When Richard Barasch took on the title of interim CEO of AdaptHealth Corp. (Nasdaq: AHCO) roughly a year ago, he wasn’t expecting to be in the temporary role for long.
Ultimately, AdaptHealth took a methodical and diligent approach to its CEO search, however. While the process may have took longer than anticipated, it resulted in AdaptHealth bringing in an executive who’s a perfect match, according to Barasch.
The Plymouth Meeting, Pennsylvania-based HME giant announced Suzanne Foster as its next top executive in April. Foster most recently served as president of Beckman Coulter Life Sciences, a part of Danaher Corporation, and she’s also held leadership roles at Cardinal Health at-Home Solutions, Stanley Healthcare and Medtronic.
“We have put to bed any lingering concerns about permanent leadership,” Barasch said during the company’s recent 2024 first-quarter earnings call. “Although a diligent search for a new CEO was well worth it, since we found the ideal candidate.”
As a company, AdaptHealth provides HME and other in-home care solutions across the U.S. Its core business segments include sleep, respiratory, diabetes plus other HME products and services.
Timing wise, Foster joins AdaptHealth at a critical time for the company. As CEO, she’ll need to continue executing on AdaptHealth’s goal of de-levering after a series of transactions in recent years. She’ll likewise need to maintain the improvements AdaptHealth has started to see in its diabetes business while, at the same time, navigating emerging HME market challenges, including the impact of GLP-1s.
“During the past year, AdaptHealth faced several internal and external challenges, and the company has addressed each one in a constructive way,” Barasch said. “This isn’t a victory lap, and our new CEO has some planning to do and the opportunity to put her own mark on the strategic future of the company.”
Overall, AdaptHealth’s 2024 Q1 revenue came in at $792.5 million, a 6.4% increase compared to $744.6 million during the same period a year ago. Net loss attributable to AdaptHealth was $2.1 million, down from $15.7 million on a year-over-year basis.
AdaptHealth’s sleep business accounted for the majority of its revenue, bringing in approximately $306.2 million in Q1. The diabetes and respiratory businesses brought in $149.3 million and $144.9 million, respectively.
“Our sleep and respiratory product lines continue to deliver strong results,” Barasch said. “We are pleased to see our diabetes business start to improve as well.”
Unlocking even more value from that diabetes segment will be a goal for Foster moving forward, Barasch suggested.
“Over the past year, we discussed the challenges in our diabetes business,” he said. “We still have a way to go, but the improvements have been tangible. We have strong new leadership. We’re building an efficient operating platform that will support our growth ambitions. We have more than doubled our sales force, who can finally state that we are activating the profit through the pharmacy channel to supplement our growth.”
And, again, AdaptHealth originally built its business on M&A, which was facilitated by attractively priced capital.
Transitioning from that aggressive M&A strategy to a more measured one and paying down debt will be a big focus for AdaptHealth throughout the rest of the year.
“Opportunistically, we took on mostly long-term debt at very attractive rates,” Barasch said. “Our overall leverage was more than desired, especially in the newer, higher interest rate environment. As a result, the entire company successfully galvanized around generation of cash flow, which has allowed us to reduce our leverage ratios and our absolute level of debt.”
