Healthcare services provider AdaptHealth Corp. (NASDAQ:AHCO) reported Q1 CY2025 results exceeding the market’s revenue expectations, but sales fell by 1.8% year on year to $777.9 million. On the other hand, the company’s full-year revenue guidance of $3.25 billion at the midpoint came in 0.5% below analysts’ estimates. Its non-GAAP profit of $0.03 per share was in line with analysts’ consensus estimates.
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AdaptHealth (AHCO) Q1 CY2025 Highlights:
- Revenue: $777.9 million vs analyst estimates of $764.8 million (1.8% year-on-year decline, 1.7% beat)
- Adjusted EPS: $0.03 vs analyst estimates of $0.04 (in line)
- Adjusted EBITDA: $127.9 million vs analyst estimates of $127.3 million (16.4% margin, in line)
- The company dropped its revenue guidance for the full year to $3.25 billion at the midpoint from $3.29 billion, a 1.2% decrease
- EBITDA guidance for the full year is $685 million at the midpoint, in line with analyst expectations
- Operating Margin: 3%, down from 6.4% in the same quarter last year
- Free Cash Flow was -$58,000 compared to -$38.86 million in the same quarter last year
- Market Capitalization: $1.19 billion
StockStory’s Take
AdaptHealth’s first quarter results reflected continued execution in core segments, with management citing improvements in the Diabetes Health business and ongoing operational initiatives in Sleep Health and Respiratory Health. CEO Suzanne Foster highlighted the company’s emphasis on patient service and operational efficiency, noting, “We have scrutinized our workflows to pinpoint our most meaningful organic growth levers.”
Looking ahead, AdaptHealth’s revised full-year guidance was primarily influenced by the divestiture of non-core incontinence assets rather than fundamental shifts in underlying demand. Management expressed confidence in their ability to manage potential tariff impacts, with CFO Jason Clemens stating, “We have consulted with each of our major manufacturing partners... and there have been no indications from these discussions that tariffs are likely to pose a significant issue.”
Key Insights from Management’s Remarks
AdaptHealth’s leadership focused on operational discipline and segment-specific trends impacting Q1 performance and future positioning. Management attributed Q1 results to a mix of segment recovery, targeted process improvements, and selective asset divestitures.
- Respiratory segment outperformance: Stronger-than-expected volumes in the Respiratory Health business were driven by elevated oxygen set-ups during a severe flu season, resulting in a new first-quarter record for the oxygen patient census.
- Diabetes Health momentum: The Diabetes Health segment, though still contracting, demonstrated sequential improvement in new patient starts and achieved its lowest attrition rate in two years. Management credited enhanced team execution and improved sales force deployment across segments for this recovery.
- Sleep Health operational initiatives: Sleep Health revenue underperformed internal targets, mainly due to slower new patient setups in a handful of states. Management identified the need for faster conversion and more effective execution in certain geographies and outlined detailed plans to address these gaps.
- Portfolio streamlining: The company continued its strategy of divesting non-core assets, completing the sale of incontinence assets and signing an agreement to sell infusion assets. Proceeds are earmarked for further debt reduction and strategic focus on core markets.
- Tariff risk monitoring: Management addressed concerns about potential tariff exposure, emphasizing ongoing dialogue with manufacturers and noting that most products fall under tariff exemptions. No material impact is expected in 2025 based on current information.
Drivers of Future Performance
Management’s outlook emphasizes operational improvements, segment recovery, and risk mitigation as the primary themes shaping guidance for the remainder of the year.
- Diabetes segment turnaround: Continued progress in Diabetes Health—especially in new patient starts and retention—will be critical for returning to aggregate organic growth in line with market trends.
- Process automation and efficiency: Initiatives to streamline CPAP order conversion, automate intake, and optimize scheduling are expected to improve Sleep Health performance, particularly in underperforming geographies.
- External policy impacts: While tariff risks and regulatory policy remain areas of uncertainty, management currently expects any impact to be manageable and not material to 2025 results.
Top Analyst Questions
- Meghan Holtz (Jefferies): Asked if the guidance reduction was solely related to the incontinence asset sale. Management confirmed it was and provided details on sequential Diabetes improvements, particularly in pumps and CGMs.
- Pito Chickering (Deutsche Bank): Pressed for clarity on underperformance in Sleep new starts and whether this reflected market issues or share loss. Management acknowledged localized competitive pressures and outlined plans to address execution gaps.
- Kevin Caliendo (UBS): Inquired about the increase in capital expenditures and Sleep Health market dynamics. Management attributed higher CapEx to Respiratory growth and noted that competitive dynamics in Sleep were concentrated in specific states.
- Ben Hendrix (RBC Capital Markets): Asked if M&A could help address Sleep segment challenges. Management indicated modest tuck-in acquisitions are under consideration in targeted markets.
- Whit Mayo (Leerink Partners): Sought updates on the “One Adapt” strategy and managed care relationships. Management described efforts to unify operations and reported strong progress in expanding payer partnerships, particularly with Humana.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will be watching (1) the pace of improvement in Diabetes Health patient starts and retention, (2) execution of operational enhancements in Sleep Health aimed at closing geographic performance gaps, and (3) the company’s ability to manage external risks, such as tariffs and ongoing asset divestitures. Successful delivery against these priorities will signal progress toward sustained organic growth and margin stability.
AdaptHealth currently trades at a forward P/E ratio of 8.3×. At this valuation, is it a buy or sell post earnings? See for yourself in our free research report.
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