AHCO

AdaptHealth is a national home-medical-equipment provider — ~4.3M patients across ~640 locations in four segments (Sleep, Respiratory, Diabetes, Wellness at Home) — that has stopped growing. FY2025 revenue of $3.24B was down 0.5% YoY and is essentially flat versus FY2023's $3.20B and FY2024's $3.26B, so the post-SPAC roll-up has hit a plateau. Worse, the company swung back to a net loss of -$70.8M (EPS -$0.52) from +$90.4M a year earlier, operating income collapsed 65.5% to $90.9M (a thin 2.8% operating margin), and the accumulated deficit deepened to -$633M. This is the second loss in three years (FY2023 was -$679M), so profitability here is fragile and lumpy, not durable.

The redeeming feature is cash conversion. The business is capital-intensive — D&A of $382M and capex of $382M (up 24.9%) reflect the rental fleet of PAP machines, oxygen and other equipment — so GAAP losses overstate the economic picture. Operating cash flow rose 11.1% to $602M, leaving roughly $220M of free cash flow, a ~6% FCF yield on the $1.39B market cap, and management used it to cut long-term debt 12.7% to $1.72B. Adding net debt of ~$1.63B to the equity value puts EV around $3.0B against ~$473M of EBITDA (operating income plus D&A), or ~6.4x — reasonable, not a screaming bargain once the leverage is counted. The gap between $90.9M operating income and the -$70.8M bottom line is largely interest on that debt load, which is exactly why deleveraging matters.