Addus HomeCare Corporation (ADUS) Earnings Call Transcript & Summary

I think we'll get going with our next presenter here, Addus Healthcare -- or Home care, rather, very pleased to have them participating in our conference this year. We've got Dirk Allison, Chairman and Chief Executive Officer; Brian Poff, EVP and Chief Financial Officer; and Heather Dixon, President and Chief Operating Officer.

Well, guys, we're about 10 months in -- almost going on 11 into the year. I've been asking companies to just sort of level set us, what's been some of the positives for the company? Has there been any challenges? How should we think about that?

It's an interesting year for companies like Addus where so much of our business is Medicaid. So certainly, as you talk about some of the things we faced this year, the Medicaid access rule and how that was going to affect states and how that affect the company was certainly at the beginning of the year, something we had to deal with as we've told people since and we can discuss more today. It really has not been an issue for our company because of the personal care service that we're in and being a low-cost provider. So what started out as a little bit of a challenge, I think, has turned into a positive. I think if you look at the rest of the year, one of the things that we were still wondering was state support, again, because 75% of our business is Medicaid. And our -- 2 of our 3 largest states, Texas and Illinois have both come through this year, even with the Medicaid rule or the Medicaid, the big beautiful bill that passed have come through with very nice rate increases. So I would say 10 months into the year, as we look at it, we're seeing pretty good growth. We're seeing our growth, and we're also then still seeing strong rate support. So that's been very beneficial to the company.

That's great. I always get the question about long-term growth algorithm and how to think about a company. Maybe just take a minute. I'm sure we've got some people that are new to Addus. How do you guys describe your long-term growth algorithm?

I'll start when we get into detailed growth, Brian will pick up. But really, when we started into the business, we felt like we set a goal out there that we would grow no less than 10% a year in revenue. It started 10 years ago. And to get there, we had 3% to 5% would be organic growth. The rest would be acquisition growth. And so since we started, we started with just personal care, we've now added clinical services for about 25% of our business. But you can still look at that is that we expect to get about half of our annual growth through organic growth and half through M&A. And I think if you look at the last few years, we've been pretty consistent being above that 10% range, but that's how we view it long term.

Okay. And we think about it taking it down to an operating income or EPS line, what about the expense side maybe?

Yes. I mean I think at that top line, A.J., is growing kind of at that 10-plus percent that Dirk was talking about, we should get some additional leverage off of G&A. So we would expect operating income to probably be a little ahead of that pace. So to put a little finer point on Dirk's point, just thinking about it from a segment perspective, personal care is probably going to be in that 3% to 5%. We've been well above the top end of that range in the last couple of years with some of the rate support that Dirk referenced. I think on the hospice and home health probably a little different these days. But clinical, we think more mid- to upper single digits, so kind of blend to get you back to kind of that mid-single digit that Dirk was talking about.

Okay. Great. Then the big question, of course, in November here is what about '26 and the headwinds and tailwinds as you think about '26, you want to spend a minute talking about that perhaps?

I think heading in '26, the company itself is in pretty good shape. We've seen really strong hiring trends. And why that's important, if you really think in terms of personal care, the real growth driver is being able to hire caregivers to take care of the elderly population, which we take. And if you think about it, there's a lot of elderly people that need help. What the limiting factor is, is finding those folks to take care of them. And so if you look, prior to our Gentiva transaction, we would be in about mid-80s on hires per business day. And if we did that, we were solidly able to handle the 3% to 5% organic growth. Now with Gentiva, we probably need anywhere from, say, 100 to 105 hires per business day. If you look at this year, I think we were right around 108 the first quarter, 105 in the second quarter and 113 in the third quarter with an upward trend. So as we get ready to head into '26, we're seeing very strong hiring growth, which should really bode well. The one thing we're going to focus on next year a little more than maybe we did the last couple of years is the census growth in personal care. If you understand personal care, we get paid by hour. So every hour we operate, we get paid. But there comes a point in time where you've done all you can do with your current base and now you need to grow your base. And we started the last few months really working towards that to where the last couple of quarters, we've had sequential growth on census, even though we're still negative year-over-year slightly. But that will be our challenge for '26 is to really focus on the census growth.

And on that hiring point, how is the interplay between corporate and the management side versus the local branches? Are they doing the hiring? Or how do you manage that? And do you have an advantage with your scale?

Yes. I mean I think I could start and Heather, if you want to add some color, but I think it's primarily a local level effort on the hiring. So thinking about our branch administrators, our folks down in the field, doing job fairs, they get a lot of support from our corporate or our HR groups, just thinking about web ad placements and things like that, but it's more of a support function from corporate, but it really is a local market-by-market effort on the recruiting, hiring and all of those efforts.

Yes. The only thing I would add on to that is it's more effective to be in the local market and attached to a branch in many instances because it's a community-based service that we provide. We're part of the community. And so recruitment in the community also is very beneficial, and it tends to work better. So those are largely handled by the branch with support, as Brian said, from corporate for some of the broader perspectives.

And how would you -- this is later, but I'll ask it now. How would you characterize the labor market and the availability of labor at this point? And I assume that largely the increases you can give year-to-year are driven by the rates. But what are you seeing in that?

So we're seeing positive trends from a hiring perspective. Dirk mentioned that the trajectory of the hires per business day has gone up significantly. We were at 113 for the quarter, but our starts per business day were also very nice in Q3. I think they were around 86. And so that's a good trend as well to make sure that those work in tandem and they increase at the same pace. The labor market that we see is showing the signs of improvement. That's PCS I'm talking about. You always have little pockets, maybe certain geographies or once you get to the skilled side, some specific roles, but those are just little pockets is exactly how I would characterize them. So overall, we're seeing positive movement there.

Right. And if an objective looking into next year is to grow the ADC, is that just a function of hiring people because the demand is there? Or do you -- what does the demand picture look like?

In the vast majority of our markets, the demand is much higher than we can provide care. It just -- it's hard to find caregivers. Now I will say this, there's a couple of states, some of our bigger states, Illinois and Texas, where we can do family caregivers, which is a big benefit in that when a patient comes, we generally bring the caregiver with them being a family member. So that is helpful. But from the standpoint of our thinking long term, our demand is driven by people getting into their mid- to late 70s. And if you think in terms of the generation we're in now, the baby boomers, 10, 15 years ago, they started hitting 65. They're now aging into this area, which is really our sweet spot as far as our personal care business.

Right. I think in the third quarter, Personal care saw about a 6.6% organic growth. How do we think -- is that sort of the run rate that's above, I think, your stated organic target? As you think about '26, is there any reason to think that would change? You've got the tailwinds of Texas and Illinois rate increases, I know.

Yes. I mean I think the key for us, A.J., is I think in the third quarter, we saw volume growth being kind of that mid-2% range. We've been talking about that this year. That really is kind of where we would like to see those numbers come in consistently is 2%, 2.5% on volume and then you get rate on top of that. So I think as we look ahead with Texas kicking in on September 1 this year, we're going to get another rate increase in Illinois, our largest PCS market on January 1. We expect to probably be at the high end or above the high end of that kind of 3% to 5% range probably through middle of next year and into Q3. We'll wait and see kind of what happens next year with legislative updates and rate updates in the next fiscal cycle. And depending on what that is, will probably give us some clarity further term on where we think about that 3% to 5%. But yes, I think it's fair to say we should be at the high end or above for the next few quarters based on that.

And I know Texas and Illinois are your biggest states, but are there other states that you're keeping an eye on that could be helpful?

I think the key one that we're looking at for next year is one that considered the rate increase this year, which is our third largest PCS market today, which is New Mexico. So they decided with everything going on with the big beautiful bill to kind of hold status quo this year, but there were conversations about a rate increase. So I think that's what we're primarily watching for '26 to see if that conversation picks back up and maybe we'll see something from them next year.

Is there a specific time frame in which they would make those kind of decisions based on their legislative schedule and so forth?

Yes, they're at July 1 fiscal. So it would be probably sometime we get into February, March. I think those conversations would start and then probably finalize probably April, May, sometime in that range.

Okay. And one of the other things that you talk about is improving the penetration of hours on your clinicians. Maybe talk a little bit about that.

Yes. So I'll certainly start. And then if you have anything to add, please feel free. So a few things I would point to. So the hourly increase or the increase in the billable hours that we've seen. Brian talked about it was nicely above that sort of 2% range. There are a couple of things driving that. One, I think very strong driver is the utilization of the app. We're certainly seeing in Illinois, which is where we have rolled the app out to the entire market now, an increase in the utilization by caregivers of the app. And then we're seeing an increase in billable hours that we believe or the service percentage is probably a better way to put it that we believe is driven by the app. While we can't draw a direct correlation, that's our belief. And the reason for that is how the app works. So it's useful to the caretaker or a caregiver for their own personal needs to see their schedule, to understand what their pay will be based on the number of hours worked, those types of things. So it's useful for them to use. They start to get used to it. But then from a scheduling perspective, it's self-service for them. So if they need to make changes to their schedule or reschedule an appointment, they can do it directly in the app, whereas traditionally, they would have either stopped by a local branch or they would have had a phone call that they needed to make into the service scheduler within that local branch. And now they can just do it online in the app. So that's what we believe is driving an improvement in the service levels there.

So is there a way to point to productivity? Is there a metric or some aspect of when people have the app, they're that much more productive than when they don't? Or how would you characterize it? Because you're going to roll it out, I guess, across the company, it sounds like.

We will. We'll roll it out. We started in Illinois, which is our largest market. We have started -- we've completed that. We've started now in New Mexico. And then next, we'll move to Texas beginning in 2026. So those are the 3 largest markets that we're focused on. In terms of some sort of a metric or benchmark to see how we're doing, it's a little too early for that because we just completed the rollout this year in Illinois, but it's something certainly that we'll begin to think about and to track. Probably one important thing to point out is it's not mandatory for caregivers to use the app. It's voluntary on their part. But that's why I led with they have some personal benefits from using the app, and so that encourages them to use it for scheduling as well.

Why wouldn't they use it? Just...

I think some of them have been caregivers for a very long time. Picking up the phone and calling their scheduler in the office or the branch or stopping by, and it's just, I think, pattern recognition for them.

I think in Illinois, we're at a 90-plus percent adoption rate. So most all caregivers in Illinois are now on it. It took a little bit of time to kind of get to that number, but it's a pretty high adoption rate.

And as you roll it out, is there any like short-term disruption that occurs or it's pretty seamless?

It should be pretty seamless for them. So I think it's really intended to be informational for them. So we're not going to necessarily impact kind of our baseline scheduling or things that are kind of day-to-day operations. It's meant to be an enhancement, not a replacement. And so there really shouldn't be kind of disruption as people start to use that to be helpful to them.

Okay. Maybe just a couple of questions on the hospice side. Discharge growth came in very strong, up 19%. You attributed to increase in admissions, ADC, patient days and revenue per patient day. Maybe drill down a little bit on those. What was the primary driver? It seems like people are across the board reporting pretty strong results in hospice. What's the state of play in the hospice industry at this point?

So I'll start with what we saw. You're right, we saw improvement in many metrics. But I believe that admissions growth is what's driving the rest of the metrics. It's driving patient days, it's driving ADC. And there are a couple of reasons for that. We've started some initiatives within hospice that I'll talk about. But first of all, just a focus on execution in hospice and really focusing on how we train and onboard our community liaisons there. I think that's making an impact. We've made some leadership changes as well, and we've also put together sales and marketing team specific to hospice that focuses on putting business development plans on a local market basis in place and specifically utilizing the community liaisons. So I think we're seeing the benefit of some of those things that we put into place, and that's what's resulting in the increased admissions from there.

I think you're right, A.J. I think the industry at large has kind of seen a return to a little more kind of probably pre-COVID normal cadence on referral volumes. So I think we've seen a little bit of that benefit as well. Just industry-wide, I think it's been a little more of a return. So I think that's been helpful to us in addition to some of the stuff that we talked about.

And we talked a little bit about personal care and sustainability going into '26. Maybe the same kind of question on hospice. Any way to think about those volumes and those types of numbers and how we should think about them fourth quarter on into '26?

Yes. I think some of the changes that we made in sales leadership, some of the training we've done, we really kind of started those initiatives late last year. So I think on a comp basis, you're seeing us perform very well against last year. I think as we roll into '26, we probably expect to see that moderate some. I think the way we've talked about hospice longer term and our expectations is more probably mid- to upper single digits overall kind of organic growth or revenue -- organic revenue growth per se. But we'll probably see that start to moderate kind of probably mid-'26 and we start to roll into some of those comparable periods would be our expectation.

And when you think about labor in that segment, is there -- is it similar to what you're seeing in personal care? Is there anything to call out about availability of the different types of staffing you need in the hospice?

I mean it's obviously a different staffing in personal care. We're talking in RNs, LVNs, CNAs. I think we probably still see certain maybe urban markets where maybe one or so of those positions may still be very competitive. So maybe we're doing a little bit more on the wage side to be competitive in those markets. But I would say, generally, it's been pretty stable.

So 3%, 4%? Is that sort of.

Our baseline is 3%. So maybe in some markets, it might be 4%, a little higher, but I think it's pretty immaterial overall because it's only in certain spots.

Okay. Okay. When you think about home health, we've obviously been dealing with the rate uncertainty unless -- I didn't check the news this morning.

I haven't seen the headline, so no.

It's obviously, for you, it's not a huge portion of your business. I guess that's the first and foremost thing to admit less than 10% of your overall business. How should we think about the growth trajectory of home health and where you're at?

We added home health at this point in our growth at stage as a complementary services to both personal care and hospice. If you think in terms of what it does for us, home health allows us to operate in personal care with value-based care. So there are contracts we enter into mainly with payers who have outsourced Medicaid programs from the state, and they've agreed to be in value-based care approach. We're able to put clinical services on top of our nonclinical personal care to meet some of the needs of reducing cost for the payers. And that's been very effective in our overlap markets. And also, I think as we talked about at the last call, home health in our 2 overlap -- right now, our 2 big overlap markets, New Mexico and Tennessee. Home health, our own home health provides about 25% of our admissions into our own hospice. So if you think in terms of it, home health itself has not made a lot of money for us. It's 5% of our business. It's pretty small, but it's been very important for both the other 2 larger segments to allow growth to happen. So that's today how we envision home health is staying somewhat small today. We put it in markets where we have home health, I mean, where we have hospice or whether we have personal care or whether we overlap, and we'll use that as a growth engine. Now if we can see some stabilization in how the government thinks about it, if we see rates start going back to what we saw before, 2%, 3% annual increases, and we're not talking about potentially a payback over some things that happened during COVID. We might be a little more interested in putting home health in some of our overlap markets more than we have today. But again, it's a complementary service from our standpoint.

Yes. Do you have any -- are you handicapping where the rule might come out?

The industry -- I have to give them credit. The industry has done a really good job this last year of coming together and meeting with Congress, meeting with the administration, CMS talking about why we disagree with the formula they're using for these rate decreases. And we found some positive feedback for whatever that's worth. I think from our standpoint, we don't believe it will be a 6.5% reduction. We believe it will be moderated from that. Whether it will be a slightly negative or neutral, I think that's probably where we're coming out, slightly negative to neutral, but we have no real knowledge of what's going on.

To your comment about -- speaking with legislators, there does seem to be a little bit of movement toward potentially doing something. Any thoughts that, that might get into some kind of year-end package if we have one of these continuing resolution bills or do we know?

Well, you're probably better at this than we are at it. The fact is it seems like the government has had tough coming together for any bill. And so we don't have a lot of hope that there's going to be something coming at the end of the year that they'll be able to put something in a bill that both sides will support. That being said, there has been some -- as you said, there's been some movement. There's been some legislators that are supporting the fact that we should not be hit like this, and we are a valuable service. And so we'll continue to work down that road. I do think eventually, there'll be -- you can determine what time frame is for eventually, but there will be an understanding that they can continue to give negative to no rate increases in home health and expect that to be able to be a viable service.

Some of your peers view it if we get the 6.4%, 6.5% cut and then we grow off that lower baseline that, that sort of captures everything that they say they need to capture. It seems like you guys have a little more cautious view on that. Maybe explain how you look at that. Do you think they might still have other recapture on top of that they would?

Well, if you look at -- from the way we understand the 6.4%, there were about 400 basis points that had to do with the clawback of the amount of funds they say, the billions that are owed. And that only represented about 15% of that. So if you -- if they said to us, we're going to give you a onetime 6.4% reduction and then that's it. We're going to start from there and build back. I think all of us -- well, I don't know everybody in the industry would be supportive, but we would certainly be so that we get that overhang out and then we can start growing that industry like we think it's necessary to do. So I think that's probably how we came up with our thinking is nobody said if we do 6.4%, it's all we're ever going to do and we're going to move forward. It's very ambiguous as to what that entails.

And so if -- let's say we got the clarity and they did the 6.4%, but somehow you got indication that was it. Does that automatically clear the decks? Or does it take some time for the industry to shake out and react to that before you could look at opportunities potentially grow?

I think all things, it would probably take a little time to shake out. But I think it would allow some of the folks that want to sell their business and get out of the industry. A lot of people are getting to retirement age and they've had this business for a while, and that's their retirement. I think if we had some clarity, those opportunities may come up. And certainly, we look at some of those. I think it will take a little bit of time before the industry gets back to a normal cadence of people coming up and being able to have the acquisition opportunities we see in the other 2 segments.

Is it in home health specifically, is it mostly about what the earnings power is given the uncertainty of the reimbursement? Or is there a big divergence of views on what the multiple should be as well?

Well, I think right now, there's both. I think we need some clarity on how the industry is viewed by the government. Are they going to be supportive going forward? I think if we can get that understanding that there's rate support, then I think it's like all things. The market will eventually determine the multiple, what makes sense. Right now, the multiples would not be very high because there's so much uncertainty that even if it could trade, you'd have to factor that into what you're willing to pay. I think if we get some certainty, it will probably normalize more to what we've seen in the past with multiples related to home health.

So inorganic growth has been a part of the company's story. I think you would described this year as being a little on the lighter side of what you've historically done. You've done -- had a couple of other years where you had above what you would target. Maybe just first comment on why would it be -- has been a little lighter? And then what does it look like for '26 pipeline?

Yes. I think it's a fair point. We've had years where we've been a little bit lighter. But last year, we did Gentiva, which is obviously the largest we've done in our history. But I think really, this year, what we've seen has been just more market-driven. I think a lot of folks coming in this year thought there would be more opportunities, more things coming to market and broker processes. And I think we've seen that be a little slow just because of the universe of prospective buyers that are highly leveraged, some of the rates have stayed pretty high. They're starting to come down toward the end of the year. So I think that makes people from what we understand, optimistic that maybe next year, there will be more larger or chunkier type opportunities for folks like us to look at. I think for us, it's finding the right things at the right price. We are, I think, pretty diligent in our process and looking at targets. The geography is very important to us, the service line, the overlap that Dirk was mentioning. I'd say we're disciplined in what we'll pay. Hospice has continued to be very expensive. So I think as those things come to market, a couple of larger ones were out this year that traded for depending on who you believe, mid- to upper teens, which are fairly expensive. So I think most of our focus has been more on personal care, maybe some smaller complementary home health at reasonable multiples. But I think that will be our focus probably going into next year. But I think we're hopeful that next year, we'll have more things to look at and more things will be in market that would make sense for us.

And just to make sure everybody is on the same page, mid-teens, that's an EBITDA multiple.

EBITDA multiple.

Right. How about the other 2 business lines? Where are you seeing valuations at this point, if you would characterize it?

They've been -- I mean, TCS has been pretty consistent. I think if we're doing small tuck-in type deals, those are as low as 4x and 5x. I think if they get to be a little bit bigger, it could be 7x to 8x. Obviously, we paid low double digits for Gentiva, but that was a very different type asset. But I think those remain pretty consistently in that range. And I think home health for us, it's similar, probably a little more expensive than personal care, but we've seen smaller home health deals that are kind of in that mid- to upper single-digit range. If it gets to be a little bit bigger, good quality assets, I think sellers are still pressing for closer to 10x, somewhere in that range, but that's probably been pretty consistent in the last year or so.

I mean it may be indicative of just where the multiples are, but any comment on competitive landscape for deals and how that's changed over the last year or 2. When you're looking at transactions, is there usually other people at the table? Or do you see exclusive deals very often?

It's -- in broker process, I think you still see folks out there, perhaps some of the typicals that we've seen in the past. Usually, it's more private equity-backed companies maybe that have multi-segments that are interested in building some density similar to us. And we've continued to see them be out there and somewhat active. I think we tried to be creative on our end. I think Gentiva is probably a good example. It wasn't a brokered process. It's something that we had been inquiring about and having conversations for quite some time. If there are ways where we can preempt processes and have direct conversations, we will always be open to doing that. So I think it's probably a mix for us.

Just to close the loop on the home health rule, because it is pretty small for you, have you sized that in terms of what the headwind would be if you had the worst-case scenario of the 6.4% cut that was proposed?

I mean our modeling shows that it comes through just exactly as proposed with our current business, it would be approximately a $3 million impact for us. So pretty small in the grand scheme of things. I think we think we have some additional work that we can do on visits per episode, we could be more efficient. So I think we would have probably some opportunity to continue to offset some of that. I think offsetting all of it would probably be difficult. It is a small segment for us. We don't have a lot of infrastructure G&A to really kind of really put pressure on, but there are some ways we can mitigate portions of that.

Okay. Okay. And just to close the loop on the M&A, what is sort of the target year-to-year? What would be a normal year in terms of tuck-in deals. I mean, obviously, if you had a Gentiva, that's way outside the norm. But year in, year out, how much supplement organic growth will come from M&A and development and maybe sort of parameter around the types of deals, size and all.

Yes. I think the way we've been talking about it for the last several years is we kind of have a -- we believe that there should be an opportunity maybe to add $100-plus million in acquired revenue per year, I think would be a really nice goal for us. I think we've hit that certain years, some years, we've been a little bit shy of that depending upon what the opportunities are. If we hit $100-plus million in acquired revenue, that's going to be nicely ahead of the 5% that we would need talking earlier about our overall 10% goal, that would put us nicely ahead of that. But it's year-to-year based on what the opportunity is for us to hit that or not.

Yes. Just a couple of things on the expense side further. You run SG&A typically in the 20%, 21% range. Are there opportunities? Is it going to -- as you leverage the revenue growth, does that give you leverage on G&A? Or is this sort of a constant number, any particular expense efficiencies that are out there?

Yes. I think 2 things on that. I think you're exactly right. Our focus has always been as we grow top line, we should get leverage on G&A. So as a percentage, we should see some improvement there. We'd like to see that and have an expectation to eventually get that sub-20% but nothing specific there. The only thing I would mention just on kind of cost savings opportunity really kind of ties back into the Gentiva acquisition. We've talked about synergies there. One of those that's still yet to come is they're on their existing EMR from when we purchased them. We probably have some duplicative costs when we move them over to our platform and we move into Homecare Homebase, hopefully, in 2026. we should see some savings from that and should get some synergy there in G&A.

[indiscernible] Have you sized that at all?

It's probably around $1 million a year. Approximately.

And then another miscellaneous one was on personal care. There's obviously some areas you're paid by the managed care. Others it's more traditional fee-for-service. How is that likely to change over time? And do you care about -- is that a headwind, tailwind?

Do you want to start, Dirk?

Go ahead.

I'd say I think the way we've tried to position ourselves today in most markets, when you're managed Medicaid, they're operating basically as a third-party administrator for the state. So the state is still setting the rate. It's an all- willing provider type environment. I think we have one exception to that, but we were able to negotiate rates directly with the MCOs in New Mexico as the only market today. But I think part of our strategy has been to position ourselves with size, scale and density in states that have managed Medicaid. So if there's an opportunity in the future for them to think about preferred provider networks, ability to negotiate rates and the states start to allow that, we'll be in a position to be a beneficiary of that. So I don't know, Dirk, if you want to talk a little bit about how you think about that longer term?

Yes. I think one of the things with our size and our multistate platform, we develop strong relationships with the larger payers. And so when they go in and take over a state's Medicaid program, they outsource it, while they may not have the ability to change rates, they do have the ability to direct business. And the fact that we work with them in various states and then help them with value-based care and other aspects and show we can control cost for them, we think it's an advantage. It's actually somewhat of a tailwind when the larger payers come in to a state and take over that Medicaid outsourced relationship. Not that the states aren't great, they are, but they probably don't appreciate some of the things we can do because they're only looking within the state. They're not looking around the country that we have with the payers.

Which sort of begs the question. When you think about growth and development and even tuck-in deals, are you looking at new states? Or is it mostly focused on just building out further and further in the states you're in?

Yes. Our strategy is to strengthen geographically the 23 states in which we're in, but we will be open like we did with Gentiva. We entered into Texas with that acquisition, but we did it in a leading market share position, which is what we would prefer to do if we go into a new market. So there's probably 4 or 5 markets out there that we either were not in or we're not very big in that we would like to grow, and we'll keep looking for opportunities there. But we want to make sure we can do it with the aspect, especially in a new state where we see the ability to either grow to large density in personal care or 3 levels of care if the market dictates.

Your leverage situation is you're just under 1x, so you're a very strong balance sheet from a leverage perspective. Any thoughts on capital deployment as we wrap up here? It sounds like priority is reinvesting in the business and inorganic growth, but any other thoughts, share repurchases, other things?

I think for now, we still are focused on M&A and using our balance sheet to continue to grow in that respect. So if some of the opportunities that we hope to see in 2026 materialize, that will definitely be our first priority. I think share repurchase for us is probably a secondary consideration. I think we're probably not quite in the range of considering that today. But down the road, if M&A opportunities and the market is slow, that's something that we probably always consider as a next potential.

All right. Well, that's great. I really appreciate Addus participating in the conference and everyone sitting in. I think next up in this room is Cigna. So have a great day, everyone.

Thank you, A.J. Great to see you guys.