Adapthealth ((AHCO)) has held its Q1 earnings call. Read on for the main highlights of the call.
AdaptHealth’s recent earnings call presented a balanced view of the company’s performance, highlighting both achievements and challenges. The sentiment was neutral, reflecting significant progress in debt reduction and improvements in specific health segments, counterbalanced by declines in overall revenue and adjusted EBITDA, as well as ongoing challenges in the Sleep Health segment.
Revenue Exceeds Guidance
In the first quarter, AdaptHealth’s revenue surpassed the midpoint of their guidance range by $13.1 million, primarily driven by stronger than anticipated performance in the Respiratory and Diabetes Health segments. This achievement underscores the company’s ability to exceed expectations despite a challenging market environment.
Significant Debt Reduction
AdaptHealth made notable strides in reducing its debt, paying down an additional $25 million in the first quarter of 2025. This brings the total debt repayment to $195 million over the last five quarters, demonstrating the company’s commitment to strengthening its financial position.
Improvement in Diabetes Health Segment
The Diabetes Health segment showed promising signs of recovery, marking the second consecutive quarter of sequential improvement in new starts and achieving the lowest resupply attrition rate in two years. This progress indicates a positive trajectory for the segment.
Strong Respiratory Health Segment Performance
The Respiratory Health segment reported a 3.3% increase in net revenue compared to the prior year quarter, with a record oxygen census of 325,000 patients. This growth highlights the segment’s robust performance and its contribution to the company’s overall revenue.
Overall Revenue Decline
Despite some segments performing well, AdaptHealth experienced a 1.8% decline in net revenue compared to the prior year quarter. This decline was partly attributed to one less business day, affecting overall financial results.
Adjusted EBITDA Decline
The first quarter saw a 19.3% decline in adjusted EBITDA from the prior year quarter, with the margin dropping from 20.0% to 16.4%. This decline reflects the challenges faced by the company in maintaining profitability.
Sleep Health Segment Revenue Decline
The Sleep Health segment faced difficulties, with net revenue decreasing by 2.8% compared to the prior year quarter. New setups were slightly behind expectations, indicating ongoing challenges in this area.
Diabetes Health Segment Revenue Decline
Despite signs of recovery, the Diabetes Health segment’s net revenue declined by 8.0% compared to the prior year quarter. This decline highlights the segment’s ongoing challenges, even as improvements are being made.
Negative Free Cash Flow
AdaptHealth reported a slight negative free cash flow of $0.1 million in the first quarter, a significant improvement from the negative $38.9 million reported in the prior year quarter. This improvement suggests better cash management, despite the ongoing deficit.
Forward-Looking Guidance
Looking ahead, AdaptHealth provided guidance for the full year 2025, anticipating revenue between $3.18 billion and $3.32 billion and adjusted EBITDA of $665 million to $705 million. The company also forecasts a free cash flow between $180 million and $220 million. However, due to the divestiture of certain incontinence assets, they are reducing their full-year revenue expectations by $40 million and adjusted EBITDA by $5 million. The company remains focused on reducing its debt and achieving a net leverage ratio target of 2.5 times.
In summary, AdaptHealth’s earnings call painted a picture of a company navigating through both achievements and challenges. While there were notable successes in debt reduction and specific health segments, overall revenue and EBITDA declines, along with challenges in the Sleep Health segment, tempered the positive aspects. The company’s forward-looking guidance reflects cautious optimism as it continues to strengthen its financial position.