Addus HomeCare Corp 10-Q for FY2025 Q1
Addus HomeCare Corp (ADUS)
About this 10-Q
Addus HomeCare Corp filed this 10-Q on May 6, 2025, covering the quarter ended March 31, 2025 (FY2025 Q1).
Headline figures
Quarter ended March 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $337.71M
- up 20.3% from $280.75M a year earlier
- Net income
- $21.23M
- up 34.1% from net income of $15.83M a year earlier
- Diluted EPS
- $1.16
- up 19.6% from $0.97 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number
(Exact name of registrant as specified in its charter)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated Filer |
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Non-Accelerated Filer |
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Smaller Reporting Company |
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Emerging Growth Company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of April 29, 2025, Addus HomeCare Corporation had
ADDUS HOMECARE CORPORATION
FORM 10-Q
INDEX
2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
ADDUS HOMECARE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31, 2025 and December 31, 2024
(Amounts and Shares in Thousands, Except Per Share Data)
(Unaudited)
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March 31, 2025 |
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December 31, 2024 |
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Assets |
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Current assets |
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Cash |
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$ |
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$ |
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Accounts receivable, net of allowances |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net of accumulated depreciation and amortization |
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Other assets |
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Goodwill |
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Intangibles, net of accumulated amortization |
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Operating lease assets, net |
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Total other assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders' equity |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued payroll |
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Accrued expenses |
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Operating lease liabilities, current portion |
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Government stimulus advances |
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Accrued workers' compensation insurance |
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Total current liabilities |
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Long-term liabilities |
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Long-term debt, less current portion, net of debt issuance costs |
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Long-term operating lease liabilities |
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Deferred income tax |
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Other long-term liabilities |
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Total long-term liabilities |
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Total liabilities |
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$ |
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$ |
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Stockholders' equity |
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Common stock—$ |
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$ |
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$ |
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Additional paid-in capital |
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Retained earnings |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)
3
ADDUS HOMECARE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2025 and 2024
(Amounts and Shares in Thousands, Except Per Share Data)
(Unaudited)
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For the Three Months |
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2025 |
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2024 |
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Net service revenues |
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$ |
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$ |
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Cost of service revenues |
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Gross profit |
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General and administrative expenses |
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Depreciation and amortization |
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Total operating expenses |
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Operating income |
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Interest income |
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( |
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( |
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Interest expense |
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Total interest expense, net |
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Income before income taxes |
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Income tax expense |
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Net income |
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$ |
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$ |
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Net income per common share |
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Basic income per share |
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$ |
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$ |
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Diluted income per share |
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$ |
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$ |
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Weighted average number of common shares and potential common |
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Basic |
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Diluted |
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See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)
4
ADDUS HOMECARE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Three Months Ended March 31, 2025 and 2024
(Amounts and Shares in Thousands)
(Unaudited)
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For the Three Months Ended March 31, 2025 |
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Common Stock |
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Additional |
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Retained |
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Total |
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Shares |
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Amount |
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Capital |
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Earnings |
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Equity |
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Balance at January 1, 2025 |
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$ |
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$ |
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$ |
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$ |
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Issuance of shares of common stock under |
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— |
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— |
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— |
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— |
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Forfeiture of shares of common stock under |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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Shares issued for exercise of stock options |
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— |
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— |
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Net income |
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— |
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— |
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— |
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Balance at March 31, 2025 |
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$ |
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$ |
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$ |
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$ |
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For the Three Months Ended March 31, 2024 |
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Common Stock |
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Additional |
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Retained |
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Total |
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Shares |
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Amount |
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Capital |
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Earnings |
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Equity |
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Balance at January 1, 2024 |
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$ |
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$ |
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$ |
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$ |
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Issuance of shares of common stock under |
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— |
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— |
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— |
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— |
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Forfeiture of shares of common stock under |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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Shares issued for exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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Balance at March 31, 2024 |
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$ |
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$ |
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$ |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)
5
ADDUS HOMECARE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2025 and 2024
(Amounts in Thousands)
(Unaudited)
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For the Three Months |
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Ended March 31, |
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2025 |
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2024 |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by (used in) operating |
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Depreciation and amortization |
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Deferred income taxes |
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Stock-based compensation |
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Amortization of debt issuance costs under the credit facility |
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Provision for credit losses |
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Gain on disposal of assets |
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— |
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Loss on termination of operating leases |
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— |
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Changes in operating assets and liabilities, net of acquisitions: |
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Accounts receivable |
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( |
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Prepaid expenses and other current assets |
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Government stimulus advances |
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( |
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Accounts payable |
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( |
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( |
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Accrued payroll |
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( |
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( |
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Accrued expenses and other long-term liabilities |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Acquisitions of businesses, net of cash acquired |
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( |
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( |
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Purchases of property and equipment |
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( |
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( |
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Proceeds received from disposal of assets |
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— |
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Proceeds received from divestiture of business |
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— |
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Net cash used in investing activities |
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( |
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( |
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Cash flows from financing activities: |
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Payments on revolver — credit facility |
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( |
) |
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( |
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Payments for debt issuance costs under the credit facility |
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( |
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— |
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Cash received from exercise of stock options |
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— |
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Net cash used in financing activities |
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( |
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( |
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Net change in cash |
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( |
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Cash, at beginning of period |
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Cash, at end of period |
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$ |
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$ |
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Supplemental disclosures of cash flow information: |
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Cash paid for interest |
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$ |
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$ |
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Cash paid (refunded) for income taxes |
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( |
) |
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See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)
6
ADDUS HOMECARE CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Nature of Operations, Consolidation, and Presentation of Financial Statements
Addus HomeCare Corporation (“Holdings”) and its subsidiaries (together with Holdings, the “Company”, “we”, “us”, or “our”) operate as a multi-state provider of
Basis of Presentation
The accompanying Unaudited Condensed Consolidated Financial Statements and related notes have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for Quarterly Reports on Form 10-Q. The accompanying balance sheet as of December 31, 2024 has been derived from the Company’s audited financial statements for the year ended December 31, 2024 previously filed with the SEC. Accordingly, these financial statements do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements and should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2024 included in our Annual Report on Form 10-K, which includes information and disclosures not included herein.
In the opinion of management, these financial statements reflect all adjustments of a normal, recurring nature necessary for the fair statement of our financial position, results of operations, and cash flows for the interim periods presented in conformity with GAAP. Our results for any interim period are not necessarily indicative of results for a full year or any other interim period.
Principles of Consolidation
These Unaudited Condensed Consolidated Financial Statements include the accounts of Addus HomeCare Corporation and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
2. Summary of Significant Accounting Policies
Estimates
The financial statements are prepared by management in conformity with GAAP and include estimated amounts and certain disclosures based on assumptions about future events. The Company’s critical accounting estimates include the following areas: revenue recognition, goodwill and intangibles and business combinations, and when required, the quantitative assessment of goodwill. Actual results could differ from those estimates.
7
Computation of Weighted Average Shares
The following table sets forth the computation of basic and diluted common shares:
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For the Three Months Ended March 31, |
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(Amounts in thousands) |
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2025 |
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2024 |
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Weighted average number of shares outstanding for basic per share calculation |
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Effect of dilutive potential shares: |
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Stock options |
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Restricted stock awards |
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Adjusted weighted average shares for diluted per share calculation |
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Anti-dilutive shares: |
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Stock options |
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Restricted stock awards |
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— |
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— |
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Recently Adopted Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Improvements to Reportable Segment Disclosures, which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in the ASU require, among other things, disclosure of significant segment expenses that are regularly provided to an entity’s chief operating decision maker (“CODM”) and a description of other segment items (the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss) by reportable segment, as well as disclosure of the title and position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The ASU was adopted in connection with the Company's most recent Annual Report on Form 10-K, which included significant segment expenses reviewed by the Company’s CODM, but did not have a material impact on the Company’s results of operations, financial position, or cash flows.
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Improvement to Income Tax Disclosures, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, may be applied on a prospective basis with the option to apply the standard retrospectively, and allows for
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which intends to provide investors more detailed disclosures around specific types of expenses. The new disclosures require certain details for expenses presented on the face of the Consolidated Statements of Operations as well as selling expenses to be presented in the notes to the financial statements. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with
3. Divestiture
Effective May 20, 2024, the Company entered into a definitive asset purchase agreement to sell all of the Company’s New York operations for a purchase price of up to $
8
In connection with this transaction, the Company ceased operations in New York. During the three months ended March 31, 2025, the Company recorded deferred payments of $
The New York Asset Sale did not qualify as a discontinued operation because it did not represent a strategic shift that has or will have a major effect on the Company’s operation or financial results.
Goodwill and intangible assets of $
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March 31, 2025 |
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Assets |
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Current assets |
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Accounts receivable, net of allowances |
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$ |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net of accumulated depreciation and amortization |
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— |
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Other assets |
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Goodwill |
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— |
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Intangibles, net of accumulated amortization |
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— |
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Operating lease assets, net |
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Total other assets |
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Total assets |
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$ |
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Liabilities |
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Current liabilities |
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Accounts payable |
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$ |
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Accrued payroll |
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Accrued expenses |
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Operating lease liabilities, current portion |
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Total current liabilities |
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Long-term liabilities |
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Operating lease liabilities, long-term portion |
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Total liabilities |
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$ |
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4. Leases
Amounts reported on the Company’s Unaudited Condensed Consolidated Balance Sheets for operating leases were as follows:
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March 31, 2025 |
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December 31, 2024 |
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(Amounts in Thousands) |
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Operating lease assets, net |
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$ |
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$ |
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Long-term operating lease liabilities |
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Total operating lease liabilities |
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$ |
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$ |
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9
Lease Costs
Components of lease costs were reported in general and administrative expenses in the Company’s Unaudited Condensed Consolidated Statements of Income as follows:
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For the Three Months Ended March 31, |
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2025 |
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2024 |
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Operating lease costs |
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$ |
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$ |
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Short-term lease costs |
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Total lease costs |
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Less: sublease income |
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( |
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( |
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Total lease costs, net |
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$ |
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$ |
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Lease Term and Discount Rate
Weighted average remaining lease terms and discount rates were as follows:
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March 31, 2025 |
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December 31, 2024 |
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Operating leases: |
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Weighted average remaining lease term |
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Weighted average discount rate |
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% |
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% |
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Maturity of Lease Liabilities
Remaining operating lease payments as of March 31, 2025 were as follows:
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Operating Leases |
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(Amounts in Thousands) |
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|
Due in the 12-month period ended March 31, |
|
|
|
|
2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total future minimum rental commitments |
|
|
|
|
Less: Imputed interest |
|
|
( |
) |
Total lease liabilities |
|
$ |
|
|
Supplemental Cash Flows Information
|
|
For the Three Months Ended March 31, |
|
|||||
|
|
(Amounts in Thousands) |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
||
Operating cash flows from operating leases |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Right-of-use assets obtained in exchange for lease obligations: |
|
|
|
|
|
|
||
Operating leases |
|
$ |
|
|
$ |
|
||
10
5. Goodwill and Intangible Assets
A summary of the goodwill by segment and related adjustments is provided below:
|
|
Hospice |
|
|
Personal Care |
|
|
Home |
|
|
Total |
|
||||
|
|
(Amounts in Thousands) |
|
|||||||||||||
Goodwill as of December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Additions for acquisitions |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Adjustments to previously recorded goodwill |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Goodwill as of March 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
On January 1, 2025, the Company completed its acquisition of its Jacksonville affiliate for approximately $
On March 1, 2025, the Company completed its acquisition of the assets of Great Lakes Home Care Unlimited, LLC for $
The Company’s identifiable intangible assets consist of customer and referral relationships, trade names and trademarks, non-competition agreements, and state licenses. Amortization is computed using straight-line and accelerated methods based upon the estimated useful lives of the respective assets, which range from to
The carrying amount and accumulated amortization of each identifiable intangible asset category consisted of the following:
|
|
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||||||||||||||||||
|
|
|
|
(Amounts in Thousands) |
|
|
(Amounts in Thousands) |
|
||||||||||||||||||
|
|
Estimated Useful Life |
|
Gross carrying value |
|
|
Accumulated amortization |
|
|
Net carrying value |
|
|
Gross carrying value |
|
|
Accumulated amortization |
|
|
Net carrying value |
|
||||||
Customer and referral relationships |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Trade names and trademarks |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Non-competition agreement |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
State Licenses |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
State Licenses |
|
Indefinite |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Total intangible assets |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Amortization expense related to intangible assets was $
6. Details of Certain Balance Sheet Accounts
Prepaid expenses and other current assets consisted of the following:
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
|
|
(Amounts in Thousands) |
|
|||||
Income tax receivable |
|
$ |
|
|
$ |
|
||
Prepaid payroll |
|
|
|
|
|
|
||
Prepaid workers' compensation and liability insurance |
|
|
|
|
|
|
||
Prepaid licensing fees |
|
|
|
|
|
|
||
Workers' compensation insurance receivable |
|
|
|
|
|
|
||
Other (1) |
|
|
|
|
|
|
||
Total prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
11
Accrued expenses consisted of the following:
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
|
|
(Amounts in Thousands) |
|
|||||
|
|
|
|
|
|
|
||
Accrued health benefits |
|
$ |
|
|
$ |
|
||
Accrued professional fees |
|
|
|
|
|
|
||
Accrued payroll and other taxes |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total accrued expenses |
|
$ |
|
|
$ |
|
||
7. ARPA Spending Plans
In recognition of the significant threat to the liquidity of financial markets and challenges to healthcare providers posed by the COVID-19 pandemic, the Federal Reserve and Congress took dramatic actions to provide liquidity to businesses and the banking system in the United States and to assist healthcare providers, including through relief legislation such as the American Rescue Plan Act of 2021 (“ARPA”). The ARPA provided for $
HCBS spending plans for the additional matching funds vary by state, but common initiatives in which the Company is participating
include those aimed at strengthening the provider workforce (e.g., efforts to recruit, retain, and train direct service providers). The Company is required to properly and fully document the use of such funds in reports to the state in which the funds originated. Funds may be subject to recoupment if not expended or if they are expended on non-approved uses.
During the three months ended March 31, 2025, the Company did
8. Long-Term Debt
Long-term debt consisted of the following:
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
|
|
(Amounts in Thousands) |
|
|||||
Revolving loan under the credit facility |
|
$ |
|
|
$ |
|
||
Less unamortized issuance costs |
|
|
( |
) |
|
|
( |
) |
Long-term debt |
|
$ |
|
|
$ |
|
||
12
Amended and Restated Senior Secured Credit Facility
On October 31, 2018, the Company entered into the Amended and Restated Credit Agreement, with certain lenders and Capital One, National Association, as a lender and as agent for all lenders, as amended by the First Amendment to Amended and Restated Credit Agreement, dated as of September 12, 2019, as further amended by the Second Amendment to Amended and Restated Credit Agreement, dated as of July 30, 2021, as further amended by the Third Amendment to Amended and Restated Credit Agreement, dated as of April 26, 2023 (as described below, the “Third Amendment”), and as further amended by the Fourth Amendment to Amended and Restated Credit Agreement, dated as of October 22, 2024 (as described below, the “Fourth Amendment”) (as amended, the “Credit Agreement”, as used throughout this Quarterly Report on Form 10-Q, “credit facility” shall mean the credit facility evidenced by the Credit Agreement). The credit facility consists of a $
On October 22, 2024, the Company entered into the Fourth Amendment to, among other things, (a) increase the Company’s revolving credit facility to an aggregate amount of $
Interest on the credit facility may be payable at (x) the sum of (i) an applicable margin ranging from
Addus HealthCare, Inc. (“Addus HealthCare”) is the borrower, and its parent, Holdings, and substantially all of Holdings’ subsidiaries are guarantors under this credit facility, and it is collateralized by a first priority security interest in all of the Company’s and the other credit parties’ current and future tangible and intangible assets, including the shares of stock of the borrower and subsidiaries. The Credit Agreement contains affirmative and negative covenants customary for credit facilities of this type, including limitations on the Company with respect to liens, indebtedness, guaranties, investments, distributions, mergers and acquisitions, and dispositions of assets. The availability of additional draws under this credit facility is conditioned, among other things, upon (after giving effect to such draws) the Total Net Leverage Ratio (as defined in the Credit Agreement) not exceeding
The Company pays a fee ranging from
The Credit Agreement contains customary affirmative covenants regarding, among other things, the maintenance of records, compliance with laws, maintenance of permits, maintenance of insurance and property, and payment of taxes. The Credit Agreement also contains certain customary financial covenants and negative covenants that, among other things, include a requirement to maintain a minimum Interest Coverage Ratio (as defined in the Credit Agreement) and a requirement to stay below a maximum Total Net Leverage Ratio (as defined in the Credit Agreement). The Credit Agreement also contains restrictions on guarantees, indebtedness, liens, investments, and loans, subject to customary carve outs, a restriction on dividends (provided that Addus HealthCare may make distributions to the Company in an amount that does not exceed $
During the three months ended March 31, 2025, the Company did
As of March 31, 2025, the Company had a total of $
As of March 31, 2025, the Company was in compliance with all financial covenants under the Credit Agreement.
13
9. Income Taxes
The effective income tax rates were
For the three months ended March 31, 2025, the difference between our federal statutory and effective income tax rates was principally due to the inclusion of state taxes and non-deductible compensation, partially offset by the use of federal employment tax credits and excess tax benefit. For the three months ended March 31, 2025 and 2024, the effective tax rates were inclusive of an excess tax benefit of
10. Commitments and Contingencies
Legal Proceedings
From time to time, the Company is subject to legal and/or administrative proceedings incidental to its business.
It is the opinion of management that the outcome of pending legal and/or administrative proceedings will not have a material effect on the Company’s Unaudited Condensed Consolidated Balance Sheets and Unaudited Condensed Consolidated Statements of Income.
11. Segment Information
Operating segments are defined as components of a company that engage in business activities from which it may earn revenues and incur expenses, and for which separate financial information is available and is regularly reviewed by the Company’s CODM. The Company identifies its together as CODMs to assess the performance of the individual segments and make decisions about resources to be allocated to the segments. The Company operates as a multi-state provider of
In its personal care segment, the Company provides non-medical assistance with activities of daily living, primarily to persons who are at increased risk of hospitalization or institutionalization, such as the elderly, chronically ill or disabled. In its hospice segment, the Company provides physical, emotional, and spiritual care for people who are terminally ill as well as related services for their families. In its home health segment, the Company provides services that are primarily medical in nature to individuals who may require assistance during an illness or after hospitalization and include skilled nursing and physical, occupational, and speech therapy.
The CODMs do not review disaggregated assets by segment. The measure of segment assets is reported on the balance sheet as total consolidated assets.
The tables below set forth information about the Company’s reportable segments, along with the items necessary to reconcile the segment information to the totals reported in the accompanying Unaudited Condensed Consolidated Financial Statements.
14
|
|
For the Three Months Ended March 31, 2025 |
|
|||||||||||||
|
|
(Amounts in Thousands) |
|
|||||||||||||
|
|
Personal Care |
|
|
Hospice |
|
|
Home Health |
|
|
Total |
|
||||
Net service revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Direct service personnel |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative salaries, wages and benefits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other segment items 1 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Segment operating income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Segment reconciliation: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Items not allocated at segment level: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
For the Three Months Ended March 31, 2024 |
|
|||||||||||||
|
|
(Amounts in Thousands) |
|
|||||||||||||
|
|
Personal Care |
|
|
Hospice |
|
|
Home Health |
|
|
Total |
|
||||
Net service revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Direct service personnel |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative salaries, wages and benefits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other segment items 1 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Segment operating income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Segment reconciliation: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Items not allocated at segment level: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
12. Significant Payors
The Company’s revenue by payor type was as follows:
|
|
|
|
|
|
|
|
|
|
|
Personal Care Segment |
|
For the Three Months Ended March 31, |
|
|||||||
|
|
2025 |
|
|
2024 |
|
||||
|
|
Amount |
|
% of Segment |
|
|
Amount |
|
% of Segment |
|
State, local and other governmental programs |
|
$ |
|
% |
|
$ |
|
% |
||
Managed care organizations |
|
|
|
|
|
|
||||
Private pay |
|
|
|
|
|
|
||||
Commercial insurance |
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
||||
Total personal care segment net service revenues |
|
$ |
|
% |
|
$ |
|
% |
||
15
|
|
|
|
|
|
|
|
|
|
|
Hospice Segment |
|
For the Three Months Ended March 31, |
|
|||||||
|
|
2025 |
|
|
2024 |
|
||||
|
|
Amount |
|
% of Segment |
|
|
Amount |
|
% of Segment |
|
Medicare |
|
$ |
|
% |
|
$ |
|
% |
||
Commercial insurance |
|
|
|
|
|
|
||||
Managed care organizations |
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
||||
Total hospice segment net service revenues |
|
$ |
|
% |
|
$ |
|
% |
||
|
|
|
|
|
|
|
|
|
|
|
Home Health Segment |
|
For the Three Months Ended March 31, |
|
|||||||
|
|
2025 |
|
|
2024 |
|
||||
|
|
Amount |
|
% of Segment |
|
|
Amount |
|
% of Segment |
|
Medicare |
|
$ |
|
% |
|
$ |
|
% |
||
Managed care organizations |
|
|
|
|
|
|
||||
State, local and other governmental programs (excluding Medicare) |
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
||||
Total home health segment net service revenues |
|
$ |
|
% |
|
$ |
|
% |
||
The Company derives a significant amount of its revenue from its operations in Illinois, New Mexico, Ohio, and Texas.
|
|
|
|
|
|
|
|
|
|
|
Personal Care Segment |
|
For the Three Months Ended March 31, |
|
|||||||
|
|
2025 |
|
|
2024 |
|
||||
|
|
Amount |
|
% of Segment |
|
|
Amount |
|
% of Segment |
|
Illinois |
|
$ |
|
% |
|
$ |
|
% |
||
New Mexico |
|
|
|
|
|
|
||||
New York(1) |
|
|
|
|
|
|
||||
Texas |
|
|
|
|
— |
|
— |
|
||
All other states |
|
|
|
|
|
% |
||||
Total personal care segment net service revenues |
|
$ |
|
% |
|
$ |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
Hospice Segment |
|
For the Three Months Ended March 31, |
|
|||||||
|
|
2025 |
|
|
2024 |
|
||||
|
|
Amount |
|
% of Segment |
|
|
Amount |
|
% of Segment |
|
Ohio |
|
$ |
|
% |
|
$ |
|
% |
||
Illinois |
|
|
|
|
|
|
||||
New Mexico |
|
|
|
|
|
|
||||
All other states |
|
|
|
|
|
|
||||
Total hospice segment net service revenues |
|
$ |
|
% |
|
$ |
|
% |
||
16
|
|
|
|
|
|
|
|
|
|
|
Home Health Segment |
|
For the Three Months Ended March 31, |
|
|||||||
|
|
2025 |
|
|
2024 |
|
||||
|
|
Amount |
|
% of Segment |
|
|
Amount |
|
% of Segment |
|
New Mexico |
|
$ |
|
% |
|
$ |
|
% |
||
Illinois |
|
|
|
|
|
|
||||
Tennessee |
|
|
|
|
|
|
||||
Total home health segment net service revenues |
|
$ |
|
% |
|
$ |
|
% |
||
A substantial portion of the Company’s revenue and accounts receivable are derived from services performed for federal, state, and local governmental agencies. The personal care segment derives a significant amount of its net service revenues in Illinois, which represented
The related receivables due from the Illinois Department on Aging represented
17
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report on Form 10-Q. This discussion contains forward-looking statements about our business and operations. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include words like “believes,” “belief,” “expects,” “plans,” “anticipates,” “intends,” “projects,” “estimates,” “may,” “might,” “would,” “should,” and similar expressions are intended to be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to: the impact of macroeconomic conditions, including significant global inflation and interest rates, legislative and political developments, including any hold on or cancellation of congressionally authorized spending or interruptions in the distribution of government funds, trade policies and tensions, including changes in, or the imposition of, tariffs and/or trade barriers and the economic impacts, volatility and uncertainty resulting therefrom, and the potential adverse effects of current conditions; business disruptions due to inclement weather, natural disasters, acts of terrorism, pandemics, civil insurrection or social unrest; changes in operational and reimbursement processes and payment structures at the state or federal levels; changes in Medicaid, Medicare, other government program and managed care organizations’ policies and payment rates, and the timeliness of reimbursements received under government programs; changes in, or our failure to comply with, existing federal and state laws or regulations, or our failure to comply with new government laws or regulations on a timely basis; the impact of decisions of the U.S. Supreme Court regarding the actions of federal agencies; changes in presidential administrations; changes in the structure and administration of, and funding for, federal and state agencies and programs; competition in the healthcare industry; the geographical concentration of our operations; changes in the case mix of consumers and payment methodologies; operational changes resulting from the assumption by managed care organizations of responsibility for managing and paying for our services to consumers; the nature and success of future financial and/or delivery system reforms; changes in estimates and judgments associated with critical accounting policies; our ability to maintain or establish new referral sources; our ability to renew significant agreements or groups of agreements; our ability to attract and retain qualified personnel; federal, state and city minimum wage pressure, including any failure of any governmental entity to enact a minimum wage offset and/or the timing of any such enactment; changes in payments and covered services due to overall economic conditions and deficit reduction measures by federal and state governments, and our expectations regarding these changes; cost containment initiatives undertaken by federal and state governmental and other third-party payors; our ability to access financing through the capital and credit markets; our ability to meet debt service requirements and comply with covenants in debt agreements; our ability to integrate and manage our information systems; any security breaches, cyber-attacks, loss of data, or cybersecurity threats or incidents, and any actual or perceived failures to comply with legal requirements related to the privacy of confidential consumer data and other sensitive information; the size and growth of the markets for our services, including our expectations regarding the markets for our services; eligibility standards and limits on services imposed by governmental agencies; the potential for litigation, audits, and investigations; discretionary determinations by government officials; our ability to successfully implement our business model to grow our business; our ability to continue identifying, pursuing, consummating, and integrating acquisition opportunities and expanding into new geographic markets; the impact of acquisitions and dispositions on our business, including the potential inability to realize the benefits of potential acquisitions; the effectiveness, quality, and cost of our services; our ability to successfully execute our growth strategy; changes in tax rates; and various other matters, many of which are beyond our control. In addition, these forward-looking statements are subject to the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the period ended December 31, 2024, filed with the SEC on February 25, 2025. You should carefully review all of these factors. Moreover, our business may be materially adversely affected by factors that are not currently known to us, by factors that we currently consider immaterial or by factors that are not specific to us, such as general economic conditions. These forward-looking statements were based on information, plans, and estimates at the date of this report, and we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes, except as may be required by law.
Overview
We are a home care services provider operating three segments: personal care, hospice, and home health. Our services are principally provided in-home under agreements with federal, state, and local government agencies, managed care organizations, commercial insurers, and private individuals. Our consumers are predominantly “dual eligible,” meaning they are eligible to receive both Medicare and Medicaid benefits. Managed care organizations accounted for 35.6% and 34.2% of our net service revenues during the three months ended March 31, 2025 and 2024, respectively.
18
A summary of certain consolidated financial results is provided in the table below.
|
|
For the Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Net service revenues by segment: |
|
(Amounts in Thousands) |
|
|||||
Personal care |
|
$ |
258,286 |
|
|
$ |
208,003 |
|
Hospice |
|
|
61,437 |
|
|
|
55,863 |
|
Home health |
|
|
17,985 |
|
|
|
16,880 |
|
Total net service revenue |
|
$ |
337,708 |
|
|
$ |
280,746 |
|
|
|
|
|
|
|
|
||
Net income |
|
$ |
21,228 |
|
|
$ |
15,830 |
|
As of March 31, 2025, we provided our services in 23 states through 260 offices. We served approximately 72,000 and 57,000 discrete individuals, respectively, during the three months ended March 31, 2025 and 2024. Our personal care segment also includes staffing services, with clients including assisted living facilities, nursing homes, and hospice facilities.
Acquisitions
In addition to our organic growth, we have grown through acquisitions that have expanded our presence in current markets, with the goal of having all three levels of in-home care in our markets or facilitating our entry into new markets where in-home care has been moving to managed care organizations or that present other strategic opportunities.
On March 9, 2024, we completed our acquisition of the operations of Upstate Home Care Solutions (“Upstate”) for $0.4 million, with funding provided by available cash. With the purchase of Upstate, the Company expanded its personal care segment in South Carolina.
On December 2, 2024, we completed the acquisition of the personal care business of Curo Health Services, LLC, a Delaware limited liability company that does business as Gentiva, consisting of certain equity interests and assets and liabilities (collectively, the “Gentiva Acquisition”) for approximately $353.6 million, with funding primarily provided by drawing on the Company’s revolving credit facility and a portion of the net proceeds of the Company’s public offering of common stock. The purchase price is subject to the completion of working capital and related adjustments. With the Gentiva Acquisition, the Company expanded its services within its personal care segment in Arizona, Arkansas, California, and North Carolina, and entered the market in Missouri and Texas. The home health segment also was expanded in Tennessee.
On January 1, 2025, the Company completed the Jacksonville Acquisition for approximately $0.8 million, with funding provided by available cash. With the Jacksonville Acquisition, the Company expanded its personal care segment in Florida and recorded goodwill of $0.8 million.
On March 1, 2025, the Company completed the Great Lakes Acquisition for $2.6 million, with funding provided by available cash. With the Great Lakes Acquisition, the Company expanded its personal care segment in Michigan and recognized goodwill in its personal care segment of $2.6 million during the three months ended March 31, 2025.
New York Asset Sale
Effective May 20, 2024, we entered into the New York Asset Sale. The Company entered into a consulting agreement with the purchaser, as the transfer of clients and caregivers and payment for assets pursuant to the New York Asset Sale is occurring over time as regulatory approvals are received, coordination of the transfer of clients and caregivers occurs, and the change of control takes place. In connection with this transaction, the Company ceased operations in New York. See Note 3 to the Notes to Unaudited Condensed Consolidated Financial Statements, Divesture, for additional details regarding our divestiture.
Recruiting
As the labor market continues to be tight and unemployment remains at low levels, the competition for new caregivers, including skilled healthcare staff, and support staff continues to be significant. In addition, the United States economy continues to experience inflationary pressures. To the extent that we continue to experience a shortage of caregivers, it may hinder our ability to fully meet the continuing demand for both our non-clinical and clinical services.
19
Revenue by Payor and Significant States
Our payors are principally federal, state, and local governmental agencies and managed care organizations. The federal, state, and local programs under which the agencies operate are subject to legislative and budgetary changes and other risks that can influence reimbursement rates. We are experiencing a transition of business from government payors to managed care organizations, which we believe aligns with our emphasis on coordinated care and the reduction of the need for acute care.
Our revenue by payor and significant states by segment were as follows:
Personal Care Segment |
|
For the Three Months Ended March 31, |
|
|||||||
|
|
2025 |
|
|
2024 |
|
||||
|
|
Amount |
|
% of Segment |
|
|
Amount |
|
% of Segment |
|
State, local and other governmental programs |
|
$132,904 |
|
51.5 |
% |
|
$107,754 |
|
51.8 |
% |
Managed care organizations |
|
117,007 |
|
45.3 |
|
|
94,276 |
|
45.3 |
|
Private pay |
|
6,976 |
|
2.7 |
|
|
3,906 |
|
1.9 |
|
Commercial insurance |
|
1,160 |
|
0.4 |
|
|
1,486 |
|
0.7 |
|
Other |
|
239 |
|
0.1 |
|
|
581 |
|
0.3 |
|
Total personal care segment net service revenues |
|
$258,286 |
|
100.0 |
% |
|
$208,003 |
|
100.0 |
% |
Illinois |
|
$111,414 |
|
43.1 |
% |
|
$107,575 |
|
51.8 |
% |
New Mexico |
|
28,305 |
|
11.0 |
|
|
28,967 |
|
13.9 |
|
New York |
|
273 |
|
0.1 |
|
|
23,534 |
|
11.3 |
|
Texas |
|
49,861 |
|
19.3 |
|
|
— |
|
— |
|
All other states |
|
68,433 |
|
26.5 |
|
|
47,927 |
|
23.0 |
|
Total personal care segment net service revenues |
|
$258,286 |
|
100.0 |
% |
|
$208,003 |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
Hospice Segment |
|
For the Three Months Ended March 31, |
|
|||||||
|
|
2025 |
|
|
2024 |
|
||||
|
|
Amount |
|
% of Segment |
|
|
Amount |
|
% of Segment |
|
Medicare |
|
$56,788 |
|
92.4 |
% |
|
$50,652 |
|
90.7 |
% |
Commercial insurance |
|
2,383 |
|
3.9 |
|
|
3,134 |
|
5.6 |
|
Managed care organizations |
|
2,028 |
|
3.3 |
|
|
1,817 |
|
3.3 |
|
Other |
|
238 |
|
0.4 |
|
|
260 |
|
0.4 |
|
Total hospice segment net service revenues |
|
$61,437 |
|
100.0 |
% |
|
$55,863 |
|
100.0 |
% |
Ohio |
|
$23,187 |
|
37.7 |
% |
|
$20,236 |
|
36.2 |
% |
Illinois |
|
14,564 |
|
23.7 |
|
|
12,252 |
|
21.9 |
|
New Mexico |
|
7,913 |
|
12.9 |
|
|
7,515 |
|
13.5 |
|
All other states |
|
15,773 |
|
25.7 |
|
|
15,860 |
|
28.4 |
|
Total hospice segment net service revenues |
|
$61,437 |
|
100.0 |
% |
|
$55,863 |
|
100.0 |
% |
20
Home Health Segment |
|
For the Three Months Ended March 31, |
|
|||||||
|
|
2025 |
|
|
2024 |
|
||||
|
|
Amount |
|
% of Segment |
|
|
Amount |
|
% of Segment |
|
Medicare |
|
$12,576 |
|
69.9 |
% |
|
$11,663 |
|
69.1 |
% |
Managed care organizations |
|
3,810 |
|
21.2 |
|
|
4,400 |
|
26.1 |
|
State, local and other governmental programs (excluding Medicare) |
|
1,087 |
|
6.0 |
|
|
26 |
|
0.2 |
|
Other |
|
512 |
|
2.9 |
|
|
791 |
|
4.7 |
|
Total home health segment net service revenues |
|
$17,985 |
|
100.0 |
% |
|
$16,880 |
|
100.0 |
% |
New Mexico |
|
$8,555 |
|
47.6 |
% |
|
$7,777 |
|
46.1 |
% |
Illinois |
|
1,932 |
|
10.7 |
|
|
2,942 |
|
17.4 |
|
Tennessee |
|
7,498 |
|
41.7 |
|
|
6,161 |
|
36.5 |
|
Total home health segment net service revenues |
|
$17,985 |
|
100.0 |
% |
|
$16,880 |
|
100.0 |
% |
The personal care segment derives a significant amount of its net service revenues in Illinois, which represented 33.0% and 38.3% of our net service revenues for the three months ended March 31, 2025 and 2024, respectively.
A significant amount of our net service revenues are derived from one payor, the Illinois Department on Aging, the largest payor program for our Illinois personal care operations, which accounted for 18.5% and 20.8% of our net service revenues for the three months ended March 31, 2025 and 2024, respectively.
Changes in Illinois Reimbursement
The Illinois Medicaid omnibus legislation passed in June 2023 included an increase in hourly rates for in-home care services to $28.07, which took effect on January 1, 2024 and required a minimum wage rate of $17.00 per hour. CMS approved an amendment to the Illinois HCBS Waiver for Persons Who are Elderly, which included the rate increase for in-home care services to $28.07, effective January 1, 2024.
The Illinois fiscal year 2025 budget included an increase in hourly rates for in-home care services to $29.63, effective January 1, 2025, and required a minimum wage of $18.00 per hour for direct service workers. CMS approved an amendment to Illinois’ Persons Who are Elderly waiver program that included this rate increase, effective January 1, 2025.
The City of Chicago requires the Chicago minimum wage to be adjusted annually based on increases in the Consumer Price Index (“CPI”), subject to a cap and other requirements. On July 1, 2024, the rate was adjusted to $16.20 based on the increase in the CPI.
Our business will benefit from the rate increases noted above as planned for 2025, but there is no assurance that there will be additional rate increases in Illinois for fiscal years beyond fiscal year 2025 to offset increases to minimum wage, and our financial performance will be adversely impacted for any periods in which an additional offsetting reimbursement rate increase is not in effect.
Impact of Changes in Medicare and Medicaid Reimbursement
Hospice
Hospice services provided to Medicare beneficiaries are paid under the Medicare Hospice Prospective Payment System, under which CMS sets a daily rate for each day a patient is enrolled in the hospice benefit. The daily rate depends on the level of care provided to a patient (routine home care, continuous home care, inpatient respite care, or general inpatient care). Daily rates are adjusted for factors such as area wage levels. CMS updates hospice payment rates each federal fiscal year. Effective October 1, 2024, CMS increased hospice payment rates by 2.9%. This reflects a 3.4% market basket increase and a negative 0.5 percentage point productivity adjustment. Hospices that do not satisfy quality reporting requirements are subject to a 4-percentage point reduction to the market basket update.
Overall payments made by Medicare to each hospice provider number are subject to an inpatient cap and an aggregate cap. The inpatient cap limits the number of days of inpatient care for which Medicare will pay to no more than 20% of total patient care days. Days in excess of the limitation are paid at the routine home care rate. The aggregate cap limits the total Medicare reimbursement that a hospice may receive in a cap year (typically the federal fiscal year) based on an annual per-beneficiary cap amount, which is set each federal fiscal year, and the number of Medicare patients served. The per-beneficiary cap amount was updated to $34,465.34 for federal fiscal year 2025. If a hospice’s Medicare payments exceed its inpatient or aggregate caps, it must repay Medicare the excess amount.
21
Home Health
Home health services provided to Medicare beneficiaries are paid under the Medicare Home Health Prospective Payment System (“HHPPS”), which uses national, standardized 30-day period payment rates for periods of care that meet a certain threshold of home health visits (periods of care that do not meet the visit threshold are paid a per-visit payment rate for the discipline providing care). Although payment is made for each 30-day period, the HHPPS permits continuous 60-day certification periods through which beneficiaries are verified as eligible for the home health benefit. The daily home health payment rate is adjusted for case-mix and area wage levels. CMS uses the Patient-Driven Groupings Model (“PDGM”) as the case-mix classification model to place periods of care into payment categories, classifying patients based on clinical characteristics and their resource needs. An outlier adjustment may be paid for periods of care where costs exceed a specific threshold amount.
CMS updates the HHPPS payment rates each calendar year. For calendar year 2025, CMS estimates that Medicare payments to home health agencies will increase by 0.5%. This is based on a home health payment update percentage of 2.7%, which reflects a 3.2% market basket update, reduced by a productivity adjustment of 0.5 percentage points, and an estimated 1.8% decrease associated with the transition to the PDGM, among other changes. Home health providers that do not comply with quality data reporting requirements are subject to a 2-percentage point reduction to their market basket update. In addition, Medicare requires home health agencies to submit a one-time Notice of Admission (“NOA”) for each patient that establishes that the beneficiary is under a Medicare home health period of care. Failure to submit the NOA within five calendar days from the start of care will result in a reduction to the 30-day period payment amount for each day from the start of care date until the date the NOA is submitted.
Under the nationwide Home Health Value-Based Purchasing (“HHVBP”) Model, home health agencies receive increases or decreases to their Medicare fee-for-service payments of up to 5% based on performance against specific quality measures relative to the performance of other home health providers. Data collected in each performance year will impact Medicare payments two years later. This program has not had a material impact on our results of operations or financial position.
In certain states, payment of claims may be impacted by the Review Choice Demonstration for Home Health Services, a program intended to identify and prevent fraud, reduce the number of Medicare appeals and improve provider compliance with Medicare program requirements. The program is currently limited to home health agencies in Illinois, Ohio, Oklahoma, North Carolina, Florida, and Texas. Providers in states subject to the Review Choice Demonstration for Home Health Services may initially select either pre-claim review or post-payment review. Home health agencies that maintain high compliance levels are eligible for additional options that may be less burdensome. This program has not had a material impact on our results of operations or financial position.
CMS Final Rule: “Ensuring Access to Medicaid Services”
In May 2024, CMS finalized a rule intended to improve access to services and quality of care for Medicaid beneficiaries across fee-for-service and managed care delivery systems. The final rule includes significant provisions related to HCBS, including the “80/20” or “payment adequacy” requirement, which will require states to ensure that at least 80% of all Medicaid payments a provider receives for homemaker, home health aide, and personal care services, less certain excluded costs, under specified programs are spent on total compensation (including benefits) for direct care workers furnishing these services, rather than administrative overhead or profit, subject to limited exceptions. States are required to ensure compliance with the 80/20 requirement by mid-2030. The final rule includes several other measures intended to promote transparency and enhance quality and access to services, including a variety of reporting requirements for states. Given the very long implementation period and the likelihood of further changes as a result of litigation, administration and congressional changes, further rule-making and state changes in response to the final rule, it is premature to predict the ultimate impact of the final rule on our business.
Developments in Public Policy
The outcome of the 2024 federal election increased regulatory uncertainty and the potential for significant policy changes. President Trump has issued executive orders that impact or may impact the healthcare industry, including an order establishing a presidential advisory commission, the Department of Government Efficiency (“DOGE”), focused on restructuring and streamlining government agencies and reducing or eliminating regulations and federal government programs and other expenditures. In March 2025, the Department of Health and Human Services (“HHS”) announced a significant restructuring in accordance with the President’s DOGE Workforce Optimization Initiative. The restructuring will reduce the HHS workforce and consolidate divisions of HHS, including integrating some functions of the Administration for Community Living, which administers programs that support older adults, into other HHS agencies. HHS also announced a change in its policy on public participation in rulemaking that may negatively affect the ability of industry participants to receive advance notice of and offer feedback on some policy changes. In addition, recent actions by the presidential administration have resulted in holds on or cancellations of congressionally authorized spending as well as interruptions in the distribution of governmental funds.
22
Home care and other healthcare providers may be significantly impacted by changes to the Medicaid program, including changes resulting from legislation and administrative actions at the federal and state levels. Federal actions may impact funding for, or the structure of, the Medicaid program, including through changes to Medicaid waiver programs, and may shape provider reimbursement rates, eligibility and coverage policies, and other aspects of state Medicaid programs. Currently, the federal government pays a percentage match for state Medicaid expenditures that varies by state and other factors, with no pre-set limit on federal spending. However, some members of Congress and the presidential administration have raised, and Congress may in the future adopt, proposals to reduce and restructure Medicaid expenditures. Reduced funding for Medicaid or changes to Medicaid waiver programs could put pressure on state budgets and result in reductions to Medicaid payments, scope of coverage and enrollment. Such reductions could, in turn, affect our reimbursements for services rendered.
Components of our Statements of Income
Net Service Revenues
We generate net service revenues by providing our services directly to consumers and primarily on an hourly basis in our personal care segment, on a daily basis in our hospice segment, and on an episodic basis in our home health segment. We receive payment for providing such services from our private consumers and payors, including federal, state, and local governmental agencies, managed care organizations, and commercial insurers.
In our personal care segment, net service revenues are principally provided based on authorized hours, determined by the relevant agency, at an hourly rate, which is either contractual or fixed by legislation, and are recognized at the time services are rendered. In our hospice segment, net service revenues are provided based on daily rates for each of the levels of care and are recognized as services are provided. In our home health segment, net service revenues are based on an episodic basis at a stated rate and recognized based on the number of days elapsed during a period of care within the reporting period. We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record revenues.
Cost of Service Revenues
We incur direct care wages, payroll taxes, and benefit-related costs in connection with providing our services. We also provide workers’ compensation and general liability coverage for our employees. Employees are also reimbursed for their travel time and related travel costs in certain instances.
General and Administrative Expenses
Our general and administrative expenses include our costs for operating our network of local agencies and our administrative offices. Our agency expenses consist of costs for supervisory personnel, our community care supervisors, and office administrative costs. Personnel costs include wages, payroll taxes, and employee benefits. Facility costs include rents, utilities, and postage, telephone, and office expenses. Our corporate and support center expenses include costs for accounting, information systems, human resources, billing and collections, contracting, marketing, and executive leadership. These expenses consist of compensation, including stock-based compensation, payroll taxes, employee benefits, legal, accounting and other professional fees, travel, general insurance, rents, provision for doubtful accounts, and related facility costs. Expenses related to streamlining our operations such as costs related to terminated employees, termination of professional services relationships, other contract termination costs, and asset write-offs are also included in general and administrative expenses.
Depreciation and Amortization Expenses
Depreciable assets consist principally of furniture and equipment, network administration and telephone equipment, and operating system software. Depreciable and leasehold assets are depreciated or amortized on a straight-line method over their useful lives or, if less and if applicable, their lease terms. We amortize our intangible assets with finite lives, consisting of customer and referral relationships, trade names, trademarks, and non-competition agreements, using straight line or accelerated methods based upon their estimated useful lives.
Interest Expense
Interest expense is reported when incurred and principally consists of interest and unused credit line fees on the credit facility.
Income Tax Expense
All of our income is from domestic sources. We incur state and local taxes in states in which we operate. The effective income tax rate was 21.4% and 25.7% for the three months ended March 31, 2025 and 2024, respectively, compared to our federal statutory rate of 21%. The difference between our federal statutory and effective income tax rates was principally due to the inclusion of state taxes, non-deductible compensation, excess tax expense/benefit and the use of federal employment tax credits.
23
Results of Operations — Consolidated
Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024
The following table sets forth our unaudited condensed consolidated results of operations.
|
|
For the Three Months Ended March 31, |
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
2025 |
|
|
|
2024 |
|
|
|
Change |
|
|
|||||||||||||||
|
|
|
|
|
% Of |
|
|
|
|
|
|
% Of |
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
Net Service |
|
|
|
|
|
|
Net Service |
|
|
|
|
|
|
|
|
|
||||||
|
|
Amount |
|
|
Revenues |
|
|
|
Amount |
|
|
Revenues |
|
|
|
Amount |
|
|
% |
|
|
||||||
|
(Amounts in Thousands, Except Percentages) |
||||||||||||||||||||||||||
Net service revenues |
|
$ |
337,708 |
|
|
|
100.0 |
|
% |
|
$ |
280,746 |
|
|
|
100.0 |
|
% |
|
$ |
56,962 |
|
|
|
20.3 |
|
% |
Cost of service revenues |
|
|
230,031 |
|
|
|
68.1 |
|
|
|
|
192,569 |
|
|
|
68.6 |
|
|
|
|
37,462 |
|
|
|
19.5 |
|
|
Gross profit |
|
|
107,677 |
|
|
|
31.9 |
|
|
|
|
88,177 |
|
|
|
31.4 |
|
|
|
|
19,500 |
|
|
|
22.1 |
|
|
General and administrative expenses |
|
|
73,220 |
|
|
|
21.7 |
|
|
|
|
61,063 |
|
|
|
21.8 |
|
|
|
|
12,157 |
|
|
|
19.9 |
|
|
Depreciation and amortization |
|
|
3,943 |
|
|
|
1.2 |
|
|
|
|
3,469 |
|
|
|
1.2 |
|
|
|
|
474 |
|
|
|
13.7 |
|
|
Total operating expenses |
|
|
77,163 |
|
|
|
22.9 |
|
|
|
|
64,532 |
|
|
|
23.0 |
|
|
|
|
12,631 |
|
|
|
19.6 |
|
|
Operating income |
|
|
30,514 |
|
|
|
9.0 |
|
|
|
|
23,645 |
|
|
|
8.4 |
|
|
|
|
6,869 |
|
|
|
29.1 |
|
|
Interest income |
|
|
(502 |
) |
|
|
(0.1 |
) |
|
|
|
(423 |
) |
|
|
(0.2 |
) |
|
|
|
(79 |
) |
|
|
18.7 |
|
|
Interest expense |
|
|
4,018 |
|
|
|
1.2 |
|
|
|
|
2,758 |
|
|
|
1.0 |
|
|
|
|
1,260 |
|
|
|
45.7 |
|
|
Total interest expense, net |
|
|
3,516 |
|
|
|
1.1 |
|
|
|
|
2,335 |
|
|
|
0.8 |
|
|
|
|
1,181 |
|
|
|
50.6 |
|
|
Income before income taxes |
|
|
26,998 |
|
|
|
8.0 |
|
|
|
|
21,310 |
|
|
|
7.6 |
|
|
|
|
5,688 |
|
|
|
26.7 |
|
|
Income tax expense |
|
|
5,770 |
|
|
|
1.7 |
|
|
|
|
5,480 |
|
|
|
2.0 |
|
|
|
|
290 |
|
|
|
5.3 |
|
|
Net income |
|
$ |
21,228 |
|
|
|
6.3 |
|
% |
|
$ |
15,830 |
|
|
|
5.6 |
|
% |
|
$ |
5,398 |
|
|
|
34.1 |
|
% |
Net service revenues increased by 20.3% to $337.7 million for the three months ended March 31, 2025 compared to $280.7 million for the three months ended March 31, 2024. Revenue increased by $50.3 million in our personal care segment, by $5.6 million in our hospice segment and by $1.1 million in our home health segment during the three months ended March 31, 2025, compared to the same period in 2024. The increase in our personal care and home health segments was primarily due to the completion of the Gentiva Acquisition on December 2, 2024, as well as the same store growth in our home health segment. The increase in our hospice segment revenue was due to organic growth.
Gross profit, expressed as a percentage of net service revenues, increased to 31.9% for the three months ended March 31, 2025, compared to 31.4% for the same period in 2024 due to growth in our higher margin hospice segment, the New York Asset Sale and the Gentiva Acquisition.
General and administrative expenses increased to $73.2 million for the three months ended March 31, 2025, as compared to $61.1 million for the three months ended March 31, 2024. The increase in general and administrative expenses was primarily due to the Gentiva Acquisition that resulted in an increase in administrative employee wage, bonus, tax, and benefit costs of $9.4 million. General and administrative expenses, expressed as a percentage of net service revenues, decreased to 21.7% for the three months ended March 31, 2025, from 21.8% for the three months ended March 31, 2024.
Interest expense increased to $4.0 million for the three months ended March 31, 2025 from $2.8 million for the three months ended March 31, 2024. The increase in interest expense was primarily due to higher average outstanding borrowings held under our credit facility for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.
24
All of our income is from domestic sources. We incur state and local taxes in states in which we operate. The effective income tax rate was 21.4% and 25.7% for the three months ended March 31, 2025 and 2024, respectively. Our lower effective income tax rate for the three months ended March 31, 2025 was principally due to a higher excess tax benefit with a lower benefit from the use of federal employment tax credits. For the three months ended March 31, 2025 and 2024, the excess tax benefit and federal employment tax credits were 7.2% and 3.5%, respectively.
Results of Operations – Segments
The following tables and related analysis summarize our operating results and business metrics by segment:
Personal Care Segment
|
|
For the Three Months Ended March 31, |
|
||||||||||||
|
|
2025 |
|
|
2024 |
|
|
Change |
|
||||||
|
|
Amount |
|
% of |
|
|
Amount |
|
% of |
|
|
Amount |
|
% |
|
|
|
(Amounts in Thousands, Except Percentages) |
|
||||||||||||
Operating Results |
|
|
|
||||||||||||
Net service revenues |
|
$258,286 |
|
100.0 |
% |
|
$208,003 |
|
100.0 |
% |
|
$50,283 |
|
24.2 |
% |
Cost of services revenues |
|
186,964 |
|
72.4 |
|
|
152,536 |
|
73.3 |
|
|
34,428 |
|
22.6 |
|
Gross profit |
|
71,322 |
|
27.6 |
|
|
55,467 |
|
26.7 |
|
|
15,855 |
|
28.6 |
|
General and administrative expenses |
|
23,730 |
|
9.2 |
|
|
15,445 |
|
7.4 |
|
|
8,285 |
|
53.6 |
|
Segment operating income |
|
$47,592 |
|
18.4 |
% |
|
$40,022 |
|
19.3 |
% |
|
$7,570 |
|
18.9 |
% |
Business Metrics (Actual Numbers, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Locations at period end |
|
199 |
|
|
|
|
153 |
|
|
|
|
|
|
|
|
Average billable census * (1) |
|
50,478 |
|
|
|
|
37,715 |
|
|
|
|
12,763 |
|
33.8 |
% |
Billable hours * (2) |
|
10,201 |
|
|
|
|
7,590 |
|
|
|
|
2,611 |
|
34.4 |
|
Average billable hours per census per month * (2) |
|
67.4 |
|
|
|
|
67.0 |
|
|
|
|
0.4 |
|
0.6 |
|
Billable hours per business day * (2) |
|
159,395 |
|
|
|
|
116,769 |
|
|
|
|
42,626 |
|
36.5 |
|
Revenues per billable hour * (2) |
|
$25.32 |
|
|
|
|
$27.35 |
|
|
|
|
$(2.03) |
|
(7.4) |
% |
Same store growth revenue % * (3) |
|
7.4 |
% |
|
|
|
9.3 |
% |
|
|
|
(1.9) |
|
(20.4) |
|
* Management deems these metrics to be key performance indicators. Management uses these metrics to monitor our performance, both in our existing operations and acquisitions. Many of these metrics serve as the basis of reported revenues and assessment of these provide direct correlation to the results of operations from period to period and facilitate comparison with the results of our peers. Historical trends established in these metrics can be used to evaluate current operating results, identify trends affecting our business, determine the allocation of resources and assess the quality and potential variability of our cash flows and earnings. We believe they are useful to investors in evaluating and understanding our business but should not be used solely in assessing the Company’s performance. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein to fully evaluate and understand the business as a whole. These measures may not be comparable to similarly titled performance indicators used by other companies.
The personal care segment derives a significant amount of its net service revenues from operations in Illinois, which represented 33.0% and 38.3% of our net service revenues for the three months ended March 31, 2025 and 2024, respectively. One payor, the Illinois Department on Aging, accounted for 18.5% and 20.8% of net service revenues for the three months ended March 31, 2025 and 2024, respectively.
25
Net service revenues from state, local, and other governmental programs accounted for 51.5% and 51.8% of net service revenues for the three months ended March 31, 2025 and 2024, respectively. Managed care organizations accounted for 45.3% of net service revenues for both the three months ended March 31, 2025 and 2024, with commercial insurance, private pay, and other payors accounting for the remainder of net service revenues.
Net service revenues increased by 24.2% for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Net service revenues included a 7.4% decrease in revenues per billable hour for the three months ended March 31, 2025, due to lower reimbursement rates attributable to the Gentiva Acquisition, as well as the New York Asset Sale, compared to the three months ended March 31, 2024.
Gross profit, expressed as a percentage of net service revenues, increased to 27.6% for the three months ended March 31, 2025 from 26.7% for the three months ended March 31, 2024. This increase was due to decreases in direct payroll and benefits expenses as a percentage of revenue for the three months ended March 31, 2025 primarily related to the New York Asset Sale.
The personal care segment’s general and administrative expenses primarily consist of administrative employee wages, taxes, and benefit costs, rent, information technology, and office expenses. General and administrative expenses, expressed as a percentage of net service revenues, was 9.2% and 7.4% for the three months ended March 31, 2025 and 2024, respectively.
Hospice Segment
|
|
For the Three Months Ended March 31, |
|
||||||||||||
|
|
2025 |
|
|
2024 |
|
|
Change |
|
||||||
|
|
Amount |
|
% of |
|
|
Amount |
|
% of |
|
|
Amount |
|
% |
|
|
|
(Amounts in Thousands, Except Percentages) |
|
||||||||||||
Operating Results |
|
|
|
||||||||||||
Net service revenues |
|
$61,437 |
|
100.0 |
% |
|
$55,863 |
|
100.0 |
% |
|
$5,574 |
|
10.0 |
% |
Cost of services revenues |
|
32,269 |
|
52.5 |
|
|
28,967 |
|
51.9 |
|
|
3,302 |
|
11.4 |
|
Gross profit |
|
29,168 |
|
47.5 |
|
|
26,896 |
|
48.1 |
|
|
2,272 |
|
8.4 |
|
General and administrative expenses |
|
14,551 |
|
23.7 |
|
|
13,439 |
|
24.1 |
|
|
1,112 |
|
8.3 |
|
Segment operating income |
|
$14,617 |
|
23.8 |
% |
|
$13,457 |
|
24.0 |
% |
|
$1,160 |
|
8.6 |
% |
Business Metrics (Actual Numbers) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Locations at period end |
|
38 |
|
|
|
|
38 |
|
|
|
|
|
|
|
|
Admissions * (1) |
|
3,474 |
|
|
|
|
3,472 |
|
|
|
|
2 |
|
0.1 |
% |
Average daily census * (2) |
|
3,515 |
|
|
|
|
3,359 |
|
|
|
|
156 |
|
4.6 |
|
Average discharge length of stay * (3) |
|
97 |
|
|
|
|
90 |
|
|
|
|
7 |
|
7.8 |
|
Patient days * (4) |
|
316,319 |
|
|
|
|
305,630 |
|
|
|
|
10,689 |
|
3.5 |
|
Revenue per patient day * (5) |
|
$194.23 |
|
|
|
|
$182.78 |
|
|
|
|
$11.45 |
|
6.3 |
|
Organic growth |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Revenue * (6) |
|
9.9 |
% |
|
|
|
5.8 |
% |
|
|
|
4.1 |
|
70.7 |
|
- Average daily census * (6) |
|
4.6 |
% |
|
|
|
(1.1) |
% |
|
|
|
5.7 |
|
(518.2) |
% |
26
* Management deems these metrics to be key performance indicators. Management uses these metrics to monitor our performance, both in our existing operations and acquisitions. Many of these metrics serve as the basis of reported revenues and assessment of these provide direct correlation to the results of operations from period to period and facilitate comparison with the results of our peers. Historical trends established in these metrics can be used to evaluate current operating results, identify trends affecting our business, determine the allocation of resources and assess the quality and potential variability of our cash flows and earnings. We believe they are useful to investors in evaluating and understanding our business but should not be used solely in assessing the Company’s performance. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein to fully evaluate and understand the business as a whole. These measures may not be comparable to similarly titled performance indicators used by other companies.
The hospice segment generates revenue by providing care to patients with a life expectancy of six months or less, as well as related services for their families. Hospice offers four levels of care, as defined by Medicare, to meet the varying needs of patients and their families. The four levels of hospice include routine home care, continuous home care, general inpatient care and respite care. Our hospice segment principally provides routine home care.
Net service revenues from Medicare accounted for 92.4% and 90.7% for the three months ended March 31, 2025 and 2024, respectively. Net service revenues from managed care organizations accounted for 3.3% for both the three months ended March 31, 2025 and 2024.
Net service revenues increased by $5.6 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily attributed to organic growth in average daily census.
Gross profit, expressed as a percentage of net service revenues, was 47.5% and 48.1% for the three months ended March 31, 2025 and 2024, respectively. For the three months ended March 31, 2025, the decrease was mainly attributed to increases in direct employee wage, tax, and benefit costs as a percentage of net service revenues.
The hospice segment’s general and administrative expenses primarily consist of administrative employee wage, tax, and benefit costs, rent, information technology, and office expenses. General and administrative expenses, expressed as a percentage of net service revenues, was 23.7% and 24.1% for the three months ended March 31, 2025 and 2024, respectively. The decrease in general and administrative expenses as a percentage of net service revenues was primarily due to more efficient operations for administrative employees for the three months ended March 31, 2025.
Home Health Segment
|
|
For the Three Months Ended March 31, |
|
||||||||||||
|
|
2025 |
|
|
2024 |
|
|
Change |
|
||||||
|
|
Amount |
|
% of |
|
|
Amount |
|
% of |
|
|
Amount |
|
% |
|
|
|
(Amounts in Thousands, Except Percentages) |
|
||||||||||||
Operating Results |
|
|
|
||||||||||||
Net service revenues |
|
$17,985 |
|
100.0 |
% |
|
$16,880 |
|
100.0 |
% |
|
$1,105 |
|
6.5 |
% |
Cost of services revenues |
|
10,798 |
|
60.0 |
|
|
11,066 |
|
65.6 |
|
|
(268) |
|
(2.4) |
|
Gross profit |
|
7,187 |
|
40.0 |
|
|
5,814 |
|
34.4 |
|
|
1,373 |
|
23.6 |
|
General and administrative expenses |
|
4,173 |
|
23.2 |
|
|
4,537 |
|
26.9 |
|
|
(364) |
|
(8.0) |
|
Segment operating income |
|
$3,014 |
|
16.8 |
% |
|
$1,277 |
|
7.5 |
% |
|
$1,737 |
|
136.0 |
% |
Business Metrics (Actual Numbers) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Locations at period end |
|
23 |
|
|
|
|
23 |
|
|
|
|
|
|
|
|
New admissions * (1) |
|
4,708 |
|
|
|
|
4,887 |
|
|
|
|
(179) |
|
(3.7) |
% |
Recertifications * (2) |
|
2,982 |
|
|
|
|
3,168 |
|
|
|
|
(186) |
|
(5.9) |
|
Total volume * (3) |
|
7,690 |
|
|
|
|
8,055 |
|
|
|
|
(365) |
|
(4.5) |
|
Visits * (4) |
|
94,593 |
|
|
|
|
106,931 |
|
|
|
|
(12,338) |
|
(11.5) |
|
Organic growth |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Revenue * (5) |
|
1.3 |
% |
|
|
|
(15.1) |
% |
|
|
|
16.4 |
|
(108.6) |
|
- Admissions * (5) |
|
(3.7) |
% |
|
|
|
(4.0) |
% |
|
|
|
0.3 |
|
(7.5) |
% |
27
* Management deems these metrics to be key performance indicators. Management uses these metrics to monitor our performance, both in our existing operations and acquisitions. Many of these metrics serve as the basis of reported revenues and assessment of these provide direct correlation to the results of operations from period to period and facilitate comparison with the results of our peers. Historical trends established in these metrics can be used to evaluate current operating results, identify trends affecting our business, determine the allocation of resources and assess the quality and potential variability of our cash flows and earnings. We believe they are useful to investors in evaluating and understanding our business but should not be used solely in assessing the Company’s performance. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein to fully evaluate and understand the business as a whole. These measures may not be comparable to similarly titled performance indicators used by other companies.
The home health segment generates net service revenues by providing home health services on a short-term, intermittent or episodic basis to individuals, generally to treat an illness or injury. Net service revenues from Medicare accounted for 69.9% and 69.1%, managed care organizations accounted for 21.2% and 26.1%, and state, local, and other governmental programs accounted for 6.0% and 0.2% for the three months ended March 31, 2025 and 2024, respectively. Home health services provided to Medicare beneficiaries are paid under the Medicare Home Health Prospective Payment System, which uses national, standardized 30-day period payment rates for periods of care. CMS uses the PDGM as the case-mix classification model to place periods of care into payment categories, classifying patients based on clinical characteristics. An outlier adjustment may be paid for periods of care in which costs exceed a specific threshold amount.
Net service revenues increased by $1.1 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024 primarily due to the Gentiva Acquisition and an increase in billable census in our home health segment for New Mexico.
Gross profit, expressed as a percentage of net service revenues, was 40.0% and 34.4% for the three months ended March 31, 2025 and 2024, respectively. For the three months ended March 31, 2025, the increase was primarily due to an increase in net service revenues compared to the three months ended March 31, 2024.
The home health segment’s general and administrative expenses primarily consist of administrative employee wage, tax and benefit costs, rent, information technology, and office expenses. General and administrative expenses, expressed as a percentage of net service revenues, was 23.2% and 26.9% for the three months ended March 31, 2025 and 2024, respectively. General and administrative expenses for the three months ended March 31, 2025 decreased compared to the corresponding period in 2024, primarily due to more efficient operations for administrative employees for the three months ended March 31, 2025.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are cash on hand and cash from operations and borrowings under our credit facility. At March 31, 2025 and December 31, 2024, we had cash balances of $97.0 million and $98.9 million, respectively. At March 31, 2025, we had a $650.0 million revolving credit facility and a $150.0 million incremental loan facility, which may be for term loans or an increase to the revolving loan commitments. The maturity of this credit facility was extended to July 30, 2028.
During the three months ended March 31, 2025, we used $3.4 million in cash to fund the Jacksonville Acquisition and the Great Lakes Acquisition and repaid $20.0 million under our revolving credit facility. As of March 31, 2025, we had a total of $203.0 million in revolving loans, with an interest rate of 6.32% outstanding on our credit facility and after giving effect to the amount drawn on our credit facility, approximately $8.0 million of outstanding letters of credit and borrowing limits based on an advance multiple of adjusted EBITDA (as defined in the Credit Agreement), we had $632.9 million of capacity and $421.9 million available for borrowing under our credit facility. At December 31, 2024, we had a total of $223.0 million revolving credit loans, with an interest rate of 6.34%, outstanding on our credit facility.
28
Our credit facility requires us to maintain a total net leverage ratio not exceeding 3.75:1.00. At March 31, 2025, we were in compliance with our financial covenants under the Credit Agreement. Although we believe our liquidity position remains strong, we can provide no assurance that we will remain in compliance with the covenants in our Credit Agreement, and in the future, it may prove necessary to seek an amendment with the bank lending group under our credit facility. Additionally, there can be no assurance that we will be able to raise additional funds on terms acceptable to us, if at all.
See Note 8 to the Notes to Unaudited Condensed Consolidated Financial Statements, Long-Term Debt, for additional details of our long-term debt.
Current Macroeconomic Conditions and American Rescue Plan Act of 2021 Relief Funding
Economic conditions in the United States continue to be challenging in various respects. For example, the United States economy continues to experience inflationary pressures, elevated interest rates, challenging labor market conditions and uncertainty regarding the impact of increased tariffs and trade disruptions. Any economic downturn would pose a risk to states’ revenues, which in turn could affect our reimbursements and collections received for services rendered. Depending on the severity and length of any potential economic downturn as well as the extent of any federal support, states could face significant fiscal challenges and revise their revenue forecasts and adjust their budgets, and sales tax collections and income tax withholdings could be depressed.
ARPA Spending Plans
The ARPA provides for $350 billion in relief funding for eligible state, local, territorial, and Tribal governments to mitigate the fiscal effects of the COVID-19 public health emergency. Additionally, the law provided for a 10 percentage point increase in federal matching funds for Medicaid HCBS from April 1, 2021, through March 31, 2022, provided the state satisfied certain conditions. States were generally permitted to use the state funds equivalent to the additional federal funds through March 31, 2025, but CMS granted extensions to several states. States must use the monies attributable to this matching fund increase to supplement, not supplant, their level of state spending for the implementation of activities enhanced under the Medicaid HCBS in effect as of April 1, 2021.
HCBS spending plans for the additional matching funds vary by state, but common initiatives in which the Company is participating include those aimed at strengthening the provider workforce (e.g., efforts to recruit, retain, and train direct service providers). The Company is required to properly and fully document the use of such funds in reports to the state in which the funds originated. Funds may be subject to recoupment if not expended or if they are expended on non-approved uses.
During the three months ended March 31, 2025, the Company did not received additional state funding provided by the ARPA. Of the total state funding received by the Company pursuant to the ARPA through March 31, 2025, the Company utilized $2.5 million during the three months ended March 31, 2025, primarily for caregivers and adding support to recruiting and retention efforts, included as a reduction of cost of service revenues in the Company’s Unaudited Condensed Consolidated Statements of Income. As of March 31, 2025, the deferred portion of ARPA funding of $8.7 million is included within Government stimulus advances on the Company’s Unaudited Condensed Consolidated Balance Sheets.
The following table summarizes changes in our cash flows:
|
|
For the Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
|
|
(Amounts in Thousands) |
|
|||||
Net cash provided by operating activities |
|
$ |
18,949 |
|
|
$ |
38,678 |
|
Net cash used in investing activities |
|
|
(1,378 |
) |
|
|
(1,750 |
) |
Net cash used in financing activities |
|
|
(19,528 |
) |
|
|
(25,000 |
) |
Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024
Cash flows from operating activities represent the inflow of cash from our payors and the outflow of cash for payroll and payroll taxes, operating expenses, interest, and taxes. Net cash provided by operating activities was $18.9 million for the three months ended March 31, 2025, compared to net cash provided by operating activities of $38.7 million for the same period in 2024. The decrease in cash provided by operations was primarily due to the timing of receipts on accounts receivable and the timing of government stimulus funds. The changes in accounts receivable were primarily related to the growth in revenue and a decrease in days sales outstanding (“DSO”) during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. The related receivables due from the Illinois Department on Aging represented 18.5% and 20.8% of the Company’s net accounts receivable at March 31, 2025 and March 31, 2024, respectively.
29
Net cash used in investing activities for the three months ended March 31, 2025, primarily consisted of $3.4 million of net cash used for the Jacksonville Acquisition and the Great Lakes Acquisition, $1.9 million of cash used for property and equipment purchases, primarily related to our ongoing investments in technology infrastructure fixed assets, offset by $3.8 million in proceeds received relating to the New York Asset Sale. Net cash used in investing activities for the three months ended March 31, 2024 primarily consisted of $0.4 million of net cash used for the Upstate acquisition and $1.4 million of cash used for property and equipment purchases.
Net cash used in financing activities for the three months ended March 31, 2025, primarily consisted of a $20.0 million payment on our revolving credit facility, offset by cash received from the exercise of stock options of $0.5 million. Net cash used in financing activities for the three months ended March 31, 2024 primarily consisted of $25.0 million payment on our revolving credit facility.
Outstanding Accounts Receivable
Gross accounts receivable as of March 31, 2025 and December 31, 2024 were approximately $138.0 million and $126.4 million, respectively. Outstanding accounts receivable, net of allowance for credit losses, increased by $11.7 million as of March 31, 2025 as compared to December 31, 2024. Accounts receivable for the Illinois Department on Aging increased approximately $6.3 million during the quarter ended March 31, 2025. Our collection procedures include review of account aging and direct contact with our payors. We have historically not used collection agencies. An uncollectible amount is written off to the allowance account after reasonable collection efforts have been exhausted.
We calculate our DSO by taking the trade accounts receivable outstanding, net of allowance for credit losses for doubtful accounts, divided by the net service revenues for the last quarter, multiplied by the number of days in that quarter. Our DSOs were 37 days and 39 days at March 31, 2025 and December 31, 2024, respectively. The DSOs for our largest payor, the Illinois Department on Aging, were 48 days and 40 days at March 31, 2025 and December 31, 2024, respectively.
Off-Balance Sheet Arrangements
As of March 31, 2025, we did not have any off-balance sheet guarantees or arrangements with unconsolidated entities.
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies and estimates previously disclosed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” set forth in Part II, Item 7 of our Annual Report on Form 10-K for the period ended December 31, 2024, filed on February 25, 2025.
Recently Issued Accounting Pronouncements
Refer to Note 2 to the Notes to Unaudited Condensed Consolidated Financial Statements for further discussion.
30
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk associated with changes in interest rates on our variable rate long-term debt. As of March 31, 2025, we had outstanding borrowings of approximately $203.0 million on our credit facility, all of such borrowings were subject to variable interest rates. If the variable rates on this debt were 100 basis points higher than the rate applicable to the borrowing during the three month period ended March 31, 2025, our net income would have decreased by $0.4 million, or $0.02 per diluted share. We do not currently have any derivative or hedging arrangements, or other known exposures, to changes in interest rates.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2025. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2025.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the fiscal quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
31
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
Legal Proceedings
From time to time, we are subject to legal and/or administrative proceedings incidental to our business. It is the opinion of management that the outcome of pending legal and/or administrative proceedings will not have a material effect on our financial position and results of operations.
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. You should carefully consider the risk factors discussed under the caption “Risk Factors” set forth in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2024, filed on February 25, 2025. There have been no material changes to the risk factors previously disclosed under the caption “Risk Factors” in our Annual Report on Form 10-K. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
During the quarter ending March 31, 2025, each of the following directors and Section 16 officers adopted a Rule 10b5-1 Trading Arrangement (as defined in Item 408(a) of Regulation S-K) to sell common shares:
Name |
Title |
Adoption Date |
Expiration Date (1) |
Shares Vesting and Subject to Sell-To-Cover (2) |
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Other Shares Being Sold (Subject to Certain Conditions) |
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n/a |
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n/a |
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n/a |
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n/a |
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n/a |
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n/a |
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n/a |
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n/a |
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n/a |
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n/a |
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n/a |
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(1) Each plan will expire on the date represented in the table or upon the earlier completion of all transactions contemplated by the arrangement.
(2) This column indicates the total number of shares vesting in connection with equity awards, not the number of shares to be sold. The actual number of shares to be sold will be a smaller number based on whatever is required to satisfy payment of applicable withholding taxes under sell-to-cover arrangements.
32
(3) On
(4) Mr. Allison became CEO of the Company in early 2016 and, in connection with that appointment, received a grant of options with respect to
Each trading arrangement noted above is intended to satisfy the affirmative defense in Rule 10b5-1(c).
33
Item 6. Exhibits
EXHIBIT INDEX
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Incorporated by Reference |
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Exhibit Number |
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Description of Document |
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Form |
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File No. |
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Date Filing |
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Exhibit Number |
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Amended and Restated Certificate of Incorporation of the Company dated as of October 27, 2009. |
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10-Q |
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001-34504 |
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11/20/2009 |
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3.1 |
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10-Q |
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001-34504 |
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05/09/2013 |
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3.2 |
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S-1 |
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333-160634 |
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10/02/2009 |
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4.1 |
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8-K |
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001-34504 |
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03/11/2025 |
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10.1 |
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8-K |
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001-34504 |
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03/11/2025 |
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10.2 |
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101.INS |
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Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document. |
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101.CAL |
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Inline XBRL Taxonomy Calculation Linkbase Document. |
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101.LAB |
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Inline XBRL Taxonomy Label Linkbase Document. |
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101.PRE |
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Inline XBRL Presentation Linkbase Document. |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101). |
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34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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ADDUS HOMECARE CORPORATION |
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Date: May 6, 2025 |
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By: |
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/s/ R. DIRK ALLISON |
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R. Dirk Allison Chairman and Chief Executive Officer (As Principal Executive Officer) |
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Date: May 6, 2025 |
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By: |
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/s/ BRIAN POFF |
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Brian Poff Chief Financial Officer (As Principal Financial Officer) |
35
Exhibit 31.1
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, R. Dirk Allison, certify that:
Date: May 6, 2025 |
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By: |
/s/ R. Dirk Allison |
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R. Dirk Allison |
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Chairman and Chief Executive Officer |
Exhibit 31.2
CERTIFICATIONS OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian Poff, certify that:
Date: May 6, 2025 |
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By: |
/s/ Brian Poff |
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Brian Poff |
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Chief Financial Officer |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
(AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2025 of Addus HomeCare Corporation (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, R. Dirk Allison, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: May 6, 2025 |
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By: |
/s/ R. Dirk Allison |
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R. Dirk Allison |
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Chairman and Chief Executive Officer |
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Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
(AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2025 of Addus HomeCare Corporation (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brian Poff, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: May 6, 2025 |
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By: |
/s/ Brian Poff |
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Brian Poff |
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Chief Financial Officer |
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