Addus HomeCare Corporation

Good day, and thank you for standing by. Welcome to the Addis Home Care Corps Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to Drew Anderson. Please go ahead.

Good morning, and welcome to the Addis Home Care Corporation second quarter 2021 earnings conference call. Today's call is being recorded. To the extent any non-GAAP financial measure is discussed in today's call, you will also find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP. by going to the company's website and reviewing yesterday's news release. This conference call may also contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Addis' expected quarterly and annual financial performance for 2021 or beyond. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, discussions of forecasts, estimates, targets, plans, beliefs, expectations, and the like are intended to identify forward-looking statements. You are hereby cautioned that these statements may be affected by important factors, among others, set forth in ADIS filings with the Securities and Exchange Commission and in its second quarter 2021 news release. Consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. At this time, I would like to turn the call over to the company's chairman and chief executive officer, Mr. Dirk Allison. Please go ahead, sir.

Thank you, Drew. Good morning, and thank you for joining us for our 2021 second quarter earnings call. With me today are Brian Popp, our chief financial officer, and Brad Bickham, our president and chief operating officer. As usual, I will begin with some overall comments, and then Brian will discuss the second quarter results in more detail. Following our comments, we'd be happy to respond to any questions. Yesterday, we announced our financial results for the second quarter of 2021. We continue to be proud of our solid operating performance as we have started to see our markets return to a more normal environment. Our revenue for the second quarter of 2021 was $217.9 million as compared to $184.6 million for the second quarter of 2020, an increase of 18.1%. Adjusted earnings per diluted share for the second quarter of 2021 was 90 cents, as compared to 73 cents for the second quarter of 2020, an increase of 23.3%. Our adjusted EBITDA for the second quarter of 2021 was $24.3 million, as compared to $18.7 million for the second quarter of 2020, an increase of 30.1%. During the second quarter, we started to see the positive effect of $350 billion in state aid, which came from the federal stimulus plan. Our states have done a nice job in maintaining, or in some cases, increasing receivable payments to Addis, leading to a very nice cash flow for the quarter and a cash balance at June 30 of approximately $139 million. Our largest state, Illinois, as scheduled, increased their statewide reimbursement rate on April 1st to cover the minimum wage increase which was effective in Chicago on July 1 of last year. In addition, the state made this rate increase retroactive to January 1, 2021, for the approximate 60% of our business, which is reimbursed directly by the state as opposed to through MCOs. As we discussed on previous earning calls, the minimum wage increases planned for Chicago have now come to an end. The final Chicago minimum wage increase of $1 per hour, which takes the city's minimum wage to $15, was effective on July 1st, 2021. In the state of Illinois budget for fiscal 2022, the state has budgeted to offset this recent July 1st 2021 Chicago minimum wage increase with an additional statewide reimbursement rate increase, which was originally to be effective January 1st, 2022. However, with the receipt of the additional 10% FMAT, which is currently in place from the earlier mentioned stimulus bill, the state has now requested approval from the federal government to accelerate this rate increase by two months making it effective on November 1st, 2021. We are grateful for this consideration by the state and expect approval from the federal government in the next few weeks. We are hopeful that other states will consider similar requests for use of the additional federal funding. As for our New York CDPAT business, which was discussed on our last call, we continue to await word on our formal protest concerning our non-award in the provider selection process for the CDPAP program. We anticipate hearing something from the state concerning this protest over the next few months. In the meantime, we did file our response to the state survey, which was created by the state to consider additional awards to providers for this program. While we have no knowledge of when there will be a decision on additional awards, the state recently provided a timeline stating that new contracts for winners of this program will not be effective until November 1st, 2021 at the earliest. We continue to believe any changes that will affect Addis will most likely be in 2022. With most of our locations returning to a more normal operating environment, we're starting to see improvements in our same store revenue. Our same store revenue growth for our personal care segment increased as expected for the past quarter, partially due to the Illinois rate increase, but also due to increasing volumes. For the second quarter of 2021, our personal care same store revenue growth was 7.4% when compared to the second quarter of 2020. Our previously announced same store revenue growth for personal care for our first quarter of this year was 2.4%. However, adjusted for the recently announced Illinois retro payment for our direct state business, we would have experienced a 4.4% growth rate, which is the upper end of our normal 3 to 5% target. We continue to be very pleased with the performance of this segment of our business in spite of the challenges we have faced over the last several quarters due to the pandemic. Our ability to hire caregivers in our personal care segment is also seeing improvements. Our personal caregiver hires in our second quarter were approximately equal to the rate we were able to hire in our previous quarter, which was a marked improvement over the last six months of 2020. While hiring continues to be a challenge for our team, we are pleased that we are making progress in this area with June being our highest hiring quarter months so far in 2021. As for our home health segment, our same-store revenue growth was 24.7% as compared to the second quarter of 2020 and up from the flat year-over-year growth we saw in the first quarter of this year. Since the beginning of 2021, our home health admissions have increased steadily with this favorable trend continuing throughout our second quarter and into July. A few weeks ago, we announced the pending acquisition of Armada Home Health and Hospice. Effective August 1st, we closed on this transaction, which more than doubled our revenues from our home health segment. This acquisition helps to give us the increased coverage for our home health to capitalize on our strategy of fully covering the state of New Mexico with all three levels of home care that we offer. We are excited about the Armada team joining our company, and I want to welcome each of them to Addis. For the second quarter of 2021, our hospice same store revenue decreased 8.4%, similar to the first quarter of this year. However, we did see the same store admission grow 12% over the second quarter of 2020, which should lead to higher census as the year progresses. While ADC has not yet returned to where we would like it to be, We did see nice growth in our ADC during July. At the end of July, our census was over 2,550, which is the highest census we have seen in many months. Our median length of stay, which was 17 days in our first quarter of 2021, continues to improve with a medium length of stay in our second quarter of 2021 increasing to 19 days and our July medium length of stay reaching 21 days. Our Queen City operation in Ohio has grown from 890 at the time of acquisition to over 1,000 in July, maintaining the positive momentum experienced in 2021. We are also excited to see our other hospice markets, including New Mexico, continue to make progress towards our growth expectations. As you saw with our Armada acquisition, we continue to focus on acquisitions which meet our goal of creating multiple markets of scale where we provide all three levels of home care. For 2021, our focus has primarily been in the personal care and home health segments of our business. However, we will continue to look at strategic opportunities in all three segments. As we announced yesterday, we closed on a new $600 million revolving credit facility. We are excited to complete this process and are grateful to our bank partners who stepped forward to support Addis. With our continued strong liquidity position, we have the ability and the desire to close additional strategic acquisitions during the next several months. With the increasing focus on home care services as a result of the pandemic, the acquisition landscape remains very competitive, particularly for clinical service providers of scale. As we have demonstrated over the past few years, we will continue to focus on our strategy to pursue transactions that are accretive and that will bring revenue and operating synergies to Addis. While conditions related to the COVID-19 pandemic have improved in recent months in the United States, as vaccinations have become more widely available, it continues to be impossible to predict the effect and ultimate impact of this pandemic on Addis as the situation continues to evolve. Our team is continuing to monitor the COVID Delta variant and the recent uptick in COVID cases. This past 15 months have shown the value of taking care of elderly and disabled consumers and patients in their homes. And as such, we have invested in planning, preparation, and materials to assist us in fulfilling our role as we monitor these developments. We firmly believe that the pandemic has raised awareness for the value of our industry the value our industry provides and will continue to be an opportunity for growth for our company. However, our operations and resulting growth are dependent on our dedicated caregivers who work so hard providing outstanding care and support to our consumers, patients, and their families. I am thankful for each of our team members and am proud of the job they have done the past 15 months and continue to do each day. It is important that each of us focus on achieving our mission by putting our patients first. With that, let me turn the call over to Brian.