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Addus HomeCare (ADUS)

Participants
Scott Brittain Corporate Communications
Dirk Allison President and Chief Executive Officer
Brian Poff Chief Financial Officer
Mitra Ramgopal Sidoti
Call transcript
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Scott Brittain

Good morning, and welcome to the Addus HomeCare Corporation Third Quarter 2017 Earnings Conference Call. Today's call is being recorded. To the extent any non-GAAP financial measure is discussed in today's call, you will also find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP by going to the Company's website and reviewing yesterday's news release. This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Addus' expected quarterly and annual financial performance for 2017 or beyond.

For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. discussions like estimates, forward-looking are foregoing, expectations plans, statements. the the and intended limiting of targets, forecasts, beliefs, Without to identify

by news the forward-looking materially discussed undertakes otherwise. and no over as obligation Securities like forward-looking You may statements, statements. Allison. Exchange may any Commission information, or whether set that Company's Chief differ result update events cautioned its to The Dirk and actual Mr. in important I Please new of third President in Company operations Officer, in to the affected results quarter call forth with are a ahead, to results others, go Consequently, now factors, the Executive from filings turn these future the Addus's the and would sir. among release. hereby be statements and

Dirk Allison

thank Financial Good our our today Scott. Chief everyone, third morning, conference you, is call. quarter for Thank for me Officer. With and joining us Poff, Brian you

grew quarter in financial Let some overall issued X.X%, then Revenues am share another quarter million solid that, the questions. and revenue me and to to begin discuss we million performance operating which of strong any million, $XXX.X for with were results we the After afternoon. to is respond from yesterday XXXX. quarter compared the period by results. I closed in with our for locations, be third Brian same $XXX.X up third happy that excited for $XXX.X will to XXXX. Adjusting would you comments

in $X.XX was XXXX in for of X.X%. to earnings compared per XXXX, share $X.XX increase of adjusted quarter Our an third the same period as the

to X.X% important of for million our the to ongoing XX.X% which revenue. enabling operating improvements, due improved us third increase part An adjusted of increased are leverage. results $X.X XXXX is our these EBITDA process Our quarter to of or

growth. as growth State Those have followed continued for dealing the build know of addition, Addus our infrastructure years. In with of both time cash of well been for of has we to who our as status have number negatively support some a acquisition financial organic continue to which impacted we flow you Illinois, that the

has past payments provider has Medicaid with million over with enabled which budget, done trying non-Medicaid. of you $XX the us sending pay last state passed. of both state As this job a non-Medicaid since well current keep quarter, a providers past with Illinois a we The due as now and to more to passed catch nice shared has receivables as to due on amounts up budget

growth fiscal volume states. July growth our our The from majority growth any to able on the will and solid faced opportunities that same-store Illinois, you of under to While the state, ultimate to XXXX both target to have the percentage committed growth X% the and while challenges is goal long-term we Therefore, I Illinois in have obtain states as we address order residents we X. footing. of financial may of outside to State business well Brian be as our a to reduce lot remain X% budget there work to of our took XX% to steps remains This that Illinois shared the of revenue. positive a pursue acquisition financial do with with that further to year. the by goal to pricing each our consolidated diversify year of for begins serving continue includes revenue restore

as we increases, states have how these a we with in states states most of around growth. Along markets. seen pricing confident budget have these certain minimum Based increased started which to our offsetting helpful any their year, through to remain a today, our changes well number industry pricing did which couple pricing wage cost year, our is of new our goal includes give as of X% meet increase, see This service. shortfalls. new sick fiscal same-store due of pass pricing X% modest in on for we reductions As our of to to in continue our finalize, minor requirements leave updates ability

legislation. our While changes a target, we due feel growth positive state about occasionally, same-store we to face growth issues in in

We in months few York. made Wage are change currently Parity A facing this Law. a the issue state in ago, New

who on those are yet cost our rate hourly Law. we received For the had Parity subject first increased cover to now partners and members the our we This change caregivers consumer to change family This direct was this Wage make Long time, to take October Island with of MCO increase an to XX. labor cost. are care effective work sure

done team help great hourly obtaining Our has this in a increases job change. to offset

meaning to While MCO hours this in Shore which decided over division. new to the our consumers, over loss we payments should to than a see of we hours consumers approved of help leveling This MCOs has past MCO. to next out, our South couple few of Shore of the our led with a the to rather growth new move South most a to couple partners occasions, our providers, increase seems and quarters. for the industry that begin loss worked expect lowered needed resolve in On the number to the we of again issue, our hours be MCO months market to exit

and work On due has grow integrated to continues X, Options the I'm has Care Home on say update recent to the acquisition we me our Home smoothly Next, due very of into This in transition Options first been happy and Options Options transition of purchase great Systems Addus fully is Care. let completed of team. procedures. as and Addus since gone expected. August our all you our our that acquisition Mexico. new we diligence our implemented to

presence our the to strengthens this as We are very state. excited overall addition in about market New Mexico further our it

you acquisition remind me strategy. of Let our

the where looks we helps we a providers as in services We who the to a more as state is care position as a very goal state, sites which needs Our important or create can to Mexico. entire market care to in see do personal to been strong our able company have is can we've managed feel be markets New service their grow states organizations. as outsource especially of this

strategy state, these only various As continue their not to would suggest active MCOs. as work MCOs for potential responsibility The with cover as time acquisitions. assume and focus of also we be but choosing mind, more providers the us position we that services, can reduce services by for to look to both With will work in patients. should disciplined add we needed experience very this they acquisition growth that our with significant continue states in the can strategy entire for and networks

balance We bank are cash outstanding positioned and of no million million in given our well revolver. ended over with the we the $XX $XXX quarter third of on XXXX

term We also million left have $XXX in $XX facility. delayed our on million draws

states. have In pay have our small pay. Arizona Medicaid that acquisition of double private pay in Care overall the nearly close in acquisition business, private growing for us pay in private continued interested approximately our These we a business, are believe and position in we million annually. we growth to two addition our we small in pay another stated to $X generate revenue pay other private of business. Recently, for completing Personal deals and we private are one completed private Today, side

these we with in more In our currently to candidates, discussions business. line acquisition in two addition service Medicaid other whose deals, are with lines are

sourcing be able will we that completing guarantee team no as deals our due transaction, these to active is in there very diligence. While any as of well close remains

over them turn employees review again important of me our Brian to their all of Brian. XX,XXX and Addus. Before This progressing where all instead the needed to stay to hard low call the which possible the to cost, they of at in work let more the me that, third for by call care performance, prefer to much a We in of health has provide expensive quarter I intimate turn setting. employees. a let more much thank made homes services less over our very to consumers service With be, once detailed an enables

Brian Poff

and everyone. for the to XXXX. quarter had Dirk, solid Addus good of I'm financial pleased third morning, performance you, another that report Thank

and meet to regard same-store with expectations to to our continue growth, margins expand. continue our revenue We

as As Dirk August and discussed, Options consistent we X, for completed scheduled, results with the on quarter were an integrated of acquisition Options expectations. our

might acquisition are any We believe also additional engaged to transactions evaluating and fund pursue. pipeline opportunities remain in in we well an active positioned we

driven Home annual third our same-store a in the for million $XXX.X revenues the third revenues high-end the growth we quarter revenues of our growth. quarter XXXX. on year, This sale increase day increase from billable adult increase increase increased growth for revenue X% X.X% resulted acquisition confident in per by contribution of the and services service of day continued the primarily Same-store and Tennessee, Net range of are X%. or X.X% and due potential hours expected Michigan, X.X% for As result, same-store were and total the to closing by extremely the region in since of adjusted in perform in which strength and per The locations was as The a from of to a Options solid organic end and in of to expansion between is the business last continue was of further Northwest revenues Care. growth Illinois well markets billable growth net and as Arizona aided our combination two X.X% rate in our in also that service well. hour.

for quarter of improved margin XX.X% for third XX XX.X% to gross quarter third the XXXX. the basis Our from points

expense higher from to operating well third expenses, much in and continue We quarter quarter of for the third year This last labor G&A and as acquisition. due have cost basis restructuring focus year was points from some overtime. initial mileage improving incurred to and controls direct leverage the Options the driven XXXX benefit XXX the produced declined revenue last to level continued related third on our in to we as XX.X%. primarily to improved of travel quarter the decline efficiencies by expenses

XXXX for EBITDA of compared This X.X% to next X.X% for last an our points grew to adjusted bad is was net debt compared $X.XX quarter third anticipate our Adjusted quarter to expense was year. bad improve second believe severance XXXX stock-based further $X.XX; and restructure with over for of quarters. debt progress quarter, make of the $X.X We The The initiatives M&A other transactions from expense Our of quarter a share we're $X.X third adjusted improvement as year. the of our quarter continuing the expense. last increase basis for third the third quarter XXXX. income third in bad per X.X% diluted million the the for $X.XX debt of $X.XX. charges XX.X% compensation are results million excluded XX declines to and $X.XX; of the following: Company's revenue of the over costs few for and noncash share quarter per $X.XX; of

the for of largely Company's the of our the and are now restructuring severance other end tax working quarter adjusted and the the should we of to our latest share of of We've that the on impact on positive additional we seven progress quarter third was Our The third pre-tax quarter made largely XXXX, with this effective $X.XX; last the tax costs for stock-based rate excluded normalization rate XX.X% the per be end year. of and of XXXX. results of with noncash Addus of have on the from near charges cost of and for income restructuring feel restructuring due compared $X.XX; process. to-date, severance restructuring We for Based $X.XX; by feel compensation been efforts completed great past XXXX severance progress $X.XX. quarters. impact now XX.X% and the charges these

at end cash expect $XXX $XX normalized at on totaling the our to $XX XX by million days the low for XXX from quarter for and third days debt the drove $XX days reduction for to over of Illinois at the State XX a hand million million million on end. We to net of Aging We of from of Illinois in the Department generated had end quarter $XX.X DSOs payment at the the end the XXX from revolver second quarter. of the the and million The be debt. rate continue to quarters tax second We quarter. term XX-day in fell third of in no cash outstanding XXs. DSOs in operations quarter the our had days

thank a Managed receive the yet from we're Illinois from of normalization concludes of our morning. state by I'll payment a interest of and want questions. up prepared for Care I us. prompt still to million, payments to the new this We have your being are please the ask slower to now being approximately cash This state open to comments operator the with although guys state plans, experiencing $X the the for as lines result you budget. affected we flows our

Operator

Ramgopal Thank you. is from [Operator of question Instructions] Sidoti. Mitra Our first

Your line is open.

Mitra Ramgopal

Yes, good morning.

acquisitions Starting anything the going you with be one I forward? months year-end? just deal by And, of pay acquisitions, in closed, know over you completed you've First future give I sense think you Care in private questions. with Arizona guess, of us a help I few few the can terms believe a mentioned, Is Dirk, small likely you true? second terms Home in I that to past that the Options there a might learned if

Dirk Allison

our were hoping January of as will expect we year we early Mitra, probably next – closed target. be it

Mitra Ramgopal

And parity. Is to you the are York, an in expand do Long other regarding or of New Island mentioned wage issue the thanks. Okay, potentially or into? that some about you states looking

Dirk Allison

is other one to is in parity Arizona. as not said, last Wage wage Mexico, we're in is things face over minimum growth do quarters such in the a minimum bit as grow New of with we is an little just not little other no there our straight And the or a issue where is issue. we've to states. wage What states a looking areas but lot. seven pressure in There’s either

minds of not or on state raising the minimum those on wage wage has wage has where been And minimum minimum state the minds legislators. so federal looking – not been above of more in the states

to leadership we don’t as rates perform want doesn't parity good that. we of that those like sure wage that about realizing grow states that reimbursement when we've that they or seen they And to make Now raise things raise such state such to is and markets mean York our – and as minimum in ability open in very New that company for those New results Washington, been maintain a areas. wage the great to the services. to Illinois still Oregon, in have wage plus York, thing and minimum the have we accommodating The ourselves those

where ability is So without try going have to grow in operate strategy pressure, more wage. is states minimum certainly to forward in the that markets to but there

Mitra Ramgopal

IT behind or us do the update you Okay, thanks. an And if infrastructure you side the you have if you can ADP give do efficiencies now? drive completely installation infrastructure any on And expand? is the side, as on to more to spending

Dirk Allison

October X. of Most We of on bringing X in project. was project past a Options X. on on the couple came Okay. July aware, been working a that we We've to finalize company, of ADP was on months. this about them Mitra. And project now able XX had for acquisitions on board August done that for this quarter, then as were that board. huge obviously, as you're And

It say gone we now, – well. we're converted ADP. extremely completely over to over has as So

think has you, position job gone done and be not discover has team is you're to on you time major process. The through biweekly some moving with to say, there When – that to dealing a going But us a going XX are basis, or with any I a during without Now you're for I tell that a project. XX,XXX it's weekly And things the over largely new on at are issues. growth over system such will we to paychecks system, it forward. it. going the fantastic

team year and allow a financial to be system are not management as in financial more that access project, would achieve. is allow moving current to system us going next we only of operations, to Now but our it's not greater continue acquisition addition early Brian pace material to his have will our material but ADP, into to to like that importantly us to growth

reporting the that process is bring then part with that quarter of that very already to on so second that team year. the has second and the And first now – And well. of started financial it using in bring his next on budget to a went project we're

Mitra Ramgopal

prepared sheet comfortable on the finally, Thanks. or are feeling acquisitions? leverage in you as And much terms with balance look you you how at of

Dirk Allison

management Mitra, that team think to fairly we like a conservative. as we're

run this in leverage basis. cash think could X.X% not levered I solid industry, flow over be long-term a X%, general, with and on

we bit appropriate, with If our you I like to leverage than be acquisition very risk quickly. Illinois the probably for But upward kind had a were X times the lever of a today the say, you that knowing up very strategic our where would and could you and was company are, that exposure appropriate higher to could target. we’d delever

Mitra Ramgopal

for Thanks the taking Okay. questions.

Dirk Allison

Thank Mitra. bet, you. You

Operator

[Operator Instructions] I'll you. closing Mr. to see Thank remarks. for it Allison turn I other questions in queue. no

Dirk Allison

in operator. And on I thank have want your for just everybody Thank a participation you, call I Addus you great to interest hope your week. our for earnings today. and

Operator

your thank and This your call. Ladies for today's you participation concludes in gentlemen, conference.

may disconnect. You now