AHCO - Earnings call transcript Q3 2020

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Operator

Hello, and welcome to the AdaptHealth Corp.

Third 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. [Operator Instructions].

conference recorded. this reminder, a is being As It over to my pleasure the call to turn Chris is now Joyce, General Counsel. ahead. go Please

Chris Joyce

Investor Thank should to the Relations well a earlier have this Luke is welcome highlight to a copy conference that quarter questions. I'd our If earnings We'll as for Josh call slide posted AdaptHealth have Jason received September we'll Officer. QX Don. release presentation our McGee, and open ended Everyone Chief Clemens, earnings Officer; from In the call results XXXX page. as not, some everyone XXXX. supplemental regarding Executive Parnes, earnings remarks XX, moment, morning. President; release the then of Corp.'s for Financial you, to like a on prepared I'd Chief like

Actual results such number statements which this to Before no included I'd have in the risk are Reform earnings provided within those to, statements regarding could Securities the update financial remind in in our from not information comments a everyone events. quarterly uncertainties may our reflect Private of and this the on constitute are we that our like call AdaptHealth materially factors and XXXX in include, annual Corp. will projected but and of discussed such because statements and These forward-looking filings. differ SEC statements for forward-looking of release obligation call start, beyond. limited subsequent to to meaning Act. results conference Litigation

call today. now Officer, earnings a quarter table McGee. being Luke are included Executive adjusted the EBITDA call, non-GAAP certain in on later to EBITDA is and which call and today's EBITDA, release. such and providing morning's morning's measures, will information reference as pleased we'll this on I'm introduce third Chief available be supplemental our Additionally, financial recorded, measures. This replay of A is EBITDA adjusted financial

Luke McGee

the joining everyone call. thanks and for Chris, Thanks,

our I like brand the such on tremendous service quarter, third would delivery diabetes fast AdaptHealth's and priorities each equipment up to proud to supply ended health these how our a Before our AdaptHealth incredibly continue business. during clinical of patients and in advanced Throughout and With We those be our months, important been has an throughout frontline and only and have needs patients' help in drivers, continued in XXXX workforce. team the extraordinary in as member added equipment I played our growing to get AdaptHealth's will staff, a and business a business, large wellbeing not the with importantly supply a eight entire I need growth acknowledge the crisis. last we the concentration profitable of health of XXXX, to accelerated but of team of small have teams my role times. medical and growing remarks home have home stepped and management. the COVID-XX medical medical acquisitions supplies efforts and with the every company who've am

HME Family October. in to and early When We in the acquisition in end, closed we March, million of Medical the high-growth in mid-August that Medical, continue third the North another a acquirers assets we would acquired to noted additions HME HME add be there on Advanced Healthline in Southeast Care quarter. in we active be and in and in To Southwest. businesses additional for Home geographies. traditional Carolina of $XX important Eastern merit density acquired that These revenue scale Texas adding

diabetes, business. as we the and diabetes Midwest from and operational much in quarter. companies management many these have HME England Solara we about national New acquisitions a within smaller excited leadership and our used We distribution grow AdaptHealth. acquire as larger the retained also made platform We're on Mid-Atlantic, can In which during several the key leaders

continued We purchase diabetes will acquisitions revenue the Center closed and diabetes $XX growth XXXX. continuous Recently, These are of to insulin our pumps, excited believe accelerate. the and add-on Pinnacle about Solutions. million and we Diabetes with the acquisitions and should market first glucose Supply Medical million of adoption in Midlands rates to monitors add $XX

information supply Our equipment with our to health particularly of us entry sleep supplies a AdaptHealth complete from along ability as generate chronic gives in we and useful priority into the space space This the conditions. disorder solutions more patients, with healthcare connected the of provider provider. management for those evolve real-time our incumbency about to diabetes is high the the a

to We pipeline deliver be continue opportunities also strategic accordance inquisitive and selectively with that our disciplined M&A approach, active identify goals. we have results but to financial our plan furthering in as an

we including acquisitions the Although for not guidance our pipeline future remainder are or robust, is XXXX. in of XXXX our for

positive the we front, last to received week competitive program. regulatory regards in Medicare bid from CMS the news On

refresher, Round originally bid be braces. proceeding XXXX and Tuesday be January only product and two with categories. XX week, XXXX off-the-shelf effective bid scheduled they a As of to back would program categories; encompass On competitive last knees X, was on CMS announced

for announcement to program Although least at competitive delay a other the change, entirely and until interpret clear subject mean not we to any categories in XXXX. bid this

blended affirmed indicated a and roll changes is from will braces guidance to has the they the The intend Additionally, knee expect devices. rate products total, believe inflation and also make to back B CMS positive Part on AdaptHealth. be in that and continuous development. monitors, rates bid territories. increases, await universal and immaterial these proposed to coverage CMS Medicare permanent, welcome CMS a the to higher further changes be for providing the rule rule, program territory whether in competitive proposal rates and off-the-shelf for we In the CGM expanded are coverage rural bid competitive glucose performing We the which we they

the that currently we under B, CGMs distribute of affirmation have we covered positive. majority been vast the as already Although view Part

the our turn to Josh to activities. Parnes, like I'd to over call our President, discuss innovation Now,

Josh Parnes

Luke. Thanks,

extremely Luke business, mentioned, entire with and As and are had announced earlier. mentioned integrating third acquisitions of the previously We core busy an successful team. appreciative our quarter we closing acquisitions, extremely the operating new AdaptHealth

Additionally, On topic, significant building payers models. value-based Care. Managed infrastructure will with focused in made Breen scalability. we alternatives thrilled us be new formulating helping strides in that our President welcome and to Bryan reimbursement expand are Vice of we investing our and and our relationships Executive as Bryan on

we ongoing Although stability COVID-XX presented pandemic, the in to and continued made ensure growth. adjustments by business face we've protocols our operations challenges still

formulary and as our back sales keeping welcomed system the starts Within in of remain are seeing our are approximately protocols QX ongoing are was in many pre-pandemic pre-COVID equipped our October prescreening administrative first guidelines. off with back have pre-COVID on continue our the resupply, office Adjusting focused that [indiscernible] teams are of up our to and social and Most our those results and results our applying To the functions. to results. acquired leveraging have operations against financial sequentially pre-COVID month mid-QX. new with We our the increasing levels. to employees the facilities turnaround low few we our efforts force. weeks some with health facilities, against operations XX% levels. levels, give protocols up technology in compliant we PPE and context, PCS our XX% against produce purchasing product focus integration expertise solid across to cloud-based QX Turnaround set And investments easily, don't of expected. levels businesses, digits distancing off XX% virtual of all but come of to approximately last access mid-single

improvements and labor We’re PCS efficiencies driving also operating revenue in for cycle expense. and in other

the businesses. believe We that and of CGM We've the legacy operational we’ve business to to those the leveraging PCS business be fourth XXXX. to the PCS profitable transitioned core continue PCS capabilities transition legacy came quarter with ActivStyle, will incontinence in Solara

In we integration processes continue XXXX. to big focused work, plans stay and on throughout for of and technology business addition balance our have XXXX the to

mobile app-based are Our orders ActivStyle respectively. Solara, increasing text in and and

in Our and paper, and remains providers. to e-Prescribe greater a priority referring by faxes, less adoption result less initiative our our e-Prescribing top penetration continue

Although and while internal to million also a we more down annually. goals, With than still investment, drive continued to way we there our tremendous for better patient to X.X efficiencies satisfaction. offering patients can unlock go a operational costs service is provider opportunity we achieve long referring our believe labor that there remains experience

Our believe us this technology business, built capabilities times. our are e-Prescribing for the to advancing. reduce increase we We HME we within are turnaround recently launched help that CGM a pilot and will backbone same orders utilizing upon

data, including call an provide this Clemens. better of our welcome validation We electronic and We pilot point, capability. XXXX patients resupply also in care. assessment and new turn to will a the recently their plan connected visibility over to Jason clinical for CFO, vision our I'll our completed the half first launch that At an of

Jason Clemens

and our morning welcoming Good Josh. thanks September. joining by who like to in our Chief joined Mullen Officer, Accounting Thanks, AdaptHealth Frank new start call. for late I'd

He's addition a has leading various partner to administrative Frank experience great years functions accounting of public proven large In deep already to expertise, and in companies. be contributor.

net of XXXX. increase financial XXXX. increase XX% results results XXX XXXX. CARES third third from an XX% the equipment not AdaptHealth million, do of the an revenue Fund. of include as patient quarter Turning of the to XX less received the million, These Act quarter of of Adjusted Relief from was for third from third EBITDA an quarter generated the quarter funds XXX% Adjusted CapEx our Provider in of XXXX. of the part million, EBITDA was April recognition of XX increase of

process post late in in published reporting updated HHS the evaluating Our notice is requirements company by of of the October. payment

we benefit possibly as requirements end finish of evaluation, will based on latest soon as we record XXXX. any We expect and benefit the our the by some

more back of as pandemic, discharges. procedures slowdown elective financial room treatment third revenue across elective medical has the are our gratifying to a indexed that as face quarter even result so and in have come of results Our products primarily emergency are elective in the the

sleep third XX% end centers. above pre-COVID sleep levels. our as reopenings As XX% improvement but by changes driven second operational to starts of the of quarter, starts sleep about is that primarily as growing the in down Josh the were The well rebounded quarter, by earlier, Josh new spoke mentioned, of

did disruption organically to just in we that digits, our We pandemic. volumes to grow believe the QX continue before levels, normal as caused XXXX as the high-single we by will at revert

quarter flow our third focus and strong the was management from team. cash remains primary for Our operations

becomes our As patient to products less grow, and CapEx continue intensive. supplies equipment diabetes

period flow how So adjusted in converts patient on are nine reported same ended September we a from Provider XX the CMS keeping EBITDA Relief CARES eye advanced payments was basis, includes the approximately cash Adjusted On cash operating million. of close XX, XXXX much adjusted million XXX a Act EBITDA. XX months That less in was XXX for EBITDA Funds. and million. million addition to CapEx, for equipment

Excluding the cash two-thirds Relief the zero regard adjusted flow we of CMS million sheet, XXX Provider operating the to percent our of period. drawn advanced XX Act of as ended million a on with Funds, the about CARES – payments In facility. credit we balance for and same revolver EBITDA our the was quarter had or cash and under

and to I'd turn for to for quarter of the the include outlook the outlook our preliminary Neither like Provider XXXX. guidance Relief the from Now, our funds guide CARES XXXX nor Act preliminary the XXXX recognition Funds. fourth

our are EBITDA XXXX less guidance adjusted net adjusted announced we patient for year morning, revenue, this increasing and equipment CapEx. EBITDA As full

equipment contribution the million, included revenue for respectively, X XXX that CapEx Luke July acquisitions, and million we ActivStyle. Our acquisitions our and Pinnacle full EBITDA a ramping Solara adjusted previous patient include did in on was net M&A to quarter additional from XXX XXX X. from contributions less mentioned but number and which XXX as not as well million of XXXX million guidance to made year key following October

accretive be million raising X.XX to expect less earnings equipment XXX to year EBITDA We million X.XX XXX billion, therefore are to and CapEx revenue adjusted full net billion these immediately to XXX we million guidance to to and XXX million. patient acquisitions adjusted XXXX to to for EBITDA

on guide, financial lines; as growth, for as assumptions ongoing the to return levels will we predict driving believe of organic perfectly There of growth continue COVID-XX, few a cannot but that XXXX. are our We the first impacts XXXX. to key Turning to including well other our aimed half market by making costs. product at efficiency returns technology ability we’re projects end direct and investments share our our grow diabetes; particularly our and in across key to indirect normalized

are Although M&A not the our X% we acquisitions healthy, guidance. We business pipeline will XX% in organically. including from contribution is to believe our grow future at core that

of targets X and will half the ramp full by July year previously on year. and acquired acquired businesses businesses performance their XXXX July additional second will October ActivStyle announced and Solara the deliver hit full between

X.XX EBITDA less CapEx of With of back net XXX billion are I’ll to million call XXX billion, to We to million patient XXX EBITDA and million. X.XX revenue turn XXX equipment the guiding to over Luke. adjusted that, million adjusted to of

Luke McGee

to I'd continuing referral prospects. delivered Jason. professionalism. like all of courage employees for while stepped and more partners conclusion, up to with reiterate about my In open that and our patients the for questions. Thanks, and ever our than our thanks have results strategy record financial confident serve line and I remain AdaptHealth please and Operator, appreciation

Operator

Certainly.

will question-and-answer a We conducting session. now be Instructions]. [Operator

Stifel. from question Mathew from today Blackman coming first is Our

Your line is now live.

Mathew Blackman

everyone. Good morning, Can okay? hear me you

Luke McGee

you are Yes. Hi, Matt. doing? How

Mathew Blackman

buckets, moving are think in bridge deals that business, is into takes of of quarter raise how for plus Luke. well, any I the sort recent we it performance there a to how third possible bit Maybe much three little about and you a then us give and to maybe guess organic Thanks guide, put maybe deals puts XXXX and drivers? lot just doing those color to ActivStyle? the of like help way of start, is in some the I’m are a business or And different the across us much versus as of there Solara roughly new in asking. raise, parts maybe acquired Pinnacle the always

Luke McGee

buckets, into I certainly but difficult it you context. Matt, those be give think some to So, can I can two break

quarter COVID, are above activities. largely only line resupply well. yet, the we be should those like middle a at that we're will that trends established slightly where of there's performing of We're despite it business, that sort started to strength in, Very with in we about we're integration versus the running bounce of and is expectation plan second material of business core ActivStyle given year. kind beginning although both quite even excited very sort I that the the And our the think feat in not Solara of of comfortable in the note back, starts I QX year. businesses. the way of

QX, to increase related the of And both then and Pinnacle on guide most deal so the activity, the is closed October in X. acquisition which completed

Mathew Blackman

growth follow what I just was you really helpful. guys in have then you quarter? maybe, that's think Okay, the And organic the Jason, do And handy one up. number have

Jason Clemens

for The a over organic quarter point. the little third was a growth

again, in face actually we're of with results. So, the COVID, pretty pleased those

As you heard in our prepared remarks, starts, particularly around sleep, are coming back.

bit a a that. compounding there's know, you of As effect on

the were direction. through a midst the So that that, in we're positive as in materially, we're of is in starting starts see QX of that going COVID, there a of down middle pull to effect hit and compounding

Mathew Blackman

talking little we sense. too Solara I’m very little makes modeled And we're little two expecting. to, That versus just And on a just maybe it quickies light aggressively. then diabetes. But a light looked what relative bit

Is then expansion broader theme some but any of deals we in And patient versus Thanks the I expectations? suspect of how Is just it there increasing or all any it's not and your think the as just color that quarter, it portfolio completed on would sort geographic above, price much. in exposure? the the that combination you out be is of helpful so too? common shakes scale? really Just curious thread? quarter about

Luke McGee

Yes.

start year just of cut known was had follow-on than us to was little new I getting aggressive a beginning patients the that's were revenue in and TRICARE resupplied. full you it. the in we Solara, of also So modeled, tell set and new of being way due to will well patients the of budget in on bit but we are trends we the terms ahead that really up that weaker the little the a impact the rate just modeled

for unit the rate if And And we of and so underlying basically deal, TRICARE diabetes. we when absorbed growth by sort you from QX business it market, we share, surprised just that the guys about increasing perspective, are taking of prevalence organic understanding have growth diabetes results with when is but excited versus growing Pinnacle, we DSCM, at very quite board; closed versus outlook – rapidly, many as me we Solara, across at we're the means, market believe know, you in asked of the pleasantly fully today our CGM. announced very we a at once what the cut the the we're

strong On acquired as viewed platform, we the – said that And continue geographic piece we we acquisition it the of teams diabetes to it Very two both and prevalence in think so that more year, of would and over when side, for was add obviously we'll a good with to business sort do management absolute a attractive the now and acquisitions. high I density those good us. in Southeast, an we've expect done states next Pinnacle, mix systems. exposure. player I of Solara, was

fortunate Pinnacle do. are that DSCM billing we We run software the same both and

year the HME earlier that establish in to like more On deal ourselves do one in we March, than we of did we’d side, the did kind this geography. really a when deals say to

And in And that some and Western Texas so did deal that to quarter there a the early we Pennsylvania more in gives density were small third able tuck-ins. and in there. were us Southeast. We then do October

deal a additional New growth small have high give deal in very, opportunities Midwest. the We operations a and very and then [ph] small our in to up footprint England, existing with expand us very

pipeline We of activity. continue a acquisition nice see to

geographic at this And point so will there likely slight some be expansion.

upper us. still continue penetrated on there. for we'll side, diabetes under is the add in to Midwest And the England then New scale

Mathew Blackman

on a again great Very All right. Thank congrats quarter. you. and helpful

Luke McGee

Thanks, Matt.

Operator

from from Thank question is you. SVB coming The Leerink. Tanal Stephen next

live. now is line Your

Stephen Tanal

much about into question. what asked guess I'd I you you’re how happened bidding and Good reading guys. there. for competitive morning, the Thanks

bids. that, what for savings how CMS fact I product love ones don't that cited, Like about that hear in the out or read the program? into thinking at program not that right, guys been they and one through future and the know this you from that reason around, the had to how I'd XX to effective the to that So the categories, they of may XX past, the mean get to pulled all much are may least didn't

Luke McGee

back most always There told up, analysts, It's into that CMS. given was what actually of press to rates increases be the to far number there read our how wouldn't too if Yes. much savings. from dangerous investors down just in markets we be come did and a will release certain certain and a as have we we given try But expect non-competitive are. categories, of how categories in

say surprise. sort bid a I'd in savings be complete high who should it be or savings didn't So it's feel not want bid bidding because huge a to it At like a trying priority program, the it will may existing they of be you a of eke the in actually savings category get not these say knows? if out getting you’d permanent be doesn't they of cancellation the to competitive may from a now. delay that categories, want. And XXXX, time, I optimist, the not same say CMS

maybe found had the below found market that the has I think that they rates. CMS even bottom bottom on the told and

executing And us gives for excited the next in about three certainly confidence our so rate and we're visibility years, plans. having stability

Stephen Tanal

of I gone bid bids. led as potentially what of guys that, to of folks a structure with kind ultimately guess the lot the out figure all of the to issue have in to and I going talked about I some And sort through heard kind prices, the clearing Absolutely. vetting DC

of of competitive consolidating read reflecting looking know you there, programs. you industry it goes, to no your this there's of thoughts? I'd structure or the to I structure point don't specific bidding think market? had stable curious well, comments a into but longer any to at hear the and is perhaps sort that do on train changes if maybe of outdo is on thought itself the like is just anything the I outcome, be maybe the bids, the this this really So, the and

Luke McGee

changes demand. supply our does the price because clearing market welcome reflect We actually and

when do that the moving move and to that economists And market move so a industry the prices and noneconomic we has market market-based are from and the were and want had in consolidate. low do if that read median – bid now to think was what continue sort will spoken lines between XXXX XXXX too We that they The believe as sort economics they said did to challenged noted of you the to and it. the – rates process exist. of clearing

again, higher we so, also to in the we are could home. the And we understand that rates. welcome world, go very we enable can ourselves, be healthcare hard sure Obviously, also down or healthcare seen costs low-cost to we have can we very, perfect the delay cancellation. make that in provider But and working a the cost need and lower

Stephen Tanal

I one sneak in That's just one can I’ll great. last and If then yield.

that X% looking the with how there, did to in on expectations? backdrop? the were this QX What gave compare rate guys out you going that growth organic for Jason in your all Just

Luke McGee

the still and part hardest compounding I think QX at pretty early knew the year-to-date hit – of of in of happy is X% revenues. frankly the top COVID. from We positive with the light QX in we're quarter rental

deliver be to the And proud able yes, of incredibly that, so team. to I'm

setting for we're as think I forecast back higher range. XXXX, we previously go a in and QX into number our up to

Stephen Tanal

Really Thanks helpful a color. lot.

Operator

coming question from is today Pito next from The you. Bank. Chickering Deutsche Thank

is line now Your live.

Pito Chickering

should due to to Good you terms and in about question rental growth organic morning, should lot XXXX? Matt's you of will diabetes of XXXX it X% tough recent both the taking moving in What each segment X% so think in And organic pieces comps about growing organically base on think we To of we thinking in my follow how a COVID. XXXX co-ops revenues, questions. with Pinnacle or is the come the XXXX for guys. better in Thanks revenues the to of When XX% XX%. talk obviously way percent script from for diabetes? up been There's a for in sales, also, XXXX deal, about on growth XXXX, about of due to baseline, there it?

Luke McGee

So Obviously, on COVID. as low core and even we expect think with XXXX hard a we've of mid-single we're X% do higher first in excludes one, BXB. that the good growth if Obviously, been to despite Obviously, you the digits, look growth to XXXX, so year-to-date, in it's the question. acquisitive baseline. see and I certainly than sort

we can model so, about just given going exercise, it, to how follow-up starting acquisitive And been. offline the but XXXX in easiest how I be we've don't that is think to

On is market. growing the second piece, fast diabetes a

diabetes we And be of there's diabetes so to mid-teens would above XXXX. get business, expect X to growth, blend in our grower us for to a market and diabetes XX some should

like And you at to percentage similar in a what we the diabetes. continue today. just We to get to in revenue, some I grow look HME. there's conservative. core playbook probably as you're with we've think Again, acquisition think execute mid-XXs, own landscape that somewhat and to if that’s we we done that of going that that is there

even higher. so with it could those And skew

Pito Chickering

of margins. a deals obviously Okay. the been pieces XXXX then question guys And have margins signing. the you on with a on There's all lot moving

we are in of On are impact walk to quarter us areas XXXX? leverage, pieces margins of the the margins to getting moving the the XXXX surface, like pressure that Can Where you any guided should at XX.X% be be looks be for the acquisitions it thinking about? you guided of fourth midpoint. margins through midpoint. XX.X of

Jason Clemens

Jason. the just To is Hi, point, Pito. this profile. of fair a Thanks question. This your is movement for amount

And growth diabetes. and strong seeing we're very base so materially the changing diabetes in what this is in business is add-on with

through So market mentioned. the seeing pull profile and you are of change we and some the that the in increase just that

the to areas cost confident of Additionally, are in talked of plans continuing that's a couple his prepared as There we're of in business profile changes. that comments. make a to in very about of added the out these also we're investments, Josh number parts

Pito Chickering

quickies. more then two And Okay.

was that Have mentioned For you're robust. the today M&A it seeing changed pipeline, multiples pre-COVID? what you versus

Luke McGee

success Yes, would of we're I'd I know sort our don't that say and a it's what people our are watching there – if our are I COVID, – success of victim we own doing. other say

So, marginally all HME deals things expensive. equal, more are

You're growth flow, sort given Xx a of we can half think talking significant can be we we've diabetes, the our and I first and HME still Xx churn. of profile, deals we or then that cash return sort of historically, the buy the it And said deals about get top range comfortably year's a to at just of done. sort think end

acquisitions, doing decently we now companies we're in what found but processes. Oftentimes HME, as business acquirer, as also adding the to diabetes. an we and very it well adding Solara HME sized acquire, slightly a in smaller, be these these be will we talent, to deals slightly in and we're environment slightly we expensive think find, to growth. said will business deals less would we find benefit diabetes All that. the I a think of year bring given Larger like that we we expensive, one less did in a deal have some of stand side, accretive if two still all, is expensive On expensive compared and at diabetes, complex Adapt. diabetes can acquisitions. behind business. I on hidden look part our when more the There be on And process they're financial than may multiple entire more across these very, smaller But our then they you that business a basis, scale better comparable we that slightly very be sort will be basis,

Pito Chickering

e-Prescribing pull goes do him in in What much, go XXXX? patients today All Thanks your Nice percent right. And guys. then that sort quarter. all think Josh here. through last you to super for just quick of sales [indiscernible] one and where so of

Josh Parnes

if of of obviously then So, XX% we have through that's about you exclude we're which coming our And resupply, resupply through own kind technology, currently, e-Prescription. the running the orders or driving process.

So, point the on that new provider order. with the is real friction

with And doing have that to we're particularly kind and of of in we're on So, my an diabetes we what for kind a I've XX%. initiatives of even HME think I XXXX drive that's the CGM e-Prescribing. number going an that QX area as on really, e-Prescription about that lot of mentioned adoption in excited in north behind of and terms industry of comments that business is automation.

a effort kind well. like drive growth putting referring us and line. And of also feel of diabetes there we're will cycle and we on So improvement help both as times, experience into and that automation additional provider customer organic the lot

Pito Chickering

Great. Thanks much, so guys.

Operator

is today coming The question Thanks. next Brian Jeffries. from Tanquilut from

now Your line is live.

Brian Tanquilut

Congrats that Luke, for or morning. now that team model because I'll do can more maybe behind good quarter. that from see kind I just front. right, be the us a ask competitive bidding seems interest could like, the to to and it's actual M&A think higher price With on we sellers? the whole of more Good guys does get the purchase Hi. you that you aggressive easier guess,

Luke McGee

It's we hard we competitive a so – were good really working to on pipeline obviously that have prior bidding.

it sell I I impact providers do I there lot of and think for, they or waiting. inbound see that we relatively on one-off know on wasn't waiting it that it wasn't to were confident math inquiry and there what or weird a going small that a what to dramatic just had to And whether be a they shared we necessarily a be material kind is think the wanted to people before just of way, had to were going us. of whether not. result, In continue basis. I they decided ourselves be a think a was to our that lot perspective done we know don't were we which

to see out us. kind HME broker continue reach We community the to of

think will M&A it XXXX be front. an do on we the year So active

Brian Tanquilut

Got guys you some side are shifting discussions of the shifting then diabetes the these there any pharmacy? PBM you. you to movement on business, benefit thinking And we're or of medical And more then just the the how seeing starting see some strategy if versus about M&A do acquisitions? to you are incremental benefit the as to

Luke McGee

a more pharmacy on Obviously, benefit. business voiced the partners be side, it insulin desire pumps have through the or on our to manufacturer see whether their go of CGM, diabetes

affirming medical a both products always coverage. believe that will continue there benefit, We the those that be particularly to a under B piece of business is for Part Medicare

payer to business. benefit a I entire our move quarter one saw think pharmacy we in the across

And No. land so, that's a gradual a it is Is it move shift? Yes. happening?

any whether on have be negatives. DSCM margin the There [indiscernible] we up At gross than and Both do business. or new business only the patients positives that. slightly capability Medtronic reminder, being kind me, have of to pharmacy pump the we a a are pharmacy Medicare the out is, contribution robust set claims time, in RCM about CGM same Tandem faster. movement, and [ph] of in XXXX. pharmacy but covering is with we are to lower benefit, much as only lower the much and providing can, really medical growth function business. CGM. seeing of sort As adjudication our if terms which To think ability think in Pinnacle reminder, generally market diabetes sell started will business the insulin a and thing not a pharmacies. the like the surface, be margin And It's either very cross benefit there's just then is of more it can I'd to I patients the in subsume sort along to And I cleaner, we other point

diabetes. a pilot compounding And so next patient measure length census census the a therapy and and of and where set to year outweigh up early on so in chronic that’s manage where we’re business of yet should have for sleep relatively that we starting the a new try be time, how starts gets then and long of across lot kind attrition, on of a diabetes, tail other patients unlock, have comorbid really a we although we’re sort diseases. we to And ends of [indiscernible] in

pharmacy lots there's so Undeniably. tailwind. headwind? And of a slight Is

Brian Tanquilut

for makes sense. on then And quick a that Yes, guess just question Jason, patient CapEx. I

QX number? of rentals, to be percentage from a As good using forward, revenue the number this is going a

Jason Clemens

a of way to of think I it rental look it's fair revenue. at percent in a terms Yes,

of XX% maybe XX%. call history, it, If bounced at our and kind you around look we've XX%, between,

the a and XX XX like rental As year. percent of quarter, was year-over-year it it last was revenue points for

to fine modeling. think about think I So a it's way

Luke McGee

bit purchase touch We is a far as we I think patients high out bunch the to snapback maybe growing demand. did meet app as QX there, of a correct. a quite just did largely number the equipment of in given that

Brian Tanquilut

Got it.

again. Thank Congrats guys. you, Awesome. Okay.

Operator

you. Thank

Our next question Capital Hie Markets. today RBC from is coming Anton from

now is line Your live.

Anton Hie

Yes. Good morning, guys. Thanks for taking the question.

a how relationships overall competitive Just of you purchasing of may But can your bidding, on some talk ups the suppliers? impacted kind of sort of some the threads at of of couple follow the power questions. that with picking the about have previous – looking some up and back from

Luke McGee

Yes.

it agreed talk productive had it think with a our perspective manufacturer that until aggregate go-forward I'm we wasn't Obviously, had reasons partners unknown, to purchase scale, want sure pricing manufacturer agree partners. I or mutually the a approach. was because a delayed or But sort better rates to lower stability about of Certainly, variety environment strongly that mean as big we are our that on that. about of completely So that agree is, scale there with shouldn’t not our why quite costs. feel we

targets have now see relationships back and sort our the going next we XXXX months think establishing us purchasing of that So you'll sort XXXX I of with into and maybe and stability, over manufacturers. and QX rate few

Anton Hie

like hear of Can that supply up. Okay, from starts then are back tail great. kind And side? to glad sort us remind the of I'm you looks the on revenue new cranking what

Luke McGee

again, because say that I you sure followed that? not Can I’m

Anton Hie

you sort new – get trying starts? could side to you an the on see for Just really timing the from on supply of see the the idea benefits when

Luke McGee

say get supply it benefit, probably when order But new set up. six I'd the it's you get to We months. the full

the come next snapping second on that's and so based rental the have And as of should our supply. half should QX recovered into some back you of see as when QX revenue of as you year, really the well declines

has unknown past off the would tell would are a the therapy fallen therapy patient now that gated that have and optimists patients otherwise think COVID me long on I stay and more committed.

the If on right going can supply benefit patients curve. And attrition yes, come so see starts as coming those we've on and and business – we're QX, that nice a we to comes into QX, we're reduced back. keep

Anton Hie

follow of that? as better the getting that. off work? tails you guys kind many Okay. that down contact business were of with that more a as or in just were sort people one And more to driver up the through of still return It through seems you durable Is then high seeing better Are patients hunkered still like sell the pandemic.

Luke McGee

of we at the and – not It's saw qX, and accelerate. think spike I we've to Yes, end QX to the big able early that. certainly maintain been continuing

just Cox, job. our think team amazing that’s doing I led resupply he's named an gentleman by a Matt

some so, I And not up that to It's able we've the keep we accelerating, census. that's attrition lack again, of due the to gained. momentum think that but, been of in

Anton Hie

lot. Great. Thanks a

Operator

you. Thank

Our from Close Richard next coming is from Canaccord question Genuity.

line Your is live. now

Richard Close

the Great. if Luke quarter. Congratulations you into covered go health. I wondering was here, Thanks. lots on been connected but just could A the

You to more any that mentioned what start? a bit is, exactly little that timing, more there pilot. Can you a on details give maybe

Luke McGee

including XXXX. be QX contribution clear. coming and and in not, from connected QX. sort want of it's our any health I into So guidance, are in multifaceted I expect to we And don't it to

get although our buzzword to a be to not partners to now. I rather think sort that But make patients sure to of our chase is that, we sure deliver results can actually there it we payer in results can deliver revenue just value trying I'm such undeniably profitably. and go we're two of than sure very cautious it I'm we forms. you to view right is deliver it not or that can sort get, can you

whether blood our The cuff off engage device. their cuffs, device, from with their CGM first that patients data get can scale, them, it getting pressure is apps more technology to off we be on

some in QX. were so in that And running pilots we

to we either a have hey, hard the health side there, to I'm this those in for volume. say, we a and or for and the I’m we excited to a or to take and basis, the exciting in working either we is exchange the triangulate a where connected payer label driving frankly, payer. listen, PMPM app share can on get just of articulate models, learnings and more probably of And more those whether PMPM who's out with us of go be payers, sort We which pretty that's about partner model can more bullish some then we on of how to risk [ph] probably trying And the savings do it's and seems we're kind that. paid and that white on then readings go for sort of

Richard Close

the And thoughts savings will any on evaluate or you or to a party just be third using entity that?

Luke McGee

Yes.

now, label be in-house we be Our working we preference right got conviction, partner to eventually in we'll or white If the with But purchase is going could something? take that now. Yes. third right parties.

Richard Close

but for there. guys maybe just on laid just mirror Okay. the XXXX that remainder competitive and expectations risks of think then in guidance the you the out? out bidding rearview achieving risk the Obviously And here, are do then the somewhat for you you biggest any what on XXXX, potential thoughts

Luke McGee

Yes.

high It's of comfortable we predictable hopefully investors this that have of in stability we XXXX, the pretty and is getting sort and business. are which with for the confidence our say a consistency So guide This on I'd the quarter business rental. visibility. with full. compounding we pretty on is that great And existing supplying business have customers. census do the relies the business to start month hopper well a resupply a and

What at if you three I is unknown think like? the months tell into least I optimistic. look you. can't look great XXXX, next I'm the COVID. does terribly

New QX. in think the same I apocalyptic pretty It don't in was a over almost I to next could days. XXX think and we the XX it's that patch for places as York. QX like here be early rough

I deal put with think we that out with and targets healthcare But hitting in learning the systems the the unknown is COVID. dealing biggest country to there. probably generally that's

Richard Close

M&A, on guess closing whether either any way waiting thoughts terms still as But results potentially goes I And the on Okay. my that final it of we're from election year impacts here. obviously how then question into end? for acquisitions we head the in

Luke McGee

have to the there push. not there going a depends LOI, I Yes. under active I – think to been effectively on guess something. say would pretty probably had with sellers being don't But hard of end Certainly, to it's pipeline. that about and was from we're think with close hard view happens you're be to Pretty Senate. in would stuff just a it's in year. people much been have the point we already way what it think and trying if the XX But already I talking [indiscernible] the dialogue it had Realistically, to complications out of we've very days if a I there that change exactly

XXXX enough, probably try XXXX. the in to unknown think in I again people to give will If just prefer close and crystallize you're

Richard Close

Okay. Thank you.

Operator

Tanal you. a SVB question Leerink. up Stephen from follow is next from Thank The

line now Your live. is

Stephen Tanal

Thanks again, guys.

one, last I guess bidding just I quick to the and guidance. did ask in really a 'XX was what Just confirm forgot competitive to you

what I digit think million came I have. that using we're back? like high-single Thanks. all headwind, is That’s a

Luke McGee

obviously, we guidance, the do For for this morning, announced so the we our guide competitive bid. 'XX know

headwind digit revenue previously and come net we a our thought forecast. so that XXXX it of high-single have sort a of said we of And out so was have sort mid-teens those headwind,

Stephen Tanal

lot, guys. a Thanks

Operator

to to the management like back over or the comments. closing end floor question-and-answer We’ve for session. reached turn of our Thank further any you. I'd

Luke McGee

we I to quarter. delivering look as management And sincere Thank you. helped to reiterate our results our work to for the a the hard all just QX well. great appreciation the of employees want that deliver forward for

Operator

today’s you. teleconference. That Thank does conclude

line for wonderful You and you have We day. may at this time disconnect your a thank your today. participation

AdaptHealth (AHCO) 4 Nov 202020 Q3 Earnings call transcript