Mertz Taggart follows the publicly traded home-based care companies and reports on their earnings calls each quarter. As a group, public company performance and share price serve as a proxy for industry performance and investor sentiment, respectively. Historically seen as the “ultimate consolidators”, the publicly traded home-based care trading multiples have a downstream effect on lower middle market home-based care M&A.
Addus Homecare (Nasdaq: ADUS)
Highlights
Addus' top-line growth continued with a 10% revenue gain in Q2 2024 vs. Q2 2023, driven by a 57% increase in the Home Health segment, an 11.6% gain in Hospice revenue, and a 7% rise in its Personal Care segment compared to Q2 2023. The revenue increase in the hospice and home health segment was primarily due to the acquisition of the operations of Tennessee Quality Care on August 1, 2023. Admissions and patient days increased in Q2 2024 compared to Q2 2023.
In Q2 2024, ADUS saw a slight increase in gross profit and operating income margins compared to Q1 2024, with gross profit margin rising from 31.4% to 32.5% and operating income margin growing from 8.4% to 9.1%. This increase was driven by higher margins in home health and hospice segments due to the acquisition of the operations of Tennessee Quality Care.
For the three and six months ended June 30, 2024, the company received ARPA funding totaling $2.0 million and $12.2 million, respectively, for supporting caregivers and boosting recruiting and retention efforts.
Key Financial Figures
M&A Activity
On May 21, 2024, the company agreed to sell its New York operations to HCS-Girling for up to $23 million, with the transfer contingent on regulatory approvals. Addus CEO Dirk Allison stated, "We are pleased to divest our New York personal care operations and exit the state, as this challenging market no longer fits our growth strategy.”
Acquisition: On June 8, 2024, the company agreed to purchase the personal care operations of Gentiva (Curo Health Services, LLC) for approximately $350 million in cash, pending regulatory approvals. The acquisition spans seven states and serves approximately 16,000 patients. Addus CEO Dirk Allison stated, “Once this deal is closed, Addus will be the number one provider of personal care services in the state of Texas, which is primarily a managed Medicaid market.”
On June 28, 2024, Addus raised $175.6 million through a public offering of 1,725,000 shares at $108.00 each. The company used $81.4 million to repay debt and may allocate the rest for general purposes, including acquisitions like Gentiva's personal care assets.
Guidance
For 2024, ADUS anticipates maintaining a stable gross margin percentage; however, ongoing caregiver shortages may potentially impact the levels of service provided.
Aveanna Healthcare (Nasdaq: AVAH)
Highlights
Q2 2024 revenue reached $505.0 million, a $33.0 million (7.0%) increase compared to $471.9 million in Q2 2023. This growth was driven by the following segment performance: Private Duty Services revenue increase by $30.2 million (8.0%), driven by approximately 10.3 million hours of care, reflecting a 4.8% increase in volume compared to the previous year. Medical Solutions revenue increased by $3.6 million (9.3%), while Home Health & Hospice revenue declined $0.8 million (1.4%).
Gross margin improved by 1.9% to $158.3 million compared to Q2 2023, reflecting the improved payer rating environment as well as cost reduction efforts taking. Operating income margin improved 9.5%, reaching $37.1 million. The improvement in operating income margin was primarily due to reduced branch and regional administrative expenses (restructuring portions of the branch and regional operating structure).
Adjusted EBITDA was $45.6 million, a 27.3% increase as compared to the prior year period.
Demand for home and community-based care remains strong, with governments and managed care organizations seeking solutions to expand capacity. AVAH results show its continued alignment with the objectives of the preferred payers and government partners.
Key Financial Figures
M&A Activity
In Q2 2024, AVAH made no comments on potential acquisitions. The company's current priorities are to improve profitability through organic growth, expand payer partnerships, strategic cost reductions and continue to invest in its caregivers.
Guidance
The company expects adj. EBITDA to ramp up throughout 2024 as reimbursement rates and caregiver hires increase. The company is looking for continue to leverage their growth through strategic cost reductions and lower overhead while building on the success of our preferred payor strategy and Government Affairs rate improvements. According to Jeff Shaner, CEO of Aveanna, “The labor environment represented the primary challenge that we needed to address to see Aveanna resume the growth trajectory that we believed our company could achieve. It is important to note that our industry does not have a demand problem. The demand for home and community-based care continues to be strong”
2024 full year projections:
Full Year 2024 Revenue guidance increased to over $1,985 million.
Full Year 2024 Adjusted EBITDA guidance raised to over $158 million.
The Pennant Group, Inc. (Nasdaq: PNTG)
Highlights
Q2 2024 total revenue reached $168.7 million, up $36.5 million or 27.6% compared to the same quarter last year. The Home Health and Hospice Services segment generated $125.3 million in revenue, marking a $30.3 million increase or 31.9% year-over-year.
Adjusted EBITDA for the quarter was $13.2 million, a rise of $3.1 million or 30.6% from the previous year.
Home health admissions totaled 14,140 in Q2 2024, up 3,699 or 35.4% from Q2 2023, while Medicare home health admissions increased by 889 or 18.3% to 5,738. The hospice average daily census grew to 3,220, an increase of 726 or 29.1% year-over-year.
Revenue for the Senior Living Services segment reached $43.4 million, up $6.2 million or 16.6% compared to the same quarter last year, supported by a higher occupancy rate and higher average monthly revenue per occupied room.
Key Financial Figures
M&A Activity
Since the beginning of the year, the company expanded its operations with the addition of four home health agencies, two hospice agencies, and three senior living communities. The company also acquired the real estate of two of three senior living communities.
Brent Guerisoli, CEO & Director of PNTG, reported, “In the process, we've added more than 2,200 lives under the Pennant umbrella through acquisitions and organic growth, along with approximately 4,000 lives under the Hartford management agreement. Collectively, this represents a greater than 50% increase in the number of lives we touch each day as compared to the end of 2023. And this does not include the impact of the Signature transaction, which will add an additional 2,500 lives.”
On August 1, 2024, The Pennant Group, Inc. announced the successful completion of its acquisition of Signature Healthcare at Home’s assets in Washington and Idaho.
Guidance
Management updated its annual guidance, projecting total revenue to range from $654.0 million to $694.5 million. Full-year 2024 adjusted EBITDA is expected to be between $50.7 million and $53.8 million. The company’s updated guidance anticipates organic growth, strong operational performance for the remainder of the year, hospice reimbursement rate adjustments, and the contributions from the joint ventures and management agreements.
Enhabit Home Health & Hospice (Nasdaq: EHAB)
Highlights
Q2 2024 total revenue slightly decreased by 0.6% vs Q2 2023. In the Home Health segment, revenue declined $3.6 million or 1.7%, primarily due to lower Medicare re-certification.
The company’s payer innovation strategy continues to drive non-Medicare growth, with non-Medicare admissions up 25.2%, leading to a total admissions increase of 6.4% year-over-year. Currently, 43% of non-Medicare visits are under payer innovation contracts at improved rates.
In the hospice segment, the company has seen consistent progress in census growth, with the average daily census increasing each month since January 2024, resulting in a 2.7% year-over-year increase.
The company's focus on recruitment and retention continues to support long-term growth.
This quarter, the company reduced bank debt by $15 million and opened a new home health location in Florida in April.
Key Financial Figures
M&A Activity
EHAB is actively evaluating potential acquisition opportunities but is currently constrained by its credit agreement, which limits its ability to pursue acquisitions due to existing leverage or debt levels. The company remains focused on its long-term goals and is not allowing these short-term limitations to affect its overall strategic outlook.
Guidance
The company expects home health admissions and hospice volumes to grow in the mid to high single digits annually over the next three years, driven by investments in case management and team development. According to Barb Jacobsmeyer, President & CEO, ”In our Home Health segment, our payer innovation strategy continues to succeed, with our field teams successfully shifting admissions out of historically lower-paying contracts to better paying contracts that recognize our better way to care.”
The company has revised its full-year 2024 guidance:
Net Service Revenue: Updated to a range of $1.05 to $1.06 billion, down slightly from the previous forecast of $1.07 to $1.10 billion
Adjusted EBITDA is now projected to be between $100 million and $106 million, up from the previous range of $98 million to $110 million. This update reflects improved cost performance, leading to a more refined adjusted EBITDA range.
BrightSpring Health Services, Inc. (NASDAQ: BTSG)
Highlights
Q2 2024 total revenue was $2,730 million, up 26.0% compared to $2,167 million in the second quarter of 2023. Net revenue growth was driven by strong performance in both segments, particularly Specialty and Infusion Pharmacy. Adjusted EBITDA reached $139.1 million, a 17% increase year-over-year, exceeding internal forecasts.
Pharmacy Solutions revenue was $2.1 billion, growing 32% compared to the second quarter of last year. The segment growth was driven by ongoing execution supporting specialty product ramp-ups and launches from 2023 to 2024, infusion patient and volume growth and strength in home and community pharmacy volume.
The Provider Services segment generated $616 million in revenue, reflecting an 8% increase compared to Q2 2023. The average daily census in home health care increased 13% year-over-year to 44,246 in the second quarter, while Rehab billable hours increased at a high single-digit rate.
The company's success in the second quarter is attributed to its focus on timely, preventative, and coordinated care for seniors and specialty patients in the home and in low-cost settings.
Key Financial Figures
M&A Activity
During the six-month period ending June 30, 2024, BTSG successfully completed four acquisitions in the Pharmacy Solutions and Provider Services segments. The company had entered these transactions to expand their services and geographic offerings. The total aggregate consideration, net of cash acquired, for these acquisitions amounted to approximately $43.9 million. The company is currently evaluating the fair value of the assets acquired and liabilities assumed. The recent acquisitions contributed approximately $15.1 million to the company’s revenue for the second quarter of 2024.
Jon Rousseau, President & CEO, commented, “We've been focused on deals that are very accretive here in the last year in particular that are four times pro forma EBITDA or less typically. And that's really where our focus has been. And we believe we can continue to augment our growth rate through very accretive M&A combined with organic growth to achieve our growth objectives.”
Guidance
BTSG has revised its revenue and Adjusted EBITDA guidance for the full year 2024 as follows:
Revenue: Increased to a range of $10.45 billion to $10.90 billion.
Adjusted EBITDA: Revised to a range of $570 million to $580 million, reflecting anticipated growth of 12% to 14%.
Option Care Health, Inc. (NASDAQ: OPCH)
Highlights
The company’s top-line performance remains strong, with a year-over-year revenue growth of 14.8%. In Q2 2024, OPCH reported net revenue of $1,227.2 million, up from $1,069.1 million in the same quarter of 2023. Growth was well-balanced across the portfolio, with particularly strong performance in the newer limited distribution and rare orphan therapies within the chronic portfolio.
Gross profit for the quarter was $249.4 million, or 20.3% of net revenue, compared to $250.8 million, or 23.5% of net revenue, in Q2 2023. Adjusted EBITDA of $108.4 million, down 1.5% compared to $110.1 million in the second quarter of 2023.
The decline in gross profit percentage was primarily due to ongoing supply chain challenges affecting certain drugs and inputs, as well as issues related to the Change Healthcare cyberattack, which disrupted pharmacy operations and led to operational inefficiencies.
The company believes it has effectively resolved supply chain issues by the end of the quarter and has made significant strides in mitigating the impact of the Change Healthcare situation. Additionally, the company has made substantial progress in reducing accounts receivable and accelerating revenue collection during the quarter.
Key Financial Figures
M&A Activity
In the second quarter, the company repurchased approximately $78 million of its stock and intends to continue this focus on share repurchase in the near term. According to Mike Shapiro, CFO, “We remain focused on M&A efforts and continue to assess acquisition opportunities. We have also reengaged on share repurchase activities and repurchased approximately $78 million of stock in the second quarter. Our efforts ramped up as our cash flows improved in the quarter and year-to-date we have repurchased more than $118 million of stock. And given the momentum in cash flow generation, we intend to remain focused on deploying capital through M&A and share repurchase strategies.”
Guidance
According to Shapiro, “We believe we have effectively resolved the supply chain challenges late in the second quarter… we have made significant progress in recovering from the Change Healthcare situation. SG&A was flat in the quarter as we continued to drive efficiencies through investments in technology and operational excellence. SG&A as a percent of revenue dropped to 12.5%, our lowest ratio on record.”
Based on the first half results and the revised expectations, Option Care Health has updated its financial guidance for the full year 2024, projecting:
Revenue: $4.75 billion to $4.85 billion
Adjusted EBITDA: $435 million to $450 million
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