Addus HomeCare’s Q4 Surge Masks Headwinds in Q1 Guidance

Date of Call: Feb 24, 2026

Financials Results

• Revenue: $373.1M for Q4 2025, up 25.6% YOY; $1.4B for 2025, up 23.2% YOY
• EPS: $1.77 adjusted EPS for Q4 2025, up 28.3% YOY; $6.23 adjusted EPS for 2025, up 18.4% YOY
• Gross Margin: 32.8% for Q4 2025, compared to 33.4% in Q4 2024

Guidance:

• Q1 2026 revenue expected to benefit from Illinois rate increase, offset by 2 fewer business days and seasonal impact from winter storms.
• Gross margin percentage expected to decline approximately 120 basis points sequentially in Q1 2026.
• Tax rate for 2026 expected to remain in the mid-20% range.
• Continued disciplined acquisition strategy focused on personal care and clinical services.

Business Commentary:

Revenue and Earnings Growth:

• Addus HomeCare reported total revenue of $373.1 million for Q4 2025, an increase of 25.6% compared to $297.1 million in Q4 2024. Adjusted earnings per share rose to $1.77 from $1.38.
• Growth was driven by strong performance in the Personal Care segment and favorable rate increases in Texas and Illinois.

Hospice Segment Performance:

• The Hospice segment's same-store revenue increased by 16% year-over-year in Q4 2025, with average daily census rising to 3,885.
• The growth resulted from operational improvements and increased admissions, supported by a higher Medicare hospice reimbursement rate.

Home Health and Acquisition Strategy:

• Home health same-store revenue decreased by 7.4% in Q4 2025. Despite this, the company is focused on clinical collaboration and acquisition opportunities.
• The strategy aims to leverage synergies by offering all levels of home-based care, with a focus on geographic density and scale.

Labor and Hiring Trends:

• Hiring in Personal Care was stable, averaging 101 hires per business day in Q4, with a rebound to 107 per day in early January 2026.
• Trends were impacted by seasonal factors and severe weather, but overall stability was maintained, with no significant issues in hiring.

Financial Stability and Strategic Positioning:

• The company reported cash flow from operations of $18.8 million for Q4 2025, with cash on hand of $81.6 million. Net leverage was under 1x adjusted EBITDA.
• This strong financial position allows flexibility for strategic acquisitions and supports ongoing efforts to expand into the full continuum of home care services.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted "strong finish to another year of growth," with 25.6% revenue growth and 33.3% adjusted EBITDA growth in Q4. Statements include being "very pleased by the continued growth in our Hospice segment" and "optimistic there's going to be more opportunities" in acquisitions. The tone is confident in operational improvements and future prospects.

Q&A:

• Question from Benjamin Hendrix (RBC Capital Markets): Outside of Texas and Illinois, can you give context on rate conversations in states like New Mexico and Tennessee?
  Response: A 4%-5% rate increase is estimated to pass in New Mexico, expected in the back half of 2026. In Illinois, the governor's initial budget does not include a rate increase, but it's early in the legislative process.

• Question from Brian Tanquilut (Jefferies): How do we think about the pass-through for the New Mexico rate increase in terms of margin flow-through?
  Response: There is a mandatory pass-through rule, but it's not formulaic. Some portion will be passed through to caregivers, but decisions are still being assessed.

• Question from Brian Tanquilut (Jefferies): What are you seeing on the labor market for caregiver recruiting and retention?
  Response: Hiring trends are strong and stable, with 101 hires per business day in Q4, a strong start to January, and a rebound in February. Challenges remain in some urban markets but overall stability is maintained.

• Question from Albert Rice (UBS): What are you seeing in the tuck-in deal pipeline and prospects for transactions?
  Response: More optimism about opportunities, with pipeline comparable to last year's deals. Potential larger personal care assets may come to market in the mid-to-back half of 2026.

• Question from Albert Rice (UBS): Regarding the adult home care rate cut, was there a tailwind in 2026, and are you more open to home health acquisitions?
  Response: The final rule was positive movement for home health. The company will continue to look at opportunities but remains cautious on valuation and strategic fit.

• Question from Andrew Mok (Barclays): Same-store billable census was down YOY, but growth is seen in key states. What's the dynamic?
  Response: Census growth has been sequential and positive throughout 2025, with a slight Q4 tick down from holidays. Expect positive YOY growth in the second half of 2026 as admissions outpace discharges.

• Question from Andrew Mok (Barclays): How are states approaching fraud, waste, and abuse in personal care, and what steps are you taking?
  Response: Focus on compliance is a strength. The company views increased state focus as an opportunity to grow as smaller players may exit the market, and they will continue to ensure their own compliance.

• Question from Matthew Gillmor (KeyBanc): How is the caregiver app rollout progressing in New Mexico, and what's the future opportunity for authorized hours penetration?
  Response: The app rollout is steady in New Mexico and will begin in Texas in Q1, aiming for completion by early Q3. The Texas market presents a greater opportunity to capture momentum.

• Question from Matthew Gillmor (KeyBanc): Will Gentiva rolling into the same-store base be additive to same-store growth?
  Response: Gentiva is expected to follow a similar growth path as the rest of the business, so no material uptick or downtick in same-store growth is expected.

• Question from Jared Haase (William Blair): How much of strong hiring trends are due to controllable factors vs. macro trends?
  Response: It's a mix of both. The company focuses on controlling the hiring and onboarding process, while also benefiting from favorable macro trends.

• Question from Jared Haase (William Blair): Are there guardrails or puts and takes for expanding EBITDA margins in 2026?
  Response: Consistent top-line growth should drive leverage, particularly on G&A. No significant wage pressures are expected, supporting margin expansion.

• Question from Thomas Keller (BMO Capital Markets): Can you quantify the volume lift directly attributable to the caregiver app?
  Response: Direct attribution is not possible, but metrics like high caregiver utilization, increased flex hour usage, and strong service percentages indicate the app is driving positive results.

• Question from Thomas Keller (BMO Capital Markets): What's the update on the Homecare Homebase CMR transition and when it will drive clinical referrals?
  Response: A measured, market-by-market rollout is planned, with completion expected by the better part of 2027. Integration should support clinical collaboration over time.

• Question from Ryan Langston (TD Cowen): Are you hearing anything specific that gives confidence the 80/20 rule will be repealed soon?
  Response: Hearings indicate CMS is looking at changes, with potential repeal in the near future, though implementation is still years away. This would be a positive signal for the industry.

• Question from Clarke Murphy (Truist): Was the shift in personal care payer mix towards managed care by design?
  Response: The shift was due to the Del Cielo acquisition in Texas, which is a heavy managed Medicaid state.

• Question from Clarke Murphy (Truist): What's the update on the home health and hospice bridging program and potential growth in 2026?
  Response: The bridging program is showing good results, especially in New Mexico and Tennessee. Home health admissions grew slightly in Q4, and the company has hired new leadership to focus on growth, expecting to return to growth in the second half of 2026.

• Question from John Ransom (Raymond James): Are there technology levers like AI that the company is working on longer term?
  Response: Exploring AI in back-office rev cycle and scheduling/logistics for personal care. An internal AI committee is evaluating implementations.

• Question from John Ransom (Raymond James): Is rate negotiation different with Medicaid payers vs. states?
  Response: In most states, payers act as TPAs with no direct rate negotiation. New Mexico is an exception where the company can negotiate directly with MCOs, providing leverage.

• Question from Joanna Gajuk (Bank of America): Are managed Medicaid payers calling out higher LTSS spending, and have you seen changes in denials or payments?
  Response: No changes in payer behavior or payment pressures have been observed. States control authorization and denial processes, not payers.

• Question from Joanna Gajuk (Bank of America): What's the update on engaging payers for dual population management?
  Response: Value-based programs with managed Medicaid are showing compelling results in reducing high-risk patient costs. This may aid future contracting but is not a major revenue opportunity currently.

• Question from Joanna Gajuk (Bank of America): Did winter storms in late January have an impact, and any observations in February?
  Response: The storms caused some pressure and missed visits in January, but February has seen a rebound with no notable ongoing impact.

• Question from Raj Kumar (Stephens): What drove the sequential increase in hospice length of stay, and any commentary on cap space?
  Response: Diversification of referral sources and improved sales efforts drove length of stay and admissions. Cap position saw a material positive movement in Q4 due to referral mix improvements.

• Question from Raj Kumar (Stephens): Any contextualization on labor benefits from Medicaid work requirements, like in Arkansas?
  Response: No specific benefit observed in Arkansas. Work requirements are seen as a potential future opportunity for hiring flexible or part-time workers.

Contradiction Point 1

Timeline and Impact of Rate Increases in New Mexico

Contradictory statements on the timing and financial impact of a New Mexico rate increase.

What are the key takeaways from the earnings report? - Benjamin Hendrix (RBC Capital Markets)

2025Q4: A 4-5% rate increase has passed the legislature and is awaiting the governor's signature, expected to benefit results in the back half of 2026. - [Brian Poff](CFO)

Excluding Texas and Illinois, how are rate discussions progressing in New Mexico and Tennessee? - Joanna Gajuk (BofA Securities)

2025Q3: For New Mexico, the company hopes a rate increase considered this year will be implemented next year. - [Brian Poff](CFO)

Contradiction Point 2

Strategic Focus and Timeline for Homecare Homebase EMR Transition

Contradictory emphasis on the strategic importance and rollout timeline for the EMR system transition.

What is your perspective on the recent earnings report? - Thomas Keller (BMO Capital Markets)

2025Q4: The enterprise rollout is planned for through 2026 into the better part of 2027. The approach will be measured, market-by-market to ensure a smooth transition. The integration is expected to eventually enhance clinical collaboration and referrals. - [Brian Poff](CFO)

What is the timeline update for the Homecare Homebase CMR transition and its impact on clinical referrals? - Constantine Davides (Citizens JMP Securities)

2025Q3: The long-term strategy is for personal care to be the starting point for a bridge program to higher levels of care. This is currently hindered by being on a different EMR system. The company is working to transition to a unified system with Homecare Homebase to enable this full continuum strategy. - [R. Allison](CEO)

Contradiction Point 3

Outlook for Medicaid Rate Increases in Specific States

Contradiction on the status and timing of a key pending rate increase.

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2025Q4: A 4-5% rate increase has passed the legislature and is awaiting the governor's signature, expected to benefit results in the back half of 2026. - [Brian Poff](CFO)

Outside Texas and Illinois, can you discuss rate conversations in New Mexico and Tennessee? - Constantine Kyriakos Davides (Citizens JMP Securities, LLC)

2025Q2: States to monitor for future rate increases include New Mexico and Pennsylvania, where budget discussions are ongoing. - [Brian W. Poff](CFO)

Contradiction Point 4

Homecare Homebase CMR System Rollout Timeline

Contradiction on when the enterprise rollout of the Homecare Homebase system will occur.

What is Thomas Keller's question? - Thomas Keller (BMO Capital Markets)

2025Q4: The enterprise rollout is planned for through 2026 into the better part of 2027. - [Brian Poff](CFO)

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2025Q1: The Homecare Homebase system is still in development/pilot phase. It is being steadily added by state, with enterprise-wide rollout likely in late 2025 or early 2026. - [Brad Bickham](COO)

Contradiction Point 5

Medicaid Rate Increase Process in Texas

Contradiction on the process for rate negotiations in Texas.

What are your key growth strategies for the upcoming quarter? - Raj Kumar (Stephens Inc.)

2025Q4: In most states, managed Medicaid payers act as TPAs and have no authority to negotiate rates. A key exception is New Mexico, where Addus can negotiate directly... In Texas, managed Medicaid payers act as TPAs and have no authority to negotiate rates. - [Brian Poff](CFO)

What drove the sequential increase in hospice length of stay in Q4 and any commentary on cap space? - Matthew Gillmor (KeyBanc Capital Markets)

2025Q1: The company is watching Texas's legislative session closely, with a potential rate increase decision expected around June 2. - [Brian Poff](CFO)