AdaptHealth Corp. Q4 FY2025 earnings call

2025 saw implementation of new operating model, closing largest capitated contract, disposing of noncore assets. Fourth quarter had broad-based patient census growth and strong revenue. Standardized operating model with centralized order intake, improved referral to setup times. Produced industry-leading clinical outcomes, deployed technology like AI pilots. Centralized patient services contact center helped with new capitated contract onboarding. Strengthened sales organization, received favorable CMS outcome on competitive bidding, closed Hawaii HME provider acquisition and divested small infusion asset.

Full year revenue was $3.245 billion and Q4 revenue was $846.3 million, both exceeding the midpoint of guidance range. Organic revenue growth was 1.7% for full year and Q4. Sleep health net revenue was $372.3 million, up 4.4% year-over-year; new starts up about 6% yoy, patient census grew 4% yoy to new record. Respiratory health net revenue was $178.2 million, up 7.8% yoy; oxygen new starts up about 4%, vent new starts up about 5%, both patient census hit new records. Diabetes health net revenue was $158.5 million, down 7.4% yoy; patient retention hit new record but net revenue impacted by payer mix. Wellness at home net revenue was $137.3 million, down 16.1% yoy, driven by asset dispositions. Full year adjusted EBITDA was $616.7 million, Q4 $163.1 million, both impacted by $14.5M legal settlement and over $10M accelerated costs for capitated contract.

Expects net revenue $3.44B - $3.51B, adjusted EBITDA $680M - $730M, free cash flow $175M - $225M. 2026 first quarter expects revenue growth 2%-3% yoy. Ramping capitated revenue to add incremental growth each quarter peaking at low double digits by Q4. 2026 midpoint adjusted EBITDA margin ~20.3%, better than 2025. First quarter 2026 adjusted EBITDA margin ~16%, improving throughout year. Free cash flow expected negative $20M - $40M in first quarter, improving as capitated revenue ramps.

Statements include forward-looking statements which could differ materially from actual results due to number of risk factors and uncertainties discussed in company's annual and quarterly SEC filings.

Q: Eric Coldwell inquired about legal settlement, including if it's the NC civil debt collection class action, if final, and steps to prevent similar issues.

A: Suzanne Foster said it was a 2022 claim, settles all claims in that state, and measures taken to fix technicalities. Jason Clemens added significant maturing in control environment with SOX opinion clean bill of health.

Q: Kevin Caliendo asked about margin cadence in 2026.

A: Jason Clemens said Q4 2026 guidance revenue growth 2%-3%, adjusted EBITDA margin ~16%, expecting margin to improve to ~20% in second quarter and higher in third and fourth.

Q: Richard Close asked about capitated agreements pipeline.

A: Suzanne Foster said there are many conversations but take time, Jason Clemens added view capitated pipeline like M&A pipeline, no impact in guidance until deals closed.

Q: Richard Close asked about diabetes growth.

A: Suzanne Foster said retention improved due to resupply team work, and they're growing diabetes sales force.

Q: Meghan Holtz asked about infrastructure readiness for new health care system partnership.

A: Jason Clemens said right on initial outlook, made key investments, pursuing similar acquisitions.

Q: Kieran Ryan asked about sleep business cadence.

A: Jason Clemens said there was noise in 2025 due to rental and sales mix change in sleep, setting up easier comparable in 2026.

Q: Kieran Ryan asked about diabetes DME vs pharmacy.

A: Jason Clemens said fewer payer policy changes on CGM, pumps have full capability in both channels.

Q: Eric Coldwell followed up on capitated contract onboarding expense delta.

A: Jason Clemens said delta was ~$8M, expense bigger than communicated but revenue also bigger, stepped up contribution from capitated contract in guidance.

Q: Eric Coldwell asked about Hawaii acquisition revenue contribution.

A: Jason Clemens said Hawaii deal run rate ~$1M/month, netted against divestiture, so no specific mention in guidance.