Thanks for joining us. My name is Joanna Gajuk. I cover healthcare facilities managed in America. Thanks so much for joining the conference and the session. Now, a pleasure to have Addus HomeCare for a virtual day with us. They are one of the largest, or maybe the largest, providers of personal care services in the U.S., but they also do other things. We can talk about that. Today, with us, we have an entire team. Derek Allison, the Chairman and CEO, Brad Beckham, who's the COO, and Brian Poff, the CFO. I guess we're going to go right into Q&A, gentlemen. Why don't you agree to that? All right. Maybe first, we should start with the hot topic, maybe by today, kind of died down a little bit, but reconsideration bill, right? There was the House version that came out. There are a bunch of things included, but there's some things not included, some high-level thoughts about how you think about this process and the things that were included and not included, and how this could impact the company? Yeah. When we started looking at this a number of months back, where they were talking about a lot of different things that could come into play as far as Medicaid changes, we tried to talk about the fact that we did not see anything out there that we felt would be material, but there were still a lot of questions. I think what we have seen over the last few weeks is more of a zeroing in on what really may be out there. I think today, as we as a company sit here and look at it, there are a couple of things that appear that will occur that we would deal with. One is work requirements. I think that is one that we talked about earlier that could actually be a benefit, and I will talk about how that can be. I think the rule that came out, or at least the proposed rule, was if they're under the age of 64 or under, they would have to put 80 hours a week, certain of them. If you look at our personal care consumer, our personal care consumer is in their 70s, the average age. Our people that we serve are not going to be the ones required to go out and have a work requirement. On the other hand, when you think about the people that might have to do that, it would be the younger, younger than the 64 age. Some of them may be single-parent families. Those are the type of individuals when they're looking for work could actually be somebody we could employ. If you think about our average caregiver, probably in their late 40s, early 50s, they work 20 hours a week. According to the rule, at least, it's been proposed they have to put in 80 hours a month. That would be perfect with our caregiving schedule. If you think in terms of some of the folks that might be required to go to work, they could have issues at home that they're dealing with as far as timing. We're pretty flexible. We can give weekend hours. We can give evening hours. We can be a little bit flexible during the day. We look at it as a potential opportunity to maybe help us as we go out and try to interview and hire our caregivers. Some of the other things, the provider tax, I think there's no direct impact to us on the provider tax. I think the thing that the overall theme people might be asking questions about with Medicaid revolve around just total dollars. If you think about a state, if any of their dollars are cut, what are they going to do with their Medicaid program? That is where I think the state's going to look to say, first off, the population we take care of, which is elderly and disabled, is generally the population they're still going to want to take care of in our minds. Also, we're the low-cost provider. If you think in terms of if we can keep people at home, and there are some elderly patients that need more care than we can give them in a home environment, they need to be in nursing homes and other environments. Those that can stay home, that is a cheaper opportunity to take care of those patients than the state would have otherwise, and in an environment the patient would rather be, which is in their home. Again, as we look at everything, they're not talking about per caps now. They're not talking about some of the other lowering the matches on some of the overall plans. We really do not see that there's any material change to our company at this point in time. We will continue to follow it, as you would expect us to. We're spending a lot of time with our government relations department being in Washington, D.C., making sure that we understand what's happening. At this point in time, we feel pretty good with what they're talking about. We're going to be fine. One item that was missing from this proposal was the Medicaid Access Rule being repealed. I guess the Staffing Rule was repealed and some other things were in there. I mean, it's a proposal. It's not repealed. You had talked about that. Does it change anything that it was not repealed in this vehicle? Does it really matter to you? Yeah. I think we've been talking all along with the administration about the Medicaid access rule. The thing that was discovered as we went through, I believe, because the CBO couldn't come up with a good score, it wasn't going to be able to be handled through the reconciliation bill. What we have been told is it will be handled. It is not a rule that the administration supports, and they're looking at a way to move that rule. I think there's also a lack of, if you realize, it's still five and a half years away. It's not like the staffing rule, which was very close. I think from our standpoint, our belief is still that the Medicaid access rule will go away. Certainly, the 80/20 component should go away, but it doesn't seem to be something that fit into the reconciliation bill like they thought it might at first. I guess another topic related to that a little bit is there have been also some staffing cuts. AHS, CMS, and we heard about something specific around the PACE Program. Is any of that somehow impacting your operations in any way? I do not know whether processing of some approvals or payments or anything. Is there anything to be said, or are you kind of not seeing much of anything? Really not seeing anything. A lot of the cuts and the programs that they're talking about, like PACE, that's something that we don't participate in. Right now, we're not seeing any issue there. Could it slow down approval of waiver amendments or something like that? Possibly. There's not any real big ones that are pending anyway for us. Maybe last piece of that, what's going on in Washington, D.C. around immigration efforts, right? I guess it's kind of slow. I mean, it's obviously in the headlines and search bars. Are you seeing any impact to either your workforce or patients? I guess, could there be something bigger, I guess, if there is something bigger that's happening in the country? Yeah. Not really. I mean, we looked at our workforce and kind of total employees that have kind of a green card, if you will. I mean, it's like 600 on the personal care side, so it's a very, very small component of our workforce. We go through E-Verify for everybody. Anyway, I mean, we don't see really any real impact there. All right. I guess moving on, the Gentiva integration sounds like it's going pretty well. Maybe you can give us more color on some of the results at this particular asset, right? Because it is a sizable acquisition for the company, right? Maybe we'll get to the census growth or anything around how you're tracking on the cost savings. I guess what else is there left to be done with Gentiva when it comes to improving the margin there? Yeah. I'll start, and then you can add in some of the color on the financial side. It's gone well. The acquisition has performed on the bottom line like we had anticipated. A little lighter on the top line, but that was really become more of a function of when we talked about weather events in January, probably disproportionately impacted Gentiva because it was in Texas, and Texans don't do ice very well. That was a negative impact there. If you look at January to February, nice pickup. If you look in February to March, a nice pickup in continuing season positive trends where admissions are outpacing discharges. They went through the redetermination process. What we've seen is it takes about six months to really start seeing that kind of build back up to normal levels. I think we're starting to see that momentum in Texas moving back into positive territory. With respect to integration, just real quick, really the big remaining item is one that is probably 12-18 months out, and that's moving them to HomeCare HomeBase. They went through a change just back in the fall, and we didn't think that they would want to go through another change there. Plus, we're still working on the development with HomeCare HomeBase. That will probably be the biggest remaining item. When you think about the one that could be, frankly, the most disruptive, it was obviously payroll and benefits, and that went surprisingly well. There anything to be said about any change in management or loss in terms of people leaving because of it? No. I mean, one thing that's really nice and beneficial about this acquisition, they have been through like seven transactions. Very seasoned veteran group of leaders still in place that at least the ones that are running the state of Texas or ones that are running the private pay division in the other states. So we have not had any turnover in the leadership position. So we've been very stable. I guess part of or as a result of this acquisition, you've also been talking about growing, I guess, home health presence in Texas. Kind of how quickly, I guess, you're going to move towards expanding, I guess, further in that market post-Gentiva? Yeah. I think that definitely has moved toward the top of our wish list from an M&A perspective is building out clinical capabilities. I think we think there's also opportunity in Texas to continue to backfill with more personal care as well. We're the largest in Texas, but I think there's still a lot of opportunity to maybe fill in some sections of the map in personal care. Those are all things that we're looking at and looking to source today. We have a little bit of hospice more around central Texas today, but we definitely could use some home health and some additional hospice potentially. Some of the managed Medicaid plans in the state have expressed interest in doing some things with us on the value-based front. We can add clinical services. That should definitely be helpful. Yeah, that's interesting. You mentioned that because that was on my list too in terms of the value-based care, right? Especially in Texas, sounds like the payers in particular are interested in it. In order for you to really participate, that's why you need you put home health assets on top of your list. Do you need to kind of fill these blanks before you can do something material or meaningful with these plans, or what's the strategy there, I guess? Yeah. I mean, the good thing about what we have found, and we approach value-based, this is really from the personal care standpoint. Where we've seen where opportunities for home health and hospice is actually starting with the value-based program on the personal care side. We have a case management system that we utilize. We're able to, and we're continuing to modify the algorithm to essentially identify clients that could benefit from home health and could transition to hospice. Kind of similar to what we do in our home health to hospice portfolio using some analytics there. You don't have to have it. It's really just being able to build out that continuum of care. You can kind of feed the different service lines through the personal care. It starts with the personal care component with the changes in condition that our caregivers identify. We also pull in some third-party data sources as well. Again, to risk our clients that instead of trying to focus on 10,000 clients, let's focus on the 50 that may be most at risk over the next 60 days. Do you already have those contracts in Texas, or are you saying you're working on those? Gentiva actually had some value-based contracts. They did not really do anything with it, honestly. It was you had a contract in place, and you may or may not get an extra check, essentially. We are formalizing those relationships and working with the payers to build out a more robust value-based component. Really, it is not so much about the potential kind of gain share that you might get from saving the money. It is really about building the relationship and the volume that comes with that. That is what we are really focused on and working with the payers. All right. You're saying this is upside-only type structure? It's upside-only. Again, the problem with challenges with value-based arrangements is, particularly if you're on an upside-only arrangement, and even if you're kind of full risk, the better you do, the smaller it gets unless you're constantly adding more lives to the program. Because they're not going to pay you for what you did last year. They want to pay you for what you're going to do this year. As you do better, you reduce hospitalizations by 15%, that was great. They want to see another 15% off of what you just did. It becomes a little more challenging. Really, the way we approach it is, one, it can help us through kind of service line synergies, continuum of care, being able to build that out and maximize that. Also, just building kind of volume and relationships with the payers. To grow volumes, I guess, under this contract, you're saying this is sort of like an exclusive almost, where you have a preferential treatment on the lesson? Those are the things we're discussing. We're not going to get—you’re not going to see an exclusive, I don't think. Can we build out some sort of preferred provider arrangement? We're talking to them about doing that. That is, again, the way we're approaching the value-based is not so much how much can we get from the value-based component. It's really about trying to build out the volume side of it. I guess since we're talking about Gentiva, and again, sizable acquisition for the company, should we expect more acquisitions this year, or are you kind of pausing to first digest it? Also, yeah, it sounds like home health in Texas is a priority. Is there some sort of order list of things you're going to focus on this year? Yeah. I mean, I think from a bandwidth standpoint, we've learned a lot over all the acquisitions that we've done. We've really built out a pretty strong integration process. Along with saying we're not on the sidelines, we're still looking. We're not constrained by any resources. Yeah. That was really a big component that we did the follow-on last year after we announced Gentiva, to keep our balance sheet in a position where we could be opportunistic. I think we definitely want to continue to be active in M&A. In the past, you talked about, I guess, adding $75 million to $100 million to acquisition per year. Is it still sort of a good framework, or maybe the number is a little bit bigger now? Brian, you want to take that? No, I think it's still a good target for us. I think, obviously, market conditions are going to play into what your opportunities are. I think just generally, long term, we still would like to complete M&A in that range. I think some years you may not have that opportunity. It might be some smaller things. You might have a year like with Gentiva where you're going to far exceed that with a larger acquisition. I think generally, I think we still think that's something that's reasonable if you're going to be doing it in there. I guess maybe switching gears to underlying performance of these different businesses. Starting with personal care, right? The biggest business for you. When I look at it, your sales have declined in the quarter, but the hours actually grew 2% year-over-year. That was 2%. I guess I assume that's hours for the year, right? What gives you confidence in that number for the year? Kind of how are you tracking maybe through April? Yeah. I mean, I think I was pleased with Q1, especially because it's kind of a soft January with the weather events. So growing at the 2% on the hours basis, I still feel good about the kind of two, maybe we'd press two and a half there. I think that from the census perspective, we went through the redetermination process last year. It kind of depends on when the state went through it. If you look at a state like New Mexico went through redetermination probably mid-year last year, you're starting to see that census growth now. It seems to take almost six months for them to kind of get back on track. We're starting to see that a bit in Texas as well. That probably moved more in October, by September, October, maybe August, a little market for us. Starting to see discharges level out. They're down to the level that they were kind of pre-redetermination. It's just taken them a little while to kind of ramp up on the admission side and the referral side. Optimistic that census should, by the end of the year, we should be on track to grow census. I still think the hour side, I still feel pretty good about the two, two and a half, just because we're doing a better job with servicing clients. We've done some things from a technology standpoint to help us increase that service percentage. Maybe you can expand on that, actually, on this technology. Is it rolled out across the markets? I guess it sounds like, yeah, you made it sound like it's going well. Maybe is there something more, I guess, to be done? Yeah. There is actually a lot more to be done on that. We have rolled it out in Illinois. That is our largest market, and had really positive adoption of it. You kind of build an application, and you are kind of wondering, are they going to use it as one more app to download? We have built in a fair amount of functionality to make it where it is a one-stop shop so they can go open the app. They can access their EVV system. They can access the payroll system easily. Good adoption in Illinois. We have seen, I think we have about 70% caregivers that registered, 70-75%. Regular users is around 55%. We are rolling it out now in the process in New Mexico. We had to wait for a Spanish translation, so we have completed that. The challenge with rolling it out, because it's kind of the fundamental challenge with Medicaid and being a multi-state provider, every state's different. You have to customize the programming of the application to fit that state's rules around it. One of the features in Illinois that we have rolled out, and we're rolling out in New Mexico, is a feature that allows the caregiver to be able to see that I am going to underserve my clients by X number of hours. It allows the caregiver to work with the client to adjust the schedules to pick up those additional hours that are authorized. They do it without having to involve our local office staff at all. They can adjust their schedules, and it just feeds into our system. We've seen some good uptake with that functionality. I think there's features there. The other component that's there is also updating their availability. We know that caregivers, and most of them want to work more hours, not less. The opportunities for them to, in real time, update their availability, that then feeds into our kind of workflows at the local office level to be able to know, okay, this caregiver says they're working 20 hours a week. They want to work 30. Let's see if we can find an extra 10 hours for them. We're talking about employees, right? Maybe you can give us an update where you stand on in terms of wages, I guess, growth, and retention, and hiring. Yeah. On the hiring, I'll take that one first. On the front, on personal care, we're in a good place. When you even factor in Gentiva, I had set a goal for the company overall on the hires per business day. I probably should have been more aggressive because we kind of hit that just out of the gate. I feel good about where we are from a hiring standpoint on personal care. Wage pressure on personal care, you may have some in some smaller markets, but it's kind of just onesie, twosie type stuff. Most of our large portion of our workforce is CVA-driven, so collective bargaining. Those do not really reopen unless there's a rate increase. You're able to kind of keep margins pretty consistent. On the clinical side, hiring is good. I think we still have some—it is still more challenging than personal care. It probably will be for the foreseeable future. We are not in a position where we are constrained from a growth perspective because of hiring. It just could be better. You are seeing a little bit more wage pressure there, but it is moderating. I think we were in a 4%-5%—we were in a 4%-5%, 3%-4% environment. I think it has been steadily improving over the last 12-18 months. Since we switch a little bit to clinical, this is just maybe we can talk about, I guess, home health as it relates to also recession, because that's another topic. At some point, the market was worried, "Hey, we might be coming into recession." I guess you just brought up the—excuse me—the concept around the—sounds like the labor is not only an issue in home health, and you're doing a really good job in personal care. How should you think about recession, if there was a recession, right? How this business has performed in prior cycles. Maybe you can remind us, I guess, personal care and also touch on the clinical side. Yeah. I do not think—when you think about the clinical side, I do not really—there is minimal impact. I mean, if you need home health or you need hospice, and hospice does not have copays. There is really not much of a—if you have a knee surgery, you have a knee surgery or a hip replacement or a cardiac event. I do not think recession really plays in there. On the personal care side, as long as it is not a prolonged deep recession that might negatively impact state budgets, it is actually probably a little bit of a tailwind for us because you probably open up more caregivers' opportunities. Excuse me. Just looking down my list. I guess, yeah, I wanted to switch to home health, and I was asking about recession, but also maybe we can touch a little bit about reimbursement, right? Kind of what's your expectations for the upcoming year? More important, how do you think this big recruitment is going to play out, if at all? Is there something to be said about, "Hey, maybe CMS will try to push it again," or do they have to address it? If they do, are they going to come out and say something like, "10-year phase in all this recruitment"? How are you guys thinking about that for you? Yeah. I think that is the challenging part of home health right now. It is one I think we have been saying for three or four years, we felt the government would eventually change their attack, so to speak, on the rate environment in home health. It has not happened yet. That being the case, it will be interesting to see if the new administration takes a different approach to home health. I believe some of the new folks in CMS believe in home health. Our thinking would be once we see if rates get back to a more normal cadence—we have been getting very little rate increases, but we get back up to that 2.5% rate increase—that makes the industry a lot more exciting. I think then you have to talk about the potential clawback. That is the thing that is really an unknown. I think what you talked about is probably the only way it can be handled. If they do believe there needs to be a recruitment, I think it's going to have to be over a period of time with an annual adjustment, a negative factor to any rate increase that would be. I think to do it any other way to the industry would be very difficult. We do not know. We have heard that potentially something will be decided by the end of the year, but we're kind of waiting. It's been an interesting time for us because certainly, as we've talked about, home health is a viable part of our service. It's something that we'd like to do a little more growth in. Right now, it's running just over 5% of our business, and it's one that we've kind of been careful, especially the last 12 months. We'd love to do some more growth in Texas around both home health and hospice, as well as personal care. As far as the home health itself, we think we're going to wait and see the next few months what the government brings out. I guess in home health, where you stand on Medicare Advantage in terms of the mix of these contracts at this point versus the reason I guess at some point the company was clearly exiting some of these contracts that did not make sense. Is there more to be done, or are you kind of where you want to be? Where are you, I guess, with the managed care guys because obviously they complain about trends and such? Is it getting harder to kind of make some progress there and getting some better rates? Yeah. I mean, we've had some success on getting some increases in per visit rates. Currently, our kind of episodic, non-episodic mix, when you look at traditional Medicare plus our episodic Medicare Advantage, we're at around 55%-45% in favor of episodic. That really hasn't changed a whole lot. I think we had, over the past 12 months, it may have gone from 56%-44% to 55%-45% from a revenue standpoint. From a volume standpoint, I should say. We haven't seen a lot of mix change there. We are having ongoing discussions with payers about moving to some sort of episodic or case rate. I think a lot of that is because of the Gentiva transaction, honestly. On the personal care side, we've become a much larger provider for a lot of these payers. That has opened up some doors to talk in terms of getting some national support for at least starting with some state contracts there. We are in active discussions on looking at some case rate contracts with some of the larger payers. Still work to be done there. It will be an interesting year for us. Mixed-wise, we have been pretty stable. All right. I guess moving on, because I have some of this stuff on hospice, which we did not talk about yet, right? Hospice is bigger than home health for you guys. It sounds like both actually did accelerate nicely in Q1, right? Are you finally getting traction there? I guess that business was kind of slow to recover post-pandemic and the mortality and such. From here, should we expect this kind of type of growth that you saw in Q1 to continue? Yeah. I mean, we have a kind of long-term we expect kind of a 5-7% revenue growth for hospice. We've exceeded that in Q1. I think we'll be at the top end or above the 5-7% for this year. We are starting to see, I think just industry-wide, we've gone through COVID had the biggest impact on hospice of any of our segments. When you saw, it was kind of interesting. Home health was almost like a V-shaped recovery. I mean, got just crushed, and then within months, it was kind of back to recover. Personal care certainly was a little bit more of a drag over that time period, but we got great rate support so that helped us. Hospice is the one that has taken the longest to recover. I think the excess deaths from COVID have largely filtered through the system, and you're now starting to see the favorable demographics of the aging population start to come back. There were some things that were in place during the public health emergency that allowed or incentivized NIPS to skill patients longer that probably would have been transferred to hospice. Those are now gone. I think you're starting to see a normalization of, one, length of stay and utilization. It's also a favorable dynamic. I am pretty confident that we'll be at the high end of that 5-7 this year and probably a little over it. We only have a few seconds. I want to ask that in terms of the cash flow outlook for the year, how would you think about it? I mean, I think I know the answer, but talk about the uses of capital deployment strategy. Yeah. I think cash flow for us has been pretty consistent, pretty strong the last few years. I think we expect that to continue this year. I think we've talked in terms of conversion rate of 75%-80% of GAAP EBITDA to cash. We'll see a little bit of up and down, usually with timing of AR this year, but nothing that we're looking at that should really impact that. Uses of cash for the moment, I think we still have a decent amount of debt on our balance sheet, even though we're at a low leverage, but we'll continue to make progress on paying down the revolver, mitigating interest expense at the moment. Where we could find M&A, we definitely would like to deploy capital in M&A with those opportunities. Great. Thank you so much. That's all the time we have today. Thank you. Thanks for.