Addus HomeCare Corporation (NASDAQ: ADUS), a comprehensive provider of home and community-based services that are primarily personal in nature, provided in the home and focused on the dual eligible population, today announced its financial results for the third quarter and nine months ended September 30, 2015.
For the third quarter, net service revenues were $84.3 million, an increase of 3.3% from $81.7 million for the third quarter of 2014. Net income was $2.9 million, or $0.26 per diluted share, for the third quarter of 2015 compared with $3.2 million, or $0.29 per diluted share, for the third quarter last year. Adjusted diluted earnings per share for the third quarter of 2015 was $0.25 compared with $0.29 for the third quarter for 2014. Adjusted EBITDA was $6.0 million for the third quarter of 2015 compared with $6.3 million for the same prior-year quarter. Adjusted EBITDA excludes stock-based compensation expense of $412,000 and $231,000 for the third quarter of 2015 and 2014, respectively. (See page 7 for a reconciliation of all non-GAAP and GAAP financial measures.)
For the first nine months of 2015, net service revenues rose 9.4% to $252.1 million from $230.3 million for the first nine months of 2014. Net income was $8.3 million, or $0.74 per diluted share, for the first nine months of 2015 compared with $8.3 million, or $0.75 per diluted share, for the comparable period in 2014. Adjusted diluted earnings per share were $0.78 for the first nine months of 2015 compared with $0.78 for the first nine months of 2014. Adjusted EBITDA increased 9.7% to $18.2 million for the first nine months of 2015 from $16.6 million for the first nine months of 2014.
Revenues and same-store revenues for the third quarter of 2015 reflected the Company's previously announced exit from certain underperforming locations during the quarter, resulting in a $2.8 million reduction in revenues for the quarter and a 1,128 reduction in total and same store average billable census from these locations compared with the third quarter last year. Adjusting revenues to remove the exited locations from both 2015 and 2014 results, total net service revenues and same store revenues rose 7.0% and 3.8%, respectively, for the third quarter of 2015 and rose 11.4% and 8.2%, respectively, for the first nine months of 2015, compared with the same prior-year periods.
The Company's results for the third quarter of 2015 were consistent with expectations for the third quarter results that Addus announced on October 22, 2015. As described in that press release, revenue growth was diminished, in part due to the slow pace of transition by states of their dual eligible populations to managed care organizations. In addition, general and administrative expenses as a percent of revenue increased due to higher costs related to the Company's new human resources and payroll information system (HRIS), Sarbanes-Oxley Act compliance effort and certain other operating expenses. Included in these third quarter G&A costs are $330,000 in items related to exited locations and a performance earn-out payment. These increases were partially offset by a 120 basis-point comparable-quarter increase in the Company's gross profit margin to 27.9%, primarily due to improved workers compensation expense experience.
"We are continuing to take steps to improve our G&A cost structure and believe our HRIS system costs have peaked for the year," commented Mark Heaney, President and Chief Executive Officer of Addus HomeCare. "We also remain focused on increasing organic growth, i.e. census development, and we continue to be encouraged by the performance of our Illinois business for third quarter, which met our expectations for revenues with both comparable-quarter and sequential-quarter growth.
"Looking forward, we remain fully committed to maintaining Addus' position as one of the most qualified companies to partner with MCOs to provide personal care services to their dual eligible populations. The transition by the states to MCOs is continuing, even if at an uneven pace. We believe this transition represents a substantial long-term growth opportunity for Addus given our scale, expertise, technology, quality of care and financial strength in a highly fragmented industry. We expect the transition will, over time, concentrate the dual eligible census with MCOs. As evidenced by the growth in our pipeline of potential acquisitions, we also believe the transition is accelerating industry consolidation consistent with other health care sectors."
Addus completed the third quarter with $14.9 million in cash, no bank debt and $40 million of availability under its revolving credit facility. There was a net cash use of $26.3 million for the third quarter of 2015, compared with $7.4 million for the third quarter last year. For the first nine months of 2015, cash generation was $8.8 million. Since the end of the third quarter, the Company has collected an additional $17.0 million in accounts receivable from the State of Illinois.
Non-GAAP Financial Measures
The information provided in this release includes adjusted diluted earnings per share, Adjusted EBITDA and adjusted net service revenue, which are non-GAAP financial measures. The Company defines adjusted diluted earnings per share as diluted earnings per share, adjusted for M&A expenses, one-time costs associated with exited sites, tax benefit from worker opportunity tax credits and incremental costs for Sarbanes-Oxley Section 404 compliance. The Company defines Adjusted EBITDA as earnings before interest expense, taxes, depreciation, amortization, M&A expenses and stock-based compensation expense. The Company defines adjusted net service revenue as revenue adjusted for the closure of certain sites. The Company has provided, in the financial statement tables included in this press release, a reconciliation of adjusted diluted earnings per share to diluted earnings per share, a reconciliation of Adjusted EBITDA to net income and a reconciliation of adjusted net service revenue to net service revenue, in each case, the most directly comparable GAAP measure. Management believes that adjusted diluted earnings per share, adjusted EBITDA and adjusted net service revenue are useful to investors, management and others in evaluating the Company's operating performance, to provide investors with insight and consistency in the Company's financial reporting and to present a basis for comparison of the Company's business operations among periods, and to facilitate comparison with the results of the Company's peers.
Conference Call
Addus will host a conference call on Tuesday, November 3, 2015, beginning at 9:00 a.m. Eastern time.