Business Wire | Nov 4, 2020 06:30AM EST

AdaptHealth Corp. Announces Third Quarter 2020 Financial Results

Nov. 04, 2020

PLYMOUTH MEETING, Pa.--(BUSINESS WIRE)--Nov. 04, 2020--AdaptHealth Corp. (NASDAQ: AHCO) ("AdaptHealth" or the "Company"), a leading provider of home healthcare equipment, medical supplies to the home and related services in the United States, announced today financial results for the three- and nine-month periods ended September 30, 2020.

Highlights

* The Company closed the acquisitions of Solara Medical Supplies and ActivStyle on July 1, 2020. Integration efforts are advancing and both acquisitions were accretive to earnings in the third quarter of 2020. * In the third quarter, the Company acquired several additional diabetes management and home medical equipment businesses in high-growth areas. * In addition, on October 1, 2020, the Company acquired Pinnacle Medical Solutions, a leading distributor of medical devices and supplies to patients for the treatment of diabetes (including continuous glucose monitors and insulin pumps). * To partially fund these acquisitions, the Company completed $1.2 billion of financing transactions, consisting of $134 million in net proceeds from a primary common equity issuance, $225 million from PIPE issuances of common equity, $343 million in net proceeds from an unsecured senior note issuance and a $450 million senior bank facility refinancing.

Third Quarter Results

* Net revenue was $284.4 million, a 108% increase from the third quarter of 2019 and 23% higher than the second quarter of 2020. * Net loss attributable to AdaptHealth Corp. was $2.5 million, or $0.04 per diluted share, compared to a net loss of $3.7 million, or $0.17 per diluted share, in the third quarter of 2019. * Adjusted EBITDA less Patient Equipment Capex was $35.9 million compared to $18.7 million in the third quarter of 2019. * Adjusted EBITDA was $53.2 million compared to $31.7 million in the third quarter of 2019.

Nine Month Results

* Net revenue was $708.0 million, an 86% increase from the first nine months of 2019. * Net income attributable to AdaptHealth Corp. was $1.4 million, or $0.02 per diluted share, compared to a net loss of $11.6 million, or $0.60 per diluted share, in the first nine months of 2019. * Adjusted EBITDA less Patient Equipment Capex was $84.0 million compared to $53.8 million in the first nine months of 2019. * Adjusted EBITDA was $126.3 million compared to $89.4 million in the first nine months of 2019.

Increased Guidance

While it is difficult to predict the duration of the COVID-19 crisis, based on current business and market trends, the Company is increasing financial guidance for fiscal year 2020 for net revenue to $1.00 billion to $1.04 billion, Adjusted EBITDA to $186 million to $194 million, and Adjusted EBITDA less Patient Equipment Capex to $124 million to $130 million.

For 2021, the Company is guiding net revenue of $1.30 billion to $1.40 billion, Adjusted EBITDA of $260 million to $280 million and Adjusted EBITDA less Patient Equipment Capex of $180 million to $200 million.

CEO Commentary

Luke McGee, Chief Executive Officer of AdaptHealth, commented, "Our strong year-to-date financial performance and improved outlook for the remainder of 2020 reflects the tremendous efforts of our employees and their dedication to our patients and healthcare partners. We have remained opportunistic throughout the quarter, acquiring several diabetes management and home medical equipment businesses in high-growth areas. Additionally, on October 1, 2020, we acquired Pinnacle Medical Solutions, a leading distributor of medical devices and supplies to patients for the treatment of diabetes, including continuous glucose monitors and insulin pumps.

"I am very proud of the dedication, courage, and professionalism of our employees as they continue to serve our patients and referral partners throughout this crisis, while also continuing to remain focused on delivering record financial results and establishing a strong foundation for 2021."

Conference Call

Management will host a conference at 8:30 am ET today to discuss the results and business activities. Interested parties may participate in the call by dialing:

* (877) 423-9820 (Domestic) or * (201) 493-6749 (International)

Webcast registration: Click Here

Following the live call, a replay will be available for six months on the Company's website, www.adapthealth.com under "Investor Relations."

About AdaptHealth Corp.

AdaptHealth is a leading provider of home healthcare equipment, medical supplies to the home and related services in the United States. AdaptHealth provides a full suite of medical products and solutions designed to help patients manage chronic conditions in the home, adapt to life and thrive. Product and services offerings include (i) sleep therapy equipment, supplies and related services (including CPAP and bi PAP services) to individuals suffering from obstructive sleep apnea, (ii) medical devices and supplies to patients for the treatment of diabetes (including continuous glucose monitors and insulin pumps), (iii) home medical equipment (HME) to patients discharged from acute care and other facilities, (iv) oxygen and related chronic therapy services in the home, and (v) other HME medical devices and supplies on behalf of chronically ill patients with wound care, urological, incontinence, ostomy and nutritional supply needs. The Company is proud to partner with an extensive and highly diversified network of referral sources, including acute care hospitals, sleep labs, pulmonologists, skilled nursing facilities, and clinics. AdaptHealth services beneficiaries of Medicare, Medicaid and commercial insurance payors. AdaptHealth services approximately 1.8 million patients annually in all 50 states through its network of 269 locations in 41 states. Learn more at www.adapthealth.com.

Forward-Looking Statements

This press release includes certain statements that are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "should," "would," "plan," "predict," "potential," "seem," "seek," "future," "outlook," and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding projections, estimates and forecasts of revenue and other financial and performance metrics and projections of market opportunity and expectations and the Company's acquisition pipeline. These statements are based on various assumptions and on the current expectations of AdaptHealth management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on, by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of the Company.

These forward-looking statements are subject to a number of risks and uncertainties, including the outcome of judicial and administrative proceedings to which the Company may become a party or governmental investigations to which the Company may become subject that could interrupt or limit the Company's operations, result in adverse judgments, settlements or fines and create negative publicity; changes in the Company's clients' preferences, prospects and the competitive conditions prevailing in the healthcare sector; and the impact of the recent coronavirus (COVID-19) pandemic and the Company's response to it. A further description of such risks and uncertainties can be found in the Company's filings with the Securities and Exchange Commission. If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that the Company presently knows or that the Company currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect the Company's expectations, plans or forecasts of future events and views as of the date of this press release. The Company anticipates that subsequent events and developments will cause the Company's assessments to change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company's assessments as of any date subsequent to the date of this press release. Accordingly, undue reliance should not be placed upon the forward-looking statements.

Use of Non-GAAP Financial Information and Financial Guidance

This release contains non-GAAP financial guidance, which is adjusted to exclude certain costs, expenses, gains and losses and other specified items that are evaluated on an individual basis. These non-GAAP items are adjusted after considering their quantitative and qualitative aspects and typically have one or more of the following characteristics, such as being highly variable, difficult to project, unusual in nature, significant to the results of a particular period or not indicative of future operating results. Similar charges or gains were recognized in prior periods and will likely reoccur in future periods.

The Company uses EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex, which are financial measures that are not prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, to analyze its financial results and believes that they are useful to investors, as a supplement to U.S. GAAP measures. In addition, the Company's ability to incur additional indebtedness and make investments under its existing credit agreement is governed, in part, by its ability to satisfy tests based on a variation of Adjusted EBITDA less Patient Equipment Capex.

The Company believes Adjusted EBITDA less Patient Equipment Capex is useful to investors in evaluating the Company's financial performance. The Company's business requires significant investment in equipment purchases to maintain its patient equipment inventory. Some equipment title transfers to patients' ownership after a prescribed number of fixed monthly payments. Equipment that does not transfer wears out or oftentimes is not recovered after a patient's use of the equipment terminates. The Company uses this metric as the profitability measure in its incentive compensation plans that have a profitability component and to evaluate acquisition opportunities, where it is most often used for purposes of contingent consideration arrangements. In addition, the Company's debt agreements contain covenants that use a variation of Adjusted EBITDA less Patient Equipment Capex for purposes of determining debt covenant compliance. For purposes of this metric, patient equipment capital expenditure is measured as the value of the patient equipment received during the accounting period without regard to whether the equipment is purchased or financed through lease transactions.

EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex should not be considered as measures of financial performance under U.S. GAAP, and the items excluded from EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex are significant components in understanding and assessing financial performance. Accordingly, these key business metrics have limitations as an analytical tool. They should not be considered as an alternative to net income or any other performance measures derived in accordance with U.S. GAAP or as an alternative to cash flows from operating activities as a measure of the Company's liquidity.

There is no reliable or reasonably estimable comparable GAAP measure for the Company's non-GAAP financial guidance because the Company is not able to reliably predict the impact of certain items, including equity-based compensation expense, transaction costs and other non-recurring (income) expense, in the fourth quarter of 2020 and full year 2021. As a result, reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is not available without unreasonable effort. In addition, the Company believes such a reconciliation would imply a degree of precision and certainty that could be confusing to investors. The variability of the specified items may have a significant and unpredictable impact on the Company's future GAAP results.

In addition, the Company's non-GAAP financial guidance in this release excludes the impact of any potential additional future strategic acquisitions and any specified items that have not yet been identified and quantified. The guidance also excludes macro-economic effects due to the COVID-19 pandemic that are not yet quantifiable. The financial guidance is subject to risks and uncertainties applicable to all forward-looking statements as described elsewhere in this press release.

ADAPTHEALTH CORP. Condensed Consolidated Balance Sheets (Unaudited) (in thousands) September 30, December 31, 2020 2019AssetsCurrent assets:Cash and cash equivalents $ 272,318 $ 76,878

Accounts receivable, net 147,335 78,619

Inventory 46,477 13,239

Prepaid and other current assets 18,255 12,679

Total current assets 484,385 181,415

Equipment and other fixed assets, net 101,656 63,559

Goodwill 810,480 266,791

Identifiable intangible assets, net 94,725 -

Other assets 6,466 6,851

Deferred tax asset 51,114 27,505

Total assets $ 1,548,826 $ 546,121

Liabilities and Stockholders' Equity(Deficit)Current liabilities:Accounts payable and accrued expenses 192,337 102,728

Current portion of capital lease 19,699 19,750 obligationsCurrent portion of long-term debt 8,479 1,721

Contract liabilities 13,231 9,556

Other liabilities 81,059 17,139

Total current liabilities 314,805 150,894

Long-term debt, less current portion 722,730 395,112

Other long-term liabilities 71,576 29,364

Total liabilities 1,109,111 575,370

Total Stockholders' Equity (Deficit) 439,715 (29,249 )

Total Liabilities and Stockholders' Equity $ 1,548,826 $ 546,121 (Deficit) ADAPTHEALTH CORP.Consolidated Statements of Operations (Unaudited)Three Months EndedNine Months Ended(in thousands, except per share data)September 30,September 30,2020

2019

2020

2019

Net revenue$284,405

$136,451

$707,960

$380,103

Costs and expenses:Cost of net revenue240,720

114,797

604,777

317,174

General and administrative expenses26,306

12,090

57,745

31,508

Depreciation and amortization, excluding patient equipment depreciation4,120

840

6,398

2,439

Total costs and expenses271,146

127,727

668,920

351,121

Operating income13,259

8,724

39,040

28,982

Interest expense12,406

10,756

27,826

31,651

Loss on extinguishment of debt, net5,316

-

5,316

2,121

Income (loss) before income taxes(4,463

)

(2,032

)

5,898

(4,790

)

Income tax expense (benefit)(636

)

1,027

2,290

5,444

Net income (loss)(3,827

)

(3,059

)

3,608

(10,234

)

Income (loss) attributable to noncontrolling interests(1,338

)

627

2,222

1,336

Net income (loss) attributable to AdaptHealth Corp.$(2,489

)

$(3,686

)

$1,386

$(11,570

)

Weighted average common shares outstanding - basic57,372

21,721

47,986

19,130

Weighted average common shares outstanding - diluted57,372

21,721

50,848

19,130

Basic earnings (loss) per share (1)$(0.04

)

$(0.17

)

$0.03

$(0.60

)

Diluted earnings (loss) per share (1)$(0.04

)

$(0.17

)

$0.02

$(0.60

)

ADAPTHEALTH CORP. Consolidated Statements of Operations (Unaudited) Three Months Ended Nine Months Ended(in thousands, except per September 30, September 30,share data) 2020 2019 2020 2019

Net revenue $ 284,405 $ 136,451 $ 707,960 $ 380,103

Costs and expenses:Cost of net revenue 240,720 114,797 604,777 317,174

General and administrative 26,306 12,090 57,745 31,508 expensesDepreciation andamortization, excluding 4,120 840 6,398 2,439 patient equipmentdepreciationTotal costs and expenses 271,146 127,727 668,920 351,121

Operating income 13,259 8,724 39,040 28,982

Interest expense 12,406 10,756 27,826 31,651

Loss on extinguishment of 5,316 - 5,316 2,121 debt, netIncome (loss) before income (4,463 ) (2,032 ) 5,898 (4,790 )taxesIncome tax expense (636 ) 1,027 2,290 5,444 (benefit)Net income (loss) (3,827 ) (3,059 ) 3,608 (10,234 )

Income (loss) attributable (1,338 ) 627 2,222 1,336 to noncontrolling interestsNet income (loss) (2,489 ) (3,686 ) 1,386 (11,570 )attributable to AdaptHealth $ $ $ $Corp. Weighted average common 57,372 21,721 47,986 19,130 shares outstanding - basicWeighted average common 57,372 21,721 50,848 19,130 shares outstanding -diluted Basic earnings (loss) per $ (0.04 ) $ (0.17 ) $ 0.03 $ (0.60 )share ^(1)Diluted earnings (loss) per $ (0.04 ) $ (0.17 ) $ 0.02 $ (0.60 )share ^(1)(1) The Company's preferred stock are considered participating securities and are therefore excluded from the earnings per share calculation under the two-class method.^(1) The Company's preferred stock are considered participating securities andare therefore excluded from the earnings per share calculation under thetwo-class method.ADAPTHEALTH CORP.Condensed Consolidated Statements of Cash Flows (Unaudited)Nine Months Ended(in thousands)September 30,2020

2019

Net cash provided by operating activities$145,287

$43,174

Net cash used in investing activities(627,097

)

(62,399

)

Net cash provided by financing activities677,250

2,862

Net increase (decrease) in cash and cash equivalents195,440

(16,363

)

Cash and cash equivalents at beginning of period76,878

25,186

Cash and cash equivalents at end of period$272,318

$8,823

Non-GAAP Financial Measures

This press release presents AdaptHealth's EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex for the three and nine months ended September 30, 2020 and 2019.

AdaptHealth defines EBITDA as net income (loss) attributable to AdaptHealth Corp., plus net income (loss) attributable to noncontrolling interests, interest expense (income), income tax expense (benefit), and depreciation and amortization.

AdaptHealth defines Adjusted EBITDA as EBITDA (as defined above), plus loss on extinguishment of debt, equity?based compensation expense, transaction costs, severance, and similar items of expense (income).

AdaptHealth defines Adjusted EBITDA less Patient Equipment Capex as Adjusted EBITDA (as defined above) less patient equipment acquired during the period without regard to whether the equipment was purchased or financed through lease transactions.

The following unaudited table presents the reconciliation of net income (loss) attributable to AdaptHealth Corp., to EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex for the three and nine months ended September 30, 2020 and 2019:

ADAPTHEALTH CORP. Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended(in thousands) September 30, 2020 2019

Net cash provided by operating activities $ 145,287 $ 43,174

Net cash used in investing activities (627,097 ) (62,399 )

Net cash provided by financing activities 677,250 2,862

Net increase (decrease) in cash and cash equivalents 195,440 (16,363 )

Cash and cash equivalents at beginning of period 76,878 25,186

Cash and cash equivalents at end of period $ 272,318 $ 8,823

Non-GAAP Financial Measures

This press release presents AdaptHealth's EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex for the three and nine months ended September 30, 2020 and 2019.

AdaptHealth defines EBITDA as net income (loss) attributable to AdaptHealth Corp., plus net income (loss) attributable to noncontrolling interests, interest expense (income), income tax expense (benefit), and depreciation and amortization.

AdaptHealth defines Adjusted EBITDA as EBITDA (as defined above), plus loss on extinguishment of debt, equity?based compensation expense, transaction costs, severance, and similar items of expense (income).

AdaptHealth defines Adjusted EBITDA less Patient Equipment Capex as Adjusted EBITDA (as defined above) less patient equipment acquired during the period without regard to whether the equipment was purchased or financed through lease transactions.

The following unaudited table presents the reconciliation of net income (loss) attributable to AdaptHealth Corp., to EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended Nine Months Ended(in thousands) September 30, September 30, 2020 2019 2020 2019

Net income (loss) (2,489 ) (3,686 ) 1,386 (11,570 )attributable to AdaptHealth $ $ $ $Corp.Income (loss) attributable (1,338 ) 627 2,222 1,336 to noncontrolling interestsInterest expense excluding 12,406 7,834 27,826 19,292 change in fair value ofinterest rate swapsInterest expense - change - 2,922 - 12,359 in fair value of interestrate swapsIncome tax expense (636 ) 1,027 2,290 5,444 (benefit)Depreciation and 22,747 16,871 57,861 45,077 amortizationEBITDA 30,690 25,595 91,585 71,938

Loss on extinguishment of 5,316 - 5,316 2,121 debt, net (a)Equity-based compensation 5,502 400 10,969 5,806 expense (b)Transaction costs (c) 10,213 5,282 16,612 8,232

Severance (d) 921 33 3,245 721

Other non-recurring 518 346 (1,473 ) 534 (income) expense (e)Adjusted EBITDA 53,160 31,656 126,254 89,352

Less: Patient equipment (17,248 ) (12,941 ) (42,283 ) (35,589 )capex (f)Adjusted EBITDA less $ 35,912 $ 18,715 $ 83,971 $ 53,763 Patient Equipment Capex(a)

Represents write offs of deferred financing costs related to refinancing of debt.

(b)

Represents amortization of equity-based compensation to employees and non-employee directors. The higher expense in the 2020 periods is due to a full quarter and year-to-date expense for awards granted in late 2019, and overall increased equity-compensation grant activity in 2020. The 2019 year-to-date period includes expense resulting from accelerated vesting and modification of certain awards in that period.

(c)

Represents transaction costs related to acquisitions and the 2019 Recapitalization.

(d)

Represents severance costs related to acquisition integration and internal AdaptHealth restructuring and workforce reduction activities.

(e)

The nine months ended September 30, 2020 includes $2.9 million of reductions in the fair value of contingent consideration liabilities related to acquisitions, a $0.6 million gain in connection with the sale of a cost method investment, offset by a $1.5 million expense associated with the PCS Transition Services Agreement and $0.5 million of other non-recurring expenses.

(f)

Represents the value of the patient equipment obtained during the respective period without regard to whether the equipment is purchased or financed through lease transactions.

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CONTACT: AdaptHealth Corp. Jason Clemens, CFA Chief Financial Officer (484) 301-6599 jclemens@adapthealth.com

CONTACT: Brittany Lett Vice President, Marketing (909) 915-4983 blett@adapthealth.com

CONTACT: The Equity Group Inc. Devin Sullivan Senior Vice President (212) 836-9608 dsullivan@equityny.com

CONTACT: Kalle Ahl, CFA Vice President (212) 836-9614 kahl@equityny.com