Buy U/G: Capitation Brings Visibility, Growth, Upside; Diabetes Sale Positive

Research evidence excerpt

Buy U/G: Capitation Brings Visibility, Growth, Upside; Diabetes Sale Positive

diabetes business to CAH is a positive, as it removes a long-standing volatile &

Exhibit 1 - FCF Profile Underappreciatedunderperforming asset that has weighed on the stock's valuation. The ~10x EBITDA sale multiple is

& Remains Robust at 6-7% of Revs; Street

accretive and should support further balance sheet deleveraging, while improving earnings visibility Mismodeling '27E FCF

$800and stability.

$700

$600

Core Respiratory & Sleep Trends Remain Strong; Capitation Brings Upside. AHCO has $500

seen success winning capitation contracts with large MCOs, an opportunity that remains $400$300 $171 $225

underappreciated by investors. As payors continue consolidating vendor relationships, we expect $200$100 $156 $150

AHCO to win additional agreements and expand existing partnerships, aided by its newfound ($100)$0 2020 2021 2022 2023 2024 2025 2026E 2027E

Operating Cash Flow Adj. FCF Consensus FCFnational scale and footprint. At the same time, Respiratory & Sleep demand remains healthy, with .

growing at-home testing adoption supporting CPAP volumes despite known capacity constraints Source: Jefferies, Company Data, FactSet

at sleep clinics.

Exhibit 2 - Balance Sheet Is Healthy

Supporting Strategic Use of FCF

Upgrade to Buy; PT to $13 $2,500 3.7x 3.6x 4.0x

3.3x 3.0x We raise our PT on AHCO to $13 (10x EBITDA-PtCapEx, derived by applying the H/C Svcs avg $2,000

2.5x $1,500• 3.1x 3.5x 2.3x

1.8x 2.0x EV/EBITDA-to-Growth ratio of 1.2x to AHCO's growth outlook) to reflect our expectation for $1,000 1.6x 1.5x

multiple expansion that will be driven by improved earnings visibility and stability (now that Brian$500 Tanquilut * | Equity Analyst 1.5x1.0x