AdaptHealth(AHCO) - 2022 Q2 - Quarterly Report

Financial Performance - Net revenue for Q2 2022 was $727.6 million, an increase of 17.9$617.0 million in Q2 2021[17] - Net income for Q2 2022 was $15.2 million, a decrease of 81.0$80.1 million in Q2 2021[17] - Operating income for Q2 2022 was $59.2 million, a decrease of 9.5$65.4 million in Q2 2021[17] - Basic net income per share for Q2 2022 was $0.10, a decrease of 82.1$0.56 in Q2 2021[17] - Comprehensive income for Q2 2022 was $16.8 million, a decrease of 79.1$80.7 million in Q2 2021[20] - Net income for Q1 2022 was $41.75 million, contributing to a total equity increase of$42.23 million[23] - Net income for Q2 2022 was $14.032 million, contributing to a total equity increase of$15.247 million[23] - Net income for the six months ended June 30, 2022 was $57.477 million, compared to$76.416 million in the same period in 2021[27] - Net revenue for the six months ended June 30, 2022 was $1,438.8 million, compared to$1,417.6 million in the same period in 2021[86] - Operating income for the six months ended June 30, 2022 was $110.7 million, compared to$114.4 million in the same period in 2021[86] - Basic net income per share was $0.10 for the three months ended June 30, 2022, and$0.38 for the six months ended June 30, 2022[160] - Diluted net income per share was $0.09 for the three months ended June 30, 2022, and$0.24 for the six months ended June 30, 2022[160] Balance Sheet and Assets - Total assets as of June 30, 2022 were $5.20 billion, a slight decrease from$5.25 billion as of December 31, 2021[15] - Cash and cash equivalents decreased to $118.8 million as of June 30, 2022 from$149.6 million as of December 31, 2021[15] - Long-term debt, less current portion, was $2.17 billion as of June 30, 2022, a slight decrease from$2.18 billion as of December 31, 2021[15] - Inventory decreased to $102.7 million as of June 30, 2022 from$123.1 million as of December 31, 2021[15] - Total stockholders' equity attributable to AdaptHealth Corp. increased to $2.13 billion as of June 30, 2022 from$2.06 billion as of December 31, 2021[16] - Total equity as of June 30, 2022, stood at $2.137693 billion, up from$2.066689 billion at the end of 2021[23] - Total equity as of June 30, 2021, stood at $1.894043 billion, up from$280.845 million at the end of 2020[26] - Goodwill balance increased to $3,515.6 million as of June 30, 2022, up from$3,512.6 million at December 31, 2021[91] - Identifiable intangible assets, net of accumulated amortization, were $182.8 million as of June 30, 2022, down from$202.2 million at December 31, 2021[94][95] - Total assets measured at fair value increased from $14,000 in December 2021 to$2,664,000 in June 2022, driven by interest rate swap agreements[103] - Total ROU assets decreased from $165.17 million in December 2021 to$140.03 million in June 2022[170] Cash Flow and Financing - Net cash provided by operating activities increased to $169.924 million in 2022 from$147.624 million in 2021[27] - Net cash used in investing activities was $170.031 million in 2022, significantly lower than$1.372 billion in 2021, primarily due to reduced business acquisition payments[27] - Net cash used in financing activities was $30.711 million in 2022, compared to net cash provided by financing activities of$1.303 billion in 2021[27] - Cash and cash equivalents decreased to $118.809 million at the end of June 2022 from$178.189 million at the end of June 2021[27] - The company repurchased shares worth $3.375 million under its share repurchase program in Q2 2022[23] - The company repaid$71.8 million of the New Promissory Note in June 2021, incurring a $8.5 million prepayment penalty[132] - The company repaid the remaining$71.7 million of the New Promissory Note in August 2021[132] - The company issued $600 million in 5.125$500 million in 4.625% senior unsecured notes due 2029 on January 4, 2021[129] - The company issued $350 million in 6.125$785 million in December 2021 to $775 million in June 2022[123] - Senior unsecured notes remained unchanged at$1,450 million between December 2021 and June 2022[123] - The 2021 Term Loan has an interest rate of 3.06% as of June 30, 2022[126] - The company had $0 outstanding under the 2021 Revolver as of June 30, 2022, with$432.6 million available for borrowing after considering stand-by letters of credit[127] Revenue Breakdown - Net revenue for the three months ended June 30, 2022 was $727.6 million, with$436.2 million from insurance, $196.3 million from government, and$95.1 million from patient pay[62] - Net revenue for the six months ended June 30, 2022 was $1.43 billion, with$857.1 million from insurance, $378.0 million from government, and$198.8 million from patient pay[62] - Net sales revenue for the three months ended June 30, 2022, was $492.654 million, a 23$400.597 million in the same period in 2021[65] - Total net revenue for the six months ended June 30, 2022, reached $1.433 billion, up 30.5$1.099 billion in the same period in 2021[65] - Sleep segment revenue for the three months ended June 30, 2022, was $260.354 million, a 13.4$229.666 million in the same period in 2021[65] - Diabetes segment revenue for the three months ended June 30, 2022, was $166.293 million, a 31.4$126.530 million in the same period in 2021[65] - Respiratory segment revenue for the three months ended June 30, 2022, was $136.756 million, a 9.7$124.682 million in the same period in 2021[65] - The company recouped $3.9 million and$9.1 million of CMS advance payments during the three and six months ended June 30, 2022, respectively[65] Acquisitions and Goodwill - The company completed acquisitions totaling $16.799 million in cash and deferred payments during the six months ended June 30, 2022[72] - Goodwill generated from acquisitions during the six months ended June 30, 2022, was$4.591 million[74] - The company acquired AeroCare Holdings, Inc. for $1.148 billion in cash and equity on February 1, 2021[75] - Net assets acquired totaled$2,562.8 million, with AeroCare contributing $2,369.0 million of the total[80] - The company received net cash of$0.9 million relating to working capital and other adjustments associated with businesses acquired during 2021, which was recorded as a decrease to goodwill[93] Leases and Operating Costs - The company leases office facilities and equipment with lease agreements expiring through March 2033, including renewal options[166] - The company has finance lease obligations for patient medical equipment and supplies, with monthly payments at various interest rates[169] - Operating lease costs for the six months ended June 30, 2022, were $19.30 million, compared to$17.64 million in the same period in 2021[171] - Finance lease costs for the six months ended June 30, 2022, were $6.63 million, compared to$19.06 million in the same period in 2021[171] - Variable lease costs increased from $6.28 million in the six months ended June 30, 2021, to$8.95 million in the same period in 2022[171] - Weighted average remaining lease term for operating leases decreased slightly from 6.7 years in December 2021 to 6.6 years in June 2022[173] - Total future undiscounted lease payments for operating leases as of June 30, 2022, amounted to $160.41 million[174] - Cash paid for operating lease liabilities in the six months ended June 30, 2022, was$19.22 million, compared to $17.51 million in the same period in 2021[175] Equity and Compensation - Equity-based compensation in Q1 2022 amounted to$5.502 million, increasing total equity by the same amount[23] - Equity-based compensation in Q2 2022 amounted to $5.72 million, increasing total equity by the same amount[23] - The company recorded equity-based compensation expense of$11.2 million for the six months ended June 30, 2022, with $7.5 million in general and administrative expenses and$3.7 million in cost of net revenue[156] - Unrecognized compensation expense related to equity-based awards was $45.4 million as of June 30, 2022, expected to be recognized over a weighted-average period of 2.3 years[157] - The company granted 127,322 shares of restricted stock to employees with a grant-date fair value of$2.4 million, vesting over 3-4 years[152] - 81,347 shares of restricted stock were granted to non-employee directors with a grant-date fair value of $1.5 million, vesting after one year[152] - 317,554 shares of restricted stock units were granted to senior executives with a grant-date fair value of$5.7 million, vesting over three years[153] - 317,554 performance-vested restricted stock units (Performance RSUs) were granted to senior executives with a grant-date fair value of $8.7 million, vesting based on relative TSR performance[153] Legal and Regulatory Matters - The company is defending against a consolidated class action lawsuit alleging violations of federal securities laws, with a motion for class certification due to be filed by January 20, 2023[188] - The company is defending against a shareholder derivative complaint alleging breaches of fiduciary duties and other claims, with the action stayed pending resolution of the consolidated class action[189][190] - The company is cooperating with a civil investigative demand issued by the U.S. Attorney's Office for the Southern District of New York regarding potential False Claims Act violations by a subsidiary[191] COVID-19 Impact - The company received$45.8 million in recoupable advance payments from CMS under the CARES Act in April 2020, with $3.7 million remaining to be recouped as of June 30, 2022[203][204] - The company received$17.2 million in CARES Act Provider Relief Fund (PRF) payments in April 2020 and assumed $7.7 million in PRF liabilities from acquired companies[206] - The company deferred$8.6 million in employer-paid FICA taxes under the CARES Act, with $4.3 million paid on January 4, 2022, and the remaining$4.3 million expected to be paid after December 31, 2022[208] - AdaptHealth experienced declines in net revenue in services related to elective medical procedures, such as new CPAP services and orthopedic supplies[209] - Increased net revenue from higher demand for respiratory products like oxygen and resupply businesses due to stay-at-home orders[209] - One-time sales of respiratory equipment, including ventilators and oxygen concentrators, to hospitals and local health agencies[209] - Medicare sequestration suspension resulted in a 2% increase in Medicare payments through March 31, 2022, and a 1% increase from April 1, 2022, to June 30, 2022[209] - Medicare sequestration resumed after July 1, 2022, leading to a 2% reduction in Medicare Fee-for-Service claims[209] Other Financial Metrics - The change in fair value of interest rate swaps in Q1 2022 resulted in a $5.998 million increase in accumulated other comprehensive income[23] - The change in fair value of interest rate swaps in Q2 2022 resulted in a$1.593 million increase in accumulated other comprehensive income[23] - The company recorded depreciation expense of $136.5 million for the six months ended June 30, 2022, compared to$86.8 million in the same period in 2021[89] - Amortization expense related to identifiable intangible assets was $20.0 million for the six months ended June 30, 2022, compared to$24.2 million in the same period in 2021[95] - Future amortization expense related to identifiable intangible assets is estimated to be $182.8 million over the next several years[98] - The company recorded no impairment charges related to identifiable intangible assets during the six months ended June 30, 2022 and 2021[98] - Contingent consideration liabilities increased from$20.3 million at the beginning of 2022 to $17.3 million by June 30, 2022, with short-term liabilities at$16.3 million and long-term at $1.0 million[106][108] - Warrant liability decreased from$57.8 million in December 2021 to $38.8 million in June 2022, reflecting changes in fair value[103] - Interest rate swap agreements had a notional amount of$250 million as of June 30, 2022, with maturity dates in February 2023 and March 2024[116] - The company recognized a gain of $9.0 million in other comprehensive income during the six months ended June 30, 2022, due to cash flow hedge accounting[119] - The fair value of derivatives related to interest rate swap agreements was$1.6 million in assets and $7.5 million in liabilities as of June 30, 2022[118] - The company uses Level 3 inputs for credit valuation adjustments in derivative contracts, though the impact on overall valuation is not significant[105][106] - Accounts payable decreased from$248.0 million in December 2021 to $198.4 million in June 2022, contributing to a total reduction in accounts payable and accrued expenses from$358.4 million to $315.0 million[121] - The company entered into forward-dated interest rate swap agreements in April 2022, effective in February 2023 and March 2024, maturing in January 2026[116] - Income tax expense for the six months ended June 30, 2022, was$14.5 million, compared to $10.6 million in the same period in 2021[176] - The company recognized an expense of$4.5 million related to changes in the estimated liability for the Tax Receivable Agreement during the six months ended June 30, 2022[178] - The company had a liability of $304.8 million related to the Tax Receivable Agreement as of June 30, 2022[179] Operational Metrics - The company serviced approximately 3.9 million patients annually as of June 30, 2022, through its network of 759 locations in 47 states[200] - Unbilled accounts receivable as of June 30, 2022, was$22.4 million, down from $23.8 million as of December 31, 2021[69] - The company incurred$1.7 million and $1.2 million in expenses related to a vendor for the three months ended June 30, 2022, and 2021, respectively, and$3.1 million and $2.2 million for the six months ended June 30, 2022, and 2021, respectively[192] - The company had$7.7 million in outstanding accounts payable to a vendor as of June 30, 2022, with purchases from this vendor totaling $15.6 million and$29.6 million for the three and six months ended June 30, 2022, respectively[195] - The company had $1.7 million in outstanding accounts payable to a service provider as of June 30, 2022, with purchases totaling$5.7 million and $10.5 million for the three and six months ended June 30, 2022, respectively[196]