AdaptHealth(AHCO)2020-11-04 18:53Financial Data and Key Metrics Changes - AdaptHealth generated net revenue of $284 million, an increase of 108% from Q3 2019 [18] - Adjusted EBITDA was $53 million, an increase of 68% from Q3 2019 [18] - Adjusted EBITDA less patient equipment CapEx was $36 million, an increase of 92% from Q3 2019 [18] - Operating cash flow for the nine months ended September 30, 2020, was $145 million, including approximately $46 million of CMS advanced payments and $17 million in CARES Act Provider Relief Funds [21] Business Line Data and Key Metrics Changes - New sleep starts rebounded to above 90% of pre-COVID levels by the end of Q3, recovering from a 30% decline in Q2 [20] - The diabetes supply management business is expected to add $85 million to $90 million in revenue in 2021 due to recent acquisitions [10] - The company continues to see strong growth in diabetes and supplies products, with expectations for organic growth to return to high-single digits [20][23] Market Data and Key Metrics Changes - The company noted a positive regulatory update from CMS regarding the Medicare competitive bid program, which is expected to provide rate stability for the next three years [12][13] - The competitive bid program's delay or cancellation is viewed positively, as it may lead to more stable pricing in the market [36][38] Company Strategy and Development Direction - AdaptHealth aims to evolve from a provider of equipment and supplies to a more complete connected healthcare solutions provider [11] - The company has an active M&A pipeline and plans to continue selectively pursuing acquisitions that align with its strategic goals [11] - The focus remains on expanding relationships with payers and formulating value-based reimbursement models [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to achieve its guidance for 2020 and 2021, despite uncertainties related to COVID-19 [73] - The company anticipates organic growth will return to normalized levels by the first half of 2021, with diabetes expected to grow at a mid-teens rate [23][43] - Management highlighted the importance of maintaining operational stability and adapting to ongoing challenges presented by the pandemic [15] Other Important Information - The company is focusing on technology and business process improvements, including increasing e-Prescribing penetration [17][49] - Management emphasized the importance of patient engagement and data collection through technology to enhance service delivery [69] Q&A Session Summary Question: Can you help us bridge the new 2020 guide? - Management indicated that the core business is performing slightly above plan, with most of the guidance increase related to acquisition activity [28] Question: What was the organic growth number in the quarter? - Organic growth for Q3 was a little over 1%, which management found pleasing given the circumstances [30] Question: How did Solara perform relative to expectations? - Revenue from Solara was slightly weaker than modeled due to the impact of TRICARE rate cuts, but new start trends are ahead of budget [32] Question: How does competitive bidding impact purchasing power? - Management noted that the uncertainty around competitive bidding had delayed discussions with suppliers, but they expect to establish purchasing targets moving forward [61] Question: What are the biggest risks for achieving guidance? - The primary risk for 2021 is the ongoing impact of COVID-19, which remains unpredictable [73] Question: How will the M&A strategy be affected by the election? - Management believes that the M&A pipeline remains active and that the election results will not significantly impact existing negotiations [75]