Addus HomeCare (NASDAQ: ADUS) came out with its second quarter financial results on July 31, 2023, holding its earnings call the next morning.
Addus posted revenue of $260 million during Q2:23, an increase of 9.7% over Q2:22 when it generated revenue of $237 million. The company also reported second-quarter net income of $14.9 million, an increase of 32% compared to the $11.3 million reported during the same period last year.
Last quarter, it was expected that Addus would post earnings of $0.90 per share when it actually produced earnings of $0.97, delivering a surprise increase of 7.78%. This marks the fourth consecutive quarter in which the company has exceeded EPS estimates.
Addus’ growth during the quarter was driven by its personal care business, which saw a 12.6% increase in revenues during the quarter. Billable hours grew by more than 300,000 year over year, and Addus reports making $2 more per billable hour in Q2:23
“Our strong volume trends in personal care, our largest segment, were a significant driver of our growth for the quarter,” Addus CEO Dirk Allison said in a statement. “Demand for our personal care services continues to grow, reflecting a greater awareness of the value of home-based care as the preferred and most cost-effective option for many individuals.”
Addus’ other divisions did not perform so well. Home health revenues experienced a significant decline of 10.9%, with new admissions and volume dropping by 17.5% and 11.8% respectively compared to the previous quarter. However, when compared to Q2:22, new admissions, recertifications and total volume for home health are still showing improvement. Hospice revenues also slipped by 1.1%, with the company seeing around 200,000 fewer admissions and 20 million fewer patient days on the books.
Despite the poor performance in some divisions, Allison expressed optimism looking ahead, stating, “We expect to see gradual improvement and expansion opportunities in our home health and hospice operations in the second half of 2023 as the clinical staffing environment continues to improve and as a result of the expiration of the public health emergency.”
As for the future of home health care, Allison isn’t worried. Most home health providers are scrambling to fight back against the Biden administration’s recently proposed rule that would cut Medicare payments to home health agencies by 2.2% in 2024. The National Association of Home Care and Hospice, a home health industry lobbying group, even announced on July 7 that it is suing CMS and HHS over the cuts. Despite the uncertainty, Addus’ leadership is actively seeking opportunities to expand the company’s home health reach. Allison also believes the rate adjustment will normalize in the near-term future.
“While home health has only seen a proposed rate, hospice recently saw a slight improvement in the final rate for the coming year,” Allison said on the company’s second-quarter earnings call Tuesday. “We are hopeful that the final home health rule, when published, will more appropriately reflect our increased costs. However, we believe that these reimbursement pressures are likely to moderate over the next few years.” Allison continued, “As such, we will continue to look for [home health] acquisition opportunities that are strategic to our overall growth.”
A day after the earnings release, Addus announced that it completed the acquisition of the home health, hospice and private-duty company Tennessee Quality Care for $106 million.
Based in Franklin, Tennessee, Tennessee Quality Care serves an average daily census of approximately 1,800 patients through 17 locations covering a service area of over 50 counties in Tennessee. The deal was originally announced in June 2023. Mr. Allison indicated that the acquired asset is expected to generate approximately $40 million in annualized revenues as well as foster further growth for Addus.
