Awesome. Good morning, and welcome again to the 2026 Jefferies Healthcare Services Conference. I'm Brian Tanquilut, Healthcare Services Analyst and IT Analyst here at Jefferies. With us this morning is Addus HomeCare, ticker ADUS, one of the largest operators of home health services in the country. Joining us this morning are Brian and Brad from the company. Maybe, guys, there was a big announcement yesterday, so let's start with that. What are we doing? Yeah. Yeah, Brian. I think, we had obviously been indicating to people that we had some maybe opportunities on some larger kind of Gentiva-sized assets that were going to come to market, and this obviously was one of those. I'm pretty excited to get this deal announced and out there, and obviously now going to be working toward close. But really nice addition for us. 10 states overall, but really big concentration in Texas, some in Illinois, some in California, and some in Arizona is probably 90%-plus of the overall business. Should be a nice overlay into our business. Gives us good concentration in those markets for what we thought was a pretty reasonable price as well. Pretty excited about this opportunity. Brad, maybe I'll ask you. As you think about these assets, anything you can share with us in terms of what it will take to integrate them, and what are you buying exactly? Is it just agencies, or does it have a back office? What are the operational things that you need to bring to the table to get this up and running and really accretive? Yeah, it's very similar to the transaction we completed, I guess, a couple of years ago, the Gentiva transaction, where it's the personal care division out of a larger home health hospice platform. Not a lot of back office came with it, although within the division, there is a fair amount of support for the personal care. It'll be an interesting integration. It's good that we've done one already very similar to that. In fact, the Gentiva one was probably even more challenging just because we had a tighter timeframe to switch over for payroll systems. It was kind of interesting to have to cut 15,000 checks almost day one. This one actually, I think we have a little more favorable timeframe. Got a really good integration team. We've been working through due diligence and at the same time putting together plans. Good open communication with the AccentCare team. We will have the system conversions for the billing side and the scheduling side. We have the payroll, the front office. Certainly, there will be some opportunities as we go through that process to get some synergies, because there is some overlap in operations. Brian, just to the point of synergy. Maybe if you can share any financial metrics or how should we be thinking about the accretion. I think in the release you said this is an accretive transaction. Anything you can share with us on that front? Yeah, I think the way to think about this, $280 million in revenue kind of run rate. I think our expectation is gross margin should be similar profile to our PCS business, so think upper 20% range. There is probably, as Brad indicated on the SG&A side, there is probably some efficiencies that we will need to gain here. Their EBITDA, right now or out of the gate, is probably going to be just under sub 10%. We will have some opportunity, we think, to bring that up to our normal level of our PCS division. That will probably take us, we think, 12 months- 18 months to fully realize those synergies, but we will probably start to get some of those fairly quickly. It will not be kind of a cliff situation. We are on a couple of EMRs today on the billing side that we actually use, so our teams are familiar with them. We will ultimately obviously convert them over to Homecare Homebase like the rest of our business. They will probably go kind of the end of our conversion schedule. We are going through our conversion internally now. That will probably happen toward the end of 2027, early 2028. Just from a timing perspective, we think this probably closes at the earliest Q1 of 2027, pending regulatory approvals. We will go through that. I do not have any concerns on an antitrust basis right now. That is the way to think about the financial profile. Brad, what are the key hurdles or the key checkpoints as you think of integrating this? When Brian says 12 months- 18 months, what does that look like, especially on the EMR side? I know you guys have done a Homecare Homebase rollout. What does that look like from a clinician's or a caregiver's perspective? Yeah, I think as Brian alluded to, we are familiar with the systems that they are on currently. We will keep them on those systems until, pace it with our Homecare Homebase rollout. They will probably be more on the back end because Texas is kind of scheduled for the back end for us. We have got the ability to pace that. But from a clinician standpoint, I think good news is with the Homecare Homebase rollout that we are doing, we are learning a lot in that process. We have got the training resources. By the time we are getting around to the AccentCare assets, we will have the super users in place. I think we will be able to manage that process very well. Awesome. This sounds really exciting. Congrats. Thank you. Brian, let's take a step back. Q2 was really good. We saw some acceleration on same store performance there. Just curious, what's driving some of this improvement in metrics and admissions and census and all that? Yeah, on the PCS side, I think obviously, we've done, I think, really well in our efforts to increase our fill rate, so basically the number of hours that we serve to the authorized hours. So we've gotten that up between 84% and 85% in Q2 as we talked about. Some efforts that we've done through our caregiver app and other things we're doing out in the field to make sure we're taking advantage of all the hours that have been authorized to us and being as efficient as we possibly can, I think has definitely helped on just the hourly growth side. We have talked about trying to target between 2% and 2.5% hours growth year-over-year on a same store basis. That's kind of our target range. We've been squarely in that range for the last several quarters. I think that's been part of it. Another focus of ours has obviously been on just pure census as well, and we've seen some sequential gains there through this year, so that's been helpful. We're still actually getting some contribution from some rate support. So the Illinois rate increase that kicked in January 1st of this year. We got Texas in the last cycle as well. We got a New Mexico increase that'll help us a little bit in the back half of this year. But that's all been helpful to keep us above the high end of that 3%- 5% target range that we typically have talked about. We anticipate we'll probably be toward the top end of that with New Mexico rate increase through the end of this year. Then we get into next year, we're not going to get an Illinois rate increase next year. Texas does go into session, but anything we get from them will be toward the end of the year. They usually kick that in on September 1st. Just thinking ahead a little bit, our expectation is probably first half of next year, you're probably more back in that 3%- 5% range, and then if we get more rate support from Texas or some others, then you can see that accelerate a little more. Brad, maybe if I may double-click on just the caregiver app. What does it do exactly and how does it drive the volumes higher or utilization? Yeah, I think Illinois is where we've had the longest experience with it, and we're spending more time to fully developing the functionality and focusing on Illinois rather than really trying to blast it out to all the locations. The biggest feature it has is the ability for caregivers to see whether or not they're going to be over-serving or under-serving a client. If they are in a situation where it looks like they're going to be under-serving a client, they can get with the client, decide when are we going to schedule those additional hours so that we make sure that you're getting all the care that you're supposed to under the authorized hours. They can do that, automatically adjusting their schedule without having to go to a service coordinator. It really allows greater visibility for the caregiver to get the hours that they've been wanting to work and what the client deserves to have provided to them without having to go through the office. Then on top of it, we're actually rolling out, in Illinois this week, a texting feature built into the app that we think will avoid a lot of the back-and-forth phone calls with service coordinators and schedulers so that they will be able to interact and communicate more readily. I think that's going to help drive even further buy-in from caregivers utilization, not just in Illinois, where we have really good utilization of the app, but in the other states where we go roll it out. Maybe, Brian, as I think about that, I think Illinois, your fill rate's in the 90s now. Broadly speaking, you were saying 84%- 85%. How do we think about the margin flow-through once you push, say, New Mexico and the broader number to close to 90%? Yeah, I would say just from a margin perspective, there is probably not going to be a lot of impact in increasing the fill rate. It is really going to be increase in hours. There could be maybe some efficiencies if you are serving more hours of the same client. If you are thinking about maybe travel time or some of those costs in between clients, there might be some mitigation there, but that is going to be pretty minor. I would not really think of it as a margin expansion opportunity, but more so just of a volume potential opportunity as we increase that. Illinois today, we are actually running just under 90%, it is kind of upper 80%, and it has been pretty consistent in that range since we rolled the app out. Texas was the next state that we went to. We have seen some nice improvement in their fill rate as well. I think our hope and our, I guess, anticipation is as we roll this out in more states and become more efficient, can we get our consolidated 84%, 85%, can we get that up into that upper 80% range? We see Illinois, and we have a few other states that operate in that range pretty consistently. We definitely see that that is achievable. We would like to try to get as much as we can our consolidated business up into that range as well. Maybe a last question from me on the PCS side. What does the labor environment look like today? That is a conversation I have had so many times in the past. Labor market seems to be okay. I am curious what that means for you guys. Yeah, I think we are in a pretty good spot labor-wise. When I first came on board 10 years ago, our rate structure was such that we just were not as competitive with a lot of other options for people. With all the rate support that we have had from states over the last eight, nine, 10 years, we are in a pretty good spot to be competitive with what a lot of options are. On top of that, we provide the flexibility in scheduling for caregivers. I think labor in most markets is not the gating factor for us. I think we are in a good spot there. Brian, maybe shifting gears. When I think about your home nursing side of the business, I think you put up, what, 9.8% admissions in Q2. What is driving that? Is that all these Centers for Medicare & Medicaid Services activities on team and other programs like that, or is it more company specific? I think for us, and Brad can give a little color on this as well, I think, we made some changes in leadership in that division toward the end of last year, early this year, that we think are really starting to pay some dividends. It has been a small segment for us. So it is 4% or 5% of our overall revenue base. We had some leadership in place there that we had picked up through the acquisitions that we have done. So we really operate really in three key states in home health. A little disparate. We went through some process a year plus ago where we tried to standardize a lot of the processes out there in the field, and that really, I think, helped from a profitability standpoint. But we really were not seeing the momentum we would like to see, to your point, on the volume side, just really seeing that increase. So made some changes, brought in a very experienced leader overall for that division. Made some also changes on the sales teams as well. And I think some of the things that they are doing and changing the way that they go about their referral visits and all the things that go with that process, have really started to pay some dividends. So I think our hope, and we are seeing it track toward that expectation, is we get to the back half of this year. We have been up and down, right? Have not been real consistent on volume. Can we get to the back half of this year and really start to be consistent and maybe start to see some year-over-year, just pure same-store revenue growth over prior year? And I think we are headed toward that. Yeah. I would add that we have had the additional sales resources, operational leadership. Home health, I think we were really focusing, to your point, just basic labor management, just blocking and tackling, just make sure that we have got a good gross margin profile and one that is more consistent with our peers. I think we have reached that point. There is still probably some tweaking to do there. But really before we press down on the gas to really grow, just, let us make sure it is profitable growth. I think I feel good that we are consistently posting good numbers from a gross margin perspective. Now it is time to really grow the business. We have been also looking at just a mix of patients and that sort of thing. That is why I think you see a lot of Admission growth, you have not seen as much just pure volume growth when you throw in recertifications, but I think we are now in a pretty good spot there. The rate outlook is actually pretty good going forward, it feels like. I know you are in the middle of a big acquisition here on the personal care side, but do you have any appetite right now for home health deals, or is that kind of on the sidelines for now? Yeah, I think obviously with maybe the shift in the winds, right, and the reimbursement in the home health sector, probably puts us, similar to a lot of people, probably puts us in a position where we are a little more open to doing some things there. I think we have continued to do small deals, even in some of the face of some of the headwinds that we have seen over the last several years. We think it is a nice service. It is important to put that where we have personal care or hospice. We get a lot of good admissions into our own hospice from our own home health. So there is some revenue synergy as well. But I think if you look at what sector are we more focused on from an M&A perspective, obviously personal care is going to probably always lead. Even with AccentCare coming on board, we think there are a couple other larger, similar-sized opportunities that we think will come to market over the next, say, 12 months- 18 months as well. We will see how the timing perspective and how the cadence of those come into play. I think we are definitely open to doing some things on the home health side for the right prices. Our expectation is with maybe some of the shift here, does that change some seller sentiment as well? Are you going to see maybe more opportunities where people are like, "Hey, I do not have to worry about a buyer trying to bake in a rate cut on me." Now maybe there is actually some support, and maybe I feel better about coming to market. Our expectation is we will probably start to see maybe more opportunities out there as well. All right. Maybe I will pull the discussion up a little bit here to a more macro level. There is a lot of fraud, waste, and abuse discussions in Washington. We had the COO of CMS speak last night, and clearly that is front and center focus for them. How are you thinking about how all these efforts affect your business, positive or negative? I will start. We certainly welcome the efforts to ferret out the fraud, waste, and abuse that is in the system. Some of the reports that you read in the news articles, some of it is so obvious. I have been pleased, and I probably should not get up on a soapbox about this, but in the past, frankly, when they have talked about fraud, waste, and abuse, it is kind of like, let us go after the big companies and see if we can collect a tax, essentially. It is refreshing to see that they are actually going for the people that they may not get any money out of it, but they are putting a stop to it. Because some of it, like I say, some of the stories that you hear on the hospice side and on the home health, the data was there. It is just flashing red lights. It is good to see that they are taking those steps now. Is it going to be painful for the industry? I have been in healthcare for, I guess, now approaching almost 30 years. You go through these cycles, where you have increased audit scrutiny, and you just deal with it. We have put a lot of resources into our compliance program. I know Brian, every year when we do the budget, he is like, "Do we really need to add some more resources there?" The answer is yes, and we are all very supportive of it. I think we feel like we are in a good place. Is it going to be a lot of work to get through some of that? It is great. Are there tweaks I would like them to make on some of their efforts? Certainly. But I do applaud them for at least going after some of the truly bad actors, which is nice to see. Brian, anything on your side, on the financial side? Yeah. I just concur with Brad. I think one of the conversations that we've had, I think the industry has been having, and we've had some direct conversations with some folks in Congress as well that are focused on this issue. Really try to avoid trying to put something in place that makes it painful for everyone and really be more targeted to where the actual fraud and abuse is coming from. And I think we're seeing some efforts where they're trying to be more targeted in that respect. So, yeah, we might see a little bit of enhanced audit activity, but it feels like they're not throwing a blanket across the whole industry and trying to make it really painful for everyone. They're trying to be more focused on where is the real fraud and abuse coming from. We encourage that. I think it creates opportunities for us. I think we've been seeing large scale providers that do spend a lot on their compliance programs are not concerned about those efforts. We actually think it's going to be good to get rid of some of the bad actors in the industry. It probably is helpful in thinking about the spend and what this service actually provides, and being focused on that. So we actually applaud those efforts. Brian, I think one of the things that CMS is doing as a way to approach this is holding back payments to states or the matching dollars to states that have not done audits. I think the states you are in have already gone through that, right? Illinois, I think, went through some of their audits. Is that the right way to think about that from an AR perspective? Yeah, we have not been impacted. We have had none of our payments withheld. I think even some of the headlines about California, for instance, keep in mind, most of the business we do in California is private pay or VA, so it is federally funded or direct to consumer, so there are no Medicaid dollars flowing to us. So we have not been impacted in that regard. Illinois has continued to be a very consistent payer for us. We have had no hiccups in our payment streams there. So they are withholding some of those dollars and making it painful on, it seems like very targeted states, not across the board. That tends to not last that long, though. Got it. The next thing we are thinking about is Medicaid work requirements. Not from a qualification perspective, but more from a disruption perspective. I think you and I have had discussions in the past when it was redeterminations, and then eventually it kind of had a trickle-down headwind impact on you guys. So how are you thinking about work requirements going forward? Yeah, I think it is kind of a double-edged sword. Could it provide some headwinds in the near term? Possibly, just because it is taking some resources that are used for qualifying people and making sure that they remain eligible. We are thinking through what can we do to help with that process, and so we have actually added some resources in some of our larger markets where we are engaging with our payers, be it the state or managed care, to help them with just some basic things. One of the things that really slows down somebody going through a redetermination process is just getting a hold of the family or the client to be able to facilitate getting paperwork back. So we are putting some of those resources in place to help reduce that burden a little bit on the states. But again, any impact there, I think, again, is going to be short duration. Now, on the plus side, you look at, okay, somebody who needs to get 80 hours of work in or whatever that number is, we're kind of the perfect employer for that individual. We offer flexibility on schedules so you can pretty much. We do weekend work. We have night work. We can fit a schedule for them that works with their lifestyle if they have kids, whatever. So I think it should provide some tailwind on the recruiting side as well. Brad, how are you positioning for that to run the recruitment process, both on the advertising it out there, and then second, what's that training process like for someone who has never done this? On the recruitment side, that's one thing that we're constantly looking at. How can we help with our recruitment efforts? We've spent a lot of time on the front end when I came on board, really trying to refine that process and try to hire and get somebody to their first billable cases as quickly as possible. We continue to look at that. We're looking at our job placements all the time. A lot of the traffic comes in through Indeed. They seem to be good at changing their algorithm periodically, and so you have to try to figure out what exactly are they doing. So modifying the spend that we have with Indeed to make sure that we've got the visibility in the markets that we really have the demand. As far as the training side of it, we've moved to in some markets where we have online training. In most cases, it's an in-person training for them. But we've got that process down pretty good. This isn't a highly skilled workforce, so the training requirements aren't too in-depth to be able to get somebody up to speed so that they can provide services in a quality manner. Got it. Brad, maybe a follow-up to a point you just made. When we think of payers, there's obviously more managed Medicaid out there today. What does that look like for you guys, both from a value-based care perspective and other initiatives that you're doing with the payers? At the acquisition we just announced, we've gotten some feedback from payers on that, very positive feedback. There's no shortage of interest in value-based contracts. I will say every major payer that's putting in an RFP comes to us for a letter of support and wants to talk and tap value-based arrangements. Where we're really focusing on are working with payers who really truly want to develop a value-based arrangement and not just check a box. How are we impacting the quality of care provided to a consumer? How are we bending the cost curve? Because we view that that's the opportunity where if you're successful there, payers are wanting to shift. They would like to have a reason, frankly, to have a smaller network of providers out there and work with fewer people and ones that are going to provide the quality of care and provide these types of additive services. No shortage of interest in it. This most recent transaction, it impacts a lot of managed care payers because of the footprint in Texas and Illinois. I think they're looking to work with us to say, "Let's put this program in place. Let's figure out how we can bend the cost curve, how we can provide better care to consumers, and let's, more importantly from our perspective, how do we incentivize people to go to you as the provider of choice? That makes sense. Brian, maybe just shifting gears here, obviously big acquisition in front of you. How should we think about your view today on the balance sheet and capital deployment and the right capital structure going forward? I think, where we sit here today, if this closes, let's just say in Q1 of 2027, right now with our cadence and cash flow, we'll most likely be debt-free by the time this closes. So $275 million purchase price. We'll probably have built a little bit of extra cash on the balance sheet by that time. All that being said, we'll probably be just over one times lever even after doing this and completing this transaction. A lot of capacity still left. Like I said, we've kind of hinted at maybe some additional larger deals that might be coming down the pike that we should still be in a great position to be able to be aggressive on. We'll think about obviously timing and integration efforts are going to play into some of that as well. I think our interest is in continuing to be acquisitive beyond AccentCare. We think there's more consolidation opportunities. We think from a capital perspective, we're going to be in a great position to continue to do that. Brad, maybe as I think about Brian's comment there, when you think of the ideal acquisition candidate in personal care, what does that look like at this point? Is that new market entry? What does the IT system have to look like for you to be interested in them? Patient population, all that. What is that ideal? Yeah, we have talked about if we're going to enter a new market, we'd like to do it at scale. Again, going back to the Gentiva transaction, we were able to enter Texas at scale. Aside from that, follow it up with additional transactions, be in tuck-ins or in this case with the AccentCare transaction. It's a pretty sizable Texas book of business that we'll add. Still a lot of opportunity in Texas, still highly fragmented. So, a lot of market share that's out there. I think first and foremost, if we're going to go into a new state, let's do it in the right way. I think the Indiana transaction, we did a smaller transaction. We're looking to try to add to that footprint to bolster our presence in Indiana, and we'll continue to look at doing that. System-wise, pretty agnostic to that. Honestly, we'll move them to our system. We've had a lot of experience with a lot of different systems out there, so we have built up some familiarity with those, and we can get them moved over pretty quickly. It'll certainly be easier once we get Homecare Homebase rolled out everywhere. The other piece of it is strong compliance and clinical processes in place. We don't want to be buying anybody's problems. That makes a lot of sense. Brian, maybe just on the rate side, you've had some good rate tailwinds behind you. What does that look like going forward, or how are you guys thinking about the key states, especially for Addus? Yeah, I think we've gotten really good support, especially some of our larger states over the last few years, coming out of COVID. I think we've been basically indicating for a while now that we expect that's probably going to moderate and temper a little bit, and I think we're definitely seeing that going into next year. Certain states may have some indirect impact on their budgets from some provisions in OBBBA that might kick in. Certain states will not. So you think about Texas, New Mexico, places that didn't have expansion populations. They're not going to feel that same pressure. With that said, we expected that probably you would see states maybe hold steady for a bit, see how all that plays out, and maybe wouldn't get the same consistent year-over-year rate increases that we've been getting. I think that's what we're seeing. Illinois this year, there was a push. The union, I think, is a really good lobbyist for us. Yeah. They go and press every year for a rate increase. They are very helpful. This year, the state decided to hold status quo. Keep in mind, we do not raise wages if our reimbursement does not increase, so there is no impact on our margin profile. We did get New Mexico this year. Last year when OBBBA was being discussed, they were in session and thinking about an increase and did not know how that was going to turn out. So they held steady, and we were hopeful that now with everything flushing through, they would say, "Okay, now it is time." We actually saw that happen. We will look at Texas as the next big one for us next year. They only meet every two years, so they are back in session early next year. I think our lobbyists in the industry are prepared to have conversations to see if there are opportunities for additional rate from them next year. We consistently get increases from some of our smaller states. We have gotten a couple this year in Oregon, some of the AAAs in Michigan, and places like that. So that is what we talk about. If we see 2%-2.5% same store hours growth and we are getting even incremental rate support, you are going to be nicely in that 3%-5%. If we get some rate support from some of our larger markets, that is going to push you to the top end of that 3%-5% or maybe above, and that is where we have been the last couple of years. You got a minute here left. Just curious, is there anything that you think investors do not focus enough about on your business, about your business, or anything you want to share with us as you think through the acquisition that is pending here? Yeah, I can just a couple things just real quick. I think obviously, from the regulatory side and a lot of the rhetoric and noise that has been out there, whether it is OBBBA and fraud, waste, and abuse, I think we tried to be pretty transparent on how we think that will impact our business. If you really think about what we do and the value proposition that we provide to states, we are the low-cost in-home provider. If you think about it, while we are Medicaid funded primarily, if those folks are not getting service from us, they are going to end up in a nursing home. It is triple the cost. I think from our perspective, in an environment where you may have to do more with less, a state basically could utilize us, and we could be part of that solution for them, not part of the problem for them. That's something maybe we'd like to clarify. Like I said, there's a lot of swirl out there that we can't control, but I think from our perspective, we have not really been impacted by that and don't really expect to see a lot of material impact there. Then the acquisition, like I said, we're very excited about finally getting something done. It's been a bit. We've done a couple smaller deals. It's nice to put some of our capital to use. We don't like to be debt free. We don't want to be overlevered, but we'd like to use our balance sheet appropriately to give return to our shareholders, and we think this should provide that for them. Awesome. Thank you so much, guys. Thanks for having us.