Hello, and welcome to the Addus HomeCare's Fourth Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to hand the call to Dru Anderson. Please go ahead.

Thank you. Good morning and welcome to the Addus HomeCare fourth quarter 2024 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 capital 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’s expected quarterly and annual financial performance for 2025 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 fourth quarter 2024 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 will now 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 2024 fourth 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 quarterly calls, I will begin with a few overall comments and then Brian will discuss the fourth quarter results in more detail. Following our comments, the three of us would be happy to respond to any questions. Before I discuss our earnings, which we announced yesterday, let me express some thoughts related to the potential Medicaid program changes being discussed by the new Administration and Congress. It is well documented that the new Administration is actively pursuing spending cuts across virtually all areas of federal spending. This includes health care service spending, although I note the precedent recently indicated that Medicare and Medicaid would not be touched as part of the cuts. Still, there are many proposals being floated, so I wanted to spend a few minutes sharing our view on some of these. As part of the Congressional discussions concerning possible cuts to federal spending, the following have been listed, among others, as potential areas to reduce federal spending on Medicaid. Per capita caps, lowering of the FMAP floor Medicaid FMAP penalty for covering undocumented immigrants with state only money reverse or limit state directed Medicaid payments, limit Medicaid provider taxes, repeal the American Rescue Plan FMAP state incentive, Medicaid work requirements and reversal of certain Biden Administration rules such as nursing home staffing ratios and Medicaid access and enrollment rules. The aggregate federal savings of this list, if implemented, could be as high as $2.3 trillion over a 10-year period of time. However, it is believed that a number of these items on the list cannot be implemented…

Thank you, Dirk and good morning everyone. Our fourth quarter financial results marked a strong finish to 2024 as we continue to deliver consistent, profitable growth throughout the year. We achieved 7.5% top line growth and a 10.3% increase in adjusted EBITDA compared with the fourth quarter last year. For the year, revenues were up 9.1% and adjusted EBITDA increased 16% over 2023. Our personal care services segment was the key driver of our business, with a solid 5.8% organic revenue growth rate over the same period last year. This growth trend has consistently tracked well above our normal expected range of 3% to 5% this year. These results were supported by strong hiring trends and favorable rate support for personal care services in some of our larger markets. As a reminder, going forward, we will benefit from the statewide reimbursement increase in Illinois effective January 1, 2025, which will contribute approximately $23 million in annualized revenue with a margin in the low 20s consistent with the 77% rule in the state. The consolidated results for the fourth quarter included one month of the personal care operations of Gentiva, acquired on December 2, 2024 and excluded the company's previous operations in the State of New York as a result of our agreement to divest these operations and exit the state. However, during the fourth quarter we did receive approximately $3.5 million in retroactive rate increases from the State of New York as a result of our previous reimbursement rate appeal. This revenue has been excluded from our adjusted results and same store metrics. We saw steady improvement in our hospice business in the fourth quarter, supported by the 2025 hospice reimbursement rate update effective October 1, 2024. We achieved 7.8% organic revenue growth and higher average daily census patient days…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Joanna Gajuk with Bank of America. Please go ahead.

Oh, yes, hi. How are you? Thanks so much for taking the question here. So I guess maybe first on the quarter, a couple of number of questions. In terms of the average revenue per hour in the quarter, Q4, right? It was a sequential, so I assume that the Gentiva deal impact there. So as we think about kind of the run rate, including fully Gentiva for 3 months, we're coming up with, call it, $25, $50 per hour versus the legacy Addus of $28. So is it in the ballpark as I understand that Texas average hourly rate is much lower. So I just want to confirm kind of the math we're doing here.

Yes, Joanna, I think that's right. Texas is a lower bill rate. We had one month in Q4. We'll have a full quarter in Q1. So I definitely wouldn't anticipate that to impact that and bring that just average per hour down. So the reimburse rate in Texas is a little under $17 an hour. So it definitely is a little different profile as we've talked about previously. Now we will see a little bit of offset to that because we are getting the 5.5% increase in Illinois, which is our largest state. So net-net, there will be kind of a plus and minus there. So I would expect to see it probably slightly down as a result of that, but that's the kind of progression Q4 into Q1.

Okay, thank you. And another, I guess, number question here. So in the quarter, you said the organic I guess, volumes in your personal coverage, did I get that right? Was it up slightly. Could you, I guess, remind me that number? And I guess, how does it compare versus your third quarter? Because I think in third quarter, the growth was maybe comparable like 0.6% or something like that, organic expenses.

Yes. I think if you look at just personal care hours quarter-over-quarter, we were up slightly year-over-year, we're about just under 1%, down slightly sequentially is basically flat. And if you look at just kind of volumes in PCS in Q4 and what impacted their -- we've talked about the redeterminations. We saw a spike in discharges in October started seeing that number decrease steadily through the remainder of the fourth quarter in November and December, January, again, saw a little deceleration there in discharges. So we believe that the redetermination process is largely none, if not completely done and we're starting to see admission volume start to tick up, but at least we did in January. So optimistic that when we look at just volume growth and PCS for 2025 we've talked about our long-term goal of 3% to 5% revenue increase. I think we'll be at kind of the high end of that range again.

I'm sorry. So you're talking about for the full year, 2025 to be towards the higher end.

Correct.

Right. Okay. And then, so I guess you alluded to like growing volumes maybe 2%. So I'm just trying to bridge how you're going to get from call it a little bit less than 1%, I guess, to 2% because I want to say, you also talked about previously about using your new scheduling up and, I guess, improving utilization there and average fill rate. So can you kind of walk us through maybe kind of the build, how are you going to get the 2% growth in organic volumes?

Yes. I mean I think if you see one, we see that the redetermination process is largely done. So we're not seeing the discharge rate is coming down to a more normalized level. We're also starting to see admission volumes tick up, which tells me that our referral sources are now more focused on new clients rather than looking in redetermination. So I think just on the volume side from the referral side, we're starting to see that number come up. As you point out, we have done a lot of things with our caregiver application. We're continuing to roll that out. It's fully rolled out in the State of Illinois, where -- that we began the rollout in New Mexico and optimistic that we'll see some continued growth through that process, helping us with our service percentage. I think optimistically, we're shooting for that 2% to 2.5% hours growth. And I think Brian alluded to in his comments that we saw a little bit of challenges volume-wise in Q1 related to weather in January. That's kind of normal. It kind of depends on when a snowstorm hits. If it's a weekend, good, if it's a Monday, not so good. So we saw a little bit of challenge there early in January, but again, January numbers look pretty good in spite of that.

Thank you. And if I may, thank you for the comments at the start of the call around the potential performance, which we don't know which items are going to be finalized and you mentioned two of them. Our interpretation was there's some support for the work requirements as well. So can you talk a little bit about how that would, if at all, impact your business if that was to happen nationwide. Thank you.

Yes. I mean we just don't see any direct impact from that. If you think about the clients we serve, the majority elderly, in many cases, also disabled. So work requirement would have a negligible direct effect. If anything, it might actually potentially add some caregivers availability to us. So we don't see any negative to our kind of primary clients that we take care of.

The next question comes from Ben Hendrix with RBC Capital Markets. Please go ahead.

Hi, this is Mike Murray [ph] on for Brian. Thanks for taking my questions. I wanted to drill down a little bit more into the Texas market. There's a sizable difference between health care, minimum wage and the statement on wage. You've obviously had a lot of success driving volumes with rate. Do you think you could outgrow your long-term personal care growth target of 3% to 5%, given this delta and the attractive demographics in Texas? Thanks.

Well, I think as you -- as we have said many times, entering into the state of Texas was a goal of ours for a long period of time due to the growth in the state, both in just general pocket relation in the elderly growth. So what we really believe will have happen as it can allow us to remain near the top of that 3% to 5% at this point in time. Now whether or not we're able to exceed that due to the Texas market, we'll have to wait and see because we're still relatively new to it. But we do think it is very much a positive for our same-store growth.

Alright, thank you. I just have a quick follow-up or a different question. So hospice saw continued admission pressure, which led to a sequential decline in census I appreciate that you're putting in a new operations and sales leadership in the segment. But I wanted to see if you could walk us through the drivers of the softness. Are you seeing lower admissions from certain referral sources? Are you seeing increased competition? Any color would be helpful. Thank you.

Yes. On the admission volume, not overly concerned. We did -- as we mentioned, we've really revamped our sales and marketing team. We've been going through ongoing sales training that started up in Q4, actually by the tail end of Q3. We're wrapping that up or just wrapped it up this past week. So sales team has been fully retrained. We -- this new sales leadership, I feel optimistic. And if you look at really, our January numbers were actually pretty strong from an admission standpoint. So not real concerned there. You do have in hospice, traditionally kind of pre-COVID. There was a little bit of seasonality when you looked at admission volumes in ADC, Q4 tended to be kind of one of your tighter or more challenging quarters just because of the holidays. And then you come out of that and your Q1 looks pretty good. So optimistic that the changes that we made in the sales leadership will pay dividends for us in 2025, and that's when we look at kind of where we think we'll land. We've talked about 5% to 7% as our target on the hospice side. I'm optimistic that we'll be towards the higher end there for 2025.

Awesome. Thank you so much.

The next question comes from Brian Tanquilut with Jefferies. Please go ahead.

Hey good morning. Maybe, Dirk, just a follow-up on the questions on policy. As we think about the potential for changes to the FMAP, how are you thinking about how that could impact you given, number one, the geographic footprint that you have? And then maybe the flip side of this, any case studies that you can point to where in states where maybe they've block granted Medicaid, kind like what have the states done in terms of adapting to that maybe using more home health and just measures like that, that you can point us to so that we can frame how to think about your exposure to Medicaid risk if Congress changes the program? Thanks.

Yes. Well, if there's a reduction in FMAP or quite honestly, if FMAP match or block grants we believe and have consistently believed and stated that Addus is in the right place in the Medicare environment. We are the company. We're the low-cost provider. We're in the home. We're not in the institutions. We have demonstrated over the last four years or five years with our value-based care approach in two or three of our markets, that we're able to lower the cost to the state or to the particular Medicaid payer in that market, whether it be fewer room visits, whether it be readmits to hospitals, trying to keep patients out of the hospitals and quite frankly, as you're aware, we're much less expensive for our general population base, if we're able to keep them in their home as opposed to them ending up in a nursing facility, which is going to have to be paid at that higher cost by the state. So again, we're watching all of the issues I mentioned earlier as it relates to Medicaid. We've been working very closely with our state and federal lobbyist as to what may happen. But at this point, we're pretty positive on the fact that whatever change may or may not happen through Medicaid, Addus is in the right place, and we believe we'll be able to handle those changes.

I appreciate that. And then maybe just as a follow-up to Joanna's question on volumes. Are we right in thinking that you're still -- there's still a supply/demand imbalance here in that you're not filling essentially every order. So as you ramp up hiring that we should see some volume growth that gets at least to that 2% number that you mentioned. Is that the right way to frame that?

Yes. I think in most of our markets, we have that imbalance. And so there is just -- there is an opportunity to extent that we're better able to leverage our existing workforce to give them more hours, which is really where a lot of our focus is on now. I think we're in a pretty good spot hiring and where I really want to see our teams do better is actually getting more hours out of our existing workforce. It's a lower cost way to do business. It also should help with turnover rates because that's really the number one reason why caregivers leave us is ironically that they can't get all the hours that they want. And so that's where we're really focusing our attention. And I think there's opportunity to help us get to that 2%, 2.5% hours growth consistently.

Awesome, thanks Brad.

The next question is from Tao Qiu with Macquarie. Please go ahead.

Hi, good morning. Thank you for taking my question. Just to follow up on Medicaid. Thinking about the mechanics here, if the 2025 budget contains certain cuts to the federal share of Medicaid dollars, when do you think that will hit your state reimbursement later 2025 event or more of a 2026 event? And I think you also mentioned that state law makers could step in to soften the blow, given the value proposition, curious what are the discussions there today?

Yes. I think as far as when it would hit. I don't think it would affect 2025 at all. It would be years after that, that I think anything that might be changed when Medicaid would come into effect.

Yes. I think a lot of states are currently in their budget process. And so I agree with Dirk, I think really if you saw pressure on state budgets is probably more of a 2026 item than a 2025 item for them.

Yes, thanks for the clarity. So Brian, you talked about the expected 200 basis point margin decline from the fourth quarter to the first quarter. How much of that is attributed to Gentiva. I'm wondering what the margin profile is today and how much cost synergies you can extract following the system integrations that you have?

Yes. I think if you think about it, with Gentiva, Texas being the largest piece of that, their gross margins are kind of in that low 20s. So that's definitely going to be impactful as part of the mix with additional two months. We typically are going to see the normal every year annual reset of payroll taxes and merits and those kind of things are probably a little over 100 basis points for us just sequentially. So it's probably just under 100 basis points. It's probably just a mix shift overall.

Got you. And lastly, if I may. The hospice revenue per patient day grew 5.6% year-on-year, which is higher than the Medicare rate increase in October. What's contributing to that strengthening rate in hospice?

Yes. I think in the quarter, so we got the hospice rate increase, which is obviously the larger component there. Outside of that, we had probably just a little bit of mix shift. We also had, I think, a positive impact in the quarter from an implicit price concession in hospice, they performed very well. And I think that was the other difference in what you saw year-over-year in Q4.

Great. Thank you.

The next question comes from Andrew Mok with Barclays. Please go ahead.

Good morning. This is Evan [ph] on for Andrew. How is the integration of Gentiva progressing? Is there any timeline you can share to achieve mature EBITDA margins? And does this acquisition impact free cash flow conversion and the pace of deals for 2025? Thanks.

Yes, I'll start with just talking about the pace of integration. As Dirk mentioned, this is not our typical integration, even though it was our largest transaction to date. There were a lot more functions we took over day one, the biggest of which was really payroll and benefits and hats off to the team, both internally at the support center and then also looking at the Gentiva team, they did a remarkable job in making that happen and go very smooth, surprisingly smooth process on that integration. Really, if you look at just kind of pace of integration, we're steadily kind of working through the other items, not as heavy of a lift as the payroll and benefits, the probably the biggest one that will be out there is converting billing and scheduling system. We're waiting until we get Homecare Homebase that we've been working with over the past several years developing a new product is personal care focused before we roll that out to the Gentiva team. So that's probably more like an 18-month time frame before they come on the dock, and they'll be kind of back-end loaded on that process. So that's probably the biggest remaining integration item. But again, it's pretty far off in the future.

Yes. And just real quick on the cash flow. So I think out of the gate early on, we've had a pretty good transition as far as billing practices and over into our system. So as Brad mentioned, we've not changed their billing systems. So a lot of that is going to remain pretty static. So no real impact there. I think conversion on cash flow was going to be remain pretty consistent. A couple of little things as we kind of move through some of the enrollment changes, but nothing material. So I think we're actually very pleased with how that's progressed for the first 2.5 months of the acquisition.

And just a quick follow-up on Gentiva, the $5.6 million in investment banking and professional fees during the quarter. Was that included in the $7 million worth of acquisition expenses? Thanks.

That is included in that $7 million. So those are the larger components of why it was $7 million during the quarter and all-in acquisition costs.

Thanks for the color.

The next question is from Scott Fidel with Stephens. Please go ahead.

Thanks, good morning. First question, I just wanted to pick up, Dirk, on some of the comments you had made around still wanting to prioritize pursuing acquisition opportunities where there's scaled personal care assets still out there. Can you maybe -- could the team maybe give us some flavor on sort of that pipeline in terms of how many of those types of properties maybe out there as an opportunity for M&A. And then from a timing perspective, I know you're recommitting to your core M&A strategy with all the comments that you made today and in the press release last night, from a timing perspective, though, would you want to see ultimately how, I guess, the sort of the legislative process does play out in Washington, just to get visibility on, ultimately, if there are changes to Medicaid reimbursement how those could flow through? Or would you -- if an opportunity strikes, I guess, ahead of that, would you pursue that still while I guess the legislative sausage [ph] making is still playing out in Washington?

Yes. I think the legislated potential changes on Medicaid. We believe, as I said earlier, we'll be able to handle those as a company because of our position in the market. So we are not changing our strategy or potential timing on deals based on that. Now obviously, we'll stay aware of that. We'll continue to look at what that might be. But we are in the process now of looking at opportunities that could further our -- not only our personal care strength in the various states, but also adding all three levels of care in markets out there that might be available to us. And so as far as the number of things we're seeing, there's a number of smaller deals out there. I think that's what you're going to see probably for the majority of 2025. I do think based on some of the recent discussions we've had, there are some larger transactions coming out potentially at the end -- towards the end of 2025. Some of those are in the clinical care area where pricing may be difficult for us, but it is something we will continue to look at. So I think, overall, I would say our strategic goal with our development, our acquisitions, meeting our 10% target is still in effect today and the potential changes from the Medicaid, any Medicaid changes are not a concern of ours today.

Okay. Got it. And then as a follow-up question, just wanted to go back to margins. And Brian, I appreciate some of the color on sequential good guys and bad guys on margin for the first quarter. So it might be helpful to just maybe to expand it out in terms of your thinking for the full year and anything you'd want to call out as we think about modeling either from a positive or negative perspective in terms of sort of, I guess, the integration of Gentiva. Does that provide sort of a ramping dynamic on margins to some degree, improvements in hospice, same-store growth that Brad had mentioned, normal seasonal factors? Just thought anything you could throw at us to help sort of provide more details on how you see margins sort of playing out over the rest of the year and then even from a year-over-year perspective in 2025 versus 2024. Thanks.

Yes, Scott. And I'll preface that just thinking about the business that we have today. Obviously, any additional acquisitions, particularly in the clinical services space is very going to change that mix a little bit. But that put to the side, I think our normal seasonality that we expect as we kind of look at gross margins down to EBITDA, Q1 is always our low watermark with payroll tax resets and merits and everything like along those lines. We usually see a little bit of lift into Q2. I think it's typically been historically 30, 40 basis points in the Q2 improvement. Q2 to Q3, usually pretty flat. Nothing really kind of moving the needle there and then Q4 is usually our best quarter of the year. We get our hospice rate increase then, which is today about 20% of our business. But we also kind of get some additional relief on some of those payroll tax caps in Q4 as well. So it's kind of a step-up kind of through the year has been what we typically historically have seen and what we would expect this year again in the absence of any further acquisitions, which might change the mix slightly.

Great. I'm going to try to sneak one more in here, if I could. Just I appreciate the update just on the debt pay down. Brian, is there any type of placeholder. I know, obviously, this could be contingent on M&A, but if we're thinking about sort of utilizing free cash flow and to pay down debt, any type of marker you'd want to give us on maybe what for 2025 could be sort of a good bogey for full year debt paydown?

Yes. If you think about just kind of our typical conversion rate from operating cash flow, we usually see that kind of in that mid-70s of GAAP EBITDA. So if you think about projections for this year, that would anticipate us being kind of that $115 million, $120 million in free cash flow for this year. So in the absence of M&A, and working cap changes, a lot of that would be targeted toward debt repayment. Again, there could be some timing differences quarter-to-quarter but that would be kind of how we would see it for the full year. So you can kind of break that down and do have to kind of see what the potential is there. So coming out of the year at $220 million in debt. I mentioned we've already paid down $10 million this quarter on the revolver. Obviously, opportunities to continue to lighten that load through cash flow in the absence of M&A. But again, our preference and our focus is on continuing to utilize our balance sheet on the M&A front.

Okay, great. Thank you.

The next question will come from Jared Haase of William Blair. Please go ahead.

Hi, good morning. Thanks for taking the questions. I appreciate all the color thus far. Maybe just on the policy environment. I'm wondering with the backdrop of let's call it, trying to drive more efficiency in payments. Do you think that can catalyze an acceleration of value-based or accountable care type reimbursement models from -- for home care looking at your state and managed care partners? Just curious if you see any kind of incremental lift from that.

Well, I think it certainly could. I mean, certainly, as the federal government is looking at efficiencies throughout the various departments states may look at that also. And for us, that's one of the reasons why we feel like it puts us in a great position with our value-based care approach over the last 4 years to 5 years, as I mentioned earlier, we have demonstrated that through our abilities, we've been able to work with either the states or with the managed Medicaid providers to reduce their cost. And again, if you're talking about an environment where you're really looking at efficiencies and how do you get rid of waste, that is the way you can do it is in a low-cost environment, if we can make sure that we're able to do what we do in a value-based approach to reduce cost overall, that should be very valuable to our state partners.

Got it. That makes a lot of sense. And then maybe just one more follow-up here on the labor environment. I think you alluded to expecting the clinical labor environment to remain more challenging relative to PCS. Just wanted to unpack that a little further in terms of what specifically you're seeing. Is that largely just reflective of the rate environment, making it hard to sort of pay the wages that you need to pay? Is there any other competitive dynamics that you're seeing from other players in the space in terms of attracting entertaining talent? Thanks.

No. I mean, I think it's really just looking at -- and it's been well documented that there is a shortage, and then that shortage is continuing to build on clinical staff. When you look at nurses in particular. So it was really looking at just competition with institutional providers who may be able to be in a position to pay a higher wage. The nice thing that we're able to offer to nurses is one flexibility and that opportunity to have kind of the one-on-one care with patients and some nurses are more than happy to kind of sacrifice a little extra money. They make working a shift at a hospital to have that one-on-one opportunity and greater scheduling flexibility, honestly working for us. But it's just a dynamic that I think the health care industry will be facing for the foreseeable future versus on the personal care side, we feel like we're in a pretty good spot there from a labor standpoint.

Okay, great. Thank you.

[Operator Instructions] The next question today comes from Matthew Gillmor with KeyBanc. Please go ahead.

Hey guys. I've just got one question left, but it's got two parts. For the improvement in the percent of hours per service and personal care that Dirk mentioned, I believe you made some system and process improvements that are helping to drive that metric. But the first part is, can you just give us a sense for how much room there is to go there? And then the second part is, as the redetermination impact stays does the penetration in number of hours just naturally come down because you're using your labor capacity for new patients? Or is this improvement in penetration purely additive to your growth?

Yes. I think if you look at the things that we're doing from our caregiver application to help -- caregivers actually kind of have greater visibility on when they're if they're scheduled to essentially kind of come up short against the authorized hours and it allows them the flexibility to work with their clients to schedule those hours to make those up. I think there is -- we have further room to grow in that respect. I mean I've been very pleased with the buy-in from caregivers who have actually downloaded the app and are actively using it. That was one of my big concerns was if you build it, will they come. And I think we've made it useful to them as a tool and they see the value in it. So I think there continues to be opportunity to increase our service percentage, which has the number of hours we serve against the authorization. And when you look at that, I mean, I think that, that is actually additive to our growth because those are ours otherwise, we probably wouldn't have scheduled. So you'd like to think our service coordinators would be kind of all monitoring that closely. But I think having the caregivers actually have that visibility will actually allow us to greater leverage our existing workforce and increase that service percentage which is capturing hours we otherwise wouldn't serve.

That’s great. Thanks, Brad.

The next question comes from Constantine Davides with Citizens. Please go ahead.

Hi, thanks. Just a couple of quick ones. I guess, first, just -- I just wanted to be sure I heard you right, but it sounded like, Dirk, in your prepared remarks, you see some continued PCS sort of M&A opportunities in Texas. And I'm just wondering if you could expand on that just given you're already the largest provider there and obviously, the relative rate and margin differential in that state.

Yes. Well, first off, Texas is a profitable state, even with the lower hourly rate just due to the rate we pay caregivers, we still have a nice margin in that state. And talking about the size. We are the largest, but even the top four providers are less than 20% of the market. We're about 5% of the market. So we still have a lot of opportunity to grow our coverage across the state. And it's something that when we looked at the Geneva transaction, we knew it was going to be an added benefit to the company. So once that actually was completed and we've got them on board, our development team is now actively looking at other opportunities in all three levels of care in the state and certainly, Personal Care is part of that focus that we're looking at.

And do you guys have any visibility into sort of process for rate lift in Texas? Just wondering if you can talk about the dialogue there and anything that might happen either this year or next.

Yes. I mean I think if you look at the rates in Texas and possibilities there, there's discussions right now with the legislative session. The legislature is in session. There is a proposal to increase funding for personal care services we're monitoring that closely. Not a lot of clarity there yet other than we think we feel pretty good there might be some upside, but don't really have it quantified right now at this point. Still a lot of work to be done in the legislature.

Great. And then just one housekeeping on the corporate office lease. Is there any lease expense savings tied to that in 2025?

No, it should be flat, Constantine. So we've actually had a kind of a full rate sublet for the last couple of years since COVID that's expiring. That's kind of what put us in a position to go ahead and accelerate and do the impairment. So there shouldn't be any impact on the P&L side.

Thank you.

The next question comes from Ryan Langston with TD Cowen. Please go ahead.

Thanks. Thanks for squeezing me in. Just a couple of quick ones. I think you said there was some storm impact maybe in the first quarter. Can you help us maybe think about the quantification of that? And then just wondering, is there any impact in the first quarter we should think about from this elevated flu season that we're seeing either from employees, ability for hours or just hours that you're booking with your clients? Thanks.

Yes, storm impact. I mean, I think if you think it seems like an eternity, but it was early January, we had some pretty significant storms of roll through, snow and ice hitting us in this area that don't handle it as well. So we saw some negative impact there. And certainly, on the personal care side, we get paid for hours served. And if we missed the visit, we try to reschedule, but there's certainly some challenges there. So there was a little impact in January, but overall, I feel pretty good about where we stand in February going into March on the personal care side. From the flu season, anecdotally, there's certainly a lot of people who have been out of the office, sick, but haven't heard really any major impacts there. And again, I think we've gotten accustomed to kind of working through those types of issues. When you think about, it seems like a lifetime ago with COVID and everything else, and we were able to weather those events pretty well.

Okay. Just last one. PCS turnover, maybe I missed it if I did sorry, but can you remind us where you're running actually on turnover in that division? And I guess is Gentiva any different just in terms of that side of the business? Thanks.

Yes, I mean we run around 50%, 55%, which is a little better than the industry average. And again, I think some of the things that we're doing, we're optimistic that we'll be able to reduce that number further. With respect to Gentiva, I think I don't have their numbers in front of me, but I don't see any differences in their workforce than ours. So their turnover rate probably consistent. That being said, they do have a lot of preferred workers. So probably 70% of their Texas workforce is preferred workers, and you typically see a lower turnover rate there.

At this time, there are no further questions. I would like to turn the call back over to Dirk Allison for closing remarks.

Thank you, operator. We want to thank each of you for taking time to join us today on our earnings call. I hope you all have a great week. Goodbye.

The conference has now concluded. Thank you for participating. You may now disconnect your lines.