AdaptHealth(US:AHCO)2024-02-27 19:15Financial Data and Key Metrics Changes - For the full year 2023, net revenue grew by 7.7% and adjusted EBITDA increased by 13% compared to the prior year, marking the fourth consecutive year of growth in both top and bottom lines [5][15] - Cash flow from operations reached $480.7 million, a 28.6% increase year-over-year, while free cash flow improved significantly to $143 million [15][19] - The net leverage ratio decreased from 3.69x to 3.16x, with expectations to fall below 3x by the end of 2024 [6][20] Business Line Data and Key Metrics Changes - The sleep product line was a primary driver, with revenue growth of 16% for the year and 15.2% in Q4, supported by a 12% increase in resupply census [7][16] - Respiratory revenue increased by nearly 8% for the year and 10% in Q4, with the oxygen census reaching over 315,000 patients [8][16] - Diabetes revenue declined by 3.8% in Q4 due to market shifts towards tubeless pumps, although CGM revenue grew by 1% despite reimbursement pressures [9][17] Market Data and Key Metrics Changes - The company has increased its market share in the CPAP and related supplies category, now being the number one provider in the U.S. [7] - Government-sponsored payers accounted for 79% of CGM census in Q4, reflecting a 30 basis point increase from the previous quarter [9] Company Strategy and Development Direction - The company aims for mid- to upper-single digit growth in 2025 and beyond, focusing on regaining market rates of growth in diabetes and maintaining dominance in sleep and respiratory categories [27][24] - AdaptHealth is enhancing its role in the healthcare ecosystem by providing care in home and community settings, leveraging data to improve patient outcomes [13][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in overcoming potential long-term pressures from GLP-1 drugs on CGM growth, believing that increased awareness of related comorbidities will benefit the business [10][12] - The company anticipates revenue for 2024 to be in the range of $3.25 billion to $3.35 billion, with adjusted EBITDA between $650 million and $710 million [21] Other Important Information - A $318.9 million pretax write-down to goodwill was recorded due to a reduction in stock price, along with a $25 million charge related to a pending securities action [20] - The company is actively searching for a new CEO, with promising candidates in the recruitment process [14] Q&A Session Summary Question: What is the normalized growth rate expected post-2024? - Management targets mid- to upper-single digit growth in 2025 and beyond, focusing on diabetes and maintaining dominance in sleep and respiratory [27] Question: Any seasonality factors affecting cash flow in 2024? - Cash flow is expected to follow a similar pattern as 2023, with Q1 being pressured and Q4 typically being the strongest quarter [28] Question: What was the final tally on pump revenue for 2023? - Pump revenue for 2023 was approximately $120 million, with expectations of a headwind of about $20 million in 2024 [31][32] Question: How does resupply growth compare to rental performance in 2024? - Resupply operations are expected to grow at higher-single digits, while rental revenue is anticipated to be flat due to tough comparables [34] Question: What is the outlook for the diabetes franchise? - Management expects to see growth in the diabetes segment in 2024, particularly from government programs and new product launches [39][41] Question: How will the expiration of the 75/25 rule impact product categories? - The sleep category, making up about 40% of revenue, is expected to be impacted the most, along with respiratory products [70]