AdaptHealth Corp.

What they do

AdaptHealth provides home medical equipment, medical supplies, and related services directly to patients' homes, operating through three reportable segments: Sleep Health, Respiratory Health, and Wellness at Home. The company serves Medicare, Medicaid, and commercial insurance beneficiaries across all 50 states through a network of approximately 670 locations. Revenue is generated through one-time sales of consumables, monthly rentals of durable equipment, and at-risk capitation arrangements where it receives a per member per month fee.

Revenue drivers

• Sleep Health — Provides sleep therapy equipment, supplies, and services (e.g., CPAP and BiLevel) for obstructive sleep apnea. In Q2 2026, organic growth was strong across all segments, with the company reporting 15.9% organic revenue growth overall.
• Respiratory Health — Offers oxygen and home mechanical ventilation equipment, supplies, and chronic therapy services for respiratory diseases. Part of the core continuing operations, contributing to the company's record volume gains.
• Resupply and one-time sale products — Consumables such as PAP masks, CGM supplies, orthopedic bracing, and wound care supplies accounted for approximately 63% of net revenue in 2025, reflecting a major recurring revenue stream.
• At-risk capitation arrangements — The company receives a per member per month fee and manages healthcare services; these arrangements accounted for approximately 4.0% of net revenue in 2025. Recent new contracts, including with Humana OneHome, are expanding this model.

Recent performance

In Q2 2026, net revenue was $740.3 million, up 12.7% year-over-year, with organic growth of 15.9%. Net loss attributable to AdaptHealth was $145.3 million, largely due to a $144.2 million pre-tax goodwill write-down. Adjusted EBITDA was $132.0 million, down 3.2% from Q2 2025. Year-to-date 2026 cash flow from operations was $239.0 million, down from $257.5 million in the prior year, and free cash flow was negative $48.4 million. For fiscal 2025, annual revenue was $3.24 billion, with a net loss of $70.8 million.

Strategy

Management is executing a multi-year effort to concentrate the portfolio on core Sleep Health, Respiratory Health, and Wellness at Home, divesting the Diabetes Health business for $235 million in cash, which is expected to close in Q1 2027. The company is expanding its at-risk capitation model, including a new agreement with Humana OneHome and a West Coast integrated delivery network contract now at run-rate. AdaptHealth is investing in digital patient engagement, having grown registered myAPP users to over 512,000, and launched an AI-powered mask-fitting tool. A restructuring plan is underway to reduce costs, streamline operations, and optimize resources, with expected annual savings of $26.8 million.

Risks

• Supplier concentration — The company relies on a relatively small number of suppliers for the majority of its equipment and supplies; disruptions or price increases could impact operations.
• Margin pressure from capitated contracts — The complexity of the West Coast capitated partnership and an unexpected manufacturer price increase have negatively impacted margins, leading to a lowered outlook.
• Integration and transition risks — The divestiture of Diabetes Health and the transition of new capitated agreements may disrupt operations and require significant management attention.
• Regulatory and trade policy risk — New tariffs or excise taxes on imported medical equipment could increase costs, and changes in reimbursement policies could affect revenue.

Outlook

Management revised fiscal 2026 guidance on a continuing operations basis, excluding Diabetes Health, to net revenue of $2.85-$2.89 billion and Adjusted EBITDA of $490-$520 million. Guidance includes a $100 million impact from reporting Diabetes Health as discontinued operations and a $55 million impact from the West Coast capitated contract. The company expects to eliminate roughly half of the $60 million in retained corporate overhead within 12 months. Free cash flow is expected to be $80-$120 million.