AdaptHealth Corp. Q1 FY2025 earnings call

• Q1 2025 revenue exceeded midpoint of guidance range despite year-over-year decline. • Adjusted EBITDA was in upper half of guidance range, adjusted EBITDA margin 16.4% in line with expectations. • Free cash flow negative $0.1 million in Q1 vs negative $38.9 million prior year quarter, on track for full year free cash flow guidance. • Reviewing and refining long-range growth plan, focusing on core segments, leveraging geographic reach and operational scale. • Process improvement to enhance CPAP order conversion, including automating intake, streamlining referral documentation, etc. • Diabetes Health segment showing signs of recovery with sequential improvement in new starts and low attrition rate. • Reduced debt balance by $25 million in Q1, exited non-core product lines for debt reduction and strategic focus.

First quarter revenue exceeded midpoint of guidance range by $13.1 million despite a 1.8% decline from prior year quarter. Respiratory Health segment net revenue increased 3.3% versus prior year quarter to $165.5 million. Diabetes Health segment net revenue declined 8.0% versus prior year quarter to $138.8 million, but showed signs of recovery with sequential improvement in new starts and lowest attrition rate in two years. Sleep Health segment net revenue decreased 2.8% versus prior year quarter to $316.4 million, with approximately half of the $30 million full year headwind from changes in purchase vs rental revenue mix impacting Q1. Wellness at Home segment net revenue increased 0.7% over prior year quarter to $157.2 million due to volume growth.

• Reduced full year revenue expectations by $40 million and adjusted EBITDA expectations by $5 million due to disposition of certain incontinence assets. • Full year 2025 revenue expected to be $3.18 billion to $3.32 billion, adjusted EBITDA $665 million to $705 million, adjusted EBITDA margin ~21%. • Free cash flow guidance range unchanged at $180 million to $220 million. • Q2 2025 revenue largely flat vs Q2 2024, adjusted EBITDA margin 18.3% to 19.3%. • Half of the $30 million full year headwind from Sleep Health revenue mix shift came in Q1, with remaining impact to be felt in subsequent quarters contributing to second half ramp.

• Potential impact of international trade policy on tariffs, but company believes exposure is contained and impact is manageable based on consultations with manufacturing partners and current inventory levels, no tariff surcharges experienced yet.

Q: Can you provide additional color on improvement in Diabetes business and if change in guidance is only for incontinence asset sale?

A: Guidance change exclusive to incontinence asset sale. Diabetes business saw positive movement in pump business, second consecutive quarter of sequential growth in CGM new starts with record retention rates.

Q: Looking at new starts to Sleep, is it market issue or share issue and can pivot to fix?

A: Starts off a couple thousand, not huge numbers. In certain geographies losing share, have detailed plans in Commercial and ops teams to close gap, still confident in full year guidance.

Q: Updated thoughts on tariffs in fiscal '26 and selling day comps?

A: Not in position to change '26 number, feeling better than in March. Revenue faced year-over-year headwind from selling days, little in and out in next quarters from day perspective.

Q: Step-up in CapEx related to tariffs or demand?

A: CapEx in Respiratory due to outperformance in Respiratory on account of increased sales during heavy flu season.

Q: Change in competitive dynamics in Sleep market and opportunities to deploy capital?

A: In handful of states need to do better, have some M&A under LOI, will update guidance if close deals, focus on modest tuck-in activity.

Q: Strength in Diabetes business, CGM side and supply environment?

A: Pump business had growth, CGM saw second sequential growth quarter in new starts, no big bend in basal trend, Diabetes team has good leadership and execution, leveraging technology and Commercial team.

Q: Elements of One Adapt strategy and Humana tracking?

A: One Adapt involves simplifying entity structure, leveraging commercial team to show full portfolio to big accounts, Humana relationship performing as expected, pipeline of additional opportunities growing.

Q: Sense of percentage of annualized revenue from incontinence assets and divestitures left?

A: Annualize guide down for incontinence sale to ~$60 million, no other assets being worked on currently, focus on managing portfolio and growing margins and top line.