Addus HomeCare Q3 Earnings Call Highlights

Key Points

• Q3 revenue rose 7% to $387.7 million, while adjusted diluted EPS increased 17.3% to $1.83 and adjusted EBITDA grew 13.5% to $51.2 million, reflecting operating leverage and cost discipline.
• Addus expects to close its $275 million acquisition of AccentCare personal care operations in Q1 2027, adding about $280 million in annualized revenue. It plans to fund the deal with cash and revolver borrowings and expects gradual margin synergies over more than 12 months.
• Personal care same-store revenue increased 6.9%, while hospice census and home health admissions also grew. Management expects a modest EBITDA margin decline in 2027 as the acquisition increases the share of lower-margin personal care, absent other acquisition activity.

Addus HomeCare NASDAQ: ADUS reported third-quarter 2026 revenue of $387.7 million, up 7% from $362.3 million in the prior-year period, while adjusted earnings per diluted share rose 17.3% to $1.83. Adjusted EBITDA increased 13.5% to $51.2 million, and the company said its cost discipline and operating leverage helped earnings growth outpace revenue growth.

Chairman and Chief Executive Officer Dirk Allison said cash flow from operations totaled $40.9 million during the quarter. At Sept. 30, Addus had $98.5 million in cash and $24.3 million in bank debt, down $40 million from the second quarter. The company also said it had repaid an additional $10 million of revolver debt early in the fourth quarter.

AccentCare acquisition targeted for first-quarter close

Addus is awaiting customary regulatory approvals to complete its planned $275 million acquisition of AccentCare's personal care operations outside New York. The federal antitrust review period has expired, and the company expects the transaction to close in the first quarter of 2027.

The acquired operations are expected to contribute about $280 million in annualized revenue, an average daily census of approximately 13,700 clients and operations across 10 states. Allison said the deal is intended to build density in current markets and expand Addus' private-pay home care business.

Chief Financial Officer Brian Poff said AccentCare's largest operations overlap with Addus in Texas, Illinois, California and Arizona. The acquisition will also add operations in six additional markets. About 7% to 8% of AccentCare's business is private pay, compared with roughly 2% of Addus' current average daily census, according to Poff.

Poff said AccentCare's personal care business currently operates at a high-single-digit EBITDA margin, and Addus sees an opportunity to bring that margin into the low-double-digit range, primarily through general and administrative savings. The company expects synergies to be realized gradually over more than 12 months following closing. Addus plans to fund the acquisition through cash on hand and borrowings under its revolving credit facility.

Personal care growth supported by rates and hiring

Personal care services generated $301 million, or 77.6%, of third-quarter revenue. Same-store personal care revenue increased 6.9% from a year earlier, supported by volume gains, contributions from the prior HomeCourt Home Care acquisition and rate enhancements in key markets.

Personal care same-store hours increased 1.6%, while average daily census declined 0.4%. Allison said seven of Addus' 10 largest markets recorded year-over-year census growth, though Texas and Illinois were slightly negative during the quarter. He attributed the shortfall from the company's growth target to a softening in those states during September, but said both markets had improved in October.

Management expects flat to slightly positive personal care census growth in the fourth quarter. The company is emphasizing higher-hour cases and using its caregiver app to improve the percentage of authorized hours served. Addus served authorized hours in the mid-80% range during the quarter and believes it has room to improve toward the upper-80% range.

Addus received an approximately 4% rate increase in New Mexico effective July 1. The company continues discussions with other states on potential 2027 rate increases, although Poff said personal care same-store growth could return closer to its 3% to 5% target range in the first half of 2027 without new rate actions in larger states.

Clinical segments show continued momentum

Hospice revenue represented 17.8% of total revenue, with same-store revenue up 4.1%. Excluding the effect of an implicit price concession benefit in the prior-year quarter, hospice same-store revenue increased 8.8%, which Allison said was at the high end of the company's target range.

Hospice average daily census increased 4.3% to 4,031, and exceeded 4,100 in October. Hospice median length of stay was 25 days, compared with 22 days in the prior-year quarter. Poff said Addus recorded no additional Medicare cap adjustments during the quarter and expects no further cap adjustments in the fourth quarter.

The fiscal 2027 Medicare hospice reimbursement update, effective Oct. 1, provides a 2.3% aggregate net increase. Based on Addus' geographic mix and wage indices, Poff said the company expects a benefit of just under 2% to its hospice business.

Home health, Addus' smallest segment, produced $17.7 million in revenue, or 4.6% of the total. Same-store home health revenue rose 2.5%, while admissions increased 13.8%. Allison said it was the company's first year-over-year quarter of positive home health revenue growth in several years and credited the segment's new leadership team, which has focused on sales, operations, recruiting and reimbursement discipline.

Addus said its Clinical Bridge Program continues to support coordination among care settings. In New Mexico and Tennessee, more than 25% of hospice admissions originated directly from its home health operations, according to Poff.

Margins and acquisition strategy

Third-quarter gross margin was 32.1%, compared with 32.2% a year earlier. Adjusted G&A expense fell to 18.9% of revenue from 19.8%, while adjusted EBITDA margin rose to 13.2% from 12.5%. The company expects full-year adjusted EBITDA margin to be in the 13% range and projects a fourth-quarter gross-margin benefit of about 50 to 60 basis points from the hospice reimbursement update and lower unemployment taxes.

Looking toward 2027, Poff said the AccentCare deal will shift Addus' revenue mix further toward personal care, which generally carries lower margins than hospice and home health. As a result, he expects EBITDA margin to decline modestly next year absent other acquisition activity.

Management said it remains open to additional acquisitions, including larger transactions. While Addus will continue pursuing personal care opportunities, Allison said the company expects to be more aggressive in evaluating clinical acquisitions in home health and hospice as pricing potentially moderates. The company views its balance sheet and available revolving-credit capacity as supporting continued acquisition activity.

About Addus HomeCare (NASDAQ:ADUS)

Addus HomeCare Inc NASDAQ: ADUS provides in-home personal care, hospice and home health services to older adults, people with disabilities and other individuals who need assistance with daily living or medical care. Its services are designed to help clients remain safely and independently in their homes while supporting families and caregivers.

The company's personal care services include assistance with bathing, dressing, grooming, meal preparation, housekeeping and other activities of daily living.

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