Addus HomeCare Corporation (Nasdaq: ADUS) has remained laser focused on one goal for some time now: building out all three of its home-based service lines in markets where it is already present.
That requires a strategic and aggressive M&A strategy, which Addus has executed in the past year. It plans to continue making moves in the future as well.
“We continue to focus on acquisitions that meet our goal of creating multiple markets of scale, where we provide all three levels of home care,” Addus CEO Dirk Allison said on the company’s second quarter earnings call Tuesday. “For 2021, our focus has primarily been in the personal care and home health segments of our business.”
Frisco, Texas-based Addus provides personal home care, home health and hospice services to nearly 44,000 patients through 210 locations in 22 states. Personal care services represent the majority of its business, but both hospice and home health have been gaining steam internally of late.
The company’s net service revenues were $217.9 million in Q2, up 18.1% year over year from the $184.6 million it posted in 2020. All three of its service line revenues were up as well.
Personal care and hospice were up nearly 13% and 51%, respectively, while home health was up nearly 25%.
On Aug. 1, Addus closed on its $29 million acquisition of Armada Skilled Home Health and Hospice, which further built out its network in the state of New Mexico, subscribing again to the aforementioned goal.
Armada, based in Albuquerque, New Mexico, complements the significant personal care footprint that Addus already had in one of its key states, adding home health and hospice capabilities.
“This acquisition helps to give us the increased coverage for our home health to capitalize on our strategy of fully covering the state of New Mexico with all three levels of home care that we offer,” Allison said.
Similarly, Addus purchased the Cincinnati-based Queen City Hospice in late 2020 for $192 million, snatching up a large provider in a scarce hospice market to build out its service lines in Ohio.
Based on Tuesday’s call, Addus seems as if it will continue looking for large deals to strike in the near term.
“We will continue to look at strategic opportunities in all three segments,” Allison said. “With our continued strong liquidity position, we have the ability and the desire to close additional strategic acquisitions during the next several months. With the increasing focus on home care services as a result of the pandemic, the acquisition landscape remains very competitive, particularly for clinical service providers of scale.”
To fuel future deals, Addus doubled its revolving credit facility to $600 million during the second quarter.
“As we have demonstrated over the past few years, we will continue to focus on our strategy to pursue transactions that are created and that will bring revenue and operating synergies to Addus,” Allison said.
Battling back on recruiting
Hiring within the personal care segment has been an uphill battle for Addus, as it has been for many providers.
But there is a light at the end of the tunnel on the issue, according to the company.
“Our ability to hire caregivers in our personal care segment is seeing improvements,” Allison said. “Our personal caregiver hires in our second quarter were approximately equal to the rate we were able to hire in our previous quarter, which was a marked improvement over the last six months of 2020.”
Addus also received a tailwind in Illinois, as the state issued an increased reimbursement rate for home-based services to match its minimum wage hike, which became effective July 1.
The increased reimbursement rate was made retroactive to Jan. 1, according to the company.
“While hiring continues to be a challenge for our team, we are pleased that we are making progress in this area, with June being our highest hiring month in 2021 thus far,” Allison said.
While the COVID-19 delta variant has not yet affected hiring or revenues, the vaccination rate for Addus employees continues to be a concern.
The company is above a 60% rate for both home health and hospice, but is only nearing 40% on its personal care side, a number that it’s hoping to improve drastically in the coming months.
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