Addus HomeCare Corp

Previous wording

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Current wording

ITEM 7. MANAGEMENT**’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Previous wording

You should read the following discussion together with our Consolidated Financial Statements and the related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements about our business and operations. Our actual results may differ materially from those we currently anticipate as a result of the factors we describe under “Risk Factors” and elsewhere in this Annual Report on Form 10-K and other risks as well as other factors that are not currently known to us, that we currently consider immaterial or that are not specific to us, such as general economic conditions. The discussion of our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) can be found in the Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

You should read the following discussion together with our Consolidated Financial Statements and the related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements about our business and operations. Our actual results may differ materially from those we currently anticipate as a result of the factors we describe under“Risk Factors”* and elsewhere in this Annual Report on Form 10-K and other risks as well as other factors that are not currently known to us, that we currently consider immaterial or that are not specific to us, such as general economic conditions. The discussion of our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, included in Item 7. Management*’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) can be found in the Annual Report on Form 10-K for the year ended December 31, 2024.

Previous wording

We are a home care services provider operating three segments: personal care, hospice and home health. Our services are principally provided in-home under agreements with federal, state and local government agencies, managed care organizations, commercial insurers and private individuals. Our consumers are predominantly “dual eligible,” meaning they are eligible to receive both Medicare and Medicaid benefits. Managed care revenues accounted for 34.8%, 36.6% and 36.0% of our revenue during the years ended December 31, 2024, 2023, and 2022 respectively.

Current wording

We are a home care services provider operating three segments: personal care, hospice and home health. Our services are principally provided in-home under agreements with federal, state and local government agencies, managed care organizations, commercial insurers and private individuals. Our consumers are predominantly “dual eligible,” meaning they are eligible to receive both Medicare and Medicaid benefits. Managed care revenues accounted for 37.0%, 34.8% and 36.6% of our revenue during the years ended December 31, 2025, 2024, and 2023 respectively.

Previous wording

On March 9, 2024, we completed our acquisition of the operations of Upstate for $0.4 million, with funding provided by available cash. With the purchase of Upstate, the Company expanded its personal care services segment in South Carolina.

Current wording

On March 9, 2024, we completed the Upstate Acquisition for $0.4 million, with funding provided by available cash. With the Upstate Acquisition, the Company expanded its personal care segment in South Carolina.

Previous wording

On December 2, 2024, we completed the Gentiva Acquisition for approximately $353.6 million, with funding primarily provided by drawing on the Company’s revolving credit facility and a portion of the net proceeds of the Company’s public offering of common stock. The purchase price is subject to the completion of working capital and related adjustments. With the Gentiva Acquisition, the Company expanded its services within its personal care services segment in Arizona, Arkansas, California and North Carolina, and entered the market in Missouri and Texas. The home health segment also was expanded in Tennessee.

Current wording

On December 2, 2024, we completed the Gentiva Acquisition for approximately $353.6 million, with funding primarily provided by drawing on the Company’s revolving credit facility and a portion of the net proceeds of the Company’s public offering of common stock. With the Gentiva Acquisition, the Company expanded its services within its personal care segment in Arizona, Arkansas, California, and North Carolina, and entered the market in Missouri and Texas. The home health segment also was expanded in Tennessee.

Previous wording

Effective May 20, 2024, we entered into a definitive asset purchase agreement to sell all of our New York operations (the “New York Asset Sale”). The Company entered into a consulting agreement with the purchaser, as the transfer of clients and caregivers and payment for assets pursuant to the New York Asset Sale is occurring over time as regulatory approvals are received, coordination of the transfer of clients and caregivers occurs, and the change of control takes place. In connection with this transaction, the Company will cease operations in New York. In October 2024, the Company qualified for sale consideration of the New York Asset Sale. As a result, the Company has deconsolidated the results of its New York operations and recorded a gain on divestiture of $3.7 million. The New York Asset Sale purchase price of up to $23.0 million includes an initial payment of $4.6 million, $6.9 million paid pro rata as a deferred payment as caregivers are transferred and 50% in the form of contingent consideration for the Company’s Consumer Directed Personal Assistance Program (“CDPAP”) business.

Current wording

Effective May 20, 2024, we entered into a definitive asset purchase agreement to sell all of the Company’s New York operations for a purchase price of up to $23.0 million in cash, subject to certain adjustments, including adjustments for future operating requirements (the “New York Asset Sale”). The purchase price included 50% cash consideration, paid out as an initial payment of $4.6 million and $6.9 million paid pro rata as a deferred payment as caregivers are transferred, and 50% in the form of contingent consideration for the Company’s New York Consumer Directed Personal Assistance Program (“CDPAP”) business. The Company entered into a consulting agreement with the purchaser effective May 20, 2024, as the transfer of clients and caregivers and payment for assets pursuant to the New York Asset Sale is occurring over time as regulatory approvals are received, coordination of the transfer of clients and caregivers occurs, and the change of control takes place. The Company determined that the consulting agreement gave it the ability to control the business until October 2024, when the Company determined that it no longer controlled the business as it transferred more than 50% of the clients and caregivers and therefore qualified for sale consideration of the New York Asset Sale. As a result, the Company deconsolidated the results of its New York operations and recorded a gain on divestiture of $3.7 million during the year ended December 31, 2024. The gain was reflected within general and administrative expenses on the consolidated statement of operations.

Previous wording

Our payor clients are principally federal, state and local governmental agencies and managed care organizations. The federal, state and local programs under which the agencies operate are subject to legislative, administrative and budgetary changes and other risks that can influence reimbursement rates. We are experiencing a transition of business from government payors to managed care organizations, which we believe aligns with our emphasis on coordinated care and the reduction of the need for acute care. Medicare advantage revenue is included within Medicare.

Current wording

Our payor clients are principally federal, state and local governmental agencies and managed care organizations. The federal, state and local programs under which the agencies operate are subject to legislative, administrative and budgetary changes and other risks that can influence reimbursement rates. We have experienced a transition of business from government payors to managed care organizations, which we believe aligns with our emphasis on coordinated care and the reduction of the need for acute care. Medicare advantage revenue is included within Medicare.

Previous wording

With the acquisition of Upstate and the Gentiva Acquisition in 2024, the Company expanded its personal care services to consumers in the state of Arizona, Arkansas, California, Missouri, North Carolina, South Carolina and Texas.

Current wording

With the Jacksonville Acquisition, the Great Lakes Acquisition, the Helping Hands Acquisition and the Gold Horses Acquisition in 2025, the Company expanded its personal care services to consumers in the state of Florida, Michigan, Pennsylvania and Texas. With the acquisition of Upstate and the Gentiva Acquisition in 2024, the Company expanded its personal care services to consumers in the state of Arizona, Arkansas, California, Missouri, North Carolina, South Carolina and Texas.

Previous wording

With the acquisition of Tennessee Quality Care in 2023, the Company expanded its hospice services to patients in the state of Tennessee and with the acquisition of JourneyCare in 2022, the Company also expanded its hospice services to patients in the state of Illinois.

Current wording

With the Helping Hands Acquisition, the Company entered the hospice market in Pennsylvania, and with the acquisition of Tennessee Quality Care in 2023, the Company expanded its hospice services to patients in the state of Tennessee.

Previous wording

We derive a significant amount of our net service revenues in Illinois, which represented 43.7% and 44.5% of our net service revenues for the years ended December 31, 2024 and 2023, respectively. A significant amount of our revenue is derived from one payor client, the Illinois Department on Aging, the largest payor program for our Illinois personal care operations, which accounted for 21.0% and 20.9% of our net service revenues for the years ended December 31, 2024 and 2023, respectively.

Current wording

We derive a significant amount of our net service revenues in Illinois, which represented 37.0% and 43.7% of our net service revenues for the years ended December 31, 2025 and 2024, respectively. A significant amount of our revenue is derived from one payor client, the Illinois Department on Aging, the largest payor program for our Illinois personal care operations, which accounted for 18.1% and 21.0% of our net service revenues for the years ended December 31, 2025 and 2024, respectively.

Previous wording

The Illinois fiscal year 2025 budget includes an increase in hourly rates for in-home care services to $29.63, effective January 1, 2025, and required a minimum wage of $18.00 per hour for direct service workers. CMS approved an amendment to Illinois’ Persons who are Elderly waiver program that included this rate increase, effective January 1, 2025.

Current wording

As noted above, we derive a significant amount of our net service revenues in Illinois. Changes to reimbursement rates and minimum wage requirements may materially impact our revenues. For example, the Illinois fiscal year 2025 budget included an increase in hourly rates for in-home care services to $29.63, effective January 1, 2025, and required a minimum wage of $18.00 per hour for direct service workers. CMS approved an amendment to the Illinois HCBS Waiver for Persons Who are Elderly that included this rate increase, effective January 1, 2025. The Illinois fiscal year 2026 budget includes an increase in hourly rates for in-home care services to $30.80, effective January 1, 2026. This rate sustains a minimum wage of $18.75 per hour for direct service workers.

Previous wording

The City of Chicago requires the Chicago minimum wage to be adjusted annually based on increases in the Consumer Price Index (“CPI”), subject to a cap and other requirements. On July 1, 2024, the rate was adjusted to $16.20 based on the increase in the CPI.

Current wording

The City of Chicago requires the Chicago minimum wage to be adjusted annually based on increases in the Consumer Price Index (“CPI”), subject to a cap and other requirements. Effective July 1, 2025, the rate was adjusted to $16.60 based on the increase in the CPI.

Previous wording

Hospice services provided to Medicare beneficiaries are paid under the Medicare Hospice Prospective Payment System, under which CMS sets a daily rate for each day a patient is enrolled in the hospice benefit. The daily rate depends on the level of care provided to a patient (routine home care, continuous home care, inpatient respite care, or general inpatient care). Daily rates are adjusted for factors such as area wage levels. CMS updates hospice payment rates each federal fiscal year. Effective October 1, 2024, CMS increased hospice payment rates by 2.9%. This reflects a 3.4% market basket increase and a negative 0.5 percentage point productivity adjustment. Hospices that do not satisfy quality reporting requirements are subject to a 4-percentage point reduction to the market basket update.

Current wording

Hospice services provided to Medicare beneficiaries are paid under the Medicare Hospice Prospective Payment System, under which CMS sets a daily rate for each day a patient is enrolled in the hospice benefit. The daily rate depends on the level of care provided to a patient (routine home care, continuous home care, inpatient respite care, or general inpatient care). Daily rates are adjusted for factors such as area wage levels. CMS updates hospice payment rates each federal fiscal year. Effective October 1, 2025, CMS increased hospice payment rates by 2.6%. This reflects a 3.3% market basket increase and a negative 0.7 percentage point productivity adjustment. Hospices that do not satisfy quality reporting requirements are subject to a 4-percentage point reduction to the market basket update.

Previous wording

Overall payments made by Medicare to each hospice provider number are subject to an inpatient cap and an aggregate cap. The inpatient cap limits the number of days of inpatient care for which Medicare will pay to no more than 20% of total patient care days. Days in excess of the limitation are paid at the routine home care rate. The aggregate cap, which is set each federal fiscal year, limits the total Medicare reimbursement that a hospice may receive in a cap year (typically the federal fiscal year), based on an annual per-beneficiary cap amount and the number of Medicare patients served. The aggregate cap was updated to $34,465.34 for federal fiscal year 2025. If a hospice’s Medicare payments exceed its inpatient or aggregate caps, it must repay Medicare the excess amount.

Current wording

Overall payments made by Medicare to each hospice provider number are subject to an inpatient cap and an aggregate cap. The inpatient cap limits the number of days of inpatient care for which Medicare will pay to no more than 20% of total patient care days. Days in excess of the limitation are paid at the routine home care rate. The aggregate cap limits the total Medicare reimbursement that a hospice may receive in a cap year (typically the federal fiscal year), based on an annual per-beneficiary cap amount, which is set each federal fiscal year, and the number of Medicare patients served. The per-beneficiary cap amount was updated to $35,361.44 for federal fiscal year 2026. If a hospice’s Medicare payments exceed its inpatient or aggregate caps, it must repay Medicare the excess amount.

Previous wording

CMS updates the HHPPS payment rates each calendar year. For calendar year 2025, CMS estimates that Medicare payments to home health agencies will increase by 0.5%. This is based on a home health payment update percentage of 2.7%, which reflects a 3.2% market basket update, reduced by a productivity adjustment of 0.5 percentage points and an estimated 1.8% decrease associated with the transition to the PDGM, among other changes. Home health providers that do not comply with quality data reporting requirements are subject to a 2-percentage point reduction to their market basket update. In addition, Medicare requires home health agencies to submit a one-time Notice of Admission (“NOA”) for each patient that establishes that the beneficiary is under a Medicare home health period of care. Failure to submit the NOA within five calendar days from the start of care will result in a reduction to the 30-day period payment amount for each day from the start of care date until the date the NOA is submitted.

Current wording

CMS updates the HHPPS payment rates each calendar year. For calendar year 2026, CMS estimates that Medicare payments to home health agencies will decrease by 1.3%. This is based on a home health payment update percentage of 2.4%, which reflects a 3.2% market basket update, reduced by a productivity adjustment of 0.8 percentage points, among other changes. Home health providers that do not comply with quality data reporting requirements are subject to a 2-percentage point reduction to their market basket update. In addition, Medicare requires home health agencies to submit a one-time Notice of Admission (“NOA”) for each patient that establishes that the beneficiary is under a Medicare home health period of care. Failure to submit the NOA within five calendar days from the start of care will result in a reduction to the 30-day period payment amount for each day from the start of care date until the date the NOA is submitted.

Previous wording

In certain states, payment of claims may be impacted by the Review Choice Demonstration for Home Health Services, a program intended to identify and prevent fraud, reduce the number of Medicare appeals and improve provider compliance with Medicare program requirements. The program is currently limited to home health agencies in Illinois, Ohio, Oklahoma, North Carolina, Florida and Texas. Providers in states subject to the Review Choice Demonstration for Home Health Services may initially select either pre-claim review or post-payment review. Home health agencies that maintain high compliance levels are eligible for additional options that may be less burdensome. This program has not had a material impact on our results of operations or financial position.

Current wording

Payment of claims may be impacted by the Review Choice Demonstration for Home Health Services, a program intended to identify and prevent fraud, reduce the number of Medicare appeals and improve provider compliance with Medicare program requirements. The program is currently limited to home health agencies in Illinois, Ohio, Oklahoma, North Carolina, Florida and Texas. Providers in states subject to the Review Choice Demonstration for Home Health Services may initially select either pre-claim review or post-payment review. Home health agencies that maintain high compliance levels are eligible for additional options that may be less burdensome. This program has not had a material impact on our results of operations or financial position.

Previous wording

In May 2024, CMS finalized a rule intended to improve access to services and quality of care for Medicaid beneficiaries across fee-for-service and managed care delivery systems. The final rule includes significant provisions related to HCBS, including the “80/20” or “payment adequacy” requirement, which will require states to ensure that at least 80% of all Medicaid payments a provider receives for homemaker, home health aide, and personal care services, less certain excluded costs, under specified programs are spent on total compensation (including benefits) for direct care workers furnishing these services, rather than administrative overhead or profit, subject to limited exceptions. States are required to ensure compliance with the 80/20 requirement by mid-2030. The final rule includes several other measures intended to promote transparency and enhance quality and access to services, including a variety of reporting requirements for states. Given the very long implementation period and the likelihood of further changes as a result of litigation, administration and congressional changes, further rule-making and state changes in response to the final rule, it is premature to predict the ultimate impact of the final rule on our business.

Current wording

In May 2024, CMS finalized a rule intended to improve access to services and quality of care for Medicaid beneficiaries across fee-for-service and managed care delivery systems. The final rule includes significant provisions related to HCBS, including the “80/20” or “payment adequacy” requirement, which will require states to ensure by mid-2030 that at least 80% of all Medicaid payments a provider receives for homemaker, home health aide, and personal care services, less certain excluded costs, under specified programs are spent on total compensation (including benefits) for direct care workers furnishing these services, rather than administrative overhead or profit, subject to limited exceptions. The final rule includes several other measures intended to promote transparency and enhance quality and access to services, including a variety of reporting requirements for states. Given the long implementation period and the likelihood of further changes as a result of litigation, administration and congressional changes, further rule-making and state changes in response to the final rule, it is premature to predict the ultimate impact of the final rule on our business. Some states have adopted or may consider adopting similar caregiver compensation restrictions.

Previous wording

Home care and other healthcare providers may be significantly impacted by changes to the Medicaid program, including changes resulting from legislation and administrative actions at the federal and state levels. Federal actions may impact funding for, or the structure of, the Medicaid program and may shape provider reimbursement rates, eligibility and coverage policies and other aspects of state Medicaid programs. Currently, the federal government pays a percentage match for state Medicaid expenditures that varies by state and other factors, with no pre-set limit on federal spending. However, some members of Congress and the presidential administration have raised, and Congress may in the future adopt, proposals intended to reduce Medicaid expenditures such as restructuring the Medicaid program to give states a “block grant” or fixed amount of overall funding for their respective Medicaid programs or to impose spending caps such as per Medicaid beneficiary limits on federal contributions. Reductions in federal funding or changes to the federal funding formula for Medicaid could have a significant impact, particularly in states that expanded Medicaid under the ACA and especially if federal contributions for Medicaid expansion populations decrease and states are unable to offset the reductions. In addition, some states use or have applied to use Medicaid waivers granted by CMS to implement the ACA’s Medicaid expansion provisions, impose different eligibility or enrollment restrictions or otherwise implement programs that vary from federal standards. Some of these program variations may reduce the number of current and/or future Medicaid enrollees.

Current wording

Home care and other healthcare providers may be significantly impacted by changes to the Medicaid program, including changes resulting from the OBBBA and other legislation and administrative actions at the federal and state levels. Federal actions may impact funding for, or the structure of, the Medicaid program, including through changes to Medicaid waiver programs, and may shape provider reimbursement rates, eligibility and coverage policies, waiver programs and other aspects of state Medicaid programs at the state level. For example, the OBBBA includes provisions that are expected to result in Medicaid spending reductions and changes in administration of state Medicaid programs. Among other changes, the law requires changes to Medicaid financing mechanisms, including restrictions intended to reduce the federal matching funds received by state Medicaid programs, with greater restrictions in states that have expanded Medicaid. In addition, some members of Congress and the executive branch have raised, and Congress may in the future adopt, other proposals intended to reduce Medicaid expenditures such as restructuring the Medicaid program to give states a “block grant” or fixed amount of overall funding for their respective Medicaid programs or to impose spending caps such as per Medicaid beneficiary limits on federal contributions. Reductions in federal funding or changes to the federal funding formula for Medicaid under the OBBBA or future initiatives could have a significant impact, particularly in states that expanded Medicaid under the ACA and especially if federal contributions for Medicaid expansion populations decrease and states are unable to offset the reductions. Decreased federal funding and increased state obligations and administrative burden could strain state budgets, which could result in state limitations on Medicaid eligibility or coverage, payment rate reductions, and changes to Medicaid waiver programs, among other effects.

Previous wording

The outcome of the 2024 federal elections, affecting both the executive and legislative branches, increases regulatory uncertainty and the potential for significant policy changes. President Trump has issued executive orders that impact or may impact the healthcare industry, including an order establishing a presidential advisory commission focused on restructuring and streamlining government agencies and reducing or eliminating regulations and federal government programs and other expenditures. Further, some members of Congress and the presidential administration have raised potential measures intended to accelerate the shift from traditional Medicare to Medicare Advantage or eliminating some or all of the consumer protections established by the ACA.

Current wording

The outcome of the 2024 federal elections, affecting both the executive and legislative branches, increased regulatory uncertainty and the potential for significant policy changes. The executive branch has significant influence over healthcare policy changes through government agency regulation and executive orders have been issued that impact or may impact the healthcare industry. Further, some members of Congress and the executive branch have raised potential measures intended to accelerate the shift from traditional Medicare to Medicare Advantage or eliminating some or all of the consumer protections established by the ACA.

Previous wording

All of our income is from domestic sources. We incur state and local taxes in states in which we operate. Our effective income tax rate was 25.9% and 23.1% for the years ended December 31, 2024 and 2023, respectively. The difference between our federal statutory and effective income tax rates was principally due to the inclusion of state taxes, non-deductible compensation, and non-deductible permanent items, partially offset by the use of federal employment tax credits.

Current wording

All of our income is from domestic sources. We incur state and local taxes in states in which we operate. Our effective income tax rate was 24.7% and 25.9% for the years ended December 31, 2025 and 2024, respectively. The difference between our federal statutory and effective income tax rates was principally due to the inclusion of state taxes, non-deductible compensation, partially offset by the use of federal employment tax credits and an excess tax benefit.

Previous wording

Net service revenues increased by 9.1% to $1,154.6 million for the year ended December 31, 2024 compared to $1,058.7 million in 2023. Net service revenue increased by $61.9 million, $21.0 million and $13.0 million in our personal care, hospice and home health segments, respectively, for the year ended December 31, 2024, compared to 2023. Net service revenue in our personal care segment increased due to a 5.2% increase in revenues per billable hour and a 2.1% increase in billable hours for the year ended December 31, 2024 compared to 2023. The increase in our hospice segment revenue was primarily due to an increase in average daily census and revenue per patient day, mainly attributed to the acquisition of Tennessee Quality Care on August 1, 2023. The increase in our home health segment is primarily due to the full-year effect in 2024 of the acquisition of Tennessee Quality Care on August 1, 2023.

Current wording

Net service revenues increased by 23.2% to$1,422.5 million for the year ended December 31, 2025, compared to $1,154.6 million in 2024. Net service revenues increased by $232.6 million, $34.4 million and $0.9 million in the personal care, hospice and home health segments, respectively, for the year ended December 31, 2025, compared to 2024. Net service revenue in our personal care segment increased, primarily due to a 36.3% increase in billable hours, offset by a 6.4% decrease in revenues per billable hour due to lower reimbursement rates attributable to the Gentiva and Helping Hands Acquisitions for the year ended December 31, 2025 compared to 2024. The increase in our hospice segment revenue was primarily due to organic growth, driven by an increase in average daily census and higher revenue per patient day.

Previous wording

General and administrative expenses increased to $258.8 million for the year ended December 31, 2024 compared to $234.8 million in 2023. The increase in general and administrative expenses was primarily due to the full-year effect of the Tennessee Quality Care acquisition that resulted in an increase in administrative employee wages, taxes and benefit costs of $11.7 million. General and administrative expenses, expressed as a percentage of net service revenues, slightly increased to 22.4% for 2024, from 22.2% in 2023.

Current wording

General and administrative expenses increased to $306.8 million for the year ended December 31, 2025, compared to $258.8 million in 2024. The increase in general and administrative expenses was primarily due to the full-year effect of the Gentiva acquisition that resulted in an increase in administrative employee wages, taxes and benefit costs of $35.0 million. General and administrative expenses, expressed as a percentage of net service revenues, decreased to 21.6% for 2025, from 22.4% in 2024.

Previous wording

Depreciation and amortization decreased to $13.5 million for the year ended December 31, 2024 from $14.1 million in 2023, primarily due to the decrease of intangible asset amortization related to accelerated amortization and the reduction in amortization expense of tradenames, which were fully amortized, partially offset by the full-year effect in 2024 of our fiscal year 2023 acquisitions and fiscal year 2024 acquisitions.

Current wording

Depreciation and amortization increased to $16.4 million for the year ended December 31, 2025, from $13.5 million in 2024, primarily due to theincrease of intangible asset amortization related to the full-year effect in 2025 of our fiscal year 2024 acquisitions and fiscal year 2025 acquisitions.

Previous wording

Total interest expense, net decreased to $7.7 million from $11.1 million for the year ended December 31, 2024 compared to 2023. The decrease in interest expense was primarily due to decreased amounts held under our credit facility for the year ended December 31, 2024 compared to 2023. Interest income increased $2.9 million due to an increase in cash investment into interest bearing accounts from the Company’s public offering of common stock.

Current wording

Interest expense increased to $13.6 million from $7.7 million for the year ended December 31, 2025, compared to 2024, primarily due to higher outstanding borrowings held under our credit facility. Interest income decreased to $2.4 million from $4.4 million for the year ended December 31, 2025, compared to 2024, due to an increase in cash investment into interest bearing accounts from the Company’s public offering of common stock in 2024.

Previous wording

All of our income is from domestic sources. We incur state and local taxes in states in which we operate. The effective income tax rate was 25.9% and 23.1% for the years ended December 31, 2024 and 2023, respectively. Our higher effective income tax rate in 2024 was due to the increase of non-deductible compensation and non-deductible permanent items, as well as lower benefit from the use of federal employment tax credits. For the years ended December 31, 2024 and 2023, the non-deductible compensation, non-deductible permanent items, and federal employment tax credits were 0.8% and (1.7)%, respectively.

Current wording

All of our income is from domestic sources. We incur state and local taxes in states in which we operate. The effective income tax rate was 24.7% and 25.9% for the years ended December 31, 2025 and 2024, respectively. Our lower effective income tax rate in 2025 was principally due to a higher excess tax benefit. For the years ended December 31, 2025 and 2024, the excess tax benefit were 2.3% and 0.5%, respectively.

Previous wording

The personal care segment derives a significant amount of its net service revenues from operations in Illinois, which represented 38.2% and 38.8% of our net service revenues for the years ended December 31, 2024 and 2023, respectively. One payor client, the Illinois Department on Aging, accounted for 21.0% and 20.9% of net service revenues for the years ended December 31, 2024 and 2023, respectively. Net service revenues from state, local and other governmental programs accounted for 53.3% and 50.4% of net service revenues for the years ended December 31, 2024 and 2023, respectively. Managed care organizations accounted for 44.0% and 46.2% of net service revenues for the years ended December 31, 2024 and 2023, respectively, with commercial insurance, private pay and other payors accounting for the remainder of net service revenues.

Current wording

The personal care segment derives a significant amount of its net service revenues from operations in Illinois, which represented 42.1% and 51.5% of our net service revenues for the years ended December 31, 2025 and 2024, respectively. One payor client, the Illinois Department on Aging, accounted for 18.1% and 21.0% of net service revenues for the years ended December 31, 2025 and 2024, respectively. Net service revenues from state, local and other governmental programs accounted for 50.8% and 53.3% of net service revenues for the years ended December 31, 2025 and 2024, respectively. Managed care organizations accounted for 46.0% and 44.0% of net service revenues for the years ended December 31, 2025 and 2024, respectively, with commercial insurance, private pay and other payors accounting for the remainder of net service revenues.

Previous wording

Net service revenues increased by 7.8% for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily as a result of an increase in revenues per billable hour of 5.2%, mainly attributed to the rate increases discussed above.

Current wording

Net service revenues increased by 27.2% for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily as a result of a 36.3% increase in billable hours, which more than offset a 6.4% decrease in revenues per billable hour discussed above.

Previous wording

Gross profit, expressed as a percentage of net service revenues, was relatively consistent at 47.0% and 46.8% for the years ended December 31, 2024 and 2023, respectively.

Current wording

Gross profit, expressed as a percentage of net service revenues, was relatively consistent at 27.9% for the year ended December 31, 2025, compared to 28.3% in 2024.

Previous wording

The personal care segment’s general and administrative expenses primarily consist of administrative employee wages, taxes and benefit costs, rent, information technology and office expenses. General and administrative expenses, expressed as a percentage of net service revenues, was 7.9% and 8.1% for the years ended December 31, 2024 and 2023, respectively.

Current wording

The personal care segment’s general and administrative expenses primarily consist of administrative employee wages, taxes and benefit costs, rent, information technology and office expenses. General and administrative expenses, expressed as a percentage of net service revenues, was 8.9% and 7.9% for the years ended December 31, 2025 and 2024, respectively.

Previous wording

Hospice generates revenue by providing care to patients with a life expectancy of six months or less, as well as related services for their families. Hospice offers four levels of care, as defined by Medicare, to meet the varying needs of patients and their families. The four levels of hospice include routine care, continuous care, general inpatient care and respite care. Our hospice segment principally provides routine care.

Current wording

The hospice segment generates revenue by providing care to patients with a life expectancy of six months or less, as well as related services for their families. Hospice offers four levels of care, as defined by Medicare, to meet the varying needs of patients and their families. The four levels of hospice include routine care, continuous care, general inpatient care and respite care. Our hospice segment principally provides routine care.

Previous wording

Net service revenues from Medicare accounted for 91.2% and 89.9% and managed care organizations accounted for 3.3% and 3.4% for the years ended December 31, 2024 and 2023, respectively. Net service revenues increased by $21.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to increases in average daily census and revenue per patient day, mainly attributed to the organic growth and the acquisition of the operations of Tennessee Quality Care on August 1, 2023.

Current wording

Net service revenues from Medicare accounted for 93.1% and 91.2% and managed care organizations accounted for 3.1% and 3.3% for the years ended December 31, 2025 and 2024, respectively. Net service revenues increased by $34.4 million for the year ended December 31, 2025, compared to the year ended December 31, 2024 primarily driven by organic growth, reflected in an incr ease in average daily census and higher revenue per patient day.

Previous wording

Home health generates revenue by providing home health services on a short-term, intermittent or episodic basis to individuals, generally to treat an illness or injury. Net service revenues from Medicare accounted for 69.5% and 72.3% and managed care organizations accounted for 25.2% and 22.2% for the years ended December 31, 2024 and 2023, respectively. Home health services provided to Medicare beneficiaries are paid under the Medicare HHPPS, which uses national, standardized 30-day period payment rates for periods of care. CMS uses the PDGM as the case-mix classification model to place periods of care into payment categories, classifying patients based on clinical characteristics. An outlier adjustment may be paid for periods of care in which costs exceed a specific threshold amount.

Current wording

The home health segment generates revenue by providing home health services on a short-term, intermittent or episodic basis to individuals, generally to treat an illness or injury. Net service revenues from Medicare accounted for 67.4% and 69.5% and managed care organizations accounted for 24.0% and 25.2% for the years ended December 31, 2025 and 2024, respectively. Home health services provided to Medicare beneficiaries are paid under the Medicare HHPPS, which uses national, standardized 30-day period payment rates for periods of care. CMS uses the PDGM as the case-mix classification model to place periods of care into payment categories, classifying patients based on clinical characteristics. An outlier adjustment may be paid for periods of care in which costs exceed a specific threshold amount.

Previous wording

Gross profit, expressed as a percentage of net service revenues, increased from 27.9% for the year ended December 31, 2023 to 28.3% for the year ended December 31, 2024 due to an increase in the reimbursement rate.

Current wording

Gross profit, expressed as a percentage of net service revenues, increased from 36.8% for the year ended December 31, 2024 to 41.8% for the year ended December 31, 2025, primarily due to a decrease of 6.1% in direct service employee wages, taxes and benefit costs.

Previous wording

The hospice segment’s general and administrative expenses primarily consist of administrative employee wages, taxes and benefit costs, rent, information technology and office expenses. General and administrative expenses, expressed as a percentage of net service revenues, was 24.3% and 25.1% for the years ended December 31, 2024 and 2023, respectively. The decrease in general and administrative expenses was primarily due to more efficient operations for administrative employees for the year ended December 31, 2024.

Current wording

The home health segment’s general and administrative expenses consist of administrative employee wages, taxes and benefit costs, rent, information technology and office expenses. General and administrative expenses, expressed as a percentage of net service revenues, were 24.2% and 25.5% for the years ended December 31, 2025 and 2024, respectively. The decrease in general and administrative expenses was primarily due to more efficient operations for administrative employees for the year ended December 31, 2025.

Previous wording

We define Adjusted EBITDA as earnings before interest expense, other non-operating income, taxes, depreciation, amortization, acquisition expenses, stock-based compensation expense, restructure expenses and other non-recurring costs, gain or loss on the sale of assets, impairment of operating lease assets, retroactive rate increases from New York and the retroactive impact from collective bargaining negotiations. Adjusted EBITDA is a performance measure used by management that is not calculated in accordance with GAAP. It should not be considered in isolation or as a substitute for net income, operating income or any other measure of financial performance calculated in accordance with GAAP. Additionally, our calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

Current wording

We define Adjusted EBITDA as earnings before net interest expense, taxes, depreciation, amortization, acquisition expense, stock-based compensation expense, restructuring and other non-recurring costs, the gain or loss on the sale of assets, the impairment of operating lease assets, the impact of New York retroactive rate increases, and the impact of New York accounts receivable settlements. Adjusted EBITDA is a performance measure used by management that is not calculated in accordance with GAAP. It should not be considered in isolation or as a substitute for net income, operating income or any other measure of financial performance calculated in accordance with GAAP. Additionally, our calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

Previous wording

Our primary sources of liquidity are cash on hand and cash from operations and borrowings under our credit facility. At December 31, 2024 and 2023, we had cash balances of $98.9 million and $64.8 million, respectively. Cash flows from operating activities represent the inflow of cash from our payor clients and the outflow of cash for payroll and payroll taxes, operating expenses, interest and taxes.

Current wording

Our primary sources of liquidity are cash on hand and cash from operations and borrowings under our credit facility. At December 31, 2025 and 2024, we had cash balances of $81.6 million and $98.9 million, respectively. Cash flows from operating activities represent the inflow of cash from our payor clients and the outflow of cash for payroll and payroll taxes, operating expenses, interest and taxes.

Previous wording

We drew approximately $233.0 million on the revolver portion of our credit facility to fund, in part, the purchase price paid in connection with the Gentiva Acquisition and repaid $136.4 million under our revolving credit facility in 2024. At December 31, 2024, we had a total of $223.0 million in revolving loans, with an interest rate of 6.34% outstanding on our credit facility. After giving effect to the amounts drawn on our credit facility, approximately $8.0 million of outstanding letters of credit and borrowing limits based on an advance multiple of Adjusted EBITDA (as defined in the Credit Agreement), we had $577.7 million of capacity and $346.6 million available for borrowing under our credit facility. At December 31, 2023, we had a total of $126.4 million of revolving loans, with an interest rate of 7.21%. During the year ended December 31, 2023, the Company drew approximately $110.0 million on the revolver portion of its credit facility to fund, in part, the Tennessee Quality Care acquisition.

Current wording

We drew approximately $11.3 million on the revolver portion of our credit facility to fund, in part, the purchase price paid in connection with the Helping Hands Acquisition and repaid $110.0 million under our revolving credit facility in 2025. At December 31, 2025, we had a total of $124.3 million in revolving loans, with an interest rate of 5.48% outstanding on our credit facility. After giving effect to the amounts drawn on our credit facility, approximately $7.9 million of outstanding letters of credit and borrowing limits based on an advance multiple of Adjusted EBITDA (as defined in the Credit Agreement), we had $650.0 million of capacity and $517.7 million available for borrowing under our credit facility. At December 31, 2024, we had a total of $223.0 million of revolving loans, with an interest rate of 6.34%. During the year ended December 31, 2024, the Company drew approximately $233.0 million on the revolver portion of its credit facility to fund, in part, the purchase price paid in connection with the Gentiva Acquisition and repaid $136.4 million under our revolving credit facility.

Previous wording

Economic conditions in the United States continue to be challenging in certain respects. For example, the United States economy continues to experience inflationary pressures, elevated interest rates and challenging labor market conditions. Any economic downturn would pose a risk to states’ revenues, which in turn could affect our reimbursements and collections received for services rendered. Depending on the severity and length of any potential economic downturn as well as the extent of any federal support, states could face significant fiscal challenges and revise their revenue forecasts and adjust their budgets, and sales tax collections and income tax withholdings could be depressed.

Current wording

Economic conditions in the United States continue to be challenging in certain respects. For example, the United States economy continues to experience inflationary pressures, elevated interest rates and challenging labor market conditions. Any economic downturn would pose a risk to states’ revenues, which in turn could affect our reimbursements and collections received for services rendered. Depending on the severity and length of any potential economic downturn as well as the extent of any federal support, states could face significant fiscal challenges and revise their revenue forecasts and adjust their budgets, and sales tax collections and income tax withholdings could be depressed. State budgetary challenges may be augmented by other factors, including the impact of the OBBBA and other federal legislation.

Previous wording

The American Rescue Plan Act of 2021 (“ARPA”) provides for $350 billion in relief funding for eligible state, local, territorial, and Tribal governments to mitigate the fiscal effects of the COVID-19 public health emergency. Additionally, the law provided for a 10-percentage point increase in federal matching funds for Medicaid HCBS from April 1, 2021, through March 31, 2022, provided the state satisfied certain conditions. States are generally permitted to use the state funds equivalent to the additional federal funds through March 31, 2025, but CMS has granted extensions to several states. States must use the monies attributable to this matching fund increase to supplement, not supplant, their level of state spending for the implementation of activities enhanced under the Medicaid HCBS in effect as of April 1, 2021.

Current wording

To mitigate the fiscal effects of the COVID-19 public health emergency, the American Rescue Plan Act of 2021 (“ARPA”) provided for a 10-percentage point increase in federal matching funds for Medicaid HCBS from April 1, 2021, through March 31, 2022, provided the state satisfied certain conditions. States were generally required to use the state funds equivalent to the additional federal funds on activities to enhance Medicaid HCBS by March 31, 2025, but CMS granted extensions to several states, permitting some states spending plans to continue until as late as September 30, 2026.

Previous wording

HCBS spending plans for the additional matching funds vary by state, but common initiatives in which the Company is participating include those aimed at strengthening the provider workforce (e.g., efforts to recruit, retain, and train direct service providers). The Company is required to properly and fully document the use of such funds in reports to the state in which the funds originated. Funds may be subject to recoupment if not expended or if they are expended on non-approved uses.

Current wording

HCBS spending plans for the additional matching funds vary by state, but common initiatives in which the Company participates include those aimed at strengthening the provider workforce (e.g., efforts to recruit, retain, and train direct service providers). The Company is required to properly and fully document the use of such funds in reports to the state in which the funds originated. Funds may be subject to recoupment if not expended or if they are expended on non-approved uses.