Summary of Addus HomeCare (ADUS) 2025 Conference Call Company Overview - **Company**: Addus HomeCare Corporation - **Industry**: Home Care Services - **Core Business**: Personal care services primarily for the elderly, focusing on activities of daily living [3][4] Key Points and Arguments Business Model and Services - **Service Breakdown**: 75% of business in nonclinical personal care, 20% in hospice, and 5% in clinical home health [4] - **Growth Strategy**: Expansion into clinical services initiated in 2018 to provide a continuum of care [4] Financial Performance - **Same Store Growth**: Achieved 7.4% same store organic growth, exceeding the target of 3-5% [5][8] - **Rate Increases**: Significant rate increase of 5.5% in Illinois, the largest market, contributing to growth [6][7] - **Future Outlook**: Anticipated continued growth due to potential rate increases in Texas [7][8] Hiring and Workforce Management - **Hiring Challenges**: High turnover rates historically (75-80%), currently reduced to 55% through improved scheduling and caregiver engagement [15][18] - **Hiring Strategy**: Focus on hiring initiatives and competitive wages above minimum wage to attract caregivers [10][11] Market Dynamics - **State Redetermination Process**: Previous impediments to volume growth due to state processes are now easing, leading to improved volume growth [12][14] - **Demographic Trends**: Texas is a key growth market due to its large elderly population and solid financial condition [23][24] Acquisition and Integration - **Gentiva Acquisition**: Successful integration of Gentiva, with Texas representing 75% of the business, positioning Addus as the largest personal care provider in the state [24][25] - **Future M&A Opportunities**: Plans to pursue additional personal care acquisitions and expand into home health and hospice services in Texas [27] Regulatory Environment - **Medicaid Policy**: Discussions around potential Medicaid cuts; however, Addus feels insulated due to its low-cost provider status [36][38] - **Work Requirements**: Potential work requirements for younger populations may create hiring opportunities for Addus [36][37] Financial Outlook - **EBITDA Margin**: Expected EBITDA margin above 12% for 2025, with typical seasonal improvements anticipated [41][43] - **Capital Deployment**: Preference for M&A opportunities while managing debt levels; $20 million paid down in Q1 and Q2 [46][47] Technology Investments - **Technology Initiatives**: Investment in caregiver technology to improve scheduling and operational efficiency [48][50] - **Unified Platform**: Development of a unified EMR system for clinical and nonclinical services to streamline operations [52] Valuation Multiples - **Acquisition Multiples**: Personal care acquisitions expected in the single-digit multiples, with smaller deals around 4-5 times and larger ones up to 8 times [54][55] Additional Important Insights - **Tariff Exposure**: Minimal exposure to tariffs as the business primarily involves services rather than goods [40] - **Market Positioning**: Addus positions itself as a low-cost provider, which may benefit from potential budget constraints faced by states [38]

Summary of Addus HomeCare (ADUS) 2025 Conference Call Company Overview - Addus HomeCare is one of the largest providers of personal care services in the U.S. [2] Key Industry Insights - Discussion on potential impacts of Medicaid changes, particularly work requirements for individuals under 64 years old, which may create employment opportunities for caregivers [3][4][5] - The company views itself as a low-cost provider, emphasizing the importance of keeping elderly patients at home rather than in nursing facilities [7][8] - No material changes expected from proposed Medicaid reforms, with ongoing monitoring of government relations [9] Financial Performance and Projections - The acquisition of Gentiva is performing as anticipated, with some challenges in top-line growth due to weather events in Texas [18][19] - Positive trends observed in admissions outpacing discharges, indicating a recovery in Texas [19] - The integration of Gentiva is progressing well, with payroll and benefits integration being notably smooth [20][21] - The company is actively looking for further acquisitions, particularly in Texas, to expand clinical capabilities [22][36] Value-Based Care Strategy - The company is focusing on building relationships with payers to enhance value-based care offerings, starting from personal care services [25][26][30] - Current contracts with payers are being formalized to create a more robust value-based component [29] Operational Updates - Personal care services saw a 2% year-over-year growth in hours, with expectations for continued growth in census numbers by year-end [41][42] - Technology adoption among caregivers is improving, with a significant percentage of caregivers using the new application rolled out in Illinois [46][47] - Hiring remains strong, particularly in personal care, with wage pressures being manageable due to collective bargaining agreements [51][53] Market Conditions and Recession Impact - Minimal impact from potential recession on clinical services, as home health and hospice care are essential regardless of economic conditions [55] - The company is cautiously optimistic about growth in home health and hospice services, particularly in Texas [60] Reimbursement and Regulatory Environment - Ongoing discussions regarding reimbursement rates for home health services, with expectations for potential changes from the new administration [57][58] - The company is actively pursuing increases in per visit rates and exploring episodic contracts with payers [62][64] Hospice Care Growth - Hospice services are expected to grow at a rate of 5% to 7%, with Q1 performance exceeding expectations [66][68] Cash Flow and Capital Deployment - Consistent cash flow expected, with a conversion rate of 75% to 80% of GAAP EBITDA to cash [70] - Plans to continue paying down debt while remaining opportunistic in M&A activities [71]

Financial Performance - Total net service revenue for Q1 2025 was $337.7 million, a 20.3% increase from $280.7 million in Q1 2024[78] - Net income for Q1 2025 was $21.2 million, compared to $15.8 million in Q1 2024, reflecting a 34.9% increase[78] - Net service revenues increased by 20.3% to $337.7 million for the three months ended March 31, 2025, compared to $280.7 million for the same period in 2024[112] - Gross profit margin increased to 31.9% for the three months ended March 31, 2025, compared to 31.4% for the same period in 2024[113] - General and administrative expenses rose to $73.2 million for the three months ended March 31, 2025, primarily due to the Gentiva Acquisition, but as a percentage of net service revenues decreased to 21.7%[114] - Interest expense increased to $4.0 million for the three months ended March 31, 2025, from $2.8 million for the same period in 2024, due to higher average outstanding borrowings[115] - The effective income tax rate was 21.4% for the three months ended March 31, 2025, down from 25.7% for the same period in 2024, primarily due to a higher excess tax benefit[116] Segment Performance - The personal care segment generated $258.3 million in revenue for Q1 2025, up 24.2% from $208.0 million in Q1 2024[78] - Revenue growth in the personal care segment was $50.3 million, in the hospice segment was $5.6 million, and in the home health segment was $1.1 million during the same period[112] - Net service revenues for the Personal Care Segment increased by 24.2% to $258,286, compared to $208,003 in the same period last year[117] - Hospice Segment net service revenues increased by 10.0% to $61,437, up from $55,863 year-over-year[126] - Home Health Segment net service revenues grew by 6.5% to $17,985, compared to $16,880 in the previous year[133] Revenue Sources - Managed care organizations accounted for 35.6% of net service revenues in Q1 2025, slightly down from 34.2% in Q1 2024[76] - The Illinois Department on Aging accounted for 18.5% of net service revenues in Q1 2025, down from 20.8% in Q1 2024[89] - The personal care segment's revenue from state, local, and other governmental programs was $132.9 million, representing 51.5% of segment revenues in Q1 2025[87] - The hospice segment's revenue from Medicare was $56.8 million, accounting for 92.4% of hospice segment revenues in Q1 2025[88] - Medicare accounted for 92.4% of net service revenues in the Hospice Segment for the three months ended March 31, 2025[130] - Home health segment net service revenues from Medicare accounted for 69.9% in Q1 2025, compared to 69.1% in Q1 2024[136] Operational Metrics - The company served approximately 72,000 individuals in Q1 2025, an increase from 57,000 in Q1 2024[78] - Average daily census in the Hospice Segment increased by 4.6% to 3,515, compared to 3,359 in the same period last year[126] - Revenue per patient day in the Hospice Segment rose by 6.3% to $194.23 from $182.78 year-over-year[126] - Days sales outstanding (DSO) improved to 37 days as of March 31, 2025, down from 39 days at December 31, 2024[154] Acquisitions and Investments - The company completed the acquisition of Gentiva for approximately $353.6 million, expanding its services in multiple states[81] - The company used $3.4 million in cash for acquisitions during Q1 2025 and repaid $20.0 million under its revolving credit facility[141] Cost and Efficiency - Gross profit as a percentage of net service revenues rose to 40.0% in Q1 2025 from 34.4% in Q1 2024[138] - General and administrative expenses as a percentage of net service revenues decreased to 23.2% in Q1 2025 from 26.9% in Q1 2024, reflecting more efficient operations[139] - Gross profit margin for the Personal Care Segment improved to 27.6% from 26.7%, attributed to lower payroll and benefits expenses[124] - Gross profit margin for the Hospice Segment decreased to 47.5% from 48.1%, primarily due to rising employee costs[131] Regulatory Changes - The Illinois Medicaid rate for in-home care services increased to $29.63 per hour effective January 1, 2025[91] - The per-beneficiary cap amount for Medicare reimbursement was updated to $34,465.34 for federal fiscal year 2025[95] - CMS increased hospice payment rates by 2.9% effective October 1, 2024, reflecting a 3.4% market basket increase[94] - Medicare payments to home health agencies are estimated to increase by 0.5% for calendar year 2025[97] - The Home Health Value-Based Purchasing Model allows for payment adjustments of up to 5% based on performance against quality measures[98] Financial Position - Cash balances were $97.0 million as of March 31, 2025, down from $98.9 million at December 31, 2024[140] - Outstanding accounts receivable increased by $11.7 million as of March 31, 2025, compared to December 31, 2024[153] - The company had $203.0 million in outstanding borrowings on its credit facility, all subject to variable interest rates[158] - If variable interest rates increased by 100 basis points, net income would decrease by $0.4 million, or $0.02 per diluted share[158]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $337.7 million, a 20.3% increase from $280.7 million in Q1 2024 [9] - Adjusted earnings per share rose to $1.42, up 17.4% from $1.21 in Q1 2024 [9] - Adjusted EBITDA increased to $40.6 million, a 25.1% rise from $32.4 million in Q1 2024 [9] - Gross margin percentage improved to 31.9% from 31.4% in Q1 2024 [24] - Adjusted EBITDA margin was 12%, compared to 11.6% in Q1 2024 [25] Business Line Data and Key Metrics Changes - Personal Care segment revenues were $258.3 million, accounting for 76.5% of total revenue, with a 7.4% organic revenue growth [23] - Hospice same store revenue increased by 9.9%, with average daily census rising to 3,515, a 4.6% increase year-over-year [14][21] - Home Health segment revenues were $18 million, representing 5.3% of total revenue, with a 1.3% organic revenue growth [22] Market Data and Key Metrics Changes - Personal Care services received favorable reimbursement support, including a 5.5% rate increase in Illinois effective January 1, 2025 [12] - Same store hours in Personal Care increased by 2% compared to Q1 2024, marking the largest year-over-year volume growth in recent quarters [13] - The company experienced solid caregiver hiring success, with 79 hires per day in Personal Care, up from 78 in Q1 2024 [10] Company Strategy and Development Direction - The company aims for a minimum annual revenue growth of 10%, focusing on acquisitions that complement organic growth [17] - The Gentiva acquisition added approximately $280 million in annualized revenues, significantly expanding market coverage [22] - The company is actively pursuing additional acquisition opportunities to enhance density in existing markets and add clinical services [23][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the continued demand for home-based care, viewing it as a growth opportunity [18] - The company anticipates stable gross margins and consistent cash flow conversion in line with historical averages [25][27] - Management noted that the clinical hiring environment remains challenging, but improvements have been observed in the personal care segment [11][67] Other Important Information - The company utilized approximately $2.5 million in ARPA funding during Q1 2025, with $8.8 million remaining [28] - As of March 31, 2025, the company had cash on hand of approximately $97 million and reduced bank debt by $20 million [9][28] Q&A Session Summary Question: Commentary on hospice cap limitations - Management indicated that cap limitations have not been material, with effective management of referral mix [33][34] Question: Impact of weather on personal care services - Management confirmed weather events affected January but noted a rebound in February and March, expecting hours growth to remain in the 2% to 2.5% range [40][41] Question: Hospice revenue growth expectations - Management projected hospice revenue growth in the 5% to 7% range, leaning towards the upper end [44] Question: Margin expansion expectations - Management expects typical margin expansion of 40 to 50 basis points into Q2, with Q1 usually being the low point [50][51] Question: Impact of Medicaid changes - Management stated that potential changes to Medicaid would likely have no direct impact on the company, as its patient base is primarily elderly and disabled [54][56] Question: Performance of Gentiva post-acquisition - Management reported that Gentiva's bottom line performance has exceeded expectations, while top line growth was slightly lighter than anticipated [77] Question: Update on home health services - Management noted stability in Medicare rates and improvements in contracting with Medicare Advantage plans, with discounts narrowing from 40% to 15-20% [106]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $337.7 million, a 20.3% increase from $280.7 million in Q1 2024 [6] - Adjusted earnings per share rose to $1.42, up 17.4% from $1.21 in Q1 2024 [6] - Adjusted EBITDA increased to $40.6 million, a 25.1% rise from $32.4 million in Q1 2024 [6] - Gross margin percentage improved to 31.9% from 31.4% in Q1 2024 [21] - Adjusted EBITDA margin was 12%, compared to 11.6% in Q1 2024 [22] Business Line Data and Key Metrics Changes - Personal Care segment revenues were $258.3 million, accounting for 76.5% of total revenue, with a same-store revenue growth of 7.4% [20] - Hospice segment revenues were $61.4 million, representing 18.2% of total revenue, with same-store revenue growth of 9.9% [20] - Home Health segment revenues were $18 million, making up 5.3% of total revenue, with a same-store revenue growth of 1.3% [20] Market Data and Key Metrics Changes - Personal Care hiring reached 79 hires per day, an increase from the previous year [7] - Average daily census for hospice increased to 3,515, up 4.6% from 3,359 in Q1 2024 [11] - Same-store hours for Personal Care increased by 2% compared to Q1 2024 [10] Company Strategy and Development Direction - The company aims for a minimum annual revenue growth of 10%, focusing on acquisitions that complement organic growth [13] - The strategy includes expanding personal care services in Texas and evaluating smaller acquisition opportunities [14] - The company is committed to maintaining a conservative approach to valuation and due diligence in acquisitions [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the continued demand for home-based care services, which are seen as cost-effective and safe [15] - The company anticipates stable gross margins and consistent cash flow conversion for the full year 2025 [22][24] - Management noted that the clinical hiring environment remains challenging but is improving overall [8][66] Other Important Information - The company utilized approximately $2.5 million in ARPA funding during Q1 2025, with $8.8 million remaining [25] - As of March 31, 2025, the company had cash on hand of approximately $97 million and reduced bank debt by $20 million [6][25] Q&A Session Summary Question: Commentary on hospice cap limitations - Management indicated that cap limitations have not been material, emphasizing a balanced referral mix [28][30] Question: Growth expectations for personal care services - Management acknowledged weather-related impacts in January but expects growth in hours to remain in the 2% to 2.5% range [38] Question: Hospice revenue growth expectations - Management anticipates hospice revenue growth in the 5% to 7% range, likely at the higher end [40] Question: Margin expansion expectations - Management expects 40 to 50 basis points of margin expansion from Q1 to Q2, consistent with historical patterns [46] Question: Impact of ACA expansion rollback - Management stated that potential changes to ACA expansion would likely have no direct impact on the company [50][52] Question: Same-store revenue growth components - Management attributed strong same-store revenue growth to improved scheduling and caregiver assignment practices [56] Question: Industry-wide workforce retention improvements - Management noted improvements in workforce retention across the industry, particularly in personal care [66] Question: Updates on Gentiva's performance - Management reported that Gentiva's bottom line performance has exceeded expectations, while top-line growth has been slightly lighter [76] Question: State budget and rate increase outlook - Management expressed confidence in state budgets and is closely monitoring potential rate increases, particularly in Texas [79]

Core Insights - Addus HomeCare (ADUS) reported revenue of $337.71 million for the quarter ended March 2025, reflecting a year-over-year increase of 20.3% [1] - The earnings per share (EPS) for the quarter was $1.42, up from $1.21 in the same quarter last year, with an EPS surprise of +6.77% compared to the consensus estimate of $1.33 [1] - The reported revenue was slightly below the Zacks Consensus Estimate of $340.01 million, resulting in a revenue surprise of -0.68% [1] Revenue Breakdown - Personal care revenue was $258.29 million, which is a 24.2% increase year-over-year, but below the average estimate of $261.89 million [4] - Home Health revenue reached $17.99 million, exceeding the average estimate of $17.66 million, with a year-over-year growth of 6.6% [4] - Hospice revenue amounted to $61.44 million, surpassing the average estimate of $59.79 million, and showing a year-over-year increase of 10% [4] Stock Performance - Over the past month, Addus HomeCare shares have returned +4.7%, outperforming the Zacks S&P 500 composite, which saw a +0.4% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Core Insights - Addus HomeCare (ADUS) reported quarterly earnings of $1.42 per share, exceeding the Zacks Consensus Estimate of $1.33 per share, and up from $1.21 per share a year ago [1][2] - The company posted revenues of $337.71 million for the quarter, which was below the Zacks Consensus Estimate by 0.68%, but an increase from $280.75 million year-over-year [3] - Addus HomeCare has surpassed consensus EPS estimates three times in the last four quarters, while revenue estimates have also been exceeded three times [2][3] Earnings Performance - The earnings surprise for the recent quarter was 6.77%, while the previous quarter's earnings matched expectations with no surprise [2] - The stock has underperformed the market, losing approximately 16.2% year-to-date compared to the S&P 500's decline of 3.3% [4] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $1.49, with expected revenues of $348.17 million, and for the current fiscal year, the EPS estimate is $6.03 on revenues of $1.4 billion [8] - The estimate revisions trend for Addus HomeCare is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [7] Industry Context - The Medical - Outpatient and Home Healthcare industry, to which Addus HomeCare belongs, is currently ranked in the top 20% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [9]

Financial Performance - Net service revenues for Q1 2025 were $337.7 million, a 20.3% increase from $280.7 million in Q1 2024[4] - Net income for Q1 2025 was $21.2 million, or $1.16 per diluted share, compared to $15.8 million, or $0.97 per diluted share in Q1 2024[4] - Adjusted EBITDA increased 25.1% to $40.6 million in Q1 2025 from $32.4 million in Q1 2024[4] - Total revenue for the three months ended March 31, 2025, was $337.7 million, a 20.3% increase from $280.7 million in the same period of 2024[22] - Adjusted EBITDA for the three months ended March 31, 2025, was $40.6 million, up from $32.4 million, marking a 25.2% increase[27] - Adjusted net income increased to $26.0 million, compared to $19.8 million in the same period last year, a growth of 31.4%[27] Segment Performance - The personal care segment, accounting for 76.5% of total revenue, saw a 7.4% organic revenue increase year-over-year[5] - Personal Care segment revenue increased to $258.3 million from $208.0 million, representing a 24.2% growth year-over-year[22] - The hospice care segment, which made up 18.2% of total revenue, experienced a 9.9% organic revenue growth compared to the previous year[6] - Hospice segment revenue rose to $61.4 million, up 9.3% from $55.9 million in the prior year[22] - Organic revenue growth for the Personal Care segment was 7.4%, down from 9.3% in the previous year[24] Operational Metrics - Cash flow from operations for Q1 2025 was $18.9 million, including $2.5 million in ARPA funds utilization[8] - Average billable census total increased to 50,478, compared to 37,715 in the previous year, reflecting a significant growth due to acquisitions[24] - Revenue per billable hour decreased to $25.32 from $27.35, indicating a 7.4% decline[24] - Medicare accounted for 69.9% of Home Health revenues, slightly up from 69.1% in the previous year[24] Assets and Liquidity - Cash and liquidity as of March 31, 2025, included $97.0 million in cash and $203.0 million in bank debt, with $632.9 million available under the revolving credit facility[8] - Total assets increased to $1.407 billion as of March 31, 2025, compared to $1.014 billion in the previous year[20] Strategic Initiatives - The company aims to pursue additional acquisition opportunities in 2025 to expand its market coverage and service offerings[9] - Addus HomeCare currently serves approximately 62,000 consumers across 260 locations in 23 states[15] - The company served 23 states and expanded locations to 199, up from 153 in the prior year[24]

Company Overview - Addus HomeCare (ADUS) shares increased by 4.9% to close at $101, supported by higher trading volume compared to normal sessions [1] - The stock has gained 1.7% over the past four weeks [1] Financial Performance - Addus HomeCare is expected to report quarterly earnings of $1.33 per share, reflecting a year-over-year increase of 9.9% [2] - Projected revenues for the upcoming report are $339.94 million, which is a 21.1% increase from the same quarter last year [2] Market Trends - The recent stock price increase is linked to a relief rally in global markets due to a 90-day pause on tariff hikes announced by the United States [1] - The consensus EPS estimate for Addus HomeCare has remained unchanged over the last 30 days, indicating stability in earnings expectations [4] Industry Context - Addus HomeCare operates within the Zacks Medical - Outpatient and Home Healthcare industry, where another company, LifeStance Health Group (LFST), saw a 5.8% increase in its stock price [4] - LifeStance Health's consensus EPS estimate has decreased by 11.1% over the past month, but it still represents a 50% improvement from the previous year [5]

Core Viewpoint - Addus HomeCare (ADUS) has been upgraded to a Zacks Rank 1 (Strong Buy), indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Performance - The Zacks rating system tracks the Zacks Consensus Estimate, which reflects EPS estimates from sell-side analysts for the current and following years, highlighting the importance of earnings revisions in stock price movements [1][4]. - A strong correlation exists between changes in earnings estimates and near-term stock price movements, with institutional investors using these estimates to determine fair value [4][6]. Company Performance Indicators - Addus HomeCare is projected to earn $6.04 per share for the fiscal year ending December 2025, representing a year-over-year increase of 14.8% [8]. - Over the past three months, the Zacks Consensus Estimate for Addus HomeCare has increased by 5.2%, indicating a positive trend in earnings expectations [8]. Zacks Rating System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [7]. - The upgrade of Addus HomeCare to Zacks Rank 1 places it in the top 5% of Zacks-covered stocks, suggesting potential for market-beating returns in the near term [10].