How should we think about sequential margin movements in the back half of the year, and what is the progress on Gentiva integration synergies?

Q2 to Q3 margins are expected to be consistent, with a higher jump in Q4 due to hospice rate increases and payroll tax relief, pushing towards the higher end of the 12-13% full-year adjusted EBITDA margin guidance. Gentiva integration synergies of approximately $1 million are expected in 2027 from EMR consolidation. “I think you kind of put all that together, that's probably going to put us toward the higher end of the 12%, pushing to 13% for the full year. I think really nice for us to see 13% in Q2.”

Can you elaborate on the hospice Medicare Cap issue, target patient balance, and how the 2.3% final rate update translates to actual rates and cap cushion?

The Q2 Medicare Cap accrual was over $3 million, primarily in Ohio. Management expects no additional cap exposure for the rest of the year and hopes to mitigate some Q2 expense. They aim for a balanced patient mix. The 2.3% national rate update will likely be slightly lower for Addus due to wage index, but it doesn't impact the cap outlook for the remainder of the year. “I think initial modeling for us based on kind of wage index and where we operate, we'll probably be a little bit less than the 2.3% national average.”

What is driving the increased M&A activity in personal care and home health, and what are the latest state budget outcomes, particularly for Illinois?

Increased M&A in personal care is due to owners becoming comfortable with Medicaid changes not significantly impacting the business. Home health M&A optimism stems from better-than-expected proposed 2027 rates and belief that temporary adjustments will be resolved. Most states have maintained rates, with Oregon and Michigan providing increases. Illinois' budget is finalized with flat rates but also no wage inflation. “I think people have gotten comfortable with that to believe that, that's going to be handled in the next year or 2. And so that's why I think you're seeing some of the opportunities in the home health starting to come about.”

ADUS

Addus HomeCare (ADUS) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Health Care· Aug 4, 2026

Source: earnings call transcript

Executive summary

Addus HomeCare Q2 FY26 — Strong Revenue Growth and Operational Execution

Addus HomeCare delivered robust financial results in Q2 FY26, driven by strong revenue and adjusted EPS growth across its Personal Care and Hospice segments. The company continued its strategic M&A with an Indiana acquisition and maintained a disciplined capital structure, reducing debt. Operational improvements, including positive hiring trends and caregiver app adoption, supported growth, though Home Health faced a slight revenue decline and regulatory adjustments remain a focus.

Highlights

Total revenue increased 8% to $377.4 million compared to Q2 FY25.
Adjusted earnings per share grew 16.1% to $1.73.
Adjusted EBITDA rose 11.9% to $49.2 million.
Cash flow from operations was strong at $40 million, up from $22.5 million in Q2 FY25.
Personal Care segment achieved 6.8% same-store revenue growth, with same-store census up 1.2% sequentially.
Hospice same-store revenue increased 11.1%, with average daily census up 6.5% to 3,964.

Concerns

Home Health same-store revenue decreased 2.8% compared to Q2 FY25.
CMS proposed a negative 3% temporary adjustment for home health payments in 2027.
Hospice segment experienced a Medicare Cap impact of over $3 million in Q2 FY26, primarily in Ohio.
Gross margin percentage slightly declined to 32.2% from 32.6% in Q2 FY25.
The tax rate increased to 26.9% due to the expiration of the Work Opportunity Tax Credit (WOTC) program.

Guidance & targets

Category	Target	Timeline	Confidence
Adjusted EBITDA margin percentage	between 12% and 13% high materiality	Full Year 2026 · FY26	High
Tax rate	in the upper 20% range medium materiality	Full Year 2026 · FY26	Medium
Gentiva EMR synergy	$1 million medium materiality	Full Year 2027 · FY27	High
New Mexico Personal Care rate increase	around 4% medium materiality	Q3 FY26 onwards	Medium
Personal Care authorized hours served fill rate	up at least up into the upper 80s medium materiality	Near-term	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Personal Care Growth bolstered by higher volume trends and positive contributions from state-level rate support in Texas (9.9%) and Illinois (3.9%). Q2 included 2 months of HomeCourt home care operations. Revenue as % of total: 78.4%Same-store hours increase: 2.2% YoYPercentage of authorized hours served: mid-80sSame-store census increase: 1.2% sequential	$296 million	6.8%	—	—
Hospice Steady performance powered by favorable year-over-year metrics across average daily census and revenue per patient day. Experienced Medicare Cap impact primarily in Ohio market. Revenue as % of total: 17%Average daily census: 3,964 (up 6.5% YoY)Median length of stay: 24 days	$64.2 million	11.1%	—	—
Home Health Experienced a decrease in same-store revenue but saw sequential improvement in revenue, operating income, and admissions. Management is focused on upgrading leadership and improving referral conversion. Revenue as % of total: 4.6%Same-store new admissions growth: 9.8% YoY	$17.2 million	-2.8%	—	—

Deals & partnerships

HomeCourt home care Acquisition of personal care operations

Closed on May 1, 2026, marking entry into Indiana, adjacent to Illinois. The acquisition has exceeded expectations slightly from a volume perspective.

Similarly sized personal care provider Acquisition of certain operating assets

Definitive purchase agreement to acquire assets of a provider based in the Indianapolis, Indiana area, complementing the HomeCourt acquisition. Intent is to integrate it with the HomeCourt operations.

Risks & headwinds

Continuing effect of temporary adjustment in home health payments 2027

negative 3%

Mitigation:Company supports industry efforts to eliminate these adjustments; management believes the issue will be handled in the next year or two.

Medicare Cap impact in Hospice segment Q2 FY26

over $3 million

Mitigation:Mitigation strategies are in place to reduce the ultimate impact; no additional cap exposure expected for the remainder of the year, with potential for some Q2 expense mitigation before year-end.

Expiration of Work Opportunity Tax Credit (WOTC) Ongoing from end of 2025

Tax rate in upper 20% range

Mitigation:None stated directly, but management notes the program has traditionally been extended retroactively as part of broader legislation.

Medicaid payment withholding due to fraud and abuse Current

Not quantified for Addus

Mitigation:Not impacting Addus's markets to any significant degree; company is very supportive of appropriate focus on fraud and abuse and ensures compliance.

What to watch in Q3 FY26

New Mexico Personal Care rate increase

Next quarter

Current Negotiations ongoing

Target Around 4% increase finalized with MCOs

Why it matters

Successful negotiation of the rate increase will directly impact revenue and margin in a key market.

So I think at this time, until we finalize those conversations, we're not probably going to talk about a specific number. But I would say, generally, we feel pretty optimistic that we're going to get our portion of what that rate increase should be for us, which we had indicated before would be around 4% rate increase for us.

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Q&A highlights

What is the QTD census trajectory for Personal Care in Illinois, New Mexico, and Texas, and what is the status of the caregiver app rollout, particularly in New Mexico and Texas?

Management noted nice momentum in Illinois and New Mexico for patient census, while Texas is holding steady. The consolidated fill rate improved to 84-85%, driven by Texas's quicker-than-expected caregiver app adoption (mid-to-upper 80% fill rate). New Mexico's app rollout has been slower due to state EBV app integration.

“Texas has gotten up in kind of that mid sling toward the upper 80% range and fill rate. New Mexico, as we kind of expected with that rollout, having to work through the state's EBV app has been a little bit slower.”

asked by Raj Kumar · answered by Brian Poff

2 min read 6 chapters

Detailed narrative

Strategic Acquisitions and Market Expansion

Addus HomeCare closed the acquisition of HomeCourt home care's personal care operation in Fort Wayne, Indiana, on May 1, 2026, marking entry into a new, attractive state adjacent to Illinois. The company also has a definitive purchase agreement to acquire another similarly sized personal care provider in the Indianapolis area, expected to close pending regulatory approval.

Management noted an increasing number of personal care acquisition opportunities and growing optimism around home health deals following the proposed 2027 payment rule.

Regulatory Environment and Advocacy

CMS proposed a 2.1% net payment rate increase for home health in 2027, reflecting a 2.1% statutory update and 0.3% outlier payment increase, offset by a negative 3% temporary adjustment. The final fiscal 2027 hospice rate increased by 2.3%. Addus continues to advocate for the elimination of the temporary adjustment and the 80/20 provision of the CMS Medicaid access rule, believing the latter could be eliminated by year-end 2026, which would be encouraging for the industry.

Operational Efficiencies and Caregiver Management

The company reported positive hiring trends in its Personal Care segment, with 104 hires per business day in Q2 FY26, consistent with Q2 FY25 levels. The rollout of the caregiver app, particularly in Texas, has accelerated faster than expected, contributing to an uptick in the consolidated fill rate to between 84% and 85%.

This, along with slightly lower caregiver turnover, is helping to meet organic growth targets and improve the percentage of authorized hours served.

Segment Performance Drivers

Personal Care same-store revenue grew 6.8%, driven by a 2.2% increase in same-store hours and positive contributions from state rate enhancements in Texas (9.9%) and Illinois (3.9%). Hospice same-store revenue increased 11.1%, supported by a 6.5% rise in average daily census to 3,964 and a median length of stay of 24 days.

Home Health same-store revenue decreased 2.8% but showed sequential improvement in revenue, operating income, and admissions, attributed to new leadership and focus on referrals.

Cash Flow and Capital Allocation

Addus generated strong net cash flow from operations of $40 million in Q2 FY26. The company reduced its bank debt by $30 million from Q1 FY26 to $64.3 million, ending the quarter with $99.6 million in cash and $577.8 million in revolving credit facility availability.

This strong balance sheet provides financial flexibility to pursue strategic growth initiatives, including targeted acquisitions, while maintaining a disciplined capital allocation approach.

Bridge Program and EMR Integration

The company is expanding its Bridge program, which connects Personal Care clients to clinical services, into Illinois, building on success in New Mexico and Tennessee. A significant ongoing initiative is the conversion of the legacy business to Homecare Homebase EMR, expected to complete by Q1 FY27.

This integration is anticipated to significantly enhance the Bridge program's effectiveness across all three service lines (Personal Care, Home Health, Hospice) by operating on a single EMR platform.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.