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As filed with the Securities and Exchange Commission on July 15, 2021.

Registration No. 333-257716

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 2 TO
FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Rotech Healthcare Holdings Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

8082
(Primary Standard Industrial
Classification Code Number)

82-5064049
(I.R.S. Employer
Identification No.)

3600 Vineland Road
Orlando, Florida 32811
Telephone: (407) 822-4600
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Steven Burres, Esq.
General Counsel
Rotech Healthcare Holdings Inc.
3600 Vineland Road
Orlando, Florida 32811
Telephone: (407) 822-4600
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Tracey A. Zaccone, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019
Telephone: (212) 373-3000

Ilir Mujalovic, Esq.
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022
Telephone: (212) 848-5313

Approximate date of commencement of the proposed sale of the securities to the public: As soon as practicable after the Registration Statement is declared effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

	Large accelerated filer ☐			Accelerated filer ☐
	Non-accelerated filer ☒			Smaller reporting company ☐
				Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

CALCULATION OF REGISTRATION FEE


Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price(1)(2)			Amount of Registration Fee(3)
Common Stock, par value $0.001 per share		$	100,000,000		$	10,910

(1)

Includes shares of common stock to be sold upon exercise of the underwriters’ option to purchase additional shares, if any.

(2)

Estimated solely for the purpose of determining the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933.

(3)

Calculated pursuant to Rule 457(o) based on estimate of the proposed maximum aggregate offering price.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion
Preliminary Prospectus, dated July 15, 2021

PROSPECTUS

Rotech Healthcare Holdings Inc.

Common Stock

This is Rotech Healthcare Holdings Inc.’s initial public offering. We are selling shares of our common stock.

We expect the public offering price of our common stock will be between $ and $ per share. Currently, no public market exists for the shares of our common stock. After pricing of the offering, we expect that the shares will trade on the Nasdaq Global Select Market under the symbol “ROTK.”

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and may elect to do so in future filings. See “Summary—Emerging Growth Company.”

Investing in shares of our common stock involves risks. See “Risk Factors” beginning on page 23 of this prospectus for factors you should consider before buying shares of our common stock.

Per Share

Total

Public offering price

Underwriting discount(1)

Proceeds, before expenses, to us

(1)

We refer you to “Underwriting” beginning on page 180 of this prospectus for additional information regarding underwriting compensation.

The underwriters may also exercise their option to purchase up to an additional shares from us at the public offering price, less the underwriting discount, for 30 days after the date of this prospectus.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The shares of common stock will be ready for delivery on or about , 2021.

BofA Securities

Jefferies

UBS Investment Bank

Truist Securities

Baird

RBC Capital Markets

The date of this prospectus is , 2021.

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Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus, any amendment or supplement to this prospectus or in any free writing prospectus prepared by us or on our behalf. Neither we nor the underwriters take any responsibility for, or can provide any assurance as to the reliability of, any information other than the information in this prospectus, any amendment or supplement to this prospectus or any free writing prospectus prepared by us or on our behalf. We and the underwriters are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

For investors outside the United States, neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of our common stock and the distribution of this prospectus outside of the United States.

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	SUMMARY					1
	RISK FACTORS					23
	SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS					69
	MARKET AND INDUSTRY DATA					70
	USE OF PROCEEDS					72
	DIVIDEND POLICY					73
	CAPITALIZATION					74
	DILUTION					76
	SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA					78
	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS					79
	BUSINESS					107
	MANAGEMENT					145
	EXECUTIVE AND DIRECTOR COMPENSATION					151
	CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS					164
	PRINCIPAL STOCKHOLDERS					166
	DESCRIPTION OF COMMON STOCK					168
	SHARES ELIGIBLE FOR FUTURE SALE					173
	MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS					176
	UNDERWRITING					180
	LEGAL MATTERS					189
	EXPERTS					189
	WHERE YOU CAN FIND MORE INFORMATION					189
	INDEX TO CONSOLIDATED FINANCIAL STATEMENTS					F-1

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About This Prospectus

Financial Statement Presentation

This prospectus includes certain historical consolidated financial and other data for Rotech Healthcare Holdings Inc. (“Rotech Healthcare Holdings Inc.”) and its subsidiaries.

Non-GAAP Financial Measures

This prospectus contains “non-GAAP financial measures,” which are financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”). Specifically, we make use of the non-GAAP financial measures “EBITDA,” “Adjusted EBITDA,” “Adjusted EBITDA less Base Patient Capex”, “Adjusted EBITDA Margin” and “Adjusted EBITDA less Base Patient Capex Margin.”

EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin have been presented in this prospectus as supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP, because we believe they assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management also believes these measures are useful to investors in highlighting trends in our operating performance. We also use EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of peer companies using similar measures. Adjusted EBITDA Margin (and Adjusted EBITDA less Base Patient Capex Margin) is calculated as a percentage of revenue.

Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are not GAAP measures of our financial performance and should not be considered as an alternative to net income (loss) as a measure of financial performance or any other performance measure derived in accordance with GAAP. The Company uses the Non-GAAP measures Adjusted EBITDA less Base Patient Capex and Adjusted EBITDA Less Base Patient Capex Margin as supplemental liquidity measures that are not required by, or presented in accordance with, GAAP because we believe they assist investors and analysts in evaluating our liquidity and in comparing the liquidity of our operations across reporting periods as well as compared with our competitors. These measures should not be used to imply or represent total residual cash flows from our operating activities that we may use for discretionary expenditures. Adjusted EBITDA less Base Patient Capex and Adjusted EBITDA less Base Patient Capex Margin are not GAAP measures of our liquidity and should not be considered as an alternative to net cash provided by operating activities as a measure of liquidity or any other liquidity measure derived in accordance with GAAP. The presentations of these measures have limitations as analytical tools and should not be considered in isolation, or as a substitute for analysis of, our results as reported under GAAP. Because not all companies use identical calculations, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company. For a discussion of the use of these measures and a reconciliation of the most directly comparable GAAP measures, see “Summary—Consolidated Financial and Other Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Information.”

Certain Definitions

As used in this prospectus, “Rotech,” the “Company,” “we,” “us” and “our” refers to Rotech Healthcare Holdings Inc., the existing holding company of our business, and its consolidated subsidiaries. “Capital Group,” “Silver Point,” “Venor” or collectively, the “Principal Stockholders” refer to certain investment funds associated with, or managed or designated by, Capital Group Companies, Inc., Silver Point Capital, L.P., and Venor Capital Management, L.P. respectively, which funds are our current majority owners, and their permitted successors and assigns.

iii

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As used in this prospectus, unless otherwise noted or the context requires otherwise:

•

“BiPAP” refers to bilevel positive airway pressure.

•

“CBP” and “DMEPOS CBP” refers to the DMEPOS competitive bidding program.

•

“CPAP” refers to continuous positive airway pressure.

•

“CMS” refers to the Centers for Medicare and Medicaid Services.

•

“DOJ” refers to the U.S. Department of Justice.

•

“DME” refers to durable medical equipment.

•

“DMEPOS” refers to Medicare durable medical equipment, prosthetics, orthotics and supplies.

•

“GAAP” refers to generally accepted accounting principles in the United States of America.

•

“HHS” refers to the U.S. Department of Health and Human Services.

•

“HHS-OIG” refers to HHS Office of Inspector General.

•

“MCO” refers to managed care organizations.

•

“Medicare patients” refers to Medicare patients other than those participating in Medicare through the Medicare Advantage program.

•

“NPWT” refers to negative pressure wound therapy.

•

“OSA” refers to obstructive sleep apnea.

•

“Payors” refers to third-party healthcare payors, including government and commercial payors.

•

“pre-IPO owners” refer to our Principal Stockholders together with other owners of Rotech Healthcare Holdings Inc. prior to this offering.

•

“The Joint Commission” refers to a nationally recognized, independent organization that develops standards for various healthcare industry segments and monitors compliance with those standards through voluntary surveys of participating providers.

•

“VA” refers to the Veterans Health Administration.

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SUMMARY

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information you should consider before investing in shares of our common stock. You should read this entire prospectus carefully, including the section entitled “Risk Factors,” “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and the related notes thereto included elsewhere in this prospectus, before you decide to invest in shares of our common stock.

Rotech

We are a leading provider of home medical equipment and related products and services (collectively referred to as “HME products and services”) in the United States. We offer a comprehensive range of HME products and services for home healthcare and delivery across five core business lines: (1) oxygen, (2) ventilators, (3) sleep therapy, (4) wound care and (5) DME. We enable the treatment of patients in their homes, including chronic patients, acute patients or patients with both chronic and acute needs. Our Payor clients include commercial insurers, Medicare, Medicaid, the VA and private individuals. As of March 31, 2021, we served more than 600,000 active patients across over 300 service locations in 45 states, supported by more than 3,500 full-time equivalent (“FTE”) employees and key Payor contracts (including over 1,750 Commercial Payor contracts). Over the past several years, we have made substantial, long-term strategic improvements in our business and operations, resulting in a growth rate of over 23% for the year ended December 31, 2020, primarily driven by organic growth and Adjusted EBITDA Margin of 30.3% for the year ended December 31, 2020. Our growth plans also include continuing to evaluate attractive acquisition opportunities in our industry.

We focus on being the industry’s highest-quality provider of HME products and services, while maintaining our commitment to being a low-cost operator. We offer a compelling value proposition to patients, providers and Payors by enabling patients to receive care and services in the comfort of their own homes while also reducing treatment costs as compared to in-patient settings. Our key HME products and services include stationary and portable home oxygen equipment, non-invasive and invasive ventilators, CPAP and BiPAP devices, NPWT pumps and supplies and other DME. As of March 31, 2021, we served more than 600,000 active patients, of whom over 218,000 were oxygen patients receiving approximately 624,000 tank deliveries in aggregate. Our revenues are generated primarily through fee-for-service arrangements with Payors for equipment, supplies, services and other items we rent or sell to patients. With an expansive network of Payor contracts, delivery technicians and therapists that is not readily replicated, we are well positioned to provide home healthcare that requires high-quality service, providing a bridge from the in-patient care setting to the home.

We operate in attractive end markets. We derived approximately 87.1% of our revenue for the year ended December 31, 2020 from the high-growth respiratory and OSA markets. According to industry reports, in 2019, the global markets for homecare oxygen concentrators, homecare ventilators, and CPAP devices were estimated to be $1.0 billion, $0.5 billion and $3.0 billion, respectively, and are projected to grow at a compound annual growth rate (“CAGR”) of approximately 15.2%, 7.3%, and 5.9%, respectively, from 2019 to 2024. We entered the market for wound care products and supplies starting with an exclusive distributor agreement with Smith and Nephew in 2019 and further with the acquisition of Halo Wound Solutions in July 2020. In 2019, the global market for wound care devices and supplies was projected to be approximately $3 billion by 2025 and this market is expected to grow at a CAGR of approximately 5.4% from 2019 to 2024. We believe these high-growth markets represent attractive embedded opportunities for continued growth.

We believe key differentiators from our competitors are our national scale and footprint, our culture of disciplined and profitable growth, our relentless operational rigor and focus on cash collections, and our proprietary technology platform. We enjoy deep and long-standing relationships with major Payors, including government, national and regional insurers and MCOs, many of whom we have contracted with for over 15 years. We believe that Payors and referral sources highly value our ability to reliably provide access to home healthcare and reduce unnecessary in-patient stays.

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cash profile through continued focus on profitable products and services, disciplined management of capital expenditures and by controlling our costs. We believe our scalable platform and infrastructure will allow us to continue to evaluate and add new products and services with high growth rates and attractive margins. Finally, since 2016, we have completed over 60 accretive asset purchases as well as four larger acquisitions, and we plan to continue to opportunistically evaluate attractive companies in the highly fragmented HME market.

For the year ended December 31, 2020, we generated $503.2 million of revenue, $119.2 million in net income, $139.1 million in net cash provided by operating activities, $152.6 million of Adjusted EBITDA (30.3% of revenue) and $99.3 million of Adjusted EBITDA less Base Patient Capex (19.7% of revenue). For the year ended December 31, 2019, we generated $408.3 million of revenue, $3.8 million in net income, $100.4 million in net cash provided by operating activities, $115.7 million of Adjusted EBITDA (28.3% of revenue) and $65.3 million of Adjusted EBITDA less Base Patient Capex (16.0% of revenue). Revenues for the year ended December 31, 2020 compared to the year ended December 31, 2019 increased partially due to demand for certain respiratory products (such as oxygen concentrators, tanks and ventilators) due to the impact of the recent coronavirus (“COVID-19”) pandemic and increased sales in our CPAP and BiPAP resupply businesses (primarily as a result of the increased ability to contact patients at home as a result of state and local government imposed stay-at-home orders). For reconciliations of Adjusted EBITDA and Adjusted EBITDA Margin (which is calculated as Adjusted EBITDA as a percentage of revenue) to net income, the most directly comparable financial performance measure prepared in accordance with GAAP, see “Summary—Consolidated Financial and Other Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Information.” For a reconciliation of Adjusted EBITDA less Base Patient Capex and Adjusted EBITDA less Base Patient Capex Margin (which is calculated as Adjusted EBITDA less Base Patient Capex as a percentage of revenue) to net cash provided by operating activities, the most directly comparable GAAP measure of cash flow, see “Summary Consolidated Financial and Other Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Information.”

As of March 31, 2021, we had $343.8 million of outstanding term loans under the second amended and restated credit agreement, dated December 17, 2020, entered into among Rotech Intermediate Holdings LLC and certain of its subsidiaries, the guarantors thereto, Truist Bank as administrative agent, swingline lender and issuing bank and the lenders party thereto, which credit agreement was further amended on June 3, 2021 (See “Summary—Recent Developments”) (the “Rotech Healthcare Inc. Credit Facility”) and $149.3 million of term loans outstanding under the second consent and amendment to the credit agreement, dated December 17, 2020, entered into among Silver Point Finance, LLC, as administrative agent, and the lenders party thereto to the credit agreement dated as of April 6, 2018, and amended as of October 24, 2019 (as amended, the “Rotech Healthcare Holdings Credit Facility”). For the three months ended March 31, 2021, we had $8.3 million of interest expense. We expect to repay all amounts outstanding under the Rotech Healthcare Holdings Credit Facility in connection with this offering. Our Principal Stockholders and/or their respective affiliates are lenders under the Rotech Healthcare Holdings Credit Facility and therefore will receive a portion of the net proceeds to us from the offering. See “Use of Proceeds.”

Industry Overview

According to the U.S. Census Bureau, the United States population aged 65 and over will grow substantially from 15.2% of the population in 2016 to 20% of the population by 2030. According to CMS estimates, the aggregate expenditure associated with the U.S. home healthcare market was $113.5 billion in 2019, and is expected to grow at a CAGR of approximately 7% between 2018 and 2028. Within the home healthcare market, the HME market provides a broad array of cost-effective, critical and convenient medical equipment and supplies with significant therapeutic benefits for patients in the home. HME providers allow patients with complex and chronic conditions to transition out of higher acuity settings into their homes and achieve greater levels of independence.

Within the expansive HME market, respiratory therapy is the largest segment and is also experiencing accelerated growth through multiple industry tailwinds. Over the last decade, there has been a substantial increase in the number of patients suffering from significant respiratory issues, including chronic obstructive pulmonary disease (“COPD”), congestive heart failure (“CHF”) and OSA. According to industry reports, in 2019, the global markets for home oxygen concentrators, home ventilators, and CPAP devices were estimated to be $1.0 billion, $0.5 billion and $3.0 billion, respectively, and are projected to grow at a CAGR of approximately 15.2%, 7.3%, and 5.9%, respectively, from 2019 to 2024. In addition to the

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significant direct costs related to these disease states, we believe COPD and OSA, in particular, are highly underdiagnosed conditions with a large untapped market opportunity. In addition to respiratory diseases, wound care is also an increasingly attractive product segment. Wound care devices are products used to treat acute and chronic wound injuries. In 2019, the global market for wound care devices and supplies was projected to be approximately $3 billion by 2025 and this market is expected to grow at a CAGR of approximately 5.4% from 2019 to 2024. In particular, the global market size of NPWT devices, the largest sub-segment of wound care, was estimated to be approximately $1.0 billion in 2019 and is expected to grow at a CAGR of approximately 6.6% from 2019 to 2024.

We expect to benefit from the following continuing trends within the home healthcare market:

•

Aging Population. The CMS Office of the Actuary projects that the number of Medicare beneficiaries will grow, on average, by 2.5% annually over the period from 2020 to 2028.

•

Continued Shift Toward Home Healthcare Driven by the Compelling Economic Value Proposition to Key Stakeholders. Home healthcare is increasingly sought out as an attractive, cost-effective, clinically appropriate alternative to expensive facility-based care. For example, according to industry reports, on average, the cost of post-acute care per patient for Medicare at an inpatient rehabilitation facility or long-term care hospital is approximately $1,500 per day compared to approximately $50 per day for home healthcare. Additionally, the recent COVID-19 pandemic has amplified the importance of home healthcare as the pandemic has prevented or increased the difficulty of frequent visits to healthcare facilities.

•

Advancements in Medical Technology. The continued introduction of technologically advanced HME products and services that are cost-effective, portable and promote greater data accessibility and consumer engagement are expected to continue to expand the market opportunity for HME providers.

Our Strategic Evolution

Over the past several years, we undertook several initiatives not only to improve our business but also to better meet the needs of our patients, providers and Payors. We revamped our executive team by moving seasoned professionals into leadership positions. We refocused the culture of our organization on profitable growth and overhauled our incentive programs to align our employees with this shift. We rationalized our product and service offerings, streamlined selling, general and administrative expenses and headcount as well as capital expenditures through disciplined operations. We developed a proprietary technology platform to further optimize our operations and enhance the delivery of our products and services while helping achieve our low-cost market position. We established a comprehensive growth plan via organic and acquisitive means, which has helped us diversify our geographic footprint as well as its service offerings. Through our significant, long-term investment in these initiatives and our strong execution on this strategic evolution, we believe we are strongly positioned to continue our market leadership.

Our strategic evolution is comprised of key improvements in our core operations, as well as significant growth investments in our business.

Operational Improvements

New Management Team with Extensive Experience and Expertise. In order to best position our business, we elevated a team of professionals with deep industry and regulatory knowledge to leadership

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positions. We promoted Timothy C. Pigg to the roles of President and Chief Executive Officer in 2014 after over 20 years with the Company in several executive positions. We hired Thomas J. Koenig in 2015 as Chief Financial Officer and Treasurer after similar roles in several other distribution companies, and quickly followed that with the promotion of Robin Menchen to the role of Chief Operating Officer in late 2015 after over 20 years with the Company in several executive positions. These leadership changes enabled Rotech to take further steps to optimize and improve our business and drive a significant cultural shift.

Purposeful Cultural Shift to Drive Profitable Growth. In order to shift from a culture of revenue growth at all costs to one focused on disciplined and profitable growth, we developed a propriety technology platform for our collections process that seamlessly integrates with our client workflows, eligibility verifications and billing system. We are focused on obtaining complete and accurate patient and Payor information at the front-end to minimize bad debt, adjustments and excess administrative cost on the back end. We utilize a robust compliance solution to ensure patient care meets reimbursement standards set by Payors.

Exited Unprofitable Segments and Consolidated Products and Services. We focused on optimizing our business by discontinuing unprofitable products and services and providing more resources for patients, Payors and referral sources which met our minimum profitability threshold. For example, we rationalized our product offerings, which enabled us to substantially reduce our stock keeping unit (“SKU”) count during 2014 and continuously seek to optimize our SKU count.

Optimized Overall Costs of our Operation. We undertook a several year, multi-faceted approach to optimizing overall costs, including product costs, operating costs, SG&A and capital expenditure which helped drive Adjusted EBITDA less Base Patient Capex Margin to 19.7% in 2020 and Adjusted EBITDA less Base Patient Capex to $99.3 million in 2020. For example, we optimized our delivery model to reduce the number of deliveries, modernized our delivery fleet, improved asset management practices, rationalized real estate, improved product sourcing and improved Payor contracting.

Growth Investments

Developed Proprietary Technology Platform to Streamline Operations. We have invested approximately $74 million since 2013 in improving our customized, proprietary information technology platform. We have worked to automate all aspects of our core operations, including e-prescribing, insurance verification, patient intake, patient set up, patient education, billing and collection, as well as established a patient portal.

Created Incentive Plans to Align Employees with Culture of Profitable Growth. We instituted Company-wide quarterly and annual bonus plans and monthly incentive plans to create a culture of profitable growth. Nearly all employees are covered by a bonus plan and payments are tied to Company and individual performance.

New Approach to Optimize Capital Expenditures. We established a new approach to manage and optimize capital expenditures by evaluating three separate categories of capital expenditures: (1) base patient capital expenditures which we seek to minimize primarily through vendor negotiation and equipment recovery efforts, (2) growth patient capital expenditures which we seek to maximize to the extent it supports profitable growth and (3) other capital expenditures which we seek to manage on a long term basis to support investments in technology and maintaining an efficient fleet.

Comprehensive Strategy to Focus on Growth. We established a holistic growth strategy by first focusing on organic growth in core markets, then expanding that strategy into new products and services, deeper referral source relationships, additional patient categories and new geographic markets. Further, we augmented our organic growth strategy by building a comprehensive acquisition program to help drive growth. This effort started with purchases of small, founder-owned providers exiting the market and has more recently involved larger acquisitions to expand our geographic reach and add new products and services and patient categories, including the expansion into wound care supplies with the acquisition of Halo Wound Solutions in July 2020.

Since 2013, we have made transformational changes to our business and have made several operational improvements, as well as growth investments. As a result of our strategic evolution, our revenue grew at a CAGR of 13.9% from 2017 to 2020, and the growth rate increased to 23.2% in 2020. In 2020, net income increased to $119.2 million, Adjusted EBITDA increased to $152.6 million, Adjusted EBITDA Margin increased to 30.3%, net cash provided by operating activities increased to $139.1 million, Adjusted EBITDA less Base Patient Capex increased to $99.3 million and Adjusted EBITDA less Base Patient

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Capex Margin increased to 19.7%. We believe that Rotech is well positioned to compete and excel in the current industry environment and to successfully navigate any future changes in the industry.

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Note: Dollars in millions.

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted EBITDA less Base Patient Capex and Adjusted EBITDA less Base Patient Capex Margin are non-GAAP financial measures. For reconciliations of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to net income, the most directly comparable financial performance measure prepared in accordance with GAAP, see “Summary Consolidated Financial and Other Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Information.” For a reconciliation of Adjusted EBITDA less Base Patient Capex and Adjusted EBITDA less Base Patient Capex Margin to net cash provided by operating activities, the most directly comparable GAAP measure of cash flow, see “Summary Consolidated Financial and Other Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Information.” Adjusted EBITDA Margin is calculated as a percentage of revenue.

Our Competitive Strengths

We believe the continued growth of Rotech will be driven by the following competitive strengths:

Industry Leading Platform with National Distribution Footprint and Scalable Infrastructure. Size and scalability are significant competitive advantages in the fragmented HME industry, and we believe we are one of the largest providers of HME products and services in the United States. As of March 31, 2021, we served more than 600,000 active patients across over 300 service locations in 45 states, supported by more than 3,500 FTE employees and key Payor contracts (including over 1,750 commercial Payor contracts). Our locations serve both urban and rural markets, resulting in both national scale and local presence, which is not easily replicated by smaller providers. Our platform enables us to be a preferred partner for providers, Payors, patients and suppliers, all of whom depend on our robust distribution network for high-quality, reliable service, which ultimately drives volume.

Culture of Disciplined and Profitable Growth The current leadership team has led a long-term, carefully implemented profit-focused change to our culture over the past several years. Prior to this long-term initiative to create a culture of disciplined and profitable growth, we had prioritized high growth at all costs, as opposed to a disciplined and sustainable, profitable growth. As part of the current leadership’s long-term, successful strategy to change our culture, we focused on driving high organic, profitable growth by focusing on high-growth segments such as respiratory and wound products and services and significantly rationalizing SKUs to lower product costs and promote distribution efficiencies. We also exited unprofitable areas by discontinuing certain products and services and in certain geographies and patient categories.

Proprietary Information Technology and Automation Capabilities. Our proprietary technology platform has led to lower costs and has increased collections. Since 2013, we have invested approximately $74 million in improving our customized, proprietary information technology platform. We have automated key aspects of our core operations, including e-prescribing, insurance verification, patient intake, patient set up, education, billing and collection.

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Streamlined End-to-End Processes and Operational Rigor. Intake, delivery, billing and collections and asset management are key phases of our operational processes, where we have a strong cultural emphasis on ensuring robust process design and strict process controls to maximize efficiency and collections. As an example of proactive asset management, we focus on timely retrieval of non-billing assets and invoicing patients for any lost, damaged or stolen assets. These practices lead to decreased denied claims, collection times and other costs, all of which allows us to optimize our capital expenditures and increase cash flow.

HME Partner of Choice. We sit at the nexus of referring providers, Payors, patients, and suppliers—all of whom share the goal of keeping patients as healthy as possible in the comfort of their homes. We believe this position allows us to deliver significant value to all stakeholders involved in a patient’s care plan.

Leadership with Proven, Successful Track Record and Deep Industry Experience. We believe our leadership team’s long industry tenure, deep industry knowledge and strong relationships with our business partners are key competitive advantages. Our strong leadership team has an impressive, proven track record in navigating the complex, fragmented and regulated HME industry–with our current leadership team in place since seven years ago, we have exceeded our internal budget every year.

Our Growth Strategy

Our goal is to be the leader in the HME industry with market leading growth. We believe the following strategies are primarily responsible for our growth to date and will continue to drive growth of our business.

Continue to drive market-leading organic growth. We believe the products and services we offer in our core product lines—oxygen, ventilators, sleep therapy and wound care—will enable us to grow in such markets and expand into new adjacent areas. We operate in attractive, growth-oriented markets with long term positive demand trends, such as an aging population, the rising prevalence of chronic health issues such as COPD, diabetes and obesity, and a shift towards home healthcare. Further, through our efforts to educate patients, providers and Payors, we believe we are increasing the size of our addressable markets and driving adoption by increasing awareness and expanding access to care for new patients. With a scalable platform, long-standing relationships with referral sources as well as national and regional insurers and MCOs, and a proven ability to execute, we believe we have a significant opportunity to continue to drive market-leading organic growth through our current operations.

Continue and Accelerate our Growth Through Strategic Acquisitions. We intend to enhance our organic growth with a strategic, disciplined acquisitions strategy. The HME market in which we operate is highly fragmented with an estimated 9,300 providers, most of which lack our scale, distribution footprint and technology infrastructure. Since 2016, we have completed over 60 accretive asset purchases and since the beginning of 2020, we completed four larger stock purchase acquisitions. With our strong track record of successful strategic acquisitions, an extensive acquisitions team and a robust proprietary technology platform in place, we intend to accelerate our inorganic growth by taking advantage of the fragmented HME market.

Drive Profitable Market Share Gains. We believe we will continue to gain market share from competitors through various strategies we have implemented, including:

•

Augmenting our sales team with individuals that have strong referral source relationships;

•

Increasing the number of preferred provider agreements;

•

Increasing the number of preferred relationships with Payors;

•

Refining major market strategies to continue to penetrate large metropolitan markets;

•

Continuing to create annual growth plans for each of our over 300 locations, by products and services; and

•

Maintaining compensation, bonus and incentive structures to be focused on profitable growth.

We believe that these strategies, combined with our operating rigor and focus on execution, have allowed us to grow at a highly attractive organic growth rate and will continue to drive our strong growth.

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Continue to Expand Our Product and Service Offerings. We have an efficient, proven, and scalable home healthcare delivery platform to which new products and services can be added to enhance organic growth. We continue to regularly evaluate and add new product lines and services with high growth rates and attractive margins. We believe our experience in expanding products and service offerings will position us to grow in new areas and add new patient categories going forward such as diabetes care, ventilators for ALS (Lou Gehrig’s disease) and pediatric patients and other HME solutions.

Benefit from and facilitate value-based healthcare paradigm shift. The shift to value-based care and payment systems are increasing the pressure on providers to transition patients out of in-patient settings faster, prevent readmissions and monitor patient care in the home and deliver optimized treatments. Through our leading home care delivery platform, combined with our ability to deliver streamlined access to patient health information through our proprietary technology, we enable providers to implement outcomes-driven value-based care programs. This allows us to generate early notifications to providers for timely interventions.

Utilize technology platform to capture cross sell opportunities. As the level of co-morbidities increases and the overall utilization of home healthcare expands, we are focused on using our technology and data resources to identify opportunities to serve unmet needs of existing patients and address any gaps in care. Our proprietary technology platform combined with differentiated insights into patient information allows us to identify opportunities to cross-sell our products and services, better serve our patients and improve their quality of life. Our data-driven approach helps drive incremental access to care for our patients and drive organic growth.

Recent Developments

Recent Acquisitions

On April 30, 2021 the Company purchased a complementary business for $2.9 million in an all-cash transaction. This acquisition expands our wound care products and supplies business. As of the date of this offering, we are in the process of determining the allocation of the fair value of the consideration paid for the acquisition to the fair value of net assets received.

On June 3, 2021, Rotech Healthcare Inc. completed the acquisition of GAMMA Holdings, LLC and subsidiaries (“Gamma”) for $17.2 million in an all-cash transaction. Gamma primarily focuses on the rental of CPAP devices and the sale of CPAP supplies with two locations in Fredrick, Maryland and Allentown, Pennsylvania. The acquisition expands our CPAP patient base and provides two new locations to expand the geographic footprint for our other product offerings. As of the date of this offering, we are in the process of determining the allocation of the fair value of the consideration paid for the acquisition to the fair value of the net assets acquired. This acquisition was not a significant acquisition for accounting and Regulation S-X purposes and therefore the Company has not included pro forma information or historical financial statements of Gamma in this prospectus.

Amendment of Rotech Healthcare Inc. Credit Facility

On June 3, 2021 the Company amended the Rotech Healthcare Inc. Credit Facility to, among other things, (i) permit this offering (ii) effectuate certain other changes to the Rotech Healthcare Inc. Credit Facility to accommodate Rotech Healthcare Holdings Inc.’s status as a publicly listed company following this offering, (iii) permit the acquisition of Gamma (as defined below), (iv) increase the amount of permitted capital leases to $50 million, from $40 million and (v) permit the payment in full of the Rotech Healthcare Holding Credit Facility with the net proceeds to us from the offering. In addition, on June 3, 2021, we borrowed $18.5 million under the Acquisition Revolving Credit Facility of the Rotech Healthcare Inc. Credit Facility.

Preliminary Financial Results for Six Months Ended June 30, 2021

Our unaudited condensed consolidated financial statements for the six months ended June 30, 2021 are not yet available. We have presented preliminary estimated ranges of certain of our financial results below for the six months ended June 30, 2021 based on information currently available to management. Our financial closing procedures for the six months ended June 30, 2021 are not yet complete. As a result, our actual results for the six months ended June 30, 2021 may differ materially from the preliminary estimated

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financial results set forth below upon the completion of our financial closing procedures, final adjustments, and other developments that may arise prior to the time our financial results are finalized. You should not place undue reliance on these estimates. The preliminary estimated financial results set forth below have been prepared by, and are the responsibility of, management and are based on a number of assumptions. Our independent registered certified public accounting firm, RSM US LLP, has not audited, reviewed, compiled, or performed any procedures with respect to the preliminary estimated financial results. Accordingly, RSM US LLP does not express an opinion or any other form of assurance with respect thereto. See “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Special Note Regarding Forward-Looking Statements” for additional information regarding factors that could result in differences between the preliminary estimated ranges of certain of our financial results that are presented below and the actual financial results we will report for the six months ended June 30, 2021.

The preliminary estimated financial results set forth below should not be viewed as a substitute for full financial statements prepared in accordance with GAAP. We will not publicly file our actual unaudited condensed consolidated financial statements and related notes for the six months ended June 30, 2021 with the U.S. Securities and Exchange Commission (the “SEC”) until after the consummation of this offering. In addition, the preliminary estimated financial results set forth below are not necessarily indicative of results we may achieve in any future period. While we currently expect that our actual results will be within the ranges described below, it is possible that our actual results may not be within the ranges we currently estimate. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Summary—Consolidated Financial and Other Data” and “Selected Consolidated Financial and Other Data” together with the consolidated financial statements and related notes thereto included elsewhere in this prospectus for additional information regarding our historical financial results.

We have presented the following preliminary estimated ranges of certain of our financial results for the six months ended June 30, 2021:

Six Months Ended
June 30, 2021

Low

High

(in thousands)

Statement of Operations Data:

Revenues

Operating expenses

Gross Margin

Net income

Key Performance Indicators:

EBITDA(a)

Adjusted EBITDA(a)

Adjusted EBITDA Margin(a)

Adjusted EBITDA less Base Patient Capex(b)

Adjusted EBITDA less Base Patient Capex Margin(b)

(a)

See footnote (1) on pages 19 and 20 under “—Summary Consolidated Financial and Other Data.” The table titled “Reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to Net Income for the Six Months Ended June 30, 2021” below reconciles EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to net income, the most directly comparable financial performance measure prepared in accordance with GAAP.

(b)

See footnote (1) on pages 19 and 20 under “—Summary Consolidated Financial and Other Data.” The table titled “Reconciliation of Adjusted EBITDA less Base Patient Capex and Adjusted EBITDA less Base Patient Capex Margin to Net Cash provided by Operating Activities for the Six Months Ended June 30, 2021” below reconciles Adjusted EBITDA less Base Patient Capex and Adjusted EBITDA less Base Patient Capex Margin to net cash provided by operating activities, the most directly comparable financial measure of cash flow prepared in accordance with GAAP.

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Reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to Net Income for the Six Months Ended June 30, 2021

Six Months Ended
June 30, 2021

Low

High

(in thousands)

Net income

Interest expense(1)

Income tax (2)

Depreciation and amortization(3)

EBITDA

Adjustments(4)

Adjusted EBITDA

Adjusted EBITDA Margin(5)

(1)

Interest expense for the six months ended June 30, 2021 related to .

(2)

Income tax for the six months ended June 30, 2021 related to .

(3)

Depreciation and amortization for the six months ended June 30, 2021 related to .

(4)

Other EBITDA adjustments include .

(5)

Adjusted EBITDA Margin is Adjusted EBITDA as a percentage of revenue and is calculated as follows:

Six Months Ended
June 30, 2021

Low

High

(in thousands)

Adjusted EBITDA

Revenue

Adjusted EBITDA Margin

Reconciliation of Adjusted EBITDA less Base Patient Capex and Adjusted EBITDA less Base Patient Capex Margin to Net Cash provided by Operating Activities for the Six Months Ended June 30, 2021

Six Months Ended
June 30, 2021

Low

High

(in thousands)

Net cash provided by operating activities

Gain on sales of property and equipment

Other

Changes in Operating Assets and Liabilities (excluding interest and taxes)

Interest Income

Interest Paid

Income Taxes Paid

Adjustments

Base Patient Capex(1)

Adjusted EBITDA less Base Patient Capex(2)

Adjusted EBITDA less Base Patient Capex Margin(3)

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(1)

(2)

Adjusted EBITDA less Base Patient Capex for the six months ended June 30, 2021 related to .

(3)

Adjusted EBITDA less Base Patient Capex Margin is Adjusted EBITDA less Base Patient Capex as a percentage of revenue and is calculated as follows:

Six Months Ended
June 30, 2021

Low

High

(in thousands)

Adjusted EBITDA less Base Patient Capex

Revenue

Adjusted EBITDA less Base Patient Capex Margin

Our Principal Stockholders

Capital Group is one of the oldest and largest privately held investment management organizations in the United States with nearly 90 years of investment experience. Through its investment management subsidiaries, Capital Group actively manages equity and fixed income investments in various collective investment vehicles and institutional client separate accounts globally. The vast majority of these assets consist of the American Funds family of mutual funds, which are U.S. regulated investment companies managed by Capital Research and Management Company. Capital Group is an active manager that uses rigorous fundamental research to find attractive investments and manage risks.

Silver Point is a registered investment adviser specializing in global credit and special situations investing. The firm, based in Greenwich, Connecticut, was launched in 2002 by Edward Mulé and Robert O’Shea, both previously Partners at Goldman Sachs, where they co-headed Goldman’s Special Situation Investing Business. The firm was designed and built to have the deep resources, expertise and capital needed to invest in the global credit markets throughout credit cycles. Silver Point employs a deeply analytical, fundamentally-driven, bottom-up approach to investing and invests across a variety of industries, geographies and capital structures. As of March 31, 2021, Silver Point has over 170 employees and manages approximately $13.5 billion in capital.

Venor is an event-driven investment firm specializing in sub-investment grade stressed, distressed, and special situation corporate opportunities in North America and Europe, with a focus on middle market capital structures. The firm, based in New York, New York, was founded in 2005 by the firm’s Co-Chief Investment Officers, Michael Wartell and Jeffrey Bersh. Venor seeks to uncover under-valued, under-followed, and misunderstood opportunities, driven by both secular and cyclical shifts. Furthermore, Venor’s focus on middle market business allows the team to play a critical role in the process whereby they can leverage decades of experience navigating highly complex situations.

After the completion of this offering, our Principal Stockholders collectively will beneficially own approximately % of our common stock (or % if the underwriters exercise their option to purchase additional shares in full). See “Principal Stockholders” and “Risk Factors—Each of our Principal Stockholders and their affiliates control us and their individual interests may conflict with ours or yours in the future.” Since none of our Principal Stockholders will individually own more than 50% of the voting power of our common stock, the Company will not be a “controlled company” within the meaning of the Nasdaq Global Select Market (“Nasdaq”) corporate governance standards.

Our Principal Stockholders and/or their respective affiliates are lenders under the Rotech Healthcare Holdings Credit Facility and therefore will receive a portion of the net proceeds to us from the offering. Silver Point Finance, LLC, an affiliate of Silver Point, serves as administrative agent under the Rotech Healthcare Holdings Credit Agreement. Upon repayment of the Rotech Healthcare Holdings Credit Facility,

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Capital Group and its affiliates will receive $ , Silver Point and its affiliates will receive $ and Venor and its affiliates will receive $ therefrom.

Risk Factors

An investment in shares of our common stock involves substantial risks and uncertainties that may adversely affect our business, results of operations and financial condition. You should carefully consider all of the information set forth in this prospectus and, in particular, should evaluate the specific factors set forth in the section titled “Risk Factors” immediately following this prospectus summary in deciding whether to invest in our common stock. These risks include, among others, the following:

•

we depend on reimbursements by Payors, which can and do change fee schedules, contract terms, reimbursement rules and standards of care which can lead to lower reimbursement rates, higher rate of denials and additional costs;

•

our Payor contracts, including those with organizations that represent a significant portion of our business, are subject to renegotiation or termination which could result in a decrease in our revenue and profits;

•

the recall of certain Royal Philips BiPAP and CPAP devices and ventilators that we distribute and sell and our reliance on new, alternative suppliers for these products could have a material negative impact on our business, results of operations, financial condition and prospects.

•

possible changes in the mix of patients and products and services provided, as well as Payor mix and payment methodologies, could have a material adverse effect on our business, results of operations, financial condition and prospects;

•

material contracts with the VA may not be extended or re-awarded to us as they expire, which could cause a material negative impact to our revenue and profitability; six of our seven VA contracts have a current expiration date during 2021 and, if such VA contracts are not extended by the end of 2021, in part due to a 2016 U.S. Supreme Court decision favoring veteran-owned small businesses, we will lose substantially all of our VA revenue over the next one to three years;

•

the recent COVID-19 pandemic and the global attempt to contain it may harm our business, results of operations, financial condition and prospects and ability to execute on our business plan;

•

ventilator product line revenues may be negatively impacted by various actions taken by Payors, our competitors and regulators;

•

if we are unable to provide consistently high quality of care at lower costs, our business will be adversely impacted;

•

our failure to establish and maintain relationships with hospital and physician referral sources may cause our revenue to decline;

•

our failure to successfully design, modify and implement technology and other process changes to maximize productivity and ensure compliance could ultimately have a significant negative impact on our business, results of operations, financial condition and prospects;

•

our failure to maintain controls and processes over billing and collections, including impacts from the outsourcing or offshoring of parts of our billing and collections activities, estimating the collectability of our accounts receivable or the deterioration of the financial condition of our Payors, could have a significant negative impact on our business, results of operations, financial condition and prospects;

•

our reliance on relatively few vendors for the majority of our patient equipment and supplies and new excise taxes which are to be imposed on certain manufacturers of such items could adversely affect our ability to operate;

•

we rely on, and in the future we may rely on, third-party contractors and components for certain of our technology, software, information systems and products and our disaster recovery plan;

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•

changes or disruption in supplies, or inability to timely scale-up manufacturing of our products and services provided by third parties could adversely affect our business;

•

unexpected changes in vendor payment terms may weaken our financial position;

•

our business is dependent on the protection of our intellectual property. If our intellectual property rights or our protection and enforcement of them is inadequate to protect our competitive advantage, our business, results of operations, financial condition and prospects could be adversely affected;

•

we may be subject to intellectual property infringement claims or other allegations, which could result in payment of substantial damages, penalties and fines and removal of data or technology from its system;

•

if our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected;

•

our capitation arrangement may prove unprofitable if actual utilization rates exceed our assumptions;

•

we are highly dependent upon senior management; our failure to attract and retain key members of senior management could have a material adverse effect on us;

•

the home healthcare industry is highly competitive and fragmented and susceptible to vertical integration by manufacturers and suppliers, Payors, providers (such as hospital systems) or disruptive new entrants;

•

we may be adversely affected by consolidation among health insurers and other industry participants;

•

there is an inherent risk of liability in the provision of healthcare services; damage to our reputation or our failure to adequately insure against losses, including from substantial claims and litigation, could have an adverse impact on our business, results of operations, financial condition and prospects;

•

any economic downturn, deepening of an economic downturn, continued deficit spending by the federal government or state budget pressures may result in a reduction in payments and covered services;

•

changes in home healthcare technology and/or product and therapy innovations may make the equipment and services we currently provide obsolete or less competitive;

•

our failure to comply with regulatory requirements or receive regulatory clearances or approvals for the Company’s products or operations in the United States could adversely affect our business;

•

reductions in Medicare, Medicaid and commercial Payor reimbursement rates could have a material adverse effect on our business, results of operations, financial condition and prospects;

•

we, our employees, independent contractors, consultants, vendors and commercial partners may fail to comply with applicable laws and regulations or engage in misconduct or other improper activities. If we fail to comply with applicable laws and regulations, we could suffer penalties or be required to make significant changes to our operations;

•

we have been and could become the subject of federal and state investigations and compliance reviews;

•

if we fail to maintain required licenses, certifications, or accreditation, or if we do not fully comply with requirements to provide notice to or obtain approval from regulatory authorities due to changes in our ownership structure or operation, it could adversely impact our operations;

•

our operations are subject to various environmental, health and safety laws and regulations, including related to storage, transportation and provision of medical gas products and compressed and liquid oxygen, which carries an inherent risk of rupture, leaks, fires or other

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accidents, and could potentially result in fines or penalties or cause substantial loss and liability that could have a material adverse effect on our business, results of operations, financial conditions and prospects;

•

failure of a key information technology system, process or site could have an adverse effect on our business; and

•

a cyber-attack, a security breach or the improper disclosure of protected health information (“PHI”) could cause a loss of confidential data, give rise to remediation and other expenses, expose us to liability under HIPAA and the Health Information Technology for Economic and Clinical Health Act (“HITECH”), consumer protection, common law or other legal theories, subject us to litigation and federal and state governmental inquiries, damage our reputation, and otherwise be disruptive to our business.

Please see “Risk Factors” for a discussion of these and other factors you should consider before making an investment in shares of our common stock.

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Our Organizational Structure

The following diagram depicts our organizational structure and equity ownership immediately following this offering. This diagram is provided for illustrative purposes only and does not show all of our legal entities or ownership percentages of these entities.

[MISSING IMAGE: tm2114271d6-fc_organ4c.jpg]

(1)

After the completion of this offering, our Principal Stockholders will beneficially own % of our outstanding common stock (or % if the underwriters exercise their option to purchase additional shares in full), our other pre-IPO owners will own % of our outstanding common stock (or % if the underwriters exercise their option to purchase additional shares in full) and public stockholders will own % of our outstanding common stock (or % if the underwriters exercise their option to purchase additional shares in full) assuming an offering price of $ per share of common stock, which is the midpoint of the range on the cover of this prospectus. See “Principal Stockholders.”

(2)

As of March 31, 2021, there were $149.3 million of borrowings outstanding under a term loan under the Rotech Healthcare Holdings Credit Facility. We expect to repay all amounts outstanding under the Rotech Healthcare Holdings Credit Facility in connection with this offering. Our Principal Stockholders and/or their respective affiliates are lenders under the Rotech Healthcare Holdings Credit Facility and therefore will receive a portion of the net proceeds to us from the offering. See “Use of Proceeds.”

(3)

On June 3, 2021, the Company amended the Rotech Healthcare Inc. Credit Facility to (i) permit this offering, to (ii) effectuate certain other changes to the Credit Facility to accommodate Rotech Healthcare Holdings Inc.’s status as a publicly listed company following the initial public offering, (iii) permit the acquisition of Gamma, (iv) increase the amount of permitted capital leases to $50 million, from $40 million and (v) permit the payment in full of the Rotech Healthcare Holding Credit Facility with the net proceeds to us from the offering. In addition, on June 3, 2021, we borrowed $18.5 million under the Acquisition Revolving Credit Facility of the Rotech Health care Inc. Credit Facility. As of March 31, 2021, there were $330.8 million of borrowings outstanding under a term loan and no outstanding borrowings under the working capital revolving credit facility and

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$13.0 million of borrowings under the Acquisition Revolving Credit Facility of the Rotech Healthcare Inc. Credit Facility.

In connection with this offering we intend to enter into (i) a stockholders governance agreement with our Principal Stockholders to provide for certain corporate governance matters and (ii) an amended and restated registration rights agreement which will provide the pre-IPO stockholders demand registration rights and customary “piggyback” registration rights. See the section titled “Description of Common Stock—Registration Rights” for a description of these registration rights.

Emerging Growth Company

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). An emerging growth company may take advantage of specified reduced reporting requirements that are otherwise generally applicable to public companies. These reduced reporting requirements include:

•

the requirement to present only two years of audited financial statements and only two years of related management’s discussion and analysis in this prospectus;

•

the ability to elect to delay compliance with new or revised accounting standards until they are made applicable to private companies;

•

an exemption from compliance with the auditor attestation requirement on the effectiveness of our internal control over financial reporting;

•

reduced disclosure about our executive compensation arrangements; and

•

an exemption from the requirements to obtain a non-binding advisory vote on executive compensation or shareholder approval of any golden parachute arrangements.

We may take advantage of these provisions until we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest to occur of: (i) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (ii) the date we qualify as a large accelerated filer, which would occur as of the last day of the fiscal year in which we have been subject to SEC reporting requirements for at least 12 months, we have filed at least one Annual Report on Form 10-K, and we have at least $700 million of equity securities held by non-affiliates as of the end of the second quarter of that fiscal year; (iii) the date on which we have, in any three-year period, issued more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year ending after the fifth anniversary of the listing of our common stock on Nasdaq. We may choose to take advantage of some but not all of these reduced reporting burdens. We have taken advantage of certain reduced reporting burdens in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

The JOBS Act permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use this extended transition period until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period. As a result, our consolidated financial statements may not be comparable to the financial statements of companies that comply with new or revised accounting pronouncements as of public company effective dates.

For certain risks related to our status as an emerging growth company, see the section titled “Risk Factors—Risks Related to this Offering and Ownership of Our Common Stock—We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.”

Corporate Information

Rotech Healthcare Holdings Inc. was incorporated in Delaware on April 4, 2018. Our principal executive offices are located at 3600 Vineland Road, Orlando, Florida, 32811 and our telephone number is (407) 822-4600.

Our website address is www.rotech.com. The information on, or that can be accessed through, our website is not part of this prospectus and is not incorporated by reference herein. We have included our website address as an inactive textual reference only.

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The Offering

Common stock offered by us

shares.

Option to purchase additional shares

We have granted the underwriters an option to purchase up to additional shares of common stock at the public offering price less underwriting discounts and commissions, which can be exercised at any time within 30 days after the date of this prospectus.

Common stock outstanding immediately after this
offering

shares (or shares if the underwriters exercise their option to purchase additional shares in full). See “Our Organizational Structure.”

Use of proceeds

We estimate that the net proceeds to us from the sale of our common shares in this offering will be approximately $ million (or approximately $ million if the underwriters exercise their option to purchase additional shares in full), based on the public offering price of $ per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We currently intend to use the net proceeds from this offering, together with our existing cash and cash equivalents, to (i) repay all amounts outstanding under the Rotech Healthcare Holdings Credit Facility and (ii) for general corporate purposes, including working capital, operating expenses and capital expenditures. We may also use a portion of the net proceeds from this offering for the acquisition of businesses or other assets that we believe are complementary to our own. Our Principal Stockholders and/or their respective affiliates are lenders under the Rotech Healthcare Holdings Credit Facility and therefore will receive a portion of the net proceeds to us from the offering. See “Use of Proceeds” for additional information.

Risk factors

Investing in shares of our common stock involves risks. See “Risk Factors” for a discussion of risks you should carefully consider before deciding to invest in our common stock.

Proposed Nasdaq trading
symbol

“ROTK”

In this prospectus, unless otherwise indicated, the number of shares of common stock outstanding and the other information based thereon is based on 8,000,000 shares outstanding as of March 31, 2021, after giving effect to this offering, including application of the use of proceeds thereof and the repayment of the Rotech Healthcare Holdings Credit Facility and does not reflect shares of common stock reserved for future issuance under the 2021 Omnibus Incentive Plan (which amount includes shares of restricted stock with an approximate aggregate value of $ , restricted stock stock units with an approximate aggregate value of $ and stock options with an approximate aggregate value of $ that we currently intend to grant to certain of our service providers upon effectiveness of this offering). See “Executive and Director Compensation—Post-IPO Equity Compensation Plans—2021 Omnibus Incentive Plan.”

Except as otherwise specifically indicated, all information in this prospectus assumes or gives effect to the following:

•

a -for-1 forward stock split of our common shares to be effective on , 2021;

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•

no exercise of the underwriters’ option to purchase up to additional common shares in this offering;

•

no exercise of the outstanding options described above after March 31, 2021;

•

the redemption of the Rotech Healthcare Holdings Credit Facility with a portion of the proceeds from this offering; and

•

the filing and effectiveness of our amended articles of incorporation which will occur immediately prior to the completion of this offering.

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Summary Consolidated Financial and Other Data

The following tables summarize, for the periods and as of the dates indicated, our consolidated financial data. We have derived the summary consolidated statements of operations data for the years ended December 31, 2020 and 2019 and the summary consolidated balance sheet data as of December 31, 2020 and 2019 from our audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated statements of operations data for the three months ended March 31, 2021 and 2020 and the summary consolidated balance sheet data as of March 31, 2021 were derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. The unaudited condensed consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and, in the opinion of our management, reflect all normal recurring adjustments necessary for the fair statement of our consolidated results for these periods. The results for any interim period are not necessarily indicative of the results that may be expected for the full year. Our historical results are not necessarily indicative of the results expected for any future period.

You should read the summary consolidated financial data below, together with the consolidated financial statements and related notes thereto appearing elsewhere in this prospectus, as well as “Selected Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the other financial information included elsewhere in this prospectus.

	Three Months Ended March 31,						Year Ended December 31,
(in thousands, except per share data)	2021			2020			2020			2019
Summary Statement of Operations Data:
Revenues		$	142,003		$	110,842		$	503,183		$	408,304
Cost of revenues:
Product and supply costs			18,955			15,357			69,698			57,352
Patent service equipment depreciation			19,177			16,648			68,872			57,610
Operating expenses			16,032			14,690			59,559			53,134
Total cost of revenues			54,164			46,695			198,129			168,096
Gross profit			87,839			64,147			305,054			240,208
Gross Margin			61.9%			57.9%			60.6%			58.8%
Expenses:
Selling, general and administrative			59,222			48,276			221,838			183,967
Depreciation and amortization			2,805			1,297			7,913			5,190
Total expenses			62,027			49,573			229,751			189,157
Operating income			25,812			14,574			75,303			51,051
Other expenses (income):
Interest expense, net			8,301			14,619			45,661			52,481
Loss on debt refinance			—			—			1,700			4,637
Other (income) expense, net			(7)			54			145			(722)
Total other expense			8,294			14,673			47,506			56,396
Income (loss) before income taxes			17,518			(99)			27,797			(5,345)
Income tax expense (benefit)			4,674			97			(91,363)			(9,148)
Net income (loss)		$	12,844		$	(196)		$	119,160		$	3,803
Basic and diluted earnings (loss) per share:
Net income (loss) per share(1)		$	1.61		$	(0.02)		$	14.90		$	0.48
Weighted average shares outstanding:
Basic and diluted(2)			8,000.00			8,000.00			8,000.00			8,000.00

(1)

Net income per share represents net income divided by the common shares issued and outstanding.

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(2)

Basic and diluted weighted average shares outstanding: We had 9,600,000 shares authorized and 8,000,000 shares issued and outstanding at December 31, 2020 and 2019 and at March 31, 2021 and 2020.

	As of March 31,						As of December 31,
(in thousands)	2021			2020			2020			2019
Summary Balance Sheet Data:
Current assets		$	140,918		$	130,986		$	129,625		$	116,944
Property and equipment, net			189,733			141,179			177,707			137,413
Total assets			697,764			534,442			668,510			516,958
Current liabilities			150,202			125,674			147,880			112,986
Other long-term liabilities			11,124			9,762			11,155			6,732
Deferred tax liability			—			23,370			—			23,370
Debt, less current portion			493,836			465,234			479,717			463,272
Total liabilities			655,162			624,040			638,752			606,360
Total stockholders’ equity (deficit)			42,602			(89,598)			29,758			(89,402)

	Three Months Ended March 31,						Year Ended December 31,
(in thousands)	2021			2020			2020			2019
Operational and Other Data:
EBITDA(1)		$	47,801		$	32,465		$	150,243		$	109,936
Adjusted EBITDA(1)			48,440			32,568			152,615			115,651
Adjusted EBITDA Margin(1)			34.1%			29.4%			30.3%			28.3%
Adjusted EBITDA less Base Patient Capex(1)			32,310			21,585			99,321			65,284
Adjusted EBITDA less Base Patient Capex Margin(1)			22.8%			19.5%			19.7%			16.0%

(1)

EBITDA is a non-GAAP measure that represents net income for the period before the impact of interest income, interest expense, income taxes, and depreciation and amortization. EBITDA is widely used by securities analysts, investors and other interested parties to evaluate the profitability of companies. EBITDA eliminates potential differences in performance caused by variations in capital structures, tax positions, the cost and age of tangible assets and the extent to which intangible assets are identifiable. Adjusted EBITDA is a non-GAAP measure that represents EBITDA before certain items that impact comparison of the performance of our businesses either period-over-period or with other businesses. We use Adjusted EBITDA as a key profitability measure to assess the performance of our businesses. We believe that Adjusted EBITDA should, therefore, be made available to securities analysts, investors and other interested parties to assist in their assessment of the performance of our businesses. Adjusted EBITDA less Base Patient Capex is a non-GAAP measure that represents Adjusted EBITDA less purchases of patient equipment net of dispositions (“Base Patient Capex”). For purposes of this metric, Base Patient Capex is measured as the value of the patient equipment received, less the net book value of dispositions of patient equipment during the accounting period. This metric is useful in evaluating the liquidity of the Company as the business requires significant capital expenditures to maintain its patient equipment fleet due to asset replacement and contractual commitments. We believe that Adjusted EBITDA less Base Patient Capex should, therefore, be made available to securities analysts, investors, and other interested parties to assist in their assessment of the liquidity of our businesses.

Adjusted EBITDA Margin is a non-GAAP measure that represents Adjusted EBITDA as a percentage of revenue. Adjusted EBITDA less Base Patient Capex Margin is a non-GAAP measure that represents Adjusted EBITDA less Base Patient Capex as a percentage of revenue.

Below, we have provided a reconciliation of EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin to our net income, the most directly comparable financial performance measure calculated

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and presented in accordance with GAAP. We have also provided a reconciliation of Adjusted EBITDA less Base Patient Capex and Adjusted EBITDA less Base Patient Capex Margin to net cash provided by operating activities, the most directly comparable financial measure of cash flow calculated and presented in accordance with GAAP. EBITDA, Adjusted EBITDA, Adjusted EBITDA less Base Patient Capex, Adjusted EBITDA Margin and Adjusted EBITDA less Base Patient Capex Margin should not be considered alternatives to net income, net cash provided by operating activities or any other measure of financial performance or liquidity calculated and presented in accordance with GAAP. Our EBITDA, Adjusted EBITDA, Adjusted EBITDA less Base Patient Capex, Adjusted EBITDA Margin and Adjusted EBITDA less Base Patient Capex Margin may not be comparable to similarly titled measures of other organizations because other organizations may not calculate these measures in the same manner as we calculate these measures.

Our uses of EBITDA, Adjusted EBITDA, Adjusted EBITDA less Base Patient Capex, Adjusted EBITDA Margin and Adjusted EBITDA less Base Patient Capex Margin have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

•

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect capital expenditure requirements for such replacements or other contractual commitments;

•

EBITDA, Adjusted EBITDA, Adjusted EBITDA less Base Patient Capex, Adjusted EBITDA Margin and Adjusted EBITDA less Base Patient Capex Margin do not reflect changes in, or cash requirements for, our working capital needs;

•

EBITDA, Adjusted EBITDA, Adjusted EBITDA less Base Patient Capex, Adjusted EBITDA Margin and Adjusted EBITDA less Base Patient Capex Margin do not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness; and

•

other companies, including companies in our industry, may calculate EBITDA, Adjusted EBITDA, Adjusted EBITDA less Base Patient Capex, Adjusted EBITDA Margin and Adjusted EBITDA less Base Patient Capex Margin measures differently, which reduces their usefulness as a comparative measure. See “Summary Consolidated Financial and Other Data.”

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin exclude items that can have a significant effect on our profit or loss and should, therefore, be used in conjunction with, not as substitutes for, net income for the period. We compensate for these limitations by separately monitoring net income from continuing operations in each period.

Reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to Net Income for the Three Months Ended March 31, 2021 and 2020 and Years Ended December 31, 2020 and 2019

The following table reconciles EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to net income, the most directly comparable financial performance measure prepared in accordance with GAAP:

	Three Months Ended March 31,						Year ended December 31,
(in thousands)	2021			2020			2020			2019
Net income		$	12,844		$	(196)		$	119,160		$	3,803
Interest expense(1)			8,301			14,619			45,661			52,481
Income tax (benefit)(2)			4,674			97			(91,363)			(9,148)
Depreciation and amortization(3)			21,982			17,945			76,785			62,800
EBITDA			47,801			32,465		$	150,243		$	109,936
Loss on debt refinance(4)			—			—			1,700			4,637
Adjustments(5)			639			103			672			1,078
Adjusted EBITDA			48,440			32,568		$	152,615		$	115,651
Adjusted EBITDA Margin(6)			34.1%			29.4%			30.3%			28.3%

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(1)

Interest expense for the year ended December 31, 2020 was $45.7 million compared to $52.5 million for the year ended December 31, 2019, a decrease of $6.8 million. The decrease in interest expense for the year ended December 31, 2020 was primarily driven by the impact of lower interest rates. Interest expense for the three months ended March 31, 2021 was $8.3 million compared to $14.6 million for the three months ended March 31, 2020, a decrease of 6.3 million. The decrease in interest expense for the three months ended March 31, 2021 was primarily driven by lower overall long-term debt balances combined with lower overall average interest rates.

(2)

Income tax (benefit) for the year ended December 31, 2020 was $(91.4) million compared to $(9.1) million for the year ended December 31, 2019. In 2020, the deferred tax valuation reserve of $98.7 million was reversed as the Company determined that it will generate sufficient taxable income in the future to utilize their net operating loss carryforwards and credit carryforwards prior to their expirations. Income tax expense for the three months ended March 31, 2021 was $4.7 million compared to $0.1 million for the three months ended March 31, 2020.

(3)

Depreciation and amortization for the year ended December 31, 2020 was $76.8 million compared to $62.8 million for the year ended December 31, 2019, an increase of $14.0 million or 22.3%. The increase in depreciation and amortization for the year ended December 31, 2020 was primarily driven by the increase in capital expenditures for patient service equipment to facilitate our growth. Depreciation and amortization for the three months ended March 31, 2021 was $22.0 million compared to $17.9 million for the three months ended March 31, 2020, an increase of $4.1 million or 22.9%. The increase in depreciation and amortization for the three months ended March 31, 2021 was primarily driven by increased amortization expense related to intangible assets related to our acquisitions in 2020 and 2021.

(4)

Loss on debt refinance related to the refinancing of the Rotech Healthcare Inc. Credit Facility in both 2020 and 2019. The loss on debt refinance for the year ended December 31, 2020 was $1.7 million compared to $4.6 million for the year ended December 31, 2019, a decrease of $2.9 million, or 63.0%.

(5)

Other EBITDA adjustments include severance, outside legal and consulting costs in connection with Board directed consulting activities plus an administrative fee on the Rotech Healthcare Holdings Credit Facility.

(6)

Adjusted EBITDA Margin is Adjusted EBITDA as a percentage of revenue and is calculated as follows:

	Three Months Ended March 31,						Year ended December 31,
(in thousands)	2021			2020			2020			2019
Adjusted EBITDA		$	48,440		$	32,568		$	152,615		$	115,651
Revenue			142,003			110,842			503,183			408,304
Adjusted EBITDA Margin			34.1%			29.4%			30.3%			28.3%

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Reconciliation of Adjusted EBITDA less Base Patient Capex and Adjusted EBITDA less Base Patient Capex Margin to Net Cash provided by Operating Activities for the Three Months Ended March 31, 2021 and 2020 and Years Ended December 31, 2020 and 2019

The following table reconciles Adjusted EBITDA less Base Patient Capex and Adjusted EBITDA less Base Patient Capex Margin to net cash provided by operating activities, the most directly comparable financial measure of cash flow prepared in accordance with GAAP:

	Three Months Ended March						Years Ended December 31
(in thousands)	2021			2020			2020			2019
Net cash provided by operating activities		$	41,143		$	31,057		$	139,096		$	100,443
Gain on sales of property and equipment			424			28			552			996
Other			—			—			481			—
Changes in Operating Assets and Liabilities (excluding interest and taxes)			2,477			(2,456)			(3,981)			955
Interest Income			(1)			(117)			(118)			(635)
Interest Paid			3,743			3,940			15,933			12,736
Income Taxes Paid			15			13			(20)			78
Adjustments			639			103			672			1,078
Base Patient Capex(1)			16,130			10,983			53,294			50,367
Adjusted EBITDA less Base Patient Capex(2)		$	32,310		$	21,585		$	99,321		$	65,284
Adjusted EBITDA less Base Patient Capex Margin(3)			22.8%			19.5%			19.7%			16.0%

(1)

Base Patient Capex is the capital expenditure that is necessary to maintain the base patient count for each product, without any growth. Base patient capital expenditure includes purchases of new equipment to replace lost, damaged or stolen equipment, equipment that has reached end of its reasonable useful life or reached its rent-to-purchase cap. The increase in Base Patient Capex in the year ended December 31, 2020 results from the overall growth in patient counts offset by our asset recovery efforts to help ensure we recover our patient service equipment when the patients are no longer using it. The increase in Base Patient Capex in the three months ended March 31, 2021 results from the overall growth in patient counts offset by our asset recovery efforts to help ensure we recover our patient service equipment when the patients are no longer using it.

(2)

Adjusted EBITDA less Base Patient Capex was $99.3 million for the year ended December 31, 2020 compared to $65.3 million for the year ended December 31, 2019, an increase of $34.0 million or 52.1%. The increase in Adjusted EBITDA less Base Patient Capex for the year ended December 31, 2020, was primarily driven by the growth in revenues while leveraging our fixed-cost base and ensuring we recover our patient service equipment when the patients are no longer using it. Adjusted EBITDA less Base Patient Capex was $32.3 million for the three months ended March 31, 2021 compared to $21.6 million for the three months ended March 31, 2020, an increase of $10.7 million or 49.5%. The increase in Adjusted EBITDA less Base Patient Capex for the three months ended March 31, 2021 was primarily driven by the growth in revenues while leveraging our fixed-cost base and ensuring we recover our patient service equipment when the patients are no longer using it.

(3)

Adjusted EBITDA less Base Patient Capex Margin is Adjusted EBITDA less Base Patient Capex as a percentage of revenue and is calculated as follows.

	Three Months Ended March 31,						Year Ended December 31,
	2021			2020			2020			2019
Adjusted EBITDA less Base Patient Capex		$	32,310		$	21,585		$	99,321		$	65,284
Revenue		$	142,003		$	110,842		$	503,183		$	408,304
Adjusted EBITDA less Base Patient Capex Margin			22.8%			19.5%			19.7%			16.0%

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RISK FACTORS

An investment in shares of our common stock involves risks. You should carefully consider the following information about these risks, together with the other information contained in this prospectus, before investing in shares of our common stock. If any of the following risks occur, our business, results of operations, financial condition and future growth prospects could be materially and adversely affected. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below. See “Special Note Regarding Forward-Looking Statements.”

Risks Related to Our Business and Operations

We depend on reimbursements by Payors, which can and do change fee schedules, contract terms, reimbursement rules and standards of care, which can lead to lower reimbursement rates, higher rate of denials and additional costs.

We receive a substantial portion of our payments for our products and services from Payors, including national and regional insurers and MCOs, Medicare, Medicaid and the VA. For the year ended December 31, 2020, approximately 48.2%, 26.7%, 4.5% and 12.4% of our revenues were generated from MCOs, Medicare and Medicaid programs and the VA, respectively.

The reimbursement process is complex and can involve lengthy delays. Payors continue their efforts to control expenditures for healthcare products and services, including proposals to revise reimbursement policies. While we generally recognize revenue on the date of in-person delivery of equipment or rental revenues on the date of shipment or monthly anniversary date through a third party to the patient, or as a result of entering into a contract in the case of capitation revenue on the basis of insured lives without regard to the actual services provided, there can be delays before we receive actual payment for these products and services. In addition, Payors may disallow, in whole or in part, requests for reimbursement based on determinations that certain amounts are not reimbursable under plan coverage, that products or services provided were not medically necessary, or that additional supporting documentation is necessary, for one or more reasons, such as retroactive membership status change.

Recoupments and retroactive adjustments may change amounts realized from Payors. For example, we may not immediately be made aware of certain patients who have been admitted to a hospital, moved into skilled nursing facility care or passed away and we may continue to inadvertently bill such patients, thus resulting in an increase in recoupments or adjustments from Payors.

Certain Payors have filing deadlines and will not pay claims submitted after such deadlines. We are subject to audits of our reimbursement claims under MCO Plans, Medicare, Medicaid, and other governmental programs and may be required to repay these agencies if they determine that we were incorrectly reimbursed. Government Payors can and do in certain cases levy fines and other penalties related to any number of issues including overpayments, regulatory violations or other matters and in some cases even when the Company believes it followed appropriate regulatory guidelines. Delays and uncertainties in the reimbursement process may adversely affect our financial position or results and increase the overall costs of our collection efforts. The failure of our systems and billing and collection center employees to detect these errors, notify and convince the Payors of their errors and to obtain the corrected reimbursements could negatively impact our business, results of operations, financial condition and prospects.

Additionally, we have noticed a reduction in the number of home healthcare and providers included in certain Payors insurance plans. While we have retained all insurers that we transact with and have not lost any Payors as a result, we cannot guarantee that we will not be impacted in the future.

As such, due to the various factors outlined above, risks associated with collecting reimbursement from Payors and the inability to monitor and manage accounts receivable successfully could have a material adverse effect on our business, results of operations, financial condition and prospects.

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Our Payor contracts, including those with organizations that represent a significant portion of our business, are subject to renegotiation or termination which could result in a decrease in our revenue and profits.

From time to time, our Payor contracts are amended (sometimes through unilateral action by Payors regarding payment policy), renegotiated, subjected to a bidding process with our competitors, or terminated altogether. Sometimes in the renegotiation process, contracts in certain lines of business may not be renewed or a Payor may enlarge its provider network or otherwise adversely change the way it conducts its business with us. In other cases, a Payor may reduce its provider network in exchange for lower payment rates. Our revenue from a Payor may also be adversely affected if the Payor alters its utilization management expectations and/or administrative procedures for payments and audits, changes its order of preference among the providers to which it refers business or imposes a third-party administrator, network manager or other intermediary. Any reduction in our projected revenues as a result of these or other factors could also lead to impairment of the value of our intangible assets, which would result in a decrease in value of these assets on our balance sheet. We cannot assure you that our Payor contracts will not be terminated or altered in ways that are unfavorable to us as a result of renegotiation or such administrative changes. Terminations or alterations of contracts, particularly those that are concentrated with organizations that represent a significant portion of our business, could have a material effect on our business, results of operations, financial condition and prospects. Payors may also decide to refer business to their owned provider subsidiaries. Some Payors have developed or acquired, or may in the future develop or acquire, an ownership interest in our competitors or administrative intermediaries. These activities could materially reduce our revenue from these Payors.

The recall of certain Royal Philips BiPAP and CPAP devices and ventilators that we distribute and sell and our reliance on new, alternative suppliers for these products could have a material negative impact on our business, results of operations, financial condition and prospects.

On June 14, 2021, one of our largest suppliers of BiPAP and CPAP devices and ventilators, Royal Philips (“Philips”), initiated a voluntary recall notification with the U.S. Food and Drug Administration (“FDA”) for certain Philips BiPAP and CPAP devices and ventilators that we distribute and sell. Philips initiated this recall to address potential health risks related to the polyester-based polyurethane (“PE-PUR”) sound abatement foam component in these devices. To date, Philips has produced millions of BiPAP and CPAP devices and ventilators using the PE-PUR sound abatement foam. Despite a low complaint rate (0.03% in 2020), Philips determined based on testing that there are possible risks to users related to this type of foam, including that the foam may degrade into particles that may be ingested or inhaled by the user, and that the foam may off-gas certain chemicals. The potential risks of particulate exposure include headache, irritation, inflammation, respiratory issues, and possible toxic and carcinogenic effects. The potential risks of chemical exposure due to off-gassing include headache, irritation, hypersensitivity, nausea/vomiting, and possible toxic and carcinogenic effects.

Philips produces alternative BiPAP and CPAP devices and ventilators that are not impacted by the recall, however, these alternative BiPAP and CPAP devices and ventilators are being used to replace recalled BiPAP and CPAP devices and ventilators rather than be sold to suppliers for placement with newly diagnosed patients. Depending on the time it takes for the FDA and Philips to resolve the issue, potential delays and shortages of BiPAP and CPAP devices and ventilators may occur in our industry, which could have a significant negative impact on our business. To address the expected shortage in CPAP devices as a result of the Philips’ recall, we have reached an agreement with one of our existing distributors who was able to secure additional CPAP devices to be procured by a new FDA-registered supplier. These CPAP devices will be manufactured in China where the new supplier is based. The term of our agreement with the distributor is for a period of 12 months and can be terminated by either party with 90-day prior written notice for any reason. The agreement between the distributor and supplier can also be terminated by either party with 90-day prior written notice for any reason. Although no assurances can be given, we believe that the current arrangement will meet or exceed our foreseeable supply requirements based on our historical and projected needs. While we currently expect these needs to be met on a timely basis with the quality standards that we require, this supplier has not provided CPAP devices to us in the past. The supplier has limited experience selling CPAP devices to medical device companies based in the United States. The supplier’s device has been FDA-authorized under the Emergency Use Authorization (“EUA”) process as part of the federally-declared COVID-19 public health emergency and has not previously submitted an application for 510(k)

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clearance under the Federal Food, Drug and Cosmetic Act (“FFDCA”). If the FDA revokes or terminates the supplier’s EUA application after issuance, such as when the COVID-19 public health emergency ends, the supplier will be required to stop distribution of its CPAP devices unless it has obtained FDA clearance under a traditional regulatory pathway, and our business and financial results will have a material negative impact if we have not secured an alternative supplier at such time. Additionally, any supply chain issues, discrepancies in quality or components used by this supplier can result in increased manufacturing defects or the devices not performing as well as others we have used in the past, which could have a material negative impact on our business and financial results. Further, delays in manufacturing, shipping and/or customs may cause delays in receipt of these CPAP devices. While our net landed cost procured under this new agreement is slightly higher than the Philips’ CPAP device, we do not expect this to result in a material adverse impact to our financial results. However, unexpected costs from the delay of receipt of equipment, procurement of components for manufacturing, resolving manufacturing defects or setting up and retrieving compliance data could cause a negative impact on our business, results of operations, financial condition and prospects. To the extent that we experience any issues with this new supplier of CPAP devices, we may not be able to procure equipment on a timely basis or at all and any alternative sources, if available, could be at significantly greater cost to us. In addition, if the distributor breaches its agreement with the supplier in China, or if the supplier fails to deliver the CPAP devices to our distributor due to a breach by the supplier or any other reason, or if the terms of the contract between the distributor and the supplier in China are modified in a way that would negatively impact our ability to obtain the CPAP devices, this could result in a material adverse impact to our financial results. Any delay in our receipt of CPAP devices, failure to obtain timely regulatory clearances or authorizations and failure to meet good manufacturing practice requirements, failure to procure replacement products or at a reasonablecost, and any manufacturing defects, supply chain and quality issues could have a significant negative impact on our business, results of operations, financial condition and prospects.

Additionally, we do not currently know the full scope of potential risks that may arise as a result of the recall and replacement of BiPAP and CPAP devices and ventilators described above. Due to the volume of our patients currently using, or who in the past have used, the BiPAP and CPAP devices and ventilators affected by the recall described above as well as future users of the replacement devices, any litigation, class action or governmental enforcement actions (including, but not limited to, claims relating to product liability, negligence, patient harm including claims for wrongful death, consumer protection, or fraud, overpayment or improper billing for services and products affected by the recall or replacement) that may involve us could have a significant negative impact on our business, reputation, results of operations, financial condition and prospects. In general, the reporting of product defects or voluntary recalls to the FDA or analogous regulatory bodies outside the United States could result in manufacturing audits, inspections and broader recalls or other disruptions to our and/or our suppliers’ businesses. This and future recalls, whether voluntary or required, could result in significant costs to us and significant adverse publicity, which could harm our ability to market our products in the future.

Possible changes in the mix of patients and products and services provided, as well as Payor mix and payment methodologies, could have a material adverse effect on our business, results of operations, financial condition and prospects.

Our revenues are determined by a number of factors, including our mix of patients, the rates of payment among Payors and the mix of our products and services provided. A shift towards Payors with lower prices, or from higher gross margin products to lower gross margin products, would reduce our gross margins. Changes in the mix of our patients, products and services provided, payment methodologies or the Payor mix among commercial Payors, Medicare, and Medicaid could have a material adverse effect on our business, results of operations, financial condition and prospects. If the market opportunities for our products and services and patient categories are smaller or not as profitable as we have estimated, we have difficulties in expanding our products and services and patient categories or we fail to capture cross-selling opportunities, we may not be able to continue to grow as profitably as we have expected, which may adversely affect our business, results of operations, financial condition and prospects.

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Material contracts with the VA may not be extended or re-awarded to us as they expire, which could cause a material negative impact to our revenue and profitability; six of our seven VA contracts have a current expiration date during 2021 and, if such contracts are not extended by the end of 2021, in part due to a 2016 U.S. Supreme Court decision favoring veteran-owned small businesses, we will lose substantially all of our VA revenue over the next one to three years.

We are one of the largest providers of home oxygen services in the United States to patients served by the VA. Our total revenue from the VA in 2020 was $62.5 million, which was approximately 12.4% of our revenues for the year ended December 31, 2020. We have seven Veterans Integrated Service Networks (“VISNs”) exclusive contracts: six contracts to provide home oxygen and one contract to provide DME. These contracts are generally awarded as five-year contracts in the form of a one-year contract with four option years, but the VA can and does provide extensions past the five-year term, generally in one- to six-month increments. Six of our seven VA contracts have a current expiration date during 2021. Although we have received multiple extensions on these contracts in the past, there can be no assurance that they will be extended again which would cause us to lose substantially all of our VA revenue over the next one to three years.

The U.S. Supreme Court decision in Kingdomware Technologies, Inc. v. United States (2016), has affected procurement processes and decisions made by the VA. Prior to Kingdomware, the VA interpreted the contracting preference in 38 U.S.C. § 8127 for veteran-owned small businesses (“VOSBs”) and service-disabled veteran-owned small businesses (“SDVOSBs”) to be satisfied when the agency achieved its stated VOSB and SDVOSB contracting goals for the fiscal year and not applicable to certain types of orders. The Supreme Court ruled in Kingdomware that the statute requires the VA to award contracts through competitions restricted to VOSBs or SDVOSBs whenever the agency has a reasonable expectation that two or more such firms will submit offers and an award can be made at a fair and reasonable price and capable of servicing the contract, which is known as the “VA Rule of Two.” Under Kingdomware, the VA Rule of Two applies to all VA procurements, including through the Federal Supply Schedule (“FSS”). The VISN contract expiring in 2024 was awarded to us in 2019, after the VISN determined that there were no two or more VOSBs or SDVOSBs that submitted offers, which enabled Rotech and other larger providers to bid on the contract. Although the VA continues to award contracts to businesses other than VOSBs and SDVOSBs, the agency has placed greater emphasis on VOSBs and SDVOSBs in contracting decisions since Kingdomware. Kingdomware is limited to a statute that applies only to procurements conducted by the VA and not by any other regulatory agency.

As such, we have formed various joint ventures with a SDVOSB to enable us to bid on these contracts. There is no guarantee that these contracts will be extended when they expire. The impact of this risk could have a material impact on our revenue and earnings. Our ability to secure new VA business through our joint ventures cannot be assured. Additionally, even if our joint venture wins future bids on these contracts, these contracts will generate substantially lower revenue and profits as a result of lower overall pricing combined with having to share those revenues and profits with our joint venture partner. Furthermore, there is a risk that the joint venture may fail to fulfil the contract in its entirety or fail to perform the contracts to our standards, which could adversely affect our business, results of operations, financial condition and prospects or have a negative impact on our reputation.

While multiple extensions of contracts with the VA have historically occurred, there is no guarantee that this will continue. A sub-segment of the geography of one of these contracts has already transitioned to smaller competitors. We believe that, in part due to the Kingdomware decision favoring small business, we will lose substantially all of our VA revenue over the next one to three years, the timing of which will depend on whether extensions of contracts with the VA will continue past the most current expiration dates.

The recent COVID-19 pandemic and the global attempt to contain it may harm our business, results of operations, financial condition and prospects and ability to execute on our business plan.

The global spread of the COVID-19 pandemic and the various efforts to contain the outbreak has created significant volatility, uncertainty and economic disruption and have had a significant impact, both directly and indirectly, on businesses and commerce with as movement and travel of workers became limited, supply chains have been disrupted, facilities and production have been suspended, and demand for certain goods and services, such as medical equipment, supplies and services, has spiked, while demand for other

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goods and services, such as travel, has fallen. The future progression of the outbreak and its effects on our business and operations continues to be uncertain.

Government mandates and healthcare advisories have implemented various measures to control the spread of the outbreak through quarantines, executive orders, shelter-in-place orders, travel restrictions, heightened border scrutiny and other measures. Such orders or restrictions, and the perception that such orders or restrictions could continue or, after being lifted, be reinstated for a period of time, have resulted in business closures, work stoppages, slowdowns and delays, work-from-home policies, travel restrictions and cancellation of events, among other effects that could negatively impact productivity and disrupt our business and operations. To protect the health and safety of our employees, patients, suppliers and other vendors, we implemented a work-from-home policy for a significant portion of our workforce, put in place enhanced travel-safe policies and altered certain aspects of our operations, including acquisition and distribution of personal protective equipment (“PPE”) to our patient-facing employees and accelerated capital expenditures of certain products. While many of our operations can be performed remotely, there is no guarantee that we have been, or will be, as effective or productive in a work-from-home environment, given that our team is dispersed, many employees may have additional personal needs to attend to (such as looking after children as a result of school closures or family who becomes sick), and employees may become sick themselves and unable to work. While the impact of the COVID-19 pandemic did not have a material adverse impact on our consolidated operating results for the twelve months ended December 31, 2020 or the three months ended March 31, 2021, we have experienced intermittent declines in revenues from certain services associated with certain of our product categories and disruption in certain physician practices (such as a decline in the set up of CPAP devices) due to prioritization of hospital resources toward the COVID-19 pandemic, which may continue during the duration of the COVID-19 pandemic. These declines were offset by an increase in revenue related to increased demand for certain respiratory products (such as oxygen concentrators, tanks and ventilators) and increased sales in our PAP resupply businesses. There is no guarantee that these offsetting increases in revenue will continue during the duration of the COVID-19 pandemic. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Impact of COVID-19 Pandemic.”

Similarly, our third-party suppliers and vendors may face disruptions in their operations. The COVID-19 pandemic has impacted manufacturing in regions where some of our vendors manufacture their products. Shortages of key equipment, such as stationary oxygen concentrators, or delays in manufacturing or transport have caused us to pay premium air freight or purchase alternative equipment at a higher cost. In 2020, these added costs were fully offset by the COVID-19 relief funds provided under Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. In response to the COVID-19 pandemic, our sales force have had to adopt certain changes in their policies and practices related to their interactions with new and existing patients and building relationships with referral sources, methods of monitoring and driving patient compliance with use of prescribed medical equipment and data collection processes to increasingly rely on digital technologies. In addition, key regulatory agencies that we interact with, including the Food and Drug Administration (“FDA”), CMS and HHS may adjust their operations, reassess their capacities and redirect resources in a way that would adversely impact our ability to obtain necessary certificates, approvals or bidding contracts in our expected timeline. For instance, we may face impediments to regulatory meetings due to measures intended to limit in-person interactions or delays in inspections that are necessary for potential approvals and accreditation to conduct our business. Furthermore, given increased government expenditures associated with its response to the COVID-19 pandemic, we could see increased government obligations which could negatively impact reimbursement rates, and accordingly, our business, results of operations, financial condition and prospects. If our third-party vendors and regulators continue to experience shutdowns or operational disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted.

While the pressures of global business closures, limitations on movement, economic disruptions and related impacts of the COVID-19 pandemic have abated in 2021, especially with the availability of vaccines and continued government measures to slow the spread of the outbreak, there is risk that such disruptions continue and the business, economic and financial impact of any such disruption cannot be estimated at this time. Should such disruptions and restrictions continue for an extended period of time, our business, results of operations, financial condition and prospects may be materially and adversely affected. To the extent the resulting economic disruption is severe, we could see some of our third-party suppliers and

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vendors go out of business, resulting in supply and/or service constraints as well as increased costs or delays in meeting the needs of our patients.

The extent to which the COVID-19 pandemic and the various responses to control the outbreak may impact our business, results of operations, financial condition and prospects will depend on numerous other evolving factors that we are not able to predict, including:

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the duration, severity and scope of the COVID-19 pandemic;

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governmental, business and individuals’ actions that have been and continue to be taken in response to the COVID-19 pandemic;

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the availability of, and cost to access, the capital markets;

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our ability to pursue, finance and integrate acquisitions and conduct related diligence;

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our ability to comply with financial and operating covenants in our debt and operating lease agreements;

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potential for intangible asset impairment charges;

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the increased cost and loss of efficiency associated with additional precautionary measures taken in order to engage in in-person interactions with, and provide care to, patients infected or potentially infected with COVID-19;

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the effect on our patients and physician/facility referral sources, and the demand for and ability to pay for healthcare services;

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disruptions or restrictions on our employees’ ability to travel and work, including as a result of their health and well-being;

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availability of third-party providers to whom we outsource portions of our internal business functions, including billing, collections, administrative and information systems and other services;

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ability of our third-party suppliers and other vendors to maintain their delivery commitments;

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risk of contagion as a result of interaction between patients, referral sources (and other constituencies). and our employees; and

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increased risk of cybersecurity breaches and other unauthorized uses as a result of remote working conditions.

During the COVID-19 pandemic, we may not be able to provide the same level of service and products that our patients and physicians/facility referral sources are used to, which could negatively impact their perception of our products and/or services.

We will continue to actively monitor the issues raised by the COVID-19 pandemic and may take further actions that alter our business operations, as may be required by federal, state, or local authorities, or that we determine are in the best interests of our patients, employees, and stockholders. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our patients, suppliers or vendors, or on our financial results. Further, while the potential economic impact brought by and the duration may be difficult to assess or predict, the COVID-19 pandemic has resulted in significant disruptions of global financial markets, which could reduce our ability to access capital, which could in the future negatively affect our liquidity.

The potential effects of the COVID-19 pandemic on our business, results of operations, financial condition and prospects may also have the effect of heightening many of the other risks described in this “Risk Factors” section, including as a result of, but not limited to, the factors described above. Due to the unprecedented and constantly evolving nature of the COVID-19 pandemic, its impact or that of a similar health epidemic is highly uncertain and subject to change.

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The sizes of the market opportunities for our HME products and services and future areas of expansion have not been established with precision and may be significantly smaller than we estimate. If we overestimate the size and growth in the markets in which we currently or plan to operate in, our business, results of operations, financial condition and prospects may be adversely affected and we may not be able to grow the markets for our products and services as intended or at all.

Our assessment of the potential market opportunity for the HME products and services that we offer, especially in our five core business lines–oxygen, ventilators, sleep therapy, wound care and DME–as well as other areas and patient populations in which we seek to expand, such as diabetes and ventilators for ALS and pediatric patients, is based on industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties, which we have not commissioned, and our own internal market research and estimates. The potential market opportunities for our HME products and services are difficult to precisely estimate because the patient population that would benefit from our medical equipment and supplies often have comorbid conditions with many disease states and some conditions, such as COPD and OSA, are highly underdiagnosed. Therefore, our estimates of the potential market opportunities for our HME products and services include several key assumptions based on our industry knowledge, industry publications, third-party research and our own market research and estimates, which may be based on a small sample size and fail to accurately reflect market opportunities. If any of our assumptions or estimates, or these publications, research, surveys or studies prove to be inaccurate, then the actual market for our HME products and services may be smaller than we expect, and as a result our sales growth, revenue and profitability may be limited and the actual market opportunity could be less than our forecasts.

Ventilator product line revenues may be negatively impacted by various actions taken by Payors, our competitors and regulators.

Changes to the medical necessity criteria related to ventilators could increase the difficulty for patients who have been prescribed a ventilator to qualify under the Medicare rules. CMS defines “medically necessary” as services or supplies that: are proper and needed for the diagnosis or treatment of one’s medical condition; are provided for the diagnosis, direct care, and treatment of one’s medical condition; meet the standards of good medical practice in the local area; and are not mainly for the convenience of the patient or doctor. This could lead to a decline in the demand for our products and have a negative impact on our revenues.

If we are unable to provide consistently high quality of care at lower costs, our business will be adversely impacted.

Providing high quality patient care at lower cost is the cornerstone of our business. We believe that hospitals, physicians and other referral sources refer patients to us in large part because of our reputation for delivering high quality care at lower cost. Clinical quality is becoming increasingly important within our industry. Medicare imposes a financial penalty upon hospitals that have excessive rates of patient readmissions within 30 days from hospital discharge for patients with specific medical conditions. We believe this provides a competitive advantage to home healthcare providers who can differentiate themselves based upon quality, particularly by achieving low patient acute care hospitalization readmission rates and by implementing disease management programs designed to be responsive to the needs of patients served by referring hospitals. We are focused on improving our patient outcomes. If we should fail to attain our goals regarding patient acute care hospitalization readmission rates and other quality metrics, we expect our ability to generate referrals would be adversely impacted, which could have a material adverse effect on our business, results of operations, financial condition and prospects.

However, we may need to increase costs, including for clinical labor, to provide our services at appropriate quality levels, which could lead to lower margins, and result in decreased demand for our products and services from our patients and Payors as they choose to conduct business with other lower cost home healthcare providers.

Our failure to establish and maintain relationships with hospital and physician referral sources may cause our revenue to decline.

Any contracts we have with hospitals, sleep labs and other physician groups are not exclusive and can be terminated with or without cause, on short notice. Our business is mostly dependent on our ability

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to work closely with hospitals and physicians to accept discharges and referrals of their patients who require our products and services. Therefore, our success is significantly dependent on referrals from hospital and physician sources. If we are unable to successfully establish new referral sources and maintain strong relationships with our current referral sources, or if efforts to increase the skill level and effectiveness of our sales force are not effective, our revenues may decline. In addition, our relationships with referral sources are subject to federal and state healthcare laws such as the federal Anti-Kickback Statute and the Stark Law, and compliance with these laws limits the scope of our relationships with our referral sources.

Our failure to successfully design, modify and implement technology and other process changes to maximize productivity and ensure compliance could ultimately have a significant negative impact on our business, results of operations, financial condition and prospects.

We are continuously exploring all areas of our operations where we can modify the current processes or systems in order to attain a higher level of productivity or ensure compliance. Additionally, Medicare and Medicaid often change their documentation requirements. CMS and other Payors have taken steps to support electronic data interchange processes, as well as to implement electronic clinical templates and suggested clinical data elements for documenting face-to-face encounters, detailed written orders and written orders prior to delivery, and laboratory test results for certain DMEPOS items. Certain Payors have complex and onerous rules which are a challenge and costly to follow, including prior authorization requirements. The standards and rules for healthcare transactions, code sets and unique identifiers also continue to evolve, such as, for example, the AMA’s Current Procedural Terminology (“CPT”), International Classification of Diseases Revision 10 (“ICD-10”) and Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) 5010 and various data security requirements. Moreover, government programs and/or commercial Payors may have difficulty administering new standards and rules for healthcare transactions, which may adversely affect timelines of payment or payment error rates. Our failure to successfully design and implement system or process modifications could have a significant impact on our business, results of operations, financial condition and prospects. The implementation of new standards and rules may require us to make substantial investments. Further, the implementation of these system or process changes could have a disruptive effect on related transaction processing and operations. If our implementation efforts related to systems development are unsuccessful, we may need to write off amounts that we have capitalized related to systems development projects. Additionally, if systems development implementations do not occur, we may need to incur additional costs to support our existing systems. Furthermore, mistakes can be made during the processing of claims which can cause those claims to be denied, leading to potential refunds, fines or other penalties.

If CMS requires prior authorization or implements changes in documentation necessary for our products, our business, results of operations, financial condition and prospects could be negatively impacted.

CMS has established and maintains a Master List of Items Frequently Subject to Unnecessary Utilization of certain DMEPOS items identified as being subject to unnecessary utilization. This list identifies items that CMS has determined could potentially be subject to Prior Authorization as a condition of Medicare payment. Since 2012, CMS has also maintained a list of categories of DMEPOS items that require face-to-face encounters with practitioners and written orders before the DMEPOS supplier may furnish the items to beneficiaries. In a final rule issued in 2019, CMS combined and harmonized the two lists to create a single unified list (the “Master List”). CMS also reduced the financial threshold for inclusion on the Master List. With certain exceptions for reductions in Payment Threshold, items remain on the Master List for ten years from the date the item was added to the Master List. The presence of an item on the Master List does not automatically mean that prior authorization is required. Under the 2019 final rule, CMS selects items from the Master List for inclusion on the “Required Prior Authorization List.” The expanded Master List would increase the number of DMEPOS items potentially eligible to be selected for prior authorization, face-to-face encounter and written order prior to delivery requirements as a condition of payment. If CMS adds additional products to the Master List, expands the list of items subject to prior authorization, or expands face-to-face encounter requirements or provisions requiring a written order prior to deliver, these changes may adversely impact our business, results of operations, financial condition and prospects.

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Our failure to maintain controls and processes over billing and collections, including impacts from the outsourcing or offshoring of parts of our billing and collections activities, estimating the collectability of our accounts receivable or the deterioration of the financial condition of our Payors, could have a significant negative impact on our business, results of operations, financial condition and prospects.

The collection of accounts receivable is one of our most significant challenges and requires constant focus, involvement by management and continuous enhancements to information systems and billing center operating procedures. Further, some of our patients and Payors may experience financial difficulties, or may otherwise not pay accounts receivable when due, resulting in increased write-offs. The COVID-19 pandemic may exacerbate these conditions. See “—The recent COVID-19 pandemic and the global attempt to contain it may harm our business, results of operations, financial condition and prospects and ability to execute on our business plan.” Our Payors also make errors in their reimbursements to us. The failure of our systems and billing and collection center employees to detect these errors, notify and convince the Payors of their errors and to obtain the corrected reimbursements could negatively impact our business, results of operations, financial condition and prospects. There can be no assurance that we will be able to maintain our current levels of collectability in future periods or accurately estimate the collectability of accounts receivable. For instance, at the beginning of each billing cycle when patients may begin coverage under a new insurance carrier and deductibles reset, we routinely see patient collections decrease. If we are unable to properly bill and collect our accounts receivable, our business, results of operations, financial condition and prospects will be adversely affected. From time to time, we are involved in disputes with various parties, including Payors and their intermediaries regarding their performance of various contractual or regulatory obligations. These disputes may lead to legal and other proceedings and may cause us to incur costs or experience delays in collections, increases in accounts receivable or loss of revenue. In addition, in the event such disputes are not resolved in our favor and/or result in the termination of our relationships with such parties, there may be an adverse impact on our business, results of operations, financial condition and prospects. Further, while we have made significant progress in the collection of our accounts receivable in recent years, we may not be able to further improve our net leverage ratios.

In addition, we have an outsourcing strategy in place with respect to certain administrative functions, disaster recovery services and other services. Where permitted, we utilize offshore and domestic business process and services firms to assist with implementing this strategy. There is significant competition for skilled technical professionals, and we expect that competition to increase, which could result in our outsourcing strategy not achieving its intended benefits. Operations in other parts of the world involve certain regional geopolitical risks that are different as compared to operating in the United States, including the possibility of civil unrest, terrorism and substantial regulation by the individual governments. These factors may cause disruptions in our business processes, which could have a material adverse effect on our business, results of operations, financial condition and prospects. We also may experience negative reactions from some patients, providers and Payors, as a result of the actual or perceived disruption caused by the outsourcing of portions of our business operations. If we fail to maintain controls over our outsourced activities then such failure could have an adverse effect on our business, results of operations, financial condition and prospects.

Our reliance on relatively few vendors for the majority of our medical equipment and supplies and new excise taxes which are to be imposed on certain manufacturers of such items could adversely affect our ability to operate.

We currently rely on a relatively small number of vendors to provide us with the majority of our medical equipment and supplies, with five of our vendors providing approximately 75% of our total service equipment and supply purchases in the year ended December 31, 2020. These third-party vendors are not our employees, and except for remedies available to us under our agreements with such third-party, we have limited ability to control the amount or timing of resources that any such third-party will devote to manufacturing our medical equipment and supplies. If these third-party vendors do not satisfactorily carry out their contractual duties or fail to meet expected deadlines, our products and services to our patients may be delayed or subject to increased costs. The third parties we rely on for these services may also have relationships with other entities, some of which may be our competitors. From time to time, we also enter into certain exclusive arrangements with a given vendor for the provision of medical equipment and supplies. Further, some of our supply agreements contain pricing scales that depend on meeting certain order volumes. Our inability to procure certain medical equipment and supplies, including as a result of failure to maintain

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and renew certain agreements and access arrangements, could have a materially adverse effect on our business, results of operations and financial condition. For example, in the event of a public health emergency, the government may limit our access to certain equipment by purchasing such equipment themselves due to public interest. This may lead to heavy reliance on a limited number of vendors, thus causing a shortage in our own equipment and supply inventory. We often use vendors selectively for quality and cost reasons. Significant price increases, or disruptions in the ability to obtain such equipment and supplies from existing vendors, may force us to increase our prices (which we may be unable to do) or reduce our margins, which would force us to use alternative vendors. As such, our reliance on relatively few vendors could have an adverse effect on our business, results of operations, financial condition and prospects.

If any of our relationships with these third parties terminate, we may not be able to enter into arrangements with alternative third parties or do so on commercially reasonable terms. Any change in the existing vendors we use could cause delays in the delivery of products and possible losses in revenue, which could adversely affect our business, results of operations, financial condition and prospects. In addition, alternative vendors may not be available, or may not provide their products and services at similar or favorable prices. If we cannot obtain the medical equipment and supplies we currently use, or alternatives at similar or favorable prices, our ability to provide such products may be severely impacted, which could have an adverse effect on our business, results of operations, financial condition and prospects.

We do not currently have invention assignment agreements with all of our employees. If we are unable to protect the confidentiality of our other proprietary information, our business and competitive position may be harmed.

Since we do not own or have a license or other rights under any patents that are material to our business, we rely on other proprietary rights, including protection of trade secrets, and other proprietary information that is not patentable or that we elect not to patent. However, trade secrets can be difficult to protect, and some courts are less willing or unwilling to protect trade secrets. To maintain the confidentiality of our trade secrets and proprietary information, we must obtain assignments of those proprietary rights from our employees or third-party contractors and include confidentiality provisions that we have in contracts with our employees, consultants, collaborators and others upon the commencement of their relationship with us. We do not currently have such assignments or confidentiality obligations in place with respect to all of our employees. We also cannot guarantee that we have entered into such agreements with other parties that may have or have had access to our trade secrets or proprietary technology and processes. Without having these agreements in place, there may be disputes around ownership of information that we consider ours or otherwise use in connection with our business, and we may not be able to prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by such third parties.

Even where we have agreements in place, these contracts may not provide meaningful protection for our trade secrets, know-how, or other proprietary information in the event of any unauthorized use, misappropriation, or disclosure of such trade secrets, know-how, or other proprietary information. There can be no assurance that such third parties will not breach their agreements with us, that we will have adequate remedies for any breach, or that our trade secrets will not otherwise become known or independently developed by competitors. Despite the protections we do place on our intellectual property or other proprietary rights, monitoring unauthorized use and disclosure of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual property or other proprietary rights will be adequate.

We rely on, and in the future we may rely on, third-party contractors and components for certain of our technology, software, information systems and products and our disaster recovery plan.

We rely on, and in the future we may rely on, third parties for certain of our technology, software, information systems and product needs including our disaster recovery plan. If we are unable to obtain or maintain licenses to utilize such technology, software, information systems or products, we could incur unanticipated expenses, suffer disruptions in service, experience regulatory issues and lose revenue from the operation of our business. For example, some of our technology, software, information systems and products contain components or products that are developed by third parties. We may not be able to replace the functions provided by these third-party components or products if they become obsolete, defective or

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incompatible with future versions of our products or with our services and solutions, or if they are not adequately maintained or updated, which could adversely affect our competitive business position and harm our business prospects. Furthermore, in the future, should we be required to obtain licenses to any third-party technology, such licenses may not be available to us on commercially reasonable terms, or at all. If we are unable to obtain rights to required third-party technology or intellectual property rights or maintain the existing rights we have, we may be required to expend significant time and resources to replace such rights, which may not be feasible on a technical or commercial basis and may harm our business, results of operations, financial condition and prospects.

We believe we have all the necessary licenses from third parties to use technology, software and intellectual property assets used in our business that we do not own. A third party could, however, allege that we are infringing its rights, which may deter our ability to obtain licenses on commercially reasonable terms from the third party, if at all, or cause the third party to commence litigation against us. If we fail to comply with our obligations in any of our license agreements, the licensor may have the right to terminate the license and we may not be able to make use of the technology that was covered by the license, which may adversely impact our business.

In addition, we may find it necessary to initiate litigation against a third party to protect our trade secrets, to enforce our intellectual property rights and to determine the scope and validity of any proprietary rights of others. Any such litigation, or the failure to obtain any necessary licenses or other rights, could cause us to incur significant expenses and could distract our management and other personnel from their normal responsibilities and could materially and adversely affect our business. Alternate sources for the technology, software, information systems and products currently provided by third parties to us may not be available to us in a timely manner, and may not provide us with the same functions as currently provided to us or may be more expensive than products we currently use or sell.

Further, the risk of intellectual property infringement claims against us may increase as we expand our business to include more third-party systems and products and continue to incorporate third-party components, software and/or other intellectual property into the products we sell. Also, individuals and firms have purchased intellectual property assets in order to assert claims of infringement against technology providers and customers that use such technology. Any infringement action brought against us or our providers could be costly to defend or lead to an expensive settlement or judgment against us and we may not have sufficient financial or other resources to conduct such litigation adequately. Any of the foregoing could harm our business, results of operations, financial condition and prospects.

Changes or disruption in supplies, or inability to timely scale-up manufacturing of our products and services provided by third parties could adversely affect our business.

As a medical device distributor, we rely on third-party device manufacturers and suppliers to maintain compliance with all applicable regulatory requirements and to deliver products on schedule and in accordance with our expectations. There is a risk that a supplier or manufacturer fails to comply with applicable regulations, such as the FDA requirements including, but not limited to, pre- or post-approval inspections and current Good Manufacturing Practice (“cGMP”) requirements (e.g., violations that could render a product adulterated or misbranded), which could result in the FDA taking administrative or other legal action, as described above. An unfavorable resolution or outcome of any administrative, enforcement, or legal action against a manufacturer or supplier or any other matter that may arise out of any FDA inspection of their facilities or products could significantly and adversely affect our business. In March 2020, the FDA temporarily paused on-site routine surveillance inspections due to the COVID-19 pandemic. In a guidance issued in August 2020 and updated on January 29, 2021, the FDA explained that it resumed prioritized domestic inspections, such as pre-approval and surveillance inspections and that, for the foreseeable future, such prioritized domestic inspections would be pre-announced. The FDA has continued, on a case-by case basis, to conduct “mission-critical” inspections based on its evaluation of a number of factors related to the public health benefit of U.S. patients having access to the product subject to inspection (e.g., whether the product may have received breakthrough therapy designation or is used to diagnose, treat, or prevent a serious disease or medical condition for which there is no other appropriate substitute). Failure by any such supplier to meet its contractual obligations or to comply with applicable laws or regulations could delay or prevent the manufacture, commercialization, or distribution of our products, and could also

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result in non-compliance or reputational harm. We do not conduct formal environmental, social or governance due diligence on our third-party vendors and may not be in a position to identify regulatory compliance issues in a timely manner.

Our reliance on third-party manufacturers and suppliers also subjects us to risks that could harm our business, including: a risk that we may not be able to obtain adequate supply in a timely manner or on commercially reasonable terms; a risk that we may have difficulty timely locating and qualifying alternative suppliers or manufacturers; a risk that there may be fluctuations in demand for products that affect our manufacturers’ or suppliers’ ability to deliver products in a timely manner; a risk that the manufacturers or suppliers with which we contract may fail to comply with regulatory requirements, be subject to lengthy compliance, validation or qualification periods, or make errors in manufacturing products or components that could negatively impact our product; and a risk that the manufacturers or suppliers with which we contract may encounter financial hardships unrelated to our demand for products or components, which could inhibit their ability to fulfill our orders and meet our requirements. In addition, given the rapid and evolving nature of the pandemic, COVID-19 could negatively affect our manufacturers or suppliers by interrupting, slowing, or rendering our supply chains inoperable. The COVID-19 pandemic also could result in a requirement to utilize alternative, and potentially more expensive, sources of materials or products, or an inability to find such alternative sources of materials or products. It is uncertain how the COVID-19 pandemic will affect our operations generally if these impacts persist or exacerbate over an extended period of time. These impacts could have a material adverse effect on our business, results of operations, financial condition and prospects.

Identifying and qualifying additional or replacement manufacturers or suppliers, if required, may not be accomplished quickly and could involve significant additional costs. Any interruption or delay in the supply of products, or our inability to obtain products from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demands of our patients and cause providers to refer patients to our competitors and could therefore have a material adverse effect on our business, results of operations, financial condition and prospects.

Unexpected changes in vendor payment terms may weaken our financial position.

Certain of our suppliers and vendors provide extended payment terms, ranging from a period of 90 days to nine months. Changes in those terms could have a material impact on our cash flow and results of operations. We have had to historically renegotiate payment terms and other provisions in agreements with certain suppliers and vendors in order to improve our financial position. If we are required to renegotiate any of these agreements, and lose the advantage of extended payment terms, our business, results of operations, financial condition and prospects may be adversely affected.

In addition, some of our vendors provide us with capital leases on attractive terms. If our vendors tighten their credit limits on these capital leases, or decline to provide such capital leases, then we may be forced to seek alternative financing arrangements on less favorable terms. These arrangements may be at a higher cost to us and may have a negative impact on our business, results of operations, financial condition and prospects.

Our business is dependent on the protection of our intellectual property. If our intellectual property rights or our protection and enforcement of them is inadequate to protect our competitive advantage, our business, results of operations, financial condition and prospects could be adversely affected.

The success of our business depends in part on our ability to protect our intellectual property rights with respect to our technologies. We rely on certain unregistered intellectual property rights, including unpatented intellectual property embodied in the software we develop, to protect and prevent others from duplicating our proprietary technology. Such means may afford only limited protection of our intellectual property and may not: (i) prevent our competitors from duplicating our technology; (ii) prevent our competitors from gaining access to our proprietary information and technology; or (iii) permit us to gain or maintain a competitive advantage.

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In addition, there can be no assurance that competitors and other third parties will not independently develop, or otherwise design around, our intellectual property protections related to our proprietary technology, in which case we would not be able to prevent such third parties from using developing similar technology.

We may be subject to intellectual property infringement claims or other allegations, which could result in payment of substantial damages, penalties and fines and removal of data or technology from its system.

Because we have not conducted a formal freedom to operate analysis for intellectual property related to our product or service offerings, we may not be aware of intellectual property that a third party might assert are infringed by one of our current or future product or service offerings, which could materially impair our business. Even in the event that we conduct a formal freedom to operate analysis, intellectual property searches to determine whether our products or services infringe intellectual property held by third parties are inherently uncertain and such searches cannot assure that all relevant intellectual property is identified.

In addition, our competitors or other third parties may obtain intellectual property protection that could restrict or preclude our ability to lawfully operate in a competitive manner, which could have a material adverse effect on our business, results of operations, financial condition and prospects. Companies, organizations or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary rights that would prevent, limit or interfere with our ability to make, use, develop, sell or market our products, which could make it more difficult for us to operate our business.

From time to time, we may need to defend ourselves against intellectual property infringement or trade secret misappropriation claims, and companies holding patents, copyrights, trademarks or other intellectual property rights may bring suits alleging infringement of such rights by us or our employees or otherwise assert their rights and urge us to take licenses from them for payment. Any such intellectual property infringement claim could result in costly litigation and divert management’s attention and resources.

We use certain open source technology in our business. We may face claims from open source licensors claiming ownership of, or demanding the release of, the technology and any other intellectual property that we developed using or derived from such open-source technology.

We use open-source technology in our business and will continue to use open-source technology in the future. There is a risk that open-source technology licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to offer our products. Open source licensors may also decide to change the conditions on which they make their open-source technology available for our use. Additionally, we may face claims from open-source licensors claiming ownership of, or demanding the public release or free license of, the technology and any other intellectual property that it developed using or derived from such open source technology. These claims could result in litigation and could require that we make our technology freely available, purchase a costly license or cease offering the implicated products or services unless and until we can re-engineer them to avoid infringement. This re-engineering process could require significant technology and product development resources, and we may not be able to complete the process successfully.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

We rely on our trademarks, service marks, domain names and logos to market our brands and to build and maintain brand loyalty and recognition. We rely on trademark protections to protect our business and our products and services. Our registered or unregistered trademarks, trade names or service marks may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. Effective trademark protection may not be available or may not be sought in every country in which our products are made available. Similarly, not every variation of a domain name may be available or be registered, even if available. We may not be able to protect our rights to these trademarks, domain names and trade names, which we need to build brand name recognition by potential patients or partners in our markets of interest. If that were to happen, we may be prevented from using our names, brands and trademarks unless we enter into appropriate royalty, license or coexistence agreements. Over the long term,

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if we are unable to establish name recognition based on our trademarks, service marks, domain names and trade names, then we may not be able to compete effectively, and our business could be adversely affected.

Our capitation arrangement may prove unprofitable if actual utilization rates exceed our assumptions.

We are party to one capitation arrangement with a commercial Payor, pursuant to which they have agreed to pay us a fixed amount (on a per member per month basis for a defined patient population) without regard to the actual services provided. Capitation revenues represented approximately 2.0% of our total revenues for 2020. We negotiate the contractual rate in this arrangement with the Payor based on assumptions regarding average expected utilization of services. If actual utilization rates exceed our assumptions, the profitability of this arrangement may be diminished. Moreover, we may be obligated to perform under such capitation arrangement even if the contractual reimbursement rates are insufficient to cover our costs based on actual levels of utilization.

We are highly dependent upon senior management; our failure to attract and retain key members of senior management could have a material adverse effect on us.

We are highly dependent on the performance and continued efforts of our senior management team. In order to best position our business, we elevated a team of professionals with deep industry and regulatory knowledge to leadership positions, including Timothy C. Pigg, our President and Chief Executive Officer, Thomas J. Koenig, our Chief Financial Officer and Treasurer, and Robin Menchen, our Chief Operating Officer, who have all served on several executive positions and have been instrumental in taking the steps necessary to optimize and improve our business and drive a significant cultural shift focused on disciplined and profitable growth. Our future success is dependent on our ability to continue to attract and retain qualified executive officers and senior management. Any inability to manage our operations effectively could have a material adverse effect on our business, results of operations, financial condition and prospects.

Our business operations are labor intensive. Difficulty in hiring enough additional management and other employees, increasing costs of compensation or employee benefits, and the potential impact of unionization and organizing activities could have an adverse effect on our business, results of operations, financial condition and prospects.

The success of our business depends upon our ability to attract and retain highly motivated, well-qualified management and other employees. The payment of salaries and benefits to our employees is one of our most significant expenses. In addition, we face significant competition in the recruitment of qualified employees, which has in the past resulted in salary and wage increases for certain employee groups. In particular, continuously improving the quality of our sales force and marketing team with the technical expertise and supporting distribution capabilities to perform our services in each of the territories in which we may have approval to sell and market out products will be expensive, time-consuming and will require significant attention of our management. If we are unable to recruit or retain a sufficient number of qualified employees, or if the costs of compensation or employee benefits increase substantially, then our ability to deliver services effectively could suffer and our profitability would likely be adversely affected. For example, the increase in payments of unemployment benefits may impact the size of the labor pool that we have to choose from and proposed increases in the federal minimum wage may also negatively impact our costs of labor if such increases are enacted. In addition, union organizing activities may occur in the future, and the adverse impact of unionization and organizing activities on our costs and operating results could be substantial.

We may be required to take significant write-downs in connection with impairment of our intangible or other long-lived assets.

Intangible and other long-lived assets comprise a significant portion of our total assets. Intangible assets include trade names, Payor relationships and accreditations with various agencies. An impairment review of indefinite-lived intangible assets is conducted at least once a year and if events or changes in circumstances indicate that their carrying value may not be recoverable, an impairment write-down may be required. Intangible assets with a finite life and other long-lived assets are tested for recoverability whenever changes in circumstances indicate that their carrying value may not be fully recoverable.

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Depending on the future business performance of the Company and other events, we may be required to recognize increased levels of future intangible amortization, or incur further charges to recognize the impairment of our assets. Such charges may be significant and may be further adversely impacted by the COVID-19 pandemic. See “—The recent COVID-19 pandemic and the global attempt to contain it may harm our business, results of operations, financial condition and prospects and ability to execute on our business plan.”

Limitations on the availability of capital or other financing sources on reasonable terms, as well as losses due to existing bad or uncollectible debts, could have an adverse impact on our business, results of operations, financial condition and prospects.

Our business requires significant liquidity to fund labor costs, including salaries, bonuses, benefits and travel-related expenses, product and supply costs, third-party customer service, billing and collections and logistics costs and medical equipment capital expenditures. Limitations on the availability of capital or other financing sources, including deferred payment arrangements with key suppliers, could have an adverse impact on our business. In addition, we may be required to seek new or additional equity or debt financing sources. In the event that additional financing is required from outside sources, we may not be able to raise such capital on terms acceptable to us or at all. Furthermore, as we shift our Payor mix toward commercial Payor plans that tend to have higher deductibles, there is a subsequent increase in patient co-pay responsibility and deductible volume which may cause us to be unable to collect on certain accounts receivable that patients incur. If we are unable to collect on these debts, raise additional capital or access other financing sources on reasonable terms, our business, results of operations and financial condition and prospects may be materially and adversely affected.

We are subject to risks associated with our incurrence of debt.

On December 17, 2020, our subsidiary entered into the Second Amended and Restated Credit Agreement (the “Second A&R Credit Agreement”), which provides for (i) a $15,000,000 senior secured working capital revolving credit facility (including a letter of credit sub-facility and a swing line sub-facility); (ii) a $75,000,000 senior secured acquisition revolving credit facility and (iii) a senior secured term loan in an initial aggregate principal amount of $335,000,000. Net proceeds from the term loan under the under the Rotech Healthcare Inc. Credit Facility were used to repay a portion of the Rotech Healthcare Holdings Credit Facility term loan, to refinance outstanding revolving loans under the Amended and Restated Credit Agreement and to pay fees and expenses in connection with the Second A&R Credit Agreement. On June 3, 2021, we amended the Rotech Healthcare Inc. Credit Facility to (i) permit this offering, (ii) effectuate certain other changes to the Rotech Healthcare Inc. Credit Facility to accommodate Rotech Healthcare Holdings Inc.’s status as a publicly listed company following this offering, (iii) permit the acquisition of Gamma, (iv) increase the amount of permitted capital leases to $50 million, from $40 million and (v) permit the payment in full of the Rotech Healthcare Holding Credit Facility with the net proceeds to us from this offering. In addition, on June 3, 2021, we borrowed $18.5 million under the Acquisition Revolving Credit Facility of the Rotech Healthcare Inc. Credit Facility. We expect to refinance, renew or replace the Second A&R Credit Agreement prior to its maturity in December 2025 or to repay it with cash from operations. An inability to refinance the Rotech Healthcare Inc. Credit Facility prior to its maturity could have a material adverse effect on our business, results of operations, financial condition and prospects. See “Management’s Discussion and Analysis of Financial Conditions and Results of Operations—Liquidity and Capital Resources—Long-Term Debt” for more information on our credit facilities.

There can be no assurance that we will succeed in obtaining such amendment or refinancing on favorable terms, if at all, which could significantly increase our future interest expense and adversely impact our business, results of operations, financial condition and prospects.

Further, an increase to our level of indebtedness could:

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require us to dedicate a portion of our cash flow from operations to payments on our indebtedness, which could reduce the availability of cash flow to fund acquisitions, start-ups, working capital, capital expenditures and other general corporate purposes;

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limit our ability to borrow money or sell stock for working capital, capital expenditures, debt service requirements and other purposes;

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limit our flexibility in planning for, and reacting to, changes in our industry or business;

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make us more vulnerable to unfavorable economic or business conditions; and

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limit our ability to make acquisitions or take advantage of other business opportunities.

In the event we incur additional indebtedness, the risks described above could increase.

The agreements and instruments governing our indebtedness contain restrictions and limitations that could significantly impact our ability to operate our business.

Our Second A&R Credit Agreement contains covenants that, among other things, restrict the ability of management and its subsidiaries to:

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incur additional indebtedness and create liens;

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pay dividends and make other distributions or to purchase, redeem or return capital stock;

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purchase, redeem or retire certain junior indebtedness;

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make loans and investments;

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enter into agreements that limit management’s or its subsidiaries’ ability to pledge assets or to make distributions or loans to us or transfer assets to us;

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sell assets;

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enter into certain types of transactions with affiliates;

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consolidate, merge or sell substantially all assets;

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make voluntary payments or modifications of junior indebtedness; and

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enter into lines of business.

Failure to generate sufficient cash flow to cover required payments or meet operating covenants under our long-term debt and long-term operating leases could result in defaults under such agreements and cross-defaults under other debt or operating lease arrangements, which could harm our operating subsidiaries. We may not generate sufficient cash flow from operations to cover required interest, principal and lease payments. In addition, our outstanding credit facilities contains restrictive covenants that requires us to maintain or satisfy specified coverage tests. These restrictions and operating covenants include, among other things, requirements with respect to net leverage ratios and fixed charge coverage ratios. These restrictions may interfere with our ability to obtain additional advances under our existing credit facilities or to obtain new financing or to engage in other business activities, which may inhibit our ability to grow our business and increase revenue. In addition, our failure to comply with these restrictive covenants could result in an event of default which, if not cured or waived, could result in the acceleration of our debt.

We may also incur future debt obligations that might subject us to additional restrictive covenants that could affect our financial and operational flexibility. We may be unable to refinance our indebtedness, at maturity or otherwise, on terms acceptable to us or at all.

Changes in tax laws may adversely affect us, and the Internal Revenue Service or a court may disagree with tax positions taken by us, which may result in adverse effects on our financial condition or the value of our common stock.

The Tax Cuts and Jobs Act (the “TCJA”), enacted on December 22, 2017, significantly affected U.S. tax law, including by changing how the United States imposes tax on certain types of income of corporations and by reducing the U.S. federal corporate income tax rate to 21%. It also imposed new limitations on a number of tax benefits, including deductions for business interest, use of net operating loss carry forwards, taxation of foreign income and the foreign tax credit, among others.

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The CARES Act, enacted on March 27, 2020, in response to the COVID-19 pandemic, further amended the Internal Revenue Code of 1986 (the “Code”), including in respect of certain changes that were made by the TCJA, generally on a temporary basis. In addition, the Internal Revenue Service (“IRS”) has yet to issue guidance on a number of important issues regarding the changes made by the TCJA and the CARES Act. In the absence of such guidance, we will take positions with respect to a number of unsettled issues. There is no assurance that the IRS or a court will agree with the positions taken by us, in which case tax penalties and interest may be imposed that could adversely affect our business, cash flows or financial performance.

Additionally, the current administration may propose significant changes to U.S. tax law, some or all of which may be enacted. The passage of such legislation, as well as changes or modifications in existing judicial decisions or in the current positions of the IRS, could substantially modify the tax treatment described in this prospectus, possibly on a retroactive basis. We cannot predict whether the U.S. Congress or any other legislative body will enact new tax legislation or whether the IRS or any other tax authority will issue new regulations or other guidance, nor can we predict what effect such legislation or regulations might have on us or our financial condition. There can be no assurance that future tax law changes will not increase the rate of the corporate income tax significantly, impose new limitations on deductions, credits or other tax benefits, or make other changes that may adversely affect our business, cash flows or financial performance.

The offering may trigger a limitation on our ability to use our historic net operating losses (“NOLs”).

As of December 31, 2020, we had federal and state NOL carryforwards of approximately $417.3 million and $23.8 million, respectively. The federal NOLs include $383.9 million that may be used to offset up to 100% of future taxable income and certain federal and state NOLs will begin to expire in the calendar year 2021, unless previously utilized. Certain NOL carryforwards subject to expiration could expire unused and be unavailable to offset future income tax liabilities. Under the TCJA, as modified by the CARES Act, federal NOLs incurred in taxable years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such federal NOLs in taxable years beginning after December 31, 2020 is limited to 80% of taxable income in such years.

Our ability to utilize historic NOL carryforwards to reduce future taxable income following this offering could be subject to various limitations under the Code. Section 382 of the Code generally imposes an annual limitation on the amount of NOLs that may be used to offset taxable income when a corporation has undergone an “ownership change” (as determined under Section 382 of the Code). An ownership change generally occurs if one or more stockholders (or groups of stockholders) who are each deemed to own at least 5% of such corporation’s stock change their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. In the event that an ownership change occurs, utilization of historic NOLs would be subject to an annual limitation under Section 382 of the Code. In general, the amount of the annual limitation is equal to the product of (a) the fair market value of the stock of the corporation immediately before the ownership change (with certain adjustments), multiplied by (b) the “long term tax exempt rate” (which is the highest of the adjusted federal long-term rates in effect for any month in the three-calendar-month period ending with the calendar month in which the ownership change occurs). Upon a change in ownership following this offering, all NOLs will be subject to limitation, if the restriction applies. Any unused annual limitation may be carried over to later years.

We are unable to predict whether the offering, if consummated, in combination with other transactions, will result in an ownership change. Any such ownership change would trigger a limitation (described above) on our ability to utilize all of our historic NOLs existing at the time of the ownership change. This could cause some of our NOLs to expire before we would be able to utilize them to reduce taxable income in future periods.

Natural disasters or other catastrophic events could materially disrupt and have a negative effect on our business, results of operations, financial condition and prospects.

Natural disasters, such as hurricanes or earthquakes, could disrupt our ability to do business. For example, such events could result in physical damage to one or more of our properties, the temporary closure of one or more of our locations, the temporary inability to process payroll or process claims, a

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negative effect in our ability to comply with certain licensing requirements, and/or a delay in the delivery of products and the provision of our service offerings. These events could also reduce demand for our products and service offerings, or make it difficult or impossible to receive products from suppliers. We may be required to suspend operations in some of our branch locations, which could have a material adverse effect on our business, results of operations, financial condition and prospects.

Our wholly-owned subsidiary, Rotech Healthcare Inc.’s prior bankruptcy could adversely affect our operations going forward.

On April 8, 2013, Rotech Healthcare Inc. filed for voluntary reorganization to re-classify certain indebtedness to equity under Chapter 11 of the Bankruptcy Code and officially emerged from bankruptcy on September 27, 2013. At the time of the bankruptcy filing, Timothy C. Pigg, our Chairman, President and Chief Executive Officer was Vice President of the Southeast Division for Operations and Sales for Rotech Healthcare Inc. and Robin Menchen, our Chief Operating Officer, was the Chief Compliance Officer of Rotech Healthcare Inc. The bankruptcy filing had an adverse effect on our credit standing with our lenders, certain suppliers, Payors and other trade creditors and the adverse publicity from this historical process could have a material adverse effect on our business, results of operations, financial condition and prospects.

Risks Related to Our Industry and Competition

The home healthcare industry is highly competitive and fragmented with limited barriers to entry and susceptible to vertical integration by manufacturers and suppliers, Payors, providers (such as hospital systems) or disruptive new entrants.

The home healthcare industry is intensely competitive and highly fragmented, as are each of the product and service line markets in which we compete. There are a large number of providers, some of which are national providers, but most of which are either regional or local providers, including hospital systems, physician specialists and sleep labs. Furthermore, other types of healthcare providers, including industrial gas manufacturers, home healthcare agencies and health maintenance organizations, have entered and may continue to enter the market to compete with our various product and service lines. Some of our competitors may now or in the future have greater financial or marketing resources than we do, which may increase pricing pressure and limit our ability to maintain or increase our market share. In addition, in certain markets, competitors may have more effective sales and marketing activities or other products and services that are or perceived to be superior to our own. For example, if larger competitors adopt more aggressive pricing strategies, we could experience substantially lower sales of our products and services, reduce our market share and put us at a competitive disadvantage. Hospitals and health systems are routinely looking to provide coverage and better control of post-acute healthcare services, including home healthcare services of the types we provide. Hospitals and/or physician groups who accept capitation amounts that include payment for our services could seek reduced payment arrangements as compared to Payors.

These trends may continue as new payment models evolve, including bundled payment models, shared savings programs, value-based reimbursement and other payment systems.

Further, certain manufacturers or Payors may choose to compete with us in the future, including by integrating vertically with companies in our industry, which could generate new synergies and put us at a competitive disadvantage. A number of manufacturers of home respiratory equipment currently provide equipment directly to patients on a limited basis. Such manufacturers have the ability to provide their equipment at prices below those charged by us, and there can be no assurance that such direct-to-patient sales efforts will not increase in the future or that such manufacturers will not seek reimbursement contracts directly with our commercial Payors, who could seek to provide equipment directly to patients from the manufacturer. In addition, pharmacy benefit managers, including CVS Caremark and the OptumRx business of UnitedHealth Group Incorporated, could enter the home healthcare market and compete with us. Large technology companies, such as Amazon.com, Inc. and Alphabet Inc., have disrupted other supply businesses and entered the healthcare market, in the case of Amazon.com, Inc. and their new pharmacy offerings, or publicly stated their interest in doing so. In the event such companies enter the home healthcare market, we may experience a loss of referrals or revenue. Similarly, disruptive entrants such as Walmart

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Inc., may adopt a more efficient business model and cause further price reduction, or significant e-commerce competitors could limit our ability to expand our e-commerce business.

We cannot assure you that these and other industry changes and the competitive nature of the home healthcare environment will not adversely affect our business, results of operations, financial condition and prospects.

We may be adversely affected by consolidation among health insurers and other industry participants.

In recent years, a number of health insurers have merged or increased efforts to consolidate with other non-governmental Payors. Insurers are also increasingly pursuing alignment initiatives with healthcare providers. Consolidation within the health insurance industry may result in insurers having increased negotiating leverage and competitive advantages, such as greater access to performance and pricing data. Our ability to negotiate prices and favorable terms with health insurers in certain markets could be affected negatively as a result of this consolidation. In addition, the shift toward value-based payment models could be accelerated if larger insurers, including those engaging in consolidation activities, find these models to be financially beneficial. There can be no assurance that we will be able to negotiate favorable terms with Payors and otherwise respond effectively to the impact of increased consolidation in the Payor industry or vertical integration efforts.

There is an inherent risk of liability in the provision of healthcare services; damage to our reputation or our failure to adequately insure against losses, including from substantial claims and litigation, could have an adverse impact on our business, results of operations, financial condition and prospects.

There is an inherent risk of liability in the provision of healthcare services. As participants in the healthcare industry, we are and expect to be periodically subject to lawsuits, some of which may involve large claims and significant costs to defend, such as mass tort or other class actions. In that case, the coverage under our insurance programs may not be adequate to protect us. Our insurance policies are subject to annual renewal and our insurance premiums could be subject to material increases in the future. We cannot be assured that we will be able to maintain this insurance on acceptable terms in the future, or at all. A successful claim in excess of, or not covered by, our insurance policies could have a material adverse effect on our business, results of operations, financial condition and prospects. Even where our insurance is adequate to cover claims against us, damage to our reputation in the event of a judgment against us, or continued increases in our insurance costs, could have an adverse effect on our business, results of operations, financial condition and prospects.

Any economic downturn, deepening of an economic downturn, continued deficit spending by the federal government or state budget pressures may result in a reduction in payments and covered services.

Adverse economic or political developments in the United States, including a slowdown of economic growth, disruptions in financial markets, economic downturns, inflation, elevated unemployment levels, sluggish or uneven economic recovery, government deficit reduction, natural and other disasters and public health crises, could lead to a reduction in federal government expenditures, including governmentally funded programs in which we participate, such as Medicare and Medicaid. In addition, if at any time the federal government is not able to meet its debt payments unless the federal debt ceiling is raised, and legislation increasing the debt ceiling is not enacted, the federal government may stop or delay making payments on its obligations, including funding for government programs in which we participate, such as Medicare and Medicaid. Failure of the government to make payments under these programs could have a material adverse effect on our business, results of business, results of operations, financial condition and prospects. The COVID‑19 pandemic may exacerbate many of these conditions. See “—The recent COVID‑ 19 pandemic and the global attempt to contain it may harm our business, results of operations, financial condition and prospects and ability to execute on our business plan.” Further, any failure by Congress to complete the federal budget process and fund government operations may result in a federal government shutdown, potentially causing us to incur substantial costs without reimbursement under the Medicare program, which could have a material adverse effect on our business, results of operations, financial condition and prospects. For example, the failure of the 2011 Joint Select Committee to meet its deficit reduction goal resulted in an automatic across-the-board reduction in Medicare payments of 2% beginning April 1, 2013. The 2%

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reduction in Medicare payments has been extended several times by Congress, although in response to the COVID-19 pandemic, the reduction was suspended through December 31, 2020. As part of the recent COVID-19 relief package, on April 14, 2021, President Biden signed into law an extension of the payment reduction suspension through December 31, 2021.

In addition, sustained unfavorable economic conditions may affect the number of patients enrolled in managed care programs and the profitability of managed care companies, which could result in reduced payment rates and could have a material adverse effect on our business, results of operations, financial condition and prospects.

Turmoil in the financial markets, including in the capital and credit markets, and any uncertainty over its breadth, depth and duration may put pressure on the global economy and could have a negative effect on our business. Further, historical worldwide financial and credit turmoil could reduce the availability of liquidity and credit to fund the continuation and expansion of business operations worldwide. The shortage of liquidity and credit combined with substantial losses in worldwide equity markets could cause an economic recession in the United States or worldwide. If financial markets in the United States, Europe and Asia experience extreme disruption, including, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations of others, governments may take unprecedented actions intended to address extreme market conditions that may include severely restricted credit and declines in real estate values.

Changes in home healthcare technology and/or product and therapy innovations may make the equipment and services we currently provide obsolete or less competitive.

We evaluate changes in home healthcare technology and product innovation on an ongoing basis, for purposes of determining the feasibility of replacing or supplementing items currently included in the medical equipment and services that we offer to our patients. We consider a variety of factors, including overall quality, functional reliability, availability of supply, Payor reimbursement policies, product features, labor costs associated with the technology, acquisition, repair and ownership costs and overall patient and referral source demand, as well as patient therapeutic and lifestyle benefits. Manufacturers continue to invest in research and development to introduce new products to the marketplace. It is possible that major changes in available technology, Payor benefit or coverage policies related to those changes, or the preferences of patients and referral sources, may cause our current product and service offerings to become less competitive or obsolete, and it will be necessary for us to adapt to such changes. For example, a new technology designed to treat sleep apnea, could make CPAP machines, a significant part of our product lines that drives our revenues, obsolete. It is also possible that product and/or delivery innovation and/or the increased effectiveness of alternative therapies may reduce clinical support requirements, thereby reducing the clinical value of our services. Furthermore, if the reimbursement model for certain of our products and services should change, similar products or services may be offered in alternative channels such as pharmacy, retail or online platform, which will increase competitive pressures. Such unanticipated changes could cause us to incur increased capital expenditures, accelerated write-offs, and may force us to alter our sales, operations, and marketing strategies.

Expansion of group purchasing organizations (“GPO”) or provider networks and the multi-tiered costing structure may place us at a competitive disadvantage.

The medical products industry is subject to a multi-tiered costing structure, which can vary by manufacturer and/or product. Under this structure, certain institutions can obtain more favorable prices for medical products than we are able to obtain. The multi-tiered costing structure continues to expand as many large integrated healthcare providers and others with significant purchasing power, such as GPOs, demand more favorable pricing terms. Additionally, the formation of provider networks and GPOs may shift purchasing decisions to entities or persons with whom we do not have a historical relationship. This may threaten our ability to compete effectively, which could in turn negatively impact our business, results of operations, financial condition and prospects. Although we are seeking to obtain similar terms from manufacturers and suppliers to obtain access to lower prices demanded by GPO contracts or other contracts, and to develop relationships with provider networks and new GPOs, we cannot assure you that such terms will be obtained or contracts will be executed.

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Future acquisitions or growth initiatives may be unsuccessful and could expose us to unforeseen liabilities.

Our strategic growth plan may involve acquisition of other companies. Any such acquisitions would involve a number of risks and uncertainties, including: difficulties related to combining previously separate businesses into a single unit, including patient transitions, product and service offerings, distribution and operational capabilities and business cultures; loss of patients, providers and Payors and other general business disruption; assumption of liabilities of an acquired business, including unforeseen or contingent liabilities or liabilities in excess of the amounts estimated; and obtaining necessary regulatory licenses and Payor-specific approvals, which may impact the timing of when we are able to bill and collect for services rendered.

The failure to effectively integrate an acquired business in a cost-effective manner could have a material adverse effect on our business, results of operations, financial condition and prospects. Integration may be expensive and time-consuming and could disrupt our ongoing business, negatively affect cash flow, distract management and other key personnel from day-to-day operations and may result in other challenges. In addition, we may not be able to realize the potential cost savings, synergies and revenue enhancements that we anticipate from any acquisitions, either in the amount or within the time frame that we expect, and the costs of achieving these benefits may be higher than, and the timing may differ from, what we expect. Our previous acquisitions have been small to mid-sized compared to our business but our future acquisitions may include larger businesses, which may significantly increase the difficulties of effective integration or realization of the potential benefits and cost savings we anticipate from such acquisitions. If we fail to realize anticipated cost savings, synergies or revenue enhancements, our financial results will be adversely affected.

In addition, we face competition for acquisition candidates, which may limit the number of acquisition opportunities available or lead to the payment of higher prices for our acquisitions. There can be no assurance that we will be able to identify suitable acquisition opportunities in the future or that any such opportunities, if identified, will be consummated on favorable terms, if at all. Without successful acquisitions, our future growth rate could decline.

While we conduct due diligence in connection with any acquisition opportunity, there may be risks or liabilities that such due diligence efforts fail to discover that are not disclosed to us or that were inadequately assessed. The failure to timely identify any material liabilities associated with any acquisitions could adversely impact our business, results of operations, financial condition and prospects.

Risks Related to Government Regulation and Litigation

Our failure to comply with regulatory requirements or receive regulatory clearances or approvals for the Company’s products or operations in the United States could adversely affect our business.

The medical gas products and certain other products we distribute are subject to extensive regulation by the FDA and other federal and state regulatory authorities. Compliance with FDA and other federal and state regulatory authority requirements regarding production, safety, quality, and good manufacturing regulations is costly and time-consuming, and while we seek to be in full compliance, instances of non-compliance could arise from time to time. We cannot be assured that all of our medical gases will be certified by the FDA and other federal and state regulatory agencies, as necessary. We have applied for, and received, designated gas certifications for our medical gas products. We may not be successful in receiving certification in the future. Other potential product manufacturing-related risks include difficulties or delays in product manufacturing, sale, or marketing, which could affect future results through regulatory actions, shutdowns, approval delays, withdrawals, recalls, penalties, supply disruptions or shortages, reputational harm, product liability, and/or unanticipated costs. We are also subject to various laws and regulations related to the operation of commercial 1712 motor vehicles and drivers and the transportation of hazardous materials. These laws and regulations, which are 1713 administered by the U.S. Department of Transportation (“DOT”) and its agencies, including the Federal Motor Carrier 1714 Safety Administration (“FMCSA”) and Pipeline and Hazardous Materials Safety Administration (“PHMSA”), as well as 1715 various state agencies, govern matters including but not limited to authorization to engage in motor carrier service, 1716 equipment safety and operation, training, record keeping, insurance, and driver qualifications and conduct.

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These laws 1717 and regulations also govern the transportation and handling of hazardous materials, including but not limited to 1718 medical gas products and compressed or liquid oxygen.

Failure to comply with applicable regulatory requirements could result in administrative enforcement action by the FDA or other federal and state regulatory authorities, which may include any of the following: adverse publicity; warning or untitled letters; fines; injunctions; consent decrees; civil money penalties; recalls; termination of distribution or seizure of our products; operating restrictions or partial suspension or total shutdown of production; delays in the introduction of products into the market; withdrawals or suspensions of current medical gas certifications or drug approvals, resulting in prohibitions on sales of our products; and criminal prosecution. There is also a risk that we may not adequately implement sustainable processes and procedures to maintain regulatory compliance and to address future regulatory agency findings, should they occur. The FDA and other federal and state regulatory authorities may change their policies, adopt additional regulations or revise existing regulations, each of which could prevent or delay certification of our medical gases or could impact our ability to market a device that was previously certified or cleared by the FDA and other federal and state regulatory authorities. Any of these sanctions could result in higher-than-anticipated costs or lower-than-anticipated sales and have a material adverse effect on our business, results of operations, financial condition and prospects.

Reductions in Medicare, Medicaid and commercial Payor reimbursement rates could have a material adverse effect on our business, results of operations, financial condition and prospects.

We have faced, and may continue to face, pricing pressures due to reductions in provider reimbursement for our products and services. For the year ended December 31, 2020, we derived approximately 26.7% and 4.5% of our revenues from Medicare and Medicaid reimbursements, respectively. There are increasing pressures on Medicare, and state Medicaid programs, to control healthcare costs and to reduce or limit reimbursement rates for home medical equipment and other products. Consistently, legislation enacted by Congress has included provisions that directly impact reimbursement for the products and services we provide, as well as the cost of providing those services. Enactment and implementation of measures to reduce or delay reimbursement or overall Medicare or Medicaid spending could result in substantial reductions in our revenue and profitability. Payors may disallow our requests for reimbursement based on determinations that certain costs are not reimbursable or reasonable because either adequate or additional documentation was not provided or because certain services were not covered or considered medically necessary. Revenue from third-party Payors can be retroactively adjusted after review during the claims settlement process or as a result of post-payment audits. We may also be subject to pre-payment review of equipment in certain business lines as a result of negative audit findings or other third-party Payor determinations, which can result in significant delays in claims processing and could materially impact revenue. Such provisions are subject to statutory and regulatory changes affecting overall spending, base rates or basis of payment, retroactive rate adjustments, annual caps that limit the amount that can be paid (including deductible and coinsurance amounts), administrative or executive orders and government funding restrictions, all of which may materially adversely affect the rates and frequency of reimbursement for our products and services. These legislative provisions and changes to such provisions have had and may continue to have a material adverse effect on our business, results of operations, financial condition and prospects. See “Business—Government Regulation.”

MCOs may also attempt to seek reductions in their fee schedules for the products and services we provide to their members. Some MCOs may seek to reduce their costs through changes in contract terms such as more stringent pre-authorization and reauthorization rules, reduced timely filing limits and/or quality assurance/compliance reporting requirements. Some MCOs could seek to shift members to plans with lower reimbursement rates for home medical equipment currently renting. Some commercial Payors are increasingly demanding discounted fee structures, including setting reimbursement rates based on Medicare fee schedules or requiring healthcare providers or suppliers to assume a greater degree of financial risk related to patient care. We have a large number of contractual arrangements with commercial Payors (which includes all Payors other than government Payors) through various national and regional insurers and MCOs, which represented approximately 48.2% of our revenue in 2020. Most of our commercial Payor contracts have two to five-year terms with an automatic extension unless it otherwise terminates. Most of our contracts are based on price—we generally do not have contracted volume guarantees. We expect that we will continue to maintain our contracts with commercial Payors and enter into more of these contractual

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arrangements as market conditions evolve. However, there can be no assurance that we will retain or obtain these contracts, or that such plans will not attempt to further reduce the rates they pay to providers. Reimbursement rates under such contracts may not remain at current levels and may not be sufficient to cover the costs of caring for patients enrolled in such programs, which would have a negative impact on our pricing flexibility, changes in Payor mix and growth in operating expenses. Increased pricing pressure from commercial Payors could result in us lowering our prices, which could adversely impact our business, results of operations, financial condition and prospects.

We cannot predict the full extent to which reimbursement for our products and cost of operations may be affected by federal and/or state legislative efforts or by initiatives, including future rounds of the CBP, or the MCO’s efforts to reduce costs. If we are unable to successfully reduce our costs or increase our volumes, our results would be adversely affected. For example, we may be unable to continue to provide services directly to patients of certain Payors or through contractual arrangements with Payors. This would have a material adverse effect on our business, results of operations, financial condition and prospects.

For further information, see “Business—Government Regulation—Medicare and Medicaid Revenues” and “Business—Government Regulation—Medicare Reimbursement.”

The DMEPOS CBP Exclusion may result in further reductions in reimbursement rates and our exclusion from certain markets or product lines, which could have a material adverse effect on our business, results of operations, financial condition and prospects.

Legislation enacted by Congress has included provisions that directly impact the cost of the products and services we provide, including legislation that requires the DMEPOS CBP to award contracts based on price and capacity to fulfill service requirements. The competitive bidding process has historically put downward pressure on the amounts we are reimbursed in the markets in which we operate, as well as in areas that are not subject to the DMEPOS CBP. We continue to monitor developments regarding the DMEPOS CBP. In March 2019, CMS announced plans to consolidate the competitive bidding areas (“CBAs”) included in the Round 1 2017 and Round 2 Recompete DMEPOS CBPs into a single round of competition, referred to by CMS as “Round 2021.” Round 2021 contracts became effective on January 1, 2021 and were extended through December 31, 2023. While products we currently provide to Medicare patients are not impacted by the Round 2021 competitive bid, there is no guarantee that future competitive bid rounds will not have a material impact on our products and reimbursement rates.

On April 9, 2020, CMS announced that, due to the COVID-19 pandemic, CMS removed non-invasive ventilator (“NIV”) product category from Round 2021 of the DMEPOS CBP, which includes ventilators used with a non-invasive interface (e.g., mask) in contrast to an invasive interface (e.g., tracheostomy tube). CMS noted that the reasons for this change included not only the agency’s ongoing concerns regarding the COVID-19 pandemic, but also the President’s exercise of the Defense Production Act for the production of ventilators, public concern regarding access to ventilators, and the fact that the NIV product category would be new to the DMEPOS CBP. Because NIVs have been removed from Round 2021 of the DMEPOS CBP, any Medicare-enrolled DMEPOS supplier can furnish NIV under the Medicare program.

On October 27, 2020, CMS announced further revisions to Round 2021 of the DMEPOS CBP. Only two out of the original 16 product categories, off-the-shelf (“OTS”) back braces and OTS knee braces, were included in Round 2021 of the DMEPOS CBP. All other product categories were removed from Round 2021, at least in part because the payment amounts did not achieve expected savings. Accordingly, there are no longer any products in our product lines included on the list of products subject to Round 2021 of the DMEPOS CBP. As of today, the CBP for respiratory and OSA product lines has been delayed to 2024, and if, at that time, there is a risk price reduction of some or all of our products and services, our business, results of operations, financial condition and prospects could be adversely affected.

Following the expiration of all previous DMEPOS CBP contracts on December 31, 2018, CMS implemented new DMEPOS payment policies during the temporary gap in the DMEPOS CBP for DMEPOS items that are paid based on information from the DMEPOS CBP. From January 1, 2019 through December 31, 2020, CMS established separate fee schedule adjustment methodologies for such DMEPOS items for three geographic areas: (1) rural/non-contiguous areas where competitive bidding has yet to be

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implemented, (2) other areas (those that are not defined as rural or non-contiguous) where competitive bidding has yet to be implemented (“other non-CBAs”), and (3) former CBAs. For other non-CBAs, the payment amounts for such DMEPOS items have been adjusted based on regional averages of the single payment amounts (“SPAs”) that apply to the DMEPOS CBP (referred to as the “Adjusted Fee Schedule”). Because the SPAs generated from the DMEPOS CBP competitions expired on January 1, 2019, the Adjusted Fee Schedule amount was increased by 1.6% on January 1, 2020, which is the percentage change in the Consumer Price Index for all Urban Consumers (“CPI-U”) for the 12-month period ending June 30, 2019 and was increased again by 0.6% on January 1, 2021. For rural/non-contiguous areas, the payment amounts for such DMEPOS items were based on a blended rate of 50% of the non-Adjusted Fee Schedule amount and 50% of the Adjusted Fee Schedule amount. The Adjusted Fee Schedule amount of the blended rate was increased by the percentage change in the CPI-U (1.6%) on January 1, 2020 and was increased again by 0.6% on January 1, 2021. For former CBAs, the payment amounts for such DMEPOS items are based on the lower of the supplier’s charge for the item or fee schedule amounts that are based on the SPAs that were in effect in the CBA before the CBP contract ended, increased by the projected percentage change in the CPI-U. Accordingly, for 2019, the fee schedule amounts were based on the SPAs in effect on December 31, 2018 for each specific CBA, increased by 2.5% (the projected percentage change in the CPI-U for the 12-month period ending January 1, 2019), and for 2020, the fee schedule amounts increased by 2.4% (the projected percentage change in the CPI-U for the 12-month period ending January 1, 2020). In March 2021, CMS published its April 2021 DMEPOS fee schedule quarterly update, which provided for an approximately 10% average increase in CBAs, an approximately 4.9% average increase in rural areas, and an approximately 5.1% average increase in other non-CBAs. Also, effective April 1, 2021, the budget neutrality requirement for separate classes and national limited monthly payment rates established for any item of oxygen and oxygen equipment was eliminated pursuant to section 121 of the Consolidated Appropriations Act of 2021.

The CARES Act introduced a new blended rate for such DMEPOS items furnished in other non-CBAs (those that are not defined as rural or non-contiguous) that is based on 25% of the non-Adjusted Fee Schedule amount and 75% of the Adjusted Fee Schedule amount, effective March 6, 2020 through the end of the COVID-19 public health emergency. For rural and non-contiguous areas, the payment amount for such DMEPOS items will continue to be based on a blended rate of 50% of the non-Adjusted Fee Schedule amount and 50% of the Adjusted Fee Schedule amount until December 31, 2020 or the end of the COVID-19 public health emergency, whichever is later. Once these extensions stop, the pricing for certain products in certain markets could decline significantly and have a materially negative impact on our profitability.

On November 4, 2020, CMS issued a proposed rule establishing the methodologies for adjusting the fee schedule payment amounts for such DMEPOS items furnished in non-CBAs on or after April 1, 2021 or the date immediately following the duration of the public health emergency period, whichever is later. CMS proposes to pay 100% of the Adjusted Fee Schedule amount in other non-CBAs. Under the proposal, CMS would continue paying suppliers higher rates (e.g., at the 50/50 blended rate) for furnishing such DMEPOS items in rural and non-contiguous areas as compared to in other non-CBAs, informed by stakeholder input indicating higher costs in these areas, greater travel distances and costs in certain non-CBAs compared to CBAs, the unique logistical challenges and costs of furnishing items to beneficiaries in the non-contiguous areas, significantly lower volume of items furnished in these areas versus CBAs, and concerns about financial incentives for suppliers in surrounding urban areas to continue including outlying rural areas in their service areas. For such DMEPOS items that originally were included in Round 2021 but for which contracts were not awarded, CMS is considering whether to simply extend application of the current fee schedule adjustment rules for non-CBAs, CBAs, and former CBAs until new SPAs are calculated for the items in a future round of the DMEPOS CBP. We believe that this proposal does not include NIVs, since they were not included in previous rounds of the DMEPOS CBP and therefore would continue to be paid based on the Medicare DMEPOS fee schedule. CMS will finalize its position on these considerations in its publication of the final rule, the timeline of which CMS announced on April 26, 2021 would be extended to May 11, 2022 (from the original publication date of May 11, 2021).

Inadequate funding for the FDA, CMS, HHS and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.

The operations of key government agencies with which we interact can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel, statutory,

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regulatory and policy changes and the impact of the COVID-19 pandemic. Average review times at such agencies have fluctuated in recent years as a result. In addition, government funding of government agencies on which our operations may rely is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at such governmental agencies may result in delay of new products to be reviewed and/or approved, conduct inspections and audits and provide necessary accreditation or renewal of permits and licenses, which would adversely affect our business. If a prolonged government shutdown occurs, it could significantly impact the operations of various government agencies, which could have a material adverse effect on our business. Further, in our operations as a public company, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

There is an inherent risk of liability in the provision of healthcare services. Damage to our reputation or our failure to adequately insure against losses, including from substantial claims and litigation, could have an adverse impact on our operations, financial condition and prospects.

We, our employees, independent contractors, consultants, vendors and commercial partners may fail to comply with applicable laws and regulations or engage in misconduct or other improper activities. If we fail to comply with applicable laws and regulations, we could suffer penalties or be required to make significant changes to our operations.

We are exposed to the risk of fraud or other misconduct by our employees, consultants, vendors and commercial partners. We have developed a corporate compliance program and instituted a disclosure program in an effort to monitor compliance with federal and state laws and regulations applicable to healthcare organizations and to implement policies, procedures and processes designed to ensure that our employees and third-parties whom we work with act in compliance with all applicable laws, regulations and company policies. and do not engage in intentional, reckless and/or negligent misconduct or unauthorized activities that violate federal and state laws and regulations. However, it is not always possible to identify and deter employee or third-party vendor misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgements, possible exclusion from participation in Medicare, Medicaid, other U.S. federal healthcare programs or healthcare programs in other jurisdictions, integrity oversight and reporting obligations to resolve allegations of non-compliance, individual imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations.

HHS-OIG has issued a series of compliance program guidance documents in which it has set out the elements of an effective compliance program, including a 1999 guidance for DMEPOS suppliers. HHS-OIG has published guidance, stating that in resolving investigations relating to healthcare offenses, the agency will consider a company’s effective ethics and compliance program, where the program is reasonably

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designed, implemented and enforced such that it is generally effective in preventing and detecting criminal conduct. HHS-OIG also encourages and will evaluate whether corporations take certain steps such as periodic monitoring and responding appropriately to detected criminal conduct. If HHS-OIG concludes that we have an ineffective compliance program, we could suffer penalties or be required to make significant changes to our operations.

The healthcare sector is heavily regulated, and we are required to comply with extensive and complex laws and regulations at the federal, state and local government levels relating to, among other things:

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billing and coding for services, including documentation of care, appropriate treatment of overpayments and credit balances, and the submission of false claims or false statements in support of claims;

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relationships and arrangements with referral sources and referral recipients, including self-referral restrictions, prohibitions on kickbacks and other non-permitted forms of remuneration, and prohibitions on the payment of inducements to Medicare and Medicaid beneficiaries in order to influence their selection of a provider;

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the necessity, appropriateness, and adequacy of medical care, equipment, documentation and personnel;

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conditions of coverage and payment for products and services;

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licensure, certification, and enrollment in government programs, including requirements affecting the operation, establishment, and addition of products and services;

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anti-competitive conduct; and

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confidentiality, privacy, data breaches, identity theft, and security issues associated with the maintenance of health-related and other personal information and medical records.

These federal, state and local laws and regulations are stringent and frequently changing, requiring compliance with burdensome and complex billing and payment, substantiation, and record-keeping requirements. For example, the Durable Medical Equipment Medicare Administrative Contractor (“DME MAC”) Supplier Manuals provide that clinical information from a “patient’s medical record” is required to be available to justify the medical necessity for the provision of Medicare-reimbursed DMEPOS items. Although we have implemented policies and procedures that are designed to meet Medicare’s documentation requirements, an auditor for at least one of the DME MACs has taken the position that, among other things, the “patient’s medical record” refers not to documentation maintained by the DMEPOS supplier but instead to documentation maintained by the patient’s physician, healthcare facility or other clinician, and that clinical information created by the DMEPOS supplier’s personnel and confirmed by the patient’s physician is not sufficient to establish medical necessity. It may be difficult, and sometimes impossible, for us to obtain documentation from other healthcare providers. While we have taken this position into account in refining our policies and procedures, if these or related positions adopted by auditors or regulatory authorities are broadly adopted in administering the Medicare program, it could result in our making refunds and other payments to Medicare and our future revenues from Medicare may be reduced.

Failure to comply with various requirements (which can and do change over time) for the reporting and returning of self-identified overpayments or risk of potential False Claims Act (“FCA”) liability (described below), Civil Monetary Penalty (“CMP”) Statute liability and exclusion from federal health care programs for failure to report and return such overpayments.

The Affordable Care Act of 2010 (the “ACA”) introduced section 1128J(d) of the Social Security Act, which requires a person who has identified an overpayment to report and return the overpayment to the Secretary, the state, or a contractor, as appropriate, at the correct address, and to notify the Secretary, state, or contractor to which the overpayment was returned in writing of the reason for the overpayment. The overpayment should be reported and returned by suppliers like us, by the date which is 60 days after the date on which the overpayment was identified. CMS believes that it should take no more than six (6) months to conclude the inquiry into a potential overpayment, though it acknowledges that particularly complex

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matters (such as a Stark Law inquiry) may take longer. Any overpayment retained by a person after the deadline for reporting and returning an overpayment is an obligation that could result in FCA liability as a “reverse false claim.” Where a provider or supplier has identified an overpayment as a result of a Stark violation and has entered into CMS’s Self-Referral Disclosure Protocol, the 60-day period for reporting and returning the overpayment is tolled.

In addition to our obligation to refund overpayments, if we fail to comply with applicable laws and regulations, we could suffer civil or criminal penalties, including fines, damages, recoupment of overpayments, loss of licenses needed to operate, loss of enrollment and approvals necessary to participate in Medicare, Medicaid and other government or managed care programs, and exclusion from participation in Medicare, Medicaid and other government healthcare programs. Investors, officers, and managing employees associated with entities found to have committed healthcare fraud also may be excluded from participation in government healthcare programs, in certain circumstances, depending on the facts under review. Enforcement officials have numerous mechanisms to investigate, detect, deter and punish fraud and abuse. Commercial Payors also have increased their level of scrutiny of healthcare claims (often through a “special investigations unit,” which will sometimes allow the Payor to have a much lengthier “lookback” period on questioning claims), in an effort to identify and pursue allegedly fraudulent and abusive practices in the healthcare industry. Many of these laws and regulations are complex, broad in scope, and have few or narrowly structured exceptions or safe harbors. Further, these laws and regulations are subject to continuing and evolving interpretation by regulatory agencies, administrative law judges and courts. New interpretations of existing requirements, new laws or regulations or the enforcement of existing or new laws and regulations, could subject our current practices to allegations of impropriety or illegality, or require us to make changes in our operations, facilities, equipment, personnel, services, capital expenditure programs or operating expenses to comply with evolving requirements. We cannot assure you that we will make any such changes in a cost-efficient manner. Furthermore, the federal FCA imposes civil liability on an individual or entity that submits or causes another to submit claims for payment to the government that the individual or entity knows or should know are false or fraudulent. Violations of the FCA may result in treble damages, civil penalties, and attorneys’ fees and expenses, as well as interest payments. In addition, the Department of Justice (“DOJ”) (which litigates FCA cases) has the discretion to refer any FCA matter to HHS-OIG for evaluation for potential exclusion from Medicare, Medicaid and other federally funded healthcare programs. Exclusion for a minimum of five years is mandatory for a felony conviction under certain circumstances (including for a healthcare fraud offense), and the presence of aggravating circumstances in a case can lead to an even longer period of exclusion. The federal government also has the discretion to exclude providers for certain conduct even absent a criminal conviction or when the conduct is unrelated to fraud or abuse. Exclusion may be warranted when a company participates in a fraud scheme, pays or receives kickbacks and/or fails to provide services of a quality that meets professionally recognized standards. See Social Security Act (“SSA”) Section 1128(b)(7) for exclusion criteria. Whistleblowers can also bring claims under other statutes, including but not limited to, the AKS and HIPAA.

If certain criteria are satisfied, the FCA allows a private individual (a “relator”) to bring a qui tam suit on behalf of the government and, if the case is successful, to share in any recovery. FCA suits brought directly by the government or private individuals against healthcare providers, like us, are increasingly common and are expected to increase, even when the government elects not to intervene in the case. Similar to the 2018 Brand Memo issued by the DOJ, a 2020 HHS final rule, titled “Good Guidance Practices,” provides protection to individuals or entities that are presently subject to FCA suits, audits, denials of claims, or other audit or enforcement actions based exclusively on allegations of noncompliance with sub-regulatory guidance documents. The frequency of filing qui tam actions has increased significantly in recent years, causing greater numbers of medical device, pharmaceutical and healthcare companies to have to defend FCA actions. Various states have also enacted laws modeled after the federal FCA, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, that apply regardless of Payor. Violation of these federal and state laws can result in the imposition of criminal and civil monetary penalties as well as exclusion from participation in federal and state healthcare programs.

In addition, as a supplier under the Medicare and Medicaid programs, we must comply with the Federal Anti-Kickback Statute (the “AKS”). The AKS prohibits the offer or receipt of any bribe, kickback, or rebate in return for the referral of patients, products, or services covered by federal healthcare programs. Federal healthcare programs have been defined to include plans and programs that provide healthcare benefits

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funded by the United States government, including Medicare, Medicaid and TRICARE (formerly known as the Civilian Health and Medical Program of the Uniformed Services), among others. The AKS covers any arrangement where even “one purpose” of the remuneration is to influence referrals. Violations of the AKS may result in civil and criminal penalties and exclusion from participation in federal healthcare programs, as well as trigger liability under the FCA.

Despite the breadth of the AKS’s prohibitions, there are only a limited number of statutory exceptions that provide absolute protection for various common business transactions and arrangements from prosecution. In addition, HHS-OIG has published safe harbor regulations that outline other types of arrangements that also are deemed protected from prosecution under the AKS or civil sanction under the related CMP Statute, provided all applicable criteria are met. In 2020, HHS-OIG published a final rule, “Revisions to Safe Harbors Under the Anti-Kickback Statute and Civil Monetary Penalty Rules Regarding Beneficiary Inducements,” that implements seven new safe harbors, modifies four existing safe harbors, and codifies one new statutory exception. The failure to meet all of the criteria of an applicable safe harbor does not necessarily mean that the particular arrangement in question violates the AKS; rather, a facts and circumstances test would need to be employed to determine whether the particular arrangements would be subject to greater scrutiny by enforcement agencies. A determination that a financial arrangement violates the AKS could subject us to liability under the SSA, including civil and criminal penalties, as well as exclusion from participation in federal healthcare programs such as Medicare and Medicaid. In order to obtain additional clarification on the AKS, a provider can obtain written advisory opinions from HHS-OIG regarding existing or contemplated arrangements. Advisory opinions are binding as to HHS but only with respect to the requesting party or parties. The advisory opinions are not binding as to other governmental agencies (e.g., the DOJ), and certain matters (e.g., whether certain payments made in conjunction with conduct seeking to meet certain safe harbor protections are at fair market value) are not within the purview of an advisory opinion.

Certain states in which we operate have enacted statutes and regulations similar to the AKS that prohibit some direct or indirect payments if those payments are designed to induce or encourage the referral of patients to a particular provider. Most states have anti-kickback statutes that prohibit kickbacks relating to the state’s Medicaid program, but some state anti-kickback statutes are broader and apply not only to the federal and state healthcare programs but also to other Payor sources (e.g., national and regional insurers and MCOs). These state laws (referred to sometimes as “all-Payor anti-kickback statutes”) may contain exceptions and/or safe harbors that are different from those at the federal level and may vary widely from state to state. A number of states in which we operate also have laws that prohibit fee-splitting arrangements between healthcare providers, if such arrangements are designed to induce or encourage the referral of patients to a particular provider. Possible sanctions for violations of these laws include exclusion from state-funded healthcare programs, loss of licensure and civil and criminal penalties. These laws vary from state to state, often are vague and often have been subject to only limited court and/or regulatory agency interpretation.

The federal physician self-referral law, commonly referred to as the “Stark Law,” prohibits a physician from making referrals for certain “designated health services” (“DHS”) payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship (ownership, investment, or compensation), and prohibits such entity from billing Medicare or any other Payor for such referred DHS, unless an exception applies. The term “designated health services” includes several services commonly performed or supplied by us, including DME and certain pharmacy items and services. In addition, the term “financial relationship” is broadly defined to include any ownership or investment interest, or compensation arrangement, pursuant to which a physician receives remuneration from the entity at issue. The Stark Law prohibition applies regardless of the reasons for the financial relationship and the referral, and, therefore, unlike the AKS, an intent to violate the prohibition generally is not required. Billing for services where an exception to the Stark Law is not met may result in loss of Medicare and Medicaid reimbursement, and, for knowing violations, civil penalties and exclusion from participation in the Medicare and Medicaid programs, and potential FCA liability. There is also a potential for FCA liability if there is an overpayment associated with Medicare payments made despite a financial relationship that did not meet a Stark Law exception.

The Stark Law contains a number of statutory and regulatory exceptions intended to protect certain types of transactions and business arrangements from penalty. In order to qualify an arrangement

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under a particular Stark Law exception, compliance with all of the exception’s requirements is necessary. Since the Stark Law was enacted in 1989, there have continued to be ongoing changes and clarifications to a number of the provisions in the legislation and regulations. In 2020, CMS issued a final rule, “Modernizing and Clarifying the Physician Self-Referral Regulations,” which creates new permanent exceptions to the Stark Law for value-based arrangements as well as provides additional guidance on several key requirements that must be met in order for physicians and healthcare providers to comply with the Stark Law. For example, compensation provided to a physician by another healthcare provider generally must be at fair market value, and the final rule provides guidance on how to determine if compensation meets this requirement. The Stark Law has also been subject to varying, and sometimes contradictory, decisions by the courts.

In addition, a number of the states in which we operate have similar prohibitions against physician self-referrals, which are not limited to federal healthcare programs. These state prohibitions may differ from the Stark Law’s prohibitions and exceptions may apply to a broader or narrower range of services, arrangements and financial relationships and may apply to other healthcare professionals in addition to physicians. Violations of these state laws may result in prohibition of payment for services rendered, loss of licenses, fines and criminal penalties. State statutes and regulations also may require physicians and/or other healthcare professionals to disclose to patients any financial relationships the physicians and/or healthcare professionals have with healthcare providers who are recommended to patients. These laws vary from state to state, often are vague, and in many cases, have not been interpreted by courts or regulatory agencies.

In addition to the laws described above, various other laws and regulations prohibit fraud and abuse in the healthcare industry and provide for significant penalties. Further, the payment of inducements to Medicare and Medicaid beneficiaries intended to influence those beneficiaries to order or receive services from a particular provider or practitioner may result in CMPs and exclusion. Examples of challenged practices include the routine waiver of coinsurance or deductibles otherwise owed by beneficiaries, to induce beneficiaries to work with the company. Federal enforcement officials have numerous enforcement mechanisms to combat fraud and abuse, including an incentive program under which individuals can receive up to $1,000 for providing information on Medicare fraud and abuse that leads to the recovery of at least $100 of Medicare funds. In addition, pursuant to its exclusion criteria, the HHS-OIG may exclude from Medicare and Medicaid and other Federal healthcare programs any investors, officers and managing employees associated with business entities that have committed healthcare fraud.

There have also been new statutes enacted to prevent fraud and abuse in healthcare, and the government continues to use existing statutes in new ways to target alleged healthcare fraud. For example, in recent years the DOJ has started using the Travel Act as a basis for prosecuting healthcare fraud defendants based on violations of state anti-kickback or anti-bribery laws, even if various safe harbors or exceptions are met. In addition, other federal statutes criminalize healthcare fraud (e.g., 18 U.S.C. § 1347), making false statements to the government (e.g., 18 U.S.C. §§ 287, 1001) or aggravated identify theft (e.g., 18 U.S.C. § 1028A).

Any enforcement action against us, even if we successfully defend against it, could cause our reputation to suffer, or cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. To avoid sanctions and resolve expensive enforcement actions, we may be required to enter into settlement or plea agreements with the government. Typically, such agreements require substantial payments to the government in exchange for the government’s release of its claims and may also require us to enter into a corporate integrity agreement that imposes extensive ongoing compliance obligations.

In addition to the fraud and abuse statutes mentioned above, CMS has promulgated regulations that give it the authority to revoke Medicare billing privileges, for a period of one to 13 years, or up to 20 years for repeat offenders, and 10 years is frequently meted out. The regulatory grounds for revocation have been growing in recent years and currently number 22, many of which are not based on fraud or abuse (e.g., failure to meet the DMEPOS supplier standards). By statute, where Medicare has revoked a provider’s or supplier’s billing privileges, Medicaid is required to revoke as well. Thus, revocation of billing privileges is the functional equivalent to an exclusion from federal healthcare programs. Moreover, by practice, where a provider or supplier has had its billing privileges revoked, commercial Payors often revoke the provider’s or supplier’s right to bill them. DMEPOS suppliers, together with physicians, have traditionally been among

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the most frequent recipients of revocation actions. The administrative appeals process for billing revocations is both lengthy and ineffective. Administrative appeals adjudicators have no authority to rule regulations invalid (yet there is no expedited judicial review process) and cannot or do not review revocation determinations for an abuse of discretion.

We cannot assure you that current or future legislative initiatives, government regulation or judicial or regulatory interpretations thereof will not have a material adverse effect on us. We cannot assure you that a review of our business by judicial, regulatory or accreditation authorities will not subject us to fines or penalties, require us to expend significant amounts, reduce the demand for our services or otherwise adversely affect our operations.

For further information, see “—We have been and could become the subject of federal and state investigations and compliance reviews” below. In addition, see “Business—Government Regulation” for a description of the extensive government regulation to which we are subject, including numerous laws directed at regulating reimbursement of our products and services under various government programs and preventing fraud and abuse.

Our business activities are subject to anti-corruption laws and anti-money laundering laws and regulations including the Foreign Corrupt Practices Act.

We are subject to various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls, the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act of 2001 and other state and national anti-bribery and anti-money laundering laws and regulations, in the countries in which we or our third-party vendors may conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors and other collaborators from authorizing, promising, offering or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector. We may engage third party vendors that have operations outside of the United States, to manufacture our products and we also have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals other organizations. We can be held liable for the corrupt or other illegal activities of our employees, agents, contractors and other collaborators, even if we do not explicitly authorize or have actual knowledge of these activities. Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences.

The FCPA generally prohibits offering, promising, giving, or authorizing others to give anything of value, either directly or indirectly, to a non-United States government official in order to influence official action, or otherwise obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Our business is heavily regulated and therefore involves significant interaction with public officials, including, potentially in the future, officials of non-United States governments. Additionally, in many other countries, the healthcare providers who prescribe pharmaceuticals and medical devices are employed by their government, and the purchasers of pharmaceuticals and medical devices are government entities; therefore, our dealings with these prescribers and purchasers will be subject to regulation under the FCPA. Recently the SEC and DOJ increased their FCPA enforcement activities with respect to healthcare companies. There is no certainty that all of our employees, agents, suppliers, manufacturers, contractors, or collaborators, or those of our affiliates, will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. Violations of these laws and regulations could result in fines, criminal sanctions against us, our management or other employees, the closing down of facilities, including those of our third-party suppliers and manufacturers, requirements to obtain necessary licenses and permits, cessation of business activities in sanctioned countries, implementation of compliance programs, and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our products in one or more countries as well as difficulties in manufacturing or continuing to develop our products, and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, and our business, financial condition, results of operations and prospects.

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We have been and could become the subject of federal and state investigations and compliance reviews.

Our operations, including our billing practices and our arrangements with healthcare providers, are subject to routine and extensive federal and state laws and audits, inquiries, and investigations from government agencies. For example, on May 6, 2020, in connection with an investigation against one of our third-party vendors, we received a subpoena issued by HHS-OIG requesting certain copies of our records related to such third-party vendor. HHS-OIG subpoenas are issued by the government in the ordinary course when it is investigating an FCA case. Since then, we have been fully cooperating with the DOJ, which is handling the subpoena for HHS-OIG. The Civil Division Assistant United States Attorney handling the matter has noted that information has been requested from several DME providers in connection with such matter, and further noted that we are not the subject or target of its investigation and refused to provide a copy of any possible civil complaint against us. Even if we are not the target or subject of federal and state investigations, we may have to participate and cooperate in such investigations, or become a target in the future, which could negatively impact our reputation, business, results of operations, financial condition and prospects.

In addition, we have entered into a settlement with the DOJ in 2018, related to a flaw in the systems programming of our insurance and medical billing services system that permitted billing for oxygen contents without requiring delivery or sufficient evidence of delivery in the preceding 90 days. The Medicare Improvements for Patients and Providers Act of 2009 repealed certain provisions of the Deficit Reduction Act of 2005 (“DRS”) but maintained a 36-month cap on the rental period of oxygen equipment and associated payments for Medicare beneficiaries. In the process of implementing the necessary regulatory changes in our software and automatic billing processes related to portable oxygen contents for Medicare beneficiaries, an error occurred that permitted our automatic billing processes to continuously bill beyond the 36-month rental period established by the DRS, which resulted in over-billing certain of our Medicare beneficiaries. When the error was discovered, we immediately refunded the amounts due to the government and issued a voluntary disclosure, shut down our automatic billing system and conducted appropriate audits and internal investigations of our billing system and related programs. Our voluntary disclosure of the matter led to an investigation by the DOJ and we entered into a settlement resulting in a penalty of $9.68 million. All payments under the settlement have been paid and we have otherwise complied with all requirements under the settlement. Since then, our automatic billing processes and software have been re-designed and implemented and periodic audits are performed to confirm that there is no incorrect billing for submitted claims.

Federal and state governments have contracted with private entities to audit and recover revenue resulting from payments made in excess of amounts permitted by federal and state benefit program rules. These entities include, but are not limited to, Recovery Audit Contractors (“RAC”) that are responsible for auditing Medicare claims, Zone Program Integrity Contractors (“ZPIC”) and Unified Program Integrity Contractors (“UPIC”) that are responsible for the identification of suspected fraud through medical record review and Medicaid Integrity Contractors (“MIC”), that are responsible for auditing Medicaid claims. We believe audits, inquiries, and investigations from these contractors and others will occur from time to time in the ordinary course of our business. We also may be subject to audits from commercial Payors. Our efforts to be responsive to these audits, inquiries, and investigations may result in substantial costs and divert management’s time and attention away from the operation of our business. Moreover, an adverse outcome with respect to any audit, inquiry or investigation may result in damage to our reputation, or in fines, penalties or other sanctions imposed on us. Such future audits, inquiries, or investigations, or the public disclosure of such matters, could have a material adverse effect on our business, results of operations, financial conditions and prospects.

Federal and state laws are broadly worded and may be interpreted or applied by prosecutorial, regulatory, or judicial authorities in ways that we cannot predict. Additionally, in many instances, there are only limited publicly-available guidelines and methodologies for determining errors with certain audits. As a result, there can be a significant lack of clarity regarding required documentation and audit methodology. The clarity and completeness of each patient medical file, some of which is the work product of physicians not employed by us, is essential to successfully challenging any payment denials. For example, as discussed above, certain provisions under CMS guidance manuals, local coverage determinations, and the DME MAC Supplier Manuals provide that clinical information from the “patient’s medical record” is required to be available to justify the initial and ongoing medical necessity for the provision of DMEPOS. Some DME

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MACs, CMS staff and other government contractors have taken the position that the “patient’s medical record” refers not to documentation maintained by the DMEPOS supplier but instead to documentation maintained by the patient’s physician, healthcare facility or other clinician, and that clinical information created by the DMEPOS supplier’s personnel and confirmed by the patient’s physician is not sufficient to establish medical necessity. If treating physicians do not adequately document, among other things, their diagnoses and plans of care, the risks that the Company will be subject to audits and payment denials are likely to increase. Moreover, auditors’ interpretations of these policies are inconsistent and subject to individual interpretation, leading to significant increases in individual supplier and industry-wide perceived error rates. High error rates could lead to further audit activity and regulatory burdens and could result in our making significant refunds and other payments to Medicare and other government programs. Accordingly, our future revenues and cash flows from government healthcare programs may be reduced. Commercial Payors also may conduct audits and may take legal action to recover alleged overpayments. We could be adversely affected in some of the markets in which we operate if an auditing Payor alleges substantial overpayments were made to us due to coding errors or lack of documentation to support medical necessity determinations. We cannot currently predict the adverse impact these measures might have on our business, results of operations, financial conditions and prospects, but such impact could be material.

Moreover, as discussed above, provisions of the ACA implemented by CMS require that overpayments be reported and returned within 60 days of the date on which the overpayment is “identified.” Any overpayment retained after this deadline may be considered an “obligation” for purposes of the FCA, liability for which can result in the imposition of substantial fines and penalties. CMS currently requires a six-year “lookback period,” for reporting and returning overpayments.

Accordingly, our arrangements and business practices may be the subject of government scrutiny or found to violate applicable laws. If federal or state government officials challenge our operations or arrangements with third parties that we have structured based upon our interpretation of these laws, rules, and regulations, such a challenge could potentially disrupt our business operations and we may incur substantial defense fees and costs, even if we successfully defend our interpretation of these laws, rules, and regulations. If the government or third parties successfully challenge our interpretation, such a challenge may have a material adverse effect on our business, results of operations, financial conditions and prospects.

Ongoing federal and state health reform initiatives could impact our operations and business condition in ways that we cannot currently predict and may have a significant adverse effect on our business, results of operations, financial condition and prospects.

Economic, political, and regulatory influences at both the federal and state level are continuously causing fundamental changes in the U.S. healthcare industry. In 2010, Congress enacted significant reforms to the U.S. healthcare system, contained primarily in the ACA and its companion act, the Health Care Education and Reconciliation Act of 2010 (collectively, the “Health Reform Laws”). Since their passage in 2010, the Health Reform Laws have faced various and ongoing legal challenges to repeal or modify those laws or delay the implementation of certain aspects of those laws.

Consequently, the core tenets of the Health Reform Laws currently remain in effect, but with several exceptions. The individual mandate penalty was reduced to zero through the TCJA with the elimination of the individual mandate penalty effective January 1, 2019. In addition, the Bipartisan Budget Act of 2018, enacted in February 2018, eliminated the Independent Payment Advisory Board, which was a 15-member panel of healthcare experts created by the Health Reform Laws and tasked with making annual cost-cutting recommendations for the Medicare program if Medicare spending exceeded a specified growth rate. In December 2019, Congress passed the Further Consolidated Appropriations Act, 2020 (Pub. Law 116-94) that repealed several provisions included in the Health Reforms Laws to pay for increased federal spending associated with those laws. Specifically, Congress: (i) repealed the Medical Device Excise Tax, which imposed a 2.3% excise tax on manufacturers, producers and importers of certain medical devices, effective in 2020; (ii) repealed the so-called “Cadillac Tax,” which imposed an excise tax of 40% on premiums of employer-sponsored insurance for individuals and families that exceeded a certain minimum threshold, effective in 2020; and (iii) repealed the health insurance tax, which applies to most fully insured plans, effective in 2021.

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The Health Reform Laws also are the subject of ongoing litigation. In particular, a collection of 20 state governors and state attorneys general (subsequently two states have dropped out) filed a lawsuit against the federal government in the Northern District of Texas seeking to enjoin the entire Health Reform Laws following the elimination of the individual mandate penalty in 2019. The District Court ruled that without the penalty provision, the individual mandate was unconstitutional and that all other provisions of the Health Reform Laws should be overturned as well. The U.S. Court of Appeals for the 5th Circuit affirmed the trial court’s decision; however, instead of deciding whether the rest of the ACA must be struck down, the 5th Circuit sent the case back to the trial court for additional analysis. In March of 2020, the U.S. Supreme Court granted certiorari in the case and, on November 10, 2020, heard oral arguments. We are unable to predict the ultimate outcome of the lawsuit but note its potential impact on the Health Reform Laws moving forward. These and other efforts to challenge, repeal or replace the ACA may result in reduced funding for state Medicaid programs, lower numbers of insured individuals and reduced coverage for insured individuals, which would have a material adverse effect on our business, results of operations, financial conditions and prospects.

We anticipate that federal and state governments will continue to review and assess alternative healthcare delivery systems and payment methodologies, and that public debate regarding these issues will continue in the future. Changes in the law or new interpretations of existing laws can have a substantial effect on permissible activities, the relative costs associated with doing business in the healthcare industry and the amount of reimbursement available from government and other Payors. If the Health Reform Laws are repealed or modified, or if implementation of certain aspects of the Health Reform Laws continues to be delayed, such repeal, modification, or delay may have a material and adverse impact on our business, results of operations, financial conditions and prospects.

We may be adversely affected by Congress’ elimination of the ACA’s individual mandate penalty.

The provisions of the ACA that penalized individuals if they failed to maintain a basic level of health insurance coverage, commonly referred to as the law’s “individual mandate penalty,” were effectively repealed through the TCJA when Congress reduced the penalty to zero dollars. The elimination of the individual mandate penalty may have the ongoing effect of increasing instability and financial disruption in the market for health insurance in 2021 and beyond, as a population of patients who may previously have obtained coverage because they were required to under the ACA may choose now to enroll in less expensive and less robust insurance products or to drop their coverage altogether. The repeal became effective January 1, 2019 but such choices may continue to materialize as more patients are made aware of the elimination of the individual mandate penalty. However, as a result of a changing administration and changes in Congress, it is possible that the individual mandate could be reinstated. These and other risks and uncertainties resulting from the elimination of the individual mandate penalty may have a material adverse effect on our business, results of operations, financial conditions and prospects.

If we fail to maintain required licenses, certifications, or accreditation, or if we do not fully comply with requirements to provide notice to or obtain approval from regulatory authorities due to changes in our ownership structure or operation, it could adversely impact our operations.

We are required to maintain state and/or federal licenses and certifications for our operations and facilities. In addition, certain employees, primarily those with clinical expertise in respiratory therapy and nursing, are required to maintain licenses in the states in which they practice. From time to time, we may become subject to new or different licensing requirements due to legislative or regulatory requirements or the development of or changes to our business. Accurate licensure is also a critical threshold issue for Medicare enrollment and for participation in the Medicare DMEPOS CBP. We are subject to periodic inspection by governmental and other authorities to assure continued compliance with the various standards necessary for licensing and certifications, some of which are complex and may be unclear or subject to varying interpretation.

All DMEPOS suppliers are also required by CMS to meet a complex array of supplier standards. In response to the declaration of a public health emergency due to the COVID-19 pandemic, CMS instituted flexibilities related to the DMEPOS supplier standards and temporarily suspended all DMEPOS provider enrollment site visits in order to ease provider burden during the COVID-19 pandemic. However, as of July 6,

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2020, CMS has resumed all DMEPOS provider enrollment site visits, and is no longer waiving certain DMEPOS supplier standards. Although we believe we have the right systems in place to monitor licensure and certification, our failure, or the failure of one or more of our clinicians, to maintain appropriate licensure or certification for our operations, facilities, and clinicians could result in interruptions in our operations and our ability to service patients, refunds to state and/or federal Payors, and the imposition of sanctions or fines, which could have an adverse and material impact on our business, results of operations, financial conditions and prospects.

Accreditation is required by most major commercial Payors and is a mandatory requirement for all Medicare DMEPOS suppliers. In response to the declaration of a public health emergency due to the COVID-19 pandemic, CMS temporarily suspended all accreditation and reaccreditation activities for DMEPOS suppliers. However, as of July 6, 2020, CMS resumed all accreditation and reaccreditation activities, including surveys, which may be conducted on-site, virtually or a combination of both depending on each state’s reopening plan. We and all of our branch locations are currently accredited by The Joint Commission. If we or any of our branch locations should lose accreditation, or if any of our new branch locations are unable to become accredited, our failure to maintain our accreditation or become accredited could have a material adverse effect on our business, results of operations, financial conditions and prospects. CMS also imposes surety bond requirements on all DMEPOS suppliers.

The requirements for licensure and certification may include notification or approval in the event of a transfer or change of ownership or certain other changes. Agencies or commercial Payors with which we have contracts may have similar requirements and some of those processes may be complex. State licensing laws are often ambiguous as to whether they apply to our services, and interpretation of these laws can change without notice. Failure to provide required notifications or obtain the requisite approvals could result in the delay or inability to complete an acquisition or transfer, loss of licensure, lapses in reimbursement or other penalties. While we make reasonable efforts to substantially comply with these requirements, if we are found to have failed to comply in some material respect, it could have an adverse or material impact on our business, results of operations, financial condition and prospects.

A recall of any of our products, either voluntarily or at the direction of the FDA or another governmental authority, or the discovery of serious safety issues with our products that leads to corrective actions being taken, could have a significant adverse impact on our business.

The FDA has authority to request the recall of medical gas products or medical devices and supplies in the event a product presents a risk of illness or injury or gross consumer deception, such as due to a material deficiency or defect in design, labeling or manufacture of a product, and a cessation of distribution and/or recall is necessary to protect the public health and welfare. If after providing the Company or the manufacturer with an opportunity to consult with the agency, the FDA finds that there is a reasonable probability that a device intended for human use would cause serious, adverse health consequences, undesirable side effects or death, the FDA has the power to mandate a recall of medical devices. Manufacturers may also, under their own initiative, recall a product if any material deficiency is identified or withdraw a product for other reasons. See “—The recall of certain Royal Philips BiPAP and CPAP devices and ventilators that we distribute and sell and our reliance on new, alternative suppliers for these products could have a significant negative impact on our business, results of operations, financial condition and prospects.” Any major recall would divert management attention and financial resources from the operation of our business, could cause the price of our stock to decline and expose us to product liability or other claims and harm our reputation with patients. If we do not adequately address problems associated with our medical gas products or medical devices and supplies, we may face additional regulatory enforcement action, FDA untitled or warning letters, product seizure, injunctions, administrative penalties, civil money penalties or criminal fines. We may also be required to bear other costs or take other actions that may have a negative impact on our revenue, or significant adverse publicity of regulatory consequences, which could harm our business.

We may be subject to fines, penalties, or injunctions if we are determined to be promoting the use of our products for unapproved or “off-label” uses, resulting in damage to our reputation and our business.

Our promotional materials and training methods must comply with applicable laws and regulations of the FDA and other regulatory authorities, including the prohibition of the promotion of a medical gas

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or medical device for a use that has not been cleared or approved by the FDA or other applicable regulatory authorities. If the FDA or other applicable regulatory authorities determine that our promotional materials or training constitutes promotion of an off-label use that is either false or misleading, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, which could have a material adverse effect on our business, results of operations, financial conditions and prospects.

Our corporate officers may be subject to a misdemeanor penalty (and possible subsequent felony) under the FFDCA for alleged violations of the Act.

The Park Doctrine, as established by the U.S. Supreme Court, provides that a responsible corporate official can be held criminally liable for a first time misdemeanor (and possible subsequent felony) for a company’s alleged violations of the FFDCA without proof that the corporate official participated in, had intent or negligence, or was even aware of the violations. In pursuing such a charge, the government need only demonstrate that the official was in a position of authority to prevent or correct the alleged violation. Under Section 303(f)(1) of the FFDCA, a person who violates a requirement relating to medical devices or supplies can be liable for a civil penalty for all violations adjudicated in a single proceeding, except for those relating to cGMPs and medical device reporting violations that do not constitute a significant or knowing departure from requirements or a risk to public health; filth violations in devices and supplies that are not otherwise defective; and minor violations relating to device and supply tracking and correction and removal reporting requirements if the person shows substantial compliance with such provisions. The FDA may use misdemeanor prosecution as an enforcement tool and may refer prosecutions to the DOJ. Once a person has been convicted of a misdemeanor under the FFDCA, any subsequent violation is a felony, even without proof that the responsible corporate official acted with the intent to defraud or mislead. In some cases, a misdemeanor conviction of an individual may serve as the basis for debarment by the FDA. The maximum civil money penalty amounts are periodically adjusted for inflation. If the DOJ were to pursue such a misdemeanor or felony prosecution against a responsible corporate official of the Company, it could have a material adverse effect on our business, results of operations, financial conditions and prospects and could lead to suspension, debarment or exclusion proceedings.

Our medical gas facilities and operations are subject to extensive regulation by federal and state authorities and there can be no assurance that our medical gas facilities will achieve and maintain compliance with such regulations.

We have a number of medical gas facilities in several states. These facilities are subject to federal and state regulatory requirements, including numerous environmental, health and safety laws and regulations, for the handling, use, storage, treatment and disposal of hazardous materials. The FDA regulates medical gases, including medical oxygen, pursuant to its authority under the FFDCA. Among other requirements, the FDA’s cGMP regulations impose certain quality control, documentation, and recordkeeping requirements on the receipt, processing, and distribution of medical gas. Further, in each state where we operate medical gas facilities, we are subject to regulation under state health and safety laws, which vary from state to state. The FDA and state authorities conduct periodic, unannounced inspections at medical gas facilities to assess compliance with the cGMP and other regulations. For further information, see “—Risks Related to Our Business and Operations—Changes or disruption in supplies , or inability to timely scale-up manufacturing of our products and services provided by third parties could adversely affect our business” above.

We expend significant time, money, and resources in an effort to achieve substantial compliance with the cGMP regulations and other federal and state law requirements at each of our medical gas facilities. There can be no assurance, however, that these efforts will be successful and that our medical gas facilities will achieve and maintain compliance with federal and state laws and regulations. Our failure to achieve and maintain regulatory compliance at our medical gas facilities could result in enforcement action, including untitled letters, warning letters, fines, product recalls or seizures, temporary or permanent injunctions, or suspensions in operations at one or more locations, as well as civil or criminal penalties, all of which could materially harm our business, results of operations, financial conditions and prospects.

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Our operations are subject to various environmental, health and safety laws and regulations, including related to storage, transportation and provision of medical gas products and compressed and liquid oxygen, which carries an inherent risk of rupture, leaks, fires or other accidents, and could potentially result in fines or penalties or cause substantial loss and liability that could have a material adverse effect on our business, results of operations, financial conditions and prospects.

Our operations involve the use of hazardous and flammable materials, and we are subject to a variety of federal, state and local environmental laws and regulations relating to the storage, transportation and provision of medical gas products and compressed and liquid oxygen. There is an inherent risk of ruptures, leaks, fires or other accidents. These risks could result in substantial losses due to personal injury or loss of life, severe damage to and destruction of property and equipment and pollution or other environmental damage and may result in curtailment or suspension of our related operations. Environmental laws and regulations impose liability for the remediation of releases of hazardous substances into the environment and for personal injuries resulting from exposure to hazardous substances, and they can give rise to substantial remediation costs and to third-party claims. Our products may also contain hazardous substances, and they are subject to laws and regulations relating to labeling requirements and to their sale, collection, recycling, treatment, storage and disposal. Corrective action plans, fines or other sanctions may be levied by government regulators who oversee the storage, transportation and provision of hazardous materials and any liability could exceed our resources. Liability under environmental laws and regulations can be joint and several and without regard to fault or negligence, and they tend to become more stringent over time, imposing greater compliance costs and increased risks and penalties associated with violations. We cannot assure you that violations of these laws and regulations, or releases of or exposure to hazardous substances, will not occur in the future and have not occurred in the past, including as a result of human error, accidents, equipment failure or other causes. If a significant accident or event occurs, it could adversely affect our business, results of operations, financial conditions and prospects. Although we maintain general liability insurance as well as workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees or third-party vendors resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or tort claims that may be asserted against us in connection with our storage or disposal of hazardous materials.

Failure of a key information technology system, process or site could have an adverse effect on our business.

We rely extensively on information technology (“IT”) systems to conduct our business, particularly with respect to our online business. These systems affect, among other things, invoice patients and Payors, to manage clinical and financial data, to communicate with our patients, Payors, vendors and other third parties, to summarize and analyze our operating results and other processes necessary to manage our business. Our systems may be subject to computer viruses, ransomware or other malware, attacks by computer hackers, failures during the process of upgrading or replacing software, databases or components thereof and if our systems are damaged or cease to function properly due to these, or any number of causes, ranging from catastrophic events and power outages to security breaches, and our business continuity plans do not effectively compensate on a timely basis, we may experience interruptions in our operations, including corruption of our data or release of our confidential information, which could have an adverse effect on our business, results of operations, financial conditions and prospects.

A cyber-attack, a security breach or the improper disclosure of protected health information (“PHI”) could cause a loss of confidential data, give rise to remediation and other expenses, expose us to liability under HIPAA and the Health Information Technology for Economic and Clinical Health Act (“HITECH”), consumer protection, common law or other legal theories, subject us to litigation and federal and state governmental inquiries, damage our reputation and otherwise be disruptive to our business.

We rely extensively on our IT systems to bill patients and Payors, to manage clinical and financial data, to communicate with our consumers, Payors, vendors and other third parties, and to summarize and analyze our operating results. Although we have implemented various policies, procedures and other security measures to protect our IT systems and data and face ongoing cyber-attacks and threats, there can be no assurance that we will not be subject to a cyber-attack, a security breach or the improper disclosure or use (including by our own employees) of PHI, which we have experienced in the past and may also experience in

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the future. Such attacks or breaches could result in loss of protected patient medical data or other information subject to privacy laws or disrupt our information technology systems or business, potentially exposing us to regulatory action, litigation and liability.

The healthcare industry has been and continues to be a target for cyber-attacks and the number of threats has only increased during the COVID-19 pandemic. Numerous federal agencies that monitor and regulate internet and cyber-crime have issued guidance, alerts and directives warning of software vulnerabilities that require immediate patching, malicious actors targeting healthcare related systems and nation state sponsored hacking designed to steal valuable information, including COVID-19 vaccine and treatment research.

HIPAA applies to covered entities (health care providers that engage in electronic standard transactions, health plans, and health care clearinghouses) and their business associates (persons that provide services for or on behalf of covered entities involving the creation, receipt, maintenance, and/or transmission of PHI). HIPAA is comprised of a number of obligations and individual rights pertaining to the privacy and security of certain PHI, security measures that must be implemented in connection with protecting PHI and related systems, as well as the standard formatting of certain electronic health transactions. HITECH (enacted under the American Recovery and Reinvestment Act of 2009) further regulated how covered entities and business associates may use and disclose PHI. In addition, HIPAA requires covered entities to use the electronic standard transactions, operating rules, code sets and unique identifiers that have been adopted through regulation by the Secretary. Covered entities and/or their business associates must report breaches of unsecured PHI without unreasonable delay to the HHS Office for Civil Rights (“OCR”), under certain circumstances to affected individuals and, in the case of larger breaches, the media. Violations of the HIPAA privacy and security regulations may result in significant criminal and civil penalties. We are subject to HIPAA as a covered entity. We enter into contracts with our business associates to require those business associates to safeguard PHI in accordance with the requirements of HIPAA and HITECH; we also sometimes enter into contracts as the business associate of another covered entity. The HIPAA privacy, security, and breach notification regulations have imposed, and will continue to impose, significant compliance costs on our operations.

Under the 21st Century Cures Act, Congress authorized the HHS Office of the National Coordinator for Health Information Technology (“ONC”) to engage in rulemaking that would drive interoperability and provide timely access to health information through standardized application programming interfaces (“APIs”) to seamlessly coordinate care, improve outcomes and reduce the cost of care, known as the Information Blocking Rules. CMS also published new regulations under their authority to regulate managed care plans and healthcare providers participating in Medicare and Medicaid programs that enable better patient access to their health information and reduce the burden on Payors and providers. The Information Blocking Rules became effective on April 5, 2021. We may be considered an “actor” subject to the Information Blocking Rules or will participate in a health information exchange or network under the ONC and CMS Interoperability Rules and we will likely be required to comply with the new regulatory framework that is emerging around value-based payments and patient-centered care.

In January 2021, the ONC published Proposed Modifications to the HIPAA Privacy Rule to Support, and Remove Barriers to, Coordinated Care and Individual Engagement. These proposed HIPAA modifications are meant to streamline patient access and improve information sharing through standardized APIs and the use of third-party mobile applications. In order to do so, OCR has proposed modifications to the individuals’ right of access to their PHI, putting patients in charge of their health records and giving patients and their families more control over their healthcare choices. While these HIPAA Privacy Rule modifications are still in the proposed phase of rulemaking, in order to remain HIPAA compliant when the new rules are finalized and implemented, healthcare providers may need to modernize their information technology capabilities and update internal policies and procedures, as well as business associate agreements.

Numerous other federal and state laws that protect the confidentiality, privacy, availability, integrity and security of PHI and healthcare related data also apply to us. In many cases, these laws are more restrictive than, and not preempted by, the HIPAA and HITECH rules and requirements, and may be subject to varying interpretation by courts and government agencies, creating complex compliance issues for us and potentially exposing us to additional expenses, adverse publicity and liability. Furthermore, the legislative and

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regulatory framework relating to the processing of personal data, including PHI, worldwide is rapidly expanding and evolving and is likely to remain uncertain for the foreseeable future. In the course of our operations, we process personal data and PHI, including from our employees and third parties with whom we conduct business. Accordingly, we are, and may increasingly become, subject to various data privacy and security laws, regulations and standards, as well as policies, contracts and other obligations that apply to the processing of personal data and PHI both by us and on our behalf, the number and scope of which are changing, subject the differing applications and interpretations, may be inconsistent among jurisdictions, and may conflict with each other.

Further, federal and state consumer laws are being applied increasingly by the Federal Trade Commission (“FTC”) and state attorneys general, to regulate the collection, use and disclosure of personal information or patient health information, and to ensure that appropriate data safeguards are implemented by business and organizations that are maintaining personal information about individuals. For example, the California Consumer Privacy Act (“CCPA”), which became effective on January 1, 2020, gives California residents expanded rights to access and delete their personal information, opt out of “sales” of the consumer’s personal information, and receive detailed information about how their personal information is collected, used, and disclosed by requiring covered businesses to provide new disclosures to California consumers. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. In addition, in November 2020, Californians approved Proposition 24, which was also known as the California Privacy Rights Act (the “CPRA”). The CPRA modifies and expands the CCPA and established a new California Privacy Protection Agency. While the CPRA extended the current CCPA exemption of employment and business-to-business data until January 1, 2023, it also established January 1, 2023 as the new compliance date for most of the other substantive provisions that companies doing business in California must be prepared to meet. In addition to applying to businesses that buy and sell personal information the CPRA applies to businesses that buy, sell or share personal information and sets forth a new category of “sensitive personal information” that includes, genetic data; biometric or health information; and sex life or sexual orientation information. In addition to the modifications that enhance individuals’ rights under the CCPA, the CPRA added five more rights, including the authority for the State to regulate the requirement for businesses to conduct risk assessments and cybersecurity audits. There is still a significant amount of uncertainty with respect to the CPRA’s three-year compliance roll-out that may increase our compliance costs and potential liability. Virginia has recently passed a similar data privacy law, and other states including New York, Massachusetts, North Dakota, Hawaii, and Maryland also are considering laws that would give consumers increased control over their personal data.

Courts also may adopt the standards for fair information practices promulgated by the FTC that concern consumer notice, choice, security and access. The FTC and many state attorneys general are interpreting existing federal and state consumer protection laws to impose evolving standards for the online collection, use, dissemination and security of health-related and other personal information. Courts may also adopt the standards for fair information practices promulgated by the FTC, which concern consumer notice, choice, security and access. Consumer protection laws require us to publish statements that describe how we handle personal information and choices individuals may have about the way we handle their personal information. If such information that we publish is considered untrue, it may be subject to government claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences. Furthermore, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5 of the FTC Act.

Under the Federal Controlling the Assault of Non-Solicited Pornography And Marketing Act of 2003 (“CAN-SPAM Act”), the Telephone Consumer Protection Act of 1991 (“TCPA”) and the Telemarketing Sales Rule and Medicare regulations, we are limited in the ways in which we can market our products and services by use of email, text or telephone marketing. The CAN-SPAM Act also prohibits and protects consumers against all auto-dialed or pre-recorded calls or text messages to an individual’s cell phone. The actual or perceived improper making of telephone calls or sending of text messages may subject us to potential risks, including liabilities or claims relating to consumer protection laws. Numerous class-action suits under federal and state laws have been filed in recent years against companies that conduct SMS texting programs, with many resulting in multi-million-dollar settlements to the plaintiffs. Any future such litigation

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against us could be costly and time-consuming to defend. For example, the TCPA, a federal statute that protects consumers from unwanted telephone calls, faxes and text messages, restricts telemarketing and the use of automated SMS text messages without proper consent. Additionally state regulators may determine that telephone calls to our patients are subject to state telemarketing regulations. The Medicare program has also imposed certain other requirements limiting the ability of a DMEPOS supplier to market to beneficiaries. If we do not comply with existing or new laws and regulations related to telephone contacts or patient health information, we could be subject to criminal or civil sanctions.

New regulation and information standards, whether implemented pursuant to federal or state laws, whether in the U.S. or in other jurisdictions, is expected in this area and could have a significant effect on the manner in which we must handle healthcare related data, and the cost of complying with such standards could be significant. We have implemented various compliance measures in connection with the HIPAA, HITECH and 21st Century Cures Act rules and requirements, and other federal and state privacy and security rules and requirements, but we may be required to take additional steps, including costly system purchases and modifications or training of our employees to ensure their compliance, to comply with these rules and requirements as they may evolve over time. We face potential government enforcement actions and administrative, civil and criminal sanctions if we do not comply with the existing or new laws and regulations dealing with the privacy and security of personal information, PHI and patient information. Any of these events could subject us to substantial fines or penalties and could have a material adverse effect on our business, results of operations, financial conditions and prospects. Similarly, if we, or any of our business associates, experience a breach of PHI or other personal information, the breach reporting requirements required by HIPAA and other applicable laws, including state laws could result in substantial financial liability and reputational harm.

Risks Related to this Offering and Ownership of our Common Stock

There has been no prior public market for our common stock and there may not be an active trading market for shares of our common stock following this offering, which may cause shares of our common stock to trade at a discount from their initial offering price and make it difficult to sell the shares of common stock you purchase.

Prior to this offering, there has not been a public trading market for shares of our common stock. It is possible that after this offering an active trading market will not develop or continue or, if developed, that any market will be sustained which would make it difficult for you to sell your shares of common stock at an attractive price or at all. The initial public offering price per share of common stock will be determined by agreement among us and the representatives of the underwriters, and may not be indicative of the price at which shares of our common stock will trade in the public market after this offering.

The market price of shares of our common stock may be volatile or may decline and our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations and could cause the value of your investment to decline.

The market price of our common stock may be highly volatile and could be subject to wide fluctuations in response to numerous factors, many of which are beyond our control, including:

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general economic, market or political conditions, including conditions resulting from COVID-19;

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overall performance of the equity markets;

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our operating performance compared to expectations of public market analysts and investors, including due to variations in our quarterly operating results or dividends, if any, to stockholders;

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changes in our projected operating results that we provide to the public, our failure to meet these projections;

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additions or departures of key management personnel;

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failure to meet analysts’ earnings estimates;

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publication of research reports about our industry;

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litigation and government investigations;

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regulatory actions with respect to our products and services;

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changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business;

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changes in our relationship with hospitals, large commercial Payors or the VA and adverse impact on our material contracts;

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adverse market reaction to any indebtedness we may incur or securities we may issue in the future;

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financing or other corporate transactions, or inability to obtain additional funding;

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changes in market valuations of similar companies or speculation in the press or investment community;

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announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments;

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adverse publicity about the industries we participate in or individual scandals;

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seasonality, including possible seasonal slowing of demand for our products and services in the beginning of the year due to patients deferring their treatment and services until they have met their annual deductibles and delays in changes to employer insurance coverage becoming effective and increased incidence of respiratory infections during the winter season that may result in additional respiratory products and services being used; and which may become more pronounced in the future as our business grows;

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trading activity by a limited number of stockholders who together beneficially own a majority of our outstanding common stock;

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sales of our common stock by us, our insiders or other stockholders;

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expiration of market stand-off or lock-up agreements;

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the size of our market float; and

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any other factors described in this “Risk Factors” section and elsewhere in this prospectus.

In addition, our quarterly and annual operating results may fluctuate significantly in the future, which makes it difficult for us to predict our future operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated guidance we may provide.

Stock markets have recently experienced extreme price and volume fluctuations. In the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

We are a holding company with no operations of our own and we are accordingly dependent upon distributions from our subsidiaries to pay taxes and pay dividends.

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such distributions under applicable law or regulation or under the terms of our financing arrangements, or are otherwise unable to provide such funds, it could materially adversely affect our liquidity and financial condition.

If securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our common stock, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our common stock price may decline. If analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our common stock price or trading volume to decline and our common stock to be less liquid.

Investors in this offering will suffer immediate and substantial dilution.

The initial public offering price per share of common stock will be substantially higher than our net tangible book value per share immediately after this offering. As a result, you will pay a price per share of common stock that substantially exceeds the per share book value of our tangible assets after subtracting our liabilities. In addition, you will pay more for your shares of common stock than the amounts paid by our pre-IPO owners. Assuming an offering price of $ per share of common stock, which is the midpoint of the range on the front cover of this prospectus, you will incur immediate and substantial dilution in an amount of $ per share of common stock. See “Dilution.”

You may be diluted by the future issuance of additional common stock in connection with our incentive plans, acquisitions or otherwise.

After this offering we will have approximately shares of common stock authorized but unissued. Our amended and restated certificate of incorporation will authorize us to issue these shares of common stock and options, rights, warrants and appreciation rights relating to common stock for the consideration and on the terms and conditions established by our board of directors in its sole discretion, whether in connection with acquisitions or otherwise. Additionally, we have reserved shares for issuance under our 2021 Omnibus Incentive Plan (the “Omnibus Incentive Plan”). See “Executive and Director Compensation—Post-IPO Equity Compensation Plans—2021 Omnibus Incentive Plan.” Any common stock that we issue, including under our Omnibus Incentive Plan or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by the investors who purchase common stock in this offering.

Participation in this offering by our existing stockholders and their affiliated entities may reduce the public float for our common stock.

To the extent certain of our existing stockholders and their affiliated entities participate in this offering, such purchases would reduce the non-affiliate public float of our shares, meaning the number of shares of our common stock that are not held by officers, directors and principal stockholders. A reduction in the public float could reduce the number of shares that are available to be traded at any given time, thereby adversely impacting the liquidity of our common stock and depressing the price at which you may be able to sell shares of common stock purchased in this offering.

Each of our Principal Stockholders and their affiliates control us and their individual interests may conflict with ours or yours in the future.

Immediately following this offering, our Principal Stockholders and their respective affiliates will beneficially own approximately % of our common stock (or % if the underwriters exercise their option to purchase additional shares in full). Even when each of our Principal Stockholders and their respective affiliates cease to own shares of our stock representing a majority of the total voting power, for so long as each of our Principal Stockholders continue to own a significant percentage of our stock, each of our Principal Stockholders will still be able to significantly influence the composition of our board of directors and the approval of actions requiring stockholder approval through their voting power. Accordingly,

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for such period of time, each of our Principal Stockholders will have significant influence with respect to our management, business plans and policies, including the appointment and removal of our officers. In particular, for so long as each of our Principal Stockholders continue to own a significant percentage of our stock, each of our Principal Stockholders will be able to cause or prevent a change of control of our Company or a change in the composition of our board of directors and could preclude any unsolicited acquisition of our Company. The concentration of ownership could deprive you of an opportunity to receive a premium for your shares of common stock as part of a sale of our Company and ultimately might affect the market price of our common stock. Additionally, each of our Principal Stockholders may assign their respective rights under the stockholders governance agreement to a third party without our consent, for example, in connection with a privately negotiated sale of all or a portion of each of our Principal Stockholders’ holdings of our common stock to a third party. Such third party would then have the right to designate individuals to be nominated to our board, as well as other rights under the stockholders governance agreement. Notwithstanding the existence of the stockholders governance agreement, our Principal Stockholders have no voting or other agreements among them. The interests of each of our Principal Stockholders or any such third party with respect to such rights may conflict with our interests or your interests in the future.

Our Principal Stockholders and their affiliates engage in a broad spectrum of activities. In the ordinary course of their business activities, our Principal Stockholders and their affiliates may engage in activities where their interests conflict with our interests or those of our stockholders. Our amended and restated certificate of incorporation will provide that none of our Principal Stockholders, any of their affiliates or any director who is not employed by us (including any non-employee director who serves as one of our officers in both his or her director and officer capacities) or his or her affiliates, will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate. Our Principal Stockholders also may pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. In addition, our Principal Stockholders may have an interest in our pursuing acquisitions, divestitures and other transactions that, in their judgment, could enhance their investment, even though such transactions might involve risks to us and our stockholders.

A significant portion of our total outstanding shares is and will be restricted from immediate resale following this offering, but if we or our pre-IPO owners sell additional shares of our common stock in the near future or are perceived by the public markets as intending to sell them, the market price of our common stock could decline significantly.

The sale of substantial amounts of shares of our common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for you to sell your common stock in the future at a time and at a price that you deem appropriate, if at all. Upon completion of this offering, we will have a total of shares of our common stock outstanding. Of the outstanding shares, the shares sold in this offering (or shares of our common stock if the underwriters exercise their option to purchase additional shares in full) will be freely tradable without restriction or further registration under the Securities Act of 1933 (the “Securities Act”). The remaining shares held by our pre-IPO owners and management after this offering will be subject to certain restrictions under securities laws or as a result of lock-up or other agreements and may be sold only in compliance with the limitations described in “Shares Eligible for Future Sale.”

We, our officers, directors and substantially all holders of our outstanding shares of common stock immediately prior to this offering, including our Principal Stockholders, will sign lock-up agreements with the underwriters that will, subject to certain customary exceptions, restrict the sale of the shares of our common stock held by them for 180 days following the date of this prospectus. BofA Securities, Inc., Jefferies LLC, UBS Securities LLC and Truist Securities, Inc. may, in their sole discretion, release all or any portion of the shares of common stock subject to such lock-up agreements. See “Underwriting” for a description of these lock-up agreements. See “Principal Stockholders” and “Shares Eligible for Future Sale—Lock-Up Agreements.”

Upon the expiration of the lock-up agreements described above, all of such shares will be eligible for resale in the public market, subject, in the case of shares held by our affiliates, to volume, manner of sale

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and other limitations under Rule 144. We expect that our Principal Stockholders will continue to be considered an affiliate following the expiration of the lock-up period based on its expected share ownership and its board nomination rights. Certain other of our stockholders may also be considered affiliates at that time. However, subject to the expiration or waiver of the 180-day lock-up period, the holders of these shares of common stock will have the right, subject to certain exceptions and conditions, to require us to register their shares of common stock under the Securities Act, and they will have the right to participate in future registrations of securities by us. Registration of any of these outstanding shares of common stock would result in such shares becoming freely tradable without compliance with Rule 144 upon effectiveness of the registration statement. See “Shares Eligible for Future Sale.”

We intend to file one or more registration statements on Form S-8 under the Securities Act to register shares of our common stock or securities convertible into or exchangeable for shares of our common stock issued pursuant to our Omnibus Incentive Plan. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market. We expect that the initial registration statement on Form S-8 will cover shares of our common stock.

As restrictions on resale end, the market price of our shares of common stock could drop significantly if the holders of these restricted shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our shares of common stock or other securities or to use our shares of common stock as consideration for acquisitions of other businesses, investments or other corporate purposes.

Because we have no current plans to pay dividends on our common stock following this offering, you may not receive any return on your investment unless you sell your common stock for a price greater than that which you paid for it.

We have no current plans to pay dividends on our common stock following this offering. The declaration, amount and payment of any future dividends on shares of common stock will be at the sole discretion of our board of directors. Our board of directors may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our stockholders or by our subsidiaries to us and such other factors as our board of directors may deem relevant. In addition, our ability to pay dividends is limited by our existing indebtedness and may be limited by covenants of other indebtedness we or our subsidiaries incur in the future. As a result, you may not receive any return on an investment in our common stock unless you sell your common stock for a price greater than that which you paid for them.

Our management may spend the proceeds of this offering in ways with which you may disagree or that may not be profitable.

Although we anticipate using the net proceeds to us from the offering as described under “Use of Proceeds,” we will have broad discretion as to the application of the net proceeds to us and could use them for purposes other than those contemplated by this offering. You may not agree with the manner in which our management chooses to allocate and spend the net proceeds to us. Our management may use the proceeds for corporate purposes that may not increase our profitability or otherwise result in the creation of stockholder value. In addition, pending our use of the proceeds, we may invest the proceeds primarily in instruments that do not produce significant income or that may lose value.

We could be subject to securities class action litigation.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because healthcare companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

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We will incur increased costs and become subject to additional regulations and requirements as a result of becoming a public company, which could lower our profits, make it more difficult to run our business or divert management’s attention from our business.

As a public company, we will be required to commit significant resources and management time and attention to the requirements of being a public company, which will cause us to incur significant legal, accounting and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements. We also will incur costs associated with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and related rules implemented by the SEC and Nasdaq, and compliance with these requirements will place significant demands on our legal, accounting and finance staff and on our accounting, financial and information systems. In addition, we might not be successful in implementing these requirements. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. These laws and regulations also could make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation.

Our internal controls over financial reporting currently do not meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act, and failure to achieve and maintain effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and the market price of the common stock.

As a public company, we will have significant requirements for enhanced financial reporting and internal controls. The process of designing and implementing effective internal controls is a continuous effort that will require us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. If we are unable to establish or maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our consolidated financial statements and harm our results of operations.

Commencing with our fiscal year ending the year after this offering is completed, we must perform system and process design evaluation and testing of the effectiveness of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting in our Form 10-K filing for that year, as required by Section 404 of the Sarbanes-Oxley Act. In addition, once we are no longer considered an emerging growth company, our independent registered public accounting firm will be required to attest to the effectiveness of our internal controls over financial reporting on an annual basis. To achieve compliance with Section 404 of the Sarbanes-Oxley Act within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, including through hiring additional financial and accounting personnel, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. This will require that we incur substantial additional professional fees and internal costs to expand our accounting and finance functions and that we expend significant management efforts.

Prior to this offering, we have never been required to test our internal controls within a specified period and, as a result, our internal controls over financial reporting currently do not meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act that eventually we will be required to

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meet. Because currently we do not have comprehensive documentation of our internal controls and have not yet tested our internal controls in accordance with Section 404, we cannot conclude in accordance with Section 404 that we do not have a material weakness in our internal controls or a combination of significant deficiencies that could result in the conclusion that we have a material weakness in our internal controls. If such weaknesses in our system of internal financial and accounting controls and procedures are discovered, it could result in a material misstatement of our financial statements. Our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC or violations of applicable stock exchange listing rules, which may result in a breach of the covenants under existing or future financing arrangements. There also could be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements. Confidence in the reliability of our financial statements also could suffer if we or our independent registered public accounting firm were to report a material weakness in our internal controls over financial reporting. This could materially adversely affect us and lead to a decline in the market price of our common stock.

We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.

We are an “emerging growth company” as defined in the JOBS Act. For so long as we remain an emerging growth company, we are permitted by SEC rules and plan to rely on exemptions from certain disclosure requirements that are applicable to other SEC-registered public companies that are not emerging growth companies. These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the SOX, not being required to comply with the auditor requirements to communicate critical audit matters in the auditor’s report on the financial statements, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, the information we provide stockholders will be different than the information that is available with respect to other public companies. We have taken advantage of reduced reporting obligations in this prospectus. In particular, in this prospectus, we have provided only two years of audited financial statements and we have not included all of the executive compensation related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of the exemption regarding the timing of the adoption of accounting standards and, therefore, while we are an emerging growth company, we will not be subject to new or revised accounting standards at the same time that they become applicable to other public companies that are not emerging growth companies.

Anti-takeover provisions in our organizational documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable.

We are subject to Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”); In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with any “interested stockholder” for a three-year period following the time that the stockholder became an interested stockholder, unless the transaction fits within an enumerated exception, such as board approval of the business combination or the transaction that resulted in a person becoming

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an interested stockholder prior to the time such person became an interested stockholder. See “Description of Common Stock—Delaware Law.” These anti-takeover provisions and other provisions under our amended and restated certificate of incorporation, amended and restated bylaws or Delaware law could discourage, delay or prevent a transaction involving a change in control of our Company, including actions that our stockholders may deem advantageous, or negatively affect the trading price of our common stock. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.

Our amended and restated certificate of incorporation will designate the Court of Chancery of the State of Delaware and the federal district courts of the United States of America as the sole and exclusive forums for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with the Company or the Company’s directors, officers or other employees.

Our amended and restated certificate of incorporation will provide that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware lacks jurisdiction over such action or proceeding, then another court of the State of Delaware or, if no court of the State of Delaware has jurisdiction, then the United States District Court for the District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for any (1) derivative action or proceeding brought on behalf of our Company; (2) action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, employee or stockholder of our Company to the Company or the Company’s stockholders; (3) action asserting a claim against the Company or any current or former director or officer of the Company arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or our amended and restated bylaws; or (4) action asserting a claim against us or any director or officer of the Company governed by the internal affairs doctrine. Our amended and restated certificate of incorporation will further provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the federal securities laws of the United States of America. Our amended and restated certificate of incorporation will provide that, to the fullest extent permitted by law, any person or entity purchasing or otherwise acquiring any interest in any shares of our common stock shall be deemed to have notice of and to have provided consent to the forum provisions in our amended and restated certificate of incorporation. Notwithstanding the foregoing, the exclusive forum provision will not apply to claims arising under the Securities Act, the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or other federal securities laws for which there is exclusive federal or concurrent federal and state jurisdiction. These choice-of-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable or convenient for disputes with the Company or the Company’s directors, officers, other employees or stockholders, which may discourage such lawsuits. In addition, if a court were to find the exclusive forum provision or other provisions of our amended and restated certificate of incorporation inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, results of operations, financial condition and prospects and result in a diversion of the time and resources of our management and board of directors.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that reflect our current views with respect to, among other things, our operations and financial performance. Forward-looking statements include all statements that are not historical facts. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “predicts,” “intends,” “trends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Forward-looking statements contained in this prospectus include, but are not limited to, statements about:

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our ability to obtain reimbursements from Payors, and comply with reimbursement rules and standards of care;

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our ability to successfully renegotiate Payor contracts on substantially similar terms;

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the recall of certain Royal Philips BiPAP and CPAP devices and ventilators and our reliance on new, alternative suppliers for these products;

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our ability to comply with changing laws and regulations, and exclusion from federal health care programs for failure to report and return overpayments;

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our reliance on relatively few vendors for the majority of our medical equipment and supplies;

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our inability to timely scale-up manufacturing of our products and services provided by third parties;

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our failure to successfully design, modify and implement technology and other process changes;

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our failure to maintain controls and processes over billing and collections;

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our failure to attract and retain key members of senior management and other skilled labor;

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our ability to address the market opportunity in the healthcare sector, as well as the total market opportunity;

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our ability to maintain regulatory approval for our products and services;

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regulatory developments in the HME industry in the United States;

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our ability to address the needs of our existing and potential patients with home healthcare products and services;

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the success of competing products that are or may become available;

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our financial performance;

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our competitive position;

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the size and growth of the markets for our products and our ability to serve those markets;

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our plans and expected potential benefits of acquisitions and our ability to identify suitable acquisition opportunities and effectively integrate acquired businesses in a cost-effective manner;

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our expectations regarding our ability to obtain and maintain intellectual property protection for our products and related technologies;

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our capital requirements, the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

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our ability to generate revenue and obtain funding for our operations, including funding necessary to complete further development of our current and future products;

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the impact of the COVID-19 pandemic on our business, financial condition and results of operations and our response to it;

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our expectations regarding the period during which we will qualify as an emerging growth company under the JOBS Act; and

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our anticipated use of our existing resources and the proceeds from this offering.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or will occur. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors include but are not limited to those described under “Risk Factors.” These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements. These forward-looking statements speak only as of the date of this prospectus and we undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

MARKET AND INDUSTRY DATA

This prospectus includes market and industry data and forecasts that we have derived from independent consultant reports, publicly available information, various industry publications and other published industry sources, which we have not commissioned, and our internal data and estimates. Independent consultant reports, industry publications and other published industry sources generally indicate that the information contained therein was obtained from sources believed to be reliable.

Some market data and statistical information are also based on our good faith estimates, which are derived from management’s knowledge of our industry and such independent sources referred to above. Certain market, ranking and industry data included elsewhere in this prospectus, including the size of certain markets and our size or position and the positions of our competitors within these markets, including our services relative to our competitors, are based on estimates of our management. These estimates have been derived from our management’s knowledge and experience in the markets in which we operate, as well as information obtained from surveys, reports by market research firms, our patients, distributors, suppliers, trade and business organizations and other contacts in the markets in which we operate. Unless otherwise noted, all of our market share and market position information presented in this prospectus is an approximation. Our market share and market position in each of our lines of business, unless otherwise noted, is based on our sales relative to the estimated sales in the markets we served. References herein to our being a leader in a market or product category refer to our belief that we have a leading market share position in each specified market, unless the context otherwise requires. As there are no publicly available sources supporting this belief, it is based solely on our internal analysis of our sales as compared to our estimates of sales of our competitors. In addition, the discussion herein regarding our various end markets is based on how we define the end markets for our products, which products may be either part of larger overall end markets or end markets that include other types of products and services.

Our internal data and estimates are based upon information obtained from trade and business organizations and other contacts in the markets in which we operate and our management’s understanding of industry conditions.

TRADEMARKS, SERVICE MARKS AND TRADE NAMES

We own or have rights to trademarks, service marks or trade names that we use in connection with the operation of our business. In addition, our names, logos and website domain names and addresses are our service marks or trademarks. We do not intend our use or display of other companies’ trademarks, service marks, copyrights or trade names to imply a relationship with, or endorsement or sponsorship of us by,

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any other companies. The trademarks we own or have the right to use include, among others, Rotech. We also own or have the rights to copyrights that protect the content of our literature, be it in print or electronic form.

Solely for convenience, certain trademarks, service marks and trade names referred to in this prospectus are used without the ™ or ® symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names. All trademarks, service marks and trade names appearing in this prospectus are the property of their respective owners.

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USE OF PROCEEDS

We estimate that the net proceeds to us from this offering will be approximately $ million, or $ million if the underwriters exercise their option to purchase additional shares in full, based on an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We currently intend to use the net proceeds to us from this offering, together with our existing cash and cash equivalents, to (i) repay all amounts outstanding under the Rotech Healthcare Holdings Credit Facility and (ii) for general corporate purposes, including working capital, operating expenses and capital expenditures. Our Principal Stockholders and/or their respective affiliates are lenders under the Rotech Healthcare Holdings Credit Facility and therefore will receive a portion of the net proceeds to us from the offering. We may also use a portion of the net proceeds from this offering for the acquisition of businesses or other assets that we believe are complementary to our own.

As of March 31, 2021, we had $149.3 million outstanding under the Rotech Healthcare Holdings Credit Facility. The Rotech Healthcare Holdings Credit Facility matures in September 2023. The term loans under the Rotech Healthcare Holdings Credit Facility bear interest at the Three Month LIBOR Index Rate (as defined in the Rotech Healthcare Holdings Credit Facility) plus the Applicable Margin (as defined in the Rotech Healthcare Holdings Credit Facility) in effect from time to time. The interest rate on the Rotech Healthcare Holdings Credit Facility is 13% as of the date of this prospectus. Interest on all outstanding term loans is payable in arrears on each Interest Payment Date (as defined in the Rotech Healthcare Holdings Credit Facility) by being capitalized and added to the outstanding principal amount of the term loans on such Interest Payment Date.

A $1.00 increase or decrease in the assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, the net proceeds to us from this offering by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase or decrease of 1,000,000 shares in the number of shares offered by us would increase or decrease, as applicable, the net proceeds to us from this offering by approximately $ million, assuming no change in the assumed initial public offering price of $ per share and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing. We expect any increase or decrease in the net proceeds to us to increase or decrease, as applicable, the amount available for general corporate purposes.

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DIVIDEND POLICY

We have no current plans to pay dividends on our common stock following this offering. Any decision to declare and pay dividends in the future will be made at the sole discretion of our board of directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our board of directors may deem relevant. Because we are a holding company and have no direct operations, we will only be able to pay dividends from funds we receive from our subsidiaries. In addition, our ability to pay dividends will be limited by covenants in our existing indebtedness and may be limited by the agreements governing any indebtedness we or our subsidiaries may incur in the future.

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2021 as follows:

•

on an actual basis; and

•

on an as adjusted basis to give effect to the sale and issuance of shares of our common stock by us in this offering, based upon the receipt by us of the estimated net proceeds from this offering at the assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us and the application of the net proceeds to us from this offering as described under “Use of Proceeds,” including repayment of the Rotech Healthcare Holdings Credit Facility.

The as adjusted information is illustrative only and our capitalization following this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. Cash and cash equivalents are not components of our total capitalization. You should read this table together with the other information contained in this prospectus, including “Selected Consolidated Financial and Other Data,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes thereto included elsewhere in this prospectus.

	As of March 31, 2021
(In thousands, except share and per share amounts)	Actual			As Adjusted(6)
Cash and cash equivalents		$	55,002		$
Rotech Healthcare Inc. Credit Facility		$	343,813		$	343,813
Term Loan A(1)			330,813			330,813
Acquisition Revolving Credit Facility(2)			13,000			13,000
Working Capital Revolving Credit Facility(3)			—			—
Rotech Healthcare Holdings Credit Facility(4)			149,268			—
Capital Leases(5)			37,067			37,067
Rotech Healthcare Holdings Inc. common stock, par value $0.001 per share, 9,600,000 shares authorized, 8,000,000 shares issued and outstanding, actual; shares authorized, shares issued and outstanding, as adjusted			8
Additional paid-in capital			125,911
Accumulated deficit			(83,317)
Total stockholders’ equity			42,602
Total capitalization		$	572,750		$

(1)

Reflects the outstanding principal amount on term loans under the Rotech Healthcare Inc. Credit Facility.

(2)

As of March 31, 2021, $62.0 million was available for borrowing under the Acquisition Revolving Credit Facility available under the Rotech Healthcare Inc. Credit Facility.

(3)

As of March 31, 2021, the $15.0 million available for borrowing under the Working Capital Revolving Credit Facility under the Rotech Healthcare Inc. Credit Facility has been reduced by the amount of outstanding letters of credit totaling $4.6 million.

(4)

Reflects the principal amount of outstanding debt under the Rotech Healthcare Holdings Credit Facility.

(5)

Reflects the principal amount of outstanding capital lease agreements primarily for patient equipment and delivery vehicles.

(6)

Each $1.00 increase or decrease in the assumed initial public offering price of $ per share,

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the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, the as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each increase or decrease of 1,000,000 shares in the number of shares offered by us would increase or decrease, as applicable, the as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $ million, assuming no change in the assumed initial public offering price of $ per share and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The as adjusted information is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing

The number of shares of common stock outstanding is based on shares outstanding as of March 31, 2021 after giving effect to this offering, including application of the use of proceeds thereof and the repayment of the Rotech Healthcare Holdings Credit Facility and does not reflect shares of common stock reserved for future issuance under the 2021 Omnibus Incentive Plan. See “Executive and Director Compensation—Post-IPO Equity Compensation Plans—2021 Omnibus Incentive Plan.”

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DILUTION

If you invest in shares of our common stock in this offering, your investment will be immediately diluted to the extent of the difference between the initial public offering price per share of common stock and the as adjusted net tangible book value per share of common stock after this offering. Dilution results from the fact that the per share offering price of the shares of common stock is substantially in excess of the as adjusted net tangible book value per share attributable to our pre-IPO owners.

Our historical net tangible book value as of March 31, 2021 was approximately $ million, or $ per share of common stock. Net tangible book value represents the amount of total tangible assets less total liabilities, and net tangible book value per share of common stock represents net tangible book value divided by the number of shares of common stock outstanding.

After giving further effect to receipt of the net proceeds of our sale of shares of common stock at an assumed initial public offering price of $ per share, the midpoint of the estimated price range set forth on the cover page of this prospectus and after deducting estimated underwriting discounts and commissions and estimated offering expenses, our as adjusted net tangible book value as of March 31, 2021 would have been approximately $ million, or $ per share. This represents an immediate increase in as adjusted net tangible book value of $ per share to our pre-IPO owners and an immediate dilution of $ per share to investors purchasing common stock in this offering. We determine dilution per share to investors participating in this offering by subtracting pro forma as adjusted net tangible book value per share after this offering from the assumed initial public offering price per share paid by investors participating in this offering.

The following table illustrates this dilution on a per share of common stock basis to investors, assuming the underwriters do not exercise their option to purchase additional shares of common stock:

Assumed initial public offering price per share of common stock

Net tangible book value per share of common stock as of March 31, 2021

Increase in net tangible book value per share of common stock attributable to investors participating in this offering

As adjusted net tangible book value per share of common stock after this offering

Dilution per share of common stock to investors participating in this offering

If the underwriters’ option to purchase additional shares in this offering is exercised in full, the as adjusted net tangible book value would be $ per share, the increase in the net tangible book value per share for our pre-IPO owners would be $ per share and the dilution to investors participating in this offering would be $ per share.

Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) the as adjusted net tangible book value, by $ per share and the dilution per share to investors participating in this offering by $ per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase (decrease) of 1,000,000 shares in the number of shares we are offering would increase (decrease) our as adjusted net tangible book value by approximately $ million, or $ per share, and the pro forma dilution per share to investors participating in this offering by $ per share, assuming that the assumed initial public offering price remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. The dilution information above is for illustrative purposes only. Our net tangible book value following the consummation of this offering is subject to adjustment based on the actual initial public offering price of our shares and other terms of this offering determined at pricing.

The following table summarizes, as of March 31, 2021, the average price per share paid by pre-IPO owners and by investors participating in this offering. As the table shows, investors purchasing shares in this offering will pay an average price per share substantially higher than our pre-IPO owners paid. The table below reflects the number of shares of our common stock, the total consideration, and the average price per

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share (i) paid to us by our pre-IPO owners and (ii) to be paid by investors participating in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, for shares purchased in this offering and excludes estimated underwriting discounts and commissions and estimated offering expenses payable by us:

	Shares of Common Stock Purchased			Total Consideration				Average Price Per Share of Common Stock
(In thousands)	Number	Percent		Amount		Percent		Average Price Per Share of Common Stock

Pre-IPO owners			%		$		%		$
Investors in this offering			%		$		%		$
Total			100%		$		100%		$

If the underwriters’ option to purchase additional shares is exercised in full, the number of shares of our common stock held by pre-IPO owners would be reduced to % of the total number of shares of our common stock outstanding after this offering, and the number of shares of common stock held by investors participating in this offering would be increased to % of the total number of shares of our common stock outstanding after this offering.

To the extent we issue additional shares of common stock or other equity or convertible debt securities, options or warrants or in the future, there will be further dilution to investors participating in this offering.

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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

We derived the selected consolidated statements of operations data for the years ended December 31, 2020 and 2019, and the selected consolidated balance sheet data as of December 31, 2020 and 2019 from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated statements of operations data for the three months ended March 31, 2021 and 2020 and the selected consolidated balance sheet data as of March 31, 2021 were derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. The unaudited condensed consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and, in the opinion of our management, reflect all normal recurring adjustments necessary for the fair statement of our consolidated results for these periods. The results for any interim periodare not necessarily indicative of the results that may be expected for the full year. Our historical results are not necessarily indicative of the results expected for any future period.

You should read the selected consolidated financial statement data below, together with the audited consolidated financial statements and related notes thereto appearing elsewhere in this prospectus, as well as “Summary—Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the other financial information included elsewhere in this prospectus.

	Three Months Ended March 31,						Year Ended December 31,
(in thousands, except per share data)	2021			2020			2020			2019
Statement of Operations Data:
Revenues		$	142,003		$	110,842		$	503,183		$	408,304
Operating income			25,812			14,574			75,303			51,051
Net income (loss)			12,844			(196)			119,160			3,803
Basic and diluted earnings (loss) per share		$	1.61		$	(0.02)		$	14.90		$	0.48

	As of March 31,						As of December 31,
(in thousands, except per share data)	2021			2020			2020			2019
Summary Balance Sheet Data:
Current assets		$	140,918		$	130,986		$	129,625		$	116,944
Property and equipment, net			189,733			141,179			177,707			137,413
Total assets			697,764			534,442			668,510			516,958
Current liabilities			150,202			125,674			147,880			112,986
Other long-term liabilities			11,124			9,762			11,155			6,732
Deferred tax liability			—			23,370			—			23,370
Debt, less current portion			493,836			465,234			479,717			463,272
Total liabilities			655,162			624,040			638,752			606,360
Total stockholders’ equity (deficit)			42,602			(89,598)			29,758			(89,402)

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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the “Selected Consolidated Financial and Other Data” and our consolidated financial statements and related notes thereto included elsewhere in this prospectus. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in “Forward-Looking Statements” and “Risk Factors.”

Overview

We are a leading provider of home medical equipment and related products and services (collectively referred to as “HME products and services”) in the United States. We offer a comprehensive range of HME products and services for home healthcare and delivery across five core business lines: (1) oxygen, (2) ventilators, (3) sleep therapy, (4) wound care and (5) DME. We enable the treatment of patients in their homes, including chronic patients, acute patients or patients with both chronic and acute needs. Our Payor clients include commercial insurers, Medicare, Medicaid, the VA and private individuals. As of March 31 2021, we served more than 600,000 active patients across over 300 service locations in 45 states, supported by more than 3,500 full-time equivalent (“FTE”) employees and key Payor contracts (including over 1,750 commercial Payor contracts). Over the past several years, we have made substantial, long-term strategic improvements in our business and operations, resulting in a growth rate of over 23% for the year ended December 31, 2020, primarily driven by organic growth and Adjusted EBITDA Margin of 30.3% for the year ended December 31, 2020. Our growth plans also include continuing to evaluate attractive acquisition opportunities in our industry.

We focus on being the industry’s highest-quality provider of HME products and services, while maintaining our commitment to being a low-cost operator. We offer a compelling value proposition to patients, providers and Payors by enabling patients to receive care and services in the comfort of their own homes while also reducing treatment costs as compared to in-patient settings. Our key HME products and services include stationary and portable home oxygen equipment, non-invasive and invasive ventilators, CPAP and BiPAP devices, NPWT pumps and supplies and other DME. As of March 31, 2021, we served more than 600,000 active patients, of whom over 218,000 were oxygen patients receiving approximately 624,000 tank deliveries in aggregate. Our revenues are generated primarily through fee-for-service arrangements with Payors for equipment, supplies, services and other items we rent or sell to patients. With an expansive network of Payor contracts, delivery technicians and therapists that is not readily replicated, we are well positioned to provide home healthcare that require high-quality service, providing a bridge from the in-patient care setting to the home.

We operate in attractive end markets. We derived approximately 87.1% of our revenue for the year ended December 31, 2020 from the high-growth respiratory and OSA markets. According to industry reports, in 2019, the global markets for homecare oxygen concentrators, homecare ventilators, and CPAP devices were estimated to be $1.0 billion, $0.5 billion and $3.0 billion, respectively, and are projected to grow at a compound annual growth rate (“CAGR”) of approximately 15.2%, 7.3%, and 5.9%, respectively, from 2019 to 2024. We entered the market for wound care products and supplies starting with an exclusive distributor agreement with Smith and Nephew in 2019 and further with the acquisition of Halo Wound Solutions in July 2020. In 2019, the global market for wound care devices and supplies was projected to be approximately $3 billion by 2025 and this market is expected to grow at a CAGR of approximately 5.4% from 2019 to 2024. In particular, the global market size of NPWT devices, the largest sub-segment of wound care, was estimated to be approximately $1.0 billion in 2019 and is expected to grow at a CAGR of approximately 6.6% from 2019 to 2024. We believe these high-growth markets represent attractive embedded opportunities for continued growth.

We believe key differentiators from our competitors are our national scale and footprint, our culture of disciplined and profitable growth, our relentless operational rigor and focus on cash collections, and our proprietary technology platform. We sit at the nexus of referring providers, Payors, patients, and suppliers — all of whom share the goal of keeping patients as healthy as possible in the comfort of their homes. We have long-standing relationships with referral sources across the country that refer patients to us

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because of our end-to-end product and service offerings, national distribution footprint, and our reputation for delivering consistent, quality service. We enjoy deep and long-standing relationships with major Payors, including government, national and regional insurers and MCOs, many of whom we have contracted with for over 15 years. We believe that Payors and referral sources highly value our ability to reliably provide access to home healthcare and reduce unnecessary in-patient stays.

We believe that we are well positioned to continue to capitalize on our organic growth initiatives as well as acquisition opportunities. Coupled with scalable technology and centralized operations, including customer service and revenue cycle management, we believe we can continue to grow our patient base while maintaining operational efficiency in a cost-efficient manner. We will also continue to focus on improving the operational efficiencies of our business through various new technology initiatives and data analytics capabilities. We believe we can continue to enhance our cash profile through continued focus on profitable products and services, disciplined management of capital expenditures and by controlling our costs. We believe our scalable platform and infrastructure will allow us to continue to evaluate and add new products and services with high growth rates and attractive margins. Finally, since 2016, we have completed over 60 accretive asset purchases as well as four larger acquisitions, and we plan to continue to opportunistically evaluate attractive companies in the highly fragmented HME market.

Trends and Factors Affecting our Future Performance

Significant trends and factors that we believe may affect our future performance include:

•

Aging Population. As life expectancy continues to rise coupled with the growth in the aging population in the United States, there will be an increase in the need for HME products and services provided by companies such as Rotech, including education and training on how to properly use certain medical equipment and supplies. The CMS Office of the Actuary projects that the number of Medicare beneficiaries will grow, on average, by 2.5% annually over the period from 2020 to 2028 and the U.S. Census Bureau projects that the United States population aged 65 and over will grow substantially from 15.2% of the population in 2016 to 20% of the population by 2030.

•

Rising Incidence of Chronic Diseases. Chronic diseases are the leading cause of death and disability in the United States, with approximately 60% of the overall population having at least one chronic affliction as of 2019 and people with chronic illnesses accounted for 81% of hospital admissions. Increasing obesity rates, the clinical consequences of the high prevalence of smoking from earlier decades and higher diagnosis of a number of chronic health conditions, such as COPD, OSA, diabetes and others, have collectively driven HME industry growth. In

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the United States, an estimated 1 in 15 adults has moderate to severe OSA, while an estimated 1 in 10 adults has diabetes, with asthma similarly prevalent among adults. According to the American Sleep Apnea Association, approximately 17.6 million people are undiagnosed for OSA, including many individuals younger than 65 years old. As the prevalence for under-diagnosed chronic conditions increases, and as diagnoses rise due to increased awareness, we expect that the demand within the HME market for providers, such as Rotech, will continue to grow.

•

Continued Shift Toward Home Healthcare Driven by the Compelling Economic Value Proposition to Key Stakeholders. According to CMS estimates, the aggregate expenditure associated with the U.S. home healthcare market was $113.5 billion in 2019, and is expected to grow at a CAGR of approximately 7% between 2018 and 2028. In August 2020, CMS published national healthcare expenditure data which showed that DME spending grew 26.6% for all Payors from 2012 to 2018. The rising cost of healthcare has caused many Payors to look for ways to contain healthcare costs. As a result, home healthcare is increasingly sought out as an attractive, cost-effective, clinically appropriate alternative to expensive facility-based care. For example, according to industry reports, on average, the cost of post-acute care per patient for Medicare at an in patient rehabilitation facility or long-term care hospitals is approximately $1,500 per day compared to approximately $50 per day for home health care.

Furthermore, improved technology has enabled a wider variety of treatments to be available at home, simplified the use of equipment through user-friendly features such as touchscreens, as well as facilitated earlier patient discharge. As we expect these trends and technologies to improve, we also believe that both providers and patients will opt for home healthcare due to its convenience and cost advantages. Additionally, the recent COVID-19 pandemic has amplified the importance of home healthcare as the pandemic has prevented or increased the difficulty of frequent visits to healthcare facilities. This is amplified by the fact that patients face a higher risk of contracting COVID-19 outside of their homes, for example, if they need to visit a healthcare facility because their home care has been interrupted. Hence, in a post-COVID environment, we expect the shift towards home healthcare to accelerate as home healthcare set ups have become more economical, accessible and user-friendly by technological advancements.

•

High Barriers to Entry and Consolidation of the Highly Fragmented HME Market Expected to Benefit Scaled National Participants. Within the fragmented HME market in which we operate, the number of industry participants dropped from approximately 12,900 in 2013 to approximately 9,300 in 2020. This decline is mostly due to the inability of smaller local and regional providers to make the significant capital and technological investments required to effectively compete. In addition, the complexity of the regulatory and reimbursement landscape has created substantial challenges for smaller providers. Without technology improvements, smaller providers are at a significant disadvantage with respect to workflow management, scalability and resolving system-wide inefficiencies. We believe that companies like Rotech with the relevant technological platform, national distribution footprint and ability to make growth investments are well-positioned to both continue to succeed in the market and continue to consolidate the market.

The COVID-19 pandemic has also caused significant issues for smaller providers by increasing the financial and logistical hurdles they face in their regular operations. Because smaller providers often lack the necessary resources to overcome such challenges effectively, large national providers are generally preferred by Payors for their ability to reliably deliver critical HME products and services to patients.

•

Advancements in Medical Technology. Technological advancements have driven the shift towards home healthcare and increased the breadth of conditions that can be effectively managed in the home. Improvements in tech-enabled tools, products and services within the HME industry have led to better home healthcare. Advancements in and higher adoption of technology in the home has helped close care gaps and increased patient compliance via remote monitoring and data collection. Accordingly, the continued introduction of technologically advanced HME products and services that are cost-effective, portable and promote greater data

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accessibility and consumer engagement are expected to continue to expand the market opportunity for HME providers.

•

Decreasing price and reimbursement levels We may continue to face pricing pressures from Medicare and Medicaid, as a result of programs such as the DMEPOS CBP, or government sequestrations, as well as from our managed care Payors as they seek to lower costs by obtaining more favorable pricing from providers such as us. In addition to the pricing reductions, such changes could cause us to provide reduced levels of certain products and services in the future, resulting in corresponding reductions in revenue.

•

Cost of containment efforts of Payors The consolidation of our managed care Payors into larger purchasing groups, such as group purchasing organizations and integrated delivery networks, has increased their negotiating and purchasing power. This trend, in turn, has resulted in increasing pricing pressure on us due to the consolidation of healthcare facilities, purchasing groups and U.S. based insurance. Payors pricing concessions and other cost containment efforts, such as the CBP.

Certain additional items may impact the comparability of the historical results presented below with our future performance, such as:

•

Cost of being a public company. To operate as a public company, we will be required to continue to implement additional legal compliance measures throughout our business and we will continue to develop and train management level and other employees to comply with ongoing public company requirements. We will also incur additional expenses as a public company, including internal and external costs associated with our public reporting obligations, preparation of our proxy statements, stockholder meetings, stock exchange compliance matters and associated fees, as well as transfer agent fees, fees in connection with future public offerings if any, including SEC and Financial Industry Regulatory Authority filing fees and offering expenses.

On June 14, 2021, one of our largest suppliers of BiPAP and CPAP devices and ventilators, Philips, initiated a voluntary recall notification with the FDA for certain Philips BiPAP and CPAP devices and ventilators that we distribute and sell. BiPAP and CPAP devices supplied by Philips generated $34.7 million and $34.6 million in rental revenues for the years ended December 31, 2020 and 2019, respectively, and $8.8 million and $8.9 million in rental revenues for the three months ended March 31, 2021 and 2020, respectively. Ventilators supplied by Philips generated $54.7 million and $29.3 million in rental revenues for the years ended December 31, 2020 and 2019, respectively, and $16.1 million and $10.6 million in rental revenues for the three months ended March 31, 2021 and 2020, respectively. We do not anticipate a material, negative impact on our revenues in future periods from these recalls because we have reached an agreement with one of our existing distributors who was able to secure additional CPAP devices to be procured by a new FDA-registered supplier, we have numerous other suppliers for BiPAP devices and ventilators and we have existing BiPAP devices in inventory, all which we believe will enable us to meet or exceed our foreseeable supply requirements based on our historical and projected needs. See “Risk Factors—Risks Related to Our Business and Operations— “The recall of certain Royal Philips BiPAP and CPAP devices and ventilators that we distribute and sell and our reliance on new, alternative suppliers for these products could have a significant negative impact on our business, results of operations, financial condition and prospects.”

Impact of COVID-19 Pandemic

Our priorities during the COVID-19 pandemic are protecting the health and safety of our employees (including patient-facing employees providing respiratory and other services), maximizing the availability of our services and products to support patient health needs, and the operational and financial stability of our business.

In response to the COVID-19 pandemic and the National Emergency Declaration, dated March 13, 2020, we activated certain business interruption protocols, including acquisition and distribution of personal protective equipment (“PPE”) to our patient-facing employees, accelerated capital expenditures of certain products and relocation of significant portions of our workforce to “work-from-home” status at some additional operating expense. In addition, shortages of key equipment, such as stationary oxygen

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concentrators, or delays in manufacturing or transport have caused us to pay premium air freight (operating expenses) or purchase alternative equipment at a higher cost (capital expenditure). In 2020, these added costs were offset by the $9.4 million of COVID-19 relief funds provided under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

While the COVID-19 pandemic, the National Emergency Declaration and the various state and local government imposed stay-at-home restrictions did not have a material adverse impact on our consolidated operating results for the year ended December 31, 2020, or the three months ended March 31, 2021, we have experienced declines in revenues in certain of our product categories and the disruption in physician practices (such as a decline in the set up of CPAP services), and such declines may continue during the duration of the COVID-19 pandemic. These declines were offset by an increase in revenue related to increased demand for certain respiratory products (such as oxygen concentrators, tanks and ventilators) and increased sales in our CPAP and BiPAP resupply businesses (primarily as a result of the increased ability to contact patients at home as a result of state and local government imposed stay-at-home orders).

Additionally, the suspension of Medicare sequestration through December 31, 2021 (resulting in a 2% increase in Medicare payments to all providers) and recent regulatory guidance from CMS expanding telemedicine and reducing documentation requirements during the emergency period are expected to result in increased revenues for certain products and services. Furthermore, we increased our workforce during the COVID-19 pandemic as our sales volumes increased.

We are closely monitoring the impact of the COVID-19 pandemic on our business. It is difficult to predict what the future impact of COVID-19 may have on our business, results of operations, financial position and cash flows. For additional information on risk factors that could impact our results, please refer to “Risk Factors” in this prospectus.

Components of Operating Results

Revenues. Revenues are recognized when control of the promised goods and services are transferred to patients in an amount equal to the consideration that we expect to receive from the patient or a third party Payor.

Fee-for-service is a payment model where we are paid for our service to provide equipment, supplies and other items. Revenues from fee-for-service arrangements are recorded at an amount that reflects the consideration that we expect to receive from patients or third party Payors.

Capitation agreements provide for a fixed fee based on the number of members covered under an affiliated plan for each month, irrespective of how many members actually require our services. Revenues earned from capitation agreements are recognized over the period that we are obligated to stand ready to provide services to covered members, primarily a calendar month.

Revenue generated from equipment that we rent to patients is recognized over the noncancelable rental period and commences on delivery of the equipment to the patients. Revenue related to sales of equipment and supplies is recognized on the date of delivery to the patients. Due to the nature of our industry and the reimbursement environment in which we operate, certain estimates are required to record total revenues.

Revenues are recorded based upon the applicable fee schedule adjusted for estimates of variable consideration. We record variable consideration reduced by implicit price concessions based on a percentage of revenue using historical Company-specific data. The percentage and amounts used to record the implicit price concessions are supported by various methods including current and historical cash collections, as well as actual contractual adjustment experience. A constraint is applied to the variable consideration such that net revenue is recorded only to the extent that it is probable that a significant reversal in the amount will not occur in the future. This percentage, which is adjusted at least on an annual basis, has proven to be the best indicator of the consideration that we expect to receive. Historical collection and adjustment percentages serve as the basis for its estimates of implicit price concessions and consists of:

•

Differences between non-contracted third-party payors’ allowable amounts and our usual and customary billing rate for payors that do not have contracts or fee schedules established with us;

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•

Services for which payment is denied due to audit or recoupment by governmental or third-party payors, or otherwise deemed non-billable by us; and

•

Collection risk related to amounts due from patients for co-payments and deductibles. Patients and payors are obligated to pay upon billing.

We do not record any financing charges on balances due. Collection risk is incorporated in our estimates for implicit price concessions. The Company recognizes revenue only when services have been provided and since we have performed under the contract, we have unconditional rights to the consideration recorded as contract assets and therefore we classify those billed and unbilled contract assets as accounts receivable.

Contracts with the VA generated approximately 12.4% of our revenue in 2020, the majority of which will expire in 2021 unless further extended. For additional information regarding our contracts with the VA, see “Risk Factors —Risks Related to Our Business —Material contracts with the VA may not be extended or re-awarded to us as they expire, which could cause a material negative impact to our revenue and profitability; six of our seven VA contracts have a current expiration date during 2021 and, if such VA contracts are not extended by the end of 2021, in part due to a 2016 U.S. Supreme Court decision favoring veteran-owned small businesses, we will lose substantially all of our VA revenue over the next one to three years.”

Cost of Revenues and Gross Margin.

Cost of Revenues. Cost of revenues include the costs of products and supplies sold to patients, patient service equipment depreciation, and certain operating costs related to respiratory services and distribution expenses. Distribution expenses represents the cost incurred to coordinate and deliver products and services to the patients. Included in distribution expenses are leasing, maintenance, licensing and fuel costs for the vehicle fleet; salaries, benefits and other costs related to drivers and dispatch personnel; and amounts paid to couriers and other third-party logistics and shipping vendors.

Gross Margin. Gross margin is gross profit expressed as a percentage of revenues. Our gross margin is impacted by Payor and product mix, fluctuations in pricing of supplies, equipment and accessories, as well as changes in reimbursement rates.

Selling, General and Administrative. Selling, general and administrative expenses are comprised of expenses incurred in support of our operations and administrative functions and includes labor costs, such as salaries, bonuses, commissions, benefits and travel-related expenses for our employees, facilities rental costs, third-party revenue cycle management costs and corporate support costs including finance, information technology, legal, human resources, procurement, and other administrative costs.

Depreciation and amortization. Depreciation and amortization expense includes depreciation charges for capital assets other than patient equipment (which is included as part of the cost of net revenue) and amortization of intangible assets.

Income Tax (Benefit) Expense. Our provision for income taxes is based on income, permanent book/tax differences and statutory tax rates in the various jurisdictions in which we operate. Significant estimates and judgments are required in determining the provision for income taxes.

Factors Affecting our Operating Results

Our operating results and financial performance are influenced by certain unique events during the periods discussed herein, including the following:

Acquisitions

We account for our stock acquisitions in accordance with FASB ASC Topic 805, Business Combinations, and the operations of the acquired entities are included in our historical results for the periods following the closing of the acquisition. We completed the acquisitions of MED, Inc. in June 2020, Bioresolutions, LLC, dba Halo Wound Solutions, in July 2020 and Medical Technology of Louisiana, LLC in

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November 2020, which were three relatively significant stock acquisitions impacting the comparability of our operating results in the year ended December 31, 2020 compared to the year ended December 31, 2019. Refer to Note 12, Acquisitions, included in our consolidated financial statements for the year ended December 31, 2020 included in this prospectus for additional information regarding our acquisitions.

Goodwill represents the portion of reorganization value not attributed to specific tangible and identified intangible assets under fresh-start reporting and the excess consideration transferred in a business combination after the fair values of identifiable tangible and intangible assets acquired and liabilities assumed have been recorded. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. We first use the qualitative approach to assess whether the existence of events and circumstances to determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Qualitative factors include, but are not limited to, under performance relative to historical or projected future operating results, significant changes in our overall business, significant negative industry or economic trends. If we determine that the thresholdis met, then we apply a quantitative test to determine the fair value of our reporting units to their respective carrying amounts and record an impairment charge for the amount by which the carrying amounts exceeds the fair value. We operate as one reporting unit. We performed our annual impairment review of goodwill and determined that it is not likely that a good will impairment exists as of December 31, 2020 and 2019. In addition, no material business acquisitions were made prior to January 1, 2019.

Debt and Recapitalization

On December 17, 2020, Rotech Healthcare Inc. entered into a second amended and restated senior secured credit agreement (the “Rotech Healthcare Inc. Credit Facility”), with Truist Bank, as administrative agent, and a syndicate of financial institutions and institutional lenders.

The Rotech Healthcare Inc. Credit Facility permits the interest rate to be selected at our option at either Adjusted LIBOR or Base Rate plus their respective applicable margin. Adjusted LIBOR is London interbank offered rate for deposits in Dollars appearing on Reuters screen page “LIBOR 01” for the applicable interest period. The Base Rate is the highest of (i) the Administrative Agent’s “Prime Rate”, (ii) the Federal Funds Effective Rate plus 0.5% per annum, and (iii) one-month Adjusted LIBOR plus 1.0% per annum. Additionally, the margin applied the Rotech Healthcare Inc. Credit Facility is determined based on consolidated net leverage ratio. Consolidated net leverage ratio is defined as the ratio of: (a) consolidated total debt as of such date, less Qualified Cash as of such date; to (b) consolidated EBITDA (as defined in the credit agreement) measured on a consolidated basis as of the last day of the period of four fiscal quarters most recently ended. “Qualified Cash” means cash and cash equivalents of the borrower and its domestic subsidiaries (a) in excess of $10,000,000 (b) that does not appear (or would not be required to appear) as “restricted” on a consolidated balance sheet of the borrower. The applicable margins and commitment fees under the Rotech Healthcare Inc. Credit Facility, based on the consolidated net leverage ratio, range from 2.25% to 3.75% per annum for Adjusted LIBOR Loans or 1.25% to 2.75% per annum for Base Rate Loans and 0.30% to 0.40% per annum for commitment fees. As of March 31, 2021, there are no borrowings outstanding on the working capital revolving credit facility and $13.0 million outstanding under the Acquisition Revolving Credit Facility of the Rotech Healthcare Inc. Credit Facility.

On June 3, 2021 the Company amended the Rotech Healthcare Inc. Credit Facility to, among other things, (i) permit this offering, to (ii) effectuate certain other changes to the Rotech Healthcare Inc. Credit Facility to accommodate Rotech Healthcare Holdings Inc.’s status as a publicly listed company following this offering, (iii) permit the acquisition of GAMMA Holdings, LLC and subsidiaries (“Gamma”), (iv) increase the amount of permitted capital leases to $50 million, from $40 million and (v) permit the payment in full of the Rotech Healthcare Holding Credit Facility with the net proceeds to us from the offering. In addition, on June 3, 2021, we borrowed $18.5 million under the Acquisition Revolving Credit Facility of the Rotech Healthcare Inc. Credit Facility.

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Seasonality

Our business is sensitive to seasonal fluctuations. Our patients are generally responsible for a greater percentage of the cost of their treatment or therapy during the early months of the year due to co-insurance, co-payments and deductibles, and therefore may defer treatment and services of certain therapies until they have met their annual deductibles. In addition, changes to employer insurance coverage often go into effect at the beginning of each calendar year which may impact eligibility requirements and delay or defer treatment or recognition of revenues. These factors may lead to lower total revenues and cash flow in the early part of the year and higher total revenues and cash flow in the latter half of the year. Additionally, the increased incidence of respiratory infections during the winter season may result in initiation of additional respiratory services such as oxygen therapy for certain patient populations. Our quarterly operating results may fluctuate significantly in the future depending on these and other factors.

Key Performance and Liquidity Metrics

We regularly review key performance and liquidity metrics to evaluate our business, identify trends in our business, prepare financial projections and make strategic decisions.

Net Income, EBITDA, Adjusted EBITDA, Adjusted EBITDA less Base Patient Capex, Adjusted EBITDA Margin and Adjusted EBITDA less Base Patient Capex Margin. We use the non-GAAP financial information of EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin as key performance measures to evaluate the business. We use the non-GAAP financial information of Adjusted EBITDA less Base Patient Capex and Adjusted EBITDA less Base Patient Capex Margin as key measures of cash flow. Refer to the “Non-GAAP Financial Information” section for further detail. The below table sets forth EBITDA, Adjusted EBITDA, Adjusted EBITDA less Base Patient Capex, Adjusted EBITDA Margin and Adjusted EBITDA less Base Patient Capex Margin for each of the three months ended March 31, 2021 and 2020 and for the years ended December 31, 2020 and 2019:

	Three Months Ended March 31,						Year Ended December 31,
(in thousands)	2021			2020			2020			2019
Net income (loss)		$	12,844		$	(196)		$	119,160		$	3,803
Net cash provided by operating activities		$	41,143		$	31,057		$	139,096		$	100,443
EBITDA			47,801			32,465		$	150,243		$	109,936
Adjusted EBITDA			48,440			32,568			152,615			115,651
Adjusted EBITDA Margin			34.1%			29.4%			30.3%			28.3%
Adjusted EBITDA less Base Patient Capex			32,310			21,585			99,321			65,284
Adjusted EBITDA less Base Patient Capex Margin			22.8%			19.5%			19.7%			16.0%

Comparison of Three Months Ended March 31, 2021 and March 31, 2020

The following tables set forth our consolidated results of operations for the periods presented in dollars and as a percentage of our total revenue:

	Three Months Ended March 31,						Three Months Ended March 31,
(dollar amounts in thousands)	2021			2020			Change $			Change %
Revenues		$	142,003		$	110,842		$	31,161		28.1%
Cost of Revenues:
Product and supply costs			18,955			15,357			3,598		23.4%
Patent service equipment depreciation			19,177			16,648			2,529		15.2%
Operating expenses			16,032			14,690			1,342		9.1%
Total cost of revenues			54,164			46,695			7,469		16.0%
Gross profit			87,839			64,147			23,692		36.9%

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	Three Months Ended March 31,						Three Months Ended March 31,
(dollar amounts in thousands)	2021			2020			Change $			Change %
Gross Margin			61.9%			57.9%
Expenses:
Selling, general and administrative			59,222			48,276			10,946		22.7%
Depreciation and amortization			2,805			1,297			1,508		116.3%
Total expenses			62,027			49,573			12,454		25.1%
Operating income			25,812			14,574			11,238		77.1%
Other expenses (income):
Interest expense, net			8,301			14,619			(6,318)		(43.2)%
Other (income) expense, net			(7)			54			(61)		(113.0)%
Total other expense			8,294			14,673			(6,379)		(43.5)%
Income (loss) before income taxes			17,518			(99)			17,617		(17,794.9)%
Income tax expense			4,674			97			4,577		4,718.6%
Net income		$	12,844		$	(196)		$	13,040		(6,653.1)%

Revenues. Revenues for the three months ended March 31, 2021 were $142.0 million compared to $110.8 million for the three months ended March 31, 2020, an increase of $31.2 million or 28.1% (of the 28.1% increase, 20.0% and 8.1% are attributable to organic growth and inorganic growth, respectively). Our core services comprise total revenues as follows:

	Three Months Ended March 31,
(dollar amounts in thousands)	2021			2020			Change$			Change%
Rental revenues
Oxygen		$	56,435		$	41,171		$	15,264		37.1%
Ventilators			17,086			11,178			5,908		52.9%
Sleep therapy			12,118			11,706			412		3.5%
Wound care			3,207			1,376			1,831		133.1%
Durable medical equipment			5,562			5,110			452		8.8%
Sales revenues Oxygen			2,636			3,701			(1,065)		(28.8)%
Sleep therapy			33,802			30,660			3,142		10.2%
Wound care			5,531			455			5,076		1,115.6%
Durable medical equipment			3,067			3,101			(34)		(1.1)%
Capitation revenues			2,559			2,384			175		7.3%
		$	142,003		$	110,842		$	31,161		28.1%

Revenues for the three months ended March 31, 2021 were $142.0 million compared to $110.8 million for the three months ended March 31, 2020, an increase of $31.2 million or 28.1%. Revenues for the three months ended March 31, 2021 increased primarily due to the following:

Rental revenues:

•

Oxygen. Rental revenues from oxygen increased 37.1% primarily due to growth in market share coupled with growth driven by COVID-19 patients.

•

Ventilators. Rental revenues from ventilators increased 52.9% primarily due to growth in market share coupled with growth driven by COVID-19 patients and two of our acquisitions whose primary focus was ventilator rentals.

•

Sleep therapy. Rental revenues from sleep therapy increased 3.5% primarily due to growth in market share in spite of the challenges presented by sleep lab closures due to COVID-19.

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•

Wound care. Rental revenues from wound care increased 133.1% primarily due to growth in market share in spite of the challenges presented by cancellations of most elective surgeries due to the COVID-19 pandemic.

•

Durable medical equipment. Rental revenues from DME increased 8.8% primarily due to growth in market share.

Sales revenues:

•

Oxygen. Sales revenues from oxygen decreased 28.8% primarily due to a decrease in VA patients’ needs for refilled oxygen tanks as patients stayed home during the COVID-19 pandemic.

•

Sleep therapy. Sales revenues from sleep therapy increased 10.2% primarily due to growth in market share and new programs to remind patients to replace their CPAP and BiPAP masks and ancillary consumable supplies more frequently.

•

Wound care. Sales revenues from wound care increased 1,115.6% primarily due to the acquisition of Halo Wound Solutions in July 2020 combined with the growth in wound care rentals.

•

Durable medical equipment and supplies. Sales revenues from DME decreased 1.1% primarily due to lower demand for these items during the COVID-19 pandemic.

Capitation revenues. Capitation revenues increased 7.3% primarily due to an increase in the lives covered.

Revenues recognized under arrangements with the VA, Medicare and Medicaid were approximately 9.5%, 27.5% and 4.8%, respectively, of total revenues for the three months ended March 31, 2021. Revenues recognized under arrangements with the VA, Medicare and Medicaid were approximately 14.4%, 26.5% and 4.4%, respectively, of total revenues for the three months ended March 31, 2020. Contracts with the VA that generated approximately 12.4% of our revenue in 2020 will expire in 2021 unless further extended. See “Risk Factors —Risks Related to Our Business and Operations—Material contracts with the VA may not be extended or re-awarded to us as they expire, which could cause a material negative impact to our revenue and profitability; six of our seven VA contracts have a current expiration date during 2021 and, if such VA contracts are not extended by the end of 2021, in part due to a 2016 U.S. Supreme Court decision favoring veteran-owned small businesses, we will lose substantially all of our VA revenue over the next one to three years.”

Cost of Revenues and Gross Margin.

Total Cost of Revenues. Total cost of revenues for the three months ended March 31, 2021 were $54.2 million compared to $46.7 million for the three months ended March 31, 2020, an increase of $7.5 million or 16.0%. Our cost of revenues was as follows:

	Three Months Ended March 31,
(dollar amounts in thousands)	2021			2020			Change $			Change %
Product and supply costs		$	18,955		$	15,357		$	3,598		23.4%
Patient service equipment depreciation			19,177			16,648			2,529		15.2%
Operating expenses			16,032			14,690			1,342		9.1%
Total cost of revenues		$	54,164		$	46,695		$	7,469		16.0%
Gross Margin			61.9%			57.9%

•

Product and supply costs increased primarily due to an increase in sales of both sleep therapy and wound care supplies.

•

Patient service equipment depreciation costs increased primarily due to an increase in patient rentals of oxygen, ventilators and wound care equipment.

•

Operating expenses increased primarily due to an increase in patient counts.

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Cost of Revenues and Gross Margins. Cost of revenues for the three months ended March 31, 2021 were 54.2 million compared to $46.7 million for the three months ended March 31, 2020, an increase of $7.5 million or 16.0%. Gross margins for the three months ended March 31, 2021 and 2020 were 61.9% compared to 57.9%, respectively, an increase of 4.0%. The gross margin increase was driven by higher reimbursement levels due to revenue cycle and operational improvements, increased Medicare reimbursement rates from the CARES Act, the temporary suspension of Medicare sequestration. The increase was partially offset by increased patient service equipment depreciation and increased sales of sleep therapy and wound care supplies, which have higher cost of revenues.

Expenses.

Selling, General and Administrative. Selling, general and administrative expenses for the three months ended March 31, 2021 were $59.2 million compared to $48.3 million for the three months ended March 31, 2020 an increase of $10.9 million or 22.7%. Selling, general and administrative expenses for the three months ended March 31, 2021 were 41.7% of total revenues compared to 43.6% of total revenues for the three months ended March 31, 2020.

The increase was primarily a result of increased sales commissions and incentives tied to growth combined with additional headcount to service the significant growth in patients.

Depreciation and amortization. Depreciation and amortization for the three months ended March 31, 2021 was $2.8 million compared to $1.3 million for the three months ended March 31, 2020, an increase of $1.5 million or 116.3%. The increase in depreciation and amortization for the three months ended March 31, 2021 was primarily driven by increased amortization expense related to intangible assets related to our acquisitions in 2020 and 2021.

Interest expense. Interest expense for the three months ended March 31, 2021 was $8.3 million compared to $14.6 million for the three months ended March 31, 2020, a decrease of $6.3 million. The decrease in interest expense for the three months ended March 31, 2021 was primarily driven by lower over all long-term debt balances combined with lower over all average interest rates.

Income tax expense. Income tax expense for the three months ended March 31, 2021 was $4.7 million compared to $0.1 million for the three months ended March 31, 2020.

Comparison of Years Ended December 31, 2020 and December 31, 2019

The following tables set forth our consolidated results of operations for the periods presented in dollars and as a percentage of our total revenue:

	Year Ended December 31,
(dollar amounts in thousands)	2020			2019			Change $			Change %
Revenues		$	503,183		$	408,304		$	94,879		23.2%
Cost of Revenues:
Product and supply costs			69,698			57,352			12,346		21.5%
Patent service equipment depreciation			68,872			57,610			11,262		19.5%
Operating expenses .			59,559			53,134			6,425		12.1%
Total cost of revenues			198,129			168,096			30,033		17.9%
Gross profit			305,054			240,208			64,846		27.0%
Gross Margin			60.6%			58.8%
Expenses:
Selling, general and administrative			221,838			183,967			37,871		20.6%
Depreciation and amortization			7,913			5,190			2,723		52.5%
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			229,751			189,157			40,594		21.5%
Operating income			75,303			51,051			24,252		47.5%
Other expenses (income):
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . .			45,661			52,481			(6,820)		(13.0)%
Loss on debt refinance . . . . . . . . . . . . . . . . . . . . . . . . .			1,700			4,637			(2,937)		(63.3)%
Other expense (income), net . . . . . . . . . . . . . . . . . . . . . .			145			(722)			867		120.1%
Total other expense			47,506			56,396			(8,890)		(15.8)%

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	Year Ended December 31,
(dollar amounts in thousands)	2020			2019			Change $			Change %
Income (loss) before income taxes			27,797			(5,345)			33,142		620.1%
Income tax benefit			(91,363)			(9,148)			(82,215)		898.7%
Net income		$	119,160		$	3,803		$	115,357		3,033.3%

Revenues. Revenues for the year ended December 31, 2020 were $503.2 million compared to $408.3 million for the year ended December 31, 2019, an increase of $94.9 million or 23.2%. Our core services comprise total revenues as follows:

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	Year Ended December 31,
(dollar amounts in thousands)	2020			2019			Change $			Change %
Rental revenues
Oxygen . . . . .		$	184,388		$	152,063		$	32,325		21.3%
Ventilators . . . .			57,986			30,771			27,215		88.4%
Sleep therapy . . . .			46,987			44,559			2,428		5.4%
Wound care . . . .			8,802			2,003			6,799		339.4%
Durable medical equipment			21,620			19,688			1,932		9.8%
Sales revenues
Oxygen . . .			13,064			15,399			(2,335)		(15.2)%
Sleep therapy			135,950			121,612			14,338		11.8%
Wound care . . . .			12,116			709			11,407		1,608.9%
Durable medical equipment			12,650			12,257			393		3.2%
Capitation revenues			9,620			9,243			377		4.1%
		$	503,183		$	408,304		$	94,879		23.2%

Revenues for the year ended December 31, 2020 were $503.2 million compared to $408.3 million for the year ended December 31, 2019, an increase of $94.9 million or 23.2%. Revenues for the year ended December 31, 2020 increased primarily due to the following:

Rental revenues:

•

Oxygen. Rental revenues from oxygen increased 21.3% primarily due to growth in market share coupled with growth driven by COVID-19 patients.

•

Ventilators. Rental revenues from ventilators increased 88.4% primarily due to growth in market share coupled with growth driven by COVID-19 patients and one of our acquisitions whose primary focus was ventilator rentals.

•

Sleep therapy. Rental revenues from sleep therapy increased 5.4% primarily due to growth in market share in spite of the challenges presented by sleep lab closures due to COVID-19.

•

Wound care. Rental revenues from wound care increased 339.4% primarily due to growth in market share in spite of the challenges presented by cancellations of most elective surgeries due to the COVID-19 pandemic.

•

Durable medical equipment. Rental revenues from DME increased 9.8% primarily due to growth in market share.

Sales revenues:

•

Oxygen. Sales revenues from oxygen decreased 15.2% primarily due to a decrease in VA patients’ needs for refilled oxygen tanks as patients stayed home during the COVID-19 pandemic.

•

Sleep therapy. Sales revenues from sleep therapy increased 11.8% primarily due to growth in market share and new programs to remind patients to replace their CPAP and BiPAP masks and ancillary consumable supplies more frequently.

•

Wound care. Sales revenues from wound care increased 1,608.9% primarily due to the acquisition of Halo Wound Solutions in July 2020 combined with the growth in wound care rentals.

•

Durable medical equipment and supplies. Sales revenues from DME increased 3.2% primarily due to growth in market share.

•

Capitation revenues. Capitation revenues increased 4.1% primarily due to an increase in the lives.

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Revenues recognized under arrangements with the VA, Medicare and Medicaid were approximately 12.4%, 26.7% and 4.5%, respectively, of total revenues for the year ended December 31, 2020. Revenues recognized under arrangements with the VA, Medicare and Medicaid were approximately 14.2%, 26.8% and 4.1%, respectively, of total revenues for the year ended December 31, 2019. Contracts with the VA that generated approximately 12.4% of our revenue in 2020 will expire in 2021 unless further extended. See “Risk Factors — Risks Related to Our Business and Operations — Material contracts with the VA may not be extended or re-awarded to us as they expire, which could cause a material negative impact to our revenue and profitability; six of our seven VA contracts have a current expiration date during 2021 and, if such VA contracts are not extended by the end of 2021, in part due to a 2016 U.S. Supreme Court decision favoring veteran-owned small businesses, we will lose substantially all of our VA revenue over the next one to three years.”

Cost of Revenues and Gross Margin.

Total Cost of Revenues. Total cost of revenues for the year ended December 31, 2020 were $198.1 million compared to $168.1 million for the year ended December 31, 2019, an increase of $30.0 million or 17.9%. Our cost of revenues was as follows:

	Year Ended December 31,						Change			Change
(dollar amounts in thousands)	2020			2019			$			%
Product and supply costs		$	69,698		$	57,352		$	12,346		21.5%
Patient service equipment depreciation			68,872			57,610			11,262		19.5%
Operating expenses			59,559			53,134			6,425		12.1%
Total cost of revenues		$	198,129		$	168,096		$	30,033		17.9%
Gross Margin			60.6%			58.8%

•

Product and supply costs increased primarily due to an increase in sales of both sleep therapy and wound care supplies.

•

Patient service equipment depreciation costs increased primarily due to an increase in patient rentals of oxygen, ventilators and wound care equipment.

•

Operating expenses increased primarily due to an increase in patient counts.

Cost of Revenues and Gross Margins. Cost of revenues for the year ended December 31, 2020 were 198.1 million compared to $168.1 million for the year ended December 31, 2019, an increase of $30.0 million or 17.9%. Gross margins for the years ended December 31, 2020 and 2019 were 60.6% compared to 58.8%, respectively, an increase of 1.8% points. The gross margin increase was driven by higher reimbursement levels due to revenue cycle and operational improvements, increased Medicare reimbursement rates from the CARES Act, the temporary suspension of Medicare sequestration. The increase was partially offset by increased patient service equipment depreciation and increased sales of sleep therapy and wound care supplies, which have higher cost of revenues.

Expenses.

Selling, General and Administrative. Selling, general and administrative expenses for the year ended December 31, 2020 were $221.8 million compared to $184.0 million for the year ended December 31, 2019 an increase of $37.8 million or 20.5%. Selling, general and administrative expenses for the year ended December 31, 2020 were 44.1% of total revenues compared to 45.1% of total revenues for the year ended December 31, 2019. The increase was primarily a result of increased sales commissions and incentives tied to growth combined with additional headcount to service the significant growth in patients.

Depreciation and amortization. Depreciation and amortization for the year ended December 31, 2020 was $7.9 million compared to $5.2 million for the year ended December 31, 2019, an increase of $2.7 million or 51.9%. The increase in depreciation and amortization for the year ended December 31, 2020 was primarily driven by the increase in capital expenditures to facilitate our growth.

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Interest expense. Interest expense for the year ended December 31, 2020 was $45.7 million compared to $52.5 million for the year ended December 31, 2019, a decrease of $6.8 million. The decrease in interest expense for the year ended December 31, 2020 was primarily driven by the impact of lower interest rates.

Loss on debt refinance. The loss on debt refinance for the year ended December 31, 2020 was $1.7 million compared to $4.6 million for the year ended December 31, 2019, a decrease of $2.9 million, or 63.0%. The decrease in loss on debt refinance for the year ended December 31, 2020 was primarily related to the refinancing of the Rotech Healthcare Inc. Credit Facility in both 2019 and 2020.

Income tax (benefit). Income tax (benefit) for the year ended December 31, 2020 was $(91.4) million compared to $(9.1) million for the year ended December 31, 2019. In 2020, the deferred tax valuation reserve of $98.7 million was reversed as the Company determined that it will generate sufficient taxable income in the future to utilize their net operating loss carryforwards and credit carryforwards prior to their expirations.

Non-GAAP Financial Information.

EBITDA, Adjusted EBITDA, Adjusted EBITDA less Base Patient Capex, Adjusted EBITDA Margin and Adjusted EBITDA less Base Patient Capex Margin. EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin are financial measures that we use to evaluate our performance and Adjusted EBITDA less Base Patient Capex and Adjusted EBITDA less Base Patient Capex Margin are financial measures we use to measure our liquidity, and in each case, are not prepared in accordance with GAAP to analyze our financial results or cash flow, as the case may be, but which we believe are useful to investors as a supplement to GAAP measures.

Adjusted EBITDA is a non-GAAP measure that represents EBITDA before certain items that impact comparison of the performance of our businesses either period-over-period or with other businesses. We use Adjusted EBITDA as a key profitability measure to assess the performance of our businesses. We believe that Adjusted EBITDA should, therefore, be made available to securities analysts, investors and other interested parties to assist in their assessment of the performance of our businesses.

Adjusted EBITDA less Base Patient Capex is a non-GAAP measure that represents Adjusted EBITDA less purchases of patient equipment net of dispositions (“Base Patient Capex”). For purposes of this metric, Base Patient Capex is measured as the value of the patient equipment received less the net book value of dispositions of patient equipment during the accounting period. We use Adjusted EBITDA less Base Patient Capex as a key liquidity measure because our businesses require significant capital expenditures to maintain the patient equipment fleet due to asset replacement and contractual commitments. We believe that Adjusted EBITDA less Base Patient Capex should, therefore, be made available to securities analysts, investors and other interested parties to assist in their assessment of the liquidity of our businesses.

Below, we have provided a reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to our net income, the most directly comparable financial performance measure calculated and presented in accordance with GAAP. EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin should not be considered alternatives to net income or any other measure of financial performance calculated and presented in accordance with GAAP. We have also provided a reconciliation of Adjusted EBITDA less Base Patient Capex and Adjusted EBITDA less Base Patient Capex Margin to net cash provided by operating activities, the most directly comparable GAAP measure of cash flow. Our EBITDA, Adjusted EBITDA, Adjusted EBITDA less Base Patient Capex, Adjusted EBITDA Margin and Adjusted EBITDA less Base

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Patient Capex Margin may not be comparable to similarly titled measures of other organizations because other organizations may not calculate these measures in the same manner as we calculate these measures.

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EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin exclude items that can have a significant effect on our profit or loss and should, therefore, be used in conjunction with, not as substitutes for, profit or loss for the period. We compensate for these limitations by separately monitoring net income from continuing operations for the period.

Reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to Net Income for the Three Months Ended March 31, 2021 and 2020 and Years Ended December 31, 2020 and 2019

The following table reconciles EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to net income, the most directly comparable financial performance measure prepared in accordance with GAAP, for the three months ended March 31, 2021 and 2020 and the years ended December 31, 2020 and 2019:

	Three Months Ended March 31,						Year Ended December 31,
(in thousands)	2021			2020			2020			2019
Net income (loss)		$	12,844		$	(196)		$	119,160		$	3,803
Interest expense(1)			8,301			14,619			45,661			52,481
Income tax expense (benefit)(2)			4,674			97			(91,363)			(9,148)
Depreciation and amortization(3)			21,982			17,945			76,785			62,800
EBITDA		$	47,801		$	32,465		$	150,243		$	109,936
Loss on debt refinance(4)			—			—			1,700			4,637
Adjustments(5)			639			103			672			1,078
Adjusted EBITDA		$	48,440		$	32,568		$	152,615		$	115,651
Adjusted EBITDA Margin(6)			34.1%			29.4%			30.3%			28.3%

(1)

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interest expense for the three months ended March 31, 2021 was primarily driven by lower overall long-term debt balances combined with lower overall average interest rates.

(2)

(3)

Depreciation and amortization for the year ended December 31, 2020 was $76.8 million compared to $62.8 million for the year ended December 31, 2019, an increase of $14.0 million or 22.3%. The increase in depreciation and amortization for the year ended December 31, 2020 was primarily driven by the increase in capital expenditures for patient service equipment to facilitate our growth. Depreciation and amortization for the three months ended March 31, 2021 was $22.0 million compared to $17.9 million for the three months ended March 31, 2020, an increase of $4.1 million or 22.9%. The increase in depreciation and amortization for the three months ended March 31, 2021 was primarily driven by the increase in capital expenditures for patient service equipment to facilitate our growth.

(4)

(5)

(6)

Adjusted EBITDA Margin is Adjusted EBITDA as a percentage of revenue and is calculated as follows:

	Three Months Ended March 31,						Year ended December 31,
(in thousands)	2021			2020			2020			2019
Net income (loss)		$	12,844		$	(196)		$	119,160		$	3,803
Revenue			142,003			110,842			503,183			408,304
Adjusted EBITDA			48,440			32,568			152,615			115,651
Adjusted EBITDA Margin			34.1%			29.4%			30.3%			28.3%

EBITDA was $150.2 million for the year ended December 31, 2020 compared to $109.9 million for the year ended December 31, 2019, an increase of $40.3 million or 36.7%. The increase in EBITDA for the year ended December 31, 2020 was primarily driven by the growth in revenues while leveraging our fixed-cost base. EBITDA was $47.8 million for the three months ended March 31, 2021 compared to $32.5 million for the three months ended March 31, 2020, an increase of $15.3 million or 47.1%. The increase in EBITDA for the three months ended March 31, 2021was primarily driven by the growth in revenues while leveraging our fixed-cost base.

Net income was $119.2 million for the year ended December 31, 2020 compared to $3.8 million for the year ended December 31, 2019, an increase of $115.4 million or 3,033.3%. The increase in net income for the year ended December 31, 2020 was primarily driven by the reversal of the deferred tax valuation reserve of $98.7 million as the Company determined that it will generate sufficient taxable income in the future to utilize their net operating loss carryforwards and credit carryforwards prior to their expirations. Net income was $12.8 million for the three months ended March 31, 2021 compared to a net loss of $0.2 million for the three months ended March 31, 2020, an increase of $13.0 million or 6,653.1%. The increase in net income for the three months ended March 31, 2021 was primarily driven by the growth in revenues while leveraging our fixed-cost base.

Adjusted EBITDA was $152.6 million for the year ended December 31, 2020 compared to $115.7 million for the year ended December 31, 2019, an increase of $36.9 million or 31.9%. The primary

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difference between EBITDA and Adjusted EBITDA is the loss on debt refinance which was $2.9 million lower in 2020 compared to 2019. Adjusted EBITDA was $48.4 million for the three months ended March 31, 2021 compared to $32.6 million for the three months ended March 31, 2020, an increase of $15.8 million or 48.5%. The primary differences between EBITDA and Adjusted EBITDA for the three months ended March 31, 2021 and 2020 were board-directed expenses.

Adjusted EBITDA Margin was 30.3% for the year ended December 31, 2020 compared to 28.3% for the year ended December 31, 2019, an increase of 2.0%. The increase in Adjusted EBITDA Margin for the year ended December 31, 2020 was primarily driven by leveraging our fixed costs over increased revenue volumes. Adjusted EBITDA Margin was 34.1% for the three months ended March 31, 2021 compared to 29.4% for the three months ended March 31, 2020, an increase of 4.7%. The increase in Adjusted EBITDA Margin for the three months ended March 31, 2021was primarily driven by leveraging our fixed costs over increased revenue volumes.

The following table reconciles Adjusted EBITDA less Base Patient Capex and Adjusted EBITDA less Base Patient Capex Margin to net cash provided by operating activities, the most directly comparable liquidity measure prepared in accordance with GAAP:

	Three Months Ended March						Years Ended December 31
(in thousands)	2021			2020			2020			2019
Net cash provided by operating activities		$	41,143		$	31,057		$	139,096		$	100,443
Gain on sales of property and equipment			424			28			552			996
Other			—			—			481			—
Changes in Operating Assets and Liabilities (excluding interest and taxes)			2,477			(2,456)			(3,981)			955
Interest Income			(1)			(117)			(118)			(635)
Interest Paid			3,743			3,940			15,933			12,736
Income Taxes Paid			15			13			(20)			78
Adjustments			639			103			672			1,078
Base Patient Capex(1)			16,130			10,983			53,294			50,367
Adjusted EBITDA less Base Patient Capex(2)		$	32,310		$	21,585		$	99,321		$	65,284
Adjusted EBITDA less Base Patient Capex Margin(3)			22.8%			19.5%			19.7%			16.0%

(1)

(2)

Adjusted EBITDA less Base Patient Capex was $99.3 million for the year ended December 31, 2020 compared to $65.3 million for the year ended December 31, 2019, an increase of $34.0 million or 52.1%. The increase in Adjusted EBITDA less Base Patient Capex for the year ended December 31, 2020, was primarily driven by the growth in revenues while leveraging our fixed-cost base and ensuring we recover our patient service equipment when the patients are no longer using it. Adjusted EBITDA less Base Patient Capex was $32.3 million for the three months ended March 31, 2021 compared to $21.6 million for the three months ended March 31, 2020, an increase of $10.7 million or 49.7%. The increase in Adjusted EBITDA less Base Patient Capex for the three months ended March 31, 2021 was primarily driven by the growth in revenues while leveraging our fixed-cost base and ensuring we recover our patient service equipment when the patients are no longer using it.

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(3)

Adjusted EBITDA less Base Patient Capex Margin is Adjusted EBITDA less Base Patient Capex as a percentage of revenue and is calculated as follows:

	Three Months Ended March 31,						Year Ended December 31,
	2021			2020			2020			2019
Adjusted EBITDA less Base Patient Capex		$	32,310		$	21,585		$	99,321		$	65,284
Revenue		$	142,003		$	110,842		$	503,183		$	408,304
Adjusted EBITDA less Base Patient Capex Margin			22.8%			19.5%			19.7%			16.0%

Liquidity and Capital Resources.

Sources of Liquidity.

Our principal source of liquidity is our operating cash flow, which is supplemented by extended payment terms from our suppliers and our Rotech Healthcare Inc. Credit Facility, which provides for (i) a $15.0 million working capital revolving credit facility (including a letter of credit sub-facility and a swing line sub-facility); (ii) a $75.0 million acquisition revolving credit facility and (iii) a term loan in an initial aggregate principal amount of $335.0 million and our Rotech Healthcare Holdings Inc. Credit Facility consisting of a term loan of $149.3 million as of March 31, 2021. As of March 31, 2021, we had $55.0 million of cash and cash equivalents and $10.4 million available under our working capital revolving credit facility and $62.0 million available under our Acquisition Revolving Credit Facility. On June 3, 2021 the Company amended the Rotech Healthcare Inc. Credit Facility to, among other things, (i) permit this offering (ii) effectuate certain other changes to the Rotech Healthcare Inc. Credit Facility to accommodate Rotech Healthcare Holdings Inc.’s status as a publicly listed company following this offering, (iii) permit the acquisition of Gamma, (iv) increase the amount of permitted capital leases to $50 million, from $40 million and (v) permit the payment in full of the Rotech Healthcare Holding Credit Facility with the net proceeds to us from the offering. In addition, on June 3, 2021 we borrowed $18.5 million under the Acquisition Revolving Credit Facility of the Rotech Healthcare Inc. Credit Facility. Our principal liquidity requirements are labor costs, including salaries, bonuses, benefits and travel-related expenses, product and supply costs, third-party customer service, billing and collections and logistics costs and patient equipment capital expenditures. Our future capital expenditure requirements will depend on many factors, including our revenue growth rates. Our capital expenditures are made in advance of patients beginning service. Certain operating costs are incurred at the beginning of the equipment rental period and during initial patient set up.

We may be required to seek additional equity or debt financing in connection with our business growth. In addition, the recent COVID-19 pandemic has caused disruption in the capital markets, which could make financing more difficult and/or expensive. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would be materially and adversely affected. We believe that our operating cash flow, together with our existing cash, cash equivalents, and Rotech Healthcare Inc. Credit Facility, will continue to be sufficient to fund our operations and growth strategies for at least the next 12 months.

We are a holding company and our operations are conducted entirely through our subsidiaries. Our ability to generate cash to pay applicable taxes at assumed tax rates and pay cash dividends we declare, if any, is dependent on the earnings and the receipt of funds from Rotech Healthcare, Inc. and its subsidiaries via dividends or intercompany loans. Deterioration in the financial condition, earnings or cash flow of Rotech Healthcare, Inc. and its subsidiaries for any reason could limit or impair their ability to pay such distributions. Additionally, to the extent that we need funds and our subsidiaries are restricted from making such distributions under applicable law or regulation or under the terms of our financing arrangements, or are otherwise unable to provide such funds, it could materially adversely affect our liquidity and financial condition. See “Risk Factors—Risks Related to this Offering and Ownership of our Common Stock—We are a holding company with no operations of our own and we are accordingly dependent upon distributions from our subsidiaries to pay taxes and pay dividends.”

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Long-Term Debt. On December 17, 2020, our subsidiary entered into a second amended and restated senior secured credit agreement (the “Rotech Healthcare Inc. Credit Facility”), with Truist Bank, as administrative agent, and a syndicate of financial institutions and institutional lenders.

The Rotech Healthcare Inc. Credit Facility permits the interest rate to be selected at our option at either Adjusted LIBOR or Base Rate plus their respective applicable margin. Adjusted LIBOR is London interbank offered rate for deposits in Dollars appearing on Reuters screen page “LIBOR 01” for the applicable interest period. The Base Rate is the highest of (i) the Administrative Agent’s “Prime Rate”, (ii) the Federal Funds Effective Rate plus 0.5% per annum, and (iii) one-month Adjusted LIBOR plus 1.0% per annum. Additionally, the margin applied the Rotech Healthcare Inc. Credit Facility is determined based on consolidated net leverage ratio. Consolidated net leverage ratio is defined as the ratio of: (a) consolidated total debt as of such date, less Qualified Cash as of such date; to (b) consolidated EBITDA (as defined in the credit agreement) measured on a consolidated basis as of the last day of the period of four fiscal quarters most recently ended. “Qualified Cash” means cash and cash equivalents of the borrower and its domestic subsidiaries (a) in excess of $10,000,000 (b) that does not appear (or would not be required to appear) as “restricted” on a consolidated balance sheet of the borrower. The applicable margins and commitment fees under the Rotech Healthcare Inc. Credit Facility, based on the consolidated net leverage ratio, range from 2.25% to 3.75% per annum for Adjusted LIBOR Loans or 1.25% to 2.75% per annum for Base Rate Loans and 0.30% to 0.40% per annum for commitment fees. As of March 31, 2021, there were no revolving borrowings under the working capital revolving credit facility and $13.0 million outstanding under the Acquisition Revolving Credit Facility of the Rotech Healthcare Inc. Credit Facility.

Level	Consolidated Net Leverage Ratio	Applicable Margin for Adjusted LIBOR Loans		Applicable Margin for Alternative Base Rate Loans		Commitment Fee
I	< 1.00:1.00		2.25%		1.25%		0.30%
II	≥ 1.00:1.00, but < 2.00:1.00		2.75%		1.75%		0.40%
III	≥ 2.00:1.00, but < 3.00:1.00		3.25%		2.25%		0.40%
IV	≥ 3.00:1.00		3.75%		2.75%		0.40%

The Rotech Healthcare Inc. Credit Facility permits, subject to certain exceptions, an increase in our Rotech Healthcare Inc. Credit Facility, as long as the consolidated net leverage ratio does not exceed three times. The credit agreement requires mandatory prepayments upon the occurrence of certain events, such as dispositions and casualty events, subject to certain exceptions. The Rotech Healthcare Inc. Credit Facility may be voluntarily prepaid at any time without any premium or penalty.

Rotech Healthcare Inc.’s assets and equity interest of all present and future wholly owned direct domestic subsidiaries, with certain exceptions, are pledged as collateral to secure the obligations under the Rotech Healthcare Inc. Credit Facility. The credit agreement contains financial covenants requiring Rotech Healthcare Inc. to maintain a total net leverage ratio not greater than 3.25:1.00 and 3:00:1:00 for the fiscal quarters ending June 30, 2021 and each Fiscal quarter ending thereafter, respectively, and a consolidated fixed charge coverage ratio of not less than 1:25:1.00.

As of March 31, 2021, there were $330.8 million outstanding term loans, $4.6 million of outstanding letters of credit and $13.0 million outstanding on the Acquisition Revolving Credit Facility under the Rotech Healthcare Inc. Credit Facility. Additional availability under the working capital revolving credit facility net of letters of credit outstanding was $10.4 million. We were in compliance with all debt covenants set forth in the Rotech Healthcare Inc. Credit Facility as of March 31, 2021. On June 3, 2021, we borrowed an additional $18.5 million under the Acquisition Revolving Credit Facility of the Rotech Healthcare Inc. Credit Facility.

Rotech Healthcare Holdings Credit Facility.

On December 17, 2020, we entered into a Second Consent and Amendment to Credit Agreement with Silver Point Finance, LLC, as administrative agent, and the lenders party thereto. This second

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amendment amended the credit agreement dated as of April 6, 2018, and amended as of October 24, 2019 (as amended, the “Rotech Healthcare Holdings Credit Facility”). Silver Point Finance, LLC as administrative agent receives an annual fee of $125,000. We expect to repay all amounts outstanding under the Rotech Healthcare Holdings Credit Facility in connection with this offering. Our Principal Stockholders and/or their respective affiliates are lenders under the Rotech Healthcare Holdings Credit Facility and therefore will receive a portion of the net proceeds to us from the offering. See “Use of Proceeds.”

The credit agreement requires mandatory prepayments upon the occurrence of certain events, such as dispositions and casualty events, subject to certain exceptions. The Rotech Healthcare Holdings Credit Facility may be voluntarily prepaid at any time without any premium or penalty.

Holdco’s assets (including its equity interest in its wholly owned direct subsidiary), with certain exceptions, are pledged as collateral to secure the obligations under the Rotech Healthcare Holdings Credit Facility.

As of March 31, 2021, there was $149.3 million of term loans outstanding under the Rotech Healthcare Holdings Credit Facility, plus $4.3 million of accrued interest. We were in compliance with all debt covenants set forth in the Rotech Healthcare Holdings Credit Facility as of March 31, 2021.

In accordance with ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, we record origination and other expenses related to certain debt issuance cost as a direct deduction from the carrying amount of the debt liability. These expenses are deferred and amortized using the effective interest method. Amortization of deferred debt issuance costs are classified within interest expense in our consolidated statements of operations and was $0.2 million, and $0.7 million for the years ended December 31, 2020 and 2019 respectively. Interest expense, excluding deferred debt issuance costs discussed above, was $8.2 million and $14.6 million for the three months ended March 31, 2021 and 2020, respectively. Interest paid on debt totaled $3.7 million and $3.9 million for the three months ended March 31, 2021 and 2020, respectively. Interest expense, excluding deferred debt issuance costs discussed above, was $45.5 million and $52.4 million for the years ended December 31, 2020 and 2019, respectively. Interest paid on debt totaled $15.9 million and $12.7 million for the years ended December 31, 2020 and 2019, respectively.

Summary Statement of Cash Flows. The following table presents selected data from our consolidated statement of cash flows:

	Three Months Ended March 31,						Year Ended December 31,
(in thousands)	2021			2020			2020			2019
Net cash provided by operating activities		$	41,143		$	31,057		$	139,096		$	100,443
Net cash used in investing activities			(40,151)			(14,003)			(108,054)			(59,445)
Net provided by (cash used) in financing activities			1,888			(6,591)			(31,586)			(30,979)
Increase (decrease) in cash and cash equivalents			2,880			10,463			(544)			10,019
Cash and cash equivalents at beginning of period			52,122			52,666			52,666			42,647
Cash and cash equivalents at end of period		$	55,002		$	63,129		$	52,122		$	52,666

Comparison of Three Months Ended March 31, 2021 and March 31, 2020

Net Cash Provided by Operating Activities.

Net cash provided by operating activities for the three months ended March 31, 2021 was $41.1 million compared to $31.1 million for the three months ended March 31, 2020, an increase of $10.0 million. The increase in net cash provided by operating activities was driven by the impact of the following:

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$13.0 million increase in net income;

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$4.1 million increase/decrease in depreciation and amortization;

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$4.6 million deferred income taxes;

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($2.2) million reduction in payment-in-kind interest

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($4.8) million increase in other non-cash items; and

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$(4.7) million decrease in cash provided by the change in operating assets and liabilities, primarily related to increase in accounts receivable, inventories and prepaid expenses offset by a decrease in other receivables and increases in accounts payable, accrued expenses and other current liabilities.

Net Cash Provided by Investing Activities.

Net cash used in investing activities for the three months ended March 31, 2021 was $40.2 million, compared to $14.0 million for the three months ended March 31, 2020, an increase of $26.2 million. The increase in net cash used in investing activities for the three months ended March 31, 2021 was primarily driven by $28.4 million used to purchase equipment and $12.2 million used for acquisitions. The primary use of funds in the three months ended March 31, 2020, was $14.1 million to purchase equipment.

Net Cash Provided by Financing Activities.

Net cash provided by financing activities for the three months ended March 31, 2021 was $1.9 million compared to net cash used in financing activities of $6.6 million for the three months ended March 31, 2020, an increase of $8.5 million. The increase in net provided by financing activities for the three months ended March 31, 2021 was primarily driven by the $13.0 million draw on the acquisition line of credit offset by payments of other liabilities, capital leases and long-term borrowings of $11.1 million. Net cash used in financing activities for the three months ended March 31, 2020 primarily reflected $3.1 million net reduction in long-term borrowings, and $2.8 million of payments on capital leases.

Comparison of Years Ended December 31, 2020 and December 31, 2019

Net Cash Provided by Operating Activities.

Net cash provided by operating activities for the year ended December 31, 2020 was $139.1 million compared to $100.4 million for the year ended December 31, 2019, an increase of $38.7 million. The increase in net cash provided by operating activities was driven by the impact of the following:

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$115.4 million increase in net income;

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$13.5 million increase in depreciation and amortization;

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($82.1) million deferred income taxes primarily related to the elimination of the valuation reserve;

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Rotech Healthcare Holdings Inc. S-1/A