Addus HomeCare (ADUS)

Dru Anderson Corporate Communications
Dirk Allison President and CEO
Brian Poff EVP and CFO
Brian Tanquilut Jefferies
Matthew Gillmor Robert Baird
Mitra Ramgopal Sidoti
Dana Hambly Stephens
Matthew Gillmor Robert Baird
Call transcript
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Good day ladies and gentlemen, and welcome to the Addus HomeCare Corporation First Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder this conference call is being recorded. I would now like to introduce your host for today's conference Ms. Dru Anderson of Corporate Communication.

You may begin.

Dru Anderson

morning XXXX to earnings good Corporation Addus and quarter first conference you and the welcome HomeCare Thank call. of also To measure the measure release. the a calculated will going GAAP comparable yesterday's news company's is financial to reconciliation find to discussed in according most extent today's call, financial any directly that measure non-GAAP website by reviewing the to you and XXXX, Litigation XXXX including financial within This among the forward-looking meaning Reform may Act Private the performance call Addus' of conference regarding statements Securities statements, annual others, expected or also of and contain quarterly beyond. for

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

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

Dirk Allison

Financial will results the conference and then Brian today call. general begin for Good joining first issued afternoon. Dru. Poff, Officer. quarter that discuss us Brian with will is everyone, yesterday and morning, some for me quarter you I comments, you, first we Thank our Chief thank With our

healthcare Sean after independence Sean would Chief as be four joined to Addus the General services Executive our Addus & Executives Home Health and start lead want Hospice. Addus. to I to experience Encompass again have we any Sean to of joining we served by Senior has with are comments President, him Legal acquisition Many and respond to Officer. continue we worked HomeCare. as questions. Sean Counsel previously Gaffney, for years happy welcoming of many excited new about our Following Vice us years brings our

yesterday, for of increase the As the first for included $X.XX of same XXXX. to the quarter XX.X% operating revenue. first compared we in $X.XX was million first announced of increase increased same-store which XXXX, as XXXX in quarter $XXX.X XXXX, earnings our compared continued of Revenue period the X.X% period share for diluted to XX.X%. per solid $XXX.X Adjusted quarter an to the an performance million same in for

$X.X $XX.X from Our million. for XX.X% of quarter the adjusted EBITDA to XXXX million increased first

In cash addition, strong to waste. little with position we have continue a

Our X.X%. quarter our growth first same-store exceeded ongoing target of

see of experience were We growth to to new the we and to consumers York and network our in sized New as coverage this nice continue directing progressed. This the market MCOs continue in provider Addus. is market narrowing

the We our increased Illinois same-store rate fourth transition as saw to more our a program in we X% who the quarter targeted returned call in our growth as our New referrals also level confident to mentioned we we earnings as of last in what MCOs the remain experienced in to CCU of X%. progressed. XXXX the the which space referrals in of has expected, As manage Mexico oppose normal completed. Also transition was Medicaid

the compared affect increase Shore of XX by margins as with first to impacted on lack mentioned continues though, we XXXX. the quarter increase offset approximately negatively our our X, to rate basis our South minimum in margins Chicago call XXXX As of July our last the points quarter margins the wage first and to

Our team Illinois we industry. to pass with increased for leadership rate on association need support to believe our the already continue increase state the the to continued educate has state the and their work to understanding and

the rate been that successful assurances increase, reimbursement wage budget state no we have experienced. the passing include industry have increase offset believe this the upcoming we will in of the importance we increase mandated to minimum While a demonstrating

our operation an strategy further presence. on we is Island, Care During our we health states New with will Long New to City Health allow on strong York us where our market Services, boroughs. partners Together health MCO personal the based VIP provider both to have previously the Long VIP South important believe ability This of our approval full coverage of transaction. public announced this Shore of for care. on acquisition close the counsel offer our five We're the us step to of first purchase currently quarter, for the needed and to items the Department operations from we received York and of planning Health in completing in a last our enhancing Island a

us transaction should Our York transaction team completed, has to plan, is the on continued to on New work will our become June behind this allow largest close X. transition market second together which Illinois. Once the

targets. to In work development addition other team our continues VIP, with to acquisition

on financial, never be deals, due progress operational are of making able final are number particular compliance to a potential although get through that on certain and any diligence we opportunity. will We we these

to our potential to as strong continue we However, of a ability are pipeline XXXX we close have excited acquisitions transactions. additional during about

large We Advantage XXXX on the continue these for flexibility few are personal opportunities earnings April and and during CMS As have services Medicare plans. to Addus provide receive on care XXXX Advantage X, with last for benefits to about we excited the their Advantage encouraged referrals members Medicare contracts under expands Medicare under our plans call, to discussed currently supplemental announcement that under contracts. we further by

provisions a offerings. expand step continue towards refine to of in services they based working of of our are under to value partners Advantage improving awareness that and gather supplemental of continue appropriate is the allow to and We our and benefit Addus quality to these with care cost the the plans services indicate personal data this healthcare. believe payment system Medicare lower the help positive their the as of CMS will expanding I value

We continue to as MA the plans cost integrated these expand personal will care that opportunities savings begin believe to through of realize more a services delivery care model. potential

this XXXX MA of One likelihood a over for the of HomeCare proposal discussion later of we While plan all. details of additional incrementally such the proposal we coverage, to Medicare would issue opportunity receive upside for which on Medicare is be the the expansion Addus. see potential segments same net anticipate for that neutral to eligible smaller that additional XXXX, has universe a with offerings individuals program impact Medicare Addus the change believe the for health our in gain we to If home care or passage lot participants Addus personal and is federal likely a for hospice, true positive. Addus. under under age a such in received expect Without should for XX of few past on the any of proposals, weeks to individuals commenting are currently service a feel

source likely consumers care a Medicare these through personal concern the and terms of continue currently and Medicare primary payments our receive if Medicaid consumers all In will that Medicaid under programs to services we even for services all be for proposal, for Medicaid of waver our believe progresses.

bring at this to turn Addus. review our a cost. performance, quarter continue to me a and as needed company all service Brian low call the our a of for of I consumers again detailed important much over Before We first to more thank let employees very

the Our setting. that much their does expensive of The enabled good team employees, our am work homes to Addus to these due is to and the possible healthcare, progressing work With only that each turn interment services hard more occurs me of of of call of which the stay over let Brian. last in appreciated ongoing consumers commitment very in instead to a I our efforts

Brian Poff

of Dirk, quarter to and growth X.X% Addus X.X%. produced quarter you, everyone. strong XXXX solid the to first of growth the sequential in year morning the as of first with and same-store had good same-store we XXXX a compared Thank revenue of start

strategy trajectory to in execute and our this well we are We XXXX. to positioned believe continue on continue

our to look we close June to addition to acquisition the favorable XXXX. on of of trends benefit current operations, services the incremental expect forward In growth VIP healthcare in X, of assets

We also pipeline and to ongoing from work evaluate continue towards acquisition an other of transactions. opportunities potential

remaining these segments home revenue prior million The and added our reflected from in XXX.X hospice health in with XX% of As Dirk attributable first a XX.X This lines contribution with was These the revenues first quarter take for XXXX revenue a service to net and XXX.X the in increase the growth XX.X% approximately largely Personal for year service in period. revenue quarter to year. and for for no our segment last effect. by quarter X.X% from business million hours million the sequential billable XX.X% that first the growth of XX.X% as over per ADC growth hours. strategies revenue increased care for total accounted per our operational driven increased mentioned, hospice day growth increase by of in billable of in begins quarter X.X% in XXXX. to first services revenues

acquired the of XXXX. was last grew for XX.X% attributable increased of associated was compared the inclusive per gross the adjusted wage X.X costs quarter impact first skilled compared XX quarter first margin profile for for expense increase for stock-based This basis quarter G&A to percentage minimum M&A other expenses Our the first first first $X.XX. to the is from of quarter compared $X.XX EBITDA first negative company's and for increase XX% XXXX. of of transaction first revenue of $X.XX, XX.X% the Chicago quarter our the $X.XX, income the our constant. results acquisition costs restructuring was XXXX. quarter for compensation non-cash the XX% to to business of skilled of of care of The the with business share of margin from non-reimbursed Adjusted XX.X% businesses. and personal quarter The last $X.XX following; and for with first remaining in impact per XX.X the quarter quarter profile million share compared year. of XXXX the personnel diluted the other adjusted the EBITDA of first Adjusted with severance with exclude higher quarter and the the points margin of for net reflective year operation primarily of XX.X% materially our X% approximately million XXXX with of the for X.X%

$X.XX. reported, $X.XX, of $X.XX, restructuring M&A expenses XXXX results charges, income Illinois of non-cash first transaction and stock-based compensation As and adjusted the of costs $X.XX. our interest for per severance quarter of exclude of share previously other of

tax compensation excess below an of benefit generated result expectation. of was stock XXXX a rate quarter for by tax the standard As first our our XX.X% our

to with XX of year Illinois we Department the compared of range. of with For XX% low quarter XX DSOs the XX our increased normal XXXX to the expect first at with CCUs to tax of the the days primarily XXXX. on Aging the end first MCO days at end the we full New our and system days largely was quarter quarter. York compared at rate Mexico. in of transition be the for quarter payer continue XXXX end return the end DSOs issues the in have been the of in the in XX to days on DSOs The XXXX fourth were quarter. expect more These impact of and during fourth Illinois delays and in at the related first the second to to resolved cash New levels the quarter increase flow of transfer

this us. the acquisition prepared only This XX morning. open to ask lines with announced quarter please had With first you operations with at credit X.X XXXX, I'll used operator continue to questions. all Our new want for our XX.X cash being strategy of your last bank thank our support I million we cash net have concludes debt. now XX, million our for on comments capacity to the facility million year we and in totaled in March hand. to


And with from Jefferies. comes our Instructions] Brian [Operator first the line question of Tanquilut

is line now open. Your

Brian Tanquilut

obviously M&A the I guess the think one question key question for the Dirk you of about first for as I story. it's

over mind and on put on what nine months? you If on that looks been to deals don't like working pipeline it any updates us conversion you've last six the the giving

Dirk Allison

Yes, thank you Brian.

extensive. be Our M&A continue efforts to

I than guys due out, pipeline more issue. ones particular we and a time working deals diligence one on have we're working we're as talked you We the of were of deals about fall financial pipeline on last no the deals, know number we in compliance two however diligence a at is go mentioned our through to the those two of so due longer times deals working operation due today although we on

be we're quarter So XXXX. this our we'll additional confident close our second year. to us able for We'd that like in deals to able third in we announce of quarter should believe to something

So that we hard towards continue work goal. to

Brian Tanquilut

about share And shrinking consolidation to about to or made market that there the to is network think as there, that then the we follow-up further guys? would comments theoretically New you you of New happen in the York drive market York opportunity you expect the

Dirk Allison

Yes, continue to an York. ongoing is there network New shrink to provider in effort the

we continuing we're we that see of call business I another in the this would of drive market second MCO think X October the into is Addus. particular second the partners have for and what phase that that year to tightening deadline

first a to fact as experiencing allowed large sensor of network. was our saw because the you in that is normal are consolidate in As the going are that not growth, than being growth the to providers to New we this X.X% York higher quarter out that other market are part able due continue with

and strategy takes networks So the what start in markets of to going strength decide all honestly, market is other their building to excited is and are narrow is lead prepared York New about future. this if the they that a we're in being

Brian Tanquilut

that just right comment just with relate just put there a down that don't made, that when that is to X% I you you is follow-up point necessarily. that to to X.X% think that think to And you reason guess to I X% conservatism? given slow of us a no for how is north the of And coming guidance quarter same-store up is the shared

Brian Poff

this I'll Yes take that is Brian, one Brian.

October York New we our forward expect be going strong we think to discussed as deadline. I continue towards

in going in forward. X% little we we we were range still still to us long-term same but over that's were X% is QX, experienced think QX general a range under I think the as we for we think

Brian Tanquilut

And from then me. Brian last question

is think As the I how progression DSOs now normalization out on or we for flow a had the I about to also are if flows, they then trending G&A there should think just to one about DSOs G&A in cash if but you close there know is anything we see call and in and year? cash that

Brian Poff

those are systems largely and New issues payers their kind the so to of York DSOs, on Yes early updating and New year transition given Mexico that this are over.

QX. takes to a get longer so payroll were seasonal So with us G&A to normal that back we're year. I expect, out seeing nothing have had in a XXXX see the that end CCUs positive their QX. perspective are would all line the trend In there to for to of of little we'll and we bit we hand about ramp sequentially reset of hope think them Illinois the hand up that on to our of kind continue that for working slightly The through updates from we to taxes trajectory that with a already them transition process done


Baird. And with our Matthew comes next from of question Gillmor line the Robert

Your line now is open.

Matthew Gillmor

sort consolidating Maybe with or of in was on following New networks this the there. on consolidation? larger had occur have that progression like quarter that seems discussion impact providers up York of quarters, than quarter natural that that Brian the something you just the this It prior a narrowing did accelerated

Dirk Allison

the the year if that in of initial providers. for further reduction the back look reduction No, providers October there the and number and of you followed by of last year was second I think go at process an

in phase what see the in we our York we growth have saw a as I that earlier, through. we nice to second New moves continue So step seen think

have quarter nothing of to with X that So be particularly the level. this deadline drove October they this that the exception down the where year next to

Matthew Gillmor

patients a trying you are and that able makes go just transition to caregivers as of with the out dynamic? recruit to well growth or understand come part kind to staff as to And are that you that easier along of little having that

Dirk Allison

the a receiving the comes the consumer. and over to majority is shifts of in of another about of that with business vast receiving they're as such cases that Addus, as from consumers network these already so the provider narrowing cases, are the just someone one care great care, Well, things most caregiver

really it So makes service job having recruit our to provide much of this caregivers easier this during to process.

So they as XX I over. for would probably percent so caregivers come with or say plus transmit

Matthew Gillmor

know an and get Illinois local in on seems that the the you would like hoping I both your offset number and a I update and House with associations of you're increase it large legislation, was increases, the the the then rate on mentioned Senate minimum wage in the your the timing and House that's this, legislation the Senate. And to rates working issue has trade co-sponsors

get change stands process So getting there the I just to terms a of where resolved? to that level confidence wanted your in sense and for is any

Dirk Allison

we remain wage this leaders dependent passed Well, the happened like in these State resolved we're going wage they believe ours State get when caregivers. that the that to of on we what increase because ultimately confident to the always understand and companies are minimum minimum the industries

in able in again, leadership We're let to support continue and good the give We that on increase and remain strong educate about half House both to we times to be work. to so with Senate particular and them all make needs an are and negative services to me in deal an barriers business. areas the we various issue. have is discussions staff out is number we've The companies provide see and them and language through good specialized Companies maybe had budget that know us to to honesty to The there. the goes opposed that population we're no just Addus that So being would want up those properly realize There like do you this. go out they It'll fashion. that point without pick if Governor's to quickly I this thing Addus are to go provide I increase difficult the be the but as as why they a companies have Governor longer this saying in put of this previous we sure do the to supports like that service impacted things right they're level to for other not encouraged. have that that, money now with. in to due working Governor's and such a in to the severely put understand increased to of base would paid having and

have with this know folks a is to State with we providers let the that the partnered an smaller association our issue many and these of of that affects So the State. in number

lot great a feedback. received So we've of

by and June will to team we working say, first Our we And by led May we July part timing from confident going that would must end soon this. of is on much happen Darby hard standpoint, get clarity Anderson price I a the would remain greater to of what's increase Xst. very on hope we have

now So we remain optimistic. right

Matthew Gillmor

know in on Brian. your number an impact quarter, headwind But this numbers any And had had properly the in there shift question voluntary then revenue? quarter. I curious last calendar days Was for of there's that if a the

Brian Poff

business this days two less sequentially. with quarter Yes,

held bit we impact. in take we an a look about that else that way QX. the consideration specifically same-store really quarter of when nothing seasonally those in We into first at had us talk impacted So but the


next our And with from Ramgopal comes the Sidoti. of question Mitra line Instructions] [Operator

line Your now open. is

Mitra Ramgopal

was with of personal health? mix as what look presence in the elsewhere, in with wanted deals, standpoint you're pipeline or a what play from a on deals should curious a terms and as Ambercare just potential home you're seeing. terms acquisition more hospice you there I I seeing care to if as at expect bidder we had and just also if well potential we just more similar or saw pure equity and of follow-up we private competitive to some

Brian Poff

maybe is Hi can add I Mitra, color. then with this that start Dirk some Brian. and

pretty last half. I what year remains think consistent our seen the profile over in pipeline and a say we've

well. with last that think home into little into with I price we're the those Ambercare us assets year moving health bit as right at interested in are hospice and

but to I is it's pure equity, a haven't side to we we care the there I private So lot in of kind there, assets. of seen this continue market look folks on equity somebody know hard of going difficult, those care just of the at start competition point, of platform personal mean to a roll lot question it's private really are a play your of out about it if personal kind a up. talking about

for have a think seen have harder competitively, backed there care really for more good couple have equity and in months. has to it's build foundation to easy start nothing last equity, but a the layer a personal I'd We what the past us something say from companies on mixed I over of unless six nine private as we to changed private to little asset looking foundation at they

Mitra Ramgopal

then get of some update the to you where wondering, all converted cetera. do improve I but things that stand software I to you on infrastructure new or you if pretty the some in systems was trying from is And investment et know just an infrastructure. payroll company one of the of now I build-out. the on much increase as behind look wanted IT was system just size ADP know to you you the standpoint? an

Dirk Allison

this is Dirk. Mitra, Yes,

out Our infrastructure behind largely is build us.

be where we to systems a we're with the make some of and makes to continue they're on keep there bring them manner while. that sure transactions come to they to on that have we and to grow for board, systems sense deal onto our have that investments in Now whether is a going as understand

that more to into current system, interface have rate. we that So much our continues but to have that's an infrastructure occur

are recently think our me good to so Oracle excuse shape or as financial just As infrastructure system, converted we've in this far we systems, I HR the excuse there. quarter, me base

Mitra Ramgopal

to Medicare if wondering relates any that And early seeing finally front? as still yet just seeing, you're I know it's if on interest Advantage, you're but it heightened

Dirk Allison

with change that plans flexibility allowed believe out to think April in Medicare that they offer. year the the recently, the benefits do I came have this I more Well, that Advantage around

I think that's really level. interest people's increased

and seeing today the talked as the that about Advantage and Service say of industry we're Personal can would nice a job Medicare we work it to very that we've a with it on plan the continue believe think is the to job them let that front know that is thing look and loss affect Medicare we level our win to in a the before cost benefit show for the marketing Advantage most them. and medical plan, still make ratio team's I to I our we on plans that the Care seem today their end teams reduction of selling possibly this service can is our

the they're of industry everybody this Medicare a a was to going take that's in plans, that because time ongoing, bit little providers that's something was not This from new or before. offered to Advantage So care. personal

understand to they're try what benefits, to and bring industry having learn are having can to So benefits, the them. to help can as we having the to they're do we an learn we them


comes with And our line Dana Instructions] [Operator Stephens. Hambly of from next question the

open. now Your line is

Dana Hambly

Managed they the plans, guys with forthcoming are how with sharing you with data right Dirk Care now?

Dirk Allison

can forth end work that on so that's data a are and can other, with day understand and make to we working always them Dana. would both the of we each progress. between data. back we That trying in that do. what that is That at touchy, share their the we is sides sure say I probably That's

Dana Hambly

can the visits the of help me things quality remind just is And maybe ER think you important some primary prevent target? you

Dirk Allison

I to a reduction done ability think stays. we've pilots reduce ER times couple in help past that we at hospital leads a visits in have which the to that the demonstrated

work with trying the MA we We readmissions lower plans rate. also the to readmission believe to and on work can

Dana Hambly

think but gross is really variable you're growth And just margin just that seeing have is when it's same-store above profit or effect But flat. I largely you in a margins. it's in is translate profit the wondering in of much growth kind that Brian the care you mentioned so but or it's X%. personal well because is gross why I'm this it the variable lag I'm not The case there costs costs? about same-store to because guessing that

Brian Poff

for Dana rate that impacted we gross and keep was margin in line year-over-year. care by Yes, last were XX margin flat by both points bottom personal the Chicago mind gross non-reimbursed July. about basis increase But margin the on

Dana Hambly

okay. Okay,

Brian Poff

a take as basis up be actually basis, would you that we comparative into percentage account, XX On if points about that a with impact excluded.

Dana Hambly

think you in the that by would be increase largely just number? driven And the same-store

Brian Poff

through our we've a that's an was gross margin that That's success to see teams really starting the diverge. kind there's in done with mean kind so to wages. cycles, certain goal try their had the stay rates is to job our have It's when go up nice I Yes, of there. on as to government to We've business. always changed been of nothing of great markets that able of and budget else impact our our and working good with rate in Chicago you're the sure overcome like cost piece make increases you

Dirk Allison

And Dana kudos our this also is operations let give them Dirk, me and team mention honestly.

two offices Mexico, as to able New offices where eliminate grow into some we one York, in whether that's continue to separate are such strong the basis, one moving we're a gross there currently we with on margin markets costs leader. operate New where opportunities As

going job great While of. advantage and taken opportunity to a that to upside be that's an of our we've is huge team margin not a has gross margin it improvement, done

biggest the same-store to continue will able to So rate. as it and we mentioned work continues at on to on a both higher grow, being to increase hard price expand in is area margin The as that. Brian continues grow as

will slight margin. in We see that increases

Dana Hambly

Last it's Dirk passed I the Work or pressure ordinance, one wouldn't historically me, is to you be the healthcare like the fair from idea but excluded. in Fair that Chicago and the Week maybe excluded industry think be country? pass something been states of the other I some has tried healthcare scheduling any may from Are that that an think workers anywhere seeing in been or

Dirk Allison

anytime in Well fair that to think educated a be have I legislative won't on a talking environment. body starts scheduling, about work why healthcare they

I a get are healthcare about good team job and talking the has working that done that States excluded. to our with trying think the

we've is always that successful. I so will And challenge. say But far seen a be it

can it's post advance like caregivers. We have schedule schedule you for a not two in restaurant where a and to that let people know out weeks

consumers today go have seen can't occur to a schedule. We or that need just to they but they things something appointment the be that have and they're, to happens that where seen be tomorrow changes Doctor our

I would it it to one but through. able work a challenge so been we've is is say far So


question And a our question from of it's Matthew line looks next Baird. with the follow-up like Gillmor Robert

now is open. line Your

Matthew Gillmor

or that you going one for a the on about impact to create mean went bunch New a XX narrowing sense same last XX had whole the any providers us it's to wanted than follow-up terms first down XX from understand York it the just XX you and in the when a year, the Can of of of and the XX narrowing to would of opportunity? opportunity what large is give I of then the networks. magnitude in of to sort future from a bigger your for sort

Dirk Allison

provider. have October that year in your members, last every I it year, this think they said And for one members of had try every have could that's XXX you plan Let how on is then provider. XX goes me one you to to you working clarify,

providers, you I a think year. same that of So I don't, see about year you continuing probably as up tighten as saw far see numbers can last the reduction to this you'll bit

for hard how us it's how exactly So are many anybody, out right plans the still to to there choose. quantify can just limited many but to their they choose they're have


for and Thank remarks. closing session. now the you. concludes today's over Q&A I any back call to like And turn Allison to would this ladies gentlemen, Dirk

Dirk Allison

Addus a for Thank in call participating week. you to all your and you have you, thank interest today. like in great Operator. I'd Hope our for


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