PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Addus HomeCare Corporation [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | Sep 30, 2020 (Thousands) | Dec 31, 2019 (Thousands) | |:---|:---|:---| | Total Assets | $695,431 | $636,748 | | Total Current Assets | $299,380 | $269,387 | | Cash | $170,331 | $111,714 | | Accounts Receivable, net | $118,623 | $149,680 | | Goodwill | $286,552 | $275,368 | | Total Liabilities | $187,831 | $161,156 | | Total Current Liabilities | $93,743 | $87,528 | | Total Stockholders' Equity | $507,600 | $475,592 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) | Metric | Three Months Ended Sep 30, 2020 (Thousands) | Three Months Ended Sep 30, 2019 (Thousands) | Nine Months Ended Sep 30, 2020 (Thousands) | Nine Months Ended Sep 30, 2019 (Thousands) | |:---|:---|:---|:---|:---| | Net Service Revenues | $193,987 | $168,993 | $568,779 | $456,415 | | Gross Profit | $56,301 | $45,176 | $167,133 | $121,696 | | Operating Income from Continuing Operations | $12,523 | $7,335 | $32,791 | $20,222 | | Net Income | $9,119 | $4,912 | $24,684 | $14,500 | | Basic Income Per Share (Continuing Operations) | $0.58 | $0.40 | $1.59 | $1.14 | | Diluted Income Per Share (Continuing Operations) | $0.57 | $0.39 | $1.55 | $1.10 | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) | Metric | Balance at July 1, 2020 (Thousands) | Balance at Sep 30, 2020 (Thousands) | Balance at Jan 1, 2020 (Thousands) | |:---|:---|:---|:---| | Common Stock | $16 | $16 | $15 | | Additional Paid-in Capital | $363,248 | $366,868 | $359,545 | | Retained Earnings | $131,597 | $140,716 | $116,032 | | Total Stockholders' Equity | $494,861 | $507,600 | $475,592 | - Net income for the three months ended September 30, 2020, was **$9,119 thousand**, contributing to the increase in retained earnings[8](index=8&type=chunk) - Stock-based compensation and shares issued for stock option exercises contributed to the increase in additional paid-in capital during both the three and nine months ended September 30, 2020[8](index=8&type=chunk)[9](index=9&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity | Nine Months Ended Sep 30, 2020 (Thousands) | Nine Months Ended Sep 30, 2019 (Thousands) | |:---|:---|:---| | Net Cash Provided by Operating Activities | $73,299 | $8,084 | | Net Cash Used in Investing Activities | $(17,507) | $(56,301) | | Net Cash Provided by Financing Activities | $2,825 | $217,420 | | Net Change in Cash | $58,617 | $169,203 | | Cash, at End of Period | $170,331 | $239,609 | - **Operating cash flows significantly increased in 2020**, driven by improved accounts receivable management[13](index=13&type=chunk) - Investing activities in 2019 included substantial business acquisitions, which **decreased significantly in 2020**[13](index=13&type=chunk) Notes to Condensed Consolidated Financial Statements [1. Nature of Operations, Consolidation, and Presentation of Financial Statements](index=8&type=section&id=1.%20Nature%20of%20Operations%2C%20Consolidation%2C%20and%20Presentation%20of%20Financial%20Statements) The Company operates as a multi-state provider across personal care, hospice, and home health segments - The Company provides in-home services across three segments: **personal care** (non-medical assistance), **hospice** (terminally ill care), and **home health** (medical services post-illness/hospitalization)[15](index=15&type=chunk) - Payors include federal, state, and local governmental agencies, managed care organizations, commercial insurers, and private individuals[15](index=15&type=chunk) - The financial statements are unaudited and prepared in accordance with SEC rules for Form 10-Q, consolidating all subsidiaries with intercompany balances eliminated[16](index=16&type=chunk)[18](index=18&type=chunk) [2. Summary of Significant Accounting Policies](index=8&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the Company's significant accounting policies, including critical estimates and accounting pronouncements - Critical accounting estimates include revenue recognition, accounts receivable and allowances, and goodwill and intangible assets[19](index=19&type=chunk) - Diluted net income per common share is calculated using the treasury stock method, considering stock options and restricted stock awards[20](index=20&type=chunk) Dilutive Securities Outstanding | Metric | Sep 30, 2020 (Thousands) | Sep 30, 2019 (Thousands) | |:---|:---|:---| | Dilutive Stock Options | 523 | 650 | | Dilutive Restricted Stock Awards | 149 | 147 | - Recently adopted accounting pronouncements (ASU 2016-13, ASU 2017-04, ASU 2018-15) **did not have a significant impact** on results of operations or liquidity[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) - Recently issued accounting pronouncements (ASU 2019-12, ASU 2020-04) are **not expected to have a significant impact**, though ASU 2020-04 is still being evaluated[26](index=26&type=chunk)[27](index=27&type=chunk) [3. Revision of Previously Issued Financial Statements](index=9&type=section&id=3.%20Revision%20of%20Previously%20Issued%20Financial%20Statements) Immaterial errors in estimating implicit price concessions led to revisions of previously issued financial statements - Immaterial errors were identified in estimating implicit price concessions, leading to an **understatement of accounts receivable allowance**[28](index=28&type=chunk) - Previously issued financial statements for periods prior to 2017 and interim periods were not materially misstated, but **2019 fiscal year statements would be materially misstated without revision**[29](index=29&type=chunk) Impact of Revisions on Consolidated Statements of Income (September 30, 2019) | Metric | Three Months (Previously Reported) | Three Months (Revision) | Three Months (As Revised) | Nine Months (Previously Reported) | Nine Months (Revision) | Nine Months (As Revised) | |:---|:---|:---|:---|:---|:---|:---| | Net Service Revenues | $169,803 | $(810) | $168,993 | $458,749 | $(2,334) | $456,415 | | Gross Profit | $45,986 | $(810) | $45,176 | $124,030 | $(2,334) | $121,696 | | Operating Income from Continuing Operations | $7,280 | $55 | $7,335 | $21,236 | $(1,014) | $20,222 | | Net Income | $4,867 | $45 | $4,912 | $15,247 | $(747) | $14,500 | | Diluted Income Per Share | $0.34 | $0.01 | $0.35 | $1.12 | $(0.06) | $1.06 | [4. Leases](index=10&type=section&id=4.%20Leases) The Company primarily uses operating leases for its branches and corporate headquarters - The Company's leases have expiration dates through 2031, with rent expense recognized on a straight-line basis[32](index=32&type=chunk) Operating Lease Balances | Metric | Sep 30, 2020 (Thousands) | Dec 31, 2019 (Thousands) | |:---|:---|:---| | Operating Lease Assets, net | $35,842 | $21,111 | | Total Operating Lease Liabilities | $42,034 | $21,535 | - An eleven-year lease agreement to expand the Frisco corporate headquarters increased operating lease assets by approximately **$17.3 million** and liabilities by **$22.2 million** during the three and nine months ended September 30, 2020[36](index=36&type=chunk) Lease Costs and Terms | Metric | Three Months Ended Sep 30, 2020 (Thousands) | Three Months Ended Sep 30, 2019 (Thousands) | Nine Months Ended Sep 30, 2020 (Thousands) | Nine Months Ended Sep 30, 2019 (Thousands) | |:---|:---|:---|:---|:---| | Total Lease Cost | $2,432 | $2,119 | $7,099 | $5,483 | | Weighted Average Remaining Lease Term (Years, Sep 30, 2020) | 7.24 | N/A | N/A | N/A | | Weighted Average Discount Rate (Sep 30, 2020) | 4.33% | N/A | N/A | N/A | [5. Acquisitions](index=11&type=section&id=5.%20Acquisitions) The Company completed several acquisitions to expand its personal care, hospice, and home health services - On July 1, 2020, the Company acquired A Plus Health Care for approximately **$12.2 million**, expanding personal care services in Montana[43](index=43&type=chunk) A Plus Health Care Acquisition Impact (3 & 9 Months Ended Sep 30, 2020) | Metric | Amount (Thousands) | |:---|:---| | Net Service Revenues | $2,600 | | Operating Income | $500 | - On October 1, 2019, the Company acquired Hospice Partners of America for approximately **$135.6 million**, expanding hospice operations across 21 locations[46](index=46&type=chunk) Hospice Partners Acquisition Impact (3 & 9 Months Ended Sep 30, 2020) | Metric | Amount (Thousands) | |:---|:---| | Net Service Revenues | $13,000 (3 months) / $40,300 (9 months) | | Operating Income | $3,500 (3 months) / $9,500 (9 months) | - On August 1, 2019, the Company acquired Alliance Home Health Care for approximately **$23.5 million**, expanding personal care, home health, and hospice in New Mexico[50](index=50&type=chunk) Alliance Acquisition Impact (3 & 9 Months Ended Sep 30, 2020) | Metric | Net Service Revenues (Thousands) | |:---|:---| | Three Months Ended Sep 30, 2020 | $3,300 | | Nine Months Ended Sep 30, 2020 | $12,000 | - On June 1, 2019, the Company acquired VIP Health Care Services for approximately **$29.9 million**, expanding personal care in New York[54](index=54&type=chunk) VIP Acquisition Impact (3 & 9 Months Ended Sep 30, 2020) | Metric | Net Service Revenues (Thousands) | |:---|:---| | Three Months Ended Sep 30, 2020 | $9,700 | | Nine Months Ended Sep 30, 2020 | $30,500 | [6. Goodwill and Intangible Assets](index=16&type=section&id=6.%20Goodwill%20and%20Intangible%20Assets) Goodwill increased to $286.6 million due to acquisitions, while identifiable intangible assets totaled $52.9 million Goodwill Activity (Nine Months Ended Sep 30, 2020) | Segment | Goodwill as of Dec 31, 2019 (Thousands) | Additions for Acquisition (Thousands) | Divestiture (Thousands) | Adjustments (Thousands) | Goodwill as of Sep 30, 2020 (Thousands) | |:---|:---|:---|:---|:---|:---| | Personal Care | $126,577 | $11,252 | — | $1,438 | $139,267 | | Hospice | $146,983 | — | $(1,167) | $(322) | $145,494 | | Home Health | $1,808 | — | — | $(17) | $1,791 | | Total | $275,368 | $11,252 | $(1,167) | $1,099 | $286,552 | - Goodwill in the personal care segment increased by **$11.3 million** due to the A Plus acquisition[60](index=60&type=chunk) Identifiable Intangible Assets (Sep 30, 2020) | Category | Gross Carrying Amount (Thousands) | Accumulated Amortization (Thousands) | Net Carrying Amount (Thousands) | |:---|:---|:---|:---| | Indefinite Lives (State Licenses) | N/A | N/A | $13,296 | | Customer & Referral Relationships | $48,028 | $(37,263) | $10,765 | | Trade Names & Trademarks | $31,946 | $(14,671) | $17,275 | | Noncompetition Agreements | $4,655 | $(2,716) | $1,939 | | State Licenses (Amortized) | $12,164 | $(2,566) | $9,598 | | Total Intangible Assets | N/A | N/A | $52,873 | - Amortization expense for identifiable intangible assets was **$1.7 million** (three months) and **$5.3 million** (nine months) ended September 30, 2020[61](index=61&type=chunk) - The weighted average remaining life of identifiable intangible assets as of September 30, 2020, is **8.7 years**[61](index=61&type=chunk) [7. Details of Certain Balance Sheet Accounts](index=16&type=section&id=7.%20Details%20of%20Certain%20Balance%20Sheet%20Accounts) This note provides a breakdown of prepaid expenses, other current assets, and accrued expenses Prepaid Expenses and Other Current Assets | Metric | Sep 30, 2020 (Thousands) | Dec 31, 2019 (Thousands) | |:---|:---|:---| | Income Tax Receivable | $2,533 | — | | Workers' Compensation Insurance Receivable | $2,186 | $1,989 | | Prepaid Workers' Compensation and Liability Insurance | $1,792 | $2,040 | | Health Insurance Receivable | $426 | $1,567 | | Other | $3,489 | $2,397 | | Total | $10,426 | $7,993 | Accrued Expenses | Metric | Sep 30, 2020 (Thousands) | Dec 31, 2019 (Thousands) | |:---|:---|:---| | Accrued Payroll Taxes | $8,448 | $1,843 | | Current Portion of Operating Lease Liabilities | $8,057 | $7,234 | | Accrued Health Insurance | $4,413 | $4,140 | | Accrued Professional Fees | $3,135 | $2,517 | | Other | $9,342 | $6,695 | | Total | $33,395 | $22,429 | - The Company deferred **$7.1 million** of payroll taxes under the CARES Act, contributing to the increase in accrued payroll taxes[63](index=63&type=chunk) [8. Long-Term Debt](index=17&type=section&id=8.%20Long-Term%20Debt) Long-term debt totaled $61.7 million, primarily consisting of loans under its credit facility Long-Term Debt Composition | Metric | Sep 30, 2020 (Thousands) | Dec 31, 2019 (Thousands) | |:---|:---|:---| | Revolving Loan | $43,458 | $43,458 | | Term Loan | $18,375 | $18,865 | | Other Debt | $1,722 | — | | Financing Leases | — | $21 | | Less Unamortized Issuance Costs | $(1,899) | $(2,452) | | Total | $61,656 | $59,892 | | Less Current Maturities | $(2,095) | $(728) | | Long-Term Debt | $59,561 | $59,164 | - The credit facility totals **$269.6 million**, including a **$250.0 million** revolving loan and a **$19.6 million** delayed draw term loan, maturing May 8, 2023[65](index=65&type=chunk) - On September 12, 2019, the credit facility was increased by **$50.0 million** in incremental revolving loans, bringing the aggregate to **$300.0 million**[67](index=67&type=chunk) - As of September 30, 2020, the Company had **$43.4 million** in revolving loans and **$18.4 million** in term loans outstanding, with **$219.0 million** available for borrowing[70](index=70&type=chunk) - The Company was **in compliance with all financial covenants** under the Credit Agreement as of September 30, 2020[68](index=68&type=chunk)[70](index=70&type=chunk) [9. Income Taxes](index=19&type=section&id=9.%20Income%20Taxes) The Company's effective income tax rates were 23.6% and 20.5% for the three and nine months ended September 30, 2020 Effective Income Tax Rates | Period | Effective Income Tax Rate | |:---|:---| | Three Months Ended Sep 30, 2020 | 23.6% | | Three Months Ended Sep 30, 2019 | 24.4% | | Nine Months Ended Sep 30, 2020 | 20.5% | | Nine Months Ended Sep 30, 2019 | 21.3% | - The federal statutory rate was **21.0%** for both periods[72](index=72&type=chunk)[73](index=73&type=chunk) - Differences from the statutory rate are mainly due to state taxes, non-deductible compensation, excess tax benefits from equity vesting, and federal employment tax credits[72](index=72&type=chunk)[73](index=73&type=chunk) [10. Commitments and Contingencies](index=19&type=section&id=10.%20Commitments%20and%20Contingencies) The Company is subject to legal proceedings and has utilized relief funding under the CARES Act - Management believes pending legal and administrative proceedings **will not materially affect** the Company's financial position or results of operations[74](index=74&type=chunk) - The COVID-19 pandemic was declared a national public health emergency in January 2020, leading to significant economic impacts and government stimulus measures like the CARES Act[75](index=75&type=chunk)[77](index=77&type=chunk) - The Company received **$6.9 million** in grants from the Relief Fund in April 2020 but returned these funds in June 2020[78](index=78&type=chunk) - The Company deferred **$7.1 million** of payroll taxes under the CARES Act, included in accrued expenses as of September 30, 2020[78](index=78&type=chunk) [11. Segment Information](index=20&type=section&id=11.%20Segment%20Information) The Company operates in three reportable segments: personal care, hospice, and home health - The Company operates in three distinct business segments: **personal care**, **hospice**, and **home health**[79](index=79&type=chunk)[80](index=80&type=chunk) - Segment operating income excludes unallocated general and administrative costs such as accounting, finance, HR, legal, IT, and corporate management[81](index=81&type=chunk) Segment Net Service Revenues and Operating Income (Three Months Ended Sep 30) | Segment | 2020 Net Service Revenues (Thousands) | 2020 Segment Operating Income (Thousands) | 2019 Net Service Revenues (Thousands) | 2019 Segment Operating Income (Thousands) | |:---|:---|:---|:---|:---| | Personal Care | $165,916 | $26,586 | $153,753 | $23,512 | | Hospice | $23,986 | $7,574 | $10,874 | $3,555 | | Home Health | $4,085 | $475 | $4,366 | $704 | | Total Segment Operating Income | N/A | $34,635 | N/A | $27,771 | Segment Net Service Revenues and Operating Income (Nine Months Ended Sep 30) | Segment | 2020 Net Service Revenues (Thousands) | 2020 Segment Operating Income (Thousands) | 2019 Net Service Revenues (Thousands) | 2019 Segment Operating Income (Thousands) | |:---|:---|:---|:---|:---| | Personal Care | $482,849 | $78,463 | $419,124 | $64,742 | | Hospice | $73,723 | $21,316 | $27,228 | $8,679 | | Home Health | $12,207 | $823 | $10,063 | $1,073 | | Total Segment Operating Income | N/A | $100,602 | N/A | $74,494 | [12. Significant Payors](index=22&type=section&id=12.%20Significant%20Payors) The Company derives significant revenue from governmental agencies, with Illinois being a major state Personal Care Segment Revenue by Payor (Three Months Ended Sep 30) | Payor Type | 2020 Amount (Thousands) | 2020 % of Segment Net Service Revenues | 2019 Amount (Thousands) | 2019 % of Segment Net Service Revenues | |:---|:---|:---|:---|:---| | State, Local & Other Governmental Programs | $85,344 | 51.5% | $75,176 | 48.9% | | Managed Care Organizations | $71,700 | 43.2% | $68,438 | 44.5% | | Private Pay | $5,193 | 3.1% | $5,720 | 3.7% | | Commercial Insurance | $2,498 | 1.5% | $2,683 | 1.8% | | Other | $1,181 | 0.7% | $1,736 | 1.1% | | Total | $165,916 | 100.0% | $153,753 | 100.0% | Hospice Segment Revenue by Payor (Three Months Ended Sep 30) | Payor Type | 2020 Amount (Thousands) | 2020 % of Segment Net Service Revenues | 2019 Amount (Thousands) | 2019 % of Segment Net Service Revenues | |:---|:---|:---|:---|:---| | Medicare | $22,404 | 93.4% | $10,045 | 92.4% | | Managed Care Organizations | $1,130 | 4.7% | $584 | 5.4% | | Other | $452 | 1.9% | $245 | 2.2% | | Total | $23,986 | 100.0% | $10,874 | 100.0% | Home Health Segment Revenue by Payor (Three Months Ended Sep 30) | Payor Type | 2020 Amount (Thousands) | 2020 % of Segment Net Service Revenues | 2019 Amount (Thousands) | 2019 % of Segment Net Service Revenues | |:---|:---|:---|:---|:---| | Medicare | $3,188 | 78.0% | $3,338 | 76.5% | | Managed Care Organizations | $829 | 20.3% | $959 | 22.0% | | Other | $68 | 1.7% | $69 | 1.5% | | Total | $4,085 | 100.0% | $4,366 | 100.0% | Personal Care Segment Revenue by State (Three Months Ended Sep 30) | State | 2020 Amount (Thousands) | 2020 % of Segment Net Service Revenues | 2019 Amount (Thousands) | 2019 % of Segment Net Service Revenues | |:---|:---|:---|:---|:---| | Illinois | $74,448 | 44.9% | $61,633 | 40.1% | | New York | $28,381 | 17.1% | $34,730 | 22.6% | | New Mexico | $21,878 | 13.2% | $19,559 | 12.7% | | All Other States | $41,209 | 24.8% | $37,831 | 24.6% | | Total | $165,916 | 100.0% | $153,753 | 100.0% | - The Illinois Department on Aging accounted for **22.9%** and **22.1%** of the Company's net service revenues for the three months ended September 30, 2020 and 2019, respectively[94](index=94&type=chunk) - Receivables from the Illinois Department on Aging represented **18.5%** and **25.1%** of net accounts receivable at September 30, 2020 and December 31, 2019, respectively[95](index=95&type=chunk) [13. Subsequent Events](index=24&type=section&id=13.%20Subsequent%20Events) The Company acquired County Homemakers Incorporated, expanding its personal care services into Pennsylvania - On November 1, 2020, the Company acquired County Homemakers Incorporated for approximately **$14.6 million**[96](index=96&type=chunk) - This acquisition expands personal care services into **Pennsylvania**[96](index=96&type=chunk) - The fair value of identifiable net assets acquired is currently being assessed[96](index=96&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations [Overview](index=25&type=section&id=Overview) The Company is a home care services provider operating in personal care, hospice, and home health segments - The Company operates in three segments: personal care, hospice, and home health, primarily serving **'dual eligible' consumers** (Medicare and Medicaid)[100](index=100&type=chunk) Managed Care Revenue Percentage | Period | % of Revenue | |:---|:---| | Three Months Ended Sep 30, 2020 | 38.0% | | Three Months Ended Sep 30, 2019 | 41.4% | | Nine Months Ended Sep 30, 2020 | 38.5% | | Nine Months Ended Sep 30, 2019 | 38.0% | Key Financial Results (Continuing Operations) | Metric | Three Months Ended Sep 30, 2020 (Thousands) | Three Months Ended Sep 30, 2019 (Thousands) | Nine Months Ended Sep 30, 2020 (Thousands) | Nine Months Ended Sep 30, 2019 (Thousands) | |:---|:---|:---|:---|:---| | Net Service Revenues | $193,987 | $168,993 | $568,779 | $456,415 | | Net Income | $9,119 | $4,912 | $24,684 | $14,500 | - As of September 30, 2020, the Company provided services in **24 states** through **193 offices**, serving approximately **59,000** discrete individuals for the nine months ended September 30, 2020[102](index=102&type=chunk) [COVID-19 Pandemic Impact](index=27&type=section&id=COVID-19%20Pandemic%20Impact) The Company's essential services minimized operational disruption, with COVID-19 costs largely offset by rate increases - COVID-19 related costs were approximately **$2.5 million** (three months) and **$4.8 million** (nine months) ended September 30, 2020, largely offset by temporary payor rate increases of **$1.8 million** and **$3.6 million**, respectively[105](index=105&type=chunk) - The Company's services were designated **'essential,'** limiting the impact of restrictions on operations[105](index=105&type=chunk) - Enhanced unemployment benefits in some states temporarily suppressed caregiver hiring, but the Company expects future opportunities to increase hiring[106](index=106&type=chunk) - States like Illinois, New York, and New Mexico have revised revenue estimates down for fiscal year 2021, posing **risks to future reimbursement**[108](index=108&type=chunk)[109](index=109&type=chunk) - As of September 30, 2020, the Company had **$170.3 million in cash** and **$219.0 million available** under its credit facility, with a total net leverage ratio of zero[110](index=110&type=chunk) [Acquisitions](index=29&type=section&id=Acquisitions) The Company has pursued growth through strategic acquisitions, expanding its geographic presence and service offerings - Acquired VIP Health Care Services on June 1, 2019, for **$29.9 million**, expanding personal care in New York[114](index=114&type=chunk) - Acquired Alliance Home Health Care on August 1, 2019, for **$23.5 million**, expanding personal care, home health, and hospice in New Mexico[115](index=115&type=chunk) - Acquired Hospice Partners of America on October 1, 2019, for **$135.6 million**, expanding hospice operations across 21 locations[116](index=116&type=chunk) - Acquired A Plus Health Care on July 1, 2020, for **$12.2 million**, expanding personal care in Montana[117](index=117&type=chunk) - Acquired County Homemakers Incorporated on November 1, 2020, for **$14.6 million**, expanding personal care in Pennsylvania[118](index=118&type=chunk) [Revenue by Payor and Significant States](index=30&type=section&id=Revenue%20by%20Payor%20and%20Significant%20States) The Company's revenue relies on governmental agencies, with a transition towards managed care organizations - Revenue is primarily from federal, state, and local governmental agencies and managed care organizations, with a transition towards managed care[118](index=118&type=chunk) Overall Revenue by Payor Type (Three Months Ended Sep 30) | Payor Type | 2020 % of Net Service Revenues | 2019 % of Net Service Revenues | |:---|:---|:---| | State, Local & Other Governmental Programs | 51.5% | 48.9% | | Managed Care Organizations | 43.2% | 44.5% | | Private Pay | 3.1% | 3.7% | | Commercial Insurance | 1.5% | 1.8% | | Other | 0.7% | 1.1% | - Illinois accounted for **38.5%** and **36.4%** of net service revenues for the three months ended September 30, 2020 and 2019, respectively[123](index=123&type=chunk) - The Illinois Department on Aging accounted for **22.9%** and **22.1%** of net service revenues for the three months ended September 30, 2020 and 2019, respectively[124](index=124&type=chunk) - Illinois in-home care rates increased by **10.9%** to $20.28 (effective Dec 1, 2019) and an additional **7.7%** to $21.84 (effective Jan 1, 2020), with a further **7.1%** increase to $23.40 contingent on federal CMS approval for January 1, 2021[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) [Impact of Changes in Medicare and Medicaid Reimbursement](index=33&type=section&id=Impact%20of%20Changes%20in%20Medicare%20and%20Medicaid%20Reimbursement) Changes in Medicare and Medicaid reimbursement policies significantly affect the Company's revenue [Home Health Reimbursement](index=33&type=section&id=Home%20Health%20Reimbursement) Home health services transitioned to the Patient-Driven Groupings Model (PDGM) in January 2020 - Effective January 1, 2020, CMS implemented the **Patient-Driven Groupings Model (PDGM)** for home health payments, classifying patients based on clinical characteristics for 30-day episodes of care[132](index=132&type=chunk) - HHPPS rates increased by **1.3%** effective January 1, 2020[133](index=133&type=chunk) - CMS is phasing out RAP payments, reducing them to **20%** in 2020, eliminating up-front payments in 2021, and replacing them with a 'Notice of Admission' in 2022[134](index=134&type=chunk) [Hospice Reimbursement](index=35&type=section&id=Hospice%20Reimbursement) Hospice services are paid under the Medicare Hospice Prospective Payment System with annually updated rates - Hospice services are paid under the Medicare Hospice Prospective Payment System with daily rates[135](index=135&type=chunk) - Effective October 1, 2020, CMS increased hospice payment rates by **2.4%**[135](index=135&type=chunk) - The aggregate cap for Medicare reimbursement was updated to **$30,683.93** for fiscal year 2021[135](index=135&type=chunk) [COVID-19 Relief](index=35&type=section&id=COVID-19%20Relief) Federal and state governments provided temporary relief measures for healthcare providers during the COVID-19 pandemic - The CARES Act and PPPHCE Act authorized **$175 billion** in funding for healthcare providers[137](index=137&type=chunk) - The Company received **$6.9 million** in grants from the Relief Fund in April 2020 but returned them in June 2020[137](index=137&type=chunk) - The CARES Act temporarily lifted the Medicare sequester from May 1 through December 31, 2020[139](index=139&type=chunk) Medicare Sequester Relief Impact (Three & Nine Months Ended Sep 30, 2020) | Segment | Three Months (Thousands) | Nine Months (Thousands) | |:---|:---|:---| | Home Health Net Service Revenues | $100 | $200 | | Hospice Net Service Revenues | $500 | $800 | [Components of our Statements of Income](index=37&type=section&id=Components%20of%20our%20Statements%20of%20Income) This section defines the key components of the Company's income statement - Net service revenues are generated by providing services directly to consumers, primarily on an hourly basis, and are recognized when services are rendered[142](index=142&type=chunk) - Cost of service revenues includes direct care wages, payroll taxes, and benefit-related costs[143](index=143&type=chunk) - General and administrative expenses cover local agency operations and corporate administrative functions, including compensation, professional fees, and facility costs[144](index=144&type=chunk) - Depreciation and amortization expenses relate to furniture, equipment, software, and finite-life intangible assets (customer relationships, trade names, non-competition agreements)[145](index=145&type=chunk) - Interest expense includes interest and unused credit line fees on the credit facility and financing lease obligations[146](index=146&type=chunk) - Income tax expense is influenced by federal (21.0% statutory rate), state, and local taxes, non-deductible compensation, excess tax benefits from equity vesting, and federal employment tax credits[147](index=147&type=chunk)[148](index=148&type=chunk) [Results of Operations — Consolidated](index=38&type=section&id=Results%20of%20Operations%20%E2%80%94%20Consolidated) Consolidated net service revenues increased due to same-store growth, higher revenues per hour, and acquisitions [Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019](index=38&type=section&id=Three%20Months%20Ended%20September%2030%2C%202020%20Compared%20to%20Three%20Months%20Ended%20September%2030%2C%202019) Net service revenues increased by 14.8% to $194.0 million, driven by same-store growth and acquisitions Consolidated Financial Performance (Three Months Ended Sep 30) | Metric | 2020 Amount (Thousands) | 2020 % of Net Service Revenues | 2019 Amount (Thousands) | 2019 % of Net Service Revenues | Change Amount (Thousands) | Change % | |:---|:---|:---|:---|:---|:---|:---| | Net Service Revenues | $193,987 | 100.0% | $168,993 | 100.0% | $24,994 | 14.8% | | Cost of Service Revenues | $137,686 | 71.0% | $123,817 | 73.3% | $13,869 | 11.2% | | Gross Profit | $56,301 | 29.0% | $45,176 | 26.7% | $11,125 | 24.6% | | General and Administrative Expenses | $40,733 | 21.0% | $35,085 | 20.8% | $5,648 | 16.1% | | Operating Income from Continuing Operations | $12,523 | 6.4% | $7,335 | 4.3% | $5,188 | 70.7% | | Net Income | $9,119 | 4.7% | $4,912 | 2.9% | $4,207 | 85.6% | - Net service revenues increased by **14.8%** due to **4.8%** same-store growth, **7.7%** increase in revenues per billable hour, and a **$13.1 million** increase from the hospice segment[150](index=150&type=chunk) - Gross profit margin increased to **29.0%** from 26.7%, primarily due to the acquisition of higher-margin businesses[151](index=151&type=chunk) - General and administrative expenses increased by **$5.6 million**, mainly due to acquisitions (**$5.3 million** in wages, taxes, benefits) and professional fees (**$1.0 million**)[152](index=152&type=chunk) [Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019](index=39&type=section&id=Nine%20Months%20Ended%20September%2030%2C%202020%20Compared%20to%20Nine%20Months%20Ended%20September%2030%2C%202019) Net service revenues grew by 24.6% to $568.8 million, driven by same-store growth and acquisitions Consolidated Financial Performance (Nine Months Ended Sep 30) | Metric | 2020 Amount (Thousands) | 2020 % of Net Service Revenues | 2019 Amount (Thousands) | 2019 % of Net Service Revenues | Change Amount (Thousands) | Change % | |:---|:---|:---|:---|:---|:---|:---| | Net Service Revenues | $568,779 | 100.0% | $456,415 | 100.0% | $112,364 | 24.6% | | Cost of Service Revenues | $401,646 | 70.6% | $334,719 | 73.3% | $66,927 | 20.0% | | Gross Profit | $167,133 | 29.4% | $121,696 | 26.7% | $45,437 | 37.3% | | General and Administrative Expenses | $125,470 | 22.0% | $94,109 | 20.7% | $31,361 | 33.3% | | Operating Income from Continuing Operations | $32,791 | 5.8% | $20,222 | 4.4% | $12,569 | 62.2% | | Net Income | $24,684 | 4.3% | $14,500 | 3.2% | $10,184 | 70.2% | - Net service revenues increased by **24.6%** due to **8.8%** same-store growth, **10.4%** increase in revenues per billable hour, and a **$46.5 million** increase from the hospice segment[157](index=157&type=chunk) - Gross profit margin increased to **29.4%** from 26.7%, primarily due to the acquisition of higher-margin businesses[158](index=158&type=chunk) - General and administrative expenses increased by **$31.4 million**, mainly due to acquisitions (**$21.5 million** in wages, taxes, benefits) and professional fees (**$3.4 million**)[159](index=159&type=chunk) [Results of Operations – Segments](index=40&type=section&id=Results%20of%20Operations%20%E2%80%93%20Segments) Segment results show varied performance across Personal Care, Hospice, and Home Health [Personal Care Segment](index=40&type=section&id=Personal%20Care%20Segment) The Personal Care segment's revenues increased due to same-store growth and higher revenues per billable hour Personal Care Segment Operating Results (Three & Nine Months Ended Sep 30) | Metric | Three Months 2020 (Thousands) | Three Months 2019 (Thousands) | Nine Months 2020 (Thousands) | Nine Months 2019 (Thousands) | |:---|:---|:---|:---|:---| | Net Service Revenues | $165,916 | $153,753 | $482,849 | $419,124 | | Gross Profit | $41,423 | $38,249 | $123,505 | $104,795 | | Segment Operating Income | $26,586 | $23,512 | $78,463 | $64,742 | Personal Care Segment Key Performance Indicators (Three & Nine Months Ended Sep 30) | Metric | Three Months 2020 | Three Months 2019 | Nine Months 2020 | Nine Months 2019 | |:---|:---|:---|:---|:---| | Same Store Growth Revenue % | 4.8% | 7.2% | 8.8% | 6.3% | | Average Billable Census | 38,589 | 39,342 | 38,443 | 39,279 | | Revenues per Billable Hour | $21.29 | $19.76 | $21.11 | $19.13 | - Net service revenues increased by **7.9%** (three months) and **15.2%** (nine months) primarily due to same-store growth and increased revenues per billable hour[169](index=169&type=chunk) - Gross profit as a percentage of net service revenues increased to **25.0%** for both periods, mainly due to a decrease in direct employee wages, taxes, and benefit costs[174](index=174&type=chunk) [Hospice Segment](index=42&type=section&id=Hospice%20Segment) The Hospice segment experienced significant growth due to acquisitions, leading to higher gross profit margins Hospice Segment Operating Results (Three & Nine Months Ended Sep 30) | Metric | Three Months 2020 (Thousands) | Three Months 2019 (Thousands) | Nine Months 2020 (Thousands) | Nine Months 2019 (Thousands) | |:---|:---|:---|:---|:---| | Net Service Revenues | $23,986 | $10,874 | $73,723 | $27,228 | | Gross Profit | $13,478 | $5,379 | $39,974 | $13,641 | | Segment Operating Income | $7,574 | $3,555 | $21,316 | $8,679 | Hospice Segment Key Performance Indicators (Three & Nine Months Ended Sep 30) | Metric | Three Months 2020 | Three Months 2019 | Nine Months 2020 | Nine Months 2019 | |:---|:---|:---|:---|:---| | Admissions | 1,399 | 563 | 4,393 | 1,548 | | Average Daily Census | 1,681 | 791 | 1,762 | 659 | | Average Length of Stay (Days) | 109 | 121 | 103 | 122 | | Revenue per Patient Day | $155.14 | $150.48 | $152.71 | $152.29 | - Net service revenues increased by **$13.1 million** (three months) and **$46.5 million** (nine months), primarily due to the acquisitions of Alliance and Hospice Partners[177](index=177&type=chunk) - Gross profit as a percentage of net service revenues increased to **56.2%** (three months) and **54.2%** (nine months), driven by decreases in employee wages, pharmacy, and medical equipment costs[178](index=178&type=chunk)[180](index=180&type=chunk) [Home Health Segment](index=44&type=section&id=Home%20Health%20Segment) The Home Health segment's revenues were impacted by COVID-19 restrictions, leading to decreased gross profit margins Home Health Segment Operating Results (Three & Nine Months Ended Sep 30) | Metric | Three Months 2020 (Thousands) | Three Months 2019 (Thousands) | Nine Months 2020 (Thousands) | Nine Months 2019 (Thousands) | |:---|:---|:---|:---|:---| | Net Service Revenues | $4,085 | $4,366 | $12,207 | $10,063 | | Gross Profit | $1,400 | $1,548 | $3,654 | $3,260 | | Segment Operating Income | $475 | $704 | $823 | $1,073 | Home Health Segment Key Performance Indicators (Three & Nine Months Ended Sep 30) | Metric | Three Months 2020 | Three Months 2019 | Nine Months 2020 | Nine Months 2019 | |:---|:---|:---|:---|:---| | New Admissions | 1,096 | 910 | 3,186 | 2,325 | | Recertifications | 607 | 764 | 2,006 | 1,949 | | Total Volume | 1,703 | 1,674 | 5,192 | 4,274 | | Visits | 28,073 | 31,477 | 91,580 | 75,188 | - Net service revenues decreased by **$0.3 million** (three months) due to COVID-19 restrictions in New Mexico, but increased for the nine months due to the Alliance acquisition[186](index=186&type=chunk) - Gross profit as a percentage of net service revenues decreased due to increased direct employee wages, taxes, and benefit costs[187](index=187&type=chunk) [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) The Company maintains strong liquidity with significant cash balances and availability under its credit facility [Overview](index=46&type=section&id=Overview) The Company's primary liquidity sources are cash on hand and cash from operations Liquidity Position | Metric | Sep 30, 2020 (Thousands) | Dec 31, 2019 (Thousands) | |:---|:---|:---| | Cash Balances | $170,331 | $111,714 | | Revolving Loans Outstanding | $43,458 | $43,458 | | Term Loans Outstanding | $18,375 | $18,865 | | Available for Borrowing under Credit Facility | $219,000 | $191,400 | - The open receivable balance from the Illinois Department on Aging decreased by **$15.8 million** from $37.6 million (Dec 31, 2019) to $21.8 million (Sep 30, 2020)[196](index=196&type=chunk) [Amended and Restated Senior Secured Credit Facility](index=46&type=section&id=Amended%20and%20Restated%20Senior%20Secured%20Credit%20Facility) The Company's credit facility totals $269.6 million and is secured by the Company's assets - The credit facility, amended in October 2018, totals **$269.6 million**, comprising a **$250.0 million** revolving loan and a **$19.6 million** delayed draw term loan, maturing May 8, 2023[197](index=197&type=chunk) - The facility was further increased by **$50.0 million** in incremental revolving loans on September 12, 2019, bringing the total revolving loans to **$300.0 million**[67](index=67&type=chunk) - The credit facility is collateralized by a first priority security interest in all of the Company's tangible and intangible assets[198](index=198&type=chunk) - The Credit Agreement contains financial covenants, including maintaining a minimum Interest Coverage Ratio and staying below a maximum Total Net Leverage Ratio (**3.75:1.00**, or **4.25:1.00** for Material Acquisitions)[197](index=197&type=chunk)[200](index=200&type=chunk) - As of September 30, 2020, the Company was **in compliance with all financial covenants**[201](index=201&type=chunk) [Cash Flows](index=48&type=section&id=Cash%20Flows) Net cash from operating activities significantly increased due to decreases in accounts receivable Summary of Cash Flows (Nine Months Ended Sep 30) | Cash Flow Activity | 2020 (Thousands) | 2019 (Thousands) | |:---|:---|:---| | Net Cash Provided by Operating Activities | $73,299 | $8,084 | | Net Cash Used in Investing Activities | $(17,507) | $(56,301) | | Net Cash Provided by Financing Activities | $2,825 | $217,420 | - The increase in operating cash was primarily due to **decreases in accounts receivable** for New York and the Illinois Department of Aging, combined with organic growth and acquisition activity[202](index=202&type=chunk) - Investing activities in 2020 included **$6.0 million** in property and equipment purchases, while 2019 included **$29.9 million** for VIP and **$23.5 million** for Alliance acquisitions[203](index=203&type=chunk) - Financing activities in 2019 included **$172.9 million** from a public offering and **$43.1 million** from credit facility borrowings, which were not present in 2020[204](index=204&type=chunk) [Outstanding Accounts Receivable](index=48&type=section&id=Outstanding%20Accounts%20Receivable) Gross accounts receivable decreased, and Days Sales Outstanding (DSO) improved significantly Accounts Receivable and DSO | Metric | Sep 30, 2020 | Dec 31, 2019 | |:---|:---|:---| | Gross Accounts Receivable (Thousands) | $118,500 | $150,600 | | Accounts Receivable (Illinois Dept. on Aging) (Thousands) | $21,800 | $37,600 | | Days Sales Outstanding (DSO) | 56 days | 72 days | | DSO (Illinois Dept. on Aging) | 48 days | 78 days | - The decrease in accounts receivable was partly due to a **$6.8 million** bonus payment received in May 2020[205](index=205&type=chunk) - Economic slowdown from COVID-19 poses significant risks to state budgets, potentially impacting future revenue forecasts and payment consistency, especially in New York which implemented Medicaid rate reductions[207](index=207&type=chunk)[208](index=208&type=chunk) [Off-Balance Sheet Arrangements](index=49&type=section&id=Off-Balance%20Sheet%20Arrangements) The Company did not have any off-balance sheet guarantees or arrangements - The Company had **no off-balance sheet guarantees** or arrangements with unconsolidated entities as of September 30, 2020[209](index=209&type=chunk) [Critical Accounting Policies and Estimates](index=50&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) There have been no material changes to the Company's critical accounting policies and estimates - **No material changes** to critical accounting policies and estimates since the December 31, 2019 Annual Report on Form 10-K[210](index=210&type=chunk) [Recently Issued Accounting Pronouncements](index=50&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) Further discussion on recently issued accounting pronouncements is available in Note 2 - Further discussion on recently issued accounting pronouncements is available in Note 2 to the Notes to Consolidated Financial Statements[211](index=211&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company is exposed to market risk from changes in interest rates on its variable-rate long-term debt - The Company is exposed to market risk from changes in interest rates on its variable-rate long-term debt[213](index=213&type=chunk) - As of September 30, 2020, outstanding variable-rate borrowings totaled approximately **$61.8 million**[213](index=213&type=chunk) Impact of 100 Basis Point Interest Rate Increase | Period | Decrease in Net Income (Thousands) | Decrease in Diluted EPS | |:---|:---|:---| | Three Months Ended Sep 30, 2020 | $100 | $0.01 | | Nine Months Ended Sep 30, 2020 | $400 | $0.02 | - The Company does not currently have any derivative or hedging arrangements[213](index=213&type=chunk) [Item 4. Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) The Company's disclosure controls and procedures were deemed ineffective due to material weaknesses in internal control [Evaluation of Disclosure Controls and Procedures](index=51&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that the Company's disclosure controls and procedures were not effective as of September 30, 2020 - Disclosure controls and procedures were **not effective** as of September 30, 2020[215](index=215&type=chunk) - Ineffectiveness is due to **material weaknesses in internal control** over financial reporting previously disclosed in the Annual Report on Form 10-K for fiscal year ended December 31, 2019[215](index=215&type=chunk) [Changes in Internal Control Over Financial Reporting](index=51&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) The Company implemented enhancements to control activities related to hours worked, billed, and price concessions - Implemented enhancements to control activities for review and approval of hours worked and billed, including reviewing SOC 1 Type 2 reports from the EVV vendor[216](index=216&type=chunk) - Enhanced controls to increase precision of review for hours worked and billed and implemented new controls within the payroll process[216](index=216&type=chunk) - Implemented enhancements to control activities over the accuracy of implicit price concession assumptions for unadjudicated net service revenues[216](index=216&type=chunk) [Remediation Efforts with Respect to Material Weaknesses](index=51&type=section&id=Remediation%20Efforts%20with%20Respect%20to%20Material%20Weaknesses) The Company is actively pursuing a remediation plan to address previously identified material weaknesses - Management initiated a remediation plan, supported by internal resources and third-party specialists, to address material weaknesses[217](index=217&type=chunk) - Remediation requires repeatable execution and evidence of operating effectiveness over a sufficient period[218](index=218&type=chunk) - **Material weaknesses continue to exist** as of September 30, 2020, and are not yet considered remediated[218](index=218&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in legal proceedings incidental to its business, which are not expected to be material - The Company is subject to legal and/or administrative proceedings incidental to its business[220](index=220&type=chunk) - Management believes the outcome of these proceedings **will not materially affect** the Company's financial position and results of operations[220](index=220&type=chunk) [Item 1A. Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K - Investing in the Company's common stock involves a **high degree of risk**[221](index=221&type=chunk) - **No material changes** to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2019[221](index=221&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company reported no unregistered sales of equity securities or use of proceeds - No unregistered sales of equity securities and use of proceeds[222](index=222&type=chunk) [Item 3. Defaults Upon Senior Securities](index=52&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities during the period - No defaults upon senior securities[222](index=222&type=chunk) [Item 4. Mine Safety Disclosures](index=52&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The Company reported no mine safety disclosures during the period - No mine safety disclosures[222](index=222&type=chunk) [Item 5. Other Information](index=52&type=section&id=Item%205.%20Other%20Information) The Company reported no other information during the period - No other information[222](index=222&type=chunk) [Item 6. Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents and certifications - Exhibits include Amended and Restated Certificate of Incorporation, Bylaws, Form of Common Stock Certificate, and Certifications of CEO and CFO[224](index=224&type=chunk) - Inline XBRL documents (Instance, Schema, Calculation, Label, Presentation, Definition Linkbase) are included for interactive data filing[225](index=225&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-34504 ADDUS HOMECARE CORPORATION (Exact name of registrant as specified in its charter) Delaware 20-5340172 (State or othe ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited Q1 2020 financial statements show significant year-over-year growth in net service revenues and net income, with total assets increasing, while also noting prior period revisions and the impact of 2019 acquisitions [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $130,463 | $111,714 | | Accounts receivable, net | $141,083 | $149,680 | | Total current assets | $278,051 | $269,387 | | Goodwill | $275,364 | $275,368 | | Total assets | $644,819 | $636,748 | | **Liabilities & Equity** | | | | Total current liabilities | $84,606 | $87,528 | | Long-term debt, net | $59,112 | $59,164 | | Total liabilities | $158,011 | $161,156 | | Total stockholders' equity | $486,808 | $475,592 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Condensed Consolidated Statements of Income (in thousands, except per share data) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net service revenues | $190,216 | $138,507 | | Gross profit | $55,835 | $36,827 | | Operating income | $10,661 | $5,496 | | Net income | $8,658 | $4,296 | | Diluted income per share | $0.54 | $0.32 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $20,442 | $(3,197) | | Net cash used in investing activities | $(2,834) | $(1,006) | | Net cash provided by (used in) financing activities | $1,141 | $(33) | | Net change in cash | $18,749 | $(4,236) | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's three operating segments, revisions to prior financial statements due to immaterial errors, significant 2019 acquisitions, and subsequent events including a new acquisition and the return of CARES Act funds - The company operates in three segments: personal care, hospice, and home health, with primary payors being governmental agencies and managed care organizations[11](index=11&type=chunk) - Previously issued financial statements for Q1 2019 were revised to correct immaterial errors, reducing net service revenues by **$0.7 million** and net income by **$0.6 million** for that period[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) - Significant 2019 acquisitions included Hospice Partners for **$135.6 million**, Alliance Home Health Care for **$23.5 million**, and VIP Health Care Services for **$29.9 million**, expanding operations across multiple states[39](index=39&type=chunk)[42](index=42&type=chunk)[48](index=48&type=chunk) Segment Operating Income (in thousands) | Segment | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Personal Care | $26,035 | $19,360 | | Hospice | $6,437 | $2,557 | | Home Health | $281 | $95 | | **Total Segment Operating Income** | **$32,753** | **$22,012** | - Illinois accounted for **37.7%** of Q1 2020 net service revenues, with the Illinois Department on Aging being the largest payor at **23.2%** of total net service revenues[83](index=83&type=chunk) - Subsequent to quarter-end, the company acquired A Plus Health Care for approximately **$12.2 million** and returned **$6.9 million** in CARES Act relief funds[85](index=85&type=chunk)[86](index=86&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q1 2020 revenue growth to organic expansion and 2019 acquisitions, notes limited Q1 COVID-19 impact but potential future state budget risks, and highlights strong liquidity with improved Days Sales Outstanding [COVID-19 Pandemic](index=24&type=section&id=COVID-19%20Pandemic) - The company's essential services were largely exempt from lockdown restrictions, resulting in limited impact on Q1 2020 reimbursements[94](index=94&type=chunk)[96](index=96&type=chunk) - Q1 2020 COVID-19 related costs were approximately **$0.3 million**, with anticipated future risks to state budgets and potential reimbursement impacts due to economic slowdown[94](index=94&type=chunk)[97](index=97&type=chunk) - The company received and subsequently returned **$6.9 million** in CARES Act relief funds in June 2020[102](index=102&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Consolidated net service revenues grew **37.3%** in Q1 2020, driven by acquisitions and organic growth, leading to improved gross profit margin and a **94.0%** increase in operating income across all segments Consolidated Results of Operations (in thousands) | Metric | Q1 2020 | Q1 2019 | Change (%) | | :--- | :--- | :--- | :--- | | Net service revenues | $190,216 | $138,507 | 37.3% | | Gross profit | $55,835 | $36,827 | 51.6% | | Operating income | $10,661 | $5,496 | 94.0% | | Net income | $8,658 | $4,296 | 101.5% | - Personal Care segment revenue increased **25.6%** to **$160.7 million**, driven by an **11.8%** increase in billable hours and a **12.6%** increase in revenue per billable hour due to rate increases[142](index=142&type=chunk)[145](index=145&type=chunk) - Hospice segment revenue surged **218.5%** to **$25.2 million**, primarily due to the Alliance and Hospice Partners acquisitions, resulting in a **224.0%** increase in average daily census[148](index=148&type=chunk)[154](index=154&type=chunk) - Home Health segment revenue grew **60.9%** to **$4.3 million**, driven by increased total visits, partially attributable to the Alliance acquisition[157](index=157&type=chunk)[162](index=162&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) - As of March 31, 2020, the company held **$130.5 million** in cash and had **$218.5 million** available under its credit facility[165](index=165&type=chunk)[166](index=166&type=chunk) - Net cash provided by operating activities was **$20.4 million** for Q1 2020, a significant improvement from a **$3.2 million** use of cash in Q1 2019, primarily due to reduced accounts receivable from Illinois and New York[175](index=175&type=chunk) - Days Sales Outstanding (DSO) improved to **68 days** at March 31, 2020, from **72 days** at December 31, 2019, with the Illinois Department on Aging DSO significantly improving to **57 days** from **78 days**[180](index=180&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risk from interest rate changes on its **$62.3 million** variable-rate debt, where a **100 basis point** increase would decrease quarterly net income by **$0.1 million** - The company's primary market risk is interest rate changes on its **$62.3 million** of variable-rate debt, where a **100 basis point** increase would decrease quarterly net income by **$0.1 million**[187](index=187&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective as of March 31, 2020, due to previously disclosed material weaknesses in internal control over financial reporting, with no material changes during the quarter - The CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2020, due to material weaknesses in internal control over financial reporting previously identified in the 2019 Form 10-K[189](index=189&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) Management anticipates that the outcomes of pending legal and administrative proceedings will not materially affect the company's financial position or results of operations - Management states that the outcome of any pending legal proceedings is not expected to have a material effect on the company's financial condition[193](index=193&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's 2019 Annual Report on Form 10-K - No material changes have been made to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2019[194](index=194&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate governance documents and required CEO/CFO certifications - The report includes standard corporate governance documents and required CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-34504 ADDUS HOMECARE CORPORATION (Exact name of registrant as specified in its charter) Delaware 20-5340172 (State or other ju ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-34504 ADDUS HOMECARE CORPORATION (Exact name of registrant as specified in its charter) Delaware 20-5340172 (State or o ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-34504 ADDUS HOMECARE CORPORATION (Exact name of registrant as specified in its charter) Delaware 20-5340172 (State or other ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-34504 ADDUS HOMECARE CORPORATION (Exact name of registrant as specified in its charter) Delaware 20-5340172 (State or other ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-34504 | --- | --- | |---------------------------------------------------------------------------------------|----------------- ...