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March 31,

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-38399

AdaptHealth Corp.

(Exact name of registrant as specified in its charter)

Delaware

82-3677704

(State of Other Jurisdiction of incorporation or Organization)

(I.R.S. Employer Identification No.)

220 West Germantown Pike Suite 250, Plymouth Meeting, PA

19462

(Address of principal executive offices)

(Zip code)

Registrant’s telephone number, including area code: (610) 424-4515

Securities registered pursuant to Section 12(b) of the Act:

    

    

Name Of Each Exchange

Title of Each Class

Trading Symbol(s)

On Which Registered

Common Stock, par value $0.0001 per share

AHCO

The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.0405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of November 4, 2022, there were 134,731,665 shares of the Registrant’s Common Stock issued and outstanding.

ADAPTHEALTH CORP.

FORM 10-Q

TABLE OF CONTENTS

Page Number

PART I FINANCIAL INFORMATION

Item 1. Interim Consolidated Financial Statements (Unaudited)

Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021

4

Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021

5

Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and 2021

6

Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021

7

Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021

9

Notes to Interim Consolidated Financial Statements

10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

44

Item 3. Quantitative and Qualitative Disclosures About Market Risk

62

Item 4. Controls and Procedures

62

PART II OTHER INFORMATION

64

Item 1. Legal Proceedings

64

Item 1A. Risk Factors

64

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

64

Item 3. Defaults upon Senior Securities

64

Item 4. Mine Safety Disclosure

64

Item 5. Other Information

65

Item 6. Exhibits

65

Signatures

67

1

CERTAIN DEFINED TERMS

Throughout this Quarterly Report on Form 10-Q, unless otherwise specified or the context so requires:

AdaptHealth Holdings” means AdaptHealth Holdings LLC, a Delaware limited liability company;

Business Combination” means the transactions completed pursuant to the Agreement and Plan of Merger, dated as of July 8, 2019, by and among DFB Healthcare Acquisitions Corp. a Delaware corporation, DFB Merger Sub LLC, a Delaware limited liability company, our wholly owned subsidiary, AdaptHealth Holdings, AH Representative LLC, BM AH Holdings, LLC, Access Point Medical Inc. and, solely for the purposes described therein, Clifton Offshore Investments L.P., a British Virgin Islands limited partnership, BlueMountain Foinaven Master Fund L.P., a Cayman Islands exempted limited partnership, BMSB L.P. a Delaware limited partnership, BlueMountain Fursan Fund L.P. a Cayman Islands exempted limited partnership, which we completed on November 8, 2019;

“Charter” means our Third Amended and Restated Certificate of Incorporation, filed with the Secretary of State of the State of Delaware on July 28, 2021;

Class A Common Stock” means the Class A Common Stock, par value $0.0001 per share, created on the Closing of the Business Combination, which, following the filing of the Charter, has been renamed to “Common Stock” (as defined below);

Class B Common Stock” means the Class B Common Stock, par value $0.0001 per share, created on the Closing of the Business Combination, which following the filing of the Charter, no longer exists;

Closing of the Business Combination” means the closing of the Business Combination, which occurred on November 8, 2019;

Common Stock” means our Common Stock, par value $0.0001 per share;

Exchange Agreement” means the Exchange Agreement, dated as of November 8, 2019, by and among AdaptHealth, AdaptHealth Holdings, and holders of AdaptHealth Units;

New AdaptHealth Units” common units representing limited liability company interests in AdaptHealth Holdings from and after the Closing of the Business Combination;

Series B-1 Preferred Stock” means the series of preferred stock of the Company designated as “Series B-1 Convertible Preferred Stock,” par value $0.0001 per share;

Sponsor” means Deerfield/RAB Ventures LLC;

Tax Receivable Agreement” means the Tax Receivable Agreement, dated as of November 8, 2019, by and among AdaptHealth, AdaptHealth Holdings, and holders of AdaptHealth Units; and

“Warrants” means, collectively, the warrants that were issued in our initial public offering (our “IPO”) pursuant to the registration statement declared effective on February 15, 2018 and which were redeemed on September 2, 2020 (the “public warrants”) and the warrants initially issued to our Sponsor in a private placement that occurred simultaneously with our IPO (the “private placement warrants”), which private placement warrants have been distributed from the Sponsor to its members.

2

CAUTIONARY STATEMENT

In this Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I Item 2, and the documents incorporated by reference herein, we make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business. These statements may be preceded by, followed by or include the words “may,” “might,” “will,” “will likely result,” “should,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “continue,” “target” or similar expressions.

These forward-looking statements are based on information available to us as of the date they were made, and involve a number of risks and uncertainties which may cause them to turn out to be wrong. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward- looking statements. Some factors that could cause actual results to differ include:

competition and the ability of our business to grow and manage growth profitably;
changes in applicable laws or regulations;
fluctuations in the U.S. and/or global stock markets;
the possibility that we may be adversely affected by other economic, business, and/or competitive factors;
the impact of the coronavirus (COVID-19) pandemic and our response to it;
failure to consummate or realize the expected benefits of acquisitions, and
other risks and uncertainties set forth in this Form 10-Q, as well as the documents incorporated by reference herein.

3

PART I – FINANCIAL INFORMATION

Item 1. Interim Consolidated Financial Statements

ADAPTHEALTH CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

(UNAUDITED)

September 30, 

December 31,

2022

2021

Assets

Current assets:

  

  

Cash and cash equivalents

$

110,738

$

149,627

Accounts receivable

 

358,341

 

359,896

Inventory

 

125,362

 

123,095

Prepaid and other current assets

 

37,490

 

37,440

Total current assets

 

631,931

 

670,058

Equipment and other fixed assets, net

 

473,056

 

398,577

Operating lease right-of-use assets

128,635

147,760

Goodwill

 

3,524,999

 

3,512,567

Identifiable intangible assets, net

172,772

202,231

Other assets

 

20,453

 

15,098

Deferred tax assets

 

286,135

 

304,193

Total Assets

$

5,237,981

$

5,250,484

Liabilities and Stockholders' Equity

 

 

Current liabilities:

 

 

Accounts payable and accrued expenses

$

346,920

$

358,384

Current portion of finance lease obligations

 

2,695

 

15,446

Current portion of operating lease obligations

28,769

31,418

Current portion of long-term debt

 

30,000

 

20,000

Contract liabilities

 

31,605

 

31,370

Other liabilities

 

26,938

 

43,194

Total current liabilities

 

466,927

 

499,812

Long-term debt, less current portion

 

2,162,088

 

2,183,552

Operating lease obligations, less current portion

103,859

120,180

Other long-term liabilities

 

306,641

 

322,487

Warrant liability

38,516

57,764

Total Liabilities

 

3,078,031

 

3,183,795

Commitments and contingencies (note 14)

 

 

Stockholders' Equity:

 

 

Common Stock, par value of $0.0001 per share, 300,000,000 shares authorized; 134,723,174 and 133,843,732 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

13

13

Preferred Stock, par value of $0.0001 per share, 5,000,000 shares authorized; 124,060 and 124,060 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

1

1

Treasury stock, at cost (750,835 shares)

(13,992)

Additional paid-in capital

2,126,468

2,107,267

Retained earnings (Accumulated deficit)

28,883

(43,021)

Accumulated other comprehensive income (loss)

 

12,994

 

(2,354)

Total stockholders' equity attributable to AdaptHealth Corp.

 

2,154,367

 

2,061,906

Noncontrolling interests in subsidiaries

 

5,583

 

4,783

Total Stockholders' Equity

 

2,159,950

 

2,066,689

Total Liabilities and Stockholders' Equity

$

5,237,981

$

5,250,484

See accompanying notes to unaudited interim consolidated financial statements.

4

ADAPTHEALTH CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

Three Months Ended September 30, 

Nine Months Ended September 30, 

2022

    

2021

    

2022

    

2021

Net revenue

$

756,495

$

653,293

$

2,190,312

$

1,752,429

Costs and expenses:

 

  

 

 

 

Cost of net revenue

 

646,714

 

529,887

 

1,853,847

 

1,417,305

General and administrative expenses

 

40,681

 

33,006

 

124,673

 

132,584

Depreciation and amortization, excluding patient equipment depreciation

 

16,151

 

14,690

 

48,113

 

46,014

Total costs and expenses

 

703,546

 

577,583

 

2,026,633

 

1,595,903

Operating income

 

52,949

 

75,710

 

163,679

 

156,526

Interest expense, net

 

28,521

 

24,252

 

78,905

 

69,584

Change in fair value of warrant liability (note 10)

1,364

(16,737)

(17,145)

(57,359)

Change in fair value of contingent consideration common shares liability (note 10)

(10,006)

(34,050)

Loss on extinguishment of debt

 

 

8,240

 

 

20,189

Other loss (income), net

257

(452)

7,179

698

Income before income taxes

 

22,807

 

70,413

 

94,740

 

157,464

Income tax expense

 

5,580

 

12,147

 

20,036

 

22,782

Net income

17,227

58,266

74,704

134,682

Income attributable to noncontrolling interest

 

1,105

 

174

 

2,800

 

1,449

Net income attributable to AdaptHealth Corp.

$

16,122

$

58,092

$

71,904

$

133,233

Weighted average common shares outstanding - basic

134,227

131,684

134,186

124,228

Weighted average common shares outstanding - diluted

137,583

140,322

138,599

133,638

Basic net income per share (1)

$

0.11

$

0.40

$

0.49

$

0.97

Diluted net income per share (1)

$

0.11

$

0.20

$

0.35

$

0.27

(1)See Note 11, Earnings Per Share, to the unaudited interim consolidated financial statements for the calculations of basic and diluted net income per share.

See accompanying notes to unaudited interim consolidated financial statements.

5

ADAPTHEALTH CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(IN THOUSANDS)

(UNAUDITED)

Three Months Ended September 30, 

Nine Months Ended September 30, 

2022

2021

    

2022

2021

Net income

$

17,227

$

58,266

$

74,704

$

134,682

Other comprehensive income:

 

  

 

  

 

 

Interest rate swap agreements, inclusive of reclassification adjustment

 

7,757

 

640

 

15,348

 

3,180

Comprehensive income

 

24,984

 

58,906

 

90,052

 

137,862

Income attributable to noncontrolling interest

 

1,105

 

174

 

2,800

 

1,449

Comprehensive income attributable to AdaptHealth Corp.

$

23,879

$

58,732

$

87,252

$

136,413

See accompanying notes to unaudited interim consolidated financial statements.

6

ADAPTHEALTH CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(IN THOUSANDS)

(UNAUDITED)

Accumulated

Additional

Retained Earnings

other

Noncontrolling

Common Stock

Preferred Stock

Treasury Stock

paid-in

(Accumulated

comprehensive

interests in

  

Shares

  

Amount

  

  

Shares

  

Amount

  

Shares

  

Amount

capital

deficit)

income (loss)

subsidiaries

  

Total

Balance, December 31, 2021

133,844

$

13

124

$

1

$

$

2,107,267

$

(43,021)

$

(2,354)

$

4,783

$

2,066,689

Equity-based compensation

187

5,502

5,502

Exercise of stock options

184

723

723

Payments for tax withholdings from restricted stock vesting and stock option exercises

(1,269)

(1,269)

Common Stock issued in connection with employee stock purchase plan

31

753

753

Net income

41,750

480

42,230

Change in fair value of interest rate swaps, inclusive of reclassification adjustment

5,998

5,998

Balance, March 31, 2022

134,246

$

13

124

$

1

$

$

2,112,976

$

(1,271)

$

3,644

$

5,263

$

2,120,626

Equity-based compensation

117

5,720

5,720

Exercise of stock options

43

Payments for tax withholdings from restricted stock vesting and stock option exercises

(613)

(613)

Shares purchased under share repurchase program

199

(3,375)

(3,375)

Reclassification of warrant liability to equity for exercised warrants

19

495

495

Distribution to non-controlling interest

(2,000)

(2,000)

Net income

14,032

1,215

15,247

Change in fair value of interest rate swaps, inclusive of reclassification adjustment

1,593

1,593

Balance, June 30, 2022

134,425

$

13

124

$

1

199

$

(3,375)

$

2,118,578

$

12,761

$

5,237

$

4,478

$

2,137,693

Equity-based compensation

83

5,562

5,562

Exercise of stock options

99

665

665

Payments for tax withholdings from restricted stock vesting and stock option exercises

(808)

(808)

Shares purchased under share repurchase program

552

(10,617)

(10,617)

Common Stock issued in connection with employee stock purchase plan

47

863

863

Reclassification of warrant liability to equity for exercised warrants

69

1,608

1,608

Net income

16,122

1,105

17,227

Change in fair value of interest rate swaps, inclusive of reclassification adjustment

7,757

7,757

Balance, September 30, 2022

134,723

$

13

124

$

1

751

$

(13,992)

$

2,126,468

$

28,883

$

12,994

$

5,583

$

2,159,950

7

ADAPTHEALTH CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Continued)

(IN THOUSANDS)

(UNAUDITED)

Accumulated

Additional

other

Noncontrolling

Class A Common Stock

Class B Common Stock

Preferred Stock

paid-in

Accumulated

comprehensive

interests in

  

Shares

  

Amount

  

  

Shares

  

Amount

  

Shares

  

Amount

  

capital

  

deficit

  

income (loss)

  

subsidiaries

  

Total

Balance, December 31, 2020

76,458

$

8

13,219

$

1

164

$

1

$

558,486

$

(199,196)

$

(4,411)

$

(74,044)

$

280,845

Issuance of Class A Common Stock for acquisitions

14,092

2

564,986

564,988

Issuance of Series C Preferred Stock for an acquisition

130

523,856

523,856

Issuance of stock options for an acquisition

134,683

134,683

Exchange of Class B Common Stock for Class A Common Stock

13,219

1

(13,219)

(1)

(77,919)

77,919

Equity-based compensation

172

8,582

8,582

Cashless exercise of stock options

9

Issuance of Class A Common Stock, net of offering costs of $13,832

8,450

1

265,017

265,018

Conversion of Series B-1 Preferred Stock to Class A Common Stock

3,950

(40)

Conversion of Series C-1 Preferred Stock to Class A Common Stock

13,047

1

(130)