ADDUS HOMECARE CORPORATION DOWNERS GROVE, Ill., Nov. 2, 2015 /PRNewswire/ -- Addus HomeCare Corporation (NASDAQ: ADUS), a comprehensive provider of home and community-based services that are primarily personal in nature, provided in the home and focused on the dual eligible population, today announced its financial results for the third quarter and nine months ended September 30, 2015.
For the third quarter, net service revenues were $84.3 million, an increase of 3.3% from $81.7 million for the third quarter of 2014. Net income was $2.9 million, or $0.26 per diluted share, for the third quarter of 2015 compared with $3.2 million, or $0.29 per diluted share, for the third quarter last year. Adjusted diluted earnings per share for the third quarter of 2015 was $0.25 compared with $0.29 for the third quarter for 2014. Adjusted EBITDA was $6.0 million for the third quarter of 2015 compared with $6.3 million for the same prior-year quarter. Adjusted EBITDA excludes stock-based compensation expense of $412,000 and $231,000 for the third quarter of 2015 and 2014, respectively. (See page 7 for a reconciliation of all non-GAAP and GAAP financial measures.)
For the first nine months of 2015, net service revenues rose 9.4% to $252.1 million from $230.3 million for the first nine months of 2014. Net income was $8.3 million, or $0.74 per diluted share, for the first nine months of 2015 compared with $8.3 million, or $0.75 per diluted share, for the comparable period in 2014. Adjusted diluted earnings per share were $0.78 for the first nine months of 2015 compared with $0.78 for the first nine months of 2014. Adjusted EBITDA increased 9.7% to $18.2 million for the first nine months of 2015 from $16.6 million for the first nine months of 2014.
Revenues and same-store revenues for the third quarter of 2015 reflected the Company's previously announced exit from certain underperforming locations during the quarter, resulting in a $2.8 million reduction in revenues for the quarter and a 1,128 reduction in total and same store average billable census from these locations compared with the third quarter last year. Adjusting revenues to remove the exited locations from both 2015 and 2014 results, total net service revenues and same store revenues rose 7.0% and 3.8%, respectively, for the third quarter of 2015 and rose 11.4% and 8.2%, respectively, for the first nine months of 2015, compared with the same prior-year periods.
The Company's results for the third quarter of 2015 were consistent with expectations for the third quarter results that Addus announced on October 22, 2015. As described in that press release, revenue growth was diminished, in part due to the slow pace of transition by states of their dual eligible populations to managed care organizations. In addition, general and administrative expenses as a percent of revenue increased due to higher costs related to the Company's new human resources and payroll information system (HRIS), Sarbanes-Oxley Act compliance effort and certain other operating expenses. Included in these third quarter G&A costs are $330,000 in items related to exited locations and a performance earn-out payment. These increases were partially offset by a 120 basis-point comparable-quarter increase in the Company's gross profit margin to 27.9%, primarily due to improved workers compensation expense experience.
"We are continuing to take steps to improve our G&A cost structure and believe our HRIS system costs have peaked for the year," commented Mark Heaney, President and Chief Executive Officer of Addus HomeCare. "We also remain focused on increasing organic growth, i.e. census development, and we continue to be encouraged by the performance of our Illinois business for third quarter, which met our expectations for revenues with both comparable-quarter and sequential-quarter growth.
"Looking forward, we remain fully committed to maintaining Addus' position as one of the most qualified companies to partner with MCOs to provide personal care services to their dual eligible populations. The transition by the states to MCOs is continuing, even if at an uneven pace. We believe this transition represents a substantial long-term growth opportunity for Addus given our scale, expertise, technology, quality of care and financial strength in a highly fragmented industry. We expect the transition will, over time, concentrate the dual eligible census with MCOs. As evidenced by the growth in our pipeline of potential acquisitions, we also believe the transition is accelerating industry consolidation consistent with other health care sectors."
Addus completed the third quarter with $14.9 million in cash, no bank debt and $40 million of availability under its revolving credit facility. There was a net cash use of $26.3 million for the third quarter of 2015, compared with $7.4 million for the third quarter last year. For the first nine months of 2015, cash generation was $8.8 million. Since the end of the third quarter, the Company has collected an additional $17.0 million in accounts receivable from the State of Illinois.
Non-GAAP Financial Measures
The information provided in this release includes adjusted diluted earnings per share, Adjusted EBITDA and adjusted net service revenue, which are non-GAAP financial measures. The Company defines adjusted diluted earnings per share as diluted earnings per share, adjusted for M&A expenses, one-time costs associated with exited sites, tax benefit from worker opportunity tax credits and incremental costs for Sarbanes-Oxley Section 404 compliance. The Company defines Adjusted EBITDA as earnings before interest expense, taxes, depreciation, amortization, M&A expenses and stock-based compensation expense. The Company defines adjusted net service revenue as revenue adjusted for the closure of certain sites. The Company has provided, in the financial statement tables included in this press release, a reconciliation of adjusted diluted earnings per share to diluted earnings per share, a reconciliation of Adjusted EBITDA to net income and a reconciliation of adjusted net service revenue to net service revenue, in each case, the most directly comparable GAAP measure. Management believes that adjusted diluted earnings per share, adjusted EBITDA and adjusted net service revenue are useful to investors, management and others in evaluating the Company's operating performance, to provide investors with insight and consistency in the Company's financial reporting and to present a basis for comparison of the Company's business operations among periods, and to facilitate comparison with the results of the Company's peers.
Conference Call
Addus will host a conference call on Tuesday, November 3, 2015, beginning at 9:00 a.m. Eastern time. The toll-free dial-in number is (877) 930-8289 (international dial-in number is (253) 336-8714), pass code 67427175. A telephonic replay of the conference call will be available through midnight on November 17, 2015, by dialing (855) 859-2056 (international dial-in number is (404) 537-3406) and entering pass code 67427175.
A live broadcast of Addus HomeCare's conference call will be available under the Investor Relations section of the Company's website: www.addus.com. An online replay of the conference call will also be available on the Company's website for one month, beginning approximately three hours following the conclusion of the live broadcast.
Forward-Looking Statements
Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may be identified by words such as "continue," "expect," and similar expressions. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. Forward-looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those expressed or implied by such forward-looking statements, including the consummation and integration of acquisitions, anticipated transition to managed care providers, our ability to successfully execute our growth strategy, unexpected increases in SG&A and other expenses, expected benefits and unexpected costs of acquisitions and dispositions, management plans related to dispositions, the possibility that expected benefits may not materialize as expected, the failure of the business to perform as expected, changes in reimbursement, changes in government regulations, changes in Addus HomeCare's relationships with referral sources, increased competition for Addus HomeCare's services, changes in the interpretation of government regulations, the uncertainty regarding the outcome of discussions with managed care organizations, changes in tax rates, the impact of adverse weather, higher than anticipated costs, estimation inaccuracies in future revenues, margins, earnings and growth, and other risks set forth in the Risk Factors section in Addus HomeCare's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2015, which is available at http://www.sec.gov. Addus HomeCare undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, these forward-looking statements necessarily depend upon assumptions, estimates and dates that may be incorrect or imprecise and involve known and unknown risks, uncertainties and other factors. Accordingly, any forward-looking statements included in this press release do not purport to be predictions of future events or circumstances and may not be realized. (Unaudited tables and notes follow).
About Addus
Addus is a comprehensive provider of home and community-based services that are primarily provided in the home and focused on the dual eligible population. Addus' services include personal care and assistance with activities of daily living, and adult day care. Addus' consumers are individuals who are at risk of hospitalization or institutionalization, such as the elderly, chronically ill and disabled. Addus' payor clients include federal, state and local governmental agencies, managed care organizations, commercial insurers and private individuals. For more information, please visit www.addus.com.
ADDUS HOMECARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income and Cash Flow Information
(amounts and shares in thousands, except per share data)
(Unaudited)
Income Statement Information: For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2015 2014 2015 2014
---- ---- ---- ----
Net service revenues $84,331 $81,658 $252,055 $230,306
Cost of service revenues 60,809 59,818 182,925 169,218
------ ------ ------- -------
Gross profit 23,522 21,840 69,130 61,088
27.9% 26.7% 27.4% 26.5%
General and administrative expenses 18,041 15,773 52,617 45,576
Depreciation and amortization 1,197 1,106 3,504 2,684
----- ----- ----- -----
Total operating expenses 19,238 16,879 56,121 48,260
------ ------ ------ ------
Operating income 4,284 4,961 13,009 12,828
Total interest expense, net 163 180 505 484
--- --- --- ---
Income before taxes 4,121 4,781 12,504 12,344
Income tax expense 1,234 1,544 4,202 4,024
----- ----- ----- -----
Net income $2,887 $3,237 $8,302 $8,320
====== ====== ====== ======
Net income per share:
Basic $0.26 $0.30 $0.76 $0.76
===== ===== ===== =====
Diluted $0.26 $0.29 $0.74 $0.75
===== ===== ===== =====
Weighted average number of common shares outstanding:
Basic 11,007 10,927 10,978 10,895
====== ====== ====== ======
Diluted 11,247 11,154 11,183 11,122
====== ====== ====== ======
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
Cash Flow Information: 2015 2014 2015 2014
---- ---- ---- ----
Net cash (used in) provided by operating activities $(26,258) $(7,413) $8,786 $7,590
Net cash (used in) investing activities (555) (821) (5,712) (12,012)
Net cash (used in) provided by financing activities (334) 2,767 (1,560) 2,981
---- ----- ------ -----
Net change in cash (27,147) (5,467) 1,514 (1,441)
Cash at the beginning of the period 42,024 19,591 13,363 15,565
------ ------ ------ ------
Cash at the end of the period $14,877 $14,124 $14,877 $14,124
======= ======= ======= =======
Condensed Consolidated Balance Sheets
(Amounts in thousands)
(Unaudited)
September 30,
-------------
2015 2014
---- ----
Assets
------
Current assets
Cash $14,877 $14,124
Accounts receivable, net 78,395 62,121
Prepaid expenses and other current assets 7,609 6,937
Deferred tax assets 8,508 8,326
----- -----
Total current assets 109,389 91,508
------- ------
Property and equipment, net 8,187 7,646
----- -----
Other assets
Goodwill 65,962 64,237
Intangible assets, net 10,179 11,043
Investment in joint venture 900 900
Other assets 404 13
--- ---
Total other assets 77,445 76,193
------ ------
Total assets $195,021 $175,347
======== ========
Liabilities and stockholders' equity
------------------------------------
Current liabilities
Accounts payable $4,869 $3,613
Accrued expenses 42,118 39,314
Current portion of capital lease obligations 1,100 978
Current portion of contingent earn-out obligation 1,250 1,000
Deferred revenue - 3
--- ---
Total current liabilities 49,337 44,908
------ ------
Capital lease obligations, less current portion 2,162 2,926
Contingent earn-out obligation, less current portion - 1,120
Deferred tax liability 5,832 3,441
Total stockholders' equity 137,690 122,952
------- -------
Total liabilities and stockholders' equity $195,021 $175,347
======== ========
ADDUS HOMECARE CORPORATION AND SUBSIDIARIES
Key Statistical and Financial Data
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2015 2014 2015 2014
---- ---- ---- ----
General:
Adjusted EBITDA (in thousands) (1) $5,950 $6,305 $18,233 $16,617
States served at period end - - 21 22
Locations at period end - - 122 132
Employees at period end - - 19,642 17,504
Home & Community
Average billable census - same store (2) 31,800 32,032 32,078 32,753
Average billable census - acquisitions (3) 607 - 730 -
Average billable census total 32,407 32,032 32,808 32,753
Billable hours (in thousands) 4,860 4,749 14,626 13,511
Average billable hours per census per month 50.0 49.9 49.5 45.8
Billable hours per business day 74,768 74,912 76,176 70,737
Revenues per billable hour $17.35 $17.03 $17.23 $17.05
Percentage of Revenues by Payor:
State, local and other governmental programs 78.1% 85.9% 77.8% 88.6%
Managed Care 18.1 9.5 18.2 6.8
Private duty 2.8 3.5 3.0 3.5
Commercial 1.0% 1.1% 1.0% 1.1%
(1) We define Adjusted EBITDA as earnings before interest expense, taxes, depreciation, amortization, M&A expenses and stock-based compensation expense. Adjusted EBITDA is a performance measure used by management that is not calculated in accordance with
generally accepted accounting principles in the United States (GAAP). It should not be considered in isolation or as a substitute for net income, operating income or any other measure of financial performance calculated in accordance with GAAP.
(2) Exited sites would have reduced same store census for the three months ended September 30, 2014 by 1,128 and nine months ended September 30, 2014 and 2015 by 1,187 and 672, respectively.
(3) The average billable census - acquisitions for 2014 was reclassified to average billable census - same stores for comparability purposes.
ADDUS HOMECARE CORPORATION AND SUBSIDIARIES
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2015 2014 2015 2014
---- ---- ---- ----
Reconciliation of Adjusted EBITDA
to Net Income(1):
Net income $2,887 $3,237 $8,302 $8,320
Interest expense, net 163 180 505 484
Income tax expense 1,234 1,544 4,202 4,024
Depreciation and amortization 1,197 1,106 3,504 2,684
M&A expenses 57 7 558 543
Stock-based compensation expense 412 231 1,162 562
--- --- ----- ---
Adjusted EBITDA $5,950 $6,305 $18,233 $16,617
====== ====== ======= =======
Reconciliation of Diluted Earnings per Share
to Adjusted Diluted Earnings per Share(2):
Diluted earnings per share $0.26 $0.29 $0.74 $0.75
Acquisition-related transaction expense - - 0.03 0.03
per share
Worker Opportunity Tax Credits per share (0.02) - (0.02) -
Costs associated with exited sites 0.01 - 0.01 -
Incremental Sarbanes-Oxley Section 404 compliance expense per share - - 0.02 -
--- --- ---- ---
Adjusted diluted earnings per share $0.25 $0.29 $0.78 $0.78
===== ===== ===== =====
Reconciliation of Net Service Revenues
to Adjusted Net Service Revenues(3):
Net service revenues $84,331 $81,658 $252,055 $230,306
Revenue associated with the closure (58) (2,888) (5,404) (8,892)
of certain sites
---
Adjusted net service revenues $84,273 $78,770 $246,651 $221,414
======= ======= ======== ========
(1) We define Adjusted EBITDA as earnings before interest expense, taxes, depreciation, amortization, M&A expenses and stock-based compensation expense. Adjusted EBITDA is a performance measure used by management that is not calculated in accordance with generally accepted accounting principles
in the United States (GAAP). It should not be considered in isolation or as a substitute for net income, operating income or any other measure of financial performance calculated in accordance with GAAP.
(2) We define Adjusted diluted earnings per share as diluted earnings per share, adjusted for M&A expenses, one time costs associated with exited sites, tax benefit from worker opportunity tax credits and incremental costs for Sarbanes-Oxley Section 404
compliance. Adjusted diluted earnings per share is a performance measure used by management that is not calculated in accordance with generally accepted accounting principles in the United States (GAAP). It should not be considered in isolation or as a
substitute for net income, operating income or any other measure of financial performance calculated in accordance with GAAP.
(3) We define Adjusted net service revenues as revenue adjusted for the closure of certain sites. Adjusted net service revenues is a performance measure used by management that is not calculated in accordance with generally accepted accounting
principles in the United States (GAAP). It should not be considered in isolation or as a substitute for net income, operating income or any other measure of financial performance calculated in accordance with GAAP.
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SOURCE Addus HomeCare Corporation
