Business Overview and History AdaptHealth Corp. (AHCO) is a national leader in providing patient-centered, healthcare-at-home solutions including home medical equipment (HME), medical supplies, and related services. The company operates under four reportable segments that align with its product categories: Sleep Health, Respiratory Health, Diabetes Health, and Wellness at Home.
AdaptHealth was originally formed in November 2017 as a publicly traded special purpose acquisition company (SPAC) called DFB Healthcare Acquisitions Corp. for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination involving one or more businesses. On July 8, 2019, DFB entered into an Agreement and Plan of Merger with AdaptHealth Holdings LLC. The business combination closed in November 2019, and the combined company was renamed AdaptHealth Corp.
Since the business combination, AdaptHealth has grown significantly through both organic initiatives and strategic acquisitions. The company has leveraged its scalable front-end and back-office technology platform to facilitate the integration of acquired home medical equipment providers, helping to realize short-term cost saving synergies and longer-term revenue growth synergies. AdaptHealth services beneficiaries of Medicare, Medicaid, and commercial insurance payors, delivering a wide range of home medical equipment, medical supplies, and related services to patients.
The company has faced some challenges over the years, including navigating the competitive and regulated home medical equipment market, managing supply chain disruptions and labor shortages, and addressing reimbursement changes from government and private payors. AdaptHealth has also had to contend with legal proceedings and investigations, such as a securities class action lawsuit filed in 2021 and a civil investigative demand from the U.S. Attorney's Office in 2022 regarding the company's billing practices.
Despite these challenges, AdaptHealth has remained focused on expanding its capabilities, improving operational efficiency, and delivering high-quality care to its patients. The company has made investments in its technology platform, strengthened its leadership team, and implemented initiatives to drive organic growth and enhance its financial position, such as divesting non-core product lines and reducing debt.
As of December 31, 2024, AdaptHealth serviced approximately 4.2 million patients annually in all 50 states through a network of approximately 660 locations in 47 states. The company's principal executive offices are located in Plymouth Meeting, Pennsylvania.
Financial Performance For the full year 2024, AdaptHealth reported net revenue of $3.26 billion, up 1.9% compared to the prior year. This growth was driven by a 4.5% increase in Sleep Health revenue, a 6.0% increase in Respiratory Health revenue, and a 1.9% increase in Wellness at Home revenue, partially offset by a 6.9% decline in Diabetes Health revenue.
Adjusted EBITDA for 2024 was $688.7 million, up 2.7% year-over-year, with an Adjusted EBITDA margin of 21.1%. The company's net income attributable to AdaptHealth Corp. was $90.4 million for the full year 2024.
For the most recent quarter (Q4 2024), AdaptHealth reported revenue of $856.7 million, which was flat compared to Q4 2023. The company exceeded the midpoint of its Q4 2024 revenue guidance by 3%. Net income for Q4 2024 was $50.3 million.
Liquidity AdaptHealth generated $541.8 million in operating cash flow and $235.8 million in free cash flow during 2024. As of December 31, 2024, the company had $109.7 million in cash and cash equivalents, with a net debt position of $1.87 billion and a net leverage ratio of 2.79x.
The company's debt-to-equity ratio stands at 0.10, indicating a relatively low level of debt compared to equity. AdaptHealth has a current ratio of 1.33 and a quick ratio of 1.09, suggesting a healthy short-term liquidity position.
Under the 2024 Credit Agreement, AdaptHealth has a $300 million revolving credit facility, of which $277.6 million was available as of December 31, 2024, providing additional financial flexibility.
Segmental Performance Sleep Health: This segment, which provides sleep therapy equipment, supplies, and related services, saw revenue increase 4.5% to $1.35 billion in 2024, accounting for 41.4% of total net revenue. Adjusted EBITDA margin for the segment was 25.8%, with Adjusted EBITDA of $348.7 million.
Respiratory Health: Revenue in this segment, which provides oxygen and home mechanical ventilation equipment and supplies, grew 6.0% to $651.2 million, representing 19.9% of total net revenue. Adjusted EBITDA margin was 30.7%, with Adjusted EBITDA of $200.1 million.
Diabetes Health: Revenue in this segment, which provides medical devices and related services for diabetes treatment, declined 6.9% to $614.4 million, accounting for 18.9% of total net revenue. The decrease was primarily due to a shift in diabetes patients by certain large commercial insurance and other payors from DME suppliers to dual-benefit and pharmacy-only suppliers. Adjusted EBITDA margin was 9.9%, with Adjusted EBITDA of $60.5 million.
Wellness at Home: This segment, which provides home medical equipment and services, saw revenue increase 1.9% to $646.2 million, representing 19.8% of total net revenue. Adjusted EBITDA margin was 12.3%, with Adjusted EBITDA of $79.3 million.
Guidance and Outlook For the full year 2025, AdaptHealth provided the following guidance: - Revenue of $3.22 billion to $3.36 billion, representing a decline of 1% to growth of 3% - Adjusted EBITDA of $670 million to $710 million, with an adjusted EBITDA margin of approximately 21%, in line with 2024 - Free cash flow of $180 million to $220 million
For Q1 2025, the company expects revenue to be down 3-4% versus Q1 2024 and an adjusted EBITDA margin of 16-17%. The company expects the first quarter of 2025 to be impacted by ongoing weakness in the Diabetes Health segment as well as a drag from the mix shift between purchase and rental revenue.
It's worth noting that AdaptHealth exceeded the high end of their guidance ranges for revenue, adjusted EBITDA, and free cash flow in Q4 2024. For full year 2024, the company's revenue grew 1.9% versus the prior year, despite headwinds from divestitures and the end of the COVID-19 public health emergency reimbursement rates.
Risks and Challenges AdaptHealth faces several risks and challenges, including: - Reliance on a limited number of suppliers for the majority of its patient service equipment and supplies - Supply chain disruptions and labor shortages in the U.S. - Potential for increased costs due to inflation - Cybersecurity threats and data breaches - Regulatory changes and reimbursement pressures from government and private payers - Competition from numerous other providers in the sleep therapy, home respiratory, mobility equipment, and diabetes medical devices and supplies markets - Ongoing legal and regulatory investigations, including civil investigative demands from the U.S. Attorney's Office regarding billing practices
In 2022, the U.S. Attorney's Office for the Southern District of New York issued a civil investigative demand to an AdaptHealth subsidiary regarding potential false claims related to the billing of federal healthcare programs for ventilators. In 2024, the U.S. Attorney's Office for the District of South Carolina issued a civil investigative demand to AdaptHealth regarding potential false claims related to the billing of federal healthcare programs for CPAP device humidifiers. AdaptHealth is cooperating with both investigations.
Despite these risks, AdaptHealth has demonstrated its ability to navigate a dynamic market environment and deliver solid financial performance. The company's focus on patient-centered care, continuous innovation, and strategic acquisitions position it well for long-term growth in the evolving healthcare-at-home industry. The home medical equipment (HME) industry that AdaptHealth operates in has seen moderate growth, with a compound annual growth rate of around 5-7% in recent years, providing a favorable backdrop for the company's operations.