continuing sequestration relief, continuing
PHE benefits, and any change to the DMEPOS fee schedule.
Management Commentary
Steve Griggs, Chief Executive Officer, commented, “We are very
pleased with our operating and financial performance for the
quarter, which reflected the outstanding efforts of our team
members. We continue to drive organic growth in the face of
challenging external circumstances (including the ongoing impact of
the Philips recall), as well as further expanding our presence
through strategic acquisitions in key markets. During the third
quarter, we completed six acquisitions and today we are announcing
another four deals in the HME and diabetes product lines.”
Mr. Griggs continued, “Having already achieved many of the
targets we set for the AeroCare merger, we are focused as a
combined company on a strong finish to the year and continuing to
execute on our core strategies of organic growth, improving
operations, and closing accretive acquisitions.”
Josh Parnes, President, commented, “We continue to leverage
technology to drive operational improvements, such as our
patient-facing technology. The Company continues to progress in
evolving our business toward chronic disease management, with an
overall goal to drive improvements in patient outcomes and
reductions in the cost of care, while at the same time continuing
to deliver strong organic growth from our existing businesses.”
Conference Call
Management will host a conference at 8:30 am ET today to discuss
the results and business activities. Interested parties may
participate in the call by dialing:
- (888) 428-7458 (Domestic) or
- (862) 298-0702 (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,
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)
home medical equipment (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 to
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 3.5 million
patients annually in all 50 states through its network of 716
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 clients’ preferences,
prospects and the competitive conditions prevailing in the
healthcare sector; and the impact of the recent 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, Adjusted EBITDA and Adjusted EBITDA
less Patient Equipment Capex, 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. 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 less
Patient Equipment Capex.
The Company believes Adjusted EBITDA less Patient Equipment
Capex is useful to investors in evaluating the Company’s financial
performance. The Company’s business requires significant investment
in equipment purchases to maintain its patient equipment inventory.
Some equipment title transfers to patients’ ownership after a
prescribed number of fixed monthly payments. Equipment that does
not transfer wears out or often times is not recovered after a
patient’s use of the equipment terminates. 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. In addition, the
Company’s debt agreements contain covenants that use a variation of
Adjusted EBITDA less Patient Equipment Capex for purposes of
determining debt covenant compliance. For purposes of this metric,
patient equipment capital expenditure is measured as the value of
the patient equipment received during the accounting period without
regard to whether the equipment is purchased or financed through
lease transactions.
EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient
Equipment Capex should not be considered as measures of financial
performance under U.S. GAAP, and the items excluded from EBITDA,
Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex
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 both the contingent consideration
common shares liability and the warrant liability, and other
non-recurring expense (income) in full year 2021. 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)
September 30,
2021
December 31,
2020
Assets Current assets: Cash and cash equivalents $
336,654
$
99,962
Accounts receivable
347,515
171,065
Inventory
99,881
58,783
Prepaid and other current assets
39,388
33,441
Total current assets
823,438
363,251
Equipment and other fixed assets, net
341,357
110,468
Operating lease right-of-use assets
148,891
—
Goodwill
3,362,268
998,810
Identifiable intangible assets, net
209,909
116,061
Other assets
12,051
16,483
Deferred tax assets
293,801
208,399
Total Assets $
5,191,715
$
1,813,472
Liabilities and Stockholders' Equity Current liabilities:
Accounts payable and accrued expenses $
312,355
$
254,212
Current portion of finance lease obligations
21,672
22,282
Current portion of operating lease obligations
31,015
—
Current portion of long-term debt
20,000
8,146
Contract liabilities
22,252
11,043
Other liabilities
73,369
89,524
Current portion of contingent consideration common shares liability
21,402
36,846
Total current liabilities
502,065
422,053
Long-term debt, less current portion
2,187,373
776,568
Operating lease obligations, less current portion
121,411
—
Other long-term liabilities
314,932
186,470
Contingent consideration common shares liability, less current
portion
15,025
33,631
Warrant liability
56,546
113,905
Total Liabilities
3,197,352
1,532,627
Total Stockholders' Equity
1,994,363
280,845
Total Liabilities and Stockholders' Equity $
5,191,715
$
1,813,472
ADAPTHEALTH CORP.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
Nine Months Ended
(in thousands, except per share data)
September 30,
September 30,
2021
2020
2021
2020
Net revenue $
653,293
$
284,405
$
1,752,429
$
707,960
Costs and expenses: Cost of net revenue
529,887
240,720
1,417,305
606,768
General and administrative expenses
33,006
26,306
132,584
57,745
Depreciation and amortization, excluding patient equipment
depreciation
14,690
4,120
46,014
6,398
Total costs and expenses
577,583
271,146
1,595,903
670,911
Operating income
75,710
13,259
156,526
37,049
Interest expense, net
24,252
12,406
69,584
27,826
Loss on extinguishment of debt
8,240
5,316
20,189
5,316
Change in fair value of contingent consideration common shares
liability
(10,006
)
25,525
(34,050
)
41,850
Change in fair value of warrant liability
(16,737
)
36,912
(57,359
)
72,358
Other (income) loss, net
(452
)
—
698
(1,991
)
Income (loss) before income taxes
70,413
(66,900
)
157,464
(108,310
)
Income tax expense (benefit)
12,147
(4,921
)
22,782
(4,736
)
Net income (loss)
58,266
(61,979
)
134,682
(103,574
)
Income (loss) attributable to noncontrolling interests
174
(10,944
)
1,449
(22,458
)
Net income (loss) attributable to AdaptHealth Corp. $
58,092
$
(51,035
)
$
133,233
$
(81,116
)
Weighted average common shares outstanding - basic
131,684
57,372
124,228
47,986
Weighted average common shares outstanding - diluted
140,322
57,372
133,638
47,986
Basic net income (loss) per share $
0.40
$
(0.89
)
$
0.97
$
(1.69
)
Diluted net income (loss) per share $
0.20
$
(0.89
)
$
0.27
$
(1.69
)
ADAPTHEALTH CORP.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Nine Months Ended September
30,
2021
2020
Cash flows from operating activities: Net income (loss) $
134,682
$
(103,574)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: Depreciation, including patient equipment
depreciation
146,476
55,186
Equity-based compensation
21,394
10,969
Change in fair value of contingent consideration common shares
liability
(34,050)
41,850
Change in fair value of warrant liability
(57,359)
72,358
Reduction in the carrying amount of operating lease right-of-use
assets
23,832
—
Deferred income tax expense (income)
11,666
(7,590)
Change in fair value of interest rate swaps, net of
reclassification adjustment
(2,185)
(2,130)
Change in fair value of contingent consideration
1,135
(2,900)
Payment of contingent consideration in connection with an
acquisition
(1,000)
(1,000)
Amortization of intangible assets
34,351
2,675
Amortization of deferred financing costs
4,069
1,189
Imputed interest expense
173
128
Write-off of deferred financing costs
4,054
46
Loss on extinguishment of debt from prepayment penalty
16,135
5,316
Gain on equity method investment
(1,922)
—
Gain on sale of investment
—
(591)
Changes in operating assets and liabilities, net of effects from
acquisitions: Accounts receivable
(25,046)
(19,251)
Inventory
3,626
(10,166)
Prepaid and other assets
(137)
(1,459)
Operating lease obligations
(23,292)
—
Operating liabilities
(81,852)
104,231
Net cash provided by operating activities
174,750
145,287
Cash flows from investing activities: Payments for business
acquisitions, net of cash acquired
(1,417,946)
(605,309)
Purchases of equipment and other fixed assets
(139,686)
(22,834)
Payments for investments
(875)
(1,000)
Proceeds from sale of investment
—
2,046
Net cash used in investing activities
(1,558,507)
(627,097)
Cash flows from financing activities: Proceeds from borrowings on
long-term debt and lines of credit
1,165,000
536,275
Repayments on long-term debt and lines of credit
(822,271)
(545,584)
Proceeds from the sale of Class A Common Stock and Series A
Preferred Stock
—
225,000
Proceeds from the issuance of Class A Common Stock
278,850
142,600
Proceeds from the issuance of senior unsecured notes
1,100,000
350,000
Proceeds from the exercise of warrants
—
24,495
Proceeds from the exercise of stock options
12,140
—
Repayments of finance lease obligations
(31,043)
(29,710)
Payments for equity issuance costs
(13,832)
(11,197)
Payments of deferred financing costs
(29,185)
(12,879)
Proceeds received in connection with employee stock purchase plan
1,016
—
Payments for tax withholdings from equity-based compensation
activity
(810)
—
Distributions to noncontrolling interests
(1,070)
(800)
Payments of contingent consideration in connection with
acquisitions
(17,200)
(200)
Payments of deferred purchase price in connection with acquisitions
(5,011)
(750)
Payments for debt prepayment penalties
(16,135)
—
Net cash provided by financing activities
1,620,449
677,250
Net increase in cash and cash equivalents
236,692
195,440
Cash and cash equivalents at beginning of period
99,962
76,878
Cash and cash equivalents at end of period $
336,654
$
272,318
Non-GAAP Financial
Measures
This press release presents AdaptHealth’s EBITDA, Adjusted
EBITDA and Adjusted EBITDA less Patient Equipment Capex for the
three and nine months ended September 30, 2021 and 2020.
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, severance, 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 (income).
AdaptHealth defines Adjusted EBITDA less Patient Equipment Capex
as Adjusted EBITDA (as defined above) less patient equipment
acquired during the period without regard to whether the equipment
was purchased or financed through lease transactions.
The following unaudited table presents the reconciliation of net
income (loss) attributable to AdaptHealth Corp. to EBITDA, Adjusted
EBITDA and Adjusted EBITDA less Patient Equipment Capex for the
three and nine months ended September 30, 2021 and 2020:
Three Months Ended
Nine Months Ended
(in thousands)
September 30,
September 30,
2021
2020
2021
2020
Net income (loss) attributable to AdaptHealth Corp. $
58,092
$
(51,035
)
$
133,233
$
(81,116
)
Income (loss) attributable to noncontrolling interests
174
(10,944
)
1,449
(22,458
)
Interest expense, net
24,252
12,406
69,584
27,826
Income tax expense (benefit)
12,147
(4,921
)
22,782
(4,736
)
Depreciation and amortization, including patient equipment
depreciation
69,828
22,747
180,827
57,861
EBITDA
164,493
(31,747
)
407,875
(22,623
)
Loss on extinguishment of debt (a)
8,240
5,316
20,189
5,316
Equity-based compensation expense (b)
5,365
5,502
21,394
10,969
Transaction costs (c)
4,616
10,213
44,570
16,612
Severance (d)
469
921
2,002
3,245
Change in fair value of contingent consideration common shares
liability (e)
(10,006
)
25,525
(34,050
)
41,850
Change in fair value of warrant liability (f)
(16,737
)
36,912
(57,359
)
72,358
Other non-recurring expense (income) (g)
(166
)
518
3,219
(1,473
)
Adjusted EBITDA
156,274
53,160
407,840
126,254
Less: Patient equipment capex (h)
(50,153
)
(17,248
)
(140,936
)
(42,283
)
Adjusted EBITDA less Patient Equipment Capex $
106,121
$
35,912
$
266,904
$
83,971
(a)
Represents write offs of
unamortized deferred financing costs 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. The higher expense in the 2021 period is
due to overall increased equity compensation grant activity in that
period, as well as expense resulting from accelerated vesting of
certain awards in that period, including accelerated vesting of
certain awards in connection with the separation of the Company’s
former Co-CEO.
(c)
Represents transaction costs
related to acquisitions.
(d)
Represents severance costs
related to acquisition integration and internal AdaptHealth
restructuring and workforce reduction activities.
(e)
Represents a non-cash charge or
gain for the change in the estimated fair value of the contingent
consideration common shares liability.
(f)
Represents a non-cash charge or
gain for the change in the estimated fair value of the warrant
liability.
(g)
The 2021 year-to-date period
includes $1.9 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, $1.6 million of expenses associated with lease
terminations, a $1.1 million charge for the increase in the fair
value of contingent consideration liabilities related to
acquisitions, and $0.1 million of other non-recurring charges,
offset by a $1.9 million gain in connection with the consolidation
of an equity method investment and a gain of $0.5 million for the
receipt of earnout proceeds in connection with the sale of an
investment. The 2020 year-to-date period includes $2.9 million of
reductions in the fair value of contingent consideration
liabilities related to acquisitions, a $0.6 million gain in
connection with the sale of an investment, offset by a $1.5 million
expense related to a transition services agreement executed in
connection with an acquisition completed in 2020, and $0.5 million
of other non-recurring expenses.
(h)
Represents the value of the
patient equipment obtained during the respective period without
regard to whether the equipment is purchased or financed through
lease transactions.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211104005568/en/
AdaptHealth Corp. Jason Clemens, CFA Chief Financial
Officer jclemens@adapthealth.com
Anton Hie Vice President, Investor Relations (615) 887-4012
anton.hie@adapthealth.com
The Equity Group Inc. Devin Sullivan Senior Vice
President (212) 836-9608 dsullivan@equityny.com
Kalle Ahl, CFA Vice President (212) 836-9614
kahl@equityny.com
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