AdaptHealth(AHCO) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents AdaptHealth Corp.'s interim financial statements, management's discussion, market risk, and controls for the reporting period Item 1. Interim Consolidated Financial Statements (Unaudited) This section presents AdaptHealth Corp.'s unaudited interim consolidated financial statements, including balance sheets, statements of operations, comprehensive income, changes in stockholders' equity, and cash flows, along with detailed notes explaining accounting policies, segment information, debt, equity, and contingencies for the periods ended June 30, 2025 and 2024 Consolidated Balance Sheets The consolidated balance sheets show a decrease in total assets and cash, alongside a reduction in long-term debt and an increase in stockholders' equity Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change (2025 vs 2024) | | :-------------------------------- | :------------ | :---------------- | :-------------------- | | Assets: | | | | | Cash | $68,630 | $109,747 | $(41,117) | | Accounts receivable | $393,593 | $408,019 | $(14,426) | | Inventory | $148,852 | $139,842 | $9,010 | | Assets held for sale | — | $52,748 | $(52,748) | | Total current assets | $658,001 | $755,788 | $(97,787) | | Goodwill | $2,651,085 | $2,675,166 | $(24,081) | | Total Assets | $4,350,825 | $4,486,947 | $(136,122) | | Liabilities & Equity: | | | | | Accounts payable & accrued expenses | $477,202 | $437,985 | $39,217 | | Liabilities held for sale | — | $7,043 | $(7,043) | | Total current liabilities | $622,092 | $566,987 | $55,105 | | Long-term debt, less current portion | $1,792,741 | $1,964,921 | $(172,180) | | Total Liabilities | $2,756,699 | $2,908,829 | $(152,130) | | Total Stockholders' Equity | $1,594,126 | $1,578,118 | $16,008 | Consolidated Statements of Operations The consolidated statements of operations reflect changes in net revenue, operating income, and net income over the reported periods Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :----------------------------------- | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Net revenue | $800,372 | $805,975 | $(5,603) | $1,578,254 | $1,598,472 | $(20,218) | | Total costs and expenses | $753,345 | $753,928 | $(583) | $1,508,057 | $1,495,894 | $12,163 | | Gain on sale of businesses | $(32,225) | — | $(32,225) | $(32,225) | — | $(32,225) | | Operating income | $79,252 | $52,047 | $27,205 | $102,422 | $102,578 | $(156) | | Interest expense, net | $27,533 | $33,038 | $(5,505) | $55,932 | $65,510 | $(9,578) | | Income before income taxes | $51,719 | $27,779 | $23,940 | $46,490 | $33,280 | $13,210 | | Income tax expense | $35,891 | $7,248 | $28,643 | $36,741 | $13,858 | $22,883 | | Net income | $15,828 | $20,531 | $(4,703) | $9,749 | $19,422 | $(9,673) | | Net income attributable to AdaptHealth Corp. | $14,674 | $19,435 | $(4,761) | $7,467 | $17,301 | $(9,834) | | Basic net income per share | $0.10 | $0.13 | $(0.03) | $0.05 | $0.12 | $(0.07) | | Diluted net income per share | $0.10 | $0.13 | $(0.03) | $0.05 | $0.12 | $(0.07) | Consolidated Statements of Comprehensive Income The consolidated statements of comprehensive income detail net income and other comprehensive income components, such as fair value changes in interest rate swaps Consolidated Statements of Comprehensive Income Highlights (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------------ | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Net income | $15,828 | $20,531 | $(4,703) | $9,749 | $19,422 | $(9,673) | | Change in fair value of interest rate swaps, net of tax | $(405) | $(364) | $(41) | $(1,080) | $492 | $(1,572) | | Comprehensive income | $15,423 | $20,167 | $(4,744) | $8,669 | $19,914 | $(11,245) | | Comprehensive income attributable to AdaptHealth Corp. | $14,269 | $19,071 | $(4,802) | $6,387 | $17,793 | $(11,406) | Consolidated Statements of Changes in Stockholders' Equity The consolidated statements of changes in stockholders' equity outline the movements in equity, driven by net income and equity-based compensation - Total Stockholders' Equity increased by $16.0 million from $1,578.1 million at December 31, 2024, to $1,594.1 million at June 30, 2025, primarily driven by net income of $15.8 million and equity-based compensation of $6.1 million during the second quarter of 2025, partially offset by distributions to non-controlling interests and changes in fair value of interest rate swaps[18][24] Consolidated Statements of Cash Flows The consolidated statements of cash flows present the company's cash generation and usage across operating, investing, and financing activities Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :----------------------------------- | :--------------------------- | :--------------------------- | :----------- | | Net cash provided by operating activities | $257,521 | $247,019 | $10,502 | | Net cash used in investing activities | $(85,981) | $(169,163) | $83,182 | | Net cash used in financing activities | $(212,657) | $(85,156) | $(127,501) | | Net decrease in cash | $(41,117) | $(7,300) | $(33,817) | | Cash at end of period | $68,630 | $69,832 | $(1,202) | Notes to Interim Consolidated Financial Statements This section provides detailed notes explaining AdaptHealth Corp.'s accounting policies, segment information, debt, equity, and contingencies (1) General Information AdaptHealth Corp. is a national leader in healthcare-at-home solutions, with recent reclassifications for industry alignment - AdaptHealth operates in four reportable segments: Sleep Health, Respiratory Health, Diabetes Health, and Wellness at Home, providing home medical equipment, supplies, and related services[30][35] - The company reclassified $42.3 million and $83.0 million from Cost of net revenue to General and administrative expenses for the three and six months ended June 30, 2024, respectively, to align with common industry practice, with no impact on net revenue, operating income, or cash flows[40] (2) Revenue Recognition and Accounts Receivable Revenue is recognized upon transfer of control, with disaggregation by payor and segment, and accounts receivable recorded at net realizable value - Revenue is recognized at a point in time for sales of supplies and disposables, or over the service period for equipment, adjusted for estimated variable consideration from Medicare, Medicaid, and third-party payors[62][63][64] Net Revenue by Payor Type (in thousands) | Payor Type | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Insurance | $475,760 | $487,787 | $929,987 | $971,152 | | Government | $208,561 | $210,946 | $405,972 | $409,344 | | Patient pay | $116,051 | $107,242 | $242,295 | $217,976 | | Total Net Revenue | $800,372 | $805,975 | $1,578,254 | $1,598,472 | Net Revenue by Segment (in thousands) | Segment | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Sleep Health | $334,689 | $331,555 | $651,040 | $656,889 | | Respiratory Health | $170,450 | $161,386 | $335,931 | $321,649 | | Diabetes Health | $144,961 | $151,189 | $283,805 | $302,045 | | Wellness at Home | $150,272 | $161,845 | $307,478 | $317,889 | | Total Net Revenue | $800,372 | $805,975 | $1,578,254 | $1,598,472 | - Unbilled accounts receivable amounted to $33.2 million as of June 30, 2025, down from $41.6 million at December 31, 2024, due to billing delays for required payor-specific documentation[81] (3) Acquisitions AdaptHealth acquired assets from two HME providers, resulting in increased goodwill attributed to expected growth and synergies - AdaptHealth acquired assets from two HME providers for $18.6 million in cash during the six months ended June 30, 2025[83] - These acquisitions generated $15.7 million in goodwill, expected to be tax-deductible and attributable to anticipated growth and cost synergies[83][84] (4) Disposals The company completed dispositions of two businesses, generating significant proceeds and a pre-tax gain without a strategic shift - AdaptHealth disposed of two businesses in its Wellness at Home segment in May and June 2025, receiving gross proceeds of $120.8 million[86][87][90] - A pre-tax gain of $32.2 million was recognized from these dispositions, which did not constitute a strategic shift for the company[89][90] (5) Equipment and Other Fixed Assets Net equipment and other fixed assets increased, with associated depreciation expense recognized for the period Equipment and Other Fixed Assets (in thousands) | Asset Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Patient medical equipment | $876,495 | $843,198 | | Computers and software | $73,919 | $92,664 | | Delivery vehicles | $17,036 | $33,637 | | Other | $23,637 | $23,233 | | Gross carrying value | $991,087 | $992,732 | | Less accumulated depreciation | $(503,094) | $(518,176) | | Net Equipment and other fixed assets | $487,993 | $474,556 | - Depreciation expense was $87.2 million for the three months ended June 30, 2025 (vs. $85.6 million in 2024) and $176.4 million for the six months ended June 30, 2025 (vs. $172.9 million in 2024)[91] (6) Segment Information AdaptHealth operates through four reportable segments, with performance evaluated using Adjusted EBITDA - The company's four reportable segments are Sleep Health, Respiratory Health, Diabetes Health, and Wellness at Home, aligning with product categories[93] - Adjusted EBITDA is the primary measure for evaluating segment performance, excluding interest, taxes, depreciation, equity-based compensation, warrant liability changes, goodwill impairment, and gains/losses on business sales[98] Adjusted EBITDA by Segment (in thousands) | Segment | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Sleep Health | $80,774 | $80,635 | $144,401 | $160,171 | | Respiratory Health | $48,961 | $56,310 | $94,439 | $101,669 | | Diabetes Health | $5,552 | $10,787 | $11,940 | $31,347 | | Wellness at Home | $20,257 | $17,583 | $32,702 | $30,613 | | Total Adjusted EBITDA | $155,544 | $165,315 | $283,482 | $323,800 | (7) Goodwill and Identifiable Intangible Assets Goodwill decreased due to dispositions, while identifiable intangible assets also declined, with associated amortization expense Goodwill by Reportable Segment (in thousands) | Segment | Balance at Dec 31, 2024 | Goodwill from Acquisitions | Goodwill from Dispositions | Balance at June 30, 2025 | | :-------------- | :---------------------- | :------------------------- | :------------------------- | :----------------------- | | Sleep Health | $1,581,039 | — | — | $1,581,039 | | Respiratory Health | $676,747 | — | — | $676,747 | | Diabetes Health | $211,796 | — | — | $211,796 | | Wellness at Home | $205,584 | $15,651 | $(39,732) | $181,503 | | Total Goodwill | $2,675,166 | $15,651 | $(39,732) | $2,651,085 | Identifiable Intangible Assets, Net (in thousands) | Asset Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Tradenames, net | $53,690 | $59,964 | | Payor contracts, net | $41,484 | $45,584 | | Total Identifiable Intangible Assets, net | $95,174 | $105,548 | - Amortization expense for identifiable intangible assets was $5.1 million for the three months and $10.3 million for the six months ended June 30, 2025[112] (8) Fair Value of Assets and Liabilities Financial assets and liabilities are measured at fair value using a three-level hierarchy, primarily for interest rate swap agreements Fair Value of Financial Assets (in thousands) | Asset Category | June 30, 2025 (Level 2) | December 31, 2024 (Level 2) | | :-------------------------------- | :---------------------- | :-------------------------- | | Interest rate swap agreements - short term | $1,578 | $2,898 | | Interest rate swap agreements - long term | — | $132 | | Total assets measured at fair value | $1,578 | $3,030 | - Interest rate swaps are valued using discounted cash flow analysis with observable market-based inputs and are classified as Level 2 in the fair value hierarchy[118][120] (9) Derivative Instruments and Hedging Activities AdaptHealth uses interest rate swap agreements to hedge interest rate risk, with fair value changes recognized in comprehensive income - The company has $250 million in interest rate swap agreements outstanding as of June 30, 2025, maturing in January 2026, designated as effective cash flow hedges[122] - A loss of $0.4 million (net of tax) was recognized in other comprehensive income for the three months ended June 30, 2025, and a loss of $1.1 million (net of tax) for the six months ended June 30, 2025, due to changes in the fair value of these swaps[123] (10) Accounts Payable and Accrued Expenses Accounts payable and accrued expenses increased, primarily driven by higher accounts payable balances Accounts Payable and Accrued Expenses (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Accounts payable | $339,654 | $284,602 | | Employee-related accruals | $42,714 | $54,627 | | Accrued interest | $28,818 | $28,818 | | Other | $66,016 | $69,938 | | Total | $477,202 | $437,985 | (11) Debt Long-term debt decreased due to voluntary repayments, with the company maintaining its credit facility and senior unsecured notes Long-Term Debt Summary (in thousands) | Debt Type | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Secured term loan | $375,000 | $550,000 | | Senior unsecured notes | $1,450,000 | $1,450,000 | | Unamortized deferred financing fees | $(16,009) | $(18,829) | | Current portion | $(16,250) | $(16,250) | | Long-term portion | $1,792,741 | $1,964,921 | - The company made voluntary repayments of $166.9 million on the 2024 Term Loan during the six months ended June 30, 2025, reducing the outstanding balance to $375.0 million[132] - AdaptHealth has $1,450.0 million in senior unsecured notes outstanding, comprising 5.125% notes due 2030, 4.625% notes due 2029, and 6.125% notes due 2028[134][135][136] - As of June 30, 2025, the company was in compliance with all applicable covenants under the 2024 Credit Agreement, with $274.5 million available for borrowing under the 2024 Revolver[130][133] (12) Stockholders' Equity Stockholders' equity includes common and preferred stock, with equity-based compensation expense and unrecognized compensation remaining - As of June 30, 2025, there were 135,215,856 shares of Common Stock issued and outstanding[18] - Warrants outstanding expired on November 8, 2024, resulting in a non-cash gain of $7.0 million for the three months ended June 30, 2024, and a non-cash charge of $0.4 million for the six months ended June 30, 2024, due to changes in fair value[139] - Equity-based compensation expense was $6.1 million for the three months and $11.4 million for the six months ended June 30, 2025, with unrecognized compensation expense totaling $42.0 million as of June 30, 2025, to be recognized over a weighted-average period of 2.2 years[147][148][150] (13) Earnings Per Share Basic and diluted net income per share are presented, considering potentially dilutive securities in the calculations Earnings Per Share (in thousands, except per share data) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income attributable to AdaptHealth Corp. | $14,674 | $19,435 | $7,467 | $17,301 | | Basic weighted-average common shares outstanding | 134,993 | 133,218 | 134,897 | 133,066 | | Diluted weighted-average common shares outstanding | 137,071 | 136,029 | 137,181 | 135,698 | | Basic net income per share | $0.10 | $0.13 | $0.05 | $0.12 | | Diluted net income per share | $0.10 | $0.13 | $0.05 | $0.12 | - Potentially dilutive securities, including preferred stock, warrants (expired Nov 2024), stock options, and unvested restricted stock units, are considered in diluted EPS calculations unless antidilutive[152][153][155] (14) Leases The company leases operating locations and vehicles, recognizing lease liabilities and ROU assets, with associated operating and finance lease costs Lease Costs and Expenses (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Operating lease costs | $10,904 | $10,391 | $21,958 | $21,395 | | Amortization of ROU assets | $3,722 | $2,538 | $7,096 | $4,793 | | Interest on lease liabilities | $677 | $551 | $1,324 | $1,058 | | Variable leases costs | $5,962 | $6,195 | $12,260 | $12,067 | | Sublease income | $65 | $257 | $235 | $537 | Weighted Average Lease Terms and Discount Rates | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Weighted average remaining lease term (Operating) | 5.0 years | 5.2 years | | Weighted average remaining lease term (Finance) | 2.9 years | 3.1 years | | Weighted average discount rate (Operating) | 5.0 % | 4.9 % | | Weighted average discount rate (Finance) | 6.7 % | 6.9 % | (15) Income Taxes Income tax expense includes a discrete expense related to business dispositions, impacting the Tax Receivable Agreement liability - Income tax expense was $35.9 million for the three months and $36.7 million for the six months ended June 30, 2025[166] - A discrete income tax expense of $27.4 million was recognized in the three and six months ended June 30, 2025, related to business dispositions[166] - The liability related to the Tax Receivable Agreement (TRA) was $265.4 million as of June 30, 2025, down from $290.4 million at December 31, 2024[169] (16) Commitments and Contingencies AdaptHealth is subject to various legal proceedings, including False Claims Act inquiries and shareholder lawsuits, with uncertain outcomes - The U.S. Attorney's Office is investigating AdaptHealth subsidiaries under the False Claims Act regarding billing for ventilators (since 2015), humidifiers (since 2017), and respiratory devices (since 2018)[173][182][184] - A consolidated class action lawsuit and a shareholder derivative complaint allege violations of federal securities laws and breaches of fiduciary duties related to billing practices in the diabetes product category and compliance programs[174][176] - A shareholder filed a Section 220 action in Delaware seeking to inspect books and records related to the class action allegations[178][180] (17) Related Party Transactions The company engages in transactions with related parties, including vendors and payors, with associated expenses and revenues - Expenses related to a vendor in which AdaptHealth holds an equity interest were $10.8 million for the six months ended June 30, 2025, for automated order intake software[185] - Net revenue from a third-party payor, where a company director also serves on the board, accounted for approximately 1.0% of consolidated net revenue for the three and six months ended June 30, 2025 and 2024[186] - Payments to a medical equipment supplier, where a beneficial owner of AdaptHealth is a minority shareholder, totaled $38.9 million for the six months ended June 30, 2025[187] (18) Subsequent Events The One Big Beautiful Bill Act, signed post-period, is expected to decrease the company's 2025 cash tax liability - The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, indefinitely reinstates 100% bonus depreciation and favorable interest deduction limitations[188] - AdaptHealth expects the OBBBA to decrease its cash tax liability for 2025[188] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on AdaptHealth's financial condition and results of operations for the three and six months ended June 30, 2025, compared to the prior year Reclassifications This section details the reclassification of certain revenue cycle management costs, which had no impact on key financial metrics - Certain revenue cycle management costs were reclassified from Cost of net revenue to General and administrative expenses for the three and six months ended June 30, 2024, to conform to current period presentation, with no impact on net revenue, operating income, or cash flows[192] AdaptHealth Corp. Overview AdaptHealth Corp. is a national leader in healthcare-at-home solutions, operating across four key segments - AdaptHealth is a national leader in healthcare-at-home solutions, including home medical equipment (HME), medical supplies, and related services[194] - The company operates through four segments: Sleep Health, Respiratory Health, Diabetes Health, and Wellness at Home, servicing approximately 4.2 million patients annually across 47 states[194][199] Impact of Inflation Inflationary pressures are affecting product and service costs, with the company implementing strategies to mitigate these impacts - Inflationary pressures, driven by material, labor, and transportation costs, are impacting AdaptHealth's product and service costs and margins[200] - Mitigation efforts include leveraging purchasing power with vendors and increasing technology use for operational efficiencies, such as a digital platform for prescriptions and delivery[200] Key Components of Operating Results This section defines the key components of AdaptHealth's operating results, including net revenue, cost of net revenue, and general and administrative expenses - Net revenue is recognized for services and products provided, either at a point in time for sales or over the service period for equipment rental, adjusted for variable consideration[201] - Cost of net revenue includes non-capitalized medical equipment, supplies, distribution expenses, labor, facilities, vehicle rental, and patient equipment depreciation[202] - General and administrative expenses cover corporate support, revenue cycle management, IT, HR, finance, legal, compliance, and equity-based compensation[203] Factors Affecting AdaptHealth's Operating Results AdaptHealth's operating results are influenced by seasonality, particularly patient deductibles and insurance coverage changes - AdaptHealth's business experiences seasonality, with lower net revenue and cash flow in the early part of the year due to patient deductibles and changes in insurance coverage[205] - The Diabetes Health segment typically sees higher revenue in Q4, while Respiratory Health may see increased services during winter due to respiratory infections[205][206] Key Business Metrics Key business metrics, including Net revenue, EBITDA, and free cash flow, are used to evaluate AdaptHealth's financial and operational performance - Key business metrics include Net revenue, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, and free cash flow, used to evaluate performance and strategic decisions[207][208] - Total net revenue is composed of net sales revenue (point-in-time), net revenue from fixed monthly equipment reimbursements (over service period), and net revenue from capitated revenue arrangements (monthly for eligible members)[208] Consolidated Results of Operations (Three Months Ended June 30, 2025 and 2024) For the three months ended June 30, 2025, net revenue decreased by 0.7% to $800.4 million, while operating income increased by 52.3% to $79.3 million, largely due to a $32.2 million gain on business sales. Net income attributable to AdaptHealth Corp. decreased by 24.5% to $14.7 million, impacted by a significant increase in income tax expense Consolidated Results of Operations (Three Months Ended June 30, in thousands, except percentages) | Metric | 2025 (Dollars) | 2025 (Percentage) | 2024 (Dollars) | 2024 (Percentage) | Increase/(Decrease) (Dollars) | Increase/(Decrease) (Percentage) | | :----------------------------------- | :------------- | :---------------- | :------------- | :---------------- | :---------------------------- | :------------------------------- | | Net revenue | $800,372 | 100.0% | $805,975 | 100.0% | $(5,603) | (0.7)% | | Cost of net revenue | $645,714 | 80.7% | $636,622 | 79.0% | $9,092 | 1.4% | | General and administrative expenses | $97,436 | 12.2% | $99,363 | 12.3% | $(1,927) | (1.9)% | | Depreciation and amortization, excluding patient equipment depreciation | $10,195 | 1.3% | $11,395 | 1.4% | $(1,200) | (10.5)% | | Goodwill impairment | — | — % | $6,548 | 0.8% | $(6,548) | (100.0)% | | Total costs and expenses | $753,345 | 94.1% | $753,928 | 93.5% | $(583) | (0.1)% | | Gain on sale of businesses | $(32,225) | (4.0)% | — | — % | $(32,225) | 100.0% | | Operating income | $79,252 | 9.9% | $52,047 | 6.5% | $27,205 | 52.3% | | Interest expense, net | $27,533 | 3.4% | $33,038 | 4.1% | $(5,505) | (16.7)% | | Income before income taxes | $51,719 | 6.5% | $27,779 | 3.4% | $23,940 | 86.2% | | Income tax expense | $35,891 | 4.5% | $7,248 | 0.9% | $28,643 | 395.2% | | Net income attributable to AdaptHealth Corp. | $14,674 | 1.8% | $19,435 | 2.4% | $(4,761) | (24.5)% | - Net revenue decreased by $5.6 million (0.7%) due to an $8.3 million decrease from non-acquired businesses, partially offset by a $2.7 million increase from acquired businesses[214] - Cost of net revenue increased by $9.1 million (1.4%), driven by higher costs of products and supplies ($3.1 million), salaries, labor and benefits ($3.6 million), and patient equipment depreciation ($2.4 million)[220] - General and administrative expenses decreased by $1.9 million (1.9%), primarily due to lower consulting expenses and salaries, labor and benefits, partially offset by higher software costs, legal settlement costs, and equity-based compensation[221] Consolidated Results of Operations (Six Months Ended June 30, 2025 and 2024) For the six months ended June 30, 2025, net revenue decreased by 1.3% to $1,578.3 million. Operating income remained stable at $102.4 million, benefiting from a $32.2 million gain on business sales. Net income attributable to AdaptHealth Corp. declined by 56.8% to $7.5 million, largely due to a significant increase in income tax expense Consolidated Results of Operations (Six Months Ended June 30, in thousands, except percentages) | Metric | 2025 (Dollars) | 2025 (Percentage) | 2024 (Dollars) | 2024 (Percentage) | Increase/(Decrease) (Dollars) | Increase/(Decrease) (Percentage) | | :----------------------------------- | :------------- | :---------------- | :------------- | :---------------- | :---------------------------- | :------------------------------- | | Net revenue | $1,578,254 | 100.0% | $1,598,472 | 100.0% | $(20,218) | (1.3)% | | Cost of net revenue | $1,303,158 | 82.6% | $1,271,652 | 79.6% | $31,506 | 2.5% | | General and administrative expenses | $184,290 | 11.6% | $188,404 | 11.8% | $(4,114) | (2.2)% | | Depreciation and amortization, excluding patient equipment depreciation | $20,609 | 1.3% | $22,760 | 1.4% | $(2,151) | (9.5)% | | Goodwill impairment | — | — % | $13,078 | 0.8% | $(13,078) | (100.0)% | | Total costs and expenses | $1,508,057 | 95.6% | $1,495,894 | 93.6% | $12,163 | 0.8% | | Gain on sale of businesses | $(32,225) | (2.0)% | — | — % | $(32,225) | 100.0% | | Operating income | $102,422 | 6.5% | $102,578 | 6.4% | $(156) | (0.2)% | | Interest expense, net | $55,932 | 3.5% | $65,510 | 4.1% | $(9,578) | (14.6)% | | Income before income taxes | $46,490 | 2.9% | $33,280 | 2.1% | $13,210 | 39.7% | | Income tax expense | $36,741 | 2.3% | $13,858 | 0.9% | $22,883 | 165.1% | | Net income attributable to AdaptHealth Corp. | $7,467 | 0.5% | $17,301 | 1.1% | $(9,834) | (56.8)% | - Net revenue decreased by $20.2 million (1.3%), primarily due to a $25.1 million decrease from non-acquired businesses, partially offset by a $4.9 million increase from acquired businesses[230][231] - Cost of net revenue increased by $31.5 million (2.5%), driven by higher costs of products and supplies ($14.8 million), salaries, labor and benefits ($9.7 million), and patient equipment depreciation ($4.8 million)[236] - General and administrative expenses decreased by $4.1 million (2.2%), mainly due to lower salaries, labor and benefits and consulting costs, partially offset by higher software costs and equity-based compensation[238] EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin AdaptHealth uses non-GAAP financial measures like EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin to analyze performance and evaluate strategic decisions. Adjusted EBITDA for the three months ended June 30, 2025, was $155.5 million (19.4% margin), down from $165.3 million (20.5% margin) in the prior year. For the six months, Adjusted EBITDA was $283.5 million (18.0% margin), down from $323.8 million (20.3% margin) - EBITDA is defined as net income attributable to AdaptHealth Corp. plus noncontrolling interests, interest expense, income tax expense, and depreciation and amortization[246] - Adjusted EBITDA further adjusts EBITDA by adding equity-based compensation, changes in warrant liability fair value, goodwill impairment, litigation settlement, gain on sale of businesses, and other non-recurring items[247] Adjusted EBITDA and Margin Reconciliation (in thousands, except percentages) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income attributable to AdaptHealth Corp. | $14,674 | $19,435 | $7,467 | $17,301 | | EBITDA | $171,612 | $151,979 | $289,127 | $282,828 | | Equity-based compensation expense | $6,131 | $5,218 | $11,427 | $9,751 | | Change in fair value of warrant liability | — | $(7,010) | — | $443 | | Goodwill impairment | — | $6,548 | — | $13,078 | | Litigation settlement gain (expense) | — | $(1,760) | — | $3,345 | | Gain on sale of businesses | $(32,225) | — | $(32,225) | — | | Other non-recurring expenses, net | $10,026 | $10,340 | $15,153 | $14,355 | | Adjusted EBITDA | $155,544 | $165,315 | $283,482 | $323,800 | | Adjusted EBITDA Margin | 19.4% | 20.5% | 18.0% | 20.3% | Segment Results of Operations (Three Months Ended June 30, 2025 and 2024) Segment performance for the three months ended June 30, 2025, showed mixed results. Sleep Health's Adjusted EBITDA slightly increased by 0.2%, while Respiratory Health and Diabetes Health saw decreases of 13.1% and 48.5%, respectively. Wellness at Home's Adjusted EBITDA increased by 15.2%, primarily due to lower costs from business dispositions Sleep Health Segment (Three Months Ended June 30) Sleep Health segment's net revenue slightly increased, while Adjusted EBITDA remained stable for the three months ended June 30 Sleep Health Segment Performance (Three Months Ended June 30, in thousands, except percentages) | Metric | 2025 (Dollars) | 2025 (Percentage) | 2024 (Dollars) | 2024 (Percentage) | Increase/(Decrease) (Dollars) | Increase/(Decrease) (Percentage) | | :-------------------------- | :------------- | :---------------- | :------------- | :---------------- | :---------------------------- | :------------------------------- | | Net revenue | $334,689 | — | $331,555 | — | $3,134 | 0.9% | | Cost of products and supplies | $105,863 | — | $106,211 | — | $(348) | (0.3)% | | Labor cost | $81,377 | — | $78,435 | — | $2,942 | 3.8% | | Other operating expenses | $32,674 | — | $32,186 | — | $488 | 1.5% | | Other segment items | $34,001 | — | $34,088 | — | $(87) | (0.3)% | | Adjusted EBITDA | $80,774 | 24.1% | $80,635 | 24.3% | $139 | 0.2% | | Patient equipment depreciation | $38,592 | — | $42,563 | — | $(3,971) | (9.3)% | - Net revenue increased by 0.9% due to higher patient census from CPAP resupply products, partially offset by lower fixed monthly equipment reimbursements[259] Respiratory Health Segment (Three Months Ended June 30) Respiratory Health segment experienced revenue growth but a decrease in Adjusted EBITDA due to increased operating costs Respiratory Health Segment Performance (Three Months Ended June 30, in thousands, except percentages) | Metric | 2025 (Dollars) | 2025 (Percentage) | 2024 (Dollars) | 2024 (Percentage) | Increase/(Decrease) (Dollars) | Increase/(Decrease) (Percentage) | | :-------------------------- | :------------- | :---------------- | :------------- | :---------------- | :---------------------------- | :------------------------------- | | Net revenue | $170,450 | — | $161,386 | — | $9,064 | 5.6% | | Cost of products and supplies | $31,717 | — | $23,788 | — | $7,929 | 33.3% | | Labor cost | $56,494 | — | $51,972 | — | $4,522 | 8.7% | | Other operating expenses | $15,323 | — | $11,491 | — | $3,832 | 33.3% | | Other segment items | $17,955 | — | $17,825 | — | $130 | 0.7% | | Adjusted EBITDA | $48,961 | 28.7% | $56,310 | 34.9% | $(7,349) | (13.1)% | | Patient equipment depreciation | $29,800 | — | $22,010 | — | $7,790 | 35.4% | - Net revenue increased by 5.6% due to higher fixed monthly equipment reimbursements from increased patient census for oxygen equipment[263] - Adjusted EBITDA decreased by 13.1% due to increased costs, including higher product and supply costs (partially due to prior year supplier credits), labor costs, and distribution expenses[264] Diabetes Health Segment (Three Months Ended June 30) Diabetes Health segment saw a decline in both net revenue and Adjusted EBITDA, impacted by payor mix shifts and rising costs Diabetes Health Segment Performance (Three Months Ended June 30, in thousands, except percentages) | Metric | 2025 (Dollars) | 2025 (Percentage) | 2024 (Dollars) | 2024 (Percentage) | Increase/(Decrease) (Dollars) | Increase/(Decrease) (Percentage) | | :-------------------------- | :------------- | :---------------- | :------------- | :---------------- | :---------------------------- | :------------------------------- | | Net revenue | $144,961 | — | $151,189 | — | $(6,228) | (4.1)% | | Cost of products and supplies | $109,426 | — | $106,931 | — | $2,495 | 2.3% | | Labor cost | $13,110 | — | $12,945 | — | $165 | 1.3% | | Other operating expenses | $2,088 | — | $4,295 | — | $(2,207) | (51.4)% | | Other segment items | $14,785 | — | $16,231 | — | $(1,446) | (8.9)% | | Adjusted EBITDA | $5,552 | 3.8% | $10,787 | 7.1% | $(5,235) | (48.5)% | | Patient equipment depreciation | $2,300 | — | $2,188 | — | $112 | 5.1% | - Net revenue decreased by 4.1% due to a shift in payor mix from commercial insurance to government payors, partially offset by growth in CGM patient census[267] - Adjusted EBITDA decreased by 48.5% due to lower net revenue and increased cost of products and supplies from CGM patient census growth and inflationary costs[268] Wellness at Home Segment (Three Months Ended June 30) Wellness at Home segment's net revenue decreased due to business dispositions, but Adjusted EBITDA improved from cost reductions Wellness at Home Segment Performance (Three Months Ended June 30, in thousands, except percentages) | Metric | 2025 (Dollars) | 2025 (Percentage) | 2024 (Dollars) | 2024 (Percentage) | Increase/(Decrease) (Dollars) | Increase/(Decrease) (Percentage) | | :-------------------------- | :------------- | :---------------- | :------------- | :---------------- | :---------------------------- | :------------------------------- | | Net revenue | $150,272 | — | $161,845 | — | $(11,573) | (7.2)% | | Cost of products and supplies | $70,747 | — | $77,732 | — | $(6,985) | (9.0)% | | Labor cost | $32,247 | — | $36,553 | — | $(4,306) | (11.8)% | | Other operating expenses | $10,776 | — | $12,082 | — | $(1,306) | (10.8)% | | Other segment items | $16,245 | — | $17,895 | — | $(1,650) | (9.2)% | | Adjusted EBITDA | $20,257 | 13.5% | $17,583 | 10.9% | $2,674 | 15.2% | | Patient equipment depreciation | $11,473 | — | $13,006 | — | $(1,533) | (11.8)% | - Net revenue decreased by 7.2% due to the disposition of two businesses in Q2 2025 and certain custom rehab technology assets in Q3 2024, partially offset by increased HME product revenues[271] - Adjusted EBITDA increased by 15.2% due to lower costs and expenses resulting from the business dispositions[272] Segment Results of Operations (Six Months Ended June 30, 2025 and 2024) For the six months ended June 30, 2025, Sleep Health and Diabetes Health segments experienced declines in Adjusted EBITDA by 9.8% and 61.9% respectively, primarily due to increased costs and shifts in payor mix. Respiratory Health's Adjusted EBITDA decreased by 7.1% despite revenue growth, while Wellness at Home's Adjusted EBITDA increased by 6.8% due to cost reductions from business dispositions Sleep Health Segment (Six Months Ended June 30) Sleep Health segment's net revenue slightly decreased, and Adjusted EBITDA declined due to increased operating expenses Sleep Health Segment Performance (Six Months Ended June 30, in thousands, except percentages) | Metric | 2025 (Dollars) | 2025 (Percentage) | 2024 (Dollars) | 2024 (Percentage) | Increase/(Decrease) (Dollars) | Increase/(Decrease) (Percentage) | | :-------------------------- | :------------- | :---------------- | :------------- | :---------------- | :---------------------------- | :------------------------------- | | Net revenue | $651,040 | — | $656,889 | — | $(5,849) | (0.9)% | | Cost of products and supplies | $214,062 | — | $209,502 | — | $4,560 | 2.2% | | Labor cost | $162,097 | — | $156,467 | — | $5,630 | 3.6% | | Other operating expenses | $65,479 | — | $63,924 | — | $1,555 | 2.4% | | Other segment items | $65,001 | — | $66,825 | — | $(1,824) | (2.7)% | | Adjusted EBITDA | $144,401 | 22.2% | $160,171 | 24.4% | $(15,770) | (9.8)% | | Patient equipment depreciation | $76,797 | — | $84,930 | — | $(8,133) | (9.6)% | - Net revenue decreased by 0.9% due to lower fixed monthly equipment reimbursements, partially offset by higher sleep sales revenue from CPAP resupply products[277] - Adjusted EBITDA decreased by 9.8% due to increased costs and expenses, including higher product and supply costs, labor costs, and distribution expenses[279] Respiratory Health Segment (Six Months Ended June 30) Respiratory Health segment achieved revenue growth, but Adjusted EBITDA decreased due to higher product and labor costs Respiratory Health Segment Performance (Six Months Ended June 30, in thousands, except percentages) | Metric | 2025 (Dollars) | 2025 (Percentage) | 2024 (Dollars) | 2024 (Percentage) | Increase/(Decrease) (Dollars) | Increase/(Decrease) (Percentage) | | :-------------------------- | :------------- | :---------------- | :------------- | :---------------- | :---------------------------- | :------------------------------- | | Net revenue | $335,931 | — | $321,649 | — | $14,282 | 4.4% | | Cost of products and supplies | $65,771 | — | $57,227 | — | $8,544 | 14.9% | | Labor cost | $110,553 | — | $101,653 | — | $8,900 | 8.8% | | Other operating expenses | $30,149 | — | $25,756 | — | $4,393 | 17.1% | | Other segment items | $35,019 | — | $35,344 | — | $(325) | (0.9)% | | Adjusted EBITDA | $94,439 | 28.1% | $101,669 | 31.6% | $(7,230) | (7.1)% | | Patient equipment depreciation | $60,916 | — | $43,815 | — | $17,101 | 39.0% | - Net revenue increased by 4.4% due to higher fixed monthly equipment reimbursements from increased patient census for oxygen equipment[281] - Adjusted EBITDA decreased by 7.1% due to increased costs and expenses, including higher product and supply costs (partially due to prior year supplier credits), labor costs, and distribution expenses[282] Diabetes Health Segment (Six Months Ended June 30) Diabetes Health segment experienced declines in net revenue and Adjusted EBITDA, primarily from payor mix changes and increased costs Diabetes Health Segment Performance (Six Months Ended June 30, in thousands, except percentages) | Metric | 2025 (Dollars) | 2025 (Percentage) | 2024 (Dollars) | 2024 (Percentage) | Increase/(Decrease) (Dollars) | Increase/(Decrease) (Percentage) | | :-------------------------- | :------------- | :---------------- | :------------- | :---------------- | :---------------------------- | :------------------------------- | | Net revenue | $283,805 | — | $302,045 | — | $(18,240) | (6.0)% | | Cost of products and supplies | $213,495 | — | $207,820 | — | $5,675 | 2.7% | | Labor cost | $26,087 | — | $25,939 | — | $148 | 0.6% | | Other operating expenses | $3,944 | — | $5,993 | — | $(2,049) | (34.2)% | | Other segment items | $28,339 | — | $30,946 | — | $(2,607) | (8.4)% | | Adjusted EBITDA | $11,940 | 4.2% | $31,347 | 10.4% | $(19,407) | (61.9)% | | Patient equipment depreciation | $4,570 | — | $3,956 | — | $614 | 15.5% | - Net revenue decreased by 6.0% due to a shift in payor mix from commercial insurance to government payors, partially offset by growth in CGM patient census[285] - Adjusted EBITDA decreased by 61.9% due to lower net revenue and increased cost of products and supplies from CGM patient census growth and inflationary costs[286] Wellness at Home Segment (Six Months Ended June 30) Wellness at Home segment's net revenue decreased due to dispositions, while Adjusted EBITDA improved from associated cost reductions Wellness at Home Segment Performance (Six Months Ended June 30, in thousands, except percentages) | Metric | 2025 (Dollars) | 2025 (Percentage) | 2024 (Dollars) | 2024 (Percentage) | Increase/(Decrease) (Dollars) | Increase/(Decrease) (Percentage) | | :-------------------------- | :------------- | :---------------- | :------------- | :---------------- | :---------------------------- | :------------------------------- | | Net revenue | $307,478 | — | $317,889 | — | $(10,411) | (3.3)% | | Cost of products and supplies | $151,301 | — | $155,316 | — | $(4,015) | (2.6)% | | Labor cost | $66,794 | — | $72,135 | — | $(5,341) | (7.4)% | | Other operating expenses | $24,345 | — | $24,502 | — | $(157) | (0.6)% | | Other segment items | $32,336 | — | $35,323 | — | $(2,987) | (8.5)% | | Adjusted EBITDA | $32,702 | 10.6% | $30,613 | 9.6% | $2,089 | 6.8% | | Patient equipment depreciation | $23,813 | — | $28,577 | — | $(4,764) | (16.7)% | - Net revenue decreased by 3.3% due to the disposition of two businesses in Q2 2025 and certain custom rehab technology assets in Q3 2024, partially offset by increased HME product revenues[289] - Adjusted EBITDA increased by 6.8% due to lower costs and expenses resulting from the business dispositions[290] Free Cash Flow Free cash flow, defined as operating cash flow less capital expenditures, is a key measure of the company's financial liquidity - Free cash flow is defined as net cash provided by operating activities less cash paid for purchases of equipment and other fixed assets[293] Free Cash Flow Reconciliation (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $161,994 | $197,984 | $257,521 | $247,019 | | Purchases of equipment and other fixed assets | $(88,665) | $(81,272) | $(184,250) | $(169,163) | | Free cash flow | $73,329 | $116,712 | $73,271 | $77,856 | - Free cash flow decreased by $43.4 million for the three months ended June 30, 2025, and by $4.6 million for the six months ended June 30, 2025, primarily due to lower net cash from operating activities and increased purchases of patient medical equipment[311][312] Liquidity and Capital Resources AdaptHealth's liquidity primarily stems from operating cash flows and credit agreements. As of June 30, 2025, cash stood at $68.6 million. The company's 2024 Credit Facility includes a $375.0 million term loan and $274.5 million available under its revolving credit facility. Long-term debt, including senior unsecured notes, totaled $1,792.7 million (less current portion) - Principal liquidity sources are operating cash flows, borrowings under credit agreements, and other debt arrangements[294] - As of June 30, 2025, AdaptHealth had $68.6 million in cash[297] - The 2024 Term Loan had $375.0 million outstanding, and the 2024 Revolver had $274.5 million available for borrowing as of June 30, 2025[298] - Working capital was $35.9 million as of June 30, 2025, a significant decrease from $188.8 million at December 31, 2024[306] Critical Accounting Policies and Estimates This section highlights critical accounting policies and estimates, such as revenue recognition and goodwill valuation, with no material changes reported - Critical accounting estimates include revenue recognition and the valuation of goodwill, which require significant management judgment and assumptions[314] - There have been no material changes to critical accounting policies and estimates since the Annual Report on Form 10-K for the year ended December 31, 2024[314] Commitments and Contingencies The company is subject to various legal proceedings and governmental investigations, as detailed in the financial statement notes - The company is involved in various legal proceedings and governmental investigations, including False Claims Act inquiries and shareholder lawsuits, as detailed in Note 16[315][316][317][319][321][323][325] Item 3. Quantitative and Qualitative Disclosures About Market Risk AdaptHealth's primary market risk exposure is to fluctuations in interest rates on its variable-rate borrowings under the 2024 Credit Agreement. A 100 basis point change in interest rates is estimated to have a $1.3 million annual impact on net income before taxes - The company's market risk primarily stems from variable interest rates on borrowings under the 2024 Credit Agreement[326] - A 100 basis point change in interest rates is estimated to result in a $1.3 million annual impact on net income (loss) before taxes[326] Item 4. Controls and Procedures Management concluded that AdaptHealth's disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness in internal control over financial reporting related to the determination of excess or obsolete medical equipment and other inventory balances. Remediation efforts are ongoing, including the implementation of a perpetual inventory system and new quarterly controls Evaluation of Disclosure Controls and Procedures Management concluded that disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting - As of June 30, 2025, disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting[327] - The material weakness relates to the lack of process-level controls over the determination of excess or obsolete medical equipment and other inventory balances, specifically the inability to track movement and status of inventory[328] - Despite the material weakness, management believes the interim consolidated financial statements fairly represent the company's financial condition and results of operations[329] Remediation of Previously Reported Material Weakness in Internal Control Over Financing Reporting Remediation efforts for the Inventory Valuation Material Weakness are ongoing, including the implementation of a perpetual inventory system and new quarterly controls - Remediation efforts for the Inventory Valuation Material Weakness are ongoing, including the implementation of a perpetual inventory system at 102 locations (34% of inventory value) to track medical equipment and other inventory[330] - A new quarterly control has been designed and implemented to review inventory movements and ensure accurate valuation, pending the full integration of the perpetual inventory system[330] Changes in Internal Control over Financial Reporting No changes in internal control over financial reporting occurred during the quarter, other than those related to ongoing remediation efforts - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, other than those related to the ongoing remediation of the material weakness[331] PART II OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, and other disclosures for AdaptHealth Corp Item 1. Legal Proceedings The company is involved in various legal proceedings in the normal course of business, as detailed in Note 16 and Item 2. Management does not expect these to have a material adverse effect on the business, but outcomes are inherently uncertain - The company is subject to legal proceedings, claims, and governmental investigations, with details cross-referenced to Note 16 and Item 2[332] - Management believes the ultimate disposition of these matters will not have a material adverse effect, but acknowledges the inherent uncertainty of legal outcomes[332] Item 1A. Risk Factors This section refers to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024, which could materially affect its results of operations or financial condition - Risk factors that could materially affect actual results are outlined in the Annual Report on Form 10-K for the year ended December 31, 2024[333] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or purchases of common stock by the company or its affiliated purchasers during the period covered by this report - No unregistered sales of equity securities occurred during the reporting period[334] - No purchases of common stock were made by the company or its affiliated purchasers during the three months ended June 30, 2025[334] Item 3. Defaults upon Senior Securities The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[335] Item 4. Mine Safety Disclosure This item is not applicable to the company - Mine Safety Disclosure is not applicable[336] Item 5. Other Information No directors or officers adopted, terminated, or modified any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, terminated, or modified by directors or officers during the three months ended June 30, 2025[337] Item 6. Exhibits This section lists all exhibits filed or furnished with the report, including corporate governance documents, certifications, and XBRL interactive data files - The exhibit index includes corporate governance documents (Certificate of Incorporation, Bylaws), Non-Employee Director Fee Deferral Policy, CEO/CFO certifications, and XBRL interactive data files[340]