Addus(ADUS) - 2020 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (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 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 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 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 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] - 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][24][25] - 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][42][48] 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] - 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][86] Management's Discussion and Analysis of Financial Condition and Results of Operations 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 - The company's essential services were largely exempt from lockdown restrictions, resulting in limited impact on Q1 2020 reimbursements[94][96] - 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][97] - The company received and subsequently returned $6.9 million in CARES Act relief funds in June 2020[102] Results of Operations 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][145] - 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][154] - Home Health segment revenue grew 60.9% to $4.3 million, driven by increased total visits, partially attributable to the Alliance acquisition[157][162] Liquidity and Capital Resources - As of March 31, 2020, the company held $130.5 million in cash and had $218.5 million available under its credit facility[165][166] - 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] - 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] PART II. OTHER INFORMATION Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] Item 6. Exhibits 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][198][199][200]