AdaptHealth Corp. (AHCO) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2026. AdaptHealth Corp. is a national provider of home medical equipment (HME), supplies, and services, operating through three segments: Sleep Health, Respiratory Health, and Wellness at Home. The company services approximately 4.8 million patients annually. A significant strategic development in this period is the decision to divest the Diabetes Health business, which is now reported as discontinued operations.
Key Financial Metrics (Six Months Ended June 30, 2026)
- Net Revenue: $1.42 billion (Continuing Operations), up 9.1% year-over-year.
- Net Loss (Continuing Operations): $168.0 million, compared to a net loss of $7.1 million in the prior year period.
- Net Loss (Total): $147.6 million (including $20.4 million net income from discontinued operations).
- Adjusted EBITDA: $236.6 million, down 5.0% year-over-year.
- Adjusted EBITDA Margin: 16.7% (down from 19.1% in the prior year).
- Cash Flow from Operations: $239.0 million.
- Free Cash Flow: Negative $48.4 million, driven by increased capital expenditures for patient equipment.
- Cash and Equivalents: $43.3 million as of June 30, 2026 (down from $106.1 million at year-end 2025).
- Total Debt: Approximately $1.89 billion (excluding current portion of $8.1 million).
Material Changes vs. Prior Period
- Goodwill Impairment: The company recognized a non-cash goodwill impairment charge of $144.2 million in Q2 2026. This was triggered by a quantitative impairment test indicating that the fair values of the Respiratory Health and Wellness at Home reporting units were less than their carrying values.
- Revenue Mix Shift: Revenue from capitated arrangements increased significantly to 12.5% of total revenue (from 4.9% in 2025), while net sales revenue decreased as a percentage of total revenue to 48.9% (from 56.0%).
- Segment Performance:
- Sleep Health: Revenue up 14.4%; Adjusted EBITDA down 4.5% due to higher costs.
- Respiratory Health: Revenue up 10.9%; Adjusted EBITDA up 13.5%.
- Wellness at Home: Revenue down 3.8%; Adjusted EBITDA down 60.5% due to prior-year dispositions and higher operating costs.
- Discontinued Operations: The Diabetes Health business generated $20.4 million in net income for the six-month period and is held for sale.
Guidance, Outlook, Risks, and Unusual Items
- Divestiture of Diabetes Health: The company entered a definitive agreement to sell the Diabetes Health business for $235.0 million, expected to close in Q1 2027. Proceeds are intended to pay down debt.
- Debt Refinancing: In April 2026, the company entered a new credit agreement (2026 Credit Facility) with a $325 million term loan, a $325 million delayed draw term loan, and a $450 million revolver. In July 2026 (subsequent event), the company borrowed $325 million under the delayed draw term loan to redeem $325 million of 6.125% Senior Notes.
- Restructuring: A cost-saving plan approved in June 2026 is expected to cost $7.0 million and generate $26.8 million in annual savings. $6.1 million in charges were recognized in the first half of 2026.
- Cybersecurity Incident: In June 2026, a social engineering attack resulted in unauthorized access to patient management systems and exfiltration of patient data. Management does not currently expect a material financial impact, but remediation costs and legal risks remain.
- Litigation: The company settled a shareholder class action for $35.0 million ($34.0 million funded by insurance, $1.0 million by the company). A separate class action regarding billing practices in North Carolina is settled in principle for $14.5 million, pending court approval.
Investor Verification Checklist
- Goodwill Impairment Drivers: Verify the specific assumptions used in the discounted cash flow analysis that led to the $144.2 million impairment, particularly regarding the fair value of the Respiratory and Wellness segments.
- Capitated Contract Margins: Assess the long-term profitability of the new capitated revenue contracts, which drove revenue growth but also increased labor and equipment costs significantly.
- Debt Covenant Compliance: Confirm the company's ability to maintain leverage and interest coverage ratios under the new 2026 Credit Agreement, especially given the negative free cash flow.
- Cybersecurity Fallout: Monitor for any regulatory fines, increased insurance premiums, or reputational damage resulting from the June 2026 data breach.
- Divestiture Closing: Track the regulatory approval process for the Diabetes Health sale to ensure the $235 million proceeds are realized as planned.