Q2 2025 Addus HomeCare Corp Earnings Call
Good morning and welcome to the Addus Home Care second quarter 2025 earnings call.
All participants will be in listen-only mode. Should you need assistance? Please signal conference specialist by pressing the star key followed by zero. After today's remarks there will be an opportunity to ask questions to ask a question. You may press star then 1 on your touchtone phone to withdraw your question. Please press star then to please note this event is being recorded. I would now like to turn the conference over to Drew Anderson. Please go ahead.
Thank you. Good morning and welcome to the Addus Home Care Corporation, second quarter, 2025 earnings conference call.
Today's call is being recorded.
To the extent. Any non-gaap Financial measure is discussed in today's call. You will also find a Reconciliation of that measure to the most directly comparable, Financial measure calculated, according to gaap by going to the company's website in reviewing yesterday's news release.
This conference call may also contain forward-looking statements within the meaning of the private Securities. Litigation Reform Act of 1995 including statements among others. Regarding Addis expected quarterly and annual financial performance for 2025 or Beyond.
For this purpose, any statements made during this call that are not statements of historical facts. May be deemed to be forward-looking statements.
without limiting the for
Forecast, estimates targets, plans, beliefs expectations, and the like are intended to identify for looking statements.
You are here by caution. That these statements may be affected by important factors among others set forth in Addis filings with the Securities and Exchange Commission and in its second quarter, 2025 news release.
Consequently 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 chairman and chief executive officer. Mr. Durk Allison. Please go ahead sir.
Thank you, Drew. Good morning, and welcome to our 2025 second quarter earnings call.
With me today, I'm Brian Poff, our Chief Financial Officer and Brad, bickham our president and Chief Operating Officer.
As we do on each of our quarterly earnings call, I will begin with a few overall comments and then Ron will discuss the second quarter results in more detail.
Following our comments, the 3 of us would be happy to respond to any questions.
As we announced yesterday afternoon, our total revenue for the second quarter of 2025 was 349.4 million and increase of 21.8% as compared to the 286.9 million for the second quarter of 2024.
Adjusted earnings per share of a149 as compared to adjusted earnings per share. For the second quarter of 2024 of a135, an increase of 10.4%.
our adjusted ebal was 43.9 Million compared to 35.3 million for the second quarter of 2024, an increase of 24.5%
during the second quarter of 2025, we continue to experience consistent cash flows. As of June 3025, we had cash on hand of approximately 91 million
During this second quarter, we reduced our bank debt by 30 million dollars. Leaving a balance of 173 million at quarter in
This gives us a conservative net leverage position at under 1 times adjusted. EBA allowing us the flexibility to continue to evaluate and pursue strategic acquisition opportunities.
Now, let me discuss certain areas of our operation.
During the second quarter of 2025, we continue to experience, strong hiring performance success, especially in our personal care segment.
During the second quarter of 2025, we began to include Argentina PCS operation, in our hires per business days. Statistics
during the first quarter of this year, we saw our hires per business day at 108. When we include Gentiva,
For the second quarter of this year, we achieved higher per business day of 105.
In addition to our strong hiring numbers, we continued our momentum in improving starts per business day, which we have seen over the past few quarters.
With respect to our clinical line as we have as we have been consistent over the past few quarters, we continue to see improvements in the overall clinical labor environment. However, we do believe that for the foreseeable future. Clinical hiring will remain more challenging and geographically variable than what we see in our PCS segment.
On May 31st 2025 the state of Illinois. Finalized, its fiscal 2026 budget with an inclusion of a 3.9% increase in the base hourly reimbursement, rate to 30.80 cents per hour to sustain a minimum wage of $18.75 per hour for direct In-Home Care Service workers.
The company expects, this rate increase will add approximately 17.5 million in annualized. Revenues for Addus with margins consistent with our existing Illinois. Personal Court care business in the low, 20% range and in compliance with the state of Illinois's 77% requirement for caregiver wages and benefits.
The Illinois rate increase will be effective, January, 1 2026 subject to the standard Federal approval process.
In addition on June 3rd 2025, the state of Texas finalized, its fiscal 2026 budget with the inclusion of a 9.9% increase in the base, hourly reimbursement, rate to 17.313 cents per hour.
The company expects to generate approximately 17.7 million dollars in additional annualized Revenue, assuming implementation consistent with historical precedent of the Texas Health and Human Services Commission and the Texas. Managed Medicaid, Health plans with margins expected to be largely consistent with our existing, Texas, personal care business at just over 20% after caregiver, wages are adjusted.
The Texas rate increase will be effective September 1st 2025 again subject to the standard Federal approval process.
In our personal care, segment. Our services, continue to receive favorable reimbursement support from many of the states in which we operate.
We are confident that personal care services continue to deliver real value to State Medicaid programs, as well as our Managed Care Partners through a reduction in the overall cost of care.
As we stated earlier, we believe these and other benefits associated with Home Care Home, Based care. Put us in a favorable position as changes to funding and other aspects of various Medicaid, programs are considered.
As for our clinical segments on August 1st, CMS issued the 2026 final rate for hospice providers, which will be effective on October 1st of this year.
An average 2.6% increase for hospice providers.
While we appreciate CMS slightly increasing this final rate, we are disappointed that this increase does not more fully reflect the increasing cost of care for this service.
Earlier on June 30, the centers for Medicaid Medicare and Medicaid services. Released the calendar year 20126 Home Health proposed payment rule
this proposed rule projects, a 6.4% aggregate reduction in Medicare payments to Home Health agencies in 2026 amounting to an estimated 1.1 billion, decrease compared to 2025
The Proposal includes a 2026 Market tax. Get payment, update of 2.4% reduced by a 3.7% decrease from the permanent behavioral adjustment as well as a first-time 4.6%, decrease from the temporary adjustment, which is the result of the CMS determination that a clawback of past payments is warranted to maintain budget neutrality.
It is our view that this clawback is improper and results. From an incorrect belief, that Home Health Providers, have received unjustified rate increases in the last few years.
We along with others in the industry, believe that this reduction will have a significant negative impact on the availability of Home Health Care and will. Potentially lead to many individuals, having to access skilled post-acute services in a more expensive facility, based setting
Addis will continue to work with our leading home health providers. Along with the National Alliance for Care at home. Our industry, take trade group to advocate for a final rule, that more appropriately, reflects the true cost of care for home health providers.
Now, let me discuss our same store Revenue growth for the second quarter of 2025 for our personal care. Segment. Our same store, Revenue growth was 7.4% compared to the second quarter of 2024,
During the second quarter of 2025, we also saw Personal Care, same store hours increased by 1.6% compared to the same period in 2024.
On a sequential basis Personal Care. Same store hours and billable census increased by 1.7% and 0.3% respectively.
As we have stated over the past several quarters, we expect volume growth to comprise a greater percentage of our personal care. Same store, Revenue growth going forward.
In that regard, it is encouraging that we continue to see incremental improvements in our percentage of our served compared to authorized hours.
We can continue to work towards our goal of consistently growing. Same store hours at a minimum of 2% year-over-year.
to our clinical operations, our hospice, same store Revenue, increased 10% when compared to the same quarter of 2024,
Our same store average daily census increased to 3,720 for the second quarter up from 3,477 and increase of 7% compared to the same period last year and an increase of 5.8% on a sequential basis.
our second quarter of 2025 same store emissions were up, 2.1% year-over-year,
For the second quarter of 2025. Our hospice mean length of stay was 28 days as compared to 29 days for the first quarter of 2025.
Overall, we are pleased by the continued improvement in our hospice segments over the past several quarters.
While our home health segments, same store Revenue decreased 6%. When compared to the same quarter 2024, our home health profitability continues to improve as our management continues to right size, our expense base,
We have new leadership in our Illinois, and New Mexico, Home Health operations that are focused on returning. This segment to profitable same store Revenue growth.
Yesterday we announced that on August 1st. We closed on our acquisition of Helping Hands home care, which is based in Western Pennsylvania.
This acquisition increases our personal care density in this area of Pennsylvania while also adding home health and hospice operations.
Actually welcome to Helping Hands team to add us.
As we have with this most recent acquisition, our development team will continue to focus on both clinical and non-clinical acquisition opportunities. That increase both the density and Geographic coverage to our current states.
While the proposed Home Health rule, will most likely continue to delay any meaningful Home, Health opportunities, we will be evaluating smaller clinical transactions, along with Personal Care Service, transactions, that fit our strategy,
Before I turn the call over to Brian. I want to thank the Adas team for the care. They are providing to our elderly and disabled consumers and patients.
We all have come to understand that the overwhelming majority of clients and patients want to receive Care at home, which remains 1 of the safest and most cost effective places to receive this care.
We believe the heightened awareness of the value of homebased care is favorable for our industry and will continue to be a growth opportunity for our company.
We understand and appreciate that our operations and growth are dependent on both our dedicated caregivers and other employees who work. So incredibly hard providing outstanding care and support to our clients patients and their families.
With that, let me turn the call over to Brian.
Thank you, Derek and good morning, everyone.
We delivered another strong financial and operating performance in the second quarter with our results, reflecting consistent, organic growth and additional support from our most recent acquisition.
We achieved 21.8% Revenue growth and a 24.5% increase in adjusted ibida, compared with the second quarter last year.
These results include the second full quarter of the Gentiva Personal Care. Operation, our largest acquisition to date, which we completed on December 2nd 2024.
Our personal care services. Segment was the key driver of our business with a solid 7.4%. Organic Revenue growth rate over the same period last year.
This growth trend has consistently tracked, well, above our normal, expected range of 3 to 5%.
These results were supported by strong hiring Trends in favorable rate, support for personal care services. And some of our larger markets, including a Statewide reimbursement, increase in Illinois, our largest market, which was effective January, 1st 2025,
Going forward, we expect to benefit from additional rate increases in Illinois and Texas.
Both States legislators recently, finalized their fiscal 2026 State budgets Each of which included reimbursement rate increases for personal care services.
Illinois included a 3.9% increase, which is set to be effective January 1, 2026, and will add approximately $17.5 million in annualized revenue for Addus, with margins in the low 20% range, consistent with the state's 77% pass-through requirements.
the state of Texas included a 9.9% increase in its fiscal 2026 budget, which is set to be effective, September 1st, 2025,
we expect this to add approximately 17.7 million dollars in annualized revenue for Addus with margins consistent with our existing Texas personal care business of just over 20%
Both rate increases are subject to customary Federal approval.
With the acquisition of the Gentiva operations, Texas. Now represents our second largest state for personal care operations, behind Illinois.
Following the organizational changes. We made late last year. We continue to see steady improvement in our hospice business in the second quarter.
We achieved 10% organic Revenue growth and higher average. Daily census patient days and revenue per patient day compared with the second quarter last year with average daily census up 7%.
As dirt mentioned, the 2026 hospice, reimbursement, update of 2.6% has been finalized and we will see this increase beginning October 1st 2025.
Hospice Care, accounted for 17.8% of our business in the second quarter.
For our home health services, which accounted for 5.2% of our business organic Revenue with 6% lower compared with the second quarter of last year.
Over the past, several quarters, we have seen significant improvement in our operating margin profile as we work with payers to improve our reimbursement rates, and streamline our processes.
While this is our smallest business segments, We Believe home health is an important clinical partner to our personal care and hospice services. And we continue to look for appropriate acquisition opportunities to support this service line.
And our Market reach.
The Gentiva acquisition completed in December of 2024 was the largest in our history adding approximately 280 million dollars in annualized revenues.
And significantly expanding our Market coverage.
Yesterday, we announced the acquisition of Helping Hands. Home Care, a provider of Personal Care, home health, and hospice services in Western Pennsylvania with annualized revenues of approximately, 16.7 million.
We believe this acquisition is a great fit for Addus as it expands the density of our personal care operations while also adding clinical capabilities in both hospice and home health.
For the remainder of 2025, we will continue working to identify additional similar acquisitions, as well as opportunities to add new personal care markets where we can enter at scale. We believe having geographic coverage and density provides us with a competitive advantage.
With our size and expanding scale, and the support of a strong balance sheet, we are well positioned to execute our acquisition strategy.
as Durk noted total, net service revenues for the second quarter were 349.4 million
The revenue breakdown is as follows.
Personal Care revenues were 269.2 million, or 77% of revenues.
Hospice Care revenues were 62.2 million or 17.8% of Revenue.
At home, health revenues were 18 million or 5.2% of Revenue.
Other Financial results for the second quarter of 2025 include the following.
Our gross margin percentage was 32.6% compared with 32.5% for the second quarter of 2024.
As expected, we saw the normal sequential expansion in our gross margin percentage from the first quarter primarily as a result of meeting certain payroll tax thresholds.
Looking forward, we continue to expect typical seasonality with gross. Margin percentages remaining, fairly consistent in the third quarter and some expansion in the fourth quarter due to the impact of the hospice rate increase as well as additional benefit from a reduction in payroll tax.
GNA expense was 22.1% of Revenue compared with 22.2% of revenue for the second quarter a year ago.
adjusted GNA expenses for the second quarter were 20%, a decrease from 20.2% and the comparable, prior year quarter, and a slight increase sequentially from 19.9% in the first quarter of 2025,
the company's adjusted IBA increased to 43.9 million compared with 35.3 million a year ago, an increase of 24.5%
Adjusted EBA margin was 12.6% compared with 12.4% for the second quarter of 2024 and an increase of 60 basis, point sequentially from the first quarter of 2025.
Adjusted net income per diluted share was $1.49 compared with $1.35 for the second quarter of 2024.
the adjusted per share results for the second quarter of 2025 exclude, the following acquisition, expenses of 11 cents and non-cash, stock-based compensation, expense of 18 cents,
the adjusted per share results for the second quarter of 2024 excluded the following
Acquisition expenses of 13 cents and non-cash. Stock-based compensation, expense of 12 cents.
Our tax rate for the second quarter of 2025 was 26.4% within our expected range for calendar 2025, we continue to expect our tax rate to remain in the mid 20% range.
the SOS were 37.7 days at the end of the second quarter of 2025 compared with 36.9 days at the end of the first quarter of 2025,
We have continued to experience consistent cash collections from the majority of our payers.
Our dsos for the Illinois, Department of Aging for the second quarter were 38.8 days compared with 47.6 days at the end of the first quarter of 2025.
Our net cash flow. From operations was 22.5 million for the second quarter of 2025.
As of June 30th 2025, the company had cash of 97 million with capacity and availability under our revolving credit facility of 635.6 million and 4544.6 million respectively.
Total bank debt was $173 million at the end of the quarter, a reduction of $30 million from the first quarter.
We have continued to reduce our revolver balance by $50 million, paid through the first half of this year.
Acquisitions.
As mentioned, we will continue to selectively pursue Acquisitions in 2025 that complement. Our organic growth and aligned with our strategy.
At the same time, we will maintain our disciplined capital allocation strategy and continue to diligently manage our net leverage ratios and ongoing debt reduction.
This concludes our prepared comments this morning and thank you for being with us. I'll now ask the operator to please open the line for your questions.
Thank you. We will now begin the question and answer session. Task a question you may press star then 1 on your touchtone phone. If you're using a speaker-phone please pick up your handset before pressing the keys to withdraw your question. Please press star then 2
At this time, we'll pause no momentarily to assemble our roster.
In our first question comes from Stephen. Vallette from barklay, please. Go ahead.
Hi, this is Andrew Mock from Barclays. I think you mentioned in your prepared remarks an effort to increase reimbursement from payers, but nearly all the national Medicaid payers called out HCBS home health as a pressure point to their margins in the quarter. So I’m just curious how you're thinking about the overall reimbursement environment and how you expect this to unfold over the next few quarters. Thanks.
Yeah, Andrew I think you know we've continued to see pretty strong Support over the last couple of years from most of our larger markets. I think, you know, coming out of coid. Uh, I think we would have expected probably the Cadence of rate increases in personal care to mitigate some. We've actually been pleasantly surprised to see States, really appreciate the value. Our services provide and give us rate increases. Not in response to minimum wage, but I'm in in conjunction, with trying to increase caregiver wages to provide access to service. Um, so seeing Illinois and Texas. Um, but through new rating in their budgets. This year, there were a couple of other of our larger states that were considering rate increases that table. Those conversations for the moment with some of the, uh, the overhang from the reconciliation. Bill still not finalized at the time. Um, so we are optimistic. Maybe we'll see something from them in the next cycle. Um, but I think, you know, longer term, I think our comments continue to be pretty consistent. That we would expect the Cadence to probably mitigate some over the next couple of years. Probably not see the same rate. Um, but we think there's a real value in our services and states are
Are appreciating that.
Great. And let me just to follow up on volumes. Uh, same store Revenue was strong in the quarter, but the the same store uh census looked like it was down about 5% or so. Uh which implies very strong rate can you, elaborate on what's driving? The the the negative volumes on a negative comp in the second quarter? Are you seeing a re acceleration and redetermination or anything of that nature? Thanks.
Yeah, we are. And I mean what you're saying is that the 5 and a half percent, that's actually inclusive of New York uh which we we've disposed of. So that is why the comparison kind of isn't really Apples to Apples. So if you look at where we are today, you actually saw a sequential increase in the same store census between q1 and Q2. So it's moving in the right direction.
So just to be clear you you continue to report New York in the same store numbers.
It it's included injury in our prior year number. It's not in this year, I think. Next month. We'll our next quarter. I'm sorry, we'll we'll Spike that out. So it's a little more clear. I think it's not a, a closed location. So it's in our existing Legacy operations but we'll Spike that out. Going forward in Q3.
Great. Thank you.
And the next question comes from Matthew Gilmour from KeyBank. Please go ahead.
Hey, thanks for the question. Um, I wanted to Circle back on the personal care, hiring and labor comments. Durk had mentioned, some favorability with Trends and and the press release also spoke to systems and tools that have been rolled out. Can you talk about where you are with that roll out? I think maybe that started in Illinois, but just, you know, where you are in that Journey, how that's impacting performance? And if you had any comments on retention, that'd be great.
The application, uh, the challenge is being, um, you know, some, you know, when you talk to Medicaid, the application has to be customized, uh, you know, for every state that you roll it out to. So we've selected Illinois, our largest market, uh, New Mexico, third, largest market. Uh, we'll probably look at Texas down the road, uh, as a, uh, place to also Implement that, but seeing good uh uh adoption by caregivers
Got it and Brad just to follow up to that. Do you find that, that improves your retention? Because then the, you know, the folks can get as many hours as as they want or more hours than they otherwise would be able to?
We think it will. I mean, I think it's a little too early to tell for sure, uh, because there's just so many other factors that go into retention, just looking at kind of overall economy and that sort of thing. Uh, but you know when we've done conducted surveys of caregivers uh, 1 of the reasons why they uh you know, talk about, you know, leaving is because they're not getting enough hours. So uh intuitively. We think it will help in the long run with the turnover is just hard to kind of isolate it, uh, and give you kind of an update today. I think, uh, you know, over the next year year and a half, we should be able to, uh, glean from the data whether this is making an impact, but just looking at the surveys that we've conducted, uh, you know, clearly hours are a big thing. Uh, and so this certainly helps address uh, part of that challenge.
Okay, I'll go ahead and leave it there. Thanks guys.
The next question comes from Jared. Hos from William Blair, please go ahead.
Hey guys. Good morning and thanks for taking the questions. Um, maybe I'll ask another 1 around labor, but a bigger picture question. And I'm I'm curious how, uh, you're thinking about immigration policy changes and the impact that, that could have on the, the Home Care Workforce over the next couple years, obviously been a lot of media coverage about kind of the prevalence of immigrants in the healthcare Workforce and especially in home and community based settings. So uh, you know, just curious to hear your perspective and how you're thinking about that over the next couple of years.
Yeah. I mean that, uh, you know, right now we're not seeing any impact, uh, from it. Uh, you know, we don't have a, uh, large, uh, workforce that is kind of green card or, uh, work eligible. I think we roughly have about 600 caregivers out of our workforce of, you know, 50,000. So, uh, you know, it's a pretty small number for us. Uh, we haven't seen any instances where they're not getting those renewed. Uh, now, I will say, I mean long term, uh, you know, it could make it more competitive if you have a smaller workforce or a pool of, uh, uh, employees that you're trying to pull from or candidates that you're trying to pull from. But we're not seeing any impact right now. Certainly not seeing it in the hiring numbers. Uh, and again, we don't have a, a, a large workforce that is, uh, you know, susceptible to those challenges.
Okay, got it, that's helpful. Um and then maybe I'll double click on the hospice segment and nice to see uh, another good quarter of about 10%. Same store growth. Uh, is that the the right level of organic growth? We should look for going forward. Obviously got the, uh, the final rate rule for 2026, which I know you mentioned. So maybe a little bit disappointing relative to cost Trends but just curious, you know how you'd level set sort of the the right way that we should be thinking about same store growth for hospice going forward.
Yeah, we talked about long term. I mean, I I think it's really probably more in the 5 to 7% range when you factor in, you know, rate plus a, you know, throw the volume increase over, uh, I think hospice is doing very well. I think some of it is, you know, coming out of Co I think the industry has rebounded. Uh, but then also, you know, we made some additions on the operations and the sales side that I think have really helped uh, uh, Drive, same store growth for us. But I think long term, you know, 5 more in the 5 to 7% range.
Okay, great. Thanks for all the caller.
The next question comes from. Rajkumar from Stevens. Please go ahead.
Hey guys, thanks for the question. Uh, just have 1 on the kind of follow up on the labor Pizza. You know, it seems like there's like a provision there from the Department of Labor or rule, just kind of, maybe carving out companionship Services. Out of like, the federal, minimum wage and overtime, um, Provisions, which on the Min wage front, you know, kind of irrelevant but thinking about overtime and how you've talked about, you know, scheduling being the most prevalent, uh, piece of turnover. As you know, caregivers aren't getting the hours that they need, maybe just kind of thoughts on that provision. And maybe if any states, are, you know, moving towards creating their own versions of overtime Provisions, based on this proposed rule,
That rule that would make it a little challenging to implement across our services because some of the services we provide wouldn't qualify for that exemption. Uh, so it becomes a little challenging and plus, you know, we have uh collective bargaining agreements uh for a sizable portion of our Workforce, that would cover overtime rules. Anyway, uh, now where it could have some, you know, potential is more on the private pay side of the business, you know, as much as smaller, uh, business for us, uh, we'll certainly keep an eye on it and, uh, you know, uh, it's interesting to kind of read through it, get some guidance on how that would actually work, but, uh, I think minimal impact for us, except maybe a little bit on the private pay side.
Yeah, and then just on the hospice portion, I know some of your peers have called out cap issues, maybe the Adas, you know, saw any of that in the quarter and then uh another on the policy front, it seems like, you know, with the, you know, the big beautiful Bill and like the increase in federal deficit. There might be an automatic trigger to the sequestration to increase. Um, and I guess, you know, for that to be waived, there would be no need to be like a Senate vote on that. Maybe any movement on that part to, you know, not have the sequestration go from like 2 to 6% based on that, automatic trigger.
Uh I'll start with the cap. Uh, so on the cap, uh, you know, having a balanced length, uh, you know, referral base is, is an important. Uh, we do have a little bit of cap that we booked this quarter, uh, a little over a million dollars. Uh, you know, but that's kind of part and parcel. I mean, we also have, if you think about it, we have opportunities 1 to, to look at, you know, changing our improving, our referral, mix in a couple of programs to, uh, to get out of cap, but certainly manageable. We also have opportunity and other programs that, you know, we have a very short length of stay and we need to diversify our referral base to get along some longer. Stay patients to kind of balance that out. So really, when you think about cap it's been around forever. Uh, since the uh, you know, the benefit was implemented. Uh, I think whereas running into some challenges right now is there's a little bit of a disconnect between the wage index and cap. And so it's not wage index for individual markets. I don't know if I really want CMS to do that, you know, frankly because I'm not sure how that would work, uh, for Rural per
Providers. But uh, you know, certainly manageable for us and then on the sequestration, front solid dirt. Yeah, you know, I think look sequence registration. Um, we we expect Congress to handle this like they have in the past, um, the Trump Administration been very clear that they're not going to cut Medicare. This would obviously be a cut to Medicare. So our thinking is and what we've been hearing is, it will be addressed in time. So that's kind of our thinking today.
Got it. Thank you.
The next question comes from Brian, Tanquilut.
Hey, good morning, guys. Congrats on the quarter. Um, maybe Brian is. I think about, you know, your original commentary at the beginning of the year expecting your margins to be above 12% for separate 2025. Just curious how you're thinking about that now, given, you know, this acquisition coming in and then the tax rate increase that kicks in September 1st.
Yeah, I I think our expectation for margins, Brian, for the rest of this year are still pretty consistent. So, starting in q1, at over 12%. Obviously, saw the normal kind of expansion in a Q2, uh, we'd expect to remain pretty static in Q3 and then see additional expansion, um, at the end of the year. So I think for the full year, I think we're still going to be squarely between, you know, 12 and 13%. Um, I think, you know, the Texas rate increase coming in at kind of just, you know, writer up just that above 20% margin. Probably is not going to move the needle. Much, the new acquisition is about 84%, personal care, and Pennsylvania, a little bit of clinical. So it does not enough, really, to kind of probably move the needle up much, um, but we'll be nice to have those ability to do those services in PA, um, but probably still pretty consistent with our prior, commentary for the rest of this year right now.
Got it. Okay, thank you.
The next question comes from Ryan. Langston from TDC, please go ahead.
Thanks. Maybe related to Matt's question, it sounds like players per business day continues to run pretty strong. But Durk, I think I heard you say clinical hiring is going to be more challenging. Is that just sort of a tight labor market dynamic, or changes in competitor behavior, or anything else you'd call out there?
No, I mean, it's Brad. I I think, uh, you know, really it's, you know, just not enough nurses out there. Uh, you know, it's it's more, you know, a challenge in certain markets. So uh I think it's just going to be, you know, long term just more competitive. Uh, right now is not, uh, you know, putting any type of pressure on being able to accept patients or or volumes or anything like that. I just think that that's going to be a little more challenging certainly than our personal care side.
The next question comes from Constantine, Davidus from Citizens. Please go ahead.
Hey guys. Um, just
Last quarter, I think you talked about...
Some large larger clinical assets coming to Market, just wondering if if, you know, you can talk about that part of your m&a pipeline and, you know, should we expect more transactions along the lines of what you're doing in Pennsylvania, or are there some larger assets out there? Um, we could see some movement on, thank you.
Well I think when we were talking about there could be some larger ones, there were some talk about some hospice uh opportunities coming out. We have heard, some of those are still looking at it. I I understand that maybe the
The um, the multiples of come in just a bit on those then, then maybe what people were expecting from last year. Um, so, you know, again, we are haven't been a a, a main player in the hospice market for the last 2 or 3 years just because of that very high valuation expectations. Most of them had our Focus has been more on the larger personal care, which we saw, which Gentiva. And then, even the Home Health right now, you know, some of the things that we're hearing is with this potential 6.4% reduction which we all believe should be somewhat moderated by the uh when the final rule comes out. But even so this is a, this is a change and this is an unknown that I think has caused some of the players that might have been looking.
To come out and see what might be out there from a standpoint of acquisition opportunities, I think it's probably delayed some of those folks coming out. So really, from our standpoint, we're going to be very focused on.
Somewhat what you saw with our most recent, helping hand acquisition finding markets where it strengthens our personal care markets, it can add some Clinical Services smaller deals. Uh, that probably are not as much affected by this potential rate reduction at home, health or potentially even the what you may be seeing valuations with hospice.
Great. And then if I could just sneak 1 more in, um, any other states
Um, that you're monitoring with the potential for a favorable rate movement, you know, in the next 12 to 18 months.
Yeah, I think Constantine, a couple that we referenced earlier, uh, that we're considering and read increases this year, uh, ended up holding kind of steady. Um, and maybe look to next year or New Mexico and Pennsylvania. I think for two that we were watching pretty closely this year. Uh, both had conversations again. No guarantee that we'll see something next year, um, but, um, potential for maybe both of those next year. So I think the Pennsylvania acquisition we just did would fit in nicely. If we got something from them, you know, next year, uh, but we'll keep monitoring, um, the states and see maybe what some chatter is going into the next budget cycle next year.
Thank you.
The next question comes from John Ransom from Raymond James. Please go ahead.
Good morning. Um,
Just a couple for me. Derek, first of all, what are your public uh, advocacy priorities now? Uh, and, you know, other than obviously the Home Health, uh, final little, what are some other things that you and your government Affairs? Folks are working on either as a state level or the, the federal level that we should keep an eye on um and then secondly just to kind of go into the question about payer Contracting. Um have have the contracts gotten any more I guess the word interesting in terms of some kickers uh and some value base or is it still kind of very much the traditional structure that you've always had? Thanks.
Paul, I'll talk about the public at the sea, you know, what's really interesting? If you look at our 3 segments of care, um, we've been very consistent over the last number of years with our state advocacy, uh, with that great success. We have good relationships with most of the, um, really all the states in which we operate. And I think we've been able along with others in the industry to continue to discuss the value proposition of the Personal Care Service as it relates to maybe some facility based care and and so we've had great success. You saw that with Illinois, you saw that with Texas. Uh Brian mentioned a couple other states that were were working with. So we're pretty comfortable with our state advocacy. We started about
Over the last 4 years since the pandemic. So certainly from our standpoint, we're we're doing a lot with the industry trying to get our story out to those that matter in the administration, telling them about the, you know, the real effect we can have on cost in the home health segment. So really, that's what we've been focused on on the federal side and it it
There's a lot going on, but, uh, you know, I wish I could tell you. We had, uh, some information today that would would, would possibly help us, um, with a final rule. But right now, it's still very deep into working with trying to get that changed. Yeah. And I'll, I'll talk about the payer Contracting on, in the personal care side. You know, we're still having the discussions on the value base, the structures largely similar to what we've been doing in the past. I will say that probably the the Nuance is, we're now talking to the payers and the payers are talking to us about, how do we get more volume into those plans and into those arrangements because we have been able to show that we can address the overall cost of care. Uh, in through those arrangements. So, I would say that's probably the kind of the newer discussions. Now, is just, how do you drive volume into those plans or into those arrangements? Uh, on the home health side, you know, we continue to talk to payers, uh, you know, about implementing, you know, a case rate or an episodic type payment. Uh, have had a couple of wins there and continue to have a positive decision.
Discussions. Uh, on that front.
Great. Thanks so much.
again, if you have a question, please press star then 1
And our next question comes from Joanna tkachuk from Bank of America. Please go ahead.
Hi.
I want the the acquisition you just sent us today. Um, can you give us? You gave the breakdown on the revenues, um, any comment, you can provide us in terms of the margins is it sort of comparable to your PCS business? You know, and also I guess it's Pennsylvania a good market for a person. Okay. That's the reason why you are kind of adding on in that market.
Hey Joan. I'll talk about the the margin profile real quick and I'll let Brad talked about just Pennsylvania Market, but it should be pretty comparable to our personal care business. But obviously, this being a smaller acquisition, you know, we're not going to have to add, you know, much in the way of anything really on the kind of thing about corporate and back office types. So it's going to be, you know, probably more 13 14%, you know, ibida margins. Gross margins will be consistent with our business there but should be somewhere in that range. So, I'll let Brad talked a little bit about the just the Pennsylvania Market. Yeah, I think, when you look at the Pennsylvania Market really the where this asset is located Western Pennsylvania. Uh, we like that area. Uh, you know, it's not quite as competitive as maybe a Philadelphia uh, and 1 of the, you know, the really Urban markets. So I feel good about, uh, you know,
The, the personal care business, you're interested to kind of, you know, look at the Home Health, and the hospice opportunity, uh, that we have there at certainly is complimentary a little bit to our Ohio. Uh, hospice operations. So excited to to see what we can do there. Uh, you know, also, when you look at Pennsylvania, I think, you know, Brian alluded to, uh, that, that is a state that we're looking at, uh, possibly some, uh, rate increases. They did a wage study. Uh, they were pretty far along in this, uh, you know, past legislative session look like they were going to do something rate wise on personal care but because of some of the budget uncertainty with around the Medicaid cuts that had not been finalized, they backed off of that. Uh, but uh, we think there's an opportunity and you know, next year. Uh, or certainly, uh, in next few years to be able to get some additional uh, uh, rate uh, from the states and uh, Pennsylvania.
Okay, thanks for that. And I guess it's tied to your, to the last commentary around. The the great increases could be. My my question is about, um, just I guess the policy changes that are coming under the reconciliation bill. So could we personally care is not targeted for cuts, right? But, but their cuts to enrollment, um, in Medicaid, to the different, um, Provisions their rate. And so that, uh, you know, highly likely, uh, put pressure on state budgets, right? Um, so in the, can you maybe talk about, you know, how you uh, thinking about how this uh, might play out and, and impact, you know, personal care of business? Because I guess maybe talk about the the prior
Cycles of budget, budget pressure. Um, seems like some states did reduce, uh, personal first spending since this is a, a voluntary service. So how do you expect states to respond to, you know, budget pressure this time around? And, you know, would it be a different I guess versus to say, you know? Um, do that 20089. Thank you.
State budgets. Uh, you know, I think we feel good about the services we provide, you know, primarily services to an elderly and disabled population. Uh, you know, politically that's a tough population to cut. We haven't really seen states. Do that in the past. Uh, where states have, you know, we had a couple of states that, you know, years ago, tried to implement some rate Cuts pretty modest. Uh, those didn't stick uh, they quickly came back and and adjusted those rates back up. So I think, you know, in the near term, you know, over the next couple of years, I think about it's not going to be a lot of impact negative impact on the state budgets. Uh, you know, come 2028. There could be some but I do think we're in a favorable position by the nature of the population we serve and the fact that, you know, I think we've established pretty well that, you know, the it's more expensive to take care of these individuals and institutional setting. Uh and there's a lot of research and data, analysis out there, to that effect. So cutting access to our services actually could exact.
Exacerbate, state budget pressures.
Thank you. Thank you so much for taking the time.
This concludes our question and answer session. I would like to turn the conference back over to you, Durk Allison, for any closing remarks.
Thank you, operator. I want to thank each of you for taking the time to join us today on our earnings call, and I hope that you all have a great week. Thank you.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.