Addus HomeCare Corp. 2026 Q2 Earnings Call

Good morning, welcome to our 2026 second quarter earnings call. With me today is Brian Poff, our Chief Financial Officer. As we do on each of our earnings call, I will begin with a few overall comments, and then Brian will discuss the second quarter results in more detail. Following our comments, we would be happy to respond to any questions. As we announced yesterday afternoon, our total revenue for the second quarter of 2026 was $377.4 million, an increase of 8% as compared to the $349.4 million for the second quarter of 2025. This revenue growth resulted in adjusted earnings per share of $1.73 as compared to adjusted earnings per share for the second quarter of 2025 of $1.49, an increase of 16.1%. Our adjusted EBITDA was $49.2 million, compared to $43.9 million for the second quarter of 2025, an increase of 11.9%.

For the second quarter of 2026, cash flow from operations was $40 million as compared to $22.5 million for the same period in 2025. As of March 31, 2026, we had cash on hand of approximately $100 million. With our strong cash flow in the second quarter, we reduced our bank debt to $64.3 million, leaving us with the financial flexibility to consider larger acquisition opportunities as we continue to pursue expansion of our market reach and increasing our geographic density. As we announced on May 1st, we closed on the acquisition of the personal care operation of HomeCourt Home Care based in Fort Wayne, Indiana. This acquisition marks our entry into an attractive state which is adjacent to our largest personal care market of Illinois. We have been interested in Indiana for some time as we look to enter new markets that fit our strategic profile.

As we announced last quarter, we have also entered into a definitive purchase agreement to acquire certain operating assets of a similarly sized personal care provider based in Indianapolis, Indiana area, which will complement our HomeCourt Home Care operation. We anticipate closing this acquisition subject to satisfaction of customary closing conditions, including regulatory review and approval. These two acquisitions continue our strategy of entering new markets with some scale and the ability to expand our services. On July 1st of this year, CMS issued a proposed 2027 Home Health Payment Rule. CMS proposed to increase payments to home health agencies by 2.4%, or $420 million, which reflects the impact of a 2.1% update in payments due to the statutory required annual payment update and a 0.3% increase in payments related to the proposed update to the fixed dollar loss ratio used for outlier payments.

CMS is also proposing to implement a negative 3% temporary adjustment, the same as was applied last year. The net result is a proposed payment rate increase of 2.1%, compared to last year's rate decrease of 1.3%. While we are pleased with the positive rate increase for 2027, we are concerned about the continuing effect of the temporary adjustment, and we support the industry's ongoing efforts to eliminate these adjustments. Comments on the proposed rules are due by August 31st, 2026, with the final rule expected around the end of October 2026. On July 30th, CMS published the final fiscal 2027 hospice rate, which will be effective on October 1st, 2026. The final rate equates to a 2.3% increase versus the 2.4% proposed rate increase. While we are appreciative of this increase, it does reflect an approximate 30-basis-point decrease from the fiscal 2026 final hospice rate increase of 2.6%.

While as of today, there has been no additional movement to announce, we continue to believe that the 80/20 provision of the CMS Medicaid Access Rule will be eliminated in the near future, potentially by year-end. While implementation is still several years away and has no current impact on our business or financial performance, we believe this outcome would be an encouraging development for both our industry and our company. Our team continues to work with CMS to eliminate this portion of the Medicaid Access Rule. During the second quarter of 2026, we continued to experience positive hiring trends in our personal care segment. Our number of hires per business day in the second quarter of 2026 was 104, which was down modestly from the prior quarter, but approximately the same rate we saw in the second quarter of 2025.

Our team continues to do a nice job making sure we keep our hiring numbers at the level needed to meet our organic growth targets. Let me discuss our same-store revenue growth for the second quarter of 2026. For our personal care segment, our same-store revenue growth was 6.8% compared to the second quarter of 2025. During the second quarter of 2026, we saw personal care same-store hours increase by 2.2% compared to the same period in 2025. While our percentage of authorized hours served in the second quarter saw incremental improvement into the mid-80s as expected. On a sequential basis, personal care same-store census increased 1.2% as we are seeing growth in the majority of our markets. During the second quarter, we saw growth in clients served in Illinois, our largest market, which is something we had anticipated for several quarters.

This is important as we look to achieve year-over-year same-store census growth during the last half of 2026. Turning to our clinical operations, our hospice same-store revenue increased 11.1% compared to the same quarter of 2025. We did experience some impact from Medicare cap this quarter, primarily in our Ohio market, which as previously noted, is excluded from our same-store calculation. We continue to focus on maintaining a balanced mix of patients and operating within the Medicare cap. We typically have some marginal cap exposure in a few provider locations each year, and consistent with our approach, have mitigation strategies in place to reduce the ultimate impact. We are pleased to see our same-store average daily census increase to 3,964 for the second quarter, up from 3,720 for the same period last year, an increase of 6.5%.

Our growth in hospice has continued in July, with our average daily census exceeding 4,000. For the second quarter of 2026, our hospice median length of stay was 24 days, as compared to 23 days for the fourth quarter of 2025 and 22 days for the second quarter of 2025. Overall, our hospice segment has continued to generate consistent growth over the past several quarters. While our home health same-store revenue decreased 2.8% when compared to the same quarter of 2025, it was an improvement from the decrease of 6.6% we saw in the first quarter of this year. Importantly, we also saw sequential improvement in revenue, operating income, and admissions. We continue to focus on upgrading leadership, conversion of referrals to admissions, and focusing on timeliness of admissions.

We continue to believe that creating size and scale are important in post-acute healthcare services. As you know, we have been focused on the development strategy for the past 10 years. Our development team continues to evaluate opportunities which would increase both density and geographic coverage as we seek to further strengthen our relationship with states and managed care organizations. Recently, we have begun to see an increasing number of personal care opportunities, which we will be actively pursuing. Since the announcement of the 2027 proposed home health rule rate, there is more optimism around potential deals in skilled home health care. While there is still some uncertainty around the temporary adjustment and its impact on future rate increases, there does seem to be more potential activity in home health care.

While we will be open to considering home health opportunities, we will continue to be diligent as we evaluate possible transactions to further our strategy. Before I turn the call over to Brian, it is important to thank our Addus team for the care they are providing to our elderly and disabled consumers and patients. We have all come to understand that the overwhelming majority population prefers to receive care at home, which not only remains one of the safest, but also the most cost-effective places to receive this care. We believe the heightened awareness of the value of home-based care is favorable for our industry and will continue to be a growth opportunity for our company.

We understand and appreciate that our operations and growth are dependent on both our dedicated caregivers and our other employees who work so incredibly hard providing outstanding care and support to our clients, patients, and their families. With that, let me turn the call over to Brian.