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AdaptHealth Reports Fourth Quarter and Full-Year 2021 Results and Updates 2022 Guidance

·19 min read

PLYMOUTH MEETING, Pa., February 24, 2022--(BUSINESS WIRE)--AdaptHealth Corp. (NASDAQ: AHCO) ("AdaptHealth" or the "Company"), a national leader in providing patient-centered, healthcare-at-home solutions including home medical equipment, medical supplies, and related services, announced today financial results for the fourth quarter and fiscal year ended December 31, 2021.

Highlights of 2021

  • AdaptHealth more than doubled its revenue in 2021, with revenues increasing to $2.45 billion from $1.06 billion in 2020, despite challenges resulting from shortages of CPAP equipment in the second half of the year.

  • The Company now provides needed medical equipment and supplies to roughly 3.8 million patients annually with operations in 47 states.

  • The Company has substantially completed its integration of AeroCare and additionally acquired more than $500 million in annualized revenue during 2021.

  • Cash flow from operations was $275.7 million in 2021, up from $195.6 million in 2020.

Fourth Quarter Results

  • Net revenue was a record $702.1 million compared to $348.4 million in the fourth quarter of 2020, an increase of 102%.

  • Net income attributable to AdaptHealth Corp. was $22.9 million, or $0.15 per diluted share, compared to a net loss of $80.5 million, or $1.22 per diluted share, in the fourth quarter of 2020.

  • Organic growth for the fourth quarter was 2.7% and non-acquired growth was 2.4% despite continued pressure on supply of CPAP devices largely due to the Philips Respironics recall.

  • Adjusted EBITDA was $158.1 million, compared to $79.4 million in the fourth quarter of 2020, an increase of 99%.

  • Adjusted EBITDA less Patient Equipment Capex was $100.0 million, compared to $58.5 million in the fourth quarter of 2020, an increase of 71%.

  • During the quarter, the Company completed four previously disclosed acquisitions in Florida, Texas, Washington, and Wisconsin, as well as acquisitions of three additional HME providers located in Iowa, New Jersey, and Wisconsin.

  • Cash flow from operations improved to $100.9 million in the fourth quarter of 2021 from $27.1 million in the third quarter of 2021.

Guidance Updated for Fiscal Year 2022

Based on current business, market trends, governmental reimbursement updates, acquisitions to date, and an expected continuation of shortages of PAP devices, the Company is updating its previously issued financial guidance for fiscal year 2022 as follows:

  • Net revenue of $2.825 billion to $3.025 billion, vs. prior guidance of $2.700 billion to $2.900 billion;

  • Adjusted EBITDA of $610 million to $670 million, vs. prior guidance of $635 million to $695 million; and

  • Total capital expenditures representing 9-11% of net revenue, unchanged vs. prior guidance.

Guidance for fiscal year 2022 does not include any contribution from acquisitions that have not yet closed, or continuing Public Health Emergency benefits beyond the currently scheduled expiration date.

Management Commentary

Steve Griggs, Chief Executive Officer, commented, "2021 was a remarkable year for AdaptHealth. Despite the worldwide pandemic, the shortage of CPAP equipment, and higher costs from supply chain challenges, AdaptHealth has continued to grow and prosper. Although Adjusted EBITDA fell short of our full-year guidance due to product mix shift from rental to sales, we were very pleased with our free cash flow generation as we exited the year.

Our operating and financial performance continues to reflect the increasingly strong positioning of AdaptHealth in a challenging environment. We are especially proud of the efforts of our over 11,000 employees to fulfill our mission to provide important medical equipment and supplies to the approximately 3.8 million patients who rely on us to live healthier lives."

Josh Parnes, President, commented, "In today’s environment, it is even more important to focus on efficiency. We continue to invest in technology to drive operational improvements and better patient outcomes along with reductions in the cost of care, advancing our value proposition."

Conference Call

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

  • (877) 407-1877 (Domestic) or

  • (201) 689-8451 (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 national leader in providing patient-centered, healthcare-at-home solutions including home medical equipment (HME), medical supplies, and related services. The Company provides a full suite of medical products and solutions designed to help patients manage chronic conditions in the home, adapt to challenges in their activities of daily living, and thrive. Product and service 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) HME to patients discharged from acute care and other facilities, (iv) oxygen and related chronic therapy services in the home, and (v) other HME 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, reaching approximately 3.8 million patients annually in all 50 states through its network of over 750 locations in 47 states.

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 customers’ preferences, prospects and the competitive conditions prevailing in the healthcare sector; and the impact of the 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 often times 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, changes in fair value of the warrant liability, and other non-recurring items of expense or income in full year 2022. 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)

December 31, 2021

December 31, 2020

Assets

Current assets:

Cash and cash equivalents

$

149,627

$

99,962

Accounts receivable

359,896

171,065

Inventory

123,095

58,783

Prepaid and other current assets

37,440

33,441

Total current assets

670,058

363,251

Equipment and other fixed assets, net

398,577

110,468

Operating lease right-of-use assets

147,760

Goodwill

3,512,567

998,810

Identifiable intangible assets, net

202,231

116,061

Other assets

15,098

16,483

Deferred tax assets

304,193

208,399

Total Assets

$

5,250,484

$

1,813,472

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable and accrued expenses

$

358,384

$

254,212

Current portion of finance lease obligations

15,446

22,282

Current portion of operating lease obligations

31,418

Current portion of long-term debt

20,000

8,146

Contract liabilities

31,370

11,043

Other liabilities

43,194

89,524

Current portion of contingent consideration common shares liability

36,846

Total current liabilities

499,812

422,053

Long-term debt, less current portion

2,183,552

776,568

Operating lease obligations, less current portion

120,180

Other long-term liabilities

322,487

186,470

Contingent consideration common shares liability, less current portion

33,631

Warrant liability

57,764

113,905

Total Liabilities

3,183,795

1,532,627

Total Stockholders' Equity

2,066,689

280,845

Total Liabilities and Stockholders' Equity

$

5,250,484

$

1,813,472

ADAPTHEALTH CORP.
Consolidated Statements of Operations (Unaudited)

Three Months Ended

Twelve Months Ended

(in thousands, except per share data)

December 31,

December 31,

2021

2020

2021

2020

Net revenue

$

702,106

$

348,429

$

2,454,535

$

1,056,389

Grant income

10,595

14,277

10,595

14,277

Costs and expenses:

Cost of net revenue

591,620

291,833

2,008,925

898,601

General and administrative expenses

34,921

31,601

167,505

89,346

Depreciation and amortization, excluding patient equipment depreciation

17,081

4,975

63,095

11,373

Total costs and expenses

643,622

328,409

2,239,525

999,320

Operating income

69,079

34,297

225,605

71,346

Interest expense, net

25,611

13,604

95,195

41,430

Loss on extinguishment of debt

20,189

5,316

Change in fair value of contingent consideration common shares liability

4,661

56,867

(29,389)

98,717

Change in fair value of warrant liability

4,178

63,010

(53,181)

135,368

Other (income) loss, net

1,134

(1,453)

1,832

(3,444)

Income (loss) before income taxes

33,495

(97,731)

190,959

(206,041)

Income tax expense (benefit)

10,024

(7,219)

32,806

(11,955)

Net income (loss)

23,471

(90,512)

158,153

(194,086)

Income (loss) attributable to noncontrolling interests

529

(9,996)

1,978

(32,454)

Net income (loss) attributable to AdaptHealth Corp.

$

22,942

$

(80,516)

$

156,175

$

(161,632)

Weighted average common shares outstanding - basic

132,470

65,897

126,306

52,488

Weighted average common shares outstanding - diluted

136,376

65,897

133,034

52,488

Basic net income (loss) per share

$

0.16

$

(1.22)

$

1.12

$

(3.08)

Diluted net income (loss) per share

$

0.15

$

(1.22)

$

0.67

$

(3.08)

ADAPTHEALTH CORP.
Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

Twelve Months Ended December 31,

2021

2020

Cash flows from operating activities:

Net income (loss)

$

158,153

$

(194,086)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization, including patient equipment depreciation

258,053

82,445

Equity-based compensation

25,323

18,670

Change in fair value of contingent consideration common shares liability

(29,389)

98,717

Change in fair value of warrant liability

(53,181)

135,368

Reduction in the carrying amount of operating lease right-of-use assets

28,624

Deferred income tax expense (benefit)

22,380

(21,101)

Change in fair value of interest rate swaps, net of reclassification adjustment

(2,927)

(2,845)

Amortization of deferred financing costs

5,378

1,876

Write-off of deferred financing costs

4,054

5,316

Loss on extinguishment of debt from prepayment penalty

16,135

Other

(3,615)

(5,636)

Changes in operating assets and liabilities, net of effects from acquisitions:

Accounts receivable

(29,694)

(29,517)

Inventory

(14,920)

(19,434)

Prepaid and other assets

2,731

(10,767)

Operating lease obligations

(28,043)

Operating liabilities

(83,383)

136,628

Net cash provided by operating activities

275,679

195,634

Cash flows from investing activities:

Payments for business acquisitions, net of cash acquired

(1,620,320)

(769,337)

Purchases of equipment and other fixed assets

(203,308)

(39,755)

Payments for investments

(1,125)

(8,657)

Proceeds from sale of investment

2,046

Net cash used in investing activities

(1,824,753)

(815,703)

Cash flows from financing activities:

Proceeds from borrowings on long-term debt and lines of credit

1,165,000

591,275

Repayments on long-term debt and lines of credit

(827,271)

(547,480)

Proceeds from the issuance of senior unsecured notes

1,100,000

350,000

Proceeds from the issuance of Class A Common Stock

278,850

142,600

Proceeds from the sale of Class A Common Stock and Series A Preferred Stock

225,000

Payments for equity issuance costs

(13,832)

(11,725)

Payments of deferred financing costs

(29,185)

(13,049)

Repayments of finance lease obligations

(42,164)

(39,051)

Proceeds from the exercise of stock options

12,320

Proceeds received in connection with employee stock purchase plan

1,016

101

Distributions to noncontrolling interests

(1,070)

(800)

Payments for tax withholdings from equity-based compensation and stock option exercises

(3,557)

(59)

Payments of contingent consideration and deferred purchase price from acquisitions

(25,233)

(3,954)

Payments for debt prepayment penalties

(16,135)

Proceeds from the exercise of warrants

24,495

Exchange of Class B Common Stock for cash

(44,273)

Payment for the exercise of call option relating to the Put/Call Agreement

(29,927)

Net cash provided by financing activities

1,598,739

643,153

Net increase in cash and cash equivalents

49,665

23,084

Cash and cash equivalents at beginning of period

99,962

76,878

Cash and cash equivalents at end of period

$

149,627

$

99,962

Non-GAAP Financial Measures

This press release presents AdaptHealth’s EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex for the three and twelve months ended December 31, 2021 and 2020.

AdaptHealth defines EBITDA as net income (loss) attributable to AdaptHealth Corp., plus net income (loss) attributable to noncontrolling interests, interest expense, net, 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, change in fair value of the contingent consideration common shares liability, change in fair value of the warrant liability, and other non-recurring 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 twelve months ended December 31, 2021 and 2020:

Three Months Ended

Twelve Months Ended

(in thousands)

December 31,

December 31,

2021

2020

2021

2020

Net income (loss) attributable to AdaptHealth Corp.

$

22,942

$

(80,516)

$

156,175

$

(161,632)

Income (loss) attributable to noncontrolling interests

529

(9,996)

1,978

(32,454)

Interest expense, net

25,611

13,604

95,195

41,430

Income tax expense (benefit)

10,024

(7,219)

32,806

(11,955)

Depreciation and amortization, including patient equipment depreciation

77,226

24,584

258,053

82,445

EBITDA

136,332

(59,543)

544,207

(82,166)

Loss on extinguishment of debt (a)

20,189

5,316

Equity-based compensation expense (b)

3,929

7,701

25,323

18,670

Transaction costs (c)

4,511

9,961

49,081

26,573

Severance (d)

2,415

2,351

4,417

5,596

Change in fair value of contingent consideration common shares liability (e)

4,661

56,867

(29,389)

98,717

Change in fair value of warrant liability (f)

4,178

63,010

(53,181)

135,368

Other non-recurring expense (income) (g)

2,052

(982)

5,271

(2,455)

Adjusted EBITDA

158,078

79,365

565,918

205,619

Less: Patient equipment capex (h)

(58,056)

(20,853)

(198,992)

(63,136)

Adjusted EBITDA less Patient Equipment Capex

$

100,022

$

58,512

$

366,926

$

142,483

(a)

Represents write offs of unamortized deferred financing costs related to refinancing of debt and pre-payment penalties for early debt payoff.

(b)

Represents equity-based compensation expense for awards granted to employees and non-employee directors. The higher expense in the 2021 year-to-date period is due to overall increased equity compensation grant activity in that period, as well as expense resulting from accelerated vesting of certain awards, including accelerated vesting of certain awards in connection with the separation of the Company’s former Co-CEO.

(c)

Represents transaction costs related to acquisitions.

(d)

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

(e)

Represents a non-cash charge or gain for the change in the estimated fair value of the contingent consideration common shares liability.

(f)

Represents a non-cash charge or gain for the change in the estimated fair value of the warrant liability.

(g)

The 2021 year-to-date period includes $2.1 million of expenses related to legal and other costs associated with the separation of the Company’s former Co-CEO, $3.9 million of expenses associated with legal settlements, $1.9 million of expenses associated with lease terminations, and $0.2 million of net other non-recurring expenses, offset by a $1.9 million gain in connection with the consolidation of an equity method investment, and $0.9 million of net reductions in the fair value of contingent consideration liabilities related to acquisitions. The 2020 year-to-date period includes $4.2 million of net reductions in the fair value of contingent consideration liabilities related to acquisitions, offset by a $1.5 million expense related to a transition services agreement executed in connection with an acquisition completed in 2020, and $0.2 million of net other non-recurring expenses.

(h)

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20220223006444/en/

Contacts

AdaptHealth Corp.
Jason Clemens, CFA
Chief Financial Officer

Anton Hie
Vice President, Investor Relations
(615) 887-4012
IR@adapthealth.com