Addus HomeCare Corp Q3 FY2024 earnings call

• Total revenue for Q3 2024 was $289.8 million, a 7% increase from Q3 2023. Adjusted earnings per share were $1.30, up 13% from Q3 2023. Adjusted EBITDA was $34.3 million, a 11.1% increase from Q3 2023.
• Announced acquisition of Gentiva Personal Care operation, expected to close in Q4 2024. This will make Addus the largest personal care services provider in Texas and strengthen presence in other states.
• In Personal Care segment, 79 hires per business day in Q3 2024, with low turnover rates. Utilized $2.5 million of $3.2 million ARPA funding received in Q3 2024.
• Illinois will enact a 5.5% increase in personal care services effective January 1, 2025. Medicare hospice reimbursement increased by ~2.9% effective October 1, 2024.
• Same-store revenue growth for Personal Care was 6.8%, Hospice was 3.5%, and Home Health was -1.7%. Actions taken to improve Hospice admissions and Home Health process changes.

For the third quarter of 2024, total net service revenues were $289.8 million. The revenue breakdown was as follows: Personal Care segment generated $215.4 million, which is 74.3% of total revenue. Hospice care segment had revenues of $57.3 million, accounting for 19.8% of total revenue. Home Health segment contributed $17 million, making up 5.9% of total revenue. For the Personal Care segment, same-store revenue growth was 6.8% compared to the third quarter of 2023. The Hospice segment saw a 3.5% increase in same-store revenue and a 2.1% increase in same-store average daily census. The Home Health segment experienced a 1.7% decrease in same-store revenue.

• Expect Gentiva acquisition to close in Q4 2024.
• Illinois rate increase will positively impact personal care performance in 2025, generating ~$23 million in annualized revenue.
• Gross margin percentage expected to expand sequentially by ~190 basis points in Q4 2024 from hospice reimbursement update and New York divestiture.
• Adjusted EBITDA margin expected to have a positive impact of ~90 basis points from New York divestiture starting in Q4 2024.
• Continued focus on identifying acquisitions that align with strategy to meet 10% minimum annual revenue growth goal.

• Medicaid re-determination process slowed approval of new personal care clients in Q3 2024.
• CMS continues to pursue reimbursement reductions from home health providers, limiting patient access.
• Potential impact of proposed federal minimum wage increase, though not material currently.
• Payer friction around approvals and prior authorizations, though not a major factor currently.

Q: Clarify margin direction sequentially.

A: Combined, gross margin will expand by ~190 basis points from hospice and New York divestiture. Bottom-line margin expected to have a net 90 basis points positive impact from New York divestiture.

Q: Thoughts on Gentiva acquisition growth and appetite for further acquisitions.

A: Excited about Gentiva acquisition, ability to drive growth in Texas and other markets. Appetite remains strong for acquisitions that meet strategic direction and are accretive to shareholders.

Q: Organic census growth and confidence in reaccelerating to 2% growth.

A: New York is excluded from same-store growth numbers. Re-determination process expected to be completed by end of Q4 2024, and steady improvement expected to lead to 2% growth in 2025.

Q: Potential impact of proposed federal minimum wage increase and Medicare expansion on strategy.

A: Minimum wage increase not material currently. Medicare expansion is positive, and would lead to increased investment in clinical businesses like home health if implemented.

Q: Operating cash flow in Q4 2024.

A: Expect a reversal of the $9.7 million one-time working capital benefit from Q3 2024, but no other material impacts expected.

Q: Payer friction and value-based care with Gentiva acquisition.

A: No major changes in payer relationships for Personal Care. Value-based care helps solidify relationships with payers by proving ability to reduce overall costs.

Q: Hospice competitive dynamics and Home Health same-store growth.

A: Optimistic about Hospice same-store ADC growth continuing to improve with new sales leadership. Home Health same-store growth expected to improve once process changes are complete.