Accendra Health, Inc. (ACH) Earnings

Management highlights

### Company Transformation & Separation - Completed the first full quarter as a standalone pure-play home-based care company; separation and transition services from Owens & Miner are on schedule - Substantially completed exit from the previously disclosed large commercial payer relationship: transition of care was completed smoothly with minimal transition cost, most patient equipment was sold to another industry player, and associated personnel and costs were transferred - Remaining smaller capitated agreements are attractive; the company will continue pursuing both fee-for-service and properly structured capitated agreements going forward - Post-separation transformation has improved profitability dramatically: from ~19% gross margins and ~4% EBITDA margins pre-separation to nearly 50% gross margins and double-digit EBITDA margins as a standalone business, with a cleaner, less volatile cash flow profile Payer Portfolio Updates - Secured an exclusive multi-year extension with the company's largest commercial payer for soft goods (ostomy, urology, diabetes, incontinence, etc.), providing long-term business certainty - Payer portfolio is well-diversified: ~20% of revenue comes from traditional Medicare, with the remainder from diversified commercial payers; no major upcoming renewals after the exited large payer exit - The company supports CMS anti-fraud initiatives and the upcoming competitive bidding program, and expects to thrive as a large, compliant national player Strategic Operational Initiatives - The sleep journey program continues to deliver expected results: higher revenue per order, lower patient attrition, and improved therapy adherence - Launched the new centralized Sleep Center of Excellence, following successful pilots in select Q1 markets; nationwide rollout is ongoing in Q2 2026. The center standardizes patient intake and onboarding to improve experience, satisfaction, provider confidence, and referral growth Balance Sheet Optimization - Announced a comprehensive balance sheet optimization transaction to pay off 2027 debt maturities, meaningfully reduce total debt, extend average debt maturities, and preserve ample liquidity and strategic flexibility; this removes near-term maturity uncertainty and supports long-term standalone growth

Guidance

- Management affirmed the full-year 2026 outlook for revenue and adjusted EBITDA - The balance sheet refinancing is expected to increase annualized cash interest expense by ~$40 million, with approximately half of this incremental impact hitting the second half of 2026 - Management expects revenue growth to ramp through the year, with at least 65% of full-year 2026 adjusted EBITDA to be generated in Q3 and Q4, consistent with typical seasonal trends - Mid-single-digit revenue growth and low single-digit margin expansion annually is a reasonable baseline for long-term normalized run-rate growth - All free cash flow generated by the business will prioritize debt reduction after transaction costs and planned separation payments are completed

Segment performance

Ascendra Health reported an overall 6.8% year-over-year revenue decline in Q1 2026. Excluding the impact of the exited large commercial payer business, core revenue grew approximately 1%: - Sleep category: grew over 4% (excluding payer impact), strong year-over-year growth driven by the sleep journey program, with higher revenue per order and lower patient attrition - Urology and ostomy: leading growth categories - Home respiratory: fell approximately 4% (excluding payer impact), underperformed expectations - Diabetes: slightly down year-over-year; insulin pump growth did not fully offset declines in continuous glucose monitors (CGMs) due to price compression from pharmacy channel competition. Adjusted EBITDA for the quarter was $58 million, in line with expectations. A one-time $52 million gain from the sale of patient equipment associated with the exited payer business is excluded from adjusted EBITDA.

Risks & headwinds

- Forward-looking statements are inherently uncertain, and actual results may differ materially from projections due to market, regulatory, and operational risks, as detailed in the company's SEC filings (10-K, 10-Q) - Current core revenue growth remains below target levels, and improvement through the rest of the year is not guaranteed - The balance sheet refinancing transaction is subject to customary closing conditions, and there is no certainty it will be completed as currently structured - CGM price compression from pharmacy channel competition pressures diabetes category performance - Post-exit SG&A cost reduction targets have not been finalized, and cost savings may not meet expectations

Analyst Q&A

• Q: What are 2026+ free cash flow expectations post-refinancing, how will excess cash be used, and can you update on the diabetes category? /

  A: All excess free cash flow generated post-transaction will be dedicated to debt reduction. Exact full-year 2026 numbers cannot be finalized until the refinancing closes in ~1-2 months, but it will still be a solid cash flow year with half the $40 million incremental annual interest hitting 2026. For diabetes, insulin pump volume is growing, but CGM faces price pressure from the pharmacy channel. Recent data shows significantly higher patient adherence for diabetes supplies via the DME channel (thanks to Ascendra's patient follow-up), creating an opportunity to educate patients and providers to stabilize DME-pharmacy mix. (458 characters)

• Q: Are mid-single-digit revenue and 5% EBITDA growth the right long-term normalized growth proxy, and why is 2027 unlevered free cash flow lower than 2026? /

  A: The mid-single-digit revenue growth projection from the investor presentation is a reasonable baseline for long-term run-rate growth. The 2027 projections were compiled a few months ago, so investors should not rely on them heavily, and the company will update full 2027 guidance during its normal annual budget process later this year. The lower 2027 free cash flow reflects planned reinvestment in the business, with debt reduction still the top priority after required investments. (412 characters)

• Q: What is the current rollout status of the Sleep Center of Excellence, and what early performance improvements have you seen? /

  A: The Sleep Journey program has been live for over a year, delivering consistent single-digit percentage point quarterly improvements in patient adherence, plus higher average order values. The new Sleep Center of Excellence is currently live in 3 markets, with full nationwide rollout completed by the start of Q4 2026. Early results show faster time from referral to therapy initiation, plus continued improvements to adherence and average order size matching the trend from the Sleep Journey program. (389 characters)

• Q: How should we model SG&A trajectory for the rest of 2026, and what is the size and margin profile of remaining capitated agreements? /

  A: Q1 SG&A was better than expected due to ongoing cost cutting focused on removing costs tied to the exited large payer. Costs from the exited business were removed in phases between late February and late March, so SG&A run rate should improve further through the remainder of the year. All remaining capitated agreements are small (none rank among the top 5-6 payers), and they are operationally efficient with attractive positive margins. The company continues to pursue new small capitated agreements as payers look to consolidate networks. (421 characters)