Good day, everyone, and welcome to today's AdaptHealth Fourth Quarter 2025 Earnings Release. Today's speakers will be Suzanne Foster, Chief Executive Officer of AdaptHealth; and Jason Clemens, Chief Financial Officer of AdaptHealth. Before we begin, I would like to remind everyone that statements included in this conference call and in the press release issued today may constitute forward-looking statements within the meaning of Private Securities Litigation Reform Act. These statements include, but are not limited to, comments regarding financial results for 2025 and beyond. Actual results could differ materially from those projected in forward-looking statements because of a number of risk factors and uncertainties, which are discussed at length in the company's annual and quarterly SEC filings. AdaptHealth Corp. has no obligation to update the information provided on this call to reflect such subsequent events. Additionally, on this morning's call, the company will reference certain financial measures such as EBITDA, adjusted EBITDA, adjusted EBITDA margin and free cash flow, all of which are non-GAAP financial measures. You can find more information about these non-GAAP measures in presentation materials accompanying today's call, which are posted on the company's website. This morning's call is being recorded, and a replay of the call will be available later today. I am now pleased to introduce the Chief Executive Officer of AdaptHealth, Suzanne Foster.

Thank you. Good morning, everyone, and welcome to the call. The fourth quarter of 2025 capped a tremendous year of transition for us. Over the course of 2025, we implemented a new operating model that drove standardization and process maturity across our enterprise. We closed the largest capitated contract in the history of the industry, and we honed our portfolio by disposing of noncore assets, using those proceeds and our strong free cash flow to pay down debt and strengthen our balance sheet. . The work we completed last year not only positions us for accelerated growth and improved financial performance in 2026 and beyond, but is essential to achieving our aspiration to become the most trusted and reliable partner in home medical equipment and services. In the fourth quarter, we continued that momentum, with broad-based patient census growth and strong revenue performance, along with meaningful operational improvements and commercial progress. Let me walk you through the details. Starting with the financial results. Full year revenue of $3.245 billion and Q4 revenue of $846.3 million, both exceeded the midpoint of our guidance range. Organic revenue growth, which does not include changes in revenue from divestitures or acquisitions, was 1.7% for both the full year and Q4. Underlying this revenue performance, we set patient census records in sleep health, respiratory health and wellness at home and a retention record in diabetes health. In sleep health, new starts were up about 6% year-over-year and just a few hundred shy of the record set in Q1 2023 during the post-Philips recall demand snapback. Sleep health patient census grew 4% year-over-year and set another new record. In respiratory health, oxygen, and vent new starts were up about 4% and 5%, respectively, and patient census for both product lines hit new all-time records. Vents for…

Thank you, Suzanne, and thanks to everyone for joining our call today. I'll cover our full year and fourth quarter 2025 results, then review our balance sheet and capital allocation before finishing with our 2026 guidance. For full year 2025, net revenue of $3.245 billion decreased 0.5% versus the prior year on a reported basis. Organic revenue growth was $56.9 million or 1.7% over the prior year. Full year revenue increased by $19.5 million because of acquisitions and decreased by $92.4 million because of dispositions. The dispositions were primarily attributable to the 3 businesses we sold within our Wellness at Home segment during 2025. For the fourth quarter, net revenue of $846.3 million decreased 1.2% versus the prior year quarter, but increased 1.7% on an organic basis, consistent with our full year rate and was impacted by the disposition actions noted a moment ago. Sleep health net revenue was $372.3 million, up 4.4% versus the prior year. New starts were approximately 130,600, up about 6% year-over-year and just a few hundred shy of the all-time record set in Q1 2023. Sleep health patient census grew 4% year-over-year to a new record of 1.73 million patients. Respiratory health net revenue was $178.2 million, up 7.8% versus the prior year. Oxygen new starts were up about 4% year-over-year and vent new starts were up about 5%. Oxygen patient census of approximately 335,000 patients set a new all-time record for the third consecutive quarter, and vent patient census also hit a new all-time record. Diabetes health net revenue was $158.5 million, down 7.4% from the prior year quarter. While new CGM starts remained soft, patient retention hit a new all-time record, the direct result of the changes we made to our resupply operations in late 2024. CGM patient census of approximately 153,000 patients…

[Operator Instructions] We'll take our first question from Eric Coldwell with Baird.

I just wanted to hit on the legal settlement. I wanted to confirm if this is the civil debt collection class action from North Carolina that was initiated several years ago? And is the $14.5 million a final settlement or an estimate? Does it cover all similar or potential claims? In other words, can we expect that this is onetime and won't repeat? And then finally, obviously, these claims relate to activities that began many years ago under different leadership. But what steps has the company taken to prevent similar complaints or issues in the future?

Appreciate that, Eric. Yes, to all of your assumptions above, meaning that this was a claim that was brought against the company in 2022. And to your point, it deals with the technicality and debt collection practices. It does -- it is the final amount and settles all claims in that state. And since then or even right after that, those -- on the technicality, we do not or have fixed anything that would be perceived as a violation of that technicality. Not saying that we thought that we are in violation of it to begin with, However, anything that could be interpreted as such has been fixed. And we decided to settle this rather than pursue this litigation as a means to further derisk the business. We have so much to look forward to the next couple of years that we thought getting this legacy lawsuit behind us, made a lot more sense at this point.

Eric, this is Jason. I might add that since 2022, there's been significant maturing in the overall control environment here at AdaptHealth, so much so that you'll note in the forthcoming 10-K this afternoon that you'll see for the first time, AdaptHealth has achieved an opinion from our auditor with a clean bill of health regarding our SOX environment. And so prior year material weaknesses, really at various points along the way have been remediated, which we're very happy about.

We will move next with Kevin Caliendo with UBS.

And Jason, thanks for the color on the cadence. I just want to make sure I understand fully how to think through the impact of the investment in 4Q and the guidance, like the margin cadence for fiscal '26. It sounds like it's going to be different than fiscal '25 a little bit, right? There's a mix of business in your onboarding. How should we think about it in the context of over the course of the year? I know you made comments around 1Q and free cash flow, but any more specifics there as we just think about modeling it to start?

Sure. Yes, Kevin. So we started with the Q4 guidance of top line at 2% to 3% revenue growth, and adjusted EBITDA margin of approximately 16%. And so particularly as the new capitated arrangement starts ramping, we expect revenue as we get into the second quarter, to be up another 3% or so incremental from Q1. We expect Q3 to be up another 3% or so incremental in terms of growth against Q2. And then as we said in our prepared remarks, we expect in Q4 over the prior year to grow revenue in the low double digits. To go in line with that revenue growth, again, we're facing that pressure in the first quarter from carrying significant expenses on the P&L prior to really the substantial contract dates really starting here in the first quarter and on throughout the year. We expect margin to be at or near 20% as we get into that second quarter. And then we think we'll add about 1.5 points to that in each of the third and then incremental again into the fourth quarter. So again, full year, we think that revenue growth will be 7% at the mid. We think the full year adjusted EBITDA margin will be just over 20%, representing an incremental point over the prior year.

And just a quick follow-up. You mentioned the 2 pilots for fiscal '26. Are they material in any way to your financial performance here? How should we think about that? Is there update that we get on these over the course of the year?

Well, Kevin, I'd say that they're not yet material, certainly, in the Q4 that we just reported nor in the Q1 guidance, the formal guidance that we brought forth this morning. We do, however, believe that we will get operating leverage over the course of the year related to these technology investments, and that is embedded in the guidance that we brought forth.

Our next question comes from Richard Close with Canaccord Genuity.

I'm curious if you guys can talk about the pipeline of capitated agreements. Obviously, a strong start to this large contract and continued execution on the previous Humana. So maybe just a lay of the land on the opportunities that exist going forward on that front.

I'll start there. We are out there, obviously responding to some inbound and obviously some outbound requests to discuss how we operate that business, the value to both sides and the patient under these types of arrangements. As I've said before, we can service this business, whether it's fee-for-service or capitated. And I think there is some market interest in getting to a place where incentives are aligned. So there is many conversations going on that are proceeding for us, but these do take time. If you think about the contract we just won, that was over a year, call it, 2-year conversation. There's infrastructure and IT systems and things that have to happen, especially if it's a new capitated arrangement. So we're going to continue to push forward and have those conversations, but I do see that there is market appetite for these, call it, not for fee-for-service arrangements.

Richard, the last thing I'd add there is that we view the capitated pipeline, much like we do our M&A pipeline is that we are continuing to pursue both, but we do not assume any impact inside of our guidance until or unless we close deals.

Okay. That's helpful. And then maybe just really quickly on diabetes. I appreciate the success on the retention and consolidating that with the sleep. I'm just curious when you expect that from a new start perspective to, I guess, begin to show growth? Or what are your long-term thoughts on the growth of that segment?

Sure. I'll start there. Yes, thank you for calling out the hard work that our resupply Nashville team has done around really improving substantially how we service our resupply patients and the retention rates are proof of that. We knew going into the turnaround that we initiated, what, 18 months ago or in the fall of 2024 that our -- the confidence in the team down in Nashville would produce a sooner, better outlook for diabetes and that it takes time to build up the sales force, retrain them and to earn the trust back of the referring providers. And so that has been the work over the past year to the point that we have also started to see improvements there in pockets of the country. And 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 too flat until that proves out. And then missed the last part of that question.

Yes. I'd say, Richard, if we think about the components of the segments, in CGMs, we've got the resupply, as Suzanne referenced. We've got new start activity that we are making key investments in an attempt to jump start the start activity from our field force as well as our pharmacy operations. And so we feel pretty good about being able to achieve that as we get later in the year. And then finally, don't forget pumps. I mean, we had a good year with pump revenues. And in Q4, both new starts and net revenue for pumps was up low double digits.

Our next question comes from Brian Tanquilut with Jefferies.

This is Meghan Holtz on for Brian Tanquilut. I just wanted to begin with, can you provide us any update on the infrastructure readiness for this new national health care system partnership this year? Are there any additional investments we need to be thinking about? Or are you in line with your initial outlook?

Meghan, I would say that we are right down the fairway with our initial outlook. The investments that we made in Q4 and that we're carrying through Q1, they have shored up a February 1 start date on the West Coast that we are now taking care of a lot of patients from this new capitated arrangement. We do have subsequent start dates as we get into the back half of Q1 and on throughout the year. We've made key investments there. We talked about the Hawaii acquisition, which is a terrific business on its own, and it will be part of supporting Hawaiian operations for this contract as that start date occurs later in the year. And then finally, we referenced the $100 million draw on the revolver in reference to an acquisition that's already closed in support of that February start date, and we are pursuing similar acquisitions to support the rest of the West Coast operations. And so we're not we're not celebrating yet. I mean there's still a lot of work ahead. But overall, we're very pleased with getting the December and February start dates secured, and we feel good about the rest of the year.

Okay. And then as a quick follow-up, as we think about free cash flow guidance, CapEx stepped up, obviously, in regards to supporting this contract as well. As we exit Q4, is this the right run rate going forward?

Yes, we do think that this is just about the right run rate as a percent of revenue. I mean, I would point out that through the disposition activity over the last, call it, 5 quarters or so, I mean we did take out about 5% of top line revenue. Now none of those businesses sold really had any CapEx at all. And so that alone add about 0.5 point to CapEx and which is why the run rate we're seeing here in Q4, we feel pretty comfortable with going forward.

We will move next with Pito Chickering with Deutsche Bank.

This is Kieran Ryan on for Pito. Just wanted to check in on the sleep business first. Just see if there's anything that we should be aware of there on cadence year-over-year or year-over-year comps or if there's anything that you'd want to highlight around maybe from a price mix perspective? Or should we generally just expect revenues to be tracking with the strong new starts and census you're seeing?

Kieran, it's Jason. I'm glad you're calling this out because there is some noise in the comparable in 2025. You might recall that we had discussed a change in the rental and sales mix within sleep last year related to the accounting of a component of the CPAPs. I mean in the first quarter last year, that was about $15 million, just a touch under. That cut in half approximately in the second quarter and again in the third and then started running out in the fourth quarter. And so that does set up an easier comparable in 2026 over 2025. Otherwise, our start growth, we've been very pleased with. We are nearing record start activity for sleep, and we're feeling very good about the sleep business for 2026.

And then just a follow-up once more on diabetes. Just kind of wanted to check in and see what you're seeing on the DME versus pharmacy side there. I know I think you've seen most of that shift already occur on the CGM side. So kind of just wondering if that's stable and then more so just what you're seeing in pumps as we see more pumps kind of moving into that channel?

Sure, Kieran. So I'd say on the CGM side of things, we absolutely saw fewer payer policy changes or notifications as we're starting this year versus what we saw in 2025 or particularly in 2024. So that's a good thing for the business. And then on the pump side of things, we do have full capability within our pharmacy operations to distribute pumps through that channel as well as through the more traditional DME channel, which is part of why we're seeing very good pump growth here in the back half of '25, and we think that will continue in 2026. .

We do have a follow-up from Eric Coldwell with Baird.

And I just wanted for posterity, I wanted to go back to the capitated contract onboarding expense in the fourth quarter of -- I think it was just over $10 million. Can you remind us how that compared to what was embedded in your guidance previously? Was there any delta on that number? And then I might have a quick follow-up.

Sure, Eric. The delta was just a touch under $10 million at approximately $8 million. Now considering that we guided first week of November, I mean, we certainly had a sense that we were going to overrun and overspend on labor and vehicles and general OpEx within the quarter. However, we wanted to be cautious in communicating that without the corresponding revenue ramp that was going to come with it. So at the end of the day, I mean, we spent more than we communicated. However, the initial outlook we provided in '26 and the revenue that came with that, you'll note that we stepped up the contribution from this capitated arrangement pretty meaningfully. I mean back in November, we said that we believe it would be 3% to 5% growth to be attributed to that contract in 2026. And today, we stepped that up to 5% to 6% growth. So this was timing. Expense came bigger and faster than we said it would. However, the revenue is also coming bigger and faster than we said it would. So we feel pretty good about it.

And then on the Hawaii acquisition I may have missed this, but did you size the revenue contribution? I know you gave us a net impact of M&A and dispositions in the -- embedded in the outlook for growth. But did you size the Hawaii deal specifically?

We didn't, but we're happy to, Eric. That Hawaii ideal, excluding any impact from the upcoming capitated arrangement, the run rate is about a little over $1 million a month. Now we netted that against what we project to be a third and final disposition in our home infusion assets. which was also just over 1 million a month. That deal closed on January 1. So subsequent to the end of the quarter, you'll see that in the filing. And so they really wash out, which is why we didn't mention it.

[Operator Instructions] We show no further questions at this time. This will conclude our Q&A session as well as our conference call. Thank you all for your participation, and you may disconnect at any time.