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, 2022.
Third Quarter Results and
Highlights
- AdaptHealth delivered record net revenue of $756.5 million for
the third quarter of 2022 compared to $653.3 million in the third
quarter of 2021, an increase of 15.8%.
- Net income attributable to AdaptHealth Corp. was $16.1 million,
or $0.11 per diluted share, compared to $58.1 million, or $0.20 per
diluted share, in the third quarter of 2021.
- Non-acquired net revenue for the third quarter increased 6.1%
over the third quarter of 2021.
- Sleep rental revenue continued to show strong sequential growth
with further improvement in the supply of PAP machines relative to
recent quarters.
- Adjusted EBITDA was $160.2 million, compared to $156.3 million
in the third quarter of 2021, an increase of 2.5%.
- Cash flow from operations was $107.0 million, compared to $27.1
million in the third quarter of 2021.
- The Company repurchased $10.6 million of its common stock in
the open market during the quarter using available cash, pursuant
to the previously-announced share repurchase authorization.
Guidance Updated for Fiscal Year
2022
The Company is updating its previously issued financial guidance
for fiscal year 2022, as follows:
- Net revenue of $2.950 billion to $3.010 billion (previously
$2.840 billion to $3.040 billion);
- Adjusted EBITDA of $620 million to $650 million (previously
$615 million to $675 million); and
- Total capital expenditures representing 10-12% of net revenue
(previously 9-11%).
Guidance for fiscal year 2022 does not include any contribution
from acquisitions that have not yet closed.
Management Commentary
Steve Griggs, Chief Executive Officer, commented, “We delivered
another solid quarter as we continued to capitalize on strong
demand in our HME and Sleep product lines with CPAP patient set-ups
at or near record levels each month of the quarter, and our
diabetes product line once again posting double-digit growth.
Additionally, our operational excellence initiatives continued to
partially offset general inflationary pressures and higher labor
costs. As a result, we were pleased to see sequential margin
expansion in the third quarter and expect further improvement in
the fourth quarter. This strong performance demonstrates the
resilience of our business and confirms confidence in our ability
to achieve the 2025 goals we set out at our Capital Markets
Day.”
Josh Parnes, President, said, “The healthcare marketplace
continues to move aggressively to the home environment, and we are
positioning AdaptHealth to lead this shift with our
technology-enabled, patient-first integrated care model. As we look
ahead, our team remains deeply committed to deliver on our mission
of helping the approximately 3.9 million patients we serve to live
their healthiest lives at home while reducing healthcare costs and
unlocking AdaptHealth’s earnings and growth potential.”
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 approximately 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)
September 30, 2022
December 31, 2021
Assets Current assets: Cash and cash equivalents $
110,738
$
149,627
Accounts receivable
358,341
359,896
Inventory
125,362
123,095
Prepaid and other current assets
37,490
37,440
Total current assets
631,931
670,058
Equipment and other fixed assets, net
473,056
398,577
Operating lease right-of-use assets
128,635
147,760
Goodwill
3,524,999
3,512,567
Identifiable intangible assets, net
172,772
202,231
Other assets
20,453
15,098
Deferred tax assets
286,135
304,193
Total Assets $
5,237,981
$
5,250,484
Liabilities and Stockholders' Equity Current liabilities:
Accounts payable and accrued expenses $
346,920
$
358,384
Current portion of finance lease obligations
2,695
15,446
Current portion of operating lease obligations
28,769
31,418
Current portion of long-term debt
30,000
20,000
Contract liabilities
31,605
31,370
Other liabilities
26,938
43,194
Total current liabilities
466,927
499,812
Long-term debt, less current portion
2,162,088
2,183,552
Operating lease obligations, less current portion
103,859
120,180
Other long-term liabilities
306,641
322,487
Warrant liability
38,516
57,764
Total Liabilities
3,078,031
3,183,795
Total Stockholders' Equity
2,159,950
2,066,689
Total Liabilities and Stockholders' Equity $
5,237,981
$
5,250,484
ADAPTHEALTH CORP.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
Nine Months Ended
(in thousands, except per share data)
September 30,
September 30,
2022
2021
2022
2021
Net revenue $
756,495
$
653,293
$
2,190,312
$
1,752,429
Costs and expenses: Cost of net revenue
646,714
529,887
1,853,847
1,417,305
General and administrative expenses
40,681
33,006
124,673
132,584
Depreciation and amortization, excluding patient equipment
depreciation
16,151
14,690
48,113
46,014
Total costs and expenses
703,546
577,583
2,026,633
1,595,903
Operating income
52,949
75,710
163,679
156,526
Interest expense, net
28,521
24,252
78,905
69,584
Change in fair value of warrant liability
1,364
(16,737
)
(17,145
)
(57,359
)
Change in fair value of contingent consideration common shares
liability
—
(10,006
)
—
(34,050
)
Loss on extinguishment of debt
—
8,240
—
20,189
Other loss (income), net
257
(452
)
7,179
698
Income before income taxes
22,807
70,413
94,740
157,464
Income tax expense
5,580
12,147
20,036
22,782
Net income
17,227
58,266
74,704
134,682
Income attributable to noncontrolling interest
1,105
174
2,800
1,449
Net income attributable to AdaptHealth Corp. $
16,122
$
58,092
$
71,904
$
133,233
Weighted average common shares outstanding - basic
134,227
131,684
134,186
124,228
Weighted average common shares outstanding - diluted
137,583
140,322
138,599
133,638
Basic net income per share $
0.11
$
0.40
$
0.49
$
0.97
Diluted net income per share $
0.11
$
0.20
$
0.35
$
0.27
ADAPTHEALTH CORP.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Nine Months Ended September
30,
2022
2021
Cash flows from operating activities: Net income $
74,704
$
134,682
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization, including
patient equipment depreciation
248,835
180,827
Equity-based compensation
16,784
21,394
Change in fair value of warrant liability
(17,145
)
(57,359
)
Change in fair value of contingent consideration common shares
liability
—
(34,050
)
Reduction in the carrying amount of operating lease right-of-use
assets
16,924
23,832
Deferred income tax expense
18,058
11,666
Change in fair value of interest rate swaps, net of
reclassification adjustment
(2,202
)
(2,185
)
Amortization of deferred financing costs
3,926
4,069
Write-off of deferred financing costs
—
4,054
Loss on extinguishment of debt from prepayment penalty
—
16,135
Other
(2,023
)
(1,614
)
Changes in operating assets and liabilities, net of effects from
acquisitions: Accounts receivable
2,357
(25,046
)
Inventory
(3,992
)
3,626
Prepaid and other assets
4,211
(137
)
Operating lease obligations
(16,794
)
(23,292
)
Operating liabilities
(66,696
)
(81,852
)
Net cash provided by operating activities
276,947
174,750
Cash flows from investing activities: Payments for business
acquisitions, net of cash acquired
(16,134
)
(1,417,946
)
Purchases of equipment and other fixed assets
(248,511
)
(139,686
)
Payments for cost method investments
(731
)
(875
)
Net cash used in investing activities
(265,376
)
(1,558,507
)
Cash flows from financing activities: Proceeds from borrowings on
long-term debt and lines of credit
—
1,165,000
Repayments on long-term debt and lines of credit
(15,000
)
(822,271
)
Repayments of finance lease obligations
(14,219
)
(31,043
)
Payments for shares purchased under share repurchase program
(13,992
)
—
Proceeds from the exercise of stock options
1,388
12,140
Proceeds received in connection with employee stock purchase plan
1,616
1,016
Proceeds from the issuance of senior unsecured notes
—
1,100,000
Proceeds from the issuance of Class A Common Stock
—
278,850
Payments for equity issuance costs
—
(13,832
)
Payments of deferred financing costs
—
(29,185
)
Payments for tax withholdings from restricted stock vesting and
stock option exercises
(2,690
)
(810
)
Payments of contingent consideration and deferred purchase price
from acquisitions
(5,563
)
(22,211
)
Distributions to noncontrolling interests
(2,000
)
(1,070
)
Payments for debt prepayment penalties
—
(16,135
)
Net cash (used in) provided by financing activities
(50,460
)
1,620,449
Net (decrease) increase in cash and cash equivalents
(38,889
)
236,692
Cash and cash equivalents at beginning of period
149,627
99,962
Cash and cash equivalents at end of period $
110,738
$
336,654
Non-GAAP Financial
Measures
This press release presents AdaptHealth’s EBITDA and Adjusted
EBITDA for the three and nine months ended September 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 attributable to AdaptHealth Corp. to EBITDA and Adjusted
EBITDA for the three and nine months ended September 30, 2022 and
2021:
Three Months Ended
Nine Months Ended
(in thousands)
September 30,
September 30,
2022
2021
2022
2021
Net income attributable to AdaptHealth Corp. $
16,122
$
58,092
$
71,904
$
133,233
Income attributable to noncontrolling interest
1,105
174
2,800
1,449
Interest expense, net
28,521
24,252
78,905
69,584
Income tax expense
5,580
12,147
20,036
22,782
Depreciation and amortization, including patient equipment
depreciation
92,331
69,828
248,835
180,827
EBITDA
143,659
164,493
422,480
407,875
Loss on extinguishment of debt (a)
—
8,240
—
20,189
Equity-based compensation expense (b)
5,562
5,365
16,784
21,394
Transaction costs (c)
519
4,616
5,832
44,570
Change in fair value of warrant liability (d)
1,364
(16,737
)
(17,145
)
(57,359
)
Change in fair value of contingent consideration common shares
liability (e)
—
(10,006
)
—
(34,050
)
Other non-recurring expense, net (f)
9,059
303
19,863
5,221
Adjusted EBITDA $
160,163
$
156,274
$
447,814
$
407,840
(a) Represents the write-off of unamortized deferred financing
costs and other expenses related to refinancing of debt and
prepayment 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 $9.0 million of
consulting expenses associated with systems implementation
activities and post-implementation support services, a $4.5 million
expense related to changes in AdaptHealth’s estimated TRA
liability, $3.8 million of expenses associated with litigation,
claims and settlements, $0.7 million of expenses associated with
lease terminations, a $0.8 million loss related to the write-off of
an investment, and $1.1 million of net other non-recurring
expenses. The 2021 year-to-date period consists of $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 litigation, claims and settlements, $1.6 million of
expenses associated with lease terminations, and $0.8 million of
net other non-recurring charges.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221108005504/en/
AdaptHealth Corp. Jason Clemens, CFA Chief Financial
Officer
Anton Hie Vice President, Investor Relations
IR@adapthealth.com
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