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Operator
Now let me discuss our same-store revenue growth for the fourth quarter of 2021. Our same-store revenue growth for our personal care segment exclusive of the New York CDPAP program was 8% when compared to the fourth quarter of 2020. This growth includes the Illinois rate increase we received starting November 1st, 2021. However, as I previously mentioned, Our same store growth in personal care hours was impacted by our quarantine levels, as well as to an increase in the turnover we saw with our market level service coordinators. These are the team members who help schedule hours to be served, as well as help to onboard new caregivers. This turnover for this position has increased over the past several months as we have experienced issues with both the Delta and Omicron variant of COVID, as well as the general labor market challenges. We are optimistic that we will see our hours return to more normal levels of growth as the current wave of the virus continues to decrease and our service coordinator turnover returns to our historical levels. Turning to our clinical care operations, our home health segment continued its strong performance. During our fourth quarter of 2021, our same store revenue growth was 7.1% as we continue to see strong volume growth in this segment. Although we did see an Omicron-related impact on volumes late in December and into January as some acute care facilities limited elective procedures. However, since the beginning of 2021, our home health admissions have increased steadily and with favorable, our overall favorable trend continuing through most of the fourth quarter. As we have been saying over the past year, we are excited about our home health operation and we'll continue to focus our efforts on expanding these services. As we have anticipated, our hospice same store revenue increased 1.3% over a strong fourth quarter in 2020, the first year over year revenue growth in our hospice segment since mid 2020. As we saw in the third quarter of this year, our same store admissions continue to improve over the prior year, growing 1.4% over the fourth quarter of 2020. Although we did see a decline sequentially due primarily to expected seasonality during the holiday season and to a lesser extent the onset of Omicron in December. We continue to make progress with our median length of stay, improving to 22 days in the fourth quarter of 2021 as compared to 15 days in January 2021. Overall, our hospice ADC increased to 2,635 for the fourth quarter of 2021, as compared to an ADC of 2,492 for the fourth quarter of 2020, inclusive of our Queen City acquisition completed during the fourth quarter of 2020. Let me update you on the status of our vaccine progress. As many of you know, the federal government has passed a mandate that all healthcare employees whose businesses operate under a condition of participation with Medicare or Medicaid must be vaccinated. This vaccination mandate covers our home health and hospice segments. In addition, New York, Delaware, and the city of Philadelphia have mandated that all healthcare companies, including personal care, must ensure that their employees in those markets are vaccinated. although most have exempted non-clinical caregivers from their state mandates. These various city, state, and federal mandates make it imperative that we continue to focus on getting as many of our employees vaccinated as possible. While Addis has not mandated vaccine for our employees, we have continued to take steps to encourage and incentivize our employees to get the COVID vaccine, and we are pleased with the progress we are seeing. Overall, our confirmed vaccination percentages, including employees with approved exemptions, are 99% vaccinated in home health, 99% vaccinated in hospice, and 72% vaccinated for personal care with a compliance rate between 95 and 100% in personal care markets with a currently applicable mandate. We will continue our efforts to encourage our employees to get vaccinated so that we will be well positioned to adhere to any future mandate implementations as they may occur. As we have discussed on our last few calls, we continue to await a decision on any additional awards or responses to our appeal in the New York CDPAP program. Based on the uncertainty associated with this RFP process, we have stopped accepting most new referrals for this New York program. Both as a result of the COVID impact and our intentional approach to reducing New York CDPAP admissions over the past 12 months, we have seen our run rate revenue in this low margin program decrease from an annualized run rate of approximately $52 million as of the fourth quarter of 2020 to approximately $42 million as of the end of our fourth quarter 2021. We expect our revenues from New York CDPAP to continue climbing in the absence of new developments or information as we continue to limit new referrals. However, we are pleased that the Governor of New York has included in her budget proposal for the coming fiscal year a rollback in the 1.5% Medicaid reduction we saw last year. In addition, she has In addition, she has proposed increasing Medicare rates by an additional 1%. If passed into law, these rate increases will strengthen the rest of our New York business. We are pleased that during the fourth quarter, we closed on our acquisition of Summit Home Health, a Medicare certified home health provider in Illinois, which allows us to provide skilled home health services in the state with our largest personal care operation. In December, we announced our agreement to acquire JourneyCare Hospice, a not-for-profit hospice with an excellent clinical reputation and one of the largest hospice service operations in the Chicago metro area. With this acquisition, we will provide all three service lines in our Illinois market. This transaction closed on February 1, 2022. Currently, we are in the early stages of the integration of JourneyCare into Addis and we are pleased with our progress. We are excited to have both the Summit Home Health and JourneyCare as part of our Addis family, and I want to again welcome both teams to Addis. Both Summit Home Health and JourneyCare are examples of acquisitions which align with our goal of creating markets where we provide all three levels of home care. We will continue to look at opportunities in all three segments with a focus on acquiring clinical services capabilities in markets where we currently have strong personal care coverage, furthering our strategy of developing states with coverage of all three levels of home care. The COVID pandemic has affirmed the value of taking care of elderly and disabled consumers and patients in their homes. Home is not only one of the safest and most cost-effective places for them to receive care, but it's also the place where most elderly individuals prefer to be. Over the past two years, we have continued to invest in planning, preparation, and materials to assist us in safely and effectively fulfilling our role as an important caregiver, allowing these consumers and patients their wish to stay at home. We believe that this heightened awareness of our value of home-based care is favorable for our industry and will continue to be a growth opportunity for our companies. We also understand and appreciate that our operations and 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 in the past and continue to do each day. It is important that we all focus on achieving our mission by putting our patients first. With that, let me turn the call over to Brian.
Brian
Thank you, Derek, and good morning, everyone. Addis had a solid financial performance for the fourth quarter, continuing our record of delivering consistent profitable growth for 2021. Our results reflect positive trends in all three segments and the benefit of the advanced Illinois rate increase for personal care. We are encouraged by the continued improvement in hospice care with a return to positive same-store revenues and continued sequential improvement in average daily census, median length of stay, and patient days. While our median length of stay for hospice segment has not fully returned to pre-pandemic levels, we are optimistic this trend will continue to improve in 2022. With the impact of the recent Omicron wave that peaked in January, we anticipate our first quarter revenues to be negatively impacted by employee quarantine, but believe our track record of managing through the pandemic reflects our ability to adapt to the ever-changing environment, and we expect to continue to produce strong operating results in 2022. As Dirk noted, total net service revenues for the fourth quarter were $224.6 million, an increase sequentially from $216.7 million in the third quarter. Full year 2021 revenues were $864.5 million, up from $764.8 million in the prior year. The revenue breakdown for the fourth quarter is as follows. Personal care revenues were $175.1 million, or 78% of revenue, which benefited both from the November 1, 2021 statewide rate increase in Illinois, as well as a retroactive rate increase for Illinois managed care organizations related to the January to March 2021 timeframe. We had previously received a rate increase for this period for all programs reimbursed directly by the state. Hospice care revenues were $40.2 million, or 17.9% of revenues. These results include the addition of Queen City Hospice, which closed at the end of 2020, and the Hospice Division of Armada, which closed on August 1, 2021. Home health revenues were $9.4 million, or 4.2% of revenue. These results include the operations of two acquisitions, the Home Health Division of Armada and Summit Home Health, which closed October 1, 2021. In addition to our strong organic growth, we added approximately $30 million in acquired revenues in 2021, and another $55 million so far in 2022 from our recently closed JourneyCare acquisition. We look forward to seeing the incremental contribution to both revenue and earnings as we integrate JourneyCare into our operations over the next several months, and we'll continue to evaluate and pursue other acquisition opportunities that meet our strategic criteria. Other financial results for the fourth quarter of 2021 include the following. Our gross margin percentage was 32.4%, an increase from 30.2% for the fourth quarter last year and up sequentially from 30.9% in the third quarter. The year-over-year increase is largely attributable to our higher mix of clinical services, and we benefited sequentially from the Illinois rate increase to offset the previous minimum wage increase in Chicago. As we have seen traditionally, we expect our first quarter gross margin to be impacted negatively by approximately 100 basis points as our unemployment tax base resets for the new year. G&A expense was 22.1% of revenue, slightly lower than 22.6% of revenue a year ago with lower acquisition-related expenses. Adjusted G&A expense was 20.1% of revenue, up slightly from 19.5% of revenue in the fourth quarter of 2020, primarily due to our higher mix of clinical services with a higher GNA profile. With the addition of JourneyCare's operations in the first quarter, we expect to see our GNA percentage of revenue increase slightly over historical levels as our clinical business continues to grow. The company's adjusted EBITDA increased to $26.7 million for the fourth quarter of 2021, compared to $20.9 million from the same period in the prior year, and was $97.7 million for the full year 2021, which was an increase from $76.9 million in the prior year. Adjusted EBITDA margin in the fourth quarter of 11.9% was an increase from 10.7% in the fourth quarter of 2020, and an increase sequentially from 11.5% in the third quarter. For the full year 2021, our adjusted EBITDA margin was 11.3%, up from 10.1% for the full year 2020. Adjusted net income per diluted share for the fourth quarter was 97 cents. The adjusted per share results for the fourth quarter of 2021 exclude the following. The favorable impact of the retroactive Illinois MCO rate increase of 5 cents, acquisition de novo expenses of 9 cents, restructure and other non-recurring costs of 1 cent, and stock-based compensation expense of 11 cents. The adjusted per share results for the fourth quarter of 2020 excluded the following. COVID-19 expense of one cent, acquisition de novo expenses of 15 cents, restructure and other non-recurring costs of three cents, and non-cash stock-based compensation of 10 cents. Our tax rate for the fourth quarter of 2021 was 26.7%. For calendar 2022, we expect our tax rate to remain in the 25 to 27% range, slightly higher than in prior years. ESOs were 53.9 days at the end of the fourth quarter of 2021, fairly consistent with 52.9 days at the end of the third quarter. We continue to see strong collections from a majority of our payers and expect this trend to continue as a majority of states where we operate currently have budget surpluses. We continue to see very strong cash flow trends with our fourth quarter net cash provided by operations totaling $25.2 million. Exclusive of payments utilizing previously received government stimulus funds and the partial repayment of our deferred payroll taxes, our net cash provided by operations would have been $28.7 million for the fourth quarter and $67.4 million for the full year 2021. As of December 31, 2021, the company had cash on hand of $168.9 million, $224.9 million in bank debt, and capacity and availability of $376.6 million and $143.6 million, respectively, under our revolver. As you can see, we've remained well capitalized and focused on maintaining a strong financial position in order to pursue our acquisition strategy as we enter the new year. This concludes our prepared comments this morning. I want to thank you for being with us. I'll now ask the operator to please open the line for your questions.
Derek
At this time, if you would like to ask a question, please press star 1 on your telephone keypad. Again, that is star 1 on your telephone keypad. Your first question comes from the line of Scott Fidel from Stephens. Your line is open. Scott Fidel, your line is open. You may answer your question.
Scott Fidel
Oh, sorry about that. I was on mute there. Good morning. First question, just understanding that you don't provide formal guidance and appreciate some of the qualitative commentary that you did give, but just give a few of the different moving pieces that you talked about, you know, in the first quarter, and then into the second quarter with the impacts from Omicron, you know, clearly being more weighted to January but having a significant impact, but then also having the JourneyCare acquisition coming online as well. You know, maybe if you could just talk to either directionally or to the level of detail you're willing to give us, you know, thinking about how those revenue trends, you know, overall could evolve in the first quarter relative to the fourth quarter and then maybe thinking about it. appropriate run rate maybe as we get to the second quarter where the impacts from Omicron will obviously be much less significant.
Brian
Yes, Scott, this is Brian. I think our expectation just looking at Q4 going into Q1 and the impacts of Omicron that we've seen to date, again, not having full visibility yet into February and March, obviously, but I think our expectation with the impact we've seen from quarantines and those pressures early this year is is outside of the JourneyCare acquisition, I think our expectation is we should see revenue sequentially probably see 2.5% to 3% reduction from Q4 into Q1. It's probably a pretty good proxy for our expectation, and I think JourneyCare coming on board February 1st will be additive to that. I think, as you recall from our prior conversations, JourneyCare is about $55 million in annualized revenue. We're going to be spending probably six to nine months really integrating that, and keep in mind that was a not-for-profit project organization, so we'll be making some adjustments there. So our expectation is really not to see any real meaningful earnings for the first six to nine months. So, you know, let's see some revenue impact in Q1, but not really much as a way as earnings until we get those integration processes well underway.
Scott Fidel
Okay. Appreciate that. And then maybe similarly just on the personal care dynamics, obviously you had a strong print there in the 4Q. for the same store with the benefit of the Illinois rate increase. Any sort of framing that you'd want to give us in terms of how you're thinking about same store growth for personal care? Obviously, you did give us that detail on some of the impact of the hours in January from the caregiver quarantines. But as we think out more over the full year, you know, how you're thinking about same-store growth for personal care against the long-term 3% to 5% target.
Brian
Yeah, I still think, obviously, we've benefited the last couple of years from nice rate increases that have kept us above that 3% to 5%. I don't think our expectation, you know, we got this rate increase in Illinois that will bake in for the first part of 22%, but I think, you know, outside of impact from, you know, any kind of additional COVID waves or volume pressures from that regard, you know, our expectation is still 3% to 5%. organic and personal care. So I think volume is going to be a key for us this year. I think we've got several things we're doing in the labor market, but we've made some adjustments to how we're onboarding employees, et cetera. So if we can get the right amount of folks coming on board with us, and we mentioned, Dirk mentioned his script, our hiring numbers are looking pretty good into February. We still think 3% to 5% is the right way to think about long-term organic growth and personal care.
Scott Fidel
Got it. And just one last quick one for me. Brian, do you have any thoughts on operating cash flow expectation for 2022 relative to 2021? And that's it for me. Thanks.
Brian
Yeah, I think 2021 was a good proxy. If you look at our net cash flow provided kind of compared to EBITDA, we run right at 69, close to 70% conversion. I think with the way we've seen our payment trends from our payers over the last couple years have been pretty steady, so our expectation will be a similar profile in 2022.
Derek
And your next question comes from the line of Brian Tankelit from Jefferies. Your line is open.
Brian Tankelit
Hey, good morning, guys. Just a few quick questions for me. I guess, Dirk, as I think about the inflationary environment that we live in today, we're talking a lot about labor, but how are you guys thinking of or what are you hearing from your clients in terms of the ability of the states or willingness of the states to raise rates to match broader inflation right now?
Operator
You know, I'll tell you, this is probably – Interesting enough, one of the strongest markets we have with our states, I think with all the help they've received from the federal government, we're seeing a number of states either consider raising rates and allow us to pass that through somewhat to our caregivers so that we can help with recruiting, or to cover costs that we previously incurred as we tried to keep people employed and meet the markets that are out there. So I'd say we're very comfortable and competent in our states today. You know, with this 10% money that's out there, a lot of them are looking at new ways to use that money over the next year or two. And so we're excited to see those programs come about over the next few months. So we're pretty comfortable right now with where we sit.
Brian Tankelit
Got it. And then just to follow up, the M&A environment, what are you seeing out there in terms of competition for deals or Anything you can share with us in terms of the pipeline of acquisition opportunities that you're looking at today?
Brian
Yeah, Brian, I don't think we've seen any increased competition per se. I think, you know, what we are hearing is maybe there are some folks with Omicron pressure, you know, wanting to kind of hold off and then come out on the other side of that. But no real change from our perspective whatsoever. You know, I think, you know, from a multiple standpoint, you know, we think there could be some compression with the current environment. But otherwise, we're pretty focused strategically on still looking for things that are good fits for us, either in additive to personal care or adding clinical services in our key markets. I think that'll be still a consistent focus for us this year.
Brian Tankelit
Got it. And then, Brian, one last question for me, just modeling. Any comment you can make on the tax rate and Any other call-outs you want us to think about as we model for 2022 and 2023? Next.
Brian
Yeah, I think on tax rate, I think our expectation is we'll be probably in that 25% to 27% range. I think in prior years, we've seen it be a little bit lower. Part of that is the benefit is our stock price is appreciated. We get some benefit from that. We don't really, where we are trading today, not expecting to see that probably continue. So I would expect to see us in 25% to 27% range for this year.
Derek
Awesome. Thank you. Your next question comes from the line of Matt Leroux from William Blair. Your line is open.
Matt Leroux
Hi. Good morning. A couple things on labor. One, I was curious if you tracked any metrics in personal care, like the time from interview to first paycheck, and how that has trended and maybe how you've been working to improve that. And then you alluded to some turnover, I think, more on the administrative side. So I was curious if you could quantify that at all and maybe indicate how that's stabilized since the Omicron service got done.
spk01
Yeah, this is Brad. With respect to tracking the metrics from basically application to hire, we do track that. Now, there are some things that kind of weigh into that that are state-specific regarding kind of background checks and timing there. So I will say when you have a virus surge, you have a little bit of delays in hiring just because kind of folks on the other side that we rely on to kind of push through background checks and that sort of thing. They struggle a little bit. But that is an area I will tell you that we are getting even more focused on. We're actually looking to add some additional IT resources to better track those metrics. So that is certainly an emphasis for us. With respect to service coordinators, as we mentioned, as Dirk mentioned in his comments, you know, we did see a tick up in... turnover with service coordinators. You know, I think we've taken some steps recently. We've got, you know, merit increases that are going out that should help stabilize some of that workforce. We have added additional recruiting resources, primarily on the clinical side, but also some on the kind of admin side, if you will. And I think a lot of that on the service coordinator side Turnover, you know, some of it is tight labor market. They have options out there. I think some of it was just kind of COVID fatigue with some of those individuals. We've asked a lot of them over this past year. And, you know, I think it kind of caught up with some of them. But, you know, I'm seeing, you know, a light at the end of the tunnel that we're making some progress filling those positions. We certainly have some initiatives out there to work on, you know, getting that turnover rate back down to where it was kind of pre-COVID.
Matt Leroux
Okay. And then just thinking about, again, that sort of that target growth range moving forward, I think the last two years, you know, organic billable hours have actually been down, I think, for the first time, at least since I've been following the company. And I'm sure, you know, mostly related to the COVID surges we've had in limited capacity. But obviously that's been aided by strong reimbursement. So I guess as we think about 22, 23 moving forward, Are there any items to call out from a reimbursement perspective that you haven't already discussed, maybe on a state-specific level? And should we be assuming that that organic billable hour metric starts to flip back positive moving forward?
spk01
Yeah, I think when you look at some of the potential tailwinds on the reimbursement front, you know, we've mentioned that we got the Illinois rate increase that is built into 2022. But we also have, as Dirk mentioned, with some of the additional 10% FMAP, the ARPA funding, that will provide some tailwinds for us. So we're waiting, frankly, on seeing more details around those plans of the various states that are looking to provide us with some rate enhancements. You know, a lot of it will be in fashion of increased reimbursement that will be passed on to caregivers to help with the recruitment and retention. So that should help actually drive just hours volume.
Matt Leroux
Okay. Thanks, Brad.
Derek
Your next question comes from the line of Mitra Ramgopal from CDOT. Your line is open.
spk09
Yes. Hi. Good morning. Thanks for taking the questions. First, I'm just curious if the tight labor environment, do you see that affecting your growth strategy, at least in near term, in terms of how aggressive you'd like to be
Operator
Mitra, are you talking about as far as M&A? Yes. No, the environment doesn't affect what we want to do as far as growth. One thing we would constantly say, and we will continue to be, is that we tend to be somewhat disciplined buyers. So we are in the market looking for opportunities today, but if multiples remain higher than we feel justify the return we'll get for our shareholders, then we're not opposed to, stepping back and waiting for something such as JourneyCare. JourneyCare was something we found, great operation, great people, not-for-profit environment, which needed us to come in and gave us the opportunity to come in and make some changes in the expense structure while we acquired that at a reasonable, certainly a fair and reasonable price. And so those are the type of things we'll be looking for, but we are not slowing down are opportunities that we're going to look at.
Brian
Yeah, let me try just to add real quick. With that said, I think obviously when we're looking at potential deals, part of our diligence process is to be cognizant of the trends in the labor market on the local and state level. So that is definitely something that we evaluate as we're looking at deals and taking into consideration. But I think the labor market today has not kind of put us on a backseat as far as our strategy overall.
spk09
Okay, thanks. That's great. And then when I look at the pair mix, I think managed care is probably at the end of this last quarter the highest we have seen. Just curious in terms of if you're having increased conversations with managed care now given the environment and, you know, how do you expect that to play out over the next few years?
Operator
Yeah, I think one of the great things about our strategy is it allows us to develop size and geographic coverage in certain markets differently. A lot of these markets, we have great relationships with managed care providers. The fact that we're able to provide services across a geographic area, which maybe some of our competitors in the market cannot do, allows us to sit across the table from these MCOs and develop pricing which we're comfortable with. So at this time, we have a team. That's all they do. They've done a great job of maintaining and increasing service. pricing as we need. So we're very comfortable with our relationships with our MCO and the pricing environment.
spk09
Okay. Thanks again for taking the questions.
Derek
Again, if you would like to ask a question, please press star 1 on your telephone keypad. Again, that is star 1 on your telephone keypad. Your next question comes from the line of Ben Hendricks from RBC Capital Markets. Your line is open.
Ben Hendricks
Hey, thanks, guys. Quick question about with JourneyCare and Summit now in the portfolio and having all three levels of care in that key Illinois market, can you give us an idea of kind of the sources and magnitude of upside that you can expect when you get all three levels of care in the market, whether it be revenue synergies or margin synergies, kind of once you have those wrapped up and in place?
spk01
Yeah, when you look at having three levels of care, we can look a little bit towards what we've accomplished in the New Mexico market with our home health, hospice, and personal care. There's certainly a significant opportunity where you have clients or patients that are actually receiving multiple levels. They could be receiving home health and personal care or hospice and personal care. We also generate a pretty steady stream of referrals from home health to hospice. We have implemented metalogics in New Mexico. We'll be implementing that in Illinois as well. That will, you know, help identify individuals that are on home health that have a, you know, that are probably in a position that they should transition into hospice so you can start having those conversations with the family. So we're very excited about having those opportunities. And then when you see personal care, You know, that's kind of the untapped piece. And you look at the Illinois market, I mean, that's our largest single personal care market out there. And the opportunities to want to cross market, cross referral is significant. You know, I think there's, you know, a lot of work we need to do in order to really maximize that. And that's one of the reasons why we've, you know, reached out to Home Care Home Base to work with them. to develop a system that would allow us to utilize home care home base for personal care so that we'd have all those records in one system. And then also opportunities to do some data mining there, similar to what we do on the home health hospice side with Metallogix.
Operator
Thank you.
Derek
There are no more phone questions. Mr. Allison, back to you.
Operator
Thank you very much, Operator. I want to thank everyone for your interest in ATIS and for being part of our earnings call today. Hope you have a good weekend. Thank you very much.
Derek
This concludes today's conference call. You may now disconnect.
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