Adapthealth at Leerink’s Global Healthcare Conference: Strategic Insights

On Tuesday, 11 March 2025, Adapthealth Corp (NASDAQ: AHCO) presented at Leerink’s Global Healthcare Conference 2025, offering a strategic overview of its business segments. The company highlighted its robust performance in the sleep and respiratory sectors, while acknowledging challenges in the diabetes segment. Adapthealth also emphasized its commitment to operational efficiency and technological innovation.

Key Takeaways

• Adapthealth aims for a leverage ratio of 2.5 times and free cash flow of $175 million to $225 million in 2025.
• The sleep business showed strong growth and high retention rates, unaffected by GLP-1s.
• The Humana contract has been extended, contributing positively to EBITDA margins.
• The diabetes segment is under a turnaround with new leadership and operational changes.
• AI investments are being made to improve data processing efficiency.

Financial Results

• Leverage and Cash Flow:

- Targeting a leverage ratio of 2.5 times, down from 2.8 times in Q4.

- Free cash flow projected between $175 million and $225 million for 2025.

- $30 million to $35 million allocated for mergers and acquisitions (M&A).

Operational Updates

• Sleep Business:

- New start activity remains healthy; market growth expected in mid to upper single digits.

- Retention rate at 75% in the first 90 days, with potential for improvement.

- Positive industry developments with Apple’s sleep apnea detection app increasing awareness.

• Respiratory Business:

- Stable growth anticipated at 2-4% annually, with a boost from the Humana contract.

- Expected sequential growth of $1 million to $2 million per quarter.

• Diabetes Business:

- Market growth estimated at 15-20%.

- Leadership overhaul in mid-September and operational adjustments in resupply processes.

- Q4 saw improved retention and new starts compared to Q3.

Future Outlook

• OneAdapt Initiative:

- Focus on standardization and continuous improvement.

- Consolidation of entities and back-office operations underway.

• Sales and Commercial Operations:

- New Chief Commercial Officer, Russ Schuster, appointed in December.

- Reintroduction of sales quotas to drive organic growth.

• AI and Technology:

- Exploring AI to process over 5 million pages of faxes monthly, aiming to convert unstructured data into structured formats.

Q&A Highlights

• Humana Contract:

- Covers over 1.2 million lives across 33 states and the District of Columbia.

- Multiyear extension achieved, performing at or above enterprise EBITDA margins.

• M&A Approach:

- Focus on deals with a 15% return on invested capital (ROIC).

- Bottoms-up approach in identifying potential acquisitions.

In conclusion, for more detailed insights, please refer to the full transcript of the conference call.

Full transcript - Leerink’s Global Healthcare Conference 2025:

Unidentified speaker, Analyst: the CFO. So we’ll get right into, some questions here. Does anybody has any of their own questions? Raise your hand. We can keep this very informal.

But, maybe just to start for a minute on the core business. You sort of have three categories now that you’ve communicated that you plan to invest and you’ve got predominantly your sleep business, respiratory, and then let’s just call it diabetes. You’ve announced some divestiture activity of some non core assets. But how would you characterize sort of like the end markets around sleep today? I mean, we’ve had some challenges with supplies and getting product over the last few years.

Has that all normalized and calm down? And then on the demand side of it, how how do you think about like just the growth in the end markets?

Jason Clemens, CFO, Adapt Health: Yes, sure, Whit. So, first I guess I’d start with on the new start or the new setup side of things. I think despite a lot of questions, we still get on GOP ones. We’re just not seeing an impact, really good or bad, we’d say. I mean, I think we’re listening to the same KOLs that you are.

And we think that sleep demand is as healthy as it’s ever been. But our starts are very steady. We continue to report the percent of those patients that are on a GLP-one. It’s actually proven to be a tailwind so far for our business. And so new start activity is healthy and growing.

On the resupply side of things, we continue to outperform there. Adherence is continues to break records frankly every quarter as does retention. Our census now stands at 1,660,000 patients. So I’d say big picture, we do think that this is a mid single digit market, potentially an upper single digit marketplace. You know, I think when you run the math on our full year guide, we’re not necessarily guiding for that for 2025.

Frankly, there’s nothing in that other than it’s early in the year, and and and we wanted to put out something that we felt we felt we felt good about.

Unidentified speaker, Analyst: Any of the, you’ve had a ton of operational internal initiatives around technology and things around that adherence and resupply, but maybe anything new or in the last year that’s contributing to that improved performance?

Jason Clemens, CFO, Adapt Health: Well, a couple of things. In mid twenty, I guess it was early twenty twenty four, we rolled out a, what we call a best in class sleep setup. And so it got very specific on the type of products, as well as the process for setting patients up market by market. And so that’s yielded additional supply when we put out that first CPAP. So the mask, the tubes, the cushions, humidifiers, things like that that come with it.

And so there’s been an uptick there and that has driven our adherence a bit, which is a big deal. I mean every patient that you start across the industry, you typically lose three out of ten. For us, we do better than that. I mean, we we’re at more of a seventy five percent retention through that first ninety days. We do think there’s opportunity there to push that up a point or two.

So those are the kind of things we’re working on.

Unidentified speaker, Analyst: Okay. Apple announced last year that new sleep apnea app or whatever it is. What’s the what’s the update on that? And I mean, the obvious, like, reaction to that is, like, wow, that’s gotta drive additional awareness, and that could drive additional growth for the industry. But like what’s where do we stand on like that as an industry development?

Jason Clemens, CFO, Adapt Health: Well, on that news, I mean, we got the new version and we tried it out. We in the company refer to that a little bit more as sleep apnea detection. We think that anything wearable or otherwise that indicates to someone that they might have a problem with sleep or particularly OSA, it can only be a good thing. I can’t say that I can draw any specific numbers or benefit to you, other than more awareness is is is a good thing for the industry.

Unidentified speaker, Analyst: Alright. Respiratory, same thing. Product, like what’s any challenges with availability of product in the marketplace? No. None.

Jason Clemens, CFO, Adapt Health: Yeah. Extraordinarily stable. You know, respiratory over time given the years is typically a 2% to 4% grower. For us, we’re in our guidance, we said, look expect about a point. I mean, we had a big year in respiratory for 2024 on account of a full year of the Humana contract.

There was a lot of respiratory in that. And you know again I mean we feel confident in hitting that 1% particularly with an elevated flu season that we’re going through right now here in Q1. But full availability of product, you know we expect that that respiratory to add a million up to 2,000,000 a quarter every quarter sequentially over the balance of the year. Frankly, it should look like that, for the coming couple of years based on what we’re seeing today. So very steady.

Unidentified speaker, Analyst: Yeah. And long term as you think about the revenue We

Jason Clemens, CFO, Adapt Health: think it’s a two to 4%. Two to four %. Okay. Again, depending on the year, depending on the flu season spikes and and and and troughs, like, things things like that will carry you closer to two than to four, but, you know, straight down the fairway, 33%.

Unidentified speaker, Analyst: Okay. Okay. And then sleep, you said, mid single digit?

Jason Clemens, CFO, Adapt Health: Correct.

Unidentified speaker, Analyst: Okay. Alright. Diabetes, been a journey?

Jason Clemens, CFO, Adapt Health: Sure has.

Unidentified speaker, Analyst: Yeah. And, certainly, a list of cross currents that have impacted that, that business for sure. Maybe just, it’d be helpful to get an update. You’ve you’ve changed out a lot of the team where you’ve made that very public. Yes.

That’s nothing that I can’t share. You’ve identified a lot of, issues and put into place correction plans to fix it. We’ve had the pharmacy DME, you know, sort of channel fight, which very well documented. But where where are we in terms of, rightsizing that, fixing the issues, identifying all the problems that we identified all the I’ll shut up and just let you Okay.

Jason Clemens, CFO, Adapt Health: Fair enough. You know in terms of diagnosis, I mean I don’t know if this is overly complicated. So I mean I do think we’re through the diagnosis period. I mean that period started with Suzanne Foster, our new CEO that joined, in May of last year, coming most recently from Danaher. You know, the one of the first discussions that I had with Suzanne, I mean, she she said, okay, all this diabetes and the channel mix and all these things that we’ve talked about.

If we step back for a minute Jason what do you think this market’s growing at. Forget all the pharmacy and medical benefit. And I said well you know I think it’s a 15% to 20% growth market right now. If you just look at Dexcom and Abbott you average those I mean that gets you a ballpark. She says okay well then what about our competitors particularly in the medical benefit channel or like DMEs, like what do you think they’re growing at?

So well if you look at our public competitor, I mean they have reported for some time now what we believe to be upper single digit potentially low double digit growth. That’s continued. We know the privates just kind of ear to the ground. We know that they have grown lower double digit revenue for the last three years. And she just simply said, well, it seems that the market’s growing, our competitors are growing and we’re not growing.

And again, just fresh eyes like it’s so simple like, okay, well, there’s probably more internal problems here than we really realize. So, yeah, by mid September, we made a lot of changes. Essentially all of the leadership in that business unit within the company are no longer with the company. The first thing that burst significant move was all of the resupply in that business and for context that represents in any given quarter 85% to 90% of the revenue in that quarter was produced by patients set up in previous quarters. And so we picked up that business and we moved it to our team, in Nashville that runs our sleep center of excellence for resupply.

Again, the the team that manages that one point six six million patient population. So we asked them to take on diabetes. Some of the first things they found, I mean, even just in the first week or two, our calls, were just very disappointing. I mean, we heard things like, you know, certain patients in certain markets, we had auto dialers turned on that were calling them ten, twelve times a day, hoping for someone to pick up and talk about a new CGM order. And, you know, what do you think is gonna happen if I mean, what happens to each of you when someone calls you three times a day or twice a day, let alone 10 to 12, but they get blocked and, you know, and and you lose you lose contact with that patient.

So just some simple things like turning off those auto dialers, you know, having the I mean, we have a big team. We’ve got a thousand people that work some offshore but mostly onshore there in Nashville. Taking on those same workflows it’s very similar to this to the sleep workflow that has changed some things. Even dropping postcards which it sounds also silly but you’d be amazed when we drop postcards how many inbound calls that generates. It’s actually pretty incredible.

And so that happened as well. So some of these CGM patients that you know were gone and dropped off of our census and no longer ordering they came back on. And so what all that created was a Q4 with the greatest retention in diabetes resupply that we’ve had in two years now. So that’s we feel like look it’s only one quarter we’ve got a ways to go but that team is moving the ball. That then helps on the new sales because the problem is when you’re when you’re frustrating patients with that kind of call volume or you’re not setting them up soon enough, they’re never gonna complain to you, but they will complain to their physician next time they go in.

Well that obviously hurts your sales funnel as you’re working for referrals from those physicians that are now now also frustrated with you. So that repair we’ve said is going to take a little time. Gary Sheehan who’s well known name in the in the DME industry. I mean, look, Gary, his sales team, I mean, they’re they’re literally out, you know, apologizing and asking asking for a second chance. And, that’s starting, you know.

So we we set up sequentially more new starts in q four than we did in q three. It’s been it’s been some time since that’s happened. And so, you know, again, there’s no one’s claiming victory here, but it was a it was a very solid stable quarter. We have guided diabetes down for twenty five. Certainly, that’s not our goal, but we think we’ve taken an appropriate approach with the business for ’25, as we continue to, you know, press the levers to to to stabilize and get back to growth mode.

Long

Unidentified speaker, Analyst: term thesis. How do you feel about the long term thesis around diabetes?

Jason Clemens, CFO, Adapt Health: Yeah. You know, someone asked me this earlier today and and I said, well, if you if you if you think like very long term, like five five years, seven years out, you know, if you unpack the the TAM that we’ve got today at a minimum, it’s about seven million patients today. And who knows if in the future patients that are not using insulin, but they are type two diabetics, like if that market opens up there could be accelerated growth coming again, but we’ll see. But if you just take the seven million patients today, the type one’s, type one diabetics a little under two million patients in The U. S.

Those penetration rates are pretty deep. I mean upwards of seventy percent, sixty percent to seventy percent of those patients are on a CGM. And so you’ll get a little growth in the TAM on the top line just patient population and the diagnosis of the disease. But penetration rates are really slowing down. Type two’s there’s a little more penetration runway to go and then certainly with the basals there’s one way.

But if you fast forward to five years, you’ll get a little bit of growth in that top line and under diagnosed nature of the disease state. Could it be three percent, five percent, somewhere in that area? Again, in the future, once CGMs are really fully penetrated, we think that makes sense. Now again between here and there, we think the growth rates are more of an upper single digit. Again, our competitors are still putting out lower double digits.

So we think over time it will continue to glide down, but there’s a lot of growth there. I mean, there’s there’s a lot of growth for us to chase right now.

Unidentified speaker, Analyst: Maybe back on some of the internal initiatives, I think you guys have framed, like, you know, four or five, maybe five, like, key areas of focus right now. There’s the one adapt. Just maybe an update on what those primary internal initiatives are, where are you, where do you hope to be by the end of the year?

Jason Clemens, CFO, Adapt Health: Sure. So, on OneAdapt, I mean, it’s really about standard work, you know, creating an environment of continuous improvement. Even the way we go to market and we represent ourselves as one company as opposed to a collection of 100 acquisitions over the years with those local names operating. That work has a long, I mean it has a long way to go. There’s just, I mean it takes time to consolidate entities and there’s tax implications.

I mean there’s this blocking and tackling back office work that will go on for some time. But in terms of the continuous improvement Kaizen initiatives you’ve heard Suzanne talk about this on our calls. She’ll continue to talk about this. We have made a new hire that starts in two weeks that is a direct report to Suzanne that will run all of these programs programmatically as opposed to just kind of one off projects. This person worked very closely with her also at Danaher over the years and so if you think of that old, I shouldn’t say old, if you think of the DBS model or Danaher business system, I mean over here at Adapt, we’re not copying pasting here, but I mean we are taking some of these principles and we’re making it our own.

So projects do continue to get identified. We haven’t yet committed to margin improvement, but there will be margin improvement coming from these programs. So that’s exciting. Organic growth is one of these five key initiatives or pillars. We hired a new Chief Commercial Officer, started in December named Russ Schuster.

I mean we’ve invested big in commercial. I mean he’s got five direct reports four of them are brand new to the company and they’ve come from big med tech primarily. These are trusted people in Suzanne’s network and Russ’s network that have that have worked overtime with them. We have reinstated quotas at Adapt Health for the first time in a couple of years, which probably sounds surprising. I mean different management teams have different views and one of the previous ones was a long time DME leader that didn’t think quotas made sense in DME.

Well, I mean medtech as you all know runs very differently and, I’ve been thrilled with this initiative. I mean that the new quotas, the new territories got recut and all that got put in place January first of this year. So I’m hopeful that we’ll start seeing benefit from that here in the very near term. Balance sheet, I mean just in general, delevering. I mean we’ve set a target of 2.5 times.

We reported that we’re just under 2.8, 2.8 times as of the fourth quarter. And we’re on path for that. I mean as we generate more free cash flow and, you know, we will do a couple deals here and there, a little bit of M and A, like we did a small deal in November that we reported and so expect more of the same in 2025. So we’ll continue driving leverage to 2.5 or below. The other areas of investment are really in, we’re experimenting in AI, particularly in our intake function.

You know, this this stat, every time I say it, it’s still astounding. I mean, we we receive and ingest over 5,000,000 pages a month of faxes. Not much as a z fax, but still. I mean, these are oftentimes handwritten notes, sometimes not, but this this data all comes in. It’s unstructured in nature, and we have a lot of humans onshore, mostly offshore, but there’s a lot of humans with a dual screen reading the eFax that came in and creating a sales order on the other screen, copying pasting, kind of creating that order and then QA ing it downstream.

So there’s tremendous opportunity here by turning that unstructured data with with with AI into structured data and lifting this out. Certainly you will continue to QA that and making sure that the machines are doing their jobs. But I mean there’s a lot of opportunity there. Again we haven’t committed to margin improvement on these initiatives either for 2025. However we’re working very hard on these investments.

And we think that’s going to bear fruit certainly as we look towards ’26.

Unidentified speaker, Analyst: Back on the implementation, the quotas, oftentimes in your restructuring sales initiatives and incentives, there can be some turnover changes. Any unusual turnover versus your expectations or anything that we should be aware of?

Jason Clemens, CFO, Adapt Health: No, it’s a good question. I think like many, I’ve been around a couple of these over the years and most go as planned, some don’t. So I’m acutely aware of the risk to that. No, turnover has been very stable. We had our national sales meeting.

Actually the week of earnings, right after earnings, folks then turned around and flew to Vegas for a sales meeting. It’s been very welcomed and the amount of questions that comes into like our sales analytics team is definitely up. People are very focused. Our salespeople are very focused particularly on the conversion side of orders because it’s not unusual to get an order that never converts. Well if it doesn’t convert you don’t get paid.

And so these sales folks are incentivized to be part of the solution of higher conversion rates. And so we view that as a very good thing. People are definitely paying attention and watching the purse strings. I mean that’s the behavior that we wanted to incentivize. And then just overall, I mean, there’s there’s been just, I think, huge respect for the the people that have come in.

I mean, we we’ve hired, I mean, we’ve hired several very, very talented sales leaders that have run huge commercial operations. So we’re we’re hopeful.

Unidentified speaker, Analyst: I saw the pictures on LinkedIn. It looked like a good Vegas party. Oracle investment, that was a conversion that you did two years ago, three years ago?

Jason Clemens, CFO, Adapt Health: Boy, yeah. It feels like a it feels like a lifetime ago, but it it went live in, everything early twenty two.

Unidentified speaker, Analyst: Okay.

Jason Clemens, CFO, Adapt Health: Yes.

Unidentified speaker, Analyst: No Oracle two point o? No other, like, other

Jason Clemens, CFO, Adapt Health: Well, there’s I wouldn’t call it two point o, maybe one dot one is turning on our perpetual inventory system. So we’ve continued to make progress there. I mean you can think of that program as just kind of the right plumbing and electrical that you want in the house. There is investment going into it. However, what we are seeing through inventory and CapEx reduction has been well worth that effort.

We do think that that will continue over the next couple of years as we continue to roll that out at more and more locations.

Unidentified speaker, Analyst: We’ll spend a second and transition to the Humana contract and maybe just frame for those that are less familiar with what you’re doing, the number of lives, where you are, revenue size, contribution margin, anything that you care to share.

Jason Clemens, CFO, Adapt Health: Most of that, not all of it. And so I I don’t know if we’ll get into contribution margin, but I’ve got some perspective. So for those that haven’t followed the company, so we were awarded the biggest contract in the history of the industry with Humana. We are coming up on the end of our second year of the contract. It’ll roll up here at the June.

So that’s been underway now for two years. It’s all of the Humana Medicare Advantage HMO business for DME in 33 different states plus the District Of Columbia. And so if you’re a member, across those states, at the time we announced the contract, we we we showed it as over 1,200,000 lives, covered lives or members, that we get paid a per member per month fee that we priced and Humana agreed to. And then we will utilize we will take risk on the utilization and put all of the DME products on those patients that are needed, whether it’s respiratory or DME or sleep. You know, so we announced in our recent earnings call, a multiyear extension on that contract.

You know, we essentially just rolled forward the date. I mean, like, we’ve been thrilled with the performance of the contract, the pricing of the contract, even our SLAs we’ve continued to bring forth more commitments holding ourselves to a higher standard with Humana which we know that they’ve appreciated. And with that comes our infrastructure and our ability to rinse and repeat and do this again. And so we’ve said about margins that that contract operates at or better enterprise EBITDA margins. We did make key investment in 2024.

I mean we have individuals now in the company that their full time job all they do every day is either price capitated arrangements or pitch capitated arrangements to payers or operate the capitated arrangements. And so like we’ve got full teams that are very focused on this. We’re running a very healthy pipeline. We did make two conversions in the fourth quarter for new capitated agreements. And so we’re working very hard on that.

And, with a little luck, we’ll see more in the future.

Unidentified speaker, Analyst: Any additional details around those two plans?

Jason Clemens, CFO, Adapt Health: Not other than

Unidentified speaker, Analyst: Regional Blues, like anything that

Jason Clemens, CFO, Adapt Health: Regional West Coast.

Unidentified speaker, Analyst: Yeah.

Jason Clemens, CFO, Adapt Health: Yeah. Yeah. Small smaller players, but but good contracts, you know, multiyear contracts. You’ll see that reported in our capitated revenue. And so we expect capitated to continue to inch up over time as membership grows.

And then certainly if we’re able to convert more capitated agreements in the future.

Unidentified speaker, Analyst: This isn’t like a new concept for the plans, right? I mean, we’ve seen the delegation of post acute in general down to all these conveners. So it it does not doesn’t seem like it would be that challenging of, you know, for the plans to understand.

Jason Clemens, CFO, Adapt Health: Well, it’s interesting. It’s nuanced. I mean, I mean, capitated arrangements have been part of the DME industry for arguably fifteen years now. I mean there were big capitated arrangements built up over time. Depending on the payer, I mean they’re I guess more advanced in being able to adjudicate those type of arrangements.

And so West Coast as normal in managed care is a little ahead of the curve depending on the blue and depending on the market. There’s maybe bigger appetite versus smaller appetite. But at the end of the day the value to the payer of having a single operator in a single state is huge. I mean there’s there’s hundreds of DMEs in every state in the country and the ability to wrap all that into a single contract, sign up for SLAs. I mean when a patient has a stat order for either oxygen or ventilation, I mean it’s critical that patient gets that order in two hours after being discharged from the hospital up to four hours.

But like it’s got to be fast. And you know with our network of six seventy locations and we got vehicles all over the country zipping around every day meeting those commitments. I mean that’s a huge part of this that essentially grouping all this together in a single contract it just simplifies things. We’re more than willing to do that at a reduced rate in exchange for a lot more volume. And so really it’s a win win I think for the payers for us and most importantly for patients.

Unidentified speaker, Analyst: So me thinking about just the Adapt brand in general and one Adapt. And do all these vans that are shooting around the country, do they say Adapt on them now? Or is it still We’re getting there.

Jason Clemens, CFO, Adapt Health: I mean, there was a big effort to repaint the fleet. We didn’t get to all of it, but we did that about two years ago. And then each year, we bring about 500 new vehicles into the fleet. They’re brand new, freshly painted. I mean, they’re fantastic.

So I mean, we’re on schedule to continue to turn that fleet over every six years or so. We’ve got about 3,000 of these vehicles. Can you

Unidentified speaker, Analyst: spend just a second? Cash flow, I can’t remember if you guided specifically to cash flow from ops.

Jason Clemens, CFO, Adapt Health: We we we did well, we we guided free cash flow

Unidentified speaker, Analyst: You got a free cash flow.

Jason Clemens, CFO, Adapt Health: Of 175 to $225,000,000

Unidentified speaker, Analyst: Okay. And the growth in cash flow from ops is in line with EBITDA? I mean, like

Jason Clemens, CFO, Adapt Health: Yes. Okay. Yeah. The the expect the same relative conversion of adjusted EBITDA to cash flow from operations in ’25 as what we saw in 2024.

Unidentified speaker, Analyst: Okay.

Jason Clemens, CFO, Adapt Health: So the the the the really the big, difference in you know we have a lower midpoint guide $35,000,000 than what we reported last year. And frankly some of the big manufacturing partners of ours I mean we extended payment terms in ’24. We’re thrilled to have the extra cash. We paid down more debt But I mean, it’s like, those are those events won’t be repeated. And so we made that adjustment as we thought about, 200,000,000 at the mid for free cash flow

Unidentified speaker, Analyst: in ’25. Alright. 200.

Jason Clemens, CFO, Adapt Health: 2 hundred million at the mid. Yep.

Unidentified speaker, Analyst: Alright. So you’re gonna end the year with 200,000,000 more of cash than you started.

Jason Clemens, CFO, Adapt Health: Plus plus proceeds, if we’re able to move these disposition processes forward.

Unidentified speaker, Analyst: Yep.

Jason Clemens, CFO, Adapt Health: You know, the proceeds, will all get pushed to the balance sheet, will get pushed to debt. In terms of free cash, I mean, Suzanne and I have said that we’ve earmarked $30,000,000 to $35,000,000 for M and A that we expect to do over the course of the year. We have a pipeline. We have a couple of small deals under LOA, so that’ll continue. But for now, any unused cash on M and A, it’s going to go also to debt and continue to delever to get us towards that 2.5 target sooner rather than later.

Unidentified speaker, Analyst: I feel like you’ve kind of developed some new muscles around development and how you kind of approach m and a. How’s the process different today versus a few years ago before Suzanne joined?

Jason Clemens, CFO, Adapt Health: Yeah. It’s it’s quite different. I’d say I’d say the biggest changes are within the managed care landscape and you know when when available I mean depending on the deal size it doesn’t make a lot of sense to chase these things. But oftentimes when you’re buying a DME company from a hospital that hospital’s rates, the managed care rates, it’s all kind of bundled into the DRG, into the overall contracting structure of the hospital. And so when you buy that company, your rates oftentimes won’t be as generous.

And so that’s very meticulously accounted for and your clean rooms and everything that comes with that to do it compliantly. But that’s a big change in how we’ve looked at deals. You know, we require 15% ROIC like even for us to spend a minute looking at it, out of the gate. I mean, so there’s just some new governance controls that we’ve laid in place. And then for every deal, I mean, we need operators pounding tables on the deal.

I’d say that M and A was driven a little more top down in our past, and going forward with Suzanne, new leadership, just new ways of doing things. I mean it’s more of a bottoms up, but those deals are vetted very tightly even the small ones. I mean we’re taking our ROIC delivery very seriously.

Unidentified speaker, Analyst: All right. One last one for me. I get this question a lot. I haven’t asked it to you in a long time.

Jason Clemens, CFO, Adapt Health: And

Unidentified speaker, Analyst: I didn’t give Jason any questions. I didn’t realize that until this morning. I was like, I never sent him any questions, so he’s done fantastic job. How do you value your business? Is it EBITDA EBITDA list patient equipment CapEx?

Jason Clemens, CFO, Adapt Health: Jason Clemens, I have free cash flow free cash flow yield. Okay. Right. I mean, I look at our equity evaluation. I’m looking at we just put up $236,000,000 of free cash and we’re planning a minimum of, you know, at the mid at the mid anyway, 200,000,000.

Dollars And, so I look at it that way. I think for others, look, whether you look at EBITDA less depreciation amortization, so EBIT essentially, Or you bring in a CapEx measure. That makes probably more sense from a comparable perspective to other companies. But at the end of the day, I mean, we guide and report adjusted EBITDA. So you know I mean health care services is obviously adjusted EBITDA driven.

We have provided new disclosures around patient depreciation amortization by segment. So I think we’ve we’ve now given the visibility to investors to to look at it really any any any way any way you wish. Again, at the end of the day, for me, it’s all about free cash flow. And that’s you know, we’re bonused on that. It’s an important metric for management, and we’re we’re all driving towards it.

Cool. Well, with that,

Unidentified speaker, Analyst: we can conclude. Thank you, Jason.

Jason Clemens, CFO, Adapt Health: That was all

Unidentified speaker, Analyst: great. Thank you.

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