Ladies and gentlemen, thank you for standing by and welcome to the Addus HomeCare Corporation's Second Quarter 2020 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I will now like to hand the conference over to your speaker, Dru Anderson. Thank you. Please go ahead, ma'am.

Thank you. Good morning and welcome to the Addus HomeCare Corporation second quarter 2020 earnings conference call. 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 2020 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 Addus’ filings with the Securities and Exchange Commission and in its second quarter 2020 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 President and Chief Executive Officer, Mr. Dirk Allison. Please go ahead, sir.

Thank you, Dru. Good morning everyone. And thank you for joining us for our 2020 second quarter earnings call. With me today are Brian Poff, our Chief Financial Officer; and Brad Bickham, our Chief Operating Officer. As usual, I will begin with some overall comments and then Brian will discuss the second quarter results that we issued yesterday afternoon. Following our comments, we would be happy to respond to any questions. Yesterday we filed our 2019 10-K along with our first and second quarter 10-Qs for 2020. With these filings, we are now back in compliance with SEC filing requirements. As you know, our delayed filings were the result of a disagreement between our current and former auditors on how to handle an approximate $10 million non-cash charge over a 10-year timeframe. To move past this issue, we engaged our current auditors, PwC, to re-audit our financial results for 2017 and 2018 that were previously audited by another Big Four accounting firm. That work was completed over the past 120 days and the expected results, which are not material, are reflected in our 2019 10-K. I have to thank both our Addus team as well as the team at PwC for their dedicated work over the past few months, which has gotten us to this point. Even with the pandemic, these individuals stayed focused and completed this task while continuing to perform their normal duties. As you saw with the financial results we announced yesterday, Addus had another solid operating performance in the second quarter of 2020. Our revenue for the second quarter was $184.6 million as compared to $148.9 million for the second quarter of 2019, an increase of 23.9%. Adjusted earnings per diluted share for the second quarter of 2020 increased to $0.73 from $0.54 in the second quarter of 2019, an increase of 35.2%. Our adjusted EBITDA for the second quarter of 2020 was $18.7 million as compared to $12.5 million for the second quarter of 2019, an increase of 49.9%. Our adjusted EBITDA margin increased to 10.1% for the quarter. During the second quarter of 2020, we saw a decrease in our revenue of approximately $8 million due to the effect of the COVID-19 virus. This reduction occurred to varying degrees in all three segments of our business. As we have discussed on previous calls, we continue to see improvement in our same-store revenue as we have progressed through the most recent phase of the pandemic. While we cannot say for certain, we estimate our third quarter revenues will be negatively impacted approximately 2% to 3% as compared to our first quarter run rate. As we reported, our operating cash flow in the second quarter was strong at approximately $30 million, increasing our June 30, 2020 cash balance to $158.5 million. Due to our strong financial position and following discussions with our board, we announced last month that we would be returning the approximate $6.9 million we had automatically received from the Care Act provider relief fund relating to our Medicare business. We have made the decision to return these funds primarily for two reasons. First, we have a strong capital structure with little debt and solid ongoing operations, mitigating the need for these funds to continue our normal operations, and allowing others who need these funds to have access to this money. Second, we lack comfort with the continuing uncertainty around federal reporting and audit requirements that may be imposed on companies in the future who choose to participate in the stimulus program. Based on these reasons, both our management and board felt it was appropriate to return these funds. As we previously discussed on July 1, 2020, the City of Chicago raised the city's minimum wage by $1 to $14 per hour. This accelerates the move to a $15 per hour minimum wage ahead of what the state of Illinois had already passed. Our team has been working with state leadership to secure funding to offset this accelerated wage increase. Our rate adjustment to cover the Chicago minimum wage increase is included in the fiscal year 2021 state budget which was passed in May of this year. This increased rate to offset the City of Chicago minimum wage increase will be effective statewide on January 1, 2021, subject to federal approval. Addus will experience an increase in our unreimbursed cost of approximately $1.2 million a quarter for each of the next two quarters until this reimbursement rate is effective. I also want to update you on certain developments pertaining to the New York state budget. After implementing a 1% reduction for all Medicaid providers in January 2020, the state has continued to deal with lower levels of funding due to the COVID virus. The recently passed fiscal 2021 budget did include an additional 0.5% reduction to the Medicaid rate effective April 1 of this year and gave the Governor, Lee White, the ability to make additional changes needed as the budget progresses. We continue to work with our New York State Associations to try and mitigate any future reductions and to help educate the state leaders of the value of home and community-based services. We believe our home-based care is cost-effective and significantly safer than having patients being forced into a facility setting in today's challenging environment. For the second quarter of 2020, our personal care same-store revenue growth was 9.7%, driven largely by our rate increases in Illinois, which were effective on July 1, 2019 and July 1 of this year, offset by the impact of the COVID-19 virus. We should continue to see solid same-store growth in our Personal Care segment over the next few quarters driven primarily by the Illinois rate increase, as well as the expected reduction in primary patient-driven call-offs caused by the COVID virus. We did see our Personal Care same-store census decrease from 38,099 to 35,479 due to the number of patients who had requested a hold in their service. Our census calculation includes those patients who have received care within the past 30 days. If a patient has placed their service on hold for more than a 30 day period, they are no longer included in our census calculation. As we seek the return of these patients when they become more comfortable with services provided in their homes, our personal care census should continue to recover. For the second quarter of 2020, our hospice same-store growth was 2.7% as our hospice program saw slowdowns in volume due to facility access restrictions as well as temporary closures of some of our recurring physician offices. Hospice admissions have steadily improved since our April lows and are currently running approximately 24% higher than our April admission numbers. However, we haven't fully recovered on the admission front as some facilities continue to impose significant restrictions on outside parties accessing their facilities. We continue to see increases in our current admission and census trends in the early part of the third quarter. Our home health same-store revenue decreased by 4.3% as we saw the effects of hospitals closing their facilities for elective surgeries during the quarter. While actual home health volumes were up, our revenue was adversely impacted by an increase of approximately 200 basis points in our non-Medicare patient mix and a reduction in our institutional early referrals under PDGM. Our Medicare admissions volume recovered in June and is currently running slightly ahead of our pre-COVID admissions numbers. In addition, our mix of institutional early Medicare admissions has also recovered to pre-COVID levels primarily due to the resumption of elective surgical procedures in many locations. As we announced on July 1, we closed on the acquisition of A Plus Health Care, a provider of personal care services in the state of Montana. This acquisition makes us one of the largest providers of personal care services in the state, which is in line with our strategy of creating and maintaining strong geographic coverage in the states where we operate. I want to welcome all of the new team members who have joined us at Addus. As most of you know, acquisitions have been and still remain an important part of our growth strategy at Addus. We have strategically maintained a strong capital structure which allows us to take advantage of acquisition opportunities as they occur. While we took a short pause from pursuing new acquisitions during the early phase of the COVID pandemic, we are now fully reengaged in identifying and closing additional growth opportunities in all three segments of our business. Our pipeline remains strong and while we are being appropriately cautious, we continue to believe that we can close additional acquisitions during 2020. As our financial results indicate, our team, both caregivers and support staff have done a wonderful job of staying committed to our mission during the past five months of the virus. Our front-line caregivers have been heroic in their willingness to continue serving the needs of our patients in their homes despite the risk of potentially contracting the COVID-19 virus. They have shown the professionalism that so many of our company's healthcare workers have demonstrated. There is no way for me to share how grateful I am for their dedication other than to say thank you. In addition, our administrative team has continued to work hard whether in the office or through remote means, providing the much-needed back office support that allows our front-line caregivers to do their job as well as continuing the difficult task of sourcing and acquiring proper PPE for both our caregivers and administrative staff. I am thankful for the patience of our team as leadership has continued to both create and modify policies and procedures to keep them safer as new information emerges. While we are seeing improvements in our call-offs, where a patient or a family decides to skip their normal personal care service visit due to their concerns about having someone, even a caregiver, in their home, we continue to experience a higher-than-normal patient-driven hold on services in certain markets, particularly New York and Chicago. As we discussed on our first quarter earnings call, we began to acquire PPE in our non-clinical segment, something that we have not needed in the past. Going forward, we believe we will need to continue supplying masks, gloves, and other necessary PPE to our personal care and clinical teams in order to help protect them and our patients from the spread of this virus, and to provide our patients and their families with an added layer of comfort while allowing our teams into their homes for service. We believe this additional expense will be necessary for the next several quarters or until an effective vaccine or treatment is developed and widely available. As we've been able to provide this higher level of PPE to our team, we have started providing services to COVID-positive and presumed positive patients. Our current case volume is equally split between our hospice and personal care service lines with only a few COVID-positive patients in our home health segment. We are committed to continuing to take care of these patients and help them as they deal with this virus. For the past five months, it has been challenging, but I remain optimistic about the future of the homecare industry and Addus in particular. We have a dedicated team of leaders and team members that have demonstrated their ability to continue to meet our mission, even as this virus has disrupted the way we have historically operated. I believe the coming months will provide many opportunities for us to continue to achieve our strategic goals for Addus. I want to close my part of this call by saying thank you to all the employees of Addus. The past few months have been a difficult time for our country and our industry. Through it all, you have continued to live our missions and values while serving our patients. It is important now more than ever for our patients to be in their homes where we can keep them safe from this virus while providing much-needed care. This is a very important responsibility to both our patients and their families, and I know that you will continue your efforts as we help fight this pandemic. With that, let me turn the call over to Brian.

Thank you, Dirk and good morning everyone. Yesterday after the market closed, we filed our 10-K for 2019 as well as our 10-Qs for both the first and second quarters of 2020 with the SEC. The delayed filings of the 10-K and first quarter 10-Q related to the completion of the re-audit of the company's financial statements for 2017 and 2018. PricewaterhouseCoopers, our auditors, have now completed that process and as a result of yesterday's filings, we are back in full compliance with the SEC. Moving on to our second quarter financial results. Addus had a very solid performance for the second quarter of 2020 with volume levels not as heavily impacted by the ongoing COVID-19 environment as we originally thought possible. Total net service revenues for the first quarter were $184.6 million. The revenue breakdown is as follows: Personal care revenues were $156.3 million or 84.7% of revenue, hospice care revenues were $24.5 million or 13.3%, and home health revenues were $3.8 million or 2% of revenues. These results demonstrate the sustained demand trend for home care services in the midst of a challenging environment with the ongoing impact of the COVID-19 pandemic. We have a strong business model in place and believe we are well positioned to continue meeting expected demand and to see favorable growth in the second half of 2020. In addition to the incremental benefits of the four acquisitions we completed in 2019, we completed an additional acquisition on July 1, 2020 with the closing of A Plus Health Care in Montana with $7.4 million in annual revenue. We expect that acquisition will be immediately accretive to our 2020 financial results and while we continue to evaluate and pursue other acquisition opportunities, we are being deliberate and cautious in our approach due to the current operational and economic environments. Other financial results for the second quarter of 2020 include the following: our gross margin percentage was 29.8% compared with 26.7% for the second quarter of last year primarily due to the higher margin profile of our skilled business. For the year-to-date period, our gross margin improved to 29.6% from 26.6% for the first six months of last year. As Dirk mentioned, we do anticipate some margin pressure in the second half of 2020 related to the increasing minimum wage in Chicago on July 1, 2020 without an offsetting reimbursement increase which will not be effective until January. General and administrative expense was 22.8% of revenue for the quarter, an increase from 20% last year primarily due to the cost of the re-audit and acquisition expenses. Adjusted G&A expense was 19.9% for the second quarter, an increase from 18.6% for the prior year quarter on a higher mix of skilled business with a higher G&A profile and lower leverage as a result of reduced revenues from COVID. The company’s adjusted EBITDA increased to $18.7 million for the second quarter of 2020 compared to $12.5 million in the second quarter of 2019. Adjusted EBITDA margin was 10.1%, an increase from 8.4% for the second quarter of 2019. Our EBITDA margins continue to benefit from the increasing concentration of skilled business compared with prior periods, but we do anticipate some short-term pressure from the Chicago minimum wage increase effective July 1, 2020 that will not be offset by the reimbursement increase until 2021. Adjusted net income per diluted share grew 35.2% to $0.73 for the second quarter from $0.54 for the second quarter of 2019. The adjusted per share results for the second quarter of 2020 exclude a loss on sale of assets of $0.02, COVID-19 expenses net of $0.01, M&A transaction expenses of $0.09, restructuring and other costs of $0.12 which primarily included the cost associated with the re-audit and non-cash stock-based compensation of $0.06. Our adjusted per share results for the second quarter of 2019 exclude M&A transaction expenses of $0.04, restructuring and other costs of $0.02 and non-cash stock-based compensation of $0.09. Our tax rate for the second quarter of 2020 was 23.6%, within the range of our expectations. For the full-year 2020, we continue to expect a tax rate of 23% to 25%. Days sales outstanding were 61.8 days at the end of the second quarter of 2020 compared with 67.5 days at the end of the first quarter of 2020. During the quarter, we continued to see strong payment trends from a majority of payers including the Illinois Department on Aging with their DSO at 62.5 days. With the potential pressure put on state budgets by declining tax revenues related to the COVID pandemic, we will continue to work closely with our state and managed Medicaid plans in an effort to maintain cadence for ongoing payments that are as normal as possible. Our second quarter net cash provided by operations totaled $30.4 million and at June 30, 2020, the company had cash on hand of $158.6 million. In addition to the strong cash flows from our payers during the quarter, we also benefited from the deferral of employer payroll taxes allowed under the Cares Act of approximately $7.1 million. As a result of our strong liquidity position and ongoing business operations, we have unenrolled from this program going forward. With only $60 million of bank debt at quarter end and $223.5 million in availability under our revolver, we continue to have substantial capacity to support our acquisition strategy and look forward to continued pursuit of attractive acquisition opportunities. This concludes our prepared comments this morning. I would like to thank you all for being with us. I’ll now ask the operator to please open the line for your questions.

[Operator Instructions] Our first question comes from the line of Scott Fidel from Stephens. Your line is now open.

First question just in terms of thinking about gross margins in 3Q and 4Q and relatively to what you called out. So would it just be as simple as taking the $1.2 million quarterly impact from Chicago and taking that into the gross margins impacting 3Q or 4Q? Are there any other factors that you think are worth falling out that we should be thinking about when modeling gross margins in the back half of the year?

Yes, Scott. This is Brian. I think that's the right way to look at it, that is a primary driver of change into Q3 will be the $1.2 million that Dirk and I mentioned. We’ll take additional costs above the gross margin line without additional reimbursement. So that will impact the gross margin percent as well as EBITDA percentage.

And second question, just interested if you can give us an update on the pacing of new caregiver recruitments in 2Q. I know that there has been an opportunity due to higher unemployment. Providing maybe some loosening in the labor market and then also just around the opportunity to recruit family caregivers at home given the home-based dynamics. And so just interested in terms of what you guys were seeing in the 2Q on those fronts and how you think that could influence organic growth trends in the back half of the year and then looking out to 2021?

Thanks, Scott. This is Brad Bickham. What we've seen as far as on the family caregiver front, we have seen the ability to bring on additional family caregivers and markets. However, our recruiting has been a little bit of a struggle I think primarily due to the additional unemployment benefits that are out there. Now, of course, we recently had a chance to reduce those numbers from the $600 down to $300 or $400 depending on whether or not the states pick up the funding. I wanted to see how big of an impact that has had. But we're getting a lot of inbounds, but frankly we're also seeing a lot of folks that won't show up for training or for the interviews. So they filed those applications, but recruiting is honestly a little down. I expect it to improve with the lower reduction from the $600 down to a lower number.

Understood, yes that makes sense. And then just a last question for me just in terms of anything to call out on Medicaid rates and budgets and early insights into FY 2021 outside of the specific impact from Chicago and whether that has represented anything else that you’re seeing out there right now that we should be thinking about?

Yes, Scott. I think just - we're continuing to obviously watch anything happening with the state budgets. As Dirk mentioned, we’re watching New York closely to see kind of what happens with that process. Your thought obviously has in their budget the rate increase we referenced. Really, we’ve seen during the quarter with COVID and temporary rate increases from a handful of states as well, which has been helpful. We'll see how long those continue, but Dirk do you want to add anything about kind of future in 2021?

Yes. I know, certainly our Medicaid side of the business has one of our challenges over the next year or two going to be the state budgets and how they recover from this particular item that we're going through this issue with the pandemic. That being said, I think one thing to remember is our service is keeping folks in their homes isolated somewhat is one of the ways to try to protect them from this virus. It also is an alternative to those folks potentially being in a nursing home setting which we all know has been a problem during this particular virus for our elderly population. So, we believe that most states understand the situation of either paying for nursing home care, which is more expensive two to three times the care of our home by service or keeping people in your home, which is not only safer, but much preferred by the families and patients or consumers themselves. So, we feel that we have a great story to tell even with that we know we have to work strongly and hope that the state budgets are able to continue to what they need to do in the way of taking care of their elderly.

Our next question comes from the line of Brian Tanquilut from Jefferies. Your line is now open.

I guess Dirk just a quick question on the Chicago stuff. So I know $15 is what the target is. So what is the path there? What’s the progression from $14 to $15, and then what are the offsets that they've put in place? I know you guys talked about a January 1 offset. Is there a second offset scheduled to cover that $15 or do we need to wait again for legislation at the state level to cover that $15 number?

Yes Brian. This is Brian. The way it currently is structured so, moved to $14 July 1 of this year in the budget as offset reimbursement increase that will get back to January 2021. Chicago will go to $15 next July. Currently there is nothing in legislation to offset that increase that will be considered as part of next year's budget cycle.

And we have, Brian, we have as a company, distinguished state leaders about the need to cover the cost of next year's $1 increase too and we've received good reception. So we'll see and continue to work on that to try to get it into 2022 fiscal budget.

And then I guess, Dirk, since I have you, any updates you can provide us on Medicare Advantage and value base. In terms of where those initiatives are right now?

As far as value-based and the Medicare Advantage we continue to work with companies along those lines. We have been a little bit late with the pandemic; some of the programs that we wanted to start earlier have been somewhat delayed, but we continue to work with a number of them. We’re seeing along the value-based care. We're seeing a number of opportunities that we can work with and see how they will benefit both ourselves as well as the companies that we're working with and we will continue to do that. We do still believe that from the Medicare Advantage, while we probably will see a few more people for 2021 have a personal care benefit and we are talking with those folks about providing the care in the markets in which we operate. It still seems to be that we're at the hard bit - it's more of a marketing approach than a cost reduction approach. And so, we still believe that probably that next level of change in this particular aspect with Medicare Advantage is probably a 2022 timeframe instead of 2021.

Yes. This is Brad. I agree with you, Dirk. We have seen some plans that have increased the hours that are available under the personal care benefit, but again not material numbers. I think with respect to our value-based programs that we're working on, those have been put on the back burner with some of the payers that we're working with due to COVID. But those are starting to work again into late Q3 early Q4.

Our next question comes from the line of Matthew Borsch from BMO Capital Markets. Your line is now open.

I was hoping you just comment on the - I know you did in the press release reaffirm your interest in acquisitions. What do you see right now the ability to engage in deal discussions, the willingness to do so given both the disruptions but as well as perhaps the economic pressure from PDGM and COVID generally?

This is Brian. I think we definitely are seeing the M&A market start to heat up like several others are. It was nice to get the A Plus acquisition closed in July. I think early in the COVID environment obviously made things a little more difficult when you're talking about due diligence and conversations, et cetera. I think as most people have begun to adapt to a virtual setting, Zoom calls and the like, I think it has alleviated some of those issues. And so I think there are a lot of individuals out there that are willing to be more receptive at this point. So at this point, we’re into Q3 and the end of the year in Q4; our pipeline still has several opportunities kind of across all three segments to be honest. So I think we still feel very confident in our ability to continue to move forward on acquisition opportunities maybe not quite as normal. But fairly close I think in the abilities of what we have today technology-wise.

And can you also - I just have a separate note, what you’re seeing in terms of volumes for - sorry if I missed this but July and into August and how did that parse out geographically if you have any granularity around that given the evolution of where COVID cases have emerged?

This is Brad. What we’re seeing in the volumes, and our low point honestly was April really in all three segments. Home health actually rebounded first although it was actually hit the hardest. So we’ve seen Medicare referrals on the home health side steadily increasing to where they're actually running comparable to our pre-COVID levels. On the hospice front, we have also seen a steady increase in admission activity there as well. So we're continuing to see some good upside and April was our low point there. Personal care, it's interesting; you have to look at the different markets. New York is still recovering. They were the hardest hit. Chicago, in our Illinois market, Chicago has been kind of slower to rebound as well, but as far as kind of the geographic, I mean we've been somewhat fortunate in the fact that we're kind of hit early in the larger markets. And so, where we're seeing kind of upticks and holds and that sort of thing is typically in our smaller markets right now.

Our next question comes from the line of Matt Larew from William Blair. Your line is now open.

I was wondering if you could maybe quantify the impact that patient homes had on the same-store census trends and then maybe just help us understand in a situation where geographies where COVID is dissipating or is perhaps not as widespread and you have adequate PPE what is the remaining hold up in terms of a patient hold? Is it unemployment in the sense there is a family member now available to be at home and so, you need the elimination of unemployment benefits to get that going? Again, just trying to understand what sort of the final hang-ups are there?

This is Brad again. What we're seeing, I mean I think you pointed out that one of the issues is out there where you have programs that do not have or permit family caregivers and that you have a family member who is now unemployed. They can take care of mom or dad; you’re seeing them step up particularly with kind of really - the acuity level is pretty low, and you're dealing with kind of lower hour cases. So you're seeing those individuals put services on hold or continuing to have them on hold. As far as what’s the remaining kind of barriers, I think it’s again even with adequate PPE to keep both our caregiver and the client safe, there are still some concerns out there. We continue to reach out to those clients and inquire whether or not they want to restart services. And we have actually seen some pretty good success with that. I mean give you an idea of, on hold they literally moved from our normal rates doubled in April which were a low point. Those have steadily improved through from May, June, and into July. And I insist they will continue to see some improvement in August.

And then, we've heard some of the skilled providers talk about share gains or perhaps some goodwill that was created by ones who take on COVID patients. Just curious either on the skilled PCA business and on the unskilled side if you’ve seen an increase in referral sources or new interactions with referral sources because of your ability to respond quickly to the, in terms of secured PPE and the ones who take on COVID patients?

This is Brad again. I don't think we've seen a significant increase in referral activity because of us taking on COVID patients. Now I do think it is bringing in some goodwill probably more so on the PCA side; we have actually had in certain markets where we have received referrals from the plans because the existing personal care firm won't take that client back on because of a lack of PPE or lack of just being uncomfortable with taking care of COVID-19 positive. So we have actually deepened our relationships with a couple of our referral sources on the PCA side due to our willingness to not only continue services to our clients who may have gone into the hospital or into a facility or coming out after testing positive but also taking on clients from other service providers in the market because of our willingness and ability to take on the COVID-19 patient.

Our next question comes from the line of Matthew Dale Gillmor from Baird. Your line is now open.

I wanted to ask about the PC volume metrics. I was curious about what you're seeing from a new admission or referral perspective and if there was any kind of an interruption from COVID-19 and if that’s been resolved. I think you had talked about maybe the billable hours metric, but just curious from an admissions standpoint. And then could you, I think you may have mentioned it but perhaps I missed it. Could you just give us a sense for what happened with the decline in the census that didn’t seem like that impacted your hours very much so just what types of patients were rolling off?

Hi, Matthew, it’s Brad. On the admission front, I mean, just like what we've seen in the home health and hospice side, we have seen an increase in admission activity in pretty much across the board in our big larger markets. I think we still have some of the smaller markets that have been more recently impacted by COVID-19 that have not fully rebounded. But that admission frames just like in home health, just like in hospice, are continuing to tick up month-over-month. Not quite back to pre-COVID levels. I think caregiver recruitment in certain markets is still problematic; that is preventing us from taking on a lot more of the referrals that we'd like to and when you look at your second question relating to the dynamic of the decline in census, yes an increase of hours for clients, again it's typical what - I think what we’re seeing - we saw and are experiencing is clients that don't need a lot of service are the ones that can put services on hold without feeling the ill effects. Those that are higher hour clients, generally speaking they really need that service in some cases to get out of bed in the morning. So they are not putting those services on hold. So, I think what you're - that the dynamic is those lower hour clients are the ones that we're seeing buy a greater impact on hold versus the higher hour clients.

And then one other follow-up. I think maybe Dirk had mentioned that third quarter revenues would be negatively impacted by 2 to 3 points because of COVID versus first quarter run rate. I guess, I was curious about kind of consistent with the trend you saw in July, or was maybe July a little bit below that and you’re expecting or seeing some improvement in August through September?

Yes. I think - this is Brian. I think we definitely have continued to see, as Brad mentioned, kind of an uptick in July and we expect that to kind of continue in September, August and September. I would say it's probably not a sharp increase, June, July, August, September. I think that curve is definitely flattening out. So I think the overall 2% to 3% could take time to account.

[Operator Instructions] Our next question comes from the line of John Ransom from Raymond James. Your line is now open.

Let's just delve into labor for a minute. A couple of questions. So what's your rate of caregivers as percent of family members now and has that changed meaningfully during the pandemic?

Yes. I think we've run probably about 30%, 35% family caregivers company-wide. I don't think that number has materially changed. I haven't looked at it, but I don't think it would have moved the needle dramatically.

And what’s your - I’ll ask you for a economic prognosticator, but - let's assume unemployment benefits go from $600 to $400. Does that have the potential at all for bringing some people off the frontlines who are maybe more willing just to take a check and not work?

Yes, this is Brad. Again I think that certainly should help some and I think more so depending on what the market that we're in. And looking at it, we don't see in certain markets it really has not impacted as much the unemployment benefit. But overall, that is a gating item. We are looking to provide some incentives to try to get some people off the sidelines, and we are going to experiment with definitely in a couple of markets. But I would say it's going to help. I think it's still going to be a little bit of a challenge the $400.

Right. And I know you guys have to do some fairly extensive upfront training. How is that going? I assume that's all remote now on Zoom and whatnot, but is that creating any issues in onboarding?

Yes, I mean it has. Because certain states made changes where you could either defer training or do it online and we are taking advantage of that where we can. There are some basic orientations that we have to do, and in some states they did not change the training requirements. So, in those cases, we have had to reduce the class size in order to socially distance within the training facility. We’re trying to also look at kind of increasing the frequency of those classes. I think one of our biggest challenges is say you've got 12 people that have been invited to a training, and six show up. So, I think we're taking steps to invite more to training, understanding that we will have a fairly higher no-show rate than we typically have had.

And then, just the staff working from home and corporate is that - what percent of your people are now working at home versus before the pandemic and is that - as you come out of this do you think you're going to have maybe some structural cost savings that you might not have had otherwise?

Yes, John. On the corporate side, we have obviously our office here in Frisco in Texas, and our support center up in Chicago as well, and they came up in March and quickly moved to full remote. So nearly 100% of our personnel are working virtually. I think that has worked very well for us. We've been continuing to be very productive. Obviously, we're able to close the acquisition in the midst of that and see that environment going forward for at least the next several months, but I think we've got a handful of people that will come in doing normal tasks, checking mail and things like that, but we're largely remote on the corporate side. I think as far as future potential cost mitigations, Dirk do you want to express that?

Yes. For us, the going remote has been something that we have quite frankly, it's a little bit surprising that we can do it so quickly and do it so well. There have been some benefits that we've all obviously learned from being remote that maybe we can take into the future. Some of our costs have been lower because of that. Long-term, we do want to get back together as a company both in - not only all our field offices largely which still have a few people coming in to those. But in our Downers Grove and Frisco corporate office, we’d like to get folks back once we get a vaccine or an effective treatment. So we will be planning on doing that hopefully early in 2021. But we have learned through this that maybe some of the travel that we've had in the past may not be as important going forward. We’ll look at the ways and the learnings that we've had through this remote operation to see how we operate in the future. But largely all that being said, we still want to get our people back together as soon as possible.

Well, Dirk, as you get back at least, it’s still better not to be on airplanes as much, I hope. And that’s probably I thought would be helpful.

There you go, there you go.

So just lastly for me, if we just take labor as a very important topic to you and we kind of measure all the inputs in terms of turnover and onboarding and output quality. Has this pandemic had a material effect one way or the other?

Well, I think when you look at on the labor side, it certainly has impacted our ability and I think primarily because of the unemployment benefits to bring caregivers on. So we struggle a little more on the hiring front than we have in the past even with a very robust economy. I am optimistic that with lower unemployment benefits going forward we should see some improvement and honestly, there are some folks that will likely enter the caregiver workforce that hadn't considered it in the past. So I think when you look at the hospitality industry and that sort of thing, it’s going to be quite slower to rebound and we should be able to I think find some really good workers from that pool of people.

And John, typically, if you look historically for Addus, as the economy and the unemployment tighten up and as unemployment has gotten higher, the economy has not been as good. Historically, that's been a better time for us to be able to hire and bring folks on. We believe, we will occur over the next year or two as the unemployment, which is a temporary measure, obviously to help the economy as that continues to move forward and eventually comes to an end. We do believe that the recruitment efforts will return to a more historical level and hopefully somewhat better.

Our next question comes from the line of Mitra Ramgopal from Sidoti. Your line is now open.

Just had a follow-up on the acquisition front. I was wondering if you've seen any - in the environment any of your competitors generally having some difficulty maybe reaching out to you more in terms of a potential transaction or if it’s just too early to see anything on that front?

Yes, Mitra. I think as I mentioned earlier, I think we definitely are starting to see the M&A market open back up. So, I think the volume over the last few months has definitely increased from the volume we saw earlier this year. I think there are a lot of potential opportunities out there for folks that were waiting to kind of see how PDGM plays out. I think we have some targets that obviously have the revenues impacted by the COVID environment. Maybe it wasn't a great time to sell, but as the sort of the rebounds are getting more comfortable with potentially moving forward with maybe a planned transaction that they may have to wait for a few months. So I think from our perspective, we see a lot of opportunity through the end of this year. I think as we talked on our last call, we always would like to close a $100 million around or even more per year. Obviously, we’re a little delayed this year ahead of the Montana acquisition. It’s still a decent opportunity for the back half of this year. And I’m sure about $100 million in revenue. But I think there are some potentials.

And then just as a follow-up on that, given as you said the uncertainties itself on the state budgets, et cetera. How are you weighing your priority in terms of keeping cash on hand versus maybe pursuing acquisitions?

Yes. I think we've obviously been very conservative as a management team. We're not a group that really looks at higher leverage as a place we like to be, especially in this situation that we're in today with COVID. I think and what we've seen in the last several months, cash flow from our peers and the way our volumes have rebounded I think makes us feel more opportunistic on the M&A front and really to use some of the cash and obviously we’ve a pretty large balance available on our credit facility. So I think early on, we wanted to keep things close to the vest, but I think at this point we feel that things have stabilized to the point where we can be more aggressive in M&A.

Thank you. At this time I'm showing no further questions. I would like to turn the call back over to Dirk Allison for closing remarks.

Thank you. Operator, I want to thank everyone today for their interest in Addus and for being part of our call. I hope you have a great week.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.