Addus HomeCare Corporation — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter report; the filing does not provide a clear standalone Q4 financial summary.
Business context
Addus provides in-home personal care, hospice and home health services, primarily to older adults and other individuals needing support. At year-end it operated in 22 states through approximately 206 offices and served about 67,000 consumers during 2021. Revenue is largely funded by government programs and managed care organizations.
Financial performance and liquidity
- Revenue: $864.5 million, up 13.0% from $764.8 million in 2020. Personal care contributed $685.9 million (+6.0%); hospice $152.3 million (+50.3%); home health $26.4 million (+62.5%).
- Profitability: Gross profit was $269.8 million, with gross margin improving to 31.2% from 29.6%. Operating income rose 48.1% to $65.9 million; operating margin was 7.6%, versus 5.8%. Net income increased 36.2% to $45.1 million; diluted EPS was $2.81 versus $2.08.
- Adjusted EBITDA: $97.7 million, compared with $76.9 million in 2020. This is a company-defined non-GAAP measure and excludes specified items, including certain COVID-19 costs.
- Cash flow: Operating cash flow was $39.5 million, down from $109.4 million. Investing cash outflow was $42.0 million, including acquisitions and $4.6 million of property and equipment purchases. Financing provided $26.3 million. Management attributed the lower operating cash flow chiefly to timing of receivables and government stimulus funds.
- Cash and debt: Cash was $168.9 million at year-end. Credit-facility borrowings were $224.9 million, all variable-rate; the stated year-end borrowing rate was 2.10%. The company reported $143.6 million available to borrow, subject to facility limits and borrowing-base calculations, and compliance with its financial covenants. The facility was amended to a $600 million revolving commitment and extended to July 30, 2026.
- Other balance-sheet items: Total assets were $947.6 million; goodwill was $504.4 million and intangible assets were $64.3 million. The company reported no goodwill or intangible impairment for 2021.
Material changes and unusual items
- Hospice growth principally reflected the full-year contribution from the 2020 Queen City Hospice acquisition. Hospice gross margin declined to 50.6% from 53.4%, primarily due to higher direct labor costs.
- Personal care revenue per billable hour rose 7.8%, while billable hours fell 1.6%. Illinois rate increases contributed to growth; the Illinois Department on Aging represented 21.4% of total revenue, down from 23.0%.
- Two 2021 acquisitions—Armada and Summit—expanded hospice and home health operations in New Mexico and Illinois. Separately, JourneyCare was acquired on February 1, 2022, after the reporting period, for approximately $72.5 million.
- COVID-related personal care expenses were approximately $16.5 million, partly offset by $12.3 million of Provider Relief Fund amounts applied to eligible expenses. The company deferred recognition of $6.5 million of COVID-related payor payments pending qualifying expenses or repayment.
- New York’s Consumer Directed Personal Assistance Program (CDPAP) contract procurement remained uncertain. The company was not selected in the initial process, filed a protest and materially suspended new admissions. The program generated approximately $42 million of 2021 revenue and $3 million of operating income.
Outlook, risks and contingencies
The filing gives no numerical revenue, earnings or cash-flow guidance. Management said it expected cash on hand, operating cash flows and available credit to fund anticipated needs for the next 12 months and foreseeable future. Its strategy emphasizes organic growth, managed-care relationships and acquisitions.
- Management cited ongoing caregiver and skilled-clinician shortages, rising wages and inflation, and potential effects of COVID-19 and vaccination requirements on staffing and costs.
- Revenue and reimbursement are exposed to government budget and policy changes, rate reductions, eligibility or service limits, audits, and shifts to managed care or value-based payment. Illinois, New Mexico and New York together generated a substantial share of revenue; Illinois alone represented 38.2%.
- The $6.5 million Medicare contractor repayment request concerning Ambercare hospice claims is disputed and under administrative appeal. The company stated it has contractual indemnification rights from the seller; the ultimate outcome was uncertain.
- The hospice reporting unit’s goodwill valuation had 20% headroom. Management said a weighted-average cost of capital increase of more than 1.5% could reduce estimated fair value below carrying value.
- Other exposures include Medicare hospice payment caps, variable interest rates, credit-facility covenants, labor relations (52.1% of employees were union-represented), litigation, and cybersecurity and privacy risks. Management said pending legal and administrative proceedings were not expected to materially affect financial position or results.
Important facts for investors to verify
- Whether the New York CDPAP procurement or appeal changes the company’s ability to retain that revenue and operating income.
- Whether labor availability, wage inflation and service volumes affect margins, particularly in hospice.
- Whether operating cash flow recovers after the 2021 decline and how much cash is available after acquisition spending and debt service.
- Whether the $6.5 million Medicare repayment request results in a payment, and whether indemnification is collectible.
- How JourneyCare performs after acquisition, including integration costs, financing and the effect on leverage.
- Whether hospice goodwill headroom remains adequate and whether reimbursement changes, including value-based payment adjustments and Medicare sequestration, affect results.