LHC Group announces fourth quarter and full year 2020 financial results

LAFAYETTE, La., Feb. 25, 2021 /PRNewswire/ -- LHC Group, Inc. (NASDAQ: LHCG) announced its financial results for the quarter ended December 31, 2020. Unless otherwise noted, all results are compared with the fourth quarter and year ended December 31, 2019.

Fourth Quarter 2020 Financial Results

• Net service revenue was $532.3 million.
• Net income attributable to LHC Group's common stockholders increased 39.3% to $30.4 million, or $0.97 per diluted share.
• Adjusted net income attributable to LHC Group's common stockholders increased 23.0% to $44.2 million, or $1.40 adjusted earnings per diluted share. Adjusted results for the fourth quarter of 2020 exclude a pre-tax amount of $3.2 million in acquisition and de novo related expenses, $12.2 million in COVID-19 related costs and expenses for purchases of personal protective equipment (PPE), supplies, employee related costs and expenses and other categories of costs and expenses incurred in response to the pandemic and $4.0 million in costs, expenses and impairments related to agency closures or consolidations.
• Adjusted EBITDA increased 28.3% to $68.4 million.

Full Year 2020 Financial Results

• Net service revenue was $2.063 billion.
• Net income attributable to LHC Group's common stockholders increased 16.6% to $111.6 million, or $3.56 per diluted share.
• Adjusted net income attributable to LHC Group's common stockholders increased 12.9% to $157.3 million, or $5.01 per diluted share. Adjusted results for the full year 2020 exclude a pre-tax amount of $7.8 million in acquisition and de novo related expenses, $52.8 million in COVID-19 related costs and expenses noted above and $5.2 million in costs, expenses and impairments related to agency closures or consolidations.
• Adjusted EBITDA increased 12.5% to $238.7 million.

A reconciliation of all non-GAAP financial results in this release appears on pages 12-13.

Operational and Strategic Highlights

• LHC Group's quality and patient satisfaction scores continue to exceed the national average as the Company remains a leader among industry peers.
• Organic growth in home health admissions increased 2.2% in the fourth quarter of 2020 compared with the same period in 2019 and increased sequentially by 1.0% over the third quarter of 2020.
• Continued strong sequential organic growth in home health Medicare revenue with a 4.6% sequential increase in the fourth quarter of 2020 following a 10.7% sequential increase in the third quarter of 2020.
• Non-Medicare episodic organic growth in home health admissions increased by 28.7% in the fourth quarter of 2020 compared with the same period in 2019 and increased by 32.0% in 2020 over 2019.
• Organic growth in hospice admissions increased 10.9% in the fourth quarter of 2020 compared with the same period in 2019 and increased by 4.6% sequentially over the third quarter of 2020.
• On October 1, 2020, LHC Group finalized a joint venture with University Health Care System to enhance home health and hospice services in Georgia and South Carolina. The joint venture includes ten total locations and LHC Group expects incremental annualized revenue from this joint venture of approximately $8.3 million.
• On October 1, 2020, LHC Group finalized a joint venture with Northeast Georgia Health System to share ownership of SunCrest Home Health in Gainesville, Georgia. LHC Group also closed on the purchase of Santa Rita Hospice in Aurora, Colorado, where it will operate under the At Home Hospice name in a shared space with LHC Group's home health provider in Aurora.
• On November 1, 2020, LHC Group finalized an expansion of its joint venture with CHRISTUS Health with the addition of a hospice provider in San Marcos, Texas. LHC Group expects incremental annualized revenue from this joint venture of approximately $1.6 million.
• On December 31, 2020, LHC Group finalized the purchase of Grace Hospice in Tulsa, Oklahoma and Valley Hospice and East Valley Palliative Care in Mesa, Arizona. The Company expects the purchase of Grace Hospice to produce approximately $12.1 million in annualized revenue. The Company expects the purchase of Valley Hospice and East Valley Palliative Care to produce approximately $4.8 million in annualized revenue.

Commenting on the results, Keith G. Myers, LHC Group's Chairman and Chief Executive Officer, said, "LHC Group plays an increasingly critical role in the nation's healthcare system with the last twelve months clearly demonstrating the importance of home as the most patient-preferred and cost-effective setting for care. The swift, comprehensive approach we took to the public health emergency caused by COVID-19 had a positive impact on the evolution of healthcare delivery models, helped to protect our employees and patients, boosted our organic growth trajectory and strengthened our value proposition to patients, partners and payors. Looking ahead to 2021 and beyond, we believe LHC Group has an unprecedented opportunity to lead our industry's transition to value-based care and address the growing needs of the population aged 65 and over that is expected to double by 2060."

COVID-19 Update
The COVID-19 pandemic had an impact on our operations and financial results for the fourth quarter of 2020 with a continued impact expected in 2021, although to a lesser extent than what we have experienced to date. During the fourth quarter, we incurred $12.2 million ($8.6 million net of tax), or $0.27 per diluted share, in additional COVID-19 costs and expenses related to PPE, supplies, employee related costs and expenses, including, without limitation, bonuses, increased wages, and wage supplements for front line caregivers, and other categories of costs and expenses incurred in response to the pandemic. For the year ended December 31, 2020 we incurred $52.8 million ($38.6 million net of tax), or $1.23 per diluted share, in COVID-19 costs and expenses.

LHC Group has also implemented a number of cost containment initiatives, including eliminating non-essential travel and expenses and other measures. We continue to have strong access to capital with approximately $530 million of available liquidity from cash and our revolving credit facility net of the $411.3 million liability associated with the Medicare Accelerated and Advance Payments and Provider Relief Funds.

Since April 2020, we received funds totaling $318.0 million under the Medicare Accelerated and Advance Payment Program as provided for by the CARES Act. The accelerated Medicare payments are interest free and the program currently requires that the Centers for Medicare and Medicaid Services (CMS) recoup the accelerated payments beginning 12 months after receipt by the provider, by withholding 25% of future Medicare fee-for service payments for claims for 11 months and then withholding 50% of future Medicare fee-for service payments for claims for an additional six months. An interest rate of 4% will be assessed on any outstanding balances after 29 months from the date of the initial advance but we intend to repay the full amount before any interest will accrue. Cash flows from operations for the full year ended December 31, 2020 included $318.0 million of accelerated Medicare payments, all of which remains deferred on the balance sheet at December 31, 2020.

As of December 31, 2020, we have received funds totaling $93.3 million related to the Provider Relief Fund as provided for by the CARES Act. The full amount received was recorded as a short-term liability in government stimulus advance in our condensed consolidated balance sheet, but no funds were recognized in our condensed consolidated statements of income for the twelve months ended December 31, 2020. It is our intent to return the funds to the government.

COVID-19 Trends
Please refer to the supplemental information that can be found under Financial Results on the Company's Investor Relations page to access more detailed statistics on pre-COVID-19 and post-COVID-19 trends. 

Full Year 2021 and First Quarter 2021 Guidance
Full year 2021 net service revenue is expected to be in a range of $2.2 billion to $2.26 billion, adjusted earnings per diluted share is expected to be in a range of $5.65 to $5.90, and EBITDA, less non-controlling interest, is expected to be in a range of $268 million to $280 million.

For the first quarter ending March 31, 2021, net service revenue is expected to be $515 million to $530 million, adjusted earnings per diluted share is expected to be in a range of $1.20 to $1.30, and EBITDA, less non-controlling interest, is expected to be in a range of $55 million to $60 million.

The Company's guidance ranges reflect a number of assumptions that are subject to change based on uncertainties related to the impact of the COVID-19 pandemic. The Company's guidance ranges do not take into account the impact of future COVID-19 related costs and expenses. The Company is estimating COVID-19 related costs and expenses in the range of $20 million to $25 million in the full year of 2021 and $8 million to $12 million in the first quarter of 2021.  The Company's guidance ranges also do not take into account reimbursement changes, if any, future acquisitions, if made, de novo locations, if opened, location closures, if any, or future legal expenses, if necessary. Please refer to the supplemental information that can be found under Financial Results on the Company's Investor Relations page to access more detailed guidance assumptions. 

Joshua L. Proffitt, LHC Group's President, added, "Our original intent for 2020 and all of the work we had accomplished beforehand was to exit the year with maximum velocity into 2021. While the shape of that trajectory was altered by the public health emergency, we have been able to generate sequential quarterly improvement in our organic admissions growth, census and number of unique physician referrals since the peak of the pandemic. This re-acceleration in our business to pre-pandemic levels was a direct result of the real-time demonstration of our value proposition, leading quality and patient satisfaction scores, extraordinary commitment from our employees and the contributions from our joint venture and co-location strategies. The high-quality growth we are generating from our differentiated strategy positions us very well to deliver for our patients, employees, partners and shareholders in 2021." 

Conference Call
LHC Group will host a conference call on Friday, February 26, 2021, at 9:00 a.m. Eastern time to discuss its fourth quarter 2020 results. The toll-free number to call for this interactive teleconference is (877) 870-4263 (international callers: (412) 317-6011). A telephonic replay of the conference call will be available through midnight on Friday, March 5, 2021, by dialing (877) 344-7529 (international callers: (412) 317-0088) and entering confirmation number 10151937.

The Company has posted supplemental financial information on the fourth quarter results that it will reference during the conference call. The supplemental information can be found under Financial Results on the Company's Investor Relations page. A live webcast of LHC Group's conference call will be available under the Investor Relations section of the Company's website, www.LHCGroup.com. A one-year online replay will be available approximately one hour following the conclusion of the live broadcast.

About LHC Group, Inc.
LHC Group, Inc. is a national provider of in-home healthcare services and innovations for communities around the nation, offering quality, value-based healthcare to patients primarily within the comfort and privacy of their home or place of residence. The company's approximately 30,000 employees deliver home health, hospice, home and community based services, and facility-based care in 35 states and the District of Columbia – reaching 60 percent of the U.S. population aged 65 and older. As the preferred joint venture partner for almost 400 leading U.S. hospitals and health systems, LHC Group works in cooperation with providers to customize each partnership and reach more patients and families with an effective and efficient model of care.

Forward-looking Statements
This press release contains "forward-looking statements" (as defined in the Securities Litigation Reform Act of 1995) regarding, among other things, future events or the future financial performance of the Company, or anticipated benefits of the transaction. Words such as "anticipate," "expect," "project," "intend," "believe," "will," "estimates," "may," "could," "should" and words and terms of similar substance used in connection with any discussion of future plans, actions or events identify forward-looking statements. Forward-looking statements contained in this press release include, but are not limited to: our 2020 revenue and earnings guidance, statements about the benefits of the acquisition, including anticipated earnings accretion, synergies and cost savings and the timing thereof; the Company's plans, objectives, expectations, projections and intentions; and other statements relating to the transaction that are not historical facts. Forward-looking statements are based on information currently available to the Company and involve estimates, expectations and projections. Investors are cautioned that all such forward-looking statements are subject to risks and uncertainties, and important factors could cause actual events or results to differ materially from those indicated by such forward-looking statements. With respect to the acquisition, these risks, uncertainties and factors include, but are not limited to: the risk that the businesses will not be integrated successfully; the risk that the cost savings, synergies and growth from the transaction may not be fully realized or may take longer to realize than expected; the diversion of management time on integration-related issues; and the risk that costs associated with the integration of the businesses are higher than anticipated. With respect to the Company's businesses, these risks, uncertainties and factors include, but are not limited to: changes in, or failure to comply with, existing government regulations that impact the Company's businesses; legislative proposals for healthcare reform; the impact of changes in future interpretations of fraud, anti-kickback, or other laws; changes in Medicare and Medicaid reimbursement levels; changes in laws and regulations with respect to Accountable Care Organizations; changes in the marketplace and regulatory environment for Health Risk Assessments; decrease in demand for the Company's services; the potential impact of the transaction on relationships with customers, joint venture and other partners, competitors, management and other employees, including the loss of significant contracts or reduction in revenues associated with major payor sources; ability of customers to pay for services; risks related to any current or future litigation proceedings; potential audits and investigations by government and regulatory agencies, including the impact of any negative publicity or litigation; the ability to attract new customers and retain existing customers in the manner anticipated; the ability to hire and retain key personnel; increased competition from other entities offering similar services as offered by the Company; reliance on and integration of information technology systems; ability to protect intellectual property rights; impact of security breaches, cyber-attacks or fraudulent activity on the Company's reputation; the risks associated with assumptions the parties make in connection with the parties' critical accounting estimates and legal proceedings; the risks associated with the Company's expansion strategy, the successful integration of recent acquisitions, and if necessary, the ability to relocate or restructure current facilities; and the potential impact of an economic downturn or effects of tax assessments or tax positions taken, risks related to goodwill and other intangible asset impairment, tax adjustments, anticipated tax rates, benefit or retirement plan costs, or other regulatory compliance costs.

Many of these risks, uncertainties and assumptions are beyond the Company's ability to control or predict. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, forward-looking statements speak only as of the information currently available to the Company on the date they are made, and the Company does not undertake any obligation to update publicly or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this press release. The Company does not give any assurance (1) that the Company will achieve its guidance or expectations, or (2) concerning any result or the timing thereof. All subsequent written and oral forward-looking statements concerning the transaction or other matters and attributable to the Company or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above.