Addus HomeCare Corporation (NASDAQ:ADUS) delivered robust financial performance for the third quarter of 2023, with revenues of $270.7 million, up 12.6% year-over-year, and adjusted earnings per share of $1.15, a 22.3% increase. The company also reported a 20% increase in adjusted EBITDA to $30.9 million. The results were driven by strong demand in the Personal Care segment and the successful acquisition of Tennessee Quality Care.
Key Takeaways from the Call:
- Addus reported a 13.9% growth in same-store revenue for the Personal Care segment compared to Q3 2022, while hospice same-store revenue increased by 3.1%. Home health same-store revenue decreased by 8.8% due to reduced admissions from nonstrategic Medicare Advantage plans.
- The company utilized funding from the American Rescue Plan Act for caregiver recruitment and retention efforts, contributing to an improving labor environment.
- Addus is in the process of negotiating with union partners over collective bargaining agreements in certain markets and anticipates lower margin contribution from rate increases in Illinois.
- Addus expects the final rule on the CMS proposed Medicaid Access Rule in late Q1 or early Q2 2024 and the home health rate for 2024, hoping for a more appropriate reflection of increased costs.
- The company plans to use its financial capacity to acquire strategic operations aligned with its growth strategy and expects to maintain EBITDA margins above 11% in 2024.
- The recent acquisition of Tennessee Quality Care has positioned Addus well for expansion and value-based contracts, allowing it to offer all three levels of home care in three states.
- The company noted success in its value-based care efforts, showing a reduction in emergency room visits and readmissions.
The company's strong performance was buoyed by improving volumes in personal care services, with a representative, Brian Poff, stating that they are trending towards finishing the year above 11%, higher than previous years. The acquisition of Tennessee Quality Care significantly contributed to the company's performance, enabling Addus to offer a full continuum of home-based clinical care.
Looking ahead to 2024, Addus is optimistic about its growth prospects. The company expects Personal Care to grow at a rate above 3-5% next year, primarily driven by a 4.2% rate increase in Illinois. Despite anticipating a slight impact from the renegotiation of wage agreements in Illinois, Addus expects volume increases to offset this. The company also anticipates mid-single-digit growth in Clinical Services.
CEO Dirk Allison concluded the earnings call on a positive note, emphasizing the company's commitment to expanding its client base, maximizing fill rates to increase volumes, and maintaining a strong capital structure to support its growth initiatives and acquisition strategy.
InvestingPro Insights
According to InvestingPro, Addus HomeCare Corporation has shown promising performance with accelerating revenue growth and consistently increasing earnings per share. The company's market cap stands at 1260M USD, with a P/E ratio of 23.58, reflecting its strong financial status.
InvestingPro data also reveals a revenue growth of 10.84% over the last twelve months as of Q3 2023, which aligns with the strong demand in the Personal Care segment reported in the company's Q3 2023 results. The company's gross profit margin for the same period is 31.69%, indicating a healthy profitability.
InvestingPro Tips suggest that the stock trades with low price volatility and operates with a moderate level of debt, which could be a sign of financial stability. It's also worth noting that 4 analysts have revised their earnings upwards for the upcoming period, indicating positive market sentiment towards Addus HomeCare.
It's important to note that InvestingPro offers numerous additional tips that can provide valuable insights for potential investors. These tips, along with real-time data, can be found on the InvestingPro platform.
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