AdaptHealth Corp.: Form 10-Q for the period ended Sep 30, 2025

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”, in our 2024 Annual Report on Form 10-K filed with the SEC on February 25, 2025. 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 CPAP 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 September 30, 2025, AdaptHealth serviced approximately 4.3 million patients annually in all 50 states through its network of approximately 640 locations in 47 states. The Company’s principal executive offices are located at 555 East North Lane, Suite 5075, Conshohocken, Pennsylvania 19428.

Reclassifications

During the three and nine months ended September 30, 2024, the Company previously classified certain expenses, primarily related to revenue cycle management costs, as a component of Cost of net revenue in its Consolidated Statements of Operations. During the three and nine months ended September 30, 2025, the Company has classified these costs within General and administrative expenses to better align with common industry practice, and has reclassified these costs in its Consolidated Statements of Operations for the three and nine months ended September 30, 2024 to conform to the current period presentation. During the three and nine months ended September 30, 2024, the Company reclassified $38.1 million and $121.1 million, respectively, from Cost of net revenue to General and administrative expenses. The resulting reclassifications had no impact on the Company's historical reported net revenue, operating income (loss), or cash flows from operating activities, investing activities, and financing activities for the three and nine months ended September 30, 2024.

Impact of Inflation

The cost to manufacture and distribute the equipment and products that AdaptHealth provides to patients is influenced by the cost of materials, labor, 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 and transportation. The increase in the cost of equipment and products is due in part to higher cost of shipping and general inflationary cost increases. 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 disposables, over the service period for equipment rental (including, but not limited to, CPAP 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 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 may be influenced by certain unique events during the periods discussed herein, including the following:

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 disposables. Net revenue from fixed monthly equipment reimbursements consists of revenue recognized over the service period for equipment (including, but not limited to, CPAP 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.

(Unaudited)

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(Unaudited)

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Results of Operations

Comparison of Three Months Ended September 30, 2025 and Three Months Ended September 30, 2024.

The following table summarizes AdaptHealth’s consolidated results of operations for the three months ended September 30, 2025 and 2024:

(in thousands, except percentages)

(Unaudited)

(a) Certain amounts previously reported within Cost of net revenue have been reclassified to General and administrative expenses in order to conform to the current year presentation. See Note 1(f), Reclassifications, included in the accompanying notes to the interim consolidated financial statements for the three and nine months ended September 30, 2025 and 2024 for additional discussion of such reclassification.

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 will now present:

(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.

(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.

(in thousands, except percentages)

(Unaudited)

(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.

(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 $19.0 million, or 5.7%, for the three months ended September 30, 2025 compared to the prior year period, primarily due to an increase in sleep sales revenue primarily from higher patient census from sales of CPAP resupply products. Net revenue from AdaptHealth's Respiratory Health segment increased by $12.8 million, or 7.8%, for the three months ended September 30, 2025 compared to the prior year period, due to higher fixed monthly equipment reimbursements primarily from higher patient census for oxygen equipment products. Net revenue from AdaptHealth's Diabetes Health segment increased by $9.0 million, or 6.4%, for the three months ended September 30, 2025 compared to the prior year period, primarily due to growth in patient census resulting in increased sales of CGM products and insulin pumps and supplies. Net revenue from AdaptHealth's Wellness at Home segment decreased by $26.4 million, or 16.0% for the three months ended September 30, 2025 compared to the prior year period, primarily due to decreased revenues from the disposition of two businesses in the second quarter of 2025 as well as the disposition of certain custom rehab technology assets in the third quarter of 2024, partially offset by increased revenues from HME products and certain other product categories within this segment.

For the three months ended September 30, 2025, net sales revenue comprised 61.7% of total net revenue, compared to 63.4% of total net revenue for the three months ended September 30, 2024. For the three months ended September 30, 2025, net revenue from fixed monthly equipment reimbursements comprised 34.4% of total net revenue, compared to 32.6% of total net revenue for the three months ended September 30, 2024. For the three months ended September 30, 2025, net revenue from capitated revenue arrangements comprised 3.9% of total net revenue, compared to 4.0% of total net revenue for the three months ended September 30, 2024.

Cost of Net Revenue.

The following table summarizes cost of net revenue for the three months ended September 30, 2025 and 2024:

(in thousands, except percentages)

(Unaudited)

Certain amounts previously reported within these categories of Cost of net revenue have been reclassified to General and administrative expenses in order to conform to the current year presentation. See Note 1(f), Reclassifications, included in the accompanying notes to the interim consolidated financial statements for the three and nine months ended September 30, 2025 and 2024 for additional discussion of such reclassification.

Cost of net revenue for the three months ended September 30, 2025 and 2024 was $658.4 million and $643.8 million, respectively, an increase of $14.6 million or 2.3%. Costs of products and supplies increased by $0.5 million primarily as a result of product mix as well as general inflationary cost increases, partially offset by slightly lower net sales revenue. Salaries, labor and benefits increased by $5.4 million, primarily due to merit and inflationary increases as well as increases in benefits costs. Patient equipment depreciation increased by $8.1 million, primarily due to accelerated depreciation on certain respiratory equipment resulting from a change in the estimated useful life of the assets, as well as higher fixed monthly equipment reimbursements and higher medical equipment prices.

General and Administrative Expenses. General and administrative expenses for the three months ended September 30, 2025 and 2024 were $90.1 million and $87.3 million respectively, an increase of $2.8 million or 3.2%. This increase is primarily due to higher equity-based compensation and salaries, labor and benefits, partially offset by lower severance charges and legal settlement costs. General and administrative expenses as a percentage of net revenue was 11.0% in the 2025 period, compared to 10.8% in the 2024 period. General and administrative expenses in the 2025 period included $4.6 million of equity-based compensation expense and $5.4 million of other non-recurring expenses, consisting of $1.7 million of consulting expenses associated with a reorganization project, $1.2 million write-off of assets, $0.6 million of consulting expenses associated with asset dispositions, and $1.9 million of other expenses. General and administrative expenses in the 2024 period included less than $0.1 million of equity-based compensation expense and $8.3 million of other non-recurring expenses, consisting of $3.2 million of severance charges (primarily related to the separation of the Company's former President), $2.8 million of consulting expenses associated with systems implementation activities, $2.0 million of consulting expenses associated with asset dispositions, $0.5 million of expenses associated with litigation, partially offset by $0.2 million of other income.

Depreciation and amortization, excluding patient equipment depreciation. Depreciation and amortization, excluding patient equipment depreciation, for the three months ended September 30, 2025 and 2024 was $10.1 million and

$11.3 million, respectively, a decrease of $1.2 million, primarily related to lower intangible amortization expense and lower depreciation from owned delivery vehicles.

Interest Expense, net. Interest expense, net for the three months ended September 30, 2025 and 2024 was $25.4 million and $31.4 million, respectively, a decrease of $6.0 million. Interest expense related to AdaptHealth's credit agreement decreased by $6.5 million in 2025 compared to 2024 as a result of lower interest rates as well as lower average outstanding borrowings in 2025 compared to 2024. This decrease was partially offset by the impact from AdaptHealth's interest rate swap agreements, which reduced interest expense by $0.9 million and $1.6 million in 2025 and 2024, respectively.

Change in Fair Value of Warrant Liability. During the three months ended September 30, 2024, AdaptHealth had outstanding warrants to purchase shares of Common Stock, as discussed in Note 12, Stockholders’ Equity, to the accompanying September 30, 2025 interim consolidated financial statements. These warrants were liability-classified, and the change in fair value of the warrant liability represents a non-cash gain in the three months ended September 30, 2024 for the change in the estimated fair value of such liability during such period. These warrants expired on November 8, 2024.

Income Tax Expense. Income tax expense for the three months ended September 30, 2025 and 2024 was $10.6 million and $8.1 million, respectively. Income tax expense on ordinary income increased due to higher pre-tax income.

Comparison of Nine Months Ended September 30, 2025 and Nine Months Ended September 30, 2024.

The following table summarizes AdaptHealth’s consolidated results of operations for the nine months ended September 30, 2025 and 2024:

(in thousands, except percentages)

(Unaudited)

(a) Certain amounts previously reported within Cost of net revenue have been reclassified to General and administrative expenses in order to conform to the current year presentation. See Note 1(f), Reclassifications, included in the accompanying notes to the interim consolidated financial statements for the three and nine months ended September 30, 2025 and 2024 for additional discussion of such reclassification.

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 will now present:

(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.

(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.

(in thousands, except percentages)

(Unaudited)

(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.

(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 $13.2 million, or 1.3%, for the nine months ended September 30, 2025 compared to the prior year period, primarily due to an increase in sleep sales revenue primarily from higher patient census from sales of CPAP resupply products, partially offset by a decrease in net revenue from fixed monthly equipment reimbursements from lower sleep rental products and related supplies. Net revenue from AdaptHealth's Respiratory Health segment increased by $27.1 million, or 5.6%, for the nine months ended September 30, 2025 compared to the prior year period, primarily due to higher fixed monthly equipment reimbursements primarily from higher patient census for oxygen equipment products. Net revenue from AdaptHealth's Diabetes Health segment decreased by $9.2 million, or 2.1%, for the nine months ended September 30, 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 CGM products and insulin pumps and supplies. Net revenue from AdaptHealth's Wellness at Home segment decreased by $36.8 million, or 7.6% for the nine months ended September 30, 2025 compared to the prior year period, primarily due to decreased revenues from the disposition of two businesses in the second quarter of 2025 as well as the disposition of certain custom rehab technology assets in the third quarter of 2024, partially offset by increased revenues from HME products and certain other product categories within this segment.

For the nine months ended September 30, 2025, net sales revenue comprised 62.8% of total net revenue, compared to 63.7% of total net revenue for the nine months ended September 30, 2024. For the nine months ended September 30, 2025, net revenue from fixed monthly equipment reimbursements comprised 33.2% of total net revenue, compared to 32.2% of total net revenue for the nine months ended September 30, 2024. For the nine months ended September 30, 2025, net revenue from capitated revenue arrangements comprised 4.0% of total net revenue, compared to 4.1% of total net revenue for the nine months ended September 30, 2024.

Cost of Net Revenue.

The following table summarizes cost of net revenue for the nine months ended September 30, 2025 and 2024:

(in thousands, except percentages)

(Unaudited)

Certain amounts previously reported within these categories of Cost of net revenue have been reclassified to General and administrative expenses in order to conform to the current year presentation. See Note 1(f), Reclassifications, included in the accompanying notes to the interim consolidated financial statements for the three and nine months ended September 30, 2025 and 2024 for additional discussion of such reclassification.

Cost of net revenue for the nine months ended September 30, 2025 and 2024 was $1,961.5 million and $1,915.4 million, respectively, an increase of $46.1 million or 2.4%. Costs of products and supplies increased by $15.2 million primarily as a result of product mix and general inflationary cost increases, partially offset by lower net sales revenue. The increase in cost of products and supplies was also attributable to the benefit received in the nine months ended September 30, 2024 related to credits received from a supplier related to certain product recalls which were recognized as a reduction to the cost of products and supplies. Salaries, labor and benefits increased by $15.0 million, primarily due to merit and inflationary increases as well as increases in benefits costs. Patient equipment depreciation increased by $12.9 million, primarily due to accelerated depreciation on certain respiratory equipment resulting from a change in the estimated useful life of the assets, as well as higher fixed monthly equipment reimbursements and higher medical equipment prices.

General and Administrative Expenses. General and administrative expenses for the nine months ended September 30, 2025 and 2024 were $274.4 million and $275.7 million, respectively, a decrease of $1.3 million or 0.5%. This decrease is primarily due to lower salaries, labor and benefits, severance charges, and consulting costs, partially offset by higher equity-based compensation and software costs. General and administrative expenses as a percentage of net revenue was 11.4% in the 2025 period, compared to 11.5% in the 2024 period. General and administrative expenses in the 2025 period included $13.2 million of equity-based compensation expense and $20.2 million of other non-recurring expenses, consisting of $9.8 million of consulting expenses associated with asset dispositions (of which $5.1 million relates to contingent success fees on the sales of businesses), $2.2 million of consulting expenses associated with systems implementation activities, $1.7 million of consulting expenses associated with a reorganization project, $1.4 million of transaction costs associated with acquisitions, $1.2 million write-off of assets, and $3.9 million of other expenses. General and administrative expenses in the 2024 period included $7.2 million of equity-based compensation expense and $21.0 million of other non-recurring expenses, consisting of $9.7 million of consulting expenses associated with systems implementation activities, $3.3 million of expenses associated with litigation, $3.2 million of severance charges (primarily related to the separation of the Company's former President), $2.9 million of consulting expenses associated with asset dispositions, and $1.9 million of other expenses.

Depreciation and amortization, excluding patient equipment depreciation. Depreciation and amortization, excluding patient equipment depreciation, for the nine months ended September 30, 2025 and 2024 was $30.7 million and $34.0 million, respectively, a decrease of $3.3 million, primarily related to lower intangible amortization expense and lower depreciation from owned delivery vehicles.

Goodwill Impairment. The goodwill impairment charge for the nine months ended September 30, 2024 relates to an immaterial business disposal during 2024.

Gain on sale of businesses. The gain on sale of businesses for the nine months ended September 30, 2025 relates to the disposition of two businesses within AdaptHealth's Wellness at Home segment. See Note 4, Disposals, for additional information.

Interest Expense, net. Interest expense, net for the nine months ended September 30, 2025 and 2024 was $81.3 million and $96.9 million, respectively, a decrease of $15.6 million. Interest expense related to AdaptHealth's credit agreement decreased by $18.7 million in 2025 compared to 2024 as a result of lower interest rates as well as lower average outstanding borrowings in 2025 compared to 2024. This decrease was partially offset by an increase of $0.5 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 $2.7 million and $4.8 million in 2025 and 2024, respectively.

Change in Fair Value of Warrant Liability. During the nine months ended September 30, 2024, AdaptHealth had outstanding warrants to purchase shares of Common Stock, as discussed in Note 12, Stockholders’ Equity, to the accompanying September 30, 2025 interim consolidated financial statements. These warrants were liability-classified, and the change in fair value of the warrant liability represents a non-cash gain in the nine months ended June 30, 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 nine months ended September 30, 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. Other loss for the nine months ended September 30, 2024 consisted of a pre-tax expense of $2.4 million for the change in fair value of shares of AdaptHealth's Common Stock that were issued in July 2024 following final court approval of the settlement of a previously disclosed securities class action lawsuit, as well as an expense of $0.9 million to settle a shareholder derivative complaint.

Income Tax Expense. Income tax expense for the nine months ended September 30, 2025 and 2024 was $47.3 million and $21.9 million, respectively. Income tax expense on ordinary income decreased due to lower pre-tax income, net of gains recognized on the disposition of two businesses within the Wellness at Home segment. Additionally, for the nine months ended September 30, 2025, AdaptHealth recognized a $27.4 million discrete income tax expense related to the dispositions. See Note 4, Disposals, for additional details.

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:

• 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 (“Acquisition”); and
• 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 certain 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 income attributable to AdaptHealth Corp. to EBITDA and Adjusted EBITDA, and the reconciliation of net income attributable to AdaptHealth Corp. as a percentage of net revenue to Adjusted EBITDA Margin, for the three months ended September 30, 2025 and 2024:

(in thousands, except percentages)

(Unaudited)

(a) Represents equity-based compensation expense for awards granted to employees and non-employee directors.

(b) Represents a non-cash gain for the change in the estimated fair value of the warrant liability. See Note 12, Stockholders’ Equity, included in the accompanying notes to the interim consolidated financial statements for the three and nine months ended September 30, 2025 for additional discussion of such non-cash gain. These warrants expired on November 8, 2024.

(c) Represents lender fees and the write-off of unamortized deferred financing costs in connection with the refinancing of the Company's credit agreement.

(d) The 2025 period consists of $1.7 million of consulting expenses associated with a reorganization project, $1.2 million write-off of assets, $0.6 million of consulting expenses associated with asset dispositions, and $1.8 million of other non-recurring expenses. The 2024 period consists of $3.3 million of severance charges (primarily related to the separation of the Company's former President), $2.8 million of consulting expenses associated with systems implementation activities, $2.0 million of consulting expenses associated with asset dispositions, $0.5 million of expenses associated with litigation, and a $1.1 million write-down of assets, partially offset by $0.6 million of other net non-recurring income.

The following unaudited table presents the reconciliation of net income attributable to AdaptHealth Corp. to EBITDA and Adjusted EBITDA, and the reconciliation of net income attributable to AdaptHealth Corp. as a percentage of net revenue to Adjusted EBITDA Margin, for the nine months ended September 30, 2025 and 2024:

(in thousands, except percentages)

(Unaudited)

(a) Represents equity-based compensation expense for awards granted to employees and non-employee directors.

(b) Represents a non-cash gain for the change in the estimated fair value of the warrant liability. See Note 12, Stockholders’ Equity, included in the accompanying notes to the interim consolidated financial statements for the three and nine months ended September 30, 2025 for additional discussion of such non-cash gain. These warrants expired on November 8, 2024.

(c) Represents non-cash goodwill impairment charges relating to an immaterial business disposal during 2024.

(d) Represents lender fees and the write-off of unamortized deferred financing costs in connection with the refinancing of the Company's credit agreement.

(e) Represents a $2.4 million charge for the change in fair value of 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.

(f) Represents pre-tax gains associated with the dispositions of two businesses within the Company's Wellness at Home segment. See Note 4, Disposals, for additional discussion of such gains.

(g) The 2025 period consists of $9.8 million of consulting expenses associated with asset dispositions (of which $5.1 million relates to contingent success fees from the sales of businesses), $2.3 million of consulting expenses associated with systems implementation activities, $1.7 million of consulting expenses associated with a reorganization project, $1.4 million of transaction costs associated with acquisitions, $1.2 million write-off of assets, and $4.1 million of other non-recurring expenses. The 2024 period consists of $9.7 million of consulting expenses associated with systems implementation activities, $3.3 million of severance charges (primarily related to the separation of the Company's former President), $3.3 million of expenses associated with litigation, $2.9 million of consulting expenses associated with asset dispositions, $2.7 million write-down of assets, and $1.6 million of other non-recurring expenses.

Segment Results of Operations

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, Adjusted EBITDA and Adjusted EBITDA Margin” for the Company’s definition of Adjusted EBITDA.

Comparison of Three Months Ended September 30, 2025 and Three Months Ended September 30, 2024.

The following table summarizes the performance of the Company’s reportable segments for the three months ended September 30, 2025 and 2024:

(in thousands)

(Unaudited)

(a) See Note 6, Segment Information, in the accompanying notes to the interim consolidated financial statements for the three and nine months ended September 30, 2025 and 2024 for a reconciliation of consolidated Adjusted EBITDA to consolidated income before income taxes.

Sleep Health Segment

The following table summarizes the Sleep Health segment’s performance for the three months ended September 30, 2025 and 2024:

(in thousands, except percentages)

(Unaudited)

(1) Represents the significant segment expense categories disclosed in Note 6, Segment Information, in the accompanying notes to the interim consolidated financial statements for the three and nine months ended September 30, 2025 and 2024.

(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 $19.0 million, or 5.7%, for the three months ended September 30, 2025 compared to the prior year period, primarily due to an increase in sleep sales revenue primarily from higher patient census from sales of CPAP resupply products.

Adjusted EBITDA from the Sleep Health segment decreased by $2.0 million or 2.4%, for the three months ended September 30, 2025 compared to the prior year period, primarily due to increased costs and expenses, partially offset by higher net revenue (as discussed above). The increase in the cost of products and supplies was primarily driven by increased sales of CPAP resupply products as well as 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 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 three months ended September 30, 2025 and 2024:

(in thousands, except percentages)

(Unaudited)

(1) Represents the significant segment expense categories disclosed in Note 6, Segment Information, in the accompanying notes to the interim consolidated financial statements for the three and nine months ended September 30, 2025 and 2024.

(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 $12.8 million, or 7.8%, for the three months ended September 30, 2025 compared to the prior year period, due to higher fixed monthly equipment reimbursements primarily from higher patient census for oxygen equipment products.

Adjusted EBITDA from the Respiratory Health segment increased by $7.6 million or 16.0%, for the three months ended September 30, 2025 compared to the prior year period, 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 higher patient census for oxygen equipment products as well as 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 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 three months ended September 30, 2025 and 2024:

(in thousands, except percentages)

(Unaudited)

(1) Represents the significant segment expense categories disclosed in Note 6, Segment Information, in the accompanying notes to the interim consolidated financial statements for the three and nine months ended September 30, 2025 and 2024.

(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 increased by $9.0 million, or 6.4%, for the three months ended September 30, 2025 compared to the prior year period, primarily due to growth in patient census resulting in increased sales of CGM products and insulin pumps and supplies.

Adjusted EBITDA from the Diabetes Health segment increased by $2.7 million or 37.2%, for the three months ended September 30, 2025 compared to the prior year period, due to higher net revenue (as discussed above), partially offset by increased costs and expenses. The increase in the cost of products and supplies was primarily due to growth in CGM patient census 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 expenses and software costs, partially offset by lower rent and occupancy costs. The decrease in other segment items was due to a decrease in general and administrative expenses that were allocated to the segment.

Wellness at Home Segment

The following table summarizes the Wellness at Home segment’s performance for the three months ended September 30, 2025 and 2024:

(in thousands, except percentages)

(Unaudited)

(1) Represents the significant segment expense categories disclosed in Note 6, Segment Information, in the accompanying notes to the interim consolidated financial statements for the three and nine months ended September 30, 2025 and 2024.

(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 $26.4 million, or 16.0%, for the three months ended September 30, 2025 compared to the prior year period, primarily due to decreased revenues from the disposition of two businesses in the second quarter of 2025 as well as the disposition of certain custom rehab technology assets in the third quarter of 2024, partially offset by increased revenues from HME products and certain other product categories within this segment.

Adjusted EBITDA

Adjusted EBITDA from the Wellness at Home segment decreased by $2.5 million or 10.8%, for the three months ended September 30, 2025 compared to the prior year period, 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 two businesses in the second quarter of 2025, and to a lesser extent, the disposition of certain custom rehab technology assets in the third quarter of 2024.

Comparison of Nine Months Ended September 30, 2025 and Nine Months Ended September 30, 2024.

The following table summarizes the performance of the Company’s reportable segments for the nine months ended September 30, 2025 and 2024:

(in thousands)

(Unaudited)

(a) See Note 6, Segment Information, in the accompanying notes to the interim consolidated financial statements for the three and nine months ended September 30, 2025 and 2024 for a reconciliation of consolidated Adjusted EBITDA to consolidated income before income taxes.

Sleep Health Segment

The following table summarizes the Sleep Health segment’s performance for the nine months ended September 30, 2025 and 2024:

(in thousands, except percentages)

(Unaudited)

(1) Represents the significant segment expense categories disclosed in Note 6, Segment Information, in the accompanying notes to the interim consolidated financial statements for the three and nine months ended September 30, 2025 and 2024.

(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 $13.2 million, or 1.3%, for the nine months ended September 30, 2025 compared to the prior year period, primarily due to an increase in sleep sales revenue primarily from higher patient census from sales of CPAP resupply products, partially offset by a decrease in net revenue from fixed monthly equipment reimbursements from lower sleep rental products and related supplies.

Adjusted EBITDA from the Sleep Health segment decreased by $17.8 million or 7.2%, for the nine months ended September 30, 2025 compared to the prior year period, primarily due to increased costs and expenses, partially offset by higher net revenue (as discussed above). 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 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 nine months ended September 30, 2025 and 2024:

(in thousands, except percentages)

(Unaudited)

(1) Represents the significant segment expense categories disclosed in Note 6, Segment Information, in the accompanying notes to the interim consolidated financial statements for the three and nine months ended September 30, 2025 and 2024.

(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 $27.1 million, or 5.6%, for the nine months ended September 30, 2025 compared to the prior year period, primarily due to higher fixed monthly equipment reimbursements primarily from higher patient census for oxygen equipment products.

Adjusted EBITDA from the Respiratory Health segment increased by $0.4 million or 0.3%, for the nine months ended September 30, 2025 compared to the prior year period, due to higher net revenue (as discussed above), offset by increased costs and expenses. The increase in cost of products and supplies was primarily due to the benefit received in the nine months ended September 30, 2024 related to credits received from a supplier related to certain product recalls which were recognized as a reduction to the cost of products and supplies, 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 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 nine months ended September 30, 2025 and 2024:

(in thousands, except percentages)

(Unaudited)

(1) Represents the significant segment expense categories disclosed in Note 6, Segment Information, in the accompanying notes to the interim consolidated financial statements for the three and nine months ended September 30, 2025 and 2024.

(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 $9.2 million, or 2.1%, for the nine months ended September 30, 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 CGM products and insulin pumps and supplies.

Adjusted EBITDA from the Diabetes Health segment decreased by $16.7 million or 43.2%, for the nine months ended September 30, 2025 compared to the prior year period, 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 payor mix and general inflationary cost increases, and to a lesser extent, the growth in CGM patient census. 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 expenses and software costs. The decrease in other segment items was due to a decrease in general and administrative expenses that were allocated to the segment.

Wellness at Home Segment

The following table summarizes the Wellness at Home segment’s performance for the nine months ended September 30, 2025 and 2024:

(in thousands, except percentages)

(Unaudited)

(1) Represents the significant segment expense categories disclosed in Note 6, Segment Information, in the accompanying notes to the interim consolidated financial statements for the three and nine months ended September 30, 2025 and 2024.

(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 $36.8 million, or 7.6%, for the nine months ended September 30, 2025 compared to the prior year period, primarily due to decreased revenues from the disposition of two businesses in the second quarter of 2025 as well as the disposition of certain custom rehab technology assets in the third quarter of 2024, partially offset by increased revenues from HME products and certain other product categories within this segment.

Adjusted EBITDA

Adjusted EBITDA from the Wellness at Home segment decreased by $0.4 million or 0.7%, for the nine months ended September 30, 2025 compared to the prior year period, due to lower net revenue (as discussed above), offset by lower costs and expenses. The decrease in total costs and expenses is primarily due to the disposition of two businesses in the second quarter of 2025, and to a lesser extent, the disposition of certain custom rehab technology assets in the third quarter of 2024.

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 September 30, 2025, AdaptHealth had $80.4 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 September 30, 2025, the outstanding borrowing under the 2024 Term Loan requires 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 nine months ended September 30, 2025, AdaptHealth made voluntary repayments on the 2024 Term Loan totaling $212.8 million. At September 30, 2025, there was $325.0 million 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 September 30, 2025, there was $26.3 million outstanding under letters of credit. As of the date of this filing, there were no outstanding borrowings under the 2024 Revolver. At September 30, 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 September 30, 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 September 30, 2025, AdaptHealth LLC had $1,450.0 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 LLC 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 (i) February 1, 2025 is 101.156%, and (ii) 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 LLC 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.

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 $32.7 million current income tax receivable, which is included in prepaid and other current assets in the accompanying consolidated balance sheets as of September 30, 2025. The majority of AdaptHealth’s income tax receivable relates to federal and state corporate income tax refunds which are expected to be received in 2026.

As of September 30, 2025 and December 31, 2024, AdaptHealth had working capital of $54.1 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 the nine months ended September 30, 2025 and 2024:

(in thousands)

(Unaudited)

Net cash provided by operating activities for the nine months ended September 30, 2025 and 2024 was $418.6 million and $391.4 million, respectively, an increase of $27.2 million. The increase was the result of a $7.9 million reduction in net income, a net increase of $4.4 million in non-cash charges, primarily from 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 $30.7 million increase 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 nine months ended September 30, 2025 and 2024 was $178.7 million and $223.4 million, respectively. The net use of funds in the 2025 period primarily consisted of $278.5 million for equipment and other fixed asset purchases and $18.6 million for business acquisitions, partially offset by $117.2 million of proceeds from the sale of businesses. The use of funds in the 2024 period consisted of $228.7 million for equipment and other fixed asset purchases, partially offset by $5.3 million of proceeds from the sale of assets.

Net cash used in financing activities for the nine months ended September 30, 2025 and 2024 was $269.3 million and $145.0 million, respectively. Net cash used in financing activities for the 2025 period primarily consisted of repayments of $237.2 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, a payment of $5.4 million for a distribution to the noncontrolling interest, and payments of $2.6 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 the 2024 period consisted of repayments of $381.7 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 $5.3 million for contingent consideration and deferred purchase price in connection with acquisitions, a payment of $3.5 million for a distribution to the noncontrolling interest, payments of $1.8 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.

Free Cash Flow

The following table reconciles net cash provided by operating activities to free cash flow for the three and nine months ended September 30, 2025 and 2024:

(in thousands)

(Unaudited)

Free cash flow was $66.8 million for the three months ended September 30, 2025 compared to $84.8 million for the three months ended September 30, 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 during the three months ended September 30, 2024 was positively impacted by cash collections of accounts receivable from certain pending claims related to the Change Healthcare cybersecurity incident (as previously disclosed).

Free cash flow was $140.1 million for the nine months ended September 30, 2025 compared to $162.7 million for the nine months ended September 30, 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. During the nine months ended September 30, 2024, free cash flow was positively impacted by AdaptHealth's participation in the Optum Temporary Funding Assistance Program (as previously disclosed).

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 valuation of goodwill. There have been no material changes in the Company’s critical accounting policies and critical estimates as compared to the critical accounting policies and critical estimates described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

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 at least 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 disclosed. 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 loss contingencies will not have a material adverse 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, claims and investigations are inherently uncertain, and material adverse outcomes are possible. Professional legal fees associated with any such legal proceedings, claims and investigations are expensed as they are incurred.

On May 2, 2022, the U.S. Attorney’s Office for the Southern District of New York ("SDNY") issued a civil investigative demand to a subsidiary of the Company, pursuant to the False Claims Act, 31 U.S.C. § 3733 ("FCA") regarding whether the subsidiary submitted false claims in violation of the FCA related to its billing of, and reimbursements from, federal health care programs for ventilators provided to patients from January 1, 2015 to the present. The Company has fully cooperated with the investigation. In August 2025, U.S. Attorney's Office for the SDNY informed the Company that, based on available information, they do not presently intend to pursue FCA claims against the Company.

On October 24, 2023, Allegheny County Employees’ Retirement System, a purported shareholder of the Company, filed a purported class action complaint against 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 Benefit Trust of Ontario, and City of Tallahassee Pension Plan as Lead Plaintiffs (the "Allegheny Lead Plaintiffs"). On May 14, 2024, Allegheny Lead Plaintiffs filed a consolidated complaint against 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 complaint the “Allegheny County Consolidated Complaint”; as to the action, the “Allegheny County Consolidated Class Action”). The Allegheny County Consolidated Complaint alleges, among other things, that the defendants 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 Allegheny County Consolidated Complaint seeks unspecified damages. 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.

The settlement is expected to consist of a cash payment by the Company which will primarily be funded by the Company’s insurance carriers, and is subject to preliminary and final Court approval and other customary closing conditions. There can be no assurance that the settlement will be finalized and approved and, even if approved, whether the conditions to closing will be satisfied, and the actual outcome of this matter may differ materially from the terms of the settlement described herein.

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 Complaint also alleges claims for unjust enrichment, waste of corporate assets, abuse of control, and gross mismanagement. The Wu Derivative Complaint seeks, among other things, an award of money damages.

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 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.

Should the Court lift the stay, the Company intends to vigorously defend itself in this action, and there can be no assurance that the defense will be successful.

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 CPAP 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.

Our exposure to market risk relates to fluctuations in interest rates from borrowings under the 2024 Credit Agreement. As of September 30, 2025, there was $325.0 million outstanding under the 2024 Term Loan, $26.3 million outstanding under letters of credit, and based on the financial debt covenants under the 2024 Credit Agreement, the maximum amount the Company could borrow under the 2024 Revolver and remain in compliance with the financial debt covenants under the agreement was $273.7 million. Amounts borrowed under the 2024 Credit Agreement bear interest at variable rates determined in relation to the Base Rate (as defined) or Term SOFR (as defined), at our option. Due to the interest rates being variable, fluctuations in interest rates may impact our earnings. Based on our current level of debt, we estimate that a 100 basis point change in interest rates would have a $0.8 million annual impact on our net income (loss) before taxes.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of September 30, 2025. Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, during the period covered by this Quarterly Report, our disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting.

As previously disclosed in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, management identified a material weakness in internal control over financial reporting, as follows:

• The Company did not design and implement process-level controls over the determination of excess or obsolete medical equipment and other inventory balances. Specifically, the Company did not have a mechanism in place to track the movement and status of specific medical equipment and other inventory which could affect the valuation of its inventory. This material weakness is hereinafter referred to as "the Inventory Valuation Material Weakness".

The material weakness continues to exist as of September 30, 2025. Notwithstanding the identified material weakness, management, including our Chief Executive Officer and Chief Financial Officer, believes the interim consolidated financial statements included in this Quarterly Report on Form 10-Q fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.

Remediation of Previously Reported Material Weakness in Internal Control Over Financing Reporting

With respect to the Inventory Valuation Material Weakness identified as of December 31, 2024, management continues to take steps toward its remediation, which includes the remaining implementation program of a perpetual inventory system. The perpetual inventory system, currently implemented at 102 locations (approximately 32% of the Company's inventory value), enables the Company to track the movement and status of specific medical equipment and other inventory in support of the valuation of the inventory. In the fourth quarter of 2024, a solution design assessment was completed. This assessment evaluated the operational efficiency and effectiveness of the perpetual inventory technology currently deployed and identified a strategic opportunity to leverage the Company’s existing order fulfillment and delivery system within a revised integrated perpetual inventory solution. This integration is now incorporated into the program. Until this integrated solution is available, management designed and implemented a new quarterly control to perform a structured review of inventory movements, incorporating sales and rental transactions for the period to ensure accurate valuation and to mitigate the risk of a material misstatement. This new control will be subject to testing during the remainder of 2025.

Changes in Internal Control over Financial Reporting

Except with respect to the changes in connection with the implementation of the initiatives to remediate the material weakness noted above, there were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Except as set forth below, there have been no material changes to the Company's risk factors disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 25, 2025. Any of those factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

Political and economic conditions, including significant global or regional developments such as economic and political events, the imposition of tariffs, a prolonged government shutdown, international conflicts (including the ongoing war in Ukraine and the conflict in the Middle East), natural disasters and public health crises that are out of AdaptHealth’s control, could adversely affect its revenue, financial condition and results of operations.

AdaptHealth’s business can be affected by a number of factors that are beyond its control, such as general geopolitical, economic and business conditions, including slower economic growth, disruptions in financial markets, economic downturns in the form of either contained or widespread recessionary conditions, inflation, elevated unemployment levels, sluggish or uneven economic recovery, government actions or changes in trade policy in the United States and other countries impacting trade agreements including the imposition of trade restrictions such as tariffs and retaliatory counter measures, government deficit reduction, tax legislation increasing the federal corporate income tax rates, natural and other disasters, public health crises affecting the operations of AdaptHealth or its customers or suppliers, staffing shortages, production slowdowns or stoppages, raw material shortages and disruptions in delivery systems. We continue to monitor the worsening macroeconomic conditions, such as the war in Ukraine, the conflict in the Middle East and global geopolitical tension. Turmoil in the financial markets, including in the capital and credit markets, and any uncertainty over its breadth, depth and duration may put pressure on the global economy and could have a negative effect on AdaptHealth’s business. If conditions in the global economy, U.S. economy or other key vertical or geographic markets are weak or uncertain, AdaptHealth could experience material adverse impacts on its revenue, financial condition and results of operations.

The federal government entered a shutdown effective October 1, 2025. Although Medicare and Medicaid reimbursement generally remains available through a shutdown, we may experience delays in payment for services rendered and other effects related to government agencies operating at reduced capacity.

On September 2, 2025, the U.S. Department of Commerce announced an investigation under Section 232 of the Trade Expansion Act of 1962 into imports of personal protective equipment, medical consumables, and medical equipment including devices in order to examine the impact of these imports on U.S. national security. The statute provides that the Commerce Department report must be completed within 270 days of initiation and that the President must decide whether to take action to remedy any identified threats, including by imposing additional tariffs, within 90 days of receiving the report.

The imposition of additional tariffs and implementation of other measures could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.