All right, good morning. Welcome again to the 2025 Jefferies Healthcare Services Conference. I'm Brian Gil Tanquilut, Healthcare Services Analyst here at Jefferies. With us today is AdaptHealth, ticker AHCO. AdaptHealth is one of the largest operators in the DME space. They are in CPAP, diabetes, and everything else, respiratory therapies and whatnot. With us this morning is Jason Clemens, the company's CFO. Maybe Jason, I'll pass it to you. Let's do a state of the state of the union. What's going on with AdaptHealth? Sure. Can you hear me okay? All right. Thanks for having us, Brian. You know, as Brian said, I mean, we're the largest DME operator in the country. We operate in four different business segments. The first and largest is in treatment of obstructive sleep apnea. In the United States, there's between 6 and 7 million patients getting treated for OSA through CPAP, and about 25% of them are supplied by AdaptHealth. We're by far the largest operator in the business. The underpenetrated market, I mean, the American Academy of Sleep Medicine thinks there's between 33 and 34 million Americans with OSA, and there's just a huge underpenetrated nature of the marketplace. For us, coming out of the second quarter, we are nearing record setups for CPAPs. We set up 128,000 new patients in the second quarter. That represents a little over 3% growth in setups over the previous year. If we're able to maintain that kind of trajectory for the balance of the year and into 2026, I think we'd all be pretty happy because that does have a tendency to compound into resupply and give you what could be a mid-single digit, up to a 5% grower within sleep. Things are going pretty well there. In respiratory, you might have seen that a little softer flu season. Believe it or not, there is a summer flu season. It has been softer. COVID's been softer. That typically translates into fewer discharges from hospitals for patients that are on oxygen and or ventilation. In general, we expect that market to grow 3 to 3.5%. We've been doing quite a bit better than that for the first half of the year, but again, given volumes in flu and being a little lighter, do with that what you will. Other than that, nothing real unusual. We've been real pleased with respiratory. Diabetes, which has for the last, call it probably six or seven quarters, been a challenge for us. We did make some big changes operationally a year ago, actually here in Nashville, where we maintain our entire resupply operation center, not just for sleep, but for diabetes. We've seen real improvement. We're finding more patients for continuous glucose monitors and insulin pumps. We're setting them up. We're retaining them better. In the fourth quarter last year and then the first and second of this year, we're hitting record retention levels. We're focused on trying to do that again here in Q3. If so, I think we're able to string that together and get our diabetes business back to growth mode. I'd say the final category of wellness at home, which is kind of everything else, we did complete two sizable dispositions in the second quarter. We were thrilled with that. Both of those businesses went at double-digit multiples. We took every dollar of the proceeds and we paid down more debt on our balance sheet as we're looking towards our 2.5 times target. Jason, to follow up on those comments, as we think about the overall growth of the company, you went through the different business lines. How are you thinking about the right growth trajectory for EBITDA for the next three years? Maybe I'd start top line and then get to EBITDA. I mean, effectively we're growing a little over 3% top line, and that's what we produced in the second quarter. If we're able to get diabetes back to growth mode, we think that could push 4%. That 3% to 4% top line organic revenue, we feel very good with that. I talked a little bit about the segments and what to expect. Some will do better, some will do a little less, but we think that's a good target. We are continuing to layer in a little bit of tuck-in M&A. Suzanne and I had committed between $30 million and $35 million this year towards acquisitions. Deals in this space typically trade for about a dollar of revenue for a dollar of purchase price, and we have deployed $19 million year to date. We've got a pipe, we've got some deals under LOI. If we're able to continue on that and get about a point of inorganic revenue on top, we're pretty happy with that. Finally, as with incapitated business, of course, our huge Humana win from a couple of years ago, we reported earlier this year a multi-year extension on that business. Most recently on the last earnings call, we reported a huge win of one of the country's largest healthcare system operators. They're also an insurance plan operator. We've been asked to shield the identity of the system, which we're doing, but it's a very important deal for AdaptHealth. We've said that we expect at least $200 million a year of top line revenue from that business, and we expect at least enterprise margins, so call it 20% to 21% adjusted EBITDA margin. That contract will start ramping in earnest in the first quarter of 2026. I'm getting to your EBITDA question. I'd say there are two things that I'd offer up. We're not obviously yet providing full outlook for 2026. However, there is at least a point of bottom line margin that we expect to improve next year. That's from, frankly, just timing, an accounting change that was made to recognition of revenue within our sleep segment at the beginning of 2025. It's a little bit of a tailwind. That's not cash dollars, but it is improvement in EBITDA. We will come forth with a commitment when we guide 2026 on cost out coming from labor, a little bit of OpEx, but mostly labor from the AI and automation investments that we've been making since Suzanne arrived. We've offered a little perspective on that. We spend a little under $100 million a year on offshore labor. We've got 4,600 heads as we exited the second quarter offshore. They're literally picking things up, putting things down, kind of dual screens, copying, pasting to create sales orders. They're doing things like connecting with insurance companies, kind of the offshore rev cycle, kind of what you'd expect. We're quite confident that with these, what are no longer AI experiments, but we're starting to stand up pilots and getting ready to scale into 2026, that in terms of automating cash posting, humans that are posting cash to accounts, we know that there will be costs out coming there. We know that when patients call in and they're now starting to speak to our chat-enabled chatbots to understand where their order is and even to place orders, bless you, there will be costs out there as well. Again, we're not making a commitment today, but over 2026, into 2027, and beyond, there's a lot of meat on that bone that we're investing to get after. That's a great answer. Maybe let's touch on the capitation side first. It looks like this is a fairly good margin book of business that's coming in with this. There aren't that many of these hospital or health system payers. Is this where the model's eventually going to shift when it comes to reimbursing for DME, number one? Would you agree that you're one of two, maybe, you have maybe two players positioned to win these businesses as they come live? I mean, we like to think we're one of one that can win these businesses when they come live, but fair enough, fair enough. We do think that this is a, you know, this is where this market heads over time. You know, there's different reasons for that. The first is that there's still about 5,500 DME operators in the United States. That's down from 10,000 back in the mid-2010s, kind of 2015, 2016 timeframe. We think that will further compress, particularly as competitive bidding rolls out again. I think we'll probably talk about that in a bit, but we're very confident that that will continue to compress. That said, for a typical payer in any given market in the United States, they've got potentially hundreds of DMEs that they're working with, that supply the DME to their membership. DME is a very, very small amount of an insurance payer's wallet, you know, about 2% on average. However, the% of complaints that come out when someone doesn't get their oxygen on time, or you're missing a stat order, or, right, I mean, things that are needed in the home to keep patients healthy at home are not there. The complaint cycle can be overwhelming and coming from, again, different companies doing things differently, different workflows in different states. The value prop to a payer is there's one throat to choke, right? For AdaptHealth, we will sign up for service level agreements, right? We got daily automated reporting. We'll have weekly cadence with that payer to commit to improvement continuously. We've got teams that, that's all they do all day long is they're focused on continuously improving the SLAs that come with these agreements. Certainly, we're happy to offer a couple of bucks of reimbursement relief in exchange for a whole lot of volume. I mean, that makes a lot of sense for us. We can be very competitive. We think more competitive than anyone, because of our cost structure and because of our technology. For those reasons, we think that the capitated revenue certainly for us will grow. I mean, as this new contract stands up, it'll be well north of 10% of our revenue, pushing 15% of our revenue. We do think that that can grow even beyond. Since you mentioned competitive bidding, I got to go there. Two sides of competitive bidding, right? First, let's touch on diabetes because that's probably a hot topic right now. How are you thinking about how that all plays out? I know our Med Tech Analyst, Matt Taylor, talks to the Dexcoms of the world, and they're saying that the distribution channel makes very healthy margins. They feel like they can pass all the cuts to you guys. Let's walk through how you're thinking about it from where that's going to be. Because we think the OEMs have very healthy margins. I think the first question to ask is what do you think happens to reimbursement, as competitive bidding comes back into play in the industry? I'm going to have two answers. One for DME that's been part of competitive bidding for a long time, and one for diabetes, which under the proposed rule is likely to come in and be part of the program. I'm going to start with the first point. I've got three to make. The first point is in just the very intentional change in the rules that CMS has proposed, with that intent to consolidate the industry. I mean, I touched on this earlier, but it is crystal clear to us that there will be many fewer players, market by market and product by product, during the next round of competitive bidding. When you understand the details of the proposed rules, there's even calculators specific to competitive bidding areas that show you, because operators have not delivered at least 5% of the volume in these areas, they will be boxed out and the number of bidders will come down. It's very intentional with calculators. For DME, for diabetes, there will be no more than nine operators per competitive bidding area in this next round. For perspective, there's about 2,700 DMEs today that distribute diabetes products, for continuous glucose monitors and for insulin pumps. That's an important factor to understand. We think as the biggest operator in the industry, we're pretty well positioned on this. We will decide if it makes sense to offer 1% lower reimbursement in Nashville. If we can get 3% improvement in market share, we would do that trade all day long. That's as we think strategically about the program. When you think about how reimbursement could change, take CPAP. It's our biggest product. In the last successful round of competitive bidding, DME operators were getting paid about $98 for CPAP. By 2017, when the rounds were effective, that went down to $38, $39. A 60% compression. This similar dynamic happened across the DME catalog. There was a lot of meat on that bone. Since then, the CAGR on the reimbursement is only up 2.5% for CPAP, but CPIU is up 3.3%. Our manufacturing friends, regardless of product, have talked about increases in price, right? There are increases in labor and in fuel and in everything else. It is just a very, very different pricing environment in 2025 and potentially in 2026 than what we were facing 10 years ago. That is a really important framework to help people think about competitive bidding. Now, diabetes, my last point, this is the first time that these products will be included in a competitive pricing environment. Our diabetes EBITDA margins are low to mid-single digit. Back to that CPAP example, it is not like there is so much, you know, meat on the bone, if you will, of reimbursement cut to even offer to put up. It really comes down to those nine operators per competitive bid area or MSA that are going to win contracts. There will be many fewer operators that will have access to the patients that the manufacturers are looking for. Much like over time, as rates have gone up, manufacturers have taken a share of that. We would anticipate a similar, on the downside, if rates come down and you want access to this market share, there is going to have to be a negotiation. Everyone here has got to make money. At the end of the day, there will be fewer operators that are going to be able to offer these products to patients. No, that makes a lot of sense. No, because I think one of the things that they go back to is, I think there's a difference in opinion in margins, right? I mean, where they think that you're making margins in the double digit range and you report your margins on a segment basis by product. So I guess just as you think about that negotiation process, in terms of market share and the nine players in each market that end up staying alive, essentially, when the first round of competitive bidding happened, you know, late 2000s, there were instances where the national players did not win markets and you ended up just having to do acquisitions. Is that kind of how you're thinking this could play out in diabetes as well? That's some optionality that will maintain that dynamic of if you don't win a contract in a particular market. I mean, look, again, you're still a large player in the business that could open up a variation in your acquisition strategy. That will always be on the table as an option for us. Back then we were also a much smaller, more regional player. Today we're across the country. As we bring in more capitated business, it's just more infrastructure that we've got. Our competitiveness and our ability to withstand reimbursement pressure, it's growing. I think that, you know, again, there's a lot of talk we hear from every meeting. Who will share in reimbursement cut? We'd argue it almost doesn't matter in respect to the amount of cash flow that we're producing versus other operators in this business. We have consistently, for the last couple of years, and we believe going forward, we'll produce between 6% and 7% of revenue as free cash flow, right? That's the margins that we've been running at. We look at a lot of DME businesses. I've seen hundreds over the, you know, I've been here going six years. I've seen hundreds of those P&Ls, and there's not a lot that are making more than a couple of points of free cash flow margin. When you get market by market, our ability to either offer a compression because we want share or we're big enough that we're not going to offer any compression in reimbursement because we know that this market can't be serviced without us, that's the other side of the coin. At the end of the day, our intent is to go into the program with the intent to expand, get bigger and win more business and certainly do that at consistent profitability levels. Hey Jason, sticking to diabetes, I know you've talked about the turnaround process in the diabetes segment, right? I know a lot of initiatives have been put in place, new management and all that. How are you thinking about just the re-ramp of diabetes? At what point, especially with a competitive bidding environment potentially bringing down margins for that business, at what point does analysis go to, do we need to own diabetes, and the synergistic value, especially as you see the capitated contracts not including diabetes? Sure. I'll answer the second part, I guess, first. I mean, you, like any company, we run a portfolio. We rationalize our product catalog at least once a year. I think you saw us do that with some of the dispositions where we decided to exit custom rehab, which was like motorized wheelchairs, as well as incontinence products direct to consumer. We bought a business in 2020. We sold it for more than we paid. I note here back in the second quarter. Finally, home infusion. We have built up, not at scale, but kind of a collection of home infusion assets over the years that we decided were not driving ancillary revenues into the core, which is sleep and respiratory. Diabetes as well, but they were not driving revenue into the core. Versus a respiratory patient, it's not uncommon that a patient will go home and also need a bed or a wheelchair at home, maybe some incontinence or urological products along with that respiratory. You can think of it as a bundle. Those products didn't make sense. Diabetes or any other product in the catalog currently we think does make sense from that perspective of servicing our 4.2 million patients and driving ancillary revenues into the core. It does cash flow, right? There's very limited CapEx on that business that we report in our segment financials. You have to keep that in mind as well. The market is growing. Despite reimbursement channel mix, whether it's reimbursed through a pharmacy or a medical benefit, the market is growing. Our job is to gain more of it. To the question of does it still make sense or does any product make sense, again, we look at this all the time and we'll continue to do so. The re-ramp of the business. The re-ramp. Yeah. I mean, a couple of things changed last September. This was really propelled from Suzanne Foster that joined us from Danaher a little over a year ago, and who's our CEO and is out west, dealing with this large new customer that we have while her finance team's here in Nashville with you all. I'd say that the biggest changes were on the leadership front and the sales front. We brought in new leaders for sales. We recut territories, we redefined the quota system. It was a pretty significant overhaul of sales as it relates to diabetes. That included our manufacturing partners, like on the pump side, we earned a lot of referrals from manufacturers as well. There was an overhaul in the leadership of that business. That's been successful to date. We have grown sequentially our new patients every quarter since then, which is great. That has to continue. The bigger part of the business though is on resupply. In a given quarter, 85% to 90% of the revenue in that quarter is generated from patients that were set up in previous quarters. That retention rate is very, very important, as well as the win-back rate. We've set records now three quarters in a row. Again, this team that's based here in Nashville, I think you know some of these folks that have been in the sleep resupply side of the business for well over a decade. They have fine-tuned things. They're running on the same technology platform today as we had on the sleep side of the business. They've really made improvements. The comparables, to our benefit, also get a little easier in the second half. We haven't said specifically when we expect diabetes to return to growth mode, but we're throwing everything at this to ensure that it does. With eight minutes left, we're going to open it up for questions to the audience. If there's anyone with a question. I was wondering if you could speak to any concerns at all about potential innovation in the press play on the world of hospitals and what all this would cost. The question is, is there a concern, I think, to the top of the funnel, perhaps on patient usage of CPAPs as new tech, I know Inspire is, you know, other implantables that are out there. I think the orals, as well as GLP-1s. I mean, I think it'd be crazy for us to say no concern with it, because after all, right, how do we know if the top of the funnel there are fewer patients showing up today than there were a year ago because they might be on a GLP-1 and they didn't have a mechanical issue. They had a weight, they had a weight problem, they've lost weight and now they're not on CPAP. I mean, we're confident that's happening. We don't know how much that's happening, but we also know on the other side, through wearables, right, the Apple watches, Samsung watches, other, you know, the Whoops, the rings, all these things that are, you know, in some ways now detecting, they're not, they're not qualifying a patient as having obstructive sleep apnea, but they are detecting it. What that's done is, the pipeline of patients getting into sleep centers or even at home sleep tests, it's like nothing we've seen in the industry. The demand is so healthy. There is a cross current, we believe, happening on, could there be fewer patients because of alternative therapies? Probably. Are there more patients because of detection and because of that? Again, six to seven million patients are on therapy today, but there's 33 to 34 million that have sleep apnea. That's absolutely happening as well. At the end of the day, the number of patients that are showing up for CPAPs for AdaptHealth, it continues to grow. It's in line with market. We're measuring who's on GLP-1s or these other orals, and it's actually helping adherence. So far it's been a slight, modest tailwind to the business, but we'll continue to keep an eye on it, but it's a big and growing market. Maybe while we wait for other questions, Jason, I'll ask cash flows. You know, you've seen very dramatic improvement in free cash generation. We sure have. How should we be thinking about cash generation going forward and maybe even your capital deployment strategies, balancing deleveraging versus investments back in the business? Sure. I guess I'd start with just kind of use of, use of capital. I mean, like head and shoulders, highest and best use of capital is in these automation and AI programs that I discussed. There's just so much manual labor to get at, and the tech has improved just so substantially. Like, now's the time. That will continue to be highest and best use. Now, fortunately, a lot of this new technology, it's not that expensive. It's not like standing up a big Oracle ERP or something like that. I mean, these are more around the edge investments. The change management is considerable, right? Getting the workers to work in different ways and human in the loop. I mean, there's a lot to this. That's highest and best use. You know, from there, we continue to pay down debt. We do believe we continue to be higher leverage than we'd like to be. We've set a leverage target of 2.5 times just at EBITDA. We're right around 2.8 as we exited the second quarter. We've also said that we expect to be under 2.5 times sooner than later. I mean, that could happen as soon as we exit 2025. I'd say at the latest, by mid-2026, we'd feel comfortable that we'll be under that 2.5 times. Now, obviously, we have the benefit of lower cash interest, and that's continuing to add to the free cash flow generation that we're continuing to grow and build at AdaptHealth. Once we're at 2.5, we'll either say that we're comfortable between 2 and 2.5, and we'll maybe do a little bit more thoughtful M&A, or we'll reset it too. That decision hasn't been made yet. We want to first cross the first bridge and get under 2.5. We've made, I think, good progress there. In terms of expanding free cash, once we're through the hump of the upfront investment of this new capitated agreement, we do think that our free cash will maintain at between 6% and 7% of revenue. We will continue to pay down debt, and we will continue to do modest M&A tuck-ins, particularly for hospital DMEs. Any questions from the audience? All right, I've got more. As I think about the sleep environment or the dynamics in that industry, obviously you've got ResMed and React right now. Philips is still on the sidelines. What are you seeing in terms of Philips trying to come back to market with their FDA negotiations, number one, and then number two, how do you think that plays out as it relates to you guys in terms of opportunity for margin once Philips is back in the market? Sure. I'd say firstly, we're rooting them on, Philips, that is, as well as ResMed and React. The more manufacturers, the better. That's a good thing for us. You know, we're by far the largest buyer of CPAPs in the world, and so more is better. In terms of what we're hearing, look, we still have a perspective of up to a year or two. Again, if we could buy DreamStation 2s tomorrow, we would place orders. However, we have not seen a change in behavior indicating that those CPAPs are coming. We continue to buy soft goods from Respironics. They've got great products as it relates to masks and cushions and everything else. However, we haven't really seen much of a change in the landscape. Jason, we've got a minute and a half here. One question we've been asking people here on stage is if there's one thing that you believe is underestimated or overlooked by investors about the AdaptHealth story, what would that be? Just closing your remarks. Yeah, I think it goes back to this free cash flow generation and how we're transforming the company to produce more of it, right? There's dispositions that are coming out. I mean, the benefit of disposition is you can raise some proceeds, pay down debt, get out of subscale business. The problem is it somewhat dilutes the story because you've got a lot of revenue coming in, some revenue coming out. I do think that that's a dynamic right now, but all that was done with the intent to pay down more debt and generate more cash. The impacts of the big beautiful bill will be significant for this company. You know, what we've said for perspective is that we paid a little over $40 million last year in cash tax, and we do not anticipate paying cash tax for the next couple of years at a minimum. The reason for that is, certainly the interest cap deduction went away, but more importantly for us, I mean, we buy a lot of patient equipment as well as vehicles to service those patients at home. That 100% bonus depreciation is a big deal that can roll forward. We have not accounted for that as we think about that 6% to 7% or the go forward cash. I think you add that into what we've been able to demonstrate here with better management of working capital and tighter labor and OpEx controls in the business and continued revenue growth that we're going to be generating a lot of free cash for the time to come. Awesome. Thank you so much, Jason. Really appreciate it. Thanks, Robert.