AHCO

AdaptHealth’s second quarter results prompted a significant negative market reaction, as the company reported both revenue and profitability well below Wall Street’s expectations. Management attributed this to a combination of operational inefficiencies in its large West Coast capitated contract and cost pressures from a sudden supplier price increase. CEO Suzanne Foster described the unexpected operational challenges as “not sustainable,” highlighting elevated costs from higher-than-anticipated order volumes and inefficient workflows. Foster also acknowledged that restructuring efforts, including workforce reductions and portfolio simplification, were necessary to address these immediate pressures. Is now the time to buy AHCO? Find out in our full research report (it’s free). Revenue: $740.3 million vs analyst estimates of $847.2 million (12.7% year-on-year growth, 12.6% miss) Adjusted EPS: -$0.07 vs analyst estimates of $0.17 (significant miss) Adjusted EBITDA: $132 million vs analyst estimates of $160.3 million (17.8% margin, 17.7% miss) The company dropped its revenue guidance for the full year to $2.87 billion at the midpoint from $3.49 billion, a 17.6% decrease EBITDA guidance for the full year is $505 million at the midpoint, below analyst estimates of $697.2 million Operating Margin: -18.6%, down from 10% in the same quarter last year Market Capitalization: $696.4 million While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Michael Murray (RBC Capital Markets) questioned the magnitude and segmentation of the $30 million supplier price impact. CEO Suzanne Foster declined to specify the affected segment but outlined efforts to offset the cost, adding that “mid-year, we do not…have the opportunity to pass through price.” Brian Tanquilut (Jefferies) asked whether AdaptHealth’s divestitures signal a strategic shift toward a smaller business. Foster explained the company’s intent to “shrink down to our core and build from there,” emphasizing the focus on Sleep and Respiratory. Pito Chickering (Deutsche Bank) pressed on the sustainability and margin profile of capitated contracts compared to fee-for-service. Foster reiterated the long-term strategic value of capitation but acknowledged current operational headwinds prevent near-term margin realization. Richard Close (Canaccord Genuity) asked if the company’s 20% margin target for capitated contracts depends on achieving the “halo effect” from additional business. Foster clarified that the margin target excludes such upside, which is considered incremental. Kevin Caliendo (UBS) challenged the abrupt manufacturer contract termination and price increase. Foster described the event as “unusual” and surprising, noting the company was not given advance warning and is working to resolve it. In the coming quarters, our analysts will closely watch (1) the pace of operational improvements and cost normalization in the West Coast capitated contract, (2) the outcome of ongoing supplier price negotiations and their effect on gross margins, and (3) execution against the company’s technology-driven efficiency strategy. The resolution of these issues will be critical for AdaptHealth’s ability to deliver on its streamlined business model. AdaptHealth currently trades at $5.27, down from $10.83 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free for active Edge members). WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses. But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.

Image source: The Motley Fool. Tuesday, Aug. 4, 2026 at 8:30 a.m. ET Chief Executive Officer - Suzanne Foster Chief Financial Officer - Jason Clemens Operator: Good day, everyone, and welcome to today's AdaptHealth Second Quarter 2026 Earnings Release. Today's speaker will be Suzanne Foster, Chief Executive Officer of AdaptHealth; and Jason Clemens, Chief Financial Officer of AdaptHealth. 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 the Private Securities Litigation Reform Act. These statements include, but are not limited to, comments regarding financial results for 2026 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, AdaptHealth 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, 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'm now pleased to introduce the Chief Executive Officer of AdaptHealth, Suzanne Foster. Suzanne Foster: Good morning, everyone, and thank you for joining our call today. I'm going to cover 3 topics this morning. First, we delivered 16% organic growth with record volumes gains across the business. Second, we made significant progress sharpening our portfolio and focusing on the core business, announcing the sale of our diabetes business, exiting other noncore products within Wellness-at-Home and contributing our e-commerce business into a new joint venture to improve how we serve the direct-to-consumer market. And third, I'll speak to 2 near-term profitability challenges we're navigating, our West Coast capitated contract and a material price increase from one of our largest manufacturers. Starting with our financial results. Given the agreement we signed to divest our Diabetes Health business, I'll walk you through our results on a continuing operations basis, which excludes Diabetes Health included for prior year period comparisons. Revenue remains a bright spot. Second quarter net revenue from continuing operations was $740.3 million, up 12.7% versus the prior year quarter and 15.9% on an organic basis. Our West Coast capitated contract contributed 10.7 points of that organic growth with 5.2 points coming from our base business. Sleep Health net revenue was $386.5 million, up 15.5% versus the prior year. Respiratory Health net revenue was $194.4 million, up 14.1%. Wellness-at-Home net revenue was $159.4 million, up 4.9%. Total capitated revenue grew to $103.3 million in the quarter and now represents approximately 14% of our continued operations net revenue. This is more than 3x the prior year with our West Coast capitated contract driving nearly all of that increase. Second quarter adjusted EBITDA from continuing operations was $132 million, with an adjusted EBITDA of 17.8%, driven by elevated West Coast capitated contract costs, which I'll speak to later. Now turning to the work we have done on simplifying and focusing our business. Over the past 2 years, we have systematically reshaped AdaptHealth around our core sleep, respiratory and supporting home medical equipment businesses, the parts of our portfolio where we have the strongest value proposition and the clearest path to growth. In July, we took the most significant step yet in that effort. We signed a definitive agreement to sell our Diabetes Health business for $235 million, a move that we expect will ultimately improve our growth rate, enhance our margin profile and allow us to sidestep looming industry risks. We also took a further step in focusing our portfolio on the core by discontinuing proactive sales of certain product categories within our Wellness-at-Home segment. This action removes nonstrategic, low-growth and low-margin product lines from our portfolio. And last week, we signed an agreement to contribute the CPAP Shop, a direct-to-consumer e-commerce business we've built within our sleep segment into a newly created joint venture with a leading e-commerce competitor and a telehealth prescriber network. The JV will have an unrivaled set of capabilities to fulfill its strategic ambition to reach the vast undiagnosed OSA population through home sleep testing and a digitally enabled path from diagnosis to treatment. Our growth strategy is focused on improving our service levels in our core business, expanding our capitated relationships where it makes sense and growing the number of large health systems we serve. This quarter, we made progress on all 3 fronts. In May, we signed a new capitated agreement with Humana OneHome, successfully transitioning 478,000 new members in South Florida and Texas without disruption. Our capitated relationship with Humana now spans 33 states plus the District of Columbia and South Florida. We have a proven track record of successfully serving Humana patients under capitation over the past 3 years, and we're building on that experience as we take on this expansion. Our newly formed enterprise sales team exclusively focused on large health systems, secured preferred provider agreements with several multi-hospital health systems. These customers recognize the clinical expertise we bring, the value of having our liaisons embedded in their systems to coordinate access to our services and care and the operational excellence that shapes how their patients experience it. Now let me turn to the more difficult part of the quarter, starting with the challenges we are facing with our West Coast capitated agreement. Having spent the first half of this year executing the largest patient transition in the history of home medical equipment, we spent the second quarter working to stabilize that operation on the West Coast. Standing up a new geography this quickly, new buildings, new routes, new inventory, new people and a new customer relationship has posed new challenges, some of which we did not fully anticipate, but which have become clearer as the contract fully scaled. Throughout, we refused to compromise patient care and have remained fully committed to serving patients, whatever it took. With the benefit of a full quarter of operating this contract, here is what we know. Order volumes are running higher than expected, primarily in sleep resupply and enteral products. The outsized sleep resupply volume largely reflect transition-related pent-up demand and should prove transitory, while enteral volumes will require further intervention. As we solve these 2 items, we believe gross margins will recover toward our original expectations. Second, there are inefficiencies in the inherited workflows, including the nonstandard use of urgent orders. These are contributing to unanticipated logistics costs downstream, which in turn have caused labor costs to remain elevated. We have met these elevated demands, but doing so at this level is not a sustainable model. We are working with our partner to align ordering practices with the original assumptions of the contract while rapidly introducing technology to streamline the workflows, shifting more of our fulfillment to drop ship rather than in-person delivery and rightsizing our fleet and labor accordingly. The combination of these items represents $40 million of expected impact on profitability relative to our prior projections for the second half of this year. We remain confident that with sustained work and additional time, the contract will be a strong contributor to our profitability. Our long-term profitability outlook for the West Coast contract has always assumed we'd be able to use the footprint we built to serve additional business beyond the current capitated membership. Currently, we are only able to serve our existing patients through our 40 new West Coast locations, and that will remain the case until the government-imposed DME moratorium put in place last February is lifted, and we can secure new PTANs, which are the Medicare billing numbers required to serve fee-for-service patients from these locations. Once that happens, we see substantial opportunity to serve patients who use our customers' health system but are insured through other payers and to sell proactively to other customers located near or within our new footprint. That incremental fee-for-service revenue will help absorb the fixed cost infrastructure we've built out on the West Coast. To help offset the cost pressures I just described, we made the difficult decision in the second quarter to restructure our workforce, delivering $19 million in annualized savings while maintaining full operational delivery across every function. This required real sacrifice from our team who took on more so that we could continue serving patients without interruption. The other lever we're pulling on is technology, using it to fundamentally reengineer the patient journey from diagnosis to treatment, improving patient experience and accelerating cost efficiencies along the way. We are already seeing what a digitally enhanced patient experience looks like in practice. Our myAPP platform now connects nearly the entire patient journey. Let me walk you through it. It starts with a digital front door. Patients can enter our platform before they are even officially a patient. It's as easy as scanning a QR code. From there, AI-powered intake walks them through insurance setup. They receive real-time order status tracking, and they can instantly self-schedule a virtual or in-person path setup without a phone call, order supplies in the app and access live or AI-powered chat support. And this quarter, we added our newest feature, an AI-powered mask fitting tool, which converted 92% of in-app scans to completed orders in its first 2 weeks. With early signs that it has reduced mask refittings that delay therapy. These features and the ease of use are driving rapid adoption of myAPP, which with users standing at 512,000, up 56% since the end of 2025 and an app store rating of 4.8 stars. This and similar work to reengineer the patient and provider experience share a common thread. By removing the human intermediary, it frees up our people to focus on higher value, higher touch work and in return, supports our efforts to improve our cost basis. Addressing the key manufacturer price challenge I mentioned earlier, we were notified on June 30 by the manufacturer of their decision to terminate our contract and impose an immediate price increase effective July 1. As it stands, this results in a $30 million impact in the second half of the year. We are actively working with the manufacturer to secure improved pricing and terms. But at this point, we've reflected the full impact in our outlook. That brings me to guidance. Our underlying base business continues to grow and is performing in line with our expectations. However, between the portfolio actions we've taken, the challenges we currently have with our West Coast capitated contract as well as the manufacturer's price increase, we must reset our full year outlook. Let me close with how we're thinking about the road ahead. Everything we are doing is to enhance the important role we play within a critical part of the health care ecosystem upon which millions of patients depend. The portfolio actions we've completed position us as a more focused company built around Sleep and Respiratory, where we have the strongest value proposition. Our rapid growth demonstrates that health care providers see the clinical and economic value of the services we provide. And in addition, with all the realities facing our industry, we are well positioned to benefit from the industry's ongoing consolidation with the size and scale to take on significant volume. We acknowledge that growing this fast over a period -- short period of time has stressed our cost structure. These near-term pains come with a silver lining. Our growth is pushing us to think differently, to leverage technology and innovate in ways we never thought possible. These innovations are benefiting patients and providers today and over time, will lower our cost to serve. Ultimately, these growing pains will make us a stronger, more efficient company. And with that, let me turn it over to Jason to review the financials. Jason Clemens: Thank you, Suzanne, and thanks to everyone for joining our call today. I'll cover our second quarter financial results, followed by a review of our balance sheet, capital allocation and outlook. As Suzanne noted, given our agreement to divest Diabetes Health, all figures I'll discuss are on a continuing operations basis, including prior period comparisons, unless otherwise noted. For the second quarter, net revenue of $740.3 million increased 12.6% versus the prior year quarter with organic growth of 15.9%. Second quarter adjusted EBITDA was $132.0 million versus $136.4 million for the prior year quarter. As Suzanne discussed, this reflects continued elevated costs associated with the West Coast capitated contract ramp. Second quarter adjusted EBITDA margin was 17.8%. Discontinued operations produced approximately $23 million of adjusted EBITDA, covering $14 million of corporate overhead expenses that remain in continuing operations. The West Coast capitated contract missed our expectations by $15 million, so we are adjusting for this run rate in full year guidance that I will cover later. Turning to the balance sheet and cash flows. We ended the quarter with a consolidated total leverage ratio of 3.06x. After quarter end, we triggered the $325 million delayed draw term loan secured as part of our April refinancing and used the proceeds to redeem our 6.125% senior notes due 2028. This action eliminated our highest cost tranche of debt and extended our overall maturity. We intend to prioritize repayment of our revolving credit facility over the remainder of the year and remain committed to our net leverage target of 2.5x. We intend to direct a significant portion of the proceeds from the Diabetes Health divestiture to further debt reduction. Regarding goodwill, the Diabetes Health divestiture required us to reallocate shared corporate costs previously carried by that segment across our remaining reporting segments and the resulting revision to Respiratory Health and Wellness-at-Home triggered a $144.2 million noncash goodwill impairment. Free cash flow was negative $20.9 million for the quarter, driven primarily by $166.2 million of capital expenditures to support the capitated contract, including approximately $25 million of onetime equipment and vehicle purchases. I'll note that our Diabetes Health divestiture closes, cash flows from that previously reported segment will continue to be presented on a consolidated basis with the cash flows from continuing operations. Our capital allocation priorities remain unchanged, investing to accelerate organic growth, reducing our leverage and pursuing disciplined smaller tuck-in acquisitions. Turning to guidance. On a continuing operations basis, our full year 2026 net revenue projection is $2.85 billion to $2.89 billion, which excludes $630 million of the anticipated full year revenue from Diabetes Health that is moving into discontinued operations. At the midpoint, this represents an increase of roughly $15 million from our prior guidance, reflecting the net impact of second quarter revenue outperformance, the revenue contributed to the e-commerce JV that will no longer consolidate and the revenue disposed with the exit of certain noncore assets in Wellness-at-Home. On a continuing operations basis, our full year EBITDA guidance is $490 million to $520 million, and let me bridge that to our prior guidance of $680 million to $730 million. First, the impact of the Diabetes Health divestiture is $100 million, which includes approximately $40 million of the anticipated full year adjusted EBITDA moving with that segment into discontinued operations and an additional $60 million of corporate overhead that had previously been allocated to Diabetes Health but will remain with continuing operations. We expect roughly half of that stranded cost to be removed within 12 months of closing the deal. Second, $55 million of guide down relates to our revised full year 2026 expectations for our largest capitated contract, which includes a miss of $15 million versus our prior expectations for Q2 and $40 million of revised projections for the second half of 2026. We continue to view a margin of 20% as the right long-term target for this contract but reaching it will take continued work and additional time. We expect sequential improvement over the next several quarters, reaching run rate profitability next year. Third, as Suzanne mentioned, we recently received notification that a large supplier has increased prices effective July 1, which we anticipate will have a $30 million impact in the second half of 2026. Finally, we are reducing our second half projections by $15 million for other intentional actions we took to focus and strengthen our portfolio. As Suzanne described, we recently made the decision to wind down certain noncore wellness products. The company has already started the process of shutting down sales channels for these products, so revenue will quickly decrease. However, the cost of servicing our existing census will continue until we transition patients to other providers over the next few quarters. Stepping back from the current year financial expectations, we want to provide perspective on how to think about these areas beyond this year. We believe that we will eliminate roughly half of the stranded corporate overhead within 12 months of closing the Diabetes Health transaction. We expect to achieve our long-term profitability target for our West Coast capitated business next year. We expect to negotiate the recent notification by a large supplier and take actions to otherwise mitigate the impact. And finally, for Wellness-at-Home, we will reduce our labor and operating expenses as patients transition. For the full year 2026, we expect free cash flow of $80 million to $120 million, which, as noted, includes cash flow from our Diabetes Health segment. For the third quarter of 2026, we expect net revenue of $720 million to $740 million. We expect modest sequential growth to offset approximately $20 million of revenue coming out of the second quarter run rate following the JV and portfolio management actions. We expect an adjusted EBITDA margin of approximately 17.9%, and we expect free cash flow to be approximately $50 million. That brings us to the end of our prepared remarks. Operator, please open the call for questions. Operator: [Operator Instructions] We'll take our first question from Ben Hendrix with RBC Capital Markets. Michael Murray: This is Michael Murray on for Ben. The revised guidance includes $30 million impact from the manufacturer price increase. I'm sorry if I missed this, but what segment did this impact? And given the magnitude, what levers do you have to offset this, whether through contract renegotiation, passing costs through to the payers? -- or other operational actions? And over what time frame should we expect those offsets to materialize? Suzanne Foster: Sure. At this point, given we're in active negotiation, I prefer not to say which segment it is hitting, but I can talk about what we're doing now. Obviously, mid-year, we do not, as a company, have the opportunity to pass through price. We are hopeful that we'll be able to resolve this. But in the meantime, the actions we would have to take are things like looking at supplier mix and profitability of those products within the mix would help offset it. We have CPI-U coming. But this is kind of a TBD right now with this situation until we really get through the negotiation, which we'll be able to update you at the end of this quarter. Michael Murray: Okay. And then just another quick one. The revised guidance also includes a $15 million impact from other portfolio actions. Can you walk us through what those entail? Are these additional divestitures, product line exits, restructuring of existing operations? And should we think of this as a onetime headwind or an ongoing drag? Jason Clemens: Yes, this is Jason. You should think of this as a one-time headwind. And the reason for that is we have already started shutting down certain sales channels that produce new patient volumes and the related revenues that come with it. And so the way to think about this as $1 of revenue comes out for these product lines, we drop off about 35%, which is the gross profit of that revenue. So significantly lower margins than the rest of our business from a cost of goods perspective. And so that work has already happened. However, we're still taking care of the patient census that we've got in the third quarter as we had in the second quarter. We're actively working to transition those patients to reputable and proper providers. And that will take us a little time. So we're going to continue to carry the labor and operating expense associated with taking care of those patients. We do believe we'll get through this over the next couple of quarters, which is why for out years '27 and beyond, this won't be a repeating expense. Operator: We will move on now to Brian Tanquilut with Jefferies. Brian Tanquilut: Suzanne, moves you're making. As I think about is there a strategy there a direction here to shrink the business essentially? I mean I get the idea of streamlining but balancing that with the deleveraging of the corporate overhead. Just walk us through how you and the Board are thinking about all these strategic moves and the direction that you want to take the company to eventually? Like what is the goal? And where -- what is that endpoint? Suzanne Foster: Yes. Thank you, Brian. Let me remind everyone that this company was built through a series of over 150 acquisitions. And when we did the portfolio review a couple of years ago, what we found is a whole host of subscale products, channels, dogs and cats that were baked into our different segments, which was really one of the reasons we ended up going the segment route to get our arms around really what were we offering in the product portfolio. Coupled with those types of acquisitions or the number of acquisitions, you can imagine the different workflows and the different ways of working. And so 2 years ago, we really set out on this path to say we need to simplify and focus on the portfolios where we have the biggest growth opportunity, highest profitability, which really equates to the best value proposition. And through that portfolio management, we identified a series of moves we had to make, which we've had and seen incontinence, custom rehab, home infusion. These were all products that we were subscale at that would require additional investment should we want to bring those to being #1 or #2 in the market. And so this quarter is the completion of that strategy. All of them are good businesses. Diabetes is a great business. E-commerce, some of these urology, ostomy -- but with the looming threats out there of competitive bid of having to invest to grow, we thought it would be better to shrink down to our core and build from there. So this very disciplined portfolio pruning has been a journey that we're on that really came to this point in time. This is the quarter where we can say we have finished that divestiture path that we've been on. And now all of our additional dollars that we generate can be invested back into our Sleep and Respiratory business and where it makes sense or in support of our home medical equipment business. But it has to be in service to our Sleep & Respiratory business where we serve either fee-for-service, capitated or more recently, a real focus on our enterprise health systems because we're trying to build density and proximity in the major markets. And so yes, there is, to your point, a shrinking in order to improve the growth outlook and the long-term EBITDA margins of the portfolio, which I believe will make us a stronger company. And the last point I'll make is a couple of years ago, we believed that we knew AI and technology is great, right? We knew it could improve our business. But the problem we had was nothing was standardized. Like we had no processes that we could easily put that technology on and deploy it at scale. And so as we shrink down to sleep respiratory and a focus -- simplified focused business, what we've seen now over the last few quarters is this ability to roll out technology at a much faster pace, deploy AI where it makes sense. And we think that we can speed that up under the current portfolio and the way that we're structured. Brian Tanquilut: Understand. And then maybe, Jason, just as I think about the West Coast contract, I mean, obviously, there's some execution there in terms of trying to get the utilization to where it needs to be. But just curious, I mean, what exactly operationally needs to be done? And are there opportunities to maybe reprice given the higher-than-expected utilization? And then maybe, Suzanne, kind of related to this, just as we think about the Humana contract expansion, are there further opportunities there? How did that work given that I think the other half of that contract was with a different provider. So are you pulling business away from that other provider? Or is Humana kind of piecing that out at this point? Suzanne Foster: Yes. I'm actually going to take both of those, and Jason can assist me after if I missed anything. So starting with our West Coast contract, what exactly has to happen. There's 2 buckets that I tried to explain but let me give you a little bit more color. We -- I'm proud of the team that we really understand now through operating this contract over the last 1.5 quarters, what is going on. And our relationship with our partner there remains incredibly strong. I want to get that out there. So if in an event we can't fix some of the operational issues, I can't promise to any kind of renegotiation. But what I can say is in partnership of serving those patients, there is a recognition that both companies have to do so profitably. Now back to what we have to do. There's -- it's easy. It's 2 line items. Order volume and utilization, we have to understand, and we have to make sure that it's being utilized and the volumes are appropriate. So the example I gave on sleep resupply, we had to send patients at the time of the transition, all of the incumbent -- all of the sleep resupply patients that were being served by the incumbent, we had to send them a letter stating we're a new provider. What we believe happened was people who were maybe not adherent with their therapy, but still have the equipment in their house said, you know what, I need to get back on that therapy. And we saw an incredible spike happen once we sent that letter. Now we have seen subsequent to the quarter that, that volume is coming down. So we believe it was like all of us, right, an intention to get healthy and then that behavior drops off. So we -- that's why we call that out as transitory. But there are some other types of product lines that we're seeing running outside what we expected. At the same time, it seems that are running below is what expected. So an ongoing discussion with our partner around that portfolio and the utilization of that portfolio is part one. And then part 2 is there's no data in the world or diligence that we could have done that us and our partner knew about that could have predicted some of these inherited messy workflows. And so from day 1, it kind of sent our operations into a bit of a tail spin because we were not expecting the level of the example, I gave urgent orders being the biggest one. It's outside the bounds of what we thought. But you can imagine, right, it's much easier for a provider to say, urgent, even though they really don't need that product in 4 hours, but we were taking that order at face value. And since then, that has been the primary focus of correcting or getting this contract under control on both sides with us and our partner because that is something we cannot solve alone. So that's about -- the rest of it is noise. If we -- as we get those 2 things under control, -- that will be much better for us and our partner. But despite all that, at those elevated rates, we are performing under our SLAs. We're hitting targets. So I'm super proud of the work we've done to come up to speed. But now that we're effective, we have to make this efficient. And I have no doubt that we will make that happen. Now on your Humana question, yes. So we, like I said, are in 33 states, 33 states, District Columbia, Florida -- South Florida is new for us. Florida was not a state we service. That does not mean we took it from the provider that has Florida. This piece of business was being handled by Humana, and they decided to get out of that business. So we -- they RFP'ed it. We took it over, purchased the assets, and we have now the new operator in that space, which is a new geography for us. But with our history with Humana, that's just kind of like a tuck-in for us. We know how to operate these businesses. We've had 3 years of experience, and that contract performs not only operationally, but financially very fair for us. So we're thrilled about that new announcement. And then just in perspective, I think you asked a question around just CAP in general. We're up to about 10 or so different contracts, Humana and our West Coast one, obviously, being the largest. But that's the reason I sit here confidently and say that over the next 4 to 5 quarters, I have no doubt that we'll figure out how to make our West Coast operations not only strong, but financially sustainable in partnership with our customer there. Operator: We'll move on now to Pito Chickering with Deutsche Bank. Pito Chickering: Just following up on that line of question just on the capitated contract. I mean, can you split out the $55 million sort of between the increase of sleep demand versus the increased actual demand versus the logistics? And does this sort of change your view around capitated contracts in general versus the simplicity of fee-for-service, maybe you go and just become a standard fee-for-service at a lower cost than trying to underwrite these capitated agreements, which take a lot of inherent risk. Suzanne Foster: Okay. I'll start that discussion and turn it over to Jason for the split out. But Pito, this is one of my favorite topics to debate with you, as you know. My contract -- I didn't mean my contract, my view on capitated has not changed. Now do I wish that we had a different first 6 months in understanding what this transition would look like? For sure. However, as I mentioned earlier, the idea -- the strategic value of capitation to get into a footprint and own a majority of those patients exclusively and have those ordering patterns come to adapt, there is a halo effect as we have talked about previously with the Humana deal that once you start piling up a few different exclusive deals, you become the provider of choice naturally in the provider's eyes just by ease of it has to go to this supplier anyway. So we have not been able to capitalize on the halo effect in the West Coast because of the DME moratorium. We always believed we would, one, secure the operations of the capitated membership. We would two, then secure the 10% to 20% that is not capitated within those health systems that are in that territory and then eventually layer in salespeople to go get additional sales and accounts that, that footprint could service. that's been put on hold. Now we do hope that the moratorium expires in August 24. But right now, we're acting as though that moratorium extends until we know better. So I think a mix of capitated, and fee-for-service is our future. I don't believe there'll ever be a majority, but I think that having some piece of capitated, much like Humana and the other capitated agreements we have is a healthy mix for us. Your second question was on. Jason Clemens: On the split out, this is Jason. I can handle that. So it's roughly 2/3 volume, these patient volumes that Suzanne discussed. And the remainder of that is labor. In terms of our outlook, we have planned very modest improvement sequentially from Q2, about $1 million a quarter, better into Q3 and then into Q4. So we're pretty comfortable with the changes that Suzanne talked about and the impacts that, that will drive. Suzanne Foster: And one last thing I forgot to mention, I think it's important to understand that in a capitated arrangement, those accounts don't require us to fund the sales force, right? The sales forces go out and ask for the business. In these accounts, you don't have that expense. Now of course, you have liaisons and other clinical folks, but you have that savings long term. And you also have reduced administrative costs when they cap directly with us because you're eliminating things like the complexity of prior auth and billing efficiencies, et cetera, and also the real-time collections. So there is other nonvisible benefits to our business of entering into these cap deals. Now I don't want anyone to think that I'm disingenuous. I do realize that this count specifically has a lot of work to do to fix our cost basis. But for all the reasons we stated today and these ongoing savings I just mentioned, that's why I continue to believe that some portion of capitated deals in our portfolio makes sense. Pito Chickering: Okay. Then the follow-up here, just about free cash flow. I think your guidance is $120 million for the year. I guess can you break down the split there between cash flow from ops versus CapEx? I think it implies the back half of the year is a positive $175 million of free cash flow versus $75 million use of cash in the first half of the year. I guess, can you just walk us through sort of the bridge in the back half of the year and how we should think about leverage ratios EBITDA less equipment CapEx? Jason Clemens: Sure, Pito. So in the first half, I think your number is closer to about $47 million, $48 million was the use of cash in the first half. And so we're saying for Q3, we expect to deliver approximately $50 million of positive free cash flow to offset that first quarter -- I'm sorry, the first half. And then the remainder will come in the fourth quarter. Cash flow from ops should follow a pretty similar shape as what you've seen in the past from us. And then CapEx will start dialing back as some of the overstock that we have built up to support not just the West Coast capitated agreement, but also national CPAP overstock, that will start working through and dial back the CapEx in the back half. Operator: We'll move on now to Richard Close with Canaccord Genuity. Richard Close: Yes. Just maybe back on the capitated and this halo impact. I think or maybe remind us what your target margin expectation is for capitated agreements like this? And is that dependent on getting that halo effect? Or is the halo effect separate from that target margin? Suzanne Foster: You got it, Richard. No, we've always said that our capitated target is enterprise margins, which is 20%, which does not include any halo effect. Even with our Humana or any other capitated business, we target that and that the halo effect has always been upside for us. Richard Close: Okay. That's helpful. And then with respect to the overhead on the diabetes, you called out getting half of that out of the business within 12 months. What are you thinking about on the other half? Does that stay with you? Or do you get that out over an extended period of time? How are you thinking about that? Jason Clemens: Yes. For that remaining $30 million of stranded costs, Richard, we believe through organic growth as well as accretive M&A, we'll bring more revenue onto the rails -- and so that will eat away at some of that $30 million of overhead as well as we'll continue to be disciplined in our expense structure. I think we demonstrated that in the quarter with a $19 million restructuring program to rightsize primarily the corporate overhead to the revenue base. And so that work will continue overtime. But that first $30 million, we're quite confident, comes out in the first 12 months. Operator: We'll move on now to Kevin Caliendo with UBS. Kevin Caliendo: My questions are on the contract and the idea that a contract gets ripped up on June 30. I mean, we work on Wall Street. We know how contracts sometimes work, but it just seems like an unusual event to have something like this happen. So I guess how shocking is it that a company can do this? And then more specifically, what was the magnitude of the price increase? Meaning like is this a 5% price increase? Is it a 30% price increase? And was there any visibility going in that this was even a risk to happen? Suzanne Foster: I would agree with you, it's unusual, but it's factual and it's unfortunate. We like to say that we have strong partnerships with our manufacturer, but somehow, we -- whether we're missing each other in communication or what's happening, but it was literally a bit of a surprise to us on June 30. I mean we're always in constant discussion with our suppliers on different situations, volumes, supply, recalls, you name it, right? So this one did surprise us a bit, notwithstanding that, the price increase notified to us on the 30th did result in an immediate price -- a percentage increase, which, listen, I don't want to say publicly right now what that is because we are working actively to try and get to better price and terms. And where we are in the quarter and having to report today, we made the decision that as we sit today, there is no contract. So anything we order today is under those new price terms. So we felt it would be disingenuous not to call out that risk. I certainly sincerely hope that it's a different outcome when I'm talking to you next. Kevin Caliendo: Is it -- I mean, isn't normally -- please tell me if I'm just completely off base here, but end of quarter, typically, there's negotiations around lower price and hitting volume targets and things like that. It's just unusual to hear that a company takes a massive price increase at the end of a quarter. I mean, just tell me I'm wrong, but like that's always how I understood these kind of vendor contracts around the end of quarter, there was always negotiation around price and volume and trying to hit targets and things like that. It was almost never the other way. Those price increases were typically done in advance and were well defined. Suzanne Foster: Yes. Yes. I think you understand the normal course of business. But at this point, I really -- I can't say what the discussions were at that time. Operator: [Operator Instructions] We'll move on now to Yujin Park with Baird. Yujin Park: I just wanted to touch on the cybersecurity incident. Can you explain more on what exactly happened? Any disruptions to date and expected cost to remediate and how you treated out that cost if you adjusted or was included in adjusted results and next steps for that? Suzanne Foster: Okay. Let me just briefly explain what happened. I mean we issued some information on this, and then I'll let Jason talk about any additional financial implications. We were notified that we had a threat actor give some data. And we have closed that out. It is done of the bad situation, it was a good situation, we believe that we've resolved it and we've moved on. So there is nothing left behind. There's no additional risk. It's kind of old news for us right now, unfortunately, like meaning we've gotten through it and close that chapter. In terms of ongoing cost, I'll turn it over to Jason. Jason Clemens: Yes. The settlement expenses to close out the matter are included in our nonrecurring expenses adjusting to EBITDA. Operator: Thank you. And it does appear that we have concluded our Q&A. I'd be happy to return the call to our host for any closing comments. Suzanne Foster: I just want to thank everyone. I recognize a lot of moving pieces this quarter and -- but I do hope that you can see that the underlying business and the strategic moves that we are making are setting us up for a really successful future. We understand we have a lot of work to do to improve that cost basis, but that's what we're getting after next. Thanks for joining our call. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect. Before you buy stock in AdaptHealth, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and AdaptHealth wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. AdaptHealth (AHCO) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved 15.9% organic revenue growth, driven by record volumes in Sleep and Respiratory Health and the scaling of the West Coast capitated contract. Completed a multi-year portfolio simplification strategy by divesting the Diabetes Health business for $235 million and exiting non-core Wellness-at-Home product lines. Formed a new e-commerce joint venture for the CPAP Shop to better target the undiagnosed OSA population through integrated telehealth and home testing. Attributed the West Coast capitated contract's margin pressure to higher-than-expected volumes in sleep resupply and enteral products, alongside inefficient inherited workflows. Implemented a workforce restructuring delivering $19 million in annualized savings to offset near-term profitability challenges. Accelerated the deployment of the myAPP digital platform to reduce human intervention in the patient journey, achieving 512,000 users and a 92% conversion rate for AI mask fitting. Revised full-year EBITDA guidance to $490 million to $520 million to reflect the diabetes divestiture, West Coast contract inefficiencies, and a $30 million manufacturer price increase. Assumes approximately $30 million of the $60 million in stranded corporate overhead from the diabetes sale will be eliminated within 12 months of closing. Expects the West Coast capitated contract to reach run-rate profitability targets of 20% by next year as transitory volume spikes subside and logistics are optimized. Anticipates substantial fee-for-service revenue upside in the West Coast footprint once the government-imposed DME moratorium is lifted, allowing for new Medicare billing numbers. Projects positive free cash flow of $80 million to $120 million for the full year, supported by a reduction in CapEx as equipment overstock is utilized. Recorded a $144.2 million non-cash goodwill impairment triggered by the reallocation of corporate costs following the diabetes divestiture. Faced an immediate $30 million headwind for the second half of 2026 due to a major manufacturer terminating a contract and imposing a price increase on July 1. Navigated a cybersecurity incident involving a threat actor; management confirmed the matter is resolved with settlement expenses excluded from adjusted EBITDA. Identified a $15 million impact from winding down non-core wellness products, where revenue will cease quickly but labor costs will persist during patient transitions. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management declined to specify the impacted segment due to active negotiations but noted they cannot pass price increases to payers mid-year. Mitigation efforts include adjusting supplier mix and evaluating product profitability, with further updates expected after the current quarter. The company is moving away from a history of 150+ acquisitions to focus on Sleep and Respiratory where they have the strongest value proposition. Simplifying the portfolio allows for faster deployment of AI and technology across standardized workflows that were previously too fragmented. Profitability was hurt by 'urgent orders' being used non-standardly by providers, which AdaptHealth is now working to align with original contract assumptions. The 'halo effect' (gaining non-capitated business in the same footprint) is currently blocked by a DME moratorium, making the contract a pure-play capitation model for now. Successfully transitioned 478,000 members after Humana exited the direct service business in those regions. Management views this as a low-risk 'tuck-in' given their three-year history of operating similar Humana contracts profitably.

Healthcare services provider AdaptHealth Corp. (NASDAQ:AHCO) fell short of the market’s revenue expectations in Q2 CY2026, with sales falling 7.5% year on year to $740.3 million. The company’s full-year revenue guidance of $2.87 billion at the midpoint came in 17.7% below analysts’ estimates. Its GAAP loss of $0.99 per share was significantly below analysts’ consensus estimates. Is now the time to buy AdaptHealth? Find out in our full research report. Revenue: $740.3 million vs analyst estimates of $847.2 million (7.5% year-on-year decline, 12.6% miss) EPS (GAAP): -$0.99 vs analyst estimates of $0.15 (significant miss) Adjusted EBITDA: $132 million vs analyst estimates of $160.3 million (17.8% margin, 17.7% miss) The company dropped its revenue guidance for the full year to $2.87 billion at the midpoint from $3.49 billion, a 17.6% decrease EBITDA guidance for the full year is $505 million at the midpoint, below analyst estimates of $697.2 million Operating Margin: -18.6%, down from 9.9% in the same quarter last year Free Cash Flow was -$20.94 million, down from $73.33 million in the same quarter last year Market Capitalization: $1.44 billion With a network of approximately 680 locations serving patients across all 50 states, AdaptHealth (NASDAQ:AHCO) provides home medical equipment, supplies, and related services to patients with chronic conditions like sleep apnea, diabetes, and respiratory disorders. A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, AdaptHealth’s 13.1% annualized revenue growth over the last five years was solid. Its growth beat the average healthcare company and shows its offerings resonate with customers. Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. AdaptHealth’s recent performance shows its demand has slowed as its revenue was flat over the last two years. This quarter, AdaptHealth missed Wall Street’s estimates and reported a rather uninspiring 7.5% year-on-year revenue decline, generating $740.3 million of revenue. Looking ahead, sell-side analysts expect revenue to grow 12.1% over the next 12 months, an improvement versus the last two years. This projection is healthy and suggests its newer products and services will catalyze better top-line performance. WHILE YOU’RE HERE: The Next Palantir? One satellite company captures images of every point on Earth. Every single day. The Pentagon wants it. Hedge funds are using it to beat earnings. You’ve probably never heard of it. This is what the early days of Palantir looked like before it became a giant. Same playbook. Different technology. If you missed Palantir, you need to see this. Claim The Stock Ticker for Free HERE. Adjusted operating margin is a key measure of profitability. Think of it as net income (the bottom line) excluding the impact of non-recurring expenses, taxes, and interest on debt - metrics less connected to business fundamentals. AdaptHealth was profitable over the last five years but held back by its large cost base. Its average adjusted operating margin of 7.2% was weak for a healthcare business. Looking at the trend in its profitability, AdaptHealth’s adjusted operating margin decreased by 10.2 percentage points over the last five years. The company’s two-year trajectory also shows it failed to get its profitability back to the peak as its margin fell by 9.4 percentage points. This performance was poor no matter how you look at it - it shows its expenses were rising and it couldn’t pass those costs onto its customers. In Q2, AdaptHealth generated an adjusted operating margin profit margin of negative 18.6%, down 26.5 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue. Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth — for example, a company could inflate its sales through excessive spending on advertising and promotions. AdaptHealth’s earnings losses deepened over the last five years as its EPS dropped 1.5% annually. We tend to steer our readers away from companies with falling EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, AdaptHealth’s low margin of safety could leave its stock price susceptible to large downswings. In Q2, AdaptHealth reported EPS of negative $0.99, down from $0.11 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast AdaptHealth’s full-year EPS will flip from negative $1.69 to positive $0.96. We struggled to find many positives in these results. Its full-year revenue guidance missed and its full-year EBITDA guidance fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 25.7% to $8.05 immediately after reporting. AdaptHealth may have had a tough quarter, but does that actually create an opportunity to invest right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.

This article first appeared on GuruFocus. Release Date: August 04, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Delivered 16% organic growth with record volume gains across the business. Signed a definitive agreement to sell the diabetes business for $235 million, improving growth and margin profile. Expanded capitated relationship with Humana to 33 states plus D.C. and South Florida, transitioning 478,000 new members. Launched AI-powered mask fitting tool with 92% conversion rate in first two weeks, driving MyApp adoption up 56%. Restructured workforce to deliver $19 million in annualized savings while maintaining operational delivery. West Coast capitated contract missed expectations by $15 million in Q2, with $40 million expected impact in H2. A major manufacturer terminated contract and imposed immediate price increase, resulting in $30 million H2 impact. Full-year adjusted EBITDA guidance reduced by $55 million due to West Coast contract and $30 million from manufacturer price increase. Free cash flow was negative $20.9 million in Q2, driven by $166.2 million in capital expenditures. Recorded a $144.2 million non-cash goodwill impairment related to the diabetes divestiture. Warning! GuruFocus has detected 6 Warning Signs with AHCO. Is AHCO fairly valued? Test your thesis with our free DCF calculator. Q: The revised guidance includes a $30 million impact from a manufacturer price increase. What segment does this impact, and what levers do you have to offset it through contract renegotiation, passing costs to payers, or other operational actions? Over what time frame should offsets materialize?A: Suzanne Foster (CEO): We are in active negotiation, so I prefer not to specify the segment. Mid-year, we do not have the opportunity to pass through price. We are hopeful to resolve this, but in the meantime, we are looking at supplier mix and product profitability to offset it. We have CPI-U coming, but it's TBD until we get through the negotiation, which we will update at the end of this quarter. Q: Can you split out the $55 million guide-down for the West Coast capitated contract between increased sleep demand, actual demand, and logistics? Does this change your view on capitated contracts versus fee-for-service?A: Suzanne Foster (CEO) & Jason Clements (CFO): The split is roughly two-thirds volume and one-third labor. My view on capitation has not changed; the strategic value of exclusive footprints and the halo effect remain strong. We plan modest sequential improvements of about $1 million per quarter into Q3 and Q4. We believe a mix of capitated and fee-for-service is our future, not a majority of either. Q: Given the June 30 contract termination and immediate price increase from a large manufacturer, how shocking is this event? What was the magnitude of the price increase, and was there any prior visibility?A: Suzanne Foster (CEO): It is unusual and unfortunate, and it did surprise us. We are actively working to secure better price and terms in the spirit of partnership. As of today, there is no contract, so we are ordering under the new terms. We felt it would be disingenuous not to call out the risk. I sincerely hope the outcome is different when we speak next. Q: The revised guidance includes a $15 million impact from other portfolio actions. What do these entail, and should we think of this as a one-time headwind or ongoing drag?A: Jason Clements (CFO): This is a one-time headwind. We have already started shutting down sales channels for non-core wellness products. For every $1 of revenue that comes out, we drop about 35% gross profit. We are still servicing the existing patient census and transitioning them to other providers over the next couple of quarters, so this will not repeat in 2027 and beyond. Q: As you make these strategic moves, is there a direction to shrink the business? What is the end goal and how do you balance streamlining with deleveraging corporate overhead?A: Suzanne Foster (CEO): This company was built through 150+ acquisitions, leading to subscale products and inconsistent workflows. Over the past two years, we have systematically pruned the portfolio (e.g., Cottman's, Custom Rehab, Homelink Fusion, and now Diabetes and e-commerce). These were good businesses, but with looming threats like competitive bidding, we chose to shrink to our core sleep and respiratory business. This quarter completes that divestiture path, allowing us to invest all additional dollars back into our core and deploy technology and AI at a much faster pace. Q: What exactly operationally needs to be done on the West Coast contract, and are there opportunities to reprice given higher-than-expected utilization? Also, how does the Humana expansion workare you pulling business from another provider?A: Suzanne Foster (CEO): There are two main buckets: order volume/utilization and inherited messy workflows. Sleep resupply spikes were transition-related pent-up demand and are coming down. Enteral volumes need intervention. We are working with our partner to align ordering practices and introducing technology to streamline workflows. On Humana, South Florida was previously handled by Humana directly, not another provider. They RFP'd it, we won, and it's a new geography for us, but we have three years of experience with Humana and know how to operate these contracts profitably. Q: What is your target margin expectation for capitated agreements, and is that dependent on the halo effect?A: Suzanne Foster (CEO): Our capitated target is enterprise margins of 20%, which does not include any halo effect. Even with Humana or other capitated business, we target that, and the halo effect has always been upside for us. Q: Regarding the stranded corporate overhead from the Diabetes divestiture, you expect to eliminate half within 12 months. What about the other half?A: Jason Clements (CFO): For the remaining $30 million of stranded cost, we believe organic growth and accretive M&A will bring more revenue onto the rails, absorbing that overhead. We will also continue disciplined expense management, as demonstrated by the $19 million restructuring program. We are quite confident the first $30 million comes out in the first 12 months. Q: Can you explain the cybersecurity incident, any disruptions, expected remediation costs, and how it was treated in adjusted results?A: Suzanne Foster (CEO) & Jason Clements (CFO): We were notified of a threat actor that took some data. We have closed it out and moved on; there is no additional risk. The settlement expenses to close out the matter are included in our non-recurring expenses, adjusting the unit. Q: Can you break down the free cash flow guidance of $80 million to $120 million, and walk through the bridge for the back half of the year?A: Jason Clements (CFO): The first half was a use of about $47-$48 million. We expect Q3 to deliver approximately $50 million of positive free cash flow to offset the first half, with the remainder in Q4. Cash flow from ops will follow a similar shape as the past, and CapEx will dial back as overstock built for the West Coast contract and national CPAP works through the system. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

CONSHOHOCKEN, Pa., August 04, 2026--(BUSINESS WIRE)--AdaptHealth Corp. (NASDAQ: AHCO) ("AdaptHealth" or the "Company"), a national leader in providing patient-centered, healthcare-at-home solutions including home medical equipment, medical supplies, and related services, announced today financial results for the second quarter ended June 30, 2026. Second Quarter Business Highlights Completed its first full quarter under the Company's exclusive capitated agreement with a large national integrated delivery network, with the contract now fully at run-rate. Signed a new capitated agreement with Humana OneHome in South Florida and Texas and successfully completed the transition of approximately 478,000 members. Subsequent to quarter-end, entered into a definitive agreement to sell the Company's Diabetes Health business for $235.0 million in cash, subject to customary purchase price adjustments, the most significant step yet in AdaptHealth's multi-year effort to concentrate its portfolio around its core Sleep Health, Respiratory Health, and supporting Wellness-at-Home businesses. The Diabetes Health business will now be presented as discontinued operations. Subsequent to quarter end, entered into a joint venture that combines the Company's eCommerce asset with a leading eCommerce sleep retailer and adds a home sleep test capability to help reach the vast undiagnosed OSA population. Grew registered myAPP users to more than 512,000, up 56% from year end 2025 and launched an AI-powered mask-fitting tool, advancing patient digital engagement and expanding self-service capabilities. Subsequent to quarter-end, redeemed the Company’s 6.125% Senior Notes due 2028 with the proceeds from the $325 million delayed draw term loan secured as part of the April 2026 refinancing. Completed a workforce restructuring, generating $19 million in annualized savings while maintaining full operational delivery across all functions. Second Quarter Results All comparisons are to the quarter ended June 30, 2025 unless otherwise stated. The amounts presented below reflect the Company’s continuing operations, except for cash flow from operations and free cash flow, which includes the cash flows from continuing operations and discontinued operations, see below for further discussion. Net revenue was $740.3 million compared to $657.1 million, an increase of 12.7%. Organic revenue growth of 15.9%, with growth across each of the Company’s reportable segments. Net loss attributable to AdaptHealth Corp. was $145.3 million compared to net income of $4.2 million, largely resulting from a $144.2 million pre-tax write down of goodwill. Adjusted EBITDA was $132.0 million compared to $136.4 million, a decrease of 3.2%. Cash flow from operations was $239.0 million year-to-date 2026, a decrease from $257.5 million during the comparable period in 2025, and free cash flow was negative $48.4 million year-to-date 2026, compared to $73.3 million during the comparable period in 2025. Management Commentary "In the second quarter, we delivered 15.9% organic growth, with record volume gains across the business," said Suzanne Foster, Chief Executive Officer. "Also, in July we signed a definitive agreement to divest our Diabetes Health business, the most significant step yet in our multi-year effort to focus AdaptHealth on our core Sleep Health, Respiratory Health, and supporting Wellness-at-Home businesses. Our West Coast capitated partnership reached full scale in the quarter, and the complexity of that transition has impacted our margins. Together with an unexpected price increase from one of our manufacturers, this has led us to lower our full-year outlook. We are moving quickly to address the cost pressures introduced by our rapid growth, and we believe these actions will make us a stronger, more efficient company." Financial Outlook The Company is revising its financial guidance for fiscal year 2026 on a continuing operations basis, which excludes the Diabetes Health business, except for free cash flow, which includes the cash flows from continuing operations and discontinued operations, as follows: Net revenue of $2.85 billion to $2.89 billion Adjusted EBITDA of $490 million to $520 million Free cash flow of $80 million to $120 million Relative to our prior fiscal year 2026 Adjusted EBITDA guidance of $680 million to $730 million, the revised guidance includes a $100 million impact from reporting the Diabetes Health business as discontinued operations, including $60 million of previously allocated corporate overhead that will remain in continuing operations, of which the Company expects roughly half to be eliminated within 12 months thereafter. The revised guidance also includes a $55 million impact related to our West Coast capitated contract; a $30 million impact from a manufacturer price increase; and a $15 million impact from other portfolio actions. Conference Call Management will host a teleconference today, Tuesday, August 4, 2026, at 8:30 am ET to discuss the results and business activities with analysts and investors. Interested parties may participate in the call by dialing: 800-274-8461 (Domestic) or 203-518-9814 (International) When prompted, reference Conference ID: AHCO2Q26 Webcast registration: Click Here Following the live call, a replay will be available for six months on the Company's website, www.adapthealth.com, under "Investor Relations." About AdaptHealth Corp. AdaptHealth is a national leader in providing patient-centered, healthcare-at-home solutions including home medical equipment, medical supplies, and related services. The Company operates under three reportable segments that align with its product categories: (i) Sleep Health, (ii) Respiratory Health, and (iii) Wellness at Home. The Sleep Health segment provides sleep therapy equipment, supplies and related services (including CPAP and BiLevel services) to individuals for the treatment of obstructive sleep apnea. The Respiratory Health segment provides oxygen and home mechanical ventilation equipment and supplies and related chronic therapy services to individuals for the treatment of respiratory diseases, such as chronic obstructive pulmonary disease and chronic respiratory failure. The Wellness at Home segment provides home medical equipment and services to patients in their homes including those who have been discharged from acute care and other facilities. The segment tailors a service model to patients who are adjusting to new lifestyles or navigating complex disease states by providing essential medical supplies and durable medical equipment. In July 2026, AdaptHealth entered into a definitive agreement to sell the Diabetes Health business for $235.0 million in cash, subject to customary purchase price adjustments. As a result of this transaction, the Diabetes Health business met the criteria to be reported as discontinued operations. Therefore, AdaptHealth has reported the results of the Diabetes Health business, including the results of operations, and related assets and liabilities, as discontinued operations for all periods presented herein. The Company is proud to partner with an extensive and highly diversified network of referral sources, including acute care hospitals, sleep labs, pulmonologists, skilled nursing facilities, and clinics. AdaptHealth services beneficiaries of Medicare, Medicaid, and commercial insurance payors, reaching approximately 4.8 million patients annually in all 50 states through its network of approximately 670 locations in 48 states. Forward-Looking Statements This press release includes certain statements that are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "should," "would," "plan," "predict," "potential," "seem," "seek," "future," "outlook," and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding projections, estimates and forecasts of revenue and other financial and performance metrics and projections of market opportunity and expectations and the Company’s acquisition pipeline. These statements are based on various assumptions and on the current expectations of AdaptHealth management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on, by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of the Company. These forward-looking statements are subject to a number of risks and uncertainties, including the outcome of judicial and administrative proceedings to which the Company may become a party or governmental investigations to which the Company may become subject that could interrupt or limit the Company’s operations, result in adverse judgments, settlements or fines and create negative publicity; changes in the Company’s customers’ preferences, prospects and the competitive conditions prevailing in the healthcare sector. A further description of such risks and uncertainties can be found in the Company’s filings with the Securities and Exchange Commission. If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that the Company presently knows or that the Company currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect the Company’s expectations, plans or forecasts of future events and views as of the date of this press release. The Company anticipates that subsequent events and developments will cause the Company’s assessments to change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company’s assessments as of any date subsequent to the date of this press release. Accordingly, undue reliance should not be placed upon the forward-looking statements. Use of Non-GAAP Financial Information and Financial Guidance The Company uses EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, free cash flow and organic revenue, which are financial measures that are not in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, to analyze its financial results and believes that they are useful to investors, as a supplement to U.S. GAAP measures. In addition, the Company’s ability to incur additional indebtedness and make investments under its existing credit agreement is governed, in part, by its ability to satisfy tests based on a variation of Adjusted EBITDA. The Company believes Adjusted EBITDA and Adjusted EBITDA Margin are useful to investors in evaluating the Company’s financial performance. The Company uses Adjusted EBITDA as the profitability measure in its incentive compensation plans that have a profitability component and to evaluate acquisition opportunities, where it is most often used for purposes of contingent consideration arrangements. EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin should not be considered as measures of financial performance under U.S. GAAP, and the items excluded from EBITDA and Adjusted EBITDA are significant components in understanding and assessing financial performance. Accordingly, these key business metrics have limitations as an analytical tool. They should not be considered as an alternative to net income or any other performance measures derived in accordance with U.S. GAAP or as an alternative to cash flows from operating activities as a measure of the Company’s liquidity. The Company uses free cash flow, which is a financial measure that is not in accordance with U.S. GAAP, in its operational and financial decision-making and believes free cash flow is useful to investors because similar measures are frequently used by securities analysts, investors, ratings agencies and other interested parties to evaluate the Company's competitors and to measure the ability of companies to service their debt. The Company's presentation of free cash flow should not be construed as a measure of liquidity or discretionary cash available to the Company to fund its cash needs, including investing in the growth of its business and meeting its obligations. Free cash flow should not be considered as a measure of financial performance under U.S. GAAP. Accordingly, this key business metric has limitations as an analytical tool. It should not be considered as an alternative to any performance measures derived in accordance with U.S. GAAP or as an alternative to cash flows from operating activities as a measure of the Company’s liquidity. The Company uses organic revenue, which is a financial measure that is not in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, to analyze its financial results and believes that it is useful to investors, as a supplement to U.S. GAAP measures. The change in net revenue from organic revenue is reported as organic revenue as a percentage of prior period total reported net revenue. Management believes organic revenue is meaningful to investors as it provides appropriate visibility into how the Company changes organically—that is, within its existing operations using its own resources. Organic revenue is defined as all changes in reported net revenues from the comparable period presented, excluding: (1) increases in net revenue in the current period from acquisitions attributable to businesses and/or assets the Company has owned for less than one year based on the month of acquisition. This excludes the acquisition of assets from previous providers to facilitate the transition of patients related to newly awarded at-risk capitated contracts, since the revenue related to these agreements is earned organically; and (2) decreases in net revenue from dispositions existing in the prior period from divested product lines, services, and/or businesses for which there is no revenue recognized in the current period. This release contains non-GAAP financial guidance. There is no reliable or reasonably estimable comparable GAAP measure for the Company’s non-GAAP financial guidance because the Company is not able to reliably predict the impact of certain items that typically have one or more of the following characteristics, such as being highly variable, difficult to project, unusual in nature, significant to the results of a particular period or not indicative of future operating results. Similar charges or gains were recognized in prior periods and will likely reoccur in future periods. As a result, reconciliation of the non-GAAP financial guidance to the most directly comparable GAAP measure is not available without unreasonable effort. In addition, the Company believes such a reconciliation would imply a degree of precision and certainty that could be confusing to investors. The variability of the specified items may have a significant and unpredictable impact on the Company’s future GAAP results. In addition, the Company’s financial guidance in this release excludes the impact of any potential additional future strategic acquisitions and any items that have not yet been identified and quantified. The financial guidance is subject to risks and uncertainties applicable to all forward-looking statements as described elsewhere in this press release. Non-GAAP Financial Measures EBITDA and Adjusted EBITDA This press release presents AdaptHealth’s EBITDA and Adjusted EBITDA for the three and six months ended June 30, 2026 and 2025. AdaptHealth defines EBITDA as net income (loss) from continuing operations, plus interest expense, net, income tax expense (benefit), and depreciation and amortization, including patient depreciation. AdaptHealth defines Adjusted EBITDA as EBITDA (as defined above), plus equity-based compensation expense, litigation settlement expense, gain on sale of businesses, restructuring expenses, loss on extinguishment of debt, goodwill impairment, and certain other non-recurring items of expense or income. The following unaudited table presents the reconciliation of net income (loss) from continuing operations to EBITDA and Adjusted EBITDA, and the reconciliation of net income (loss) from continuing operations as a percentage of net revenue to Adjusted EBITDA Margin, for the three months ended June 30, 2026 and 2025: The following unaudited table presents the reconciliation of net income (loss) from continuing operations to EBITDA and Adjusted EBITDA, and the reconciliation of net income (loss) from continuing operations as a percentage of net revenue to Adjusted EBITDA Margin, for the six months ended June 30, 2026 and 2025: Free Cash Flow This press release presents AdaptHealth’s free cash flow for the three and six months ended June 30, 2026 and 2025. AdaptHealth defines free cash flow as net cash provided by operating activities less cash paid for purchases of equipment and other fixed assets. The following unaudited table reconciles net cash provided by operating activities to free cash flow for the three and six months ended June 30, 2026 and 2025: View source version on businesswire.com: https://www.businesswire.com/news/home/20260804623956/en/ Contacts AdaptHealth Corp.Jason Clemens, CFAChief Financial Officer Luke Montgomery, CFASenior Vice President, Investor [email protected]

Interested in AdaptHealth Corp.? Here are five stocks we like better. AdaptHealth delivered strong revenue growth in Q2, with continuing-operations revenue up 12.7% year over year to $740.3 million, led by Sleep Health and Respiratory Health; organic growth reached 15.9%. Profitability was pressured by the West Coast capitated contract, which fell $15 million short in Q2, along with higher supplier costs and portfolio changes. The company expects an additional $40 million impact from the contract in the second half of 2026. AdaptHealth cut its 2026 adjusted EBITDA outlook to $490 million–$520 million, while pursuing cost savings, the sale of its Diabetes Health business, and debt reduction through proceeds from the divestiture. 3 Small-Cap Leaders Poised for Significant Growth AdaptHealth (NASDAQ:AHCO) reported second-quarter revenue growth in its continuing operations but lowered its full-year profitability outlook, citing higher-than-expected costs in its West Coast capitated contract, a supplier price increase and portfolio actions. Chief Executive Officer Suzanne Foster said the company delivered 15.9% organic revenue growth during the quarter, supported by record volume gains. Continuing-operations net revenue rose 12.7% year over year to $740.3 million, while adjusted EBITDA declined to $132 million from $136.4 million a year earlier. Adjusted EBITDA margin was 17.8%. → SpaceX’s First Earnings Report Could Decide Whether Shorts or Bulls Have Control The company is presenting results on a continuing-operations basis following its agreement to sell its Diabetes Health business. The proposed sale, announced in July, is valued at $235 million. Sleep Health revenue increased 15.5% from the prior-year quarter to $386.5 million, while Respiratory Health revenue rose 14.1% to $194.4 million. Wellness at Home revenue grew 4.9% to $159.4 million. → Financials Hit Record Highs as the AI Trade Unravels—Can They Keep Leading? The West Coast capitated contract accounted for 10.7 percentage points of the company’s organic growth, while the base business contributed 5.2 percentage points. Total capitated revenue reached $103.3 million, representing about 14% of continuing-operations revenue and more than three times the level reported a year earlier. Foster said AdaptHealth also expanded its relationship with Humana OneHome in May, transitioning 478,000 members in South Florida and Texas. The company’s Humana capitated relationship now spans 33 states, the District of Columbia and South Florida. → Why Rare Earth Processing Could Be the Real 2027 Opportunity AdaptHealth also said its enterprise sales team secured preferred-provider agreements with several multi-hospital health systems during the quarter. The company said its West Coast capitated arrangement fell short of expectations by $15 million in the second quarter. AdaptHealth expects a further $40 million effect on profitability relative to its earlier projections during the second half of 2026. Foster said order volumes have run above expectations, particularly in Sleep Health resupply products and enteral products. She attributed the elevated Sleep Health resupply volumes largely to transition-related pent-up demand, which the company expects to be temporary. Enteral volumes, however, will require further intervention. AdaptHealth also identified inefficiencies in inherited workflows, including non-standard use of urgent orders, which have increased logistics and labor costs. The company is working with its customer to align ordering practices with contract assumptions, expand drop-shipping, introduce technology into workflows, and adjust fleet and labor levels. “We remain confident that with sustained work and additional time, this contract will be a strong contributor to our profitability,” Foster said. Chief Financial Officer Jason Clemens said approximately two-thirds of the West Coast profitability shortfall relates to volume and the remainder is tied to labor. The company continues to target a 20% long-term margin for its capitated business and expects the West Coast contract to reach run-rate profitability next year, with sequential improvement anticipated over the next several quarters. Foster said the company has not yet been able to generate the expected “halo effect” from its West Coast footprint because a government-imposed DME moratorium has prevented it from securing new Medicare billing numbers, known as PTANs, for its 40 new locations. If the moratorium is lifted, the company sees an opportunity to serve additional fee-for-service patients and other customers within the region. AdaptHealth has continued to narrow its focus around Sleep Health, Respiratory Health and supporting home medical equipment operations. In addition to the Diabetes Health sale, the company discontinued proactive sales of certain low-growth and low-margin Wellness at Home products. The company also agreed to contribute its CPAP Shop e-commerce operation into a new joint venture with an e-commerce competitor and a telehealth prescriber network. Foster said the venture is intended to serve direct-to-consumer customers through home sleep testing and a digital path from diagnosis to treatment. Clemens said the Wellness at Home product exits represent a one-time profitability headwind. While the company has started shutting down sales channels, it will continue to carry expenses associated with existing patients as they transition to other providers over the next several quarters. AdaptHealth also restructured its workforce during the second quarter, a move expected to generate $19 million in annualized savings. Foster said the company is using technology and automation to lower its cost to serve. Its myAPP digital platform had 512,000 users at quarter-end, up 56% from the end of 2025. The company lowered its full-year 2026 adjusted EBITDA outlook for continuing operations to between $490 million and $520 million. The prior outlook was $680 million to $730 million, including the Diabetes Health business. The Diabetes Health divestiture accounts for a $100 million reduction, including $40 million of adjusted EBITDA moving into discontinued operations and $60 million of corporate costs that will remain with continuing operations. Revised West Coast contract expectations account for a $55 million reduction. A price increase imposed by a large supplier effective July 1 is expected to reduce second-half profitability by $30 million. Other portfolio actions account for a $15 million reduction in second-half projections. Foster said the supplier notified AdaptHealth on June 30 that it was terminating its contract and implementing an immediate price increase. The company is negotiating with the supplier and is evaluating supplier mix and product profitability to mitigate the effect, but has included the full $30 million impact in its outlook. For 2026, AdaptHealth expects continuing-operations revenue of $2.85 billion to $2.89 billion and free cash flow of $80 million to $120 million, including cash flow from Diabetes Health. Third-quarter revenue is projected at $720 million to $740 million, with adjusted EBITDA margin of about 17.9% and free cash flow of about $50 million. Free cash flow was negative $20.9 million in the second quarter, primarily due to $166.2 million of capital expenditures supporting the capitated contract, including about $25 million in one-time equipment and vehicle purchases. The company ended the quarter with a consolidated leverage ratio of 3.06 times and said it remains committed to a 2.5-times net leverage target. After the quarter ended, AdaptHealth drew $325 million under a delayed-draw term loan and used the proceeds to redeem its 6.125% senior notes due in 2028. Clemens said the company intends to use a significant portion of Diabetes Health sale proceeds to reduce debt further. AdaptHealth, Inc operates as a leading provider of home medical equipment (HME) and related services in the United States. The company focuses on delivering respiratory care, mobility solutions and bathroom safety products to patients with chronic and acute medical needs. Through its comprehensive service offerings, AdaptHealth aims to enhance quality of life and clinical outcomes for patients who require long-term support outside of a hospital setting. The company's respiratory portfolio includes products such as continuous positive airway pressure (CPAP) devices, oxygen concentrators, ventilators, and associated supplies for patients with sleep apnea, COPD and other pulmonary conditions. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "AdaptHealth Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

AdaptHealth Corp. (NASDAQ:AHCO) shares plunged nearly 13% in pre-market trading after the home medical equipment provider reported second-quarter 2026 results that fell short of Wall Street expectations and sharply reduced its financial outlook for the year. The weaker-than-expected performance was accompanied by lower guidance for revenue, adjusted EBITDA and free cash flow. AdaptHealth reported a quarterly loss of $0.99 per share, compared with analyst expectations for earnings of $0.15 per share. Revenue totalled $740.3 million, missing the consensus estimate of $848.89 million. Despite the shortfall, sales were 12.7% higher than the $657.1 million reported in the same quarter last year. The company also recorded organic revenue growth of 15.9% across all of its business segments. Chief Executive Officer Suzanne Foster said demand remained robust despite operational challenges. “The company delivered 15.9% organic growth, with record volume gains across the business,” Foster said, adding that “the complexity of that transition has impacted our margins.” AdaptHealth significantly lowered its fiscal 2026 guidance. The company now expects revenue of between $2.85 billion and $2.89 billion, well below the analyst consensus estimate of approximately $3.486 billion. Management also reduced its adjusted EBITDA forecast to a range of $490 million to $520 million and lowered its free cash flow guidance to between $80 million and $120 million. The revised guidance reflects a number of headwinds affecting the business. AdaptHealth said the sale of its Diabetes Health business, which is now classified as discontinued operations, will reduce reported revenue by approximately $100 million, including $60 million of corporate overhead that will remain with the company. Additional pressures include a $55 million impact from a capitated contract on the U.S. West Coast, approximately $30 million in manufacturer price increases and a further $15 million related to other portfolio actions. Adjusted EBITDA declined 3.2% year over year to $132.0 million from $136.4 million. The company reported a net loss of $145.3 million, compared with net income of $4.2 million in the prior-year period. The deterioration was primarily driven by a goodwill impairment charge of $144.2 million. Following the end of the quarter, AdaptHealth entered into a definitive agreement to sell its Diabetes Health business for $235.0 million in cash and announced the creation of a joint venture combining its eCommerce assets with a leading sleep products retailer. AdaptHealth stock price