Addus finds its second wind: three care lines turn as the M&A window swings open

PCS census is back to growth, home health is mending and a near-net-cash balance sheet has Addus ready to act on the thinnest regulatory overhang in years.

ADUS · Earnings Call · 2026-08-04

Three care lines, one inflection

Addus HomeCare's second quarter (revenue of $377.4M, up 8% year-over-year, with total revenue on an 11-year +351% climb) reads as a steady-state print on the surface, but the prepared remarks and Q&A sketch an operator at a rare convergence: the personal care engine is refilling, the clinical lines are re-rating, and the M&A calendar — which management has been flagging for three quarters — is finally delivering. The largest driver is personal care, 78% of revenue, which posted 6.8% same-store growth. The headline for the quarter is that the census decline that has dogged the book is ending. Illinois, the largest market, finally turned to year-over-year growth after months of starts exceeding discharges, and management expects Texas — the holdout — to follow in the back half. The quiet hero of this is the caregiver app, rolled out across Illinois and now ramping in Texas and New Mexico faster than the company projected. Brian Poff quantified it:

We actually saw a nice uptick this quarter. Our fill rate on a consolidated basis was between 84% and 85%... The big driver of that actually has been Texas... has gotten up in kind of that mid, sliding toward the upper 80% range.
Brian Poff, Executive Vice President · 2026-08-04

That push on authorized hours served — closing the gap between billable and authorized — is the operational flywheel that turns app adoption into billable hours revenue without needing new entry into the labor market. The clinical picture is improving in tandem. Hospice same-store revenue rose 11.1%, and average daily census reached 3,964 (over 4,000 in July) while median length of stay lengthened to 24 days. Home health — the weakest line, down 2.8% same-store — still represents a sharp improvement from the −6.6% in Q1, with same-store new admissions up 9.8%. Dirk Allison attributed the turn to new leadership and a renewed emphasis on referral conversion and timeliness of admissions, which will matter once the bridge program — home health to hospice, and eventually upstream of PCS—systems come fully online with the Homecare Homebase conversion.

The M&A window Addus spent the year waiting for

The clearest strategic signal is that the sellers Addus has been waiting for are finally arriving. The company entered Indiana with two acquisitions (the first, HomeCourt Home Care, closed May 1 and has run "ahead of expectations" in volume); the second, in the Indianapolis area, is pending regulatory approval. Both are small — roughly $20M of combined annualized revenue in aggregate — but they are the first evidence of the thaw management described in the call's most telling exchange:

People are getting used to the fact that the changes that the administration make on Medicaid is not really affecting our business or our industry near as much as people thought. So I think owners are now comfortable in considering putting their business up for sale... realistically... there started to be optimism in the [home health] industry.
Dirk Allison, Chairman · 2026-08-04

This is a marked shift from earlier in the year. In February, Brian Poff described a pipeline still "comparable to the deals that we closed last year," with larger personal care assets expected only "midyear or towards the back half of the year" — and home health explicitly gated on the "temporary adjustment" clawback overhang. That timing has come due: the CMS proposed 2027 home health rule nets a roughly +2.1% increase versus last year's −1.3%, and the final hospice rule for fiscal 2027 delivers +2.3%. The balance sheet is positioned to convert this thaw into action. Cash stands at $99.6M against bank debt of $64.3M (down $30M in the quarter, with another $10M repaid in Q3), leaving roughly $578M of revolver availability. The company is now effectively at net cash — a striking swing from the net-debt position held through much of 2025 — which is the point of the discipline management has been preaching: interest coverage of 22.6x, up 142% year-over-year on a leverage profile that has liabilities-to-assets down to 21.2%.

The one number that gives Addus pause — and what the tape says

The single blemish on the quarter is hospice Medicare cap exposure, primarily the Ohio market, where the company booked a roughly $3M accrual. Management downplayed it — "we don't expect to see any additional expense the remainder of this year," and believes mitigation could recoup some before the cap year ends — but it trimmed what would otherwise have been a strong hospice margin quarter. It is a recurring, manageable friction for the industry rather than a structural issue. Cash collections, meanwhile, remain a quiet strength: Illinois Department of Aging days-sales-outstanding collapsed from 47.4 days at Q1-end to 26.8 days at Q2-end, and overall DSOs improved to 35.5 days — a meaningful working-capital tailwind behind the strong operating cash flow of $40M in the quarter. Receivables-to-revenue of 38.5%. The stock appears to be registering the improvement. After peaking in January 2025 and drifting into a drawdown, the shares have rebounded ~25% over the last 90 days — and the multiple has room to re-rate: price-to-net-income has de-rated 30% year-over-year to 17.8x. Whether the story is "back to growth in three lines plus a live M&A calendar" or "one cap charge away from a clean quarter," Addus has handed investors something it lacked for nearly a year: a reason to model upside rather than manage downside.