Addus(ADUS)2024-11-05 18:26Financial Data and Key Metrics - Total revenue for Q3 2024 was 270.7 million in Q3 2023 [10] - Adjusted earnings per share (EPS) for Q3 2024 was 1.15 in Q3 2023 [10] - Adjusted EBITDA for Q3 2024 was 30.9 million in Q3 2023 [10] - Cash on hand at the end of Q3 2024 was approximately 215.4 million, representing 74.3% of total revenue [46] - Same-store revenue growth for Personal Care was 6.8% compared to Q3 2023 [23] - Same-store hours increased by 0.6% in Q3 2024 compared to Q3 2023 [24] - Hiring rate in Personal Care remained strong at 79 hires per business day in Q3 2024 [17] - Illinois will enact a 5.5% reimbursement rate increase for Personal Care services effective January 1, 2025, expected to generate 57.3 million, representing 19.8% of total revenue [46] - Same-store revenue growth for Hospice was 3.5% compared to Q3 2023 [25] - Average daily census increased by 2.1% compared to Q3 2023 [25] - Medicare hospice reimbursement increased by 2.9% effective October 1, 2024, expected to add 17 million, representing 5.9% of total revenue [46] - Same-store revenue for Home Health decreased by 1.7% compared to Q3 2023 [27] - The segment is undergoing operational changes, including standardized intake and scheduling processes, expected to improve referral conversion rates and reduce administrative costs [27] Market and Strategic Developments - The company is in the process of acquiring Gentiva Personal Care, which is expected to close in Q4 2024 and add 3.2 million in ARPA funding in Q3 2024 and utilized 13 million in accessible funds [18] - Days Sales Outstanding (DSO) improved to 31.7 days at the end of Q3 2024, down from 36 days in Q2 2024 [60] - Net cash flow from operations in Q3 2024 was 9.7 million [61] - The company amended its credit agreement, increasing the revolving credit facility from 650 million and extending the maturity date to July 2028 [63] Q&A Session Summary Question: Margin Direction and G&A Expenses [66] - Management confirmed that gross margin is expected to increase by 190 basis points sequentially, with 150 basis points from the New York divestiture and 40 basis points from hospice reimbursement updates [66] - Adjusted G&A expenses are expected to increase by approximately 60 basis points due to the New York divestiture [56] Question: Gentiva Acquisition and Future Acquisitions [68][69] - Management is optimistic about the growth potential of the Gentiva acquisition, particularly in Texas, which represents over 80% of the acquired business [69] - The company remains open to further acquisitions, particularly in Personal Care and Home Health, and has strengthened its balance sheet to support future deals [71] Question: Organic Census Growth and Medicaid Re-determination [75][76] - The Medicaid re-determination process has slowed new client approvals, but management expects the process to be completed by the end of Q4 2024, leading to a return to target same-store hours growth of 2% [76] Question: Hospice Admissions and Growth Outlook [79][80] - Hospice admissions have declined, but management has made leadership changes and is optimistic about improving admissions trends in 2025 [80] Question: Reimbursement Environment in New States [82][83] - The reimbursement environment in Missouri is solid, while North Carolina offers a small but high-margin case management business [83] Question: Policy Proposals and Election Impact [86][87] - Management does not expect the proposed federal minimum wage increase to have a material impact on the company, as wages in Texas are already above the federal rate [87] - The company views potential Medicare expansion for Personal Care services as a positive development, though details remain unclear [88] Question: Operating Cash Flow in Q4 [92] - Management expects the $9.7 million one-time working capital benefit in Q3 to reverse in Q4, but no other significant impacts on operating cash flow are anticipated [92] Question: Value-Based Care and Gentiva Acquisition [107][108] - The Gentiva acquisition will enhance the company's ability to pursue value-based care contracts, particularly in Texas, though the revenue impact is expected to be immaterial [108] Question: Wage Inflation and Unit Cost Outlook [111][112] - Wage inflation in Personal Care has been offset by rate increases, while wage inflation in Clinical services has improved to 3%-4% [112][113] Question: Hospice Length of Stay Trends [115][116] - Hospice length of stay has stabilized post-COVID, with current levels considered normalized [116] Question: PCS Rate Environment and Election Impact [120][121] - Management expects rate increases to moderate over the next few years, with a return to historical norms of 3%-5% growth [121] Question: Gentiva Seasonality and Technology Integration [122][123] - The Gentiva acquisition is not expected to introduce significant seasonality, and the company plans to integrate its payroll system and caregiver app quickly [123] Question: Hospice Competitive Dynamics [126] - Management is optimistic about improving hospice same-store growth, driven by new sales leadership and operational changes [126] Question: Home Health Same-Store Growth [128] - Excluding markets undergoing operational changes, Home Health same-store growth would have been in the 2%-3% range [128]