Addus Home Care Q3 2025 Earnings Call - Strong 25% Revenue Growth Fueled by Personal Care Expansion and Strategic Acquisitions

Conference Operator: Good day and welcome to Addus Home Care’s Third Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mode. After today’s presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Drew Anderson.

Please go ahead.

Drew Anderson, Unspecified, Addus Home Care: Thank you. Good morning and welcome to

Legal/Compliance Speaker, Addus Home Care: the Addus Home Care Corporation third quarter twenty twenty five 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 Addus’ 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 Attis’ filings with the Securities and Exchange Commission and in its third quarter twenty twenty five 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.

Dirk Allison, Chairman and Chief Executive Officer, Addus Home Care: Thank you, Drew. Good morning and welcome to our twenty twenty five third quarter earnings call. With me today are Brian Poff, 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 2025 was $362,300,000 an increase of 25% as compared to $289,800,000 for the 2024. This revenue growth resulted in adjusted earnings per share of 1.56 as compared to adjusted earnings per share for the 2024 of $1.3 an increase of 20%. Our adjusted EBITDA was $45,100,000 compared to $34,300,000 for the 2024, an increase of 31.6%. During the 2025, we experienced strong operating cash flow at over $50,000,000 for the quarter. As of 09/30/2025, we had cash on hand of approximately $102,000,000 We ended the third quarter with bank debt of $154,000,000 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 15 with our former President and COO, Brad Bickham moving to the position of advisor to the CEO until his official retirement in March 2026. I want to welcome Heather to our team and thank Brad for all he has done for Addus 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 1. The Illinois rate increase will be effective 01/01/2026 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, CMS finalized the fiscal year twenty twenty six Hospice Wage Index and Payment Rate update resulting in a 2.6% increase effective on October 1. 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 30, 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 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 improved 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 2025. For our Personal Care segment, our same store revenue growth was 6.6% compared to the 2024.

During the 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 re 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 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 twenty twenty five same store admissions were up 6.5% year over year. For the 2025, our hospice medium length of stay was thirty 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 Mexico and Tennessee are currently coming from our Addus 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 1, 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 Addus family. Going forward, our development team will continue to focus on both clinical and nonclinical 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 Addus 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.

Brian Poff, Chief Financial Officer, Addus Home Care: Thank you, Dirk, and good morning, everyone. The third quarter marked another strong financial and operating performance for Addus in 2025 as we continue to deliver consistent organic growth and benefit from our recent acquisitions. Our results were highlighted by 25% top line revenue growth and a 31.6% increase in adjusted EBITDA compared with the third quarter last year. Our Personal Care Services segment was a key driver of our business with a solid 6.6% organic revenue growth rate over the same period last year, including a 2.4% increase in hours per business day. This growth trend has consistently tracked well above our normal expected range of 3% to 5% over the past several quarters, supported by strong hiring trends and favorable rate support for personal care services in some of our larger markets.

This includes a statewide reimbursement increase in Illinois, our largest market, which was effective 01/01/2025, and a recent 9.9% rate increase in Texas that was effective on 09/01/2025. With Texas now being our second largest personal care market, this increase will have a positive impact on our business going forward, adding approximately $17,700,000 in annualized revenue, with margins consistent with existing Texas Personal Care business of just over 20%. State of Illinois, which represents our largest PCS market, has also announced an additional 3.9% increase, which is set to be effective 01/01/2026, subject to customary federal approvals, and will add approximately $17,500,000 in annualized revenue for Addus, with margins consistent in the low 20% range. Our Personal Care results also include the Gentiva Personal Care operations, our largest acquisition to date, which we completed on 12/02/2024, and two months of operations for Helping Hands Home Care Services acquired on 08/01/2025. We continue to see steady improvement in our hospice business in the third quarter with strong 19% year over year organic revenue growth, driven by increases in admissions, average daily census, patient days and revenue per patient day.

Hospice care accounted for 19% of our revenue for the third quarter. Going forward, the 2026 Medicare hospice reimbursement rate update was effective October 1, which will increase our rates by approximately 3.1% based on our current geographic mix. Our home health services represent our smallest segment, accounting for 4.9 of third quarter revenue. We continue to look for ways to support and expand the service line, including via acquisitions, as it is part of our strategy to offer all three levels of home based care in select markets. In addition to the consistent organic growth we have achieved in 2025, we have benefited from our recently acquired operations.

The Gentiva acquisition completed in December 2024 added approximately $280,000,000 in annualized revenues and significantly expanded our market coverage. In August, we acquired Helping Hands Home Care Service, a provider of personal care, home health and hospice services in Western Pennsylvania, with annualized revenue of approximately $16,700,000 And yesterday, as Dirk noted, we announced the acquisition of the personal care assets of Del Cielo Home Care Services located in South Texas, adding approximately 12,700,000 in annualized revenue and further expanding our market presence in Texas. We continue to source and evaluate additional similar acquisitions, as well as opportunities to add new personal care markets where we can enter at scale, as we believe having geographic coverage and density provides us with a competitive advantage. With our size and expanding scale and the support of a strong balance sheet, we are well positioned to continue to execute our acquisition strategy. As Dirk noted, total net service revenues for the third quarter were $362,300,000 The revenue breakdown is as follows: Personal Care revenues were $275,800,000 or 76.1% of revenue.

Hospice Care revenues were $68,900,000 or 19% of revenue. Home health revenues were $17,600,000 or 4.9% of revenue. Other financial results for the 2025 include the following. Our gross margin percentage was 32.2%, an increase from 31.8% for the 2024. This was a slight decrease sequentially from 32.6% in the 2025, primarily as a result of one extra holiday during the quarter.

Looking ahead, we expect normal seasonality in the 2025, with the hospice reimbursement update to benefit our gross margin percentage by approximately 40 basis points and a sequential benefit of approximately 20 basis points from lower unemployment taxes. G and A expense was 21.9% of revenue compared with 21.7% of revenue for the third quarter a year ago and lower sequentially from 22.1% in the 2025. Adjusted G and A expenses for the 2025 were 19.8%, a decrease from 20% in the comparable prior year quarter and a decrease sequentially from 20 in the 2025. The company’s adjusted EBITDA increased 31.6% to $45,100,000 compared with $34,300,000 a year ago. Adjusted EBITDA margin was 12.5% compared with 11.8 for the 2024.

Adjusted net income per diluted share was $1.56 compared with $1.3 for the 2024. The adjusted per share results for the 2025 exclude the following: acquisition expenses of $08 noncash stock based compensation expense of $08 and restructuring and other non recurring costs of $06 The adjusted per share results for the 2024 exclude the following acquisition expenses of $08 and non cash stock based compensation expense of $0.12 Our tax rate for the 2025 was 24.7%, in the range we anticipated. For calendar 2025, we expect our tax rate to remain in the mid-twenty percent range. DSOs were thirty five days at the end of the 2025 compared with thirty seven point seven days at the end of the 2025. We have continued to experience consistent cash collections from the majority of our payers.

Our DSOs for the Illinois Department of Aging for the third quarter were thirty two point five days compared with thirty eight point eight days at the end of the second quarter twenty twenty five. Our net cash flow from operations was $51,300,000 for the third quarter of twenty twenty five and $92,700,000 year to date. As of 09/30/2025, the company had cash of $101,900,000 with capacity and availability under our revolving credit facility of $650,000,000 and $487,700,000 respectively. Total bank debt was $154,300,000 at the end of the quarter, a reduction of $18,700,000 from the end of the second quarter and net of the acquisition of Helping Hands on August 1. We continue to have a capital structure that supports our ability to invest in our business and pursue strategic growth initiatives, including acquisitions.

As mentioned, we will continue to selectively pursue acquisitions that complement our organic growth and align with our strategy. At the same time, we will maintain our disciplined capital allocation strategy and continue to diligently manage our net leverage ratio through ongoing debt reduction. This concludes our prepared comments this morning, and thank you for being with us. I’ll now ask the operator to please open the line for your questions.

Conference Operator: We will now begin the question and answer session. The first question comes from Matthew Gillmor with KeyBanc. Please go ahead.

Matthew Gillmor, Analyst, KeyBanc: Hey, good morning everyone. I wanted to ask about the same store volume growth on the Personal Care side. Dirk had mentioned the improvement in the penetration of ours. And I think within that, you’ve talked about the benefit you’re seeing from the caregiver app rollout in Illinois. Can you give us a sense for sort of how much more opportunity there is within Illinois?

And then I believe you’re rolling that out to New Mexico. Any update in terms of how that’s gone and the penetration or the opportunity that would be with New Mexico?

Brian Poff, Chief Financial Officer, Addus Home Care: Yeah, Matt, this is Brian. I’ll talk a little bit about just the penetration and Heather can talk a little bit about the schedule for the rollout in additional markets. But I think Illinois, a pretty mature market for us. We have seen some uptick there in our fill rate. I think, in our view, going into Mexico and Texas next, their fill rate traditionally has been a little bit lower.

So I think in our view, a little bit more of an opportunity, a little more headroom there, to see some improvement. We saw some total improvement consolidated this quarter from last quarter. I’ll let Heather talk a little bit about the rollout coming into Mexico and Texas next on the caregiver app.

Heather Dixon, President and Chief Operating Officer, Addus Home Care: Sure. Hi, Matt. It’s Heather here. That rollout is going very well. We’re seeing caregivers really driving some utilization in a nice way in Illinois where we have rolled it out.

As Brian mentioned, next we’ll go to New Mexico and then we’ll follow in Texas where we think we have a little more headroom to see some improvement. That app is really giving caregivers the ability to use the app to gain information that they will find useful to themselves personally, such as their pay expectations, etcetera, but also to just be more efficient. As an example, they can see what the capacity is for their clients. They can actually reschedule a visit directly in the app without visiting or even calling the office. So, we’re seeing that really drives some of the utilization in a positive way.

If I go back to how you started your question, the growth that we’re seeing on a same store basis in revenue and PCS, That was partially due to the rate increases that we talked about in the script, but also just notably an uptick in the billable hours, which we also mentioned in the script. That’s coming in at a very nice rate and that’s partially the focus on hiring and also the fill rate consistency. But we’re seeing of that 6.6% same store revenue growth, over a third of that is actually coming from the billable hours increases.

Matthew Gillmor, Analyst, KeyBanc: That’s great. Thanks. And then, Brian, I was just going to follow-up on the cash flow. It was particularly strong in the quarter and it seems like the Illinois Department of Aging DSOs continue to decline. Is that just normal fluctuation or is there any effort on their part to pay in a more timely way?

Brian Poff, Chief Financial Officer, Addus Home Care: No, think traditionally you’re always going to see a little up and down just based on timing, nothing specific with them. I think we’d like to see this quarter Q1 and Q2 probably had a little bit of a headwind from working cap in both of those quarters. We saw that revert in Q3. Think where we sit today here today, we have I think a net a little over $5,000,000 benefit from working cap changes. So, consistent, but it’s all just timing related, nothing specific.

Matthew Gillmor, Analyst, KeyBanc: Got it. Thank you and welcome to Heather as well.

Heather Dixon, President and Chief Operating Officer, Addus Home Care: Thanks, Matt.

Conference Operator: The next question comes from Ben Hendrix with RBC Capital. Please go ahead.

Ben Hendrix, Analyst, RBC Capital: Thank you very much and welcome Heather. Just wanted to follow-up on that prior line of questioning in terms of the organic momentum you’re are seeing. How are you thinking about, especially in light of the strong Texas rate increase and what you are seeing in Illinois, the hiring trends into 2026, is this strong volume growth that we saw kind of how we should think about a jumping off point for organic growth in 2026? Thanks.

Brian Poff, Chief Financial Officer, Addus Home Care: Yes, Ben, this is Brian. I can jump in. I think what we’re seeing really on the hiring front, Rick mentioned 113 hires per business day, the highest mark we’ve seen all year. So, I think we’ve gotten some good momentum on that side. The labor market seems to be pretty consistent.

I think to your point exactly when you got almost 10% rate increase in Texas, margins are going to be pretty consistent, so the caregivers are going to get some increases there. Or we’ve seen that in the past in other markets where caregivers are we have the ability to pay more that traditionally has benefited hiring on the other side of that. So, we’d anticipate seeing something similar in Texas, which is a big market for us. I think it kind of plays all back into our overall thesis. If the rates are there where we can hire more caregivers, that’s always going to help us on the organic volume side.

So, I think we feel like we’re in a good spot here toward the end of 2025 headed into 2026, have some good momentum on that side. We’ve been talking about it for a bit. We really are targeting trying to keep above that kind of 2% year over year volume growth. We’ve kind of been at it or just below it early this year seeing 2.4% this quarter. It was really nice and we hope to keep that momentum going into 2026.

Ben Hendrix, Analyst, RBC Capital: Great. Thanks. And just to follow-up also on your commentary about the complementary home health and hospice assets in specific markets. Obviously, a lot of uncertainty in home health, but solid rate update in hospice. How is that kind of changing your appetite right now?

What would you expect in the near term in terms of how you’re going to allocate capital to those markets where you’re looking for that three legs of the stool? Thanks.

Drew Anderson, Unspecified, Addus Home Care: Yes.

Dirk Allison, Chairman and Chief Executive Officer, Addus Home Care: We’re always interested in home health in overlap markets where we can put them together with personal care and hospice. I think you see what we’re seeing in New Mexico and Tennessee is validation of the strategy, which we believe home health where home health plays for this company. As we look to increase our home health segment, we will be careful. Obviously, the the rate discussion that’s out there now has has kinda lowered the temperature for anybody to be able to do anything of size in home health. So we’ll continue to monitor that.

But, again, remember, home health for us is truly an add on to our personal care and hospice business. And strategically, just like we’ve done in the past this past year, if we find companies that have home health in a market where we have these other two services, we’re not opposed to going ahead and pull the trigger. Great. Thank you.

Conference Operator: The next question comes from Brian Tanquilut with Jefferies. Please go ahead.

Brian Tanquilut, Analyst, Jefferies: Hey, good morning guys and congrats again on the quarter. Maybe Brian as I think about 2026, I know we’re obviously not giving guidance, but as I think about your ability to drive margins, I think we can build the building blocks to EBITDA on revenue. But how are you thinking about the margin opportunity as we think about next year?

Brian Poff, Chief Financial Officer, Addus Home Care: Yes, Brett. I think the main thing to keep in mind as we continue to grow top line and if we’re continuing to see that kind of consistent growth, particularly in PCS and Hospice, we should get some additional leverage on G and A. I think that’s been our model all along. We’re not going to grow those cost bases at the same rate. So, thinking about just bottom line margin year over year, would expect to see some benefit from that in 2026.

Everything else being the same, I think obviously what we do in the mix and M and A can play into that as well. If we’re a little more active on the clinical side, there’s a little higher margin profile. But business as it is, I think it’s more leverage on G and A cost with top line growth.

Brian Tanquilut, Analyst, Jefferies: Got it. And then setting aside the fact that we’re still waiting for this home health rule, we’ll see when it is. But how are we thinking or how are you guys thinking about the home nursing business within your book? I know there are some moving pieces there. So just curious what efforts are being put into place to drive inflection there?

Brian Poff, Chief Financial Officer, Addus Home Care: Yes. I think we talked about a little bit, I think in the last couple of calls, Brian, where we have really kind of three key markets in our home health business, New Mexico, Illinois, Tennessee, all through acquisition. We’ve done a lot of things over the last, I’d say, nine months or so to really kind of get processes standardized, really trying to get the profitability levels straight. I think still on the growth side, we have not kind of seen that take off. Think particularly in Tennessee, we’ve got some new leadership in there to really try to kind of get that thing moving in the right direction.

So, outside of the rate, we’d like to see that business start to perform a little bit better. We’re looking for probably a higher level of some leadership to come in and help with that as well. Heather can jump in on that here in a sec. But I think a focus of ours, but really to Dirk’s point, a real benefit for us there, not necessarily the operations of that business per se, but the benefit that it provides indirectly into hospice. It’s something you don’t see on a segment level in the results of home health, but they’re definitely benefiting in the hospice area.

But I’ll let Heather talk a little bit about that as well.

Heather Dixon, President and Chief Operating Officer, Addus Home Care: Yeah, I’ll pick up on that. We’re working on several initiatives within that business, and we’re seeing admissions volumes stabilize on a same store basis. But what we’re seeing is a decline in recertifications, which is attributable to what Brian’s referencing. I’ll talk about that for a minute. That’s the bridging program that we’ve put in place to make sure that patients are receiving care in the right setting and the right level of care.

And that’s been in place for a while in New Mexico, and then we rolled it out, as Brian mentioned, within the last twelve months in Tennessee. And we’re seeing it really start to take off there. And what we’re seeing is an uptick in our admissions from a hospice perspective in those markets from these referrals. And in fact, as we mentioned earlier, Mexico and Tennessee, over twenty five percent of our hospice admissions come from the home health segment and from this program. So, we see this as a real benefit in having the three levels of service in the markets that we serve, and particularly between home health and hospice, where Home Health is just really a complementary line of service to the other businesses.

Jared Haas, Analyst, William Blair: Awesome. Thank you.

Conference Operator: The next question comes from Joanna Gagu with Bank of America. Please go ahead.

Drew Anderson, Unspecified, Addus Home Care: Hi, good morning. Thanks so much for taking the question. So maybe first couple of, I guess, numbers and clarifications. On your comments about fourth quarter gross margins, it sounds like it implies maybe high 32 or so for gross margin. And then if we assume G and A, call it below 21%, I guess it implies adjusted EBITDA above 13% or so in Q4.

Is that the right way to think about numbers?

Brian Poff, Chief Financial Officer, Addus Home Care: Yes, Joanna, I think that’s fair. I think if you look at the seasonality of our business and our company, Q4 is always the high watermark for margins for us. I would expect that to be the case. We’ve been solidly in the 12s all year, but Q4 based on what we see right now expectation of being 13 over for that quarter, I think is definitely reasonable.

Drew Anderson, Unspecified, Addus Home Care: Okay. Thank you. And I guess you answered the other question around the margins for next year. So, if you grow high single digits or low double digits revenue, right, it’s going to be G and A leverage. So growing from, call it, 12.5% or so for this year adjusted EBITDA, that should be kind of our thinking about next year right, growing from that level.

Brian Poff, Chief Financial Officer, Addus Home Care: Yes, I think that’s fair. Think back to my earlier comment, I think top line growth is always going to get us some additional leverage on G and A. So everything else being equal, obviously, everything can change at any time as we all know, but everything else being equal, that be the case.

Drew Anderson, Unspecified, Addus Home Care: Okay. Now my question on the topic of rate updates from your key states. So you did that great, Texas and Illinois. And on your last call, you alluded to the idea that there’s an expectation that New Mexico, Pennsylvania might have some rate increases. It doesn’t seem like Pennsylvania is in a position to increase rates, right?

So, is there a risk to have a rate cut in that state in particular? And any other states that you’re on the lookout for? And maybe give us a little bit update on New Mexico. Thank you.

Brian Poff, Chief Financial Officer, Addus Home Care: Yeah. I think New Mexico, when they get into their budget cycle for next fiscal year, which is still early, we’re not in that range yet. I think we’re hopeful that their consideration of a rate increase this year, that will be something that they’ll consider next year. And obviously, we’ll be you know, working with, you know, the industry on advocacy for that in the next cycle. I think on Pennsylvania specifically, yeah, I think they had considered a rate increase this past year.

I think with everything going on there, I think our most recent intelligence, what’s going on in their budget or inability to get a budget, would probably put us in a position of thinking we’ll probably be flat again. I don’t think we’re anticipating a rate cut, but probably not as optimistic as we were about a rate increase Pennsylvania in this next budget.

Drew Anderson, Unspecified, Addus Home Care: And any other states that we should be looking out for in terms of any major increases or I guess potential for cuts?

Brian Poff, Chief Financial Officer, Addus Home Care: No, nothing that we’re aware of at this point. I think usually a lot of those states when they get into session, it’s going to be probably more early twenty six, early to spring time, but nothing that we are aware of that will be worth mentioning at this point, no.

Drew Anderson, Unspecified, Addus Home Care: Great. Thank you so much.

Conference Operator: The next question comes from A. J. Rice with UBS. Please go ahead.

Drew Anderson, Unspecified, Addus Home Care0: Thanks. Hi, everybody. And welcome on board, Heather. Maybe just to think broadly about the acquisition and deal pipeline. I know that’s an important part, obviously, of your ongoing inorganic growth strategy.

Can you just update us on what you’re seeing competitively across the main buckets? How pricing is evolving? And is what does the pipeline look like, whether it’s pretty deep or a lot of things are just on hold right now?

Brian Poff, Chief Financial Officer, Addus Home Care: Yes, A. J, I think I characterized it. We haven’t seen probably a lot of shift from where we have been probably over the last, I’d say, year and a half or so. Most of the things that we’re looking at are in our pipeline today are probably on the smaller side similar to Del Cielo we just closed, Helping Hands that we closed last quarter. In markets that we’re in providing some density, low multiples, PCS on the small end are still going to be as low as four and five times, even larger size could be maybe seven, maybe eight.

That really hasn’t moved much. I think on the clinical side, there’s been a couple of large, very large hospice organizations that traded this year for very high multiples. It seems like there maybe was a little bit of moderation coming in, but still probably mid teen type expectations, so still a little pricey on that end. We would always be interested in hospice, but probably at a little lower price point. And then home health, as Dirk kind of mentioned earlier, you know, there is some benefit to us and how that feeds into or works with personal care and hospice.

So, there’s opportunities on the home health side, it’s going to be probably on the smaller side for us, in markets that we’re in kind of overlapping. You know, those are things we’d be interested in, but those tend to still be a little on the inexpensive side. So if they’re smaller, it could be upper single digits, maybe it presses closer to 10 plus times if it’s more sizable. But obviously, we’ll always work into our performance on any home health deal, what might be going on with race. We’re very cognizant of that as well.

I think what we’re hearing from folks externally thinking about 26, there could be some things that might be on the larger side that might you know, be available. Some of those might be interesting to us. So early conversations, nothing really to report, but, you know, we’re hopeful maybe there’s a little more opportunity for us to do some some larger chunkier things next year.

Drew Anderson, Unspecified, Addus Home Care0: Okay. And I know you’ve been asked a couple of times about home health, but say we get the rate notice and it gives clarity as to sort of the trajectory, is that enough do you think to maybe step up the pace in home health a bit? Or do we need some time for everything to settle out, assuming we get some kind of a rate action, either the six point four percent is proposed or maybe they happen or something like that? Does it take some time for the market to sort itself out? Or do you think people will react pretty quickly and you might be able to step up the activity in Home Health then?

Dirk Allison, Chairman and Chief Executive Officer, Addus Home Care: Well, I think getting this year’s rate finalized will certainly take one of the issues that’s on the table as far as doing much in the home health industry. The problem you’re going to have, AJ, is that unless they come out with a fix for the potential clawback, which is what 400 basis points of this year’s potential rate reduction. If they do away with that, are they going to send a signal that that is passed and won’t come back up again? As long as that overhang is still out there on any potential clawback, I think it’s going to continue to keep the acquisition in the home health market a little moderated in the future.

Drew Anderson, Unspecified, Addus Home Care0: Okay. All right. Thanks so much.

Conference Operator: The next question comes from Jared Haas with William Blair. Please go ahead.

Jared Haas, Analyst, William Blair: Hey, good morning. Thanks for taking all the questions. I wanted to ask another one on your comments about the value of having overlapping operations in New Mexico and Tennessee and the impact that has on referrals between home health and hospice. So I’m curious, when you look at the data, do you actually see a meaningful difference when you have the overlap there? Do you actually see a meaningful difference in either patient satisfaction, quality of care, anything to that effect when you kind of have that density of service offerings in a particular market?

Heather Dixon, President and Chief Operating Officer, Addus Home Care: Yeah. Hi, Jared. This is Heather. We see a couple of benefits that are coming from that referral ability from home health to hospice. The first, it’s better for the patient and for the family to be in the right setting of care and to be receiving the right level of care.

So we see that benefit that comes through. We also see continuity of care from those two different settings of care from home health to hospice. So what we’re seeing from the patients and from their families, of course, once they’re in hospice has been positively influencing some of the decisions that we’re making as we see those hospice admissions that are really supporting or being supported by home health.

Jared Haas, Analyst, William Blair: Got it. That’s helpful. And then I just wanted to follow-up as well on the comments around clinical labor. And it sounds like that’s been stable for at least a few quarters now. I think you mentioned outside of a few challenging urban markets, though.

Just wanted to understand that a little bit better. So what specifically is sort of challenging in some of those markets? Is that largely just a function of kind of the broader reimbursement environment makes it harder to compete on wages in certain areas or something else we should be thinking about?

Heather Dixon, President and Chief Operating Officer, Addus Home Care: No, I think it’s really largely just related to some of the larger urban markets and more specifically on the skilled side. We’re seeing better opportunities for hiring than what we have seen in the past, but as pockets are arising out there or continue to be managed through, it’s very limited to those skilled hires, I would say, and then the urban markets.

Jared Haas, Analyst, William Blair: Okay. Got it. I guess maybe just a point of clarification. If we did get some sort of meaningful relief on the reimbursement rate in the home health space, do you feel like the labor market is such that you would be able to kind of attract the folks that you need to return to more consistent organic growth there?

Drew Anderson, Unspecified, Addus Home Care: Yes.

Jared Haas, Analyst, William Blair: Perfect. Okay. Great to hear. Thank you.

Conference Operator: The next question comes from Raj Kumar with Stephens. Please go ahead.

Drew Anderson, Unspecified, Addus Home Care1: Hi, good morning. Maybe just kind of focusing on hospice. I know the company has kind of talked about making key investments in the team over the past few quarters. And maybe just kind of want to break down what they’ve been able to identify, clearly strong results organically this year. And have they been able to reconcile all of what they’ve identified in 2025?

Or should we expect a kind of multiyear opportunity in terms of being able to display above targeted same store revenue growth for that segment?

Heather Dixon, President and Chief Operating Officer, Addus Home Care: Well, maybe I’ll start with some of the initiatives that we have that are driving the results and then Brian can talk about how we think that will develop from a future perspective. But you’re right, we’re seeing very nice volume growth in that hospice segment. And I think there are a few things that I would point to. The first is just a focus on better execution. That includes a focus on our onboarding and training efforts across the board, but specifically related to the utilization of community liaisons.

We’ve mentioned that we’ve made some leadership changes there and we’ve invested in a sales function that is focused on structured sales efforts and developing local market strategies for business development, including a better utilization of those community liaisons. We’ve mentioned we’re seeing success from that bridge program that we’ve put in place to drive the right referrals from home health into hospice. And we’ve talked about that, that that’s really been something positive that we’re seeing. And so we do see a lot of positive momentum in that hospice business that we’ve seen through the quarter, we’ve seen that building and that we would expect to continue.

Brian Poff, Chief Financial Officer, Addus Home Care: Yes. And Raj, I think obviously 19% organic growth is probably not something we would expect to have into perpetuity. But I think we’ve said for a long time, everything else being equal, we would expect our hospice business to have an opportunity to grow in the kind of upper mid to at least upper single digit range. So I think all the changes that we’ve made, I think the comps that we’re seeing over the last year is probably driving some of the percentage increase. But as we get settled into a nice trend, I think that upper single digit range is probably still fair.

So our business we’re going to get the benefit of a little over 3% on rate. So if you think about what that leaves for ADC growth, I think we feel pretty comfortable that we could continue in that range.

Drew Anderson, Unspecified, Addus Home Care1: Got it. And then maybe just on Home Health, kind of fee for service mix trended kind of lower sequentially and year over year. I know there’s been progression on the margin front with that business as you kind of case optimize the whole book. But trying to get a better picture of kind of how margins did trend in this quarter given the mix shift dynamics and there was kind of higher MA mix. So maybe trying to gauge also if there’s any incremental case rate or episodic reimbursement wins on the MA side in the quarter?

Brian Poff, Chief Financial Officer, Addus Home Care: Yes. I think we continue to make a little headway on just getting better rates and working with MA plans and moving to more episodic. That’s really our focus on necessarily Medicare fee for service versus MA, but really episodic versus non episodic. And I think we’ve made some progress there. I think in this quarter’s numbers, you’re seeing a little bit of impact.

It’s small, but Helping Hands was largely MA. There’s a little bit of home health business up there. And I think in Tennessee, we’ve got some contract changes that we’ve gotten done down there that have helped kind of shift a little bit of that business in that Tennessee market. But nothing I think on a high level that I would flag out as being material overall.

Drew Anderson, Unspecified, Addus Home Care1: Got it. Thank you.

Conference Operator: The next question comes from Constantine Davides with Citizens. Please go ahead.

Drew Anderson, Unspecified, Addus Home Care2: Thanks. Just a quick one on Del Cielo. Their website says they also offer other levels of service. So I just wanted to confirm that the only thing you’re getting is just the pure personal care business.

Brian Poff, Chief Financial Officer, Addus Home Care: That is correct. We only purchase the personal care assets of that business.

Drew Anderson, Unspecified, Addus Home Care2: Great. And then just a follow-up on this 25% figure, New Mexico and Tennessee in terms of impacting growth in hospice. You’ve obviously got a PC footprint that’s multiples bigger than what you have in home health. And I was just wondering if you could articulate some of the benefits of being in personal care as it pertains to maybe the growth algorithm in both home health and hospice.

Dirk Allison, Chairman and Chief Executive Officer, Addus Home Care: Yes, thanks. That’s a great question. It’s part of our overall strategy that we’ve been following for a number of years now. We believe that everything starts with personal care. That is something that we have stated before and will continue to state.

The problem with getting a bridge program today as strong as we see from home health hospice from personal care up to other levels of care is the EMR in which we operate today. So if you look at today, we got home care home base in, the home health and the hospice. So everything can be done from an electronic standpoint where we can use, systems to kinda look at our patient base and recommend, levels of care and and changes that may need to happen in the future. The problem we have today with personal care is it’s on a different system. So everything from a bridge process is much more manual.

And so that is why three or so years ago, we started working with Homecare Homebase to develop a strong personal care system that we could put in place and then use going forward to have one EMR so that we could start a bridge program all the way through our levels of care. We are early in that transition. We are still working with home care home based. There are still some things we need to finalize. I think today we have five small states that are using that today, and we’re learning from that.

But the whole plan going forward is to get this on one system so that then you will start to see the same sort, in our minds, the same sort of bridge results that we currently get between home health and hospice. You can then start with personal care. So that again kinda encapsulate encapsulates our entire strategy that we’ve been applying the last four or five years.

Conference Operator: The next question comes from Christian Bourgmeier with TD Cowen. Please press star then 1. Please go ahead, Christian.

Jared Haas, Analyst, William Blair: Hi, good morning. I had a question about the hospice side. Revenue per patient day was really strong in the quarter. And you also cited an improvement in, the Medicare cap cushion. I was curious if this was a tailwind to revenue per PD in the quarter, if there may be a similar dynamic in 4Q?

And then just curious what sort of clinical dynamic drives this Medicare cap liability? Thanks.

Brian Poff, Chief Financial Officer, Addus Home Care: Yeah. I think this is Brian. On the Medicare cap side, Dirk mentioned we had no liability this quarter. We actually took a little bit of a charge in Q2. So I think sequentially you saw benefit of that flow through revenue per patient day.

I think the other thing that impacted this quarter, think just on a year over year basis, we did see some positive effect from the good old implicit price concession or revenue adjustment or whatever you want to call it. But we had some positive experience in collecting some older aged AR and I think that benefited a little bit in this quarter. But nothing that was, I think, overly material. I think just going forward, just talking about CAP, I think we feel like we’re in a pretty good position. I think we’ve had a lot of focus in a couple of locations where we had that issue creeping in.

I’ve done a lot there to make progress on our referral mix and balancing that out is a highlight for us. So, I think, you you look at us historically, we’ve always had probably one or two locations every year that might slip a little bit in the cap. It’s nothing new for us. It’s something that we manage of day to day, but I think we feel pretty good where we are coming out of Q3 and to Q4 that we’re in a good spot.

Ben Hendrix, Analyst, RBC Capital: Okay, got it. Thank you.

Conference Operator: The next question comes from Andrew Mock with Barclays. Please go ahead.

Drew Anderson, Unspecified, Addus Home Care1: Hi, good morning. This is Jeffrey Song on for Andrew. Medicaid payers have been under a lot of pressure recently. Can you help us understand the nature of the dialogue between payers and providers in the home health space in recent months? Thank you.

Jared Haas, Analyst, William Blair: Yes.

Dirk Allison, Chairman and Chief Executive Officer, Addus Home Care: If I understand your question and what you’re trying to get to, I do think the COBRA out there has put some pressure on states with their Medicaid programs. They’re having to look at how do we take the dollars we’re continuing to receive from the feds and apply that effectively to our Medicaid program. And I think that’s where that puts Anna squarely in an important seat in that discussion because if you think of our service, when when we when people are qualified for first care services, they also would be qualified for nursing home services if we cannot keep them in in their home with the amount of hours that the states are giving us. So we have demonstrated to a number of states and a number of our managed care partners through value based care contracts that by following certain protocols, keeping them in the house, we’re able to reduce various aspects of other costs related to those patients that would be covered by Medicaid, whether that’s emergency room visits, whether that’s readmits to the hospital, or quite frankly, SNF where people would end up in twenty four hour SNF care, which is much more expensive to the state.

So it’s our job as an industry. It’s our job as Addus to continue to work with the states to show them the value proposition of if they are looking where to put their dollars for the Medicaid program to be the most effective to make sure that they put it into the personal care business, which is going to save them money overall.

Drew Anderson, Unspecified, Addus Home Care1: Great. Thank you.

Conference Operator: This concludes our question and answer session. I would like to turn the conference over to Dirk Allison for any closing remarks.

Dirk Allison, Chairman and Chief Executive Officer, Addus Home Care: Thank you, operator. I want to thank each of you for taking the time to join us on our earnings call today, and I hope you all have a great week.

Conference Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.