What Management Said

Read the full Q3 2025 transcript ↗

As we do on each of our quarterly earnings calls, I will begin with a few overall comments, and then Brian will discuss the third quarter results in more detail. As we announced yesterday afternoon, our total revenue for the third quarter of 2025 was $362.3 million, an increase of 25% as compared to $289.8 million for the third quarter of 2024. This revenue growth resulted in adjusted earnings per share of $1.56 as compared to adjusted earnings per share for the third quarter of 2024 of $1.30, an increase of 20%. Our Adjusted EBITDA was $45.1 million compared to $34.3 million for the third quarter of 2024, an increase of 31.6%.

During the third quarter of 2025, we experienced strong operating cash flow at over $50 million for the quarter. We ended the third quarter with bank debt of $154 million, leaving us with net leverage of under 1x Adjusted EBITDA, allowing us the flexibility to continue to evaluate and pursue strategic acquisition opportunities. As we mentioned on our last earnings call, both the states of Texas and Illinois have announced rate increases for Personal Care Services. the Texas rate increase was effective on October 1st of this year.

The Illinois rate increase will be effective January 1, 2026, subject to the standard federal approval process. On July 30 of this year, CMS finalized the fiscal year 2026 Hospice Wage Index and payment rate update, resulting in a 2.6% increase effective on October 1 of this year. This increase reflects a 3.3% market basket increase reduced by a 0.7% productivity adjustment. Based on our current geographic and acuity mix, we expect to realize a 3.1% increase in our Hospice rates.

What went well
  • Total revenue grew 25% year-over-year to $362.3 million (from $289.8 million), with adjusted EPS up 20% to $1.56 and adjusted EBITDA up 31.6% to $45.1 million, lifting adjusted EBITDA margin to 12.5% from 11.8%.
  • Personal Care Services delivered 6.6% same-store revenue growth - well above the normal 3%-5% range - including a 2.4% increase in same-store hours, supported by record hiring of 113 hires per business day (up 6.6% sequentially).
  • Hospice produced strong 19% same-store revenue growth, with average daily census up 9.5% to 3,872 and admissions up 6.5%, and no additional Medicare cap liability was accrued in the quarter.
  • Secured favorable Medicaid rate support in its two largest personal care markets: a 9.9% Texas rate increase effective September 1, 2025 (about $17.7 million annualized) and an approved 3.9% Illinois increase effective January 1, 2026 (about $17.5 million annualized).
  • Generated strong operating cash flow of $51.3 million in the quarter ($92.7 million year-to-date), reduced bank debt by $18.7 million to $154.3 million and ended with $101.9 million of cash and net leverage under 1x adjusted EBITDA.
  • Continued its tuck-in acquisition strategy, closing Helping Hands Home Care (August 1, ~$16.7 million annualized revenue) and the personal care assets of Del Cielo Home Care in South Texas (October 1, ~$12.7 million).
What went wrong
  • Home Health same-store revenue declined 2.8% year-over-year, remaining the company's weakest and smallest segment (4.9% of revenue) amid an uncertain reimbursement backdrop.
  • CMS's proposed CY2026 Home Health rule projected a 6.4% aggregate Medicare payment reduction, creating an overhang that management said would continue to delay meaningful Home Health acquisitions.
  • Personal Care same-store billable census was up only slightly sequentially as the company worked through the tail end of Medicaid redeterminations in Illinois.
  • Gross margin ticked down sequentially to 32.2% from 32.6% in Q2 2025, primarily due to one extra holiday during the quarter.
  • The acquisition pipeline remained skewed toward smaller, lower-multiple deals, with larger, chunkier personal care opportunities not expected until 2026.

Guidance Changes

MetricPeriodCurrent guidance
Adjusted EBITDA marginQ4 2025Expected to be 13% or above, the seasonal high-water mark
Gross marginQ4 2025Benefit of ~40 bps from the Hospice reimbursement update plus ~20 bps from lower unemployment taxes
Personal Care same-store hours growthOngoingTargeting above 2% year-over-year going forward
Effective tax rateFY2025Expected to remain in the mid-20% range
Hospice Medicare rateEffective October 1, 2025Approximately 3.1% increase based on the company's geographic and acuity mix

Performance Breakdown

MetricYoYNote
Total revenue +25% to $362.3M Consistent organic growth across Personal Care and Hospice plus contribution from the Gentiva, Helping Hands and Great Lakes acquisitions.
Personal Care revenue $275.8M (76.1% of revenue); +6.6% same-store Higher billable hours (+2.4%), strong hiring and rate support in Illinois and Texas.
Hospice revenue $68.9M (19% of revenue); +19% same-store Growth in admissions, average daily census (+9.5% to 3,872), patient days and revenue per patient day from operational improvements.
Home Health revenue $17.6M (4.9% of revenue); -2.8% same-store Year-over-year admissions leveling out; segment valued mainly as a referral source into Hospice (>25% of Hospice admissions in New Mexico and Tennessee).
Adjusted EBITDA +31.6% to $45.1M Top-line growth and G&A leverage; adjusted G&A improved to 19.8% of revenue.
Adjusted EPS +20% to $1.56 Revenue growth and margin expansion.
Operating cash flow $51.3M in quarter ($92.7M YTD) Strong collections; Illinois Department on Aging DSOs improved to 32.5 days from 38.8 days.

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
Medicaid rate support & OBBBAAwaiting Texas and Illinois rate decisionsTexas 9.9% increase live September 1 and Illinois 3.9% effective January 1, 2026; management argues home-based care's cost-effectiveness positions Addus well as states manage Medicaid under the OBBBA.—
Full continuum / Bridge ProgramBuilding overlap across Personal Care, Home Health and HospiceOver 25% of Hospice admissions in New Mexico and Tennessee now come from Addus Home Health, validating the strategy; the company aims to replicate this in Illinois.—
Caregiver app (Addus Connect)Rolled out in IllinoisDriving fill-rate and utilization gains in Illinois; rollout planned next for New Mexico and Texas, where fill rates have historically been lower, leaving more headroom.—
Acquisition strategy & capital allocationDisciplined tuck-in M&APipeline skewed to small, low-multiple PCS deals (4-5x on the small end); Hospice targets trading at mid-teens multiples viewed as pricey; disciplined debt reduction maintained alongside deal activity.—
Leadership transitionBrad Bickham as President & COOHeather Dixon became President and COO on September 15, 2025; Bickham moved to Advisor to the CEO ahead of his March 2026 retirement.—
EMR consolidationPersonal Care on a separate systemWorking with Homecare Homebase to move Personal Care onto one EMR (five small states live) to eventually enable a full Bridge Program from Personal Care through Home Health and Hospice.—

Q&A Summary

KeyBanc (Matthew Gilmor) asked about the Personal Care same-store volume opportunity and the Caregiver App rollout in Illinois and New Mexico.
Management said the app is driving fill-rate improvement in Illinois and will roll out next to New Mexico and Texas, where fill rates are lower and there is more headroom; over a third of the 6.6% PCS same-store growth came from increased billable hours.
RBC (Ben Hendrix) asked whether strong Q3 volume growth is a jumping-off point for 2026 organic growth.
Poff pointed to record hiring (113/day) and consistent labor markets; the Texas ~10% rate increase should support caregiver pay and hiring, and the company targets keeping same-store hours growth above 2% into 2026.
Jefferies (Brian Tanquilut) asked about the 2026 margin opportunity.
Poff said continued top-line growth, especially in PCS and Hospice, should yield additional G&A leverage and modest year-over-year bottom-line margin improvement, with clinical M&A adding higher-margin mix.
Bank of America (Joanna Gajuk) asked to confirm Q4 gross margin and EBITDA assumptions and rate expectations in other states.
Poff confirmed Q4 adjusted EBITDA margin of 13%+ is reasonable as the seasonal high; on rates, New Mexico may consider an increase next cycle while Pennsylvania is likely flat given its budget difficulties, with no cuts anticipated.
UBS (A.J. Rice) asked about the acquisition pipeline and pricing.
Poff characterized the pipeline as mostly smaller, density-building PCS deals at 4-8x, with Hospice pricey at mid-teens and Home Health cautious given the rate overhang; he was hopeful for larger opportunities in 2026.
William Blair (Jared Haase) asked about the benefit of overlapping Home Health/Hospice operations and clinical labor.
Dixon cited better continuity of care and patient/family satisfaction, with the Bridge Program driving Hospice admissions; clinical labor is stable outside a few challenging urban skilled markets.
Barclays (Jeffrey Song) asked about the dialogue between Medicaid payers and providers under OBBBA pressure.
Allison said OBBBA pressures states to allocate Medicaid dollars effectively, positioning Addus favorably because keeping clients at home through Personal Care avoids far more expensive ER visits, readmissions and nursing-home care.

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Transcript

Q3 2025 call
Reported 2025-11-04 · figures from the Addus HomeCare Corp Q3 2025 earnings call.

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