Image source: The Motley Fool.
DATE
Tuesday, May 5, 2026 at 9 a.m. ET
CALL PARTICIPANTS
- Chairman & Chief Executive Officer — R. Dirk Allison
- Chief Financial Officer — Brian W. Poff
- President & Chief Operating Officer — Heather Dixon
Need a quote from a Motley Fool analyst? Email [email protected]
TAKEAWAYS
- Total Revenue -- $363.6 million, up 7.7%, driven primarily by growth in the Personal Care segment.
- Adjusted EPS -- $1.62, reflecting a 14.1% increase.
- Adjusted EBITDA -- $44.5 million, rising 9.7% with margin at 12.2% versus 12% prior year.
- Cash Flow From Operations -- $52.4 million, compared to $18.9 million, contributing to a $30 million reduction in bank debt to $94.3 million.
- Cash on Hand -- $103 million as of March 31, 2026, supported by revolving credit facility capacity of $650 million and availability of $547.8 million.
- Personal Care Revenue -- $281.1 million (77.3% of total), up 8.8% (6.5% same-store); segment benefitted from Illinois and Texas rate increases, with Illinois contributing $17.5 million in annualized revenues from the latest rate adjustment.
- Hospice Revenue -- $65.8 million (18.1% of total), representing 7.7% same-store growth, and a median length of stay at 23 days compared to 25 days a year earlier.
- Home Health Revenue -- $16.7 million (4.6% of total), with segment operating income improved both year over year and sequentially versus last quarter, despite a 6.6% decline in organic revenue.
- Gross Margin -- 31.9%, consistent with the prior year due to annual merit increases and payroll tax resets; G&A expense was 21.4% of revenue (down from 21.7%), with adjusted G&A at 19.6% (down from 19.9%).
- DSOs -- 36.3 days, down from 38.2; Illinois DSOs at 47.4 days, lower than 54.7 days prior year.
- Hiring Trends -- 108 personal care hires per business day (up sequentially from 103), even with adverse weather limiting volumes in January.
- Indiana Expansion -- Closed acquisition of HomeCourt Home Care (approximately $9.7 million annual revenue, approximately 240 clients) and signed a definitive agreement for an additional similar-sized operation, expecting combined Indiana revenue just under $20 million.
- App Rollout -- "We now have deployed it in all three of our three largest states," with high uptake in Texas, and full rollouts expected in other locations to improve service percentages and caregiver engagement.
- Bridge Program Uptake -- Over 25% of hospice admissions in New Mexico and Tennessee now originate from Addus (ADUS 1.68%) Home Health operations, demonstrating internal referral synergies.
- Regulatory Update -- Recent 3.9% Illinois and 9.9% Texas personal care rate increases in effect; Illinois budget not yet finalized but ongoing payor support cited; New Mexico allocated $10 million for home and community-based services, pending program detail from Medicaid.
- CMS Medicaid Access Rule -- Company expects the 80/20 provision will be eliminated in the near future, though it currently has "no current impact on our business or financial performance."
SUMMARY
Addus (ADUS 1.68%) advanced its market position by entering Indiana, executing two acquisitions that solidify a new regional footprint and provide immediate revenue scale. Management articulated a disciplined M&A strategy, emphasizing readiness for both large and incremental deals due to a strengthened balance sheet and lower leverage. Expansion of the caregiver app across top states is expected to drive continued operational efficiency, employee engagement, and service utilization. The Bridge program increased in-market cross-sell rates, indicating enhanced integration across service lines. Management noted an improved macro regulatory environment for home health and supportive funding dynamics in major states, providing a backdrop for ongoing same-store growth and further geographic densification.
- The company experiences lower DSOs in key states, supporting improved working capital management and near-term cash availability.
- Management stated, "We are pleased to see more patients receiving the benefit of the full continuum of post-acute home-based care and anticipate seeing similar clinical teamwork develop in Illinois," highlighting cross-segment opportunities.
- Labor market commentary indicates base wage inflation reverted to approximately 3%, with positive candidate flow across markets, aiding hiring initiatives.
- Answers regarding CMS’s focus on fraud, waste, and abuse and regulatory scrutiny of self-directed care suggest Addus’ agency model and robust compliance infrastructure may benefit competitively as regulatory standards tighten.
- On personal care census trends, Dixon said, "we saw gains as we exited the quarter. Importantly, March census exceeded both January and February census," confirming sequential momentum in the company's largest state.
- Continued G&A leverage is supported by revenue growth, without incremental cost in corporate functions as new markets are integrated.
- Integration of recent acquisitions, especially in contiguous geographies, is expected to deliver further operational synergies.
INDUSTRY GLOSSARY
- DSO: Days sales outstanding; a measure of the average number of days it takes to collect payment after a sale, used for receivables management.
- EVV: Electronic Visit Verification; a technology used to verify caregiver visits and service delivery to home-based care clients, often required for compliance and accurate billing.
- Bridge Program: Addus' internal initiative to transition patients from home health to hospice care, enhancing cross-service referrals and full-continuum patient management.
Full Conference Call Transcript
the company Chairman and Chief Executive Officer, R. Dirk Allison. Please go ahead, sir. Thank you, Dru.
R. Dirk Allison: Good morning, and welcome to our 2026 first quarter earnings call. With me today are Brian W. Poff, our Chief Financial Officer, and Heather Dixon, our President and Chief Operating Officer. As we do on each of our quarterly earnings calls, I will begin with a few overall comments and then Brian will discuss the first quarter results in more detail. Following our comments, the three of us would be happy to respond to any questions. As we announced yesterday afternoon, our total revenue for the first quarter of 2026 was $363.6 million, an increase of 7.7% as compared to $337.7 million for the first quarter of 2025.
This revenue growth resulted in adjusted earnings per share of $1.62 as compared to adjusted earnings per share of $1.42 for the first quarter of 2025, an increase of 14.1%. Our adjusted EBITDA was $44.5 million compared to $40.6 million for the first quarter of 2025, an increase of 9.7%. For the first quarter of 2026, cash flow from operations was $52.4 million as compared to $18.9 million for the same period in 2025. As of 03/31/2026, we had cash on hand of approximately $103 million.
With our strong cash flow in the first quarter, we reduced our bank debt to $94.3 million, leaving us with the financial flexibility to consider larger acquisitions as we continue to pursue expansion of our market reach and creating geographic density. During the first quarter, we saw an impact on revenue due to the widespread weather event that occurred toward January. Our team did a good job of rescheduling affected personal care visits where possible, however, we could not make up for every weather-impacted missed visit. While the amount of the revenue was immaterial to our company overall, we did see a loss of revenue of approximately $1.5 million as a result of these storms.
However, February and March returned to our normalized revenue expectations. As we announced on May 1, we closed on the acquisition of the personal care operations of HomeCourt Home Care based in Fort Wayne, Indiana. This acquisition marks our entry into an attractive state that is adjacent to our largest personal care market of Illinois. We have been interested in Indiana for some time as, over the past three years, they increased rates and worked to eliminate client wait lists. I am excited to welcome all of our new team members from HomeCourt Home Care. We have also entered into a definitive purchase agreement for an additional personal care operation in Indiana which will complement HomeCourt Home Care.
We anticipate that this additional Indiana acquisition should close in the coming months, subject to customary regulatory approvals. These two acquisitions continue our strategy of entering new markets with scale and where we have the ability to expand our services. As we mentioned on our last earnings call, the state of Illinois increased our rates in personal care services effective 01/01/2026, adding approximately $17.5 million in annualized revenues. This most recent rate increase continues to show the important support we are receiving from our state partners as we continue to provide these much needed services to our elderly and disabled clients.
We also understand the New Mexico legislature included increased funding of $10 million for home and community-based services in the budget for the upcoming fiscal year. We are waiting for communications from the New Mexico Medicaid department regarding how and to which programs the funding will be expended. As we have stated before, we continue to believe that the 80/20 provision of the CMS Medicaid access rule will be eliminated in the near future. 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.
All our recent communications indicate that this part of the Medicaid access rule is expected to be eliminated this year. During the first quarter of 2026, we continued to experience positive hiring trends in our personal care segment. Our number of hires per business day in the first quarter of 2026 was 108, up sequentially from 103 hires per day in the fourth quarter of last year and consistent with the first quarter of 2025. We achieved this number in spite of the impact of the weather event I mentioned earlier. As we have mentioned in the last few quarters, our clinical hiring remains consistent and has been mostly stable outside of a few of our urban markets.
However, even in those markets, we have been able to staff our operations appropriately. Now let me discuss our same-store revenue growth for the first quarter of 2026. For our personal care segment, our same-store revenue growth was 6.5% compared to the first quarter of 2025. During the first 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 first quarter remained consistent with what we experienced in 2025. On a sequential basis, personal care same-store census was down slightly, partially due to the weather we mentioned before.
However, during the first quarter, we saw growth in clients served in Illinois, our largest market, which is something we had anticipated for a while. This is important as we look to achieve year-over-year census growth during 2026. Turning to our clinical operations, our same-store revenue increased 7.7% compared to the first quarter of 2025. Our average daily census increased to 3,804 for the first quarter, up from 3,515 for the same period last year, an increase of 8.2%. In the first quarter of 2026, our hospice median length of stay was 23 days as compared to 25 days for the first quarter of 2025 and 19 days for the first quarter of 2024.
We are very pleased by the continued growth in our hospice segment over the past several quarters. While our home health same-store revenue decreased when compared to the first quarter of 2025, our home health operating income improved over last year’s first quarter and sequentially versus the fourth quarter of 2025. It is also important to understand that over 25% of our hospice admissions in New Mexico and now Tennessee are coming from our own Addus Home Health operations which overlap in these two markets as we continue to focus on our Bridge program.
We are pleased to see more patients receiving the benefit of the full continuum of post-acute home-based care and anticipate seeing similar clinical teamwork develop in Illinois where we also have both home health and hospice operations. We continue to believe that size and scale are important to health care services and have been the focus of our strategy for the past ten years. We continue to evaluate opportunities which would increase both density and geographic coverage as well as seek to further strengthen our relationships with states and managed care organizations. Recently, we have begun to see an increasing number of personal care opportunities.
Due to our focus on maintaining a conservative balance sheet, we have the ability to actively pursue these transactions. Recently, there appears to be more optimism around home health care due to the final home health rule for 2026 being more favorable than was originally proposed. There is still some uncertainty about the future rate increases, but there does seem to be more potential activity in home health care. While we will be open to 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 that I thank the team for the care they are providing to our elderly and disabled consumers and patients. We all have come to understand that the majority of this 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 other employees who work so incredibly hard providing outstanding care and support to our PACS clients, patients, and their families. With that, let me turn the call over to Brian.
Brian W. Poff: Thank you, Dirk, and good morning, everyone. The first quarter of 2026 marked a solid start to a new year for Addus. The results for the quarter reflect our continued ability to execute our strategy and deliver consistent growth. Results were highlighted by a 7.7% increase in top-line revenue to $363.6 million and a 9.7% increase in adjusted EBITDA to $44.5 million when compared with the first quarter of 2025. Personal care, at 77.3% of our revenues, was a key driver of our business. Revenues for the segment grew to $281.1 million, an increase of 8.8% overall and an increase of 6.5% on a same-store basis compared to the same quarter last year.
We are continuing to see contributions from our acquisition of Gentiva’s personal care operations in late 2024 and the acquisitions of Helping Hands Home Care Services and Del Cielo Home Care, both of which were acquired in 2025. The revenues of Gentiva’s personal care operations are included in our same-store numbers for the first time this quarter. In addition to higher volumes, we are continuing to benefit from rate support in some of our key state markets, including our two largest in Illinois and Texas. Our first quarter results included the impact of the 3.9% rate increase in Illinois which became effective on 01/01/2026 as well as the 9.9% rate increase in Texas that became effective on 09/01/2025.
Our hospice care business continued to perform well and accounted for 18.1% of revenues for the first quarter. Our hospice revenues were $65.8 million with a same-store increase of 7.7% over the same period last year and year-over-year improvement in average daily census. For the period, home health services, our smallest segment, accounted for 4.6% of first quarter revenue at $16.7 million. We continue to look for ways to support and expand our home health service line, including through acquisitions. We believe important synergies can be realized by offering multiple levels of home-based care in the markets we serve. Yesterday, we announced two transactions in Indiana.
HomeCourt Home Care, based in Fort Wayne, closed on May 1, and we signed a definitive agreement to acquire additional operations of a similar size in the state. Currently, HomeCourt serves approximately 240 clients with annual revenues of approximately $9.7 million. We anticipate our second acquisition in the state will close later this year. We believe our announced expansion into Indiana, a new market for Addus, is aligned with our strategy of broadening our geographic coverage with density and scale. Our team looks forward to welcoming the clients and caregivers to the Addus family. We intend to provide additional details on the second acquisition when regulatory considerations permit.
Strategic opportunities will continue to play a role in our long-term growth planning. Our primary focus will be on identifying opportunities where we can leverage geographic coverage and density, providing us with a competitive advantage. We will also seek opportunities to add services to meet our ultimate objective of offering multiple levels of care in the markets we serve. With our size and expanding scale and the support of a strong balance sheet, we are well positioned to execute our strategy. As Dirk noted, total net service revenues for the first quarter were $363.6 million. Revenue breakdown is as follows. Personal care revenues were $281.1 million, or 77.3% of revenue.
Hospice care revenues were $65.8 million, or 18.1% of revenue, and home health revenues were $16.7 million, or 4.6% of revenue. Other financial results for the first quarter of 2026 include the following. Our gross margin percentage was 31.9%, consistent with the first quarter of 2025. As usual, our gross margin was affected in the first quarter by our annual merit increases and the annual reset of payroll taxes. Looking forward, we anticipate our gross margin percentage will remain relatively stable and consistent with our historical annual pattern. G&A expense was 21.4% of revenue, compared with 21.7% of revenue for the first quarter a year ago.
Adjusted G&A expense for the first quarter was 19.6% compared with 19.9% a year ago as we continue to generate leverage from our growing revenue base. The company’s adjusted EBITDA for the first quarter of 2026 was $44.5 million compared with $40.6 million a year ago, an increase of 9.7%. Adjusted EBITDA margin was 12.2% compared with 12% for the first quarter of 2025. Consistent with 2025, we anticipate our adjusted EBITDA margin percentage for the full year will remain above 12%. Adjusted net income per diluted share was $1.62 compared with $1.42 for the first quarter of 2025.
The adjusted per share results for the first quarter of 2026 exclude the following: acquisition expenses of $0.06 and noncash stock-based compensation expense of $0.20, including the impact of accelerated vesting for the previously announced retirement of our former President and COO. The adjusted per share results for the first quarter of 2025 exclude the following: acquisition expenses of $0.13 and noncash stock-based compensation expense of $0.13. Our effective tax rate for the first quarter of 2026 was 22.7%, benefiting from the excess tax benefit related to our stock compensation. For the full year 2026, we expect our tax rate to be in the mid-20% range.
DSOs were 36.3 days at the end of the first quarter of 2026 compared with 38.2 days at the end of the first quarter of 2025, with DSOs for the Illinois Department of Aging at 47.4 days compared with 54.7 days at the end of the first quarter of 2025. As expected, we saw resolution in some of the normal timing differences in payment cycles we experience around year-end. Our net cash flow from operations was $52.4 million for the first quarter of 2026, a strong start to the year. As of 03/31/2026, the company had cash of approximately $103.1 million, with capacity and availability under our revolving credit facility of $650 million and $547.8 million, respectively.
Total bank debt was $94.3 million at the end of the quarter, a reduction of $30 million from the end of the first quarter of 2025. We have continued to reduce our revolver balance in 2026 with $10 million paid to date. We have a capital structure that supports continued pursuit of our strategic initiatives. Looking ahead, we expect to maintain our disciplined capital allocation strategy and continue to diligently manage our net leverage ratio while also focusing on enhancing shareholder value. This concludes our prepared comments this morning, and thank you for being with us. I will now ask the operator to please open the line for your questions.
Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. In the interest of time, please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. Our first question comes from Brian Tanquilut from Jefferies. Please go ahead.
Brian Tanquilut: Hey, good morning, guys. Maybe I will start, Dirk. When we think about the caregiver app rollout, I know that is something that you are working on in Texas. How do we think about the progress there and what it will take to get it to where you want it to be as quickly as possible? And then what are the expected benefits for that? I mean, how do we think about the P&L translation of this app rollout and why it is so important?
Heather Dixon: Hi, Brian. Good morning. I will start and then Dirk can add anything that I miss. So I will start with the progress that we are seeing with that caregiver app. We now have deployed it in all three of our three largest states. Illinois, as you know, has been deployed for a while, and we are continuing to see really good utilization and uptick of that utilization throughout the state. In New Mexico, we have deployed it for a portion of our branches.
We have some special nuances associated with the state EVV system there, so we are going to roll it out in two tranches, but we have deployed it and we expect to be deploying to the rest of the branches soon in the coming quarters. And then finally, in Texas, we rolled it out during Q1, and we are seeing some really positive momentum in the utilization of that and caregivers actually downloading that app. We saw even in the first few days to a week, over 10% of our caregivers had already adopted that app. So we are seeing really good momentum. As we think about where we go from here, there are a couple of things.
One, continue to roll it out to other locations, and that is really going to enable our caregivers and help us focus on increasing our service percentage. And then two, we can use that to really drive communication and create positive engagement with our caregivers.
R. Dirk Allison: Yes, Brian, and I think what Heather just mentioned are the two aspects that we really focus on and why we invested in the caregiver app. You have seen positive momentum in Illinois for the percent of hours served. We believe a large part of that is directly attributed to the caregiver app, which allows the caregiver to see how many hours are left on the authorization and make sure that we are serving to an appropriate amount. Also, we think it can allow us to be a little more sticky.
As Heather said, with our caregivers, it makes it easier for them to know what their paycheck is going to be, to know their hours served, and also their ability, if they want to pick up additional hours, we have this app that allows them to do that in an effective manner. So those are really the benefits that we are looking for from this app.
Brian Tanquilut: That makes sense. And then maybe my follow-up, Heather, for you or maybe Brian: thinking about the length of stay on the hospice side, you have gotten questions on cap risk and how you are thinking about that. So just anything you can share with us on the hospice cap concern?
Brian W. Poff: Yes, Brian. Right now, we do not really have any cap consideration. We actually are managing our referral mix and our patient base pretty well. Discharge length of stay was a little higher this quarter, but, again, those are just a factor of the people that actually discharged during the quarter and probably not indicative of how you would think about cap. Our median length of stay, as Dirk mentioned, was 23 days, which probably is a little bit low for us. But I think we have a really good mix, so no cap concerns for us at the moment.
Operator: Thank you. Our next question comes from Raj Kumar from Stephens.
Raj Kumar: Hi, good morning. Maybe just an update on the budgets from each of your states. I am curious on Indiana more specifically. I know when you guys went into Texas with Gentiva, that was on the front end of the state passing or in the process of passing a rate update. So curious on the Indiana rate backdrop and any commentary there?
Brian W. Poff: Yes. I think in Indiana specifically—let me talk about some other states as well, Raj. Indiana, as Dirk mentioned, we have seen some nice rate support over the past several years. If you went back about five years ago or so, I am not sure it would have been quite as attractive for us, but we have seen nice support there, and a nice margin in that state pretty consistent with where we are on a consolidated basis. I think the ability for us to do two acquisitions simultaneously or in close proximity gives us really good coverage. We have always wanted to have a pretty good footprint when we go into a new market.
If we were to do one without the other, it probably would not have been quite as attractive, but doing both gives us a nice place to start in Indiana and the ability to continue to add either additional services or more density there—so one more place on the map where we have opportunities. From a budgetary standpoint, obviously Texas is every other year, so they are not going to meet this year—nothing to really report there. Dirk referenced New Mexico, which finalized their budget. There are dollars allocated for home and community-based services. We are just trying to determine and get the information on the logistics of how that will pass down to providers. Illinois is our largest market.
It is still in session; it has not been finalized. Their budget this year—our understanding is there are conversations from the union, as we would expect every year, about our services and rates, but nothing to report. We would expect them to probably finalize their budget over the next few weeks, so we will know more then. Those are probably the three that we will keep our eye on.
Raj Kumar: Got it. And then maybe looking at home health, I guess there was a shift in the payer mix toward higher Medicaid year over year. Anything to call out on that front—is it intentional or just how it played out, and has it been paying better than MA if it is intentional? I am just curious on the payer mix trend for home health in the quarter.
Brian W. Poff: Yes, I think in the quarter it is probably a little bit of an anomaly. We had some positive rate updates in one of our programs that kind of falls into that “other” bucket that you saw in our press release yesterday. We saw that in the quarter. We will probably revert back to more historical norms next quarter. Nothing intentional. Obviously, we are focused on making sure we try to get the best rate possible in the business that we take in home health and try to make sure that it is profitable.
Our team on the payer side is having conversations consistently with folks on trying to get as many episodic rates as we can and looking at taking cases that make sense for us from a profitability perspective.
Operator: The next question comes from Matthew Gillmor from KeyBanc. Please go ahead.
Matthew Dale Gillmor: Hey, good morning. Thanks for the question. Maybe following up on some of the census comments for personal care. I think I saw you mentioned Illinois was up, which is encouraging. I just wanted to confirm I heard that correctly. And then more broadly, I know census for personal care oftentimes is lower in the first quarter. If Illinois was stronger, does that imply there was weakness elsewhere? Or would you just categorize it as normal seasonal trends? Any other details to share on this topic?
Heather Dixon: Sure. I will take that. Hi, Matt. Good morning. As Dirk mentioned, we did have some weather impact in the beginning of the quarter, and that impacted our sequential census growth. That is what you saw as a slight sequential decline. But you did hear correctly—we had census improvements throughout the quarter, and we saw gains as we exited the quarter. Importantly, March census exceeded both January and February census. We are focused on those sequential gains going forward. That should lead to year-over-year gains as we move through the next couple of quarters.
Specifically in Illinois, we were very pleased to see that starts of care exceeded discharges throughout the quarter, and that led to sequential monthly improvement there as well. As we exited the quarter in Illinois, we saw a nice trajectory and, frankly, overall with census we saw that trajectory continue as we moved into the second quarter as well. There is nothing else to point to. It is not that Illinois is masking anything else. It is just that, as our largest state and one that we are very focused on, we wanted to be sure that we shared the positive improvement that we have seen there.
Matthew Dale Gillmor: That is great. Appreciate it. And then maybe following up on some regulatory topics. CMS has made some comments that have been skeptical of the self-directed care model within personal care and home and community-based services broadly—especially with some key states like New York, which I know you do not have exposure to. I was curious if the skepticism on the self-directed care model created opportunities for Addus more broadly, given your focus on the agency-directed model?
R. Dirk Allison: You know, self-directed care does have an issue—you do not have anybody in between the patient and the caregiver to make sure that the service is being performed. So the state has a little more responsibility on themselves to do that. In New York, it was a program that was, in our mind, going to have issues and not really be sustainable—that is why we left New York. There are also issues in California. There is a large issue there because it is self-directed care. We do not participate in Medi-Cal there. Most of the business we have is VA and private pay.
We have been saying for years that personal care is a great service and much needed and saves the states a lot of money, but it needs to be done in the right way. One of the advantages to having companies like Addus and others hiring the caregiver and matching them with the patient is that we have responsibilities to do a lot of extra things to make sure that service is being provided, whether that is supervisory visits in person, calls on the telephone. We have EVV; we have to make sure that the caregiver shows up, stays the amount of time, and when they leave so that we are billing the proper number of hours.
There are a lot of compliance issues that are placed on companies like Addus as opposed to self-directed care where there is very little, if any, of those. We think it is a real encouragement to our industry. From our standpoint, we agree with the fact that there needs to be a look and make sure that when you are paid for services, those services are being rendered. We think that will benefit a company like Addus.
Operator: The next question comes from Sean Dodge from BMO Capital Markets. Please go ahead.
Analyst: Great, thanks for taking our questions. It is Chris Charlton on for Sean here. Maybe back on personal care. You have again driven strong growth in same-store available hours even amid declining census. Can you share more detail on the dynamics behind the strength here and continuing to fill a strong percentage of the authorized hours, and how you anticipate that evolving throughout the year as you expect to return to some census growth?
Heather Dixon: Sure. I will take that. Hi, Chris. I will start with billable hours and what we are doing that fuels that growth. A couple of things specifically. One, we are working on refining our operational processes from the support center and also from the branch perspective, particularly with scheduling and utilization of our authorized hours. And then, as we talked about a couple of minutes ago, we have been focused on creating tools and deploying them that will help our providers—actually the caregivers—have access to those hours as well, and that is in the form of the app. What we have seen is improvement in that service percentage or fill rate.
So the hours that we are posting are a higher utilization of the authorized hours. We are seeing that in most of our states and specifically where we have deployed the app and had really good usage. We would expect that opportunity to improve this service percentage as we move throughout the year, particularly as we deploy the app in Texas, one of our largest states. If you think about Q4 to Q1—your question about even though census is down just a bit sequentially, billable hours are up—that is just a function of the weather that we saw earlier in the quarter and nothing else to point to.
R. Dirk Allison: Let me jump in on census because I know everybody is focused on that number, and it is an important number. It is not one that we get paid on—we get paid on billable hours—so we really focus on making sure we get the proper amount of hours per census as opposed to just census per se. You have to get the right census and the right hours from that patient coming on board to make sure that it is something we can serve appropriately and profitably. That being said, we understand that people are looking at that. The important thing this quarter that is very exciting to us is Illinois made the turn.
Illinois is one we really worked on the last four quarters to get back into a growth mode. It just so happens this quarter, Texas was a little soft coming out in January. We saw a little bit of effect in Texas for the census for the quarter. But by the end of the quarter, Texas was back; Illinois continued to grow. The important thing is we believe most of our states now are in the situation where starts of care are exceeding discharges.
Sometimes you are going to have a little bit of an issue in a state during a quarter, but the general trend is we think we have seen that change, and now we think all three of our big states are in that situation where we should grow census.
Analyst: And then on home health, there were some encouraging adjustments to the final rate from CMS last year as you come up on their initial proposal. We will see 2027 rates in the coming months. Maybe just qualitatively, can you share some thoughts on the backdrop and what you would like to see initially to give everyone some clarity that the environment might be starting to stabilize and be more favorable for opportunities there?
Brian W. Poff: I can take that one, and Dirk can add some color as well. We saw some positivity in the final rule last year. We are interested to see what the rule will look like this year. It feels like there is more appreciation coming out of CMS for what the industry has gone through the last few years. They seem to be focusing on some of the areas where there might have been issues that impacted how they looked at reimbursement in the last few years. The industry has been lobbying for some time for them to see that.
If some of the things in the fraud, waste, and abuse area potentially have been used in the calculation and with those maybe out of the mix and identified, we are hopeful that there will be more positivity in the rate that we will see this year. It is a small segment for us. We think there are a lot of synergies in having multiple lines of care. We will watch closely, and it is still something we are interested in.
Operator: The next question comes from Andrew Mok from Barclays. Please go ahead.
Analyst: Hi, good morning. This is Jeffrey on for Andrew. I appreciate all the color around the personal care segment, but I wanted to better understand Addus’ exposure to self-directed personal care and the impact that had on recent personal care segment results.
R. Dirk Allison: We do not really see an impact from self-directed care in most of our states. As we mentioned, there were issues in New York. We left that state. In California, if you go back ten to fifteen years ago, we did business there, and California decided to go self-directed care. That was not something that we provided. We focused on states that really understand the difference between self-directed care and agency care. That goes back to what I said a few minutes ago: with agency care, you get a compliance program. You get companies like Addus making sure that the caregiver—who may or may not actually be a family member even if it is called family caregiver—is trained properly.
We make sure that EVV is in place. We go through our complete compliance program to make sure that we are being paid appropriately and that we are providing the appropriate care per the plan of care. So, for us, self-directed care does not have a direct impact, but we are glad to see that regulators are looking at self-directed care to make sure that it is following the rules just like agency care.
Analyst: Thanks. And maybe on the hospice side, I think revenue per patient day growth was negative for the first time in a while. Could you help us better understand the dynamics there, including any trade-off with average length of stay?
Brian W. Poff: I think there are two elements this quarter. Primarily, we talked last year that we had some positive impact from the implicit price concession (or revenue—whichever term you want to use), and we indicated we expected that to revert back to historical norms. That is where we were this quarter. So that was part of the consideration between last year—even Q4—into Q1. There is a little bit of impact from mix as well, but nothing really material. Those are the two factors.
Operator: The next question comes from Constantine Davides from Citizens. Please go ahead.
Constantine Davides: Thanks. Dirk, you highlighted your balance sheet strength and ongoing debt reduction both in the quarter and post the quarter. Can you comment a little bit on the size of the opportunities in the M&A pipeline—whether that is starting to skew up a little bit more in recent months?
R. Dirk Allison: What we are starting to see this year—there are already two or three opportunities out there that are of size—that we are looking at. It is something that changed probably in the last three months or so where we are seeing processes begin on these larger opportunities. That is one of the reasons, Constantine, that we have worked very hard to keep our balance sheet clean. It is the reason we were able to do Gentiva very quickly and bring it on board. We are looking at some of these bigger opportunities that, because of our balance sheet, we could do and bring on fairly rapidly without having to stress our balance sheet.
They are out there, they are in a process, and we are looking at them.
Constantine Davides: And when you say “of size,” something along the scale of a Gentiva?
R. Dirk Allison: Yes, they are similar in size to Gentiva. That is correct.
Constantine Davides: Great. And then a quick follow-up on Indiana. You talked about that state being attractive and good rate momentum in recent periods. Where do rates compare to either other states you are in or your blended average?
R. Dirk Allison: The rates are a little higher than some of the Midwestern states. Obviously, Illinois is going to be our highest market. But Indiana, if you look around the other states around there, the rates now are nice rates—rates that we can operate in very effectively. There also seems to be a little less competition in Indiana in the number of providers of our care. It is a state that we have been looking at and, with the 2023 timeframe when they really raised their rates to make them more competitive, ever since then we have been looking for opportunities to get into the state.
HomeCourt Home Care and the other acquisition that we announced allow us to get into that state and start looking for other opportunities to grow. Thank you.
Operator: The next question comes from Ryan M. Langston from TD Cowen. Please go ahead.
Ryan M. Langston: Hi. Maybe just dovetailing off Indiana. Obviously, the strategy is to enter states with size and scale. If you combine the two assets, where would that put you in terms of market share in the state? And beyond decent rates and competition dynamics, anything else in particular that made Indiana attractive?
Brian W. Poff: I can start and then Dirk can add some color. I do not know that we have enough detail to know exactly where we would stand. It is going to be a good footprint for us from a coverage standpoint. All in, the other acquisition is going to be similar size. We are going to be just under $20 million in revenue, which is a pretty good start for us in the state. One of the things that made it attractive for us, in addition to what Dirk referenced, is the managed Medicaid component. A lot of the larger players there—think United and those folks—we have good relationships with all of those guys nationally.
It is a good fit for us. States that have managed Medicaid, where we can have those relationships in place, have always been part of the profile that we like. I am excited about that.
Ryan M. Langston: Okay. And then, more broadly, this administration is really focused on fraud, waste, and abuse, and has made statements to that effect over the past several months to a year plus. In general, what do you think any of that could mean for Addus? Is that a potential benefit because you are large and sophisticated versus some of your smaller competitors in your markets? How could this administration’s stance on FWA affect Addus?
R. Dirk Allison: One of the things that Addus did—we participated with the Alliance in talking to the current administration about the fact that fraud and abuse is out there, and it causes issues for legitimate providers. From the standpoint of Addus, we are glad to see the administration focus on fraud and abuse. We spend a lot of money on compliance—have for the last ten years. We want to make sure that when we operate in a state, we are following the rules and doing what is proper. At times if you find that maybe something was billed improperly, we pay it back very quickly to stay in compliance with the state.
The fact that we are large and spend millions of dollars on compliance bodes very well for what the administration is trying to do—that is, take out the players, mostly smaller players, that are not doing the right thing and are just billing and not following through. More importantly, the most important thing is that the care is being given to the patient. There is a reason that patient has a plan of care that the state approved—they need that care. We would rather regulators call out home care broadly and address fraud and abuse in home health and hospice as well.
From a personal care standpoint, we believe that we are a leader in the industry, and part of being a leader is to lead the compliance effort. We are pleased with the administration’s focus, and we believe long term it will be a benefit to our company.
Operator: The next question comes from Jared Phillip Haase from William Blair. Please go ahead.
Jared Phillip Haase: Maybe just one for the model. Appreciate all the detail you have given us as far as hiring and some of the initiatives you have going on, like the caregiver application. That hours-per-census-per-month metric has been above 70 for a couple quarters now. Is there anything structurally that would cause that to decline? I think the typical seasonality would have that continue to grow sequentially over the rest of the year, but I want to make sure that is the right expectation to level set how we are thinking about things for the model, given the moving parts as it relates to census and volume trends.
Brian W. Poff: Yes, Jared. I would not expect to see that decline. There is nothing structurally that is going to cause that to decline. You will always have a little bit of ebb and flow and mix in states. With the efforts around the caregiver app rollout and our fill rate, we would actually expect that longer term to continue to grow because we think there are hours available for clients under their care plan that we are currently not serving. So, no, I would not expect to see that decline for any structural reason.
Jared Phillip Haase: Got it. That is helpful. And then maybe another one on Indiana as a new market for you. Do you get any regional leverage in a market like Indiana, given the proximity to your largest market, Illinois? Is there any infrastructure you are able to leverage that would help you scale up and extract synergies a little more quickly than normal?
Brian W. Poff: Yes. If you look at where we have markets around Indiana—obviously we are very large in Illinois; we are in Michigan and Ohio—Indiana is right in the middle of that geographically. From a regional or leadership perspective, there is not going to be a need to add additional layers there. They should be able to tuck under what exists for us on the infrastructure today. Obviously, we will have people in those branch locations, but that should be the limit of it. From a leverage perspective on G&A, that should slide right into the operations that surround the state.
Operator: The next question comes from Clarke Murphy from Truist. Please go ahead.
Clarke Murphy: Hey, good morning, guys. Thanks for taking my question. I had a follow-up on labor. I appreciate the commentary you gave around the caregiver app and hiring trends. Are you seeing any benefit on labor availability given some of the macro concerns that seem to have amplified over the last couple of months and the impacts that has had on a broader consumer environment?
Heather Dixon: Hi, good morning, Clarke. The short answer is that we are seeing positive hiring trends, and we are seeing some of the leading indicators in terms of wage inflation and availability of candidates all trend in the right direction. With wage inflation, we are back to roughly a 3% base—some a little higher, some a little lower. In terms of candidates, we are seeing really good candidate flow across our markets. As Dirk mentioned, we will always have small pockets where it is a little more difficult to staff, but that is really limited to mostly rural locations and a couple of skilled categories in those rural locations.
We continue to work through those so that we can make sure we are hiring the right staff to drive growth and to serve our patients and clients. We are seeing good trajectory there. Whether it is attributable to the macro environment is hard to say, but we are seeing positive trends.
Clarke Murphy: Got it. Thanks. Switching gears to capital deployment—if I think about your current pace of debt paydown relative to your debt balance, it suggests, absent M&A, you would be largely paid off by the end of the year. Absent any large-scale M&A, how would that potentially impact your capital deployment priorities going forward?
R. Dirk Allison: We spent a lot of time talking about this at our board meeting, as you would expect with a company in our position. The thing we see that maybe is not as apparent to outsiders is the number of deals that are now starting to come on board. We are starting to see some larger transactions, as we mentioned. Remember, with those larger transactions, there are still a number of smaller transactions—like the ones we just announced—that are out there that we consider, in most cases, backfill. In this case, it was entering a new market.
We believe that before our debt is paid off, we will put to work a great deal of our capital in these opportunities that are out there. That led us to decide that is what we understand we are going to use our capital for today. If that did not happen over the next year, you would see us maybe come up with a different decision on how we used our capital. But we believe right now, with the opportunities that are there for us, we will be able to use our cash and debt to grow the company.
Operator: The next question comes from Benjamin Hendrix from RBC Capital Markets. Please go ahead.
Analyst: Hi, this is Michael Murray on for Ben. Thanks for taking my question. You saw some pretty good leverage on adjusted SG&A even with the weather headwinds. Are there specific cost initiatives driving this improvement? Do you think the caregiver app is helping there? And how should we think about the SG&A ratio as we move through the year?
Brian W. Poff: I would say first, the caregiver app is not really going to have an impact on G&A. We continue to see ongoing leverage, particularly on our corporate G&A, as we grow our revenue base, as we would expect. We are not having to add incremental cost there. On the labor side, as we mentioned earlier, this year we are back to a roughly 3% default rate—back to norm. Going forward, we do give our merits on March 1. So, sequentially into Q2, there will be a little bit of additional dollars in G&A in Q2 as those flow through for the whole quarter, but nothing else really from a seasonal perspective.
We would expect it to maintain a pretty stable percentage of revenue and continue to see additional leverage as we grow.
Analyst: Okay. And shifting gears to home health. Organic revenue declined 6.6%. I think you previously indicated a return to growth in the second half of this year against some easier comps. Can we get an update on admission trends, the impact of your new leadership, and your confidence in achieving that timeline?
Heather Dixon: Sure. Hi, Michael. I will take that one and talk about home health. I will start by reminding everybody it is less than 5% of our business. That said, we have made changes from a leadership perspective and from a sales perspective in how we go to market for that business recently. In Q1, we saw our margins really where we want them to be, so our focus is now on volume. We did see some positive trends in Q1. In fact, in Q1 2026, new admissions, total volume, and total visits all improved sequentially versus Q4 2025. That is the trend we want to see.
We continue to think that we will see that later this year and feel good about that statement. At a higher level, picking up on something that Dirk said earlier, the real value in our home health business is the interconnecting care that we provide and the correlation we see in markets where we have multiple lines of service and different levels of care. For example, in New Mexico and Tennessee, where we have the Bridge program in place and focus on creating referrals and admissions from home health into hospice where appropriate, we have seen those rates exceed 25%. We have also begun that program in Illinois.
Illinois home health is a little earlier for us, but there is great opportunity there to continue that pattern.
Operator: Again, if you have a question, please press star then 1. Our next question comes from Albert Rice from UBS. Please go ahead.
Albert Rice: Hi, everybody. First, I think at one point you had said that you thought in the second quarter you would still see above-average growth in personal care and hospice, and then it would moderate in the second half. Any update to your thinking about seasonality or the seasonal layout of the business for the rest of the year?
Brian W. Poff: AJ, this is Brian. Maybe not so much seasonal, but think about comps over prior year and the rate impact, particularly in personal care. Our prior comments were that we expected to be toward the high end of our normal 3% to 5% range, if not above. Starting this year at 6.5% on a same-store basis, we would still expect that to be the case for the remainder of this year. Once we get confirmation on New Mexico and that flowing through as well, that will benefit the back half of the year. We still feel pretty comfortable with that commentary, thinking about where we will be on a same-store basis for each quarter going forward in PCS.
Hospice has been double-digit plus in same-store. We guided people to think that is probably not long-term sustainable. Our ultimate expectation is upper single digits. We were just under 8% this quarter. We have seen nice trajectory in ADC coming out of the quarter. We were a little softer coming off the holiday, so that sets us up well to be in good shape to continue to meet that for the remainder of this year.
Albert Rice: Thanks on that. And then to your comments about M&A and the pipeline—obviously, deals are more in the personal care arena. You sound like you are feeling a little better about the home health backdrop. Would that be something you would now lean into again on M&A, or is it still too early?
R. Dirk Allison: I think we would look at home health deals today as opposed to maybe a year ago. As you can understand, we would be very careful in what we did, making sure it strategically fits for us and that they overlap with our hospice and personal care.
