AdaptHealth (AHCO)·Q4 2025 Earnings Summary
AdaptHealth Beats Revenue on Record Census, Guides FY26 Well Above Street
February 24, 2026 · by Fintool AI Agent
AdaptHealth (NASDAQ: AHCO) reported Q4 2025 results this morning with a 5.9% revenue beat driven by record patient census across three of four segments, though Adjusted EBITDA missed by 2.5% due to infrastructure investments and a $14.5M legal settlement.
The real story: FY2026 guidance came in 7-8% above consensus as the company prepares to ramp its transformational capitated contract - the largest in industry history - through 2026.
Did AdaptHealth Beat Earnings?
Q4 2025 Results:
Revenue beat despite a 1.2% YoY decline ($846.3M vs $856.6M in Q4 2024) as the company divested non-core assets and experienced payer mix shifts in Diabetes Health. Organic revenue growth was 1.7% for both Q4 and the full year.
The EBITDA miss was driven by:
- $14.5M legal settlement expense - final settlement of a 2022 NC class action on debt collection practices
- $10M+ strategic investments to onboard the capitated contract earlier than planned
- Lower margins in Diabetes Health segment (Q4 GAAP results included $128M non-cash goodwill impairment)
Milestone achieved: AdaptHealth received its first clean SOX audit opinion from its auditor, with prior year material weaknesses fully remediated.
Ask Fintool AI AgentWhat Did Management Guide?
FY2026 guidance came in well above Street expectations:
Q1 2026 Guidance (specific quarterly outlook provided):
- Revenue growth: 2-3% over prior year quarter
- EBITDA margin: ~16% (lowest of the year due to capitated infrastructure costs ahead of revenue)
- Free Cash Flow: -$20M to -$40M
Quarterly Cadence for 2026:
- Q2: Revenue +3% incremental vs Q1, EBITDA margin at or near 20%
- Q3: Revenue +3% incremental vs Q2, add ~1.5pts to margin
- Q4: Revenue up low double digits YoY, margin improvement continues
The capitated contract contribution was stepped up from 3-5% to 5-6% revenue growth, reflecting that "expense came bigger and faster than we said it would. However, the revenue is also coming bigger and faster than we said it would."
CEO Suzanne Foster: "As we enter 2026, we believe our house is in the best condition it has ever been. Our operational foundation is stronger, our portfolio is more focused, our balance sheet is healthier, our patient census is growing, and our capitated contract is ramping."
Revenue & Margin Trend
Q4 margins compressed vs Q3 due to one-time items (legal settlement, capitated contract investments). Underlying profitability remains intact per management.
What Changed From Last Quarter?
Key developments since Q3 2025:
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Capitated Contract Progress: Made "significant investments in critical infrastructure and nearly 500 dedicated employees" to secure first start dates
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Geographic Expansion: Acquired leading HME provider in Hawaii, expanding footprint to 48th state to support capitated contract
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Digital Transformation: myApp users more than doubled to 327,000 from Q4 2024
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Credit Upgrades: Received upgrades from both S&P and Moody's rating agencies
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Debt Reduction: Reduced debt by $25M in Q4, bringing FY2025 total debt reduction to $250M
Patient Census Records:
- Sleep Health: 1.73M patients (+4% YoY), new starts up 6% and just a few hundred shy of Q1 2023 record
- Respiratory Health: Both oxygen and vent census at all-time records (vent for third consecutive quarter)
- Wellness at Home: Wheelchair and bed census both at all-time records
- Diabetes Health: Record retention rate (offsetting slower new starts to keep census flat YoY)
Operational Improvements
The standard operating model implemented in Q3 is showing measurable results:
Technology pilots showing success:
- AI pilot for sleep order intake "significantly reduced processing time"
- Conversational AI for PAP self-scheduling "meaningfully reduced patient phone time"
- Both pilots planned for rollout to additional regions in 2026
Competitive positioning: CMS competitive bidding outcome was favorable - core sleep and respiratory products excluded from the next round, providing stability in the longer-term outlook.
How Did the Stock React?
The stock closed at $10.29 on February 23 (last trading day before earnings) and traded slightly lower in the aftermarket at $10.26 (-0.3%).
Stock performance context:
- 52-week high: $11.63
- 52-week low: $7.11
- Current: $10.29 (11% below 52-week high)
- Market cap: ~$1.4B
The muted reaction likely reflects the EBITDA miss offsetting the strong guidance, with investors waiting to see execution on the capitated contract ramp.
Ask Fintool AI AgentFull Year 2025 Results
Quarterly Free Cash Flow Trend:
The organic revenue growth of +1.7% was offset by asset divestitures (infusion, incontinence, custom rehab) that the company exited to focus on core segments.
Balance Sheet & Capital Allocation
The company reduced net debt by ~$241M in FY2025 while maintaining capital flexibility for the capitated contract ramp. Net leverage ratio stands at 2.75x, tracking toward the 2.5x target.
Debt Structure (Dec 31, 2025):
The Capitated Contract: Key Catalyst
The "largest capitated contract in the industry's history" - now ramping:
- Contract Value: $1B+ over 5-year term
- Annual Revenue at Maturity: $200M+
- Margin Profile: In-line with enterprise EBITDA margins
- Coverage: 10M+ members nationwide with ~1,200 dedicated employees across 30 locations
- FY26 Revenue Contribution: 5-6% growth (stepped up from prior 3-5% guidance)
Go-Live Progress:
- December 2025: Mid-Atlantic cohort (~50,000 members in 3 states) went live - earlier than planned
- February 1, 2026: West Coast launch achieved, now serving patients
- Remaining 2026: Additional start dates throughout the first half
CEO Foster: "When fully operational, we'll be serving over 10 million patients nationwide... The transition has been remarkably smooth, thanks to seven months of preparation by our team and exceptional collaboration with both the incumbent provider and our customer."
Segment Profitability Breakdown
The Q4 2025 earnings slide reveals stark divergence in segment-level profitability:
Respiratory Health was the standout performer with margin expansion, while Diabetes Health's margin collapse (from 12.8% to just 2.6%) explains the goodwill impairment charge.
Goodwill Impairment
Q4 2025 included a $128.0M non-cash goodwill impairment charge related to the Diabetes Health segment, where the fair value fell below carrying value.
The segment EBITDA margin collapse from 12.8% to 2.6% (see table above) provides context for the impairment. This follows continued challenges from payer mix shifts and pricing pressure, though management noted signs of recovery with improving starts and resupply retention.
Risks to Monitor
- Capitated Contract Execution: Significant infrastructure investments are being made ahead of revenue ramp - execution risk remains
- Diabetes Health Segment: Continued headwinds despite signs of stabilization
- Payer Rate Negotiations: Some negotiations pushed into 2026
- Integration Risk: Nearly 500 new employees being onboarded for capitated contract
Ask Fintool AI AgentQ&A Highlights
On the legal settlement (Eric Coldwell, Baird):
"This was a claim that was brought against the company in 2022. It deals with a technicality in debt collection practices. It is the final amount and settles all claims in that state... We decided to settle this rather than pursue this litigation as a means to further de-risk the business."
On capitated pipeline (Richard Close, Canaccord):
"We are out there obviously responding to some inbound and obviously some outbound requests... there is some market interest in getting to a place where incentives are aligned. There's many conversations going on that are proceeding forth, but these do take time."
CFO Jason Clemens added that capitated pipeline is treated like M&A pipeline - no impact assumed in guidance until deals close.
On diabetes turnaround (Richard Close):
"We've also made the decision to grow our diabetes sales force to improve our CGM, particularly our CGM new starts in 2026, notwithstanding that we're holding the expectation to flat till that proves out."
Management noted that pumps had a strong year with new starts and revenue up low double digits in Q4.
On capitated infrastructure overspend:
"The delta was just a touch under 10 at approximately $8 million... Expense came bigger and faster than we said it would. However, the revenue is also coming bigger and faster than we said it would."
Post-Quarter Events
Subsequent to December 31, 2025:
- Acquired certain HME provider assets for $47.6M total consideration to support West Coast capitated contract launch
- Drew $100M from revolving credit facility to fund this and potential similar acquisitions
- Expect to pay down the revolver as free cash flow builds throughout 2026
The February 1st West Coast start date has been achieved, with "a lot of patients" now being served under the new capitated arrangement.
Forward Catalysts
- Q1 2026: West Coast launch achieved (Feb 1); additional start dates in back half of Q1; expect margin pressure (~16% EBITDA margin)
- Q2 2026: Revenue acceleration (+3% incremental), margins recovering to ~20%
- H2 2026: Capitated revenue ramps to full contribution, margins expand further
- Full Year 2026: Path to $705M EBITDA midpoint (+14% YoY), 20.3% margins
- Ongoing: Debt reduction toward 2.5x net leverage target (currently 2.75x); paydown of $100M revolver draw as FCF builds
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