Key Takeaways:
AdaptHealth reported Q2 net revenue of $740.3 million, up 12.7%, but swung to a $145.3 million net loss on a $144.2 million goodwill impairment.
"We delivered 15.9% organic growth, with record volume gains across the business," Chief Executive Officer Suzanne Foster said. "The complexity of our West Coast capitated transition has impacted margins, and together with an unexpected manufacturer price increase, this has led us to lower our full-year outlook."
The company cut full-year 2026 Adjusted EBITDA guidance to $490 million-$520 million from $680 million-$730 million, citing a $100 million impact from reporting Diabetes Health as discontinued operations, $55 million from the West Coast capitated contract, $30 million from a manufacturer price increase, and $15 million from other portfolio actions. Adjusted EBITDA fell 3.2% to $132.0 million, with margin compressing to 17.8% from 20.8%.
Shares fell $4.12 to $6.71 on Tuesday, giving the company a market value of about $912 million. The company also agreed to sell its Diabetes Health business for $235 million in cash, and Levi & Korsinsky announced an investigation into whether AdaptHealth misrepresented its financial outlook.
The Q2 loss of $0.99 per share missed the $0.17 consensus estimate. The goodwill impairment hit the Respiratory Health and Wellness at Home reporting units, triggered by the reallocation of shared corporate costs following the Diabetes Health divestiture announcement.
Revenue growth was led by the Sleep Health segment, up 15.5% to $386.5 million, and Respiratory Health, up 14.1% to $194.4 million. Wellness at Home grew 4.9% to $159.4 million. Capitated revenue reached $103.3 million, about 14 percent of continuing operations revenue, more than triple the prior year.
The company completed its first full quarter under an exclusive capitated agreement with a large national integrated delivery network on the West Coast and signed a new capitated agreement with Humana OneHome in South Florida and Texas, transitioning approximately 478,000 members. Management said the West Coast contract missed expectations by $15 million in Q2, with a $40 million expected second-half profitability impact from higher-than-expected sleep resupply and enteral volumes, inefficient workflows, and elevated labor and logistics costs.
Free cash flow was negative $20.9 million for the quarter, driven by $166.2 million of capital expenditures supporting the capitated rollout. Year-to-date free cash flow was negative $48.4 million versus positive $73.3 million in 2025. The company expects $80 million-$120 million of free cash flow for the full year.
The guidance reset reflects the most significant step yet in AdaptHealth's multi-year effort to focus on its core Sleep Health, Respiratory Health, and Wellness-at-Home businesses. The company also completed a workforce restructuring expected to deliver $19 million in annualized savings and redeemed its 6.125% Senior Notes due 2028 using proceeds from a $325 million delayed-draw term loan.
The stock's decline puts AdaptHealth near its 52-week low of $6.14. Management expects sequential improvement in the West Coast contract over the next several quarters, reaching run-rate profitability next year, and expects to eliminate roughly half of the stranded corporate overhead within 12 months of closing the Diabetes Health sale.
This article is for informational purposes only and does not constitute investment advice.
