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Awesome. Good morning, and welcome again to the 2026 Jeffries Healthcare Services Conference. I'm Brian Tinkiel, Healthcare Services Analyst and IT Analyst here at Jeffries. With us this morning is Addis Homecare, ticker ADUS, one of the largest operators of home health services in the country. And joining us this evening is Jeffries, and joining us today is Jeffry, and joining with us this afternoon are Brian and Brad from the company. And maybe, guys, like, there was a big announcement yesterday, so let's start with that. Like, what are we doing? Yeah, Brian, I think we had obviously been indicating to people that we had some maybe opportunities on some larger kind of Gentiva-sized assets that were going to come to market, and this obviously was one of those. So pretty excited to get this deal announced and out there, and then obviously now going to be working toward close, but really nice addition for us. So 10 states overall, but really big concentration in Texas, some in Illinois, some in California, and some in Arizona. It's probably 90-plus percent of the overall business. Should be a nice overlay into our business. Gives us good concentration in those markets for what we thought was a pretty reasonable price as well. So pretty excited about this opportunity. Brad, maybe I'll ask you, as you think about these assets, anything you can share with us in terms of what it will take to integrate them? And what are you buying exactly? Is it just agencies or does it have a back office? Like, what are the operational things that you need to bring to the table to get this up and running and really accretive? Yeah, I mean, it's very similar to the transaction we completed, I guess, a couple of years ago. The Gentiva transaction where it's the personal care division out of a larger home health hospice platform. So not a lot of back office came with it. Although, within the division, there is a fair amount of support for the personal care. So, you know, it'll be an interesting integration. It's good that we've done one already, very similar to that. In fact, the Gentiva one was probably even more challenging just because we had a tighter time frame to switch over for payroll systems. I mean, it was kind of interesting to have to, you Know, cut 15,000 checks almost, you Know, day one. So this one, actually, I think we have a little more favorable time frame. Got a really good integration team. We've been, you know, working through due diligence and at the same time putting together plans. Good open communication with the accident care team. So, you Know, we'll have the system conversions, you know, from the billing side and the scheduling side. We've got the payroll, the front office. Certainly will be some opportunities as we go through that process to get some synergies because there is some overlap in operations. Brian, just to the point of synergy, so maybe if you can share any financial metrics or how should we be thinking about the creation? I think in the release you said this is an accretive transaction. So anything you can chair with us on that front? Yeah, I mean, I think the way to think about this, so $280 million in revenue kind of run rate, I think our expectation is gross margin should be similar profile to our PCS business, I Think, kind of upper 20% range. You know, there's probably, as Brad kind of indicated on the SG&A side, there's possibly some efficiencies that we'll need to gain here. So their EBITDA, you know, right now or out of the gate is probably going to be just under sub-10%. So we'll have some opportunity, we think, to bring that up kind of to our normal level of our PCS division. That'll probably take us, we'd think, you now, 12 to 18 months to fully realize those synergies, but we'll probably start to get some of those fairly quickly. It won't be kind of a cliff situation. You know, we're on a couple of EMRs today on the billing side that we actually use, so our teams are familiar with them. We'll ultimately, obviously, convert them over to home care home base like the rest of our business. They'll probably go kind of the end of our conversion schedule. We're going through our conversion internally now. So that'll probably happen, you know, toward the end OF27, early 2028. Just from a timing perspective, we think this probably closes at the earliest Q1 of 27, pending kind of regulatory approvals. We'll go through that. but don't have any concerns on an antitrust basis right now. But, you know, that's kind of the way to think about the financial profile. Brad, what are the key hurdles or the key checkpoints as you think of integrating this? I mean, when Brian says 12 to 18 months, what does that look like, especially in the EMR side? I know you guys have done a home care home-based rollout. What does that looks like from a clinician's or a caregiver's perspective? Yeah, I mean I think, as Brian alluded to, we're familiar with the systems that they're on currently. So we will keep them on those systems until, you know, pace it with our home care, home base rollout. They'll probably be more on the back end because Texas is kind of scheduled for the back-end for us. So we've got the ability to kind of pace that. But, you Know, from a clinician standpoint, I think, you Now, good news is with the home care home base rollout that we're doing, you Know, we're learning a lot in that process. We've got The training resources. By the time we're doing, you know, getting around to the AccentCare assets, you know, we'll have the super users in place. So I think we'll be able to manage that process very well. Awesome. So this sounds really exciting. Congrats. So maybe, Brian, let's take a step back. Second quarter was really good. We saw some acceleration, same store performance there. Just curious, what's driving some of this improvement in metrics and admissions and census and all that? Yeah, on the PCS side, I think, obviously, you we've done um i think really well in our efforts to kind of increase our fill rates so basically the number of hours that we serve uh to the authorized hours so we've gotten that up between 84 85 percent in q2 as we kind of talked about so some efforts that we've um through our caregiver app and other things we're doing out in the field to kind make sure we're taking advantage of all the hours have been authorized to us and being as efficient as we possibly can i think has definitely helped on just the hourly growth side so you know we have talked about trying to target between two and two and a half percent hours growth year over year on a same store basis that's kind of our target range we've been kind of squarely in that range for the last several quarters i think that's been part of it another focus of ours has obviously been on just just pure census as well and we've seen some sequential gains there through this year so that's been helpful i mean we're still actually you know getting some contribution from some rate support so the illinois rate increase that kicked in jan 1st of this year you know we got texas you know the last cycle as well we got a new mexico increase that'll help us a little bit in the back half of this here but that's all been helpful to keep us kind of above the kind of the high end of that three to five kind of target range that we typically have talked about we anticipate we'll probably be toward the top end of that with new mexico rate increase kind of through the end of thisyear now we get into next year you're not going to get an illinois rate increase next year texans does go into session but anything we get from them will be toward the end of the year. They usually kick that in on September 1st. So just kind of thinking ahead a little bit, you know, our expectation is, you know, probably first half of next year, you're probably more back in that three to five range. And then if we get more rate support from Texas or some others, then you can see that accelerate a little more. Brad, maybe if I may double click on just the caregiver app, what does it do exactly and how does it drive the volumes higher or utilization? Yeah, I think Illinois is where we've had the longest experience with it, and we're spending more time fully developing the functionality and focusing on Illinois rather than really trying to blast it out to all the locations. The biggest feature it has is the ability for caregivers to see whether or not they're going to be over-serving or under-serping a client. and if they are in a situation where it looks like they're going to be underserving a client, they can get with the client, decide when are we going to schedule those additional hours so that we make sure that you're getting all the care that you are supposed to under the authorized hours and they can do that automatically adjusting their schedule without having to go to a service coordinator. And so it really allows greater visibility for the caregiver to get the hours that they've been wanting to work and what the client deserves to have provided to them without having to go through the office. And then on top of it, we're actually rolling out in Illinois this week a texting feature built into the app that we think will avoid a lot of the back-and-forth phone calls with service coordinators and schedulers so that they will be able to interact and communicate more readily. And I think that's going to help drive even further, you know, buy-in from caregivers, utilization, you know, in not just Illinois, where we have really good utilization of the app, but in the other states where we go roll it out. Maybe, Brian, as I think about that, right, I think Illinois, your fill rate's in the 90s now. Broadly speaking, you were saying 84 to 85. How do we think about the margin flow through once you push, say, New Mexico and the broader number to, like, close to 90%? Yeah, I would say just from a margin perspective, there's probably not going to be a lot of impact in increasing the fill rate. It's really going to increase in hours. There could be, you know, maybe some efficiencies if you're serving more hours with the same clients. So if you were thinking about maybe travel time or some of those costs in between clients, there might be some mitigation there, but that's going to pretty minor. So I wouldn't really think of it as a margin expansion opportunity, but more so just of a volume potential opportunity as we increase that. So Illinois today, we're actually running just under 90%, it's kind of upper 80%, and been pretty consistent in that range since we rolled the app out. Texas was the next state that we went to. We've seen some nice improvement in their fill rate as well. So I think our hope or I guess anticipation is as we roll this out in more states and become more efficient, can we get our consolidated 84%, 85%? Can we get that up into that upper 80% range? We see Illinois and we have a few other states that operate in that range pretty consistently. So we definitely see that that is achievable. We'd like to to try to get, you know, as much as we can our consolidated business up into that range as well. Maybe a last question for me on the PCS side. I mean, what does the labor environment look like today? I mean that's a conversation, you and I have had so many times in the past. Labor market seems to be okay. So I'm curious what that means for you guys. Yeah, I mean I think we're in a pretty good spot labor-wise. I mean when I first came on board, you Know, 10 years ago, you Now, rates were, our rate structure was such that we just weren't as competitive with a lot of other options for people with all the rate support that we've had from states over the last uh you know eight nine ten years we're in a pretty good spot to be competitive with what a lot options are and then on top of that you know we provide the flexibility uh in scheduling uh for caregivers so you know i think labor in most markets uh is not the kind of gating factor for us uh so i think we're In a good spot there brian maybe shifting gears when i think about your home nursing side of the business um i think you put up like what 9.8 admissions in q2 what's driving that is is that like all these cms activities on like team and other programs like that or is that more company specific i think for us and brett can give a little call on this as well i think we made some some changes in leadership in that division uh toward the end of last year early this year that we think are really starting to pay some dividends so it's been a small segment for us so it's you know four or five percent of our overall revenue base you know we had some leadership in place there that we had kind of picked up through the acquisitions that we've done so we really operate really in three key states in home health a little disparate we went through some process you know a year plus ago where we kind of try to standardize a lot of the processes out there in the field and that really I think helped from a profitability standpoint we really weren't seeing kind of the the momentum we would like to see to your point on the volume side i'm just kind of really seeing that increase so made some changes brought in a very experienced leader overall for that division made some also changes on the sales teams as well and i think some of the things that they're doing and changing the way that they go about you know their referral visits and all the things to go with that that process have really started to pay some dividends so i think our our hope and we're kind of seeing a track toward that expectation is we get to the back half of this year you know we've kind of been kind of up and down right haven't been real consistent on volume can we get to the back half of this year and really start to be consistent and maybe start to see some year over year just pure same store revenue growth over prior year I think we're headed toward that yeah and I would add that you know we have had the additional kind of sales resources operational leadership you know home health I think We were really focusing to your point just basic kind of labor management just blocking and tackling just make sure that we've got a good gross margin profile and one that's more consistent with our peers and I think we're have kind of reached that point there's still probably some tweaking to do there but really before we kind of press down on the gas to really grow just I mean let's make sure it's profitable growth and so I think I feel good that we're you know consistently posting good numbers from a gross margin perspective and now it's time to really grow the business and you know we've been also kind of looking at just a mix of patients and that sort of thing, and that's why I think you see a lot of admission growth. You haven't seen as much just pure volume growth when you throw in recertifications, but I think we're now in a pretty good spot there. And the rate outlook is actually pretty good going forward, it feels like. I know you're in the middle of a big acquisition here in the personal care side, but do you have any appetite right now for home health deals, or is that kind of on the sidelines for now? Yeah, I mean, I think obviously with maybe the shift in the winds, right, the reimbursement uh in the home health sector you know probably puts us similar to a lot of people probably puts this position where we're a little more open to to doing some things there i think we've continued to do small deals um even in kind of some of the faces some of the headwinds that we've seen over the last several years we think it's you know a nice service it's important to put that where we have personal care or hospice you know we get a lot of good admissions into our own hospice from our own home health so there's some revenue synergy as well but i think if you kind of look at you know where what sector are we more focused on from an mma perspective obviously personal care is going to probably always lead um even with accent care coming on board we think there are you know a couple other you know larger similar sized opportunities that we think will come to market over the next say 12 to 18 months as well so you know we'll see how those um you know the timing perspective and how the cadence of those come come into play but you know i think we're definitely open to doing some things on the home health side for the right prices um you know our expectation is with maybe some of the shift here does that that change some seller sentiment as well are you going to see maybe more opportunities where people are like hey i don't have to worry about you know a buyer trying to bake in a you know a rate cut on me now maybe there's actually some support and maybe i feel better about coming to market um so our expectation as we'll probably start to see many more opportunities out there as well all right so maybe i'll pull the discussion up a little bit here to a more macro level so there's a lot of fraud waste and abuse discussions in Washington we had the COO of CMS speak last night and clearly that's front and center focus for them so how are you thinking about how all these efforts affect your business positive or negative I'll start you know it's we certainly welcome the efforts to kind of to ferret out the fraud waste an abuse this in the system and you Some of the reports that you read in the news articles, I mean, some of it is so obvious. And so I've been pleased, and I probably shouldn't get up on a soapbox about this, but in the past, frankly, when they've talked about fraud, waste, and abuse, it's kind of like let's go after the big companies and see if we can collect a tax, essentially. It's refreshing to see that they're actually going for the people that they may not get any money out of it, but they're putting a stop to it because some of the stories that you hear on the hospice side and on the home health, the data was there. I mean, it's just flashing red lights. So it's good to see that they're taking those steps. Now, is it going to be, you know, is it painful for the industry? I mean I've been in health care for, I guess, now approaching, you knows, almost 30 years. You know, you go through these cycles where you have increased audit scrutiny and you just deal with it. And we've, you notice, put a lot of resources into our compliance program. You know I know Brian every year when we do the budget, he's like, do they really need to add some more resources there? And the answer is yes, and we're all very supportive of it. So I think we feel like we're in a good place. Is it going to be a lot of work to get through some of that? It's great. Are there tweaks I would like them to make on some of their efforts? Certainly. But I do applaud them for at least going after some of the truly bad actors, which is nice to see. Brian, anything on your side, on the financial side? Yeah, yeah, I just concur with Brad. I think one of the conversations that we've had, I think the industry has been having, We've had some direct conversations with some folks in Congress as well that are focused on this issue. Really try to avoid trying to put something in place that makes it painful for everyone and really be more targeted to where the actual fraud and abuse is coming from. And I think we're seeing some efforts where they're trying to be more targetted in that respect. So, yeah, we might see a little bit of enhanced kind of audit activity, but it feels like they're not throwing a blanket across the whole industry and trying to make it really painful for for everyone. They're trying to be more focused on where is the real fraud and abuse coming from. You know, we encourage that. I think it creates opportunities for us. I think we've been seeing large-scale providers that do spend a lot on their compliance programs, you know, are not concerned about those efforts. We actually think it's going to be good to get rid of some of the bad actors in the industry. It probably is helpful in thinking about, you Know, the spend and what this service actually provides and being focused on that. So we actually applaud those efforts, Brian. And I think one of the things that CMS is doing as a way to approach this is holding back payments to states or the matching dollars to states that have not done audits. I think the states that you're in have already gone through that, right? Like Illinois, I think, went through some of their audits, is that the right way to think about that from an AR perspective? Yeah, we haven't been impacted, we've had none of our payments withheld. I think even some of the headlines about California, for instance, keep in mind most of the business we do in California is private pay or VA. So it's federally funded or direct to consumers. So there's no Medicaid dollars flowing to us. So we've not been impacted in that regard. Illinois has continued to be a very consistent payer for us. We've had no kind of hiccups in our payment streams there. So they're withholding some of those dollars and making it painful on what seems like very targeted states, not across the board. That tends to not last that long. Got it. So the next thing we're thinking about is Medicaid work requirements. not from a qualification perspective but more from a disruption perspective I think you and I have had discussions in the past when it was redeterminations and then eventually it kind of had a trickle down headwind impact on you guys so how are you thinking about work requirements going forward yeah I mean I think it's kind of a double-edged sword so could it provide some headwinds in the near term, possibly, just because it's taking some resources that are used for qualifying people and making sure that they remain eligible. You know, we're thinking through what can we do to help with that process, and so we've actually added some resources in some of our larger markets where we are engaging with our payers, you know, be it the state or managed care to help them with just some basic things like you know one of the the things that really slows down you know somebody is going through a redetermination process is just getting a hold to the family or the or the client to be able to facilitate getting paperwork back so we're putting some of those resources in place to help kind of reduce that burden a little bit on the states but again you know any impact there I think again is going to be kind of short duration Now, on the plus side, you know, you look at, okay, somebody who needs to get 80 hours of work in or whatever that number is. We're kind of the perfect employer for that individual. I mean, we offer flexibility on schedules, you Know, so you can pretty much, I mean we do weekend work, we have night work. You know, we can fit a schedule for them that works with their lifestyle, if they have kids, whatever. So I think it should provide some tailwind on the recruiting side as well. Brad, how are you positioning for that, to run the recruitment process, both on the advertising it out there, and then second, what's that training process like for someone who has never done this? Yeah, I mean, you know, on the recruitment side, I mean, that's one thing that we've been, we're constantly looking at how can we help with our recruitment efforts. And so we've spent, you know, a lot of time on the front end when I came on board, really trying to refine that process and try to hire and get somebody to their first billable cases as quickly as possible. We continue to look at that. We're looking at our job placements all the time. You know, a lot, a whole lot of the traffic comes in through Indeed. They seem to be good at changing their algorithm periodically. And And so you have to kind of try to figure out what exactly are they doing, you know, so modifying, you know, the spin that we have with Indeed to make sure that we've got the visibility in the markets that we really have the demand. As far as the training side of it, you know, we've moved to, you know, in some markets where we have online training, you know, and most cases, you know, it's an in-person training for them. But, you know, you've got that process down pretty good. You know, this isn't a highly skilled workforce, so the, you know, training requirements aren't too in-depth. Us to be able to get somebody up to speed so that they can provide services in a quality manner. Got it. Brad, maybe a follow-up to a point you just made. I mean, when we think of payers, there's obviously more managed Medicaid out there today. What does that look like for you guys, both from a value-based kind of care perspective and other initiatives that you're doing with the payers? Yeah, you know, the acquisition we just announced, I mean, we've gotten some feedback from payers on that, very positive feedback. There's no shortage of interest in value-based contracts. I mean I will say every major payer that's putting in an RFP comes to us for a letter of support and wants to talk and tout value- based arrangements. You know, we're really focusing on are working with payers who really truly want to develop a value-based arrangement and not just check a box. You know, how are we impacting the quality of care provided to a consumer? How are we bending the cost curve? Because we view that that's the opportunity where if you're successful there, you know, payers are wanting to kind of shift. They would like to have a reason frankly to have a smaller network of providers out there and work with fewer people and ones that are going to provide the quality of care and provide these types of additive services so no shortage of interest in it this most recent transaction you know it impacts a lot of managed care payers because of the footprint in texas and illinois you know i think they're they're looking to work with us to say, you know, let's put this program in place. Let's figure out how we can bend the cost curve, how we can provide better care to consumers. And let's, you know, more importantly, from our perspective, how do we incentivize people to go to you as the provider of choice? That makes sense. Brian, maybe just shifting gears here, obviously big acquisition in front of you. How should we think about your view today on the balance sheet and capital deployment and the right capital structure going forward yeah i mean i i think you know where we sit here today you know if this closes let's just say in q1 of 27 you know right now with our cadence and cash flow you know we'll most likely be you know debt free by the time this closes so 275 million dollar purchase price we'll probably have built a little bit of cash on the extra cash on the balance sheet by that time all that being said we'll prolly be just over one times lever even after doing this and completing this transaction so a lot of capacity still left like i said we've kind of hinted at maybe some additional larger deals that might be coming down the pike that we should still be in a great position to be able to to be aggressive on um you know we'll think about obviously timing and integration efforts are going to play into you know some of that as well but i think you know our our interest isn't continuing to be acquisitive beyond accent care we think there's more consolidation opportunities but we think think from a capital perspective, we're going to be in a great position to continue to do that. Brad, maybe as I think about Brian's comment there, when you think of the ideal acquisition candidate in personal care, what does that look like? Is that new at this point, right? Is that new market entry? What does the IT system have to look like for you to be interested in them? Patient population, all that stuff, you know, like what is that ideal? Yeah, I mean, we have talked about if we're going to enter a new market has to be, we'd like to do it at scale. So, you know, again, going back to the Gentiva transaction, we were able to enter Texas at scale, and then aside from that, follow it up with additional transactions, be them tuck-ins, or in this case with the AccentCare transaction. I mean, it's a pretty sizable Texas book of business that we'll add. Still a lot of opportunity in Texas, still highly fragmented, so a lot market share that's out there. So I think first and foremost, you know, if we're going to go into a new state, let's do it in the right way and let's, you know, I think the Indiana transaction, we, you know, did a smaller transaction. We're looking to try to add to that footprint, you know, to bolster our presence in Indiana. We'll continue to look at doing that. System-wise, pretty agnostic to that, honestly. I mean, we'll move them to our system. And, you know, we've had a lot of experience with a lot of different systems out there, so we, you know, kind of, you know, have built up some familiarity with those, and we can get them moved over pretty quickly. You know, it'll certainly be easier once we get home care, home base rolled out everywhere. But, you know, the other piece of it is, you know, strong, you know, compliance and, you know, clinical processes in place. We don't want to be buying anybody's problems. that makes a lot of sense brian maybe just on the rate side you've had some good rate tailwinds behind you what does that look like going forward or how are you guys thinking about this the key states especially for addis yeah i mean i think you know we've gotten really good support especially some of our larger states over the last few years coming out of covid i think you know basically indicating for for a while now that we expect you know that's probably going to moderate and temper a little bit and i think we're definitely seeing that going into next year um you know certain states you know may have you know some indirect impact on their you know budgets from you know Some provisions in ob3 that might kick in certain states will not so you think about Texas New Mexico places that didn't have expansion populations they're not going to feel that same pressure with that said you know we expected that probably you would see states maybe kind of hold steady for a bit see how kind of all that plays out and maybe wouldn't get kind of the same consistent year-over-year rate increases that we've been getting and I think that's what we're seeing illinois this year there was a push you know the union i think is a really good you know lobbyists for us they they go and and press every year for a rate increase they're very helpful but this year the state decided to kind of hold status quo but keep in mind you know we don't raise wages if our reimbursement doesn't increase so there's no impact on our margin profile we did get new mexico this year last year when ob3 was kind of you know being discussed you know they were in session thinking about an increase and didn't know how that was going going to turn out so they held steady and we were hopeful that now with everything kind of flushing through they would say okay now it's time and we actually saw that happen um so we'll look at you know texas is the next big one for us next year they go they only meet every two years so they're back in session uh early next year i think our lobbyists industry are prepared to have conversations to see if there's opportunities for additional rate from them next year but we can we consistently get you know increases from some of our smaller states we've gotten a A couple this year in Oregon, some of the AAAs in Michigan and places like that. So, you know, that's what we talk about. If we see two, two and a half percent same store hours growth, we're getting, you know, even incremental rate support, you're going to be, you know, nicely in that three to five. If we get some rate support from some of our larger markets, that'S going to push you to the top end of that three-to-five or maybe above. And that'S where we've been the last couple years. So, we've got a minute here left. Just curious, is there anything that you think investors don't focus enough about on your business about your business or anything you want to share with us as you think through the acquisition that's pending here yeah i can just a couple things just real quick i i think obviously you know from the regulatory side and a lot of the the the rhetoric and noise that's been out there whether it's ob3 and fraud waste and abuse i think we tried to be you know pretty pretty transparent on how we think that will impact our business but if you really think about what we do and the value proposition that we provide to states we are the low-cost in-home provider so if you think about it while we are medicaid funded primarily you know if those folks are not getting service from us they're going to end up in a nursing home it's triple the cost so i think from our perspective in an environment where you may have to do more with less a state would would basically could could utilize us and we could be part of that solution for them not part of the problem um for them so that's something maybe we'd like to to clarify but like Like I said, there's a lot of swirl out there that we can't control. But I think, you know, we think from our perspective, we have not really been impacted by that and don't really expect to see a lot of material impact there. And then the acquisition, like I said. We're very excited about, you now, finally getting something done. It's been a bit. We've done a couple of smaller deals. It's nice to put some of our capital to use. You know, we don't like to be debt free. We don't want to be over levered, but we'd like to use, you know, use our balance sheet appropriately to give a return to our shareholders. And we think this should provide that for them. Awesome. Thank you so much, guys. Thanks for having us.