Home Health Index | 2015 December Update

The Stoneridge Partners Home Health Index (HH Index) is updated monthly and measures the performance of these three publicly traded home health companies, all listed on the NASDAQ:

  • Almost Family (AFAM)
  • LHC Group (LHCG)
  • Amedisys (AMED)

Quote of the Month:

“This quarter’s M&A report continues to see the pendulum shift to a seller’s market across all deal sizes.”  From M&A Source Market Pulse Survey Report Q3 2015

The Stoneridge Partners Home Health Index Sets a New Record High!

The difficult summer is over and now, over the past two months, the Stoneridge Partners Home Health Index (HH Index) has surged ahead 5.5% to a new record high of 43.17.

To be fair it should be noted that during this same two month period the market as a whole, as measured by the S&P 500, was up over 8%.

All of the stocks in our HH Index were up with LHC Group leading the way…. plus 3.3% for the month.

The former record high of 42.55 was set four months ago.  Prior to that one would have to go back to October of 2008 when the index was at 41.75. We then dropped all the way down to 11.64 on Dec. 1 of 2011.  We are now up 271% from that low….it’s been quite a ride.

See It to Believe It!

This graph compares the percentage change of the HH Index to the percentage change in the S&P 500 Index for over 13 years, going back to January, 2002. It has been quite a ride.

This is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart, through  November, 2015.

This graph compares our HH Index to the price of Addus stock (non-Medicare).  As you can see, after their earnings release, their stock took a bit of a dive.

Here are the results of the stock prices for the past two years:

Company 11/30/15 1 mos change YTD change 1 yr change 2 yr change
Almost Family 42.37 +2.1% +46% +52% +52%
Amedisys 40.59 +2.6% +38% +60% +149%
LHC Group 46.55 +3.3% +49% +98% +96%
HH Index** 43.17 +2.7% +45% +69% +91%
S&P 500 2080.41 +0.05% +1.0% +0.6% +15.2%
Addus 22.80 –8.73% -6% -1% -21%

Although we track the performance of Addus, they are not included in our HH Index because very little of their revenue comes from Medicare.

Enterprise Value (EV)

EV (in M)) 12/1/2015 11/1/2015 10/1/15 9/1/15 8/1/15
Almost Family 493 430 462 454 458
Amedisys 1,418 1,390 1,345 1,390 NA
LHC Group 867 832 827 817 775
HH Index Total 2,770 2,652 2,634 2,661
NA
Addus 239 236 303 329 285

Enterprise Value (EV), aka Selling Price,  as a Percent of Revenue.

Company 12/1/15 12/1/14 12/1/13
Almost Family 96% 68% 59%
Amedisys 115% 80% 40%
LHC Group 112% 69% 64%
HH Index Average 107% 76% 58%
Addus 72% 81% 93%

Multiples of EV/EBITDA.

Think of this as selling price as a multiple of EBITDA.

Company 12/1/15 12/1/14 12/1/13
Almost Family 13.4 14.0 9.15
Amedisys 15.8 18.5 10.1
LHC Group 11.2 8.6 6.8
HH Index Average 13.5 13.1 8.4
Addus 10.0 10.6 13.2

The above calculations are based on selling price being defined as Enterprise Value (EV), with data provided by Capital IQ.   EV has been calculated based on stock prices September 1. Enterprise value is defined as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents. EBITDA is calculated using methodology that may differ from that used by a company it is reporting.

Third Quarter Earnings!

Almost Family

In Thousands 2015* 2014 Difference %
Revenue 386,997 371,072 +15,925 +4.3%
Gross Margin 182,855 173,468 +9,387 +5.4%
Gross Margin % 47.2% 46.7% +0.5 10.7%
G&A Expenses 156,268 156,772 -544  -0.3%
Operating Income 26,587 16,696 +9,891 +59.2%
Stock Price 10/1 40.05 29.44 +10.6 +36%

Increases all around except for G&A, resulting in a nice 59% increase in Operating Income.

*2015: Due to an accounting change their 2015 quarter ended October 2.

To read their complete SEC 10Q click HERE

Amedisys

In Thousands 2015 2014 Difference %
Revenue 942,174 904,026 +38,148 +4.2%
Gross Margin 408,742 384,340 +24,402 +6.3%
Gross Margin % 43.4% 42.5 +0.9 +2.1%
G&A Expenses* 359,411 372,896 -13,485 -3.6%
Operating Income -25,862 9,236 -35,862 -380%
Stock Price 10/1 20.17  37.98 +17.8 +88%

*G&A Expenses – In the first quarter of 2015 Amedisys wrote off about $75M in “asset impairment charge”. For comparison purposes asset impairment charges were excluded.

To read their complete SEC 10Q click HERE

LHC Group

In Thousands 2015 2014 Difference %
Revenue 597,373 540,261 +57,112 +10.5%
Gross Margin 245,435 218,278 +27,157 +12.4%
Gross Margin % 41.1% 40.4% +0.7 +1.7%
G&A Expenses 180,416 172,499 +7,917 +4.6%
Operating Income 50,146 34,080 +16,066 +47.1%
Stock Price 10/1 44.77 23.20 +21.57 +93%

Nice performance all around.

To read the complete SEC 10Q click HERE

Totals for Almost Family, Amedisys & LHC Group

In Thousands 2015 2014 Difference %
Revenue 1,926,544 1,815,359 +111,185 +6.1%
Gross Margin 837,032 776,086 +60,946 +7.9%
Gross Margin % 43.9% 43.2% +0.7 +1.6%
G&A Expenses 696,055 702,167 -6,112 0.1%
Operating Income 126,064 62,220 +63,844 +103%
HH Index 9/30 40.93 23.51 +17.42 +74%

Merger & Acquisition Activity:

“This quarter’s report continues to see the pendulum shift to a seller’s market across all deal sizes.”  From M&A Source Market Pulse Survey Report Q3 2015

Q3 2015 Market Pulse

 

The above report is for general M&A activity, but we are surely seeing a sellers market in quality home health and hospices.  Agencies and hospices with strong earnings and good accounting and management records are in great demand, with prices higher than we have seen in years.

SOLD BY STONERIDGE PARTNERS!

Lafayette, LALHC Group, Inc. (NASDAQ;LHCG) announced that they have acquired substantially all of the assets of The Visiting Nurses Association of Greater Cincinnati and Northern Kentucky, Inc’s Kentucky home health operations.  Brian Bruenderman and Ben Bogan, partners at Stoneridge, provided sell side advisory services.

OTHER SALES FROM AROUND THE COUNTRY!

Lafayette, LA – LHC Group completed the previously announced acquisition of substantially all of the assets of Nurses Registry and Home Health Corp. (“Nurses Registry”), which became effective on November 11, 2015.

Dallas, TX – New Century Hospice has acquired Family Hospice, LLC based in Boulder.  New Century operates hospices in Castle Rock and Colorado Springs as well as 17 other locations in Georgia, Louisiana, Oklahoma, Texas and Virginia.

Earlier this month New Century Hospice also announced the acquisition of Autumn Bridge, LLC, a hospice provider located in Oklahoma City, Oklahoma, effective October 31, 2015.  Purchase price and terms were not disclosed.

Woodridge, VA – Addus HomeCare Corporation (NASDAQ: ADUS), a comprehensive provider of home and community-based services that are mainly provided in the home, personal in nature and concentrated on the dual eligible population, announced that it has acquired substantially all of the assets of the personal care business of Five Points Healthcare of Virginia, LLC, effective Nov. 9.

BestCare HomeCare serves individuals in 11 counties in Northern Virginia and reported annualized revenues of about $5.7 million for the first nine months of 2015.

Exclusively Listed for Sale by Stoneridge Partners:

  • North Carolina – Accredited $2 million North Carolina Innovations Waiver Provider for Individuals with I/DD located in Winston-Salem and surrounding areas with a strong reputation in the community. Stoneridge File S-4001
  • Mid-Atlantic region – $30 million Medicare/Medicaid agency with multiple branches in several states, including CON service areas. Long history and great reputation for quality care. Stoneridge File S-8300
  • California – Approximately $8 million private duty home health and staffing company located in Northern California with multiple locations. Stoneridge File S-7500
  • New Jersey $3.5 million Medicaid agency in Northern NJ. Great opportunity for existing operator to add revenue and service area. Motivated seller. Stoneridge File S-9254
  • Florida – $2.8 million Medicare certified home health agency in District 9 of Florida with a diverse referral base. Stoneridge File S-4148
  • Minnesota – $14 million revenue Medicare certified home health agency with large Medicaid census, well established and deficiency free, SE Minnesota. Stoneridge file S-5268
  • DFW Area – Approx. $3.5 million home care and hospice agency just listed.  Stoneridge file S-6600.
  • California- Approx. $2.6 million Medicare home health agency. Central coast region of Northern California. 90% Traditional Medicare. Strong gross profit with opportunities for immediate, sustained, long-term growth. Accredited.  Stoneridge file S-5400. ON CONTRACT
  • Pennsylvania – Approx. $4 million Medicaid home care agency located in central PA. Accelerated and profitable growth trajectory with continued opportunity for future growth. Professionally run with outstanding clinical and excellent staff in place.  Stoneridge file S-1000. ON CONTRACT
  • Colorado – $2.5 million diversified home care agency  and hospice,  accredited with excellent books and records.  Stoneridge file S-1005
  • Rhode Island – $2.5 million Medicare agency.  Accredited in CON state.  Stoneridge file S-1100
  • Texas – $4.8 million Medicare agency in Houston metro area with solid bottom line. 65% of revenue from traditional Medicare and the balance in private non-skilled care. Stoneridge file #S-2000.
  • Oklahoma –  $1.5 million Medicare agency.  89% of revenue from traditional Medicare.  Stoneridge file S-4131
  • Florida – $4 million in pure private pay.  15% bottom line.  Accredited on the central east coast.  Stoneridge file S-3250
  • Illinois – $5 million plus Medicare agency with four offices. Strong management with excellent clinical.  Stoneridge file S-6550
  • Kentucky – Certificate of Need for 3 counties in Northern KY, rare opportunity to establish or expand services in populous CON service area. Stoneridge file S-1121 SOLD
  • Illinois – $3 million hospice in Chicago area.  Average census 58.  Stoneridge file S-5325
  • Texas – $4 million East Texas Medicare certified home health agency with diverse payor sources, including Medicare, Medicaid, pediatric and private pay.  Stoneridge file S-3665
  • Massachusetts – $5 + million home health agency, primarily Medicaid, but also private pay and commercial insurance, plus Medicare certification. Zero deficiencies on last survey.  Stoneridge file S-9300 ON CONTRACT
  • Washington State – $2 million revenue. This agency has a long history of profitability. Diverse payor sources includes Medicaid programs and private pay. Great reputation in a unique service area. Stoneridge file S-7010 SOLD!
  • Florida – $5 million Medicare agency located in the Tampa – St. Pete area.  Accredited, with solid bottom line.   Stoneridge file S-4109, ON CONTRACT
  • Texas – $8 million East Texas agency, Medicare certified with deficiency free survey, no audits, and top-of- the line software.  Stoneridge file S-3001 ON CONTRACT
  • Texas – $1.5  million East Texas Medicare certified home health agency, providing skilled care, approx 75% from traditional PPS Medicare.  Last survey was deficiency free. Stoneridge file S-4088
  • Texas – $2.3 million Medicare certified home health agency in Houston, Texas. 92% Traditional Medicare. Stoneridge file S-1542
  • Texas – $3.3 million accredited Medicare home health agency. Profitable and still growing with approximately 87% of revenue coming from traditional Medicare. Strong marketing team in place with diversified referral sources. Stoneridge file S-1500 ON CONTRACT
  • Texas – $2 million Fort Worth Medicare agency, approx 90% traditional Medicare.Stoneridge file S-2650 ON CONTRACT
  • Florida – $2.8 million Medicare certified agency serving District 3. Solid operational team in place. 95% Medicare.  Stoneridge file S-9000
  • Ohio – $2.5 million Medicare agency in Columbus area, 75% traditional Medicare, long history of quality care.  Stoneridge file S-5232
  • Texas $1.2 million Medicare certified home health care agency in the Galveston area. Stoneridge file S-9015
  • Texas – $1 million Medicare agency in the DFW area – 99% of revenue from traditional Medicare.  Stoneridge file S-1015

To see more home care agencies and hospices exclusively listed for sale by Stoneridge Partners go to the following link: Agencies for Sale

Do you know of any acquisitions that have taken place?  We would be interested in your comments.  At the top of this column is a “Contact Tab” with a section for comments.  These can be sent anonymously. The return email address can be left blank.  We are interested in what you have to say, or acquisitions that you know about.

DoctorsStrike

More

For more cartoons and additional musings on the state of homecare and what’s going on at Stoneridge Partners, visit our blog, which is updated regularly: http://stoneridgepartners.com/category/blog/.

From Don Cummins, Publisher of “The Home Health Index” don@stoneridgepartners.com – 800-218-3944

Previous editions of this monthly newsletter can be searched for at the bottom of the home page of the Home Health Index. Links to Google Finance: Almost Family | Amedisys | LHC Group