Addus HomeCare (NasdaqGS:ADUS) Q4 2025 Earnings call February 24, 2026 09:00 AM ET Company ParticipantsA.J. Rice - Managing Director of Equity ResearchAndrew Mok - Director of Equity ResearchBrian Poff - EVP and CFOClarke Murphy - VP of Equity ResearchDirk Allison - Chairman and CEODru Anderson - Senior PartnerHeather Dixon - President and COOJared Haase - Equity Research AssociateJohn Ransom - Managing Director of Healthcare Equity ResearchRaj Kumar - Managing DirectorConference Call ParticipantsBen Hendri ...

Financial Performance - In Q4, revenue increased by 9.9% to $1.5 billion, and adjusted EBITDA rose by 15.9% to $335.6 million, driven by 5.3% discharge growth and a 4.1% increase in net revenue per discharge [1][5] - For the full year 2025, revenue grew by 10.5%, with EBITDA increasing by 14.9%, supported by operating leverage and disciplined expense management [3][5] - Adjusted free cash flow for the full year was $818 million, reflecting an 18.5% increase [9] Labor and Operational Efficiency - Premium labor costs decreased significantly, down more than $21 million year-over-year in 2025, with Q4 premium labor at $23.8 million, the lowest since Q1 2021 [2][5][7] - The company added approximately 300 same-store registered nurses (RNs) during 2025, contributing to improved operational efficiency [7] Capacity Expansion and Growth Strategy - Management plans to add 517 beds in 2025 through new hospitals and expansions, with ongoing investments expected to meet a growing target demographic [12] - A new 24-bed small-format hospital prototype is set to launch in 2027 as part of a hub-and-spoke strategy [13] 2026 Guidance - For 2026, management guided net revenue of $6.365–6.465 billion, adjusted EBITDA of $1.34–1.38 billion, and adjusted EPS of $5.81–6.10, with a leverage target of approximately 1.83x [4][18] Regulatory and Payer Dynamics - The company reported a 93% affirmation rate for its Alabama hospitals under the RCD model, indicating effective engagement with CMS [16] - Management expressed concerns about challenges with a national Medicare Advantage payer, which affected conversion rates despite referral growth [20]

Financial Data and Key Metrics Changes - The company reported revenues of $229 million for Q3 2025, an increase of $48.4 million, or 26.8% year-over-year [5] - Adjusted EBITDA was $17.3 million, up $2.2 million, or 14.5% compared to the prior year quarter [5] - Adjusted EPS increased to $0.30, reflecting a $0.04 increase, or 15.4% year-over-year [5] - Full-year revenue guidance was raised to between $911.4 million and $948.6 million, with adjusted EBITDA expected between $70.9 million and $73.8 million [10][25] Business Line Data and Key Metrics Changes - Home Health and Hospice segment revenue reached $173.6 million, a 27.9% increase, with adjusted EBITDA of $26.8 million, up 22.7% [12] - Senior Living segment revenue was $55.5 million, up 23.2% year-over-year, with adjusted EBITDA increasing 26.2% [15] - Same-store occupancy in senior living reached 81.8%, with all-store occupancy at 80.9% [15] Market Data and Key Metrics Changes - The average CMS reported star rating for home health was 4.1, compared to the industry average of three stars [12] - Potentially preventable hospitalizations decreased to 8.4%, below the national average of 9.9% [12] - Hospice quality composite score improved to 97%, exceeding the national average of 92% [12] Company Strategy and Development Direction - The company is focused on integrating the recently acquired UnitedHealth Amedisys operations and enhancing local leadership [5][33] - There is a strong emphasis on empowering local clinical leaders to drive operational success and improve clinical outcomes [9][12] - The company plans to continue pursuing acquisition opportunities in senior living and home health, maintaining a disciplined approach [23][60] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term value of home health services despite current regulatory uncertainties [19] - The company anticipates some lumpiness in results due to integration efforts but expects significant long-term potential from recent acquisitions [6][10] - Management highlighted the importance of local leadership and community engagement in driving operational success [9][48] Other Important Information - The company closed on a $100 million term loan to enhance balance sheet capacity [24] - The acquisition of UnitedHealth Amedisys included 54 locations with trailing 12-month revenues of $189.3 million [21] - The company is actively advocating against proposed regulatory changes that could negatively impact the industry [9][18] Q&A Session Summary Question: What are the top priorities for integration after the Amedisys transaction? - The focus is on identifying and elevating leaders, ensuring exceptional support for agencies, and developing a joint venture with the University of Tennessee [33][34] Question: How should we think about margins in senior living going forward? - As occupancy increases, there is an expectation for improved margins, with a focus on operational efficiency and revenue quality [38] Question: What dynamics are affecting margin guidance? - NCI growth and elevated G&A expenses are impacting EBITDA margins, with adjustments made for these factors [40][41] Question: What is driving the increase in hospice length of stay? - The increase reflects a return to pre-pandemic levels and improved identification of appropriate patients for hospice services [42][43] Question: How is the internal reception of the Amedisys assets? - Employees have shown excitement and commitment, with minimal turnover and strong performance during the transition [46][49] Question: What is the competitive landscape for senior living acquisitions? - There is increased activity in the senior living space, with a mix of opportunities within the company's target range [60][62]

Q3 2025 Performance Highlights - Consolidated net service revenue increased by 3.9% year-over-year to $263.6 million[19, 20] - Adjusted EBITDA grew by 10.2% year-over-year to $27.0 million, with an Adjusted EBITDA margin of 10.2%[19, 20] - Net income attributable to Enhabit, Inc was $11.1 million, a 110.1% increase compared to the previous year[19, 20] - Adjusted diluted EPS was $0.17, a 466.7% increase compared to the previous year[19, 20] Home Health Segment - Home health net service revenue was $200.5 million, a decrease of 0.2% year-over-year[19, 20] - Total admissions increased 3.6% year-over-year[18, 68] - Medicare admissions decreased by 5.1% year-over-year, while non-Medicare admissions increased by 10.4%[19, 68] - Cost per patient day improved by 2.1% year-over-year[19, 68] Hospice Segment - Hospice net service revenue increased by 20.0% year-over-year to $63.1 million[19, 20] - Adjusted EBITDA increased 72.0% year-over-year[19] - Average daily census grew by 12.6% year-over-year[18, 38] - Cost per patient day improved by 3.1% year-over-year[19, 44] Balance Sheet and Guidance - Reduced bank debt by $15.0 million in Q3, exiting with a 3.9x leverage ratio[19] - Total debt reduced by $100 million since Q4 2023[51] - Updated 2025 net service revenue guidance to $1.058 billion to $1.063 billion[56]

Financial Data and Key Metrics Changes - Total revenue for Q3 2025 was $362.3 million, a 25% increase from $289.8 million in Q3 2024 [6] - Adjusted earnings per share rose to $1.56, up 20% from $1.30 in the previous year [6] - Adjusted EBITDA increased by 31.6% to $45.1 million compared to $34.3 million in Q3 2024 [6][18] - Operating cash flow exceeded $50 million for the quarter, with cash on hand of approximately $102 million as of September 30, 2025 [6][25] - Net leverage was under one times adjusted EBITDA, providing flexibility for strategic acquisitions [6] Business Line Data and Key Metrics Changes - Personal Care segment revenues were $275.8 million, accounting for 76.1% of total revenue, with same-store revenue growth of 6.6% [21] - Hospice segment revenues increased by 19% year-over-year, with same-store average daily census rising to 3,872, up 9.5% from the previous year [13][20] - Home Health segment revenues were $17.6 million, representing 4.9% of total revenue, with a 2.8% decrease in same-store revenue compared to Q3 2024 [14][22] Market Data and Key Metrics Changes - Texas and Illinois announced rate increases for personal care services, with Texas effective October 1, 2025, and Illinois set for January 1, 2026 [8][19] - The hospice reimbursement rate update effective October 1, 2025, is expected to increase rates by approximately 3.1% [20] - Proposed home health payment rule indicates a 6.4% aggregate reduction in Medicare payments for 2026 [10] Company Strategy and Development Direction - The company continues to pursue strategic acquisitions to enhance geographic coverage and density, with recent acquisitions including Del Cielo Home Care Services [15][21] - Focus on maintaining a balanced approach to organic growth and acquisitions, particularly in overlapping markets for home health and hospice services [16][68] - Emphasis on the value of home-based care and the benefits of personal care services in reducing overall care costs [8][17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the growth potential in personal care services due to favorable rate increases and strong hiring trends [19][40] - The company anticipates continued organic growth momentum into 2026, supported by recent rate increases and hiring performance [41] - Management acknowledged challenges in the home health segment but remains focused on improving operational efficiencies and profitability [50][52] Other Important Information - The company reported a gross margin percentage of 32.2%, an increase from 31.8% in Q3 2024 [22] - Adjusted G&A expenses were 19.8%, a decrease from 20% in the prior year [23] - The company maintains a strong balance sheet with total bank debt of $154.3 million, down from the previous quarter [25] Q&A Session Summary Question: About same store volume growth in Personal Care - Management noted improvements in fill rates and billable hours, attributing part of the 6.6% same store revenue growth to these factors [28][33] Question: On cash flow and DSOs - Management indicated that fluctuations in DSOs are typical and attributed the strong cash flow to timing rather than specific changes in payer behavior [34] Question: Organic growth expectations for 2026 - Management expressed confidence in maintaining above 2% year-over-year volume growth, supported by strong hiring and rate increases [40][41] Question: Home health and hospice asset allocation - Management remains interested in home health acquisitions that complement existing personal care and hospice services, despite current market uncertainties [44] Question: Hospice revenue per patient day and Medicare cap dynamics - Management confirmed that the absence of cap liability this quarter positively impacted revenue per patient day, with expectations for similar dynamics in Q4 [104]

Financial Data and Key Metrics Changes - The company reported Q2 2025 revenue of $219.5 million, an increase of $50.8 million or 30.1% year-over-year, and adjusted EBITDA of $16.4 million, up $3.2 million or 24.5% from the prior year quarter [7][32][10] - GAAP diluted earnings per share for the quarter was $0.20, while adjusted diluted earnings per share was $0.27 [32] Business Line Data and Key Metrics Changes - In the Home Health and Hospice segment, revenue reached $166 million, an increase of $40.7 million or 32.5%, with adjusted EBITDA of $25.5 million, up $5.9 million or 29.9% year-over-year [15] - Hospice revenue was $73.8 million, an increase of $14.4 million or 24.3%, with hospice admissions up 14.7% and average daily census up 21.4% [16] - Home health revenue grew to $79.2 million, an increase of $17.6 million or 28.5%, with total home health admissions increasing 26.1% [19] - Senior Living segment revenue improved to $53.5 million, an increase of $10 million or 23.1%, with same store occupancy exceeding 80% [24][26] Market Data and Key Metrics Changes - The company anticipates full-year revenue in the range of $852.8 million to $887.6 million, with adjusted earnings per share expected between $1.09 and $1.15 [13][32] - The proposed 2026 Home Health Rule suggests a net reduction of 6.4% in aggregate payments to home health agencies, which could impact the company's revenue [21][22] Company Strategy and Development Direction - The company is focused on leadership development, clinical excellence, employee engagement, margin improvement, and growth as key focus areas for continuous improvement [7] - The acquisition of divested assets from Amedisys and UnitedHealth Group is seen as a significant opportunity to expand operations in attractive markets, particularly in Tennessee, Alabama, and Georgia [12][29] - The company is committed to adapting its operations to the changing regulatory environment and believes in the essential role of home health services in the healthcare continuum [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the proposed home health rule, stating it could negatively affect access to care for vulnerable patients and increase overall healthcare spending [22][23] - Despite challenges, management remains optimistic about the company's growth trajectory, citing strong performance across various segments and a healthy balance sheet [10][13] Other Important Information - The company has a strong focus on operational efficiency and has implemented various initiatives to improve clinical quality and financial performance [20][24] - The company is actively preparing for the integration of newly acquired assets and has invested in leadership and operational training to ensure a smooth transition [58][70] Q&A Session Summary Question: Insights on the Tennessee market and payer landscape - Management highlighted the unique opportunities in the Tennessee market, emphasizing the potential for building a care continuum and the presence of quality providers [41][43] Question: Impact of proposed clawback on capitated relationships - Management acknowledged that adjustments from Medicare rate changes could affect both traditional and capitated contracts, but emphasized the company's diversified business model [46][48] Question: Sustainability of revenue per occupied bed in senior living - Management indicated that while they anticipate mid-single-digit growth in revenue per occupied bed, they are encouraged by recent occupancy growth [54][56] Question: Preparations for the Amedisys acquisition - Management detailed investments in leadership and resources to ensure a successful transition and operational efficiency post-acquisition [57][58] Question: Balancing M&A versus market share growth amid regulatory changes - Management expressed confidence that disruptions in the market could create opportunities for growth, emphasizing a strategic approach to acquisitions [59][62]

Financial Performance - Total net service revenue increased by 2.1% year-over-year to $266.1 million in Q2 2025[20] - Hospice net service revenue increased significantly by 19.4% year-over-year to $60.2 million[20] - Net income attributable to Enhabit, Inc was $5.2 million, a substantial increase compared to a loss of $0.2 million in Q2 2024[19, 20] - Adjusted EBITDA increased by 6.7% year-over-year to $26.9 million, with an Adjusted EBITDA margin of 10.1%[19, 20] - Home health net service revenue decreased by 2.0% year-over-year to $205.9 million[19, 20] Operational Metrics - Home Health non-Medicare admissions increased by 5.2% year-over-year[18, 63] - Hospice average daily census (ADC) grew by 12.3% year-over-year[18, 40] - Home Health Medicare ADC decreased by 3.4% compared to a 14.1% decline in the corresponding 2024 period[28] Debt and Liquidity - Bank debt was reduced by $10.0 million in Q2 2025, and is $70.0 million lower than Q1 2024[19] - Total debt decreased from $515.4 million at the end of 2024 to $479.3 million as of June 30, 2025[53] - Available liquidity was $113.5 million as of June 30, 2025[53, 55] Guidance - Updated 2025 net service revenue guidance to $1.06 billion to $1.073 billion[56]

Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $349.4 million, an increase of 21.8% compared to $286.9 million in Q2 2024 [6] - Adjusted earnings per share rose to $1.49, up 10.4% from $1.35 in the previous year [6] - Adjusted EBITDA increased by 24.5% to $43.9 million from $35.3 million in Q2 2024 [6][20] - Cash on hand as of June 30, 2025, was approximately $91 million, with a reduction in bank debt by $30 million to a total of $173 million [6][28] Business Line Data and Key Metrics Changes - Personal Care segment revenues were $269.2 million, accounting for 77% of total revenue, with a same-store revenue growth of 7.4% [25][14] - Hospice segment revenues were $62.2 million, representing 17.8% of total revenue, with a same-store revenue growth of 10% [25][15] - Home Health segment revenues were $18 million, making up 5.2% of total revenue, with a same-store revenue decrease of 6% [25][16] Market Data and Key Metrics Changes - Illinois and Texas have finalized budget increases for personal care services, with Illinois set to increase reimbursement rates by 3.9% effective January 1, 2026, and Texas by 9.9% effective September 1, 2025 [10][22] - The Illinois rate increase is expected to add approximately $17.5 million in annualized revenue, while the Texas increase is projected to add about $17.7 million [10][22] Company Strategy and Development Direction - The company continues to focus on strategic acquisitions to enhance geographic coverage and clinical services, with the recent acquisition of Helping Hands Home Care in Pennsylvania [17][24] - The company aims to maintain a conservative net leverage position to pursue further acquisition opportunities [6][29] - The focus remains on organic growth complemented by acquisitions, particularly in personal care and hospice services [24][29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the reimbursement environment, noting strong support for personal care services from state budgets [33] - Concerns were raised about potential reductions in Medicare payments for home health services, which could impact availability and access to care [12][13] - The company believes that the value of home-based care will continue to be recognized, providing growth opportunities [18] Other Important Information - The company has experienced consistent cash collections and a reduction in bank debt, supporting its capital structure for future investments [28][29] - The adjusted net income per diluted share for Q2 2025 was $1.49, reflecting a solid financial performance [27] Q&A Session Summary Question: How is the overall reimbursement environment expected to unfold? - Management noted strong support from larger markets and expressed optimism about future rate increases, despite some states delaying discussions due to budget uncertainties [32][34] Question: What is driving the negative volumes in same-store census? - The decrease was attributed to the inclusion of New York in prior year comparisons, which has since been disposed of, and a sequential increase in same-store census was noted [35][36] Question: How is the caregiver application rollout impacting performance? - The caregiver application has seen good adoption in Illinois, with about 90% of caregivers registered, and is expected to improve fill rates and retention over time [42][45] Question: What is the impact of immigration policy changes on the workforce? - Currently, there is no significant impact observed, as the company has a small number of caregivers affected by immigration policies [51][52] Question: What are the expectations for hospice segment growth? - Long-term growth expectations for the hospice segment are projected to be in the 5% to 7% range, with recent operational improvements contributing to current growth [53][54] Question: What are the public advocacy priorities for the company? - The company is focused on advocating for the value of personal care services and addressing concerns regarding proposed Medicare payment reductions [81][84] Question: How are payer contracts evolving? - Discussions with payers are increasingly focused on driving volume into plans, with ongoing efforts to implement case rate or episodic payment structures in home health [85][86]

Core Insights - The Pennant Group, Inc. has acquired GrandCare Health Services, expanding its home health services in California [1][2] - The acquisition aims to enhance patient care through increased resources and expertise while maintaining continuity in service delivery [2][3] Company Overview - The Pennant Group operates independent subsidiaries providing healthcare services through home health and hospice agencies and senior living communities across multiple states [4] - GrandCare Health Services is a 5-star rated provider with over 20 years of experience, serving more than 6,000 patients annually, specializing in post-surgical rehabilitation and chronic disease management [5] Strategic Importance - The acquisition strengthens Pennant's presence in key California markets where it already has a significant senior living footprint [2][3] - The partnership is expected to build a continuum of care, enhancing the quality of home health services delivered to patients in Southern California [3] Leadership Statements - Pennant's CEO expressed enthusiasm about the acquisition, emphasizing the commitment to quality care and the integration of GrandCare's legacy with Pennant's resources [2][3] - GrandCare's leadership highlighted the alignment of values between the two organizations, focusing on empowering local teams and delivering high-quality clinical care [3] Transaction Support - Montauk AI acted as the placement agent for the acquisition, facilitating the transaction for GrandCare [3]

Summary of Enhabit (EHAB) FY Conference Call - June 10, 2025 Company Overview - **Company**: Enhabit (EHAB) - **Industry**: Home Health and Hospice Care Key Points Industry and Market Dynamics - The home health industry is experiencing mid-single-digit volume growth, with Medicare Advantage driving higher utilization compared to traditional Medicare, which is declining at approximately -4% [7][10] - The aging population is a significant factor fueling growth in home health services [7] - Enhabit has seen a decline in traditional Medicare volumes but is working to stabilize and improve this through strategic initiatives [10][35] Company Strategy and Performance - Enhabit has focused on payer innovation as a critical part of its strategy to be recognized as a full-service provider [3] - The company has made substantial investments in changing its case management clinical model for hospice, which has shown positive results in growth [4] - Enhabit aims to grow its payer innovation contracts, which have shown a year-over-year increase of approximately 15% [21] - The company has successfully renegotiated contracts with major national and regional payers, enhancing its full-service provider status [14] Financial Metrics and Projections - Enhabit reported a decline in fee-for-service volumes, improving from -13% to -7% year-over-year, with a target to further reduce this to -4% to -5% by the end of the year [35][38] - The company has a goal to maintain a Medicare revenue percentage in line with peers, currently at just under 57% [12] - The average daily census (ADC) for hospice is expected to continue growing due to improved case management and business development efforts [60] Cost Management and Efficiency - Home health cost per day increased by 1% in 2024, with a focus on managing costs through technology and optimizing visit utilization [68][70] - Hospice cost per day is projected to grow by 2% to 3%, reflecting market inflation and operational efficiencies [75] - General and administrative (G&A) costs have been effectively managed, running slightly below the target range of $27 million to $28 million per quarter [76] Regulatory and Reimbursement Environment - Enhabit is advocating for better reimbursement rates from CMS, emphasizing the need for all-payer margin analysis rather than just Medicare margins [49][50] - The company is preparing for potential clawbacks and is actively engaging with MedPAC to address reimbursement challenges [53][54] Future Outlook - Enhabit plans to continue expanding its hospice services, with a focus on early patient acceptance and education for referral sources [57][64] - The company is targeting approximately 10 new sites annually, with a focus on hospice, which is expected to contribute to overall revenue growth [61] - Enhabit aims to leverage best practices from successful markets to enhance performance across its portfolio [39] Additional Insights - The company is focused on maintaining high-quality care while managing costs effectively, ensuring a balanced approach to patient care and operational efficiency [73] - Enhabit is committed to strategic growth through organic means, de novo expansions, and potential M&A opportunities, particularly in the hospice sector [62] This summary encapsulates the key insights and strategic directions discussed during the Enhabit FY Conference Call, highlighting the company's performance, market dynamics, and future growth strategies.