Addus Positioned to ‘Stay Acquisitive’ During 2022

Acquisitions will be crucial to Addus HomeCare Corp.’s (NASDAQ: ADUS) 2022 objectives as COVID headwinds start to abate. The company expects to gain momentum on expansion as the year progresses.

Acquisitions remain an important part of the company’s growth strategy as it seeks to co-locate each of its three business lines in the markets it serves. Forthcoming transactions will spur momentum on the company’s 10% revenue growth target for the year, according to CEO and Chairman Dirk Allison.

Addus CFO and executive vice president Brian Poff indicated that the company is in a “favorable position to continue to be acquisitive,” in a Q1 2022 earnings call.

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“We continue to evaluate and pursue acquisition opportunities from a pipeline of potential transactions that meet our investment and strategic criteria,” said Poff said during the earnings call. “We believe there is positive momentum in the number of opportunities coming to market as provider volumes recover from the omicron surge, and we are well-positioned to be active in the M&A arena.”

In February Addus completed its $85 million acquisition of Illinous-based hospice provider JourneyCare Inc., and is moving forward with integration.

The company last year acquired Armada Hospice of New Mexico and Armada Hospice of Santa Fe for $29 million. The transaction also included the affiliated Armada Skilled Home Health of New Mexico.

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Industry-wide, deal volume in the hospice and home health markets slipped during the first quarter of 2022 after a late 2021 blitz in transactions. Addus and other buyers may be taking their time with forthcoming hospice deals in the hopes that record-high price tags may start to come down.

“With multiples being where they are in the [hospice] sector compared to last year, we are starting to see a little bit of compression,” Poff said. “It might take a little bit of time for sellers to come around to the rationalization that they are a little bit lower, but early on this year, we are seeing a little bit of compression and expectations on multiples.”

The company’s net service revenues rose 10.4.% in Q1 to $226.6 million, up from $205.3 million in the prior year’s quarter. The hospice segment brought in $47.7 million, compared to $36 million in the same period last year.

The company also saw sequential improvement in average daily census, median length of stay and patient days.

Like many in health care, Addus has contended with labor headwinds tied to the COVID-19 variant surge that persisted through the first half of the quarter. This included both wage hikes, turnover and larger contingents of staff on quarantine.

The company’s personal care segment saw its highest levels since the beginning of the pandemic, with roughly 4% of those employees impacted in January. 

On the hospice and home health side, Addus saw increased turnover at the year’s start, but had improvement in March along with an uptick in recruitment. Those business lines also saw wage increases of about 4% to 5% during the quarter, depending on clinical specialty.

“We believe that our upward adjustment in wages, along with a general improvement in the labor market, will potentially help moderate any continuing wage pressures during the remainder of 2022,” Allison said.

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