Earnings call transcript: Adapthealth Q1 2025 misses EPS forecast, stock rises

Adapthealth Corp (AHCO) reported its Q1 2025 earnings, revealing a miss on earnings per share (EPS) expectations but a slight revenue beat. The company reported an EPS of -$0.05, falling short of the $0.10 forecast, while revenue reached $777.9 million, slightly above the expected $774.88 million. Despite the earnings miss, the stock rose 3.45% in premarket trading to $9, reflecting investor optimism about the company’s strategic initiatives and future outlook. According to InvestingPro analysis, the company appears undervalued based on its Fair Value calculations, with a strong free cash flow yield of 20%.

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Key Takeaways

• Q1 2025 EPS of -$0.05 missed the forecast of $0.10.
• Revenue of $777.9 million slightly exceeded expectations.
• Stock price increased by 3.45% in premarket trading.
• Company continues to focus on operational improvements and debt reduction.
• Positive signs in the diabetes segment and home healthcare growth.

Company Performance

Adapthealth’s performance in Q1 2025 highlighted a mixed financial picture. While the company failed to meet EPS expectations, it demonstrated resilience in revenue generation and operational improvements. The company continues to benefit from favorable market conditions, such as the aging U.S. population and a shift towards home healthcare, which are expected to drive long-term growth.

Financial Highlights

• Revenue: $777.9 million, down 1.8% year-over-year.
• Adjusted EBITDA: $127.9 million, representing a 16.4% margin.
• Free Cash Flow: Negative $100,000.
• Debt Reduction: $25 million in Q1, totaling $195 million over the last five quarters.

Earnings vs. Forecast

Adapthealth’s EPS of -$0.05 fell short of the $0.10 forecast, marking a significant miss. However, the revenue of $777.9 million slightly surpassed the expected $774.88 million. The EPS miss reflects ongoing challenges in certain segments, but the revenue beat indicates strength in other areas.

Market Reaction

Despite the EPS miss, Adapthealth’s stock rose 3.45% in premarket trading to $9. The positive market reaction may be attributed to the company’s strategic focus on operational improvements and its potential for future growth in the home healthcare market. The stock remains below its 52-week high of $11.9 but above the low of $7.11. Analyst consensus remains bullish, with price targets ranging from $9.50 to $16.00, suggesting potential upside. InvestingPro data shows the company maintains a "GREAT" overall financial health score of 3.28 out of 5, particularly strong in relative value metrics.

Outlook & Guidance

Adapthealth provided a full-year 2025 revenue guidance of $3.18 billion to $3.32 billion and an adjusted EBITDA guidance of $665 million to $675 million. The company expects Q2 2025 revenue to remain flat year-over-year and aims to achieve a net leverage ratio of 2.5x.

Executive Commentary

CEO Suzanne Foster emphasized the company’s focus on delivering patient service excellence at scale as a key driver of success. CFO Jason Clements expressed confidence in meeting the company’s revenue, adjusted EBITDA, and free cash flow guidance for 2025.

Risks and Challenges

• Market share challenges in the sleep market in certain geographies.
• Potential tariff impacts, though expected to be minimal.
• Ongoing efforts to streamline operations and exit non-core product lines.

Q&A

During the earnings call, analysts inquired about the recovery in the diabetes segment and the company’s modest M&A strategy. Management highlighted positive trends in diabetes and reiterated its focus on strategic acquisitions to enhance growth.

Full transcript - Adapthealth Corp (AHCO) Q1 2025:

Conference Operator: Good day, everyone, and welcome to today’s Adapt Health’s First Quarter twenty twenty five Earnings Release. Today’s speakers will be Suzanne Foster, Chief Executive Officer of Adapt Health and Jason Clements, Chief Financial Officer of Adapt Health. Before we begin, I’d like to remind everyone that statements included in this conference call and in the press release issued today may constitute forward looking statements within the meaning of Private Securities Litigation Reform Act. These statements include, but are not limited to, comments regarding financial results for 2025 and beyond. Actual results could differ materially from those projected in forward looking statements because of a number of risk factors and uncertainties, which are discussed at length in the company’s annual and quarterly SEC filings.

Adapt Health Corp. Has no obligation to update the information provided on this call to reflect such subsequent events. Additionally, on this morning’s call, the company will reference certain financial measures such as EBITDA, adjusted EBITDA and adjusted EBITDA margin and free cash flow, all of which are non GAAP financial measures. You can find more information about these non GAAP measures in the presentation materials accompanying today’s call, which are posted on the company’s website. This morning’s call is being recorded and a replay of the call will be available later today.

I am now pleased to introduce the Chief Executive Officer of Adapt Health, Suzanne Foster.

Suzanne Foster, Chief Executive Officer, Adapt Health: Good morning, everyone, and welcome to our call. Amid elevated uncertainty in the external environment, we at Adapt Health have stayed course with a relentless focus on improving our business and providing exceptional service to the four point two million patients that depend on us. Reflecting that focus in Q1 twenty twenty five, we delivered another quarter of solid results and we continue to make progress on several areas of focus. Starting with our results. First quarter revenue exceeded midpoint of our guidance range by $13,100,000 despite declining 1.8% from the prior year quarter.

This was driven by stronger than anticipated revenues in our respiratory health segment as well as in our diabetes health segment, which while still contracting, continue to demonstrate signs of improvement. First quarter adjusted EBITDA was in the upper half of our guidance range despite declining 19.3% from the prior year quarter, while our adjusted EBITDA margin was in line with our expectations at 16.4%. Free cash flow was negative $100,000 in the first quarter compared to negative $38,900,000 in the prior year quarter. Importantly, we remain on track to achieve our free cash flow guidance for the full year. Over the last several months, we have been reviewing and refining our long range growth plan.

This work confirms that we have a tremendous opportunity to deliver consistent, sustainable organic growth by simply staying on course with our current strategy. Our plan has been and will continue to be to remain focused on our four core segments and to combine our geographic reach and operational scale with industry leading patient service excellence to capture market share. The addressable markets within our four segments are large and we believe are growing in aggregate by mid single digits, driven by meaningful tailwinds. These include an aging U. S.

Population, increasing prevalence and diagnosis of the chronic conditions our services and products help treat and the ongoing shift to home health care, which is expected to outstrip growth of overall health care spending by roughly 200 basis points over the next decade. Even as the industry leader in our markets, we still have a significant untapped opportunity for organic growth. We are addressing this opportunity from a position of competitive strength. We have the broadest geographic footprint in the industry with over six sixty locations serving 4,200,000 patients across all 50 states. Our expansive geographic reach and operational scale uniquely position us to lead the transformation of the home health industry.

This is most clearly demonstrated in the opportunities we are addressing in managed care and with large health systems. We believe payers and providers will increasingly turn to Adapt Health to leverage our scale and industry leading adherence programs as part of their efforts to better predict and manage healthcare costs and drive better health outcomes for patients. These dynamics are fueling our growing pipeline of active discussions around new capitated arrangements, especially as payers look to AdaptHealth for help managing utilization inside their expanding Medicare Advantage businesses. Despite our competitive advantages, we haven’t yet realized our full organic growth potential, but that is well within our grasp. We have brought together a group of exceptional leaders.

We have scrutinized our workflows to pinpoint our most meaningful organic growth levers. And we are enabling the organization to activate these levers through the discipline of our Adapt operating system and a set of targeted initiatives. The common thread running through these initiatives is a commitment to patient service excellence, which means delivering superior quality with speed at a competitive cost to serve. One example is the process improvement we are introducing to improve CPAP order conversion. Our operations team has been working hard to automate intake, streamline referral documentation, optimize scheduling capacity to reduce setup delays and enhance patient communications.

These initiatives will help us convert more referrals to orders. They will also meaningfully improve the patient experience by expediting their access to the critical therapies they need. And ultimately, a better patient experience will help us drive increased census and revenue growth. Delivering patient service excellence at scale is how we will win. Our industry remains highly fragmented with service levels that vary widely and often fall short of expectations.

We have an immense opportunity to take market Capturing that opportunity doesn’t require major incremental investments. It also doesn’t require capital intensive M and A. It simply requires being the best operator in the markets we already serve, which brings me to our Diabetes Health segment. We cannot deliver enterprise level organic growth that meets or exceeds market growth if our Diabetes Health segment is underperforming. I’m pleased to say the Diabetes Health team has continued to execute on its plans to enhance our processes and we continue to see positive signs that the steps they’ve taken are yielding results.

Notably, we had a second consecutive quarter of sequential improvement in new starts and our resupply attrition rate was the best we have experienced in two years amid a period of significant supply chain disruption. I would like to take a moment to commend the entire diabetes team for ensuring that our patients continue to receive their diabetes supplies during this disruption and for exceeding our internal forecast. It’s still early, but the dedication of our diabetes health team and the progress they’ve made are increasing our confidence that the segment will return to growth, removing a key obstacle to delivering accelerated, consistent and sustainable organic growth across our overall business. Moving on to another core focus, we continue to strengthen our financial position. During Q1, we reduced our debt balance by another $25,000,000 bringing total debt repayment to $195,000,000 over the last five quarters.

Further, we continue to exit non core product lines, generating additional proceeds that are earmarked for debt reduction, while enabling us to sharpen our strategic focus. Specifically, in May, we completed a transaction to sell certain incontinence assets to a third party. And we signed a definitive agreement to sell certain infusion assets to a third party. Before I close, let me take a moment to address the concerns surrounding the potential impact of international trade policy on operators in the healthcare industry, including Adapt Health. Clearly, the situation is fluid.

But based on what we know today, we believe our exposure to tariffs is contained and the impact on our business is likely to be very manageable. We have consulted with each of our major manufacturing partners to verify their production locations and to gather their perspectives on the potential impact of tariffs. There have been no indications from these discussions that tariffs are likely to pose a significant issue and several of our large partners have referenced tariff exemptions in their public remarks. To date, we have not experienced any tariff surcharges nor have we initiated any contract renegotiations because of tariffs. Given our current inventory levels, we do not anticipate any potential impact from tariffs to materialize before the second half of the year at the earliest.

Given these considerations and our current assessment of the risks, we do not currently believe it is necessary to adjust our 2025 guidance for any potential impact of tariffs. In summary, the team delivered another quarter of solid results. We continue to improve our financial position by paying off our debt. The organization is laser focused on driving service excellence at scale to deliver consistent, sustainable organic growth and our diabetes business demonstrated further signs of improvement. While we are monitoring the risks of government policy, we believe these risks will be manageable and moreover, we won’t let them distract us from the critical work we are doing to organize, execute and improve day after day and quarter after quarter.

With that, I will turn it over to Jason.

Jason Clements, Chief Financial Officer, Adapt Health: Thank you, Suzanne, and thank you everyone for joining our call. Today, I’m going to cover our first quarter twenty twenty five results. I’ll follow that with a review of our balance sheet and our plans for capital allocation before finishing with guidance for 2025. For first quarter twenty twenty five, net revenue of $777,900,000 declined 1.8% versus the prior year quarter, which had one additional business day. Net revenue was $13,100,000 above the midpoint of our Q1 guidance range, driven by the combination of strong volumes in our Respiratory Health segment and stronger than anticipated Diabetes revenues, more than offsetting Sleep Health segment revenues that fell modestly shy of our expectations.

First quarter Sleep Health segment net revenue decreased 2.8% versus the prior year quarter to $316,400,000 We previously referenced a $30,000,000 full year headwind related to the noncash impact of changes in the mix of purchase revenue versus rental revenue. As anticipated, approximately half of that impact came in the first quarter. Sleep Health new setups, which are typically seasonally lower in the first quarter of the year, were approximately 113,000, slightly behind our expectations. Despite the lighter new setups, our Sleep Health Census grew to 1,680,000 patients, up another 19,000 sequentially. Our Q1 twenty twenty five CPAP survey indicates that the percentage of respondents using GLP-1s to manage diabetes or weight loss was up slightly to fifteen point seven percent in Q1 twenty twenty five from fifteen point three percent in Q4 twenty twenty four.

Our survey continues to show an immaterial difference in adherence and resupply ordering patterns between GLP-one patients and non GLP-one patients. First quarter Respiratory Health segment net revenue increased 3.3% versus the prior year quarter to $165,500,000 We saw stronger than anticipated oxygen new setups fueled by stronger field sales during an especially severe flu season. Our oxygen census of 325,000 patients was a new first quarter record. First quarter Diabetes Health segment net revenue declined 8% versus the prior year quarter to $138,800,000 While revenue contracted, as Suzanne mentioned, we continue to see signs that the segment is recovering. New starts improved sequentially for the second consecutive quarter, and our first quarter attrition rate was the lowest we experienced in two years.

For the Wellness at Home segment, which includes all other product categories, first quarter net revenue increased 0.7% over the prior year quarter to $157,200,000 as growth in volumes offset revenue disposed with the sale of certain custom rehab assets in the third quarter of twenty twenty four. Turning to profitability. First quarter twenty twenty five adjusted EBITDA was $127,900,000 slightly above the midpoint of our Q1 guidance range. Adjusted EBITDA margin of 16.4% declined from 20% in Q1 twenty twenty four, but was within our Q1 guidance range. This reflected the combination of lower revenue and gross margins in our Diabetes Health segment and the anticipated impact of changes in the mix of purchase revenue versus rental revenue in our Sleep Health segment, all of which fell to the bottom line.

Moving to cash flow, balance sheet and capital allocation. For Q1 twenty twenty five, cash flow from operations was $95,500,000 CapEx of $95,600,000 was 12.3% of revenue, in line with our expectations. Free cash flow was negative $100,000 as certain cash collections anticipated in the first quarter were pushed into the second quarter. Unrestricted cash stood at $53,700,000 at the end of the quarter. As of quarter end twenty twenty five first quarter, net debt stood at $1,960,000,000 and our net leverage ratio was 2.98 times, up from 2.79 times at the end of last quarter as a result of lower adjusted EBITDA.

We’ve been using free cash to reduce debt, and we’ve reduced our TLA balance by $25,000,000 in Q1 twenty twenty five. As Suzanne mentioned, in early May, we completed a transaction to sell certain incontinence assets to a third party, and we signed a definitive agreement to sell certain infusion assets to a third party. Between these sales, which will generate further proceeds for debt reduction and our expectations for free cash flow generation in 2025, we are steadily tracking toward achieving our target of 2.5 times net leverage. Our capital allocation priorities remain unchanged. Our highest priorities are investing to accelerate organic growth and reducing our debt to further strengthen our financial position, followed by strategic acquisitions of home medical equipment providers to round out our geographic footprint and increase patient access.

Turning to guidance. We are reducing our full year revenue expectations by $40,000,000 and our full year adjusted EBITDA expectations by $5,000,000 to reflect the disposition of certain incontinence assets in early May. There are no other changes to our guidance. As Suzanne discussed earlier, given our current understanding of tariff policy and based on the indications provided by our manufacturers, we expect that any impact of tariffs on our 2025 results is likely to be manageable, and we do not currently believe it is necessary to adjust our full year guidance for tariffs. For full year 2025, we now expect revenue of $3,180,000,000 to $3,320,000,000 and adjusted EBITDA of $665,000,000 to $7.00 $5,000,000 Our revised revenue and adjusted EBITDA guidance implies an adjusted EBITDA margin of approximately 20 expectations.

Our free cash flow guidance range remains unchanged at 180,000,000 to $220,000,000 For Q2 twenty twenty five, we expect revenue to be largely flat versus Q2 twenty twenty four revenue of $8.00 $6,000,000 Notably, the prior year quarter included approximately $22,000,000 of revenue from certain disposed assets as well as approximately $8,000,000 from the noncash impact of the revenue mix shift from purchases to rental in our Sleep Health segment. We expect an adjusted EBITDA margin of 18.3% to 19.3%, down from 20.5% in Q2 twenty twenty four, reflecting the flow through to the bottom line of the items just discussed and lower revenues in Diabetes Health. We continue to expect to generate approximately onethree of our full year free cash flow in the first half. In summary, we are on track to achieve our revenue, adjusted EBITDA and free cash flow guidance for 2025, and we’re making good progress on our balance sheet. As we enhance operational effectiveness and advance key initiatives, we are confident that we are building momentum in the business.

That brings me to the end of my remarks. Operator, would you kindly open up the call for questions?

Conference Operator: Thank you very much. We’ll take our first question from Brian Tranquillet with Jefferies. Please go ahead.

Megan Holt, Analyst, Jefferies: Good morning. This is Megan Holt on for Brian. Thank you for taking my question. Can you guys just provide some additional color in terms of improvement that you’re seeing in the diabetes business? You mentioned you were going to potentially see modest growth in the pumps.

Did that come through? And then some signs of improvement in CGM. And then just a quick follow-up to your comments on guidance. Is the change in guidance only for the Incontinence asset sale and not the infusion asset sale?

Jason Clements, Chief Financial Officer, Adapt Health: Hey, Megan, this is Jason. Good morning. I’ll take the second one first. Yes, the guidance change is exclusively for the disposal of certain incontinence assets. Although we expect to close the infusion deal in the second quarter, we’re going to withhold any comments on that until the deal is closed, similar to our previous policy on all M and

Pito Chickering, Analyst, Deutsche Bank: A and

Jason Clements, Chief Financial Officer, Adapt Health: dispositions. Regarding diabetes, you asked about pumps. We did see positive movement in our pump business. So that was great news, showing some growth over the first quarter of twenty twenty four. And in addition, within CGMs, we spoke of a second sequential growth quarter in new starts, which is very good news.

As we start stringing those together and as we manage our retention rates at record levels, we’re confident that the turnaround in diabetes is happening.

Conference Operator: Thank you. We’ll go next to Pito Chickering with Deutsche Bank. Please go ahead.

Pito Chickering, Analyst, Deutsche Bank: Hey, thank you guys. So first question here is looking at new starts to sleep. I guess, can you sort of dig in more into sort of what you’re seeing there? Is

Eric Coldwell, Analyst, Baird: this

Pito Chickering, Analyst, Deutsche Bank: a market issue or is this a market share issue? Are you guys losing share? And if so, is there anything that you can do to pivot in order to fix those issues?

Jason Clements, Chief Financial Officer, Adapt Health: Sure, Peeta. Good morning. So firstly, I mean, starts were off a couple of thousand. So we’re not talking huge numbers. However, we thought it was appropriate to call it out being it’s our biggest business, obviously.

This is not some kind of exogenous factor. We’re quite confident in that via various data points. We are in certain geographies losing. We need to set up faster. We need to do better in these certain geographies.

We’ve got detailed plans in our commercial team as well as our ops team to close that gap. And we’re still very confident in the full year guidance that we put out last quarter. So generally going according to plan, I think in a portfolio, some assets are up a little, some are down a little, but we feel very good about the full year.

Pito Chickering, Analyst, Deutsche Bank: Okay, great. And then the follow-up is just on the 2Q guidance, just to make sure that heard that right. You’re talking about flat revenue year over year margins of 18.3% to 19.3%. So that will get to sort of 18.8 at the midpoint, which is about $150 plus million of EBITDA, I think for 2Q. I guess, is that what I heard right?

And if so, as you think about sort of the back half ramp on the new implied guidance, just sort of do we sort of transition from 1Q, 2Q and how do get into sort of the back half of the year ramp? Thank you.

Jason Clements, Chief Financial Officer, Adapt Health: Sure. So I guess I’d say firstly that keep in mind that Q2 of last year included almost $30,000,000 of revenue that was either disposed or was not impacted by the shift of purchase to rental revenue. And so I think the underlying growth rate of 3% to 4% is really an important fact to keep in mind. Now that said, the $8,000,000 that we called out of the change from purchase to rental revenue, I mean, that’s all bottom line impact. And so that’s pushing a point of adjusted EBITDA compression year over year.

And then secondly, we’re going to continue to see lower diabetes revenue. And so that’s impacting us there to the tune of a couple of million dollars as well, Although we’re feeling pretty hopeful about the future diabetes in the short term. As we think about the rest of the year, there is an implied ramp in our guidance. Now a lot of that ramp is the $30,000,000 of top and bottom line impact in our Sleep business that we had talked about, the change of purchase to rental revenue and all that is bottom line impact. We said that about half of that we’d experienced in Q1 and then that would compress in Q2 to the tune of about $8,000,000 Q3, will come down quite a bit further and run out in Q4.

So that is something that is just unusual in the year, but it is contributing to a second half ramp.

Pito Chickering, Analyst, Deutsche Bank: All right. And then the last quick one here. Can you just refresh us on the Nairobi protocols and sort of are there any products you can sell that don’t fit within Nairobi protocols from a tariff perspective? Thank you.

Jason Clements, Chief Financial Officer, Adapt Health: Yes, sure. So it gets pretty nuanced, the Nairobi protocol and the definition of products intended to treat the chronically disabled. And so many products, I mean, you’ve heard from some of our public manufacturers, whether it be CPAPs or sleep devices, as well as oxygen and ventilation, as well as DME. I mean, many of these products are part of the NRAB protocol and are excluded from tariffs. As it relates to our diabetes products, again, the nuances in the treatment of diseases as opposed to being more diagnostic in nature.

And so when a CGM is used with a pump, as an example, that’s really part of that full delivery system to treat diabetes for CGMs that are not used with TUMS. I mean, understanding is that that’s more of a diagnostic or therapeutic device that is not accounted for in our early protocol. However, both of our public CGM manufacturers have reported here over the last two weeks or so. And both have talked about significant manufacturing onshore here in The United States and very manageable tariff expectations on their end. We’ve had open dialogue with all these manufacturers, and we’re feeling very comfortable with no tariff impact in our guidance for twenty twenty five.

Eric Coldwell, Analyst, Baird: Great. Thanks so much.

Kevin Caliendo, Analyst, UBS: Thank you. And next, we’ll go

Conference Operator: to Eric Coldwell with Baird. Please go ahead.

Eric Coldwell, Analyst, Baird: Thanks. I have a couple and I’ll just start with following on that last line of Q and A. At a conference in March, you highlighted the $10,000,000 potential AOI impact in fiscal twenty twenty six for tariffs and then of course, Liberation Day hit and that might have changed the outlook. There’s been a lot of moving pieces. But I’m curious if you have any updated thoughts on what you think your exposure may be in fiscal twenty twenty six?

And then I’ll follow-up with one or two others. Thanks.

Jason Clements, Chief Financial Officer, Adapt Health: Yes, Eric. I don’t know that we’re in a position to change that number today. I mean, if anything, it’s we could probably take it down based on the clarification of Nairobi and who’s covered. There were many manufacturers that received letters from Homeland Security and Customs that clarified their Nairobi classification. A lot of those hit in early April, which is after we made the comments in March.

So again, I don’t know that we’d say much about ’26 at this point other than we’re feeling a little better than we did back when we made those comments.

Eric Coldwell, Analyst, Baird: That sounds great. Happy to hear it. On the next question is, did I hear you say that this quarter’s revenue also faced a year over year headwind from selling days?

Jason Clements, Chief Financial Officer, Adapt Health: Yes, correct.

Eric Coldwell, Analyst, Baird: Are there any We got any other And we

Jason Clements, Chief Financial Officer, Adapt Health: that pegged at about $8,000,000 The rental revenue we earn as well as the PMPM for capitated revenue isn’t really going to be impacted by number of days in the month. It’s the sales revenue. So if you take roughly 5,000,000,000 of sales revenue in the first quarter, that full day impact is about 8,000,000

Eric Coldwell, Analyst, Baird: Perfect. And are there any other selling day comps to be aware of in the fiscal year, the next three quarters?

Jason Clements, Chief Financial Officer, Adapt Health: Not from a day perspective. There’s a little in and out in terms of when weekends fall and when holidays fall, nothing that we’d call out for it.

Eric Coldwell, Analyst, Baird: Perfect. Thanks so much. I’ll jump back in if needed.

Kevin Caliendo, Analyst, UBS: Thank you. And next we’ll

Conference Operator: go to Kevin Caliendo with UBS. Please go ahead.

Ben Hendrix, Analyst, RBC Capital Markets: Good morning. Thanks for taking my question. There was a bit of a step up in CapEx in the quarter.

Matthew Blackman, Analyst, Stifel: That in any way

Ben Hendrix, Analyst, RBC Capital Markets: related tariffs? Or was that

Jason Clements, Chief Financial Officer, Adapt Health: you buying machines expected ramp in It’s respiratory, Kevin. So we’ve had outperformance in respiratory on account of increased sales during a heavy flu season. And then we’ve got those patients that will continue on census that they’ve been diagnosed with underlying COPD or other advanced respiratory conditions. So it’s really a function of profile.

Ben Hendrix, Analyst, RBC Capital Markets: Okay. That’s helpful to know. On the sleep side, the numbers were disappointing. I hear your comments about it. Is there any change in the competitive dynamics there?

Do you think you lost market share or anything like that? Like what’s happening in the sleep market right now broadly? And how are you positioned within it relative to how you were six months ago or a year ago?

Jason Clements, Chief Financial Officer, Adapt Health: Yes. I’d say in a handful of states, we need to do a little better job. I mean, it’s really as simple as that. It’s nothing big picture that’s happening. It’s really within a handful of states.

Competitors are getting an edge on us. We need to do faster. We need to sell a little more and pull a little more through on conversion. And we got detailed plans to address that.

Ben Hendrix, Analyst, RBC Capital Markets: Fantastic. Thanks, guys.

Conference Operator: Next, we’ll go to Ben Hendrix with RBC Capital Markets. Please go ahead.

Matthew Blackman, Analyst, Stifel: Yes, thank you very much. Just to follow-up on the sleep question, are there opportunities in some of those troubled markets to deploy capital and acquire competitors? It’s maybe kind of head off some of that some of those headwinds and those competitive pressures? Yes,

Jason Clements, Chief Financial Officer, Adapt Health: Ben. I guess we qualify that as an astute question. We do have some M and A under LOI. Again, if we’re able to close those deals, we’ll talk about it when we execute on that. And if we close in those deals, we’ll update guidance accordingly.

But certainly, the markets where we’re falling a little short on sleep as well as all other markets, I mean, there’s plenty of opportunity out there. But as we’ve said, there’s no change to our capital allocation priorities. We’re going to stay focused on some modest tuck in activities, so you’ll expect to continue to see that throughout the course of the year.

Matthew Blackman, Analyst, Stifel: Great. Thanks for that. And just a quick follow-up also on the tariff commentary in your conversations with some of your suppliers. I guess, are you or are they doing anything preemptively in order to kind of pull forward any kind of any inventory to kind of preemptively manage any expected headwinds? Or is it just kind of business as usual from a supply perspective?

Thanks.

Jason Clements, Chief Financial Officer, Adapt Health: Business as usual.

Eric Coldwell, Analyst, Baird: Thank you.

Conference Operator: Next, we’ll go to Matthew Blackman with Stifel. Please go ahead.

Eric Coldwell, Analyst, Baird: Hey, guys. You had a really strong quarter in diabetes. I was just wondering where exactly the strength is coming from. You guys talked to a bit of pump growth, but curious on the CGM side if you did see any uptick in basal adoption and going forward what your expectations are for the supply environment in that business given we heard some of DexCom’s comments earlier this earnings season? Thanks.

Jason Clements, Chief Financial Officer, Adapt Health: Hey, Colin, sure. Pumps, I mean, recall that’s a pretty small part of our diabetes business, but we did see some growth there. So that helped to the tune of a couple of million dollars within the quarter. Regarding your Basal question, we’re not seeing any big bend in the trends for Basal, either setups or utilization. In terms of kind of what we’ve focused on and where we’re pressing our energy, I mean, Suzanne may weigh in with a few comments there.

Suzanne Foster, Chief Executive Officer, Adapt Health: Yes. In terms of the diabetes team, I mean, just goes back to good old fashioned leadership and execution. I think we have a really good team in place that has dug in, understood the business and have gotten things organized and they’re executing much better than they were a few quarters ago. We’re also appropriately leveraging technology where it matters. We still have human in the loop, but we’re definitely deploying technology that’s helping.

And then in terms of our commercial team, they have just been out there and doing a much better job with better focus, not only as a diabetes sales team, but they’re leveraging our entire HME sales force. So it’s just more people out there talking about one adapted our approach to patient service.

Eric Coldwell, Analyst, Baird: Got you. Thank you.

Kevin Caliendo, Analyst, UBS: Thank you. And next, we’ll

Conference Operator: go to Whit Mayo with Leerink Partners. Please go ahead.

Kevin Caliendo, Analyst, UBS: Hey, thanks. Good morning. Suzanne, just on the topic of One Health or OneAdapt and just the various initiatives you have, any new elements of that strategy you care to share as you think about 2025 and any improvement we may see in operations as a result of that focus?

Suzanne Foster, Chief Executive Officer, Adapt Health: Yes. Thanks, Whit. So in terms of wanting to add the high level here for anyone new to the story is that this organization came together as a result of hundreds of acquisitions. And so we clearly the strategy of driving size really was successful over the last couple of years and the entire leadership team now is focused on delivering scale. And so that starts with the most obvious stuff of brand and in terms of who we are.

So getting out there as Adapt Health and not 100 different names. We have a lot of legal and tax work to make sure that our entity structure is simplified. That will obviously reduce cost in operating the business. So there’s a lot of internal organization. But in terms of going forward into 2025 and 2026, we’re looking at the business about how do we reach the most amount of patients.

And so our commercial team really leveraging each other, going to our big accounts, including Managed Care and big health systems, showing our full portfolio and capabilities that is getting traction. And so we believe that will deliver additional growth in the back half and especially going into 2026.

Kevin Caliendo, Analyst, UBS: No, that’s helpful. And maybe just spend a second on Humana and just sort of how that’s tracking versus your assumptions. And it felt like you were referencing maybe an increased level of confidence on expanding some new payer relationships. So just wanted to unpack that a little bit more. Sure.

Suzanne Foster, Chief Executive Officer, Adapt Health: So our Humana relationship, Ian, the performance is as expected, continues to be a bright spot for us. We’re very, very happy with that relationship and our performance under that contract. And yes, we are, like I said last quarter and this quarter, our pipeline of additional opportunities is growing and not only growing, but moving down the pipeline. So we are optimistic that we’re going to continue to move in that direction. Think it’s the right thing for patient service and for overall healthcare economics.

So we’re making great progress and we expect to have continued good news on that front.

Kevin Caliendo, Analyst, UBS: Thanks.

Conference Operator: And our last question comes from John Piney with Canaccord Genuity. Please go ahead.

John Piney, Analyst, Canaccord Genuity: Hi, John Piney on Richard Close. Thanks for the question. I guess one quick one from me. So I guess the incontinence assets sold, that’s the only thing that’s factored in the guidance as far as changes from the divestitures.

Jason Clements, Chief Financial Officer, Adapt Health: Can you just give us a

John Piney, Analyst, Canaccord Genuity: sense of you called out $100,000,000 annualized revenue last quarter for things to be divested. So I guess what percentage of that is the incontinence assets? And is there anything still left to be considered or to be divested this year? Or is it really just the incontinence assets and the infusion? Thanks.

Jason Clements, Chief Financial Officer, Adapt Health: Hey, John. This is Jason. So if you annualize the guide down for the incontinence sale, you get to about $60,000,000 So I think that answers your question on the approximate revenues. Again, if we get to the point that we’re able to sell certain home infusion assets, we’ll update the full guide accordingly. In terms of are there other assets we’re working on?

The answer is no. I mean, certainly, we’ll continue to manage the portfolio as you’d expect, investing to grow margins everywhere we can and investing to grow top line everywhere we can. But for now, we feel after we get through these dispositions that we’ve got a great TAM in each of the four segments that we operate in and a lot of opportunity in front of us both organically and inorganically.

John Piney, Analyst, Canaccord Genuity: Great. Thank you.

Conference Operator: And that concludes our question and answer session and concludes today’s program. We thank you for your participation. You may disconnect at any time.

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