ADUS - NASDAQ

Good day, and welcome to the Addus HomeCare's Third Quarter 2023 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Dru Anderson. Please go ahead, ma'am.

Thank you. Good morning, and welcome to the Addus HomeCare Corporation third quarter 2023 earnings conference call. Today's call is being recorded. To the extent that any non-GAAP financial measure is discussed in today's call, you will also find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP by going to the company's website and reviewing yesterday's news release. This conference call may also contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including statements, among others, regarding Addus' expected quarterly and annual financial performance for 2023 or beyond. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, discussions of forecasts, estimates, targets, plans, beliefs, expectations and the like are intended to identify forward-looking statements. You are hereby cautioned that these statements may be affected by important factors, among others, set forth in Addus filings with the Securities and Exchange Commission and in its third quarter 2023 news release. Consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. I would now like to turn the call over to the company's Chairman and Chief Executive Officer, Mr. Dirk Allison. Please go ahead, sir.

Thank you, Dru. Good morning, and welcome to our 2023 third quarter earnings call. With me today are Brian Poff, our Chief Financial Officer; and Brad Bickham, our President and Chief Operating Officer. As we do on each of our earnings calls, I will begin with a few overall comments, and then Brian will discuss the third quarter results in more detail. Following our comments, the three so us would be happy to respond to any questions. Before I turn to the discussion of our results, I want to take a moment and bring you up to date on the status of the CMS proposed Medicaid Access Rule. At this time, CMS continues to review the more than 2,000 comments submitted to the proposal before issuing a final rule. The comments submitted to CMS, including those from a broad array of state Medicaid agencies, overwhelmingly called for the administration to resend the part of the proposed rule requiring that 80% of the Medicaid payment providers go to direct caregiver wages. States, along with others who submitted comments to the proposed rule, generally site both the inherent challenges to a one-size-fits-all approach and the lack of data to support the likelihood of the 80% mandate increasing access to care for Medicaid beneficiaries as the reasons for the call to resend it. Similar calls to resend the 80% mandates are coming from Congress, including in the House Energy and Commerce Health subcommittee hearing held on Wednesday of last week. Based on the feedback we have received from industry sources, we believe the final rule may be published sometime late in the first quarter or early part of the second quarter of 2024. While the volume and substance of the comment letters may have an impact on the final rule, we do not currently have visibility as to whether the proposed rule will be materially changed. We do, however, expect that if the rule is finalized as proposed, it would most likely be subject to a legal challenge on one or more states. It is important to remind you that there are many unknowns around the proposed rule and its ultimate impact on our operations even if it were to be implemented as proposed and withstand legal challenge. Among these unknowns, we do not know when a final rule will be issued, and therefore, when the proposed full year implementation period will begin or if the proposed implementation period might be extended for a longer period of time. Our team will continue to be active on this issue as we attempt to affect changes to any final rule. Yesterday, we announced our results for the third quarter of 2023. These results highlight continued strong financial performance by Addus. This performance would not be possible without the hard work and dedication of all our employees as they continue to provide quality care to our clients and patients in the home. I want to say thank you to each member of our team, your efforts are appreciated. As we announced, our total revenue for the third quarter of 2023 was $270.7 million, an increase of 12.6% as compared to $240.5 million for the third quarter of 2022. This revenue growth resulted in adjusted earnings per share of $1.15 as compared to adjusted earnings per share for the third quarter of 2022 of $0.94, an increase of 22.3%. Our adjusted EBITDA of $30.9 million was an increase of 20% over the third quarter of 2022. During the third quarter of 2023, we continued to see strong cash flow from operations as our states and other payers have continued to pay in a timely manner. This strong cash flow, along with continued management of our balance sheet has allowed us to reduce our debt while maintaining a cash balance of approximately $80 million at the end of the quarter. Our low leverage gives us the financial flexibility to be opportunistic as we anticipate seeing additional acquisition opportunities coming to market over the next several quarters. It remains our plans to use our financial capacity to acquire strategic operations that align with our overall growth strategy of offering all three levels of home-based care in our markets. During the third quarter, we continued to see an improving labor environment, especially as it pertains to our Personal Care segment. During the third quarter of 2023, we experienced solid personal care hiring with 84 hires per business day, up from 81 hires per business day in the second quarter of this year. In addition to our strong hiring numbers, we continue to see improvement in our starts per business day. While it's important to increase our hires, making sure these hires actually start caring for consumers is a key contributor in the past few quarters to our growth in personal care. Hiring in our Clinical Care segment has also improved, but does remain a challenge in our - more challenging than in our Personal Care segment, with certain more difficult urban markets impacting our home health and hospice growth rates in those markets. As we have in prior quarters, we continue to utilize the funding we received from the American Rescue Plan Act or ARPA. To date, we have received approximately $26 million, of which we have $8.3 million remaining to utilize. We anticipate receiving an additional $16 million in ARPA funding beginning in the fourth quarter of this year. These funds have been helpful with our caregiver recruitment and retention efforts to support the delivery of personal care services and should continue to help those efforts in the future as we deploy the remaining funds. In addition to utilizing the ARPA funds for direct recruitment and retention of caregivers, we are also utilizing the funds to improve our caregivers experience through the implementation of enhanced caregiver training and the development of caregiver application that we believe will help our caregiver retention and overall service delivery. In our Personal Care segment, our services have largely continued to receive reimbursements for the majority of the states we operate in, with our most recent rate increase in our largest personal care market of Illinois effective in the second quarter. While we anticipate future reimbursement increases to enhance access to care and to help mitigate additional wage pressures, we will be negotiating with our union partners over the next few quarters in certain of our markets, to update aspects of our collective bargaining agreements. Given rising costs from inflation and certain onetime benefit enhancements, we expect we may see lower levels of margin contribution from the near-term rate increase in Illinois as we work to see that our caregivers are compensated appropriately in these markets. The impact of these negotiations may result in a slightly lower overall gross margin percentage in our Personal Care segment that we anticipate will be offset by volume increases in those markets. We continue to await the release of the final rule on the home health rate for 2024. We are hopeful that CMS has listened to the extensive feedback received over the past few months that the proposed rate decrease is not adequately taken to consideration the increase in wages and expenses home health providers have experienced over the past several years or the questionable methodology and assumption used by CMS in calculating the behavioral adjustment and budget neutrality aspects surrounding proposed rate cuts. While the home health rate cut is currently only a proposed rule, the hospice reimbursement rule was finalized during the third quarter with an overall rate increase of 3.1% effective October 1, 2023, which is an improvement over the original proposed hospice rate increase of 2.8%. We are cautiously optimistic that we will see some incremental improvement in the proposed home health rate reduction with the publication of the final home health rule in the coming days, which will more appropriately reflect our increased costs. However, as we stated before, we believe that these near-term traditional Medicare home health reimbursement pressures are likely to moderate over the next few years. And as such, we will continue to look for home health acquisition opportunities that are strategic to our overall growth. Now let me discuss our same-store revenue growth for the third quarter of 2023. For our Personal Care segment, our same-store revenue growth was 13.9% when compared to the third quarter of 2022. During the third quarter of 2023, we saw personal care same-store hours per business day grow 4.2% over the same period in 2022 and up slightly on a sequential quarterly basis. We are excited to see our various hiring and scheduling improvement initiatives taking hold and contributing to our strong sequential our growth over the past several quarters. Turning to clinical operations. our hospice same-store revenue increased 3.1% when compared to the third quarter in 2022. While our same-store ADC was basically flat when compared to the third quarter of 2022, we did see an increase in same-store ADC of 1% over last quarter. During the third quarter, we continued to see an increasing length of stay from patients residing in skilled nursing facilities as we anticipated following the end of the public health emergency. As of the end of the third quarter, our hospice medium length of stay was 32 days, exclusive of our Journey Care and recently acquired Tennessee Quality Care operations. For comparison purposes, we have historically excluded our Journey Care operations as it has a higher proportion of shorter length of state patients due to our inpatient units in the Chicago area. We continue to be encouraged by the steady sequential improvement in admissions and census volumes in our hospice segment and anticipate those favorable trends continuing into the fourth quarter. Our home health segment same-store revenue decreased 8.8% over the same quarter in 2022 as we continued to reduce admissions from payers that do not currently reimburse us adequate rates to cover our cost. While we did see lower admissions primarily due to intentionally limiting emissions from these nonstrategic Medicare Advantage plans. We did see a sequential increase in home health volume of 5.5% as a result of some incremental contract pricing success and improvements in clinical staffing. While we have limited certain admissions due to contract rates, we have seen an increase in our overall episodic commission rate going from 46% in the third quarter of 2022 to a rate of 56% in the third quarter of 2023. With the improvement in episodic admission rate, we have seen an increase in our home health gross margin to 36.2% in our third quarter of this year compared to 23.2% in the third quarter of 2022. We remain excited about our home health operation as it complements both our personal care services, particularly where we participate in value-based contracting models and our hospice services by allowing us to provide the full continuum of home-based clinical here. Over the past few months, we have continued to see limited strategic opportunities in both personal care and home health due to the reimbursement uncertainty that exists in each of these segments. As we have more clarity around these particular issues, we believe that we will start to see increasing acquisition opportunities in these segments that will meet our strategic objectives. We are extremely pleased with our Tennessee Quality Care acquisition, which has strengthened our overall operations in the state of Tennessee. This is an example of the type of acquisition that fits squarely within our strategy of providing all three levels of home care and building density in strategically important states. As for our value-based care efforts, we have been telling you for the past several quarters that we are gathering data to improve our effectiveness at helping to reduce the overall cost of care for members of our payers that participate in our various value-based care programs. We now have results in most -- in our most mature value-based agreements, and we have been able to demonstrate a material reduction in both emergency room visits as well as a percentage of patients which were readmitted to the hospital at both 30- and 90-day intervals. In addition, we've been able to help with the improvement of HEDIS scores and the closure of care gaps relating to these patients. We believe our success is due to our ability to provide both nonclinical personal care services to identify changes and conditions and clinical resources as needed for specific skilled patient care interventions. We continue to invest in value-based strategies and related technology resources. These investments should give us an opportunity during the next couple of years to accelerate our revenue growth from this part of our operation as we increase the scale of our value-based programs. We will be using this information as part of our conversations with various Medicare Advantage payers showing them how Addus can be a part of providing cost-effective care to their members that can significantly reduce the overall medical loss ratio and improve the overall quality of care received by members participating in our programs. With the recent addition of Tennessee Quality Care, we now have three states where we can offer all three levels of home care. We believe this coverage positions us well to continue to expand and add our value-based contracts in these markets. As I say each quarter, I'm so proud of our team for the care they are providing to our elderly and disabled consumers and patients. There's no question that the majority of clients and patients want to receive care in their homes which remains one of the safest and most cost-effective places to receive this care. We believe the heightened awareness of the value of home-based care is favorable for our industry and will continue to be a growth opportunity for our company. We understand and appreciate that our operations and growth are dependent on our dedicated caregivers who worked so incredibly hard providing outstanding care and support to our clients, patients and their families. With that, let me turn the call over to Brian.

Thank you, Dirk, and good morning, everyone. Addus had a strong financial and operating performance for the third quarter, reflecting the continued momentum in our business in 2023. Our results were driven by robust demand for our services, highlighted by 13.9% year-over-year organic growth in personal care services, well above our normal expected range of 3% to 5%. For the year-to-date period, personal care revenue is up 12.5% compared with the same period last year. In addition to the volume growth, we benefited from the statewide rate increases in Illinois, our largest personal care market that were effective January 1 and April 1 of this year. Our third quarter results included two months of operations of Tennessee Quality Care, a provider of home health, hospice and private duty nursing, which we acquired on August 1, 2023. We are pleased with the integration process to date and look forward to the additional growth opportunities this acquisition offers in an attractive market. Acquisitions remain an important area of focus for Addus, with the market somewhat tempered pending proposed rule changes for reimbursement and program structures. We continue to be selective in assessing and pursuing strategic opportunities in the interim. We were pleased to see continued improvement in our hospice business in the third quarter with positive sequential trends in same-store revenue, average daily census, length of stay and patient days with same-store revenues up 3.1% over the prior year. We have begun to see the early impact from the expiration of the public health emergency, which we expected to lead to an increase in our skilled nursing facility hospice length of stay. The overall results for our hospice business also include the addition of the Tennessee Quality Care operations. Same-store revenue for our home health services was down 8.8% from the same period a year ago, as we have intentionally limited emissions from payers with less favorable rates and continue to look for ways to more effectively balance our mix of episodic versus nonepisodic cases. These strategies have affected our volumes on a short-term basis but have resulted in improved profitability for home health. We are continuing to negotiate more favorable rates with certain payers that we anticipate will help drive higher patient volumes and saw sequential increases in emissions and total volume for second quarter of 2023. Our home health results include the Tennessee Quality Care acquisition as well as Apple Home Health, which we acquired on October 1, 2022. As Dirk noted, total net service revenues for the third quarter were $270.7 million. The revenue breakdown is as follows: Personal Care revenues were $201.9 million or 74.6% of revenue, Hospice care revenues were $53.1 million or 19.6% of revenue and home health revenues were $15.7 million or 5.8% of revenue. Other financial results for the third quarter of 2023 include the following: Our gross margin percentage was 32% and compared with 31.3% for the third quarter of 2022 and a sequential improvement of 30 basis points compared to 31.7% for the second quarter of 2023. As expected, the addition of the Tennessee Quality Care operations and a higher mix of clinical services had a positive impact on gross margin. With the most recent reimbursement increase in Illinois, we were not negatively affected by the annual July 1 minimum wage increase in Chicago as we expected, as we had previously adjusted our wage scales. We do anticipate some additional gross margin expansion sequentially in the fourth quarter, both from the first full quarter of our Tennessee Quality Care clinical operations as well as our annual hospice rate increase which will be 3.1% effective October 1, 2023. The combined positive impact on our gross margin is expected to be approximately 60 basis points. Looking ahead to the first quarter of 2024, we will see the normal negative seasonal impacts from our annual merit increases and the reset of payroll taxes of approximately 80 basis points and as Dirk mentioned, may see some onetime slight compression on our margin percentages from our collective marketing negotiations. G&A expense was 22.3% of revenue, a decline from 22.6% in the third quarter a year ago, but up slightly from 22.1% sequentially in the second quarter. primarily as a result of our Tennessee Quality Care acquisition having a higher G&A profile. Adjusted G&A expense for the third quarter of 2023 was 20.6%, essentially flat from the same period in the prior year and up slightly sequentially from 20.4% in the second quarter. With the first full quarter of Tennessee Quality Care and its higher G&A profile in the fourth quarter, we expect our adjusted SG&A percentage to remain relatively flat sequentially. The company's adjusted EBITDA increased to $30.9 million compared with $25.7 million a year ago. Adjusted EBITDA margin was 11.4% compared with 10.7% for the third quarter of 2022 and a 50 basis point increase from 10.9% in the second quarter of 2023. Adjusted net income per diluted share was $1.15 compared with $0.94 for the third quarter of 2022. The adjusted per share results for the third quarter of 2023 exclude the following: acquisition expenses of $0.08 and noncash stock-based compensation expense of $0.12. The adjusted per share results for the third quarter of 2022 exclude the following: acquisition expenses of $0.08, restructuring and other nonrecurring costs of $0.01, and noncash stock-based compensation expense of $0.14. Our tax rate for the third quarter of 2023 was 23.8% in alignment with our expectations. For the full year calendar 2023, we continue to expect our tax rate to be in the mid-20% range. DSOs were 41.5 days at the end of the third quarter of 2023 compared with 35.6 days at the end of the second quarter of 2023. While we have continued to experience consistent cash collections for most of our payers, we saw a more normal payment timing in the third quarter as anticipated. Our DSOs for the Illinois Department of Asia for the third quarter returned to a more typical level at 41.8 days compared with 22.3 days at the end of the second quarter of 2023. Our cash flows have continued to be very strong in 2023 with our third quarter net cash provided by operations at $21.8 million. Year-to-date, net cash provided by operations was $87.6 million, exclusive of $5.5 million in ARPA net spending. As of the end of the third quarter, we still have approximately $8.3 million in ARPU funds outstanding to be utilized, and we expect to receive approximately $16 million in additional funding from the state of New Mexico beginning in the fourth quarter. As of September 30, 2023, the company had cash of $79.8 million and bank debt of $166.4 million with capacity and availability under our revolver of $450 million and $275.6 million, respectively. With our strong cash flow, we continue to prioritize debt repayment in the absence of acquisition activity. As a result, subsequent to our borrowing for the Tennessee Quality Care acquisition, we repaid $25 million on our revolver during the third quarter and have made additional payments of $25 million to date in the fourth quarter. Our year-to-date net borrowing on our revolver as of the end of the third quarter of 2023 was $31.5 million, inclusive of the acquisition of Tennessee Quality Care for approximately $106 million. We have a capital structure that supports our growth initiatives and acquisition strategy. And as previously noted, we continue to pursue selective acquisitions as market conditions evolve. At the same time, we will continue to focus on our debt repayment strategy and manage our net leverage ratio, which is currently well under 1x net of cash on hand. This concludes our prepared comments this morning, and we'd like to thank you for being with us. I'll now ask the operator to please open the line for your questions.

[Operator Instructions] And the first question will come from Scott Fidel with Stephens. Please go ahead.

Hi, thanks. Good morning. First question, just wanted to just ask about thinking about with the fourth quarter and recognizing that you don't provide formal guidance, but would be curious if you could give us some of your thinking on sort of directional trajectory of volumes across the three core business lines sequentially for the fourth quarter and any seasonality that you would think about also influencing that? And then also on the cash flow side, which has been very strong throughout the year. Any working capital items that we should be thinking about when modeling 4Q cash flows.

Yes, Scott, this is Brian. I think just looking ahead to Q4 on growth rates, obviously, we've been well ahead of our 3% to 5% this year in Personal Care, Illinois, two rate increases this year have definitely been beneficial. I think looking ahead to the fourth quarter, we still expect our growth rate in Personal Care to most likely be above that 3% to 5% range, maybe not quite to the level we've seen in the last couple of quarters with some of the comps to last year, but still a healthy growth rate on a same-store basis year-over-year for the fourth quarter. I think in the clinical services, we've talked about we've seen some sequential improvement from Q2 into Q3. I think we would expect and anticipate to see continued positive momentum there. We do have a little bit of seasonality. I think just like most books when it comes around the holidays, particularly maybe in the hospice segment, but I think that's pretty typical. But I would say probably not overly material. And then just on the question on the cash flow. I think nothing significant, I think, from a working cap perspective, I think our DSOs have been pretty stable. We talked last quarter about being a little artificially low. We came back a little more, so I think a normal range in Q3. I would expect that to be pretty consistent. So really nothing towards the end of the back part of this year. I think just thinking ahead a little bit, we get into the early part of next year, you sort of think about annual merits, compensation, things like that, that play a little bit of an impact some of your insurance on a prepaid basis, but again, probably nothing overly material there.

Okay. Thanks Brian. And then just as a follow-up question, and I appreciate some of the visibility into thinking about gross margins in both the fourth quarter in the first quarter. I thought it may be helpful just to the extent that you can, just relative to the specific dynamic that you called out around the renegotiation on the collective bargaining with the PCS workers and some effect that may have on gross margin. As we try to think about modeling that and I guess in particular sort of as we sort of step into next year and into the first quarter. I know you talked about like the 80 basis points of other factors, is there any type of, I guess, sort of range or framing that you can give us on how we should think about tackling the gross margin impact, I guess, for the PCS segment or on the consolidated basis from the, I guess, some of these revised wage agreements that you're working on? Thanks.

Yes, Scott. I think primarily, it's in Illinois. I think the rate increase we're getting on January 1. It isn't tied to any kind of step-up in minimum wage. There's no kind of offset wage scale per se that happens exactly at that time. So in our negotiations with them, and we'll be a little cautious in exactly how detailed we get I think we expect to see some onetime, as Dirk mentioned, kind of benefit enhancements, so not necessarily hourly rates or wages. But some things that haven't been addressed through our negotiations in the past several years that we're taking an opportunity to address now. So the way to think about, I think, going into next year, normally, we kind of see an rate increase. This is going to be the amount we're getting to be about a 4.2% increase on our current rate we would see kind of a normal margin pull-through. I think our expectation is we're not going to see that with this particular rate increase when we make some of these adjustments. Illinois is a decent part of our business. So we'll probably have a very slight impact on the margin rate, but not, I would say, overly material from a percentage basis, but probably a slight impact.

Okay. Great. Thank you.

The next question we have is from Ben Hendricks with RBC Capital Markets. Please go ahead.

Great. Thank you very much. I appreciate the commentary about the PC hiring momentum. I was wondering if you could give us some your take on how retention has been trending, especially after the special Illinois rate increase that you saw or the extra Illinois rate increase you saw last year if that's having an impact on retention. Then on the hospice side, the ADC sequentially on a same-store basis. I'm wondering how that trended through the quarter and kind of what's giving you confidence in seeing some pickup in 4Q? Thanks.

Ben, this is Brad. With respect to the PCS, just kind of looking at the turnover and retention rates there. We have seen continued improvement in our retention and our turnover rates on the PCS side. I think a lot of us, as we pointed out earlier, is a lot of the enhanced unemployment benefits ended last year, which certainly helped on the retention side and getting people to work. But then more importantly, I think as you point out, some of these rate enhancements have certainly helped keep people engaged to help with hiring numbers helped keep them - I think we're doing a better job, honestly, of giving them more hours, that's one of our focuses is we're doing a good job on the hiring front. But what we really need to, I think, focus on this year and next is really maximizing our existing workforce because it's there's a lot of employees there that want more hours, and it's really a matter of matching those caregivers with open shifts, and that's where we're spending a lot of our efforts now and into next year is really focused on technology enhancements that would allow us to do a better job, which I think one helps us get cases started faster, as Dirk alluded to, but then more importantly, allows us to get more hours out of our existing workforce, which helps with the retention. When you look at the hospice trends, we saw pretty good hospice numbers when you looked at July and particularly August, tailed off a little bit in September, but then picked up again in October. So I think we've got some good momentum on the hospice front. There's still some pockets where we had some challenges on the staffing side, primarily in some urban markets like Chicago and Portland, Oregon. Those have improved. So I think that gives us some optimism heading into Q4, but as Brian pointed out, you typically have a little bit of seasonality around the holiday season, particularly with respect to hospice.

Thank you.

The next question will come from Joanna Gajuk with Bank of America. Please go ahead.

Good morning. Thank you so much for taking my question here. So I guess maybe first I'll start with a follow-up question, and then I have my question. But on the follow-up, so just talking about the Illinois rate increase and how you expect a onetime, I guess, impact to gross margin because of the lower, I guess, flow through. But you also said in the prepared remarks, you expect to see some offsets from volume increases in the market. So could you talk about that a little bit more? Like when would you see those volume, I guess, increases materializing? Is it immediately? Or is it more of a comment over time?

Yes. Joanne, this is Brad. With respect to the volume, if you look at Illinois, and this kind of goes back to the previous question, we paid a pretty good rate in Illinois because of some of the rate increases that we've received from the state, which has been beneficial on caregiver recruitment and retention. So we've seen some really solid hours growth in Illinois. I think year-over-year, they're up by almost 6% on an hours basis. Even though we're not getting necessarily as much margin out of this - the upcoming rate increase, I do anticipate that those volume increases should continue, which will give us more leverage off of our SG&A which I think when you talk about margin, really focused on the bottom line, it should have a negligible effect that we're seeing a little bit of not as much pull-through on this rate increase.

Okay. Thank you. And my question around the margin comment there, so appreciate typically, this Q4 margins are higher. But then to your point, Q1 tends to be a lower margin quarter in a year. So I guess this year, I guess, tracking for the full year EBITDA margins, I'm talking about 11% and in change maybe 11.1% for the full year. So is that a good starting point when you think about the full year 2024, I understand you don't give specific guidance, but I guess in light of the commentary is around Q1, I think it will be helpful talking about also kind of fourth quarter period, how the margins could play out? And as you talk about that, I guess, any puts and takes in terms of the volumes and rates, obviously, volumes have been improving nicely in PCS, but it's very strong right and how you see this normalizing into next year? Thank you.

Yes, Joanna, I think for 2023, I think we are trending toward finishing the full year above - back above 11%, which is where we were a couple of years ago. I think we had talked about coming into this year, we expected our margins to remain somewhat stable compared to last year where we saw a lot of wage pressure. I think we've actually overperformed that a little bit this year, I think adding an acquisition like Tennessee Quality Care and Clinical is helpful with that as well. But I think our expectation looking forward to 2024 on a margin perspective is we would expect to again be back above 11% and stay in that range. I think talking a little bit of piggybacking on Scott's earlier question about growth rates, I think our long-term growth rate in personal care 3% to 5%, I think we're still comfortable with and then getting to a four plus percent increase in Illinois just thinking about the top line, not necessarily the pull-through is very helpful in that regard going into next year. So I think we expect to be nicely into that range and maybe towards the top end of next year. And I think our clinical services, we anticipate we'd like to see those get back to our normal growth rates of kind of mid-single digits. So with that, again, that 11-plus percent bottom line margin expectation for next year.

Thank you. If I can just follow up on that. So I guess, sounds like you're talking about maybe higher end of the 3% to 5% for PCS. So how would you break it down the volumes versus rates? Or I guess Illinois, you just mentioned 4% increase. And how are, I guess, the rest of the PCS markets trending when it comes to rate increases into next year? Thank you.

Yes, I think Illinois obviously is going to be the most impactful one for us next year. So they're about 40% of our business in personal care. So at four plus percent, that's a good start on the 3% to 5% consolidated for the year. I think we've seen good rate support over the last couple of years from a lot of our markets. We've seen a lot of corresponding increases to offset some minimum wage step-up. We don't have many of those, I think, scheduled for next year. So I think our expectation is outside of Illinois, not probably a lot on the rate side next year. I think we are getting, as Brad mentioned, really good momentum and volume - on the volume side. And we have an expectation that our markets will continue to grow both in number of clients, but also where we can maximize the fill rates from our authorizations. We're making some headway there. We have some opportunity there on the volume side, we believe.

Great. Thank you so much.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Dirk Allison for any closing remarks. Please go ahead.

Thank you, operator. I want to thank you for your interest in Addus and for being part of our call today. We hope you have a great week.