Core Insights - Addus HomeCare is focusing on growth through mergers and acquisitions (M&A) while navigating the complexities of Medicaid rate increases, which are influenced by state budgets and legislative decisions [1][4][7] Financial Performance - Addus has achieved over $1.5 billion in revenue with operating margins increasing from approximately 5-6% to 12-13%, aligning with the company's long-term vision [2][3][5] - The company has implemented a caregiver app that improved fill rates in Illinois from the low 80s to the upper 80s, with plans to roll it out in Texas and New Mexico [5][16] M&A Strategy - The company completed the acquisition of Gentiva for $280 million, marking its largest deal to date and establishing Addus as the largest personal care provider in Texas with about 5% market share [6][13][14] - Addus is positioned for additional tuck-in deals and larger acquisitions later in the year, supported by a clean balance sheet [6][18] Medicaid Rate Environment - Texas has enacted a nearly 10% rate increase effective September 2025, while Illinois and New Mexico are also expected to see rate adjustments, with New Mexico anticipating a 4-5% increase [7][10] - The pass-through rate to wages is typically in the mid-to-upper 20% range, varying by state [9] Compliance and Industry Scrutiny - Addus has invested in an internal compliance group to address industry concerns about fraud, emphasizing a proactive approach to compliance through training and supervision [11][12] - The company welcomes increased scrutiny in the industry, believing it could create market share opportunities [12] Hospice Strategy - Addus has expanded its hospice services since entering the segment in 2018, now operating in nine states, and has made leadership changes to enhance performance [17][18]

Financial Data and Key Metrics Changes - The company reported normalized FFO per share of $0.37 and normalized AFFO per share of $0.38, representing a 6% improvement over the same period in 2024 [20][22] - Total normalized FFO and normalized AFFO for the quarter were $89.2 million and $91.6 million respectively, reflecting strong sequential growth from increased NOI [20][22] - The net debt to adjusted EBITDA ratio was five times as of June 30, 2025, a decrease of 0.19 times from March 31, 2025 [24][26] Business Line Data and Key Metrics Changes - The managed senior housing portfolio contributed nearly 21% of total annualized cash NOI, with cash NOI for the quarter growing 17.1% year over year in the same store portfolio [14][18] - Cash rental income from the triple net portfolio increased by $2.3 million from the first quarter, driven by a $1.4 million increase in percentage rents [20][21] - The occupancy rate in the same store portfolio was 86% compared to 84.6% in 2024, with cash NOI growth expected to be in the low to mid-teens for the same store managed senior housing portfolio [16][24] Market Data and Key Metrics Changes - The average Medicaid rate increase is expected to be around 3.5%, with the top five skilled nursing tenants averaging just above 5% [9][12] - The Medicare market saw an upward revision from 2.8% to 3.2%, which is considered unusual but positive for the company [9][12] - The Canadian portfolio's RevPAR increased by 6.8% year over year, with occupancy above 90% for over five quarters [17][18] Company Strategy and Development Direction - The company aims to increase its SHOP (Senior Housing Operating Portfolio) from 20% to 30% by 2026, requiring approximately $1 billion in investments [11][12] - The focus is on acquiring well-performing newer senior housing communities that cater to the baby boomer generation, as the supply-demand equation remains constrained [15][18] - The company is not interested in building a loan book or engaging in complex joint venture structures, preferring straightforward traditional deals [36][104] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the investment pipeline, targeting $4.5 billion in investments for the year, with a strong deal flow expected to continue [11][70] - The company noted that the operational recovery in skilled nursing and senior housing has allowed for robust pricing, despite some challenges in the market [46][92] - Management remains optimistic about future occupancy and NOI growth, anticipating improvements as the transition from the holiday portfolio stabilizes [65][66] Other Important Information - The company declared a quarterly cash dividend of $0.30 per share, representing a payout of 79% of the second quarter normalized AFFO per share [27][28] - The company has ample liquidity of approximately $1.2 billion, consisting of unrestricted cash and available borrowings [27][26] Q&A Session Summary Question: Investment guidance and pipeline - Management indicated confidence in reaching the $400 million to $500 million investment range for the year, depending on timing [30][31] Question: Same store SHOP NOI growth - Management noted that the same store SHOP NOI growth is running at the high end of expectations, with hopes for upside [38][40] Question: Skilled nursing opportunities - Management clarified that while pricing is not an issue, the focus is on finding quality assets in the right markets [32][34] Question: Holiday transition impact - Management explained that the transition of holiday assets has had an impact on occupancy and NOI, but they expect improvements moving forward [44][65] Question: Labor market conditions - Management reported wage increases of around 4% across both skilled nursing and senior housing portfolios, with no significant labor market issues identified [96][99] Question: Operator selection criteria - Management emphasized the importance of understanding operators' outcomes and their willingness to grow as key selection criteria for new operators [103][104]