Addus Revenue Bruised by Political Conflict in Core Market

Dirk Allison made his earnings call debut as president and CEO of Downers Grove, Illinois-based Addus HomeCare (NASDAQ: ADUS) on Tuesday, and expressed his hope for the company’s long-term growth.

“After six weeks at the company, I now believe that we can continue to offer high-quality care while at the same time reducing our costs, allowing us to meet our strategic goals,” Allison said during the call with analysts.

Going forward, Addus will continue to concentrate on organic growth in its current markets, as well explore acquisition opportunities in new markets, Allison said.

“I strongly believe that Addus has the market opportunity to become a much bigger company while continuing to be a market leader in the personal care industry,” he added.

The rationale behind recent shake-ups to the company’s executive team was not explicitly addressed in the call, though Allison hinted at the company’s thought process.

“We believe that there is opportunity to execute more efficiently, and effectively, than we have in the past,” Allison said.

At this time, Addus’ main initiatives will center around the enhanced capabilities and effectiveness of the company’s IT function, the simplification of certain operational processes, and the development of consistent procedures meant to enhance the company’s ability to serve the needs of its consumers, Allison said.

Addus’ fourth-quarter 2015 revenue of $84.76 million beat analyst expectations by $0.27 million. The company’s fourth-quarter earnings of 29 cents per share, meanwhile, were in line with analyst expectations.

The company recorded a bad miss on revenues in the third quarter of 2015, and blamed it primarily on acquisitions that failed to meet expectations and a slower transition to managed care in key markets. This past quarter, political troubles in Illinois, one of its key markets, bruised revenue.

“Our management team remains focused on doing what it can to resolve the issue before it becomes a major problem for Addus,” Addus Chief Financial Officer Don Klink said during the call, noting that Addus and other companies have been talking to Illinois reps and officials about possible solutions “for some time.”

The budget conflict in Illinois has slowed Addus’ cash collection since June 1, 2015, when the state no longer had an approved budget, Klink explained. Illinois Gov. Rauner, a Republican, and the Democrats who control the Illinois Legislature have reached a stalemate over a budget that was supposed to go into effect July 1.

The state’s politics have negatively impacted Addus’ accounts receivable balance for Addus consumers funded solely by the state. The budget conflict has yet to impact Addus’ Illinois Medicaid or managed care business, however, Klink said.

The company’s goal is to diversify away from the dependence on one state, Allison added.

“We will be moving away from the state of Illinois, not because it’s bad business, but because we believe very clearly that we need to make sure that it is a lesser percent of our overall revenue going forward,” he explained.

Additionally, Addus created a focused task force in mid-January to recommend ways to improve the process of delivering paychecks, while at the same time reducing ongoing expenses related to this function, Allison said. The task force is headed by Zeke Zoccoli, the company’s chief information officer.

Addus’ stock was down Tuesday late afternoon to $19.50.

Written by Mary Kate Nelson