Addus HomeCare to Accelerate Acquisition Activity

Though the acquisition market has slowed down this year for home-based care companies, Addus HomeCare Corp. (NASDAQ: ADUS) remains on the hunt.

The most prominent home-based care transactions so far this year have involved payers seeking to acquire large providers with multiple business lines. Addus has been among the few publicly traded companies that have remained active acquirers, and more deals are likely on the way during the fourth quarter and into 2024.

“We continue to see strong cash flow from operations as our states and other payers have continued to pay in a timely manner. This strong cash flow along with continued management of our balance sheet has allowed us to reduce our debt while maintaining a cash balance of approximately $80 million at the end of the quarter,” Addus CEO Dirk Allison said in a Q3 earnings call. “Our loan leverage gives us the financial flexibility to be opportunistic, as we anticipate seeing additional acquisition opportunities coming to market over the next several quarters.”

All told, Addus provides hospice, home health and personal care to an estimated 47,500 patients annually across 203 locations in 22 states.

Going forward, Addus plans to continue its long-standing acquisition strategy — designed to co-locate all three of its service lines in certain markets.

Fueling the company’s cash flow are increases in net service revenue that continued into Q3, including its hospice segment.

Addus’ overall net service revenue reached $270.07 million, up 12.6% year-over-year. Its hospice segment earned $53.1 million, up more than 3% from nearly $51.4 million in Q2 of last year.

Acquisitions have contributed to the company’s revenue growth, including its summer purchase of Tennessee Quality Care, a home health, hospice and private-duty company for $106 million. The deal made Tennessee the third state in which Addus offers all three of its core services, along with New Mexico and Illinois.

“Our third quarter results included two months of operations of Tennessee Quality Care, a provider of home health, hospice and private duty nursing, which we acquired on August 1, 2023,” CFO Brian Poff said in the earnings call. “We are pleased with the integration process to date and look forward to the additional growth opportunities this acquisition offers in an attractive market.”

Acquisitions contributed about $65 million to Addus’ bottom line in 2022. The company purchased Illinois-based hospice provider JourneyCare Inc. for $85 million in October that year and picked up Chicago-based Apple Home Health Ltd. for an undisclosed sum the following month.

The company’s same-store hospice average daily census remained flat in Q3 compared to the prior year’s quarter, but it did increase sequentially by 1%. Addus also saw the average length of stay go up for its hospice patients, reaching 32 days (excluding data from JourneyCare and Tennessee Quality Care).

“We were pleased to see continued improvement in our hospice business in the third quarter with positive sequential trends in same store revenue average daily census length of stay and patient days with same store revenues of 3.1% over the prior year. We have begun to see the early impact from the expiration of the public health emergency,” Poff said. “We expect it to lead to an increase in our skilled nursing facility hospice length of stay. The overall results for our hospice business also include the addition of the Tennessee quality care operations.”