Addus HomeCare Corporation

Welcome to the Addis Home Care first quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Drew Anderson. Please go ahead.

Thank you. Good morning and welcome to the Addis Home Care Corporation first quarter 2025 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 ADIS expected quarterly and annual financial performance for 2025 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 and added filings with the Securities and Exchange Commission and in its first quarter 2025 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. I would now 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 welcome to our 2025 first quarter earnings call. With me today are Brian Poth, our Chief Financial Officer, and Brad Bickham, our President and Chief Operating Officer. As we do on each of our quarterly earnings calls, I will begin with a few overall comments, and then Brian will discuss the first quarter results in more detail. Following our comments, the three of us would be happy to respond to any questions. As we announced yesterday afternoon, our total revenue for the first quarter of 2025 was $337.7 million, an increase of 20.3% as compared to the $280.7 million for the first quarter of 2024. This revenue growth resulted in adjusted earnings per share of $1.42 as compared to adjusted earnings per share for the first quarter of 2024 of $1.21, an increase of 17.4%. Our adjusted EBITDA was $40.6 million compared to $32.4 million for the first quarter of 2024, an increase of 25.1%. During the first quarter of 2025, we continued to experience consistent cash flows. As of March 31, 2025, we had cash on hand of approximately $97 million. During the first quarter, we reduced our bank debt by $20 million, leaving a balance of $203 million at the end of the quarter. This gives us a conservative net leverage position at under one times of adjusted EBITDA, allowing us the flexibility to continue to evaluate and pursue strategic acquisition opportunities. Now let me discuss certain areas of our operation. During the first quarter of 2025, we continued to experience solid caregiver hiring success, especially in our personal care segment. During the first quarter of 2025, we saw personal care hiring at 79 hires per day, up one hire per business day compared to the first quarter of 2024, and up three hires per day sequentially. Please note that the hiring numbers exclude our divested New York operations, as well as the recently acquired Gentiva PCS operations, which had its first full quarter of operation as a part of ATIS. In addition to our strong hiring numbers, we continued our momentum in starts per business day, which we have seen over the past few quarters. With respect to our clinical service lines, as has been consistent over the past few quarters, We continue to see improvements in the overall clinical labor environment, although we do believe that for the foreseeable future, clinical hiring will remain more challenging and geographically variable than what we see in our PCS segment. As we have over the past few quarters, we continue to utilize the funding we received from the American Rescue Plan Act, or ARPA. During the first quarter of 2025, we utilized over $2.5 million leaving approximately $8.8 million remaining in accessible funds. These funds are continuing to be used to help with caregiver recruitment and retention efforts, as well as other opportunities to enhance our caregivers' experience and training, primarily in our New Mexico market. In our personal care segment, our services continue to receive favorable reimbursement support from many of the states in which we operate. We are confident that personal care services continue to deliver real value to state Medicare programs as well as our managed care partners through a reduction in the overall cost of care and put us in a favorable position as changes to the funding and other aspects of various Medicaid programs are considered. As we previously disclosed, effective January 1st, 2025, Illinois, our largest state for personal care services, enacted a 5.5% rate increase for personal care services, bringing the rate per hour to $29.63. We continue to appreciate the strong support that home and community-based care services receive from the leadership of that state. Now let me discuss our same store revenue growth for the first quarter of 2025. For our personal care segment, our same store revenue growth was 7.4% compared to the first quarter of 2024. During the first quarter of 2025, we also saw personal care same store hours increased by 2% as compared to the same period in 24, our largest year over year volume growth over the past few quarters. As we have stated over the past several quarters, we expect volume growth to comprise a greater percentage of our personal care same-store revenue growth going forward. It is also encouraging that we continue to see improvement in our percentage of hours served compared to authorized hours as we show nice improvement over the first quarter of 2024. This continued improvement, along with the completion of the state-led Medicaid redetermination process, should help us achieve and maintain our goals of same-store personal care hour growth of at least 2% per year. Turning to our clinical operations, our hospice same-store revenue increased 9.9% when compared to the first quarter of 2024. Our total average daily census increased to 3,515 for the first quarter, up from 3,359 for the same period last year, an increase of 4.6%. Our first quarter 2025 same-store admissions were up slightly year over year and were up 12.5% sequentially. For the first quarter 2025, our hospice medium length of stay was 25 days as compared to 26 days for the fourth quarter of 2024. Our stated target for this metric is mid to high 20s. Overall, we are pleased by the continued improvement in our hospice segment over the past several quarters. Our home health segment, same store revenue, increased 1.3% when compared to the same quarter of 2024. We are pleased to see this segment of our business return to positive same store revenue growth. As we have previously discussed, our home health operation provide an important clinical partner to our hospice and personal care segments in the markets where we have these overlapping services, which allow us to provide our patients with access to the right care at the right time. As demonstrated by the Gentiva personal care transaction, acquisitions continue to be an important part of our growth strategy at Addis. Our targeted minimum annual revenue growth of 10% remains our goal even with the larger size of our revenue base. Specifically for home health opportunities, we are primarily seeing small transactions coming to market at this point in time. We don't believe this dynamic will change until the industry sees how the new CMS administration will handle both annual home health rate setting and the potential revenue clawback. Despite this uncertainty, we will continue to source and evaluate potential accretive home health transactions that fit our strategy of selectively adding clinical services in our existing personal care markets. Now that we have a strong presence in Texas following our Argentina personal care acquisition, our team has started looking for both clinical and non-clinical acquisition opportunities to increase both the density and geographic scope of our personal care service offerings in Texas, and to add complementary clinical services to achieve our goal of broad coverage across the state for all three levels of home care. We are currently looking at certain smaller transactions which fit well with this strategy. While there are indications that a number of larger clinical service acquisition opportunities may be coming to market later in 2025, we remain committed to maintaining a conservative approach to valuation and overall due diligence, which we feel has proven to be strategically advantageous over the past several years. Before I turn the call over to Brian, I want to thank the ADDIS team for the call they are providing to our elderly and disabled consumers and patients. We all have come to understand that the majority of the elderly and disabled clients and patients want to receive care at home, which remains one of the safest and most cost-effective places to receive this care. We believe that heightened awareness of the value of home-based care is favorable for our industry and will continue to be a growth opportunity for our company. We understand and appreciate that our operations and growth are dependent on both our dedicated caregivers and our other employees who work so hard providing outstanding care and support to our clients, patients, and their families. With that, let me turn the call over to Brian.