Q2 2020 Addus Homecare Corp Earnings Call

Thousand 20, <unk> earnings conference call at this time, all participant lines are in listen only mode. After the speakers presentation. There will be a question and answer session. So question. During the session you wanting to press star one on your telephone. Please be advised of today's conference is being recorded if you're acquiring further assistance. Please press star zero.

I would now like turn the conference or what your speaker today.

I understand thank you. Please go ahead ma'am.

Thank you good morning, and welcome to the Addus Homecare Corporation second quarter 2020 earnings Conference call.

To the extent any non-GAAP financial measure as discussed in today's call. You'll also find a reconciliation of that measure to the most directly comparable financial measures calculated according to gap by going to the company's website and reviewing yesterday's news release.

This conference call May also contain forward looking statements within the meaning of the private Securities Litigation Reform Act 1995, including statements among others regarding Addus expected quarterly and annual financial performance for 2020 or beyond.

For this purpose any statements made during this call that are not statements of historical fact, maybe deemed to be forward looking statements.

Without limiting the foregoing discussions a forecast estimates targets plans beliefs expectations and the like are intended to identify forward looking statements.

You are hereby cautioned that these statements may be affected by important factors among others.

Set forth in Addus filings with the Securities Exchange Commission and then at second quarter 2020 news release.

It's a quaintly actual operations and results may differ materially from the results discussed in the forward looking statements. The company undertakes no obligation to update any forward looking statements, whether as a result of new information future events or otherwise.

I would now like to turn the call over to the company's President and Chief Executive Officer Mr. Dirk Allison. Please go ahead Sir.

Thank you drew.

Good morning, everyone and thank you for joining us for 2022nd quarter earnings call with me today or Ron Paul for Chief Financial Officer, and Brad become our Chief operating officer.

As usual I will begin some overall comments and then Brian will discuss the second quarter results that we issued yesterday afternoon.

Following our comments, we wouldn't be happy to respond to any questions.

Yesterday, we filed our 2019 10-K, along with our first and second quarter 10-Q's 2020.

With these filings we are now back in compliance with FCC filing requirements. As you know our delight filings were the result of a disagreement between our current and family auditors on how to handle on approximately $10 million noncash charge in the aggregate aggregate related to a 10 year time.

Brian.

And then pass this issue we engaged our current auditors pwc to reorder financial results for 2017, and 2019 that were previously audited by another big or accounting for.

That work was completed over the past 120 days and the expected results, which are not material are reflected in our 2019 10-K.

I have to thank both our atish team as well as the team at Pwc for their dedicated work over the past few months, which has gotten us to this point.

Even with a pandemic these individual stay focused and completed this task while continuing to perform their normal duties.

As you saw what the financial results, we announced yesterday Atas had another solid operating performance in the second quarter of 2020.

Our revenue for the second quarter was $184.6 million as compared to $148.9 million for the second quarter 2019, an increase of 23.9%.

Adjusted earnings per diluted share for the second quarter 2020 increased to 73 cents from 54 cents in the second quarter 2019, an increase of 35.2%.

Our adjusted EBITDA for the second quarter of 2020 was $18.7 million as compared to $12.5 million for the second quarter of 2019, an increase of 49.9%.

Our adjusted EBITDA margin increased to 10.1% for the quarter.

During the second quarter of 2020, we saw a decrease in our revenue of approximately $8 million due to the effect of the cobot 19 virus. This reduction occurred to varying degrees in all three segments of our business as we have discussed on previous calls we continue to see improvement in our same store revenue as we have.

Progressed through the most recent phase of the pandemic.

Well, we cannot say for certain we estimate our third quarter revenues will be negatively impacted approximately 2% to 3% as compared to our first quarter run right.

As we reported operating cash flow into second quarter was strong at approximately $30 million, increasing our June 32020 cash balance to $158.5 million.

Due to our strong financial position and following discussions with our board, we announced last month, we wouldn't be returning the approximate $6.9 billion. We had automatically received from the care Act provide a relief fun relating to our Medicare business. We have made the decision to return these funds primarily for two reasons.

First we have a strong capital structure with little debt and solid ongoing operations mitigating the need for these funds to continue our normal operations and allowing us to let others, who need these bonds to have access to this mine.

And second we like comfort with the continuing uncertainty around federal reporting an audit requirements, which may be imposed on companies in the future who chose to participate in the stimulus program.

Based on these reasons, both our management and board felt it was appropriate to return these funds.

As we've previously discussed on July 1st 2020, the city of Chicago race, the city's minimum wage a one dollar to $14 per hour.

This accelerates the moved to a $15 per hour minimum wage ahead of what the state of Illinois has already passed.

Our team has been working with state leadership to secure funding to offset this accelerated wage increase.

A rate adjustment to cover the Chicago minimum wage increase is included in the fiscal year 2021 state budget, which was passed in may of this year.

This increase rate to offset the city of Chicago minimum wage increase will be affected statewide on January 1st 2021 subject to federal approval.

Atish will experienced an increase in our unreimbursed cost of approximately $1.2 million a quarter for each of the next two quarters until this reimbursement rate is effect.

I also want to update you on certain developments pertaining to the New York State budget.

After implementing a 1% reduction for all Medicaid providers in January 2020. The state has continued to deal with lower levels of funding due to the code that virus.

The recently passed fiscal 2021 budget did include an additional 0.5% reduction to the Medicaid rate effective April one this year and gave the governor leeway to make additional changes needed at some budget year progresses.

We continue to work with our New York State associations to try and mitigate any future reductions and do help educate the stake leaders of the value of home and community based services. We believe our home based care is cost effective and significantly safer than having patients to be forced into a facility setting and today.

Challenging environment.

For the second quarter of 2020, our personal care same store revenue growth was 9.7% driven largely by our rate increases in Illinois, which were effective in July 1st 2019, and July one up this year offset by the impact of the co but not.

King virus.

We should continue to see solid same store growth in our personal care segment over the next few quarters, driven primarily by the Illinois rate increase as well as the expected reduction in primary patient driven call loss caused probably cobot virus.

We did see our personal care same store census decreased from 38099 to 35479 due to the number of patients who had requested a hold in their service.

Our sense is calculation includes those patients who have received to care within the past 30 days.

<unk> patient has placed their service on hold for more than a 30 day period. They are no longer included in our census calculation.

As we see the return of these patients when they become more comfortable with surfaces provided in their homes, our personal care census should continue to recover.

For the second quarter of 2020, our hospice same store growth was 2.7% as our hospice program saw slowdowns in volume due to facility access restrictions as well as temporary closures of some of our referring physician offices.

Hospice admissions have steadily improved since our April lows and are currently running approximately 24% higher than our April admission numbers.

However, we haven't fully recovered on the admission front as some facilities continue to impose significant restrictions on outside parties accessing their facilities.

We continue to see increases in our current admission and census trends in the early part of the third quarter.

Our home health same store revenue decreased by 4.3% as we solve the effects of hospitals closing their facilities for elective surgeries during the quarter.

While actual a home health volumes were up our revenue was adversely impacted by an increased approximately 200 basis points in our non Medicare patient mix and the reduction in our institutional early referrals under Pdgm.

Our Medicare admissions volume recovered in June and is currently running slightly ahead of our creek cobot admissions numbers.

In addition, our mix of institutional early Medicare admissions has also recovered to pre cope with levels, primarily due to the resumption of elective surgical procedures in many locations.

As we announced on July 1st we closed on the acquisition of eight plus healthcare provider a personal care services in the state of Montana.

This acquisition makes us one of the largest providers of personal care services in the state, which is in line with our strategy of creating and maintaining strong geographic coverage in the states where we operate.

I want to welcome off a new team members from a plug that have joined us at at Us.

Okay.

As most of you know acquisitions have Dan and still remain an important part of our growth strategy and added.

We have strategically maintained a strong capital structure, which allows us to take advantage of acquisition opportunities as they occur.

While we took a short pause from pursuing new acquisitions during the early phase of the cobot NIM pandemic. We are now fully reengaged in the process of identifying and closing additional growth opportunities in all three segments of our business.

Our pipeline remains strong and while we are being appropriately cautious we continue to believe that we can close additional acquisitions during 2020.

As our financial results indicate our team both caregivers and support staff have done a wonderful job of staying committed to our mission during the past five months of the bars, our frontline caregivers had been heroic and their willingness to continue serving the needs of our patients and their homes in spite of the risk of potentially contracts.

The cobot 19 virus.

They have shown to professionalism that so many of our company's healthcare workers have demonstrated theres no way for me to share how grateful I am for their dedication other than to say thank you.

In addition.

Our administrative team has continued to work hard whether in the office or through remote means providing the much needed back office support that allows our frontline caregivers to do their job as well as continuing the difficult task of sourcing and acquiring proper PPD for both our caregivers and administrative staff.

I am thankful for the patients of our team as leadership has continued to both create and modify policies and procedures to keep them safer as new information emerges.

While we are seeing improvements in our call offs, and that's where a patient our family decides to skip their normal personal care service visit due to their concerns of having someone even a caregiver and their home we continue to experience a higher than normal patient driven hold on services in certain markets protect.

It really new York in Chicago.

As we discussed on our first quarter earnings call, we began to acquire PE and our Nonclinical segment, something that we had not needed in the past going forward. We believe we will need to continue supplying math gloves and other necessary ppt to our personal care and clinical teams in order to help protect them in our patients from this.

Brett of this virus and to provide our patients and their families and added layer of copper, while allowing our teams into their home for service. We believe this additional expense will be necessary for the next several quarters or until the end effective vaccine our treatment is developed and widely available.

As we have been able to provide this higher level of ERP to our team. We have started providing services to cope with positive and percent positive patients. Our current case volume is equally split between our hospice and personal care service lines with only a few cobot positive patients in our home health segment. We're.

Committed to continuing to take care of these patients and help them as they deal with this virus.

While the past five months been challenging I remain optimistic about the future of the home care industry and Addus in particular, we have a dedicated team of leaders and team members that have demonstrated their ability to continue to meet our mission even as this virus has disrupted the way we have historically operated.

I believe the coming months will provide many opportunities for us to continue to achieve our strategic goals for addus.

I want to close my part of this call by saying Thank you to all the employees up at US the past few months have been a difficult time for our country and our industry through it. All you have continued to live our missions in values, while serving our patients. It is important now more than ever for our patients to be in their homes, where we.

We can keep them say from this virus, while providing much needed care.

This is very important responsibility to both our patients and their families and I know that you will continue your efforts as we continue to help fight this pandemic.

With that let me turn the call over to Brian.

Thank you Dirk and good morning, everyone.

Yesterday after the market close we filed our 10-K for 2019 as well as our 10-Q's for both the first and second quarters of 2020 with the SEC. The delay filings of the 10-K in first quarter 10-Q related to the completion of the re audit of the Companys financial statements for 2017 and 2018.

Pricewaterhouse Coopers our current auditors have now completed that process and as a result of yesterday's filings. We are back in full compliance with the SEC.

Moving onto our second quarter financial results.

I just had a very solid financial performance for the second quarter of 2020 with volume levels not it's heavily impacted by the ongoing cobot environment as we originally thought possible.

Mr. noted total net service revenues for the first quarter were 184.6 million. The revenue breakdown is as follows.

Personal care revenues were $156.3 million or 84.7% of revenue.

This care revenues were $24.5 million or 13.3% of revenue.

At home Health revenues were $3.8 billion for 2% of revenues.

These results demonstrate the sustained demand trend for homecare services in the midst of a challenging environment with the ongoing impact to the curve at 19 pandemic.

We have a strong business model in place and believe we are well positioned to continue meeting expected demand SSC favorable growth in the second half of 2020.

In addition to the incremental benefits of the four acquisitions. We completed a 2019, we completed an additional acquisition on July Onest 2020, with the closing of eight plus healthcare in Montana were $10.4 million an annual revenue.

We expect that acquisition will be immediately accretive to our 2020 financial results and while we continue to evaluate and pursue other acquisition opportunities, we are being deliberate and cautious and our approach to the current operational and economic environments.

Other financial results for the second quarter of 2020 include the following.

Our gross margin percentage was 29.8% compared with 26.7% for the second quarter last year, primarily due to the higher margin profile of our skilled business for the year to date period, our gross margin improved to 29.6% from 26.6% for the first six months of last year.

As Dirk mentioned, we do anticipate some margin pressure in the second half of 2020 related to the increasing the minimum wage in Chicago on July Onest 2020, without offsetting reimbursement increase which will not be effective until January 1st 20.

DNA expense was 22.8% of revenue for the quarter increased from 20% last year, primarily due to the cost of the re audit acquisition expenses adjusted DNA expense was 19.9% for the second quarter increase for 18.6% for the prior year quarter.

On a higher mix of skill business with a higher DNA profile and lower leverage as a result of reduced revenues from coated.

The company's adjusted EBITDA increased to 18.7 million for the second quarter 2020, compared to 12.5 million in the second quarter of 2019.

Adjusted EBITDA margin was 10.1% an increase for 8.4% for the second quarter of 2019.

Our EBITDA margins continue to benefit from the increasing concentration of skilled business compared with prior periods, but we do anticipate some short term pressure from the Chicago minimal wage increase effective July one 2020 that will not be upset by the reimbursement increase until 2021.

Adjusted net income per diluted share grew 35.2% to 73 cents for the second quarter from 54 cents for the second quarter of 2019.

The adjusted per share results for the second quarter of 2020 exclude the following.

Loss on sale of assets of two cents Cobot 19 expenses net of one said M&A transaction expenses of nine cents restructuring and other costs of 12 cents, which primarily included the costs associated with the re audit and noncash stock based compensation of success.

Our adjusted per share results for the second quarter 2019 exclude M&A transaction expenses of four cents restructuring and other cost of two cents a noncash stock based compensation of nine cents.

Our tax rate for the second quarter 2020 was 23.6% within the range of our expectation for the full year 2020, we continue to expected tax rate of 23% to 25%.

Dsos were 61.8 days at the end of the second quarter of 2020, compared with 67.5 days at the end of the first quarter of 2020.

During the quarter, we continue to see strong payment trends from a majority of our payers, including the Illinois Department of aging with their Dsos at 62.5 days with the potential of pressure put on state budgets by declining tax revenues related to the cobot pandemic. We will continue to work closely with our state and managed Medicaid plans in an effort.

To maintain a cadence for ongoing payments that is as normal as possible.

Our second quarter net cash provided by operations totaled $30.4 million at at June 32020, The company had cash on hand of $158.6 million.

In addition to the strong cash flows from our payers during the quarter. We also benefited from the deferral of employer payroll taxes allowed under the cares act of approximately $7.1 million as a result of our strong liquidity position and ongoing business operations. We have other enrolled from this program going forward.

With only 60 million of bank debt at quarter end, and 223.5 million and availability under our revolver. We continue to have substantial capacity to support our acquisition strategy and look forward to continue pursuit of attractive acquisition opportunities.

This concludes our prepared comments this morning, I would like to thank you all for being with US I'll now ask the operator to please open the line for your questions.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press about King Please standby will become barbecue in a roster.

Our first question comes from the line of Scott Fidel from Stephens. Your line is now open.

Hi, Thanks, and good morning.

First question just in terms of thinking about gross margins in Threeq and Fourq, you and relative to what you called out.

So what did you see a simple as taking the 1.2 million.

Early impact from Chicago, and make you added into the gross margins.

Impact in Threeq or Fourq, you or are there any other factors that you think are worth calling out.

That you that we should be thinking about when modeling gross margins in the back half the year.

Yes got this is Brad I think thats the right way to look at it FW. The primary driver of change going into Q3 will be the $1.2 million that Durcan I mentioned.

We'll take additional cost above the gross margin line without additional reimbursement so that will impact the gross margin percentage as well as EBITDA percentage.

Okay and second question just interested if you give us an update on the pacing of new caregiver Recruitments in Twoq you.

No that there's been an opportunity here both from just just higher unemployment.

Providing maybe some some loosening and labor market and then also just around the opportunity to.

Recruit.

Family caregivers at home given that the home based dynamics here. So just mentioned in terms. What you guys were seeing in the Twoq on those fronts in how you think that could influence organic growth trends in the back half the or and then looking at the 2021.

Hey, Scott this spread become.

What we've seen as far as on the family caregiver front, we have seen the ability to bring on additional family care givers and markets. However, in our recruiting has been a little bit of a struggle I think primarily due to the additional unemployment benefits that are out there now of course, we recently had a change to reduce those numbers from the $600 down.

To 300, or 400, depending on whether or not the states pick up the funding will have to see how big of an impact that has had but.

We're getting a lot of inbounds, but frankly, we're also seeing a lot of folks that won't show up for training or for the interviews.

So they file those applications.

You know recruiting is honestly, a little down I expect that to improve with the lower.

The reduction from the 600 down to a lower number.

I understood.

That makes sense and then just last question for me just just in terms of anything to call out on.

Medicaid rates in budgets.

Early insights into Aflac 21 outside of the specific call that since you gave us for the Chicago caught and job and that 70 York got caught you essentially if there's anything else that you're seeing out there right now that that we should we thinking about.

Yes got I think just we're continuing to obviously watch anything happening with state budgets. Dirk mentioned, we're watching you were closely to see kind of what happens with that that process, Illinois, obviously has an their budget the rate increase we referenced.

Really we've seen during the quarter with Covitz, some temporary rate increases from a handful of states as well which has been helpful.

How long those continue but are going to if you want to add anything about kind of future in 2020 or yeah. You know I know certainly our medic Kate side at the business are one of our challenges over the next year two are going to be the state budgets and how they recover from this particular item that we're going through this issue with the pandemic that being said.

I think one thing to remember is.

Our services keeping folks in their home isolated somewhat.

Is one of the ways to try to protect them from this bar. It's it also is an alternative to those folks that potentially being in a nursing home setting, which we all know has been a a problem. During this particular virus for our elderly population. So we believe that most states understand the situation.

Either paying for nursing home care, which is more expensive two to three times the care of our home by service or keeping people in their home, which is not only safer, but much preferred by the families and patients are consumers themselves. So we feel that we have a great story detail even with that so we know we have to work.

Strongly and hope that the state budgets are able to.

To continue to do what they need to do in the way it taking care of their elderly.

Okay all right. Thank you.

Thank you. Our next question comes from the line of Brian Tanquilut from Jefferies. Your line is now open.

Hey, good morning, guys, Congrats and good quarter I guess, just a quick question.

On the Chicago stuff. So I know $15 is what the target as so what's the path there what's the progressing from 14 to 15 and then what are the offset that they've put in place I know you guys talked about a January 1st offset is there.

Offset scheduled to get to cover that 15 or do we need to wait again legislation that state level to cover that $15.

Number.

Yeah, Brian This is Brian there's a way to it currently is structured so moved to 14 July one of this year in the budget is offsetting reimbursement increases will be effective January one 2020 Watt Chicago will go to 15 next July currently there is nothing in legislation to offset that increase that will be I would have some considered as part of next.

Two years budget cycle.

And we have done we have.

We have as a as a company.

We have been distinguished state leaders about the need to.

Cover the cost of next year is one dollar increase to and we've received good reception. So we'll see in continued work on let's try to get it into 2022 fiscal budget.

Gotcha, and then I guess there does that have you any update provided on Medicare advantage and value base is there's a where those initiatives are right now.

Yes.

Yes, as as far as value based and the Medicare advantage update we continue to.

To work with companies along those lines, we had been a little delayed.

Pandemic some of the program. So we wanted to start earlier had been somewhat delayed but we continue to work with a number of them we're seeing.

Along with them around the value based care, we're seeing a number of opportunities that we can work with and see.

How they will benefit both.

Our sales as well as the company. So we're working with and we will continue to do that we do still believe that from the Medicare advantage, while we probably will see a few more people up or for 2021 have a personal care benefit and we are talking with those folks about providing the that care in the markets in which we operate it still seems.

To be that were at the part that it's more a marketing approach than a cost reduction approach and so we still believe that probably that next level of change in this particular aspect with Medicare advantage is probably a 2022.

Timeframe instead of 21.

Yes, Brad I agree with the dark you know we have seen some plants up the increase the hours that's available under the personal care benefit, but again not material numbers I think you know with respect our value based programs that were working on those Ur cobot certainly put those on the back burner with some of the payers that we're working on.

On a working with but those are starting to come up.

Starting to work again and kind of mid to late Q3 early Q4.

Okay.

Thank you. Our next question comes from the line of Matthew Borsch from BMO capital markets. Your line is now open.

Hi, Yes, sorry can you hear me.

Yes, we country.

Okay.

I was hoping you just comment on.

I know you did in the press release reaffirm your.

Hi.

Your interest in acquisitions.

Do you see right now the ability to.

Engage in deal discussions the willingness to do so.

Given both the disruptions, but as well as perhaps economic pressure from PGGM and co bid generally.

Hi, This is Brad I think we definitely are seeing the M&A market start to heat up I think of several others are it was nice to have to get a plus acquisition closed in July I think early in the cobot environment, obviously makes things a little more difficult when you're talking about diligence and conversations et cetera, I think is.

Most people have begun to adapt to a virtual setting.

Zoom calls or the like I think it has alleviate some of those issues and that so I think you know there a lot of individuals out there that are willing to be more more receptive I think at this point so.

At this point going into into Q3 and ended the year in Q4, our pipeline still has several opportunities kind of across all three segments to be honest. So I think we still feel very confident our ability to continue to move forward on acquisition opportunities, maybe not quite as normal but fairly close I think in that.

Deliveries of what we have today technology was.

Can you also.

What do you see in terms of volumes.

For.

Sorry, I missed this mid July.

Into August.

And how.

Our style.

Yes.

Granularity around.

Given.

Police and Bob.

Emerge.

Yeah. This is Brad what we're saying on the volumes I mean, we have stuff or low point honestly was April really in all three segments home health actually rebound.

First although it was actually hit the hardest so we have seen a Medicare referrals on the home health side steadily increasing to where they're actually running comparable to our pre cobot levels on the hospice fraud or we have also seen a steady increase in admission activity there as well.

So we're continuing to see some good upsizing in April was our low point their personal care. It's.

Interesting you have to look at the different markets than New York is still recovering they were the hardest hit a Chicago, Illinois market Chicago has been the kind of slower to rebound.

As well, but as far as kind of the geographic I mean, we've been somewhat fortunate in the fact that.

We're kind of hit early in the larger markets and so where we're seeing kind of upticks in holds and that sort of thing is typically in our smaller markets right now.

Okay. Thank you.

Thank you. Our next question comes from the line of Matt Leroux from William Blair. Your line is now open.

Hi, Good morning, I was wondering if you can any.

Quantified the impact that patient holds.

Add on the same store incentive trends and then maybe help us understand and situation, where you know geographies, where covantas dissipating or perhaps not as widespread and you have adequate pp. What is the remaining hold up in terms of patient hold is it.

Unemployment in the sense of family members now available to be at home.

And so you need the elimination of unemployment benefits to get that go again, just trying understand what sort of the final hang ups are there.

Yes. This is Brad again, what we say I mean, and I think you pointed out to set one of the issues is out there where you have programs that do not have our permit family caregivers and yet, but you have a family member who is now unemployed that can take care of mom or dad years, you're seeing them step up particularly.

Whereas a kind of fairly.

The acuity level is pretty low and you're dealing with kind of lower our case, so you're seeing those individuals but.

Services on hold are continuing to have them on hold.

As far as you know what the remaining kind of barriers I think it's again I mean, even with adequate pp a you know to keep the both our caregiver and the client safe Theres still some concerns out there.

We continue to reach out to those clients and inquire as to whether or not they want to restart services and we have actually seen I had some pretty good success with that I mean to give you an idea of our old holds.

They literally.

From our normal rates doubled in April, which I look at a low point those have steadily improved through from May June and into July and I anticipate will continuously some improvement in August.

Okay, and then be we've heard.

Some of the skilled providers talk about share gains or perhaps goodwill that was created by ones take on.

Hi, good patients just curious either on the skilled PC or business already and on the unskilled side.

If you see an increase in referral sources or new interactions with referral sources because of.

Your ability to respond quickly to the.

In terms of securing ppt headwind is to take on.

Patients.

Yes, this Brad again.

I don't think we've seen a significant.

The increase in referral activity because of a taking on coded patients now I do think it is bringing us some goodwill probably more so on the PC side. We have actually had you know in certain markets, where we have received referrals from the.

The plan because their existing piece a personal care from won't take that client back on because of a lack of the lack of just being uncomfortable with taking care of coded positive. So we have.

Actually probably deepened our relationships with a couple of a referral sources on PC aside.

Willingness not of not only taking alone and continuing services to our clients who may have gone into the hospital or into a facility are coming out after testing positive, but also taking on clients from other service providers in the market because of our willingness and ability to take all the covet patient.

Okay got it thank you.

Our next question comes on the line of Matthew Gilmore from Baird. Your line is now open.

Pardon me Matthew Gilmore from Baird. Your line is now open.

Great Hey, thanks, sorry about that.

I wanted to ask about the PC volume metrics I was curious what you're seeing from a new admission or referral perspective, and if there was any kind of interruption from co business. That's been resolved I think I think you had talked about maybe Doug.

You know the billable hours metric, but just curious for Matt from an admission standpoint.

And then could you.

Thank you ma'am you may be mentioned, it but perhaps I missed it could you just give us a sense or what happened with the decline in that sense, if it doesn't seem like that impacted.

Hours very much so just what types of patients were rolling off.

Hi, Matt is Brad only admission front I mean, just like it where we've seen them home health hospice side, we have seen an increase in admission activity.

Pretty much across the board in our big our larger markets.

I think we still have some of the smaller markets that have more recent impact from coded that are have not fully rebounded, but you know that admission trends just like in home health just like in hospice are continuing to tick up month over month I'm not quite back to pre co. Good levels I think.

Caregiver recruitment in certain markets is still problematic that is a permitting is from taking on a lot more of the referrals that we'd like to.

And when you look at your second question relating to.

Dynamic of a decline in census, yet an increase of ours for clients.

Again as typical what where I think what we say we saw and are experiencing is clients that don't need a lot of service are the ones that can put services on hold without feeling Neal affects those that are higher our clients.

Generally speaking they really need that serviced and in some cases to get out of bed in the morning. So they are not putting those services on hold so I think what your.

The dynamic is those lower our clients are the ones that we've seen by a greater impact of elm holds versus the higher our clients.

Got it and then one other follow up but I think.

Maybe Dirk had mentioned that third quarter revenues would be negatively impacted by two to three points.

On on that because it kind of it versus the first quarter run rate and I guess I.

I was curious about what kind of consistent with the trend do you saw in July or was maybe July little but below that in your you're expecting are seeing some improvement in in August or September.

Yeah, I think but this is Brian I think we definitely have continued to see as Brad mentioned kind of uptick in July and we expect that to kind of continue into September <unk> August and September I would say, it's probably not a sharp increase June July August September I think that curve is definitely flattening out so.

I think the overall, 2% to 3% I think picked us it takes into account.

Okay, great. Thank you.

Yeah.

Thank you as a reminder, ladies and gentlemen to ask a question you wanted to press star one on your telephone to withdraw your question about cool.

Our next question comes on the line of John Ransom from Raymond James Your line is now open.

Hey, good morning, everybody.

Let's just delve into labor for a minute a couple of questions. So what's your rate of caregivers as percent of family members now and has that changed meaningfully during the pandemic.

Yeah, I think you know were run probably about 30, 35% family caregivers companywide I don't think that number hasn't materially changed.

I haven't looked at it but I don't think it would have moved the needle dramatically.

Okay, and what's your Oh, I see the play economic prognosticator, but with.

Well, let's assume unemployment benefits go from 600 to 400 does that have the potential at all for bringing some people off the sidelines, who are maybe more willingness to take a second network.

Yes. This is Brad.

Again, I think that says certainly should help some and I think more so depending on what the market that we're in and what they are that add you know we don't see in certain markets. A really has not impact is as much the a the unemployment benefit but overall it will you know that.

As a gating item, we are looking to provide some incentives to try to give some people off the sidelines.

We're going to experiment with that in a couple of markets but.

I would say it's got to help I think is still going to be a little bit of the challenge that 400.

Right and I know you guys do you have to do some fairly extensive upfront training how is that going I assume that's all remote now and zoom and whatnot, but is that a is that created any issues in the morning.

Yes, I mean, it has because of certain states.

Made changes, where you could either deferred training or do it online and we are taking advantage of that where we where we can.

There is some basic orientation that we have to do and in some states they did not the.

Change the training requirements. So in those cases, we have had to reduce the class size in order to socially distance within the training facility.

We're trying to also looked at kind of increasing the frequency of the those classes.

No one of our biggest challenges as you know so you've got the 12 people that have been invited to training six show up. So I think were taken steps to invite more training understanding that we will have a fairly a higher no show rate than we typically have had.

Okay, and then just the.

Staff.

The staff working from home they corporate a is that.

What percent of your people are now working at home.

Versus before the pandemic in is that.

As you come out of this do you think you're gonna have maybe some structural cost savings as you might not have had otherwise.

Yeah, John to other corporate side, we have obviously our office here that in Frisco in Texas, but our sports that are up in Chicago as well and I know that came up in March we quickly moved to full remote so nearly 100% of our personnel working virtually I think that actually has worked very well for us we've been continues to be very for it.

Obviously, we're able to that's a close an acquisition in the midst of that and see that environment going forward for at least the next several months, but I think we've got a handful people that will come in you know doing normal task checking mail things like that but the were largely to vote on the corporate side.

I think as far as future potential cost mitigation hurt you want to it.

Yeah.

You know for us the.

Going remote has been something that we had.

Quite frankly, there is a little bit surprising that we can do it so quickly into it so well there's been some benefits that we call will obviously learn from being remote that maybe we can take intend to future. Some of our costs have been lower because of that.

Long term, we do want to get back together as a company.

Both in.

Not only all of our field offices.

Largely which still have a few people coming in to those but in our Downers Grove and our fresco support center corporate office, we'd like to get folks back once we get a vaccine or a effective treatment. So we will plan on doing that hopefully early in 2021, but we have learned.

This that maybe some of the travel that weve.

Had in the past it may not be as important going forward, we'll look at ways and the learnings that we've had through this remote operation.

See how we operate into future, but largely all that being said, we still want to get our people back together as soon as possible.

Well, a little dark does your back at least feel better not getting on airplanes as much I hope.

That's probably one [laughter] license.

[laughter], you're you're talking about my age John be careful I'm talking about your I'm talking about your back you know you.

Hey, guys Tiger within a Tiger Woods back I think going on there so.

That's probably not helpful.

So just lastly for me it if we.

Just take labor as a very important topic today, and we kind of measure all the inputs in terms of turnover and Onboarding and.

Output quality as this business.

Business pandemic had a material effect, one way or the other.

Well I think when you look at the on the labor side I mean, it certainly has impacted our ability and I think primarily because of the unemployment of additional unemployment benefits to bring peace caregiver zone. So we've struggled a little more on the hiring front than we have in the past even with a a very robust economy I'm optimistic that.

Lower unemployment benefits going forward.

We should see some improvement and honestly you know weve, there's some oh folks that will likely entered the caregiver workforce that hadn't considered in the past I think when you look at hospitality industry and that sort of thing is going to be by slower to rebound.

And we should be able to I think I find some really good.

Workers, so that pool of people and John Yes.

If you look historically paradis as the economy in the unemployment has tightened up is uninformed gotten hire the economy stop in as good a historically thats been a better time for us to be able to hiring folks on we believe.

Will occur over the next year or two adds that you'd be unemployment, which is a temporary measure obviously to help the economy as that continues to move forward and eventually comes to an end. We do believe that the recruitment efforts will return to a more historical level and hopefully somewhat better.

Great. Thanks, so much.

Sure.

Thank you Sir our next question comes on the line of Mitra Ramgopal from Sidoti. Your line is now thanks.

Yes, hi, good morning. Thanks for taking my question just had a follow up on the acquisition front I was wondering if you've seen environment any of your competitors potentially having some difficulty maybe reaching out to you more in terms of.

Potential transaction or if it's just too early to say anything on that front.

Let me try I think you as I mentioned earlier I think we definitely are starting to see the M&A market open back up so I think our inbounds over the last few months is definitely increase from the volume. We saw earlier. This year I think there are a lot of potential opportunities out there folks that.

Ill health side, there theyre waiting to get to see how PDGF. Please.

We have some targets that obviously other revenues impacted by the cobot environment, maybe it wasn't a great time to sell but as those start to rebound, they're getting more comfortable with potentially moving forward maybe a planned.

Planned transactions that they maybe have delayed for a few months. So I think from from our perspective, we see a lot of opportunity through the end of this year I think we talk or last call you about our target for this year and we always would like to close 100 million or revenue were more per year, obviously, we're a little delayed this year.

The Montana acquisition, it's still sees opportunities for the back half of this year not sure.

100 million in revenue, but I think there are there are some potential.

Okay. Thanks, and then just a follow up on that given as you said the uncertainties itself the state budgets et cetera.

How are you willing to priority in terms of keeping cash on hand versus maybe.

Pursuing acquisitions.

Yes, I think we we've obviously been very conservative as a management team. We're not we're not a group really looks at high leverage as a place we like to be especially in the situation that we're in today, what kind of it I think what we've seen the last several months cash flow from Braemar payers and the way our volumes have rebounded I think makes fuel.

More opportunistic on the M&A front the ability to use some of the cash in the end the publicly that we have a pretty large.

Level or credit facility. So I think early on we were obviously wanted to keep things close to divest, but I think at this point we feel.

With that things have stabilized to the point, where we can be probably more more aggressive in M&A.

Okay. That's great. Thanks, again for taking the questions.

Thank you.

Thank you at this time I'm showing no further questions I would like to turn the call back over to Dirk Allison for closing remarks.

Thank you operator, I want to thank everyone today for their interest in Addus and for being part of our call Hope you have a great week.

Ladies and gentlemen, this concludes today's conference call. Thanks for participating you may now disconnect.

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