Good day and thank you for standing by. Welcome to the Addus HomeCare Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised, that today's conference is being recorded.

[Operator Instructions] I would now like to hand the conference over to Dru Anderson. Please go ahead..

Thank you. Good morning and welcome to the Addus HomeCare third quarter 2021 earnings conference call.

To the extent 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 2021 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 it's third quarter 2021 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, MA - Dirk Allison. Please go ahead, sir..

Thank you, Dru. Good morning and welcome to our 2021 third quarter earnings call. With me today are Brian Poff, our Chief Financial Officer; and Brad Bickham, our President and Chief Operating Officer. As is our custom, I will begin with a few overall comments and then Brian will discuss the third quarter results in more detail.

Following our comments, we'll be happy to respond to any questions. Yesterday, we announced our financial results for the third quarter of 2021 and we are proud of our operating performance. Our team was able to produce record results in the quarter despite certain pressures from the current operating environment that I will discuss.

Our revenue for the third quarter of 2021 was $216.7 million as compared to $194 million for the third quarter of 2020, an increase of 11.7%. Adjusted earnings per diluted share for the third quarter of 2021 or $0.91 as compared to $0.76 for the third quarter of 2020, an increase of 19.7%.

Our adjusted EBITDA for the third quarter of 2021 was $24.9 million as compared to $19.5 million for the third quarter of 2020, an increase of 27.4%.

During the third quarter, we continued to see the positive effect of the $350 billion in State Aid which came from the most recent federal stimulus plan as our states have done a nice job in maintaining and, in some cases, increasing outstanding accounts receivable payments to Addus leading to a strong cash flow quarter and a cash balance at September 30 of approximately $152 million.

Over the past few years, I have discussed the minimum wage increases which were occurring in Chicago. These annual minimum wage increases have now been fully implemented. The final Chicago minimum wage increase of $1 per hour which takes the city's minimum wage to $15, was effective on July 1, 2021.

It is important to note that this cost increase is reflected in our third quarter results without a corresponding reimbursement rate increase which had a negative effect on our operating margin.

As we told you during our last earnings call, the State of Illinois budget for the fiscal year 2022 planned to offset the Chicago minimum wage increase with an additional statewide reimbursement rate increase which was to be effective January 1, 2022.

However, with it's receipt of the additional 10% FMAP funding through the previously mentioned stimulus bill, the State has requested approval from CMS to accelerate this rate increase by two months making it effective on November 1, 2021 and appear confident that they will receive approval for a November 1 increase.

This rate increase will cover the entire state of Illinois and positively impact our fourth quarter financial results. Several other states have requested approval from CMS for changes to their home and community-based service programs utilizing the additional federal funds from the 10% FMAP.

Many of these requests include proposed reimbursement rate increases for our services. We hope to see these requests approved by CMS in the near future and to learn more about the specific reimbursement rate increases included in those requests.

Along with our positive operating trends, we saw some near-term pressure related to other developments that impacted our third quarter financial results.

Our ability to continue our New York consumer-directed business, as we discussed on our last call, remains uncertain as we continue to await word on our formal protest concerning our non-award and the provider selection process for the CDPAP program.

We anticipate hearing something from the State concerning this protest over the next few months, although no official timetable has been released. In the meantime, we filed our response to the state's follow-up survey which was created by the state to consider additional awards to providers for this program.

While we continue to await decisions on any additional awards, we have stopped accepting most new referrals for the New York CDPAP program due to the uncertainty of continuity and negative reimbursement changes for a portion of our business that was already one of our lowest margin contracts.

As a result of the COVID impact and our attentional approach to the New York CDPAP over the past 12 months, we have seen our revenue in this program decreased from an annualized run rate of approximately $52 million as of the third quarter of 2020 to approximately $44 million as of the end of our third quarter of 2021.

We expect our revenues from the New York CDPAP to continue to decline in the absence of changes to the existing status as we continue to limit new referrals. Our third quarter results were also modestly impacted by an increase in the number of caregivers in quarantine due to the surge in COVID infections resulting from the delta variance.

While the impact of this most recent surge in the COVID virus was not as significant as the one we saw during the fourth quarter of 2020, we did see an increasing number of missed visits due to call-offs. These call-offs peaked in September and steadily decreased through the month of October.

These call-offs had an immaterial effect on our third quarter revenues. While there was no impact to our third quarter results, another challenge that we, like most companies face today is the issue concerning vaccinations.

As many of you know, the federal government has proposed that all health care employees whose businesses operate under a condition of participation with Medicare or Medicaid must be vaccinated. This proposed vaccination mandate would cover our home health and hospice segments.

In addition, New York, Delaware and the City of Philadelphia have mandated that all health care companies, including personal care, must ensure that their employees in those markets are vaccinated.

Companies like Addus are also operating under the potential of an OSHA requirement that all employers with 100 or more employees must mandate that their employees be vaccinated.

These various city and state mandates as well as the potential of federal mandates make it imperative that we focus on getting as many of our employees vaccinated as possible. While Addus has not mandated vaccines for our employees, we have taken a number of steps to strongly encourage our employees to get the COVID vaccine.

Over the past few months, we have implemented a number of initiatives designed to increase the vaccination rate of our employees.

These include a stipend for getting vaccinated and ongoing communication program centered around the theme of Be A Hero which includes videos with corporate leadership and Board members as well as written communications with stories of caregivers who have received the vaccine and now a program that provides prize opportunities for vaccinated employees.

These efforts have been effective as we have seen our vaccination rates continue to increase. With New York being our largest market with the current vaccine mandate, it has been a priority to get our employees vaccinated and to track vaccination status. Our dispersed workforce makes this process more challenging.

But as of today, we have confirmed that roughly 93% of our New York caregivers have now been fully vaccinated or received their first dose of a two shot regiment. We are very pleased with this response from our employees but we also realized that all markets may not embrace the mandate like they have in New York.

While vaccine mandates are a potential issue for Addus, we are pleased in the progress we are seeing. Overall, our confirmed vaccination percentages are 79% vaccinated in home health, 71% vaccinated in hospice and 56% vaccinated for personal care.

Based on our experience with our New York caregivers, we believe these numbers could be understated by some amount based on incomplete information. We are still working to ascertain vaccination status for all employees which is an ongoing process, particularly with our dispersed personal caregivers.

As of today, we have not seen any material effect on our revenues due to these various mandates and we continue our efforts to be well positioned to adhere to any future mandates implemented as they occur. A critical item for our personal care organic growth is the ability to hire new care givers.

A tightening labor market had some effect on our growth in certain markets and particularly, Oregon, Idaho and Tennessee. Many segments of the economy are seeing labor shortages which may continue and may be more severe in some areas of the country. However, our overall hiring in our Personal Care segment continues to see improvement.

We saw solid growth in our hires per business day during the third quarter in our Personal Care segment with September being our best hiring month of 2021. This favorable hiring trend continued into the month of October.

Our personal caregiver hires in our third quarter were up slightly over the third quarter of the prior year and a 5.8% on a sequential basis with most of the increase occurring in September. Now let me discuss our revenue growth in our various operating segments.

Our same-store revenue growth for our personal care operation exclusive of the New York CDPAP program was 4% when compared to the third quarter of 2020. This growth is within our range of expectations for our Personal Care segment.

With our upcoming Illinois rate increase, we expect to be at the high end of this rate of growth over our next few quarters. We are pleased with the performance of this segment of our business in spite of the challenges we have faced over the last several quarters due to the pandemic.

As for our Home Health segment, this segment of our company has continued it's strong performance. During our third quarter of 2021, our same-store revenue growth was 24.8%. Since the beginning of 2021, our home health admissions have increased steadily with this favorable trend continuing throughout the third quarter.

We are excited about our home health operation and we'll continue to focus our efforts on expanding this part of our company. On our last earnings call, we discussed our belief that we would start to see a steady growth in our hospice ADC during the last half of 2021.

With strong hospice admissions since the beginning of the year, we believe that a corresponding increase in our ADC would come. We are pleased to see the beginnings of this growth in our third quarter hospice results.

While our hospice same-store revenue decreased 4.8% over a strong third quarter in 2020, it was an approximate 400 basis point improvement over our second quarter same-store growth.

As we saw in the second quarter of this year, our same-store admissions continued to be strong, growing 22.3% over the third quarter of 2020 and 14.5% on a sequential quarterly basis. This should continue to lead to higher census as the year progresses.

Our hospice ADC grew to 2,629 for the third quarter of 2021 as compared to an ADC of 2,460 for the second quarter of this year. This improvement is consistent with our expectation of seeing our hospice census gradually improve over the last half of 2021 as our median length of stay also continues to improve from our low point in January of this year.

We are also seeing an improvement in our hospice volumes in both ALS and SNFs both of which have been slower to return than census outside of the facility setting. In July, we announced the acquisition of Armada Home Health and Hospice Effective October 1, we closed on our acquisition of Summit Home Health, a home health provider in Illinois.

This represents our entry into clinical services in Illinois, our largest state for personal care services. This is consistent with our strategy of adding clinical care to our personal care markets.

We are excited about our Armada Home Health and Hospice as well as Summit Home Health being a part of our company and I want to welcome all of our new team members to the Addus family.

As you saw with both of these purchases, we continue to focus our acquisitions -- on acquisitions which meet our goal of creating multiple markets where we provide all three levels of homecare. We will continue to look at our opportunities in all three segments with a focus on acquiring services in markets where we have strong personal care coverage.

This past 18 months has shown the value of taking care of elderly and disabled consumers and patients in their homes during the pandemic. We have invested in planning, preparations and materials to assist us in safely fulfilling our role as we continue to monitor developments related to the pandemic and changes in the homecare industry.

We believe the pandemic has raised awareness about the value -- our value our industry provides and will continue to be a growth opportunity for our company. But our operations and resulting growth are dependent on our dedicated caregivers who work so hard providing outstanding care and support to our consumers, patients and their families.

I am thankful for each one of our team members and I am proud of the job they have done in the past 18 months and continue to do each day. It is important that each of us focus on achieving our mission by putting our patients first. With that, let me turn the call over to Brian..

COVID-19 expense of $0.02, acquisition and de novo expenses of $0.02, restructuring and other costs of $0.08 and noncash stock-based compensation of $0.07. Our tax rate for the third quarter of 2021 was 26.6% within the range of our expectation. For the full calendar 2021, we continue to expect a tax rate in the mid-20% range.

DSOs were 52.9 days at the end of the third quarter of 2021 compared with 56.9 days at the end of the second quarter. We continue to see consistent payments from the majority of our payers, including another strong cash collection quarter from the Illinois Department of AG whose ESOs were down to 36.4 days at the end of the third quarter of 2021.

We continue to see strong cash flows with our third quarter net cash provided by operations totaling $17.6 million. At September 30, 2021, the company had cash on hand of $152.4 million with $224.9 million of bank debt.

Under our recently expanded revolver at the end of the third quarter, we had capacity and availability of $367 million and $123.8 million, respectively and remain well positioned to execute on our acquisition strategy. This concludes our prepared comments this morning and we would like to thank you for all being with us.

I'll now ask the operator to please open the line for your questions..

[Operator Instructions] Our first question comes from the line of Matt Borsch with BMO Capital. Your line is open..

Yes. Impressive results, particularly given all the circumstances. Let me ask you about the M&A pipeline and how that may be changing given what we've been going through here.

And to the extent you can comment at all about what kind of valuations are prevailing and how that may have changed? I'm particularly interested in the hospice side where for a while their valuation and maybe this is still the case that we've been quite elevated..

Yes, Matt. I think what we're seeing currently in the pipeline, I think our valuation ranges really haven't moved from the projects that we've been working on. I think we still have several things that we would like to continue to progress.

But as you know, we're being very selective in what we're looking to acquire both from a valuation standpoint but also a good strategically with where we have overlap in our service lines. So I think we feel still pretty positive about what we're looking at today. Haven't seen valuations move.

I will say I think we've seen probably a little bit of a slowdown in maybe things coming to market through brokered processes. I think two, three, four, five months ago, there's quite a bit more activity. We are seeing a little bit, I guess, less activity in that regard over the last couple of months..

Okay, great.

And are you trying to emphasize the homecare side of the business just given that that remains a fairly small percentage of your overall revenue?.

Yes. I think we definitely -- we indicated this in the last couple of quarters as well. Our focus has been on trying to add clinical services where we have significant personal care assets. So I think that still is consistent with what we're looking at today and home -- skilled home health is obviously a much smaller portion of our business.

So we were happy to bring on Summit this last quarter which gives us our first clinical services in Illinois. It was a small acquisition but I think it's in really well with Chicago which is our largest personal care market. So where we can continue to replicate that type of acquisition in the future, we definitely would like to.

If we get a little more size and scale, definitely has always preferred as well..

All right, thank you..

Our next question comes from the line of Scott Fidel with Stephens. Your line is open..

Hi. Thanks, Brian. Good morning. Interested if you could maybe give us a little thoughts on the headwinds and tailwinds just in terms of thinking about modeling revenues and margins sequentially.

Just thinking about in the last couple of quarters, it seemed like the street has probably been a little bit aggressive on the revenue side and a little bit conservative on the margin side. So trying to get in front of that a little bit here.

And understand that you don't provide formal guidance but maybe giving us some framing to think about sequentially for 4Q relative to 3Q..

Yes, Scott. I think liked to fourth quarter, obviously, with the Illinois rate increase coming on board in November which we expect to get full approval on that from CMS or the state to get approval, I'm sorry, very shortly.

Obviously, that's going to be a benefit, not just to revenue but also to margin as we've taken the impact of the Chicago minimum wage increase. Keep in mind, we'll give all of our non-Chicago workers that increase. At the same time, we get the rate increase. But so would be a benefit for us in Q4.

So, I think your point is well taken, looking at Q3 as kind of a baseline move into Q4, especially from the top line and revenue expectation we've seen consistent sequential growth. I think we would expect to see that continuing into Q4. We'll benefit from one extra month of Armada in Q4 and Summit which is the small acquisition we did up in Chicago.

But thinking about it from a margin perspective, we should see the benefit of Illinois particularly in Q4. If you look forward into 2022, especially in Q1, with reset of payroll taxes, you've got potentially the Medicare sequester holiday ceasing at the end of the year, probably would expect to see some of that rationalize in Q1..

Got it, thanks. And then just as my follow-up question, just I guess, back on to CDPAP and the situation there. And appreciate you calling out the annualized revenue contribution, that's helpful.

That's still a bit tricky, I think, for all of us in terms of what to do with that contract in our models at this point and whether to keep it in or not? So not asking you what we should do with our models there but if you could give us some insight, I guess, into sort of where you think things sit from a timing perspective at this point.

And I know you mentioned that it's a much lower margin now on that contract. But if you were able to clean out even more specifically what you think the annualized EBITDA contribution is from CDPAP, I think that would be helpful for us to try to ring-fence if that contract did go offline..

Yes. Honestly, Scott, as we look at what's going to happen with the CDPAP program and at least in our mind, we're going to continue to limit new referrals into that program.

We're concerned not only about our ability to continue in that program because of a contract but also the profitability of that as the state has come out with -- and lowered the reimbursement for that particular program.

So we have continued -- as you will see, since the last year, we started right at about a year ago, starting to limit that -- those referrals were down almost $10 million in revenue to around $44 million annualized today. You should see that continue to decrease at a similar rate over the next year.

The only change would be if the state came through, gave us contract and adjusted their rates so that going forward, providers in that particular program can actually make a return then we would consider continuing to service new clients. But right now, we'll continue to see that decrease, as far as the margin....

Yes. I think, Scott, I think to Dirk's point, timing is going to be probably something we don't have a lot of insight into you, unfortunately, right now. I think the state has not really come forward with any kind of a set time table.

So I think we had said a few months ago, we -- they've kind of put out this potential for a November 1 period of starting to transfer patients. I think we were a little dubious of that even at the time. haven't seen that come to fruition.

So hard for us to put a box around when will we see that transition, assuming that we you did not say in the program through one of the various methods that Dirk described in his comments earlier, I think from a margin perspective, we're down to $44 million in annualized revenue.

Our margins there are in the kind of that mid- to upper single-digit range. So it's a pretty low-margin contract. So not material for us. And as that continues to kind of trail off, I think even continues to lessen the exposure..

Okay, that's helpful. Thanks..

Our next question comes from the line of Frank Morgan with RBC Capital Markets. Your line is open..

Good morning. I was hoping we could kind of go back to the sort of the -- what you're seeing in terms of momentum exiting the quarter? I think you gave a little bit of commentary about hospice. But as you look across all three of the segments, maybe what you're seeing so far in the year.

And I guess I'm also curious on the hospice side since that's the one that's been sort of the drag is maybe more color specifically on the recovery in that mix of SNF and Alpha pools. That's my first question..

Yes. Frank, this is Brad. With respect to kind of where we stand in the various segments exiting the quarter, what's encouraging on the personal care side, it was probably impacted the most from a COVID standpoint with quarantined employees. We started seeing those numbers decrease towards the end of September and that's continued into October.

Also kind of a driver is our hiring metrics which have been strong. September, surprisingly was actually our strongest hiring month, not just this year but actually the strongest over the last two years.

I don't know if that's a reflection of some of the stimulus money coming to an end with respect to the enhanced unemployment benefits but the timing seems to match up. With respect to and then just related to that October hiring trends have actually been pretty favorable there as well. And we still continue to see robust demand for our services.

With respect to Home Health, Home Health has been just checking along. And we've had some really good quarters, I anticipate -- of course, the comps are going to start getting a little more challenging because of all the growth that we've had this year.

but optimistic that, that's going to continue traditionally on the home health side, kind of as you get later in the year, a lot of people going to try to use surgeries and stuff to use up any deduct or any deductibles that they have under their plans. Go ahead and get them out, taken care of this year.

So you'll see a pickup kind of late Q4 and then into Q1 there. With respect to hospice, we've actually seen a couple of things going in. Since January of this year, we bottomed out on our median length of stay. We've seen nice sequential increases in our median length of stay. It's not quite up to the mid-20s yet but it's around 20, 21 days.

October, it looks like we may have picked up about a day there as well. So, it seems -- and continuing to see some good admission volume. Now, we'll say Hospice in Q4 around the holidays tend to slow down a little bit and then pick up again in Q1. As far as the mix, we have seen actually a pickup in both ALS and nursing homes.

We started seeing the Smith volume pickup last quarter. This quarter, we actually started seeing the ALS pick up as well. So we're still not back to what our kind of pre-pandemic mix is. And I think that's going to take some time with facility occupancy levels increasing but certainly, we started seeing a nice pickup there..

Got you. Maybe as a follow-up, in terms of home health care and hospice how much agency labor or just premium labor that have you had to use? And then maybe a brine question. Just remind us what the annualized effect of that sequester would be on all your Medicare revenues? Thanks..

Yes, I'll take the staffing question first. We really have used minimal outside staffing on both home health and hospice. We've been fortunate there..

Yes. On sequester, Frank, I think when that goes away just with the mix of our skilled business today, that would probably be around $3 million in total. But keep in mind, we're also going to get our kind of annual CPI rate increase here in the fourth quarter as well that will probably help to offset that.

So I think the way we look at it going into next year, assuming that sequester holiday does go away, will be essentially flat but I wouldn't expect to see us have a net rate increase going into next year but essentially flat..

Okay, thanks..

Our next question comes from the line of Matt Larew with William Blair. Your line is open..

Yes. Hi, good morning. I just wanted to ask maybe the latest you're hearing around the potential for some HCBS funding and a legislative package before the end of the year. I know there's been many iterations and discussions around that but just kind of related to hearing on the whole..

Yes. Certainly, we -- like everybody else, we're sitting here waiting to see if the Democrats are going to get together and pass the reconciliation bill. Right now, as we understand it, there's $150 billion in the current draft of the reconciliation bill that will be dedicated to home and community-based care.

As far as really having any further insight of where that stands, all we know is that it is still in the build today but we have no knowledge of when and if this might be passed..

Okay. And then, just one on a previous question. You mentioned you utilize much contract labor. Obviously, a number of your peers have referenced that. They also referenced things like additional bonuses, pretty significant increases in the wage trend.

Did you also not experience that? And I guess, any thoughts on why you've been able to avoid some of those near-term staffing challenges?.

Yes. I think when you look on the staffing side, I mean, one, our exposure on the clinical is certainly not as maybe significant as some of our peers. But it is -- we're starting to see some wage pressure, certainly, in particular markets. So nurses specifically, are more competitive.

We've had to make some proactive adjustments there on the compensation side. So far, we've avoided some of the special bonuses. But we are having to make some proactive adjustments on the -- for wages, particularly with respect to nurses.

But we've been fortunate to be able to avoid any of that premium labor so far but it's a competitive environment out there on the clinical services..

And administrative..

Yes. And we're starting to see administrative services kind of across all segments. That is a much smaller part of our cost structure. But certainly a service coordinators our personal care side which are schedulers certainly starting to see some wage pressures there..

Okay, appreciate it. Thanks..

Our next question comes from the line of Brian Tanquilut with Jefferies. Your line is open..

Thank you, everybody. Guys, I guess, Brian, first question for you or maybe for Dirk as well. I know in the past, you've talked about kind of like a goal of acquiring at least $100 million of revenue a year and year at $30 million this year. So I know you typically source your own deal.

So just curious, Brian, you said you're not seeing that much or there's a slowdown in brokered deals but what are you seeing on the deal front from your own BD team.

And are there any changes in the market that you would call out that would explain some of the slowdown in your typical M&A pace?.

Yes, Brain. I think specifically, I just talk about kind of our pace for this year. And we had some projects that we were working on early this year. And I think as you guys know, we're pretty stringent in our diligence process. We also are looking at things that are very specific and strategic to us.

We're not looking to necessarily just make acquisitions to make acquisitions. So kind of through that selective process and then some things that didn't get across the finish line, I think, has put us where we are a little behind where we'd like to be as far as acquired revenues for this year. I will say the year is not over just yet.

It's still in November. But we still got some things in our pipeline that we're excited about and we'll see if we can get those through our process and to close.

So I think from a market perspective, I think what we've seen, as I mentioned a little bit earlier, just broker processes, we're not seeing the level of activity we saw probably over the summer. It seemed like there were several things out in the market at the time.

A lot of those that didn't fit well with us but we are probably feeling that broker processes a little slower towards the end of the year. I think you had a big bolus of people that we're looking to get out to the market and advance the potential cap gains issues.

I think they realize now going into the end of the year, that's probably going to be difficult to get closed this year. So maybe their decision process to say it's better to kind of rebase off of a Delta wave and look at going out early next year, not really sure. That's a little speculative on my part.

But that's probably all I can really say that what we're seeing different in the market today..

Got it.

And then, Dirk, just any updates you can share with us on the MA front in terms of your efforts to try to gain traction there and maybe expand into the M&A market?.

Yes. Again, Brian, what we've been doing as it relates to Medicare Advantage and really the whole value-based care approach. We currently -- as we said, we've announced one deal with Presbyterian where we're working on a value-based approach.

We hope to -- we should be announcing further deals soon which will show that we're into a number of pilots all related around value-based care. And the reason I talk about that is even though some of the pilots will be doing or managed Medicaid providers.

The data that we're going to develop or are developing from these various pilots will allow us to sit across with the Medicare Advantage providers and talk about how we can help them control their medical loss costs. So we're still very excited about this.

In fact, we believe value-based care is a real opportunity not only for Addus, obviously but for others in the industry. We think the market is headed that direction. We have a team that is working specifically around value-based care and what we can do in the future with Medicare Advantage.

It's just, again, it's not going to be something that flips the switch and becomes material to Addus in the next year or so. It's going to take three or four years for us to continue to work with these various companies and present the opportunity we believe we bring to them to lower their cost.

So we're still excited about it but it's going to be a long-term process..

Okay. Thanks, guys..

Our next question comes from the line of John Ransom with Raymond James. Your line is open..

Good morning.

Have you seen any material inflection in labor supply since some of these states ended their unemployment benefits?.

Yes, John, this is Brad. We have -- I mean, it certainly appears to be with -- if you look at our September hiring numbers which corresponds when the enhanced federal unemployment benefits expired across the country. Now we did see a nice pickup there. It was our strongest personal care hiring month in over two years.

So whether that's specifically tied to that, not sure. But it seemed to correspond with it and particularly in our hiring numbers, honestly, kind of in the Illinois market increased pretty significantly, particularly in the Chicago area which was one of the ones that had unemployment benefit enhanced benefits out there to early September..

Great. And then conversely, in states that you're operating in that are embracing vaccine mandates as sort of a harbinger for maybe some -- the federal program that you talked about.

Have you been able to navigate those as successfully, more successfully, less successfully than you might have thought?.

Yes. Actually, I think more successfully than we would have thought. I mean, now New York being the largest market that is subject to a vaccine mandate that applies to our personal care caregivers, as Dirk mentioned in his script, I mean, we ended up around 93% vaccinated.

We still have a few out there employees that I think are still considering getting vaccinated. Impact was pretty negligible. It's probably less than 2% on hours out of the gate with the mandate going into effect.

So it's something that we're certainly monitoring and whether New York is going to be the same as Downstate Illinois or Montana or Idaho is to be seen.

But we're really pushing hard and encouraging our caregivers to get vaccinated and not just for -- in preparation of the mandate but we just, honestly, as a company, I think that's the right thing to do. We do believe that in the best interest of our employees. I mean if you look at the safety and efficacy of the vaccines.

So we're still continuing to push it. Our biggest challenge, honestly, is just understanding the vaccination status of a very dispersed workforce is primarily part time for us. We still have a lot of unknowns and that's our focus over the next month or so..

And just remind me the current stat on percent of your labor that's family members and how that may have evolved over the past couple of years?.

Yes. We're probably around 35% family caregivers and that's a good point when it comes to the vaccine mandates. What we have seen at some of the local levels is that family caregivers or those that are residing in the home are typically exempt from those mandates.

So we'll have to wait and see what happens on the federal front and with some of these other mandates but we have seen some relief there..

Okay, thanks so much..

[Operator Instructions] Our next question comes from the line of Mitra Ramgopal with Sidoti. Your line is open..

[Indiscernible] hiring is not the problem [ph]?.

Mitra, you're breaking that. Mitra, you're breaking up pretty bad..

Can you hear us?.

No. Try again..

Hey, Mitra can you hear us?.

Yes, you're not coming through..

Operator why don't we go ahead and if there is no other questions. Mitra can contact me directly and get his questions..

Okay. Thank you. I am showing no further questions at this time. I'd like to turn the call back over to Dirk Allison for closing comments..

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

This concludes today's conference call. Thank you for participating. You may now disconnect..