AdaptHealth Corp

Previous wording

AdaptHealth is a national leader in providing patient-centered, healthcare-at-home solutions including home medical equipment (“HME”), medical supplies, and related services. The Company focuses primarily on providing (i) sleep therapy equipment, supplies and related services (including CPAP and bi PAP services) to individuals suffering from obstructive sleep apnea (“OSA”), (ii) medical devices and supplies to patients for the treatment of diabetes (including continuous glucose monitors and insulin pumps), (iii) home medical equipment to patients discharged from acute care and other facilities, (iv) oxygen and related chronic therapy services in the home, and (v) other HME devices and supplies on behalf of chronically ill patients with wound care, urological, incontinence, ostomy and nutritional supply needs. The Company services beneficiaries of Medicare, Medicaid and commercial insurance payors. As of March 31, 2024, AdaptHealth serviced approximately 4.1 million patients annually in all 50 states through its network of approximately 670 locations in 47 states. The Company’s principal executive offices are located at 220 West Germantown Pike, Suite 250, Plymouth Meeting, Pennsylvania 19462.

Current wording

AdaptHealth is a national leader in providing patient-centered, healthcare-at-home solutions including home medical equipment (“HME”), medical supplies, and related services. The Company focuses primarily on providing (i) sleep therapy equipment, supplies and related services (including CPAP and bi PAP services) to individuals suffering from obstructive sleep apnea (“OSA”), (ii) medical devices and supplies to patients for the treatment of diabetes (including continuous glucose monitors and insulin pumps), (iii) home medical equipment to patients discharged from acute care and other facilities, (iv) oxygen and related chronic therapy services in the home, and (v) other HME devices and supplies on behalf of chronically ill patients with wound care, urological, incontinence, ostomy and nutritional supply needs. The Company services beneficiaries of Medicare, Medicaid and commercial insurance payors. As of June 30, 2024, AdaptHealth serviced approximately 4.2 million patients annually in all 50 states through its network of approximately 670 locations in 47 states. The Company’s principal executive offices are located at 220 West Germantown Pike, Suite 250, Plymouth Meeting, Pennsylvania 19462.

Previous wording

Current and future inflationary effects may be driven by, among other things, general inflationary cost increases, supply chain disruptions and governmental stimulus or fiscal policies. The cost to manufacture and distribute the equipment and products that AdaptHealth provides to patients is influenced by the cost of materials, labor, and transportation, including fuel costs. AdaptHealth continues to experience inflationary pressure and higher costs as a result of the increasing cost of materials, labor and transportation. The increase in the cost of equipment and products is due in part to higher cost of shipping and general inflationary cost increases. Additionally, it is not certain that AdaptHealth will be able to pass increased costs onto customers to offset inflationary pressures. Continuing increases in inflation could impact the overall demand for AdaptHealth’s products and services, its costs for labor, equipment and products, and the margins it is able to realize on its products, all of which could have an adverse impact on AdaptHealth’s business, financial position, results of operations and cash flows. In addition, future volatility of general price inflation and the impact of inflation on costs and availability of materials, costs for shipping and warehousing and other operational overhead could adversely affect AdaptHealth’s financial results. Although there have been increases in inflation, AdaptHealth cannot predict whether these trends will continue. AdaptHealth’s mitigation efforts relating to these inflationary pressures include utilizing AdaptHealth’s purchasing power in negotiations with vendors and the increased use of technology to drive operating efficiencies and control costs, such as AdaptHealth’s digital platform for prescriptions, orders and delivery.

Current wording

The cost to manufacture and distribute the equipment and products that AdaptHealth provides to patients is influenced by the cost of materials, labor, and transportation, including fuel costs. Current and future inflationary effects may be driven by, among other things, general inflationary cost increases, supply chain disruptions and governmental stimulus or fiscal policies. Increases in inflation could impact the overall demand for AdaptHealth’s products and services, availability of materials, its costs for labor, equipment and products, shipping, warehousing and other operational overhead and the margins it is able to realize on its products, all of which could have an adverse impact on AdaptHealth’s business, financial position, results of operations and cash flows. Additionally, it is not certain whether AdaptHealth would be able to pass increased costs onto customers to offset inflationary pressures. AdaptHealth has experienced inflationary pressure and higher costs as a result of increased cost of materials, labor and transportation. The increase in the cost of equipment and products is due in part to higher cost of shipping and general inflationary cost increases. Although there have been increases in inflation, AdaptHealth cannot predict whether these trends will continue. AdaptHealth’s mitigation efforts relating to these inflationary pressures include utilizing AdaptHealth’s purchasing power in negotiations with vendors and the increased use of technology to drive operating efficiencies and control costs, such as AdaptHealth’s digital platform for prescriptions, orders and delivery.

Previous wording

Total net revenue is comprised of net sales revenue, net revenue from fixed monthly equipment reimbursements, and net revenue from capitated revenue arrangements. Net sales revenue consists of revenue recognized at a point in time for the sale of supplies and disposables. Net revenue from fixed monthly equipment reimbursements consists of revenue recognized over the service period for equipment (including, but not limited to, CPAP machines, oxygen concentrators, ventilators, hospital beds, wheelchairs and other equipment).

Current wording

Total net revenue is comprised of net sales revenue, net revenue from fixed monthly equipment reimbursements, and net revenue from capitated revenue arrangements. Net sales revenue consists of revenue recognized at a point in time for the sale of supplies and disposables. Net revenue from fixed monthly equipment reimbursements consists of revenue recognized over the service period for equipment (including, but not limited to, CPAP machines, oxygen concentrators, ventilators, hospital beds, wheelchairs and other equipment). Net revenue from capitated revenue arrangements consists of revenue recognizedin the month in which eligible members are entitled to receive healthcare services in connection with at-risk capitation arrangements.

Previous wording

Net revenue for the three months ended March 31, 2024 and 2023 was $792.5 million and $744.6 million, respectively, an increase of $47.9 million or 6.4%. The increase in net revenue was driven by non-acquired growth of $46.1 million, and acquisitions, which increased net revenue by $1.8 million. Net revenue from AdaptHealth's sleep business increased by $11.8 million, or 4.0%, for the three months ended March 31, 2024 compared to the prior year period, primarily due to increased patient census driven by strong patient demand for sleep products, including CPAP resupply products. Net revenue from AdaptHealth's respiratory business increased by $2.3 million, or 1.6%, for the three months ended March 31, 2024 compared to the prior year period, primarily due to increased patient census driven by strong patient demand for respiratory products. Net revenue from AdaptHealth's diabetes business increased by $2.9 million, or 2.0%, for the three months ended March 31, 2024 compared to the prior year period, primarily due to an increase in CGM patient census, partially offset by a shift in diabetes patients by certain large commercial insurance and other payors from DME suppliers to dual-benefit and pharmacy-only suppliers, and lower net revenue from insulin pumps and supplies as a result of a shift toward more pumps being sold to patients through the pharmacy channel, as well as the effect from manufacturers bringing additional distribution business in-house. In addition, the increase in net revenue was due to an increase in revenue from capitated revenue arrangements from the timing of such agreements.

Current wording

Net revenue for the three months ended June 30, 2024 and 2023 was $806.0 million and $793.3 million, respectively, an increase of $12.7 million, or 1.6%. The increase in net revenue was primarily driven by non-acquired growth of $11.9 million, as well as acquisitions, which increased revenue by $0.8 million. Net revenue from AdaptHealth's sleep business increased by $19.8 million, or 6.5%, for the three months ended June 30, 2024 compared to the prior year period, primarily due to increased patient census driven by strong patient demand for sleep products, including CPAP resupply products. In addition, net revenue from AdaptHealth's respiratory business increased by $7.1 million, or 4.6%, for the three months ended June 30, 2024 compared to the prior year period, primarily due to increased patient census driven by strong patient demand for respiratory products. These increases were partially offset by a decrease in net revenue from AdaptHealth's diabetes business, which decreased by $17.7 million, or 10.5%, for the three months ended June 30, 2024 compared to the prior year period, primarily due to a shift in diabetes patients by certain large commercial insurance and other payors from DME suppliers to dual-benefit and pharmacy-only suppliers, and lower net revenue from insulin pumps and supplies as a result of a shift toward more pumps being sold to patients through the pharmacy channel, as well as the effect from manufacturers bringing additional distribution business in-house and a decrease in CGM supplies patient census.

Previous wording

For the three months ended March 31, 2024, net sales revenue(recognized at a point in time)comprised 64% of total net revenue, compared to 66% of total net revenue for the three months ended March 31, 2023. For the three months ended March 31, 2024, net revenue from fixed monthly equipment reimbursements comprised 32% of total net revenue, compared to 34% of total net revenue for the three months ended March 31, 2023. For the three months ended March 31, 2024, net revenue from capitated revenue arrangements comprised 4% of total net revenue. For the three months ended March 31, 2023, net revenue from capitated revenue arrangements was immaterial.

Current wording

For the three months ended June 30, 2024, net sales revenue (recognized at a point in time) comprised 64% of total net revenue, compared to 66% of total net revenue for the three months ended June 30, 2023. For the three months ended June 30, 2024, net revenue from fixed monthly equipment reimbursements comprised 32% of total net revenue, compared to 34% of total net revenue for the three months ended June 30, 2023. For the three months ended June 30, 2024, net revenue from capitated revenue arrangements comprised 4% of total net revenue. For the three months ended June 30, 2023, net revenue from capitated revenue arrangements was immaterial, and is included in net sales revenue and net revenue from fixed monthly equipment reimbursements by core product line.

Previous wording

Cost of net revenue for the three months ended March 31, 2024 and 2023 was $675.7 million and $655.4 million, respectively, an increase of $20.3 million or 3.1%. Costs of products and supplies increased by $3.8 million, primarily as a result of increased net sales revenue and general inflationary cost increases. Salaries, labor and benefits increased by $1.9 million, primarily due to workforce wage pressure driven by inflation, partially offset by cost savings actions implemented in the second half of 2023 resulting in headcount reductions. Patient equipment depreciation increased by $3.2 million, primarily as a result of higher medical equipment prices.

Current wording

Cost of net revenue for the three months ended June 30, 2024 and 2023 was $679.0 million and $673.4 million, respectively, an increase of $5.6 million or 0.8%. The cost of products and supplies decreased by $9.6 million primarily as a result of lower net sales revenue and the impact of credits received from a supplier related to certain product recalls which were recognized as a reduction to the cost of products and supplies, which were partially offset by general inflationary cost increases. Salaries, labor and benefits increased by $8.5 million, primarily due to increased benefits costs and annual merit increases, partially offset by cost savings actions implemented in the second half of 2023 resulting in headcount reductions. Patient equipment depreciation decreased by $4.0 million, primarily due to lower net revenue from fixed monthly equipment reimbursements, partially offset by higher medical equipment prices. The increase in other operating expenses was primarily due to higher distribution expenses, vehicle rental costs, and revenue cycle management costs.

Previous wording

Interest Expense, net. Interest expense, net for the three months ended March 31, 2024 and 2023 was $32.5 million and $32.0 million, respectively, an increase of $0.5 million. Interest expense related to AdaptHealth's credit agreement increased slightly in 2024 compared to 2023 as a result of higher interest rates, offset by lower average outstanding borrowings in 2024 compared to 2023. Interest expense on AdaptHealth's finance leases increased by $0.5 million in 2024 compared to 2023.

Current wording

Interest Expense, net. Interest expense, net for the three months ended June 30, 2024 and 2023 was $33.0 million and $32.6 million, respectively, an increase of $0.5 million. Interest expense related to AdaptHealth's credit agreement decreased slightly in 2024 compared to 2023, primarily as a result of lower average outstanding borrowings in 2024 compared to 2023, offset by higher interest rates. Interest expense on AdaptHealth's finance leases increased by $0.6 million in 2024 compared to 2023.

Previous wording

General and Administrative Expenses. General and administrative expenses for the three months ended March 31, 2024 and 2023 were $48.4 million and $47.5 million respectively, an increase of $0.9 million or 1.8%. This increase is primarily due to higher professional and consulting fees and incentive-based compensation, partially offset by lower legal fees and equity-based compensation. General and administrative expenses as a percentage of net revenue was 6.1% in the 2024 period, compared to 6.4% in the 2023 period. General and administrative expenses in the 2024 period included $3.5 million of equity-based compensation expense and other non-recurring expenses of $3.3 million, consisting of $1.2 million of expenses associated with litigation, $1.1 million of professional and consulting expenses, and $1.0 million of expenses associated with systems implementation activities. General and administrative expenses in the 2023 period included $4.6 million of equity-based compensation expense and other non-recurring expenses of $8.1 million, consisting of $6.0 million of expenses associated with litigation, $1.2 million of expenses associated with systems implementation activities, and $0.9 million of other expenses.

Current wording

General and Administrative Expenses. General and administrative expenses for the six months ended June 30, 2024 and 2023 were $105.4 million and $97.6 million, respectively, an increase of $7.8 million or 8.0%. This increase is primarily due to higher legal and professional fees, incentive-based compensation, contract labor costs and other non-recurring expenses, partially offset by lower restructuring expenses related to a cost savings program that was implemented in 2023 and, to a lesser extent, equity-based compensation expense. General and administrative expenses as a percentage of net revenue was 6.6% in the 2024 period, compared to 6.3% in the 2023 period. General and administrative expenses in the 2024 period included$8.0 million of equity-based compensation expense and other non-recurring expenses of$12.5 million, consisting of$6.8 million of expenses associated with systems implementation activities,$2.8 million of expenses associated with litigation, and$2.9 million of other expenses, primarily related to professional and consulting expenses. General and administrative expenses in the 2023 period included$12.3 million of equity-based compensation expense and other non-recurring expenses of$17.6 million, consisting of$8.5 millionof expenses associated with litigation,$6.2 million of expenses associated with the cost savings program, $2.6 millionof expenses associated with systems implementation activities, and$0.3 million of other expenses.

Previous wording

Change in Fair Value of Warrant Liability. AdaptHealth has outstanding warrants to purchase shares of Common Stock, as discussed in Note 10, Stockholders’ Equity, to the accompanying March 31, 2024 interim consolidated financial statements. These warrants are liability-classified, and the change in fair value of the warrant liability represents a non-cash charge in the three months ended March 31, 2024 and a non-cash gain in the three months ended March 31, 2023, for the change in estimated fair value of such liability during the respective periods.

Current wording

Change in Fair Value of Warrant Liability. AdaptHealth has outstanding warrants to purchase shares of Common Stock, as discussed in Note 10, Stockholders’ Equity, to the accompanying June 30, 2024 interim consolidated financial statements. These warrants are liability-classified, and the change in fair value of the warrant liability represents a non-cash charge in thesix months ended June 30, 2024 and a non-cash gain in thesix months ended June 30, 2023, for the change in the estimated fair value of such liability during the respective periods.

Previous wording

Other Loss, net. Other loss, net for the three months ended March 31, 2024 consisted a pre-tax expense of $4.2 million for the change in fair value of shares of the Company's Common Stock expected to be issued in connection with the settlement of a previously disclosed securities class action lawsuit, as well as an expense of $0.9 million to settle a shareholder derivative complaint. See Note 14, Commitments and Contingencies for additional information. Other loss, net for the three months ended March 31, 2023 consisted of expenses associated with legal settlements.

Current wording

Other Loss. Other loss for the six months ended June 30, 2024 consi sted ofa pre-tax expense of $2.4 million for the change in fair value of shares of AdaptHealth's Common Stock that were issued in July 2024 following final court approval of the settlement of a previously disclosed securities class action lawsuit, as well as an expense of $0.9 million to settle a shareholder derivative complaint. See Note 14, Commitments and Contingencies, for additional information. Other loss for the six months ended June 30, 2023 consisted of$1.4 million of impairments of operating lease right-of-use assets,$1.2 million of expenses associated with legal settlements, and$0.7 million of lease termination costs.

Previous wording

Income Tax Expense (Benefit). For the three months ended March 31, 2024 and 2023, the Company recorded income tax expense of $6.6 million and an income tax benefit of $1.7 million, respectively. The increase in income tax expense was primarily related to higher pre-tax income, net of warrant liability fair value adjustments. Additionally, the Company recognized a $0.5 million income tax benefit, and corresponding increase to net deferred tax assets, related to a non-cash goodwill impairment charge of $6.5 million recognized during the three months ended March 31, 2024. See Note 5, Goodwill and Identifiable Intangible Assets, for additional details.

Current wording

Income Tax Expense. Income tax expense for the six months ended June 30, 2024 and 2023 was $13.9 million and $3.7 million, respectively. The increase in income tax expense was primarily related to higher pre-tax income, net of warrant liability fair value adjustments and goodwill impairment charges.

Previous wording

AdaptHealth defines Adjusted EBITDA as EBITDA (as defined above), plus equity-based compensation expense, change in fair value of the warrant liability, goodwill impairment, litigation settlement expense, and certain other non-recurring items of expense or income.

Current wording

AdaptHealth defines Adjusted EBITDA as EBITDA (as defined above), plus equity-based compensation expense, change in fair value of the warrant liability, goodwill impairment, litigation settlement expense (gain), and certain other non-recurring items of expense or income.

Previous wording

The following unaudited table presents the reconciliation of net (loss) income attributable to AdaptHealth Corp. to EBITDA and Adjusted EBITDA, and the reconciliation of net (loss) income attributable to AdaptHealth Corp. as a percentage of net revenue to Adjusted EBITDA Margin, for the three months ended March 31, 2024 and 2023:

Current wording

The following unaudited table presents the reconciliation of net income attributable to AdaptHealth Corp. to EBITDA and Adjusted EBITDA, and the reconciliation of net income attributable to AdaptHealth Corp. as a percentage of net revenue to Adjusted EBITDA Margin, for the three months ended June 30, 2024 and 2023:

Previous wording

(e)The 2024 period consists of $1.2 million of expenses associated with litigation, $1.0 million of consulting expenses associated with systems implementation activities, a $0.7 million write-down of assets, and $1.1 million of other non-recurring expenses. The 2023 period consists of $7.1 million of expenses associated with litigation, $1.2 million of consulting expenses associated with systems implementation activities, and $0.9 million of other non-recurring expenses.

Current wording

(e)The 2024 period consists of $5.8 million of consulting expenses associated with systems implementation activities, $1.6 million of expenses associated with litigation, $0.9 million write-down of assets, and $2.0 million of other non-recurring expenses. The 2023 period consists of $2.5 million of expenses associated with litigation, $4.9 million of severance charges (of which$2.9 million relates to the separation of the Company's former CEO),$1.4 million of consulting expenses associated with systems implementation activities, $1.4 million of impairments of operating lease right-of-use assetsand $2.5 million of other non-recurring expenses.

Previous wording

(b)Represents a non-cash charge or gain for the change in the estimated fair value of the warrant liability. See Note 10, Stockholders' Equity, included in the accompanying notes to the interim consolidated financial statements for the three months ended March 31, 2024 and 2023 for additional discussion of such non-cash charge or gain.

Current wording

(b)Represents a non-cash charge or gainfor the change in the estimated fair value of the warrant liability. See Note 10, Stockholders’ Equity, included in the accompanying notes to the interim consolidated financial statements for the three and six months ended June 30, 2024 for additional discussion of such non-cash charge or gain.

Previous wording

(d)Represents a $4.2 million charge for the change in fair value of shares expected to be issued in connection with the settlement of the previously disclosed Securities Settlement, as well as an expense of $0.9 million to settle a shareholder derivative complaint. The proposed settlements remain subject to final court approval and other customary closing conditions. See Note 14, Commitments and Contingencies, included in the accompanying notes to the interim consolidated financial statements for the three months ended March 31, 2024 for additional information.

Current wording

(d)Represents a $2.4 million charge for the change in fair value of shares of Common Stock of the Company that were issued in July 2024 following final court approval of the previously disclosed Securities Settlement, as well as an expense of $0.9 million to settle a shareholder derivative complaint. See Note 14, Commitments and Contingencies, included in the accompanying notes to the interim consolidated financial statements for the three and six months ended June 30, 2024 for additional information.

Previous wording

As of March 31, 2024, AdaptHealth had approximately $79.6 million of cash.

Current wording

As of June 30, 2024, AdaptHealth had approximately $69.8 million of cash.

Previous wording

In January 2021, AdaptHealth entered into a credit agreement (as amended, the "2021 Credit Agreement"). As of March 31, 2024, AdaptHealth had $770.0 million outstanding under the 2021 Credit Agreement. The 2021 Credit Agreement consisted of a $800 million term loan (the “2021 Term Loan”) and $450 million in commitments for revolving credit loans with a $55.0 million letter of credit sublimit (the “2021 Revolver”), both with maturities in January 2026. The outstanding borrowing under the 2021 Term Loan requires quarterly principal repayments of $10.0 million through December 31, 2025, and the unpaid principal balance is due at maturity in January 2026. In addition, the Company made a voluntary repayment of $15.0 million on the 2021 Term Loan in April 2024. Borrowings under the 2021 Revolver may be used for working capital and other general corporate purposes, including for capital expenditures and acquisitions permitted under the 2021 Credit Agreement. As of March 31, 2024, there was $75.0 million outstanding under the 2021 Revolver, which was repaid in April 2024, and $21.6 million outstanding under letters of credit. As of the date of this filing, there were no outstanding borrowings under the 2021 Revolver. As of March 31, 2024, based on the financial debt covenants under the 2021 Credit Agreement, the maximum amount the Company could borrow under the 2021 Revolver, net of outstanding borrowings, and remain in compliance with the financial debt covenants under the agreement was $263.8 million.

Current wording

In January 2021, AdaptHealth entered into a credit agreement (as amended, the "2021 Credit Agreement"). As of June 30, 2024, AdaptHealth had $650.0 million outstanding under the 2021 Credit Agreement. The 2021 Credit Agreement consisted of a $800 million term loan (the “2021 Term Loan”) and $450 million in commitments for revolving credit loans with a $55.0 million letter of credit sublimit (the “2021 Revolver”), both with maturities in January 2026. The outstanding borrowing under the 2021 Term Loan requires quarterly principal repayments of $10.0 million through December 31, 2025, and the unpaid principal balance is due at maturity in January 2026. The Company made voluntary repayments on the 2021 Term Loan totaling $36.6 million during thesix months ended June 30, 2024. Borrowings under the 2021 Revolver may be used for working capital and other general corporate purposes, including for capital expenditures and acquisitions permitted under the 2021 Credit Agreement. During the six months ended June 30, 2024, the Company borrowed $75.0 million under the 2021 Revolver which was repaid during that period. As of June 30, 2024, there was $21.6 million outstanding under letters of credit. As of the date of this filing, there were no outstanding borrowings under the 2021 Revolver. As of June 30, 2024, based on the financial debt covenants under the 2021 Credit Agreement, the maximum amount the Company could borrow under the 2021 Revolver, net of outstanding borrowings, and remain in compliance with the financial debt covenants under the agreement was $346.4 million.

Previous wording

Interest periods for loans based on Term SOFR are available for one or three months at the option of AdaptHealth. Borrowings using Base Rate accrue interest at a per annum rate equal to the sum of (a) the Base Rate determined on each day (subject to a zero percent floor), plus (b) an Applicable Margin (as defined) ranging from 0.50% to 2.25% per annum determined based on the Consolidated Senior Secured Leverage Ratio (as defined) of AdaptHealth. Borrowings using Term SOFR accrue interest at a per annum rate equal to the sum of (a) Term SOFR for the applicable interest period (subject to a zero percent floor), plus (b) a Term SOFR Adjustment (as defined) of 0.10%, plus (c) an Applicable Margin (as defined) ranging from 1.50% to 3.25% per annum determined based on the Consolidated Senior Secured Leverage Ratio of AdaptHealth. The 2021 Revolver carries a commitment fee during the term of the 2021 Credit Agreement ranging from 0.25% to 0.50% per annum of the actual daily undrawn portion of the 2021 Revolver depending on the Consolidated Senior Secured Leverage Ratio of AdaptHealth.

Current wording

At the option of AdaptHealth, amounts borrowed under the 2021 Credit Agreement bear interest at variable rates based upon either the Base Rate (as defined), payable quarterly, or Term SOFR (as defined), payable monthly or quarterly. Interest periods for loans based on Term SOFR are available for one or three months at the option of AdaptHealth. Borrowings using Base Rate accrue interest at a per annum rate equal to the sum of (a) the Base Rate determined on each day (subject to a zero percent floor), plus (b) an Applicable Margin (as defined) ranging from 0.50% to 2.25% per annum determined based on the Consolidated Senior Secured Leverage Ratio (as defined) of AdaptHealth. Borrowings using Term SOFR accrue interest at a per annum rate equal to the sum of (a) Term SOFR for the applicable interest period (subject to a zero percent floor), plus (b) a Term SOFR Adjustment (as defined) of 0.10%, plus (c) an Applicable Margin (as defined) ranging from 1.50% to 3.25% per annum determined based on the Consolidated Senior Secured Leverage Ratio of AdaptHealth. The 2021 Revolver carries a commitment fee during the term of the 2021 Credit Agreement ranging from 0.25% to 0.50% per annum of the actual daily undrawn portion of the 2021 Revolver depending on the Consolidated Senior Secured Leverage Ratio of AdaptHealth.

Previous wording

At March 31, 2024, AdaptHealth had $1,450.0 million aggregate principal amount of unsecured senior notes outstanding. In August 2021, AdaptHealth LLC issued $600.0 million aggregate principal amount of 5.125% senior unsecured notes (the “5.125% Senior Notes”). The 5.125% Senior Notes will mature on March 1, 2030. Interest on the 5.125% Senior Notes is payable on March 1st and September 1st of each year. The 5.125% Senior Notes will be redeemable at AdaptHealth’s option, in whole or in part, at any time on or after March 1, 2025, and the redemption price for the 5.125% Senior Notes if redeemed during the 12 months beginning (i) March 1, 2025 is 102.563%, (ii) March 1, 2026 is 101.281%, (iii) March 1, 2027 and thereafter is 100.000%, in each case together with accrued and unpaid interest. AdaptHealth may also redeem some or all of the 5.125% Senior Notes before March 1, 2025 at a redemption price of 100% of the principal amount of the 5.125% Senior Notes, plus a “make-whole” premium, together with accrued and unpaid interest. In addition, AdaptHealth may redeem up to 40% of the original aggregate principal amount of the 5.125% Senior Notes before March 1, 2025 with the proceeds from certain equity offerings at a redemption price equal to 105.125% of the principal amount of the 5.125% Senior Notes, together with accrued and unpaid interest. Furthermore, AdaptHealth may be required to make an offer to purchase the 5.125% Senior Notes upon the sale of certain assets or upon specific kinds of changes of control.

Current wording

At June 30, 2024, AdaptHealth had $1,450.0 million aggregate principal amount of unsecured senior notes outstanding. In August 2021, AdaptHealth issued $600.0 million aggregate principal amount of 5.125% senior unsecured notes (the “5.125% Senior Notes”). The 5.125% Senior Notes will mature on March 1, 2030. Interest on the 5.125% Senior Notes is payable on March 1st and September 1st of each year. The 5.125% Senior Notes will be redeemable at AdaptHealth’s option, in whole or in part, at any time on or after March 1, 2025, and the redemption price for the 5.125% Senior Notes if redeemed during the 12 months beginning (i) March 1, 2025 is 102.563%, (ii) March 1, 2026 is 101.281%, (iii) March 1, 2027 and thereafter is 100.000%, in each case together with accrued and unpaid interest. AdaptHealth may also redeem some or all of the 5.125% Senior Notes before March 1, 2025 at a redemption price of 100% of the principal amount of the 5.125% Senior Notes, plus a “make-whole” premium, together with accrued and unpaid interest. In addition, AdaptHealth may redeem up to 40% of the original aggregate principal amount of the 5.125% Senior Notes before March 1, 2025 with the proceeds from certain equity offerings at a redemption price equal to 105.125% of the principal amount of the 5.125% Senior Notes, together with accrued and unpaid interest. Furthermore, AdaptHealth may be required to make an offer to purchase the 5.125% Senior Notes upon the sale of certain assets or upon specific kinds of changes of control.

Previous wording

In January 2021, AdaptHealth LLC issued $500.0 million aggregate principal amount of 4.625% senior unsecured notes (the “4.625% Senior Notes”). The 4.625% Senior Notes will mature on August 1, 2029. Interest on the 4.625% Senior Notes is payable on February 1st and August 1st of each year. The 4.625% Senior Notes will be redeemable at AdaptHealth’s option, in whole or in part, at any time on or after February 1, 2024, and the redemption price for the 4.625% Senior Notes if redeemed during the 12 months beginning (i) February 1, 2024 is 102.313%, (ii) February 1, 2025 is 101.156%, and (iii) February 1, 2026 and thereafter is 100.000% in each case together with accrued and unpaid interest. AdaptHealth may also redeem some or all of the 4.625% Senior Notes before February 1, 2024 at a redemption price of 100% of the principal amount of the 4.625% Senior Notes, plus a “make-whole” premium, together with accrued and unpaid interest. In addition, AdaptHealth may redeem up to 40% of the original aggregate principal amount of the 4.625% Senior Notes before February 1, 2024 with the proceeds from certain equity offerings at a redemption price equal to 104.625% of the principal amount of the 4.625% Senior Notes, together with accrued and unpaid interest. Furthermore, AdaptHealth may be required to make an offer to purchase the 4.625% Senior Notes upon the sale of certain assets or upon specific kinds of changes of control.

Current wording

In January 2021, AdaptHealth issued $500.0 million aggregate principal amount of 4.625% senior unsecured notes (the “4.625% Senior Notes”). The 4.625% Senior Notes will mature on August 1, 2029. Interest on the 4.625% Senior Notes is payable on February 1st and August 1st of each year. The 4.625% Senior Notes will be redeemable at AdaptHealth’s option, in whole or in part, at any time on or after February 1, 2024, and the redemption price for the 4.625% Senior Notes if redeemed during the 12 months beginning (i) February 1, 2024 is 102.313%, (ii) February 1, 2025 is 101.156%, and (iii) February 1, 2026 and thereafter is 100.000% in each case together with accrued and unpaid interest. AdaptHealth may also redeem some or all of the 4.625% Senior Notes before February 1, 2024 at a redemption price of 100% of the principal amount of the 4.625% Senior Notes, plus a “make-whole” premium, together with accrued and unpaid interest. In addition, AdaptHealth may redeem up to 40% of the original aggregate principal amount of the 4.625% Senior Notes before February 1, 2024 with the proceeds from certain equity offerings at a redemption price equal to 104.625% of the principal amount of the 4.625% Senior Notes, together with accrued and unpaid interest. Furthermore, AdaptHealth may be required to make an offer to purchase the 4.625% Senior Notes upon the sale of certain assets or upon specific kinds of changes of control.

Previous wording

In July 2020, AdaptHealth LLC issued $350.0 million aggregate principal amount of 6.125% senior unsecured notes (the “6.125% Senior Notes”). The 6.125% Senior Notes will mature on August 1, 2028. Interest on the 6.125% Senior Notes is payable on February 1st and August 1st of each year. The 6.125% Senior Notes will be redeemable at AdaptHealth’s option, in whole or in part, at any time on or after August 1, 2023, and the redemption price for the 6.125% Senior Notes if redeemed during the 12 months beginning (i) August 1, 2023 is 103.063%, (ii) August 1, 2024 is 102.042%, (iii) August 1, 2025 is 101.021% and (iv) August 1, 2026 and thereafter is 100.000%, in each case together with accrued and unpaid interest. AdaptHealth may also redeem some or all of the 6.125% Senior Notes before August 1, 2023 at a redemption price of 100% of the principal amount of the 6.125% Senior Notes, plus a “make-whole” premium, together with accrued and unpaid interest. In addition, AdaptHealth may redeem up to 40% of the original aggregate principal amount of the 6.125% Senior Notes before August 1, 2023 with the proceeds from certain equity offerings at a redemption price equal to 106.125% of the principal amount of the 6.125% Senior Notes, together with accrued and unpaid interest. Furthermore, AdaptHealth may be required to make an offer to purchase the 6.125% Senior Notes upon the sale of certain assets or upon specific kinds of changes of control.

Current wording

AdaptHealth may also redeem some or all of the 6.125% Senior Notes before August 1, 2023 at a redemption price of 100% of the principal amount of the 6.125% Senior Notes, plus a “make-whole” premium, together with accrued and unpaid interest. In addition, AdaptHealth may redeem up to 40% of the original aggregate principal amount of the 6.125% Senior Notes before August 1, 2023 with the proceeds from certain equity offerings at a redemption price equal to 106.125% of the principal amount of the 6.125% Senior Notes, together with accrued and unpaid interest. Furthermore, AdaptHealth may be required to make an offer to purchase the 6.125% Senior Notes upon the sale of certain assets or upon specific kinds of changes of control.

Previous wording

As of March 31, 2024 and December 31, 2023, AdaptHealth had working capital of $163.3 million and $112.0 million, respectively. A significant portion of AdaptHealth’s current assets consists of accounts receivable from third-party payors that are responsible for payment for the products and services that AdaptHealth provides.

Current wording

As of June 30, 2024 and December 31, 2023, AdaptHealth had working capital of $90.4 million and $112.0 million, respectively. A significant portion of AdaptHealth’s current assets consists of accounts receivable from third-party payors that are responsible for payment for the products and services that AdaptHealth provides.

Previous wording

Cash Flow. The following table presents selected data from AdaptHealth’s consolidated statements of cash flows for the three months ended March 31, 2024 and 2023:

Current wording

Cash Flow. The following table presents selected data from AdaptHealth’s consolidated statements of cash flows for the six months ended June 30, 2024 and 2023:

Previous wording

Net cash provided by operating activities for the three months ended March 31, 2024 and 2023 was $49.0 million and $140.2 million, respectively, a decrease of $91.2 million. The decrease was the result of a $17.8 million reduction in net income, a net increase of $44.6 million in non-cash charges, primarily from a goodwill impairment charge, depreciation and amortization, the change in the estimated fair value of the warrant liability, deferred income taxes, and the reduction in the carrying amount of operating and finance lease right-of-use assets, a payment of $1.9 million for contingent consideration in connection with an acquisition, and a net $116.2 million decrease resulting from the change in operating assets and liabilities, primarily from the change in accounts receivable, inventory and accounts payable and accrued expenses.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2024 and 2023 was $247.0 million and $226.6 million, respectively, an increase of $20.5 million. The increase was the result of a $12.3 million reduction in net income, a net increase of $38.3 million in non-cash charges, primarily from goodwill impairment charges, depreciation and amortization, the change in the estimated fair value of the warrant liability, deferred income taxes, and the reduction in the carrying amount of operating and finance lease right-of-use assets, a payment of $1.9 million for contingent consideration in connection with an acquisition, and a net $3.8 million decrease resulting from the change in operating assets and liabilities, primarily from the change in accounts receivable, inventory and accounts payable and accrued expenses.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2024 and 2023 was $87.9 million and $89.6 million, respectively. The use of funds in the 2024 period related to equipment and other fixed asset purchases. The use of funds in the 2023 period consisted of $89.1 million for equipment and other fixed asset purchases and $0.5 million for business acquisitions.

Current wording

Net cash used in investing activities for the six months ended June 30, 2024 and 2023 was $169.2 million and $189.8 million, respectively. The use of funds in the 2024 period related to equipment and other fixed asset purchases. The use of funds in the 2023 period consisted of $171.7 million for equipment and other fixed asset purchases, $17.9 million for business acquisitions, and $0.1 million for other investments.

Previous wording

Net cash provided by financing activities for the three months ended March 31, 2024 and 2023 was $41.3 million and $4.4 million, respectively. Net cash provided by financing activities for the 2024 period consisted of borrowings on lines of credit of $75.0 million, proceeds of $0.6 million in connection with the employee stock purchase plan and proceeds of $0.5 million relating to stock option exercises, offset by repayments of $27.3 million on long-term debt and finance lease liabilities, a payment of $5.0 million for contingent consideration in connection with an acquisition, payments of $1.4 million in connection with the Company's liability relating to the TRA, and payments of $1.1 million for tax withholdings associated with equity-based compensation. Net cash provided by financing activities for the 2023 period consisted of borrowings on lines of credit of $50.0 million and proceeds of $1.0 millionin connection with the employee stock purchase plan, offset by repayments of$31.0 million on long-term debt, lines of credit and finance lease liabilities, payments of $9.2 million for Common Stock purchases under a share repurchase program, payments of$3.2 million in connection with the Company's liability relating to the TRA, payments of$2.5 million for tax withholdings associated with equity-based compensation, and payments of$0.7 million for deferred purchase price in connection with acquisitions.

Current wording

Net cash used in financing activities for the six months ended June 30, 2024 and 2023 was $85.2 million and $38.0 million, respectively. Net cash used in financing activities for the 2024 period consisted of repayments of $149.9 million on long-term debt and finance lease liabilities, a payment of $5.1 million for contingent consideration and deferred purchase price in connection with acquisitions, a payment of $3.5 million for a distribution to the noncontrolling interest, payments of $1.4 million in connection with the Company's liability relating to the TRA, and payments of $1.4 million for tax withholdings associated with equity-based compensation, offset by borrowings on lines of credit of $75.0 million, proceeds of $0.6 million in connection with the employee stock purchase plan and proceeds of $0.5 million relating to stock option exercises. Net cash used in financing activities for the 2023 period consisted of repayments of $68.7 million on long-term debt and finance lease liabilities, payments of $9.2 million for Common Stock purchases under a share repurchase program, payments of $3.2 million in connection with the Company's liability relating to the TRA, payments of $4.4 million for tax withholdings associated with equity-based compensation and stock option exercises, a payment of $2.5 million for a distribution to the noncontrolling interest, and payments of $1.0 million for deferred purchase price in connection with acquisitions, offset by borrowings of long-term debt of $50.0 million and proceeds of $1.0 million in connection with the employee stock purchase plan.

Previous wording

The following table reconciles net cash provided by operating activities to free cash flow, which is a non-GAAP measure, for the three months ended March 31, 2024 and 2023:

Current wording

The following table reconciles net cash provided by operating activities to free cash flow, which is a non-GAAP measure, for the three and six months ended June 30, 2024 and 2023:

Previous wording

Free cash flow was negative$38.9 million for the three months ended March 31, 2024 compared to positive $51.1 million for the three months ended March 31, 2023. The decrease in free cash flow was due to lower net cash provided by operating activities, primarily due to a net increase in the use of cash from operating assets and liabilities related to accounts receivable, inventory and accounts payable and accrued expenses. In addition, during the three months ended March 31, 2024, free cash flow was materially adversely impacted by the Change Healthcare cybersecurity incident as discussed above. The lower net cash provided by operating activities was offset by a decrease in, and timing of, purchases of patient medical equipment for operating requirements.

Current wording

Free cash flow was $116.7 million for the three months ended June 30, 2024 compared to $3.7 million for the three months ended June 30, 2023. The increase in free cash flow was due to higher net cash provided by operating activities, primarily due to a net increase in the source of cash from operating assets and liabilities related to accounts receivable, inventory and accounts payable and accrued expenses. In addition, during the three months ended June 30, 2024, free cash flow was positively impacted by the release of pending claims related to the Change Healthcare cybersecurity incident and funds received in connection with AdaptHealth's participation in the Optum Temporary Funding Assistance Program (see further discussion below). The increase in free cash flow was also, to a lesser extent, due to a decrease in, and timing of, purchases of patient medical equipment for operating requirements.

Previous wording

The Company has been working with its software provider to identify and implement alternative processes to help maintain its claims processing activity. However, this has only partially offset the material adverse impact on the timing of collection of certain accounts receivable. Pending claims from this incident peaked shortly following the data breach, however, as of March 31, 2024, the pending claims balance had been reduced significantly. These payment collection delays increased the Company’s accounts receivable balances and materially adversely impacted the Company's operating cash flows during the three months ended March 31, 2024. Nearly all of the pending claims were released by the end of April 2024, and the Company expects that the issues relating to the claims processing activity resulting from this incident will be resolved and that the Company’s operating cash flows will normalize during the second quarter of 2024. Given these impacts, and certain other cash requirements, including the previously disclosed class action securities litigation settlement, the Company borrowed $75.0 million under the 2021 Revolver to fund its operating cash requirements during the three months ended March 31, 2024. As discussed above, the Company repaid this amount in April 2024.

Current wording

As previously disclosed, in February 2024, the Company learned that a cyber security threat actor had gained access to some of the information technology systems of Change Healthcare, a subsidiary of UnitedHealth Group, with which one of the Company’s third-party software providers interfaces in connection with the Company’s claims processing activity. UnitedHealth Group isolated the impacted systems upon learning of this threat and Change Healthcare suspended its claims processing activity with the Company’s software provider. The Company has worked with its software provider to identify and implement alternative processes to help maintain its claims processing activity. Pending claims from this incident peaked shortly following the data breach, however, all pending claims have been processed and the impacted accounts receivable balances have been substantially collected by June 30, 2024. This incident impacted the timing of collection of certain accounts receivable. These payment collection delays materially adversely impacted the Company's operating cash flows during the three months ended March 31, 2024, however, the issues relating to the payment collection delays resulting from this incident were primarily resolved during the three months ended June 30, 2024. Given these impacts, and certain other cash requirements, including the previously disclosed class action securities litigation settlement, the Company borrowed $75.0 million under the 2021 Revolver to fund its operating cash requirements during the three months ended March 31, 2024, which was repaid in April 2024.

Previous wording

The discussion and analysis of the Company’s financial condition and results of operations is based upon the Company’s consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of the Company’s consolidated financial statements requires its management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. The Company’s management bases its estimates, assumptions and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Different assumptions and judgments would change the estimates used in the preparation of the Company’s consolidated financial statements which, in turn, could change the results from those reported. In addition, actual results may differ from these estimates and such differences could be material to the Company’s financial position and results of operations.

Current wording

Company’s management bases its estimates, assumptions and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Different assumptions and judgments would change the estimates used in the preparation of the Company’s consolidated financial statements which, in turn, could change the results from those reported. In addition, actual results may differ from these estimates and such differences could be material to the Company’s financial position and results of operations.

Previous wording

The Company’s critical estimates in relation to its consolidated financial statements include those related to revenue recognition and valuation of goodwill. There have been no material changes in the Company’s critical accounting policies and critical estimates as compared to the critical accounting policies and critical estimates described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

Critical estimates are those that the Company’s management considers the most important to the portrayal of the Company’s financial condition and results of operations because they require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The Company’s critical estimates in relation to its consolidated financial statements include those related to revenue recognition and valuation of goodwill. There have been no material changes in the Company’s critical accounting policies and critical estimates as compared to the critical accounting policies and critical estimates described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Previous wording

On July 29, 2021, Robert Charles Faille Jr., a purported shareholder of the Company, filed a purported class action complaint against the Company and certain of its current and former officers in the United States District Court for the Eastern District of Pennsylvania for alleged violations of the federal securities laws arising from allegedly false and misleading statements and/or failures to disclose material information regarding changes made to the methodology used to calculate the Company’s organic growth trajectory. On October 14, 2021, the court appointed Delaware County Employees Retirement System and the Bucks County Employees Retirement System as Lead Plaintiffs. On November 22, 2021, Lead Plaintiffs filed a consolidated complaint against the Company and certain of its current and former officers and directors on behalf of shareholders that purchased or otherwise acquired the Company’s stock and options between November 8, 2019 and July 16, 2021 (as to the complaint, the “Consolidated Complaint”; as to the action, the “Consolidated Class Action”). The Consolidated Complaint generally alleges that the defendants violated federal securities laws by making allegedly false and misleading statements and/or failing to disclose material information regarding changes made to the methodology used to calculate the Company’s organic growth trajectory and the Company’s former Co-CEO’s alleged tax fraud arising from certain past private activity. The Consolidated Complaint seeks unspecified damages. On January 20, 2022, the defendants filed a motion to dismiss the Consolidated Complaint, which the court denied on June 9, 2022. On June 7, 2023, the court entered an order staying the Consolidated Class Action pending the outcome of a private mediation between the parties.

Current wording

On July 29, 2021, Robert Charles Faille Jr., a purported shareholder of the Company, filed a purported class action complaint against the Company and certain of its current and former officers in the United States District Court for the Eastern District of Pennsylvania for alleged violations of the federal securities laws arising from allegedly false and misleading statements and/or failures to disclose material information regarding changes made to the methodology used to calculate the Company’s organic growth trajectory. On October 14, 2021, the court appointed Delaware County Employees Retirement System and the Bucks County Employees Retirement System as Lead Plaintiffs. On November 22, 2021, Lead Plaintiffs filed a consolidated complaint against the Company and certain of its current and former officers and directors on behalf of shareholders that purchased or otherwise acquired the Company’s stock and options between November 8, 2019 and July 16, 2021 (as to the complaint, the “Consolidated Complaint”; as to the action, the “Consolidated Class Action”). The Consolidated Complaint generally alleged that the defendants violated federal securities laws by making allegedly false and misleading statements and/or failing to disclose material information regarding changes made to the methodology used to calculate the Company’s organic growth trajectory and the Company’s former Co-CEO’s alleged tax fraud arising from certain past private activity. The Consolidated Complaint sought unspecified damages. On January 20, 2022, the defendants filed a motion to dismiss the Consolidated Complaint, which the court denied on June 9, 2022. On June 7, 2023, the court entered an order staying the Consolidated Class Action pending the outcome of a private mediation between the parties.

Previous wording

On February 26, 2024, defendants entered into a stipulation and agreement of settlement with the Lead Plaintiffs (the "Securities Settlement"). The Company’s portion of the proposed settlement consists of (i) $32.2 million of cash from the Company’s insurance carriers; (ii) $17.8 million of cash from the Company; (iii) 1 million shares of the Company’s Common Stock (the “Settlement Shares”), which had a fair value of $7.3 million recognized at December 31, 2023; and (iv) the implementation of certain corporate governance reforms. All of the aforementioned cash consideration has been paid consistent with the Securities Settlement during the three months ended March 31, 2024. The Company anticipates that the Settlement Shares, the only outstanding portion of the Company's financial consideration, will be issued from available Treasury Stock. For the three months ended March 31, 2024, the Company recognized a pre-tax expense of $4.2 million for the change in fair value of the Settlement Shares, which is included in other loss, net in the accompanying consolidated statements of operations. As of March 31, 2024, the Company recorded a liability of$11.5 million relating to the Settlement Shares; such liability is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets. Upon issuance of the Settlement Shares, $11.5 million will be reclassified from liabilities to stockholders' equity.

Current wording

On February 26, 2024, the defendants entered into a stipulation and agreement of settlement with the Lead Plaintiffs (the “Securities Settlement”). On March 5, 2024, the court granted preliminary approval of the settlement. On July 10, 2024, the court entered a judgment approving the class action settlement. The judgment certified the putative class for settlement purpose, found that the settlement is fair, reasonable, and adequate in all respects, and subject to certain exclusions and limitations, releases claims on behalf of the settlement class that were asserted or could have been asserted in the Consolidated Class Action against the defendants. Subject to any appeals, the judgment will become final under the Securities Settlement within 30 days of entry. The Company’s portion of the settlement consists of (i) $32.2 million of cash from the Company’s insurance carriers; (ii) $17.8 million of cash from the Company; (iii) 1 million shares of the Company’s Common Stock (the “Settlement Shares”), which had a fair value of $7.3 million recognized at December 31, 2023; and (iv) the implementation of certain corporate governance reforms. All of the aforementioned cash consideration has been paid consistent with the Securities Settlement during the six months ended June 30, 2024.

Previous wording

On April 23, 2024, defendants entered into a stipulation and agreement of settlement with the Derivative Plaintiff. In exchange for full releases, the proposed settlement consists of (i) $0.9 million in attorneys’ fees and expenses, which will be funded with cash from the Company; and (ii) the implementation of corporate governance reforms separate from those negotiated in Securities Settlement. For the three months ended March 31, 2024, the Company recorded a pre-tax expense of $0.9 million associated with the settlement, which is included in other loss, net in the accompanying consolidated statements of operations. As of March 31, 2024, the Company recorded a liability of $0.9 million relating to the settlement; such liability is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets.

Current wording

On April 23, 2024, defendants entered into a stipulation and agreement of settlement with the Derivative Plaintiff. In exchange for full releases, the proposed settlement consists of (i) $0.9 million in attorneys’ fees and expenses, which will be funded with cash from the Company; and (ii) the implementation of corporate governance reforms separate from those negotiated in Securities Settlement. For the six months ended June 30, 2024, the Company recorded a pre-tax expense of $0.9 million associated with the settlement, which is included in other loss, net in the accompanying consolidated statements of operations. As of June 30, 2024, the Company recorded a liability of $0.9 million relating to the settlement; such liability is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets.

Previous wording

The proposed settlement remains subject to final court approval and other customary closing conditions. On March 5, 2024, the court granted preliminary approval of the settlement, and set the final approval hearing for June 20, 2024. Upon the effectiveness of the proposed settlement, the Company and its directors and officers as well as the other defendants named in the Consolidated Complaint will be released from the claims that were asserted or could have been asserted in the Consolidated Class Action, with certain limitations, by class members participating in the settlement. The Company has always maintained, and continues to believe, that it did not engage in any wrongdoing or otherwise commit any violation of federal or state securities laws or other laws. The settlement includes no admission of liability or wrongdoing and is subject to court approval. There can be no assurance that the settlement will be approved and, even if approved, whether the conditions to closing will be satisfied, and the actual outcome of this matter may differ materially from the terms of the settlement described herein.

Current wording

On June 25, 2024, the court granted preliminary approval of the settlement, and set the final approval hearing for November 13, 2024. Upon the effectiveness of the proposed settlement, the Company and its directors and officers as well as the other defendants named in the Derivative Complaint will be released from the claims that were asserted or could have been asserted in the Derivative Action, with certain limitations, by class members participating in the settlement. The Company has always maintained, and continues to believe, that it did not engage in any wrongdoing or otherwise commit any violation of federal or state securities laws or other laws. The settlement includes no admission of liability or wrongdoing and is subject to court approval. There can be no assurance that the settlement will be finalized and approved and, even if approved, whether the conditions to settlement will be satisfied, and the actual outcome of this matter may differ materially from the terms of the settlement described herein.

Previous wording

On October 24, 2023, Allegheny County Employees’ Retirement System, a purported shareholder of the Company, filed a purported class action complaint against the Company and certain of its current and former officers, and certain underwriters in the United States District Court for the Eastern District of Pennsylvania (the “Allegheny County Complaint”). The Allegheny County Complaint purports to be asserted on behalf of a class of persons who purchased the Company’s stock between August 4, 2020 and February 27, 2023. The Allegheny County Complaint alleges, among other things, that the defendants violated federal securities laws by making allegedly false and misleading statements and/or failing to disclose material information regarding the Company’s organic growth in its diabetes business. The Allegheny County Complaint seeks unspecified damages. On January 23, 2024, the court entered an order appointing Allegheny County Employees' Retirement System, International Union of Operating Engineers, Local No. 793, Members Pension Benefit Trust of Ontario, and City of Tallahassee Pension Plan as Lead Plaintiffs. On April 22, 2024, the court entered a joint stipulation outlining deadlines for Lead Plaintiffs to identify an operative complaint or file an amended or consolidated complaint and for defendants to respond to the operative complaint.

Current wording

On October 24, 2023, Allegheny County Employees’ Retirement System, a purported shareholder of the Company, filed a purported class action complaint against the Company and certain of its current and former officers, and certain underwriters in the United States District Court for the Eastern District of Pennsylvania. On January 23, 2024, the court entered an order appointing Allegheny County Employees' Retirement System, International Union of Operating Engineers, Local No. 793, Members Pension Benefit Trust of Ontario, and City of Tallahassee Pension Plan as Lead Plaintiffs. On May 14, 2024, Lead Plaintiffs filed a consolidated complaint against the Company and certain of its current and former officers and directors, and certain underwriters, on behalf of shareholders that purchased or otherwise acquired the Company’s stock between August 4, 2020 and November 7, 2023 (as to the complaint the “Allegheny County Consolidated Complaint”; as to the action, the “Allegheny County Consolidated Class Action”). The Allegheny County Consolidated Complaint alleges, among other things, that the defendants violated federal securities laws by making allegedly false and misleading statements and/or failing to disclose material information regarding (i) the Company’s billing practices with respect to its diabetes business, and (ii) the Company’s compliance programs and integration with respect to acquired companies. The Allegheny County Consolidated Complaint seeks unspecified damages. On July 23, 2024, the defendants filed a motion to dismiss the Allegheny County Consolidated Complaint. Plaintiffs’ opposition brief is due to be filed on October 1, 2024; and defendants’ reply brief is due to be filed on November 15, 2024.

Previous wording

On March 20, 2024, a putative shareholder of the Company, Weiding Wu, filed a shareholder derivative complaint related to the allegations in the Allegheny County Complaint, and against certain current and former directors and officers of the Company in the United States District Court for the Eastern District of Pennsylvania (as to the complaint, the “Wu Derivative Complaint”). The Wu Derivative Complaint alleges, among other things, that the defendants breached their fiduciary duties and violated federal securities laws by making allegedly false and misleading statements and/or failing to disclose material information regarding the Company’s organic growth in its diabetes business. The Wu Derivative Complaint also alleges claims for unjust enrichment, waste of corporate assets, abuse of control, and gross mismanagement. The Derivative Complaint seeks, among other things, an award of money damages.

Current wording

On March 20, 2024, a putative shareholder of the Company, Weiding Wu, filed a shareholder derivative complaint related to the allegations in the Allegheny County Complaint, and against certain current and former directors and officers of the Company in the United States District Court for the Eastern District of Pennsylvania (as to the complaint, the “Wu Derivative Complaint”; as to the action, the “Wu Derivative Action”). The Wu Derivative Complaint alleges, among other things, that the defendants breached their fiduciary duties and violated federal securities laws by making allegedly false and misleading statements and/or failing to disclose material information regarding the Company’s organic growth in its diabetes business. The Wu Derivative Complaint also alleges claims for unjust enrichment, waste of corporate assets, abuse of control, and gross mismanagement. The Derivative Complaint seeks, among other things, an award of money damages.

Previous wording

The Company intends to vigorously defend against the allegations contained in the Wu Complaint, but there can be no assurance that the defense will be successful.

Current wording

The Company intends to vigorously defend against the allegations contained in the Wu Derivative Complaint, but there can be no assurance that the defense will be successful.