Q2 2025 AdaptHealth Corp Earnings Call
Mhm.
Please stand by. We're about to begin.
Good day everyone and welcome to today's adapt Health. Second quarter 2025 earnings release.
Today's speakers will be Suzanne. Foster Chief Executive Officer of adapt health and Jason Clemons Chief Financial Officer of adapt health.
Before we begin, I'd 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 the 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.
Adapt Health 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 ibida, adjusted ibida, adjusted ibida, margin and free cash flow. All of which are non-gaap Financial measures. You can find more information about these non-gaap measures in the 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 adapt Health. Suzanne Foster, please go ahead, ma'am.
Thank you and good morning everyone. Thank you for joining our call.
Starting with our Q2 2025 results. I'm pleased to report that we delivered another solid quarter.
Our second quarter Revenue was 800.4 Million.
Adjusting for Revenue, disposed to our recent. Divestitures Revenue was as expected in line with the second quarter of the prior year.
Second quarter, adjusted IBA was 155.5 Million.
Our adjusted Eva margin was 19.4% at the high end of our guidance range.
Free free cash flow was 73.3 million in the second quarter ahead of our expectations. And we are on track to meet our free. Cash flow guidance for FY 2025.
Over the past year, we've detailed our efforts to strengthen our foundation and position the company for long-term success.
What began as a series of tech tactical moves that were necessary to stabilize operations has matured into a cohesive plan focused on 3, levers that drive value.
1 acceleration, Revenue growth to enhancing profitability and 3, strengthening our balance sheet and step by step. And without compromising on our commitment to deliver the best possible patient experience, we are executing to unlock the full value of our Enterprise.
Quarter demonstrates.
Starting with non-acquired growth, we are leveraging our organizational strengths to address payer preference and build a pipeline of new capitated arrangements.
I'm pleased to announce that we have signed a definitive agreement to become the exclusive provider of home. Medical equipment and supplies for a major National Health Care system.
In a across the systems, broad network of hospitals and medical offices.
The arrangements features a capitation capitation payment model that will cover the systems more than 10 million members across multiple States.
The contract is for a 5-year term totaling more than a billion dollars of Revenue, over the term of the contract added, just a ibida margins that are projected to be in line with our Enterprise margins.
Also, once ramped this new Arrangement will Elevate capitated Revenue to at least 10% of our total revenue. Increasing our mix of recurring revenues
This new partnership is a clear endorsement of our ability to deliver Patient Service Excellence at scale from a leading Managed Care Organization.
Through the RFP process, we were able to demonstrate how our combination of talent expertise and tech-enabled patient experience, aligned with the Health Care Systems Innovative approach to serving its membership.
Securing this agreement. Strengthens our conviction that we have a tremendous opportunity to consolidate the market by becoming the most reliable operator in our core market segments.
That conviction is rooted in our ability to flex and configure our resources to accommodate whichever payment Model A payer prefers for managing their spent capitated or fee for service.
Continuing with non-acquired growth. Our respiratory Health segment Revenue continued to accelerate
As a result of the sales incentive-based compensation changes introduced earlier in the year and a streamlined order intake process. That reduces the administrative burden on our referring providers.
Meanwhile, our diabetes Health segment, delivered a third consecutive quarter of sequential Improvement in new starts and a resupply retention rate. That once again outperformed the comparable quarters of the past 2 years.
This momentum is under this momentum and underlying business Trends. If sustained would allow us to resume growth in diabetes Health revenues possibly as early as the second half of this year. Easing what has been a hindrance to Enterprise growth?
Staying with non-acquired growth. Our recent efforts in our sleep Health segment, to standardized scheduling practices in order intake, are producing quicker setup times, which have already improved by a third from the prior quarter.
We've given patients greater flexibility to choose the timing and format that best fits their setup needs by offering expanded appointment availability, same-day scheduling, and offering in-person as well as virtual setups.
As a result sleep, Health new setups accelerated in Q2 as these efforts eclipse. The dynamic spectro lighter, new starts in q1.
In fact, Q2 new setups, where the highest since the recall recovery in Q2 2023.
with this strength, continuing through July
Looking forward, the roll out of our standard operating model and the automation of intake. Both of which are currently underway will reduce order cycle time, and further accelerate setup times with the goal of becoming the most reliable and convenient in the industry.
This brings us to our second topic enhancing profitability.
We are prioritizing initiatives that will drive labor productivity, increase the capacity of our operating assets. Expand, our adjusted Eva margin and amplify Returns on our invested capital.
We are well into rolling out a standard field. Operating model across our regions, which will establish a uniform approach for operating our business and delivery in care.
Model features standardized bands, layers, and rolls. Regional centralization of patient order intake, qualification, and scheduling functions.
And Technology Solutions that support capacity planning productivity and Patient Service consistency.
Building on the foundation of our standard operating model. We are advancing a series of initiatives on our 3-year roadmap.
We are leveraging technology including Automation, and AI to streamline inbound and outbound call handling.
Increasing agent productivity.
Second as noted earlier, we are leveraging AI to automate order intake to increase intake, efficiency, improve order, accuracy, and reduce order cycle time,
And third, we are scaling my app, our self-service mobile based app that includes a growing list of features including Bill K, scheduling order, status and live agent assist.
In addition to significantly improving patient experience, these 3 initiatives will substantially reduce manual. Administrative burden, lessen, our dependence on Lower skilled contract labor, and create capacity to reinvest in upscale upskilling, our Workforce for higher value roles.
Importantly, we expect these initiatives to slow the rate of new hiring, that would otherwise be required to support the growth of our business.
Moving to our third topic, our balance sheet, we continue to make rapid progress.
And the second quarter, we reduced our debt balance by another 150 million.
Funded in part with proceeds, from divesting certain incontinence assets.
in in,
May directing certain incontinence Assets in May and certainly infusion acts as in June.
in total we have reduced debt by 175 million year to date and by 345 million over the last 6 quarters,
With our net leverage Target of 2.5. Times in sight, we will continue to use our substantial free cash flow generation to further de-lever
Driven by the conviction that a more balanced capital structure will reduce Financial Risk. Lower our cost of capital and enhance the long-term value of our equity.
I'd like to take a few moments to share our perspective on some of the key developments that are shaping the broader landscape.
First as anticipated in early J July CMS released a proposed rule on home health and DME detailing new policies for the next round of competitive bidding.
CMS has not has not yet, announced the specific time frame for the next bidding round.
Based on historical precedent, we believe it is likely that CMS will release the final rule in the third or fourth quarter of this year and that bidding windows could open as early as the first half of 2026, with implementation beginning in 2027.
Cmx has also yet to release which specific product care product categories will be included in the bidding program.
however, as anticipated, the proposed rule specifically references cgm's and medical supplies, including ottimo, and neurology as potential new additions,
Additionally, the proposed bidding process appears nuanced and includes some notable method methodological changes from prior rounds with CMS to listening feedback during the 60-day public comment period.
With many details, still unfolding the situation remains fluid and it remains too early to quantify any potential impact.
At a high level, the proposed rule seems to prioritize containing costs and this could potentially cause some economic pressure on industry operators.
At the same time the proposed rule also fights an intent to reduce the number of contracts. Awarded suggesting that the winning suppliers have an opportunity to capture a greater portion of volume.
We believe our scale better equips us to navigate both these Dynamics.
In the meantime, we're deeply engaged in policy, advocacy working closely with our industry partners and we are sharply focused on internal preparations.
These efforts include a thorough evaluation of proposed rules implications across our 4 core segments, along with profitability and balance sheet enhancement initiatives. I just outlined, which will strengthen our organization, whatever the outcome of the bidding.
Program.
Turning to the tax bill signed into law, July 1 as the obba. We believe this law has several positive implications for our cash tax profile.
Among the more impactful the law indefinitely reinstates, a less restrictive interest limitation calculation, which we estimate will increase deductible currently or interest expense in accelerate, the absorption of 32025 interest car interest expense carryovers into taxes, 2025 and 2026 all else equal.
Additionally, the law allows immediate expensing of fixed assets. Placed in service.
The implication of these changes in the tax law but our preliminary analysis shows a significant reduction in our cash taxes over the next few years and a related benefit to our free cash flow.
Finally, we see that deal flow in our industry is picking up as a leading strategic player. We have seen a notable increase in inbound opportunities over the past few months and we have completed 2, small transactions here today, we recognize that mounting external pressures on smaller operators is accelerating conditions for another wave of consolidation.
Our approach to m&a continues to be grounded in extreme disciplines.
Our highly capable corporate development team operates under a clear mandate.
Every potential acquisition must meet rigorous Financial standards.
Support the targeted expansion of our Geographic footprint and align with our strength in sleep and respiratory with meaningful synergies.
Should the right opportunity emerge. We will rigorously evaluate it.
That said, with our strong free cash flow, industry-leading platform and meaningful opportunities to unlock value by simply. Maintaining our internal Focus. We are operating from a position of strength.
We are under no pressure to pursue Acquisitions. And we can remain selective and patient.
I want to close by thanking the adopting for their commitment to serving over 4.2 million patients while preparing to serve Millions more as a result of our new partnership,
although this new partnership is the largest in the company's history, we know what to do and we are committed to executing on our commitments.
As today's discussion reflects, we've made meaningful progress and our momentum continues to build.
with that. I will turn it over to Jason.
Thank you Suzanne and thanks to everyone for joining our call today.
After covering our second quarter 2025 results, I'll provide an overview of our new capitated agreements.
I'll follow with that with the usual review of the balance sheet and our plans for Capital, allocation and finish up with updates to our guidance for 2025.
For second quarter 2025, net revenue of 800.4 million declined 0.7% compared with 86.0 million in the prior year quarter.
Excluding revenue is associated with certain infusion assets that were sold in June Revenue was largely flat versus the prior year. Quarter meeting our expectations.
In our sleep Health segment, the current year quarter included approximately 8 million of impact from the previously, disclosed changes in the mix of purchase Revenue versus rental Revenue.
In our Wellness at home segment. As previously announced, we sold certain incontinence infusion and custom rehab assets that would have otherwise generated and estimated 20 million dollars in the second quarter.
Second quarter, sleep helps segment, net revenue increase, 0.9% versus the prior year quarter to 334.7 million.
Which included the non-cash impact. I just mentioned.
Sleep Health starts were approximately 128,000. Our highest quarter in 2 years and our sleep. Health census was 1.7 million patients up from 1.68 million in the prior quarter.
Second quarter, respiratory Health segment, net revenue, increased 5.6% from the prior year quarter to 170.5 million.
We can tell you to see strong oxygen starts in our oxygen. Census of 329,000 patients was a new second quarter record.
Second quarter diabetes, Health segment, net revenue declined 4.1% versus the prior year quarter to 145.0 million.
As Suzanne noted, we continued to see signs that the segment is recovering driven by Improvement in starts and resupply retention.
Although volume growth was all set by pair mix shift, it is important to note that CGM, census grew over the prior year quarter for the second consecutive quarter.
For the wellness at home segment which includes all other product categories. Second quarter, net revenue declined, 7.2% from the prior year quarter to 153 150.23 million including the previously mentioned impact of the dispositions of certain non-core assets.
Turning a profitability.
Second quarter, 2025 adjusted IBA was 155.5 Million.
Declined from 20.5% in Q2 2024, but was slightly higher.
Was slightly above the high end of our Q2 guidance range.
Year-over-year Trend reflected the combination of lower revenue and gross margins. In our diabetes Health segment and the anticipated impact of changes in the mix of purchase Revenue. Versus rental Revenue in our sleep Health, segments, all of which fell to the bottom line
Moving to cash flow, balance sheet, and capital allocation.
For Q2 2025 cash flow from operations was 162 million.
Capex of 888.7. Million was 11.1% of Revenue up slightly to support growing momentum in patient starts particularly in our sleep health and respiratory Health segments.
Free cash flow was 73.3 Million ahead of our expectations.
Unrestricted cash. So that 68.6 million at the end of the quarter.
As of quarter ends 2025 net debt, stood at 1.8 billion down from 1.96 billion at the end of the first quarter.
And our net leverage ratio stood at 2.81 times down from 2.98 times at the end of the first quarter in tracking steadily, toward our Target of 2 and a half times.
We reduced our TLA, balance by 150 million in Q2, 2025, funded primarily with proceeds from the dispositions discussed earlier.
Our Capital allocation priorities remain unchanged. We continue to prioritize investing to accelerate non-acquired growth and debt reduction to strengthen our financial position.
These priorities are followed by strategic Acquisitions of Home. Medical Equipment providers to round out, our Geographic footprint and increase patient access.
To that end, we acquired 2 tuck in hme businesses on June 1st.
Both were previously owned by health systems, that we are very pleased to be partnering with, in support of their communities and our new patients.
Turning to expectations for our new capitated partnership.
This agreement fundamentally strengthens our competitive position by accelerating our expansion into new geographies and providing an opportunity to scale our sales force.
Applying amplifying the impact of this historic and transformational development.
Once fully rammed, we expect the agreement to generate at least $200 million in new annual revenue.
at an adjusted, even a margin in line, with our Enterprise margin and to be accretive to our return on invested capital,
We expect revenues to ramp throughout 2026 and in advance of that ramp. We need to install considerable infrastructure to support a contract of this magnitude.
This includes new locations that need to be outfitted and stalked.
Hundreds of vehicles must be procured registered and customized. And over 1,000, new employees must be recruited trained and ready to go in advance of go live dates.
The contract was signed very recently, so the detailed planning is now underway.
Although we have good estimates for the Investments required, to support the contract, the specific timing of those investments will get nailed down over the next few months.
the infrastructure will ramp between now and the end of the first quarter of 2026 and the revenue will start 2 to 3 months after
we also expect a material investment in patient equipment, capex potentially before the end of 2025. However, we expect to at least offset this with lower cash taxes, as a result of the obb BBA,
Moving to guidance for full year 2025, we are maintaining the midpoint of our Revenue Guidance with a narrower range at 3.18 billion to 3.26 billion.
We are reducing our adjusted ebit guidance, to a range of 642 million to 682 million.
in anticipation of supporting the forthcoming, capitated arrangement, we feel it is prudent to maintain infrastructure expenses that we were originally planning to reduce
Additionally, certain payer rate negotiations, which are still ongoing are expected to push into 2026.
Despite the revised adjusted Eva. Guidance range, we are maintaining our free cash flow guidance at a range of 170 million to 190 million.
For Q3 2025, we expect Revenue to be approximately 800 million, largely flat versus Q3 2024.
Keep in mind, the prior year quarter included approximately 30 million, dollars of revenue from certain disposed assets as well as approximately 6 million dollars from the non-cash impact of the revenue mix shift from purchases to rentals in our sleep Health segments.
Approximately 20 to 21%.
That brings me to the end of my remarks operator, would you kindly open up the call for questions?
Certainly, thank you, Mr. Clemens. Ladies and gentlemen, at this time, if you do have any questions or comments, simply press star 1 on your telephone. If you find your question has been addressed, you can remove yourself from the queue by pressing star 2. Once again, star 1 for questions. We go first this morning to Eric Coldwell of Beard.
Thanks very much, good morning. A lot to absorb there at the end with the capitated deal. So I wanted to dive in on that $200 million, minimum $200 million a year of revenue.
Is that, um, I guess several questions on that, um, is that anticipated to grow over time? Um, is it based on just a simple calculation on number of patients, under that health system over time are there inflation Riders uh any kind of additional details on how that Revenue May ramp and and when exactly it kicks in and hits, uh Hits full productivity, full Revenue capture on them, a monthly basis would be very helpful, uh, and then I might have a couple of follow-ups. Thank you.
You got it? I love taxing this. Um, so yeah, you're thinking about it basically, right? Um, we will start, you know, first patient rolling in here, basically in q1. And it will ramp. There are, um, several different regions that we in, in several states that we have to go to, and we're going to do that in an orderly fashion. And so you'll see that ramp the service to those over 10 million patients throughout the course of 2026 going into a, um, full service by 2027. Um, so that's that's why 2026 will be a ramp year and then the following 4 years will be more consistent based on that membership that we serve.
Um and then I'll have Jason walk through a little bit more detail on on how to model that. Yeah, I I might add. Eric, you are thinking of the, um, think of the core agreement, um, the right way. It's a, it's a um, if you know, generally a per member per month, type agreement, um, similar to our human, a contract, and other capitated arrangements that we've
Um that we we support here at adapt. Um, you know, I know you asked if there is uh
A growth. Um, baked into this. We, we are not, uh, setting an expectation in these numbers of at least 200 million of Revenue. We're not setting the expectation of growth. However, we do know that there's a halo effect with these capitated Arrangements. I mean, our public competitors have talked about those pressures of our humano award, uh, and other business. We have um,
Um, you know, it's it's logical to think that as we drop in um, sales folks into these territories. We don't have a sales presence. Now, I mean, we're laying in that infrastructure to support, you know, ah, ah, ah, what to us as a huge contract. Um, but we're going to have to capacity to support more and so it's reasonable to assume that that number can grow over time. Uh, but again, we're we're trying to outline what we think is a, a very clear and conservative number with, uh, with with this award,
and then, if I could, um,
If I could just a couple of quick follow-ups. So to be clear with the contract ramping in starting in 26 through 26 are you anticipating at least 200 million in 26? Or was that more of a 5 year average?
Yeah, think of it as our exit of 26. We we're, we're quite confident, we'll be at, at least $200 million. Uh, Suzanne said, I mean, first place, first patient. Um, you know, shows up um, at the beginning of the year and then that'll ramp uh, over the, the essentially, the first half into kind of early, third quarter. And then, as we're in Q4, we should be exiting at at least 200 million in Revenue.
And then, uh, last 1 for now. Thank you for all of this. Um, so 200 million a year, minimum 10 million patients, minimum would imply a capitated rate of something. Uh, if I've done the math quickly here right about a dollar, I think it was about a dollar 67, a month. Um, I know it could be more patients than that which could bring that per month, number down to something like a buck 50. Um, am I thinking about that correctly in terms of the the per patient per month, uh, Revenue stream?
Like a low per-member per-month, but it's all-encompassing. So you have a lot of healthy patients in that 10 million plus count.
You, you you've got it. We're we're very pleased with how we've priced this out. We're very confident. We'll deliver, uh,
The uh, Enterprise margin on the on the contract.
Very good. Thanks, thanks so much for all the questions.
Thank you, we go next. Now, to pedo Chickering of Deutsche Bank
Hey, uh, good morning guys. And thanks for taking my questions. Uh, just 1 question on the ebit guy in searching of down 20 million dollars for the year. Can you use can you bridge out the impact from from the devices?
Versus investing in the New capitated Deal versus anything else on the core side.
Yeah. If you know this this is Jason um sure. So I I mean it's it's really 2 factors that are driving the 20 million dollar uh change to adjusted Ava.
It's not related to the disposition of
Assets. I mean we we accounted for that last piece when we announced
Um about 2 months ago, I guess month and a half ago. Um when we announced the last deal and we adjusted the guidance accordingly for that. So it's it's unrelated to uh, to this position. So the 2 factors are, you know, a little more than half of that is the timing of certain payer rate negotiations. Um, you know, we have literally dozens of payer rate negotiations going on at any time in the company. Um, you know we got a couple of larger ones that uh we are.
Working very hard at, but that timing is slipping. We we expect however, uh, to pick that up in 26. So you can think of it as kind of a easier comp in 25 and more to come in 26. Um, the rest of that is infrastructure. So we talked about people, uh, technology, locations vehicles. Um, you know, we we were working through uh, as you'd expect uh, this time of year, we worked through ways of of tightening up the middle of the p&l. Um, we decided that given the magnitude of this win. Um, you know, we're we're going to, we're going to stay put, I mean, we think we need everything. We've got plus some. Um, so that's that's accounting for the rest of that. So, again, kind of timing impacted. I mean, if you just think of the magnitude of this win and what it's going to take, to stand it up, um, although we are lowering our expectations for 25. I mean, I mean, 26 obviously, just went up in a, in a big way.
Okay. Fair enough. Uh, I think for the follow-up uh looking at ResMed sales in the US, this quarter as a comp is definitely a difference between what you guys did uh, this quarter. This is what they did. So, you know, like we talked about, uh, new scheduling and Order intake and new starts accelerating, can you help us Bridge sir? What the market growth was? You think in the US this quarter and where your share went? Uh, and when the new starts, uh, that are increasing big inflowing through into growing at market growth rates.
Well, I I I think it depends on how you define market growth rate. I mean, I if you're anchoring to resmed's us uh device number, I I believe they were around 7% and, of course, that that includes volume as well as rate.
Uh, on their side of the equation. Um, I'd say for us, if you look at our starts, the 128,000 that we talked about, that's a 3% over the prior year and so um, you know, we were very pleased with that. We think there's more to get um you know as our uh time to set up is decreasing and our our access and and ability for patients to have their preference and how they get set up continues to improve, you know, we're, we're, we're feeling pretty good in the second half about about continuing the strength and momentum in, in sleep starts. And we'll start to see a full quarter as we move into Q3 of the changes that we've implemented really taking hold. So, you know, like we talked about in the q1 report out those things were were just kind of being identified and then they were ramped into Q2 now now we'll have the benefit going forward of starting to see that full quarter execution of those um changes we made
Great. Thanks so much.
Thank you, we go next. Now to Brian tan, quilet of Jeffrey's.
Hey, good morning. Um, maybe Suzanne just a question on competitive bidding as we think about this proposal out of CMS and changes to the diabetes reimbursement. Uh, structure just curious. How
You're thinking about that or strategizing around pricing straight, you know, pricing Dynamics and discussions with the suppliers. I mean, or do you feel like you can pass on some of that adjust potential, adjustment to the supplies and what those discussions are like, thanks
Yep, sure. Um, you know, and I think
best cost option, if you will given our scale and in the work that we're doing in the middle of the p&l, particularly in diabetes to remove, um, the
People administrative burdens, we're implementing Technologies. And kind of streamlining, that business, I think will prepare us for a future where we have to um, perhaps
Potentially sacrifice some rate, but be able to keep the profitability of that business. Um, so we are, we are confident that with additional volume and the work that we're doing that. We should weather the storm, uh, very well on that front in terms of, um, our, our work with the manufacturers. Um, yes, there is conversations going on. Of course, about how we partner in this new world. And so those conversations, I mean, I'm not going to go into much detail, but there is a partnership mentality about how do we make sure that the hme channel for this technology stays
Alive and and, and and profitable. And so they don't be a partnership approach to entering into the new world of competitive bid. If CGM, goes to that direction.
No appreciate that. And then maybe Jason just to follow up, um, and maybe some pto's questions, uh, as I think about some of the comments you made last quarter about, you know, some challenges, some share losses. You were seeing at local market levels in the Sleep business. Just curious, if you can share with us any updates on what you're seeing in those markets and broadly speaking if you're you know seeing Improvement or incremental degradation and and share. Thanks.
Yeah, we're absolutely seeing Improvement. Brian. I mean it's it's really related to that that speed to set up. Um, I mean, you know these these markets I mean we we cut off a week of uh, of lag time.
You know, from the day, the patient gets diagnosed until the day, they can get their CPAP. Um, there's more to go there. Um, you know, we we, we're very confident that we'll, we'll continue to corrupt compress that time to set up and increase our conversion factors. So, um, yeah. I mean, we, when we put out the q1, uh, point of view, it was, it was really predicated on. Look, we we have good plans in place. We think we're going to make this up, but in the event we don't, we don't want to be caught, you know, flat footed later in the year. Um, but you know, it's, it's very clear that, um, you know, q1 was a was a 1-off and we're we're
Back to some pretty pretty solid growth and we we expect that to continue.
Awesome. Great to hear it. Thanks.
Thank you. We'll go next now to Ben Hendricks of RBC Capital markets,
Hi. This is Michael Murray on for been. I was hoping you could expand on the m&a environment. Uh where are you seeing the opportunities? Any specific business lines uh what do valuations look like and what leverage level would you be comfortable going to for the right acquisition?
Um, yeah, I'll start with just saying that. Uh, what we're seeing is really across the board of all sizes, of, of players out there. We've had some inbounds around, uh, the small regionals, um, and some, you know, indications that there are some larger assets coming to the market. Um,
what I can say is, like I said earlier, is what we're particularly interested in in is staying within our core competencies of sleep and respiratory which a lot of these assets are focused on um that would be the the type of assets that we're reviewing and looking at to see if it's strategically fits for some reason for, for example, gives us, you know, pockets of the geography where we may be light, or some other thing that it brings to us that we we would benefit from. Um, so we're being extremely disciplined. Um, and we think, you know,
Um, the broader Market Dynamic, like we talked about with competitive bid on the horizon and the shrinking of potential number of providers. Um, in addition, to even just, you know, additional capitated type Arrangements. Coming our way, does put pressure on the industry and so we would welcome assets that add to the strength and strategic position on the dot. I'll turn it over to Jason for comments on valuation and how we think of that. Yeah, I I'd say that. I mean, I think, I think, you know, the industry is well aware of our trading multiples as well as our competitors. And so, you know, it's reasonable to think that anything we buy would be at trailing 12, uh, lower multiple than that, and then and then you can apply Synergy there. So in terms of your leverage question at at what point would we go up to for the right acquisition? I mean, I think as we stand here today, we wouldn't, um, you know, we're quite confident that if there are, uh, you know, a little more acquisition than we originally committed to um, you know, we would we would bring those assets in totally self-funded.
To your ownership actually drive down Leverage.
Okay. That's that's really helpful um just to a follow on. So so I appreciate the color on the diabetes. Um,
you know the performance I think was better than expected in the quarter. How should we think about diabetes Revenue in the back half of the year? And should we expect year-over-year declines to turn positive by year end?
Like like we stated um, there is real momentum going on there, not only, um, are they adding new, uh, patience that's translating into better retention rates in our resupply business. So I couldn't be prouder of the team and how quickly they've turned this business around. So we like I said, if the momentum continues and the execution continues as we're seeing, we do expect that business to, uh, as I say, remove the parentheses, around the around the growth number and turn positive, um, in the back half of this year. So, it's on the, on the, on the right path forward and, um, it really does come down to our execution, which, as I said, the team is, is currently delivering very well on.
Thanks so much.
Thank you, and just a quick reminder, ladies and gentlemen, star 1, please, for any further questions. Today, we go next now to John Penny with Canaccord Genuity.
And John your line is open. If you do actually appears, we lost, John ladies and gentlemen. So again, ladies and gentlemen, any further questions today, please press star 1 at this time.
And Miss Foster appears. We have no further questions this morning, so I'd like to turn the conference back to you for any closing comments.
Well, again, I want to thank everyone for joining us today. I've been an exciting quarter as hopefully you can see. I mean, we continue to just 1 brick at a time. I think turn this business into something that is really starting to show how the size and scale of what we've put together matters. Um, this is an historic, um, contract that we we are announcing today that will basically transform our business. Um, provide, you know, a future of of
A lot of growth and a lot of patients that we have to go after to serve and all of the hard work that the team has done over the last year to towards improving the middle of the p&l will begin to really start to show those those Sprouts are sprouting. So, I appreciate everyone's Support over this past year. And I look forward to delivering, um,
you know, next quarter in the quarter, after our progress on how we're preparing for a big 2026. Thank you again.
Thank you very much, Miss Foster, and again, thank you everyone for joining us today for adapt Health. Second quarter 2025, earnings release. That does conclude today's conference call, we asked you all disconnected this time and have a wonderful day. Goodbye.