Good morning, and welcome to Addus HomeCare Corporation's First Quarter 2020 Earnings Conference Call. Today's call is being recorded. To the extent any non-GAAP financial measure is directly 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 2020 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 first quarter 2020 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. As a reminder, Addus has not yet filed its 2019 Form 10-K and will file its Form 10-Q for the first quarter when it finalizes the Form 10-K. As a result, all financial results discussed on this call today are preliminary. I would like to now turn the call over to the company's President and Chief Executive Officer, MDirk Allison. Please go ahead, sir.

Thank you, Drew. Good morning, everyone, and thank you for joining us for our 2020 first quarter earnings call. With me today is Brian Poff, our Chief Financial Officer; and Brad Bickham, our Chief Operating Officer. As usual, I will begin with some overall comments, and then Brian will discuss the first quarter results that we issued yesterday afternoon. Following our comments, we would be happy to respond to any questions. As you saw with the preliminary financial results we announced yesterday, we had another very solid operating performance in the first quarter of 2020. Our revenue for the first quarter was $190.2 million, adjusted earnings per diluted share for the first quarter of 2020 increased to $0.77, and our adjusted EBITDA for the first quarter of 2020 was $17.7 million. We did start to experience a reduction in our revenues beginning in the last 2 weeks of March due to the coronavirus, which I will discuss in a few minutes. As we'd previously announced, on January 1 of this year, we received a rate increase from the State of Illinois. This rate increase is to cover the minimum wage increase which occurred in Chicago and Cook County on July 1, 2019. This increase also allowed us to correspondingly increase the wages of our Illinois team located outside of the Chicago area. We appreciate that the leadership of the State of Illinois recognized the need to make adjustments to cover the cost associated with the higher minimum wages. As for additional minimum wage increases in Illinois, the city of Chicago has passed an ordinance which will raise the city's minimum wage on July 1 by $1 to $14 per hour. This accelerates the move to a $15-per-hour minimum wage ahead of what the State of Illinois had already passed. Our…

Thank you, Dirk, and good morning, everyone. Please note that the financial results discussed on this call and in our press release are preliminary and will not be finalized until the 2019 Form 10-K financial statements are completed and filed. In coordination with our current auditors, PwC, we currently anticipate the timing to completion and filing to be in advance of our standard second quarter filing deadline. Addus had a solid financial performance for the first quarter, marking a strong start to 2020. For the quarter, we had favorable demand trends across all of our service segments and also realized the impact of the additional scheduled rate increase in Illinois on January 1, 2020. As Dirk noted, total net service revenues for the first quarter were $190.2 million. The revenue breakdown is as follows -- personal care revenues were $160.7 million, or 84.5% of revenue; hospice care revenues were $25.2 million, or 13.2% of revenue; and home health revenues were $4.3 million, or 2.3% of revenues. Our first quarter results demonstrate we are continuing to execute on our organic growth strategy with favorable results prior to the impact of COVID, which impacted the last few weeks of the quarter and will be more impactful in the second quarter, as Dirk mentioned. While we are facing a challenging environment, we have a strong business model in place and believe we are well positioned to continue to support our clients and payors through the pandemic. We are also continuing to realize the incremental benefits of the 4 acquisitions we completed in 2019, with total annualized revenue of approximately $130 million. We continue to evaluate and pursue other acquisition opportunities and have a robust pipeline of potential transactions. However, we are approaching acquisition activity with all appropriate caution and diligence, which temporarily could…

[Operator Instructions]. Our first question is from the line of Matthew Borsch with BMO Capital Markets.

Maybe if I could, to just start on the -- I don't know if you're prepared to say anything else about the delayed filing. If I could just ask a simplistic question, and I'm sure you've gotten this before, but it just seems, from an outsider's perspective, that this has been delayed for so long over something that is so immaterial to your results. Can you just comment on that, if you don't mind?

Yes, Matthew. This is Dirk. Yes, it is frustrating -- I know it is to us, so I assume it is to you guys, too -- that something that is as immaterial for a company our size as this has kept us from being able to file financials. I think the good thing is this -- once we were able to work through the fact that our two auditing firms were not going to be able to make a decision together to allow us to file, we had a plan to follow up behind that to make sure we could take care of it as quickly as possible. That plan, which required our current auditor, PwC, to come in and audit our 2017 and 2018 financials that had been previously audited by Ernst & Young, has begun and is on track and is progressing as we have expected. So while it -- I think Brian mentioned in his comments that we expect this to be completed by the time we file our second quarter earnings release, so we're hopeful that the first quarter release is the last time we'll talk to you about preliminary.

Oh, okay. All right, well, great. And if I could just add one more question on a completely different topic, as you look at the current volume environment -- I think I heard you say April down 10%, I believe, for revenue, and I'm assuming that's year-over-year, and that you expect the second quarter as a whole to be down -- I'm not asking for guidance, of course, but are you seeing any stabilization or are the volume trends worsening as you end April into May, or is it too early to say?

Yes, and let me say, it's not 10% year-over-year. Not at all. It is just -- it's 10%, right around 10%, lower than we were running prior to the virus starting to affect the company. So we're still left with all the growth we've had. That -- make sure you understand that. Let me talk about what we're seeing, briefly. This is new to us. Our operations team, we've been trying to gather data as quickly as possible. We do still have some caregivers that are on written paper time sheets, which takes a little bit longer to get in, but what we're seeing as we flow through the last 3 or 4 weeks, the real impact has been focused around New York, Illinois, mainly Chicago area, and a little bit of Detroit. That's really where we've seen the biggest reduction. We've seen a little bit in Washington State, as I mentioned earlier. But if you really want to say, where is it affecting you? It's New York, Long Island and the Chicago area. We saw a gradual rise in call-offs, which reduced our referrals, starting in, probably, the third week of March, and continuing on that point. They started out small. I would say about the first or second week of April we saw them get up, in New York particularly, much higher -- as you probably know, the New York pinnacle of this virus. I will tell you that what we have seen -- and again, this is not necessarily a trend -- but this last week, we started to see a top-out and start to come back where the percent of call-offs was starting to be lower than the week before. So we believe, in all of our markets or the majority of our markets, particularly the Chicago and the Long Island -- the New York and Long Island markets, we have seen the pinnacle and we're starting to come down. If that continues, then what we'd be talking about is that the 10% reduction would be in April, and then May and June, the rest of the quarter might be somewhat below that. But again, let me just caution you, we're still looking at this data and it's just starting to turn, so we've got to see if it continues. But so far we would say we're comfortable with the 10%. We could see it starting to come back a little.

And your next question is from the line of Frank Morgan with RBC Capital Markets.

I appreciate the color about the rate environment out there. I'm curious if -- how much of a factor you think these [indiscernible] payments under the CARES Act could potentially help personal care? And then just curious about any other grant monies or Medicare money you may have gotten in your home health care business. Any proceeds you received there?

Yes, we did receive some funds, just under $7 million, from the CARES Act as it relates to our Medicare business, and we've taken that money and set it aside, and we're looking at the expenses related around the virus that would appropriate for it, so we'll see how that works out as time goes. Really, other than that, we did not apply, obviously, at our size, for any of the loans that were out there for small business. That was not us. So we -- the only other item I think we have, Brian, you can talk about is the -- maybe just the deferral of the tax submissions.

Yes, I think from a cash flow perspective, Frank, that's the only other thing that we've really materially -- we've taken advantage of, is the delay in the payroll tax submissions, but under the CARES Act, I think it's still kind of to-be-determined for, primarily, for Medicaid providers, what relief is out there. That's something I think everyone is working through currently. But we haven't seen anything on that side as of yet.

And then on the FMAP, do you feel like you've got a shot at maybe getting some of those dollars and maybe offset some of these cuts you were talking about?

I'm sorry, Frank, can you repeat that? We didn't -- you were a little garbled on the first part.

Okay, yes. The FMAP, the federal matching assistance, on the Medicaid side, any sense that personal care may get some of those proceeds?

Yes, that's definitely going to be helpful to us. I think we're still waiting to see exactly how that will flow through. I think we haven't seen a lot of adjustments at this point. I think the states are going to have to utilize those as they see best, and we're working with them to see how that might benefit us down the road.

Yes. This is Brad Bickham. We have seen some states give some additional payments on a temporary basis just recently. Most of those are for the caregivers to pass through, so we are seeing some relief there. It's hard to quantify as to whether it's material or not, but a lot of those funds will be passed through to the caregivers.

Got you. And then you mentioned about a more cautious view on the deal pipeline. Just curious, are you seeing a pick-up? I mean, are people reaching out to you now with all that's happened over the past 2 months? Any characterizations on that? And then finally, just any other cost levers that you might have in terms of managing this drop in revenue? Thanks.

Yes. Realistically -- let's talk first about the acquisitions. We're not seeing people necessarily reach out more at this time. We are still seeing some companies come through that are interested in selling, so I would say our activity is maybe slightly down from what it was before the virus, but it's certainly picked up a little bit, and we expect that will continue. And for us, we took the first 60 days of this virus just really focused inward, making sure that we had everything done to continue to operate, see our patients, pay our caregivers. We're to a point now where we feel like that's stabilized a bit, so if we can determine ways to do the appropriate due diligence in today's environment, we will start back to trying to get these things done in a manner that makes sense for us as far as mergers and acquisitions. We fully anticipate to continue with our acquisition program. As it relates to additional cost levers, let me be clear -- the only real additional cost we're seeing with this virus is the protective equipment we're now providing to our nonclinical staff. Our clinical staff always had PPE. Now maybe we're giving them a little more because we are taking care of some COVID-positive or presumptive positive patients, but other than that, that's pretty much the same as we've always done, so it's the additional expense of the PPE for the clinical services. The revenue reduction for us, while we mentioned it could be up to 10%, that's not something that's going to affect our company where we need, at this point, as we see it, that we need to make any drastic changes. We think it will be temporary, whether that's 1 month, three months, but we believe we're financially strong enough to continue to operate as we have been and feel that's the best way to do it to make sure that we're a very strong company as we come through this virus.

And your next question is from the line of Matt Larew with William Blair.

First, wanted to ask about sort of the hiring environment. Obviously, it's been a tough sort of last several weeks to months for folks who are hourly workers and potentially you'd like to open up some opportunities for you to hire, but I also know it may be challenging to do so given some of the restrictions in place because of COVID, so just want to get a sense for what that's looking like. And then, sort of dovetailing on that, have you noticed a change in -- at all in terms of the desire for family members to be the primary caregiver as a result of COVID?

Yes, this is Brad Bickham. On the hiring front, we have seen a pick-up on the hiring recently. When the COVID virus first impacted us, we actually pulled back just to put hiring on a hold to get a better handle on how are we going to do that in a safe manner. Fortunately, states have provided some temporary regulatory relief that has allowed us to continue or start hiring back up. We'd like to make some of that training time up. But that certainly has helped and benefitted us on the hiring front. Your question related to family caregivers -- what we have done in those states where it allows us to have a family caregiver, there are people that are now out of work that, when they decided, well, I'd rather not have somebody in the home, we've been able to identify somebody, a family member who's in the home now, that is unemployed, and bring them on as a family caregiver. So whether that continues post the impact of the COVID virus remains to be seen, but it certainly has helped benefit us in the near term.

Okay, thanks. And then obviously, Dirk, you alluded to patient call-offs or patient fear driving some of the volume softness. Have you had any issues with sort of new patient generation? Have state agencies had to slow down their home assessments? Or is it really just the one thing you can point to here is call-offs?

Yes. So when the virus first impacted us, the call-offs were a factor. We did see a slowdown in new admissions on the personal care side because there was a delay. Some of the care coordination units in the Illinois market, for instance, were struggling to work from home and how you handle those assessments remotely. We have seen that kind of pick up. I mean, I've just been pleasantly surprised that we didn't really see new admits just shut off. So that certainly has started to come back up recently, and I think that's contributing to some of the improvements that we're seeing in some of our numbers as we head into May.

Okay. And the final, just a clarification question. Dirk, you said not 10% year-over-year but 10% pre-virus, and I want to understand. Are you referring to patient census overall being about 10% lower than pre-virus, and that census building through May and June, or are you referring to sort of a revenue number? So just if you could clarify that, and then I'll jump off. Thanks.

Well, we were referring to the personal care -- the visits, the number of visits that we do, which is really the way that our revenue is calculated, as opposed to ADC. So what we were running in February, which was on track with what we had expected, that is what we're comparing it to. Our high point in February is where we're saying that we'd been at that 10% level. So certainly not year-over-year.

And your next question is from the line of Brian Tanquilut with Jefferies.

It's Jason Plagman for Brian. One -- most of my questions have already been asked, but just wondered if any of the state agencies have discussed maybe adjusting reimbursement to cover the incremental cost of PPE that you're now bearing, since that wasn't traditionally a major component of the cost of delivering personal care services?

Yes, Jason, I can take that, and Brad can add some color if you'd like. But we have seen a few states that have stepped up to try to help cover the cost of PPE. Illinois, specifically, has made some -- not material payments, but some payments to kind of help businesses like ours cover some of those costs. And as he mentioned earlier, a couple of the states have given us some pass-through dollars as well as part of their funding, so we are seeing some of that.

Yes, and those were actually fairly recent. It was really probably about the last week that we've seen some of those payments come through, for instance, from Illinois on the PPE; also with some of the states adjusting rates on a temporary basis to help offset some additional costs on the caregiver side.

And your next question is from the line of Scott Fidel with Stephens.

Actually just wanted to first just follow up on that question around the PPE costs, and obviously without trying to ask for guidance, just interested if you can give us some insight into what type of incremental costs you're seeing from PPE, whether maybe just the amount of additional cost that you saw in April or even how you're thinking about that just for the second quarter in terms of incremental PPE costs?

Yes. We spent, I think -- Brian said about a little over $200,000 in the first quarter. As you would expect, we were trying to ramp up around the middle of March, and it took a while for us to actually get supplies, PPE, in. I think we spent a total of about $1.5 million to this point. That is -- obviously that's not going to be used immediately. That has some inventory in it for future usage. The question remains, going forward, what happens with the PPE for personal care? Because really, from a clinical service, the only real additional cost with PPE is the fact that because the virus has come and because of the fact so many people are ordering, the cost of that equipment has gone up. Once -- if that comes back and stabilizes, then it'll have no impact on our clinical services because that's what we've been buying before. The question is, will we continue as a company to provide masks, gloves for our personal caregivers going forward? And that's something we're talking about as a company. We'll certainly be talking with the states about that, because that would be a new cost associated with taking care of the clients in the state. So it's something still to be determined, but I'd say right now, while $1.5 million is not immaterial, that's kind of the magnitude of what we're talking.

Got it. That's helpful, thanks. And then just a second question, I guess, for clarification, or just some more insight, just on that $6.5-million retroactive payment from Illinois that you mentioned you're expecting to get in the second quarter, have you accrued anything for that yet in revenues, or would that be all incremental to income statement in the second quarter? And then I would also assume that that should just be -- that should flow through just on cash flows, right, from the second quarter?

Yes, Scott, that would be just a cash flow impact for us in the quarter. The revenue has already been recognized in the period that it was related to, which was in 2019, and the related cost as well. So no P&L impact, and that'll be a cash flow event for us in Q2 when that comes in.

Understood. And then just last question from me, just interested in any additional insights you can give us into just transitioning some of the operations to reflect the changing dynamics post-COVID? And in particular, just interested in how things are going in terms of shifting some of your training programs for new caregivers over to more remote applications as compared -- I know you guys traditionally were doing a lot of that in person, and there were plans to start transitioning that to more online, et cetera, given the changing environment.

Yes, this is Brad. We are really experimenting, kind of, with or piloting the kind of remote learning applications. What the benefit is in this current kind of environment is the fact that states have waived, in many cases, the upfront training requirements. Now, we're going to have to make those up. We're looking at ways to do that on an online basis. And then part of the challenge there is, all states are generally different and unique with respect to what training is required, what flexibility you have with respect to in-person versus online training, but we're certainly accelerating the look at that and have a vendor that we're working with currently to help facilitate that going forward.

[Operator Instructions]. And your next question is from the line of Mitra Ramgopal with Sidoti.

I just wanted -- Brian, I know you mentioned the acquisition pipeline remains pretty full, and you're obviously looking to get some transactions done when things return as close to normal as possible. I was just curious if any of your thinking or strategy has changed in light of what we've seen with COVID-19? Clearly some states being affected more than others, some would probably have some issues as it relates to budgets, et cetera. Just curious if there's been any change in the strategy there.

Yes, I think it's -- I mean, overall, Mitra, I think in strategy, we haven't really had a different shift. I think we believe our business model is still sound. Having kind of the three elements, especially in markets that, we think, still makes a lot of sense for us, and I think that's proven out as we've kind of moved through the COVID situation. So I think largely, our focus is still aligned with where we were. Obviously market to market is something that we're always cognizant of. We're always watching any dynamics changing, state budgets, et cetera. So that's something that we are always keenly aware of as well, as we look at potential targets and acquisitions. So we're hopeful, as this progresses, we can kind of get back to business as usual, so we're doing everything we can behind the scenes, but still being very cautious, as you guys know. It's a different element right now to try to get out, and due diligence, things like that, so looking forward to getting back to that in the future.

Thanks. And then also, just curious in the sense that obviously some industries are being impacted a lot more than others, and clearly your business is an essential service, but do you get the sense that at the end, there'll still be some shake-out in the industry as it relates to maybe some operators not being as financially strong as yourself, et cetera, being unable to withstand the reduced volume in some markets, et cetera, and ultimately leading to long-term opportunity for you?

Yes, I'll take that. Yes, I do think, clearly, this industry, especially if we talk about the personal side of our business, there are a lot of small mom-and-pop providers of this service spread throughout the country. And obviously this virus is difficult, as you go through it, to -- just from an operating standpoint. How do you operate remotely? What about the -- is there any added expense with PPE? What about the cash flow impact? So from our belief, going forward, this could affect our -- this could give us an opportunity to continue to consolidate the personal care space once we get through this virus and see if some of those mom-and-pops are ready to maybe talk to us about coming on board.

And I am showing no further questions at this time. I will now turn the call back to Dirk Allison for closing remarks.

Thank you, Operator. I want to thank everyone today for their interest in Addus and for being part of our earnings call. Have a great week.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and have a wonderful day. You may all disconnect.