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What changed in AdaptHealth Corp.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of AdaptHealth Corp.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+480 added−390 removedSource: 10-K (2025-02-25) vs 10-K (2024-02-27)

Top changes in AdaptHealth Corp.'s 2024 10-K

480 paragraphs added · 390 removed · 302 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

47 edited+10 added−7 removed51 unchanged
Biggest changeThe Company focuses primarily on providing (i) sleep therapy equipment, supplies and related services (including CPAP and bi PAP services) to individuals suffering from obstructive sleep apnea (“OSA”), (ii) medical devices and supplies to patients for the treatment of diabetes (including continuous glucose monitors (“CGM”) and insulin pumps), (iii) home medical equipment to patients discharged from acute care and other facilities, (iv) oxygen and related chronic therapy services in the home, and (v) other HME devices and supplies on behalf of chronically ill patients with wound care, urological, incontinence, ostomy and nutritional supply needs.
Biggest changeDiabetes Health The Diabetes Health segment provides medical devices, including continuous glucose monitors and insulin pumps, and related services to patients for the treatment of diabetes. Wellness at Home 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.
Changes in the laws and regulations and new interpretations of existing laws and regulations may affect permissible activities, the relative costs associated with doing business, and reimbursement amounts paid by federal, state and other third-party payers.
Changes in laws and regulations and new interpretations of existing laws and regulations may affect permissible activities, the relative costs associated with doing business, and reimbursement amounts paid by federal, state and other third-party payers.
AdaptHealth is led by a proven management team with experience in the HME industry across a variety of healthcare organizations. AdaptHealth has a centralized approach for key business processes, including revenue cycle management, strategic purchases, payor contracting, mergers and acquisitions (“M&A”) activity, finance, compliance, legal, human resources, IT and sales management.
AdaptHealth is led by a proven management team with experience across a variety of organizations in the healthcare industry. AdaptHealth has a centralized approach for key business processes, including revenue cycle management, strategic purchases, payor contracting, mergers and acquisitions (“M&A”) activity, finance, compliance, legal, human resources, IT and sales management.
AdaptHealth has established an integrated, technology-enabled, centralized platform, distinguishing itself from many of its competitors who traditionally use less automated processes that are typically complex, can be prone to mistakes and are less efficient. AdaptHealth’s technology enables automated, compliant, and integrated workflow into patients’ delivery of care.
AdaptHealth has established an integrated, technology-enabled, centralized platform, distinguishing itself from many of its competitors that traditionally use less automated processes that are typically complex, can be prone to mistakes and are less efficient. AdaptHealth’s technology enables automated, compliant, and integrated workflow into patients’ delivery of care.
If treating physicians do not adequately document, among other things, their diagnoses and plans of care, the risks that AdaptHealth will be subject to audits and payment denials may increase. Moreover, auditors’ interpretations of these policies are inconsistent and subject to individual interpretation, leading to significant increases in individual supplier and industry-wide perceived error rates.
If treating physicians do not adequately document, among other things, their diagnoses and plans of care, the risk that AdaptHealth will be subject to audits and payment denials may increase. Moreover, auditors’ interpretations of these policies are inconsistent and subject to individual interpretation, leading to significant increases in individual supplier and industry-wide perceived error rates.
AdaptHealth maintains a Compliance Program that is designed to meet the guidelines set forth by the U.S. Department of Health and Human Services ("HHS"), and provides ongoing compliance training designed to keep AdaptHealth’s officers, directors and employees well-educated and up-to-date regarding developments on relevant topics and to emphasize AdaptHealth’s policy of strict compliance.
AdaptHealth maintains a Compliance Program that is designed to meet the guidelines set forth by the U.S. Department of Health and Human Services ("HHS"), provides ongoing compliance training designed to keep AdaptHealth’s officers, directors and employees well-educated and up-to-date regarding developments on relevant topics and emphasizes AdaptHealth’s policy of strict compliance.
AdaptHealth believes that its relationships with its referral sources are strong and that these entities will continue to be a source of non-acquired growth through new patients. While AdaptHealth views its referral sources as fundamental to its business, no single referral source accounted for a material amount of its annual net revenue as of December 31, 2023.
AdaptHealth believes that its relationships with its referral sources are strong and that these entities will continue to be a source of non-acquired growth through new patients. While AdaptHealth views its referral sources as fundamental to its business, no single referral source accounted for a material amount of its annual net revenue as of December 31, 2024.
Providers of home oxygen and other respiratory therapy services and equipment have historically been heavily dependent on Medicare reimbursement due to the high proportion of elderly persons suffering from respiratory disease utilizing Medicare benefits. Durable medical equipment, including oxygen equipment, is traditionally reimbursed by Medicare based on fixed fee schedules. Impact of the MMA.
Providers of home oxygen and other respiratory therapy services and equipment have historically been heavily dependent on Medicare reimbursement due to the high proportion of elderly persons suffering from respiratory diseases utilizing Medicare benefits. Durable medical equipment, including oxygen equipment, is traditionally reimbursed by Medicare based on fixed fee schedules. Impact of the MMA.
The gap period commenced as anticipated and CMS has yet to announce when the temporary gap period for the CBP would end, but indicated that it would start bidding for the next CBP round after it completes the formal notice and comment rulemaking process and implements necessary changes to the CBP to establish sustainable process, save money for Medicare patients and taxpayers, help limit fraud, waste, and abuse, and ensure patient access to quality items and services.
The gap period commenced as anticipated and CMS has yet to announce when the temporary gap period for the CBP will end but indicated that it would start the bidding process for the next CBP round after it completes the formal notice and comment rulemaking process and implements necessary changes to the CBP to establish sustainable processes, save money for Medicare patients and taxpayers, limit fraud, waste, and abuse, and ensure patient access to quality items and services.
For the years ended December 31, 2023, 2022 and 2021, net revenue generated with respect to providing OTS knee and back braces (excluding amounts generated in non-rural and rural non-bid areas) were not material.
For the years ended December 31, 2024, 2023, and 2022, net revenue generated with respect to providing OTS knee and back braces (excluding amounts generated in non-rural and rural non-bid areas) were not material.
These distributors invoice AdaptHealth for the cost of shipped products at the time of sale. AdaptHealth receives referrals from a variety of sources, such as acute care hospitals, sleep laboratories, pulmonologist and endocrinologist offices, skilled nursing facilities, hospice operators, and primary care providers, among others.
These distributors invoice AdaptHealth for the cost of shipped products at the time of sale. AdaptHealth receives referrals from a variety of sources, such as acute care hospitals, sleep laboratories, pulmonologist and 5 Table of Contents endocrinologist offices, skilled nursing facilities, hospice operators, and primary care providers, among others.
See Item 1 C , " Cybersecurity ", of this Annual Report on Form 10-K, for discussion of AdaptHealth's risk management and strategy and governance relating to cybersecurity. Revenue Cycle Management. AdaptHealth’s revenue cycle management and billing processes have both manual and computerized elements that are designed to maintain the integrity of revenue and accounts receivable.
See Item 1C , " Cybersecurity ", of this Annual Report on Form 10-K, for discussion of AdaptHealth's risk management and strategy and governance relating to cybersecurity. Revenue Cycle Management. AdaptHealth’s revenue cycle management and billing processes have both manual and computerized elements that are designed to maintain the integrity of revenue and accounts receivable.
AdaptHealth cannot currently predict the adverse impact these measures might have on its financial condition and results of operations, but such impact could be material. Federal and state budgetary and other cost-containment pressures will continue to impact the home respiratory care industry.
AdaptHealth cannot currently predict the adverse impact these measures might have on its financial condition and results of operations, but such impact could be material. 11 Table of Contents Federal and state budgetary and other cost-containment pressures will continue to impact the home respiratory care industry.
AdaptHealth is often paid a fixed monthly amount for certain HME products as designated by the Centers for Medicare & Medicaid Services (“CMS”) or commercial insurance payors, such as CPAP equipment, wheelchairs, hospital beds, oxygen concentrators, insulin pumps and other similar products. These sales accounted for approximately 33% of AdaptHealth’s net revenue for the year ended December 31, 2023.
AdaptHealth is often paid a fixed monthly amount for certain HME products as designated by the Centers for Medicare & Medicaid Services (“CMS”) or commercial insurance payors, such as CPAP equipment, wheelchairs, hospital beds, oxygen concentrators, insulin pumps and other similar products. These sales accounted for approximately 32% of AdaptHealth’s net revenue for the year ended December 31, 2024.
AdaptHealth believes that these facilities are adequate to meet its current needs. Human Capital Resources As of December 31, 2023, AdaptHealth had approximately 10,700 employees. AdaptHealth’s human capital resources objectives and compensation program include attracting and retaining highly motivated, well-qualified employees and executives. AdaptHealth uses a mix of competitive salaries and other benefits to attract and retain employees and executives.
AdaptHealth believes that these facilities are adequate to meet its current needs. Human Capital Resources As of December 31, 2024, AdaptHealth had approximately 10,500 employees. AdaptHealth’s human capital resources objectives and compensation program include attracting and retaining highly motivated, well-qualified employees and executives. AdaptHealth uses a mix of competitive salaries and other benefits to attract and retain employees and executives.
AdaptHealth competes with other large national providers, including Owens & Minor Inc., Lincare Holdings Inc., Rotech Healthcare, Inc. and Cardinal Health, Inc.; regional providers, including DASCO Home Medical Equipment, Binson’s Medical Equipment, Inc., Norco, Inc., Protech Home Medical Corp. and Quipt Home Medical; and product-specific providers, including Breg, Inc., Inogen, Inc., Acelity L.P., CCS Medical, and Advanced Diabetes Supply, as well as over 6,000 generally smaller local providers.
AdaptHealth competes with other large national providers, including Owens & Minor Inc., Lincare Holdings Inc., Rotech Healthcare, Inc., Cardinal Health, Inc. and Quipt Home Medical Corp; regional providers, including DASCO Home Medical Equipment, Binson’s Medical Equipment, Inc., Norco, Inc., Protech Home Medical Corp., Quipt Home Medical and Viemed Healthcare, Inc.; and product-specific 7 Table of Contents providers, including Breg, Inc., Inogen, Inc., Acelity L.P., CCS Medical, and Advanced Diabetes Supply, as well as over 6,000 generally smaller local providers.
Both California laws require initial disclosures in 2026. Compliance with climate-related laws may be further complicated by disparate regulatory approaches in various 9 Table of Con t ents jurisdictions. New or expanded climate-related laws could impose substantial costs on AdaptHealth. At the present time, we cannot predict their potential effect on AdaptHealth's capital expenditures or results of operations.
Both California laws require initial disclosures in 2026. Compliance with climate-related laws may be further complicated by disparate regulatory approaches in various jurisdictions. New or expanded climate-related laws could impose substantial costs on AdaptHealth. At the present time, we cannot predict their potential effect on AdaptHealth's capital expenditures or results of operations.
The effects could impair, for example, the availability and cost of certain products, commodities and energy (including utilities), which in turn may impact AdaptHealth's ability to procure goods or services required for the operation of its business at the quantities and levels it requires.
The effects could impair, among other things, the availability and cost of certain products and commodities and energy (including utilities), which may in turn impact AdaptHealth's ability to procure goods or services required for the operation of its business at the quantities and levels it requires.
The impacts may include physical risks (such as rising sea levels or frequency and severity of extreme weather conditions), social and human effects (such as population dislocations or harm to health and well-being), compliance costs and transition risks (such as regulatory or technology changes) and other adverse effects.
The impacts may include physical risks (such as rising sea levels or frequency and severity of extreme weather conditions), social and human effects (such as population displacement or harm to health and well-being), compliance costs and transition risks (such as regulatory or technological changes) and other adverse effects.
In March 2019, CMS announced that it would consolidate all rounds and areas of the DMEPOS Competitive Bidding Program (“CBP”) into a single round of competition effective January 1, 2021 named “Round 2021.” Round 2021 contracts became effective on January 1, 2021 and extend through December 31, 2023. CMS included 16 product categories in Round 2021.
In March 2019, CMS announced that it would consolidate all rounds and areas of the DMEPOS Competitive Bidding Program (“CBP”) into a single round of competition effective January 1, 2021 named “Round 2021.” Round 2021 contracts became effective on January 1, 2021 and extended through December 31, 2023. CMS included 16 product 10 Table of Contents categories in Round 2021.
The MMA instructed CMS to establish and implement programs under which competitive acquisition areas would be established throughout the United States for purposes of awarding contracts for the furnishing of competitively priced items of DME, including oxygen equipment.
The MMA instructed CMS to establish and implement programs under which competitive acquisition areas would be established throughout the U.S. for the purposes of awarding contracts for the furnishing of competitively priced items of DME, including oxygen equipment.
AdaptHealth purchases these items primarily from two to three suppliers for each of its product categories, including its sleep therapy equipment and supplies, its mobility and home services products (such as hospital beds, wheelchairs, walkers and commodes) and its diabetes services products/CGM products.
Suppliers AdaptHealth purchases home healthcare equipment, medical devices and supplies from a variety of suppliers. AdaptHealth purchases these items primarily from two to three suppliers for each of its product categories, including its sleep therapy equipment and supplies, its mobility and home services products (such as hospital beds, wheelchairs, walkers and commodes) and its diabetes services products/CGM products.
AdaptHealth focuses on regional management to respond promptly and effectively to local market demands and opportunities. AdaptHealth’s regional managers are responsible and accountable for maintaining and developing relationships with referral sources, customer service for non-CPAP supply product lines and logistics for non-drop-shipped products. 5 Table of Con t ents IT.
AdaptHealth focuses on regional management to respond promptly and effectively to local market demands and opportunities. AdaptHealth’s regional managers are responsible and accountable for maintaining and developing relationships with referral sources, customer service for non-CPAP supply product lines and logistics for non-drop-shipped products. IT.
For example, AdaptHealth has developed a Leadership Development curriculum for its managers and provides regular feedback conversations about performance goals with its employees. This encourages a high-performance culture and creates an environment dedicated to caring for patients, while achieving company goals. Competition The HME market is fragmented and highly competitive.
AdaptHealth's management team has implemented various talent development initiatives. For example, AdaptHealth has developed a Leadership Development curriculum for its managers and provides regular feedback conversations about performance goals with its employees. This encourages a high-performance culture and creates an environment dedicated to caring for patients while achieving company goals. Competition The HME market is fragmented and highly competitive.
Sources of referrals include acute care hospitals, sleep laboratories, pulmonologist and endocrinologist offices, skilled nursing facilities, hospice operators, and primary care providers, among others. AdaptHealth’s sales representatives maintain continual contact with medical professionals across these facilities.
AdaptHealth primarily acquires new patients through referrals. Sources of referrals include acute care hospitals, sleep laboratories, pulmonologist and endocrinologist offices, skilled nursing facilities, hospice operators, and primary care providers, among others. AdaptHealth’s sales representatives maintain continual contact with medical professionals across these facilities.
For each competitive acquisition area, CMS is required to conduct a competition under which providers submit bids to supply certain covered items of DME.
For each competitive acquisition area, CMS is required to conduct an auction under which providers submit bids to supply certain covered items of DME.
These products, which include CPAP masks and related supplies, diabetes management supplies, CGMs, wound care supplies, wheelchair cushions accessories, orthopedic bracing, breast pumps and supplies, walkers, commodes and canes, nutritional supplies and incontinence supplies, accounted for approxima t ely 67% of AdaptHealth’s net revenue for the year ended December 31, 2023. Supply Chain.
These products, which include CPAP masks and related supplies, diabetes management supplies, CGMs, wound care supplies, wheelchair cushions accessories, orthopedic bracing, breast pumps and supplies, walkers, commodes and canes, nutritional supplies and incontinence supplies, accounted for approximately 64% of AdaptHealth’s net revenue for the year ended December 31, 2024. Supply Chain.
Similarly, government agencies and their contractors periodically open investigations and obtain information from healthcare providers pursuant to the legal process.
Similarly, 8 Table of Contents government agencies and their contractors periodically open investigations and obtain information from healthcare providers pursuant to the legal process.
Sales and Marketing Sales activities are generally carried out by AdaptHealth’s full-time sales representatives with assistance from on-site liaisons in certain markets who interact directly with hospital discharge coordinators and patients. AdaptHealth’s sales team works in close alignment with AdaptHealth’s trained clinical team as part of their respiratory sales activities. AdaptHealth primarily acquires new patients through referrals.
Sales and Marketing Sales activities are generally carried out by AdaptHealth’s full-time sales representatives with assistance from on-site liaisons in certain markets who interact directly with hospital discharge coordinators and patients. AdaptHealth’s sales 6 Table of Contents team works in close alignment with AdaptHealth’s trained clinical team as part of their respiratory sales activities.
AdaptHealth may bear losses incurred as a result of, for example, physical damage to or destruction of its facilities (such as patient service offices and warehouses), loss or spoilage of inventory, and business interruption due to weather events that may be attributable to climate change.
AdaptHealth may bear losses incurred as a result of, among other things, physical damage to or destruction of its 9 Table of Contents facilities (such as patient service offices and warehouses), loss or spoilage of inventory, and business interruption due to weather events that may be attributable to climate change.
Competitive bidding contracts are expected to be re-bid at least every three years. CMS is required to award contracts to multiple entities submitting bids in each area for an item or service but has the authority to limit the number of contractors in a competitive acquisition area to the number it determines to be necessary to meet projected demand.
CMS is required to award contracts to multiple entities submitting bids in each area for an item or service but has the authority to limit the number of contractors in a competitive acquisition area to the number it determines to be necessary to meet projected demand.
AdaptHealth believes that relations between its management and employees are good, and it is committed to inclusion and policies and procedures to maintain a safe work environment. AdaptHealth is committed to its DIRECT Value Statements: Diversity and Inclusion, Integrity, Respect, Excellence, Compassion and Teamwork.
AdaptHealth believes that relations between its management and employees are good, and it is committed to inclusion and policies and procedures to maintain a safe work environment. AdaptHealth is committed to its DIRECT Value Statements: Diversity and Inclusion, Integrity, Respect, Excellence, Compassion and Teamwork. Talent Development and Retention Building and strengthening AdaptHealth’s talent pipeline is imperative to its success.
AdaptHealth cannot predict the future of federal, state and local regulation or legislation, including Medicare and Medicaid statutes and regulations, or possible changes in national healthcare policies. Future legislative and regulatory changes could have a material adverse effect on AdaptHealth’s financial condition and results of operations. The long-term effects of climate change are difficult to predict and may be widespread.
AdaptHealth cannot predict the future of federal, state and local regulation or legislation, including Medicare and Medicaid statutes and regulations, or possible changes in national healthcare policies. Adapting to future legislative and regulatory changes could have a material adverse effect on AdaptHealth’s financial condition and results of operations.
The SEC maintains an internet website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC. 11 Table of Con t ents We also make available free of charge through our website, https://adapthealth.com/investorrelations, electronic copies of certain documents that we file with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
We also make available free of charge through our website, https://adapthealth.com/investorrelations, electronic copies of certain documents that we file with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
The Company services beneficiaries of Medicare, Medicaid and commercial insurance payors. As of December 31, 2023, AdaptHealth serviced approximately 4.1 million patients annually in all 50 states through our network of approximately 680 locations in 47 states. The Company's principal executive offices are located at 220 West Germantown Pike, Suite 250, Plymouth Meeting, Pennsylvania 19462. Company Operations Product Offering .
As of December 31, 2024, AdaptHealth serviced approximately 4.2 million patients annually in all 50 states through our network of approximately 660 locations in 47 states. The Company's principal executive offices are located at 220 West Germantown Pike, Suite 250, Plymouth Meeting, Pennsylvania 19462. Company Operations Product Offering .
As of December 31, 2023, AdaptHealth serviced approximately 4.1 million patients annually across all 50 states through its network of approximately 680 locations in 47 states. During the year ended December 31, 2023, AdaptHealth performed an average of approximately 38,000 equipment and supply deliveries a day.
As of December 31, 2024, AdaptHealth serviced approximately 4.2 million patients annually in all 50 states through its network of approximately 660 locations in 47 states. During the year ended December 31, 2024, AdaptHealth completed an average of approximately 39,000 equipment and supply deliveries a day.
Third-party payors that can accommodate electronic claims submission, such as Medicare, certain state Medicaid payors and many commercial insurance payors, are billed electronically on a daily basis. For other payors, who are unable to accept electronic submissions, AdaptHealth generates paper claims and invoices.
Third-party payors that can accommodate electronic claims submission, such as Medicare, certain state Medicaid payors and many commercial insurance payors, are billed electronically on a daily basis. For payors that are unable to accept electronic submissions, AdaptHealth generates paper claims and invoices. Outsourced Providers AdaptHealth contracts with business process outsourcing providers to provide certain billing, accounts payable and administrative functions.
In addition, AdaptHealth competes with non-HME providers, including CVS and Amazon. Consolidation of the HME market is a continuing trend, as required technology investments and reduced reimbursements put financial pressure on smaller providers.
In addition, AdaptHealth competes with non-HME providers, including CVS and Amazon. Consolidation of the HME market is a continuing trend, as required technology investments and reduced reimbursements put financial pressure on smaller providers. Larger HME providers with integrated technology and automated processes are generally better positioned to gain market share and more attractive vendor pricing.
Outsourced Providers AdaptHealth contracts with business process outsourcing providers to provide certain billing, accounts payable and administrative functions. These providers are primarily based in India and the Philippines and provide AdaptHealth with the ability to scale its workforce in a cost-effective manner. As of December 31, 2023, approximately 4,500 full-time equivalent personnel were provided to AdaptHealth under such arrangements.
These providers are primarily based in India, the Philippines and Guyana, South America, and provide AdaptHealth with the ability to scale its workforce in a cost-effective manner. As of December 31, 2024, approximately 4,700 full-time equivalent personnel were provided to AdaptHealth under such arrangements.
Because payors typically select a limited number of exclusive suppliers, and physicians typically refer based on timely delivery and consistency, relationships with both are critical to success in the market.
The Medicare Durable Medical Equipment, Prosthetics, Orthotics, & Supplies (“DMEPOS”) Competitive Bidding Program also emphasizes the importance of relationships with both the payors and referral sources. Because payors typically select a limited number of exclusive suppliers, and physicians typically refer based on timely delivery and consistency, relationships with both are critical to success in the market.
Violations of federal and state regulations can result in severe criminal, civil and administrative penalties and sanctions, including disqualification from Medicare and other reimbursement programs, which could have a material adverse effect on AdaptHealth’s financial condition and results of operations. 8 Table of Con t ents Numerous federal and state laws and regulations, including HIPAA and the HITECH Act, govern the collection, dissemination, security, use and confidentiality of patient-identifiable health information or personal information.
Violations of federal and state regulations can result in severe criminal, civil and administrative penalties and sanctions, including disqualification from Medicare and other reimbursement programs, which could have a material adverse effect on AdaptHealth’s financial condition and results of operations.
Item 1. Business AdaptHealth Corp. and subsidiaries ("AdaptHealth" or "the Company") is a national leader in providing patient-centered, healthcare-at-home solutions including home medical equipment (“HME”), medical supplies, and related services.
Item 1. Business AdaptHealth Corp. and subsidiaries ("AdaptHealth" or "the Company") is a national leader in providing patient-centered, healthcare-at-home solutions including home medical equipment (“HME”), medical supplies, and related services. The Company operates under four reportable segments that align with its product categories: (i) Sleep Health, (ii) Respiratory Health, (iii) Diabetes Health, and (iv) Wellness at Home.
Successful bidders are expected to meet certain program quality standards, volume commitments and surety bond requirements in order to be awarded a contract, and only successful bidders can supply the covered items to Medicare beneficiaries in the respective acquisition area (there are, however, regulations in place that allow non-contracted suppliers to continue to provide equipment and services to their existing customers at the new prices determined through the bidding process).
Successful bidders are expected to meet certain program quality standards, volume commitments and surety bond requirements in order to be awarded a contract, and only successful bidders can supply the covered items to Medicare beneficiaries in the respective acquisition area.
AdaptHealth has obtained contracts for OTS knee and back braces, and does not expect the single payment amounts imposed by CMS under such contracts to have a material impact on AdaptHealth. 10 Table of Con t ents On May 25, 2023, CMS announced a temporary gap period for the CBP starting January 1, 2024, following the expiration of all Round 2021 contracts for OTS knee and back braces on December 31, 2023.
On May 25, 2023, CMS announced a temporary gap period for the CBP starting January 1, 2024, following the expiration of all Round 2021 contracts for OTS knee and back braces on December 31, 2023.
Consumer protection laws require AdaptHealth to publish statements that describe how it handles personal information and choices individuals may have about the way AdaptHealth handles their personal information. If such information that AdaptHealth publishes is considered untrue, it may be subject to government claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences.
If any such notice that AdaptHealth publishes is considered untrue, it may be subject to government claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences.
Acquisitions Continuing to grow through accretive acquisitions remains an element of AdaptHealth’s growth strategy, and AdaptHealth continuously reviews its pipeline of potential acquisition candidates.
Acquisitions Continuing to grow through accretive acquisitions remains an element of AdaptHealth’s growth strategy, and AdaptHealth continuously reviews its pipeline of potential acquisition candidates. AdaptHealth leverages its scalable front-end and back-office technology platform to facilitate acquisition integration to help realize short-term cost saving synergies and longer-term revenue growth synergies.
As part of AdaptHealth’s provision of, and billing for, healthcare equipment and services, AdaptHealth is required to collect and maintain patient-identifiable health information. In addition, various federal and state legislative and regulatory bodies, or self-regulatory organizations, may expand current laws or regulations, enact new laws or regulations or issue revised rules or guidance regarding privacy, data protection and consumer protection.
In addition, various federal and state legislative and regulatory bodies or self-regulatory organizations may expand current laws or regulations, enact new laws or regulations, or issue revised rules or guidance regarding privacy, data protection and consumer protection. For instance, the California Consumer Privacy Act ("CCPA") became effective on January 1, 2020.
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AdaptHealth leverages its scalable front-end and back-office technology platform to facilitate acquisition integration to help realize short-term cost saving synergies and longer-term revenue growth synergies. 6 Table of Con t ents Suppliers AdaptHealth purchases home healthcare equipment, medical devices and supplies from a variety of suppliers.
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A description of the products and services provided within each of the Company’s four reportable segments is provided below. Sleep Health 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.
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Diversity and Inclusion AdaptHealth’s value of Diversity and Inclusion recognizes that our differences make us stronger, and encourages the sharing of different ideas. This value helps AdaptHealth to unlock the strengths of its employees to transform healthcare and improve lives.
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Respiratory Health 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.
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AdaptHealth has a Diversity and Inclusion Council that leads learning activities around the concepts of leading inclusively, inclusion in the workforce and unconscious bias.
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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. The Company services beneficiaries of Medicare, Medicaid and commercial insurance payors.
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AdaptHealth places a high value on inclusion-building initiatives that create opportunities around cultural awareness and social learnings; this is largely accomplished through engaging employees in its Employee Resource Groups that are a subset of the Diversity and Inclusion Council.
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Numerous federal and state laws and regulations, including HIPAA and the Health Information Technology for Economic and Clinical Health Act ("HITECH Act"), govern the collection, dissemination, security, use and confidentiality of patient-identifiable health information or personal information. As part of AdaptHealth’s provision of, and billing for, healthcare equipment and services, AdaptHealth is required to collect and maintain patient-identifiable health information.
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These activities are supported by employees with diverse backgrounds and experiences who share a common interest in professional development and improving corporate culture. Talent Development and Retention Building and strengthening AdaptHealth’s talent pipeline is imperative to its success. AdaptHealth's management team has implemented various talent development initiatives.
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Consumer protection laws require AdaptHealth to publish notices that describe how it handles personal information and rights individuals may have to control their personal information, including about the way AdaptHealth may handle their personal information.
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Larger HME providers with integrated technology and 7 Table of Con t ents automated processes are generally better positioned to gain market share and more attractive vendor pricing. The Medicare Durable Medical Equipment, Prosthetics, Orthotics, & Supplies (“DMEPOS”) Competitive Bidding Program also emphasizes the importance of relationships with both the payors and referral sources.
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Changes enacted by a new presidential administration or Congress may impact Medicare and Medicaid programs, as well as insurance plans offered on the Affordable Care Act exchanges. These changes can result in reduction of reimbursements to AdaptHealth, increased regulatory complexity, and a reduction in the number of beneficiaries covered by these programs or other changes that affect AdaptHealth.
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For instance, the California Consumer Privacy Act ("CCPA") became effective on January 1, 2020.
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The long-term effects of climate change are difficult to predict and may be widespread.
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There are, however, regulations in place that allow non-contracted suppliers to continue to provide equipment and services to their existing customers at the new prices determined through the bidding process. Competitive bidding contracts are expected to be re-bid at least every three years.
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AdaptHealth has obtained contracts for OTS knee and back braces and does not expect the single payment amounts imposed by CMS under such contracts to have a material impact on AdaptHealth.
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The SEC maintains an internet website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

126 edited+27 added−29 removed219 unchanged
Biggest changeThe integration of acquisitions requires significant attention from management, may impose substantial demands on AdaptHealth’s operations or other projects and may impose challenges on us including, but not limited to, consistencies in business standards, procedures, policies and business cultures. There can be no assurance that any future acquisitions, if consummated, will result in further growth.
Biggest changeAdaptHealth may not be able to combine successfully the operations of recently acquired companies with its operations, and, even if such integration is accomplished, AdaptHealth may never realize the potential benefits of such acquisition. 19 Table of Contents The integration of acquisitions requires significant attention from management, may impose substantial demands on AdaptHealth’s operations or other projects and may impose challenges on us including, but not limited to, consistencies in business standards, procedures, policies and business cultures.
Continuing increases in inflation could impact the overall demand for AdaptHealth’s products and services, its costs for labor, equipment and products, and the margins it is able to realize on its products, all of which could have an adverse impact on AdaptHealth’s business, financial position, results of operations and cash flows.
Continuing increases in inflation could have an impact the overall demand for AdaptHealth’s products and services, its costs for labor, equipment and products, and the margins it is able to realize on its products, all of which could have an adverse impact on AdaptHealth’s business, financial position, results of operations and cash flows.
These third-party providers may not comply on a timely basis with all of AdaptHealth’s requirements, or may not provide AdaptHealth with an acceptable level of service or may not protect properly AdaptHealth’s and its customers’ confidential or protected data.
These third-party providers may not comply on a timely basis with all of AdaptHealth’s requirements, or may not provide AdaptHealth with an acceptable level of service or may not properly protect AdaptHealth’s and its customers’ confidential or protected data.
The incurrence of losses and liabilities that exceed AdaptHealth’s available coverage, therefore, could have a material adverse effect on its business, financial condition and results of operations. AdaptHealth also maintains Directors and Officers (D&O) Liability insurance coverage to protect all of its directors and executive officers.
The incurrence of losses and liabilities that exceed AdaptHealth’s available coverage could therefore have a material adverse effect on its business, financial condition and results of operations. AdaptHealth also maintains Directors and Officers ("D&O") Liability insurance coverage to protect all of its directors and executive officers.
These provisions were announced through blanket waivers under Section 1135 of the Social Security Act, two Interim Final Rules with Requests for Comment on April 6, 2020 and May 8, 2020, respectively, and through numerous forms of subregulatory guidance.
These provisions were announced through blanket waivers under Section 1135 of the Social Security Act and two Interim Final Rules with Requests for Comment on April 6, 2020 and May 8, 2020, respectively, and through numerous forms of subregulatory guidance.
In addition, the prevalent use of mobile devices that access confidential information increases the risk of data security breaches, which could lead to the loss of confidential information or other intellectual property. AdaptHealth or its third-party vendors may experience cybersecurity and other breach incidents, including such incidents that remain undetected for an extended period.
In addition, the prevalent use of mobile devices that access confidential information increases the risk of data security breaches, which could lead to the loss of confidential information or other intellectual property. AdaptHealth or its third-party vendors may experience cybersecurity and other security incidents, including such incidents that remain undetected for an extended period.
If AdaptHealth experiences difficulties with the transition and integration of information systems or is unable to implement, maintain, or expand its systems properly, AdaptHealth could suffer from, among other things, operational disruptions, delays, cessation of service, regulatory problems, increases in administrative expenses and other harm to its business and competitive position.
If AdaptHealth experiences difficulties with the transition and integration of information systems or is unable to implement, maintain, or expand its systems properly, AdaptHealth could suffer from, among other things, operational disruptions, delays, cessation of service, regulatory problems, increases in administrative expenses and other harm to its business, operations, and competitive position.
AdaptHealth’s only significant asset is its ownership of AdaptHealth Holdings, and such ownership may not be sufficient to generate the funds necessary to meet its financial obligations or to pay any dividends on its Common Stock. AdaptHealth has no direct operations and no significant assets other than the ownership of AdaptHealth Holdings.
AdaptHealth’s only significant asset is its ownership of AdaptHealth Holdings, and such ownership may not be sufficient to generate the funds necessary to meet its financial obligations or to pay any dividends on its Common Stock. AdaptHealth has no direct operations and no significant assets other than the ownership of AdaptHealth Holdings LLC ("AdaptHealth Holdings").
AdaptHealth may be adversely affected if it is unable to maintain current levels of collectability and by the deterioration of the financial condition of AdaptHealth’s payors or disputes with third parties could have a significant negative impact on its financial condition and results of operations.
AdaptHealth may be adversely affected if it is unable to maintain current levels of collectability, and the deterioration of the financial condition of AdaptHealth’s payors or disputes with third parties could have a significant negative impact on its financial condition and results of operations.
These requirements may be interpreted and applied in a manner that varies from one jurisdiction to another and/or may conflict with other laws or regulations. As a result, AdaptHealth’s practices may not have complied or may not comply in the future with all such laws, regulations, requirements and obligations.
These requirements may be interpreted and applied in a manner that varies from one jurisdiction to another and/or may conflict with other laws or regulations. As a result, AdaptHealth’s practices may not have fully complied or may not fully comply in the future with all such laws, regulations, requirements and obligations.
The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
The risk of a security breach or system disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
Any failure by AdaptHealth to satisfy physician or patient demand for its equipment and supplies or to maintain meaningful market acceptance will harm its business and future prospects. AdaptHealth may be adversely affected by consolidation among health insurers and other industry participants.
Any failure by AdaptHealth to satisfy physician or patient demand for its equipment and supplies or to maintain meaningful market acceptance may harm its business and future prospects. AdaptHealth may be adversely affected by consolidation among health insurers and other industry participants.
If AdaptHealth is unable to effectively manage growth, its financial results could be adversely impacted. AdaptHealth’s strategic plan has historically involved acquisitions of home medical equipment providers and such acquisitions remain an element of AdaptHealth's strategy.
If AdaptHealth is unable to effectively manage growth, its financial results could be adversely impacted. AdaptHealth’s strategic plan historically involved acquisitions of home medical equipment providers and such acquisitions remain an element of AdaptHealth's strategy.
We will continue to incur significant increased expenses and administrative burdens as a result of being a public company, which could have a material adverse effect on AdaptHealth's business, financial condition and results of operations.
We will continue to incur significant expenses and administrative burdens as a result of being a public company, which could have a material adverse effect on AdaptHealth's business, financial condition and results of operations.
“ Controls and Procedures ”; however, if we are unable to remediate our material weaknesses in a timely manner or we identify additional material weaknesses, we may be unable to provide required financial information in a timely and reliable manner and we may incorrectly report financial information.
“ Controls and Procedures ”; however, if we are unable to remediate our material weakness in a timely manner or we identify additional material weaknesses, we may be unable to provide required financial information in a timely and reliable manner and we may incorrectly report financial information.
Specific integration risks relating to the acquisition of other companies by AdaptHealth may include: • difficulties related to combining previously separate businesses into a single unit, including patient transitions, product and service offerings, distribution and operational capabilities and business cultures; • availability of financing to the extent needed to fund acquisitions; • customer loss and other general business disruption; 19 Table of Con t ents • managing the integration process while completing other independent acquisitions or dispositions; • diversion of management’s attention from day-to-day operations; • assumption of liabilities of an acquired business, including unforeseen or contingent liabilities or liabilities in excess of the amounts estimated; • failure to realize anticipated benefits and synergies, such as cost savings and revenue enhancements; • potentially substantial costs and expenses associated with acquisitions and dispositions; • failure to retain and motivate key employees; • coordinating research and development activities to enhance the introduction of new products and services; • difficulties in establishing and applying AdaptHealth’s internal control over financial reporting and disclosure controls and procedures to an acquired business; • obtaining necessary regulatory licenses and payor-specific approvals, which may impact the timing of when AdaptHealth is to bill and collect for services rendered; • AdaptHealth’s ability to transition patients in a timely manner may impact AdaptHealth’s ability to collect amounts for services rendered; • AdaptHealth’s estimates for revenue accruals during the integration of acquisitions may require adjustments in future periods as the transition of patient information is finalized; and • delays in obtaining new government and commercial insurance payor identification numbers for acquired branches, resulting in a slowdown and/or loss of associated revenue.
Specific integration risks relating to the acquisition of other companies by AdaptHealth may include: • difficulties related to combining previously separate businesses into a single unit, including patient transitions, product and service offerings, distribution and operational capabilities and business cultures; • availability of financing to the extent needed to fund acquisitions; • customer loss and other general business disruption; • managing the integration process while completing other independent acquisitions or dispositions; • diversion of management’s attention from day-to-day operations; • assumption of liabilities of an acquired business, including unforeseen or contingent liabilities or liabilities in excess of the amounts estimated; • failure to realize anticipated benefits and synergies, such as cost savings and revenue enhancements; • potentially substantial costs and expenses associated with acquisitions and dispositions; • failure to retain and motivate key employees; • coordinating research and development activities to enhance the introduction of new products and services; • difficulties in establishing and applying AdaptHealth’s internal control over financial reporting and disclosure controls and procedures to an acquired business; • obtaining necessary regulatory licenses and payor-specific approvals, which may impact the timing of when AdaptHealth is to bill and collect for services rendered; • AdaptHealth’s ability to transition patients in a timely manner may impact AdaptHealth’s ability to collect amounts for services rendered; • AdaptHealth’s estimates for revenue accruals during the integration of acquisitions may require adjustments in future periods as the transition of patient information is finalized; and • delays in obtaining new government and commercial insurance payor identification numbers for acquired branches, resulting in a slowdown and/or loss of associated revenue.
On July 8, 2019, AdaptHealth Holdings LLC ("AdaptHealth Holdings") entered into an Agreement and Plan of Merger (the "Merger Agreement"), as amended on October 15, 2019, with DFB, pursuant to which AdaptHealth Holdings combined with DFB (the "Business Combination"). The Business Combination closed on November 8, 2019.
On July 8, 2019, AdaptHealth Holdings entered into an Agreement and Plan of Merger (the "Merger Agreement"), as amended on October 15, 2019, with DFB, pursuant to which AdaptHealth Holdings combined with DFB (the "Business Combination"). The Business Combination closed on November 8, 2019.
Supply chain disruptions and economy-wide labor shortages in the U.S. have negatively impacted, and may continue to negatively impact, AdaptHealth’s businesses. Many companies, including AdaptHealth, recently have experienced increased supply chain and labor challenges.
Supply chain disruptions and economy-wide labor shortages in the U.S. have negatively impacted, and may continue to negatively impact, AdaptHealth’s businesses. Many companies, including AdaptHealth, have experienced increased supply chain and labor challenges.
Additionally, corrective action plans, fines or other sanctions may be levied by government regulators who oversee transportation of hazardous materials such as compressed or liquid oxygen. AdaptHealth provides a significant number of patients with oxygen-based therapy, and from time to time, AdaptHealth has operated medical gas facilities in several states subject to federal and state regulatory requirements.
Additionally, corrective action plans, fines, or other sanctions may be levied by government regulators that oversee transportation of hazardous materials such as compressed or liquid oxygen. AdaptHealth provides a significant number of patients with oxygen-based therapy, and from time to time, AdaptHealth has operated medical gas facilities in several states subject to federal and state regulatory requirements.
AdaptHealth derived approximately 60% and 61% of its net revenue for the years ended December 31, 2023 and 2022, respectively, from third-party private payors. Such payors continually seek to control the cost of providing healthcare services through direct contracts with healthcare providers, increased oversight and greater enrollment of patients in managed care programs and preferred provider organizations.
AdaptHealth derived approximately 61% and 60% of its net revenue for the years ended December 31, 2024 and 2023, respectively, from third-party private payors. Such payors continually seek to control the cost of providing healthcare services through direct contracts with healthcare providers, increased oversight and greater enrollment of patients in managed care programs and preferred provider organizations.
Attorney’s Office for the Southern District of New York issued a civil investigative demand to a subsidiary of AdaptHealth, pursuant to the False Claims Act, 31 U.S.C. § 3733 ("FCA") surrounding whether the subsidiary submitted false claims in violation of the FCA related to its billing of, and reimbursements from, federal health care programs for ventilators provided to patients from January 1, 2015 to the present.
Attorney’s Office for the Southern District of New York issued a civil investigative demand to a subsidiary of AdaptHealth, pursuant to the False Claims Act, 31 U.S.C. § 3733 ("FCA") regarding whether the subsidiary submitted false claims in violation of the FCA related to its billing of, and reimbursements from, federal health care programs for ventilators provided to patients from January 1, 2015 to the present.
The standards and rules for healthcare transactions, code sets and unique identifiers also continue to evolve, such as ICD 10 and HIPAA 5010 and other data security requirements. Moreover, government programs and/or commercial insurance payors may have difficulties administering new standards and rules for healthcare transactions and this may adversely affect timelines of payment or payment error rates.
The standards and rules for healthcare transactions, code sets and unique identifiers such as ICD 10 and HIPAA 5010 and other data security requirements, also continue to evolve. Moreover, government programs and/or commercial insurance payors may have difficulty administering new standards and rules for healthcare transactions and this may adversely affect timelines of payment or payment error rates.
In addition, pharmacy benefit managers, including CVS Health Corporation and the OptumRx business of UnitedHealth Group Incorporated, could enter the HME market and compete with AdaptHealth. Large technology companies, such as Amazon.com, Inc. and Alphabet Inc., have disrupted other supply businesses and have entered the healthcare market.
In addition, pharmacy benefit managers, including CVS Health Corporation and the Optima business of UnitedHealth Group Incorporated, could enter the HME market and compete with AdaptHealth. Large technology companies, such as Amazon.com, Inc. and Alphabet Inc., have disrupted other supply businesses and have entered the healthcare market.
The existence of material weaknesses or significant deficiencies in internal control over financial reporting could adversely affect our reputation or investor perceptions of us. In addition, we have and will continue to incur additional costs to remediate the material weaknesses in our internal control over financial reporting that are described in Item 9A. “ Controls and Procedures ”.
The existence of material weaknesses in internal control over financial reporting could adversely affect our reputation or investor perceptions of us. In addition, we have and will continue to incur additional costs to remediate the material weaknesses in our internal control over financial reporting that are described in Item 9A. “ Controls and Procedures ”.
AdaptHealth’s largest national home respiratory/home medical equipment provider competitors include Owens & Minor Inc., Lincare Holdings Inc., Rotech Healthcare, Inc. and Cardinal Health, Inc. The rest of the homecare market in the United States consists of regional providers and product-specific providers, as well as numerous local organizations.
AdaptHealth’s largest national home respiratory/home medical equipment provider competitors include Owens & Minor Inc., Lincare Holdings Inc., Rotech Healthcare, Inc., Cardinal Health, Inc. and Quipt Home Medical Corp. The rest of the homecare market in the United States consists of regional providers and product-specific providers, as well as numerous local organizations.
In addition, AdaptHealth’s outsourced functions may be negatively impacted by any number of factors, including: political unrest; public health crises; social unrest; cyber-attacks; terrorism; war; vandalism; currency fluctuations; changes to the laws of India, the Philippines, the United States or any other jurisdictions in which AdaptHealth does business or outsources operations; or increases in the cost of labor and supplies in India and the Philippines or any other jurisdiction in which AdaptHealth outsources any portion of its internal or other business functions.
In addition, AdaptHealth’s outsourced functions may be negatively impacted by any number of factors, including: political unrest; public health crises; social unrest; cyber-attacks; terrorism; war; vandalism; currency fluctuations; changes to the laws of India, the Philippines, Guyana, South America, the United States or any other jurisdictions in which AdaptHealth does business or outsources operations; or increases in the cost of labor and supplies in India, the Philippines, Guyana, South America, or any other jurisdiction in which AdaptHealth outsources any portion of its internal or other business functions.
The interests of OEP AHCO Investment Holdings, LLC and/or Deerfield Management Company, L.P. may not align with the interests of our other stockholders. Each of OEP AHCO Investment Holdings, LLC and Deerfield Management Company, L.P. are in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us.
The interests of OEP AHCO Investment Holdings, LLC and/or Deerfield Management Company, L.P. may not align with the interests of our other stockholders. Each of OEP AHCO Investment Holdings, LLC and Deerfield Management Company, L.P. is in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us.
The gap period commenced as anticipated and CMS has yet to announce when the temporary gap period for the CBP would end, but indicated that it would start bidding for the next CBP round after it completes the formal notice and comment rulemaking process and implements necessary changes to the CBP to establish sustainable process, save money for Medicare patients and taxpayers, help limit fraud, waste, and abuse, and ensure patient access to quality items and services.
The gap period commenced as anticipated and CMS has yet to announce when the temporary gap period for the CBP will end but indicated that it would start the bidding process for the next CBP round after it completes the formal notice and comment rulemaking process and implements necessary changes to the CBP to establish sustainable processes, save money for Medicare patients and taxpayers, limit fraud, waste, and abuse, and ensure patient access to quality items and services.
A cybersecurity attack or other incident that bypasses AdaptHealth’s or its third-party vendors' information systems security could cause a security breach that may lead to a material disruption to AdaptHealth's information systems infrastructure or business and/or involve a significant loss of business or patient health or other protected data or information.
A cybersecurity attack or other incident that bypasses AdaptHealth’s or its third-party vendors' information security measures or controls could cause a security breach that may lead to a material disruption to AdaptHealth's information systems infrastructure or business and/or involve a significant loss of business or patient health or other protected data or information.
Many states have also adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare items or services reimbursed by any source, not only the Medicare and Medicaid programs. 22 Table of Con t ents The federal Ethics in Patient Referrals Act of 1989, commonly known as the “Stark Law,” prohibits, subject to certain exceptions, physician referrals of Medicare and, as applicable under state law, Medicaid patients to an entity providing certain “designated health services” if the physician or an immediate family member has any financial relationship with the entity.
Many states have also adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare items or services reimbursed by any source, not only the Medicare and Medicaid programs. 22 Table of Contents The federal Ethics in Patient Referrals Act of 1989, commonly known as the “Stark Law,” prohibits, subject to certain exceptions, physician referrals of Medicare and, as applicable under state law, Medicaid patients to an entity providing certain “designated health services” if the physician or an immediate family member has any financial relationship with the entity.
The actual or perceived improper sending of text messages may subject us to potential risks, including liabilities or claims relating to consumer protection laws. Numerous class-action suits under federal and state laws have been filed in recent years against companies who conduct SMS texting programs, with many resulting in multi-million-dollar settlements to the plaintiffs.
The actual or perceived improper sending of text messages may subject us to potential risks, including liabilities or claims relating to consumer protection laws. Numerous class-action suits under federal and state 27 Table of Contents laws have been filed in recent years against companies who conduct SMS texting programs, with many resulting in multi-million-dollar settlements to the plaintiffs.
The amount of the cash payments that we may be required to make under the Tax Receivable Agreement could be significant and is dependent upon significant future events and assumptions, including the timing of the exchanges of AdaptHealth Units, the price of our Common Stock at the time of each exchange, the extent to which such exchanges are taxable transactions and the amount of the exchanging TRA Holder’s tax basis in its AdaptHealth Units at the time of the relevant exchange.
The amount of the cash payments that we may be required to make under the Tax Receivable Agreement could be significant and is dependent upon significant future events and assumptions, including the timing of the exchanges of AdaptHealth Units, the price of our Common 33 Table of Contents Stock at the time of each exchange, the extent to which such exchanges are taxable transactions and the amount of the exchanging TRA Holder’s tax basis in its AdaptHealth Units at the time of the relevant exchange.
AdaptHealth’s business can be affected by a number of factors that are beyond its control, such as general geopolitical, economic and business conditions, including slower economic growth, disruptions in financial markets, economic downturns in the form of either contained or widespread recessionary conditions, inflation, elevated unemployment levels, sluggish or uneven economic recovery, government actions impacting trade agreements including the imposition of trade restrictions such as tariffs and retaliatory counter measures, government deficit reduction, tax legislation increasing the federal corporate income tax rates, natural and other disasters, public health crises affecting the operations of AdaptHealth or its customers or suppliers, staffing shortages, production slowdowns or stoppages, raw material shortages and disruptions in delivery systems.
AdaptHealth’s business can be affected by a number of factors that are beyond its control, such as general geopolitical, economic and business conditions, including slower economic growth, disruptions in financial markets, economic downturns in the form of either contained or widespread recessionary conditions, inflation, elevated unemployment levels, sluggish or uneven economic recovery, government actions or changes in trade policy in the United States and other countries impacting trade agreements including the imposition of trade restrictions such as tariffs and retaliatory counter measures, government deficit reduction, tax legislation increasing the federal corporate income tax rates, natural and other disasters, public health crises affecting the operations of AdaptHealth or its customers or suppliers, staffing shortages, production slowdowns or stoppages, raw material shortages and disruptions in delivery systems.
Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may be difficult to detect, AdaptHealth its third-party software providers’ may be unable to anticipate these techniques or implement adequate preventive measures.
Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may be difficult to detect, AdaptHealth or its third-party software providers may be unable to anticipate these techniques or implement adequate preventive measures.
“ Controls and Procedures ,” we concluded that our internal control over financial reporting was ineffective as of December 31, 2023 and our independent registered public accounting firm has expressed an adverse report on the operating effectiveness of our internal control over financial reporting as of December 31, 2023.
“ Controls and Procedures ,” we concluded that our internal control over financial reporting was ineffective as of December 31, 2024 and our independent registered public accounting firm has expressed an adverse report on the operating effectiveness of our internal control over financial reporting as of December 31, 2024.
To the extent that we require funds and AdaptHealth Holdings or its subsidiaries are restricted from making distributions under applicable law or regulation or under the terms of their financing arrangements, or are otherwise unable to provide such funds, it could materially adversely affect our liquidity and financial condition, including our ability to pay our income taxes when due.
To the extent that we require funds and AdaptHealth 30 Table of Contents Holdings or its subsidiaries are restricted from making distributions under applicable law or regulation or under the terms of their financing arrangements, or are otherwise unable to provide such funds, it could materially adversely affect our liquidity and financial condition, including our ability to pay our income taxes when due.
AdaptHealth’s medical gas facilities and operations are subject to extensive regulation by the Food and Drug Administration (“FDA”) and other federal and state authorities. The FDA regulates medical gases, including medical oxygen, pursuant to its authority under the federal Food, Drug and Cosmetic Act.
AdaptHealth’s medical gas facilities and operations are subject to extensive regulation by the FDA and other federal and state authorities. The FDA regulates medical gases, including medical oxygen, pursuant to its authority under the federal Food, Drug and Cosmetic Act.
“ Controls and Procedures ,” we concluded that our internal control over financial reporting was ineffective as of December 31, 2022 as described in our December 31, 2022 Annual Report on Form 10-K because material weaknesses existed in our internal control over financial reporting which were identified in connection with the preparation of the Company’s consolidated financial statements for the fiscal year ended December 31, 2022.
“ Controls and Procedures ,” we concluded that our internal control over financial reporting was ineffective as of December 31, 2023 as described in our December 31, 2023 Annual Report on Form 10-K because three material weaknesses existed in our internal control over financial reporting which were identified in connection with the preparation of the Company’s consolidated financial statements for the fiscal year ended December 31, 2023.
Factors affecting the trading price of our Common Stock may include: • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about our operating results; • our operating results failing to meet the expectation of securities analysts, investors or our guidance in a particular period; • changes in financial estimates and recommendations by securities analysts concerning AdaptHealth or the home medical equipment industry in general; • operating and stock price performance of other companies that investors deem comparable to us; • our ability to market new and enhanced products on a timely basis; • changes in laws and regulations affecting our business; • our ability to meet compliance requirements; • commencement of, or involvement in, litigation involving us; • inability to quickly remediate material weaknesses or the continued identification of material weaknesses in internal control over financial reporting; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of our Common Stock available for public sale; • any major change in our board of directors or management; • sales of substantial amounts of common stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and • general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism, including the war in Ukraine and the Hamas-Israel conflict.
In such circumstances, the trading price of our Common Stock may not recover and may experience a further decline. 31 Table of Contents Factors affecting the trading price of our Common Stock may include: • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about our operating results; • our operating results failing to meet the expectation of securities analysts, investors or our guidance in a particular period; • changes in financial estimates and recommendations by securities analysts concerning AdaptHealth or the home medical equipment industry in general; • operating and stock price performance of other companies that investors deem comparable to us; • our ability to market new and enhanced products on a timely basis; • changes in laws and regulations affecting our business; • our ability to meet compliance requirements; • commencement of, or involvement in, litigation involving us; • inability to quickly remediate material weaknesses or the continued identification of material weaknesses in internal control over financial reporting; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of our Common Stock available for public sale; • any major change in our board of directors or management; • sales of substantial amounts of common stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and • general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism, including the war in Ukraine and the Hamas-Israel conflict.
Among other requirements, the FDA’s current Good Manufacturing Practice (“cGMP”) regulations impose certain quality control, documentation and record keeping requirements on the receipt, processing and distribution of medical gas. Further, in each such state, its medical gas facilities would be subject to regulation under state health and safety laws, which vary from state to state.
Among other requirements, the FDA’s current Good Manufacturing Practice (“cGMP”) regulations impose certain quality control, documentation and record keeping requirements on the receipt, processing and distribution of medical gas. Further, in each such state, its medical gas facilities are subject to regulation under state health and safety laws, which vary from state to state.
In addition, from time to time AdaptHealth is involved in disputes with various parties, including its payors and their intermediaries regarding their performance of various contractual or regulatory obligations. These disputes sometimes lead to legal and other proceedings and cause AdaptHealth to incur costs or experience delays in collections, increases in its accounts receivable or loss of revenue.
In addition, from time-to-time AdaptHealth is involved in disputes with various parties, including its payors and their intermediaries regarding their performance of various contractual or regulatory obligations. These disputes sometimes lead to legal and other proceedings and cause AdaptHealth to incur costs or experience delays in collections, increases in its accounts receivable or loss of 16 Table of Contents revenue.
AdaptHealth currently outsources, and from time to time in the future may outsource, portions of its internal business functions, including billing and administrative functions relating to revenue cycle management and accounts payable, to third-party providers in India and the Philippines, and utilizes third-party managed file transfer software providers to transfer its sensitive and protected customer data.
AdaptHealth currently outsources, and from time to time in the future may outsource, portions of its internal business functions, including billing and administrative functions relating to revenue cycle management and accounts payable, to third-party providers in India, the Philippines and Guyana, South America, and utilizes third-party managed file transfer software providers to transfer its sensitive and protected customer data.
As long as OEP AHCO Investment Holdings, LLC and/or Deerfield Management Company, L.P. own or control a significant percentage of our outstanding voting power, they will have the ability to significantly influence all corporate actions requiring stockholder approval, including the election and removal of directors and the size of our board of directors, any amendment to our Charter or Amended and Restated Bylaws (our “Bylaws”), or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets.
As long as OEP AHCO Investment Holdings, LLC and/or Deerfield Management Company, L.P. own or control a significant percentage of our outstanding voting power, they will have the ability to significantly influence all corporate actions requiring stockholder approval, including the election and removal of directors and the size of our board of directors, any amendment to our Charter, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets.
AdaptHealth’s Charter requires, to the fullest extent permitted by law, other than any claim to enforce a duty or liability created by the Exchange Act or other claim for which federal courts have exclusive jurisdiction, that derivative actions brought in AdaptHealth’s name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of the 34 Table of Con t ents State of Delaware, the stockholder bringing such suit will be deemed to have consented to service of process on such stockholder’s counsel.
AdaptHealth’s Charter requires, to the fullest extent permitted by law, other than any claim to enforce a duty or liability created by the Exchange Act or other claim for which federal courts have exclusive jurisdiction, that derivative actions brought in AdaptHealth’s name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of the State of Delaware, the stockholder bringing such suit will be deemed to have consented to service of process on such stockholder’s counsel.
Any failure, or perceived failure, by AdaptHealth or any of its third-party partners or service providers to comply with privacy policies or federal or state privacy or consumer protection-related laws, regulations, industry self-regulatory principles, industry standards or codes of conduct, regulatory guidance, orders to 26 Table of Con t ents which they may be subject, or other legal obligations relating to privacy or consumer protection, could adversely affect AdaptHealth’s reputation, brand and business, and may result in claims, proceedings or actions against AdaptHealth by governmental entities, consumers, users, suppliers or others.
Any failure, or perceived failure, by AdaptHealth or any of its third-party partners or service providers to comply with privacy policies or federal or state privacy or consumer protection-related laws, regulations, industry self-regulatory principles, industry standards or codes of conduct, regulatory guidance, orders to which they may be subject, or other legal obligations relating to privacy or consumer protection, could adversely affect AdaptHealth’s reputation, brand and business, and may result in claims, proceedings or actions against AdaptHealth by governmental entities, consumers, users, suppliers or others.
Additionally, including CGM under the pharmacy benefit could allow pharmacy benefit managers to attempt to restrict how beneficiaries obtain CGM, including attempts to shift to specifically contracted providers with reduced reimbursement to the supplier or pharmacy.
Additionally, including CGMs under the pharmacy benefit could allow pharmacy benefit managers to attempt to restrict how beneficiaries obtain CGMs, including attempts to shift to specifically contracted providers with reduced reimbursement to the supplier or pharmacy.
AdaptHealth derived approximately 27% and 26% of its net revenue for the years ended December 31, 2023 and 2022, respectively, from Medicare and various state-based Medicaid programs.
AdaptHealth derived approximately 26% and 27% of its net revenue for the years ended December 31, 2024 and 2023, respectively, from Medicare and various state-based Medicaid programs.
Failure to maintain the security and functionality of AdaptHealth’s information systems and related software or to contract with third parties which do, or a failure to defend a cybersecurity attack or other attempt to gain unauthorized access to AdaptHealth’s, AdaptHealth’s third-party vendors’, or any of its or their acquisition targets’ systems, facilities or patient health information, could expose AdaptHealth to a number of adverse consequences, the vast majority of which are not insurable, including, but not limited to, disruptions in AdaptHealth’s operations, regulatory and other civil and criminal penalties, fines, investigations and enforcement actions (including, but not limited to, those arising from the SEC, FTC, the Office of Inspector General or state attorneys general), private litigation with those affected by the data breach, loss of 14 Table of Con t ents customers, disputes with payors and increased operating expense, all or any of which could adversely impact AdaptHealth’s financial condition and results of operations.
Failure to maintain the security and functionality of AdaptHealth’s information systems and related software or to contract with third parties which do, or a failure to reasonably defend against a cybersecurity attack or other attempt to 14 Table of Contents gain unauthorized access to AdaptHealth’s, AdaptHealth’s third-party vendors’, or any of its or their acquisition targets’ systems, facilities or patient health information, could expose AdaptHealth to a number of adverse consequences, the vast majority of which are or may not be insurable, including, but not limited to, disruptions in AdaptHealth’s operations, regulatory and other civil and criminal penalties, fines, investigations and enforcement actions (including, but not limited to, those arising from the SEC, FTC, the Office of Inspector General or state attorneys general), private litigation with those affected by the data breach, loss of customers, disputes with payors and increased operating expense, all or any of which could adversely impact AdaptHealth’s financial condition and results of operations.
Any successful cybersecurity attack or other unauthorized access to AdaptHealth’s, AdaptHealth’s third-party vendors’, or any of its or their acquisition targets’ systems, facilities or patient health information also could result in negative publicity, which could damage AdaptHealth’s reputation or brand with its patients, referral sources, payors or other third parties and could subject AdaptHealth to substantial penalties under HIPAA and other federal and state data protection laws, in addition to costs and potential damages associated with private litigation related to those affected.
Any successful cybersecurity attack or other unauthorized access to AdaptHealth’s, AdaptHealth’s third-party vendors’, or any of its or their acquisition targets’ systems, facilities or patient health information also could result in negative publicity, which could damage AdaptHealth’s reputation or brand with its patients, referral sources, payors or other third parties and could subject AdaptHealth to substantial penalties under HIPAA and other federal and state data protection laws, in addition to costs and potential damages associated with any private litigation brought by affected individuals.
As a result, it is possible that we could make cash payments under the Tax Receivable Agreement that are substantially greater than our actual cash tax savings. The interests of the TRA Holders in our business may conflict with the interests of our stockholders.
As a result, it is possible that we could make cash payments under the Tax Receivable Agreement that are substantially greater than our actual cash tax savings. 34 Table of Contents The interests of the TRA Holders in our business may conflict with the interests of our stockholders.
AdaptHealth cannot predict fully the potential legal, regulatory, and financial risks that may arise out of the warning related to the DreamStation 2 CPAP machines and cannot predict whether the FDA or Philips will take further action regarding the DreamStation 2 CPAP machines.
AdaptHealth cannot predict fully the potential legal, regulatory, and financial risks that may arise out of the warning related 12 Table of Contents to the DreamStation 2 CPAP machines and cannot predict whether the FDA or Philips will take further action regarding the DreamStation 2 CPAP machines.
If we are not able to implement additional internal controls and procedures in accordance with the requirements of Section 404 in a timely manner or with adequate compliance, we may not be able to conclude that our internal control over financial 30 Table of Con t ents reporting is effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our Common Stock.
If we are not able to implement additional internal controls and procedures in accordance with the requirements of Section 404 in a timely manner or with adequate compliance, we may not be able to conclude that our internal control over financial reporting is effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our Common Stock.
As participants in the healthcare industry, AdaptHealth may periodically be subject to lawsuits, some of which may involve large claims and significant costs to defend, such as mass tort or other class actions.
As a participant in the healthcare industry, AdaptHealth may periodically be subject to lawsuits, some of which may involve large claims and significant costs to defend, such as mass tort or other class actions.
On January 17, 2023, CMS published the annual F2F/WOPD Required List update in a federal register announcement, which added 10 orthosis codes that go into effect on April 17, 2023. To ensure practitioner involvement, these items will require an in person face-to-face encounter or telehealth encounter and also require a written order prior to delivery (WOPD).
On January 17, 2023, CMS published the annual F2F/WOPD Required List update in a federal register announcement, which added 10 orthosis codes that are effective on April 17, 2023. To ensure practitioner involvement, these items will require an in person face-to-face encounter or telehealth encounter and also require a written order prior to delivery ("WOPD").
The effects could impair, for example, the availability and cost of certain products, commodities and energy (including utilities), which in turn may impact AdaptHealth's ability to procure goods or services required for the operation of its business at the quantities and levels it requires.
The effects could impair, among other things, the availability and cost of certain products and commodities and energy (including utilities), which may in turn may impact AdaptHealth's ability to procure goods or services required for the operation of its business at the quantities and levels it requires.
The impacts may include physical risks (such as rising sea levels or frequency and severity of extreme weather conditions), social and human effects (such as population dislocations or harm to health and well-being), compliance costs and transition risks (such as regulatory or technology changes) and other adverse effects.
The impacts may include physical risks (such as rising sea levels or frequency and severity of extreme weather conditions), social and human effects (such as population displacement or harm to health and well-being), compliance costs and transition risks (such as regulatory or technological changes) and other adverse effects.
To the extent that any governmental or private payor revises their resupply guidelines to reduce the number of times such supplies can be purchased, such reductions could adversely impact AdaptHealth’s revenue, financial condition and results of operations. 15 Table of Con t ents If AdaptHealth fails to manage the complex and lengthy reimbursement process, its revenue, financial condition and results of operations could suffer.
To the extent that any governmental or private payor revises their resupply guidelines to reduce the number of times such supplies can be purchased, such reductions could adversely impact AdaptHealth’s revenue, financial condition and results of operations. If AdaptHealth fails to manage the complex and lengthy reimbursement process, its revenue, financial condition and results of operations could suffer.
CMS’s changes included the exercise of enforcement discretion with respect to the clinical conditions and face-to-face encounter requirements required under certain national and local coverage determinations applicable to certain items and supplies AdaptHealth offers. 21 Table of Con t ents The public health emergency ended on May 11, 2023, which triggered the expiration of many of the waivers, enforcement discretion and flexibilities.
CMS’s changes included the exercise of enforcement discretion with respect to the clinical conditions and face-to-face encounter requirements required under certain national and local coverage determinations applicable to certain items and supplies AdaptHealth offers. The public health emergency ended on May 11, 2023, which triggered the expiration of many of the waivers, enforcement discretion and flexibilities.
Unauthorized parties may attempt to gain access to AdaptHealth’s systems or facilities, or those of third parties with whom AdaptHealth does business, including its confidential managed file transfer software providers, through fraud or other forms of deceiving its employees or contractors.
Unauthorized parties may attempt to gain access to AdaptHealth’s systems or facilities, or those of third parties with whom AdaptHealth does business, including its confidential managed file transfer software providers, through fraud or other forms of deceiving its employees or contractors (e.g., social engineering).
New health information standards, whether implemented pursuant to HIPAA, the HITECH Act, congressional action or otherwise, could have a significant effect on the manner in which AdaptHealth handles healthcare-related data and communicates with 27 Table of Con t ents payors, and the cost of complying with these standards could be significant.
New health information standards, whether implemented pursuant to HIPAA, the HITECH Act, congressional action or otherwise, could have a significant effect on the manner in which AdaptHealth handles healthcare-related data and communicates with payors, and the cost of complying with these standards could be significant.
Payors may disallow AdaptHealth’s requests for reimbursement based on determinations that certain costs are not reimbursable or reasonable because either adequate or additional documentation was not provided or because certain services were not covered or considered medically necessary.
Payors may disallow AdaptHealth’s requests for reimbursement based on determinations that certain costs 21 Table of Contents are not reimbursable or reasonable because either adequate or additional documentation was not provided or because certain services were not covered or considered medically necessary.
AdaptHealth’s failure to successfully outsource certain of its business functions could materially adversely affect its business, results of operations, and financial condition. 18 Table of Con t ents AdaptHealth's ability to successfully operate its business is largely dependent upon the efforts of key personnel of AdaptHealth, including senior management, the loss of any of whom could negatively impact AdaptHealth's operations and financial results.
AdaptHealth’s failure to successfully outsource certain of its business functions could materially adversely affect its business, results of operations, and financial condition. AdaptHealth's ability to successfully operate its business is largely dependent upon the efforts of key personnel of AdaptHealth, including senior management, the loss of any of whom could negatively impact AdaptHealth's operations and financial results.
These restrictions may interfere with AdaptHealth’s ability to obtain additional advances under its existing credit facility or to obtain new financing or to engage in other business activities, which may inhibit AdaptHealth’s ability to grow its business and increase revenue.
These restrictions may interfere with AdaptHealth’s ability to obtain additional advances under its existing credit facility or to obtain new financing or to engage in other business activities, which may inhibit AdaptHealth’s ability to grow its business and 29 Table of Contents increase revenue.
Although AdaptHealth’s insurance coverage reflects deductibles, 20 Table of Con t ents self-insured retentions, limits of liability and similar provisions that it believes are reasonable based on its operations, the coverage under its insurance programs may not be adequate to protect it in all circumstances.
Although AdaptHealth’s insurance coverage reflects deductibles, self-insured retentions, limits of liability and similar provisions that it believes are reasonable based on its operations, the coverage under its insurance programs may not be adequate to protect it in all circumstances.
As a result of the Public Health Emergency Declaration, National Emergency Declaration, and pursuant to the provisions of the CARES Act, among other things, CMS issued regulatory guidance indicating enforcement discretion and flexibility regarding the provisions of items and services by DMEPOS suppliers like AdaptHealth.
As a result of the Public Health Emergency Declaration, National Emergency Declaration, and pursuant to the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), among other things, CMS issued regulatory guidance indicating enforcement discretion and flexibility regarding the provisions of items and services by DMEPOS suppliers like AdaptHealth.
AdaptHealth may bear losses incurred as a result of, for example, physical damage to or destruction of its facilities (such as patient service offices and warehouses), loss or spoilage of inventory, and business interruption due to weather events that may be attributable to climate change.
AdaptHealth may bear losses incurred as a result of, among other things, physical damage to or destruction of its facilities (such as patient service offices and warehouses), loss or spoilage of inventory, and business interruption due to weather events that may be attributable to climate change.
If a cybersecurity attack or another unauthorized attempt to access AdaptHealth’s or its third-party vendors' systems or facilities were to be successful, it could result in the theft, destruction, loss, misappropriation or release of confidential information or intellectual property, and could cause operational or business delays that may materially impact AdaptHealth’s ability to provide various healthcare services.
If a cybersecurity attack affects the confidentiality, integrity or availability of AdaptHealth’s or its third-party vendors' systems, or if an unauthorized attempt to access such systems or AdaptHealth's facilities were to be successful, it could result in the theft, destruction, loss, misappropriation or release of confidential information or intellectual property and could cause operational or business delays that may materially impact AdaptHealth’s ability to provide various healthcare services.
Political and economic conditions, including significant global or regional developments such as economic and political events, international conflicts (including the ongoing war in Ukraine and the Hamas-Israel conflict), natural disasters and public health crises that are out of AdaptHealth’s control, could adversely affect its revenue, financial condition and results of operations.
Political and economic conditions, including significant global or regional developments such as economic and political events, the imposition of tariffs, international conflicts (including the ongoing war in Ukraine and the conflict in the Middle East), natural disasters and public health crises that are out of AdaptHealth’s control, could adversely affect its revenue, financial condition and results of operations.
The HITECH Act included notification requirement for breaches of patient-identifiable health information, restricts certain disclosures and sales of patient-identifiable health information and provides a tiered system for civil monetary penalties for HIPAA violations. HIPAA also provides for criminal penalties.
The HITECH Act includes notification requirements for breaches of patient-identifiable health information, restricts certain disclosures and sales of patient-identifiable health information and provides a tiered system for civil monetary penalties for HIPAA violations. HIPAA also provides for criminal penalties.
AdaptHealth’s business depends on the proper functioning and availability of its computer systems and networks. AdaptHealth relies on an external service provider to provide continual maintenance, upgrading and enhancement of AdaptHealth’s primary information systems used for its operational needs.
AdaptHealth’s business depends on the proper functioning and availability of its computer systems and networks and those of third parties on which it relies. AdaptHealth relies on an external service provider to provide continual maintenance, upgrading and enhancement of AdaptHealth’s primary information systems used for its operational needs.
Furthermore, certain of the key personnel of AdaptHealth may be unfamiliar with the requirements of operating a company regulated by 29 Table of Con t ents the SEC, which could cause AdaptHealth to have to expend time and resources helping them become familiar with such requirements.
Furthermore, certain of the key personnel of AdaptHealth may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause AdaptHealth to have to expend time and resources helping them become familiar with such requirements.
To the extent that its third-party providers fail to 13 Table of Con t ents support, maintain and upgrade such software or systems, or if AdaptHealth loses its licenses with third-party providers, the efficiency of AdaptHealth’s operations could be disrupted or reduced.
To the extent that its third-party providers fail to support, maintain and upgrade such software or systems, or if AdaptHealth loses its licenses with third-party providers, the efficiency of AdaptHealth’s operations could be disrupted or reduced.
AdaptHealth’s ability to execute its growth strategy therefore depends upon the adoption by patients, physicians and sleep centers, among others, of AdaptHealth’s sleep therapy equipment and supplies to treat their patients suffering from OSA. There can be no assurance that AdaptHealth's sleep therapy equipment and supplies will continue to maintain broad acceptance among physicians and patients.
AdaptHealth’s ability to execute its growth strategy therefore depends upon the adoption by patients, physicians and sleep centers, among others, of AdaptHealth’s sleep therapy equipment and supplies for the treatment of OSA. There can be no assurance that AdaptHealth's sleep therapy equipment and supplies will continue to maintain broad acceptance among physicians and patients.
The amount due and payable in those circumstances is determined based on certain assumptions, including an 33 Table of Con t ents assumption that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivable Agreement.
The amount due and payable in those circumstances is determined based on certain assumptions, including an assumption that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivable Agreement.
However, these drugs may have a significant impact on obesity rates over time, which 17 Table of Con t ents may result in reduced demand for our current equipment or services and we may not be able to adapt to those changes to stay competitive.
However, these drugs may have a significant impact on obesity rates over time, which may result in reduced demand for our current equipment or services and we may not be able to adapt to those changes to stay competitive.
For example, some payors have shifted coverage for continuous glucose monitors (“CGM”) from the medical benefit to the pharmacy benefit for their insureds. The impact of changing the benefit can include changes to the types of providers that can provide CGM, increased competition from pharmacies, changes to covered amounts, and changes to patient deductibles.
For example, some payors have shifted coverage for CGMs from the medical benefit to the pharmacy benefit for their insureds. The impact of changing the benefit can include changes to the types of providers that can provide CGMs, increased competition from pharmacies, changes to covered amounts, and changes to patient deductibles.
We have taken a number of measures to remediate the material weaknesses identified as of December 31, 2022, and such material weaknesses have been remediated as of December 31, 2023 as described in Item 9A, “ Controls and Procedures ”.
We have taken a number of measures to remediate the material weaknesses identified as of December 31, 2023, and two of the three material weaknesses have been remediated as of December 31, 2024 as described in Item 9A, “ Controls and Procedures ”.
AdaptHealth cannot predict what additional actions will be required of AdaptHealth by the FDA or other state or federal agencies related to the recall.
AdaptHealth cannot predict what additional actions will be required of AdaptHealth by the Food and Drug Administration ("FDA") or other state or federal agencies related to the recall.
The enactment of the American Rescue Plan Act in 2021 would have triggered PAYGO sequestration in 2021. In the Protecting Medicare & American Farmers from Sequester Cuts Act, Congress delayed the PAYGO sequestration until January 1, 2023. The Consolidated Appropriations Act, 2023 (Public Law No: 117-328) further prevented implementation of the PAYGO Medicare 4% sequester through the end of 2024.
In the Protecting Medicare & American Farmers from Sequester Cuts Act, Congress delayed the PAYGO sequestration until January 1, 2023. The Consolidated Appropriations Act, 2023 (Public Law No: 117-328) further prevented implementation of the PAYGO Medicare 4% sequester through the end of 2024.
If in future periods AdaptHealth were to experience a further decline in its market capitalization or expected results for a sustained period of time, AdaptHealth may be required to perform an additional goodwill impairment 28 Table of Con t ents test at an interim or annual period and could be required to recognize an additional non-cash goodwill impairment charge at that time, which could be material.
In future periods, if AdaptHealth were to experience a decline in its market capitalization or expected results for its reporting units for a sustained period of time, AdaptHealth may be required to perform an additional quantitative goodwill impairment test at an interim or annual period and could be required to recognize a non-cash goodwill impairment charge at that time, which could be material.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

5 edited+1 added−1 removed6 unchanged
Biggest changeThis includes a vendor management and risk assessment program to ensure the third party environments in which AdaptHealth’s data is stored or processed are built to standards sufficient to satisfy HIPAA security requirements.
Biggest changeThis includes a vendor management and risk assessment program to ensure the third-party environments in which AdaptHealth’s data is stored or processed are built to standards sufficient to satisfy HIPAA security requirements. This includes a risk-based due diligence process in selecting third-party service providers, which covers the third-party vendor’s general IT controls and IT facilities used to service AdaptHealth’s business.
The Audit Committee also discusses any 35 Table of Con t ents significant cybersecurity incidents or risk exposures that have come to management’s attention during the conduct of their assessments and the steps management has taken to mitigate such exposures.
The Audit Committee also discusses any significant cybersecurity incidents or risk exposures that have come to management’s attention during the conduct of their assessments and the steps management has taken to mitigate such exposures.
AdaptHealth's Audit Committee is responsible for reviewing AdaptHealth's cybersecurity risks and incidents, and for overseeing management’s controls over information security.
The Audit Committee of AdaptHealth's Board is responsible for reviewing AdaptHealth's cybersecurity risks and incidents, and for overseeing management’s controls over information security.
For further discussion on AdaptHealth’s risks from cybersecurity threats, see Item 1A , Risk Factors - “ AdaptHealth’s business depends on its information systems, including software licensed from third parties, and any failure or significant disruptions of these systems, security breaches or loss of data could materially affect our business, results of operations and financial condition .” Cybersecurity Governance AdaptHealth’s Board of Directors is responsible for oversight of AdaptHealth's cyber risk management program, including risk identification, mitigation strategy and efforts, and resources.
For further discussion on AdaptHealth’s risks from cybersecurity threats, see Item 1A , Risk Factors - “ AdaptHealth’s business depends on its information systems, including software licensed from or hosted by 35 Table of Contents third parties, and any failure or significant disruption or effective cyber-attack on any of these systems, security breaches or improper disclosure of or loss of data could materially affect our business, results of operations and financial condition .” Cybersecurity Governance AdaptHealth’s Board of Directors is responsible for oversight of AdaptHealth's cyber risk management program, including risk identification, mitigation strategy and efforts, and resources.
During the period covered by this report, AdaptHealth has not identified any previous cybersecurity incidents that have materially affected or are reasonably likely to materially affect AdaptHealth, including its business strategy, results of operations or financial condition.
AdaptHealth believes that these processes are essential to support its compliance, internal controls and efficiency initiatives. During the period covered by this report, AdaptHealth has not identified any previous cybersecurity incidents that have materially affected or are reasonably likely to materially affect AdaptHealth, including its business strategy, results of operations or financial condition.
Removed
This includes a risk-based due diligence process in selecting third-party service providers, which covers the third-party vendor’s general IT controls and IT facilities used to service AdaptHealth’s business. AdaptHealth believes that these processes are essential to support its compliance, internal controls and efficiency initiatives.
Added
This cyber risk management program is integrated into, and is part of, our overall enterprise risk management processes.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAll facilities are leased pursuant to operating leases. We believe that our facilities are suitable and adequate for our planned needs. Item 3. Legal Proceedings See Item 7. “Management's Discussion and Analysis of Financial Results and Operations - Commitments and Contingencies ."
Biggest changeAll facilities are leased pursuant to operating leases. We believe that our facilities are suitable and adequate for our planned needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

0 edited+6 added−2 removed0 unchanged
Removed
Item 3. Legal Proceedings 36 Item 4. Mine Safety Disclosures 36 PART II Item 5. Market Price of and Dividends on Registrant’s Common Equity and Related Stockholder Matters; Issuer Purchases of Equity Securities 37 Item 6. [Reserved] 37 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 38 Item 7A.
Added
Item 3. Legal Proceedings From time to time and in the normal course of business, the Company is involved in legal proceedings relating to its business.
Removed
Quantitative and Qualitative Disclosures About Market Risk 55 Item 8. Financial Statements and Supplementary Data 57
Added
While there can be no assurance, based on the Company’s evaluation of information currently available, the Company’s management, following consultation with legal counsel, does not expect the ultimate disposition of any or a combination of any such legal proceedings to have a material adverse effect on our business, financial condition or operating results.
Added
However, the Company’s assessment may change in the future based upon availability of new information and further developments in such legal proceedings. The results of legal proceedings are inherently uncertain, and material adverse outcomes are possible.
Added
Regardless of the outcome of any particular legal proceedings and the merits of any particular claim, litigation can have a material adverse impact on the Company due to, among other reasons, any injunctive relief granted which could inhibit the Company’s ability to operate its business, amounts paid as damages or in settlement of any such matter, diversion of management resources and defense costs.
Added
See Note 18, Commitments and Contingencies , and Item 7. “Management's Discussion and Analysis of Financial Results and Operations - Commitments and Contingencies ," in this report for information concerning other potential contingent liabilities matters that do not rise to the level of materiality for purposes of disclosure hereunder. Item 4.
Added
Mine Safety Disclosures Not applicable. 36 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

1 edited+1 added−1 removed4 unchanged
Biggest changeItem 5. Market Price of and Dividends on Registrant’s Common Equity and Related Stockholder Matters; Issuer Purchases of Equity Securities Market Information Our Common Stock is currently listed on Nasdaq under the symbol “AHCO.” As of February 23, 2024, there were 41 holders of record of shares of our Common Stock.
Biggest changeItem 5. Market Price of and Dividends on Registrant’s Common Equity and Related Stockholder Matters; Issuer Purchases of Equity Securities Market Information Our Common Stock is currently listed on Nasdaq under the symbol “AHCO.” As of February 21, 2025, there were 37 holders of record of shares of our Common Stock.
Removed
Issuer Purchases of Equity Securities The following table shows information with respect to purchases of our Common Stock made during the three months ended December 31, 2023 by us or any of our “affiliated purchasers” as defined in Rule 10b-18(a)(3) under the Exchange Act: Period Total number of shares purchased (1) Average price paid per share (1) Total number of shares purchased as part of publicly announced plans or programs (1) Approximate dollar amount remaining that may be used to purchase shares under the plans or programs (in thousands) (1) October 1 - 31, 2023 2,227,312 $ 7.88 2,227,312 $ 159,252 November 1 - 30, 2023 324,935 $ 7.51 324,935 $ 156,811 December 1 - 31, 2023 — $ — — $ 156,811 Total 2,552,247 2,552,247 (1) The Company’s board of directors authorized a share repurchase program for up to $200.0 million of the Company’s Common Stock, which expired on December 31, 2023.
Added
Issuer Purchases of Equity Securities There were no purchases of equity securities by us or any of our "affiliated purchasers," as defined in Rule 10b-18(a)(3) of the Securities Exchange Act of 1934, during the quarter ended December 31, 2024. Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

119 edited+132 added−47 removed47 unchanged
Biggest changeThree Months Ended Net Revenue March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 (in thousands, except revenue percentage, "%") $ % $ % $ % $ % Total $ % (Unaudited) Net sales revenue - Point in time Sleep $ 213,457 28.7 % $ 215,849 27.2 % $ 227,005 28.2 % $ 240,808 28.1 % $ 897,119 28.0 % Diabetes 142,544 19.1 % 165,021 20.8 % 157,328 19.6 % 182,538 21.3 % 647,431 20.2 % Supplies to the home 46,555 6.3 % 48,323 6.1 % 48,349 6.0 % 49,248 5.7 % 192,475 6.0 % Respiratory 7,929 1.1 % 8,191 1.0 % 8,164 1.0 % 8,086 0.9 % 32,370 1.0 % HME 28,563 3.8 % 27,237 3.4 % 27,095 3.4 % 27,302 3.2 % 110,197 3.4 % Other 53,207 7.1 % 57,012 7.3 % 64,184 8.0 % 77,307 9.0 % 251,710 8.0 % Total Net sales revenue $ 492,255 66.1 % $ 521,633 65.8 % $ 532,125 66.2 % $ 585,289 68.2 % $ 2,131,302 66.6 % Net revenue from fixed monthly equipment reimbursements Sleep $ 80,922 10.9 % $ 86,783 10.9 % $ 88,387 11.0 % $ 87,957 10.2 % $ 344,049 10.8 % Diabetes 3,831 0.5 % 3,886 0.5 % 2,609 0.3 % 2,282 0.3 % 12,608 0.4 % Respiratory 134,723 18.1 % 145,889 18.4 % 142,919 17.8 % 142,919 16.7 % 566,450 17.7 % HME 22,341 3.0 % 23,974 3.0 % 25,087 3.1 % 24,926 2.9 % 96,328 3.0 % Other 10,554 1.4 % 11,121 1.4 % 12,904 1.6 % 14,861 1.7 % 49,440 1.5 % Total Net revenue from fixed monthly equipment reimbursements $ 252,371 33.9 % $ 271,653 34.2 % $ 271,906 33.8 % $ 272,945 31.8 % $ 1,068,875 33.4 % Total net revenue Sleep $ 294,379 39.6 % $ 302,632 38.1 % $ 315,392 39.2 % $ 328,765 38.3 % $ 1,241,168 38.8 % Diabetes 146,375 19.6 % 168,907 21.3 % 159,937 19.9 % 184,820 21.6 % 660,039 20.6 % Supplies to the home 46,555 6.3 % 48,323 6.1 % 48,349 6.0 % 49,248 5.7 % 192,475 6.0 % Respiratory 142,652 19.2 % 154,080 19.4 % 151,083 18.8 % 151,005 17.6 % 598,820 18.7 % HME 50,904 6.8 % 51,211 6.4 % 52,182 6.5 % 52,228 6.1 % 206,525 6.4 % Other 63,761 8.5 % 68,133 8.7 % 77,088 9.6 % 92,168 10.7 % 301,150 9.5 % Total Net revenue $ 744,626 100.0 % $ 793,286 100.0 % $ 804,031 100.0 % $ 858,234 100.0 % $ 3,200,177 100.0 % 41 Table of Con t ents Three Months Ended Net Revenue March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 (in thousands, except revenue percentage, "%") $ % $ % $ % $ % Total $ % (Unaudited) Net sales revenue - Point in time Sleep $ 192,335 27.2 % $ 194,693 26.8 % $ 198,206 26.2 % $ 208,787 26.8 % $ 794,021 26.7 % Diabetes 151,359 21.4 % 162,259 22.3 % 169,075 22.3 % 188,295 24.1 % 670,988 22.6 % Supplies to the home 39,865 5.6 % 43,881 6.0 % 47,793 6.3 % 47,787 6.1 % 179,326 6.0 % Respiratory 8,145 1.2 % 7,891 1.1 % 9,734 1.3 % 8,572 1.1 % 34,342 1.2 % HME 30,052 4.3 % 30,313 4.2 % 29,463 3.9 % 28,714 3.7 % 118,542 4.0 % Other 54,199 7.7 % 53,617 7.3 % 58,252 7.7 % 52,393 6.7 % 218,461 7.4 % Total Net sales revenue $ 475,955 67.4 % $ 492,654 67.7 % $ 512,523 67.7 % $ 534,548 68.5 % $ 2,015,680 67.9 % Net revenue from fixed monthly equipment reimbursements Sleep $ 57,938 8.2 % $ 65,661 9.0 % $ 72,423 9.6 % $ 76,683 9.8 % $ 272,705 9.2 % Diabetes 3,946 0.6 % 4,034 0.6 % 4,211 0.6 % 3,912 0.5 % 16,103 0.5 % Respiratory 132,580 18.8 % 128,865 17.7 % 130,618 17.3 % 128,634 16.5 % 520,697 17.5 % HME 25,725 3.6 % 25,547 3.5 % 25,482 3.4 % 25,502 3.3 % 102,256 3.4 % Other 10,059 1.4 % 10,853 1.5 % 11,238 1.4 % 11,004 1.4 % 43,154 1.5 % Total Net revenue from fixed monthly equipment reimbursements $ 230,248 32.6 % $ 234,960 32.3 % $ 243,972 32.3 % $ 245,735 31.5 % $ 954,915 32.1 % Total Net revenue Sleep $ 250,273 35.4 % $ 260,354 35.8 % $ 270,629 35.8 % $ 285,470 36.6 % $ 1,066,726 35.9 % Diabetes 155,305 22.0 % 166,293 22.9 % 173,286 22.9 % 192,207 24.6 % 687,091 23.1 % Supplies to the home 39,865 5.6 % 43,881 6.0 % 47,793 6.3 % 47,787 6.1 % 179,326 6.0 % Respiratory 140,725 20.0 % 136,756 18.8 % 140,352 18.6 % 137,206 17.6 % 555,039 18.7 % HME 55,777 7.9 % 55,860 7.7 % 54,945 7.3 % 54,216 7.0 % 220,798 7.4 % Other 64,258 9.1 % 64,470 8.8 % 69,490 9.1 % 63,397 8.1 % 261,615 8.9 % Total Net revenue $ 706,203 100.0 % $ 727,614 100.0 % $ 756,495 100.0 % $ 780,283 100.0 % $ 2,970,595 100.0 % 42 Table of Con t ents Three Months Ended Net Revenue March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 (in thousands, except revenue percentage, "%") $ % $ % $ % $ % Total $ % (Unaudited) Net sales revenue - Point in time Sleep $ 128,682 26.7 % $ 163,331 26.5 % $ 173,359 26.5 % $ 188,758 26.9 % $ 654,130 26.6 % Diabetes 95,017 19.7 % 123,314 20.0 % 134,228 20.5 % 175,523 25.0 % 528,082 21.5 % Supplies to the home 41,363 8.6 % 42,675 6.9 % 42,441 6.5 % 41,351 5.9 % 167,830 6.8 % Respiratory 5,621 1.2 % 13,154 2.1 % 6,228 1.0 % 6,013 0.9 % 31,016 1.3 % HME 23,401 4.9 % 29,268 4.7 % 29,919 4.6 % 31,217 4.4 % 113,805 4.6 % Other 23,181 4.8 % 28,855 4.7 % 45,996 7.1 % 46,511 6.6 % 144,543 6.0 % Total Net sales revenue $ 317,265 65.8 % $ 400,597 64.9 % $ 432,171 66.2 % $ 489,373 69.7 % $ 1,639,406 66.8 % Net revenue from fixed monthly equipment reimbursements Sleep $ 48,109 10.0 % $ 66,335 10.8 % $ 62,755 9.6 % $ 60,053 8.6 % $ 237,252 9.7 % Diabetes 2,853 0.6 % 3,216 0.5 % 3,722 0.6 % 3,332 0.5 % 13,123 0.5 % Respiratory 83,454 17.3 % 111,528 18.1 % 117,918 18.0 % 114,370 16.3 % 427,270 17.4 % HME 20,380 4.2 % 24,431 4.0 % 26,043 4.0 % 25,082 3.6 % 95,936 3.9 % Other 10,058 2.1 % 10,910 1.7 % 10,684 1.6 % 9,896 1.3 % 41,548 1.7 % Total Net revenue from fixed monthly equipment reimbursements $ 164,854 34.2 % $ 216,420 35.1 % $ 221,122 33.8 % $ 212,733 30.3 % $ 815,129 33.2 % Total Net revenue Sleep $ 176,791 36.7 % $ 229,666 37.3 % $ 236,114 36.1 % $ 248,811 35.5 % $ 891,382 36.3 % Diabetes 97,870 20.3 % 126,530 20.5 % 137,950 21.1 % 178,855 25.5 % 541,205 22.0 % Supplies to the home 41,363 8.6 % 42,675 6.9 % 42,441 6.5 % 41,351 5.9 % 167,830 6.8 % Respiratory 89,075 18.5 % 124,682 20.2 % 124,146 19.0 % 120,383 17.2 % 458,286 18.7 % HME 43,781 9.1 % 53,699 8.7 % 55,962 8.6 % 56,299 8.0 % 209,741 8.5 % Other 33,239 6.9 % 39,765 6.4 % 56,680 8.7 % 56,407 7.9 % 186,091 7.7 % Total Net revenue $ 482,119 100.0 % $ 617,017 100.0 % $ 653,293 100.0 % $ 702,106 100.0 % $ 2,454,535 100.0 % 43 Table of Con t ents Results of Operations Comparison of Year Ended December 31, 2023 and Year Ended December 31, 2022.
Biggest changeThree Months Ended Net Revenue March 31, 2024 June 30, 2024 September 30, 2024 December 31, 2024 (in thousands, except revenue percentages) $ % $ % $ % $ % Total $ % (Unaudited) Net sales revenue: Sleep Health $ 237,592 30.0 % $ 242,526 30.1 % $ 246,895 30.6 % $ 265,319 31.0 % $ 992,332 30.4 % Respiratory Health 7,905 1.0 % 8,033 1.0 % 8,307 1.0 % 8,443 1.0 % 32,688 1.0 % Diabetes Health 146,979 18.5 % 147,260 18.3 % 137,099 17.0 % 167,108 19.5 % 598,446 18.4 % Wellness at Home 113,664 14.4 % 118,586 14.7 % 118,392 14.8 % 116,663 13.6 % 467,305 14.3 % Total net sales revenue $ 506,140 63.9 % $ 516,405 64.1 % $ 510,693 63.4 % $ 557,533 65.1 % $ 2,090,771 64.1 % Net revenue from fixed monthly equipment reimbursements: Sleep Health $ 80,690 10.2 % $ 82,053 10.2 % $ 81,530 10.1 % $ 83,456 9.7 % $ 327,729 10.1 % Respiratory Health 137,232 17.3 % 138,898 17.2 % 140,930 17.5 % 141,469 16.5 % 558,529 17.1 % Diabetes Health 2,279 0.3 % 2,383 0.3 % 2,437 0.3 % 2,605 0.3 % 9,704 0.3 % Wellness at Home 34,137 4.3 % 34,992 4.3 % 37,418 4.7 % 37,548 4.4 % 144,095 4.4 % Total net revenue from fixed monthly equipment reimbursements $ 254,338 32.1 % $ 258,326 32.0 % $ 262,315 32.6 % $ 265,078 30.9 % $ 1,040,057 31.9 % Net revenue from capitated revenue arrangements: Sleep Health $ 7,052 0.9 % $ 6,976 0.9 % $ 7,379 0.9 % $ 7,745 0.9 % $ 29,152 0.9 % Respiratory Health 15,126 1.9 % 14,455 1.8 % 14,942 1.9 % 15,410 1.8 % 59,933 1.8 % Diabetes Health 1,598 0.2 % 1,546 0.2 % 1,536 0.2 % 1,580 0.2 % 6,260 0.2 % Wellness at Home 8,243 1.0 % 8,267 1.0 % 8,993 1.0 % 9,299 1.1 % 34,802 1.1 % Total net revenue from capitated revenue arrangements $ 32,019 4.0 % $ 31,244 3.9 % $ 32,850 4.0 % $ 34,034 4.0 % $ 130,147 4.0 % Total net revenue Sleep Health $ 325,334 41.1 % $ 331,555 41.2 % $ 335,804 41.6 % $ 356,520 41.6 % $ 1,349,213 41.4 % Respiratory Health 160,263 20.2 % 161,386 20.0 % 164,179 20.4 % 165,322 19.3 % 651,150 19.9 % Diabetes Health 150,856 19.0 % 151,189 18.8 % 141,072 17.5 % 171,293 20.0 % 614,410 18.9 % Wellness at Home 156,044 19.7 % 161,845 20.0 % 164,803 20.5 % 163,510 19.1 % 646,202 19.8 % Total net revenue $ 792,497 100.0 % $ 805,975 100.0 % $ 805,858 100.0 % $ 856,645 100.0 % $ 3,260,975 100.0 % 41 Table of Contents Three Months Ended Net Revenue March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 (in thousands, except revenue percentages) $ % $ % $ % $ % Total $ % (Unaudited) Net sales revenue: Sleep Health $ 223,007 29.9 % $ 225,364 28.4 % $ 242,113 30.1 % $ 256,619 29.9 % $ 947,103 29.6 % Respiratory Health 7,839 1.1 % 8,076 1.0 % 10,632 1.3 % 18,672 2.2 % 45,219 1.4 % Diabetes Health 142,544 19.1 % 165,021 20.8 % 157,328 19.6 % 182,538 21.3 % 647,431 20.2 % Wellness at Home 118,865 16.0 % 123,172 15.6 % 122,052 15.2 % 127,460 14.8 % 491,549 15.4 % Total net sales revenue $ 492,255 66.1 % $ 521,633 65.8 % $ 532,125 66.2 % $ 585,289 68.2 % $ 2,131,302 66.6 % Net revenue from fixed monthly equipment reimbursements: Sleep Health $ 80,922 10.9 % $ 86,783 10.9 % $ 88,596 11.0 % $ 88,310 10.3 % $ 344,611 10.8 % Respiratory Health 134,723 18.1 % 145,889 18.4 % 143,752 17.9 % 144,980 16.9 % 569,344 17.8 % Diabetes Health 3,831 0.5 % 3,886 0.5 % 2,609 0.3 % 2,282 0.3 % 12,608 0.4 % Wellness at Home 32,895 4.4 % 35,095 4.4 % 36,949 4.6 % 37,373 4.3 % 142,312 4.4 % Total net revenue from fixed monthly equipment reimbursements $ 252,371 33.9 % $ 271,653 34.2 % $ 271,906 33.8 % $ 272,945 31.8 % $ 1,068,875 33.4 % Total net revenue Sleep Health $ 303,929 40.8 % $ 312,147 39.3 % $ 330,709 41.1 % $ 344,929 40.2 % $ 1,291,714 40.4 % Respiratory Health 142,562 19.2 % 153,965 19.4 % 154,384 19.2 % 163,652 19.1 % 614,563 19.2 % Diabetes Health 146,375 19.6 % 168,907 21.3 % 159,937 19.9 % 184,820 21.6 % 660,039 20.6 % Wellness at Home 151,760 20.4 % 158,267 20.0 % 159,001 19.8 % 164,833 19.1 % 633,861 19.8 % Total net revenue $ 744,626 100.0 % $ 793,286 100.0 % $ 804,031 100.0 % $ 858,234 100.0 % $ 3,200,177 100.0 % Three Months Ended Net Revenue March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 (in thousands, except revenue percentages) $ % $ % $ % $ % Total $ % (Unaudited) Net sales revenue: Sleep Health $ 203,551 28.8 % $ 203,635 28.0 % $ 207,214 27.4 % $ 216,671 27.8 % $ 831,071 28.0 % Respiratory Health 7,748 1.1 % 7,631 1.0 % 9,561 1.3 % 8,504 1.1 % 33,444 1.1 % Diabetes Health 151,359 21.4 % 162,258 22.3 % 169,075 22.3 % 188,296 24.1 % 670,988 22.6 % Wellness at Home 113,298 16.1 % 119,129 16.4 % 126,673 16.7 % 121,077 15.5 % 480,177 16.2 % Total net sales revenue $ 475,956 67.4 % $ 492,653 67.7 % $ 512,523 67.7 % $ 534,548 68.5 % $ 2,015,680 67.9 % Net revenue from fixed monthly equipment reimbursements: Sleep Health $ 57,938 8.2 % $ 65,661 9.0 % $ 72,423 9.6 % $ 76,683 9.8 % $ 272,705 9.2 % Respiratory Health 132,580 18.8 % 128,866 17.7 % 130,618 17.3 % 128,633 16.5 % 520,697 17.5 % Diabetes Health 3,946 0.6 % 4,034 0.6 % 4,211 0.6 % 3,912 0.5 % 16,103 0.5 % Wellness at Home 35,784 5.0 % 36,401 5.0 % 36,720 4.8 % 36,505 4.7 % 145,410 4.9 % Total net revenue from fixed monthly equipment reimbursements $ 230,248 32.6 % $ 234,962 32.3 % $ 243,972 32.3 % $ 245,733 31.5 % $ 954,915 32.1 % Total net revenue Sleep Health $ 261,489 37.0 % $ 269,296 37.0 % $ 279,637 37.0 % $ 293,354 37.6 % $ 1,103,776 37.2 % Respiratory Health 140,328 19.9 % 136,497 18.7 % 140,179 18.6 % 137,137 17.6 % 554,141 18.6 % Diabetes Health 155,305 22.0 % 166,292 22.9 % 173,286 22.9 % 192,208 24.6 % 687,091 23.1 % Wellness at Home 149,082 21.1 % 155,530 21.4 % 163,393 21.5 % 157,582 20.2 % 625,587 21.1 % Total net revenue $ 706,204 100.0 % $ 727,615 100.0 % $ 756,495 100.0 % $ 780,281 100.0 % $ 2,970,595 100.0 % 42 Table of Contents Consolidated Results of Operations Comparison of Year Ended December 31, 2024 and Year Ended December 31, 2023.
Income Tax (Benefit) Expense. Income tax benefit for the year ended December 31, 2023 was $49.0 million compared to income tax expense of $24.8 million for the year ended December 31, 2022.
Income Tax Expense/Benefit. Income tax benefit for the year ended December 31, 2023 was $49.0 million compared to income tax expense of $24.8 million for the year ended December 31, 2022.
AdaptHealth has used these funds to meet its capital requirements, which primarily consist of capital expenditures including patient equipment, product and supply costs, salaries, labor, benefits and other employee-related costs, third-party customer service, billing and collections and logistics costs, acquisitions and debt service, and to fund share repurchases.
AdaptHealth has used these funds to meet its capital requirements, which primarily consist of capital expenditures including patient equipment, product and supply costs, salaries, labor, benefits and other employee-related costs, third-party customer service, billing and collections and logistics costs, acquisitions, debt service, and to fund share repurchases.
Recent Accounting Pronouncements Recently issued accounting pronouncements that may be relevant to the Company’s operations but have not yet been adopted are out lined in Note 2, Summary of Significant Accounting Policies - (ee) Recentl y Issued Accounting Pronouncements, to its consolidated financial statements included in this report.
Recent Accounting Pronouncements Recently issued accounting pronouncements that may be relevant to the Company’s operations but have not yet been adopted are out lined in Note 2, Summary of Significant Accounting Policies - (ee) Recentl y Issued Accounting Pronouncements Not Yet Adopted, to its consolidated financial statements included in this report.
On October 14, 2021, the court appointed Delaware County Employees Retirement System and the Bucks County Employees Retirement System as Lead Plaintiffs.
On October 14, 2021, the court appointed the Delaware County Employees Retirement System and the Bucks County Employees Retirement System as Lead Plaintiffs.
On January 23, 2024, the court entered an order appointing Allegheny County Employees' Retirement System, International Union of Operating Engineers, Local No. 793, Members Pension Benefit Trust of Ontario, and City of Tallahassee Pension Plan as Lead Plaintiffs.
On January 23, 2024, the court entered an order appointing Allegheny County Employees' Retirement System, International Union of Operating Engineers, Local No. 793, Members Pension Benefit Trust of Ontario, and City of Tallahassee Pension Plan as Lead Plaintiffs (the "Allegheny Lead Plaintiffs").
The Derivative Complaint generally alleges that the defendants breached their fiduciary duties owed to the Company by, among other things, allegedly causing or allowing misrepresentations and/or omissions regarding changes made to the methodology used to calculate the Company’s organic growth and the Company’s former Co-CEO’s alleged criminal activity and engaging in insider trading.
The Derivative Complaint generally alleged that the defendants breached their fiduciary duties owed to the Company by, among other things, allegedly causing or allowing misrepresentations and/or omissions regarding changes made to the methodology used to calculate the Company’s organic growth and the Company’s former Co-CEO’s alleged criminal activity and engaging in insider trading.
This increase is primarily due to higher professional fees and higher equity-based compensation expense, partially offset by lower transaction costs. General and administrative expenses as a percentage of net revenue was 5.9% in 2023, compared to 5.5% in 2022.
This increase is primarily due to higher professional fees and equity-based compensation expense, partially offset by lower transaction costs. General and administrative expenses as a percentage of net revenue was 10.5% in 2023, compared to 10.9% in 2022.
EBITDA and Adjusted EBITDA AdaptHealth uses EBITDA and Adjusted EBITDA, 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.
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin AdaptHealth uses EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin, 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.
EBITDA and Adjusted EBITDA 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.
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.
Net revenue from AdaptHealth's diabetes business decreased by $27.1 million, or 3.9%, for the year ended December 31, 2023 compared to the prior year period, primarily due to a shift in diabetes patients by certain large commercial insurance and other payors from DME suppliers to dual-benefit and pharmacy-only suppliers and lower net revenue from insulin pumps and supplies as a result of a shift toward more pumps being sold to patients through the pharmacy channel, as well as the effect from manufacturers bringing additional distribution business in-house, partially offset by an increase in CGM patient census.
Net revenue from AdaptHealth's Diabetes Health segment decreased by $27.1 million, or 3.9%, for the year ended December 31, 2023 compared to the prior year period, primarily due to a shift in diabetes patients by certain large commercial insurance and other payors from DME suppliers to dual-benefit and pharmacy-only suppliers and lower net revenue from insulin pumps and supplies as a result of a shift toward more pumps being sold to patients through the pharmacy channel, as well as the effect from manufacturers bringing additional distribution business in-house, partially offset by an increase in CGM patient census.
The increase was the result of a $747.9 million reduction in net income (loss), a net increase of $769.3 million in non-cash charges, primarily from goodwill impairment charges, depreciation and amortization, the change in the estimated fair value of the warrant liability, deferred income taxes, and the reduction in the carrying amount of operating and finance lease right-of-use assets, payments of contingent consideration related to acquisitions of $2.5 million in the 2022 period, and a net $82.9 million incre ase resulting from the change in operating assets and liabilities, primarily from the change in accounts receivable, inventory and accounts payable and accrued expenses.
The increase was the result of a $747.9 million reduction in net income (loss), a net increase of $769.3 million in non-cash charges, primarily from goodwill impairment charges, depreciation and amortization, the change in the estimated fair value of the warrant liability, deferred income taxes, and the reduction in the carrying amount of operating and finance lease right-of-use assets, payments of contingent consideration related to acquisitions of $2.5 million in the 2022 period, and a net $82.9 million increase resulting from the change in operating assets and liabilities, primarily from the change in accounts receivable, inventory and accounts payable and accrued expenses.
Other loss, net for the year ended December 31, 2023 consisted of an expense of $25.1 million relating to an agreement to settle a previously disclosed securities class action lawsuit, net of expected contributions from the Company’s insurers, $4.8 million of lease termination costs associated with a cost management program, $0.9 million of impairments of operating lease right-of-use assets, $1.2 million of expenses associated with other legal settlements, and a $0.3 million charge for the increase in the fair value of a contingent consideration liability related to an acquisition, offset by income of $2.5 million related to changes in AdaptHealth’s estimated TRA liability, and $0.3 million of equity income related to an equity method investment.
Other loss, net for the year ended December 31, 2023 consisted of a pre-tax expense of $25.1 million relating to an agreement to settle a previously disclosed securities class action lawsuit, net of expected contributions from the Company’s insurers, $4.8 million of lease termination costs associated with a cost management program, $0.9 million of impairments of operating lease right-of-use assets, $1.2 million of expenses associated with other legal settlements, and a $0.3 million charge for the increase in the fair value of a contingent consideration liability related to an acquisition, partially offset by income of $2.5 million related to changes in AdaptHealth’s estimated TRA liability, and $0.3 million of equity income related to an equity method investment.
Attorney’s Office for the Southern District of New York issued a civil investigative demand to a subsidiary of the Company, pursuant to the False Claims Act, 31 U.S.C. § 3733 ("FCA") surrounding whether the subsidiary submitted false claims in violation of the FCA related to its billing of, and reimbursements from, federal health care programs for ventilators provided to patients from January 1, 2015 to the present.
Attorney’s Office for the Southern District of New York issued a civil investigative demand to a subsidiary of the Company, pursuant to the False Claims Act, 31 U.S.C. § 3733 ("FCA") regarding whether the subsidiary submitted false claims in violation of the FCA related to its billing of, and reimbursements from, federal health care programs for ventilators provided to patients from January 1, 2015 to the present.
Furthermore, AdaptHealth may be required to make an offer to purchase the 4.625% Senior Notes upon the sale of certain assets or upon specific kinds of changes of control. In July 2020, AdaptHealth LLC issued $350.0 million aggregate principal amount of 6.125% senior unsecured notes (the “6.125% Senior Notes”). The 6.125% Senior Notes will mature on August 1, 2028.
In addition, AdaptHealth may be required to make an offer to purchase the 4.625% Senior Notes upon the sale of certain assets or upon specific kinds of changes of control. In July 2020, AdaptHealth LLC issued $350.0 million aggregate principal amount of 6.125% senior unsecured notes (the “6.125% Senior Notes”). The 6.125% Senior Notes will mature on August 1, 2028.
Net cash used in financing activities for 2022 was $66.1 million and consisted of repayments of $36.2 million on long-term debt and finance lease obligations, payments of $14.5 million for contingent consideration and deferred purchase price related to acquisitions, payments of $14.0 million for Common Stock repurchases under a share repurchase program, a payment of $2.0 million for a distribution to noncontrolling interests, and payments of $3.5 million for tax withholdings associated with equity-based compensation activity and stock option exercises, offset by proceeds of $1.6 million in connection with the employee stock purchase plan and proceeds of $2.5 million relating to stock option exercises.
Net cash used in financing activities for 2022 was $66.1 million and consisted of repayments of $36.2 million on long-term debt and finance lease obligations, payments of $14.5 million for contingent consideration and deferred purchase price related to acquisitions, payments of $14.0 million for Common Stock purchases under a share repurchase program, a payment of $2.0 million for a distribution to noncontrolling interests, and payments of $3.5 million for tax withholdings associated with equity-based compensation and stock option exercises, offset by proceeds of $1.6 million in connection with the employee stock purchase plan and proceeds of $2.5 million relating to stock option exercises.
On October 24, 2023, Allegheny County Employees’ Retirement System, a purported shareholder of the Company, filed a purported class action complaint against the Company and certain of its current and former officers, and certain underwriters in the United States District Court for the Eastern District of Pennsylvania (the “Allegheny County Complaint”).
On October 24, 2023, Allegheny County Employees’ Retirement System, a purported shareholder of the Company, filed a purported class action complaint against the Company and certain of its current and former officers, and certain underwriters in the United States District Court for the Eastern District of Pennsylvania.
Under the 2021 Credit Agreement, AdaptHealth is subject to a number of restrictive covenants that, among other things, impose operating and financial restrictions on AdaptHealth. Financial covenants include a Consolidated Total Leverage Ratio and a Consolidated Interest Coverage Ratio, both as defined in the 2021 Credit Agreement.
Under the 2024 Credit Agreement, AdaptHealth is subject to a number of restrictive covenants that, among other things, impose operating and financial restrictions on AdaptHealth. Financial covenants include a Consolidated Total Leverage Ratio and a Consolidated Interest Coverage Ratio, both as defined in the 2024 Credit Agreement.
The Consolidated Complaint generally alleges that the defendants violated federal securities laws by making allegedly false and misleading statements and/or failing to disclose material information regarding changes made to the methodology used to calculate the Company’s organic growth trajectory and the Company’s former Co-CEO’s alleged tax fraud arising from certain past private activity. The Consolidated Complaint seeks unspecified damages.
The Consolidated Complaint generally alleged that the defendants violated federal securities laws by making allegedly false and misleading statements and/or failing to disclose material information regarding changes made to the methodology used to calculate the Company’s organic growth trajectory and the Company’s former Co-CEO’s alleged tax fraud arising from certain past private activity. The Consolidated Complaint sought unspecified damages.
Cost of net revenue primarily includes the cost of non-capitalized medical equipment and supplies, distribution expenses, labor costs, facilities and vehicle rental costs, revenue cycle management costs and depreciation for capitalized patient equipment. Distribution expenses represent the cost incurred to coordinate and deliver products and services to the patients.
Cost of net revenue primarily includes the cost of non-capitalized medical equipment and supplies, distribution expenses, labor costs, facilities and vehicle rental costs, and depreciation for capitalized patient equipment. Distribution expenses represent the cost incurred to coordinate and deliver products and services to the patients.
The Derivative Complaint seeks, among other things, an award of money damages. On March 4, 2022, the parties to the Derivative Action stipulated to stay the Derivative Action pending final resolution of the Consolidated Class Action. On March 7, 2022, the court so-ordered the parties’ stipulation.
The Derivative Complaint sought, among other things, an award of money damages. On March 4, 2022, the parties to the Derivative Action stipulated to stay the Derivative Action pending final resolution of the Consolidated Class Action. On March 7, 2022, the court so-ordered the parties’ stipulation.
Any borrowing under the 2021 Credit Agreement may be repaid, in whole or in part, at any time and from time to time without premium or penalty, other than customary breakage costs, and any amounts repaid under the 2021 Revolver may be reborrowed.
Any borrowing under the 2024 Credit Agreement may be repaid, in whole or in part, at any time and from time to time without premium or penalty, other than customary breakage costs, and any amounts repaid under the 2024 Revolver may be reborrowed.
General and administrative expenses consist of corporate support costs including information technology, human resources, finance, contracting, legal, compliance, equity-based compensation, transaction expenses and other administrative costs. Depreciation and Amortization, Excluding Patient Equipment Depreciation. Depreciation expense includes depreciation charges for capital assets other than patient equipment (which is included as part of the cost of net revenue).
General and administrative expenses consist of corporate support costs including revenue cycle management costs, information technology, human resources, finance, contracting, legal, compliance, equity-based compensation, and other administrative costs. Depreciation and Amortization, Excluding Patient Equipment Depreciation. Depreciation expense includes depreciation charges for capital assets other than patient equipment (which is included as part of the cost of net revenue).
See Note 5, Goodwill and Identifiable Intangible Assets , for additional details. Interest Expense, net. Interest expense, net for the years ended December 31, 2023 and 2022 was $130.3 million and $109.4 million, respectively.
See Note 7, Goodwill and Identifiable Intangible Assets , for additional details. Interest Expense, net. Interest expense, net for the years ended December 31, 2023 and 2022 was $130.3 million and $109.4 million, respectively.
(h) The 2023 period consists of $13.9 million of expenses associated with litigation, $7.1 million of severance charges (of which $2.9 million relates to the separation of the Company's former CEO), $5.6 million of consulting expenses associated with systems implementation activities, $5.2 million of consulting expenses associated with cost savings initiatives, $4.8 million of lease termination costs associated with a cost management program, $0.9 million of net impairments of operating lease right-of-use assets as a result of vacating the leased facilities, and $1.6 million of other non-recurring expenses, offset by income of $2.5 million related to changes in AdaptHealth's estimated TRA liability.
The 2023 period consists of $13.9 million of expenses associated with litigation, $7.1 million of severance charges (of which $2.9 million relates to the separation of the Company's former CEO), $5.6 million of consulting expenses associated with systems implementation activities, $5.2 million of consulting expenses associated with cost savings initiatives, $4.8 million of lease termination costs associated with a cost management program, $1.0 million of transaction costs and expenses related to integration efforts related to acquisitions, $0.9 million of net impairments of operating lease right-of-use assets as a result of vacating the leased facilities, and $1.6 million of other non-recurring expenses, offset by income of $2.5 million related to changes in AdaptHealth's estimated TRA liability.
Interest expense related to AdaptHealth's credit agreement increased by $27.6 million in 2023 compared to 2022 as a result of higher interest rates, offset by lower average outstanding borrowings in 2023 compared to 2022. Interest expense on AdaptHealth's finance leases increased by $1.1 million in 2023 compared to 2022.
Interest expense related to AdaptHealth's credit agreement increased by $27.6 million in 2023 compared to 2022 as a result of higher interest rates, offset by lower average outstanding borrowings in 2023 48 Table of Contents compared to 2022. Interest expense on AdaptHealth's finance leases increased by $1.1 million in 2023 compared to 2022.
General and administrative expenses in 2022 included $15.8 million of equity-based compensation expense, $6.0 million of transaction costs, and other non-recurring expenses of $19.7 million, primarily consisting of $11.7 million of consulting expenses associated with systems implementation activities and post-implementation support services and $7.4 million of expenses associated with litigation. Depreciation and amortization, excluding patient equipment depreciation.
General and administrative expenses in 2022 included $15.5 million of equity-based compensation expense and other non-recurring expenses of $25.7 million, primarily consisting of $11.7 million of consulting expenses associated with systems implementation activities and post-implementation support services, $7.4 million of expenses associated with litigation, and $6.0 million of transaction costs. Depreciation and amortization, excluding patient equipment depreciation.
AdaptHealth believes Adjusted EBITDA is useful to investors in evaluating AdaptHealth’s financial performance. AdaptHealth uses this metric 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.
AdaptHealth believes Adjusted EBITDA and Adjusted EBITDA Margin are useful to investors in evaluating AdaptHealth’s financial performance. AdaptHealth 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.
As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual or interim goodwill impairment test will prove to be accurate predictions of the future.
As a result, there can be no assurance that the 60 Table of Contents estimates and assumptions made for purposes of the annual or interim goodwill impairment test will prove to be accurate predictions of the future.
The 2021 Credit Agreement also contains certain customary events of default, including, among other things, failure to make payments when due thereunder, failure to observe or perform certain covenants, cross-defaults, bankruptcy and insolvency-related events, and non-compliance with healthcare laws. AdaptHealth was in compliance with the applicable covenants in the aforementioned credit facility as of December 31, 2023.
The 2024 Credit Agreement also contains certain customary events of default, including, among other things, failure to make payments when due thereunder, failure to observe or perform certain covenants, cross-defaults, bankruptcy and insolvency-related events, and non-compliance with healthcare laws. AdaptHealth was in compliance with the applicable covenants in the 2024 Credit Agreement as of December 31, 2024.
The 2022 period consists of $11.7 million of consulting expenses associated with systems implementation activities and post-implementation support services, $10.5 million of expenses associated with litigation, a $0.8 million loss related to the write-off of an investment, and $3.9 million of net other non-recurring expenses, offset by income of $2.9 million related to changes in AdaptHealth’s estimated TRA liability.
The 2022 period consists of $11.7 million of consulting expenses associated with systems implementation activities and post-implementation support services, $10.5 million of expenses associated with litigation, $6.0 million of transaction costs and expenses related to integration efforts related to acquisitions, a $0.8 million loss related to the write-off of an investment, and $3.9 million of net other non-recurring expenses, offset by income of $2.9 million related to changes in AdaptHealth’s estimated TRA liability.
While there can be no assurance, based on the Company’s evaluation of information currently available, the Company’s management believes any liability that may ultimately result from resolution of such loss contingencies will not have a material adverse effect on the Company’s financial conditions or results of operations. However, the Company’s assessment may be affected by limited information.
While there can be no assurance, based on the Company’s evaluation of information currently available, the Company’s management believes any liability that may ultimately result from resolution of such loss contingencies will not have a material adverse effect on the Company’s financial conditions or results of operations.
AdaptHealth’s future capital expenditure requirements will depend on many factors, including its patient volume and revenue growth rates. 48 Table of Con t ents AdaptHealth’s capital expenditures are made in advance of patients beginning service. Certain operating costs are incurred at the beginning of the equipment service period and during initial patient set up.
AdaptHealth’s future capital expenditure requirements will depend on many factors, including its patient volume and revenue growth rates. AdaptHealth’s capital expenditures are made in advance of patients beginning service. Certain operating costs are incurred at the beginning of the equipment service period and during initial patient set up.
The Company utilizes the expected value method to determine the amount of variable consideration, including implicit and explicit price concessions, that should be included to arrive at the transaction price, using contractual agreements and historical reimbursement experience within each payor type.
The Company utilizes the expected value method to determine the amount of variable consideration, including implicit and explicit price concessions, that should be included to arrive at the transaction price, using contractual agreements and historical reimbursement experience.
For the year ended December 31, 2023, net revenue from fixed monthly equipment reimbursements comprised 33% of total net revenue, compared to 32% of total net revenue for the year ended December 31, 2022. Cost of Net Revenue.
For the year ended December 31, 2023, net revenue from fixed monthly equipment reimbursements comprised 33% of total net revenue, compared to 32% of total net revenue for the year ended December 31, 2022. 47 Table of Contents Cost of Net Revenue.
These increases were offset by a reduction in interest expense of $8.3 million related to AdaptHealth's interest rate swap agreements. Change in Fair Value of Warrant Liability . AdaptHealth has outstanding warrants to purchase shares of Common Stock, as discussed in Note 11, Stockholders' Equity – Warrants , to the accompanying December 31, 2023 consolidated financial statements.
These increases were offset by a reduction in interest expense of $8.3 million related to AdaptHealth's interest rate swap agreements. Change in Fair Value of Warrant Liability . AdaptHealth had outstanding warrants to purchase shares of Common Stock, as discussed in Note 13, Stockholders' Equity – Warrants , to the accompanying December 31, 2024 consolidated financial statements.
AdaptHealth’s mitigation efforts relating to these inflationary pressures include utilizing AdaptHealth’s purchasing power in negotiations with vendors and the increased use of technology to drive operating efficiencies and control costs, such as AdaptHealth’s digital platform for prescriptions, orders and delivery.
AdaptHealth’s mitigation efforts relating to these inflationary pressures include utilizing AdaptHealth’s purchasing power in negotiations with vendors and the increased use of technology to drive operating efficiencies and control costs, such as AdaptHealth’s digital platform for prescriptions, orders and delivery. Key Components of Operating Results Net Revenue .
Depreciation and amortization, excluding patient equipment depreciation, for the years ended December 31, 2023 and 2022 was $57.1 million and $64.9 million, respectively, a decrease of $7.8 million, primarily related to lower intangible amortization expense. 45 Table of Con t ents Goodwill Impairment.
Depreciation and amortization, excluding patient equipment depreciation, for the years ended December 31, 2023 and 2022 was $57.1 million and $64.9 million, respectively, a decrease of $7.8 million, primarily related to lower intangible amortization expense. Goodwill Impairment.
Based on the results of the tests performed as of September 30, 2023 and December 31, 2023, it was concluded that the estimated fair value of AdaptHealth's reporting unit was less than its carrying values at such dates; as such, AdaptHealth recognized an aggregate non-cash goodwill impairment charge of $830.8 million during the year ended December 31, 2023, which included an impairment charge of $318.9 million recognized during the fourth quarter.
Based on the results of the tests performed as of September 30, 2023 and December 31, 2023, it was concluded that the estimated fair value of AdaptHealth's reporting unit at that time was less than its carrying values at such dates; as such, AdaptHealth recognized an aggregate non-cash goodwill impairment charge of $830.8 million during the year ended December 31, 2023.
The Company reviews its accruals at least quarterly and adjusts accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information. At this time, the Company has no material accruals related to lawsuits, claims, investigations and proceedings, except as disclosed below.
The Company reviews its accruals at least quarterly and adjusts accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information. At this time, the Company has no material accruals related to lawsuits, claims, investigations or proceedings.
Costs of products and supplies increased by $105.7 million primarily as a result of increased net sales revenue and general inflationary cost increases. Salaries, labor and benefits increased by $8.6 million, primarily due to increased benefit costs, annual merit increases, and workforce wage pressure driven by inflation, partially offset by cost savings actions driven by headcount reductions.
Costs of products and supplies increased by $107.3 million primarily as a result of increased net sales revenue and general inflationary cost increases. Salaries, labor and benefits increased by $12.8 million, primarily due to increased benefit costs, annual merit increases, and workforce wage pressure driven by inflation, partially offset by cost savings actions driven by headcount reductions.
The Derivative Complaint also alleges claims for waste of corporate assets and unjust enrichment.
The Derivative Complaint also alleged claims for waste of corporate assets and unjust enrichment.
Debt In January 2021, AdaptHealth refinanced its debt borrowings and entered into a new credit agreement, which was subsequently amended in April 2021 and March 2023 (the “2021 Credit Agreement”).
In January 2021, AdaptHealth refinanced its outstanding debt borrowings under its then existing credit agreement and entered into a new credit agreement, which was subsequently amended in April 2021 and March 2023 (the “2021 Credit Agreement”).
The estimated implicit price concession is developed using assumptions based on the best information available to the Company at the time, but which 52 Table of Con t ents are inherently uncertain and unpredictable and as a result, actual results may differ significantly from the Company's estimates.
The estimated implicit price concession is developed using assumptions based on the best information available to the Company at the time, but which are inherently uncertain and unpredictable and as a result, actual results may differ significantly from the Company's estimates.
The use of funds in 2022 consisted of $19.0 million for business acquisitions, $391.4 million for equipment and other fixed asset purchases and $0.7 million for other investments.
The use of funds in 2023 consisted of $337.5 million for equipment and other fixed asset purchases, $19.7 million for business acquisitions, and $0.1 million for other investments. The use of funds in 2022 consisted of $19.0 million for business acquisitions, $391.4 million for equipment and other fixed asset purchases and $0.7 million for other investments.
Total net revenue is comprised of net sales revenue and net revenue from fixed monthly equipment reimbursements. Net sales revenue consists of revenue recognized at a point in time for the sale of supplies and disposables and revenue recognized in connection with at-risk capitation arrangements .
Total net revenue is comprised of net sales revenue, net revenue from fixed monthly equipment reimbursements, and net revenue from capitated revenue arrangements. Net sales revenue consists of revenue recognized at a point in time for the sale of supplies and disposables.
Also, net revenue generated by the Company’s diabetes product line is typically higher in the fourth quarter compared to the earlier part of the year due to the timing of when patients meet their annual deductibles and their associated reordering patterns.
Also, net revenue generated by AdaptHealth’s Diabetes Health segment is typically higher in the fourth quarter compared to the earlier part of the year due to the timing of when patients meet their annual deductibles and their associated reordering patterns.
Accordingly, the Company’s assessment may change in the future based upon availability of new information and further developments in the proceedings of such matters. The results of legal proceedings are inherently uncertain, and material adverse outcomes are possible. Professional legal fees are expensed as they are incurred.
However, the Company’s assessment may change in the future based upon availability of new information and further developments in the proceedings of such matters. The results of legal proceedings, claims and investigations are inherently uncertain, and material adverse outcomes are possible. Professional legal fees associated with any such legal proceedings, claims and investigations are expensed as they are incurred.
Patient equipment depreciation was 10.2% of net revenue in 2023 compared to 9.6% in 2022, primarily as a result of higher medical equipment prices and rental counts. General and Administrative Expenses. General and administrative expenses for the years ended December 31, 2023 and 2022 were $190.1 million and $162.1 million, respectively, an increase of $28.0 million or 17.2%.
Patient equipment depreciation was 10.2% of net revenue in 2023 compared to 9.6% in 2022, primarily as a result of higher medical equipment prices and rental counts. General and Administrative Expenses. General and administrative expenses for the years ended December 31, 2023 and 2022 were $334.6 million and $324.8 million, respectively, an increase of $9.8 million or 3.0%.
Continuing increases in inflation could impact the overall demand for AdaptHealth’s products and services, its costs for labor, equipment and products, and the margins it is able to realize on its products, all of which could have an adverse impact on AdaptHealth’s business, financial position, results of operations and cash flows.
Increases in inflation could impact the overall demand for AdaptHealth’s products and services, availability of materials, its costs for labor, equipment and products, shipping, warehousing and other operational overhead and the margins it is able to realize on its products, all of which could have an adverse impact on AdaptHealth’s business, financial position, results of operations and cash flows.
The proposed settlement will exhaust $35.0 million in D&O coverage limits available to the Company for the policy period from November 8, 2020 to November 8, 2021.
The insurance settlement exhausted $35.0 million in D&O coverage limits available to the Company for the policy period from November 8, 2020 to November 8, 2021.
Revenue Recognition Revenues are recognized either at a point in time for the sale of supplies and disposables, over the service period for equipment rental (including, but not limited to, CPAP machines, hospital beds, wheelchairs and other equipment), net of implicit price concessions for amounts estimated to be received from patients or under reimbursement arrangements with Medicare, Medicaid and other third-party payors, including private insurers, or in the month in which eligible members are entitled to receive healthcare services in connection with at-risk capitation arrangements.
The Company’s critical estimates in relation to its consolidated financial statements include those related to revenue recognition and valuation of goodwill. 59 Table of Contents Revenue Recognition Revenues are recognized either at a point in time for the sale of supplies and disposables, over the service period for equipment rental (including, but not limited to, CPAP machines, hospital beds, wheelchairs and other equipment), net of implicit price concessions for amounts estimated to be received from patients or under reimbursement arrangements with Medicare, Medicaid and other third-party payors, including private insurers, or in the month in which eligible members are entitled to receive healthcare services in connection with at-risk capitation arrangements.
The following table summarizes AdaptHealth’s consolidated results of operations for the years ended December 31, 2023 and 2022: (in thousands, except percentages) Year Ended December 31, 2023 2022 Dollars Revenue Percentage Dollars Revenue Percentage Increase/(Decrease) Dollars Percentage (Unaudited) Net revenue $ 3,200,177 100.0 % $ 2,970,595 100.0 % $ 229,582 7.7 % Costs and expenses: Cost of net revenue 2,720,613 85.0 % 2,553,169 85.9 % 167,444 6.6 % General and administrative expenses 190,091 5.9 % 162,125 5.5 % 27,966 17.2 % Depreciation and amortization, excluding patient equipment depreciation 57,087 1.8 % 64,890 2.2 % (7,803) (12.0) % Goodwill impairment 830,787 26.0 % — — % 830,787 — % Total costs and expenses 3,798,578 118.7 % 2,780,184 93.6 % 1,018,394 36.6 % Operating (loss) income (598,401) (18.7) % 190,411 6.4 % (788,812) (414.3) % Interest expense, net 130,299 4.1 % 109,414 3.7 % 20,885 19.1 % Change in fair value of warrant liability (34,482) (1.1) % (17,158) (0.6) % (17,324) 101.0 % Other loss, net 29,566 0.9 % 253 — % 29,313 11586.2 % (Loss) income before income taxes (723,784) (22.6) % 97,902 3.3 % (821,686) (839.3) % Income tax (benefit) expense (49,004) (1.5) % 24,769 0.8 % (73,773) (297.8) % Net (loss) income (674,780) (21.1) % 73,133 2.5 % (747,913) (1022.7) % Income attributable to noncontrolling interests 4,115 0.1 % 3,817 0.1 % 298 7.8 % Net (loss) income attributable to AdaptHealth Corp. $ (678,895) (21.2) % $ 69,316 2.4 % $ (748,211) (1079.4) % Net Revenue.
The following table summarizes AdaptHealth’s consolidated results of operations for the years ended December 31, 2023 and 2022: (in thousands, except percentages) Year Ended December 31, 2023 2022 Dollars Revenue Percentage Dollars Revenue Percentage Increase/(Decrease) Dollars Percentage (Unaudited) Net revenue $ 3,200,177 100.0 % $ 2,970,595 100.0 % $ 229,582 7.7 % Costs and expenses: Cost of net revenue (a) 2,576,110 80.4 % 2,390,480 80.5 % 185,630 7.8 % General and administrative expenses (a) 334,594 10.5 % 324,814 10.9 % 9,780 3.0 % Depreciation and amortization, excluding patient equipment depreciation 57,087 1.8 % 64,890 2.2 % (7,803) (12.0) % Goodwill impairment 830,787 26.0 % — — % 830,787 — % Total costs and expenses 3,798,578 118.7 % 2,780,184 93.6 % 1,018,394 36.6 % Operating (loss) income (598,401) (18.7) % 190,411 6.4 % (788,812) (414.3) % Interest expense, net 130,299 4.1 % 109,414 3.7 % 20,885 19.1 % Change in fair value of warrant liability (34,482) (1.1) % (17,158) (0.6) % (17,324) 101.0 % Other loss, net 29,566 0.9 % 253 — % 29,313 11586.2 % (Loss) income before income taxes (723,784) (22.6) % 97,902 3.3 % (821,686) (839.3) % Income tax (benefit) expense (49,004) (1.5) % 24,769 0.8 % (73,773) (297.8) % Net (loss) income (674,780) (21.1) % 73,133 2.5 % (747,913) (1022.7) % Income attributable to noncontrolling interests 4,115 0.1 % 3,817 0.1 % 298 7.8 % Net (loss) income attributable to AdaptHealth Corp. $ (678,895) (21.2) % $ 69,316 2.4 % $ (748,211) (1079.4) % 46 Table of Contents (a) Certain amounts previously reported within Cost of net revenue have been reclassified to General and administrative expenses in order to conform to the current year presentation.
The 2021 Revolver carries a commitment fee during the term of the 2021 Credit Agreement ranging from 0.25% to 0.50% per annum of the actual daily undrawn portion of the 2021 Revolver based on the Consolidated Senior Secured Leverage Ratio.
The 2024 Revolver carries a commitment fee during the term of the 2024 Credit Agreement ranging from 0.25% to 0.50% per annum of the actual daily undrawn portion of the 2024 Revolver depending upon AdaptHealth's Consolidated Senior Secured Leverage Ratio.
Furthermore, AdaptHealth may be required to make an offer to purchase the 6.125% Senior Notes upon the sale of certain assets or upon specific kinds of changes of control. As of December 31, 2023 and 2022, AdaptHealth had working capital of $112.0 million and $129.1 million, respectively.
In addition, AdaptHealth may be required to make an offer to purchase the 6.125% Senior Notes upon the sale of certain assets or upon specific kinds of changes of control. As of December 31, 2024 and 2023, AdaptHealth had working capital of $188.8 million and $112.0 million, respectively.
The 4.625% Senior Notes will be redeemable at AdaptHealth’s option, in whole or in part, at any time on or after February 1, 2024, and the redemption price for the 4.625% Senior Notes if redeemed during the 12 months beginning (i) February 1, 2024 is 102.313%, (ii) February 1, 2025 is 101.156%, and (iii) February 1, 2026 and thereafter is 100.000%, in each case together with accrued and unpaid interest.
The 4.625% Senior Notes are redeemable at AdaptHealth’s option, in whole or in part, and the redemption price for the 4.625% Senior Notes if redeemed during the 12 months beginning (i) February 1, 2025 is 101.156%, and (ii) February 1, 2026 and thereafter is 100.000%, in each case together with accrued and unpaid interest.
Net cash used in financing activities for 2023 was $92.5 million and consisted of repayments of $101.8 million on long-term debt and finance lease liabilities, payments of $29.3 million for Common Stock purchases under a share repurchase program, payments of $3.2 million in connection with the Company's liability relating to the TRA, payments of $5.8 million for tax withholdings associated with equity-based compensation and stock option exercises, a payment of $2.5 million for a distribution to the noncontrolling interest, and payments of $2.5 million for deferred purchase price in connection with acquisitions, offset by borrowings of long-term debt of $50.0 million, proceeds of $2.0 million in connection with the employee stock purchase plan and proceeds of $0.6 million relating to stock option exercises.
Net cash used in financing activities for 2024 was $198.9 million and consisted of repayments of $433.3 million on long-term debt (primarily in connection with the refinancing of the Company's credit agreement) and finance lease liabilities, payments of $6.4 million for debt issuance costs, payments of $5.6 million for distributions to the noncontrolling interest, payments of $5.3 million for contingent consideration and deferred purchase price in connection with acquisitions, payments of $2.1 million for tax withholdings associated with equity-based compensation, and payments of $1.4 million in connection with the Company's liability relating to the TRA, offset by borrowings on long-term debt and lines of credit of $253.5 million, proceeds of $1.0 million in connection with the employee stock purchase plan, and proceeds of $0.7 million relating to stock option exercises. 58 Table of Contents Net cash used in financing activities for 2023 was $92.5 million and consisted of repayments of $101.8 million on long-term debt and finance lease liabilities, payments of $29.3 million for Common Stock purchases under a share repurchase program, payments of $3.2 million in connection with the Company's liability relating to the TRA, payments of $5.8 million for tax withholdings associated with equity-based compensation and stock option exercises, a payment of $2.5 million for a distribution to the noncontrolling interest, and payments of $2.5 million for deferred purchase price in connection with acquisitions, offset by borrowings of long-term debt of $50.0 million, proceeds of $2.0 million in connection with the employee stock purchase plan and proceeds of $0.6 million relating to stock option exercises.
Net revenue from AdaptHealth's respiratory business increased by $43.8 million, or 7.9%, for the year ended December 31, 2023 compared to the prior year period, primarily due to increased patient census driven by strong patient demand for respiratory products.
Net revenue from AdaptHealth's Respiratory Health segment increased by $60.4 million, or 10.9%, for the year ended December 31, 2023 compared to the prior year period, primarily due to increased patient census driven by strong patient demand for respiratory products.
The 6.125% Senior Notes will be redeemable at AdaptHealth’s option, in whole or in part, at any time on or after August 1, 2023, and the redemption price for the 6.125% Senior Notes if redeemed during the 12 months beginning (i) August 1, 2023 is 103.063%, (ii) August 1, 2024 is 102.042%, (iii) August 1, 2025 is 101.021% and (iv) August 1, 2026 and thereafter is 100.000%, in each case together with accrued and unpaid interest.
The 6.125% Senior Notes are redeemable at 57 Table of Contents AdaptHealth’s option, in whole or in part, and the redemption price for the 6.125% Senior Notes if redeemed during the 12 months beginning (i) August 1, 2024 is 102.042%, (ii) August 1, 2025 is 101.021% and (iii) August 1, 2026 and thereafter is 100.000%, in each case together with accrued and unpaid interest.
For the year ended December 31, 2023, net sales revenue (recognized at a point in time) comprised 67% of total net revenue, compared to 68% of total net revenue for the year ended December 31, 2022.
For the year ended December 31, 2023, net sales revenue comprised 67% of total net revenue, compared to 68% of total net revenue for the year ended December 31, 2022.
These warrants are liability-classified, and the change in fair value of the warrant liability represents a non-cash gain in 2023 and 2022 for the change in the estimated fair value of such liability during the respective periods. Other loss, net.
These warrants were liability-classified, and the change in fair value of the warrant liability represented a non-cash gain in 2023 and 2022 for the change in the estimated fair value of such liability during the respective periods. These warrants expired on November 8, 2024. Other loss, net.
Additionally, the Company recognized a $64.8 million income tax benefit, and corresponding increase to net deferred tax assets, related to non-cash goodwill impairment charges of $830.8 million recognized during the year ended December 31, 2023. See Note 5, Goodwill and Identifiable Intangible Assets , for additional details. Comparison of Year Ended December 31, 2022 and Year Ended December 31, 2021.
Additionally, the Company recognized a $64.8 million income tax benefit, and corresponding increase to net deferred tax assets, related to non-cash goodwill impairment charges of $830.8 million recognized during the year ended December 31, 2023.
Net cash provided by operating activities for the years ended December 31, 2022 and 2021 was $373.9 million and $275.7 million, respectively, an increase of $98.2 million.
Net cash provided by operating activities for the years ended December 31, 2023 and 2022 was $480.7 million and $373.9 million, respectively, an increase of $106.8 million.
Such triggering events potentially warranting an annual or interim goodwill impairment assessment include, among other factors, declines in historical or projected revenue, operating income or cash flows, and sustained decreases in AdaptHealth's stock price or market capitalization. Such changes in circumstance can include, among others, changes in the legal environment, reimbursement environment, operating performance, a nd/or future prospects.
Such triggering events potentially warranting an annual or interim goodwill impairment assessment include, among other factors, declines in historical or projected revenue, operating income or cash flows, and sustained decreases in AdaptHealth's stock price or market capitalization.
Free Cash Flow The following table reconciles net cash provided by operating activities to free cash flow, which is a non-GAAP measure, for the years ended December 31, 2023, 2022 and 2021: 51 Table of Con t ents Year Ended December 31, (in thousands) 2023 2022 2021 (Unaudited) Net cash provided by operating activities $ 480,666 $ 373,867 $ 275,679 Purchases of equipment and other fixed assets (337,463) (391,423) (203,308) Free cash flow $ 143,203 $ (17,556) $ 72,371 Free cash flow was positive $143.2 million for the year ended December 31, 2023, compared to negative $17.6 million for the year ended December 31, 2022.
Free Cash Flow The following table reconciles net cash provided by operating activities to free cash flow, which is a non-GAAP measure, for the years ended December 31, 2024, 2023 and 2022: Year Ended December 31, (in thousands) 2024 2023 2022 (Unaudited) Net cash provided by operating activities $ 541,839 $ 480,666 $ 373,867 Purchases of equipment and other fixed assets (306,055) (337,463) (391,423) Free cash flow $ 235,784 $ 143,203 $ (17,556) Free cash flow was $235.8 million for the year ended December 31, 2024, compared to $143.2 million for the year ended December 31, 2023.
General and administrative expenses in 2023 included $19.6 million of equity-based compensation expense, $1.0 million of transaction costs, and other non-recurring expenses of $28.9 million, primarily consisting of $12.8 million of expenses associated with litigation, $6.5 million of expenses associated with cost savings initiatives, and $5.6 million of expenses associated with systems implementation activities.
General and administrative expenses in 2023 included $17.7 million of equity-based compensation expense and other non-recurring expenses of $29.9 million, primarily consisting of $12.8 million of expenses associated with litigation, $6.5 million of expenses associated with cost savings initiatives, $5.6 million of consulting expenses associated with systems implementation activities, $2.9 million of severance relating to the separation of the Company's former CEO, and $1.0 million of transaction costs.
The following table presents selected data from AdaptHealth’s consolidated statements of cash flows for years ended December 31, 2023, 2022 and 2021: Year Ended December 31, (in thousands) 2023 2022 2021 (Unaudited) Net cash provided by operating activities $ 480,666 $ 373,867 $ 275,679 Net cash used in investing activities (357,278) (411,171) (1,824,753) Net cash (used in) provided by financing activities (92,528) (66,051) 1,598,739 Net increase (decrease) in cash 30,860 (103,355) 49,665 Cash at beginning of period 46,272 149,627 99,962 Cash at end of period $ 77,132 $ 46,272 $ 149,627 50 Table of Con t ents Net cash provided by operating activities for the years ended December 31, 2023 and 2022 was $480.7 million and $373.9 million, respectively, an increase of $106.8 million.
The following table presents selected data from AdaptHealth’s consolidated statements of cash flows for years ended December 31, 2024, 2023 and 2022: Year Ended December 31, (in thousands) 2024 2023 2022 (Unaudited) Net cash provided by operating activities $ 541,839 $ 480,666 $ 373,867 Net cash used in investing activities (310,275) (357,278) (411,171) Net cash used in financing activities (198,949) (92,528) (66,051) Net increase (decrease) in cash 32,615 30,860 (103,355) Cash at beginning of period 77,132 46,272 149,627 Cash at end of period $ 109,747 $ 77,132 $ 46,272 Net cash provided by operating activities for the years ended December 31, 2024 and 2023 was $541.8 million and $480.7 million, respectively, an increase of $61.2 million.
The Allegheny County Complaint alleges, among other things, that the defendants violated federal securities laws by making allegedly false and misleading statements and/or failing to disclose material information regarding the Company’s organic growth in its diabetes business. The Allegheny County Complaint seeks unspecified damages.
The Wu Derivative Complaint alleges, among other things, that the defendants breached their fiduciary duties and violated federal securities laws by making allegedly false and misleading statements and/or failing to disclose material information regarding the Company’s organic growth in its diabetes product category.
AdaptHealth defines Adjusted EBITDA as EBITDA (as defined above), plus loss on extinguishment of debt, equity-based compensation expense, transaction costs, change in fair value of the warrant liability, goodwill impairment, 46 Table of Con t ents change in fair value of the contingent consideration common shares liability, litigation settlement expense, and certain other non-recurring items of expense or income.
AdaptHealth defines Adjusted EBITDA as EBITDA (as defined above), plus equity-based compensation expense, change in fair value of the warrant liability, goodwill impairment, loss on extinguishment of debt, litigation settlement expense, and certain other non-recurring items of expense or income. AdaptHealth defines Adjusted EBITDA Margin as Adjusted EBITDA (as defined above) as a percentage of net revenue.
The Company has also reached an agreement in principle with its directors and officers liability insurers to resolve a proceeding that the Company filed in Delaware Superior Court concerning coverage in connection with the Consolidated Class Action and the Derivative Action discussed immediately below.
On March 7, 2024, the Company entered into a settlement agreement with its Directors and Officers (D&O) liability insurers to resolve a proceeding that the Company filed in Delaware Superior Court concerning coverage in connection with the Consolidated Class Action and the Derivative Action discussed immediately below.
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 AdaptHealth’s liquidity.
They should not be considered as an alternative to net income or any other performance measures derived in accordance with U.S.
Borrowings under the 2021 Revolver may be used for working capital and other general corporate purposes, including for capital expenditures and acquisitions permitted under the 2021 Credit Agreement. As of December 31, 2023, there were no outstanding borrowings under the 2021 Revolver.
Borrowings under the 2024 Revolver may be used for working capital and other general corporate purposes, including for capital expenditures and acquisitions permitted under the 2024 Credit Agreement. AdaptHealth had no borrowings under the 2024 Revolver as of the date of this filing. At December 31, 2024, there was $22.4 million outstanding under letters of credit.
Net cash used in investing activities for the years ended December 31, 2023, 2022 and 2021 was $357.3 million, $411.2 million and $1,824.8 million, respectively. The use of funds in 2023 consisted of $337.5 million for equipment and other fixed asset purchases, $19.7 million for business acquisitions, and $0.1 million for other investments.
Net cash used in investing activities for the years ended December 31, 2024, 2023 and 2022 was $310.3 million, $357.3 million and $411.2 million, respectively. The use of funds in 2024 consisted of $306.1 million for equipment and other fixed asset purchases, $9.5 million for business acquisitions, partially offset by $5.3 million of proceeds from the sale of assets.
The comparability of AdaptHealth's net revenue between periods was impacted by certain factors as described below. The table below presents the items that impacted the change in AdaptHealth's net revenue between periods.
The table below presents the items that impacted the change in AdaptHealth's net revenue between periods.
Mandatory prepayments are required under the 2021 Revolver when borrowings and letter of credit usage exceed the total commitments for revolving credit loans. Mandatory prepayments are also required in connection with the disposition of assets to the extent not reinvested, unpermitted debt transactions, and calculation of excess cash flow, as defined, if certain leverage tests are not met.
Mandatory prepayments are required under the 2024 Revolver when borrowings and letter of credit usage exceed the total commitments for revolving credit loans. Mandatory prepayments are also required in connection with certain dispositions of assets and receipt of certain insurance proceeds or condemnation awards to the extent proceeds thereof are not reinvested, and unpermitted debt transactions.
AdaptHealth’s quarterly operating results may fluctuate significantly in the future depending on these and other factors. 40 Table of Con t ents Key Business Metrics AdaptHealth focuses on Net revenue, EBITDA, Adjusted EBITDA and Free Cash Flow as it reviews its performance. Refer to EBITDA, Adjusted EBITDA and Free Cash Flow included in the Non-GAAP measures section below.
Key Business Metrics AdaptHealth focuses on Net revenue, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and free cash flow as it reviews its performance. Refer to EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and free cash flow included in the non-GAAP measures section below.
See N ote 16 , Commitments and Contingencies, included in the accompanying notes to the consolidated financial statements for the year ended December 31, 2023 for additional discussion of such agreement.
See Note 12, Debt , included in the accompanying notes to the consolidated financial statements for the year ended December 31, 2024 for additional discussion of such refinancing.
If determined necessary, AdaptHealth applies the quantitative impairment test to identify and measure the amount of impairment, if any.
If determined necessary, AdaptHealth applies the quantitative impairment test to identify and measure the amount of impairment, if any, by comparing the fair value of a reporting unit to its carrying amount, including goodwill.
If determined necessary, the Company applies the quantitative impairment test to identify and measure the amount of impairment, if any.
If determined necessary, the Company applies the quantitative impairment test to identify and measure the amount of impairment, if any, by comparing the fair value of a reporting unit to its carrying amount, including goodwill.
If additional capital is unavailable when desired, AdaptHealth’s business, results of operations, and financial condition could be materially adversely affected. As of December 31, 2023, AdaptHealth had approximately $77.1 million of cash. At December 31, 2023, AdaptHealth had $720.0 million outstanding under its existing credit facility.
If additional capital is unavailable when desired, AdaptHealth’s business, results of operations, and financial condition could be materially adversely affected. As of December 31, 2024, AdaptHealth had approximately $109.7 million of cash. In September 2024, AdaptHealth entered into an amendment to its existing credit agreement (as amended, the "2024 Credit Agreement").

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of December 31, 2023, there was $720.0 million outstanding under the 2021 Term Loan, no outstanding borrowings under the 2021 Revolver, $21.6 million outstanding under letters of credit, and based on the financial debt covenants under the 2021 Credit Agreement, the maximum amount the Company could borrow under the 2021 Revolver 55 Table of Con t ents and remain in compliance with the financial debt covenants under the agreement was $226.2 million.
Biggest changeAs of December 31, 2024, there was $550.0 million outstanding under the 2024 Term Loan, $22.4 million outstanding under letters of credit, and based on the financial debt covenants under the 2024 Credit Agreement, the maximum amount the Company could borrow under the 2024 Revolver and remain in compliance with the financial debt covenants under the agreement was $277.6 million.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Our exposure to market risk relates to fluctuations in interest rates from borrowings under the 2021 Credit Agreement.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Our exposure to market risk relates to fluctuations in interest rates from borrowings under the 2024 Credit Agreement.
Due to the interest rate being variable, fluctuations in interest rates may impact our earnings. Based on our current level of debt, we estimate that a 100 basis point change in interest rates would have a $5.5 million annual impact on our net income (loss) before taxes. 56 Table of Con t ents
Based on our current level of debt, we estimate that a 100 basis point change in interest rates would have a $3.0 million annual impact on our net income (loss) before taxes. 63 Table of Contents
Removed
Amounts borrowed under the 2021 Credit Agreement bear interest quarterly at variable rates based upon, except in the case of Base Rate Loans (as defined), the sum of (a) the forward looking rate based on Term SOFR (subject to a zero percent floor) equal to Term SOFR plus a Term SOFR Adjustment (as defined) of 0.10%, plus (b) an Applicable Margin (as defined) ranging from 1.50% to 3.25% per annum based on the Consolidated Senior Secured Leverage Ratio (as defined).
Added
Amounts borrowed under the 2024 Credit Agreement bear interest at variable rates determined in relation to the Base Rate (as defined) or Term SOFR (as defined), at our option. Due to the interest rates being variable, fluctuations in interest rates may impact our earnings.

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