AdaptHealth Corp 8-K, filed Dec 1, 2020
AdaptHealth Corp. (AHCO)
About this 8-K
AdaptHealth Corp filed this 8-K on December 1, 2020.
Items reported
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
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CURRENT REPORT
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Item 7.01. Regulation FD Disclosure.
On December 1, 2020, AdaptHealth Corp., a Delaware corporation (the “Company”), issued a press release announcing the execution of a definitive agreement to acquire AeroCare Holdings, Inc., a Delaware corporation (the “Acquisition”). A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
In addition, the Company will be holding a conference call and simultaneous presentation to investors at 8:30 a.m. EST on December 1, 2020 to discuss the Acquisition. A copy of the investor presentation is attached hereto as Exhibit 99.2 and incorporated herein by reference.
Such exhibits and the information set forth therein shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise be subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, regardless of any general incorporation language in such filing, unless expressly incorporated by reference in such filing.
Additional information about the Acquisition and the related financing and other transactions will be included in a subsequently filed Form 8-K.
Forward-looking Statements
This Current Report on Form 8-K includes certain statements that are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “plan,” “predict,” “potential,” “seem,” “seek,” “future,” “outlook,” and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding projections, estimates and forecasts of revenue and other financial and performance metrics, projections of market opportunity and expectations, the Company’s acquisition pipeline and the impact of the recent coronavirus (COVID-19) pandemic and our response to it. These statements are based on various assumptions and on the current expectations of Company management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on, by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of the Company.
These forward-looking statements are subject to a number of risks and uncertainties, including the outcome of judicial and administrative proceedings to which the Company may become a party or governmental investigations to which the Company may become subject that could interrupt or limit the Company’s operations, result in adverse judgments, settlements or fines and create negative publicity; changes in the Company’s clients’ preferences, prospects and the competitive conditions prevailing in the healthcare sector; and the impact of the recent coronavirus (COVID-19) pandemic and the Company’s response to it. A further description of such risks and uncertainties can be found in the Company’s filings with the Securities and Exchange Commission. If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that the Company presently knows or that the Company currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect the Company’s expectations, plans or forecasts of future events and views as of the date of this press release. The Company anticipates that subsequent events and developments will cause the Company’s assessments to change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company’s assessments as of any date subsequent to the date of this press release. Accordingly, undue reliance should not be placed upon the forward-looking statements.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| 99.1 | Press Release, dated December 1, 2020. |
| 99.2 | Investor Presentation, dated December 1, 2020. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
Dated: December 1, 2020
| AdaptHealth Corp. | |||
| By: | /s/ Jason Clemens | ||
| Name: | Jason Clemens | ||
| Title: | Chief Financial Officer | ||
Exhibit 99.1
ADAPTHEALTH CORP. ANNOUNCES ACQUISITION OF NATIONAL HME PROVIDER AEROCARE HOLDINGS INC. AND UPDATES FINANCIAL GUIDANCE FOR 2021
· Expected to significantly enhance scale and geographic reach, providing access to new customers and strengthening relationships with referral partners, patients, manufacturers, and managed healthcare plans
· Greater managed care access, broader product availability, and enhanced customer service for patients
· Combination of two industry leading technology platforms will position the combined company to lead the shift to connected healthcare and value-based arrangements
· Total purchase price of approximately $2.0 billion, comprised of $1.1 billion in cash and 31 million shares of AdaptHealth
· Expected to be financially accretive to growth, earnings, and cash flow
· $50 million in estimated run-rate cost synergies identified
· Best-in-class senior leadership team with strong cultural alignment
Plymouth Meeting, PA – December 1, 2020 – AdaptHealth Corp. (NASDAQ: AHCO) (“AdaptHealth” or the “Company”), a leading provider of home healthcare equipment, medical supplies to the home and related services in the United States, announced today that it has entered into a definitive agreement to acquire Orlando, Florida based AeroCare Holdings, Inc. (“AeroCare”).
Founded in 2000, AeroCare is a leading national technology-enabled respiratory and home medical equipment (“HME”) distribution platform in the United States and offers a comprehensive suite of direct-to-patient equipment and services including CPAP and BiPAP machines, oxygen concentrators, home ventilators, and other durable medical equipment products. AeroCare maintains extensive relationships with leading national manufacturers and managed healthcare plans, and services patients in over 300 locations across 30 states. AeroCare is currently owned by private investors including Peloton Equity, SkyKnight Capital, SV Health Investors, and AeroCare management and employees. The combined company will operate under the name AdaptHealth, and Luke McGee, CEO of AdaptHealth, and Steve Griggs, CEO of AeroCare, will jointly lead the company as Co-CEOs. Josh Parnes will continue to serve as President. In addition, AdaptHealth will expand its Board of Directors at closing of the transaction to 11 directors, with Steve Griggs and shareholder designee Ted Lundberg of Peloton Equity to join the Board.
Luke McGee commented, “We are very excited to welcome Steve and the AeroCare team to AdaptHealth. This highly accretive transaction pairs up two industry leaders with similar strategies and strong execution track records of growth and profitability, technology innovation, and patient service. Our combined company will further enhance our geographic reach with a footprint in 47 of the 48 continental US states, strengthening relationships with our referral partners, patients, manufacturers, and managed healthcare plans. Steve is a highly-regarded innovator in our industry and will bring exceptional leadership to AdaptHealth.”
Steve Griggs added, “Joining forces with AdaptHealth strengthens our combined ability to transform our industry and positively impact the lives of chronically ill patients across the country. I am very excited to partner with Luke, Josh and the AdaptHealth team to build an even stronger business, sharing best practices across each organization to drive operational efficiencies and create enhanced opportunities for our employees, patients, referral sources and other stakeholders.”
The transaction values AeroCare at approximately $2.0 billion on a debt-free, cash-free basis, with cash consideration of $1.1 billion, subject to adjustment as provided in the definitive agreement, and 31 million shares of AdaptHealth common stock. The share consideration will initially be a combination of Class A Common Stock (up to 19.9% of the outstanding Class A Common Stock) and non-voting convertible preferred, which converts to Class A Common Stock once AdaptHealth shareholders approve the issuance of the share consideration under NASDAQ rules. AdaptHealth will seek such shareholder approval after closing of the transaction. AdaptHealth intends to fund the cash portion of the consideration and associated costs through incremental debt and has committed debt financing from Jefferies Finance LLC.
The acquisition and financing transactions have received necessary board approvals and are expected to close in the first quarter of 2021, subject to certain customary closing conditions and regulatory approvals, including expiration or termination of all applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. In connection with the closing of the acquisition of AeroCare, the Company will also simplify its corporate tax structure and convert all of the outstanding membership units of its subsidiary limited liability company, AdaptHealth Holdings LLC, and all of the outstanding shares of Class B Common Stock into shares of the Company’s Class A Common Stock. The simplification transaction will reduce the Company’s tax compliance costs, enhance its ability to structure future acquisitions and result in the Class A Common Stock being the Company’s only class of Common Stock outstanding. In order to provide for the payment of capital gains tax obligations related to the conversion of management’s membership units and Class B Common Stock, the Company has elected to satisfy with cash, in lieu of certain shares of Class A Common Stock, a portion of the membership units and shares of Class B Common Stock exchanged by certain members of the Company’s management prior to the simplification transaction.
Jefferies LLC is acting as the lead M&A advisor to AdaptHealth and Truist Securities, Inc. is acting as financial advisor to AdaptHealth. Willkie Farr & Gallagher LLP and K&L Gates LLP are acting as legal advisors to AdaptHealth. Morgan Stanley & Co. LLC is serving as AeroCare’s financial advisor and Goodwin Procter LLP and Brown & Fortunato, P.C. are serving as AeroCare’s legal counsel in connection with the transaction.
Separately, AdaptHealth is pleased to announce it has closed its acquisition of Massachusetts-based New England Home Medical Equipment (“NEHME”), furthering the growth and expansion of its diabetes division. Founded in 2015, NEHME is a leading supplier of CGM and diabetes management supplies throughout New England and the Northeastern United States. For the trailing twelve months ended September 30, 2020, NEHME generated net revenues of approximately $31 million.
Reaffirms 2020 Guidance and Increases 2021 Guidance
In connection with the acquisitions of AeroCare and New England Home Medical Equipment, the Company is increasing financial guidance for fiscal year 2021 for net revenue from a range of $1.30 billion to $1.40 billion to a range of $2.05 billion to $2.20 billion, Adjusted EBITDA from a range of $260 million to $280 million to a range of $480 million to $515 million, and Adjusted EBITDA less Patient Equipment Capex from a range of $180 million to $200 million to a range of $300 million to $330 million. This guidance assumes the AeroCare transaction closes on January 31, 2021 and includes estimated financial results of the combined company beginning on February 1, 2021. AdaptHealth reaffirms its previously disclosed full year 2020 guidance.
Conference Call and Webcast
The Company will host an investor conference call at 8:30 am Eastern Time today, December 1, 2020, to discuss the details of this announcement. The conference call may be accessed by dialing (877) 423-9820 (Domestic) or (201) 493-6749 (International).
For reference during the call, the Company will post certain supplemental slides at http://www.adapthealth.com.
The live call and replay will also be available on the Company’s website, http://www.adapthealth.com, under “Investor Relations”.
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About AdaptHealth Corp.
AdaptHealth is a leading provider of home healthcare equipment, medical supplies to the home and related services in the United States. AdaptHealth provides a full suite of medical products and solutions designed to help patients manage chronic conditions in the home, adapt to life and thrive. Product and services offerings include (i) sleep therapy equipment, supplies and related services (including CPAP and bi PAP services) to individuals suffering from obstructive sleep apnea, (ii) medical devices and supplies to patients for the treatment of diabetes (including continuous glucose monitors and insulin pumps), (iii) home medical equipment (HME) to patients discharged from acute care and other facilities, (iv) oxygen and related chronic therapy services in the home, and (v) other HME medical devices and supplies on behalf of chronically ill patients with wound care, urological, incontinence, ostomy and nutritional supply needs. The Company is proud to partner with an extensive and highly diversified network of referral sources, including acute care hospitals, sleep labs, pulmonologists, skilled nursing facilities, and clinics. AdaptHealth services beneficiaries of Medicare, Medicaid and commercial insurance payors. AdaptHealth services approximately 1.8 million patients annually in all 50 states through its network of 269 locations in 41 states. Learn more at www.adapthealth.com.
Forward-Looking Statements
This press release includes certain statements that are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “plan,” “predict,” “potential,” “seem,” “seek,” “future,” “outlook,” and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding projections, estimates and forecasts of revenue and other financial and performance metrics and projections of market opportunity and expectations and the Company’s acquisition pipeline. These statements are based on various assumptions and on the current expectations of AdaptHealth management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on, by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of the Company.
These forward-looking statements are subject to a number of risks and uncertainties, including the outcome of judicial and administrative proceedings to which the Company may become a party or governmental investigations to which the Company may become subject that could interrupt or limit the Company’s operations, result in adverse judgments, settlements or fines and create negative publicity; changes in the Company’s clients’ preferences, prospects and the competitive conditions prevailing in the healthcare sector; and the impact of the recent coronavirus (COVID-19) pandemic and the Company’s response to it. A further description of such risks and uncertainties can be found in the Company’s filings with the Securities and Exchange Commission. If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that the Company presently knows or that the Company currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect the Company’s expectations, plans or forecasts of future events and views as of the date of this press release. The Company anticipates that subsequent events and developments will cause the Company’s assessments to change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company’s assessments as of any date subsequent to the date of this press release. Accordingly, undue reliance should not be placed upon the forward-looking statements.
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Use of Non-GAAP Financial Information and Financial Guidance
This release contains non-GAAP financial guidance, which is adjusted to exclude certain costs, expenses, gains and losses and other specified items that are evaluated on an individual basis. These non-GAAP items are adjusted after considering their quantitative and qualitative aspects and typically have one or more of the following characteristics, such as being highly variable, difficult to project, unusual in nature, significant to the results of a particular period or not indicative of future operating results. Similar charges or gains were recognized in prior periods and will likely reoccur in future periods.
The Company uses EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex, which are financial measures that are not prepared 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, the Company’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 less Patient Equipment Capex.
The Company believes Adjusted EBITDA less Patient Equipment Capex is useful to investors in evaluating the Company’s financial performance. The Company’s business requires significant investment in equipment purchases to maintain its patient equipment inventory. Some equipment title transfers to patients’ ownership after a prescribed number of fixed monthly payments. Equipment that does not transfer wears out or oftentimes is not recovered after a patient’s use of the equipment terminates. The Company uses this metric 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. In addition, the Company’s debt agreements contain covenants that use a variation of Adjusted EBITDA less Patient Equipment Capex for purposes of determining debt covenant compliance. For purposes of this metric, patient equipment capital expenditure is measured as the value of the patient equipment received during the accounting period without regard to whether the equipment is purchased or financed through lease transactions.
EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex should not be considered as measures of financial performance under U.S. GAAP, and the items excluded from EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex 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 the Company’s liquidity.
There is no reliable or reasonably estimable comparable GAAP measure for the Company’s non-GAAP financial guidance because the Company is not able to reliably predict the impact of certain items, including equity-based compensation expense, transaction costs and other non-recurring (income) expense for the full year 2021. As a result, reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is not available without unreasonable effort. In addition, the Company believes such a reconciliation would imply a degree of precision and certainty that could be confusing to investors. The variability of the specified items may have a significant and unpredictable impact on the Company’s future GAAP results.
In addition, the Company’s non-GAAP financial guidance in this release excludes the impact of any potential additional future strategic acquisitions and any specified items that have not yet been identified and quantified. The guidance also excludes macro-economic effects due to the COVID-19 pandemic that are not yet quantifiable. The financial guidance is subject to risks and uncertainties applicable to all forward-looking statements as described elsewhere in this press release.
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Contacts
AdaptHealth Corp.
Jason Clemens, CFA
Chief Financial Officer
(484) 301-6599
jclemens@adapthealth.com
Brittany Lett
Vice President, Marketing
(909) 915-4983
blett@adapthealth.com
The Equity Group Inc.
Devin Sullivan
Senior Vice President
(212) 836-9608
dsullivan@equityny.com
Kalle Ahl, CFA
Vice President
(212) 836-9614
kahl@equityny.com
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Exhibit 99.2
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Investor Presentation December 1, 2020 |
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Disclaimer Disclaimers and Other Important Information This presentation (this “Presentation”) is for informational purposes only and has been prepared to assist interested parties in making their own evaluation with respect to a potential investment in AdaptHealth Corp. (“AdaptHealth” or the “Company”) and for no other purpose. The information contained in this Presentation does not purport to be all inclusive. The data contained herein is derived from various internal and external sources. The information contained in this Presentation is not, and should not be assumed to be, complete and does not present all the information that investors may require or desire in considering an investment in the Company. It is not intended to form the basis of any investment decision or any other decision in respect of the Company. AdaptHealth (as well as its respective directors, officers and stockholders) makes, and each of hereby expressly disclaims, any representations or warranties, express or implied, as to the reasonableness of the assumptions made in this Presentation or the accuracy or completeness of any projections or modeling or any other information contained in this Presentation. AdaptHealth shall not have any liability for any representations, express or implied, contained in, or omissions from, this Presentation or any other written or oral communication communicated to the recipient in the course of the recipient’s evaluation of AdaptHealth. Nothing contained within this Presentation is or should be relied upon as a promise or representation as to the future. AdaptHealth does not assume any obligation to provide the recipient with access to any additional information or to update the information in this Presentation. Investors should not construe the contents of this Presentation, or any prior or subsequent communications from or with the Company or its representatives as investment, legal or tax advice. No securities commission or securities regulatory authority or other authority in the United States or any other jurisdiction has in any way passed upon the merits of a potential investment in AdaptHealth or the accuracy or adequacy of this Presentation. Forward Looking Statements This investor presentation includes certain statements that are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “plan,” “predict,” “potential,” “seem,” “seek,” “future,” “outlook,” and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding projections, estimates and forecasts of revenue and other financial and performance metrics, projections of market opportunity and expectations, the Company’s acquisition pipeline and the impact of the recent coronavirus (COVID-19) pandemic and our response to it. These statements are based on various assumptions and on the current expectations of Company management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on, by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of the Company. These forward-looking statements are subject to a number of risks and uncertainties, including the outcome of judicial and administrative proceedings to which the Company may become a party or governmental investigations to which the Company may become subject that could interrupt or limit the Company’s operations, result in adverse judgments, settlements or fines and create negative publicity; changes in the Company’s clients’ preferences, prospects and the competitive conditions prevailing in the healthcare sector; and the impact of the recent coronavirus (COVID-19) pandemic and the Company’s response to it. A further description of such risks and uncertainties can be found in the Company’s filings with the Securities and Exchange Commission. If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that the Company presently knows or that the Company currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect the Company’s expectations, plans or forecasts of future events and views as of the date of this presentation. The Company anticipates that subsequent events and developments will cause the Company’s assessments to change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company’s assessments as of any date subsequent to the date of this presentation. Accordingly, undue reliance should not be placed upon the forward-looking statements. Market and Industry Data Industry and market data used in this Presentation is unaudited and have been obtained from third-party industry publications and sources as well as from research reports prepared for other purposes. AdaptHealth has not independently verified the data obtained from these sources and cannot assure you of the data’s accuracy or completeness. This data is subject to change and cannot always be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey of market or industry data. You are cautioned not to give undue weight to such industry and market data. Non-GAAP and Other Financial Information This Presentation includes references to financial measures that are calculated and presented on the basis of methodologies o ther than in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), including EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex. AdaptHealth defines EBITDA as net income (loss) attributable to AdaptHealth Corp., plus net income attributable to noncontrolling interests, interest expense (income), income tax expense (benefit), and depreciation. AdaptHealth defines Adjusted EBITDA as EBITDA (as defined above), plus loss on extinguishment of debt, equity-based compensation expense, transaction costs, severance, and similar items of expense (income). AdaptHealth defines Adjusted EBITDA less Patient Equipment Capex as Adjusted EBITDA (as defined above) less patient equipment acquired during the period without regard to whether the equipment was purchased or financed through lease transactions. EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex should not be considered as measures of financial performance under U.S. GAAP, and the items excluded from EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex 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. No Offer or Solicitation This Presentation and any oral statements made in connection with this Presentation do not constitute an offer to sell, or a solicitation of an offer to buy, or a recommendation to purchase, any securities in any jurisdiction, or the solicitation of any proxy, vote, consent or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of any securities in any jurisdiction where, or to any person to whom, such offer, solicitation or sale may be unlawful under the laws of such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. |
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Transaction Summary Purchase Consideration $1.1 billion in cash 31 million common shares valued at $926 million as of November 30, 2020(1) Leadership & Governance President: Josh Parnes (President of AdaptHealth) CFO: Jason Clemens (CFO of AdaptHealth) Steve Griggs and shareholder designee Ted Lundberg of Peloton Equity to join the Board, representing 2 out of 11 seats Financial Highlights Purchase price represents a multiple of 2021E EBITDA of 8.8x and 2021E EBITDA less Patient CapEx of 17.6x (7.2x and 12.3x respectively, including synergies)(2) Pro Forma 9/30/20 Net Debt / LTM PF Adj. EBITDA of 3.6x(3) Expected run-rate annual cost synergies of approximately $50 million(4) Timing Transaction expected to close in 1Q 2021 subject to regulatory approval and other customary closing conditions AdaptHealth to seek shareholder approval post-closing for conversion of preferred equity into Class A common shares (1)Initially structured as issuance of common shares up to 19.9% of Class A outstanding shares and the remainder in non-voting convertible preferred shares, which convert to Class A common |
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AeroCare Overview Other 11% HME 11% Sleep 47% Respiratory 31% 995,000+ active patients 3,500+ employees 200+ sales professionals 155 completed acquisitions Founded in 2000; HQ in Orlando, FL Historical Revenue Growth ($mm) Payor Mix (LTM 9/30/20) Other 4% $654 $536 $387 $290 $227 FFS Medicaid 6% Patient 12% Commercial 28% 2016201720182019LTM Q3 2020 Managed Medicare 15% FFS Medicare 30% |
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Strategic Rationale Leading Independent HME Provider with Significantly Enhanced Scale and Geographic Reach Combination of Two Industry Leading Technology Platforms Financially Compelling – Highly Accretive Transaction Multiple Pathways for Future Growth, Including Additional Acquisitions in a Highly Fragmented Market Identifiable and Achievable Cost Synergies with Meaningful Additional Upside Best-in-Class Senior Leadership Team with Strong Cultural Alignment |
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(1) 2021 guidance; $ millions AdaptHealth’s acquisition of AeroCare will create shareholder value through significant and immediate accretion to growth, earnings and cash flows Note: PC = Patient Capex |
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Leading Independent HME Provider with Significantly Enhanced Scale and Geographic Reach Highly complementary footprint with expansion into fast-growing Southeastern geographies |
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Expands Footprint into Attractive Fast-Growing Geographies AeroCare TTM August 2020 Total Revenue by State AeroCare TTM August 2020 Same Store Growth by State(1) State Growth(2) TN 13% CO 10% FL 14% TX 9% GA 7% SC 3% Other 43% Tennessee14% Colorado4% Texas16% Georgia19% South Carolina18% Other9% 12% All States |
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Pro Forma Unique Patients Serviced Patients in thousands on a rolling TTM basis 1,4621,535 603 573 588 2,142 827 759 710 647 902 883 2,775 995 795 874 932 1,113 1,177 1,249 1,315 1,576 1,601 1,780 Q2'18Q3'18Q4'18Q1'19Q2'19Q3'19Q4'19Q1'20Q2'20Q3'20 Patients will gain greater managed care access and broader product availability. The patient experience will be enhanced through best-in-class customer service platform and patient satisfaction procedures Note: AdaptHealth figures may vary from previously reported figures as these calculations are periodically refreshed to account for timing of new acquisitions. Figures presented |
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Diabetes 17% Respiratory 19% Sleep 38% HME 11% Based on LTM September 2020A (1) Other 5% Supplies to Home 13% Sleep 33% HME 11% Respiratory 11% Diabetes 27% Other 11% HME 11% Sleep 47% Respiratory 31% Other 7% Supplies to Home 8% Combined company will be positioned as a leader in large, growing addressable markets focused on patients with chronic conditions |
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Pro Forma Payor Mix Based on LTM September 2020A (1) (1) Managed Medicaid 6% FFS Medicaid 7% Patient 11% Other 7% Commercial 42% Managed Medicaid 5% FFS Medicaid 6% Patient 12% Other 4% Commercial 28% Managed Medicaid 6% FFS Medicaid 7% Patient 11% Other 6% Commercial 37% Managed Medicare 6% FFS Medicare 21% Managed Medicare 15% FFS Medicare 30% Managed Medicare 9% FFS Medicare 24% Combined company remains highly diversified by payor |
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Combination of Two Industry Leading Technology Platforms Both AdaptHealth and AeroCare utilize a fully integrated, centralized technology platform + Electronic portal / interface + Proprietary workflow technology + Improved efficiency + Significantly enhanced ease of use for all stakeholders + Improved compliance + Enabling analytics-driven decision making + Still highly manual and labor intensive + Faxes + Telephonic interaction + Printing / copying + Physical mailings HME Today + ePrescribing + Mobile documentation + Cloud-based revenue cycle + Digital inventory tracking + Social media integration AdaptHealth & AeroCare are Creating a Modern, Digitized Workflow |
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Building on Our Track Record of Successful Acquisitions Transactions Closed Since Inception 84 155 Transactions Closed (2017 – YTD 2020) 64 50 Both companies have a similar philosophy of acquisitions and integration with substantial runway for future acquisitions of smaller HME companies and regional diabetes companies |
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Identifiable and Achievable Cost Synergies and Meaningful Additional Upside $50 million estimated pre-tax run-rate annual synergies Potential Cost Synergies + Direct and Indirect Spend + Branch Consolidation + Technology Additional revenue synergies not included in forecast + PAP 90-day compliance + PAP resupply compliance + Payment collections efficiency + Cross-selling respiratory medication and diabetes products ~$25 million of cost synergies expected to be realized in 2021 Additional Revenue Synergy Opportunities |
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Long-Term Targets Organic Revenue Growth 8% to 10% Acquired Revenue $100 to $150mm annually Business Mix Sleep: ~40% Diabetes: ~30% All Other: ~30% Adj. EBITDA Margin 23% to 25% Adj. EBITDA Less Patient CapEx Margin 15% to 17% Combination with AeroCare accelerates growth and expands margins |
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Pro Forma Capitalization Overview New debt used to finance cash consideration of the purchase price, backstop and/or refinance existing Term A and pay transaction fees: + Existing bond to remain in place, due 2028 + $1.35bn committed financing package Pro forma capital structure strategy: + No near term maturities + Deleverage through growth and cash flow + Committed to conservative leverage profile + Flexible capital structure to facilitate continued M&A growth Pro Forma Capitalization ($mm) |
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Pro Forma Share Count Information (in thousands)Common StockWarrants Class AClass B Adapt’s Board has approved eliminating the Up-C corporate structure at the closing of the AeroCare acquisition(4) Steps: + Eliminate the two class share structure + Exchange AdaptHealth Holdings LLC interests and Class B shares for Class A shares + Merge AdaptHealth Holdings LLC into a corporate subsidiary of AdaptHealth Corp. Simplified pro forma tax structure: + Reduces tax compliance and filing burden + Facilitates growth strategy by reducing complexity and limitations around deal structuring + Increases tax efficiency by eliminating intercompany debt and cost allocations (1)Includes 18,356 as converted shares of Series B-1 Preferred Stock. |
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Key Highlights in Summary Leading Independent HME Provider with Significantly Enhanced Scale and Geographic Reach Combination of Two Industry Leading Technology Platforms Financially Compelling – Highly Accretive Transaction Multiple Pathways for Future Growth, Including Additional Acquisitions in a Highly Fragmented Market Identifiable and Achievable Cost Synergies with Meaningful Additional Upside Best-in-Class Senior Leadership Team with Strong Cultural Alignment |
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Appendix |
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Recent Acquisition: NE Home Medical High growth direct-to-patient distributor of diabetes supplies 3,900+ CGM patients 2,000+ insulin delivery patients Primarily commercial insurance Founded in 2015; HQ in Chelmsford, MA Significant opportunity to expand in New England and adjacent markets Establishes AdaptHealth with key Massachusetts payor contracts in closed markets Very strong health system and physician referral network –Augments AdaptHealth’s sales force Historical Revenue Growth ($mm)Product Mix $31 $25 $14 $3 Insulin Delivery 30% Continuous Glucose Monitors 70% 201720182019LTM Q3 2020 19 |
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Thank You |