Accendra’s $300M Payer Hit Clouds 2026 Growth Outlook

Date of Call: Feb 19, 2026

Financials Results

• Revenue: $2.8B for full year, up a little more than 3% YOY; Q4 growth in sleep, ostomy, urology, with diabetes up almost 2% YOY, but impacted by a large commercial payer contract loss approximating 1% of what would have been over 3% growth.

Guidance:

• Annual revenue expected between $2.55B and $2.65B for 2026, impacted by ~$300M+ reduction from a large commercial payer change versus 2025, partially offset by volume growth and improved collection rates.
• Adjusted EBITDA expected in range of $335M to $355M for 2026.
• At least $100M of free cash flow expected in 2026 at the midpoint.
• Expect about 60% of adjusted EBITDA to be realized in second half of 2026, with Q4 being strongest.

Business Commentary:

Revenue and Segment Growth:

• Accendra Health reported revenue of nearly $2.8 billion for 2025, with an overall growth of over 3%. Key categories like sleep therapy, ostomy, and urology showed decent year-over-year growth, while diabetes grew by almost 2%.
• The growth was driven by the large sleep category, ostomy, and urology, but was inhibited by a somewhat weaker collection rate compared to a strong 2024.

Impact of Contract Loss:

• The company experienced the initial impact of a contract loss with a large commercial payer, affecting quarterly revenue growth by approximately 1%, which would have been over 3% otherwise.
• The impact is projected to increase significantly in 2026, with an aggregate revenue loss of approximately $300 million in 2026 versus 2025 and an additional $40 million in 2027.

Adjusted EBITDA and Cost Management:

• Fourth-quarter adjusted EBITDA was $90 million, compared to $102.5 million in the previous year, with a full-year adjusted EBITDA of $375 million, slightly up from 2024.
• The decline was driven by lower payment prices, inflationary product cost increases, and higher health benefit costs, partially offset by lower teammate benefit costs and stranded costs.

Cash Flow and Debt Reduction:

• The company's operating cash flow was $68 million in Q4, with continuing operations generating $135 million. Free cash flow for Q4 was $18 million, and for the year was $98 million.
• Debt reduction was achieved by $65 million from September 30, and net debt was reduced to $1.8 billion by year-end, with a focus on deleveraging and optimizing capital structure.

Outlook and Strategic Focus:

• For 2026, Accendra Health expects annual revenue between $2.55 billion and $2.65 billion, with adjusted EBITDA projected between $335 million and $355 million.
• The company plans to leverage technology for improved customer experience and cost efficiency, focusing on debt reduction and strategic investments in a growing market.

Sentiment Analysis:

Overall Tone: Positive

• Statements include: 'We are a national leader in home-based care for numerous chronic conditions', 'We have a bullish outlook on the long-term demand', 'We are optimistic about the strong long-term demand', 'We are entering 2026 as a much leaner and more nimble business with a much higher margin profile', 'The investment thesis is much improved'.

Q&A:

• Question from Michael Cherny (Leerink Partners LLC): Maybe if I can just dive in on some of the commentary you made on investments. Fully understand, I think we all do the dynamics around debt pay down, but you talked about targeted investments. As you think about the businesses, especially with the Rotech deal being in the background, what do you see target investments looking like for the RemainCo going forward?
  Response: Primary focus for 2026 is debt reduction and metered investments in technology to lower cost to serve and improve customer experience; may consider small tuck-in M&A but not a priority.

• Question from Michael Cherny (Leerink Partners LLC): You talked about the rebuild of revenue recapture opportunity as you have the large customer rolling off. You signed a preferred agreement with Optum. How is that going so far?
  Response: Early process with Optum; gaining some traction but won't completely fill the revenue gap; creates opportunity to redeploy resources to backfill revenue via preferred agreements and expansion of existing contracts.

• Question from Kevin Caliendo (UBS Investment Bank): One, just a numbers question. Jon, how much was patient CapEx in the fourth quarter? And how should we think about patient CapEx as a percentage of overall CapEx in 2026.
  Response: Patient CapEx was $45M in Q4, ~$189M for the year; in 2026, patient CapEx is expected to be roughly 95% of total CapEx, with the lost customer having a disproportionate amount.

• Question from Kevin Caliendo (UBS Investment Bank): Just wondering if there's been -- there's been talk of a manufacturer coming back to market who had been sort of out of the market for a while. Wondering if you have any update on that? And I was wondering if that could actually maybe provide a little relief on cost if another manufacturer were to come in CPAP or events or and the like.
  Response: Cannot comment on competitors' plans, but another manufacturer entering would create a different competitive dynamic in the market.

• Question from Daniel Grosslight (Citigroup Inc.): Really appreciate all the detail that you've provided in your presentation. If I could just go to the adjusted EBITDA range for the '26 guide. I'm curious if you can kind of maybe break down for us how much of that volume improvement I guess it will largely come through volume improvement. But how much of that is driven by Optimum and perhaps other contracts that you haven't announced publicly yet? And how much is kind of non-Optimum and noncontracted at the moment?
  Response: Volume growth is not heavily reliant on preferred agreements; it is fairly spread across all therapy categories, with some upside but not the bulk.

• Question from Daniel Grosslight (Citigroup Inc.): And then on your CapEx guidance, you're no longer guiding to a net CapEx number and I see a footnote that's because I guess I don't know. I just said it doesn't include sales, patient CapEx. What are your expectations now on a net basis for CapEx? And is the delta going to be reduced significantly because of that contract rolling off?
  Response: Net CapEx guidance is presented as ~30% of growth from patient CapEx; the lost customer had a disproportionate amount, so the delta will be reduced significantly.

• Question from John Stansel (JPMorgan Chase & Co): I just want to touch on in the adjusted EBITDA bridge. The manufacturer cost increases and inflation seems like it's outpacing pricing growth. Is that concentrated to a particular category or area? And how should we think about that as a kind of durable trend?
  Response: Not concentrated in one category; viewed as an opportunity to grow EBITDA by working with manufacturing partners on pricing models and incentives, not a durable trend but a focal point for improvement.

• Question from John Stansel (JPMorgan Chase & Co): And then you mentioned that you're kind of considering all options to kind of optimize the balance sheet. Can you just spend a little more time talking about your levers around balance sheet optimization. It sounds like there's kind of imminent changes you think you could be making?
  Response: Assessing capital structure holistically post-divestiture; opportunities include addressing near-term debt maturities and ensuring structure fits new business model with stronger margins and different working capital needs.

• Question from Eric Coldwell (Robert W. Baird & Co. Incorporated): I wanted to go back to that recent question on manufacturer cost increases and inflation. I want to be -- if we can, I want to be clear on this. Are you seeing broad-based cost increases across multiple manufacturers and categories? And is that -- so is it general market environment? Are they passing tariffs on do you guys trying to figure out what it actually is? Is it related to a specific primarily a specific manufacturer, a specific product line? And then how does that compare to the past? Because this is -- obviously, this is a new chart for us. But we don't really have the historical context on it. And then finally, Jonathan, you said you saw some opportunity there to improve upon it. What's in your control? What opportunities are in your control? How do you improve upon it?
  Response: Not broad-based; seen in some major categories annually; related to normal historical inflation, not tariffs; opportunity to work with manufacturers on pricing models and incentives to mitigate, especially as contracts phase in.

• Question from Eric Coldwell (Robert W. Baird & Co. Incorporated): Yes. That's super helpful. If I could do one follow-up?
  Response: Question on collection rate improvement drivers: the 2025 pullback was due to learning curves from new technology investments; confident in a rebound in 2026 as technology becomes additive.

• Question from Eric Coldwell (Robert W. Baird & Co. Incorporated): What is your bad debt rate? Now that you're a stand-alone pure play, maybe you can talk about that a little bit.
  Response: Bad debt rate is not disclosed; CFO declined to provide a specific ratio.

• Question from Allen Lutz (Bank of America Securities) [via Dave]: Maybe just to kick it off, just more on the revenue side. your sleep growth was 89%. It looks to be a slight step up quarter-over-quarter. Just would love to know what's driving that. And then would just also love to get a sense of the underlying health of the market across some of the other categories outside of sleep and diabetes and what's contemplated in guidance here for drivers of growth. I guess, from a volume and pricing perspective, specifically for home respiratory therapy, ostomy, wound care.
  Response: Sleep growth driven by 'Sleep Journey' initiative improving customer experience and recurring revenue; market health expects low single-digit growth across categories on average for 2026, with various initiatives to expand beyond that.

• Question from Allen Lutz (Bank of America Securities) [via Dave]: I guess just real quick one clarification point. I think you mentioned some of the benefits from the pharmacy DME mix. I guess, is that now a tailwind on the diabetes side. Is that what you're mentioning or at least was -- is the expectation?
  Response: Pharmacy/DME mix is not a tailwind; it's a shift from DME to pharmacy, with no net benefit.

• Question from Allen Lutz (Bank of America Securities) [via Dave]: And then, yes, I think there's a lot of, obviously, great color you guys provided on the various drivers of cash flow here. But I just wanted to take a step back. And I would just love to get an understanding of what the biggest swing factors are here for the year on cash flow. From your standpoint where you sit, where you have visibility into and maybe ones that are less so. Just what are the biggest swing factors we should think through here?
  Response: Biggest single swing factor is the transaction break fee and financing fees totaling $98M; business is cash generative with strong working capital dynamics unlike legacy operations.

Contradiction Point 1

Timeline for providing 2026 financial guidance

Contradiction on when guidance will be formally released.

What are your key growth strategies for the upcoming quarter? - Michael Cherny (Leerink Partners)

2025Q4: The primary focus for 2026 is debt reduction... Regarding Optum, it's still early... - Edward Pesicka(CEO)

What are the targeted investments for the remaining business moving forward, especially post-Rotech deal, and how is the revenue recapture opportunity with Optum progressing? - Daniel Christopher Clark (Leerink Partners)

20251031-2025 Q3: No 2026 data was published yet; guidance will be provided with Q4 results. - Edward Pesicka(CEO)

Contradiction Point 2

Expected contribution of Optum agreement to 2026 volume growth

Contradiction on whether Optum is a major driver for 2026 growth.

Can you provide an update on the company's performance? - Daniel Grosslight (Citi)

2025Q4: The volume growth in guidance is not heavily dependent on the Optum preferred agreement... - Jonathan Leon(CFO)

How much of the 2026 adjusted EBITDA guidance is driven by volume improvements from Optum and other contracts versus non-contracted growth, and what are the expectations for net CapEx? - Daniel Christopher Clark (Leerink Partners)

20251031-2025 Q3: Performance is tracking as expected and will create more opportunities over time. - Edward Pesicka(CEO)

Contradiction Point 3

Magnitude of EBITDA Impact from Lost Customer Contract

Contradiction on how much new revenue is needed to offset the unprofitable contract loss.

What is Kevin Caliendo's question for the earnings call? - Kevin Caliendo (UBS)

2025Q4: The lost customer's impact reduces the overall $2.8B revenue guidance by ~$25-$30M. - Jonathan Leon(CFO)

What was patient CapEx in Q4, and what percentage of total CapEx will it represent in 2026? Is there any update on a potential manufacturer returning to the market and its impact? - Daniel Grosslight (Citigroup Inc.)

2025Q3: It will take very little additional revenue to offset the EBITDA/cash flow impact. - Edward Pesicka(CFO)

Contradiction Point 4

Dependence of 2026 Guidance on Optum Agreement

Contradiction on whether the Optum deal is a major driver for the volume growth in 2026 guidance.

What was Daniel Grosslight's question for Citi during the earnings call? - Daniel Grosslight (Citi)

2025Q4: The volume growth in guidance is not heavily dependent on the Optum preferred agreement. - Jonathan Leon(CFO)

How much of the 2026 adjusted EBITDA guidance is driven by volume improvements from Optum and other contracts versus non-contracted growth, and what are the expectations for net CapEx? - Daniel Christopher Clark (Leerink Partners LLC)

2025Q3: The Optum agreement is in early stages... Selling in the Optum channel is new... No specific 2026 guidance is provided yet. - Edward Pesicka(CFO)

Contradiction Point 5

Future Acquisition Strategy

Contradictory focus on deal size and priority between quarters.

What is Michael Cherny's question from Leerink Partners? - Michael Cherny (Leerink Partners)

2025Q4: The primary focus for 2026 is **debt reduction**. There may be opportunities for **small tuck-in M&A but not a priority**. - Edward Pesicka(CEO)

What are the targeted investments for the remaining business, particularly in light of the Rotech deal, and how is the Optum revenue recapture opportunity progressing? - Allen Charles Lutz (BofA Securities)

2025Q2: Focus will be on **smaller bolt-on deals** that fit strategically. - Edward Pesicka(CEO)