Addus Credits ‘Restructuring’ For Third Quarter Comeback
After a year of ups and downs, Addus HomeCare Corporation (Nasdaq: ADUS) is seeing a resurgence.
There were multiple moving parts that made the third quarter successful for the Downers Grove, Illinois-based home care company. The company saw significant revenue growth, driven by a 22.9% increase in billable hours per business day, Brian Poff, executive vice president and CFO, explained in an earnings call Tuesday morning.
Addus, which has 121 locations throughout 24 states, saw a net service revenue growth of 22.7% to $103.5 million in the third quarter, up from $84.3 million in the third quarter of 2015. The company’s adjusted EBITDA increased 45.5% in the third quarter to $8.7 million, from $6 million in quarter three of 2015.
“For the last nine months Addus has been in a restructuring process,” Dirk Allison, president and CEO, said on the call. “We have made executive changes, closed sites, including our contact center, we negotiated vendor agreements and partnered with new vendors to help improve our services and lower our cost.”
Site closings in the third quarter included three adult day sites in Illinois, where the company has a large amount of home care sites, which all were closed as of September 30, 2016 and resulted in a write-off of $1.8 million. Though the company does still operate three profitable adult day sites in Illinois, Allison added.
The home care payments Addus has been waiting on from the state of Illinois also were paid back in part during the third quarter from a year’s worth of home care. The remainder of the funds, over $1 million, owed by the state are expected to be paid in the fourth quarter of this year. However the Illinois budget that allows for these payments has been exhausted, which means the company will not know the extent of receiving the rest of the payments until 2017.
“We expect our year-to-date tax rate of 25.2% to continue through the rest of this year and, with the restructuring charges behind us, to normalize [to] approximately 30% to 32% in 2017,” Poff said. “Primarily as a result of the Illinois payments received during the quarter, we had net cash provided by operations for the third quarter of $49.3 million, compared with cash flow used of $26.3 million for the third quarter last year.”
Integrating New Tech
Addus began the conversion of its field technology to CellTrak, a mobile health care delivery management solution, in the third quarter. By the end of the year, the company should have all of its sites in Illinois converted to CellTrak and the rest of the sites will follow, Allison explained.
“More important than the cost reduction from this project is the real-time serviced information that will be available to our leadership,” he said. “We expect this more timely information will support our ability to drive further organic growth while ensuring that we continue to provide the quality services that our consumers expect.”
To keep up with expected growth, the company is in the process of designing and developing a new payroll process, which is anticipated to be effective on July 1, 2017.
“This process is very detailed and time consuming,” Allison stated. “It is also extremely important to Addus as we continue to grow our company as this allows us to transition future acquisitions on to our payroll system with minimal disruptions.”
For the third quarter, Addus beat analysts expectations by $0.08. The company’s stock also took a large jump following the third quarter earnings release today by 15.38% to $30.00 per share.
Written by Alana Stramowski