Addus HomeCare (ADUS) Jefferies 2024 Global Healthcare Conference summary

Industry and regulatory environment

• Personal care sector has stabilized after Medicaid access rule finalization, with unit volume and hiring both showing strong growth over the past 6-8 quarters.

• Inflation and economic pressures have aided recruitment, as more caregivers seek additional income.

• The 80/20 rule's final version is more favorable than expected, with extended implementation to six years and increased state flexibility.

• Illinois operates at a 77% threshold, and future changes may slightly reduce margins but are expected to be offset by higher volume.

• Industry consolidation is increasing, with larger providers gaining market share as smaller operators exit.

Strategic actions and financial outlook

• Exiting the New York market due to regulatory instability, wage pressures, and low profitability, freeing capital for more attractive states.

• Sale of New York assets, representing over $90 million in revenue, will have minimal impact on EPS and overall financials.

• Illinois rate increase effective January 1, 2025, will raise caregiver wages to $18/hour and add approximately $23 million in new revenue.

• Cash generation remains strong, leverage is low, and capital is being reserved for M&A opportunities.

• Focus remains on expanding density in key states and selectively adding clinical services to strengthen the business.

Segment performance and growth initiatives

• Personal care segment is experiencing high-end or above-target growth, with improved hiring and reduced turnover.

• Hospice admissions are strong, with efforts to convert admissions into average daily census growth.

• Home health growth is intentionally modest, with selective case acceptance and improved contracting expected to drive future gains.

• Recruitment benefits from economic conditions, with a focus on rapid hiring and onboarding to maintain momentum.

• M&A remains a priority, especially in personal care, with interest in entering new states and expanding complementary clinical services.