Indicate by check mark whether the ~~registrant:~~registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting ~~company,”~~company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 25, ~~2021,~~2022, Addus HomeCare Corporation had ~~15,927,411~~16,110,364 shares of Common Stock outstanding.

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

~~See accompanying~~ Notes to Condensed Consolidated Financial Statements ~~(Unaudited)~~

~~See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)~~

1. Nature of Operations, Consolidation, and Presentation of Financial Statements

Addus HomeCare Corporation (“Holdings”) and its subsidiaries (together with Holdings, the “Company”, “we”, “us” or “our”) operate as a multi-state provider of 3three distinct but related business segments providing in-home services. In its personal care services segment, the Company provides non-medical assistance with activities of daily living, primarily to persons who are at increased risk of hospitalization or institutionalization, such as the elderly, chronically ill or disabled. In its hospice segment, the Company provides physical, emotional and spiritual care for people who are terminally ill as well as related services for their families. In its home health segment, the Company provides services that are primarily medical in nature to individuals who may require assistance during an illness or after hospitalization and include skilled nursing and physical, occupational and speech therapy. The Company’s payors include federal, state and local governmental agencies, managed care organizations, commercial insurers and private individuals.

The pro forma disclosures in the table above include adjustments for amortization of intangible assets, tax expense and acquisition costs to reflect results that are more representative of the combined results of the transactions as if ~~Armada, Queen City, Hospice, County Homemakers and A Plus~~the operations of JourneyCare had been acquired effective January 1, ~~2020.~~2021. This pro forma information is presented for illustrative purposes only and may not be indicative of the results of operations that would have actually occurred. In addition, future results may vary significantly from the results reflected in the pro forma information. The unaudited pro forma financial information does not reflect the impact of future events that may occur after the acquisition, such as anticipated cost savings from operating synergies.

In recognition of the significant threat to the liquidity of financial markets posed by the COVID-19 pandemic, the Federal Reserve and Congress ~~have taken~~took dramatic actions to provide liquidity to businesses and the banking system in the United ~~States.~~ States, as described below.

One of the primary sources of relief for healthcare providers is the Provider Relief Fund, which has been funded through the Coronavirus Aid, Relief, and Economic Security Act (“CARES ~~Act, which was expanded by the PPPHCE Act,~~Act”) and ~~the CAA. The American Rescue Plan Act of 2021 (“ARPA”), another relief package with numerous provisions that affect~~related legislation. Provider Relief Fund payments are intended to compensate healthcare providers ~~was signed into law~~for lost revenues and health care related expenses incurred in ~~March 2021. See Note 9 for additional information regarding government actions~~response to ~~mitigate COVID-19’s impact.~~

the COVID-19 pandemic and are not required to be repaid, provided that recipients attest to and comply with certain terms and conditions, including limitations on balance billing and not using funds received from the Provider Relief Fund

In to reimburse expenses or losses that other sources are obligated to reimburse. Commercial organizations that receive and expend annual total ~~the CARES Act and other relief legislation include over $178 billion~~awards of $750,000 or more in federal funding, ~~to be distributed~~including payments received through the Provider Relief Fund, are subject to ~~eligible providers, including public entities and Medicare- and/or Medicaid-enrolled providers.~~ federal audit requirements.

In November 2020, the Company received grants in an aggregate principal amount of ~~$13.7~~$13.7 million from the Provider Relief Fund, ~~for which we had previously applied. The Company~~and fully utilized ~~$0.4~~these funds as of December 31, 2021, including $0.4 million and ~~$11.7~~$11.7 million ~~of these funds for~~during the three and nine months ended September 30, 2021, respectively, for healthcare related expenses, including retention payments, attributable to COVID-19 that were unreimbursed by other sources. ~~In accordance with the current guidance issued by HHS, the Company expects to utilize additional funds through December 31, 2021, at which point we anticipate any unused funds will be returned.~~ We ~~are required to~~ properly and fully ~~document~~documented the use of such funds in reports submitted to ~~HHS, which must be submitted no later than~~the U.S. Department of Health & Human Services (“HHS”) in the quarter ended March 31, 2022. ~~The Company’s ability to utilize and retain some or all of such funds will depend on~~During the magnitude, timing and nature of the impact of the COVID-19 pandemic, as well as the terms and conditions of the funds received. Queen City Hospice administered retention payments totaling $1.9 million to caregivers for the nine monthsquarter ended September 30, ~~2021, which~~2022, we ~~believe~~submitted an unmodified audit report to ~~be necessary to secure and maintain adequate personnel. Commercial~~HHS in accordance with Generally Accepted Government Auditing Standards, as required for commercial organizations that ~~receive~~received and ~~expend annual~~expended total awards of ~~$750,000~~$750,000 or ~~more in federal funding, including~~ ~~payments received through the Provider Relief Fund, are subject to federal audit requirements~~more..

The CARES Act expanded the Medicare Accelerated and Advance Payment Program to increase cash flow to providers impacted by the COVID-19 pandemic. Hospice and home health providers were able to request an advance or accelerated payment of up to 100% of the Medicare payment amount for a ~~three-month~~ period (not including Medicare Advantage payments). The Medicare Accelerated and Advance Payment Program payments are a loan that providers must repay. In April 2020, Queen City Hospice received an amount equal to $10.8 million pursuant to the Medicare Accelerated and Advance Payment Program. Queen City Hospice did 0t repay the funds prior to the completion of our acquisition of Queen City Hospice. However, Queen City Hospice repaid such funds following its acquisition in March 2021, prior to any Centers for Medicare and Medicaid Services (“CMS”) recoupment and before any interest accrual.

The CARES Act also ~~provides~~provided for certain federal income and other tax changes, including allowing for the deferral of the employer portion of Social Security payroll taxes through December 31, 2020. The ~~payroll tax deferral requires that the deferred payroll taxes be paid over two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022. The~~ Company received a cash benefit of approximately ~~$7.1~~$7.1 million related to the deferral of employer payroll taxes for 2020 under the CARES Act, for the period April 2, 2020 through June 30, 2020. ~~Effective July 1, 2020,~~As of September 30, 2022 and December 31, 2021, the ~~Company began paying its~~ deferred portion of employer Social Security payroll taxes was $4.1 million, which is included within Government stimulus advances on the Company’s Unaudited Condensed Consolidated Balance Sheets. The payroll tax deferral requires that the remaining deferred payroll taxes be paid by December 31, 2022.

The American Rescue Plan Act of 2021 (“ARPA”), which became law on March 11, 2021, provides for $350 billion in relief funding for eligible state, local, territorial, and ~~expects~~Tribal governments to ~~repay half~~mitigate the fiscal effects of the ~~$7.1~~COVID-19 public health emergency. Additionally, the law provides for a 10-percentage point increase in federal matching funds for Medicaid home and community based services (“HCBS”) from April 1, 2021, through March 31, 2022, provided the state satisfied certain conditions. States are permitted to use the state funds equivalent to the additional federal funds through March 31, 2025. 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.

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 During the nine months ended September 30, 2022, the Company received state funding provided by the ARPA in an aggregate amount of $22.4 million. The Company recorded revenue of $1.7 million and related cost of service revenues of $1.3 million for certain states that met the revenue recognition criteria. The Company deferred the remaining $20.7 million, which was received from states with specific spending plans and reporting requirements. The Company utilized $3.2 million and $3.6 million of these funds during the three and nine months ended September 30, 2022, respectively, primarily for caregivers and adding support to recruiting and retention efforts, included as a reduction of cost of service revenues in the ~~fourth quarter~~Company’s Unaudited Condensed Consolidated Statements of ~~2021.~~Income. As of September 30, 2022, the deferred portion of ARPA funding was $17.0 million, which is included within Government stimulus advances on the Company’s Unaudited Condensed Consolidated Balance Sheets.

~~Long-term debt consisted~~The CARES Act and related laws temporarily lifted the Medicare sequester which would have otherwise reduced payments to Medicare providers by 2%, as required by the Budget Control Act of ~~the following:~~2011, from May 1, 2020, through December 31, 2021. Congress further delayed

these sequestration cuts through March 31, 2022, and reduced the sequestration adjustment to 1% from April 1 through June 30, 2022. The full 2% reduction resumed July 1, 2022. These sequestration cuts have been extended through 2030, with the reductions for 2030 set to increase to 2.25% for the first six months and to 3% for the second six months.

In the hospice segment, Medicare sequester relief resulted in an increase in net service revenues of $0.0 million and $0.7 million for the three months ended September 30, 2022 and 2021, respectively, and $1.4 million and $2.1 million for the nine months ended September 30, 2022 and 2021, respectively. In the home health segment, Medicare sequester relief resulted in an increase in net service revenues of $0.0 million and $0.1 million for the three months ended September 30, 2022 and 2021, respectively, and $0.3 million for both nine month periods ended September 30, 2022 and 2021.

The ARPA increases the federal budget deficit in a manner that triggers an additional statutorily mandated sequestration under the Pay-As-You-Go Act of 2010 (“PAYGO Act”). As a result, an additional Medicare payment reduction of up to 4% was required to take effect in January 2022. However, Congress delayed implementation of this payment reduction until 2023. We cannot currently determine if, or to what extent, our business, results of operations, financial condition or liquidity will ultimately be impacted by mandated sequestration triggers under the PAYGO Act, or if or when the mandated sequestration will occur.

For the three and nine months ended September 30, 2022, COVID-19-related expenses in our personal care segment were approximately $0.9 million and $3.7 million, respectively, and are included in cost of service revenues on the Consolidated Statements of Income. For the three and nine months ended September 30, 2021, COVID-19-related expenses in our personal care segment were approximately $1.3 million and $14.6 million, respectively, which were offset by $0.4 million and $11.7 million, respectively, related to the utilization of a portion of the funds received from the Provider Relief Fund in November 2020 and included in cost of service revenues on the Condensed Consolidated Statements of Income. Additionally, the Company recognized revenue of $1.3 million and $4.3 million attributable to temporary rate increases from certain payors in our personal care segment for the three and nine months ended September 30, 2022, respectively, and $1.3 million and $6.1 million for the three and nine months ended September 30, 2021, respectively.

For the three and nine months ended September 30, 2021, COVID-19-related expenses in our hospice segment were approximately $1.9 million, which were offset by $1.9 million, related to the utilization of a portion of the funds received from the Queen City Hospice Provider Relief Fund and included in cost of service revenues on the Condensed Consolidated Statements of Income.

Although the United States has experienced a moderation of infection and related hospitalization rates, there continues to be a significant number of COVID-19 cases and deaths in the United States and throughout the world. Given the longer-term uncertainties associated with the COVID-19 pandemic, it is impossible to predict the effect and ultimate impact of the COVID-19 pandemic on the Company as conditions related to the COVID-19 pandemic continue to evolve.

The Company derives a significant amount of its revenue from its operations in Illinois, New ~~York~~Mexico and New ~~Mexico.~~ York. The percentages of segment revenue for each of these significant states ~~for the three and nine months ended September 30, 2021 and 2020~~ were as follows:

~~With the acquisition of Queen City Hospice, the Company expanded our hospice services in the state of Ohio.~~

A substantial portion of the Company’s revenue and accounts receivable are derived from services performed for federal, state and local governmental agencies. We derive a significant amount of our net service revenues in Illinois, which represented ~~37.8%~~44.3%, and ~~38.5%~~37.8% of our net service revenues for the three months ended September 30, ~~2021,~~2022, and ~~2020,~~2021, respectively, and accounted for ~~37.5%~~43.5% and ~~37.8%~~37.5% of our net service revenues for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively.The Illinois Department on Aging, the largest payor program for the Company’s Illinois personal care operations, accounted for ~~21.3%~~21.0% and ~~22.9%~~21.3% of the Company’s net service revenues for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and accounted for ~~21.4%~~20.8% and ~~23.1%~~21.4% of the Company’s net service revenues for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively.

The related receivables due from the Illinois Department on Aging represented ~~14.4%~~15.3% and ~~15.9%~~16.1% of the Company’s net accounts receivable at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

You should read the following discussion together with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report on Form 10-Q. This discussion contains forward-looking statements about our business and operations. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include words like “believes,” “belief,” “expects,” “plans,” “anticipates,” “intends,” “projects,” “estimates,” “may,” “might,” “would,” “should” and similar expressions are intended to be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the ~~future~~anticipated impact to our business with respect to developments related to the COVID-19 pandemic, including, without limitation, those related to the length and severity of the pandemic, as well as the timing, availability and acceptance of effective medical treatments, vaccines and booster shots; the spread of potentially more contagious and/or virulent forms of the virus; the pandemic’s impact on our operations, reimbursement and our consumer population; measures we are taking to respond to the pandemic; the impact of government regulation, stimulus and ~~stimulus~~relief measures, including the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), Paycheck Protection Program and Health Care Enhancement Act (“PPPHCE Act”), the Consolidated Appropriations Act, 2021 (“CAA”), the COVID-Related Tax Relief Act of 2020, the American Rescue Plan of 2021 (“ARPA”) and any other stimulus or relief legislation, ~~as well as the six-point COVID-19 plan announced by the current Presidential administration,~~ along with the related uncertainties regarding ~~the implementation of~~ such ~~stimulus~~ measures and any future ~~stimulus~~ measures related to COVID-19; negative economic conditions in the United States, including inflationary conditions; higher interest rates, increased expenses related to personal protective equipment (“PPE”), labor, supply chain, or other ~~expenditures;~~expenditures, including as a result of inflationary conditions; workforce disruptions, including shortages and increased labor expenses, associated with competitive labor market conditions; the impact of vaccine mandates on the workforce; and supply shortages and disruptions; changes in operational and reimbursement processes and payment structures at the state or federal levels; changes in Medicaid, Medicare, other government program and managed care organizations policies and payment rates; changes in, or our failure to comply with, existing, federal and state laws or regulations, or our failure to comply with new government laws or regulations on a timely basis; competition in the healthcare industry; the geographical concentration of our operations; changes in the case mix of consumers and payment methodologies; operational changes resulting from the assumption by managed care organizations of responsibility for managing and paying for our services to consumers; the nature and success of future financial and/or delivery system reforms; changes in estimates and judgments associated with critical accounting policies; our ability to maintain or establish new referral sources; our ability to renew significant agreements or groups of agreements; our ability to attract and retain qualified personnel; federal, ~~city~~state and ~~state~~city minimum wage pressure, including any failure of ~~Illinois or~~ any ~~other~~ governmental entity to enact a minimum wage offset and/or the timing of any such enactment; changes in payments and covered services due to the overall economic conditions, ~~including economic and business conditions resulting from the COVID-19 pandemic,~~ and deficit spending by federal and state governments; cost containment initiatives undertaken by federal, state and other third-party payors; our ability to access financing through the capital and credit markets; our ability to meet debt service requirements and comply with covenants in debt agreements; business disruptions due to natural disasters, acts of terrorism, pandemics, riots, civil insurrection or social unrest, looting, protests, strikes or street demonstrations; our ability to integrate and manage our information systems; our ability to prevent cyber-attacks or security breaches to protect our ~~computer~~information technology systems and confidential consumer data; our expectations regarding the size and growth of the market for our services; the acceptance of privatized social services; our expectations regarding changes in reimbursement rates; eligibility standards and limits on services imposed by state governmental agencies; the potential for litigation; discretionary determinations by government officials; our ability to successfully implement our business model to grow our business; our ability to continue identifying, pursuing, consummating and integrating acquisition opportunities and expand into new geographic markets; the impact of acquisitions and dispositions on our business, including the potential inability to realize the benefits of ~~the acquisition of Queen City Hospice, LLC and its affiliate Miracle City Hospice, LLC (together “Queen City Hospice”); the~~ potential ~~impact of the discontinuation or modification of LIBOR;~~acquisitions; the effectiveness, quality and cost of our services; our ability to successfully execute our growth strategy; changes in tax ~~rates, including, without limitation, increases in the corporate tax rate;~~rates; the impact of public health ~~emergencies;~~emergencies, including the COVID-19 pandemic; the impact of inclement weather or natural disasters; and various other matters, many of which are beyond our control. In addition, these forward-looking statements are subject to the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the period ended December 31, ~~2020,~~2021, filed with the SEC on ~~March 1, 2021.~~February 25, 2022. You should carefully review all of these factors. Moreover, our business may be materially adversely affected by factors that are not currently known to us, by factors that we currently consider immaterial or by factors that are not specific to us, such as general economic conditions. These forward-looking statements were based on information, plans and estimates at the date of this report, and we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes, except as may be required by law.

We are a home care services provider operating in 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 ~~36.7%~~36.2% and ~~38.0%~~36.7% of our net service revenues during the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~37.3%~~35.9% and ~~38.5%~~37.3% of our net service revenues during the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively.

A summary of ~~our~~certain consolidated financial results ~~for the three and nine months ended September 30, 2021 and 2020~~ is provided in the table below.

As of September 30, ~~2021,~~2022, we provided our services in 22 states through ~~207~~206 offices. ~~For~~We served approximately 62,000 and 64,000 discrete individuals, respectively, during the nine months ended September 30, ~~2021~~2022 and ~~2020, we served approximately 64,000 and 59,000 discrete individuals, respectively.~~2021. Our personal care segment also includes staffing services, with clients including assisted living facilities, nursing homes and hospice facilities.

~~COVID-19,~~Although the ~~disease caused by~~United States has experienced a ~~novel coronavirus,~~moderation of infection and related hospitalization rates, there continues to be widespread throughout the United States and other parts of the world. Governments and public health officials continue to recommend and mandate certain precautions to mitigate the spread of the virus. The number of cases of COVID-19 decreased in the United States as vaccines became widely available, and a significant ~~number of restrictions related to the COVID-19 pandemic in the United States have been eliminated or relaxed as the result of such decrease. In connection with the decrease in the~~ number of COVID-19 cases and ~~the change of restrictions~~deaths in the United States ~~economic conditions in~~and throughout the United States have significantly improved during 2021. However, during the third quarter of 2021, the number of COVID-19 case and deaths increased in the United States due in part to the emergence of a new variant of the novel coronavirus that causes COVID-19, as well as low vaccination rates in many parts of the country. In response, various governmental authorities and private businesses in the United States continued to implement, or reinstituted, certain mitigation strategies, such as masking and vaccine requirements.world. The ~~rate~~long-term trends of new cases and deaths in the United States ~~are currently decreasing again but longer-term trends are unknown.~~

~~In September 2021, President Biden announced a six-point plan for responding to~~and the ~~COVID-19 pandemic. Part~~future impact of ~~this plan provides that~~ the ~~Occupational Safety and Health Administration (“OSHA”) will develop a rule which will require all employers with 100 or more employees to require their workforce~~pandemic continue to be ~~fully vaccinated against~~unknown.

CMS issued an interim rule in November 2021 requiring COVID-19 ~~(or, alternatively,~~vaccinations for Medicare- and Medicaid-certified providers and suppliers, including hospices and home health agencies, which covers clinical staff, individuals providing services under arrangements, volunteers and staff who are not involved in direct patient care. Additionally, some states have implemented, or may implement in the future, vaccine mandates with respect to ~~provide a negative COVID-19 test result on a weekly basis). The employer mandate has not yet gone into effect and further details, including any proposed OSHA~~healthcare personnel. These rules have not been released. Some states have also imposed or have plans to impose vaccine mandates, particularly in healthcare settings. In addition, CMS is expected to issue an emergency regulation requiring COVID-19 vaccination of staff within all Medicareimpacted, and Medicaid-certified facilities. CMS has indicated that compliance with the vaccine mandate will be a condition of participation in the Medicare and Medicaid programs. The exact scope and other details of the OSHA and CMS mandates are not yet known, but we expect that ~~these rules~~they will continue to impact, our home health and hospice segments.

~~We are monitoring developments related to these plans as information becomes available to assess how these plans, including any national or state vaccine mandates, may impact~~For the three and nine months ended September 30, 2022, COVID-19-related expenses in our ~~workforce in~~ personal care ~~home health, hospice~~segment were approximately $0.9 million and ~~our corporate support centers.~~ ~~While~~$3.7 million, respectively, and are included in cost of service revenues on the Company has not mandated vaccines for our employees, we have developed a multistep program in order to strongly encourage our employees to get the COVID-19 vaccine, which includes offering a vaccine stipend and prizes as well as creating educational and motivational leadership communication. We are actively engaged in an effort to track vaccination rates among caregivers and to continue to improve those rates. ~~However, it is difficult to predict the future impact~~Consolidated Statements of ~~the pandemic or the six-point COVID-19 plan and state vaccine mandates on economic conditions in the United States and our business at this time.~~

Income. For the three and nine months ended September 30, 2021, COVID-19-related expenses in our personal care segment were approximately $1.3 million and $14.6 million, respectively, which were offset by $0.4 million and $11.7 million, respectively, related to the utilization of a portion of the funds received from the Provider Relief Fund in November 2020 and ~~are~~ included in cost of service revenues on the Condensed Consolidated Statements of Income. As of September 30, 2021, the Company deferred the recognition of the remaining Provider Relief Fund of approximately $0.5 million, which will be recognized as we incur specific expenses related to the pandemic, or we anticipate will be returned, to the extent COVID-19-related expenses are not incurred, by December 31, 2021. Additionally, we recognized revenue of $1.3 million and ~~$6.1~~$4.3 million attributable to temporary rate increases from certain payors in our personal care segment for the three and nine months ended September 30, 2022, respectively, and $1.3 million and $6.1 million for the three and nine months ended September 30, 2021, respectively.

As of September 30, ~~2021,~~2022, the Company deferred the recognition of ~~$6.7~~$4.9 million of payments received from payors for COVID-19 reimbursement, included within accrued expenses, which will be recognized as we incur specific expenses related to the pandemic, such as expenses related to acquiring additional PPE and COVID-19 related paid time off, or will be returned to the extent COVID-19-related expenses are not incurred. We are not able to reasonably predict the total costs we will incur related to the COVID-19 pandemic, and such costs could be substantial.

As the labor market continues to be tight and unemployment has declined in comparison to earlier levels, the competition for new caregivers has increased, which will continue to impact our ability to attract and retain new caregivers. In addition, the competition for skilled healthcare staff has increased significantly, which continues to impact our ability to attract and retain qualified skilled healthcare staff. To the extent that we continue to have lower unemployment levels in the United States and shortages of caregivers and skilled healthcare staff, it may continue to hinder our ability to attract and retain sufficient caregivers and skilled healthcare staff to meet the continuing demand for both our non-clinical and clinical services. The increased staffing challenges may also result in increased labor cost to satisfy our staffing requirements.

Federal and state agencies continue to issue regulations and guidance related to the COVID-19 pandemic, ~~and~~but have shifted to reducing or terminating certain temporary measures that were implemented to ease delivery of care earlier in the COVID-19 public health emergency. The public health situation continues to evolve, and, therefore, we cannot currently predict with certainty the extent to which our business, results of operations, financial condition or liquidity will ultimately be ~~impacted.~~impacted by the pandemic. We will continue to assess the impact and consequences of the COVID-19 pandemic and government responses to the pandemic, including the ~~enactment and~~ implementation of the CARES Act, the PPPHCE Act, the CAA, the ARPA, ~~and~~ other stimulus and relief legislation, ~~as well as the implementation of~~ the President’s ~~six-point~~National COVID-19 ~~plan~~Preparedness Plan, and ~~any~~existing and potential additional federal, state and ~~state~~local vaccine mandates, on our business, results of operations, financial condition and cash flows. Given the dynamic nature of these circumstances, the related financial effect cannot be reasonably estimated at this time but is not expected to materially adversely impact our business. See Part I, Item 1A—“Risk Factors — “The COVID-19 pandemic could negatively affect our operations, business and financial condition, and our liquidity could also be negatively impacted, particularly if the U.S. ~~economy remains unstable for a significant amount of time~~economic and/or public health conditions deteriorate in connection with the pandemic” of our Annual Report on Form 10-Kfor the ~~period~~year ended December 31, ~~2020,~~2021, filed with the SEC on ~~March 1, 2021.~~February 25, 2022.

See “Liquidity and Capital Resources” below for additional information regarding funds received related to COVID-19 pandemic relief.

As the labor market has tightened and unemployment has declined in comparison to earlier levels, the competition for new caregivers, including skilled healthcare staff, and support staff has increased. In addition, the United States economy continues to experience significant inflationary pressures and a competitive labor market. To the extent that we continue to experience a shortage of caregivers, it may hinder our ability to fully meet the continuing demand for both our non-clinical and clinical services. The increased staffing challenges, including COVID-19 related quarantine requirements and inflationary pressures, resulted in increased labor costs to satisfy our staffing requirements during the three and nine months ended September 30, 2022 compared to 2021 in our non-clinical and clinical operations.

In addition to our organic growth, we have grown through acquisitions that have expanded our presence in current markets, with the goal of having all three levels of ~~home~~in-home care in ~~additional~~our markets or facilitating our entry into new markets where in-home care has been moving to managed care organizations.

On July 1, 2020, we completed the acquisition of A Plus Health Care, Inc. (“A Plus”) for approximately $14.5 million, including the amount of excess cash held by A Plus at the closing of the acquisition (approximately $2.8 million), with funding provided by available cash. With the purchase of A Plus, we expanded our personal care services in the state of Montana.

~~On November 1, 2020, we completed the acquisition of County Homemakers, Inc. (“County Homemakers”) for approximately $15.8 million,~~ ~~including the amount of acquired excess cash held by County Homemakers at the closing of the acquisition (approximately $1.1 million),~~ ~~with funding provided by~~ ~~available cash. With the purchase of County Homemakers, we expanded our personal care services in the state of Pennsylvania.~~

~~On December 4, 2020, we completed the acquisition of Queen City Hospice for approximately $194.8 million,~~ ~~including the amount of acquired excess cash held by Queen City Hospice at the closing of the acquisition (approximately $15.4 million).~~ With the purchase of Queen City Hospice, we expanded our hospice services in the state of Ohio. Additionally, on December 1, 2020, we completed the acquisition of SunLife Home Care (“SunLife”) for approximately $1.7 million. With the purchase of SunLife, we expanded our personal care services in the state of Arizona. ~~We funded these acquisitions through a combination of our revolving credit facility and available cash~~.

On August 1, 2021, we completed the acquisition of Armada Skilled Homecare of New Mexico LLC, Armada Hospice of New Mexico LLC and Armada Hospice of Santa Fe LLC (collectively, “Armada”) for approximately $29.8 million, including the amount of acquired excess

cash held by Armada at the closing of the acquisition (approximately $0.7 million), with funding provided by our revolving credit facility. With the purchase of Armada, we expanded our home health and hospice services in the state of New Mexico.

On October 1, 2021, we completed the acquisition of Summit Home Health, LLC (“Summit”) for approximately $8.1 million, with funding provided by available cash. With the purchase of Summit, we added clinical services in Illinois to our home health ~~segment~~segment.

On February 1, 2022, we completed the acquisition of the hospice and palliative operations of JourneyCare, Inc. (“JourneyCare”) for approximately $86.6 million, including the amount of acquired excess cash held by JourneyCare at the closing of the acquisition (approximately $0.5 million) plus the finalization of net working capital payable to seller of $1.6 million, with funding provided through a combination of a $35.0 million draw under the revolving credit facility and available cash on hand. With the JourneyCare acquisition, we added hospice services in Illinois.

Our ~~payor clients~~payors 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 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.

~~For the three and nine months ended September 30, 2021 and 2020, our~~Our revenue by payor and significant states by segment were as follows:

Personal Care

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2021

2020

2021

2020

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

State, local and other
   government programs

$
83,821

49.5

%

$
85,344

51.5

%

$
253,052

49.5

%

$
242,751

50.3

%
Managed care organizations

76,890

45.3

71,700

43.2

231,211

45.3

213,087

44.1

Private pay

4,934

2.9

5,193

3.1

14,883

2.9

15,449

3.2

Commercial insurance

2,459

1.4

2,498

1.5

7,481

1.5

7,468

1.5

Other

1,505

0.9

1,181

0.7

4,117

0.8

4,094

0.9

Total personal care segment net
   service revenues

$
169,609

100.0

%

$
165,916

100.0

%

$
510,744

100.0

%

$
482,849

100.0

%
Illinois

$
81,959

48.3

%

$
74,448

44.9

%

$
240,131

47.0

%

$
215,047

44.6

%
New York

24,127

14.2

28,381

17.1

77,237

15.1

87,463

18.1

New Mexico

24,214

14.3

21,878

13.2

73,291

14.3

64,402

13.3

All other states

39,309

23.2

41,209

24.8

120,085

23.6

115,937

24.0

Total personal care segment net
   service revenues

$
169,609

100.0

%

$
165,916

100.0

%

$
510,744

100.0

%

$
482,849

100.0

%
(1)

The Company has suspended materially all of its new patient admissions under the New York CDPAP program as discussed below.

Hospice

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2021

2020

2021

2020

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

Medicare

$
36,278

92.8

%

$
22,404

93.4

%

$
104,715

93.4

%

$
68,372

92.8

%
Managed care organizations

1,514

3.9

1,130

4.7

4,396

3.9

3,710

5.0

Other

1,303

3.3

452

1.9

2,987

2.7

1,641

2.2

Total hospice segment net
service revenues

$
39,095

100.0

%

$
23,986

100.0

%

$
112,098

100.0

%

$
73,723

100.0

%
Ohio

$
15,868

40.6

%

$
—

—

%

$
44,676

39.8

%

$
—

—

%
New Mexico

9,268

23.7

10,979

45.8

27,216

24.3

33,431

45.3

All other states

13,959

35.7

13,007

54.2

40,206

35.9

40,292

54.7

Total hospice segment net
service revenues

$
39,095

100.0

%

$
23,986

100.0

%

$
112,098

100.0

%

$
73,723

100.0

%
(2)

With the JourneyCare acquisition, the Company expanded its hospice services in the state of Illinois.

(3)

With the acquisition of ~~Queen City Hospice,~~Summit, the Company expanded ~~our hospice~~its home health services in the state of ~~Ohio.~~

Home Health

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2021

2020

2021

2020

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

Medicare

$
6,372

80.1

%

$
3,188

78.0

%

$
13,699

80.5

%

$
9,667

79.2

%
Managed care organizations

1,218

15.3

829

20.3

2,838

16.7

2,325

19.0

Other

368

4.6

68

1.7

478

2.8

215

1.8

Total home health segment
net service revenues

$
7,958

100.0

%

$
4,085

100.0

%

$
17,015

100.0

%

$
12,207

100.0

%
New Mexico

$
7,958

100.0

%

$
4,085

100.0

%

$
17,015

100.0

%

$
12,207

100.0

%
Total home health segment
net service revenues

$
7,958

100.0

%

$
4,085

100.0

%

$
17,015

100.0

%

$
12,207

100.0

%
Illinois.

We derive a significant amount of our net service revenues in Illinois, which represented ~~37.8%~~44.3% and ~~38.5%~~37.8% of our net service revenues for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and accounted for ~~37.5%~~43.5% and ~~37.8%~~37.5% of our net service revenues for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively.

A significant amount of our net service revenues are derived from one payor, ~~client,~~ the Illinois Department on Aging, the largest payor program for our Illinois personal care operations, which accounted for ~~21.3%~~21.0% and ~~22.9%~~21.3% of our net service revenues for the three months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively, and accounted for ~~21.4%~~20.8% and ~~23.1%~~21.4% of the Company’s net service revenues for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively.

Changes in Reimbursement Rates

Illinois

On November 26, 2019, the City of Chicago voted to approve additional increases in the Chicago minimum wage to $14 per hour beginning July 1, 2020 and to $15 per hour beginning July 1, 2021. In subsequent years, minimum wage will be increased through a cost of living adjustment capped at 2.5%.

Effective January 1, 2021, the state of Illinois fiscal year 2021 budget increased hourly in-home care rates through the Community Care Program by 7.1%, to $23.40 from $21.84. However, the rate increase was delayed and did not take effect until April 1, 2021, as a result of ~~on-going state revenue declines due to COVID-19 and~~ the failure of the November 2020 referendum to revise the Illinois income tax code. ~~On June 29, 2021, the Governor announced the authorization of bonus payments to providers in an amount equivalent~~The Company recognized $2.0 million related to the rate increase for ~~services delivered from January 1, 2021 to March~~the year ended December 31, 2021, ~~for state reimbursed hours of care. The bonus payment of $3.0 million~~which was ~~recognized as net service revenues~~received during the three and nine months ended ~~June~~September 30, ~~2021, and was received in September 2021. On June 17, 2021,~~2022.

Originally, the ~~Governor of~~ Illinois ~~signed the~~ fiscal year 2022 budget ~~which funds an~~included a scheduled increase of hourly in-home care rates to $24.96, to be effective January 1, 2022. On July 12, 2021, in connection with the ~~State of~~temporary increase in federal funding for Medicaid HCBS authorized by the ARPA, Illinois submitted its Initial ~~Illinois~~ Spending Plan and Narrative to CMS for ~~Home and Community Based Services investments as part of the ARPA. Included in that~~approval. This plan isincluded the acceleration of the rate increase to $24.96 to November 1, 2021 from January 1, 2022 (i.e., two months earlier). CMS granted partial approval of the Illinois plan, including the acceleration of the rate increase to November 1, ~~2021, for which~~2021. However, CMS noted that the state ~~appears confident~~will need to submit an amendment for certain Medicaid waiver programs with regard to any rate change methodology and has highlighted that itpay increases for providers of HCBS funded through the temporary increase in federal matching funds available under the ARPA will ~~receive approval~~require an updated rate methodology. We recognized revenue of $3.6 million related to the rate increase for the year ended December 31, 2021, of which $3.2 million was received during the nine months ended September 30, 2022. The remainder is expected to be received during the fourth quarter of ~~2021.~~2022.

The Illinois fiscal year 2023 budget was signed into law by the Governor on April 19, 2022 and includes a $0.70 rate increase effective January 1, 2023. The Chicago minimum wage increased by 2.5% effective July 1, 2022.

Our business will benefit from the rate increases noted above as planned for ~~2022,~~2023, but there is no assurance that there will be additional offsetting rate increases ~~will be adopted~~ in Illinois for fiscal years beyond fiscal year ~~2022,~~2023, and our financial performance will be adversely impacted for any periods in which an additional offsetting reimbursement rate increase is not in effect.

Table of Contents

Impact of Changes in Medicare and Medicaid Reimbursement

Home Health

Home health services provided to Medicare beneficiaries are paid under the Medicare Home Health Prospective Payment System (“HHPPS”), which uses national, standardized 30-day period payment rates for periods of care that meet a certain threshold of home health visits (periods of care that do not meet the visit threshold are paid a per-visit payment rate for providing care). Although payment is made for each 30-day period, the HHPPS permits continuous 60-day certification periods through which beneficiaries are verified as eligible for the home health benefit. The daily home health payment rate is adjusted for case-mix and area wage levels. CMS uses the Patient-Driven Groupings Model (“PDGM”) as the case-mix classification model to place periods of care into payment categories, classifying patients based on clinical characteristics and their resource needs. An outlier adjustment may be paid for periods of care where costs exceed a specific threshold amount.

CMS updates the HHPPS payment rates each calendar year. ~~Effective~~For calendar year ~~2021,~~2022, CMS increased HHPPS rates ~~increased~~ by ~~2.0%~~an estimated 3.2%, which reflects a ~~2.3%~~3.1% market basket update ~~reduced by~~and a ~~multifactor~~ productivity adjustment of ~~0.3~~negative 0.5 percentage points. CMS expects Medicare payments to home health agencies in 2021 to increase in the aggregate by 1.9% after accounting for a 0.1 percentage point decrease in payments to home health agencies due to changes in the rural add-on percentages mandated by the Bipartisan Budget Act of 2018.points, among other changes. Home health providers that do not comply with quality data reporting requirements are subject to a ~~2 percentage~~2-percentage point reduction to their market basket update.

~~Historically, CMS paid~~ In addition, beginning January 1, 2022, Medicare requires home health providers 50% to 60% of anticipated payment at the beginning of a patient’s care episode through a request for anticipated payment (“RAP”). However, to address potential program integrity risks, CMS has phased out RAP payments. In calendar year 2021, CMS will not provide any up-front payments in response to a RAP but will continue to require home health providersagencies to submit ~~streamlined RAPs as notice~~a one-time Notice of Admission (“NOA”) for each patient that aestablishes that the beneficiary is under a Medicare home health period of care. InFailure 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.

Effective January 1, 2022, CMS began implementing a nationwide expansion of the Home Health Value-Based Purchasing (“HHVBP”) Model. Under the model, home health agencies will receive increases or decreases to their Medicare fee-for-service payments of up to 5%, based on performance against specific quality measures relative to the performance of other home health providers. Data collected in each performance year will impact Medicare payments two years later. Calendar year 2023 is the first performance year under the expanded HHVBP Model, which will affect payments in calendar year ~~2022, CMS will replace~~2025.

In certain states, payment of claims may be impacted by the ~~RAP~~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 applies to home health agencies in Illinois, Ohio, North Carolina, Florida and Texas and may expand, in the future, into additional states. Providers in states subject to the Review Choice Demonstration may initially select from the following claims review and approval processes: pre-claim review, post-payment review or a minimal post-payment review with a ~~“Notice~~25% payment reduction. Home health agencies that maintain high compliance levels will be eligible for additional options that may be less burdensome. We are currently unable to predict what impact, if any, this program may have on our result of ~~Admission.”~~

~~Table of Contents~~operations or financial position.

Hospice

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. CMS updates these rates each federal fiscal year. Effective October 1, ~~2021,~~2022, CMS increased hospice payment rates by ~~2.0%~~3.8%. This reflects a ~~2.7%~~4.1% market basket increase ~~reduced~~and a negative 0.3 percentage point productivity adjustment. Hospices that do not satisfy quality reporting requirements are subject to a 2 percentage point reduction to the market basket update. Beginning in 2024, the reduction to the market basket update for failure to report quality data will increase to 4 percentage points.

Overall payments made by ~~a productivity adjustment~~Medicare to each hospice provider number are subject to an inpatient cap and an aggregate cap, which is set each federal fiscal year. The inpatient cap limits the number of ~~0.7 percentage points. Additionally, the~~days of inpatient care to no more than 20% of total patient care days. The aggregate cap, which limits the total Medicare reimbursement that a hospice may receive based on an annual per-beneficiary cap amount and the number of Medicare patients served, was updated to ~~$31,297.61~~$32,486.92 for federal fiscal year 2023, which began October 1, 2022. If a hospice’s Medicare payments exceed its inpatient or aggregate ~~cap,~~caps, it must repay Medicare the excess amount. ~~Hospices that do not satisfy quality reporting requirements are subject to a 2 percentage point reduction to the market basket update.~~

New York CDPAP

~~On February 11,~~The New York Consumer Directed Personal Assistance Program (“CDPAP”) is a self-directed care alternative program that allows eligible individuals who need help with activities of daily living or skilled nursing services to choose their caregivers. We provide support services as a CDPAP fiscal intermediary. In 2021, the ~~state of New York announced its initial selection of parties~~Company was not selected to enter into contracts as a Lead Fiscal Intermediary under its previously announced Request for Offer (“RFO”) process related to its Consumer Directed Personal Assistance Program (“CDPAP”), in which the Company currently participates as a provider. The Company was not one of the selected entities in the initial RFO process. The announcement followed an extended RFO process first begun in 2019, with responses originally due in February 2020. The Company hasand submitted a formal protest in response to the selection process, which was filed and accepted on March 19, 2021. The Company has not ~~yet~~ received a response to the formal protest. Based on its current run rate, the Company estimates it will receive $44 million and $3 million in revenue and operating income, respectively, from the program for the year ended December 31, 2021. The Company continues to explore its options, including appeals, other arrangements under which the Company may continue to provide these services, and expense reductions to minimize any potential final impact

Table of ~~the RFO process.~~Contents

The New York fiscal year ~~2022~~2023 state budget, ~~included a provision~~passed in April 2022, amends the current Fiscal Intermediary Request For Offer (“RFO”) process to ~~add additional~~authorize all fiscal intermediaries ~~(one~~that submitted an RFO application and served at least 200 clients in New York City or ~~two entities per county~~50 clients in other counties between January 1, 2020 and March 31, 2020 to contract with specified population sizes, plus entities that meet various other requirements) to those awarded contracts as a Lead Fiscal Intermediary under the initial RFO process, based on the scoring of the original RFO. As scoring of RFOs was not publicly released, it is unknown at this time if the Company’s score ranked high enough to qualify for these additional awards. The Company has submitted a response to the survey issued by the New York State Department of Health and continue to ~~determine~~operate in all counties contained in their application if the ~~additional contract awards. The~~fiscal intermediary submits an attestation and supporting information to the New York State Department of Health ~~has published an~~no later than November 29, 2022. Under this provision, the Company is allowed to continue to contract with all of its current payors for CDPAP services as of the contract award date, which is anticipated ~~contract start date for all awards~~ to be ~~no earlier than November 1, 2021. No later than~~January 15, 2023. The Company continues to assess the contract start date, we will be required to transition patients within the CDPAP to a fiscal intermediary that has been awarded a contract and cease providing services to those patients. We continue to consider other arrangements and to pursue our protestfuture of ~~the award.~~its participation in this program. Given the ~~uncertainty surrounding~~status of the program, the Company ~~has~~ suspended materially all of its new patient admissions under the New York ~~CDPAP program.~~CDPAP.

Components of our Statements of Income

Net Service Revenues

We generate net service revenues by providing our services directly to consumers and primarily on an hourly basis in our personal care segment, on a daily basis in our hospice segment and on an episodic basis in our home health segment. We receive payment for providing such services from our ~~payor clients,~~private consumers and payors, including federal, state and local governmental agencies, managed care organizations and commercial ~~insurers and private pay consumers.~~insurers.

In our personal care segment, net service revenues are principally provided based on authorized hours, determined by the relevant agency, at an hourly rate, which is either contractual or fixed by legislation, and are recognized at the time services are rendered. In our hospice segment, net service revenues are provided based on daily rates for each of the levels of care and are recognized as services are provided. In our home health segment, net service revenues are based on an episodic basis at a stated rate and recognized based on the number of days elapsed during a period of care within the reporting period. We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record revenues.

Cost of Service Revenues

We incur direct care wages, payroll taxes and benefit-related costs in connection with providing our services. We also provide workers’ compensation and general liability coverage for our employees. Employees are also reimbursed for their travel time and related travel costs in certain instances.

~~Table of Contents~~

General and Administrative Expenses

Our general and administrative expenses include our costs for operating our network of local agencies and our administrative offices. Our agency expenses consist of costs for supervisory personnel, our community care supervisors and office administrative costs. Personnel costs include wages, payroll taxes and employee benefits. Facility costs include rents, utilities, and postage, telephone and office expenses. Our corporate and support center expenses include costs for accounting, information systems, human resources, billing and collections, contracting, marketing and executive leadership. These expenses consist of compensation, including stock-based compensation, payroll taxes, employee benefits, legal, accounting and other professional fees, travel, general insurance, rents, provision for doubtful accounts and related facility costs. Expenses related to streamlining our operations such as costs related to terminated employees, termination of professional services relationships, other contract termination costs and asset write-offs are also included in general and administrative expenses.

Depreciation and Amortization Expenses

Depreciable assets consist principally of furniture and equipment, network administration and telephone equipment and operating system software. Depreciable and leasehold assets are depreciated or amortized on a straight-line method over their useful lives or, if less and if applicable, their lease terms. We amortize our intangible assets with finite lives, consisting of customer and referral relationships, trade names, trademarks and non-competition agreements, using straight line or accelerated methods based upon their estimated useful lives.

Interest Expense

Interest expense is reported when incurred and principally consists of interest and unused credit line fees on the credit facility.

Income Tax Expense

All of our income is from domestic sources. We incur state and local taxes in states in which we operate. ~~For the three and nine months ended September 30, 2021 and 2020, the federal statutory rate was 21.0%.~~ The effective income tax rate was ~~26.6%~~23.7% and ~~23.6%~~26.6% for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The effective income tax ~~rate was~~rates are 25.4% and 24.7% ~~and 20.5%~~ for the nine months ended September 30, 2022 and 2021, ~~and 2020, respectively.~~respectively, compared to our federal statutory rate of 21%. The difference between our federal statutory and effective income tax rates iswas principally due to the inclusion of state taxes, non-deductible compensation, excess tax expense/benefit and the use of federal employment tax credits.

Table of Contents

Results of Operations — Consolidated

Three Months Ended September 30, ~~2021~~2022 Compared to Three Months Ended September 30, ~~2020~~2021

The following table sets forth ~~for the periods indicated,~~ our unaudited condensed consolidated results of operations.


	For the Three Months Ended September 30,																		For the Three Months Ended September 30,
	2021						2020						Change						2022						2021						Change
				% Of						% Of												% Of						% Of
				Net Service						Net Service												Net Service						Net Service
	Amount			Revenues			Amount			Revenues			Amount		%				Amount			Revenues			Amount			Revenues			Amount			%
	(Amounts in Thousands, Except Percentages)																		(Amounts in Thousands, Except Percentages)
Net service revenues	$	216,662			100.0	%	$	193,987			100.0	%	$	22,675		11.7		%	$	240,495			100.0	%	$	216,662			100.0	%	$	23,833			11.0		%
Cost of service revenues		149,616			69.1			137,686			71.0			11,930		8.7				165,310			68.7			149,616			69.1			15,694			10.5
Gross profit		67,046			30.9			56,301			29.0			10,745		19.1				75,185			31.3			67,046			30.9			8,139			12.1
General and administrative expenses		46,280			21.4			40,733			21.0			5,547		13.6				54,228			22.5			46,280			21.4			7,948			17.2
Depreciation and amortization		3,406			1.6			3,045			1.6			361		11.9				3,441			1.4			3,406			1.6			35			1.0
Total operating expenses		49,686			23.0			43,778			22.6			5,908		13.5				57,669			24.0			49,686			22.9			7,983			16.1
Operating income		17,360			7.9			12,523			6.4			4,837		38.6				17,516			7.3			17,360			8.0			156			0.9
Interest income		(37	)		—			(87	)		—			50		(57.5	)			(83	)		—			(37	)		—			(46	)		124.3
Interest expense		1,614			0.7			680			0.4			934		137.4				2,472			1.0			1,614			0.7			858			53.2
Total interest expense, net		1,577			0.7			593			0.4			984		165.9				2,389			1.0			1,577			0.7			812			51.5
Income before income taxes		15,783			7.2			11,930			6.0			3,853		32.3				15,127			6.3			15,783			7.3			(656	)		(4.2	)
Income tax expense		4,206			1.9			2,811			1.4			1,395		49.6				3,584			1.5			4,206			1.9			(622	)		(14.8	)
Net income	$	11,577			5.3	%	$	9,119			4.6	%	$	2,458		27.0		%	$	11,543			4.8	%	$	11,577			5.4	%	$	(34	)		(0.3	)	%

Net service revenues increased by ~~11.7%~~11.0% to $240.5 million for the three months ended September 30, 2022 compared to $216.7 million for the three months ended September 30, ~~2021 compared to $194.0~~2021. Revenue increased by $12.3 million ~~for the three months ended September 30, 2020. This increase was primarily due to an increase of $15.1~~in our hospice segment and by $2.0 million ~~from~~in our ~~hospice~~home health segment during the three months ended September 30, ~~2021,~~2022, compared to the same period in ~~2020.~~2021. The increase in our hospice segment revenue was ~~primarily~~ due to ~~an increase in average daily census~~organic growth and ~~revenue per patient day, mainly attributed to~~ the ~~acquisition~~acquisitions of ~~Queen City Hospice~~the operations of JourneyCare on ~~December 4, 2020.~~February 1, 2022 and Armada on August 1, 2021.

Gross profit, expressed as a percentage of net service revenues, increased to ~~30.9%~~31.3% for the three months ended September 30, ~~2021,~~2022, compared to ~~29.0%~~30.9% for the same period in ~~2020. The increase was mainly attributed~~2021 due to ~~the full-quarter effect~~growth in ~~2021 of the acquisition of a relatively~~our higher margin hospice ~~segment business in 2020.~~segment.

General and administrative expenses increased to $54.2 million for the three months ended September 30, 2022, as compared to $46.3 million for the three months ended September 30, ~~2021, as compared to $40.7 million for the three months ended September 30, 2020.~~2021. The increase in general and administrative expenses was primarily due to acquisitions that resulted in an increase in administrative employee wages, taxes and benefit costs of ~~$3.3~~$5.9 million and an increase in ~~data processing~~rent expense of $0.4 million. ~~In addition, stock-based compensation increased by $0.9 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.~~ General and administrative expenses, expressed as a percentage of net service revenues increased to 22.5% for the three months ended September 30, 2022, from 21.4% for the three months ended September 30, ~~2021, from 21.0% for the three months ended September 30, 2020.~~2021.

~~Depreciation and amortization~~Interest expense increased to ~~$3.4 million from $3.0~~$2.5 million for the three months ended September 30, ~~2021 and 2020, respectively, primarily due to the intangible assets and property and equipment acquired in the fiscal year 2020 acquisitions.~~

~~Interest expense increased to~~2022 from $1.6 million for the three months ended September 30, ~~2021 from $0.6 million for the three months ended September 30, 2020.~~2021. The increase in interest expense was primarily due to higher average outstanding borrowings due to additional borrowings used to fund acquisitions and increased interest rates under our credit facility for the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020.~~2021.

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 ~~26.6%~~23.7% and ~~23.6%~~26.6% for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The difference between the federal statutory and our effective income tax rates was principally due to the inclusion of state taxes, ~~and~~ non-deductible compensation, ~~partially offset by~~excess tax expense/benefit and the use of federal employment tax credits.

Table of Contents

Nine ~~months~~Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021 ~~Compared to Nine months Ended September 30, 2020~~

The following table sets forth, for the periods indicated, our consolidated results of operations.


	For the Nine Months Ended September 30,																			For the Nine Months Ended September 30,
	2021						2020							Change						2022						2021						Change
				% Of						% Of													% Of						% Of
				Net Service						Net Service													Net Service						Net Service
	Amount			Revenues			Amount			Revenues				Amount		%				Amount			Revenues			Amount			Revenues			Amount			%
	(Amounts in Thousands, Except Percentages)																			(Amounts in Thousands, Except Percentages)
Net service revenues	$	639,857			100.0	%	$	568,779			100.0		%	$	71,078		12.5		%	$	704,070			100.0	%	$	639,857			100.0	%	$	64,213			10.0		%
Cost of service revenues		442,804			69.2			401,646			70.6				41,158		10.2				483,100			68.6			442,804			69.2			40,296			9.1
Gross profit		197,053			30.8			167,133			29.4				29,920		17.9				220,970			31.4			197,053			30.8			23,917			12.1
General and administrative expenses		139,881			21.9			125,470			22.1				14,411		11.5				162,476			23.1			139,881			21.9			22,595			16.2
Depreciation and amortization		10,594			1.7			8,872			1.6				1,722		19.4				10,571			1.5			10,594			1.7			(23	)		(0.2	)
Total operating expenses		150,475			23.6			134,342			23.7				16,133		12.0				173,047			24.6			150,475			23.5			22,572			15.0
Operating income		46,578			7.2			32,791			5.7				13,787		42.0				47,923			6.7			46,578			7.3			1,345			2.9
Interest income		(90	)		—			(576	)		(0.1	)			486		(84.4	)			(249	)		—			(90	)		—			(159	)		176.7
Interest expense		4,092			0.6			2,309			0.4				1,783		77.2				6,278			0.9			4,092			0.6			2,186			53.4
Total interest expense, net		4,002			0.6			1,733			0.3				2,269		130.9				6,029			0.9			4,002			0.6			2,027			50.6
Income before income taxes		42,576			6.6			31,058			5.4				11,518		37.1				41,894			6.0			42,576			6.7			(682	)		(1.6	)
Income tax expense		10,508			1.6			6,374			1.1				4,134		64.9				10,631			1.5			10,508			1.6			123			1.2
Net income	$	32,068			5.0	%	$	24,684			4.3		%	$	7,384		29.9		%	$	31,263			4.4	%	$	32,068			5.0	%	$	(805	)		(2.5	)	%

Net service revenues increased by ~~12.5%~~10.0% to $704.1 million for the nine months ended September 30, 2022 compared to $639.9 million for the nine months ended September 30, ~~2021 compared to $568.8~~2021. Net service revenue increased by $39.1 million ~~for the nine months ended September 30, 2020. This increase was primarily due to an increase~~ in ~~revenue of $38.4 million from~~ our hospice segment and by $12.8 million in our home health segment during the nine months ended September 30, ~~2021,~~2022, compared to the same period in ~~2020. The~~2021. During the nine months ended September 30, 2022, the increase in our hospice segment revenue was primarily due to an increase in ~~average daily census and~~ revenue per patient day, ~~mainly attributed~~attributable to the ~~acquisition~~acquisitions of ~~Queen City Hospice~~the operations of JourneyCare on ~~December 4, 2020. Additionally, net~~February 1, 2022 and Armada on August 1, 2021, compared to the same period in 2021. Net service revenue increased by $12.4 million in our personal care segment due to ~~a 6.3%~~an increase in revenues per billable hour for the nine months ended September 30, 2022 compared to 2021, partially offset by a decrease in ~~our personal care segment.~~the New York CDPAP program patient admissions.

Gross profit, expressed as a percentage of net service revenues, increased to ~~30.8%~~31.4% for the nine months ended September 30, ~~2021,~~2022, compared to ~~29.4%~~30.8% for the same period in ~~2020.~~2021. The increase was mainly attributed to the acquisition of a relatively higher margin hospice business in ~~2020.~~2022.

General and administrative expenses increased to $162.5 million for the nine months ended September 30, 2022 as compared to $139.9 million for the nine months ended September 30, ~~2021 as compared to $125.5 million for the nine months ended September 30, 2020.~~2021. The increase in general and administrative expenses was primarily due to acquisitions and wage increases that resulted in an increase in administrative employee wages, taxes and benefit costs of ~~$8.6~~$16.7 million and an increase in rent expense of ~~$0.6~~$1.8 million. ~~In addition, stock-based compensation increased by $3.1 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.~~ General and administrative expenses, expressed as a percentage of net service revenues ~~decreased~~increased to 23.1% for the nine months ended September 30, 2022, from 21.9% for the nine months ended September 30, ~~2021, from 22.1% for the nine months ended September 30, 2020.~~2021.

~~Depreciation and amortization~~Interest expense increased to ~~$10.6~~$6.3 million from ~~$8.9~~$4.1 million for the nine months ended September 30, ~~2021 and 2020, respectively, primarily due to the intangible assets and property and equipment acquired in the fiscal year 2020 acquisitions.~~

~~Interest expense increased to $4.1 million from $2.3 million for the nine months ended September 30, 2021,~~2022, as compared to the nine months ended September 30, ~~2020.~~2021. The increase in interest expense was primarily due to higher average outstanding borrowings and increased interest rates under our credit facility for the nine months ended September 30, ~~2021,~~2022, compared to the nine months ended September 30, ~~2020.~~2021.

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%~~25.4% and ~~20.5%~~24.7% for the nine months ended September 30, 2022 and 2021, respectively. For the nine months ended September 30, 2022, the difference between our federal statutory and ~~2020, respectively.~~effective income tax rates was principally due to the inclusion of state taxes, non-deductible compensation, and excess tax expense, partially offset by the use of federal employment tax credits. For the nine months ended September 30, 2021, the difference between our federal statutory and effective income tax rates was principally due to the inclusion of state taxes and non-deductible compensation, partially offset by the use of federal employment tax credits and excess tax benefit. For the nine months ended September 30, ~~2020, the difference between our federal statutory~~2022 and effective income tax rates was principally due to the inclusion of an excess tax benefit and the use of federal employment tax credits partially offset by state taxes and non-deductible compensation. For the nine months ended September 30, 2021, ~~and 2020,~~ the effective tax rates were inclusive of an excess tax expense of 0.8% and an excess tax benefit of 2.1% ~~and 6.8%~~, respectively. The excess tax expense/benefit is a discrete item, related to the vesting of equity shares, which requires the Company to recognize the expense/benefit fully in the period.

Table of Contents

Results of Operations – Segments

The following tables and related analysis summarize our operating results and business metrics by segment:

Personal Care Segment

	For the Three Months Ended September 30,																	For the Nine Months Ended September 30,
	2021					2020					Change							2021					2020					Change							For the Three Months Ended September 30,														For the Nine Months Ended September 30,
Personal Care Segment	Amount		% of Segment Net Service Revenues			Amount		% of Segment Net Service Revenues			Amount			%				Amount		% of Segment Net Service Revenues			Amount		% of Segment Net Service Revenues			Amount			%
																																			2022					2021					Change				2022					2021					Change
																																			Amount			% of Segment Net Service Revenues		Amount			% of Segment Net Service Revenues		Amount		%		Amount			% of Segment Net Service Revenues		Amount			% of Segment Net Service Revenues		Amount		%
	(Amounts in Thousands, Except Percentages)																	(Amounts in Thousands, Except Percentages)																		(Amounts in Thousands, Except Percentages)														(Amounts in Thousands, Except Percentages)
Operating Results
Net service revenues	$	169,609		100.0	%	$	165,916		100.0	%	$	3,693			2.2		%	$	510,744		100.0	%	$	482,849		100.0	%	$	27,895			5.8		%	$	179,180		100.0	%	$	169,609		100.0	%	$	9,571	5.6	%	$	523,142		100.0	%	$	510,744		100.0	%	$	12,398	2.4	%
Cost of services revenues		125,647		74.1			124,493		75.0			1,154			0.9				375,744		73.6			359,344		74.4			16,400			4.6				131,968		73.7			125,647		74.1			6,321	5.0			386,940		74.0			375,744		73.6			11,196	3.0
Gross profit		43,962		25.9			41,423		25.0			2,539			6.1				135,000		26.4			123,505		25.6			11,495			9.3				47,212		26.3			43,962		25.9			3,250	7.4			136,202		26.0			135,000		26.4			1,202	0.9
General and administrative expenses		15,166		8.9			14,837		8.9			329			2.2				46,807		9.2			45,042		9.3			1,765			3.9				15,238		8.5			15,166		8.9			72	0.5			45,688		8.7			46,807		9.2			(1,119)	(2.4)
Segment operating income	$	28,796		17.0	%	$	26,586		16.0	%	$	2,210			8.3		%	$	88,193		17.3	%	$	78,463		16.3	%	$	9,730			12.4		%	$	31,974		17.8	%	$	28,796		17.0	%	$	3,178	11.0	%	$	90,514		17.3	%	$	88,193		17.3	%	$	2,321	2.6	%
Business Metrics (Actual Numbers, Except Billable Hours in Thousands)
Location at period end																			162					153
Locations at period end																																																		161					162
Average billable census * ⁽¹⁾		37,979					38,589					(610	)		(1.6	)	%		38,266					38,443					(177	)		(0.5	)	%		37,677					37,979					(302)	(0.8)	%		37,253					38,266					(1,013)	(2.6)	%
Billable hours * ⁽²⁾		7,537					7,778					(241	)		(3.1	)			22,712					22,825					(113	)		(0.5	)			7,473					7,537					(64)	(0.8)			21,947					22,712					(765)	(3.4)
Average billable hours per census per month * ⁽²⁾		65.8					66.9					(1.1	)		(1.6	)			65.7					65.6					0.1			0.2				65.9					65.8					0.1	0.2			65.2					65.7					(0.5)	(0.8)
Billable hours per business day * ⁽²⁾		114,195					117,841					(3,646	)		(3.1	)			116,472					116,454					18			-				113,229					114,195					(966)	(0.8)			112,547					116,472					(3,925)	(3.4)
Revenues per billable hour * ⁽²⁾	$	22.47				$	21.29				$	1.18			5.5		%	$	22.45				$	21.11				$	1.34			6.3		%	$	23.92				$	22.47				$	1.45	6.5	%	$	23.71				$	22.45				$	1.26	5.6	%
Same store revenue growth % * ⁽³⁾		4.0					4.8												6.6				8.8
Same store growth revenue % * (3)																																				7.0	%				4.0	%								3.5	%				6.6	%

~~(1)~~

~~Average billable census is the average number of unique clients receiving a billable service during the year and is the total census divided by months in operation during the period.~~

(1)

Average billable census is the number of unique clients receiving a billable service during the year and is the total census divided by months in operation during the period.

~~(2)~~

Billable hours is the total number of hours served to clients during the period. Average billable hours per census per month is billable hours divided by average billable census. Billable hours per day is total billable hours divided by the number of business days in the period. Revenues per billable hour is revenue attributed to billable hours divided by billable hours.

(2)

(3)

Same store revenue growth reflects the change in year-over-year revenue for the same store base. We define the same store base to include those stores open for at least 52 full weeks. This measure highlights theperformance of existing stores, while excluding the impact of acquisitions, new store openings and closures, and the revenue associated with New York CDPAP and the ARPA.

Same store revenue growth reflects the change in year-over-year revenue for the same store base. We define the same store base to include those stores open for at least 52 full weeks. This measure highlights theperformance of existing stores, while excluding the impact of acquisitions, new store openings and closures. In addition, the Company has suspended materially all of its new patient admissions under the New York CDPAP program based on program uncertainty and therefore excludes associated revenues from this calculation.

Management deems these metrics to be key performance indicators. Management uses these metrics to monitor our performance, both in our existing operations and acquisitions. Many of these metrics serve as the basis of reported revenues, and assessment of them provide direct correlation to the results of operations from period to period and we believe these metrics facilitate comparison with the results of our peers. Historical trends established in these metrics can be used to evaluate current operating results, identify trends affecting our business, determine the allocation of resources and assess the quality and potential variability of our cash flows and earnings. We believe they are useful to investors in evaluating and understanding our business but should not be used solely in assessing the Company’s performance. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein to fully evaluate and understand the business as a whole. These measures may not be comparable to similarly-titled performance indicators used by other companies.

* Management deems these metrics to be key performance indicators. Management uses these metrics to monitor our performance, both in our existing operations and acquisitions. Many of these metrics serve as the basis of reported revenues and assessment of these provide direct correlation to the results of operations from period to period and facilitate comparison with the results of our peers. Historical trends established in these metrics can be used to evaluate current operating results, identify trends affecting our business, determine the allocation of resources and assess the quality and potential variability of our cash flows and earnings. We ~~derive~~believe they are useful to investors in evaluating and understanding our business but should not be used solely in assessing the Company’s performance. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein to fully evaluate and understand the business as a whole. These measures may not be comparable to similarly titled performance indicators used by other companies.

The personal care segment derives a significant amount of ~~our~~its net service revenues from operations in Illinois, which represented ~~37.8%~~44.3% and ~~38.5%~~37.8% of our net service revenues for the three months ended September 30, ~~2021~~2022 and ~~2020~~,2021, respectively, and accounted for ~~37.5%~~43.5% and ~~37.8%~~37.5% of our net service revenues for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively. One payor, ~~client,~~ the Illinois Department on Aging, accounted for ~~21.3%~~21.0% and ~~22.9%~~21.3% of net service revenues for the three months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively, and accounted for ~~21.4%~~20.8% and ~~23.1%~~21.4% of net service revenues for the nine months ended September 30, 2022 and 2021, ~~and 2020, respectively~~respectively..

Net service revenues from state, local and other governmental ~~payors~~programs accounted for ~~49.5%~~49.4% and ~~51.5%~~49.5% of net service revenues for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Managed care organizations accounted for ~~45.3%~~46.4% and ~~43.2%~~45.3% of net service revenues for the three months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively, with commercial insurance, private pay and other payors accounting for the remainder of net service revenues. Net service revenues from state, local and other governmental ~~payors~~programs accounted for ~~49.5%~~49.4% and ~~50.3%~~49.5% of net service revenues for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Managed care organizations accounted for ~~45.3~~%46.1% and ~~44.1~~%45.3% of net service revenues for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively with commercial insurance, private pay and other payors accounting for the remainder of net service revenues.

Table of Contents

Net service revenues increased by ~~2.2%~~5.6% and ~~5.8%~~ increased by 2.4% for the three and nine months ended September 30, ~~2021,~~2022, respectively, compared to the three and nine months ended September 30, ~~2020.~~2021. Net service revenues included a ~~5.5%~~6.5% and ~~6.3%~~5.6% increase in revenues per billable hour for the three and nine months ended September 30, ~~2021,~~2022, respectively, mainly attributed to rate increases discussed above, as compared to the three and nine months ended September 30, ~~2020.~~2021. The Company experienced a decrease in New York net service revenues of ~~$4.3~~$3.1 million and ~~$10.2~~

~~Table of Contents~~

$13.7 million for the three and nine months ended September 30, ~~2021, respectively,~~2022, primarily driven by a decrease in participation in the New York CDPAP program as discussed above, compared to ~~the three and nine months ended September 30, 2020.~~

2021. Gross profit, expressed as a percentage of net service revenues, increased to 26.3% for the three months ended September 30, 2022 from 25.9% for the three months ended September 30, 2021 ~~from 25.0%~~. This increase was primarily due to decreases in direct payroll and benefits as a percentage of net service revenues of 0.4% for the three months ended September 30, ~~2020~~ ~~and~~2022. Gross profit expressed as a percentage of net service revenues, decreased to 26.0% for the nine months ended September 30, 2022 from 26.4% for the nine months ended September 30, ~~2021 from 25.6% for the nine months ended September 30, 2020. This increase~~2021.This decrease was primarily due to ~~a decrease~~an increase of 0.4% in direct payroll as a percentage of net service revenues ~~of 0.5% and 0.6%,~~ for the three and nine months ended September 30, ~~2021, respectively,~~2022 as compared to the three ~~months ended September 30, 2020.~~

~~For the three~~and nine months ended September 30, 2021 ~~and 2020, general~~primarily related to the labor wage pressures discussed above.

General and administrative expenses, expressed as a percentage of net service revenues, ~~remained flat at 8.9% for each period,~~was 8.7% and 9.2% ~~and 9.3%~~ for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively.

Hospice Segment


	For the Three Months Ended September 30,														For the Nine Months Ended September 30,
	2022					2021					Change				2022					2021					Change
	Amount			% of Segment Net Service Revenues		Amount			% of Segment Net Service Revenues		Amount		%		Amount			% of Segment Net Service Revenues		Amount			% of Segment Net Service Revenues		Amount		%
		(Amounts in Thousands, Except Percentages)														(Amounts in Thousands, Except Percentages)
Operating Results
Net service revenues	$	51,359		100.0	%	$	39,095		100.0	%	$	12,264	31.4	%	$	151,160		100.0	%	$	112,098		100.0	%	$	39,062	34.8	%
Cost of services revenues		25,695		50.0			18,992		48.6			6,703	35.3			74,659		49.4			56,500		50.4			18,159	32.1
Gross profit		25,664		50.0			20,103		51.4			5,561	27.7			76,501		50.6			55,598		49.6			20,903	37.6
General and administrative expenses		12,550		24.4			8,880		22.7			3,670	41.3			37,298		24.7			26,016		23.2			11,282	43.4
Segment operating income	$	13,114		25.5	%	$	11,223		28.7	%	$	1,891	16.8	%	$	39,203		25.9	%	$	29,582		26.4	%	$	9,621	32.5	%
Business Metrics (Actual Numbers)
Locations at period end																33					34
Admissions * (1)		3,182					2,565					617	24.1	%		9,778					7,211					2,567	35.6	%
Average daily census * (2)		3,280					2,629					651	24.8			3,304					2,523					781	31.0
Average discharge length of stay * (3)		93					95					(2)	(2.1)			87					95					(8)	(8.4)
Patient days * (4)		301,797					240,692					61,105	25.4			880,574					680,600					199,974	29.4
Revenue per patient day * (5)	$	170.18				$	162.43				$	7.75	4.8	%	$	171.66				$	164.71				$	6.95	4.2	%
Organic growth
- Revenue * (6)		0.1	%				(4.8)	%								1.6	%				(7.2)	%
- Average daily census * (6)		2.2	%				(7.6)	%								5.0	%				(24.6)	%

For the Three Months
Ended September 30,

For the Nine Months
Ended September 30,

2021

2020

Change

2021

2020

Change

Hospice Segment

Amount

% of
Segment
Net Service
Revenues

Amount

% of
Segment
Net Service
Revenues

Amount

%

Amount

% of
Segment
Net Service
Revenues

Amount

% of
Segment
Net Service
Revenues

Amount

%

(Amounts in Thousands, Except Percentages)

(Amounts in Thousands, Except Percentages)

Operating Results

Net service revenues

$
39,095

100.0

%

$
23,986

100.0

%

$
15,109

63.0

%

$
112,098

100.0

%

$
73,723

100.0

%

$
38,375

52.1

%
Cost of services revenues

18,992

48.6

10,508

43.8

8,484

80.7

56,500

50.4

33,749

45.8

22,751

67.4

Gross profit

20,103

51.4

13,478

56.2

6,625

49.2

55,598

49.6

39,974

54.2

15,624

39.1

General and administrative expenses

8,880

22.7

5,904

24.6

2,976

50.4

26,016

23.2

18,658

25.3

7,358

39.4

Segment operating income

$
11,223

28.7

%

$
7,574

31.6

%

$
3,649

48.2

%

$
29,582

26.4

%

$
21,316

29.0

%

$
8,266

38.8

%
Business Metrics (Actual Numbers)

Locations at period end

34

30

Admissions * ⁽¹⁾

2,565

1,339

1,226

91.6

%

7,211

4,393

2,818

64.1

%
Average daily census * ⁽²⁾

2,629

1,681

948

56.4

2,523

1,762

761

43.2

Average discharge length of stay * ⁽³⁾

95

109

(14
)

(12.7
)

95

103

(8
)

(7.4
)

Patient days * ⁽⁴⁾

240,692

154,609

86,083

55.7

680,600

482,765

197,835

41.0

Revenue per patient day * ⁽⁵⁾

$
162.43

$
155.14

$
7.29

4.7

%

$
164.71

$
152.71

$
12.00

7.9

%
Organic growth *

- Revenue * ⁽⁶⁾

(4.8
)
%

(5.6
)
%

(7.2
)
%

—

%

- Average daily census * ⁽⁶⁾

(7.6
)
%

(6.2
)
%

(24.6
)
%

3.9

%

(1)

Represents referral process and new patients on service during the period.

(2)

Average daily census is total patient days divided by the number of days in the period.

(3)

Average length of stay is the average number of days a patient is on service, calculated upon discharge, and is total patient days divided by total discharges in the period.

(4)

Patient days is days of service for all patients in the period.

(5)

Revenue per patient day is hospice revenue divided by the number of patient days in the period.

(6)

Revenue organic growth and average daily census organic growth reflect the change in year-over-year revenue and average daily census for the same store base. We define the same store base to include those stores open for at least 52 full weeks. These measures highlight theperformance of existing stores, while excluding the impact of acquisitions, new store openings and closures.

* Management deems these metrics to be key performance indicators. Management uses these metrics to monitor our performance, both in our existing operations and acquisitions. Many of these metrics serve as the basis of reported revenues and assessment of these provide direct correlation to the results of operations from period to period and facilitate comparison with the results of our peers. Historical trends established in these metrics can be used to evaluate current operating results, identify trends affecting our business, determine the allocation of resources and assess the quality and potential variability of our cash flows and earnings. We believe they are useful to investors in evaluating and understanding our business but should not be used solely in assessing the Company’s performance. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein to fully evaluate and understand the business as a whole. These measures may not be comparable to similarly titled performance indicators used by other companies.

~~(1)~~

~~Represents referral process and new patients on service during the period.~~

~~(2)~~

~~Average daily census is total patient days divided by the number of days in the period.~~

~~(3)~~

~~Average length of stay is the average number of days a patient is on service, calculated upon discharge, and is total patient days divided by total discharges in the period.~~

~~(4)~~

~~Patient days is days of service for all patients in the period.~~

~~(5)~~

~~Revenue per patient day is hospice revenue divided by the number of patient days in the period.~~

~~(6)~~

Revenue organic growth and average daily census organic growth reflect the change in year-over-year revenue and average daily census for the same store base. We define the same store base to include those stores open for at least 52 full weeks. These measures highlight the~~performance of existing stores, while excluding the impact of acquisitions, new store openings and closures.~~

Management deems these metrics to be key performance indicators. Management uses these metrics to monitor our performance, both in our existing operations and acquisitions. Many of these metrics serve as the basis of reported revenues, and assessment of them provide direct correlation to the results of operations from period to period and we believe that these metrics facilitate comparison with the results of our peers. Historical trends established in these metrics can be used to evaluate current operating results, identify trends affecting our business, determine the allocation of resources and assess the quality and potential variability of our cash flows and earnings. We believe they are useful to investors in evaluating and understanding our business but should not be used solely in assessing the Company’s performance. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein to fully evaluate and understand the business as a whole. These measures may not be comparable to similarly-titled performance indicators used by other companies.

~~Hospice~~32

Table of Contents

The hospice segment generates net service revenues 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 home care, continuous home care, general inpatient care and respite care. Our ~~Hospice~~hospice segment principally provides routine home care ~~but~~and continuous home care services, and with the JourneyCare acquisition, ~~of Queen City Hospice, the Company~~ expanded ~~continuous~~into providing general inpatient care services.

~~Net~~ In our hospice segment, net service revenues from Medicare accounted for ~~92.8%~~90.6% and ~~93.4% and managed care organizations accounted for 3.9% and 4.7%~~92.7% for the three months ended September 30, 2022 and 2021, respectively, and ~~2020, respectively.~~ ~~Net service revenues from Medicare accounted for~~90.8% and 93.4% ~~and 92.8% and managed care organizations accounted for 3.9% and 5.0%~~ for the nine months ended September 30, 2022 and 2021, respectively. Net service revenues from managed care organizations accounted for 3.5% and 3.9% for each the three months ended September 30, 2022 and September 30, 2021, and ~~2020,~~3.6% and 3.9% for the nine months ended September 30, 2022 and 2021, respectively.

~~Table of Contents~~

Net service revenues increased by ~~$15.1~~$12.3 million and ~~$38.4~~$39.1 for the three and nine months ended September 30, ~~2021,~~2022, respectively, compared to the three and nine months ended September 30, ~~2020. For the three and nine months ended September 30,~~ 2021 ~~net service revenues increased primarily due to increases in average daily census and revenue per patient day mainly~~ attributed to ~~the acquisition of Queen City Hospice on December 4, 2020, partially offset by a decrease in~~ organic growth ~~compared to~~and the ~~three~~acquisitions of the operations of JourneyCare on February 1, 2022 and ~~nine months ended September 30, 2020.~~ Armada on August 1, 2021.

Gross profit, expressed as a percentage of net service revenues was ~~51.4%~~50.0% and ~~56.2%~~51.4% for the three months ended September 30, 2022 and 2021, respectively, and ~~2020, respectively,~~ 50.6% and 49.6% ~~and 54.2%~~, for the nine months ended September 30, 2022 and 2021, ~~and 2020, respectively~~.respectively. For the three ~~and nine~~ months ended September 30, ~~2021,~~2022, the decrease ~~as a percentage of net service revenues~~ was mainly attributed to ~~an increase of~~increases in direct employee wages, taxes and benefit costs of ~~4.7% and 4.5%, respectively.~~1.3% . For the nine months ended September 30, 2022, the increase was mainly attributed to the decrease in pharmacy related expenses of 1%.

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 ~~22.7%~~24.4% and ~~24.6%~~22.7% for the three months ended September 30, 2022 and 2021, respectively, and ~~2020, respectively,~~ 24.7% and 23.2% ~~and 25.3%~~ for the nine months ended September 30, 2022 and 2021, ~~and 2020, respectively. These decreases for the three and nine months ended September 30, 2021 compared to corresponding periods in 2020 are primarily due to acquisitions synergies.~~respectively. The increase in general and administrative expenses for the three and nine months ended September 30, ~~2021,~~2022, was ~~primarily~~ due to acquisitions that resulted in a ~~$2.3~~$3.0 million and ~~$5.5~~$8.8 million, respectively, increase in administrative employee wages, taxes and benefit costs.

Home Health Segment


	For the Three Months Ended September 30,														For the Nine Months Ended September 30,
	2022					2021					Change				2022					2021					Change
	Amount			% of Segment Net Service Revenues		Amount			% of Segment Net Service Revenues		Amount		%		Amount			% of Segment Net Service Revenues		Amount			% of Segment Net Service Revenues		Amount		%
		(Amounts in Thousands, Except Percentages)														(Amounts in Thousands, Except Percentages)
Operating Results
Net service revenues	$	9,956		100.0	%	$	7,958		100.0	%	$	1,998	25.1	%	$	29,768		100.0	%	$	17,015		100.0	%	$	12,753	75.0	%
Cost of services revenues		7,647		76.8			4,977		62.5			2,670	53.6			21,501		72.2			10,560		62.1			10,941	103.6
Gross profit		2,309		23.2			2,981		37.5			(672)	-22.5			8,267		27.8			6,455		37.9			1,812	28.1
General and administrative expenses		2,410		24.2			1,477		18.6			933	63.2			7,270		24.4			3,410		20.0			3,860	113.2
Segment operating income	$	(101)		(1.0)	%	$	1,504		18.9	%	$	(1,605)	-106.7	%	$	997		3.3	%	$	3,045		17.9	%	$	(2,048)	(67.3)	%
Business Metrics (Actual Numbers)
Locations at period end																12					11
New admissions * (1)		3,684					2,608					1,076	41.3	%		10,371					4,962					5,409	109.0	%
Recertifications * (2)		1,482					1,081					401	37.1			4,207					2,476					1,731	69.9
Total volume * (3)		5,166					3,689					1,477	40.0			14,578					7,438					7,140	96.0
Visits * (4)		71,670					55,963					15,707	28.1	%		205,335					115,210					90,125	78.2	%
Organic growth
- Revenue * (5)		0.2	%				24.8	%								(1.2)	%				15.9	%
- Admissions * (5)		18.6	%				27.9	%								15.7	%				23.8	%

For the Three Months
Ended September 30,

For the Nine Months
Ended September 30,

2021

2020

Change

2021

2020

Change

Home Health Segment

Amount

% of
Segment
Net Service
Revenues

Amount

% of
Segment
Net Service
Revenues

Amount

%

Amount

% of
Segment
Net Service
Revenues

Amount

% of
Segment
Net Service
Revenues

Amount

%

(Amounts in Thousands, Except Percentages)

(Amounts in Thousands, Except Percentages)

Operating Results

Net service revenues

$
7,958

100.0

%

$
4,085

100.0

%

$
3,873

94.8

%

$
17,015

100.0

%

$
12,207

100.0

%

$
4,808

39.4

%
Cost of services revenues

4,977

62.5

2,685

65.7

2,292

85.4

10,560

62.1

8,553

70.1

2,007

23.5

Gross profit

2,981

37.5

1,400

34.3

1,581

112.9

6,455

37.9

3,654

29.9

2,801

76.7

General and administrative expenses

1,477

18.6

925

22.6

552

59.7

3,410

20.0

2,831

23.2

579

20.5

Segment operating income

$
1,504

18.9

%

$
475

11.6

%

$
1,029

216.6

%

$
3,045

17.9

%

$
823

6.7

%

$
2,222

270.0

%
Business Metrics (Actual Numbers)

Locations at period end

11

10

New admissions * ⁽¹⁾

2,608

1,096

1,512

138.0

%

4,962

3,186

1,776

55.7

%
Recertifications * ⁽²⁾

1,081

607

474

78.1

2,476

2,006

470

23.4

Total volume * ⁽³⁾

3,689

1,703

1,986

116.6

7,438

5,192

2,246

43.3

Visits * ⁽⁴⁾

55,963

28,073

27,890

99.3

%

115,210

91,580

23,630

25.8

%
Organic growth *

- Revenue * ⁽⁵⁾

24.8

%

(8.9
)
%

15.9

%

(0.6
)
%

- New Admissions * ⁽⁵⁾

27.9

%

42.6

%

23.8

%

23.0

%

(1)

Represents new patients during the period.

(2)

A home health certification period is an episode of care that begins with a start of care visit and continues for 60 days. If at the end of the initial episode of care, the patient continues to require home health services, a recertification is required. This represents the number of recertifications during the period.

(3)

Total volume is total admissions and total recertifications in the period.

(4)

Represents number of services to patients in the period.

(5)

Revenue organic growth and admissions organic growth reflect the change in year-over-year revenue and admissions for the same store base. We define the same store base to include those stores open for at least 52 full weeks. These measures highlight theperformance of existing stores, while excluding the impact of acquisitions, new store openings and closures.

~~(1)~~

~~Represents new patients during the period.~~

~~(2)~~

~~(3)~~

~~Total volume is total admissions and total recertifications in the period.~~

~~(4)~~

~~Represents number of services to patients in the period.~~

~~(5)~~

Revenue organic growth and new admissions organic growth reflect the change in year-over-year revenue and new admissions for the same store base. We define the same store base to include those stores open for at least 52 full weeks. These measures highlight the~~performance of existing stores, while excluding the impact of acquisitions, new store openings and closures.~~

Management deems these metrics to be key performance indicators. Management uses these metrics to monitor our performance, both in our existing operations and acquisitions. Many of these metrics serve as the basis of reported revenues, and assessment of them provide direct correlation to the results of operations from period to period and we believe that these metrics facilitate comparison with the results of our peers. Historical trends established in these metrics can be used to evaluate current operating results, identify trends affecting our business, determine the allocation of resources and assess the quality and potential variability of our cash flows and earnings. We believe they are useful to investors in evaluating and understanding our business but should not be used solely in assessing the Company’s performance. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein to fully evaluate and understand the business as a whole. These measures may not be comparable to similarly-titled performance indicators used by other companies.

~~Home~~33

Table of Contents

current operating results, identify trends affecting our business, determine the allocation of resources and assess the quality and potential variability of our cash flows and earnings. We believe they are useful to investors in evaluating and understanding our business but should not be used solely in assessing the Company’s performance. These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein to fully evaluate and understand the business as a whole. These measures may not be comparable to similarly titled performance indicators used by other companies.

The home health segment generates net service revenues 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 ~~80.1%~~73.5% and ~~78.0%~~80.1%, managed care organizations accounted for ~~15.3%~~20.1% and ~~20.3%~~15.3% and other accounted for ~~4.6%~~6.4% and ~~1.7%~~4.6% for the three months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively. Net service revenues from Medicare accounted for ~~80.5%~~73.0% and ~~79.2%~~80.5%, managed care organizations accounted for ~~16.7%~~20.7% and ~~19.0%~~16.7% and other accounted for ~~2.8%~~6.3% and ~~1.8%~~2.8% for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Home health services provided to Medicare beneficiaries are paid under the Medicare Home Health Prospective Payment System, ~~(“HHPPS”). Effective January 1, 2020,~~which uses national, standardized 30-day period payment rates for periods of care. CMS ~~began using a 30-day episode~~uses the PDGM as the case-mix classification model to place periods of care ~~for home health payments and implemented the Patient-Driven Groupings Model (“PDGM”)~~

~~Table of Contents~~

~~as part of the shift toward value-based care. The PDGM classifies~~into payment categories, classifying patients based on clinical ~~characteristics and other patient information into payment categories and eliminates the use~~characteristics. An outlier adjustment may be paid for periods of ~~therapy service thresholds for determination of payments. Also effective January 1, 2020, CMS finalized~~care in which costs exceed a ~~policy allowing therapy assistants to provide maintenance therapy services in the home and modified certain requirements relating to the home health plan of care.~~specific threshold amount.

Net service revenues increased by ~~$3.9~~$2.0 million and ~~$4.8~~$12.7 million for the three and nine months ended September 30, ~~2021~~2022, respectively, compared to the three and nine months ended September 30, ~~2020.~~2021. Total visits increased for the three months and nine months ended September 30, ~~2021,~~2022, mainly attributed to ~~organic growth and~~ the acquisition of Armada on August 1, 2021 and Summit on October 1, 2021.

Gross profit, expressed as a percentage of net service revenues was ~~37.5%~~23.2% and ~~34.3%~~37.5% for the three months ended September 30, 2022 and 2021, respectively, and ~~2020, respectively,~~ 27.8% and 37.9% ~~and 29.9%~~, for the nine months ended September 30, 2022 and 2021, ~~and 2020, respectively~~.respectively. For the three and nine months ended September 30, ~~2021,~~2022, the ~~increase~~decrease was primarily due to ~~a decrease of~~an increase in direct employee wages, taxes and benefit costs of ~~2.7%~~13.6% and ~~6.9%~~9.2%, respectively, as a percentage of net service revenues. Gross profit, expressed as a percentage of net service revenues, for the three and nine months ended September 30, 2021 improved compared to the corresponding periods in 2020, due to PDGM case mix and improvements as restrictions related to COVID-19 ease.

The home health 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 ~~18.6%~~24.2% and ~~22.6%~~18.6% for the three months ended September 30, 2022 and 2021, respectively, and ~~2020, respectively,~~ 24.4% and 20.0% ~~and 23.2%~~ for the nine months ended September 30, 2022 and 2021, respectively. The increase in general and ~~2020, respectively~~administrative expenses was primarily due to acquisitions that resulted in a $0.8 million and $3.2 million increase in administrative employee wages, taxes and benefit costs for the three and nine months ended September 30, 2022..

Liquidity and Capital Resources

Overview

Our primary sources of liquidity are cash on hand and cash from operations and borrowings under our credit facility. At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had cash balances of ~~$152.4~~$105.6 million and ~~$145.1~~$168.9 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. The open receivable balance from the Illinois Department on Aging, the largest payor program for the Company’s Illinois personal care operation, decreased by $1.7 million from $21.2 million as of December 31, 2020 to $18.1 million as of At September 30, ~~2021. The state of Illinois fiscal year 2021 budget included~~2022, we had a $600.0 million revolving credit facility and a $125.0 million incremental loan facility, which may be for term loans or an ~~appropriation to raise in-home care rates to offset previous minimum wage increases by the City of Chicago. However the rate~~ increase was delayed and did not take effect until April 1, 2021, as a result of on-going state revenue declines due to COVID-19 and the failure of the November 2020 referendum to revise the Illinois income tax code. On June 29, 2021, the Governor announced the authorization of bonus payments to providers in an amount equivalent to the ~~rate increase for services delivered from January 1, 2021 to March 31, 2021 for state reimbursed hours~~revolving loan commitments. The maturity of ~~care. The bonus payment of $3.0 million was recognized as net service revenues during the three months ended June 30, 2021, and was received in September 2021.~~

~~During the three and nine months ended September 30, 2021, we drew $29.0 million under~~this credit facility ~~to fund the acquisition of Armada. Additionally, we~~ is July 30, 2026.

~~reallocated and refinanced $17.4 million of our outstanding initial term loans as revolving loans, as discussed below~~. During the nine months ended September 30, ~~2020,~~2022, we ~~did not draw on~~(i) drew $47.0 million under our revolving credit facility to fund, in part, the ~~term loan.~~JourneyCare and Apple Home acquisitions (ii) repaid $105.0 million under our revolving credit facility. As of September 30, ~~2021,~~2022, we had a total of ~~$224.9~~$166.9 million in revolving loans, with an interest rate of ~~2.08%. After~~5.11% outstanding on its credit facility and after giving effect to the amount drawn on our credit facility, approximately ~~$8.2~~$8.1 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 ~~$367.0~~$375.5 million of capacity and ~~$123.8~~$200.5 million available for borrowing under our ~~revolving~~ credit ~~loan~~ facility. At December 31, ~~2020,~~2021, we had a total of ~~$178.5~~$224.9 million revolving credit loans, with an interest rate of ~~1.90%~~2.10%, ~~and $18.1 million term loans, with an interest rate of 1.90%.~~outstanding on our credit facility.

Our credit facility requires us to maintain a total net leverage ratio not exceeding 3.75:1.00. At September 30, ~~2021,~~2022, we were in compliance with our financial covenants under the Credit Agreement. Although we believe our liquidity position remains strong, we can provide no assurance that we will remain in compliance with the covenants in our Credit Agreement, and in the future, it may prove necessary to seek an amendment with the bank lending group under our credit facility. Additionally, there can be no assurance that we will be able to raise additional funds on terms acceptable to us, if at all.

~~COVID-19~~See Note 8 to the Notes to Condensed Consolidated Financial Statements, Long-Term Debt, for additional details of our long-term debt.

Any deterioration in economic conditions in the United States, including as the result of the COVID-19 pandemic, would pose a risk to states’ budgets, which in turn could affect our collections. Depending on the severity and length of any potential economic downturn, 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 in fiscal 2021 (which began July 1 in most states), and, potentially, future fiscal years. In this regard, Illinois, New York and New Mexico, our top three markets, previously revised revenue estimates downward for the 2021 fiscal year as the result of earlier negative economic conditions arising from the pandemic. Also in response to reduced revenues, the state of New York authorized the issuance of short-term bonds and implemented uniform reductions to Medicaid payments. Effective for dates of service on or after April 2, 2020, the uniform reduction rate is 1.5%. The reduction applies to home health services but hospice services are exempt. We cannot determine

Table of Contents

~~the impact that~~ COVID-19 may have on states’ budgets for 2022 or beyond, or if additional federal stimulus measures will be provided. However, such impacts could have a material adverse effect on our financial condition, results of operations and cash flows.Pandemic

As a result of the COVID-19 pandemic, federal and state governments have passed legislation, promulgated regulations, and taken other administrative actions intended to assist healthcare providers in providing care to COVID-19 patients and other patients during the public health emergency. These temporary measures include relief from Medicare conditions of participation requirements for healthcare providers, relaxation of licensure requirements for healthcare professionals, relaxation of privacy restrictions for telehealth remote communications, promoting use of telehealth by expanding the scope of services for which Medicare reimbursement is available, and limited waivers of fraud and abuse laws for activities related to COVID-19 during the emergency period. The current federal public health emergency declaration expires January ~~16, 2022,~~11, 2023, but HHS has indicated it will provide states with 60 days’ notice prior to termination of the declaration.

The ARPA, which became law on March 11, 2021, 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 provides for a 10 percentage point increase in federal matching funds for Medicaid home and community based services (“HCBS”) from April 1, 2021, through March 30, 2022, provided the state satisfies certain conditions. States must use the funds attributable to this matching fund increase to supplement existing state funds expended for Medicaid HCBS in effect as of April 1, 2021, and must use the state funds equivalent to the matching fund increase to implement or supplement the implementation of activities to enhance HCBS under the Medicaid program. States will be permitted to use the state funds equivalent to the additional federal funds through March 31, 2024. The additional federal funds and other federal stimulus measures may help to ease state-level budget constraints due to COVID-19.

~~Government Stimulus Advances~~

Provider Relief Fund

One of the primary sources of relief for healthcare providers is the Provider Relief Fund, which was established by the CARES Act, which was expanded by the PPPHCE Act and the CAA. Provider Relief Fund payments are intended to compensate healthcare providers for lost revenues and health care related expenses incurred in response to the COVID-19 pandemic and are not required to be repaid, provided that recipients attest to and comply with certain terms and conditions, including limitations on balance billing and not using funds received from the Provider Relief Fund to reimburse expenses or losses that other sources are obligated to reimburse.

In November 2020, the Company received grants in an aggregate principal amount of $13.7 million from the Provider Relief Fund, ~~for which we had previously applied. The Company~~and fully utilized these funds as of December 31, 2021, including $0.4 million and $11.7 million ~~of these funds for~~during the three and nine months ended September 30, 2021, ~~respectively,~~ for healthcare related expenses, including retention payments, attributable to COVID-19 that were unreimbursed by other sources. ~~In accordance with the current guidance issued by HHS, the Company expects to utilize additional funds through December 31, 2021, at which point we anticipate any unused funds will be returned.~~ We ~~are~~were required to properly and fully document the use of such funds in reports to HHS, ~~which must be~~and we have submitted ~~no later than March 31, 2022. The Company’s ability to utilize and retain some or all of such funds will depend on~~ the terms and conditions of the funds received. Queen City Hospice administered retention payments totaling $1.9 million to caregivers for the nine months ended September 30, 2021, which we believed to be necessary to secure and maintain adequate personnel. Commercial organizations that receive and expend annual total awards of $750,000 or more in federal funding, including payments received through the Provider Relief Fund, are subject to federal audit requirements.required reports.

~~Medicare Accelerated and Advance Payment Program – Queen City Hospice~~

In addition, the CARES Act expands the Medicare Accelerated and Advance Payment Program to increase cash flow to providers impacted by the COVID-19 pandemic. Hospice and home health providers were able to request an advance or accelerated payment of up to 100% of the Medicare payment amount for a three-month period (not including Medicare Advantage payments). The Medicare Accelerated and Advance Payment Program payments are a loan that providers must repay. In April 2020, Queen City Hospice received an amount equal to $10.8 million pursuant to the Medicare Accelerated and Advance Payment Program. Queen City Hospice did not repay the funds prior to the completion of our acquisition of Queen City Hospice. However, Queen City Hospice repaid such funds following its acquisition in March 2021, prior to any CMS recoupment and before any interest accrual.

Payroll tax deferral

The CARES Act ~~also provides for certain federal income and other tax changes, including allowing~~allowed for the deferral of the employer portion of Social Security payroll taxes through December 31, 2020. ~~The payroll tax deferral requires that the deferred payroll taxes be paid over two years, with half~~As of ~~the amount required to be paid by~~September 30, 2022 and December 31, 2021, ~~and~~ the other half by December 31, 2022. The Company received a cash benefit of approximately $7.1 million related to the deferral of employer payroll taxes for 2020 under the CARES Act, for the period April 2, 2020 through June 30, 2020. Effective July 1, 2020, the Company began paying its deferred portion of employer Social Security payroll taxes was $4.1 million, which is included within Government stimulus advances on the Company’s Unaudited Condensed Consolidated Balance Sheets. The payroll tax deferral requires that the remaining deferred payroll taxes be paid by December 31, 2022.

ARPA Spending Plans

The ARPA, which became law on March 11, 2021, provided for $350 billion in relief funding for eligible state, local, territorial and ~~expects~~tribal governments to ~~repay half~~mitigate the fiscal effects of the ~~$7.1~~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 permitted to use the state funds equivalent to the additional federal funds through March 31, 2025. 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.

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. During the nine months ended September 30, 2022, the Company received state funding provided by the ARPA in an aggregate amount of $22.4 million. The Company recorded revenue of $1.7 million and related cost of service revenues of $1.3 million for certain states that met the revenue recognition criteria. The Company deferred the remaining $20.7 million, which was received from states with specific spending plans and reporting requirements. The Company utilized $3.2 million and $3.6 million of these funds during the three and nine months ended September 30, 2022, primarily for caregivers and adding support to recruiting and retention efforts, included as a reduction of cost of service revenues in the ~~fourth quarter~~Company’s Unaudited Condensed Consolidated Statements of ~~2021.~~Income. As of September 30, 2022, the deferred portion of ARPA funding was $17.0 million, which is included within Government stimulus advances on the Company’s Unaudited Condensed Consolidated Balance Sheets.

Medicare sequester

The CARES Act and related legislation ~~also include other provisions offering financial relief, for example~~ temporarily ~~lifting~~lifted the Medicare sequester ~~which~~that would have otherwise reduced payments to Medicare providers by 2% as required by the Budget Control Act of 2011, from May 1, 2020 through December 31, ~~2021 (but also extending~~2021. Congress further delayed these sequestration cuts through ~~2030).~~

~~Table of Contents~~March 31, 2022, and reduced the sequestration adjustment to 1% from April 1 through June 30, 2022. The full 2% reduction resumed July 1, 2022. These sequestration cuts have been extended through 2030, with the reductions for 2030 set to increase to 2.25% for the first six months and to 3% for the second six months.

In our hospice segment, Medicare sequester relief resulted in an increase in net service revenues of ~~$0.7~~$0.0 million and ~~$0.5~~$0.7 million for the three months ended September 30, 2022 and 2021, respectively, and ~~2020, respectively,~~$1.4 million and $2.1 million ~~and $0.8 million~~ for each of the nine months ended September 30, ~~2021~~2022 and ~~2020, respectively.~~2021. In our home health ~~net~~ segment, Medicare sequester relief resulted in an increase in net service revenues of $0.0 million and $0.1 million for ~~both~~each of the three months ended September ~~2021~~30, 2022 and ~~2020, and $0.3 million and $0.2 million, for the nine months ended September~~ 2021, ~~and 2020,~~ respectively.

~~However, the~~35

Table of Contents

The ARPA increases the federal budget deficit in a manner that triggers an additional statutorily mandated sequestration under the PAYGO Act. As a result, ~~absent congressional action,~~an additional Medicare ~~spending will be reduced by~~payment reduction of up to 4% ~~in fiscal year 2022, to begin~~was required to take effect in January ~~2022, in addition to the existing sequestration requirements~~2022. However, Congress has delayed implementation of ~~the Budget Control Act of 2011.~~this payment reduction until 2023. We cannot currently determine if, or to what extent, our business, results of operations, financial condition or liquidity will ultimately be impacted by mandated sequestration triggers under the PAYGO Act, or if or when the mandated sequestration will occur.

~~Amended and Restated Senior Secured Credit Facility~~

We entered into the Amended and Restated Credit Agreement, dated as of October 31, 2018, with certain lenders and Capital One, National Association, as a lender and as agent for all lenders (as amended by the Amendment (as hereinafter defined) and the Second Amendment (as hereinafter defined), the “Credit Agreement”). This credit facility totaled $269.6 million, inclusive of a $250.0 million revolving loan and a $19.6 million delayed draw term loan and is evidenced by the Credit Agreement. This credit facility amended and restated our existing senior secured credit facility totaling $250.0 million. As used throughout this Annual Report on Form 10-K, “credit facility” shall mean the credit facility evidenced by the Credit Agreement.

The maturity of this credit facility is May 8, 2023. Interest on this credit facility may be payable at (x) the sum of (i) an applicable margin ranging from 0.75% to 1.50% based on the applicable senior net leverage ratio plus (ii) a base rate equalSee Note 7 to the ~~greatest of (a) the rate of interest last quoted by The Wall Street Journal as the “prime rate,” (b) the sum~~Notes to Condensed Consolidated Financial Statements, COVID-19 Pandemic, for additional details of the federal funds rate plus a margin of 0.50% and (c) the sum of the adjusted LIBOR that would be applicable to a loan with an interest period of one month advanced on the applicable day (not to be less than 0.00%) plus a margin of 1.00% or (y) the sum of (i) an applicable margin ranging from 1.75% to 2.50% based on the applicable senior net leverage ratio plus (ii) the offered rate per annum for similar dollar deposits for the applicable interest period that appears on Reuters Screen LIBOR01 Page (not to be less than zero). Swing loans may not be LIBOR loans. The availability of additional draws under this credit facility is conditioned, among other things, upon (after giving effect to such draws) the Total Net Leverage Ratio (as defined in the Credit Agreement) not exceeding 3.75:1.00. In certain circumstances, in connection with a Material Acquisition (as defined in the Credit Agreement), we can elect to increase our Total Net Leverage Ratio compliance covenant to 4.25:1.00 for the then current fiscal quarter and the three succeeding fiscal quarters.

Addus HealthCare, Inc. (“Addus HealthCare”) is the borrower, and its parent, Holdings, and substantially all of Holdings’ subsidiaries are guarantors under this credit facility, and it is collateralized by a first priority security interest in all of our and the other credit parties’ current and future tangible and intangible assets, including the shares of stock of the borrower and subsidiaries. The Credit Agreement contains affirmative and negative covenants customary for credit facilities of this type, including limitations on us with respect to liens, indebtedness, guaranties, investments, distributions, mergers and acquisitions and dispositions of assets.COVID-19 pandemic.~~We pay a fee ranging from 0.20% to 0.35% based on the applicable senior net leverage ratio times the unused portion of the revolving loan portion of the credit facility.~~

The Credit Agreement contains customary affirmative covenants regarding, among other things, the maintenance of records, compliance with laws, maintenance of permits, maintenance of insurance and property and payment of taxes. The Credit Agreement also contains certain customary financial covenants and negative covenants that, among other things, include a requirement to maintain a minimum Interest Coverage Ratio (as defined in the Credit Agreement), a requirement to stay below a maximum Total Net Leverage Ratio (as defined in the Credit Agreement) and a requirement to stay below a maximum permitted amount of capital expenditures, as well as restrictions on guarantees, indebtedness, liens, investments and loans, subject to customary carve outs, a restriction on dividends (provided that Addus HealthCare may make distributions to us in an amount that does not exceed $7.5 million in any year absent of an event of default, plus limited exceptions for tax and administrative distributions), a restriction on the ability to consummate acquisitions (without the consent of the lenders) under our credit facility subject to compliance with the Total Net Leverage Ratio (as defined in the Credit Agreement) thresholds, restrictions on mergers, dispositions of assets, and affiliate transactions, and restrictions on fundamental changes and lines of business.

On September 12, 2019, we entered into a First Amendment (the “First Amendment”) to our Credit Agreement. The First Amendment increased our credit facility by $50.0 million in incremental revolving loans, for an aggregate $300.0 million in revolving loans. The First Amendment provides that future incremental loans may be for term loans or an increase to the revolving loan commitments. The First Amendment further provides that the proceeds of such $50.0 million incremental revolving loan may be used for, among other things, general corporate purposes.

On July 30, 2021, the Company entered into a Second Amendment (the “Second Amendment”) to our Credit Agreement. The Second Amendment, among other things, reallocated and refinanced the Company’s outstanding initial term loans as revolving loans (such that the Company has no outstanding initial term loans and no further initial term loans may be borrowed) and increased the Company’s revolving credit facility to an aggregate amount of $600.0 million. Moreover, the Second Amendment increased the Company’s incremental loan facility to an aggregate amount $125.0 million, which incremental loan facility may be for term loans or an increase to the revolving loan commitments. The maturity of the revolving credit facility was also extended from May 8, 2023 to July 30, 2026. Additionally, the CreditCash Flows

~~Table of Contents~~

Agreement contemplates a transition from LIBOR, specifically identifies SOFR as the replacement reference rate and details the mechanism for transition at LIBOR cessation, which is anticipated to occur on June 30, 2023. The transition to SOFR is not expected to have a material impact on the Company’s results of operations or liquidity. In connection with the Second Amendment, we incurred approximately $3.0 million of debt issuance costs.

~~At September 30, 2021, we were in compliance with our financial covenants under the Credit Agreement~~.

~~Cash Flows~~

The following table summarizes changes in our cash ~~flows for the nine months ended September 30, 2021 and 2020:~~flows:

For the Nine Months Ended September 30,

2021

2020

(Amounts in Thousands)

Net cash provided by operating activities

$
14,287

$
73,299

Net cash used in investing activities

(32,433
)

(17,507
)
Net cash provided by financing activities

25,447

2,825


	For the Nine Months Ended September 30,
	2022			2021
	(Amounts in Thousands)
Net cash provided by (used in) operating activities	$	80,818		$	14,287
Net cash used in investing activities		(87,354	)		(32,433	)
Net cash used in financing activities		(56,715	)		25,447

Nine ~~months~~Months Ended September 30, ~~2021~~2022 Compared to Nine ~~months~~Months Ended September 30, ~~2020~~2021

Cash flows from operating activities represent the inflow of cash from our payors and the outflow of cash for payroll and payroll taxes, operating expenses, interest and taxes. Net cash provided by operating activities was ~~$14.3~~$80.8 million for the nine months ended September 30, ~~2021,~~2022, compared to ~~$73.3~~net cash used in operating activities of $14.3 million for the same period in ~~2020.~~2021. The increase in cash provided by operations was primarily due to the timing of receipts on accounts receivable and the timing of government stimulus funds. The changes in accounts receivable were primarily related to the growth in revenue and a decrease ~~for~~in days sales outstanding (“DSO”) during the nine months ended September 30, ~~2021, in cash provided by operations~~2022 compared to 2021, as described below. The related receivables due from the ~~same period in 2020, was due to~~Illinois Department on Aging represented 15.3% and 16.1% of the ~~timing of~~Company’s net accounts receivable ~~of $32.6 million,~~at September 30, 2022 and ~~the timing of $31.5 million of government stimulus funds.~~December 31, 2021, respectively, as discussed below.

Net cash used in ~~investing activities was $32.4 million for the nine months ended September 30, 2021 compared to $17.5 million for the nine months ended September 30, 2020. Our~~ investing activities for the nine months ended September 30, ~~2021~~2022, primarily consisted of ~~$29.1~~$87.3 million ~~primarily~~of net cash used for the ~~acquisition of Armada~~JourneyCare acquisition. For the nine months ended September 30, 2022 and ~~$3.2 million in purchases of~~2021, property and equipment purchases, primarily related to our ongoing investments in our technology ~~infrastructure. Our investing activities for the nine months ended September 30, 2020 consisted of $11.7~~infrastructure, were $2.8 million ~~primarily for the acquisition of A Plus~~ and ~~$5.9~~$3.2 million, ~~in purchases of property and equipment primarily related to investments in our technology infrastructure.~~respectively.

~~Our~~Net cash used in financing activities for the nine months ended September 30, ~~2021 included~~2022, primarily related to a $105.0 million payment on the revolver portion of our credit facility, partially offset by borrowings of ~~$29.0~~$47.0 million on the revolver portion of our credit facility to fund, in part, the ~~Armada acquisition,~~JourneyCare and Apple Home acquisitions. For the ~~reallocation~~nine months ended September 30, 2022 and ~~refinancing of $17.4 million of our outstanding initial term loans as revolving loans, cash paid for~~ ~~debt issuance costs~~ of ~~$3.0 million and~~ ~~term loan payments of $0.7 million.~~ ~~Net~~2021, net cash provided by financing activities ~~was related to~~included cash received from the exercise of stock options of ~~$3.3~~$1.3 million ~~for the nine months ended September 30, 2020.~~and $0.2 million, respectively.

Outstanding Accounts Receivable

Gross accounts receivable as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 were approximately ~~$135.6~~$127.6 million and ~~$133.4~~$138.4 million, respectively. Outstanding accounts receivable, net of allowance ~~increased~~for credit losses, decreased by ~~$1.2~~$10.7 million as of September 30, ~~2021~~2022 as compared to December 31, ~~2020.~~2021. Accounts receivable for the Illinois Department on Aging ~~decreased~~increased approximately ~~$1.7~~$0.1 million during the quarter ended September 30, ~~2021. We received a bonus payment of $3.0 million from the Illinois Department on Aging in September of 2021.~~2022. Our collection procedures include review of account aging and direct contact with our payors. We have historically not used collection agencies. An uncollectible amount is written off to the allowance account after reasonable collection efforts have been ~~exhausted~~exhausted..

We calculate our DSO by taking the trade accounts receivable outstanding, net of allowance for credit losses for doubtful accounts, divided by the net service revenues for the last quarter, multiplied by the number of days in that quarter. Our DSOs were 5346 days and 6154 days at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The DSOs for our largest payor, the Illinois Department on Aging, were 35 days and 43 days at September 30, ~~2021~~2022 and December 31, 2020 were 36 days and 46 days, respectively. We may not receive payments on a consistent basis in the near term and our DSOs and the DSO for the Illinois Department on Aging may increase despite the state of Illinois’s enactment of state budgets for fiscal years 2021, ~~and 2022.~~respectively.

Any deterioration in economic conditions in the United States, including as the result of the COVID-19 pandemic, would pose a risk to states’ budgets, which in turn could affect our collections. Depending on the severity and length of any potential economic downturn, 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 in fiscal 2021 (which began July 1 in most states), and, potentially, future fiscal years. The ARPA provided $350 billion dollars in emergency funding for state, local, territorial, and Tribal governments to remedy the mismatch between increasing costs and decreasing revenues. We cannot determine if Congress will provide additional relief with additional stimulus and relief legislation, including extension of unemployment benefits and relief for states. These and other federal stimulus measures may help to ease state-level budget constraints due to the COVID-19 pandemic. We cannot determine the impact that the economic slowdown caused by the COVID-19 pandemic may have on states’ budgets for 2022 or beyond, or if additional federal stimulus measures will be provided. However, such impacts could have a material adverse effect on our financial condition, results of operations and cash flows.

3736

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Off-Balance Sheet Arrangements

As of September 30, ~~2021,~~2022, we did not have any off-balance sheet guarantees or arrangements with unconsolidated entities.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimates previously disclosed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” set forth in Part II, Item 7 of our Annual Report on Form 10-K for the period ended December 31, ~~2020,~~2021, filed on ~~March 1, 2021.~~February 25, 2022.

Recently Issued Accounting Pronouncements

Refer to Note 2 to the Notes to Condensed Consolidated Financial Statements (Unaudited) for further discussion.

3837

Table of Contents

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~ITEM 3.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

We are exposed to market risk associated with changes in interest rates on our variable rate long-term debt. As of September 30, ~~2021,~~2022, we had outstanding borrowings of approximately ~~$224.9~~$166.9 million on our credit facility, all of such borrowings were subject to variable interest rates. If the variable rates on this debt were 100 basis points higher than the rate applicable to the borrowing during the three and nine ~~months~~month periods ended September 30, ~~2021,~~2022, our net income would have decreased by ~~$0.4~~$0.5 million, or $0.03 per diluted share, and ~~$1.2~~$1.6 million, or ~~$0.07~~$0.10 per diluted share, respectively. We do not currently have any derivative or hedging arrangements, or other known exposures, to changes in interest rates.

ITEM 4.CONTROLS AND PROCEDURES

~~ITEM 4.~~

~~CONTROLS AND PROCEDURES~~

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, ~~2021.~~2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, ~~2021.~~2022.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the fiscal quarter ended September 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3938

Table of Contents

PART II – OTHER INFORMATION

Item 1.~~Item 1.~~

~~Legal Proceedings~~

Legal Proceedings

From time to time, we are subject to legal and/or administrative proceedings incidental to our business. It is the opinion of management that the outcome of pending legal and/or administrative proceedings will not have a material effect on our financial position and results of operations.

Item 1A.Risk Factors

~~Item 1A.~~

~~Risk Factors~~

Investing in our common stock involves a high degree of risk. You should carefully consider the risk factors discussed under the caption “Risk Factors” set forth in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, filed on ~~March 1, 2021.~~February 25, 2022. There have been no material changes to the risk factors previously disclosed under the caption “Risk Factors” in our Annual Report on Form 10-K. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

None.

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

~~None.~~

Item 3.Defaults Upon Senior Securities

None.

~~Defaults Upon Senior Securities~~

~~None.~~

Item 4.Mine Safety Disclosures

None.

~~Mine Safety Disclosures~~

~~None.~~

Item 5.Other Information

~~Other Information~~

~~None.~~

40None.

Table of Contents

~~Item 6.~~

~~Exhibits~~


~~3.1~~		Amended and Restated Certificate of Incorporation of the Company dated as of October 27, 2009 (filed on November 20, 2009 as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q (File No. 001-34504) and incorporated by reference herein).

~~3.2~~		Amended and Restated Bylaws of the Company, as amended by the First Amendment to the Amended and Restated Bylaws (filed on May 9, 2013 as Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q (File No. 001-34504) and incorporated by reference herein).

~~4.1~~		Form of Common Stock Certificate (filed on October 2, 2009 as Exhibit 4.1 to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-160634) and incorporated by reference herein).

10.1*		Second Amendment to Amended and Restated Credit Agreement, dated as of July 30, 2021, by and among Addus HealthCare, Inc., as the Borrower, Addus HomeCare Corporation, the other Credit Parties party thereto, Capital One, National Association, as administrative agent and as a Lender, and the other Lenders party thereto (filed on August 4, 2021 as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-34504) and incorporated by reference herein).

~~31.1~~		~~Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~31.2~~		~~Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~32.1~~		~~Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~32.2~~		~~Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~101.INS~~		~~Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).~~

~~101.SCH~~		~~Inline XBRL Taxonomy Extension Schema Document.~~

~~101.CAL~~		~~Inline XBRL Taxonomy Calculation Linkbase Document.~~

~~101.LAB~~		~~Inline XBRL Taxonomy Label Linkbase Document.~~

~~101.PRE~~		~~Inline XBRL Presentation Linkbase Document.~~

~~101.DEF~~		~~Inline XBRL Taxonomy Extension Definition Linkbase Document.~~

~~104~~		~~Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).~~

*	Schedules and exhibits have been omitted pursuant to Item 601 of Regulation S-K. The Company hereby undertakes to furnish supplementally a copy of any of the omitted schedules and exhibits upon request by the Securities and Exchange Commission.

41Item 6.Exhibits

EXHIBIT INDEX


		Incorporated by Reference
Exhibit Number	Description of Document	Form	File No.	Date Filing	Exhibit Number

3.1	Amended and Restated Certificate of Incorporation of the Company dated as of October 27, 2009.	10-Q	001-34504	11/20/2009	3.1

3.2	Amended and Restated Bylaws of the Company, as amended by the First Amendment to the Amended and Restated Bylaws.	10-Q	001-34504	05/9/2013	3.2

4.1	Form of Common Stock Certificate.	S-1	333-160634	10/2/2009	4.1

31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH	Inline XBRL Taxonomy Extension Schema Document.

101.CAL	Inline XBRL Taxonomy Calculation Linkbase Document.

101.LAB	Inline XBRL Taxonomy Label Linkbase Document.

101.PRE	Inline XBRL Presentation Linkbase Document.

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.

104	Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).

Table of Contents

* Management compensatory plan or arrangement

~~SIGNATURES~~

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	ADDUS HOMECARE CORPORATION

Date: November ~~2, 2021~~1, 2022	By:	/s/ R. DIRK ALLISON

		R. Dirk Allison Chairman and Chief Executive Officer (As Principal Executive Officer)

Date: November ~~2, 2021~~1, 2022	By:	/s/ BRIAN POFF

		Brian Poff Chief Financial Officer (As Principal Financial Officer)



Delaware		20-5340172
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6303 Cowboys Way, Suite 600 Frisco, TX		75034
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	ADUS	The Nasdaq Global Market


PART I. FINANCIAL INFORMATION	3

Item 1. Financial Statements (Unaudited)	3

Condensed Consolidated Balance Sheets as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021	3

Condensed Consolidated Statements of Income For the Three and Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	4

Condensed Consolidated Statement of Stockholders’ Equity For the Three and Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	5

Condensed Consolidated Statements of Cash Flows For the Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	7

Notes to Condensed Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3. Quantitative and Qualitative Disclosures About Market Risk	3938

Item 4. Controls and Procedures	3938

PART II. OTHER INFORMATION	4039

Item 1. Legal Proceedings	4039

Item 1A. Risk Factors	4039

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4039

Item 3. Defaults Upon Senior Securities	4039

Item 4. Mine Safety Disclosures	4039

Item 5. Other Information	4039

Item 6. Exhibits	4140



	September 30, 2022		December 31, 2021
Assets
Current assets
Cash	$	105,644	$	168,895
Accounts receivable, net of allowances for credit losses		126,253		136,955
Prepaid expenses and other current assets		8,245		18,491
Total current assets		240,142		324,341
Property and equipment, net of accumulated depreciation and amortization		17,428		18,483
Other assets
Goodwill		575,205		504,392
Intangibles, net of accumulated amortization		72,655		64,321
Operating lease assets, net		40,503		36,048
Total other assets		688,363		604,761
Total assets	$	945,933	$	947,585
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	19,545	$	19,358
Accrued payroll		35,084		44,083
Accrued expenses		39,557		37,077
Government stimulus advances		21,158		4,173
Accrued workers' compensation insurance		12,844		12,998
Total current liabilities		128,188		117,689
Long-term liabilities
Long-term debt, net of debt issuance costs		163,557		220,912
Long-term operating lease liabilities		37,168		32,859
Other long-term liabilities		2,183		1,781
Total long-term liabilities		202,908		255,552
Total liabilities	$	331,096	$	373,241
Stockholders' equity
Common stock—$.001 par value; 40,000 authorized and 16,090 and 15,940 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	$	16	$	16
Additional paid-in capital		389,267		380,037
Retained earnings		225,554		194,291
Total stockholders' equity		614,837		574,344
Total liabilities and stockholders' equity	$	945,933	$	947,585


	September 30, 2021		December 31, 2020
Assets
Current assets
Cash	$	152,379	$	145,078
Accounts receivable, net		133,814		132,650
Prepaid expenses and other current assets		13,514		9,969
Total current assets		299,707		287,697
Property and equipment, net of accumulated depreciation and amortization		18,614		19,749
Other assets
Goodwill		497,919		469,072
Intangibles, net of accumulated amortization		66,332		71,549
Deferred tax assets, net		5,919		6,524
Operating lease assets, net		36,424		37,991
Total other assets		606,594		585,136
Total assets	$	924,915	$	892,582
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	23,167	$	23,705
Accrued payroll		31,626		35,815
Accrued expenses		35,780		37,564
Government stimulus advances		7,674		32,087
Accrued workers' compensation insurance		14,286		13,759
Current portion of long-term debt		—		971
Total current liabilities		112,533		143,901
Long-term liabilities
Long-term debt, less current portion, net of debt issuance costs		220,707		193,901
Long-term operating lease liabilities		33,509		35,516
Other long-term liabilities		115		588
Total long-term liabilities		254,331		230,005
Total liabilities	$	366,864	$	373,906
Stockholders' equity
Common stock—$.001 par value; 40,000 authorized and 15,913 and 15,826 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively	$	16	$	16
Additional paid-in capital		376,802		369,495
Retained earnings		181,233		149,165
Total stockholders' equity		558,051		518,676
Total liabilities and stockholders' equity	$	924,915	$	892,582


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	For the Three Months Ended September 30, 2022
	Common Stock					Additional Paid-in Capital		Retained Earnings		Total Stockholders' Equity
	Shares			Amount
Balance at July 1, 2022		16,081		$	16	$	385,750	$	214,011	$	599,777
Issuance of shares of common stock under restricted stock award agreements		—			—		—		—		—
Forfeiture of shares of common stock under restricted stock award agreements		(1	)		—		—		—		—
Stock-based compensation		—			—		2,780		—		2,780
Shares issued for exercise of stock options		10			—		737		—		737
Net income		—			—		—		11,543		11,543
Balance at September 30, 2022		16,090		$	16	$	389,267	$	225,554	$	614,837

	For the Nine Months Ended September 30, 2022
	Common Stock					Additional Paid-in Capital		Retained Earnings		Total Stockholders' Equity
	Shares			Amount
Balance at January 1, 2022		15,940		$	16	$	380,037	$	194,291	$	574,344
Issuance of shares of common stock under restricted stock award agreements		129			—		—		—		—
Forfeiture of shares of common stock under restricted stock award agreements		(4	)		—		—		—		—
Stock-based compensation		—			—		7,945		—		7,945
Shares issued for exercise of stock options		25			—		1,285		—		1,285
Net income		—			—		—		31,263		31,263
Balance at September 30, 2022		16,090		$	16	$	389,267	$	225,554	$	614,837


	For the Nine Months
	Ended September 30,
	2022			2021
Cash flows from operating activities:
Net income	$	31,263		$	32,068
Adjustments to reconcile net income to net cash provided by (used in) operating activities, net of acquisitions:
Depreciation and amortization		10,571			10,594
Deferred income taxes		413			605
Stock-based compensation		7,945			7,105
Amortization of debt issuance costs under the credit facility		645			590
Provision for credit losses		481			744
Impairment of operating lease assets		1,174			—
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		18,232			(1,906	)
Prepaid expenses and other current assets		10,568			(3,610	)
Government stimulus advances		16,985			(24,413	)
Accounts payable		(693	)		(780	)
Accrued payroll		(10,421	)		(4,553	)
Accrued expenses and other long-term liabilities		(6,345	)		(2,157	)
Net cash provided by (used in) operating activities		80,818			14,287
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired		(84,490	)		(29,219	)
Purchases of property and equipment		(2,864	)		(3,214	)
Net cash used in investing activities		(87,354	)		(32,433	)
Cash flows from financing activities:
Payments on revolver loan — credit facility		(105,000	)		—
Proceeds from borrowings on revolver — credit facility		47,000			46,395
Payments on term loan — credit facility		—			(18,130	)
Payment for debt issuance costs		—			(3,020	)
Cash received from exercise of stock options		1,285			202
Other		—			—
Net cash used in financing activities		(56,715	)		25,447
Net change in cash		(63,251	)		7,301
Cash, at beginning of period		168,895			145,078
Cash, at end of period	$	105,644		$	152,379
Supplemental disclosures of cash flow information:
Cash paid for interest	$	5,589		$	3,648
Cash paid for income taxes		629			14,767
					—


	Operating Leases			Operating Leases
	(Amounts in Thousands)			(Amounts in Thousands)
Due in the 12-month period ended September 30,
2022	$	2,765
2023		10,717		$	12,379
2024		8,657			10,645
2025		6,520			7,816
2026		3,883			5,756
2027					4,433
Thereafter		16,786			13,070
Total future minimum rental commitments		49,328			54,099
Less: Imputed interest		(6,106	)		(6,065	)
Total lease liabilities	$	43,222		$	48,034


	Total (Amounts in Thousands)			Total (Amounts in Thousands)
Goodwill	$	28,479		$	70,724
Identifiable intangible assets		990			13,792
Cash		653			500
Accounts receivable					8,171
Property and equipment		40			1,194
Operating lease assets, net					3,728
Other assets		29			333
Accrued expenses					(6,799	)
Accrued payroll		(400	)		(1,511	)
Long-term operating lease liabilities					(3,537	)
Total purchase price	$	29,791		$	86,595

	Total (Amounts in Thousands)
Goodwill	$	169,302
Identifiable intangible assets		20,015
Cash		15,444
Accounts receivable		5,922
Property and equipment		759
Operating lease assets, net		3,028
Other assets		85
Accounts payable		(2,281	)
Accrued payroll		(1,555	)
Accrued expenses		(503	)
Government stimulus advances		(12,694	)
Long-term operating lease liabilities		(2,765	)
Total purchase price	$	194,757

	Total (Amounts in Thousands)
Goodwill	$	13,475
Identifiable intangible assets		474
Cash		1,104
Accounts receivable		1,395
Property and equipment		52
Operating lease assets, net		485
Other assets		40
Accounts payable		(96	)
Accrued payroll		(586	)
Accrued expenses		(37	)
Long-term operating lease liabilities		(485	)
Total purchase price	$	15,821

	Total (Amounts in Thousands)
Goodwill	$	9,732
Identifiable intangible assets		1,523
Cash		2,819
Accounts receivable		1,009
Operating lease assets, net		180
Other assets		26
Accounts payable		(34	)
Accrued expenses		(353	)
Accrued payroll		(275	)
Long-term operating lease liabilities		(100	)
Total purchase price	$	14,527


	Customer and referral relationships			Trade names and trademarks			Non- competition agreements			State Licenses			Total			Customer and referral relationships			Trade names and trademarks			Non- competition agreements			State Licenses			Total
	(Amounts in Thousands)															(Amounts in Thousands)
Intangible assets with indefinite lives	$	—		$	—		$	—		$	21,221		$	21,221			—			—			—			25,891			25,891
Intangible assets subject to amortization:
Gross carrying amount		44,672			42,926			6,785			12,507			106,890			44,672			51,941			6,785			12,517			115,915
Accumulated amortization		(35,866	)		(17,800	)		(3,579	)		(4,534	)		(61,779	)		(37,652	)		(20,402	)		(4,581	)		(6,516	)		(69,151	)
Intangible assets subject to amortization, net		8,806			25,126			3,206			7,973			45,111			7,020			31,539			2,204			6,001			46,764
Total intangible assets at September 30, 2021	$	8,806		$	25,126		$	3,206		$	29,194		$	66,332
Total intangible assets at September 30, 2022																$	7,020		$	31,539		$	2,204		$	31,892		$	72,655


	Hospice			Personal Care		Home Health		Total
	(Amounts in Thousands)
Goodwill as of December 31, 2021	$	328,334		$	152,688	$	23,370	$	504,392
Additions for acquisitions		70,724							70,724
Adjustments to previously recorded goodwill		(52	)				141		89
Goodwill as of September 30, 2022	$	399,006		$	152,688	$	23,511	$	575,205

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