AdaptHealth’s first quarter results were met with a negative market reaction, as investors digested both a modest year-over-year decline in revenue and a significant contraction in operating margin. Management attributed these outcomes to underperformance in the Diabetes Health and Sleep Health segments, alongside a planned shift in revenue mix from purchases to rentals. CEO Suzanne Foster emphasized that “process improvement initiatives” in CPAP order conversion and continued operational focus are expected to improve patient service and support future growth. Despite challenges, the company highlighted improving trends within Diabetes Health, noting a second consecutive quarter of sequential improvement in new patient starts.
Is now the time to buy AHCO? Find out in our full research report (it’s free).
AdaptHealth (AHCO) Q1 CY2025 Highlights:
- Revenue: $777.9 million vs analyst estimates of $764.8 million (1.8% year-on-year decline, 1.7% beat)
- Adjusted EPS: $0.03 vs analyst estimates of $0.04 (in line)
- Adjusted EBITDA: $127.9 million vs analyst estimates of $127.3 million (16.4% margin, in line)
- The company dropped its revenue guidance for the full year to $3.25 billion at the midpoint from $3.29 billion, a 1.2% decrease
- EBITDA guidance for the full year is $685 million at the midpoint, in line with analyst expectations
- Operating Margin: 3%, down from 6.4% in the same quarter last year
- Market Capitalization: $1.19 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions AdaptHealth’s Q1 Earnings Call
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Meghan Holtz (Jefferies) asked for details on the improvement in Diabetes Health and whether pump growth materialized. CFO Jason Clemens confirmed positive pump growth and noted that sequential improvement in continuous glucose monitor (CGM) new starts and retention supported the segment's turnaround.
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Pito Chickering (Deutsche Bank) questioned whether the decline in Sleep Health new setups was a market issue or a sign of lost market share. Clemens responded that the challenge was localized to specific states and that detailed plans were in place to address execution gaps.
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Eric Coldwell (Baird) pressed for updates on tariff risk for 2026, referencing prior management commentary. Clemens stated that subsequent regulatory clarifications had eased concerns and that current guidance did not incorporate material tariff headwinds.
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Kevin Caliendo (UBS) inquired about the rationale behind higher capital expenditures and the competitive dynamics in Sleep Health. Clemens attributed increased spending to strong respiratory demand and acknowledged that competitors had gained an edge in certain geographies, with remediation efforts underway.
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Ben Hendrix (RBC Capital Markets) followed up on whether capital deployment or acquisitions could offset competitive headwinds in Sleep Health. Clemens confirmed the company has some tuck-in acquisitions under letter of intent but maintained that the primary focus remains on execution and select M&A.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) the pace of operational improvement in Sleep Health and Diabetes Health, (2) the successful completion and integration of non-core asset divestitures, and (3) progress in expanding partnerships with managed care organizations and large health systems. The ongoing assessment of tariff risks and AdaptHealth’s ability to sustain margin improvements will also be important signposts.
AdaptHealth currently trades at $9.29, up from $8.70 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
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