Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with AdaptHealth Corp.'s ("AdaptHealth" or the "Company") consolidated financial statements and the accompanying notes included in this report. All amounts presented are in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"), except as noted. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management's expectations. Factors that could cause such differences include, but are not limited to, those discussed in Item 1A, " Risk Factors, " of this Annual Report on Form 10-K. Certain amounts that appear in this section may not sum due to rounding.
AdaptHealth Corp. Overview
AdaptHealth 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. 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 continuous positive airway pressure and BiLevel services) to individuals for the treatment of obstructive sleep apnea.
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.
Diabetes 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. 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. As of December 31, 2025, AdaptHealth serviced approximately 4.3 million patients annually in all 50 states through its network of approximately 640 locations in 48 states. The Company's principal executive offices are located at 555 East North Lane, Suite 5075, Conshohocken, Pennsylvania 19428.
Impact of Inflation
The cost to manufacture and distribute the equipment and products that AdaptHealth purchases from vendors and provides to patients is influenced by the cost of materials, labor, shipping, and transportation, including fuel costs. Current and future inflationary effects may be driven by, among other things, general inflationary cost increases, supply chain disruptions and governmental stimulus or fiscal policies. 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. Additionally, it is not certain whether AdaptHealth would be able to pass increased costs onto customers to offset inflationary pressures. AdaptHealth has experienced inflationary pressure and higher costs as a result of increased cost of materials, labor, shipping and transportation. Although there have been increases in inflation, AdaptHealth cannot predict whether these trends will continue. 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 . Net revenue is recognized for services and related products that AdaptHealth provides to patients for healthcare-at-home solutions including HME, medical supplies and related services. Revenues are recognized either at a point in time for the sale of supplies and consumables, over the service period for equipment rental (including, but not limited to, PAP 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. Certain trends or uncertainties that may have a material impact on revenue growth and operating results include the Company's ability to obtain new at-risk capitation arrangements, new patient starts and to generate referrals from patient referral sources and the ability to meet the increased demand considering inflationary pressures.
Cost of Net Revenue. 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. Included in distribution expenses are leasing, maintenance, licensing and fuel costs for the vehicle fleet; salaries, benefits and other costs related to drivers and dispatch personnel; and amounts paid to couriers.
General and Administrative Expenses. 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). Amortization expense includes amortization of identifiable intangible assets.
Factors Affecting AdaptHealth’s Operating Results
AdaptHealth’s operating results and financial performance are influenced by certain unique events during the periods discussed herein, including the following:
Goodwill Impairment
AdaptHealth has a significant amount of goodwill on its balance sheet that resulted from the business acquisitions AdaptHealth has made. Goodwill is not amortized, rather, it is assessed at the reporting unit level for impairment annually and also upon the occurrence of a triggering event or change in circumstances indicating that the carrying value of goodwill may be impaired. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such triggering events potentially warranting an annual or interim goodwill impairment assessment include, among other factors, declines in historical or projected reporting unit revenue, operating results 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, and/or future prospects. AdaptHealth performs its annual impairment assessment of goodwill during the fourth quarter of each year. The impairment assessment can be performed on either a qualitative or quantitative basis. AdaptHealth first assesses qualitative factors to determine whether it is necessary to perform a quantitative goodwill analysis. Under the qualitative assessment, the Company is not required to calculate the fair value of a reporting unit unless the Company determines that it is more likely than not that its fair value is less than its carrying amount. If determined necessary, AdaptHealth applies the quantitative test to identify and measure the amount of , if any, by comparing the fair value of a reporting unit to its carrying amount, including goodwill. If under the quantitative test the fair value of a reporting unit is less than its carrying amount, then the amount of the , if any, is determined based on the amount by which the carrying amount exceeds the fair value up to the total value of goodwill assigned to the reporting unit. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors, such as estimates of a reporting unit's fair value, and judgment about triggering events. Fair values of the reporting units are estimated using a weighted methodology considering the output from both the income and market approaches. The income approach incorporates the use of a discounted cash flow (“DCF”) analysis. A number of significant assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including revenue growth rates and discount rates. Several of these assumptions could vary among reporting units. The market approach is performed using the Guideline Public Companies method which is based on earnings multiple data. The Company performs a reconciliation between its market capitalization and its estimate of the aggregate fair value of the reporting units, including consideration of an estimated control premium. As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual or interim goodwill test will prove to be accurate predictions of the future.
In the fourth quarter of 2025, in connection with the Company's annual assessment of the recoverability of goodwill, management performed a quantitative goodwill impairment test for each of the Company's reporting units. The fair value of the Company’s reporting units were computed using the methodology described above. The impairment test indicated that the estimated fair value of the Company's Diabetes Health reporting unit was less than its carrying value, and as such, the Company recognized a non-cash goodwill impairment charge of $128.0 million during the year ended December 31, 2025.
During the year ended December 31, 2024, AdaptHealth recorded non-cash goodwill impairment charges totaling $13.1 million related to the disposition of certain immaterial custom rehab technology assets. The Company recognized an immaterial loss as a result of this transaction.
During the year ended December 31, 2023, AdaptHealth experienced declines in its market capitalization as a result of sustained decreases in AdaptHealth's stock price and also revised its financial projections. AdaptHealth considered these items to represent triggering events and performed a goodwill impairment test at each quarterly reporting date during 2023. 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.
Gain on Sale of Businesses
During the year ended December 31, 2025, the Company closed the disposition of certain businesses that were included in its Wellness at Home segment. In connection with these transactions, the Company recognized total pre-tax gains of $32.6 million.
Seasonality
AdaptHealth’s business experiences some seasonality. Its patients are generally responsible for a greater percentage of the cost of their treatment or therapy during the early months of the year due to co-insurance, co-payments and deductibles, and therefore may defer treatment and services of certain therapies until meeting their annual deductibles. In addition, changes to employer insurance coverage often go into effect at the beginning of each calendar year which may impact eligibility requirements and delay or defer treatment. 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. These factors may lead to lower net revenue and cash flow in the early part of the year versus the latter half of the year. Additionally, the increased incidence of respiratory infections during the winter season may result in initiation of additional respiratory services such as oxygen therapy for certain patient populations, which could impact the timing of revenue generated by AdaptHealth's Respiratory Health segment. AdaptHealth’s quarterly operating results may fluctuate significantly in the future depending on these and other factors.
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.
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 consumables . Net revenue from fixed monthly equipment reimbursements consists of revenue recognized over the service period for equipment (including, but not limited to, PAP machines, oxygen concentrators, ventilators, hospital beds, wheelchairs and other equipment). Net revenue from capitated revenue arrangements consists of revenue recognized in the month in which eligible members are entitled to receive healthcare services in connection with at-risk capitation arrangements. AdaptHealth’s revenue recognized under its capitation arrangements for the year ended December 31, 2023 is included in net sales revenue and net revenue from fixed monthly equipment reimbursements by segment in the tables below, which was immaterial for that period.
Three Months Ended
Net Revenue
March 31, 2025
June 30, 2025
September 30, 2025
December 31, 2025
(in thousands, except revenue percentages)
Total $
(Unaudited)
Net sales revenue:
Sleep Health
Respiratory Health
Diabetes Health
Wellness at Home
Total net sales revenue
Net revenue from fixed monthly equipment reimbursements:
Sleep Health
Respiratory Health
Diabetes Health
Wellness at Home
Total net revenue from fixed monthly equipment reimbursements
Net revenue from capitated revenue arrangements:
Sleep Health
Respiratory Health
Diabetes Health
Wellness at Home
Total net revenue from capitated revenue arrangements
Total net revenue:
Sleep Health
Respiratory Health
Diabetes Health
Wellness at Home
Total net revenue
Three 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
Respiratory Health
Diabetes Health
Wellness at Home
Total net sales revenue
Net revenue from fixed monthly equipment reimbursements:
Sleep Health
Respiratory Health
Diabetes Health
Wellness at Home
Total net revenue from fixed monthly equipment reimbursements
Net revenue from capitated revenue arrangements:
Sleep Health
Respiratory Health
Diabetes Health
Wellness at Home
Total net revenue from capitated revenue arrangements
Total net revenue
Sleep Health
Respiratory Health
Diabetes Health
Wellness at Home
Total net revenue
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
Respiratory Health
Diabetes Health
Wellness at Home
Total net sales revenue
Net revenue from fixed monthly equipment reimbursements:
Sleep Health
Respiratory Health
Diabetes Health
Wellness at Home
Total net revenue from fixed monthly equipment reimbursements
Total net revenue
Sleep Health
Respiratory Health
Diabetes Health
Wellness at Home
Total net revenue
Consolidated Results of Operations
Comparison of Year Ended December 31, 2025 and Year Ended December 31, 2024.
The following table summarizes AdaptHealth’s consolidated results of operations for the years ended December 31, 2025 and 2024:
(in thousands, except percentages)
Year Ended December 31,
Dollars
Revenue
Percentage
Dollars
Revenue
Percentage
Increase/(Decrease)
Dollars
Percentage
(Unaudited)
Net revenue
Costs and expenses:
Cost of net revenue
General and administrative expenses
Depreciation and amortization, excluding patient equipment depreciation
Goodwill impairment
Total costs and expenses
Gain on sale of businesses
Operating income
Interest expense, net
Change in fair value of warrant liability
Loss on extinguishment of debt
Other loss, net
(Loss) income before income taxes
Income tax expense
Net (loss) income
Income attributable to noncontrolling interests
Net (loss) income attributable to AdaptHealth Corp.
Net Revenue.
Change in Methodology for Reporting Net Revenue Change Drivers
Beginning with the quarter ended September 30, 2025, AdaptHealth has changed how it presents the drivers that contribute to the change in net revenue between periods. AdaptHealth now presents:
(a) Organic revenue: All changes in reported net revenue from the comparable period presented excluding the impacts from acquisition (b) and disposition (c).
(b) Acquisition: The change in net revenue attributable to businesses and/or assets AdaptHealth has owned for less than one year based on the month of acquisition, excluding the acquisition of equipment from previous providers to facilitate the transition of patients related to newly awarded at-risk capitated contracts, since the revenue related to these agreements is earned organically.
(c) Disposition: Net revenue generated in the comparative prior year period from divested product lines, services, and/or businesses for which there is no revenue recognized in the comparative months within the current period presented.
This revised presentation eliminates the “change from non-acquired” driver previously reported. The “change from non-acquired” driver represented the change in net revenue excluding the impact of revenue of businesses and/or assets AdaptHealth owned for less than one year based on the month of acquisition. This revised presentation replaces the “change from non-acquired” driver by separating the unique drivers of change for “dispositions” and “organic,” where “organic” excludes acquisitions and also excludes the impact of dispositions. Since there is no revenue generated from a divested business subsequent to the date of disposition, the impact to the change in net revenue will exist for only one year from the date of disposition. The “organic” driver measures how AdaptHealth changes organically—that is, within its existing operations using its own resources. The change in net revenue from organic revenue is reported as organic revenue as a percentage of prior period total reported net revenue. As a result of the increased impact on net revenue from recent disposition activity, AdaptHealth believes separating the “organic” and “disposition” drivers provides appropriate visibility into revenue trends and more closely aligns with how management currently evaluates the business subsequent to the increased disposition activity.
This revised presentation has no impact on AdaptHealth's historically reported U.S. GAAP net revenues for any period.
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.
Year Ended December 31,
Variance 2025 vs. 2024
(in thousands, except percentages)
(Unaudited)
Revenue change driver:
Organic revenue (a)
Acquisition (b)
Disposition (c)
Total change in net revenue
(a) All changes in reported net revenue from the comparable period presented excluding the impacts from acquisition (b) and disposition (c).
(b) The change in net revenue attributable to businesses and/or assets AdaptHealth has owned for less than one year based on the month of acquisition, excluding the acquisition of equipment from previous providers to facilitate the transition of patients related to newly awarded at-risk capitated contracts, since the revenue related to these agreements is earned organically.
(c) Net revenue generated in the comparative prior year period from divested product lines, services, and/or businesses for which there is no revenue recognized in the comparative months within the current period presented.
Net revenue from AdaptHealth's Sleep Health segment increased by $28.9 million, or 2.1%, for the year ended December 31, 2025 compared to the prior year period, primarily due to an increase in sleep sales revenue primarily from higher patient census from sales of PAP resupply products, partially offset by a decrease in net revenue from fixed monthly equipment reimbursements from lower sleep rental products. Net revenue from AdaptHealth's Respiratory Health segment increased by $40.0 million, or 6.1%, for the year ended December 31, 2025 compared to the prior year period, primarily due to higher fixed monthly equipment reimbursements from higher patient census for oxygen equipment products. Net revenue from AdaptHealth's Diabetes Health segment decreased by $22.0 million, or 3.6%, for the year ended December 31, 2025 compared to the prior year period, primarily due to a shift in payor mix from commercial insurance to government payors, partially offset by growth in patient census for insulin pumps and supplies. Net revenue from AdaptHealth's Wellness at Home segment decreased by $63.1 million, or 9.8% for the year ended December 31, 2025 compared to the prior year period, primarily due to decreased revenues from the disposition of certain incontinence and infusion businesses during 2025, and to a lesser extent, the disposition of certain custom rehab technology assets during
2024, which combined reduced net revenue by $92.4 million, partially offset by increased revenues primarily from HME products within this segment.
For the year ended December 31, 2025, net sales revenue comprised 62.6% of total net revenue, compared to 64.1% of total net revenue for the year ended December 31, 2024. For the year ended December 31, 2025, net revenue from fixed monthly equipment reimbursements comprised 33.4% of total net revenue, compared to 31.9% of total net revenue for the year ended December 31, 2024. For the years ended December 31, 2025 and 2024, net revenue from capitated revenue arrangements comprised 4.0% of total net revenue.
Cost of Net Revenue.
The following table summarizes cost of net revenue for the years ended December 31, 2025 and 2024:
(in thousands, except percentages)
Year Ended December 31,
Dollars
Revenue Percentage
Dollars
Revenue Percentage
Increase/(Decrease)
Dollars
Percentage
(Unaudited)
Costs of net revenue:
Cost of products and supplies
Salaries, labor and benefits
Patient equipment depreciation
Rent and occupancy
Other operating expenses
Total cost of net revenue
Cost of net revenue for the years ended December 31, 2025 and 2024 was $2,635.7 million and $2,579.9 million, respectively, an increase of $55.8 million or 2.2%. Refer to the section below titled “ Segment Results of Operations ” for a discussion of the changes in cost of products and supplies, salaries, labor and benefits, and rent and other operating expenses. Patient equipment depreciation increased by $21.0 million, primarily due to higher fixed monthly equipment reimbursements and higher medical equipment prices, as well as accelerated depreciation on certain respiratory equipment resulting from a change in the estimated useful life of the assets.
General and Administrative Expenses. General and administrative expenses for the years ended December 31, 2025 and 2024 were $382.3 million and $359.2 million, respectively, an increase of $23.1 million or 6.4%. This increase is primarily due to higher legal settlement costs, equity-based compensation, software costs, and salaries, labor and benefits, partially offset by lower severance charges.
Depreciation and amortization, excluding patient equipment depreciation. Depreciation and amortization, excluding patient equipment depreciation, for the years ended December 31, 2025 and 2024 was $40.6 million and $45.0 million, respectively, a decrease of $4.4 million, primarily related to lower depreciation expense from owned delivery vehicles and lower intangible amortization expense.
Goodwill Impairment. AdaptHealth performed a quantitative goodwill impairment test for each of its reporting units during the fourth quarter of 2025. The impairment test indicated that the estimated fair value of AdaptHealth's Diabetes Health reporting unit was less than its carrying value, and as such, AdaptHealth recognized a non-cash goodwill impairment charge of $128.0 million during the year ended December 31, 2025. The non-cash goodwill impairment charge for the year ended December 31, 2024 related to the disposition of certain immaterial custom rehab technology assets during 2024. See Note 7, Goodwill and Identifiable Intangible Assets , for additional details.
Gain on sale of businesses. The gain on sale of businesses for the year ended December 31, 2025 primarily relates to the disposition of certain incontinence and infusion businesses within AdaptHealth's Wellness at Home segment. See Note 4, Disposals , for additional information.
Interest Expense, net. Interest expense, net for the years ended December 31, 2025 and 2024 was $105.8 million and $126.7 million, respectively, a decrease of $20.9 million. Interest expense related to AdaptHealth's credit agreement
decreased by $23.6 million in 2025 compared to 2024 as a result of lower average outstanding borrowings in 2025 compared to 2024 as well as lower interest rates. This decrease was partially offset by an increase of $0.4 million related to AdaptHealth's finance leases in 2025 compared to 2024. In addition, the impact from AdaptHealth's interest rate swap agreements reduced interest expense by $3.3 million and $6.3 million in 2025 and 2024, respectively.
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, 2025 consolidated financial statements. These warrants were liability-classified, and the change in fair value of the warrant liability represented a non-cash gain in the year ended December 31, 2024 for the change in the estimated fair value of such liability during such period. These warrants expired on November 8, 2024.
Loss on Extinguishment of Debt . Loss on extinguishment of debt for the year ended December 31, 2024 consisted of lender fees and the write-off of unamortized deferred financing costs in connection with AdaptHealth refinancing its credit facility in 2024.
Other loss, net. Other loss, net for the years ended December 31, 2025 and 2024 consisted of immaterial items.
Income Tax Expense. Income tax expense for the years ended December 31, 2025 and 2024 was $50.9 million and $41.2 million, respectively. Income tax expense increased primarily due to gains recognized on the disposition of certain incontinence and infusion businesses within the Wellness at Home segment. See Note 4, Disposals , to the accompanying December 31, 2025 consolidated financial statements for additional details. Additionally, the Company recognized a $10.1 million and $1.0 million income tax benefit, and corresponding increase to net deferred tax assets, related to non-cash goodwill impairment charges of $128.0 million and $13.1 million recognized during the years ended December 31, 2025 and 2024, respectively. See Note 7, Goodwill and Identifiable Intangible Assets , to the accompanying December 31, 2025 consolidated financial statements for additional details.
Comparison of Year Ended December 31, 2024 and Year Ended December 31, 2023.
For a comparison of AdaptHealth's results of operations for the years ended December 31, 2024 and 2023, see "Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations" of AdaptHealth's Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 25, 2025.
Organic Revenue
AdaptHealth uses organic revenue (as defined below), which is a financial measure that is not in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, to analyze its financial results and believes that it is useful to investors, as a supplement to U.S. GAAP measures. The change in net revenue from organic revenue is reported as organic revenue as a percentage of prior period total reported net revenue. Management believes organic revenue is meaningful to investors as it provides appropriate visibility into how AdaptHealth changes organically—that is, within its existing operations using its own resources.
Organic revenue is defined as all changes in reported net revenues from the comparable period presented, excluding: (1) increases in net revenue in the current period from acquisitions attributable to businesses and/or assets AdaptHealth has owned for less than one year based on the month of acquisition, excluding the acquisition of equipment from previous providers to facilitate the transition of patients related to newly awarded at-risk capitated contracts, since the revenue related to these agreements is earned organically (“Acquisition”); and (2) decreases in net revenue from dispositions existing in the prior period from divested product lines, services, and/or businesses for which there is no revenue recognized in the current period (“Disposition”).
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. In addition, AdaptHealth’s ability to incur additional indebtedness and make investments under its existing credit agreement is governed, in part, by its ability to satisfy tests based on a variation of Adjusted EBITDA.
AdaptHealth defines EBITDA as net income (loss) attributable to AdaptHealth Corp., plus net income (loss) attributable to noncontrolling interests, interest expense, net, income tax expense (benefit), and depreciation and amortization, including patient equipment depreciation.
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, gain on sale of businesses, and 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.
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.
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin should not be considered as measures of financial performance under U.S. GAAP, and the items excluded from EBITDA and Adjusted EBITDA are significant components in understanding and assessing financial performance. Accordingly, these key business metrics have limitations as an analytical tool. They should not be considered as an alternative to net income or any other performance measures derived in accordance with U.S. GAAP or as an alternative to cash flows from operating activities as a measure of AdaptHealth’s liquidity.
The following unaudited table presents the reconciliation of net (loss) income attributable to AdaptHealth Corp., to EBITDA and Adjusted EBITDA, and the reconciliation of net (loss) income attributable to AdaptHealth Corp. as a percentage of net revenue to Adjusted EBITDA Margin, for the years ended December 31, 2025, 2024 and 2023:
Year Ended December 31,
(in thousands, except percentages)
Dollars
Revenue Percentage
Dollars
Revenue Percentage
Dollars
Revenue Percentage
(Unaudited)
Net (loss) income attributable to AdaptHealth Corp.
Income attributable to noncontrolling interest
Interest expense, net
Income tax expense
Depreciation and amortization, including patient equipment depreciation
EBITDA
Equity-based compensation expense (a)
Change in fair value of warrant liability (b)
Goodwill impairment (c)
Loss on extinguishment of debt (d)
Litigation settlement expense (e)
Gain on sale of businesses (f)
Other non-recurring expenses, net (g)
Adjusted EBITDA
Adjusted EBITDA Margin
(a) Represents equity-based compensation expense for awards granted to employees and non-employee directors.
(b) Represents non-cash gains for the changes in the estimated fair value of the warrant liability. The warrants expired on November 8, 2024.
(c) The 2025 period includes a non-cash goodwill impairment charge as a result of the fair value of the Company's Diabetes Health reporting unit being less than its carrying value. The 2024 period includes non-cash goodwill impairment charges relating to an immaterial business disposal during 2024. The 2023 period includes non-cash goodwill impairment charges as a result of the fair value of the Company’s reporting unit at that time being less than its carrying value. See Note 7, Goodwill and Identifiable Intangible Assets , included in the accompanying notes to the consolidated financial statements for the year ended December 31, 2025 for additional discussion of such impairment charges.
(d) Represents lender fees and the write-off of unamortized deferred financing costs in connection with the refinancing of the Company's credit agreement. See Note 12, Debt , included in the accompanying notes to the consolidated financial statements for the year ended December 31, 2025 for additional discussion of such refinancing.
(e) The expense in 2025 represents the estimated amount expected to be funded by the Company relating to a previously disclosed securities settlement. See Note 18, Commitments and Contingencies , to the accompanying December 31, 2025 consolidated financial statements for additional details. The expense in 2024 includes a $2.4 million charge for the change in fair value of the shares of Common Stock of the Company that were issued in July 2024 following final court approval of a previously disclosed securities settlement, as well as an expense of $0.9 million to settle a shareholder derivative complaint. The expense in 2023 includes a charge relating to a previously disclosed securities settlement, net of contributions from the Company’s insurers.
(f) Represents pre-tax gains primarily associated with the disposition of certain incontinence and infusion businesses within the Company's Wellness at Home segment. See Note 4, Disposals , for additional information.
(g) The 2025 period consists of $10.7 million of consulting expenses associated with asset dispositions (of which $5.1 million relates to contingent success fees from the sales of businesses), $2.6 million of transaction costs associated with acquisitions, $2.6 million of consulting expenses associated with a reorganization project, $2.4 million of consulting expenses associated with systems implementation activities, $1.6 million of expenses associated with securities litigation, $1.2 million write-off of assets, $1.2 million of severance charges, and $3.6 million of other non-recurring expenses. The 2024 period consists of $13.9 million of consulting expenses associated with systems implementation activities, $4.5 million of consulting expenses associated with asset dispositions, $4.2 million of expenses associated with litigation, $3.9 million of severance charges (primarily related to the separation of the Company's former President), $2.7 million write-down of assets, and $1.9 million of other non-recurring expenses. 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 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 the Company's estimated TRA liability.
Segment Results of Operations
Comparison of Year Ended December 31, 2025 and Year Ended December 31, 2024 .
Operating segments are defined as components of a public entity for which discrete financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”) for purposes of allocating resources and evaluating financial performance. AdaptHealth’s CODM is its Chief Executive Officer. AdaptHealth 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.
The CODM evaluates performance of the reportable segments based on Adjusted EBITDA. Refer to the section above titled “EBITDA and Adjusted EBITDA” for the Company’s definition of Adjusted EBITDA.
The following table summarizes the performance of the Company’s reportable segments for the years ended December 31, 2025 and 2024:
(in thousands)
Sleep Health
Respiratory Health
Diabetes Health
Wellness at Home
Consolidated Totals (a)
Net revenue
Adjusted EBITDA
Net revenue
Adjusted EBITDA
(a) See Note 6, Segment Information , in the accompanying notes to the consolidated financial statements for the year ended December 31, 2025 for a reconciliation of consolidated Adjusted EBITDA to consolidated income (loss) before income taxes.
Sleep Health Segment
The following table summarizes the Sleep Health segment’s performance for the years ended December 31, 2025 and 2024:
Increase/(Decrease)
Year Ended December 31,
(in thousands, except percentages)
Dollars
Percentage
Net revenue
Less:
Cost of products and supplies (1)
Labor cost (1)
Other operating expenses (1)
Other segment items (2)
Adjusted EBITDA
Adjusted EBITDA Margin
Patient equipment depreciation
(1) Represents the significant segment expense categories disclosed in Note 6, Segment Information , in the accompanying notes to the consolidated financial statements for the year ended December 31, 2025.
(2) Other segment items include allocated costs related to various general and administrative functions, such as revenue cycle management (including billing and collections), customer service, technology and communications, sales and marketing, accounting and finance, executive administration, human resources, information technology and legal and compliance.
Net Revenue
Net revenue from the Sleep Health segment increased by $28.9 million, or 2.1%, for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to an increase in sleep sales revenue primarily from higher patient census from sales of PAP resupply products, partially offset by a decrease in net revenue from fixed monthly equipment reimbursements from lower sleep rental products.
Adjusted EBITDA
Adjusted EBITDA from the Sleep Health segment decreased by $38.2 million or 10.9%, for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to higher net revenue from a shift in
product mix (as discussed above), which was offset by increased costs and expenses. The increase in the cost of products and supplies was primarily due to an increase in sales revenue and general inflationary cost increases. The increase in labor cost was primarily due to merit and inflationary increases as well as increases in benefits costs. The increase in other operating expenses was primarily due to higher distribution-related expenses and software costs. The increase in other segment items was due to an increase in general and administrative expenses that were allocated to the segment.
Respiratory Health Segment
The following table summarizes the Respiratory Health segment’s performance for the years ended December 31, 2025 and 2024:
Increase/(Decrease)
Year Ended December 31,
(in thousands, except percentages)
Dollars
Percentage
Net revenue
Less:
Cost of products and supplies (1)
Labor cost (1)
Other operating expenses (1)
Other segment items (2)
Adjusted EBITDA
Adjusted EBITDA Margin
Patient equipment depreciation
(1) Represents the significant segment expense categories disclosed in Note 6, Segment Information , in the accompanying notes to the consolidated financial statements for the year ended December 31, 2025.
(2) Other segment items include allocated costs related to various general and administrative functions, such as revenue cycle management (including billing and collections), customer service, technology and communications, sales and marketing, accounting and finance, executive administration, human resources, information technology and legal and compliance.
Net Revenue
Net revenue from the Respiratory Health segment increased by $40.0 million, or 6.1%, for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to higher fixed monthly equipment reimbursements from higher patient census for oxygen equipment products.
Adjusted EBITDA
Adjusted EBITDA from the Respiratory Health segment increased by $9.6 million, or 4.8%, for the year ended December 31, 2025 compared to the year ended December 31, 2024, due to higher net revenue (as discussed above), partially offset by increased costs and expenses. The increase in cost of products and supplies was primarily due to credits received from a supplier during 2024 related to certain product recalls which were recognized as a reduction to the cost of products and supplies during the year ended December 31, 2024, as well as higher patient census for oxygen equipment products and general inflationary cost increases. The increase in labor cost was primarily due to merit and inflationary increases as well as increases in benefits costs. The increase in other operating expenses was primarily due to higher distribution-related expenses and software costs. The increase in other segment items was due to an increase in general and administrative expenses that were allocated to the segment.
Diabetes Health Segment
The following table summarizes the Diabetes Health segment’s performance for the years ended December 31, 2025 and 2024:
Increase/(Decrease)
Year Ended December 31,
(in thousands, except percentages)
Dollars
Percentage
Net revenue
Less:
Cost of products and supplies (1)
Labor cost (1)
Other operating expenses (1)
Other segment items (2)
Adjusted EBITDA
Adjusted EBITDA Margin
Patient equipment depreciation
(1) Represents the significant segment expense categories disclosed in Note 6, Segment Information , in the accompanying notes to the consolidated financial statements for the year ended December 31, 2025.
(2) Other segment items include allocated costs related to various general and administrative functions, such as revenue cycle management (including billing and collections), customer service, technology and communications, sales and marketing, accounting and finance, executive administration, human resources, information technology and legal and compliance.
Net Revenue
Net revenue from the Diabetes Health segment decreased by $22.0 million, or 3.6%, for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to a shift in payor mix from commercial insurance to government payors, partially offset by growth in patient census for insulin pumps and supplies.
Adjusted EBITDA
Adjusted EBITDA from the Diabetes Health segment decreased by $34.5 million, or 56.9%, for the year ended December 31, 2025 compared to the year ended December 31, 2024, due to lower net revenue (as discussed above), and to a lesser extent, increased costs and expenses. The increase in the cost of products and supplies was primarily due to growth in patient census for insulin pumps and supplies, and general inflationary cost increases. The increase in labor cost was primarily due to merit and inflationary increases as well as increases in benefits costs. The decrease in other operating expenses was primarily due to lower rent and occupancy costs, partially offset by higher distribution-related expenses and software costs.
Wellness at Home Segment
The following table summarizes the Wellness at Home segment’s performance for the years ended December 31, 2025 and 2024:
Increase/(Decrease)
Year Ended December 31,
(in thousands, except percentages)
Dollars
Percentage
Net revenue
Less:
Cost of products and supplies (1)
Labor cost (1)
Other operating expenses (1)
Other segment items (2)
Adjusted EBITDA
Adjusted EBITDA Margin
Patient equipment depreciation
(1) Represents the significant segment expense categories disclosed in Note 6, Segment Information , in the accompanying notes to the consolidated financial statements for the year ended December 31, 2025.
(2) Other segment items include allocated costs related to various general and administrative functions, such as revenue cycle management (including billing and collections), customer service, technology and communications, sales and marketing, accounting and finance, executive administration, human resources, information technology and legal and compliance.
Net Revenue
Net revenue from the Wellness at Home segment decreased by $63.1 million, or 9.8%, for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to decreased revenues from the disposition of certain incontinence and infusion businesses during 2025, and to a lesser extent, the disposition of certain custom rehab technology assets during 2024, which combined reduced net revenue by $92.4 million, partially offset by increased revenues primarily from HME products within this segment.
Adjusted EBITDA
Adjusted EBITDA from the Wellness at Home segment decreased by $9.0 million, or 11.3%, for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to lower net revenue (as discussed above), partially offset by lower costs and expenses. The decrease in total costs and expenses is primarily due to the disposition of certain incontinence and infusion businesses during 2025, and to a lesser extent, the disposition of certain custom rehab technology assets in the third quarter of 2024, partially offset by general inflationary cost increases.
Comparison of Year Ended December 31, 2024 and Year Ended December 31, 2023.
For a comparison of segment results of operations for the years ended December 31, 2024 and 2023, see "Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations" of AdaptHealth's Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 25, 2025.
Free Cash Flow
AdaptHealth uses free cash flow, which is a financial measure that is not in accordance with U.S. GAAP, in its operational and financial decision-making and believes free cash flow is useful to investors because similar measures are frequently used by securities analysts, investors, ratings agencies and other interested parties to evaluate AdaptHealth's competitors and to measure the ability of companies to service their debt. AdaptHealth's presentation of free cash flow
should not be construed as a measure of liquidity or discretionary cash available to AdaptHealth to fund its cash needs, including investing in the growth of its business and meeting its obligations.
Free cash flow should not be considered as a measure of financial performance under U.S. GAAP. Accordingly, this key business metric has limitations as an analytical tool. It should not be considered as an alternative to any performance measures derived in accordance with U.S. GAAP or as an alternative to cash flows from operating activities as a measure of AdaptHealth’s liquidity.
AdaptHealth defines free cash flow as net cash provided by operating activities less cash paid for purchases of equipment and other fixed assets. For further discussion on free cash flow, including a reconciliation from cash flows provided by operating activities, see Liquidity and Capital Resources - Free Cash Flow below.
Liquidity and Capital Resources
AdaptHealth’s principal sources of liquidity are its operating cash flows, borrowings under its credit agreements and other debt arrangements. 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. 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.
AdaptHealth believes that its expected operating cash flows, together with its existing cash and amounts available under its existing credit agreement, will continue to be sufficient to fund its operations and growth strategies for at least the next twelve months.
AdaptHealth may seek additional equity or debt financing in connection with the growth of its business, primarily for acquisitions. In addition, economic conditions may cause disruption in the capital markets, which could make financing more difficult and/or expensive. In the event that additional financing is required from outside sources, AdaptHealth may not be able to raise it on acceptable terms or at all. 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, 2025, AdaptHealth had approximately $106.1 million of cash.
In September 2024, AdaptHealth entered into an amendment to its existing credit agreement (as amended, the "2024 Credit Agreement"). The 2024 Credit Agreement included a $650 million term loan (the “2024 Term Loan”) and $300 million in revolving credit commitments with a $55 million letter of credit sublimit (the “2024 Revolver”, and together with the 2024 Term Loan, the "2024 Credit Facility"). The 2024 Credit Facility matures in September 2029. However, if the 6.125% Senior Notes (as defined below) have not been refinanced (to extend the maturity date to a date that is later than December 13, 2029) or repaid in full, on or prior to December 31, 2027, then the 2024 Credit Facility will mature on May 1, 2028; and, if the 4.625% Senior Notes (as defined below) have not been refinanced (to extend the maturity date to a date that is later than December 13, 2029) or repaid in full, on or prior to December 31, 2028, then the 2024 Credit Facility will mature on May 1, 2029. As of December 31, 2025, the outstanding borrowing under the 2024 Term Loan require quarterly principal repayments of $4.1 million through September 30, 2026, increasing to $8.1 million from December 31, 2026 through June 30, 2029, and the remaining unpaid principal balance is due in September 2029. During the years ended December 31, 2025 and 2024, AdaptHealth made voluntary repayments on the 2024 Term Loan totaling $218.8 million and $95.9 million, respectively. At December 31, 2025 and 2024, there was $315.0 million and $550.0 million, respectively, outstanding under the 2024 Term Loan. 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. At December 31, 2025, there was $26.3 million outstanding under letters of credit. Subsequent to December 31, 2025, the Company borrowed $100.0 million under the 2024 Revolver for working capital and other general corporate purposes. As of the date of this filing, there was $100.0 million of outstanding borrowings under the 2024 Revolver. At December 31, 2025, based on the financial debt covenants under the 2024 Credit Agreement, the maximum amount AdaptHealth could borrow under the 2024 Revolver and remain in compliance with the financial debt covenants under the agreement was $273.7 million.
At the option of AdaptHealth, amounts borrowed under the 2024 Credit Agreement bear interest at variable rates based upon either the Base Rate (as defined in the 2024 Credit Agreement), payable quarterly, or Term SOFR (as defined in the 2024 Credit Agreement), payable monthly or every three months depending on the interest period selected. Interest periods for Term SOFR loans are available for one, three, or six months at the option of AdaptHealth. Base Rate loans accrue interest at a per annum rate equal to the sum of (a) the Base Rate determined on each day (subject to a zero percent floor), plus an applicable margin ranging from 0.50% to 2.25% per annum based on AdaptHealth's Consolidated Senior Secured Leverage Ratio (as defined in the 2024 Credit Agreement). Term SOFR loans accrue interest at a per annum rate equal to the sum of (a) Term SOFR for the applicable interest period (subject to a zero percent floor), plus (b) an applicable margin ranging from 1.50% to 3.25% per annum based on AdaptHealth's 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.
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 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, 2025.
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. 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.
At December 31, 2025, AdaptHealth had $1,435.0 million aggregate principal amount of unsecured senior notes outstanding. In August 2021, AdaptHealth issued $600.0 million aggregate principal amount of 5.125% senior unsecured notes (the “5.125% Senior Notes”). The 5.125% Senior Notes will mature on March 1, 2030. Interest on the 5.125% Senior Notes is payable on March 1st and September 1st of each year. The 5.125% Senior Notes are redeemable at AdaptHealth’s option, in whole or in part, and the redemption price for the 5.125% Senior Notes if redeemed during the 12 months beginning (i) March 1, 2025 is 102.563%, (ii) March 1, 2026 is 101.281%, (iii) March 1, 2027 and thereafter is 100.000%, in each case together with accrued and unpaid interest. In addition, AdaptHealth may be required to make an offer to purchase the 5.125% Senior Notes upon the sale of certain assets or upon specific kinds of changes of control.
In January 2021, AdaptHealth issued $500.0 million aggregate principal amount of 4.625% senior unsecured notes (the “4.625% Senior Notes”). The 4.625% Senior Notes will mature on August 1, 2029. Interest on the 4.625% Senior Notes is payable on February 1st and August 1st of each year. 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 February 1, 2026 and thereafter is 100.000%, in each case together with accrued and unpaid interest. 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 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. Interest on the 6.125% Senior Notes is payable on February 1st and August 1st of each year. The 6.125% Senior Notes are redeemable at 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, 2025 is 101.021% and (ii) August 1, 2026 and thereafter is 100.000%, in each case together with accrued and unpaid interest. 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. In November 2025 and January 2026, the Company repurchased $15.0 million and $10.0 million aggregate principal amount of the 6.125% Senior Notes at an average price of 100.253% and 100.800% of such principal amounts, respectively, through open market transactions.
On July 4, 2025, the President signed the One Big Beautiful Bill Act (the "OBBBA") into law. The tax law changes under the OBBBA reduced AdaptHealth’s 2025 estimated cash income tax liability, resulting in a $29.2 million current income tax receivable, which is included in prepaid and other current assets in the accompanying consolidated
balance sheets as of December 31, 2025. The majority of AdaptHealth’s income tax receivable relates to federal and state corporate income tax refunds, $10.0 million of which was received in January 2026. The remaining refunds are expected to be received in 2026.
As of December 31, 2025 and 2024, AdaptHealth had working capital of $16.5 million and $188.8 million, respectively. A significant portion of AdaptHealth’s current assets consists of accounts receivable from third-party payors that are responsible for payment for the products and services that AdaptHealth provides.
Cash Flow. The following table presents selected data from AdaptHealth’s consolidated statements of cash flows for years ended December 31, 2025, 2024 and 2023:
Year Ended December 31,
(in thousands)
(Unaudited)
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Net (decrease) increase in cash
Cash at beginning of period
Cash at end of period
Net cash provided by operating activities for the years ended December 31, 2025 and 2024 was $601.8 million and $541.8 million, respectively, an increase of $60.0 million. The increase was the result of a $160.8 million decrease in net income (loss), a net increase of $128.1 million in non-cash charges, primarily from a goodwill impairment charge, depreciation and amortization, deferred income taxes, and the reduction in the carrying amount of operating and finance lease right-of-use assets, and a net $92.7 million increase resulting from the change in operating assets and liabilities, primarily from the change in accounts receivable, inventory, accounts payable and accrued expenses, and income tax receivables.
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 increase was the result of a $769.6 million increase in net income, a net decrease of $709.3 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, a payment of $1.9 million for contingent consideration in connection with an acquisition, and a net $1.0 million decrease resulting from the change in operating assets and liabilities, primarily from the change in accounts receivable, inventory and accounts payable and accrued expenses.
Net cash used in investing activities for the years ended December 31, 2025, 2024 and 2023 was $303.2 million, $310.3 million and $357.3 million, respectively. The use of funds in 2025 primarily consisted of $382.4 million for equipment and other fixed asset purchases, $42.4 million for business acquisitions, partially offset by $120.4 million of proceeds from the sale of businesses. 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 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 financing activities for 2025 was $302.2 million and primarily consisted of repayments of $268.5 million on long-term debt and finance lease liabilities, payments of $25.0 million in connection with the Company's liability relating to the TRA, payments of $7.0 million for distributions to the noncontrolling interest, and payments of $2.7 million for tax withholdings associated with equity-based compensation, partially offset by proceeds of $1.2 million in connection with the employee stock purchase plan.
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.
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.
Free Cash Flow
The following table reconciles net cash provided by operating activities to free cash flow for the years ended December 31, 2025, 2024 and 2023:
Year Ended December 31,
(in thousands)
(Unaudited)
Net cash provided by operating activities
Purchases of equipment and other fixed assets
Free cash flow
Free cash flow was $219.4 million for the year ended December 31, 2025, compared to $235.8 million for the year ended December 31, 2024. The decrease in free cash flow was due to an increase in, and timing of, purchases of patient medical equipment for operating requirements, partially offset by higher net cash provided by operating activities, primarily due to a net increase in the cash provided from operating assets and liabilities related to accounts receivable, inventory and accounts payable and accrued expenses.
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. The increase in free cash flow was due to higher net cash provided by operating activities, primarily due to higher net income, and to a lesser extent, a net decrease in the use of cash from operating assets and liabilities, primarily from accounts receivable, inventory and accounts payable and accrued expenses. The increase in free cash flow was also due to a decrease in, and timing of, purchases of patient medical equipment for operating requirements.
Critical Accounting Policies and Estimates
The discussion and analysis of the Company’s financial condition and results of operations is based upon the Company’s consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of the Company’s consolidated financial statements requires its management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. The Company’s management bases its estimates, assumptions and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Different assumptions and judgments would change the estimates used in the preparation of the Company’s consolidated financial statements which, in turn, could change the results from those reported. In addition, actual results may differ from these estimates and such differences could be material to the Company’s financial position and results of operations.
Critical estimates are those that the Company’s management considers the most important to the portrayal of the Company’s financial condition and results of operations because they require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The Company’s critical estimates in relation to its consolidated financial statements include those related to revenue recognition and recoverability of goodwill.
Revenue Recognition
Revenues are recognized either at a point in time for the sale of supplies and consumables, over the service period for equipment rental (including, but not limited to, PAP 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 determines the transaction price based on contractually agreed-upon amounts or rates, referred to as explicit price concessions, adjusted for estimates of variable consideration, such as implicit price concessions, based on historical reimbursement experience. 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. The Company applies a constraint to the transaction price, such that net revenue is recorded only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in the future. If actual amounts of consideration ultimately received differ from the Company’s estimates, the Company adjusts these estimates, which would affect net revenue in the period such adjustments become known.
The estimated implicit price concession requires significant judgment as it involves the complexity of third-party billing arrangements, contractual terms and the uncertainty of reimbursement amounts. 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.
Recoverability of Goodwill
The Company has a significant amount of goodwill on its balance sheet that resulted from the business acquisitions the Company has made. Goodwill is not amortized, rather, it is assessed at the reporting unit level for impairment annually and also upon the occurrence of a triggering event or change in circumstances indicating that the carrying value of goodwill may be impaired. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such triggering events potentially warranting an annual or interim goodwill impairment assessment include, among other factors, declines in historical or projected reporting unit revenue, operating results or cash flows, and sustained decreases in the Company’s stock price or market capitalization. Such changes in circumstance can include, among others, changes in the legal environment, reimbursement environment, operating performance, and/or future prospects. In addition, if applicable, a goodwill impairment test is also performed immediately before and after a reorganization of the Company’s reporting structure when the reorganization would affect the composition of one or more of the Company’s reporting units.
The Company performs its annual impairment assessment of goodwill during the fourth quarter of each year. The impairment assessment can be performed on either a qualitative or quantitative basis. The Company first assesses qualitative factors to determine whether it is necessary to perform a quantitative goodwill impairment test. Under the
qualitative assessment, the Company is not required to calculate the fair value of a reporting unit unless the Company determines that it is more likely than not that its fair value is less than its carrying amount. 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 under the quantitative test the fair value of a reporting unit is less than its carrying amount, then the amount of the impairment loss, if any, is determined based on the amount by which the carrying amount exceeds the fair value up to the total value of goodwill assigned to the reporting unit.
Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors, such as estimates of a reporting unit's fair value, and judgment about impairment triggering events . Fair values of the reporting units are estimated using a weighted methodology considering the output from both the income and market approaches. The income approach incorporates the use of a discounted cash flow (“DCF”) analysis. A number of significant assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including revenue growth rates and discount rates. Several of these assumptions could vary among reporting units. The market approach is performed using the Guideline Public Companies method which is based on earnings multiple data. The Company performs a reconciliation between its market capitalization and its estimate of the aggregate fair value of the reporting units, including consideration of an estimated control premium. 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.
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) Recently Issued Accounting Pronouncements Not Yet Adopted, to its consolidated financial statements included in this report .
Commitments and Contingencies
From time to time and in the normal course of business, the Company is subject to loss contingencies, arising from legal proceedings, claims, and governmental and other investigations under or with respect to various governmental programs and state and federal laws relating to its business, including as a result of or following acquisitions and other business activities, that cover a wide range of matters. In accordance with FASB ASC Topic 450, Accounting for Contingencies , the Company records accruals for such loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. If there is no probable estimate within a range of reasonably possible outcomes, the Company’s policy is to record at the low end of the range of such reasonably possible outcomes. Judgment is required to determine both probability and the estimated amount. The Company reviews its accruals 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, except as . 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 contingencies will not have a material effect on the Company’s financial condition or results of operations. 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, and are inherently uncertain, and material outcomes are possible. Professional legal fees associated with any such legal proceedings, and are expensed as they are incurred. On October 24, 2023, Allegheny County Employees’ Retirement System, a shareholder of the Company, filed a class action 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. 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 Trust of Ontario, and City of Tallahassee Pension Plan as Lead (the "Allegheny Lead "). On May 14, 2024, Allegheny Lead filed a consolidated the Company and certain of its current and former officers and directors, and certain underwriters, on behalf of shareholders that purchased or otherwise acquired the Company’s stock between August 4, 2020 and November 7, 2023 (as to the the “Allegheny County Consolidated ”; as to the action, the “Allegheny County Consolidated Class Action”). The Allegheny County Consolidated , among other things, that the federal securities laws by making and statements and/or to material information regarding (i) the Company’s billing practices with respect to its diabetes product category, and (ii) the Company’s compliance programs and integration with respect to acquired companies. The Allegheny County Consolidated seeks unspecified . On July 23, 2024, the
defendants filed a motion to dismiss the Allegheny County Consolidated Complaint. The Allegheny Lead Plaintiffs filed their opposition brief on October 1, 2024, and defendants filed their reply brief on November 15, 2024.
On May 28, 2025, the parties jointly filed a letter requesting that the Court hold the motion to dismiss in abeyance pending the outcome of a private mediation between the parties. On October 8, 2025, the parties attended a private mediation. On October 24, 2025, after subsequent settlement discussions, the parties jointly filed a letter informing the Court that the parties had reached an agreement in principle to settle the litigation and requesting until November 24, 2025 to negotiate the formal settlement agreement and file a preliminary approval motion. On November 21, 2025, Allegheny Lead Plaintiffs informed the Court that the parties required additional time to finalize the settlement papers and that Lead Plaintiffs intended to file the Motion for Preliminary Approval of Proposed Settlement and Approval of Notice to the Settlement Class on or before December 19, 2025.
On December 19, 2025, the parties filed said Motion and the preliminary approval order was granted by the Court on February 2, 2026. The proposed settlement is expected to be funded as follows: (i) $34.0 million of cash from the Company’s insurance carriers and (ii) $1.0 million of cash from the Company. At December 31, 2025, the Company recorded a liability of $35.0 million, consisting of the aggregate cash payments, which is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets. In addition, at December 31, 2025, the Company recorded a receivable of $34.0 million, representing the amount to be received from the Company’s insurance carriers, which is included in prepaid expenses and other current assets in the accompanying consolidated balance sheets. For the year ended December 31, 2025, the Company recorded an expense of $1.0 million associated with the proposed settlement, which is included in other loss, net in the accompanying consolidated statements of operations. The proposed settlement is subject to preliminary and final Court approval and other customary closing conditions. Upon the effectiveness of the proposed settlement, the Company and its directors and officers as well as the other defendants named in the Allegheny County Consolidated Complaint will be released from the claims that were asserted or could have been asserted in the Consolidated Class Action, with certain , by class members participating in the settlement. The Company has always maintained, and continues to believe, that it did not engage in any or otherwise commit any of federal or state securities laws or other laws. The settlement includes no admission of liability or and is subject to court approval. There can be no assurance that the settlement will be finalized and approved and, even if approved, whether the conditions to will be , and the actual outcome of this matter may differ materially from the terms of the settlement described herein.
On January 13, 2026, after consultation with the parties, the Court denied Defendants’ pending motion to dismiss as moot, without prejudice, due to the pending settlement.
On March 20, 2024, a putative shareholder of the Company, Weiding Wu, filed a shareholder derivative complaint related to the allegations in the Allegheny County Complaint, and against certain current and former directors and officers of the Company in the United States District Court for the Eastern District of Pennsylvania (as to the complaint, the “Wu Derivative Complaint”; as to the action, the “Wu Derivative Action”). 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 (i) the Company’s billing practices with respect to its diabetes product category, and (ii) the Company's compliance programs and integration with respect to acquired companies. The Wu Derivative also for enrichment, waste of corporate assets, of control, and gross . The Wu Derivative seeks, among other things, an award of money .
On July 25, 2024, the parties to the Wu Derivative Action stipulated to stay the Wu Derivative Action pending final resolution of the Allegheny County Consolidated Class Action. On July 26, 2024, the court so-ordered the parties’ stipulation.
The Company intends to vigorously defend against the allegations contained in the Wu Derivative Complaint, but there can be no assurance that the defense will be successful.
On December 9, 2025, a putative shareholder, Aaron Frankel, filed under seal a shareholder derivative complaint against certain current and former directors and officers of the Company in the United States District Court for the Eastern District of Pennsylvania (as to the complaint, the “Frankel Derivative Complaint”; as to the action, the “Frankel Derivative Action”). On January 7, 2026, the Court unsealed the Frankel Derivative Action, and Frankel notified the Company of the Frankel Derivative Action and conferred with the Company regarding necessary redactions of the Frankel Derivative Complaint. On January 28, 2026, Frankel filed a redacted amended complaint on the public docket.
The Frankel Derivative Complaint is related to the allegations in the Allegheny County Complaint and Wu Derivative Complaint. It 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 (i) the Company’s billing practices with respect to its diabetes product category, and (ii) the Company's compliance programs and integration with respect to acquired companies. The Frankel Derivative Complaint also alleges claims for enrichment and waste of corporate assets. The Frankel Derivative seeks, among other things, an award of money .
The Company intends to vigorously defend against the allegations contained in the Frankel Derivative Complaint, but there can be no assurance that the defense will be successful.
On June 24, 2025, a putative shareholder of the Company, Blake T. Myers, filed against the Company a complaint in the Court of Chancery of the State of Delaware seeking to compel an inspection of books and records under 8 Del. C. § 220 (“Section 220”) (as to the complaint, the “Myers Section 220 Complaint”; as to the action, the “Myers Section 220 Action”). The Myers Section 220 Complaint asserts the putative shareholder’s right to inspect certain corporate books and records relevant to the issues in the Allegheny County Consolidated Class Action for the purported purposes of (i) investigating potential wrongdoing by the current and/or former members of the Board and the Company’s current and/or former executive officers, (ii) supporting appropriate action in the event current and/or former directors or executive officers did not properly discharge their fiduciary duties, and (iii) evaluating whether members of the current Board have a conflict of interest such that making a demand upon the Board to bring a derivative action on behalf of the Company would be futile.
On July 1, 2025, the parties to the Myers Section 220 Action met and conferred regarding a mutually agreeable resolution to obviate the need for litigation and agreed that a thirty-day window to continue negotiations was appropriate. On July 2, 2025, putative shareholder Myers filed a letter to the Court requesting upcoming deadlines to be extended through August 1, 2025. The Court granted the requested extension on July 8, 2025. On July 31, 2025, Myers filed a letter to the Court requesting upcoming deadlines be extended through August 31, 2025, which the Court granted on August 5, 2025. On September 3, 2025, Myers filed a letter to the Court requesting upcoming deadlines be extended through October 3, 2025. On September 26, 2025, the Company completed its production to Myers. On October 3, 2025, Myers filed a letter to the Court requesting additional time for the parties to confer about the Company’s production and offering to provide a subsequent update to the Court on November 3, 2025. On October 6, 2025, the Court stayed the action pending any further requests of the parties. On November 3, 2025, Myers filed a letter informing the Court that the parties are continuing to confer and offering to provide a subsequent update to the Court on December 3, 2025. The Company completed its production on November 19, 2025.
On December 3, 2025, Myers voluntarily dismissed the action.
On February 6, 2026, Myers filed a shareholder derivative complaint under seal related to the allegations in the Allegheny County Consolidated Complaint against certain current and former directors and officers of the Company in the Delaware Court of Chancery (as to the Complaint, the “Myers Derivative Complaint;” as to the action, the “Myers Derivative Action”). The Myers Derivative Complaint alleges claims for breach of fiduciary duty, insider trading, and unjust enrichment under Delaware law. On February 12, 2026, Myers filed a redacted complaint on the public docket.
The Company intends to vigorously defend against the allegations contained in the Myers Derivative Complaint, but there can be no assurance that the defense will be successful.
In October 2022, a former customer of the Company, Mr. Ray (“Plaintiff”), filed an individual action against the Company and a collection agency for violation of North Carolina’s Debt Collection Practices Act (“the Act”) based on allegations that the Company failed to address Mr. Ray’s billing concerns and issue a refund in a timely manner related to his return of medical equipment. Plaintiff was permitted to amend his individual complaint to a class action complaint on behalf of similarly situated North Carolina residents who allegedly experienced improper billing issues after the asserted return of medical equipment. Over continued objection, and after withdrawing a motion for class certification, Plaintiff amended his class action complaint again in May 2025 to assert of the Act related to three classes of North Carolinians: (a) a class of patients who were billed after returning equipment, (b) a class of patients who were charged a fee after assertedly returning their equipment, and (c) a class of patients who received collection letters that the Act. has that the are , and the classes could be certified up to and including approximately 130,000 North Carolina patients. The Company has vigorously the case; believes the merit; and, believes that none of the three classes could be certified. Neither the
merits of the case nor the certification of these classes have been reviewed by the Court. While nonetheless strongly defending the case, to minimize exposure and risk under the Act, and reduce further litigation expenses, the Company has also pursued settlement options. The Company and the Plaintiff, a proposed class representative, recently agreed to inform the Court that the parties have agreed to certify the classes and settle the case as to Class A, Class B and Class C members for a total settlement payment to be made by the Company of $14.5 million in consideration for full releases of the Company. At December 31, 2025, the Company recorded a liability of $14.5 million, which is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets. For the year ended December 31, 2025, the Company recorded an expense of $14.5 million associated with the proposed settlement, which is included in general and administrative expenses in the accompanying consolidated statements of operations. This outcome, while considered likely by the Company, is not fixed and is contingent on factors not wholly within the Company’s control, including finalizing additional material terms with Plaintiff, seeking and achieving preliminary approval by the Court, an administrative process, and obtaining final approvals from the Court. Should this pathway for resolution , the Company will continue its robust defense of the case.
On July 29, 2024, the U.S. Attorney’s Office for the District of South Carolina issued a civil investigative demand to the Company pursuant to the FCA regarding whether the Company submitted false claims in violation of the FCA related to its billing of, and reimbursements from, federal health care programs for humidifiers that are integrated with PAP devices and provided to patients from January 1, 2017 to the present. The Company is fully cooperating with the investigation. Given the stage of the investigation, it is not possible to determine whether it will have a material adverse effect on the Company.
On March 8, 2025, the U.S. Attorney’s Office for the Eastern District of Pennsylvania issued a civil investigative demand to the Company pursuant to the FCA surrounding whether the Company submitted false claims in violation of the FCA related to its billing of, and reimbursements from, federal health care programs for respiratory devices and related supplies provided to patients from January 1, 2018 to the present. The Company is fully cooperating with the investigation. Given the stage of the investigation, it is not possible to determine whether it will have a material adverse effect on the Company.
