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10-Q 1 adus-20240630.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-34504

ADDUS HOMECARE CORPORATION

(Exact name of registrant as specified in its charter)



Delaware		20-5340172
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6303 Cowboys Way, Suite 600 Frisco, TX		75034
(Address of principal executive offices)		(Zip Code)

(469) 535-8200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	ADUS	The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 30, 2024, Addus HomeCare Corporation had 18,100,285 shares of Common Stock outstanding.

Table of Contents

ADDUS HOMECARE CORPORATION

FORM 10-Q

INDEX


PART I. FINANCIAL INFORMATION	3

Item 1. Financial Statements (Unaudited)	3

Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	3

Condensed Consolidated Statements of Income For the Three and Six Months Ended June 30, 2024 and 2023	4

Condensed Consolidated Statement of Stockholders’ Equity For the Three and Six Months Ended June 30, 2024 and 2023	5

Condensed Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2024 and 2023	7

Notes to Condensed Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3. Quantitative and Qualitative Disclosures About Market Risk	37

Item 4. Controls and Procedures	37

PART II. OTHER INFORMATION	38

Item 1. Legal Proceedings	38

Item 1A. Risk Factors	38

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3. Defaults Upon Senior Securities	38

Item 4. Mine Safety Disclosures	39

Item 5. Other Information	39

Item 6. Exhibits	40

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ADDUS HOMECARE CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of June 30, 2024 and December 31, 2023

(Amounts and Shares in Thousands, Except Per Share Data)

(Unaudited)



	June 30, 2024		December 31, 2023
Assets
Current assets
Cash	$	173,305	$	64,791
Accounts receivable, net of allowances		109,195		115,499
Prepaid expenses and other current assets		12,488		19,714
Total current assets		294,988		200,004
Property and equipment, net of accumulated depreciation and amortization		23,381		24,011
Other assets
Goodwill		663,851		662,995
Intangibles, net of accumulated amortization		88,398		91,983
Operating lease assets, net		44,145		45,433
Other long-term assets		1,791		—
Total other assets		798,185		800,411
Total assets		1,116,554	$	1,024,426
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	20,188	$	26,183
Accrued payroll		55,102		56,551
Accrued expenses		35,633		33,236
Operating lease liabilities, current portion		11,224		11,339
Government stimulus advances		13,000		5,765
Accrued workers' compensation insurance		12,385		12,043
Total current liabilities		147,532		145,117
Long-term liabilities
Long-term debt, net of debt issuance costs		—		124,132
Long-term operating lease liabilities		38,359		39,711
Other long-term liabilities		9,008		8,772
Total long-term liabilities		47,367		172,615
Total liabilities	$	194,899	$	317,732
Stockholders' equity
Common stock—$.001 par value; 40,000 authorized and 18,100 and 16,227 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively	$	18	$	16
Additional paid-in capital		584,896		403,846
Retained earnings		336,741		302,832
Total stockholders' equity		921,655		706,694
Total liabilities and stockholders' equity	$	1,116,554	$	1,024,426

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

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ADDUS HOMECARE CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the Three and Six Months Ended June 30, 2024 and 2023

(Amounts and Shares in Thousands, Except Per Share Data)

(Unaudited)


	For the three months ended June 30,						For the six months ended June 30,
	2024			2023			2024			2023
Net service revenues	$	286,922		$	259,980		$	567,668		$	511,579
Cost of service revenues		193,764			177,662			386,333			350,846
Gross profit		93,158			82,318			181,335			160,733
General and administrative expenses		63,576			57,397			124,639			113,757
Depreciation and amortization		3,401			3,382			6,870			6,829
Total operating expenses		66,977			60,779			131,509			120,586
Operating income		26,181			21,539			49,826			40,147
Interest income		(474	)		(291	)		(897	)		(397	)
Interest expense		2,114			2,331			4,872			4,792
Total interest expense, net		1,640			2,040			3,975			4,395
Income before income taxes		24,541			19,499			45,851			35,752
Income tax expense		6,462			4,647			11,942			8,225
Net income	$	18,079		$	14,852		$	33,909		$	27,527
Net income per common share
Basic income per share	$	1.12		$	0.93		$	2.10		$	1.72
Diluted income per share	$	1.10		$	0.91		$	2.06		$	1.69
Weighted average number of common shares and potential common shares outstanding:
Basic		16,177			16,002			16,120			15,975
Diluted		16,498			16,283			16,449			16,304

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

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ADDUS HOMECARE CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the Three and Six Months Ended June 30, 2024

(Amounts and Shares in Thousands)

(Unaudited)


	For the Three Months Ended June 30, 2024
	Common Stock					Additional Paid-in Capital		Retained Earnings		Total Stockholders' Equity
	Shares			Amount
Balance at April 1, 2024		16,370		$	16	$	406,465	$	318,662	$	725,143
Issuance of shares of common stock under restricted stock award agreements		8			—		—		—		—
Forfeiture of shares of common stock under restricted stock award agreements		(3	)		—		—		—		—
Stock-based compensation		—			—		2,855		—		2,855
Shares issued for exercise of stock options		—			—		—		—		—
Shares issued in Public offering, net of offering costs		1,725			2		175,576		—		175,578
Net income		—			—		—		18,079		18,079
Balance at June 30, 2024		18,100		$	18	$	584,896	$	336,741	$	921,655

	For the Six Months Ended June 30, 2024
	Common Stock					Additional Paid-in Capital		Retained Earnings		Total Stockholders' Equity
	Shares			Amount
Balance at January 1, 2024		16,227		$	16	$	403,846	$	302,832	$	706,694
Issuance of shares of common stock under restricted stock award agreements		151			—		—		—		—
Forfeiture of shares of common stock under restricted stock award agreements		(3	)		—		—		—		—
Stock-based compensation		—			—		5,474		—		5,474
Shares issued for exercise of stock options		—			—		—		—		—
Shares issued in Public offering, net of offering costs		1,725			2		175,576		—		175,578
Net income		—			—		—		33,909		33,909
Balance at June 30, 2024		18,100		$	18	$	584,896	$	336,741	$	921,655

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

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ADDUS HOMECARE CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the Three and Six Months Ended June 30, 2023

(Amounts and Shares in Thousands)

(Unaudited)


	For the Three Months Ended June 30, 2023
	Common Stock				Additional Paid-in Capital		Retained Earnings		Total Stockholders' Equity
	Shares		Amount
Balance at April 1, 2023		16,204	$	16	$	395,879	$	252,991	$	648,886
Issuance of shares of common stock under restricted stock award agreements		10		—		—		—		—
Forfeiture of shares of common stock under restricted stock award agreements		—		—		—		—		—
Stock-based compensation		—		—		2,613		—		2,613
Shares issued for exercise of stock options		—		—		—		—		—
Net income		—		—		—		14,852		14,852
Balance at June 30, 2023		16,214	$	16	$	398,492	$	267,843	$	666,351

	For the Six Months Ended June 30, 2023
	Common Stock				Additional Paid-in Capital		Retained Earnings		Total Stockholders' Equity
	Shares		Amount
Balance at January 1, 2023		16,128	$	16	$	393,208	$	240,316	$	633,540
Issuance of shares of common stock under restricted stock award agreements		86		—		—		—		—
Forfeiture of shares of common stock under restricted stock award agreements		—		—		—		—		—
Stock-based compensation		—		—		5,259		—		5,259
Shares issued for exercise of stock options		—		—		25		—		25
Net income		—		—		—		27,527		27,527
Balance at June 30, 2023		16,214	$	16	$	398,492	$	267,843	$	666,351

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

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ADDUS HOMECARE CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2024 and 2023

(Amounts in Thousands)

(Unaudited)


	For the Six Months
	Ended June 30,
	2024			2023
Cash flows from operating activities:
Net income	$	33,909		$	27,527
Adjustments to reconcile net income to net cash provided by (used in) operating activities, net of acquisitions:
Depreciation and amortization		6,870			6,829
Deferred income taxes		264			165
Stock-based compensation		5,474			5,259
Amortization of debt issuance costs under the credit facility		430			430
Provision for credit losses		486			313
Gain on disposal of assets		(5	)		—
Loss on termination of operating leases		10			—
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		5,362			21,395
Prepaid expenses and other current assets		7,127			(4,018	)
Government stimulus advances		7,235			(3,382	)
Accounts payable		(6,333	)		(597	)
Accrued payroll		(1,449	)		2,788
Accrued expenses and other long-term liabilities		(1,889	)		3,704
Net cash provided by operating activities		57,491			60,413
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired		(400	)		(940	)
Purchases of property and equipment		(2,421	)		(1,771	)
Proceeds received from disposal of assets		19			—
Proceeds received from divestiture of business		4,600			—
Net cash provided by (used in) investing activities		1,798			(2,711	)
Cash flows from financing activities:
Payments on revolver loan — credit facility		(126,353	)		(53,500	)
Proceeds from Public offering		175,578			—
Cash received from exercise of stock options		—			25
Net cash provided by (used in) financing activities		49,225			(53,475	)
Net change in cash		108,514			4,227
Cash, at beginning of period		64,791			79,961
Cash, at end of period	$	173,305		$	84,188
Supplemental disclosures of cash flow information:
Cash paid for interest	$	4,491		$	4,416
Cash paid for income taxes		13,986			6,767

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

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ADDUS HOMECARE CORPORATION

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Nature of Operations, Consolidation and Presentation of Financial Statements

Addus HomeCare Corporation (“Holdings”) and its subsidiaries (together with Holdings, the “Company”, “we”, “us” or “our”) operate as a multi-state provider of three distinct but related business segments providing in-home services. In its personal care services segment, the Company provides non-medical assistance with activities of daily living, primarily to persons who are at increased risk of hospitalization or institutionalization, such as the elderly, chronically ill or disabled. In its hospice segment, the Company provides physical, emotional and spiritual care for people who are terminally ill as well as related services for their families. In its home health segment, the Company provides services that are primarily medical in nature to individuals who may require assistance during an illness or after hospitalization and include skilled nursing and physical, occupational and speech therapy. The Company’s payors include federal, state and local governmental agencies, managed care organizations, commercial insurers and private individuals.

Basis of Presentation

The accompanying Unaudited Condensed Consolidated Financial Statements and related notes have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for Quarterly Reports on Form 10-Q. The accompanying balance sheet as of December 31, 2023 has been derived from the Company’s audited financial statements for the year ended December 31, 2023 previously filed with the SEC. Accordingly, these financial statements do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements and should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2023 included in our Annual Report on Form 10-K, which includes information and disclosures not included herein.

In the opinion of management, these financial statements reflect all adjustments of a normal, recurring nature necessary for the fair statement of our financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP. Our results for any interim period are not necessarily indicative of results for a full year or any other interim period.

Principles of Consolidation

These Unaudited Condensed Consolidated Financial Statements include the accounts of Addus HomeCare Corporation, and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

2. Summary of Significant Accounting Policies

Estimates

The financial statements are prepared by management in conformity with GAAP and include estimated amounts and certain disclosures based on assumptions about future events. The Company’s critical accounting estimates include the following areas: revenue recognition, goodwill and intangibles in business combinations and when required, the quantitative assessment of goodwill. Actual results could differ from those estimates.

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Computation of Weighted Average Shares

The following table sets forth the computation of basic and diluted common shares:


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	(Amounts in thousands)				(Amounts in thousands)
	2024		2023		2024		2023
Weighted average number of shares outstanding for basic per share calculation		16,177		16,002		16,120		15,975
Effect of dilutive potential shares:
Stock options		251		237		239		245
Restricted stock awards		70		44		90		84
Adjusted weighted average shares outstanding for diluted per share calculation		16,498		16,283		16,449		16,304
Anti-dilutive shares:
Stock options		19		61		42		61
Restricted stock awards		8		77		8		1

Recently Adopted Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805). This ASU requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. The ASU was adopted prospectively on January 1, 2023. The additional disclosures required did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures, which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in the ASU require, among other things, disclosure of significant segment expenses that are regularly provided to an entity's chief operating decision maker (“CODM”) and a description of other segment items (the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss) by reportable segment, as well as disclosure of the title and position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Annual disclosures are required for fiscal years beginning after December 15, 2023 and interim disclosures are required for periods within fiscal years beginning after December 15, 2024. Retrospective application is required, and early adoption is permitted. These requirements will result in expanded disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvement to Income Tax Disclosures, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, may be applied prospectively or retrospectively, and allows for early adoption. These requirements are not expected to have an impact on the Company's financial statements and will expand income tax disclosures.

3. Public Offering

On June 28, 2024, the Company completed a public offering of an aggregate 1,725,000 shares of common stock, par value $0.001 per share, including 225,000 shares of common stock sold pursuant to the exercise in full by the underwriters of their option to purchase additional shares, at a public offering price of $108.00 per share (the “Public Offering”). The Company received net proceeds of approximately $175.6 million, after deducting underwriting discounts and estimated offering expenses of approximately $10.7 million. The Company used approximately $81.4 million from the net proceeds of the Public Offering for the repayment of indebtedness outstanding under its credit facility and may use any remaining net proceeds of the Public Offering for general corporate purposes, including the Company’s previously announced planned acquisition of the personal care assets of Gentiva and any future acquisitions or investments. The Public Offering resulted in an increase to additional paid in capital of approximately $175.6 million on the Company’s Unaudited Condensed Consolidated Balance Sheets at June 30, 2024.

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4. Acquisition and Divestiture

Acquisition

On June 8, 2024, the Company entered into a definitive stock and asset purchase agreement (the “Gentiva Purchase Agreement”) to acquire the personal care operations of Curo Health Services, LLC, a Delaware limited liability company which does business as Gentiva (“Gentiva”), consisting of equity interests and certain assets and liabilities, for a purchase price of approximately $350.0 million, payable in full in cash at the closing, subject to typical adjustments for working capital and other customary items (collectively, the “Gentiva Acquisition”). The acquired business operates in Arizona, Arkansas, California, Missouri, North Carolina, Tennessee and Texas, and serves approximately 16,000 patients. The Company expects to close this acquisition following completion of regulatory approvals and subject to customary closing conditions and fund it through the Company’s existing revolving credit facility and a portion of the net proceeds from the Public Offering.

Divestiture

On May 21, 2024, the Company entered into a definitive asset purchase agreement to sell all of the Company’s New York operations for a purchase price of up to $23.0 million in cash, subject to certain adjustments, including adjustments for future operating requirements (the “New York Asset Sale”). The Company entered into a consulting agreement with the purchaser on May 21, 2024, as the transfer of clients and caregivers and payment for assets pursuant to the New York Asset Sale is occurring over time as regulatory approvals are received, coordination of the transfer of clients and caregivers occurs, and the change of control takes place. In connection with this transaction, the Company will cease operations in New York. During the three months ended June 30, 2024, the Company recorded $0.7 million in consulting fees and received a $4.6 million initial payment on the acquisition.

The New York Asset Sale did not qualify as a discontinued operation because it did not represent a strategic shift that has or will have a major effect on the Company’s operation or financial results.

As of May 21, 2024, the Company’s New York personal care operations met the criteria to be classified as held for sale. The carrying value does not exceed the fair market value and will result in a gain on divestiture once the transaction closes.

The carrying amounts of the assets and liabilities associated with our New York personal care operations included in our Unaudited Condensed Consolidated Balance Sheets as of June 30, 2024 were as follows (amounts in thousands):


	June 30, 2024
Assets
Current assets
Accounts receivable, net of allowances	$	7,712
Prepaid expenses and other current assets		3
Total current assets		7,715
Property and equipment, net of accumulated depreciation and amortization		34
Other assets
Goodwill		3,801
Intangibles, net of accumulated amortization		4,841
Operating lease assets, net		3,727
Total other assets		12,369
Total assets	$	20,118
Liabilities
Current liabilities
Accounts payable	$	6,340
Accrued payroll		3,531
Accrued expenses		753
Operating lease liabilities, current portion		790
Total current liabilities		11,414
Long-term liabilities
Other long-term liabilities		2,829
Total liabilities	$	14,243

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5. Leases

Amounts reported on the Company’s Unaudited Condensed Consolidated Balance Sheets for operating leases were as follows:


	June 30, 2024		December 31, 2023
	(Amounts in Thousands)
Operating lease assets, net	$	44,145	$	45,433

Short-term operating lease liabilities (in accrued expenses)		11,224		11,339
Long-term operating lease liabilities		38,359		39,711
Total operating lease liabilities	$	49,583	$	51,050

Lease Costs

Components of lease costs were reported in general and administrative expenses in the Company’s Unaudited Condensed Consolidated Statements of Income as follows:


	For the Three Months Ended June 30, (Amounts in Thousands)						For the Six Months Ended June 30, (Amounts in Thousands)
	2024			2023			2024			2023
Operating lease costs	$	3,373		$	3,292		$	6,669		$	6,334
Short-term lease costs		179			284			380			700
Total lease costs		3,552			3,576			7,049			7,034
Less: sublease income		(491	)		(700	)		(1,089	)		(1,399	)
Total lease costs, net	$	3,061		$	2,876		$	5,960		$	5,635

Lease Term and Discount Rate

Weighted average remaining lease terms and discount rates were as follows:


	June 30, 2024			December 31, 2023
Operating leases:
Weighted average remaining lease term (years)		5.98			6.26
Weighted average discount rate		5.80	%		5.47	%

Maturity of Lease Liabilities

Remaining operating lease payments as of June 30, 2024 were as follows:


	Operating Leases
	(Amounts in Thousands)
Due in the 12-month period ended June 30,
2025	$	7,368
2026		11,955
2027		9,534
2028		6,974
2029		5,707
Thereafter		17,799
Total future minimum rental commitments		59,337
Less: Imputed interest		(9,754	)
Total lease liabilities	$	49,583

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Supplemental Cash Flows Information


	For the Six Months Ended June 30,
	(Amounts in Thousands)
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7,224	$	7,010

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	4,509	$	14,415

6. Goodwill and Intangible Assets

A summary of the goodwill and related adjustments is provided below:

         
        Hospice

        Personal Care

        Home Health

        Total

         
        (Amounts in Thousands)

Goodwill as of December 31, 2023

432,799

153,276</