UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR o 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. Emp ...

Financial Data and Key Metrics Changes - AdaptHealth reported net revenue of $744.6 million for Q1 2023, a 5.4% increase from $706.2 million in Q1 2022 [20] - Adjusted EBITDA for the quarter was $134 million, a decline of 2.7% year-over-year, with an adjusted EBITDA margin of 18%, down 150 basis points from the previous year [22] - Cash flow from operations was $140.2 million, with free cash flow of $51.1 million [23] Business Line Data and Key Metrics Changes - The sleep equipment business experienced 18% growth in net revenues, with PAP setups more than 50% higher than prior to the Philips recall [10][11] - The diabetes and CGM product lines saw an 8.3% increase in patient census, but revenue for pumps and supplies was down $9 million year-over-year [21][22] - The respiratory business is expected to see sequential quarterly growth as it stabilizes after the pandemic [12] Market Data and Key Metrics Changes - The diabetes product line faced headwinds due to a shift of patients to pharmacy channels, impacting revenue negatively [21] - The company reported a 53% increase in sleep patient rental census from the lows during the PAP shortage [21] Company Strategy and Development Direction - AdaptHealth is transitioning to a value-based care model, with new contracts expected to enhance patient outcomes and streamline billing [13][14] - The company is focused on expanding its technology platform, including the launch of the Adapt myApp for diabetes management, which has seen strong adoption [17][18] - Management is implementing cost management programs aimed at generating annualized savings of approximately $40 million [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to capitalize on future opportunities despite current challenges in the diabetes segment [28] - The company anticipates sequential improvement in the diabetes business and expects to maintain revenue trends experienced in Q1 2023 [25][32] Other Important Information - The company completed $9.2 million in share repurchases during the quarter, with approximately $177 million remaining under authorization [24] - Management is optimistic about the potential of new value-based contracts to drive growth and improve margins [39][60] Q&A Session Summary Question: What gives confidence in the revenue guidance amidst changes in the diabetes segment? - Management acknowledged the significant market changes affecting diabetes but expressed confidence in sequential improvement in the coming quarters [32][34] Question: How will the new value-based contracts impact growth? - Management indicated that these contracts are expected to be accretive to EBITDA and will provide advantages in marketing other products [38][60] Question: What is the plan for cash flow utilization? - Management clarified that while M&A activity will be modest, the majority of free cash flow will be returned to shareholders or used for debt reduction [41] Question: Can you elaborate on the cost savings initiatives? - Management detailed that $20 million in annualized savings have already been achieved, with an additional $10 million targeted for the current year [66] Question: How does the company view the long-range plan in light of recent challenges? - Management remains confident in the long-range plan, particularly in the growth of the government business and the sleep segment [45][46]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 OR FORM 10-Q o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 Commission file number: 001-38399 AdaptHealth Corp. (Exact name of registrant as specified in its charter) (State of Other Jurisdiction of incorporation or Organization) (I.R.S. Employer Identificatio ...

Adapthealth Corp (NASDAQ:AHCO) Q4 2022 Earnings Conference Call February 28, 2023 8:30 AM ET Company Participants Christopher Joyce - General Counsel & Secretary Stephen Griggs - CEO & Director Joshua Parnes - President & Director Jason Clemens - CFO & Principal Accounting Officer Conference Call Participants Philip Chickering - Deutsche Bank Joanna Gajuk - Bank of America Merrill Lynch Mathew Blackman - Stifel, Nicolaus & Company Operator Ladies and gentlemen, thank you for joining us this morning for the ...

PART I [Business](index=6&type=section&id=Item%201.%20Business) AdaptHealth provides national healthcare-at-home solutions, including HME and medical supplies, serving **3.9 million patients** annually with revenue from rentals and sales - AdaptHealth is a national leader in healthcare-at-home solutions, including HME and medical supplies, focusing on sleep therapy, diabetes, and oxygen services. As of year-end 2022, the company served approximately **3.9 million patients** annually through a network of about **725 locations** in **47 states**[22](index=22&type=chunk) FY 2022 Revenue Breakdown by Type | Revenue Type | Percentage of Net Revenue | | :--- | :--- | | Resupply & One-Time Sales | ~68% | | Fixed Monthly Equipment Rentals | ~32% | - A key element of AdaptHealth's growth strategy is accretive acquisitions. In 2022, the company completed acquisitions of **eight companies** for approximately **$17.6 million**, a significant decrease from 2021 when it acquired **23 companies** for about **$2.9 billion**, primarily due to the AeroCare acquisition[33](index=33&type=chunk)[34](index=34&type=chunk) - The company's operations were materially impacted by the **June 2021 Philips Respironics recall** of certain ventilator, BiPAP, and CPAP devices, which led to supply chain shortages and affected the company's ability to meet patient demand throughout 2022[35](index=35&type=chunk) - AdaptHealth is subject to extensive government regulation, including federal and state laws governing reimbursement, fraud and abuse (such as HIPAA and the HITECH Act), and Medicare's Competitive Bidding Program. The company maintains a compliance program to adhere to these complex regulations[45](index=45&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) [Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) AdaptHealth faces risks from supplier reliance, supply chain, inflation, cybersecurity, payor pricing, regulatory changes, goodwill impairment, and internal control weaknesses - The company relies on a small number of suppliers for its equipment. The **June 2021 Philips recall** of sleep and respiratory care devices created significant supply shortages that materially impacted the business in 2021 and 2022[69](index=69&type=chunk)[71](index=71&type=chunk)[74](index=74&type=chunk) - AdaptHealth is exposed to macroeconomic risks, including supply chain disruptions, economy-wide labor shortages, and inflationary pressures that increase the cost of materials, labor, and transportation[75](index=75&type=chunk)[78](index=78&type=chunk) - A significant portion of revenue comes from specific sources, creating concentration risk: - **Private Payors:** Approximately **61%** of net revenue for FY2022 was from private third-party payors, who are increasingly seeking to control costs. - **Sleep Therapy:** Approximately **36%** of net revenue for FY2022 was from sleep therapy equipment and supplies. - **Government Payors:** Approximately **26%** of net revenue for FY2022 was from Medicare and Medicaid programs, which are subject to policy and reimbursement changes[84](index=84&type=chunk)[90](index=90&type=chunk)[118](index=118&type=chunk) - The company is subject to various governmental audits and investigations related to healthcare fraud and abuse laws, including ongoing inquiries by the U.S. Attorney's Offices for the Eastern District of Pennsylvania and the Western District of Kentucky regarding ventilator and oxygen billing practices[134](index=134&type=chunk)[136](index=136&type=chunk)[138](index=138&type=chunk) - As of December 31, 2022, the company had **$3.5 billion** of goodwill on its balance sheet. A significant drop in market capitalization or other triggering events could lead to a material impairment charge[165](index=165&type=chunk) - The company has identified **material weaknesses** in its internal control over financial reporting, which could subject it to adverse regulatory consequences and harm investor confidence[174](index=174&type=chunk)[175](index=175&type=chunk) [Unresolved Staff Comments](index=37&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments from the Securities and Exchange Commission - None[190](index=190&type=chunk) [Properties](index=37&type=section&id=Item%202.%20Properties) AdaptHealth leases all its corporate headquarters and operating facilities, which are considered adequate for current business needs - The company leases all of its offices and facilities. Its corporate headquarters is located at 220 West Germantown Pike, Suite 250, Plymouth Meeting, Pennsylvania 19462[191](index=191&type=chunk) [Legal Proceedings](index=37&type=section&id=Item%203.%20Legal%20Proceedings) Legal proceedings information is incorporated by reference from the Commitments and Contingencies section within Item 7 - This section refers to the Commitments and Contingencies section within Item 7 for details on legal proceedings[192](index=192&type=chunk) [Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[192](index=192&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=38&type=section&id=Item%205.%20Market%20Price%20of%20and%20Dividends%20on%20Registrant%27s%20Common%20Equity%20and%20Related%20Stockholder%20Matters%3B%20Issuer%20Purchases%20of%20Equity%20Securities) AdaptHealth's common stock trades on Nasdaq under "**AHCO**," with no cash dividends paid or planned, and no equity security repurchases in Q4 2022 - The company's common stock is listed on the Nasdaq Stock Market under the trading symbol "**AHCO**"[195](index=195&type=chunk) - AdaptHealth has not paid any cash dividends on its common stock and has no current plans to do so in the foreseeable future[196](index=196&type=chunk) - There were no issuer purchases of equity securities during the quarter ended December 31, 2022[199](index=199&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In FY2022, net revenue grew **21.0%** to **$2.97 billion**, while net income decreased **55.6%** to **$69.3 million**, and Adjusted EBITDA increased to **$593.8 million** [Results of Operations](index=46&type=section&id=Results%20of%20Operations) In 2022, net revenue grew **21.0%** to **$2.97 billion**, operating income decreased **15.6%**, and net income declined **55.6%** to **$69.3 million** Consolidated Results of Operations (2022 vs. 2021) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Net Revenue** | **$2,970.6M** | **$2,454.5M** | **$516.1M** | **21.0%** | | Cost of Net Revenue | $2,553.2M | $2,008.9M | $544.2M | 27.1% | | Operating Income | $190.4M | $225.6M | ($35.2M) | (15.6)% | | Interest Expense, net | $109.4M | $95.2M | $14.2M | 14.9% | | **Net Income (to AHCO)** | **$69.3M** | **$156.2M** | **($86.9M)** | **(55.6)%** | Revenue Change Drivers (2022 vs. 2021) | Driver | Change ($) | Change (%) | | :--- | :--- | :--- | | Increase from acquisitions | $439.8M | 17.9% | | Increase from non-acquired growth | $86.4M | 3.5% | | Decrease in business to business revenue | ($10.1M) | (0.4)% | | **Total change in net revenue** | **$516.1M** | **21.0%** | - Cost of net revenue increased **27.1%** to **$2.55 billion** in 2022, driven by acquisition growth, increased product costs, higher wages due to inflation, and a **$2.6 million** increase in fuel costs[233](index=233&type=chunk) - General and administrative expenses decreased by **3.2%** to **$162.1 million** in 2022, primarily due to lower transaction costs from reduced M&A activity, offset by higher professional fees for systems implementation and legal matters[234](index=234&type=chunk) Consolidated Results of Operations (2021 vs. 2020) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Net Revenue** | **$2,454.5M** | **$1,056.4M** | **$1,398.1M** | **132.4%** | | Operating Income | $225.6M | $71.3M | $154.3M | 216.2% | | **Net Income (Loss) (to AHCO)** | **$156.2M** | **($161.6M)** | **$317.8M** | **(196.6)%** | [Key Business Metrics](index=42&type=section&id=Key%20Business%20Metrics) Net revenue is disaggregated by service line, with Sleep (**35.9%**) and Diabetes (**23.1%**) being the largest contributors to the **$2.97 billion** total in 2022 Net Revenue by Service Line (FY 2022) | Service Line | Net Revenue (in millions) | % of Total | | :--- | :--- | :--- | | Sleep | $1,066.7 | 35.9% | | Diabetes | $687.1 | 23.1% | | Respiratory | $555.0 | 18.7% | | HME | $220.8 | 7.4% | | Supplies to the home | $179.3 | 6.0% | | Other | $261.6 | 8.9% | | **Total Net Revenue** | **$2,970.6** | **100%** | Net Revenue by Service Line (FY 2021) | Service Line | Net Revenue (in millions) | % of Total | | :--- | :--- | :--- | | Sleep | $891.4 | 36.3% | | Diabetes | $541.2 | 22.0% | | Respiratory | $458.3 | 18.7% | | HME | $209.7 | 8.5% | | Supplies to the home | $167.8 | 6.8% | | Other | $186.1 | 7.7% | | **Total Net Revenue** | **$2,454.5** | **100%** | [EBITDA and Adjusted EBITDA](index=52&type=section&id=EBITDA%20and%20Adjusted%20EBITDA) Adjusted EBITDA increased to **$593.8 million** in 2022 from **$565.9 million** in 2021, reflecting specific adjustments from net income Reconciliation of Net Income to Adjusted EBITDA | (in thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Net income (loss) attributable to AdaptHealth Corp.** | **$69,316** | **$156,175** | **($161,632)** | | Income (loss) attributable to noncontrolling interests | $3,817 | $1,978 | ($32,454) | | Interest expense | $109,414 | $95,195 | $41,430 | | Income tax expense (benefit) | $24,769 | $32,806 | ($11,955) | | Depreciation and amortization | $351,178 | $258,053 | $82,445 | | **EBITDA** | **$558,494** | **$544,207** | **($82,166)** | | Adjustments | $35,276 | $21,711 | $287,785 | | **Adjusted EBITDA** | **$593,770** | **$565,918** | **$205,619** | [Liquidity and Capital Resources](index=53&type=section&id=Liquidity%20and%20Capital%20Resources) AdaptHealth's liquidity is from operations and debt, with **$46.3 million** cash, **$2.15 billion** long-term debt, and negative free cash flow of **$17.6 million** in 2022 Cash Flow Summary | (in thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $373,867 | $275,679 | $195,634 | | Net cash used in investing activities | ($411,171) | ($1,824,753) | ($815,703) | | Net cash (used in) provided by financing activities | ($66,051) | $1,598,739 | $643,153 | | **Net (decrease) increase in cash** | **($103,355)** | **$49,665** | **$23,084** | Free Cash Flow Calculation | (in thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $373,867 | $275,679 | $195,634 | | Purchases of equipment and other fixed assets | ($391,423) | ($203,308) | ($39,755) | | **Free cash flow** | **($17,556)** | **$72,371** | **$155,879** | - As of December 31, 2022, the company had **$765.0 million** outstanding under its term loan and **$432.6 million** available under its revolving credit facility[274](index=274&type=chunk)[318](index=318&type=chunk) [Commitments and Contingencies](index=59&type=section&id=Commitments%20and%20Contingencies) The company faces ongoing government investigations into billing practices and shareholder lawsuits, though a **Corporate Integrity Agreement** expired in April 2022 - A five-year **Corporate Integrity Agreement (CIA)** assumed from the PPS acquisition expired in **April 2022**, and the OIG confirmed all obligations were satisfied as of **January 2023**[308](index=308&type=chunk)[579](index=579&type=chunk) - The company is subject to several ongoing government investigations: - U.S. Attorney's Office (EDPA) investigation into ventilator billing practices from **2017**. - U.S. Attorney's Office (WDKY) investigation into pre-acquisition billing for oxygen tank contents by AeroCare. - U.S. Attorney's Office (SDNY) civil investigative demand regarding potential **False Claims Act** violations related to ventilator billing from **2015** to present[309](index=309&type=chunk)[310](index=310&type=chunk)[317](index=317&type=chunk) - AdaptHealth is defending against a **shareholder class action complaint** alleging false and misleading statements regarding organic growth and a **shareholder derivative complaint** alleging breaches of fiduciary duty[312](index=312&type=chunk)[315](index=315&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=61&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate fluctuations on its variable-rate debt, with **$765.0 million** outstanding under the **2021 Term Loan** as of December 31, 2022 - The company's main market risk is from interest rate fluctuations on its variable-rate borrowings. As of December 31, 2022, there was **$765.0 million** outstanding under the **2021 Term Loan**, which is tied to the Adjusted LIBOR Rate[318](index=318&type=chunk) [Financial Statements and Supplementary Data](index=62&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements, with KPMG LLP issuing an **unqualified opinion** on financials but an **adverse opinion** on internal controls as of December 31, 2022 [Consolidated Financial Statements](index=68&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show total assets of **$5.22 billion** and liabilities of **$3.06 billion** at year-end 2022, with **$2.97 billion** net revenue and **$69.3 million** net income Consolidated Balance Sheet Data (as of Dec 31) | (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | **Total Current Assets** | **$585,308** | **$670,058** | | Goodwill | $3,545,297 | $3,512,567 | | **Total Assets** | **$5,219,587** | **$5,250,484** | | Total Current Liabilities | $456,214 | $499,812 | | Long-term debt, less current portion | $2,153,267 | $2,183,552 | | **Total Liabilities** | **$3,061,829** | **$3,183,795** | | **Total Stockholders' Equity** | **$2,157,758** | **$2,066,689** | Consolidated Statement of Operations Data (Year Ended Dec 31) | (in thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net revenue | $2,970,595 | $2,454,535 | $1,056,389 | | Operating income | $190,411 | $225,605 | $71,346 | | **Net income (loss) to AHCO** | **$69,316** | **$156,175** | **($161,632)** | | **Diluted EPS** | **$0.33** | **$0.67** | **($3.08)** | Consolidated Statement of Cash Flows Data (Year Ended Dec 31) | (in thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | $373,867 | $275,679 | $195,634 | | Net cash used in investing activities | ($411,171) | ($1,824,753) | ($815,703) | | Net cash (used in) provided by financing activities | ($66,051) | $1,598,739 | $643,153 | - The independent auditor, KPMG LLP, issued an **unqualified opinion** on the consolidated financial statements but an **adverse opinion** on the effectiveness of the company's internal control over financial reporting as of December 31, 2022[324](index=324&type=chunk)[332](index=332&type=chunk) - The auditor identified the evaluation of the implicit price concession estimate as a **critical audit matter**, requiring complex and subjective judgment to evaluate the historical reimbursement experience used in the estimate[329](index=329&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=130&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) This item is not applicable to the company - Not applicable[618](index=618&type=chunk) [Controls and Procedures](index=130&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls were **not effective** as of December 31, 2022, due to **material weaknesses** in internal control over financial reporting, also noted by KPMG LLP - Management concluded that disclosure controls and procedures were **not effective** as of December 31, 2022, due to **material weaknesses** in internal control over financial reporting[619](index=619&type=chunk) - The **material weaknesses** relate to an insufficient complement of resources to complete a risk assessment, resulting in ineffective process-level controls and general information technology controls[620](index=620&type=chunk)[624](index=624&type=chunk) - The independent registered public accounting firm, KPMG LLP, issued an **adverse report** on the operating effectiveness of the Company's internal control over financial reporting as of December 31, 2022[626](index=626&type=chunk) - Remediation efforts undertaken in 2022 include establishing an executive steering committee, expanding resources, completing a risk assessment, and implementing an ERP system. However, the **material weaknesses** are not yet considered fully remediated[627](index=627&type=chunk) [Other Information](index=131&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[629](index=629&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=131&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[630](index=630&type=chunk) PART III [Directors, Executive Officers, and Corporate Governance](index=131&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference to the Definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[632](index=632&type=chunk) [Executive Compensation](index=131&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference to the Definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[633](index=633&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=131&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership information is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference to the Definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[634](index=634&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=132&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference to the Definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[635](index=635&type=chunk) [Principal Accountant's Fees and Services](index=132&type=section&id=Item%2014.%20Principal%20Accountant%27s%20Fees%20and%20Services) Principal accountant's fees and services information is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference to the Definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[636](index=636&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=133&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists consolidated financial statements and provides an index of all exhibits filed with the Annual Report on Form 10-K - This item lists the consolidated financial statements and exhibits filed with the report[638](index=638&type=chunk)[639](index=639&type=chunk) [Form 10-K Summary](index=133&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company did not provide a summary for Form 10-K - None[640](index=640&type=chunk)

AdaptHealth Corp. (NASDAQ:AHCO) Q3 2022 Earnings Conference Call November 8, 2022 8:30 AM ET Company Participants Christopher Joyce - General Counsel Stephen Griggs - CEO Joshua Parnes - President Jason Clemens - CFO Conference Call Participants Taji Phillips - Jefferies Pito Chickering - Deutsche Bank Kevin Caliendo - UBS Richard Close - Canaccord Genuity Joanna Gajuk - Bank of America Eric Coldwell - Robert W. Baird Whit Mayo - SVB Securities Operator Greetings, and welcome to AdaptHealth's Third Quarter ...

Financial Data and Key Metrics Changes - AdaptHealth reported record revenues of $727.6 million for Q2 2022, representing a year-over-year growth of 17.9% [16] - The company maintained its full-year guidance for revenue between $2.840 billion and $3.040 billion and adjusted EBITDA of $615 million to $675 million [21] - Free cash flow for the quarter was $26.3 million, exceeding expectations [19] Business Line Data and Key Metrics Changes - The Sleep business saw a 16% increase in census from February 2022, with strong growth in PAP rental and resupply [9] - The diabetes business experienced a year-to-date non-acquired growth of 17%, although growth was flat for the quarter [10] - Non-acquired growth for the total company declined by 30 basis points for the quarter [17] Market Data and Key Metrics Changes - The company is largely insulated from higher interest rates, with over 75% of its debt being fixed [11] - Inflationary pressures and supply chain issues have impacted results, but the company has managed to stabilize gross margins [10][18] Company Strategy and Development Direction - AdaptHealth is focusing on leveraging technology to improve patient care and operational efficiencies, including e-prescribe and e-ordering platforms [12][13] - The company is pursuing value-based payment arrangements, having signed two new agreements with managed care payers [12] - Investments in technology are aimed at transforming the home medical equipment experience and improving patient satisfaction [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving guidance for the year despite inflation and supply chain challenges [8] - The backlog of patients has remained stable, with expectations for a successful third quarter as product availability improves [31] - Management is optimistic about the potential for further acquisitions as supply issues ease [33] Other Important Information - The company repurchased 199,000 shares for $3.4 million during the second quarter [20] - A Capital Markets Day is scheduled for September 16, where the company will present future targets and opportunities [22] Q&A Session Summary Question: What is driving the weakness in the diabetes segment? - Management noted that the lack of acquisitions in the first half of the year affected growth rates, but overall performance is in line with market expectations [26] Question: Can G&A expenses be reduced going forward? - Management indicated that planned investments in technology would not yield operating leverage until the end of next year, but they are confident in the long-term benefits [28] Question: How is the backlog of patients being managed? - Management stated that the backlog has remained stable, with expectations for improved setups in the third quarter as supply increases [31] Question: What is the expected organic growth for the Sleep business? - Management expressed confidence that the Sleep business would outperform expectations, contributing positively to overall growth [37] Question: What is the margin expansion outlook for the second half of the year? - Management indicated that margin expansion would be driven by increased rental revenue and operational efficiencies as the year progresses [52]