Addus HomeCare Corporation

Good day and welcome to Addis Homecare's third 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 a touchtone phone. To withdraw your question, please press star then two. Please note that 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 third 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 in ADIS filings with the Securities and Exchange Commission and in its third 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 third quarter earnings call. With me today are Brian Popp, our Chief Financial Officer, and Heather Dixon, 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 third 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 third quarter of 2025 was $362.3 million, an increase of 25% as compared to $289.8 million for the third quarter of 2024. This revenue growth resulted in adjusted earnings per share of $1.56 as compared to adjusted earnings per share for the third quarter of 2024 of $1.30, an increase of 20%. Our adjusted EBITDA was $45.1 million compared to $34.3 million for the third quarter of 2024, an increase of 31.6%. During the third quarter of 2025, we experienced strong operating cash flow at over $50 million for the quarter. As of September 30, 2025, we had cash on hand of approximately $102 million. We ended the third quarter with bank debt of $154 million, leaving us with net leverage of under one times adjusted EBITDA, allowing us the flexibility to continue to evaluate and pursue strategic acquisition opportunities. As most of you know, Heather Dixon became our President and Chief Operating Officer on September 15th, with our former president and COO, Brad Bickham, moving to the position of advisor to the CEO until his official retirement in March of 2026. I want to welcome Heather to our team and thank Brad for all he has done for Addis over the past nine years. This transition has been moving forward over the past several weeks as Heather and Brad have worked closely together to make this change as seamless as possible. I appreciate the efforts of both of them along with the members of the operation team during this transition. While we will miss Brad, we are very excited to have Heather join us as part of our leadership team. As we mentioned on our last earnings call, both the states of Texas and Illinois have announced rate increases for our personal care services. The Texas rate increase was effective on October 1st of this year. The Illinois rate increase will be effective January 1, 2026 subject to the standard federal approval process. We believe the Illinois and Texas rate increases, as well as favorable reimbursement support from many of the states in which we operate, is due to the recognition of the value that personal care services provide to both state Medicaid programs and managed care partners through a reduction in the overall cost of care. We continue to believe these and other benefits associated with home-based care put us in a favorable position as changes to the funding and other aspects of various Medicaid programs are implemented as part of the OBRA. We continue to work through our legislative efforts in other states to help them understand the benefits for supporting these services with future rate increases. On July 30 of this year, CMS finalized a fiscal year 2026 Hospice Wage Index and Payment Rate update, resulting in a 2.6% increase effective on October 1 of this year. This increase reflects a 3.3% market back increase reduced by a 0.7% productivity adjustment. Based on our current geographic and acuity mix, we expect to realize a 3.1% increase in our hospice rates. We are appreciative of this increase as it helps offset a portion of the added cost associated with providing this critical service to patients and their families. As for our home health, on June 30th, CMS released the calendar year 2026 proposed home health payment rule. This proposed rule projects a 6.4% aggregate reduction in Medicare payments to the home health agencies in 2026 compared to 2025. As you would expect, There has been a great deal of advocacy put forth by the home health industry working with CMS to possibly affect this potential rate reduction. While we do not have a finalized home health rate for 2026, we are hopeful that these efforts will have a positive impact on the final rate, which we expect to be published in the next few weeks. During the third quarter of 2025, we continued to experience strong hiring performance especially in our personal care segment. For the third quarter of this year, we achieved hires per business day of 113, which is an increase of 6.6% over the second quarter of this year. In addition to our strong hiring numbers, we saw our starts per business day improve to 86 for the third quarter. Clinical hiring remains consistent with what we have experienced over the last two years, and has been mostly stable outside of a few more challenging urban markets. Now let me discuss our same store revenue growth for the third quarter of 2025. For our personal care segment, our same store revenue growth was 6.6% compared to the third quarter of 2024. During the third quarter of 2025, we also saw personal care same store hours increase by 2.4% compared to the same period in 2024. We also experienced incremental improvement in our percentage of authorized hours served. On a sequential basis, personal care same-store billable census was up slightly as we continue to see the impact of Medicaid determinations in Illinois near its end. In Illinois, our personal care admissions have started to exceed our discharges, which we expect should lead to census growth by the end of the fourth quarter of this year. 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. Turning to our clinical operations, our hospice same store revenue increased 19% when compared to the third quarter of 2024. Our same store average daily census increased to 3,872 for the third quarter up from 3,534 for the same period last year, an increase of 9.5%. Our third quarter 2025 same-store admissions were up 6.5% year over year. For the third quarter of 2025, our hospice medium length of stay was 30 days, up two days sequentially. During the third quarter, we saw an improvement in our Medicare cap cushion, as a result of our balanced admissions growth, which resulted in no additional cap liability being accrued during the quarter. We have been very pleased by the continuing growth in our hospice segment over the past several quarters as a result of our operational improvements. While our home health same-store revenue decreased 2.8% when compared to the same quarter of 2024, we have seen year-over-year admissions level out. I also want to point out that over 25% of our hospice admissions in New Mexico and Tennessee are currently coming from our Addis Home Health operation, which overlap in these two markets. We are pleased to see more patients receiving the benefit of a full continuum of post-acute care and anticipate a similar dynamic to develop in Illinois, where we also have both home health and hospice operations and will continue to evaluate opportunities in other markets. In our earnings release yesterday, we announced that on October 1st, we closed on our acquisition of the personal care operations of Del Cielo Home Care Services, which operates in the South Texas market, including Corpus Christi, increasing our personal care density in this area of Texas. This transaction continues our acquisition and development strategy of enhancing our geographic coverage and density in Texas. Our team is excited about this acquisition, and I want to officially welcome the Del Cielo Home Care Team to the Addis family. Going forward, our development team will continue to focus on both clinical and non-clinical acquisition opportunities to increase both the density and geographic coverage to our current states. While the proposed home health rule will most likely continue to delay any meaningful home health opportunities, we will be evaluating smaller clinical transactions along with personal care service transactions that fit our strategy. Before I turn the call over to Brian, I want to thank the Addis team for the care they are providing to our elderly and disabled consumers and patients. We all have come to understand that the overwhelming majority of clients and patients want to receive care at home, which continues to remain one of the safest and most cost-effective places to receive this care. We believe the heightened awareness of the value of home-based care, which we are seeing, 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 other employees who work so incredibly hard providing outstanding care and support to our clients, patients, and their families. With that, let me turn the call over to Brian.