Addus HomeCare Corp Q1 FY2022 Earnings Call

Good day and welcome to the Addus HomeCare's First Quarter 2022 Earnings Conference Call. All participants are in a listen-only mode. After today's presentation there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Dru Anderson. Please go ahead.

Thank you. Good morning and welcome to the Addus HomeCare Corporation's first quarter 2022 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 2022 or beyond. 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 first quarter 2022 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. At this time, I would like to now turn the call over to the company's Chairman and Chief Executive Officer, Mr. Dirk Allison. Please go ahead, sir.

Thank you, Dru. Good morning and welcome to our 2022 first quarter earnings call. With me today are Brian Poff, our Chief Financial Officer; and Brad Bickham, our President and Chief Operating Officer. As we do on each of our earning calls, I will begin with a few overall comments and then Brian will discuss the first quarter results in more detail. Following our comments, the three of us would be happy to respond to your questions. I want to start by welcoming Cliff Blessing to Addus as our new Executive Vice President, Chief Development Officer. Many of you know Cliff from his long tenure leading the development team at Encompass Home Health. With our strategy to build further capability in skilled home health and hospice, along with our strong personal care platform, we were fortunate to be able to add someone with Cliff's background experience in acquiring and developing home health and hospice operations. I know I speak for our leadership team and board in saying how excited we are that Cliff has joined our team. Yesterday, we announced our financial results for the first quarter of 2022. Especially in light of the challenges we saw in the first quarter, we are proud of our strong operating performance with year-over-year growth in revenue, gross margin, and earnings. Our team was able to produce solid results for the quarter despite the pressures from increased employee quarantines due to the Omicron variant of COVID and a tight labor environment, which I will discuss in more detail in a few minutes. Our revenue for the first quarter of 2022 was $226.6 million, as compared to $205.3 million for the first quarter of 2021, an increase of 10.4%. Adjusted earnings per diluted share for the first quarter of 2022 were $0.77, as compared to $0.74 for the first quarter of 2021, an increase of 4.1%. Our adjusted EBITDA for the first quarter of 2022 was $22.4 million, as compared to $19.3 million for the first quarter of 2021, an increase of 16.1%. As we have discussed on our last call, during the first quarter of 2022, we saw the effects of the Omicron surge, which began in late December. As the Omicron surge continued into January, we experienced the highest caregiver quarantine levels at any time going back to the beginning of the COVID pandemic, with approximately 4% of our personal care team impacted. While this most recent surge began to decline at the end of January, it was closer to the second week of February before we saw both our hiring numbers return to a more normal level and an immaterial number of caregivers entering quarantine. As of today, we continue to have a significantly reduced number of caregivers in quarantine, but we are continuously monitoring the prevalence of the BA.2 Omicron sub-variant. With many caregivers quarantined in January, in some cases up to two weeks and personal care builds by the hour of service, we did see an expected reduction in personal care hours served of approximately 6% for January 2022. However, by March, our hours per business day had increased to levels we saw in the fourth quarter of 2021. Omicron also negatively affected our home health segment in the first quarter in New Mexico, where the majority of our home health operations exist. Our revenues were negatively impacted by several hospital systems temporarily halting or limiting elective surgical procedures due to the rise of Omicron cases. While this impacted our early quarter home health revenues, by March, we saw our admissions and financial results return to normal. One of the most challenging issues we face today is labor pressure. This includes dealing with the challenge of hiring enough employees to care for our consumers and patients, as well as the increasing wages due to competition in the current labor environment. During our first quarter, we experienced continued pressure in both of these areas. As previously discussed, we have seen the biggest impact of recent wage increases in clinical care. In our home health and hospice segments, market pressures resulted in wage increases of approximately 4% to 5%, depending on clinical specialty. We have also experienced an increase in turnover in these segments, as the demand for the limited number of clinicians increases across various healthcare settings. In March, we began to see improvement in our ability to hire and retain our clinical team. We believe that our upward adjustment in wages, along with a general improvement in the labor market, will potentially help moderate any continuing wage pressures during the remainder of 2022. During this last quarter, we began to have more visibility into how our states will be utilizing federal ARPA funding, for home and community-based service investments. At this time, 18 of our personal care states have approved ARPA spending plans and have either initiated payments or made public comments on the intended use of funds. A summary of those plans is as follows: eight of our states are providing lump sum payments. The majority of these funds will be passed through to our caregivers. Even when funds are passed completely to our team, we intend to design the payments to help us retain current caregivers and assist with our recruiting efforts. We have identified approximately $21.1 million in ARPA-related funding that we expect to receive from these states. Seven of our states will provide permanent rate increases for caregivers averaging $2.22 per hour. We expect that we will benefit from a margin on these increased rate increases. Three of our states will provide a temporary extension of rate increases averaging $2.17 per hour. We have also seen the finalization of many state budgets for the next fiscal year, including Illinois and New York. In Illinois, Governor Pritzker signed the fiscal 2023 budget on April 19. We are pleased to have the certainty of a $0.70 per hour statewide rate increase, which will cover the July 1, 2022, Chicago cost of minimum wage increase. However, as was the case in previous years, this rate increase will not be effective until January 1, 2023. As we have experienced over the last couple of years, this timing means we will have two quarters of an approximate cost of living minimum wage increase of $0.40 per hour for our Chicago-based caregivers before we receive the offsetting rate increase. Once we receive the rate increase from the state, we expect to be able to adjust wages for our remaining Illinois employees. In New York, the governor also signed the fiscal 2023 budget on April 19. One of the provisions included in this budget, which impacts providers, is an amendment to the CDPAP Fiscal Intermediary RFO process, which we have been discussing over the last year. The amendment authorizes all entities that submitted an RFO application, and who serve a minimum number of clients, to be able to contract with the department and continue operations in all counties contained in their application. This amendment positively impacts Addus and allows us to continue providing CDPAP services. While we're excited to continue our long history of serving CDPAP clients, we will focus on limiting our services to working with payers that maintain a reimbursement rate allowing us to make a reasonable return on our services. The New York budget also eliminated the 1.5% Medicaid rate reduction from last year's budget. Additionally, Medicaid rates were increased 1% effective April 1, 2022. Together, this means we will see a 2.5% increase on a portion of our New York Business. While this is good news for our current New York Business, we will continue to focus on ensuring our managed care payers properly pass through these positive adjustments. With these changes to New York Medicaid reimbursement, we expect to see our New York operations stabilize. Now, let me discuss our same-store revenue growth for the first quarter of 2022. Our same-store revenue growth for the personal care segment, exclusive of New York's CDPAP program and initial ARPA funds, was 0.9% compared to the first quarter of 2021. However, exclusive of the impact of the Omicron variant, our same-store growth in personal care would have been within our target range of 3% to 5%. We are happy to see that our March performance showed a strong recovery from the Omicron impact early in the quarter. Our personal care hires per patient day increased to 84 hires in March, compared to 64 hires per day in the difficult month of January. With strong hiring levels continuing into April, we expect to see our personal care same-store revenue growth return to our targeted range. Turning to our clinical operations, our home health segment same-store revenue was down 0.5% from the prior year due to the discussed Omicron impact on volumes in January and early February. Although we were affected by this issue in the initial months of the quarter, we saw March home health admissions increase steadily, with the overall favorable trend continuing into April. We are excited about our home health operation as it complements our personal care services. We will continue to focus our efforts on expanding these services into our existing personal care markets. As we anticipated, our hospice same-store revenue continued to improve, increasing by 4.4% over the first quarter of 2021 despite the Omicron challenges. We experienced solid same-store admission growth in the first quarter with admission volume increasing 1.9% over the first quarter of 2021 and 2.4% over the fourth quarter of 2021. Medium length of stay improved to 20 days in the first quarter compared to 17 days for the first quarter of 2021. We did, however, see a slight decrease in minimum length of stay on a sequential basis. Medium length of stay increased in March 2022 to 22 days, with this improvement continuing in April. Overall, our hospice average daily census (ADC) increased to 3,320 for the first quarter of 2022, inclusive of our JourneyCare acquisition completed during the quarter, compared to an ADC of 2,400 for the first quarter of 2021. As I mentioned, we closed on our acquisition of the operations of JourneyCare hospice, a not-for-profit hospice with an excellent clinical reputation and one of the largest hospice operations in the Chicago metro area. We now provide all three levels of care in our northern Illinois market and will continue to look for opportunities to increase our home health and hospice coverage throughout the state. Our team has been working diligently on the integration of JourneyCare into Addus. While there are several integration items remaining, I'm happy to report that we are on track with this process within our expected timeline and budget. The JourneyCare team has been a great addition to Addus, and I am excited about the potential for growth in this historically strong personal care market for Addus. With the addition of Cliff Blessing to lead our development efforts, we are reaffirming that acquisitions remain an important part of our growth strategy. While we remain interested in all three levels of care, our current focus is on acquiring additional companies that operate in our personal care markets and in the homecare segment. We continue to believe that acquisitions will remain important in achieving our 10% minimum annual revenue growth target, which we have maintained for the past few years. Over the past year, we have participated in various projects with managed Medicaid payers to demonstrate our ability to help them improve outcomes for high-cost, high-risk members. We have begun to collect and analyze data demonstrating that our efforts engaging both personal care and clinical services have a positive impact on overall health costs and outcomes. These projects have been focused on efforts to limit hospital readmissions, unnecessary emergency room visits, and closing care gaps. I'm excited to report that we are now ready to move to the next phase in our value-based care efforts. Over the next 12 months, we will begin investing in additional technology and analytics to enable us to scale these activities and increase the number of our patients covered under a value-based approach. These investments will enhance our ability to effectively use the data we are collecting to improve clinical outcomes and better manage the costs associated with these patients. While we still believe any substantial increase in our revenues from these efforts is two or three years away, we are excited about the potential of our value-based care approach. The COVID pandemic has reaffirmed the value of taking care of elderly and disabled consumers and patients at home. Home remains one of the safest and most cost-effective places to receive care and is also the desired place for most elderly individuals and their families. Over the past two years, we have continued to invest in planning, preparation, and materials to assist us in safely and effectively fulfilling our role as an important care provider, allowing these consumers and patients to stay at home. We believe that this heightened awareness of our value in home-based care is favorable for our industry and will continue to be a growth opportunity for our company. We also understand and appreciate that our operations and growth depend on our dedicated caregivers who work incredibly hard providing outstanding care and support to our consumers, patients, and their families. I am thankful for each of our team members and proud of the job they have done in the past and continue to do every day. It is important that we all focus on achieving our mission of putting our patients first. With that, let me turn the call over to Brian.

Thank you, Dirk, and good morning everyone. As Dirk noted, Addus had a solid financial performance for the first quarter despite the challenges related to the pandemic and a higher caregiver quarantine rate to start the year. Our results reflect positive volume trends in all three segments compared to the first quarter last year, as well as improved direct margins. Personal care benefited from the most recent rate increase in Illinois, and we are also encouraged by the continued progress in hospice care with improved revenue trends and sequential growth in admissions. While our median length of stay for hospice care has not fully returned to pre-pandemic levels, we're optimistic that this trend will continue to improve in 2022. Our home health segment volumes were impacted by the reduction in elective procedures during the Omicron wave, but we saw strong upward volume trends exiting the quarter. As Dirk referenced, total net service revenues for the first quarter were $226.6 million. The revenue breakdown is as follows: Personal care revenues were $169.6 million, or 74.8% of revenue. Hospice care revenues were $47.7 million, or 21.1% of revenue. First quarter 2022 hospice care revenues include the addition of the hospice division of Armada, which we acquired as of August 1, 2021, and two months’ results from the acquired operations of JourneyCare, which closed on February 1, 2022. Home health revenues stood at $9.3 million, or 4.1% of revenue. These results include the operations of two acquisitions, the Home Health Division of Armada, and Summit Home Health, which closed on October 1, 2021. We have a strong business model across the care continuum and believe we are well-positioned to meet anticipated increasing demand in all our operating segments. In addition to organic growth, we added approximately $30 million of acquired annualized revenues in 2021, and $55 million of acquired revenues to date in 2022 with the acquisition of JourneyCare. We continue to evaluate and pursue acquisition opportunities from a pipeline of potential transactions that meet our investment and strategic criteria. As expected, we believe there is positive momentum in the number of opportunities coming to market as provider volumes recover from the Omicron surge, and we are well-positioned to be active in the M&A arena. Other financial results for the first quarter of 2022 include the following: our gross margin percentage was 31%, compared with 29.8% for the first quarter of 2021. We continue to benefit from a higher mix of clinical services, including the JourneyCare acquisition completed in the first quarter. We also saw a full quarter of positive impact from the most recent Illinois rate increase in personal care, effective November 1, 2021. These margin increases were partially offset by our anticipated unemployment tax base reset on January 1. While we expect to see our payroll tax burden lighten in the second quarter, we will begin to feel the effect of the Medicare Sequestration Holiday expiration, with a 1% cut restored on April 1, and the additional 1% cut restored effective on July 1. We anticipate these changes will negatively impact our gross margins by approximately 20 basis points in the second quarter, and an additional 20 basis points in the third quarter. G&A expense was 23.5% of revenue, slightly higher than the 22.1% of revenue a year ago, primarily due to a higher level of acquisition expenses and a higher proportion of clinical services with a higher G&A profile. Adjusted G&A expense was 21.1% of revenue, up from 20.4% for the same period last year. The company's adjusted EBITDA increased to $22.4 million, compared to $19.3 million a year ago, an increase of 16.1%. Adjusted EBITDA margin in the first quarter was 9.9%, compared with 9.4% for the first quarter of 2021, and reflects the impact of our higher proportion of clinical services, which now comprise 25% of our revenues. Adjusted net income per diluted share was $0.77, compared with $0.74 for the first quarter of 2021. The adjusted per-share results for the first quarter of 2022 exclude the following: acquisition and de novo expenses of $0.13 and non-cash stock-based compensation expense of $0.11. The adjusted per-share results for the first quarter of 2021 exclude the following: COVID-19 expense benefit net of $0.03, acquisition and de novo expenses of $0.08, restructuring and other costs of $0.02, and non-cash stock-based compensation of $0.12. Our tax rate for the first quarter of 2022 was 27.9%, up from 19% for the first quarter last year. This increase is primarily due to the change in the excess tax benefit generated by our stock compensation. For calendar 2022, we continue to expect our tax rate to be in the 25% to 27% range. DSOs were 52.4 days at the end of the first quarter of 2022, compared with 53.9 days at the end of the fourth quarter of 2021. We continue to see consistent payments from the majority of our payers and expect this trend to persist, especially in our key markets where the states currently have budget surpluses. Our DSO for the Illinois Department of Aging for the first quarter of 2022 was 43 days, consistent with the end of the fourth quarter of 2021. Our first quarter net cash provided by operations totaled $6 million. While cash collections were strong, we were negatively impacted during the quarter by the timing of certain payroll-related payments. We expect to see the benefit from these timing differences in future quarters. After funding the JourneyCare acquisition, which closed on February 1, 2022, and as of March 31, 2022, the company had cash of $124.8 million, $259.9 million of bank debt and capacity and availability of $377.6 million and $109.6 million respectively under our revolver. With the ability to fund a significant portion of our acquisitions through cash flow and a strong commitment from our bank, we remain well-capitalized to continue our targeted acquisition strategy in 2022. This concludes our prepared comments this morning. We would like to thank you for being with us. I'll now ask the operator to please open the line for your questions.

We will now begin the question and answer session. The first question comes from Scott Fidel with Stephens. Please go ahead.

Hi. Thanks and good morning everyone. I want to ask just my first question regarding the macro dynamic and market starting. I think a little bit more around the potential of an economic slowdown ultimately starting to play out at some point, particularly given what's happening with rising rates. I'm interested in how you guys actually think about the impact of a slowing economy on your businesses, certainly reflecting that your businesses aren't necessarily as economically sensitive. And just your thoughts on whether that can actually possibly sort of open up the hiring environment somewhat relative to what you guys have been experiencing over the last year, obviously?

Thanks, Scott. Let me try to take that one. Really, if you look at the economic issue out there in the industry, whether it's slowing down or not, and as it does slow down, if it does, there are two things that will be affected. One, think in terms of revenues, which as you mentioned, we're really not quite as sensitive to. The significant issues in past years have been state budgets in which we operate, with 75% of our revenue still coming from Medicaid programs. The good part of where we sit today is that with all the money given to the states through the federal program, our states are probably in the best financial position they've been in for a long time. So, even entering into a slowdown, we feel fairly confident that our states' budgets are in good shape and should continue to handle the costs associated with Medicaid plans like ourselves. On the other side, you mentioned labor. One finding has been that when the economy slows, it tends to be beneficial for us, especially on the non-clinical side, as we look to hire caregivers. If you look at the caregivers we hire, many of ours are minimum wage caregivers with fewer opportunities elsewhere, which seems to modify somewhat when we see an economic slowdown. If history is a precursor of what we might see if the economy continues to slow, we would expect our ability to hire to continue to improve, as we have seen in the last couple of months, as we discussed about the quarter. Therefore, we expect an economic slowdown to have minimal effect on our company at this time.

Okay. Got it. And then just a follow-up - maybe looking a bit more near term and interested if Brian, maybe you can provide some framing on 2Q relative to how the Street has positioned things. Right now, Street's projecting around 6% sequential revenue growth and an EBITDA margin of just around 9.9%. You guys did mention several of the tailwinds around the ARPA funding, and obviously, you have the closed deals and just, as we think about the margins that the Street's anticipating, hoping to get some of your comfort level with how consensus is modeling the next quarter. Thanks.

Yes, Scott. I'll provide some general comments as we exit Q1 and move into Q2. I think we had indicated on our last call what we expected the impact of Omicron to be in Q1. We expected things to return more back to normal as we headed into Q2. I think our expectation remains the same today. Exiting the quarter, I think we're back to our pre-Omicron surge numbers. Hiring numbers have been strong. It's still early in Q2. But I think we're optimistic that you'll see the quarter return to a more normal base into April, May, and June. Regarding margins, those changes will be offset. If you think about sequestration coming in, it's a small piece of our business overall, but we'll get a bit of relief from the payroll tax burden, which will offset that into Q2. In Q3, you see another 1% cut as part of sequestration, and we'll experience a little impact from the Chicago cost of living adjustment increase, which should not be to the same level we saw the last couple of years as it's a much smaller increase this year. However, we are fairly comfortable with our trajectory heading out from Q1 into Q2.

And, Scott, let me just comment on the ARPA funds to clarify. While we're expected to receive a lot of ARPA funds from the various states, most of that will not be revenue, if any. The way it'll be handled, since a lot will be a direct pass-through to caregivers, the benefit for the company will be in how we tailor those funds. We will design those funds to help retain the caregivers we have today and to assist with recruiting new caregivers. So, understand that there may not be a significant financial bottom line impact of the vast majority of those funds, but there should be a long-term improvement in our ability to hire and retain people because of them. Just wanted to clarify that.

Okay, great. Thank you.

The next question comes from Joanna Gajuk with Bank of America. Please go ahead.

Good morning. Thanks so much for taking the question. So actually, on this last point, in terms of the states accessing the federal funding, I appreciated the $20 million that you expect to receive from, I guess, sounds like from the eight states. That will just flow through to the caregivers. But you also mentioned seven states that will implement rate increases. So I guess, the question here is the timing for this. Because it sounds like this would be the one piece where you might expect benefit to margins, just having the higher rates. So I guess, could you clarify how long those temporary rate increases will be in place?

Yes, Joanna, thank you. Let me clarify regarding the rate increases. There are two aspects: permanent rate increases and temporary rate increases. With permanent rate increases, some states dictate that all funds go to caregivers while others allow us to retain a small part. Thus, we believe there will be a small margin gain on the permanent rate increases, although it probably won't be to the same level normally seen in regard to our margins for those types of services. On temporary rate increases, those are excluded from our numbers as they are temporary in nature and often entirely passed to caregivers. In terms of ARPA funds, we're observing that not much of an effect is expected on the bottom line; instead, it will flow through to caregivers that should assist with recruitment and retention.

Joanna, this is Brian. Just one quick follow-up on that too, just kind of breaking that down. In some of our larger markets, if you're considering New Mexico, New York, etc., those are the states providing lump sum payments. The rate increases Dirk mentioned primarily come from our smaller states, so it's not significant either. I just wanted to clarify that as well.

Got it. It's very helpful. Thank you for that. But I guess, when it comes to timing, are we talking about these starting to flow through next quarter, or this year?

Yes. We're expecting to start seeing some of those payments made in early this year and into the second quarter and Q3. We will definitely see many of the plans we've reviewed provide those funds in 2022 for sure.

Great. One more follow-up. You also mentioned investments needed to move forward towards value-based care models. It's good to hear and I appreciate the comment that in terms of seeing the benefits, it could still be a couple of years away. But just trying to get more color on these investments: how meaningful would they be? Are they also coming in a lump amount, any incremental color you might provide on those? And are they coming this year?

Yes. The investment in value-based care is primarily focused on improving our ability from a software standpoint to gather and review data. It will be immaterial to the overall nature of our business. It may slightly affect operational numbers but in an immaterial basis, with expenses to be spread out over the next 12 months. So, it shouldn't have a material effect on our numbers.

Thank you. Regarding your comment on M&A and the new hire, Cliff who joined from Encompass, it's great to see that team developing. Could you discuss whether you are observing more assets available for acquisition, or do you anticipate needing to wait for sequestration to fully return before seeing an increase in deals on the home health side?

Yes. This is Brian. I think we’re very excited about his, obviously, depth of experience, particularly in the skilled sectors, which have been a significant focus of our M&A over the last couple of years. We expect to see a little more increase in volume and inbound deals coming in the spring as people get further away from the Omicron surge. I think it's fair to say we're seeing a higher number of inbound calls recently. So I think this is coming to fruition. We’ve expected more skilled home health assets to come to market the last couple of years, which hasn’t fully materialized yet. Nonetheless, we’re hopeful to see more opportunities in 2022, and with Cliff coming on board and his specific experience, we feel very opportunistic.

Great. Thank you.

The next question comes from Matt Larew with William Blair. Please go ahead.

Hi. This is actually Madeline Mollman on for Matt Larew. On hiring, we're wondering, have you seen much interest in your CNA training programs? And what percent of new nursing hires are coming through that program? Where do you see that trending long term? How much of your new nursing hires would you like to come from personal care employees being trained as CNAs long term?

Yes. This is Brad. Our CNA program is designed to elevate our caregivers who come in. We actually offer a scholarship program. They apply and must meet certain criteria as caregivers. Then, we pre-pay their fees for certification and education. We’ve seen a promising pipeline; it's limited to a few states, notably New Mexico and a little in Ohio, but we’re seeing good traction. These individuals either stay in our personal care segment or transition into home health or hospice. It really focuses on elevating our personal caregivers to practice at a higher level and provide opportunities in not just personal care but also in home health and hospice.

Great. Thank you. And in terms of value-based care, I know you mentioned working to build it out through software improvements. We were wondering if you've seen an increase in interest from managed care plans wanting to incorporate personal care in their offerings, wanting to partner with you as you work through these pilot programs?

Yes, we have. It’s interesting; we’ve consistently believed that personal care along with clinical services holds significant value in a value-based care setting. We believe we’ve demonstrated this with our managed Medicaid pilots out of New Mexico. As I mentioned earlier, we’re beginning to gather data proving our efforts lower care costs. We’re observing managed care organizations express interest and understand personal care's importance. In fact, we have the opportunity to expand beyond New Mexico and engage with other MCOs in different markets. We believe having both personal care and home health services is valuable for value-based care.

Great. Thank you so much for the insight.

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

Hey, good morning, guys. Dirk, I guess, my first question for you. Anecdotally we're hearing that recruitment or interest for a lot of companies has picked up, likely due to the pickup in inflation, and also employees are now willing to take more hours. Just any color on what you're seeing in terms of applications and new hires?

Yes, Brian. This is Brad. We’ve witnessed a nice pickup in candidate flow since January. Unfortunately, with the Omicron variant, we couldn't seize that opportunity as much due to internal staff quarantines. But that trend continued into February and March on the applicant side. And regarding hiring, we exited March with our hiring numbers reaching their highest at 84 per business day, and that trend has continued into April as well.

Okay. That's awesome. And then, regarding the hospice side of the business, I mean, obviously, length of stay is still significantly lower. I know some of that's due to some of the new acquisitions, but how are you thinking about the pace of recovery for hospice length of stay in ADC?

Yes. It's been a slow and steady recovery, I would characterize it. We saw our hospice median length of stay, which strongly influences ADC, decrease slightly from Q4 to Q1. That being said, we ended back at 22 days, the same as Q4, and April also recorded 22 days in median length of stay. Our referrals and admissions have steadily improved since early in the pandemic. So the trend seems positive overall.

Awesome. Appreciate it. Thank you, guys.

Thanks, Brian.

The next question comes from Mitra Ramgopal with Sidoti. Please go ahead.

Yes. Hi. Good morning. Just wanted to follow up on the M&A front first. Do you expect the higher interest rate environment to alter your acquisition strategy? And could you comment on changes in valuations, especially on the hospice side and personal care?

Mitra, this is Brian. I think just on the interest rate side, we've indeed seen a hike, and know there are more expected later this year. However, I don't believe that materially impacts our acquisition strategy. If you look at us today, we've executed a few deals, and net of cash on hand, we're still just over one-time leverage. We're in a very favorable position to continue making acquisitions. Going forward, depending on the size of the deals, for example, JourneyCare, we used up a significant cash amount for that deal. Our borrowing is minimal. We can also potentially fund a lot of our acquisition strategy through cash flow, which lessens any worry about rising interest rates. Deal flow, as we've stated, is improving; we’ve observed a higher number of inbound calls, but we think there will be some compression in valuations.

Okay. Thanks. And just quickly, in terms of your mix in caregivers. What percentage would you say is related to family versus no relation?

Yes. It's around 35% of our caregivers being family members to the total caregivers.

Okay. Has that number remained stable? Or do you see it evolving to skew more towards family caregivers given the current environment?

It's been stable over the past several years. We haven’t really seen that number change primarily because Illinois has such a large market for us, where a higher proportion of family caregivers exist.

Okay. Thanks for answering my questions.

This concludes our question and answer session. I would like to turn the conference back over to Mr. Allison for any closing remarks.

Thank you, operator. I want to thank you all for your interest in Addus and for being part of our earnings call today. We hope you have a great week.

This conference is now concluded. Thank you for attending today's presentation. You may now disconnect.