Addus HomeCare Corporation (NASDAQ:ADUS) Q3 2023 Earnings Call Transcript

Brad Bickham: Yes. Joanne, this is Brad. With respect to the volume, if you look at Illinois, and this kind of goes back to the previous question, we paid a pretty good rate in Illinois because of some of the rate increases that we’ve received from the state, which has been beneficial on caregiver recruitment and retention. So we’ve seen some really solid hours growth in Illinois. I think year-over-year, they’re up by almost 6% on an hours basis. Even though we’re not getting necessarily as much margin out of this – the upcoming rate increase, I do anticipate that those volume increases should continue, which will give us more leverage off of our SG&A which I think when you talk about margin, really focused on the bottom line, it should have a negligible effect that we’re seeing a little bit of not as much pull-through on this rate increase.

Joanna Gajuk: Okay. Thank you. And my question around the margin comment there, so appreciate typically, this Q4 margins are higher. But then to your point, Q1 tends to be a lower margin quarter in a year. So I guess this year, I guess, tracking for the full year EBITDA margins, I’m talking about 11% and in change maybe 11.1% for the full year. So is that a good starting point when you think about the full year 2024, I understand you don’t give specific guidance, but I guess in light of the commentary is around Q1, I think it will be helpful talking about also kind of fourth quarter period, how the margins could play out? And as you talk about that, I guess, any puts and takes in terms of the volumes and rates, obviously, volumes have been improving nicely in PCS, but it’s very strong right and how you see this normalizing into next year? Thank you.

Brian Poff: Yes, Joanna, I think for 2023, I think we are trending toward finishing the full year above – back above 11%, which is where we were a couple of years ago. I think we had talked about coming into this year, we expected our margins to remain somewhat stable compared to last year where we saw a lot of wage pressure. I think we’ve actually overperformed that a little bit this year, I think adding an acquisition like Tennessee Quality Care and Clinical is helpful with that as well. But I think our expectation looking forward to 2024 on a margin perspective is we would expect to again be back above 11% and stay in that range. I think talking a little bit of piggybacking on Scott’s earlier question about growth rates, I think our long-term growth rate in personal care 3% to 5%, I think we’re still comfortable with and then getting to a four plus percent increase in Illinois just thinking about the top line, not necessarily the pull-through is very helpful in that regard going into next year.

So I think we expect to be nicely into that range and maybe towards the top end of next year. And I think our clinical services, we anticipate we’d like to see those get back to our normal growth rates of kind of mid-single digits. So with that, again, that 11-plus percent bottom line margin expectation for next year.

Joanna Gajuk: Thank you. If I can just follow up on that. So I guess, sounds like you’re talking about maybe higher end of the 3% to 5% for PCS. So how would you break it down the volumes versus rates? Or I guess Illinois, you just mentioned 4% increase. And how are, I guess, the rest of the PCS markets trending when it comes to rate increases into next year? Thank you.