Addus HomeCare Seeks Acquisitions Amid Hospice Census Growth

Addus HomeCare Corp. (NASDAQ: ADUS) has a number of deals in its mergers and acquisition pipeline, some expected to occur in the fourth quarter. The company is leaning its M&A activity towards personal care and home health, but hospice transactions may be in the cards as they work to build density in markets where they have a home health or personal care presence.

Addus HomeCare (NASDAQ: ADUS) this summer secured a $600 million revolving line of credit with Capital One Financial Corp. (NYSE: COF) as the lead arranger and administrative agent. The company intends to apply the credit to pursue further acquisitions. The company has been active in the M&A market in recent years, completing seven personal care acquisitions and four home health and hospice since 2019.

“We continue to focus on acquisitions which meet our goal of creating multiple markets where we provide all three levels of home care,” CEO Dirk Allision said in an earnings call. “We will continue to look at opportunities in all three segments, with a focus on acquiring services in markets where we have strong personal care coverage.”

Most recently, Addus acquired Armada Hospice of New Mexico and Armada Hospice of Santa Fe for $29 million. The transaction also included the affiliated Armada Skilled Home Health of New Mexico.

In October, the company completed its acquisition of Summit Home Health, near Chicago.

Addus is also nearly finished with integration of its Queen City Hospice purchase in Ohio last year. In December 2020, the company bought Queen City and its affiliate Miracle City Hospice from the private equity firm Stonehenge Partners for a cash purchase price of $192 million.

Addus provides hospice, home health and personal care services to nearly 44,000 patients through 215 locations in 25 states. The company’s net service revenues rose 11.7% to $216.7 million in the third quarter of 2021, up from $194.0 million for the prior year’s period.

Addus benefitted from $350 million in COVID-19 stimulus funds during Q3.

While showing an increase, the company’s third quarter revenues felt some pressure from high numbers of caregivers in quarantine due to potential exposures to the virus. The number of quarantined employees had dropped since Q4 2020. Allison indicated that the impact on their bottom line was immaterial.

Addus has seen hospice admissions rise throughout 2021, though revenues for the segment were down 4.8% from Q3 2020. Same-store admissions grew 2.3% from the prior year’s quarter and and 14.5% sequentially. 

“This improvement is consistent with our expectation of seeing our hospice centers gradually improve over the last half of 2021, as our median length of stay also continues to improve for our low point in January of this year,” Allison said. “We are also seeing an improvement in our hospice volumes in both [assisted living and skilled nursing facilities], both of which have been slower to return.”