AdaptHealth eyes bolt-ons for supply business

PLYMOUTH MEETING, Pa. - On the heels of a “record” 2019, AdaptHealth looks to add another $100 million in revenues through acquisitions in 2020, CEO Luke McGee said during the company's first earnings call last week.

AdaptHealth has already completed a near-record 18 acquisitions in 2019, deal-making that it expects to add annual net revenues of $116 million.

“Our acquisition pipeline remains robust and we expect to be active in 2020,” said McGee. “We believe we can accretively acquire an additional $100 million in HME revenue. In addition to HME companies, we are looking at additional supplies companies that we can bolt on to the Patient Care Solutions platform.”

AdaptHealth closed on its acquisition of McKesson's PCS business in January. That business, which includes CGMs and insulin pumps, is expected to add net revenues of approximately $117 million in 2020, and break even in Q4, says McGee.

The company also expects organic growth to remain strong, driven primarily by its sleep business, says McGee.

“Sleep is a high single-digit grower for us—depending on the territory, a low double-digit grower—and we are seeing that carry through resupply. as well,” he said.

Oxygen setups, on the other hand, were flat year over year, says McGee, and the company doesn't see it as a growth category.

AdaptHealth reported net revenue of $149.5 million for the fourth quarter ended Dec. 31, 2019, and $529.5 million for the full year, an increase of 38% and 53%, respectively, over the same periods in 2018.

The provider reported a net loss of $3.4 million for the quarter, including $5.3 million of equity-based compensation and $7.8 million of transaction costs, primarily related to the merger with DFB.

AdaptHealth has also increased its outlook for 2020. It expects to generate net revenue of $765 million to $782 million, adjusted EBITDA of $155 million to $158 million, and adjusted EBITDA less patient equipment capex of $95 million to $97 million.