AdaptHealth Corp.

Greetings and welcome to ADAPT Health Corps Second Quarter 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Chris Joyce, General Counsel. Thank you. You may begin.

Thank you, Laura. I'd like to welcome everyone to ADAPT Health Corp's earnings conference call for the quarter ended June 30, 2020. Everyone should have received a copy of our earnings release earlier this morning. If not, I'd like to highlight that the earnings release, as well as a supplemental slide presentation regarding Q2 2020 results, is posted on our investor relations page. In a moment, we'll have some prepared comments from Luke McGee, Chief Executive Officer, Josh Parnas, President, and Greg Hulst, our retiring Chief Financial Officer. We'll then open the call for questions. Before we start, I'd like to remind everyone that statements included in this conference call and in our earnings release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These statements include, but are not limited to, comments regarding our financial results for 2020 and beyond. Actual results could differ materially from those projected in forward-looking statements because of the number of risk factors and uncertainties which are discussed in our annual and quarterly SEC files. ADAPT Health Corp. shall have no obligation to update the information provided on this call to reflect such subsequent events. Additionally, on this morning's call, we'll reference certain financial measures such as EBITDA and adjusted EBITDA, which are non-GAAP financial measures. A table providing supplemental information on EBITDA and adjusted EBITDA is included in today's first quarter earnings release. This morning's call is being recorded, and a replay of the call will be available later today. I'm now pleased to introduce our Chief Executive Officer, Luke McGee.

Thanks, Chris, and thanks, everyone, for joining the call this morning. Before I get to my remarks on Q2, I would like to acknowledge the tremendous efforts of Adapt Health's frontline branch staff, clinical teams, and delivery drivers We've played such an important role in Adapt Health's continued service of our patients' health needs during these extraordinary times. Throughout the last five months, our priorities have been and will continue to be the health and well-being of our workforce and our patients. I am incredibly proud of the entire Adapt Health team and how each and every team member has stepped up to help those in need throughout the COVID-19 crisis. We had an extraordinarily busy and productive second quarter. Our core business performed well, and we were active in identifying attractive acquisition candidates to help further our strategic long-term goals. As previously announced, we closed two strategically important acquisitions on July 1, 2020, Solara Medical Supplies and Active Style Inc. Solara is a leading independent distributor of continuous glucose monitors in the U.S. This is a transformative transaction that will establish AdaptHealth as a leader in the fast-growing diabetes management business. CGM technology continues to be rapidly adopted by the diabetic community as it offers more real-time feedback on blood glucose levels compared to traditional test strips and blood glucose meters. Additionally, the recurring provision of CGM sensors and transmitters fits in well with our core competency around resupply to patients with chronic conditions. ActiveStyle is a distributor of incontinence products and related home medical supplies. It adds needed critical mass and the potential to capture synergies to our AdaptHealth Patient Care Solutions business that we bought from McKesson Corporation on January 2nd, 2020. On AdaptHealth's core business, I'm proud to state that we continue to run ahead of the plan we established at the beginning of the year. For the quarter, we generated $232 million in net revenue, $42.6 million of adjusted EBITDA, and most importantly, $30.6 million of adjusted EBITDA less patient equipment capex, our standard for measuring financial success. Excluding the results of our patient care solutions acquisitions which we previously communicated would require investments in the first year. We earned 46.2 million and 34.2 million of adjusted EBITDA and adjusted EBITDA less patient equipment capex respectively which are record quarterly results for the company and validate our strategy of growing organically and integrating accretive acquisitions onto our technology platform. Our traditional direct to patient HME and supplies business performed well for the quarter considering the challenges presented by the COVID-19 pandemic. The strength of our resupply business largely offsets softness in product lines adversely impacted by stay-at-home orders such as CPAP equipment new starts, orthotics, walkers, commodes, and other products closely linked to discharges from emergency rooms and similar facilities following elective procedures. While the downward pressure on PAP new starts and other lines of business linked to hospital and long-term care discharges has subsided since the end of Q2, we do not expect volumes in these areas will return to pre-pandemic levels in 2020. To offset adverse financial impacts of the COVID-19 pandemic on our Q2 results, we expanded our sales efforts and focused on providing a wide range of respiratory and other equipment to our referral partners. We were able to generate approximately $28 million of B2B revenue for equipment sales and rentals of products like ventilators, BiPAP machines, oxygen concentrators, thermometers, blood pressure cuffs, and pulse oximeters. Although not a traditional distribution channel for ADAPT Health, we've been able to utilize our supply chain to provide much-needed equipment to municipalities, NGOs, and hospital systems. We expect this channel to generate $7 million in revenue for the next two quarters based on continued COVID-19 related needs. Now, I'd like to turn the call over to Josh Parnas, our president, to discuss our integration activities.