Addus at RBC Healthcare Conference: Growth and Strategic Moves

On Tuesday, 20 May 2025, Addus HomeCare Corporation (NASDAQ:ADUS) presented at the RBC Capital Markets Global Healthcare Conference 2025, highlighting its robust Q1 performance and strategic initiatives. The company reported significant growth in its personal care segment and outlined its plans for future acquisitions and technology investments. However, it also acknowledged challenges in managing Medicare caps and navigating policy changes.

Key Takeaways

• Addus achieved a 7.4% same-store organic growth in personal care, surpassing its target.
• The company is focused on expanding through M&A, particularly in Texas.
• Addus aims to maintain an EBITDA margin above 12% for 2025.
• The integration of Gentiva in Texas is progressing smoothly.
• Addus is investing in technology to enhance efficiency and caregiver retention.

Financial Results

• Personal Care: Achieved 7.4% same-store organic growth in Q1, driven by a 5.5% rate increase in Illinois and 2-2.5% volume growth. The company expects to remain at the top end of its 3-5% growth target.
• EBITDA Margin: Targeting an EBITDA margin above 12% for 2025, with Q1 starting at 12%. The company anticipates a 40-50 basis point expansion from Q1 to Q2 due to payroll tax cap relief.
• Debt Reduction: Paid down $20 million of debt in Q1 and an additional $20 million year-to-date in Q2, maintaining a leverage ratio of less than 1 times.

Operational Updates

• Hiring: Focused on hiring to drive volume growth, with inflation aiding in recruitment. The turnover rate has decreased from 65% to approximately 55% due to improved scheduling and increased hours.
• Gentiva Integration: Progressing smoothly, with Texas now a significant part of Addus’s business. The company seeks additional acquisitions in Texas to expand its home health and hospice services.
• Technology Investments: Investing in a caregiver app and developing a unified EMR platform to improve scheduling, communication, and service delivery.

Future Outlook

• M&A Strategy: Prioritizing capital deployment through M&A, focusing on personal care and clinical home health acquisitions. The company sees smaller tuck-in opportunities across all service lines.
• Medicare Reimbursement: Awaiting clarity on potential clawbacks and rate pressures, which could lead to larger home health acquisitions.
• Medicaid Policy: Confident that work requirements for Medicaid recipients will not significantly impact the business due to the nature of its patient base.

Q&A Highlights

• Turnover Rate: Expected to remain in the 50-55% range due to industry dynamics.
• Hospice Cap: Managing hospice caps by balancing marketing efforts between short-stay and longer-stay patients.
• Valuation Multiples: Personal care acquisitions are in the single-digit multiples, while larger home health deals may reach low double digits.

For further details, readers are encouraged to refer to the full transcript of the conference call.

Full transcript - RBC Capital Markets Global Healthcare Conference 2025:

Ben, Analyst: Morning to be joined by management from Addus Home Care Corporation. We have Dirk Allison, chairman and chief executive officer, and Brian Poff, executive vice president and chief financial officer. Thank you, gentlemen, for joining us today.

Brian Poff, Executive Vice President and Chief Financial Officer, Addus Home Care Corporation: Thank you.

Ben, Analyst: So maybe we can kind of give a little bit of a a little bit of an update for people less familiar with the story. You guys are a home care provider may with the core being personal care. Can Midge maybe give us a little kind of overview of of that business and and how it’s differentiated in the home care space?

Dirk Allison, Chairman and Chief Executive Officer, Addus Home Care Corporation: Sure. You know, personal care, been around a long time. It is a nonclinical home based care service. We help basically the elderly, certainly the disabled too, but mainly our our client base is the elderly population that needs help with what’s called activities of daily living, whether that’s dressing, feeding, things such as that bathing. And so it it’s a service that states pay for through the Medicaid program, through way maintenance, through waiver programs.

We do about 75% of our home care business in the nonclinical space. Then we also started in ’18 adding clinical services with the strategy that because we’re in the home first, if you think about personal care services, we get in the home when an elderly patient needs help with certain nonclinical items, but eventually they progress where they might have a home health need or eventually may need to be talked about as far as hospice. And so we started adding clinical services to get that continuum of care in the home in 2018. So today, we do about 20% thereabout of our business in hospice and then about five or so percent in in true clinical home health.

Ben, Analyst: Got you. And and in the personal care, we saw really strong results on a same store basis, 7.4% same store organic growth, and then that’s higher than your stated target that you’ve talked about in the three to 5% range. Maybe you can kind of talk about the trends you’re seeing in in personal care and kinda what’s driving that that that strong growth.

Brian Poff, Executive Vice President and Chief Financial Officer, Addus Home Care Corporation: Yeah. I think, you know, specifically in q one, you know, we got a rate increase in Illinois, which is our largest personal care market of 5.5%, so that was definitely impactful. We’ve gotten really good rate support over the last few years. I think, you know, our focus this year, and we saw it in q one, was getting back into a cadence of, you know, two to two and a half percent just pure volume growth on the hours basis, and we saw that in q one. So that was impactful as well.

So I think the way we’re kinda looking at the rest of this year and potentially in the ’26 is behind some of the rate support we’ve seen is probably be at the top end or maybe slightly above that kind of long term three to 5% range. Mhmm. We’re, you know, waiting to hear if we’re getting the rate increase in Texas, which we anticipate. If that comes through, that would go into effect this September. So that could be helpful from a same store perspective into 2026 from the Gentiva acquisition.

So that could keep us again next year toward that top end of that three to five. But I think three to 5% overall is still kind of our long term range, but as long as we’re getting, you know, some of these larger rate increases in some of our bigger markets, it’s it’s put us at the top or above that range.

Ben, Analyst: And on the volume side, you guys noted that hours are kind getting back to your target levels, and you’ve called that out before. I just wanted to get an idea of the visibility you have on that aspect of it and what’s helping act as a tailwind to some of these volumes that you’re seeing?

Brian Poff, Executive Vice President and Chief Financial Officer, Addus Home Care Corporation: Well, I think on the hour side, think the key for us is is hiring. So I think, you know, we can talk about that as well. But that’s, you know, been very consistent for us. I think with inflation, way that it’s been the last, you know, year, year and a half, that’s helped. You know, typically, we’re a little countercyclical where unemployment is high, typically good for us, but I think, you know, inflation has kinda, you know, stepped into that void on the as unemployment’s been a little lower and kept us in a really good hiring position.

But some of the things that we’ve done internally, which, Dirk, I don’t if you wanna talk a little bit about some of those initiatives to try to ease, you know, the hiring process for us. I think some of the rate support that we’ve talked about has put us nicely above minimum wage in a lot of markets, so I think that’s helped us. So we’ve seen the impact of, you know, states that have been supportive on the rate side allowing us to pay more to caregivers, and we’re not directly in competition with retail, hospitality, some of the other potential folk places that our folks could go work, I think has helped us as well on the hiring front. I know hiring is a leading indicator of us on what will happen on the volume side, but also mining, you know, internally our own, you know, existing caregiver workforce and our clients and trying to maximize the number of hours that we provide under their authorizations.

Dirk Allison, Chairman and Chief Executive Officer, Addus Home Care Corporation: And and I think one of the things we’ve talked about the last few quarters that we’re starting to really come out of is the state’s redetermination process. That that was a real impediment to volume growth for a period of time because when states would were asked to go through that and they had a short period of time to do it, they didn’t have a lot of excess personnel to do that. And so some of the folks that would normally be going out and authorizing new hours for new clients, all of a sudden, were pulled into doing redetermination. So we saw some of our states really, Texas went through it just before we acquired them. We kinda saw that go down, and now it’s back up.

New Mexico, same thing we saw. We’re through that. We’re starting to see volume growth again. The last one was probably Illinois. Certain parts of Illinois were a little slower to get started.

First quarter, that was just a little bit of a problem. It seems to since then, really since February, March, and on into April, we’re starting to see that trend of discharges versus emissions turnaround. So I think, realistically, if you think about our targeted 2% to 2.5% volume growth, I think we’re pretty comfortable that this year we should be at that target.

Ben, Analyst: Gotcha. Maybe we could talk a little bit, go back to the hiring aspect of stuff because this is a little bit different industry than we’re used to in other clinical areas. Kind of what does the what does the turnover landscape look like, and and kind of what what levers do you have to pull to to mitigate turnover and and increase hiring new

Dirk Allison, Chairman and Chief Executive Officer, Addus Home Care Corporation: You know, this industry has always had a high turnover. If you go back prior to the pandemic, you probably were in the 75, 80 percent turnover range because our caregivers are lower wage. Now they’re above minimum wage in a lot of states, but they’re still lower wage workers. And they usually average about twenty hours of care because of you know, there’s a real focus on providers. We can’t pay overtime because the state does not pay us in in overtime.

So we’re very careful how we schedule folks. And and what we’ve found over the period of years is that the number one reason people turn over is because they can’t get enough hours. You know, these caregivers would like to have more hours, and sometimes companies do not do as good a job trying to match. Well, we you may have twenty hours left before overtime. Can we what can we do to fill that?

And we started about two or three years ago developing a care system that our caregivers can utilize to tell us, do they want more hours? When are when is their availability? Keeping it up to date. Because, again, that’s something that if you don’t keep up to date, what might have been a good additional schedule for you last week may not work for you this week because your lifestyle might have changed some way. So it’s really helped us as we look at trying to lower our turnover.

And we probably we’ve lowered our turnover probably from 65% down about 55% because we’re able to give a few more hours. Now we’re still working on that. We’ve rolled it out to Illinois. We’re rolling it out to New Mexico now. Obviously, Texas will be a big market eventually to roll it out to.

And the whole goal is not only to try to control that over time, but also that drives your ability to grow because now all a sudden, your percentage of worked hours versus hours you’re authorized by the state continues to grow. And as we do that, that also helps with unit growth.

Ben, Analyst: Got you. And where do you think the turnover rate could probably go on a on a long term basis? Is it hard is that something you have a target on, or is it

Dirk Allison, Chairman and Chief Executive Officer, Addus Home Care Corporation: You know, you always would like to lower it more. We’ve been pretty consistent the last year in that fifty, fifty five range. It’s gonna be hard to lower it a whole lot more just due to the nature of the industry. Because remember, 35% of our caregivers are family caregivers. And if you’re taking care of your mom or your grandmother and you no longer need that care at some point in time, you’re probably not going to keep working for the company and take somebody that’s not in the family.

And so you’ve got turnover built into that system because of those family caregivers. So there’s a there’s a limit as to how low you can get. We we certainly will continue to try to lower it, but we’ve been pretty consistent in that fifty, fifty plus range for the last year or two.

Ben, Analyst: Gotcha. Maybe we can now shift over and talk about Gentiva, your biggest acquisition to date, and kind of how that integration’s going and what you’re seeing in in Texas, which is a new very large market for you guys.

Dirk Allison, Chairman and Chief Executive Officer, Addus Home Care Corporation: Yeah. It’s an exciting market for us because of the you know, you look at Texas. It’s a it’s a huge market. It’s a growing market with the our population base, 65 and older. The state’s financial condition is pretty solid, so it’s we don’t have budget worries.

Now the key is, can we grow in the state? And and when we brought Gentivi in, obviously, Texas was a big attraction. They brought other states that have been great too. I’m not downplaying them, but, you know, Texas was about 75% of the business. We now are the largest personal care provider in the state of Texas.

We’d have a little bit in the central section hospice. Mhmm. But we have no other clinical services in the market. So one of the things as we look at the acquisition, we brought it in. It’s doing well.

It’s hitting our targets. We brought in a really fantastic team that’s been there a long time. They understand operations in Texas. And so it’s been you know, there’s always things when you do an acquisition like that that you you learn. Mhmm.

But mostly, we understood we had a long period of time between sign and close that we could work with their team and plan the transition. So it’s gone relatively smooth. We’re pretty excited about it. And now the real thinking for us as far as Texas is not just the organic growth. We’re excited about that, as I mentioned, with the growth in the market.

But it’s also the ability to open up our m and a and look for additional personal care acquisitions as well as now we can look at home health hospice in the state of Texas and try to develop our three levels of care. And

Ben, Analyst: then maybe we can touch on that a little bit on the home health side. Clearly, people are waiting to see if we’re gonna have a proposal with a clawback on on the reimbursement Medicare Medicare reimbursement for home health. What are your thoughts there, and what could that landscape look like as we get more clarity on the regulatory side?

Dirk Allison, Chairman and Chief Executive Officer, Addus Home Care Corporation: Yeah. I think you’re right. I think it’s been a little bit frustrating the last two or three years not understanding what the government they keep kind of pushing it down the road, talking about a callback, and then not giving us rate increases that really cover the cost of care. We believe we hope we we think we’re getting closer to a resolution. We’d like to think that.

We’ve heard some some thinking that maybe that’s being discussed. I think if we could get some answers, whatever those answers are, some certainty around the clawback, some certainty around are we going to continue to face long term pressure on rates. If we could get that settled, then I think the fact that companies like ourselves that wanna grow in home health, I think we would open up our look and see for companies that maybe are a little bigger. Now we can have continued to buy some of the smaller operations because they tuck in nicely with what we do. And from a standpoint of trying to price in there what might be a solution at the end is a little easier, but you get a little bigger transaction, and it makes them more difficult.

So I think we’re all waiting to see if that comes to some sort of conclusion in the next year or so.

Ben, Analyst: Got you. And then maybe we can talk about the the other clinical area on hospice. You know, we have heard a lot of your hospice competitors talk about areas where they’re rubbing against Medicare caps, but it seems like you guys have navigated that fairly well. Just wanna get your thoughts there and if it’s something that, you know, you see as maybe a headwind in the future.

Dirk Allison, Chairman and Chief Executive Officer, Addus Home Care Corporation: You know, cap’s been around since the program was developed back in the eighties. Mhmm. I think it took probably until late nineties, maybe early two thousands for people to realize it was in the rule because somebody had a problem with CAP up until that point. We all came from the hospice industry back many years ago where we had to really focus in that early part of February on the CAP. And what we realized was you have to have a balanced approach to your marketing to deal with CAP.

I mean, because the whole idea of CAPP is to maintain that length of stay in a range that makes sense for the program. And so, you know, you need to make sure that not only are you really marketing towards the short stay length of pay, which tends to be hospital discharges. Folks that come out of hospital tend to have a shorter length of stay. But then you also need to balance that with some potential ALFs and some institutional care that people come out may have a little longer length of stay. And that’s that’s the real challenge of the cap, can you do that?

We’ve been fortunate in our various with our Medicare license that in those markets, we’ve been able to work with those that balance and maintain a cap situation that’s worked pretty well for our company. So it’s not something you can change immediately if you get into a cap situation. But if you think long term, how do we mitigate cap and stay out of cap, I think you’re able to do so.

Ben, Analyst: Gotcha. Thank you for that. And just wanted to to kinda close out on on the Medicaid piece of it going back to personal care. Clearly, we can’t talk about a a Medicaid levered company without discussing the policy backdrop. And, of course, you guys have talked about getting good rate updates from Illinois and Texas, but just wanted to get your thoughts on kind of the broader discussions in Washington.

We’ve had some news on the on the development of potential Medicaid cuts over the last week or so. And it seems like you are fairly insulated, but just maybe kind of wrap some some parameters around that for us.

Dirk Allison, Chairman and Chief Executive Officer, Addus Home Care Corporation: Yeah. You know, the the one of the big ones that they they continue to talk about and I think pretty much has the support of the Republican Party, is the work requirements. Mhmm. Work requirements for us probably is not a true negative because our the people we take care of think of the patient basis or the consumer basis. They’re the disabled population or they’re the folks over 65 years of age, and so they’re not going to be required to go out and work this twenty hour a week they’re talking about.

On the other hand, it could be an opportunity for us because as we talk about growth, Brian mentioned the fact one of the limiting factors for our growth is to be able to hire enough caregivers going forward to take care of a growing population. And if all of a sudden folks are the younger folks, the below 65 folks are required to go out and get twenty hours of care Mhmm. Of work a a week, that’s our average. That’s what we do. That’s our average caregiver works that part time basis.

We also have very flexible schedules So if people have some limitations on when they can work during the day, we would be a great employment opportunity for them. So we don’t work look at work requirements as the issue. I think a bigger issue for the industry itself with all they’re talking about is if they make some changes that maybe reduces some of the match, they’re talking about maybe they wanna reduce the 90% match on the on the expansion population. Well, we didn’t get any benefit from the expansion population. But if states’ budgets have to look at what do we do with less money, would that affect a company like Addus?

It could just because there’s less dollars, but we feel comfortable because we’re the low cost provider. We’re the folks that if the state really is saying, how do we take care of the elder population and control our dollars? If we can help keep them out of the institutional settings, we can save money for the state. So nothing we’re seeing today do we believe is a huge impediment to what we’re doing, our strategy. We’re pretty comfortable that if the changes made that they’re discussing will be fine.

Mhmm.

Ben, Analyst: And then just another requisite question on topical issues, the tariff exposure. What what have you guys said in terms of the of how you’re levered there? Any any headwinds that you can see?

Brian Poff, Executive Vice President and Chief Financial Officer, Addus Home Care Corporation: Yeah. We really don’t have any exposure to some of the tariff kinda noises out there. If you think about our business, it’s largely services and personnel or the bulk of our costs. So you start thinking about, you know, clinical services, you know, maybe there’s, you know, a little bit of pressure on things like med supplies and things like that, but it’s going to be fairly immaterial for us, so nothing that, you know, we’re concerned about really impacts us. Then

Ben, Analyst: kind of just moving on to your outlook, you have a, you know, you’re expecting EBITDA margin above 12% for 2025. Just wanted to get your thoughts on kind of how that progresses, how you generally see seasonality, and what your your thoughts on the margin development, you know, as we get get through the year?

Brian Poff, Executive Vice President and Chief Financial Officer, Addus Home Care Corporation: Yeah. I think from our end, I think, you know, starting off in Q1, which is typically our low watermark from a quarterly basis on on every year, you know, being at 12% out of the gate, I think, is a is a very strong start to this year. But our normal kind of seasonal cadence, which we would expect this year, there’s really nothing unusual that we see on the horizon right now, would typically be, you know, some improvement from Q1 into Q2. Usually, we see some relief from, you know, payroll tax caps being hit. So we usually see 40 to 50 basis points of expansion into Q2 on average.

You know, usually Q2 to Q3, pretty static, not a lot of movement, should be pretty consistent. Usually, Q4 is our best quarter. Again, we get a little bit of relief typically from some additional payroll tax Mhmm. Caps being hit, but also that’s when our hospice rate increase drops in on October 1, without any kind of corresponding or or all of our merits and increases on the wage side, we usually do those in March, so we don’t see that corresponding increase in wages. So we get the benefit of the hospice rate increase for q four.

So that’s kind of the way we would see the cadence for this year continuing to move.

Ben, Analyst: Mhmm. And then just to go back, I’m sorry to jump around here, but it just reminded me, you have talked about really strong hiring, you know, in in in cost controls and efficiencies on the PC side. Maybe on the clinical side in terms of hiring, any kind of margin pressures you expect there from having to ramp up that, you know, that clinical workforce? Or

Dirk Allison, Chairman and Chief Executive Officer, Addus Home Care Corporation: You know, I think if you go back four or five years ago, we were all really struggling with the clinical side as far as what does it take from a salary standpoint increases with some of the opportunities that the clinical staffs had elsewhere. We’ve really seen that moderate. Now I will say hiring on the clinical side is a little bit more difficult than hiring on the nonclinical side. Mhmm. But it’s eased up the last twelve to eighteen months.

What and where we we saw the wage increases probably couple years ago, four to 5% running in the clinical side. It’s probably moderated more to the three to 4% this last year. So while it’s still a little little higher than maybe you would see on the nonclinical side, it’s really gotten back into more normalized increases as well as ability to hire as we’ve seen in our clinical side.

Ben, Analyst: Maybe we can just move over to the, you know, balance sheet You know, when you think about, you know, putting cash to work, how do you balance, you know, debt reduction, acquisition activity, potential investments in operations, you know, as we as we look forward?

Brian Poff, Executive Vice President and Chief Financial Officer, Addus Home Care Corporation: Yeah. I think our priority would be our preference would be, you know, to deploy capital through M and A. But I think, obviously, that’s gonna be, you know, based on opportunities that are out there. I think right now what we’re seeing in the market are probably things more on the smaller side. So there are things that we’re looking at kind of across, you know, to be honest, all three service lines today, but on the smaller side.

So I think in the absence of M and A or while we’re working on some of those projects, you know, we’ll continue to pay down on our revolver. We’ve made some good progress already this year, paid down 20,000,000 in q one, have already paid down another 20,000,000 in q two to date so far. So, you know, we’re still, you know, levered less than one times, but we still have, you know, some debt on our balance sheet, so we can mitigate some interest. But I think, overall, our preference would be to continue to source and find and put that money to work through M and A.

Dirk Allison, Chairman and Chief Executive Officer, Addus Home Care Corporation: You know, one thing we we have been able to do the last couple years is we’ve invested a little more in the technology side with our capital. We’ve used some of the ARPA funds that have allowed us to to do some of that. And it it led to what I mentioned earlier ago, this caregiver app that we have, which is very critical. It’s it’s it’s the one place that we can give our workforce where they can go. They can look at their schedule.

They we can eventually make changes in that schedule. So there’s a number of things there they can do. They can make sure their paycheck is gonna be correct, which is very important to our caregivers. So it it’s really been a nice investment. We also are in the early stages of working with home care.

Well, I say early. For us making the final commitment, we’re getting closer. But Homecare Homebase and ourselves have been working for the last three to four years on developing a personal care technology that will allow us to have our have all clinical services and nonclinical services on the same m e m EMR, which will be very important as we look to try to move patients from one service level to the next. So that’s been another use of of what we can do with our capital and our keeping our balance sheet clean to allow us down the future, not only to grow, but also to look at can how we can cut expense growth going forward by using technology. And that’s very important.

Ben, Analyst: Yeah. We’ve heard actually the flexibility with home care, home base easing M and A as well. Is that something that you think could kind of help your tuck in initiative as you go forward?

Brian Poff, Executive Vice President and Chief Financial Officer, Addus Home Care Corporation: Yeah. I think having everything on one platform is going to provide a lot of benefits for us. But I think, you know, in the clinical side, obviously, every deal we do, maybe they’re already on home care home based, but if they’re not, we immediately move them onto our platform. I think having a unified platform for personal care should help ease that process. Yes.

Ben, Analyst: Mhmm. And, just in the last minute here, maybe you can just talk about kind of what kind of valuation multiples you’re seeing out there for tuck ins and and kind of across the different segments.

Brian Poff, Executive Vice President and Chief Financial Officer, Addus Home Care Corporation: Yeah. I mean, particularly, you know, probably the the two that are a priority for us, right now are are personal care and then some maybe some clinical home health where we have personal care. Most of deals that we’re looking at are gonna be, you know, in the single digits. So, you know, on the smaller end for personal care, those could be as low as four or five times. You know, if they’re a little more sizable, it could be, you know, six, seven, eight times.

On the home health side, I think it’s similar. If it’s on the smaller end, it’s going to be, you know, mid, maybe slightly upper single digits. You know, things of scale on the home health side will probably tip, you know, 10 or low double digits, but I think most things we’re looking at today are in the single digit multiples.

Ben, Analyst: Well, great, guys. I think that brings us to time. I appreciate you you being with us today.

Dirk Allison, Chairman and Chief Executive Officer, Addus Home Care Corporation: Thanks a lot. Thanks, Ben. Appreciate it.

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