Adapthealth Corp. · NASDAQ:AHCO
Adapthealth — DFB Healthcare Acquisitions — SPAC Merger (July 2019)
35 slides from Adapthealth's SPAC merger presentation, Jul 8, 2019
Slide 1: Disclaimers and Other Important Information
Disclaimer Disclaimers and Other Important Information This presentation (this “Presentation”) is for informational purposes only and has been prepared to assist interested parties in making their own evaluation with respect to a potential business combination between AdaptHealth Holdings, LLC (“Ada
Slide 2: Disclaimer
Disclaimer eee emer em ee eer tm memo reece ee ~*adapthealth Page2
Slide 3: Transaction Overview
Transaction Overview • AdaptHealth, headquartered in Pennsylvania, is a leading provider of home medical equipment • The Company serves over 1 million patients across the United States and performs 7,000 deliveries per day across 49 states • Products include CPAP equipment, oxygen equipment, wheelch
Slide 4: Compelling Investment Opportunity
Compelling Investment Opportunity CAGR through 2026 • • • • $56 billion1 HME market has experienced stable growth since 2000 and is forecasted to grow at a ~6% Significant HME Market Opportunity Increasing prevalence of chronic conditions and diagnosis of sleep / respiratory issues enhance underlyin
Slide 5: Home Care Market Is Large and Growing
Home Care Market Is Large and Growing 73.1 • U.S. geriatric population is currently ~15% of the total population and is projected to grow to ~24% by 20602 Chronic Obstructive Pulmonary Disease (COPD) is the third leading cause of death in the U.S. and over 15 million people report diagnosis3 Nearly
Slide 6: HME Is Critical To Serving Patients At Home
HME Is Critical To Serving Patients At Home Home Medical Equipment (“HME”) industry provides a strategic entry point to patients in the home • HME service providers deliver critical medical equipment into a patient’s home • Primarily serve patients with need for respiratory and/or mobility equipment
Slide 7: Established Track Record
Established Track Record Founded in 2012, AdaptHealth has effectively optimized operations, amassed significant market share, and become one of the largest and most diversified HME providers in the U.S. 2012 – 2015 2015 – 2018 Strategy for 2019+ larger acquisitions $30 •56 acquisitions3 Source: Mana
Slide 8: Purpose-Built Technology Platform
Purpose-Built Technology Platform AdaptHealth has established a fully integrated, technology-enabled, centralized model • • The HME industry uses antiquated processes that are complex, prone to mistakes, and inefficient Over the last five years, the Company has developed industry leading technology
Slide 9: AdaptHealth's Proven Track Record as Consolidator
AdaptHealth’s Proven Track Record as Consolidator Since 2012, AdaptHealth has executed an M&A growth strategy to leverage its efficient operating model and grow through rounds of competitive bidding • • • Has acquired 56 targets since inception Typically targets acquisitions with revenue ranging fro
Slide 10: Significant, Multi-Levered Growth Opportunity
Significant, Multi-Levered Growth Opportunity • Targeting EBITDA growth in the 20-30% range through a combination of revenue growth, margin expansion, and continued M&A pipeline •Additional products and services •Al, remote patient monitoring, robotics, skilled nursing •Value-based purchasing + • •
Slide 11: Product Expansion Opportunities
Product Expansion Opportunities There are several key expansion opportunities through introduction of new offerings in existing markets • Higher Positive Airway Pressure (PAP) adherence rates should prolong time on therapy = higher resupply census Expand into higher margin clinical respiratory produ
Slide 12: Robust Pipeline of Opportunities
Robust Pipeline of Opportunities Source: Management; no definitive agreements at this time with any targets 1.Included in illustrative pro forma projections Page 13 Name Geography Approximate Annual Revenue ($ in millions) Target 11 West $6 Target 21 Southeast $28 Target 3 Diversified $10 Target 4 W
Slide 13: Financial Performance
Financial ($ in millions) Performance 2018PF 2 2019E 3 2020E 3 2018PF2 2019E 3 2020E 3 2016A 2017A 2016A 2017A 25.0% 18.9% $7.4 2018PF 2 2019E 3 2020E 3 2019E 3 2020E 3 2016A 2017A 2018PF2 2016A 2017A Source: Management 1. 2. 3. 4. 5. 6. Net revenue includes provision for bad debt 2018 PF includes a
Slide 14: AdaptHealth Management Team
AdaptHealth Management Team AdaptHealth is led by a proven management team with extensive industry knowledge Luke McGee Chief Executive Officer • Chairman and CEO of AdaptHealth since 2012; built business from $7mm of revenue in first acquisition to nearly $500mm+ today Led the Company’s proven acqu
Slide 15: Company Overview
Section 1 Company Overview Page 16
Slide 16: AdaptHealth Snapshot
AdaptHealth Snapshot AdaptHealth is the third largest distributor of HME in the U.S. serving over 1 million patients in 49 states • • • • Generates revenue through the sale and rental of HME Performs over 7,000 deliveries each day Operates 110 full service locations, 59 distribution-only depots, and
Slide 17: Diversified Product Offering
Diversified Product Offering AdaptHealth offers a full suite of medical products available for both rental and sale • Rentals are typically done for larger, more expensive products such as oxygen equipment, CPAP systems, wheelchairs, beds, and ventilators • Sales are typically disposable goods less
Slide 18: HME Rental Supply Chain Overview
HME Rental Supply Chain Overview products directly to patients AdaptHealth buys products directly from leading HME manufacturers and then rents or sells the Refers Patient to AdaptHealth Discharges Patient to Home Delivery of Product Supplies Products Capital Lease Payments • Sells and ships product
Slide 19: Fully Integrated, Centralized Platform
Fully Integrated, Centralized Platform AdaptHealth has established a fully integrated and centralized model to optimize service delivery to its customers • Experienced management team has built AdaptHealth’s centralized platform Tech-Enabled Infrastructure Vendor Relationships • Proprietary workflow
Slide 20: Strong and Diversified Referral Relationships
Strong and Diversified Referral Relationships AdaptHealth derives revenue from an extensive network of referral sources, including acute care hospitals, sleep laboratories, pulmonologist offices, skilled nursing facilities, wound care clinics, and rehab clinics • • • Referrals are highly diversified
Slide 21: One-Stop Shop Strategy
One-Stop Shop Strategy AdaptHealth strives to offer all products for all payors to its referral base, including respiratory, mobility, and general home Referral Type • Provide all products across all payors, including lower margin items like walkers and mobility Consignment closets to help ensure qu
Slide 22: Market Opportunity
Section 2 Market Opportunity Page 23
Slide 23: Home Medical Equipment Industry
Home Medical Equipment Industry Organic growth drivers continue to expand the HME industry • Adapt currently operates in a growing segment of the HME industry, which represents an estimated $12-$15 billion total market, within a broader HME industry representing $56 billion in total market value and
Slide 24: Competitive Bidding
Competitive Bidding The Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (“HMEPOS”) Competitive Bidding Program (“CBP”) was established by The Centers for Medicare & Medicaid Services (“CMS”) as a way to reduce costs to patients in the largest HME spending categories • • Bid
Slide 25: HME Competitive Landscape
HME Competitive Landscape Post Competitive Bidding, the HME landscape is shifting as larger platforms continue to capture market share. Competitors need both scale and technology to win in today’s environment. • • Pre Competitive Bidding, higher rates and low accountability created a crowded and ine
Slide 26: Financial Overview
Section 3 Financial Overview Page 27
Slide 27: Financial Performance
Financial ($ in millions) Performance 2018PF 2 2019E 3 2020E 3 2018PF2 2019E 3 2020E 3 2016A 2017A 2016A 2017A 25.0% 18.9% $7.4 2018PF 2 2019E 3 2020E 3 2019E 3 2020E 3 2016A 2017A 2018PF2 2016A 2017A Source: Management 1. 2. 3. 4. 5. 6. Net revenue includes provision for bad debt 2018 PF includes a
Slide 28: EBITDA Margin Evolution
EBITDA Margin Evolution Through process improvements and deployment drive meaningful margin improvement of its technology platform, AdaptHealth was able to Percentage of Gross Revenue Composition 10% 11% 2014 2018 1 2019E 2 Note: Percentages based on gross revenue 1.Reflects non-adjusted EBITDA 2.20
Slide 29: Pro Forma Capitalization
Pro Forma Capitalization Transaction 3/31/2019 ($ in millions) Cash $15 $245 Term Loan Undrawn Revolver ($25 million) Undrawn Acquisition Line2 Undrawn Delayed Draw Term Loan3 Total Debt Net Debt $300 ---- --2.3x ---- --$300 ---- --$300 $285 2.3x 2.2x $300 $55 BlueMountain Preferred Note4 $100 0.8x
Slide 30: Transaction Overview
Section 4 Transaction Overview Page 31
Slide 31: Illustrative Transaction
Illustrative Transaction DFB and AdaptHealth Framework between • Pro Forma enterprise value of $1.0bn •8.0x, 7.7x(1) 2019E EBITDA (without acquisitions, with acquisitions) •6.8x, 5.9x(2) 2020E EBITDA (without acquisitions, with acquisitions) $50mm Deerfield PIPE with potential to commit $100mm depen
Slide 32: Comparable Company Analysis – Trading Statistics
Comparable Company Analysis – Trading Statistics SPAC entry price is a meaningful discount to the average price of comparable companies Pure play home health 2019E Median: 19.0x 2020E Median: 17.4x Diversified post-acute 2019E Median: 9.2x 2020E Median: 9.0x 21.1x 18.9x 19.0x 18.5x 5.9x 3 with acqui
Slide 33: Comparable Company Analysis – Operating Statistics
Comparable Statistics Company Analysis – Operating Pure play home health Median: 12.4% Diversified post-acute Median: 6.0% 30.6% 18.5% 6.0% 4.3% with acquisitions 1 Pure play home health Median: 18.2% Diversified post-acute Median: 4.8% 37.0% 26.9% 26.8% with acquisitions 3 Diversified post-acute Me
Slide 34: Comparable Company Analysis — Operating Statistics
Comparable Company Analysis — Operating Statistics <= Median 124% 30.6% aaa 12.4% 124% 11.4% _ — oes ge Sh Medien 182% 260% 18.2% 17.0% amateys th 200% BE ses | _ resect eeteptent, amis Wiley tee Source: FectSet Wal Sreetreseorch, Monegement dat as of 6/2/18 1. 2020E numbers include $582.5mm ofreven
Slide 35: Pro Forma Adjusted EBITDA Bridge
Pro Forma Adjusted EBITDA Bridge (8 in millions) AdaptHealth Pro Forma Adjusted EBITDA Bridge to Net Income Fiscal Year Ended December 31 2016A 20178 Net income (Loss) (989) $68 $122 Plus: Interest expense 58 50 80 Plus: Income tax (benefit) expense (0.2) 02 21) Plus: Depreciation & amortization 297
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