By leveraging improved recruitment numbers and the surplus of resources from state governments, leaders with Addus HomeCare Corporation (Nasdaq: ADUS) are hoping the tail end of 2022 could be a big one in terms of M&A and organic growth.
Addus’ EVP and CFO Brian Poff sounded optimistic about the company’s growth plans – as well as fulfilling more demand – at the Jefferies Healthcare Conference Wednesday.
“We saw record kinds of hiring numbers on our personal care side in March and April,” Poff said. “We’re turning our focus into M&A this year as well, and trying to combine clinical services in areas where we have strong personal care.”
The Frisco, Texas-based Addus currently provides home-based care services to about 44,500 consumers through 207 locations across 22 states.
Although Poff said Addus left some deals on the table over the last year, he expects the company to be more deal-heavy in the coming months.
“We weren’t able to close as many as we had in the years prior, but making the move we did in bringing on a new chief development officer is definitely going to be helpful for us with his career and experience,” Poff said. “We’ve talked pretty openly recently that we’d like to continue to add clinical services in areas where we have strong personal care. We think there’s more opportunity for us there.”
Addus’ primary focus when it comes to its growth plans is bolstering its currently occupied markers.
Given the state budget environments, growing could be easier than previously expected, Poff said.
“A couple of years ago, we would have said state budgets would be something that we were probably more concerned about,” he said. “With some of the federal money that obviously has come through the last couple of years, most states we operate in today are operating with nice surpluses.”
Those surpluses have allowed certain states like Illinois and New Mexico to raise their rates, which has helped Addus’ bottom line.
However, in the same states where reimbursement rates were favorable, minimum wages have also increased, which Addus has also had to navigate.
“We’ve been encouraged [with the labor market] recently,” Poff said. “I think some of the government programs that have been out there that kept a lot of those folks on the sidelines, so to speak, have started to drop off. Because of that, we’ve tended to see applicant numbers increase.”
Another way Addus has addressed retention is implementing DailyPay, an earned wage access solutions platform.
The lower rates for contract and travel nurses have also helped Addus’ recruitment efforts.
“Burnout was obviously a big player for everyone in the industry over the last couple of years,” Poff said. “Bringing new nurses on board has been a little more expensive for us. We’ve done probably 4% to 5% increases in order to stem some of that turnover. But over the last few months, as some of those contract rates have pulled back, we’ve started to see some positive movement in our turnover on the clinical side.”
By looking in areas where the company’s Medicare Advantage enrollees are located in and keeping a close eye on other private equity activity, Addus will continue to be active in M&A, Poff said.
He also mentioned that growing organically today may be a more feasible goal than at the height of the pandemic.
“I think 3% to 5% organic growth rate in personal care is still a good target range for us,” Poff said. “We would expect to see that slightly more toward volume and I think that the leading indicator there is the recruitment side of this. If we’re able to see those [recruitment] numbers continue to have some positive momentum, then that should translate, hopefully, into more hours and more clients.”
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