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Addus HomeCare (ADUS)

Participants
Dirk Allison President & CEO
Brian Poff EVP & CFO
Jacob Johnson Stephens
Mitra Ramgopal Sidoti & Company
Call transcript
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Operator

Good morning, and welcome to the Addus HomeCare Corporation First Quarter 2018 Earnings Conference Call. Today's call is being recorded. To the extent any non-GAAP financial measure is discussed in today's call, you will also find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP by going to the company's website and reviewing yesterday's news release. This conference call may also contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Addus' expected quarterly and annual financial performance for 2018 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 statement. discussions like estimates, forward-looking are foregoing, expectations plans, statements. the the and intended limiting of targets, forecast, beliefs, Without to identify

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

Dirk Allison

Officer. thank we Thank for our call. me everyone, afternoon. first today you is any quarter that will happy quarter some discuss then to joining After the Brian yesterday us Financial will questions. you, morning, to Poff, conference Jamie. would our first overall be comments, we With I respond results Good Brian that, and issued begin with and for Chief

increase performance As million for for the of solid we financial X.X%, million to growth $XXX.X yesterday, the by $XXX.X of compared and an continued driven of our organic results. first led same to in operating in announced the quarter Revenue which a first strong acquisitions. XXXX, our quarter combination XXXX, was period

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

first increase from with first X.X% quarter XXXX the the with increased million EBITDA cash the $XX.X $XX.X X%. to in of of bank an $X.X adjusted $X million of million Our our to ended and debt. margin adjusted approximately We EBITDA for million in quarter

Illinois including payers, business keeping to a collections state. our increase all strong the With our both a nice continues Illinois. do position, tax our be our job current from the a in cash XXXX State on with cash to reflected and budget, continued relatively of As company fiscal of

month, this XXXX budget year. concerning the a the state During leadership the has fiscal negotiations for started of

issue the increase passed off the for will state contingency lead pay a that in are a summer, being of this the to optimistic With which a we tax to allow will table, our manner. budget this timely services process

past, of leaders Addus. and I like to we to close would Illinois As like to a to will importance the total business situation work annualized the mention XX% the of we to with of down two inclusion to of our non-Medicaid last approximately our understand to the service budget State that the state revenue. the sure have with in our providers stay continue make acquisitions, is

X, part on of important & operations service two us business. announced Wisconsin. at strengthening on comes as closed majority market transaction was Addus. line revenue eight acquisition current This our an of strategy. our care Arcadia allowing Arcadia in we it April of Staffing entry strategic our As operations our the strengthened while into we Home states our Care and Florida personal states, of similar our of current new is This main our services, acquisition to in The from very

in growth. future recruitment, key with is component which maintaining addition, on organic our caregivers In division focuses a provides important Arcadia us is also that recruiting very a since

the now Arcadia Arcadia our sites growth this smooth to sites. to Arcadia Addus this business. publicly continued we our are month, working continued team past under company. All excited of in and of a about to the the want welcome forward and completion the of to of transition transaction team the our look operations Over I performance direction We're the Arcadia been team. to ensure has have

health addition X, Arcadia care, transaction, the of leading May and of provider of to home purchase previously personal in Ambercare, hospice a Mexico. closed In our on services we announced on state New

As grow both started and Ambercare care and a team Mexico. I'm services both to now New strong a two continue brings the scalable Ambercare from our to companies in field onto have use operations. largest operating platform Addus, as platforms services. result, to will personal health to to which Teams excited the home to hospice hospice provider transition welcome are common of we we systems these we Addus. integrate in and

to system process of With the Homebase, addition these and we software those the health operations Homecare leading home services. to converting for hospice will begin the our company,

new are We this platform. excited operating about moving to

plan for while an is to of model, care end to to to strategy acquisition XXXX. model The our completed be conversion example Ambercare homes also that this home-based calls business individuals care services Our their managed partners. by stay our by a services add our enables in needed of the offering

add payers. and services our benefit to opportunities for consumers, look to continue that will We patients

will both team these on during are efforts continues ongoing, transaction to integration and we through our to grow our opportunity the believe XXXX. at of close to additional opportunities have one other that evaluate While acquisition acquisitions Addus least

our to While Plans I may exciting for partners. XXXX. expanding focus Addus acquisitions in an states that discussing care offerings call, criteria. our services operate, grow new added on of in Wisconsin, is one organically both CMS Advantage Medicare in last beginning and be to had we our our announced which continue are that possibility and This we MCO earnings also meet to care have on market their which we mentioned with personal On states now we growth the our and of in share which Florida ability through

made managed decision to more we know, programs you the as strong have to care relationships providers As have states Medicaid develop with outsource to their worked MCOs.

could tell the services early of increasing availability this too our be is market of the impact the value-based another and for value indication care of an expanding in personal it While towards step awareness home services. Addus, is potential to positive what the care a of

homes is that, of stay each me to that more expensive of work at first important them a a to this important progressing of Addus. care enables to in us performance, provide all turn and does in to setting. the XX,XXX of XX much the over very review we call turn cost. This the to to detailed for a more me instead their consumers low very Brian. patients of It I the quarter work our employees. day services and realize for employees intimate let all health much-needed Addus that Brian good by thank hours With The call let a hard made our is possible Before over less

Brian Poff

morning, further the for strong of throughout of quarter and growth as the good for ongoing you, Addus through everyone. acquisition initiatives, XXXX organic Thank and, well performed XXXX. our company positioned success Dirk, growth the first produced we

first For with the again strong revenue of quarter, we produced the quarter X.X% of XXXX. same-store compared growth

additional Home consecutive also revenue growth Care to reflected XXXX. full second in our August primarily the For the of quarter, of impact year-over-year quarter due acquisition Options the

to quarters. Looking produce to X%, target to in forward, seven continue exceeded same-store met the our growth revenue which last range for or expect we we've of X%

the and of discussed overall Arcadia to double-digit In expect to throughout remainder by Ambercare company growth XXXX. our contribute to earnings acquisitions, the for be revenue and addition, accretive to the Dirk, we

of day directly quarter our against XXX of rate Continued revenue as bad operating revenue earnings the income points. as the increased X business on XX% of the debt XXXX. that of accretive anticipated a $XXX.X as This first instead for billable a range, growth would Compared the to the per revenue of approximately for from to in prior for support hours of for revenues as the comparability growth two Net same-store provision first by per of rate X.X% reflected revenue million. for remainder billable ASC an increase growth below expectations the and the the in and million profitable acquisitions, and our note P&L with an expense, in combined XXX quarter for reduced service reduction revenues affected growth XXXX, percentage revenue basis increase of I hour. of stronger tax of for X.X% quarter change X% netted in to periods. growth about quarter January an adoption items was XXXX this quarter our an

with Illinois quarter quarter margins. year. $X.XX reminder, net adjusted quarter diluted our first results was EBITDA increase to stock-based company's of impact, the The our $X.XX of as income, XXXX EBITDA increases for XX.X% year and quarter the prior to To for increased compared of expenses XX X%. the have the points following: adjusted net has basis $X.XX. was for interest increased primarily XX.X% X.X% basis expenses, with a costs State first accounting adoption consistent as update. in and XX.X% and first other $X.XX, for charges of have XXXX, change the year. gross Included quarter prior revenue related reimbursement latest continued successful transaction increased basis from XXX per margin margin gaining adoption of payment last and on for restructuring this for date, to income impact been XXXX of quarter first the earnings offset Gross share a percentage XX.X% this share. $X.XX, mandated from income of have $X.XX, no stock-based result points the was increases XXX. the An the of the Adjusted a wage first the the of of quarter XXX adjusted be of essentially reporting quarter, prompt of our revenue share for XX.X% with Without to G&A the the compared the $X.X of would for standards $X.XX expense noncash quarter compensation million totaling we to G&A first of the per diluted points per from to maintained severance exclude compensation, in restructuring The effect quarter to the in or and severance for As first the XXXX. XXXX. adjusted of for of EBITDA adjusted percentage charges M&A quarter, the XX.X% expense while ASC margin other of compared costs of M&A corresponding

Our costs adjusted a severance expenses sale for the and of on of the of noncash $X.XX of transaction service $X.XX. quarter stock-based other per centers $X.XX, exclude first compensation day of results gain and share of $X.XX, M&A XXXX adult the

point first treated tax This we the tax of and the credit lower me a as discrete announced rate out was our empowerment zone federal that quarter. anticipated. result that extension first a in quarter XXXX was in than XXXX XX.X%, item also February was Let that

rate expect For in to have previously we as XXXX, range, be remainder XX% we the our low of indicated. tax the

with Department XX with on hand, cash the XX XX, quarter nothing XX million After and of $XXX.X cash end compared on XXXX, acquisition year-end DSOs March million. for Illinois had on $XX.X well debt. of with still hand. of Arcadia approximately draw loan, $XXX $XX from accordion to and our with in compared debt million quarter under of acquisitions first another the strategy $XX days cash availability the our revolver. At the of days on for term increased end $XXX.X acquisitions, first drawn on consummation facility at our Ambercare at subsequently days We're $XX.X the term of DSOs XXXX. credit Our Aging million net delayed on our at available at to our executing XXXX. operations XX in were still in revolving we end and available were $XX.X days our approximately capitalized million the million continue term totaled our had million million

very summer, open questions. process. this your from as prompt in remain operator our As on Illinois, the to morning. have that a including Dirk with are $X.X and efforts current we being consistent Illinois as being in We for We to pleased now payment with This million passed look us. continued concludes keep this budget us will prepared focused line their possible. payments please to and for mentioned, comments to all interest forward see Thank you we the ask

Operator

Our Instructions] Hambly Stephens. question [Operator from of first is Dana

Jacob Johnson

you on soon? I then out seize Jacob are Dana. is all? Johnson year, for starting to it? it added for are preparing at how able you is Advantage as a Or personal too opportunity for supplemental This with care And guess this benefit being Medicare next

Dirk Allison

in able to It's Yes, it opportunity MA very to relates not early personal Jacob. we're as size care. Thanks, process. the still the

having a our the However, care we discussions managed at that are they providers way about with of opportunity. look lot

course, that standpoint. help help a So involved our with could from able that be plan then, to for MAs, from continuing be with opportunity to with them design effective. us, And a to we're service being visit of our try like standpoint, just to them we'd

Jacob Johnson

of Dirk, years, last over couple team built a at the pretty then there corporate And you've level. the impressive

close revenue you getting million do scale think a the of more could how $XXX your Now target, you can that base infrastructure revenue current it? much you're to run rate support? large How

Dirk Allison

subjective Well, honestly, a question. that's somewhat of

think very grow, base understand itself, there. that But handling growth. we to we I do to we a up. talked I $XXX there all company have $X of to that that to take I is billion may we think our be resources want can way company, an My with -- problem this with -- million have team getting this and bring capable about we additional being think, you in the no team the that. help as continue I us team

Jacob Johnson

into following the up business? that that side required investments are are that, guess hospice, moved you there I of as on on

Dirk Allison

Well, that a we excited strong those relates home as one lines. of utilize the to platform as were which could continue health about bought service we to we one it they Ambercare, acquired things when we we felt grow and pretty hospice, is

to I as to grow we home the is making scale we over will are ability platform think help that to the us and the see transition current give operating health from which with that the hospice system, we and our believe Homecare opportunities. immediately both Homebase investment system

So we making investment that this year. are

Jacob Johnson

home there; that's And the health Homebase, clarification just quick Homecare hospice. on

personal the side. on that implementing not You're care

Dirk Allison

side. be It is care That not the on personal will correct.

Jacob Johnson

acquisitions? On land you you've last me. do to Why fishing like question year able M&A, this there then be for been you've more and pretty competitive but good-sized in been some markets, pretty you're able deals think to with call may some come. successful And maybe sounds personal to the where to benefit successful? away care you're just looking personal secret others Are want sauce? Anything care Do out -- think be you you because the give you it's don't aren't? leading to or --

Dirk Allison

pretty us, wish let's what I a have which in million them sure transformational company areas good the $XXX with the of that think, could we know in say, under. And to and size to which the to acquisition been make acquisitions. a not haven't secret acquire, revenue tell a getting We've -- I I looking we you to are are, competitors size, is. sauce been the trying job, some We're more getting of in looking do know trying company fit. as we we're culture our

trying they So other than look our that, these where just making sure that is we understand very is culture can the business, we're is understand we when deals. believe I at probably important and That what you we go. to what and tell

Operator

Our is Sidoti. Instructions] of next question [Operator Mitra from Ramgopal

Mitra Ramgopal

expect up on another follow of Clearly, to wanted to by the complete deal indicated the side you year. M&A end the Just first. you

others in increased terms terms coming of also you're Just you seeing any in much wondering at are this yourself space? be helpful. Or And targets? color pretty seeing would environment is the of there out competition there, it looking into

Dirk Allison

that say, would know as I deals. we've competition that I -- seen we've Mitra, Well, at increased look don't

of we've what area been looked. able has as where the again, And it's we've a that and I after pricing competition. we as which see to in out in but opportunities seen Ambercare larger realizing think high, then looking with we pricing company the in far see we deals We've frankly, continue gotten step-up -- only consistent both at the care rare consistent in the that. we've home haven't quite personal seen not pay, as we're and the care hospice, not there that quite some transformational we're to

Mitra Ramgopal

increased Arcadia interest you and the in And the are of increased now managed partnering size getting company, wondering, light I terms Ambercare of from in of care with or was you?

Dirk Allison

Absolutely.

the I locations, operate into they'd to the where to home like last our that things that our services that partners and one over is months, places important and think personally us additional see additional interest the they I of to ability that's of add few add operate. have seen MCO and

the get Ambercare, our add stronger as particular want operate, in those in that So markets. want lines fits that. and we far we which additional Arcadia is us as for both, very were in And strategy part to acquisition. why service and markets strategic of an to with hand-in-hand That's we

Mitra Ramgopal

terms And I revenue tick the just in the billable sort noticed on -- -- it hour, to continues of a question per up nicely. of

from you a et reimbursement getting look contracts, are you As any to pushback negotiate new standpoint? cetera,

Brian Poff

Yes, Mitra.

-- to to mentioned pressure. an script know the last toward We've is step-up. that York job. I to that reimbursement end continue that in about consistent of done my going be year like see We've comments, we've wage New increases a had a you we've talked market offset think opportunity. pretty great we I was

in Our team market great working has of to get payers done up step-up. job with the a that

So we continue in success see to area. that

Mitra Ramgopal

South pretty that Shore you Is you. was I remember a drag much for behind now?

Brian Poff

Yes.

we've what from gap team seen, of great us, job a for has far that So filling yes. done our

Operator

Dana next Hambly of is Our Instructions] [Operator from Stephens. question

Jacob Johnson

It's Jacob again.

last one was anything Just more Arcadia you little color they're give than at Addus a a had the the question. had Dirk, division different to previously. table? Could mentioned on recruiting you bringing that bit you a what just

Dirk Allison

of had operating looking Arcadia, personal in business, that our if right on fit of would biggest caregivers. one his care, business you started with did challenges, challenges each which we Addus. you got we with Yes. he about of talked They recruitment Because staffing. look And sites excited of at at tell the of our of majority Bickham, team, is their coming one more COO, possibilities of the our more obviously that the our Brad When most a Addus. with was the division the also their then that, that we at

ability to that of onboard to of people patients, that cases, very sure we the we're knowledge payers base And in is those of our And with bear so have service need our the for on came company need the very, help us staffing to a markets seeing of to who work in important. our continue consumers, make lot we of this now and, happened needs one caregivers. is or our we operate this to we will future our one where biggest to resources try Arcadia bringing help as markets that believe,

in that it's very we're we've done as excited past. the Jacob, not about So even you something division, though, mentioned

Operator

Mitra is Our Ramgopal Sidoti. next from question of

Mitra Ramgopal

Just private a I tuck-in did this couple of of of side wanted that you pay follow-up late was acquisitions seeing. to the the I early year on in opportunities that you're business. year. know the terms on last and wondering front

Dirk Allison

to with Well, continue bring in about be I those working interested, did We those you on pay. Mitra, we X% and revenue of as taken, private to It's a are private couple believe, our companies, X% from the private companies. mentioned, about we pay. pay

not area acquisition franchise a going we're about huge of providers, by not we're that private in. So pay because of the area grow a providers interested be in that's services excited larger are to it's and to It's opportunity. that model hard that most growth because

Mitra Ramgopal

be Ambercare be just Arcadia, Was Illinois just I that Dirk, Okay. And revenue. had to to clear? know and in clear. XX% finally, mentioned of -- factor I you you about after is believe,

Dirk Allison

Yes.

so just clear Let understand. up me that you

Illinois everybody So is. understands where have we --

about you of you and the XX%. in going If after Arcadia, to entire be it's took factor Illinois, revenue Ambercare

by state. state. government. the which Now by is paid in matching also is not is It federal paid pay, as It not you paid, know, private the Medicaid, includes that the which by are

lawsuit. required of state be by is paid is a the through to So that the still the part Medicaid

keeping their the picked that's not The by MCOs job business. cash that us current part in a done MCOs, have of a nice very part flow. So risk the is of in been up

general fund we So non-Medicaid equates, the up. business, and leaves call our revenue overall what revenue. about clears that the is business that and that XX% to of hope it after I Ambercare what or Arcadia,

Operator

to turn Q&A the conclude Dirk like today. does that call for remarks. Allison back And Mr. over our I'd for further to any session

Dirk Allison

Hope everybody to have in week. for you thank and a operator. for great call today. Addus interest your earnings Thank I'd your like our in you, participation

Operator

in participating have Ladies today's great and program, This conference. may and gentlemen, does conclude Everyone, thank you all today's disconnect. day. you a for