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une

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-38399

AdaptHealth Corp.

(Exact name of registrant as specified in its charter)

Delaware

82-3677704

(State of Other Jurisdiction of incorporation or Organization)

(I.R.S. Employer Identification No.)

220 West Germantown Pike Suite 250, Plymouth Meeting, PA

19462

(Address of principal executive offices)

(Zip code)

Registrant’s telephone number, including area code: (610) 630-6357

Securities registered pursuant to Section 12(b) of the Act:

    

    

Name Of Each Exchange

Title of Each Class

Trading Symbol(s)

On Which Registered

Common Stock, par value $0.0001 per share

AHCO

The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.0405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer

Non-accelerated filer ☐

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of November 5, 2021, there were 132,215,165 shares of the Registrant’s Common Stock issued and outstanding.

ADAPTHEALTH CORP.

FORM 10-Q

TABLE OF CONTENTS

Page Number

PART I FINANCIAL INFORMATION

Item 1. Consolidated Interim Financial Statements (Unaudited)

Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020

4

Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020

5

Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2021 and 2020

6

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2021 and 2020

7

Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020

9

Notes to Consolidated Interim Financial Statements

10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

49

Item 3. Quantitative and Qualitative Disclosures About Market Risk

69

Item 4. Controls and Procedures

69

PART II OTHER INFORMATION

70

Item 1. Legal Proceedings

70

Item 1A. Risk Factors

72

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

101

Item 3. Defaults upon Senior Securities

101

Item 4. Mine Safety Disclosure

101

Item 5. Other Information

101

Item 6. Exhibits

101

Signatures

103

1

CERTAIN DEFINED TERMS

Throughout this Quarterly Report on Form 10-Q, unless otherwise specified or the context so requires:

AdaptHealth Holdings” means AdaptHealth Holdings LLC, a Delaware limited liability company;

AdaptHealth Units” means units of AdaptHealth Holdings;

Business Combination” means our business combination with AdaptHealth Holdings, which we completed on November 8, 2019;

“Charter” means our Third Amended and Restated Certificate of Incorporation, filed with the Secretary of State of the State of Delaware on July 28, 2021;

Class A Common Stock” means the Class A Common Stock, par value $0.0001 per share, created on the Closing, which, following the filing of the Charter, has been renamed to “Common Stock” (as defined below);

Class B Common Stock” means the Class B Common Stock, par value $0.0001 per share, created on the Closing, which following the filing of the Charter, no longer exists;

Closing” means the closing of the Business Combination;

Common Stock” means our Common Stock, par value $0.0001 per share;

Exchange Agreement” means the Exchange Agreement, dated as of November 8, 2019, by and among AdaptHealth, AdaptHealth Holdings, and holders of AdaptHealth Units;

OEP Purchaser” means OEP AHCO Investment Holdings, LLC, a Delaware limited liability company;

Series B-1 Preferred Stock” means the series of preferred stock of the Company designated as “Series B-1 Convertible Preferred Stock,” par value $0.0001 per share;

Sponsor” means Deerfield/RAB Ventures LLC;

Tax Receivable Agreement” means the Tax Receivable Agreement, dated as of November 8, 2019, by and among AdaptHealth, AdaptHealth Holdings, and holders of AdaptHealth Units; and

“Warrants” means, collectively, the warrants that were issued in our initial public offering (our “IPO”) pursuant to the registration statement declared effective on February 15, 2018 and which were redeemed on September 2, 2020 (the “public warrants”) and the warrants initially issued to our Sponsor in a private placement that occurred simultaneously with our IPO (the “private placement warrants”), which private placement warrants have been distributed from the Sponsor to its members.

2

CAUTIONARY STATEMENT

In this Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I Item 2, and the documents incorporated by reference herein, we make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business. These statements may be preceded by, followed by or include the words “may,” “might,” “will,” “will likely result,” “should,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “continue,” “target” or similar expressions.

These forward-looking statements are based on information available to us as of the date they were made, and involve a number of risks and uncertainties which may cause them to turn out to be wrong. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward- looking statements. Some factors that could cause actual results to differ include:

competition and the ability of our business to grow and manage growth profitably;
changes in applicable laws or regulations;
fluctuations in the U.S. and/or global stock markets;
the possibility that we may be adversely affected by other economic, business, and/or competitive factors;
the impact of the coronavirus (COVID-19) pandemic and our response to it;
failure to consummate or realize the expected benefits of acquisitions, including the failure to realize the expected benefits of the acquisition of AeroCare Holdings, Inc. (“AeroCare”); and
other risks and uncertainties set forth in this Form 10-Q, as well as the documents incorporated by reference herein.

3

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Interim Financial Statements

ADAPTHEALTH CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

(UNAUDITED)

September 30, 

December 31,

2021

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

Commitments and contingencies (note 14)

 

 

Stockholders' Equity:

 

 

Common Stock, par value of $0.0001 per share, 300,000,000 shares authorized and 132,154,358 shares issued and outstanding as of September 30, 2021; and 210,000,000 shares authorized and 76,457,439 shares issued and outstanding as of December 31, 2020

13

8

Class B Common Stock, par value of $0.0001 per share, 0 shares authorized and 0 shares issued and outstanding as of September 30, 2021; and 35,000,000 shares authorized and 13,218,758 shares issued and outstanding as of December 31, 2020

1

Preferred Stock, par value of $0.0001 per share, 5,000,000 shares authorized; 124,060 and 163,560 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

1

1

Additional paid-in capital

2,057,289

558,486

Accumulated deficit

(65,963)

(199,196)

Accumulated other comprehensive loss

 

(1,231)

 

(4,411)

Total stockholders' equity attributable to AdaptHealth Corp.

 

1,990,109

 

354,889

Noncontrolling interests in subsidiaries

 

4,254

 

(74,044)

Total Stockholders' Equity

 

1,994,363

 

280,845

Total Liabilities and Stockholders' Equity

$

5,191,715

$

1,813,472

See accompanying notes to unaudited consolidated interim financial statements.

4

ADAPTHEALTH CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

Three Months Ended September 30, 

Nine Months Ended 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 (note 10)

(10,006)

25,525

(34,050)

41,850

Change in fair value of warrant liability (note 10)

(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 (1)

$

0.40

$

(0.89)

$

0.97

$

(1.69)

Diluted net income (loss) per share (1)

$

0.20

$

(0.89)

$

0.27

$

(1.69)

(1) See Note 11, Earnings Per Share, to the unaudited consolidated interim financial statements for the calculations of basic and diluted net income (loss) per share.

See accompanying notes to unaudited consolidated interim financial statements.

5

ADAPTHEALTH CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(IN THOUSANDS)

(UNAUDITED)

Three Months Ended September 30, 

Nine Months Ended September 30, 

2021

2020

    

2021

2020

Net income (loss)

$

58,266

$

(61,979)

$

134,682

$

(103,574)

Other comprehensive income (loss):

 

  

 

  

 

 

Interest rate swap agreements, inclusive of reclassification adjustment

 

640

 

925

 

3,180

 

(11,558)

Comprehensive income (loss)

 

58,906

 

(61,054)

 

137,862

 

(115,132)

Income (loss) attributable to noncontrolling interests

 

174

 

(10,944)

 

1,449

 

(22,458)

Comprehensive income (loss) attributable to AdaptHealth Corp.

$

58,732

$

(50,110)

$

136,413

$

(92,674)

See accompanying notes to unaudited consolidated interim financial statements.

6

ADAPTHEALTH CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(IN THOUSANDS)

(UNAUDITED)

Accumulated

Additional

other

Noncontrolling

Common Stock

Class B Common Stock

Preferred Stock

paid-in

Accumulated

comprehensive

interests in

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

capital

deficit

  

income (loss)

  

subsidiaries

  

Total

Balance, December 31, 2020

76,458

$

8

13,219

$

1

164

$

1

$

558,486

$

(199,196)

$

(4,411)

$

(74,044)

$

280,845

Issuance of Class A Common Stock for acquisitions

14,092

2

564,986

564,988

Issuance of Series C Preferred Stock for an acquisition

130

523,856

523,856

Issuance of stock options for an acquisition

134,683

134,683

Exchange of Class B Common Stock for Class A Common Stock

13,219

1

(13,219)

(1)

(77,919)

77,919

Equity-based compensation

172

8,582

8,582

Cashless exercise of stock options

9

Issuance of Class A Common Stock, net of offering costs of $13,832

8,450

1

265,017

265,018

Conversion of Series B-1 Preferred Stock to Class A Common Stock

3,950

(40)

Conversion of Series C-1 Preferred Stock to Class A Common Stock

13,047

1

(130)

(1)

Class A Common Stock issued in connection with employee stock purchase plan

8

314

314

Net loss

(3,966)

324

(3,642)

Equity activity resulting from the Tax Receivable Agreement

16,768

16,768

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

1,876

1,876

Other

(19)

(810)

(810)

Balance, March 31, 2021

129,386

$

13

$

124

$

1

$

1,993,962

(203,162)

$

(2,535)

$

4,199

$

1,792,478

Issuance of Class A Common Stock for acquisitions

441

12,166

12,166

Equity-based compensation

37

7,447

7,447

Exercise of stock options

200

2,300

2,300

Distribution to non-controlling interest

(1,070)

(1,070)

Net income

79,107

951

80,058

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

664

664

Balance, June 30, 2021

130,064

$

13

$

124

$

1

$

2,015,875

(124,055)

$

(1,871)

$

4,080

$

1,894,043

Issuance of Common Stock for acquisitions

977

25,507

25,507

Equity-based compensation

189

5,365

5,365

Exercise of stock options

898

9,840

9,840

Common Stock issued in connection with employee stock purchase plan

26

702

702

Net income

58,092

174

58,266

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

640

640

Balance, September 30, 2021

132,154

$

13

$

124

$

1

$

2,057,289

(65,963)

$

(1,231)

$

4,254

$

1,994,363

7

ADAPTHEALTH CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(IN THOUSANDS)

(UNAUDITED) (Continued)

Accumulated

Additional

other

Noncontrolling

Common Stock

Class B Common Stock

Preferred Stock

paid-in

Accumulated

comprehensive

interests in

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

capital

deficit

  

income (loss)

  

subsidiaries

  

Total

Balance, December 31, 2019

40,816

$

4

31,564

$

3

$

$

$

(40,258)

$

1,431

$

(26,963)

$

(65,783)

Issuance of Class A Common Stock for an acquisition

387

6,248

6,248

Exchange of Class B Common Stock for Class A Common Stock

1,000

(1,000)

(361)

361

Exercise of warrants

1,092

15,273

15,273

Equity-based compensation

59

2,223

2,223

Net loss

(34,551)

(14,902)

(49,453)

Equity activity resulting from Tax Receivable Agreement

2,483

2,483

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

(6,570)

(4,847)

(11,417)

Balance, March 31, 2020

43,354

$

4

30,564

$

3

$

$

25,866

$

(74,809)

$

(5,139)

$

(46,351)

$

(100,426)

Exchange of Class B Common Stock for Class A Common Stock

2,055

(2,055)

(1,580)

1,580

Exercise of warrants

1,034

1

17,627

17,628

Equity-based compensation

32

3,244

3,244

Exchange of Class A Common Stock for Series B-1 Preferred Stock

(15,810)

(2)

158

1

1

Distribution to non-controlling interest

(800)

(800)

Net income

4,470

3,388

7,858

Equity activity resulting from the Put/Call Agreement

(29,927)

(29,927)

Equity activity resulting from the Tax Receivable Agreement

2,223

2,223

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

(656)

(410)

(1,066)

Balance, June 30, 2020

30,665

$

3

28,509

$

3

158

$

1

$

17,454

$

(70,339)

$

(5,795)

$

(42,593)

$

(101,266)

Issuance of Common Stock for acquisitions

4,344

1

83,280

83,281

Sale of Class A Common Stock and Series A Preferred Stock, net of offering costs of $1,639

10,930

1

75

223,360

223,361

Issuance of Class A Common Stock, net of offering costs of $9,558

9,200

1

133,041

133,042

Exchange of Class B Common Stock for Class A Common Stock

2,634

(2,634)

(7,467)

7,467

Exercise of warrants

1,979

40,691

40,691

Equity-based compensation

35

5,502

5,502

Conversion of Series B-2 Preferred Stock to Series B-1 Preferred Stock

(9)

Conversion of Series A Preferred Stock to Class A Common Stock

2,888

(40)

Class A Common Stock issued in connection with employee stock purchase plan

6

Net loss

(51,035)

(10,944)

(61,979)

Equity activity resulting from Tax Receivable Agreement

2,236

2,236

Equity activity resulting from the impact of other changes in ownership and deferred taxes

(10,623)

(10,623)

Equity activity resulting from the Put/Call Agreement

(2,694)

2,694

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

684

241

925

Balance, September 30, 2020

62,681

$

6

25,875

$

3

184

$

1

$

484,780

$

(118,680)

$

(5,111)

$

(45,829)

$

315,170

See accompanying notes to unaudited consolidated interim financial statements.

8

ADAPTHEALTH CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS) (UNAUDITED)

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